-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ILqxEkcPkiXLgNyjdokbZcjym98/h3pjZXC+VHfhijwqed3eXRT29yVvGBxeWs3n 2O8FpemWIcSmxt7rlXtZ9w== 0001005477-97-000586.txt : 19970225 0001005477-97-000586.hdr.sgml : 19970225 ACCESSION NUMBER: 0001005477-97-000586 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970224 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: STARWOOD LODGING CORP CENTRAL INDEX KEY: 0000316206 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521193298 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-32050 FILM NUMBER: 97542165 BUSINESS ADDRESS: STREET 1: 2231 E CAMELBACK RD, 4TH FL CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 6028523900 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK RD. 4TH FL CITY: PHOENOX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS CORP DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL INSURANCE CO OF AMERICA CENTRAL INDEX KEY: 0000729057 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 221211670 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: PRUDENTIAL PLZ STREET 2: 751 BROAD STREET CITY: NEWARK STATE: NJ ZIP: 07102-3777 SC 13D 1 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) Under the Securities Exchange Act of 1934 (Amendment No. )* STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION - -------------------------------------------------------------------------------- (Name of Issuer) Shares of Beneficial Interest, $.01 par value Common Stock, $.01 par value --------------------------------------------- (Title of Class of Securities) 855905 20 4 ----------- (CUSIP Number) James P. Walker, Esq. Gregory P. Patti, Jr., Esq. c/o Prudential Real Estate Investors O'Melveny & Myers LLP 8 Campus Drive The Citicorp Center Parsippany, New Jersey 07054 153 East 53rd Street, 54th Floor (201) 683-1690 New York, New York 10022-4611 (212) 326-2000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 14, 1997 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. CUSIP No. 855905 20 4 - -------- * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON The Prudential Insurance Company of America S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION New Jersey - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 4,533,537 Paired Shares consisting of (i) 2,779,500 OWNED BY EACH Paired Shares beneficially owned by The Prudential REPORTING PERSON Insurance Company of America and (ii) 1,754,037 Units beneficially owned by The Prudential Insurance Company of America that may be exchanged, under certain circumstances, for Paired Shares on a 1-for-1 basis. ----------------------------------------------------- 8 SHARED VOTING POWER - 0 - ----------------------------------------------------- 9 SOLE DISPOSITIVE POWER 4,533,537 Paired Shares consisting of (i) 2,779,500 Paired Shares beneficially owned by The Prudential Insurance Company of America and (ii) 1,754,037 Units beneficially owned by The Prudential Insurance Company of America that may be exchanged, under certain circumstances, for Paired Shares on a 1-for-1 basis. ----------------------------------------------------- 10 SHARED DISPOSITIVE POWER - 0 - ----------------------------------------------------- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,533,537 Paired Shares consisting of (i) 2,779,500 Paired Shares beneficially owned by The Prudential Insurance Company of America and (ii) 1,754,037 Units beneficially owned by The Prudential Insurance Company of America that may be exchanged, under certain circumstances, for Paired Shares on a 1-for-1 basis. - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |X| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IC, CO, IA - -------------------------------------------------------------------------------- Page 2 of 14 Pages ITEM 1. SECURITY AND THE ISSUER This Statement on Schedule 13D (this "Statement") relates to shares of beneficial interest, par value $.01 per share (the "Trust Shares"), of Starwood Lodging Trust, a Maryland real estate investment trust (the "Trust"), and shares of common stock, par value $.01 per share (the "Corporation Shares"), of Starwood Lodging Corporation, a Maryland corporation (the "Corporation" and together with the Trust, the "Companies"). Pursuant to a pairing agreement between the Trust and the Corporation, the Trust Shares and the Corporation Shares are "paired" and may only be held and transferred in units consisting of one Trust Share and one Corporation Share (collectively, a "Paired Share"). Accordingly, this Statement on Schedule 13D is filed with respect to Paired Shares and relates to both the Trust and the Corporation. The Trust is the general partner of SLT Realty Limited Partnership, a Delaware limited partnership ("SLT"), and the Corporation is the general partner of SLC Operating Limited Partnership, a Delaware limited partnership ("SLC"). The limited partnership interests of SLT and SLC (one limited partnership unit in SLT, together with one limited partnership unit of SLC, are together referred to herein as a "Unit") may be exchanged, under certain circumstances, for Paired Shares on the basis of one Unit for one Paired Share. The name and address of the principal executive offices of the Trust are as follows: Starwood Lodging Trust, 2231 East Camelback Road, Suite 400, Phoenix, AZ 85016. The name and address of the principal executive offices of the Corporation are as follows: Starwood Lodging Corporation, 2231 East Camelback Road, Suite 410, Phoenix, AZ 85016. ITEM 2. IDENTITY AND BACKGROUND This Statement is filed by The Prudential Insurance Company of America, a New Jersey corporation ("Prudential"), with respect to the acquisition by Prudential of Paired Shares and Units on February 14, 1997. Prudential holds such Paired Shares and Units on behalf of one of its commingled separate accounts, Prudential Property Investment Separate Account II ("PRISA II"). PRISA II is not a legal entity separate from Prudential for purposes of this Statement. In addition, prior to February 14, 1997 Prudential held other Paired Shares on behalf of one of its other commingled separate accounts, Prudential Diversified Investment Strategies ("Prudential Diversified"), and continues to hold such Paired Shares. Prudential Diversified is not a legal entity separate from Prudential for purposes of this Statement. Page 3 of 14 Pages Prudential is an insurance company, and the address of its principal business and principal office is Prudential Plaza, 751 Broad Street, Newark, New Jersey 07102. During the past five years, none of Prudential and, to the knowledge of Prudential, the executive officers or directors of Prudential has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). During the past five years, none of Prudential and, to the knowledge of Prudential, the executive officers or directors of Prudential has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Certain information required by Item 2 concerning directors and executive officers of Prudential is set forth on Schedule A hereto, which Schedule A is incorporated herein by reference. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Pursuant to a Contribution Agreement (the "Contribution Agreement") dated as of January 15, 1997 by and among SLT, SLC, SLT Financing Partnership, a Delaware general partnership ("SLT Financing" and together with SLT and SLC, the "Starwood Partnerships"), the Trust, the Corporation, and the other parties listed on the signature pages thereto, Prudential contributed to the Starwood Partnerships (a)(i) certain limited liability company membership interests, limited partnership interests, joint venture interests and general partnership interests owned by Prudential on behalf of PRISA II in a total of ten limited liability companies, limited partnerships, joint ventures and general partnerships, each of which entities (the "Property Companies") owned a single hotel (a "Hotel") and (ii) certain tangible and intangible personal property assets owned by the Property Companies in connection with the operation of the Hotels, in exchange for (b) (i) 4,529,037 Units, (ii) approximately $2,340,000 in cash, (iii) $72,000,000 represented by a joint note of Trust and SLT (described more fully below) and (iv) the assumption by Trust and SLT of certain debt encumbering the Hotels. The Contribution Agreement contemplates that Prudential receive Units, cash and the assumption of certain debt in exchange for its interests in the Property Companies and the intangible and tangible assets referenced in Page 4 of 14 Pages clause (a)(ii) above. In lieu of the payment of $72,000,000 in cash to Prudential on the Closing Date pursuant to the terms of the Contribution Agreement, Prudential orally agreed with SLT and the Trust to accept a joint note in the principal amount of $72,000,000. Subsequent to such oral agreement, Prudential agreed to make a short term loan to SLT and the Trust in the principal amount of $25,500,000 to cover the cost of paying down certain debt on the Hotels to be assumed by SLT and the Trust pursuant to the Contribution Agreement. Accordingly, a joint note in the principal amount of $97,500,000 (the "Note") was issued to Prudential by SLT and the Trust on February 14, 1997 (the "Closing Date"). Pursuant to the terms of the Note, SLT and the Trust jointly and severally agree to pay (i) $25,500,000, together with interest accrued thereon, on or prior to February 20, 1997 and (ii) the balance of the Note, together with interest accrued thereon, on April 15, 1997 (unless SLT and the Trust notify Prudential on or prior to April 11, 1997 of their election to extend the date of payment, in which case the date of payment shall be extended to May 14, 1997). Interest on the unpaid principal amount of the Note accrues at a fixed rate per annum equal to 7.00%; provided that any amount not paid when due bears interest at a rate that is 6.00% per annum in excess of the rate of interest otherwise payable under the Note. On February 20, 1997 SLT and the Trust paid $25,500,000, plus accrued interest, to Prudential pursuant to the terms of the Note. The foregoing descriptions of the Contribution Agreement and the Note are qualified in their entirety by reference to the Contribution Agreement and the Note, respectively, copies of which are filed as Exhibit I and Exhibit II hereto and are incorporated herein by reference. On the Closing Date, immediately after the closing of the transactions contemplated by the Contribution Agreement, Prudential tendered 2,775,000 Units to the Companies pursuant to the Units Exchange Rights Agreement referenced in Item 6 in exchange for 2,775,000 Paired Shares. ITEM 4. PURPOSE OF TRANSACTION Prudential acquired and is holding the Units and Paired Shares owned by it on behalf of PRISA II and the Paired Shares owned by it on behalf of Prudential Diversified for investment purposes and without the intention of effecting a change in control of the Companies or SLT or SLC. Notwithstanding the foregoing, depending on market conditions, Prudential may choose to acquire additional Units or Paired Shares, exchange some of its Units for Paired Shares, or dispose of some or all of its Units or Paired Shares. Page 5 of 14 Pages Except as set forth in the three immediately following sentences, neither Prudential, nor to Prudential's knowledge, any of the persons identified on Schedule A has any plans or proposals that would result in or relate to any of the transactions described in paragraphs (a) through (j) of Item 4 of Schedule 13D. Pursuant to the terms of the Contribution Agreement, the Trust shall not later than fifteen days after the Closing Date take all necessary action to increase the number of trustees of the Trust by two and, subject to certain approvals of the gaming authorities of Clark County, Nevada and the State of Nevada, nominate and support for election to the board of trustees of the Trust Gary M. Mendell, the President of the Trust (and one of the indirect owners of the Property Companies prior to the Closing Date), and Roger S. Pratt, a managing director of Prudential. Pursuant to the terms of the Contribution Agreement, for so long as Prudential shall maintain the Minimum Share Ownership (as defined below), Prudential shall continue to be entitled to designate, subject to certain approvals of the gaming authorities of Clark County, Nevada and the State of Nevada, one representative to be nominated for election to the board of trustees of the Trust at any annual or special meeting of the shareholders of the Trust called for the purpose of electing trustees. "Minimum Share Ownership" means either (i) ownership by Prudential of a total number of Units plus Paired Shares which (in the aggregate) equals fifty percent (50%) or more of the aggregate number of Units received by Prudential on the Closing Date pursuant to the Contribution Agreement, or (ii) that Prudential is one of the five largest shareholders of the Trust on a fully diluted basis (assuming, for purposes of such calculation, that all outstanding Units (other than those owned by the Trust and the Corporation) have been converted into Paired Shares). ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) Prudential beneficially owns 2,779,500 Paired Shares, or approximately 6.5% of the 42,924,490 Paired Shares issued and outstanding as of the Closing Date (after giving effect to the issuance to Prudential of 2,775,000 Paired Shares on the Closing Date). Of such 2,779,500 Paired Shares, Prudential beneficially owns 2,775,000 Paired Shares on behalf of PRISA II and 4,500 Paired Shares on behalf of Prudential Diversified. In addition, Prudential beneficially owns on behalf of PRISA II 1,754,037 Units that may be exchanged, under certain circumstances, for Paired Shares on a 1-for-1 basis. If all of the Units beneficially owned by Prudential were exchanged for Paired Shares, Prudential would beneficially own 4,533,537 Paired Shares, or approximately 10.1% of the 44,678,527 Paired Shares that would be issued and outstanding after such exchange, based on the number of Paired Shares issued and outstanding as of the Closing Date. The Page 6 of 14 Pages Declaration of Trust of the Trust and the Certificate of Incorporation of the Corporation, however, prohibit any person from directly or indirectly owning more than 8% of the Paired Shares. Prudential Securities Inc., an indirect wholly-owned subsidiary of Prudential ("PSI"), beneficially owns 27,875 Paired Shares in certain discretionary accounts on behalf of clients of PSI. Prudential disclaims beneficial ownership of such Paired Shares because the management of PSI, and not Prudential, directs the disposition and/or voting, if any, of such Paired Shares. (b) Prudential has the sole power to vote or to direct the vote and sole power to dispose or direct the disposition of the Paired Shares beneficially owned by it. (c) Except as specified above in Item 3, Prudential has not effected any transactions in the Paired Shares or Units during the past 60 days. (d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF ISSUER As described in Item 3 above, Prudential entered into the Contribution Agreement as of January 15, 1997. Pursuant to the terms of the Contribution Agreement, on the Closing Date Prudential was issued 4,529,037 Units and entered into the partnership agreements of SLT and SLC. Immediately following the issuance of such Units, Prudential exchanged 2,775,000 of such Units for 2,775,000 Paired Shares. As described in Item 4 above, the Contribution Agreement (i) obligates the Trust to nominate and support for election to the board of trustees of the Trust Gary M. Mendell, the President of the Trust (and one of the indirect owners of the Property Companies prior to the Closing Date), and Roger S. Pratt, a managing director of Prudential and (ii) grants Prudential the right to continue to be entitled to designate one representative to be nominated for election to the board of trustees of the Trust at any annual or special meeting of the shareholders of the Trust called for the purpose of electing trustees for so long as Prudential maintains the Minimum Share Ownership. The foregoing description of the Contribution Agreement is qualified in its entirety by reference to the Contribution Agreement, a copy of which is filed as Exhibit I hereto and is incorporated herein by reference. Page 7 of 14 Pages Prudential also entered into a Registration Rights Agreement (the "Registration Rights Agreement") dated as of February 14, 1997 among the Trust, the Corporation, Prudential and the persons listed on the signature pages thereto. Pursuant to the terms of the Registration Rights Agreement, the Trust and the Corporation have agreed, prior to the date that is six months after the date of the Registration Rights Agreement, to file a registration statement under Rule 415 of the Securities Act of 1933, as amended, registering the Paired Shares to be issued to Prudential and the other parties to the Registration Rights Agreement upon the exchange of the Units issued to them pursuant to the Contribution Agreement. The Trust and the Corporation agree in the Registration Rights Agreement to use their reasonable efforts to keep such registration statement effective until all of the Paired Shares covered thereby have been sold. In the event that the Trust and the Corporation are unable to cause such registration statement to be declared effective or are unable to keep such registration statement effective for such period, Prudential and the other parties thereto have been granted certain other demand, shelf and piggyback registration rights as set forth therein. The foregoing description of the Registration Rights Agreement is qualified in its entirely by reference to such Registration Rights Agreement, a copy of which is filed as Exhibit III hereto and is incorporated herein by reference. Prudential also entered into a Units Exchange Rights Agreement (the "Exchange Rights Agreement") dated as of February 14, 1997 among the Trust, the Corporation, SLT, SLC, Prudential and the persons listed on the signature pages thereto. Pursuant to the terms of the Exchange Rights Agreement, Prudential has the right to tender the Units owned by it to the Trust and the Corporation. Not later than fifteen days after such tender, the Trust and the Corporation shall elect to pay for such Units by delivering to Prudential either (i) Paired Shares (based on a one Unit for one Paired Share exchange ratio), (ii) cash (based on the average closing price for Paired Shares for the ten trading day period ending one day prior to the date of such tender) or (iii) a combination of Paired Shares and cash. Under no circumstances may Paired Shares or cash be issued or paid in respect of any tender of Units if, among other things: (i) such issuance or payment would result in any entity owning Paired Shares in excess of 8% of the outstanding Paired Shares, (ii) such issuance or payment would result in the Trust not satisfying certain requirements under the Internal Revenue Code of 1986, as amended (the "Code"), with respect to the qualification of the Trust under the Code as a real estate investment trust or (iii) if certain regulatory approvals, including without limitation approvals of the gaming authorities of the State of Nevada and Clark County, Nevada, with respect to such issuance and payment have not been obtained. The foregoing description of the Exchange Page 8 of 14 Pages Rights Agreement is qualified in its entirety by reference to the Units Exchange Rights Agreement, a copy of which is filed as Exhibit IV hereto and is incorporated herein by reference. The filing of this Statement should not be construed as an admission that Prudential is or was for the purposes of Section 13 or Section 16 of the Securities Exchange Act of 1934, as amended, the beneficial owner of the Paired Shares listed herein ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit No. Description ----------- ----------- I Contribution Agreement dated as of January 15, 1997 II Purchase Money Promissory Note dated as of February 14, 1997 III Registration Rights Agreement dated as of February 14, 1997 IV Units Exchange Rights Agreement dated as of February 14, 1997 Page 9 of 14 Pages Signature After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. February 24, 1997 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Roger S. Pratt ----------------------- Name: Roger S. Pratt Title: Vice President Page 10 of 14 Pages SCHEDULE A Additional information required by Item 2 of Schedule 13D. Set forth below is the name and business address of each executive officer or director of Prudential. Each of such persons is a citizen of the United States of America, except that Richard M. Thomson is a citizen of Canada. DIRECTORS Name Principal Occupation/ Address Title - ---- --------------------- ------- Franklin E. Agnew Business Consultant USX Tower Suite 660 600 Grant Street Pittsburgh, PA 15219 Frederic K. Becker President Wilentz Goldman & Spitzer 90 Woodbridge Center Drive Suite 900 Woodbridge, NJ 07095 William W. Boeschenstein Former Chairman & CEO Owens-Corning Fiberglas Corporation One Seagate, Suite 1530 Toledo, OH 43604 Lisle C. Carter, Jr. Former Senior Vice The Prudential Insurance President and General Company of America Counsel, United Way of Prudential Plaza America 751 Broad Street Newark, NJ 07102 James G. Cullen Vice Chairman Bell Atlantic Corp. 1310 North Court House Road 11th Floor Arlington, VA 22201 Carolyne K. Davis Health Care Advisor Ernst & Young 1225 Connecticut Avenue, NW Washington, DC 20036 Roger A. Enrico Chief Executive Officer PespiCo 700 Anderson Hill Road Purchase, NY 10577 Allan D. Gilmour Former Vice Chairman, The Prudential Insurance Ford Motor Company Company of America 751 Broad Street Newark, NJ 07102 William H. Gray III President and CEO United Negro College Fund, Inc. 8260 Willow Oaks Corp. Drive P.O. Box 10444 Fairfax, VA 22031-4511 Page 11 of 14 Pages Jon F. Hanson Chairman Hampshire Management Company 235 Moore Street, Suite 200 Hackensack, NJ 07601 Constance J. Horner Guest Scholar The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036-2188 Allen F. Jacobson Former Chairman and CEO Minnesota Mining & Manufacturing (3M) 3050 Minnesota World Trade Center 30 Seventh Street East St. Paul, MN 55101-4901 Burton G. Malkiel Professor Princeton University Dept. of Economics 110 Fisher Hall Prospect Avenue Princeton, NJ 08544-1021 Arthur F. Ryan Chairman, CEO and The Prudential Insurance President Company of America 751 Broad Street Newark, NJ 07102 Charles R. Sitter Former President Exxon Corporation 5959 Las Colinas Boulevard Irving, TX 75039-2298 Donald L. Staheli Chairman and CEO Continental Grain Company 277 Park Avenue New York, NY 10172 Richard M. Thomson Chairman and CEO The Toronto-Dominion Bank P.O. Box 1 Toronto-Dominion Centre Toronto, Ontario Canada M5K 1A2 James A. Unruh Chairman and CEO Unisys Corporation Township Line and Union Meetings Roads P.O. Box 500 Blue Bell, PA 19424-0001 P. Roy Vagelos, M.D. Former Chairman and CEO Merck & Co., Inc. One Crossroads Drive Building A, 3rd Floor Bedminster, NJ 07921 Stanley C. Van Ness, Esq. Counselor at Law Picco Herbert Kennedy One State Street Square Suite 1000 Trenton, NJ 08607-1388 Paul A. Volcker Chairman and CEO Wolfensohn & Co., Inc. 599 Lexington Avenue New York, New York 10022 Joseph H. Williams Director The Williams Companies, Inc. One Williams Center Tulsa, OK 74172 Page 12 of 14 Pages EXECUTIVE OFFICERS Name Principal Occupation/ Address Title - ---- --------------------- ------- Arthur F. Ryan Chairman of the Board, The Prudential Insurance Chief Executive Company of America Officer and President Prudential Plaza 751 Broad Street Newark, NJ 07102-3777 E. Michael Caulfield Chief Executive Officer, The Prudential Insurance Money Management Group Company of America Prudential Plaza 751 Broad Street Newark, NJ 07102-3777 Michele Darling Executive Vice President, The Prudential Insurance Human Resources Company of America Prudential Plaza 751 Broad Street Newark, NJ 07102-3777 Mark B. Grier Chief Financial Officer The Prudential Insurance Company of America Prudential Plaza 751 Broad Street Newark, NJ 07102-3777 Roger A. Lawson Executive Vice President, The Prudential Insurance Marketing and Planning Company of America Prudential Plaza 751 Broad Street Newark, NJ 07102-3777 John V. Scicutella Operations and Systems The Prudential Insurance Executive Officer Company of America Prudential Plaza 751 Broad Street Newark, NJ 07102-3777 William F. Yelverton Chief Executive Officer, The Prudential Insurance Individual Insurance Company of America Group Prudential Plaza 751 Broad Street Newark, NJ 07102-3777 Page 13 of 14 Pages EXHIBIT INDEX Exhibit No. Exhibit Name Page No. ----------- ------------ -------- I Contribution Agreement dated as of January 15, 1997 II Purchase Money Promissory Note dated as of February 14, 1997 III Registration Rights Agreement dated as of February 14, 1997 IV Units Exchange Rights Agreement dated as of February 14, 1997 Page 14 of 14 Pages EX-1 2 CONTRIBUTION AGREEMENT ================================================================================ CONTRIBUTION AGREEMENT DATED AS OF JANUARY 15, 1997 BY AND AMONG SLT REALTY LIMITED PARTNERSHIP SLT FINANCING PARTNERSHIP SLC OPERATING LIMITED PARTNERSHIP STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION AND THE INDIVIDUALS AND ENTITIES SET FORTH ON SCHEDULES A-1 AND 1-2 HERETO WHO ARE SIGNATORIES TO THIS AGREEMENT ================================================================================ TABLE OF CONTENTS ARTICLE I DEFINITIONS 1.01 Property...................................................2 1.02 Certain Other Definitions..................................3 ARTICLE II CONTRIBUTION; CONSIDERATION; DEPOSIT 2.01 Agreement to Contribute...................................11 2.02 Reserved..................................................12 2.03 Consideration for Contribution............................12 2.04 [Reserved]................................................12 2.05 Deposit...................................................12 ARTICLE III TITLE 3.01 Title to Property.........................................13 ARTICLE IV NET WORKING CAPITAL ADJUSTMENT 4.01 Net Working Capital Adjustment............................15 (a) Estimated Closing Balance Sheet.....................15 (b) Adjustment..........................................15 (c) Final Closing Balance Sheet.........................16 (d) Independent Auditor.................................16 (e) Final Adjustment....................................17 4.02 Errors....................................................17 ARTICLE V [Reserved] ARTICLE VI RISK OF LOSS 6.01 Risk of Loss..............................................18 6.02 Casualty..................................................18 6.03 Eminent Domain............................................18 6.04 Elections Upon Casualty or Eminent Domain.................18 (a) Minor Loss..........................................18 (b) Substantial Loss....................................18 (c) Major Casualty Damage...............................19 6.05 Adjustment Amount.........................................19 ARTICLE VII REPRESENTATIONS AND WARRANTIES 7.01 Contributing Party's Representation and Warranties........20 (a) Subsidiaries and Investments........................20 (b) Property Company Capitalization; Title to Property Company Interests ..................................20 (c) Tax Matters.........................................21 (d) Insurance...........................................23 (e) Single-Purpose Entity...............................23 (f) Leases..............................................23 2 (g) Compliance With Laws................................23 (h) Contracts...........................................24 (i) Employees...........................................24 (j) No Pending Condemnation Proceedings.................24 (k) Real Estate Taxes...................................24 (l) No Other Interests..................................24 (m) No Litigation.......................................24 (n) No Further Action; Execution and Delivery...........24 (o) Good Standing.......................................25 (p) Proprietary Rights..................................25 (q) Financial Statements................................25 (r) Events Subsequent to November 28, 1996..............25 (s) Absence of Undisclosed Liabilities..................26 (t) No "Foreign Person".................................26 (u) Environmental Matters - No Violations...............26 (v) Environmental Matters - Environmental Claims........27 (w) [Reserved]..........................................27 (x) Investment Representation...........................27 (y) Binding Effect......................................28 (z) Status of Constituent Documents.....................28 7.02 The Partnerships' Representations and Warranties..........28 (a) Power and Authority Non-contravention, Investment...28 (b) Good Standing.......................................29 (c) Binding Effect......................................29 (d) Status of the Constituent Documents.................29 (e) No Litigation; Proceedings..........................29 (f) Units...............................................29 (g) Financial Statements; Undisclosed Liabilities.......30 (h) Conduct in the Ordinary Course of Business..........30 (i) ERISA Matters.......................................30 7.03 The Corporation's Representation and Warranties...........31 (a) Power and Authority, Non-contravention..............31 (b) Good Standing.......................................31 (c) Binding Effect......................................31 (d) Status of the Constituent Documents.................31 (e) No Litigation; Proceedings..........................31 (f) Capitalization......................................31 (g) Financial Statements; Undisclosed Liabilities.......32 (h) Conduct in the Ordinary Course of Business..........32 (i) SEC Documents.......................................32 (j) Reservation of Shares...............................32 (k) ERISA Matters.......................................33 7.04 The Trust's Representations and Warranties................33 (a) Power and Authority, Non-contravention..............33 (b) Good Standing.......................................33 (c) Binding Effect......................................33 (d) Status of the Constituent Documents.................33 3 (e) No Litigation; Proceedings..........................34 (f) Capitalization......................................34 (g) Financial Statements; Undisclosed Liabilities.......34 (h) Conduct in the Ordinary Course of Business..........34 (i) SEC Documents.......................................35 (j) Reservation of Shares...............................35 (k) ERISA Matters.......................................35 ARTICLE VIII CONDITIONS 8.01 Conditions to the Partnerships' Obligations...............35 (a) Exchange Rights Agreement...........................35 (b) HEI Contribution....................................35 (c) No Material Misrepresentation etc...................36 (d) Title to Property...................................36 (e) Contributing Parties' Proceedings...................36 (f) Contributing Party's Performance, Consents..........36 (g) Licenses............................................37 (h) Franchise License Agreements........................37 (i) Notices.............................................37 (j) ERISA Limitations...................................37 8.02 Conditions to Contributing Party's Obligations............37 (a) The Starwood Parties' Proceedings...................38 (b) The Starwood Parties' Performance...................38 (c) No Material Misrepresentation etc...................38 (d) Exchange Rights Agreement...........................38 (e) Registration Rights Agreement.......................38 (f) [Reserved]..........................................38 (g) HEI Contribution....................................38 (h) [Reserved]..........................................38 (i) Partnership Amendments..............................38 (j) ERISA Limitations...................................39 ARTICLE IX DOCUMENTS 9.01 The Contributing Parties' Closing Deliveries..............40 (a) Assignment of Property Company Interests............40 (b) Confirmation of Distribution of Contributed Assets..40 (c) Bills of Sale and General Assignment................40 (d) Affidavits Regarding Authority, "Foreign Person"....40 (e) Title Requirements..................................40 (f) Transfer Tax Returns................................40 (g) [Reserved]..........................................40 (h) Pay-Off Letters.....................................41 (i) Good Standing Certificate...........................41 (j) Others as Reasonably Required.......................41 9.02 The Partnerships Closing Deliveries.......................41 (a) Good Standing Certificate...........................41 (b) Partnership Amendments..............................41 4 (c) Affidavit...........................................41 (d) Others as Reasonably Required.......................41 9.03 Closing Deliveries by the Trust and the Corporation.......41 (a) Good Standing.......................................41 (b) Paired Shares.......................................41 (c) Affidavit...........................................42 (d) Others as Reasonably Required.......................42 ARTICLE X COSTS 10.01 Transaction Costs.........................................42 ARTICLE XI BROKERAGE 11.01 Broker....................................................42 ARTICLE XII SCHEDULES, CLOSING, "AS IS" 12.01 Schedules.................................................43 12.02 Access....................................................43 (a) Access - Partnerships...............................43 (b) Access - Contributing Parties.......................43 12.03 Certain Definitions.......................................44 12.04 Deliveries................................................44 12.05 Effect of Inspections, "As Is"............................44 (c) [Reserved]..........................................45 12.06 Delivery of Property Company Records......................45 12.07 The Partnerships' Indemnification.........................45 12.08 Date and Location Closing.................................46 ARTICLE XIII EARNEST MONEY, DEFAULT AND REMEDIES 13.01 Duties of Escrow Agent....................................46 (a) Earnest Money Deposits..............................46 (b) Disputes............................................46 (c) Costs...............................................46 (d) Limited Duties......................................46 (e) Liability...........................................46 13.02 Default...................................................47 (a) Contributing Parties Default........................47 (b) Starwood Parties' Default...........................47 (c) [Reserved]..........................................48 ARTICLE XIV INDEMNIFICATION 14.01 Survival..................................................48 14.02 Indemnification by Contributing Parties...................48 14.03 Indemnification by Starwood Parties.......................49 14.04 Procedures................................................51 ARTICLE XV FURTHER ASSURANCES 5 15.01 Further Assurances........................................54 ARTICLE XVI PRE-CLOSING OPERATIONS 16.01 Contributing Party's Conduct of Business..................54 16.02 On-Site Representative....................................55 ARTICLE XVII NOTICES 17.01 Procedure for Notice......................................55 ARTICLE XVIII ADDITIONAL COVENANTS 18.01 Board Representation......................................57 18.02 Obligation of the Contributing Parties As to Closing Conditions...............................................58 18.03 Obligation of The Starwood Parties As to Closing Conditions...............................................58 ARTICLE XIX [RESERVED] ARTICLE XX MISCELLANEOUS 20.01 Modifications and Waivers.................................58 20.02 Governing Law.............................................58 20.03 Captions etc..............................................58 20.04 Rules of Construction.....................................59 20.05 Successors and Assigns....................................59 20.06 Entire Agreement..........................................59 20.07 Counterparts..............................................59 20.08 Starwood Lodging Trust....................................59 20.09 Confidentiality and Exclusivity...........................59 20.10 Joint Liability...........................................60 20.11 Press Releases............................................60 20.12 Expiration................................................60 LIST OF SCHEDULES...............................................63 LIST OF EXHIBITS................................................65 6 CONTRIBUTION AGREEMENT THIS AGREEMENT is made and entered into as of , by and among SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership ("SLT"), SLT FINANCING PARTNERSHIP, a Delaware general partnership ("SLT Financing") and SLC OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership ("SLC", and together with SLT and SLT Financing, the "Partnerships"), STARWOOD LODGING TRUST, a Maryland real estate investment trust (the "Trust"), STARWOOD LODGING CORPORATION, a Maryland corporation (the "Corporation"), the individuals and entities listed on Schedule A-1 attached hereto and made a part hereof (each a "Contributing Party" and collectively, the "Contributing Parties") and the entities set forth on Schedule A-2 attached hereto and made a part hereof (each a "Property Company" and collectively, the "Property Companies"), each of whom are parties to this Agreement as evidenced by their execution hereof. RECITALS A. The Contributing Parties are the direct or indirect owners of the limited liability company membership interests, limited partnership interests (as general or limited partners), joint venture interests or general partnership interests, as applicable, in the respective Property Companies as set forth opposite each Contributing Party's name on Schedule A-1 (collectively, the "Property Company Interests"). B. The Property Companies are the owners of ten (10) hotels and the related real and personal property, both tangible and intangible, all as more particularly described in Article I below (each a "Hotel" and collectively, the "Hotels"). Each Property Company owns the Hotel set forth opposite its name on Schedule A-2 attached hereto. C. The Partnerships, the Trust and the Corporation (collectively, the "Starwood Parties") and the Contributing Parties desire to provide for the following transactions to be effected simultaneously but in the order set forth below, all upon the terms and conditions herein set forth: (1) The Contributing Parties desire to cause the Property Companies to distribute to the Contributing Parties certain tangible and intangible personal property assets owned by the Property Companies in connection with the operation of the Hotels, as such assets are more particularly described on Schedule B attached hereto (the "Contributed Assets") and SLC desires to acquire from the Contributing Parties such Contributed Assets for the purpose of operating the Hotels in exchange for limited partnership interests in SLC as set forth on Schedule B and the Contributing Parties desire to contribute such assets to SLC and to receive such consideration therefor all upon the terms and conditions herein set forth. (2) Certain Contributing Parties which are entities which are direct owners of Hotel Company Interests shall distribute such Hotel Company Interest to the Contributing Parties which own interests in such entities. (3) SLT Financing desires to acquire from the Contributing Parties the Property Company Interests described on Schedule C attached hereto and the Contributing Parties desire to transfer such Property Company Interests to SLT Financing all upon the terms and conditions herein set forth. (4) SLT desires to acquire from the Contributing Parties the Property Company Interests described on Schedule D attached hereto in exchange for cash and limited partnership interests in SLT as set forth in Schedule D and the Contributing Parties desire to contribute such Property Company Interests to SLT and to receive such consideration therefor all upon the terms and conditions herein set forth. (5) The Contributing Parties desire to immediately upon closing convert a portion of the limited partnership interests in SLT and SLC received pursuant hereto into Paired Shares (as defined below) as more particularly set forth on Schedule E attached hereto. D. The Trust, on behalf of the Trust and on behalf of SLT (as the general partner of SLT), and the Corporation, on behalf of the Corporation and on behalf of SLC (as the managing general partner of SLC), entered into a letter of intent with HEI Hotels, LLC and The Prudential Insurance Company of America on behalf of Prudential Property Investment Separate Account II, collectively on behalf of the Contributing Parties, which letter of intent is dated December 9, 1996 (the "Letter of Intent"), regarding the transactions contemplated in this Agreement and the HEI Contribution Agreement (as hereinafter defined). Upon execution of this Agreement and the other Transaction Documents (as defined below) this Agreement and the other Transaction Documents shall supersede the terms and provisions of the Letter of Intent. IN CONSIDERATION of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement, intending to be bound legally and equitably, agree as follows: ARTICLE I DEFINITIONS 1.1 Property. The term "Property" means and includes with respect to each Property Company, such Property Company's right title and interest in and to: (a) the land described in Schedule 1.01 hereto designated thereon as owned by such Property Company, together with all right, title and interest in and to any land lying in the bed of any street, road, avenue or alleyway open, proposed or closed in front of or adjoining such land, and all right, title and interest in and to any strips, gores, easements, rights of way, riparian rights and privileges belonging to or inuring to the benefit of such land and all right, title and interest in and to any tenements, hereditaments and appurtenances belonging or in anywise appertaining to any or all of the aforesaid (the "Land"), (b) all buildings, structures and improvements now or hereafter erected or situate on, over or beneath the Land, including, but not limited to, the Hotels (the "Buildings"), (c) the Tenant Leases (the Land, the Buildings and the Tenant Leases are sometimes collectively referred to herein as the "Real Property"), (d) the FF&E, (e) the 2 Inventory and other tangible personal property now or hereafter situate on, attached or appurtenant to or used in connection with the Land and/or the Buildings (collectively, with the FF&E, the "Tangible Personal Property"), (e) the Intangible Property, (I) the Contracts, (g) the Proprietary Rights, and (h) the Miscellaneous Interests, and in all cases whether owned by such Property Company as of the date of this Agreement or acquired by such Property Company prior to the Closing Date (defined below). 1.2 Certain Other Definitions. (a) "ADA" means the Americans with Disabilities Act, as amended. (b) "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Exchange Act. (c) "Assumed Debt" means those mortgage loan obligations of certain of the Property Companies as set forth on Schedule 1.02(c). (d) [Reserved] (e) "Business Day" means any day other than Saturdays, Sundays and legal holidays on which federal banks are not open for business. (f) "Closing" and "Closing Date" are defined in Section 12.08. (g) "Code" means the Internal Revenue Code of 1986, as amended. (h) "Closing Value" of an OP Unit shall mean the greater of (i) the average closing price of a Paired Share as reported as of the close of trading on the New York Stock Exchange on the five (5) trading days immediately preceding the date of Closing, or (ii) $49.25. (i) [Reserved] (j) "Constituent Documents" means: (1) with respect to any Person that is a limited partnership: (i) its agreement of limited partnership; (ii) its certificate of limited partnership; (iii) any amendments or supplements to items (i) and (ii); and (iv) any other certificate or instrument required to be filed in the jurisdiction of formation of such Person to evidence the formation or continued existence thereof; (2) with respect to any Person that is a limited liability company: (i) the operating agreement for such Person; (ii) the certificate of formation for such Person; (iii) any amendments or supplements to the items described in clauses (i) and (ii) above; and (iv) any other certificate or instrument required to be filed in the jurisdiction of formation of such Person to evidence the formation or continued existence thereof; 3 (3) with respect to a Person that is a corporation: (i) its articles of incorporation; (ii) its by-laws; (iii) any amendments or supplements to the items described in clauses (i) and (ii); and (iv) any other certificate or instrument required to be filed in the jurisdiction of formation of such Person to evidence the formation or continued existence thereof; (4) with respect to any Person that is a general partnership or joint venture, the agreement of general partnership or joint venture agreement for such person and any amendments or modifications thereto; and (5) with respect to any Person that is a trust: (i) the declaration of trust for such Person; (ii) the trust regulations, if any, pertaining thereto; (iii) any amendment or supplement to the items set forth in clauses (i) and (ii) above; and (iv) any other certificate or instrument required to be filed in the jurisdiction of formation of such Person to evidence its formation or continued existence. (k) "Contracts" means with respect to each Property Company, the interest of such Property Company in: (1) those future reservations and advance bookings for the use of all or any part of the Property, involving aggregate payments to the Property Company of $25,000 or more in any 12 month period, and (2) those other agreements, utility contracts, leases (other than Tenant Leases), concession agreements, the License Agreements, service contracts, and commitments which have an aggregate unpaid balance of $25,000.00 or more by the Property Company or are not terminable without payment of any fee or penalty on sixty (60) days or less notice. (l) "Contributed Assets" is defined in Recital C(1). (m) "Corporation Shares" has the meaning given in Section 7.03(f). (n) "Deposit" has the meaning given in Section 2.05. (o) "Eligible Investment" has the meaning given in Section 2.04(b). (p) "Environmental Laws" means and includes any law or regulation of any federal, state or local governing or administrative body relating to pollution or protection or cleanup of the environment (including, but not limited to, ambient air, surface water, groundwater, land surface or subsurface strata) including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the Resources Conservation and Recovery Act of 1976, as amended ("RCRA") and other such Legal Requirements relating to (i) release, containment, removal, remediation, response, cleanup or abatement of any sort of hazardous substance, pollutant, contaminant or waste, (ii) the manufacture, generation, formulation, processing, labeling, distribution, introduction into commerce, use, treatment, handling, storage, disposal or transportation of any chemical or toxic 4 substance or (iii) the management, use, storage, disposal, cleanup or removal of asbestos, asbestos-containing materials, polychlorinated biphenyls or any other chemical or toxic substance. (q) "Environmental Reports" has the meaning given in Section 7.01(u). (r) "Equipment Leases" means, with respect to each Property Company, any leases to which such Property Company is a party for telephone systems, computer systems, electronic door lock systems, mini bars and other equipment and systems used in connection with the Hotels. (s) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations, interpretations and exemptions promulgated thereunder. (t) "Evaluation Materials" has the meaning given in Section 2.04(c). (u) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (v) "Excluded Liabilities" is defined in Section 8.02(i). (w) "FF&E" means with respect to each Property Company, the interest of such Property Company in, all fixtures, furniture, furnishings, fittings, equipment, computer hardware, machinery, apparatus, artwork, appliances, and audio/visual equipment and used in connection with the ownership, operation and maintenance of the Hotels owned by such Property Company (other than the Inventory). FF&E shall also include funds in the aggregate amount of Two Million Nine Hundred Thousand Dollars ($2,900,000.00), subject to adjustment as provided for below, as a reserve for scheduled calendar year 1997 FF&E expenditures for all of the Hotels; provided, however, that such sum shall be adjusted at Closing: (1) upwards to reflect the aggregate amount then unpaid for certain FF&E expenditure items budgeted for the Hotels with respect to calendar year 1996, as such items are described on Schedule 1.02(w), and (2) downwards to reflect any amount expended prior to Closing for certain FF&E expenditure items budgeted for the Hotels with respect to calendar year 1997, as such items are described on Schedule 1.02(w); i.e., such sum assumes that at Closing all FF&E expenditures budgeted for 1996 will have been paid and no FF&E expenditures budgeted for 1997 will have been paid. (x) "Financial Statements" is defined in Section 7.01(q). (y) "GAAP" means United States generally accepted accounting principles, applied on a consistent basis. (z) "Government Entity" means any federal, state or municipal governmental or quasi governmental body or agency or any subdivision thereof. 5 (aa) "HEI" means HEI Hotels, LLC, a Delaware limited liability company. (ab) "HEI Contribution Agreement" means the Contribution Agreement of even date herewith between the Partnerships, HEI and the other parties thereto for the contribution of the "HEI Business" (as defined therein) to the Partnerships pursuant to the terms thereof. (ac) "HEI Contribution" has the meaning set forth in the HEI Contribution Agreement. (ad) "Intangible Property" means with respect to each Property Company all use, occupancy, liquor and other operating permits and licenses relating thereto used in connection with the Property owned by such Property Company; the interest of the Property Company in all information and reservation systems owned by such Property Company, including all computer programs, software and documentation thereof relating to such systems (subject to the limitations of any applicable license agreements pertaining thereto), and including all electronic data processing systems, program specifications, source codes, logs, input data and report layouts and forms, record file layouts, diagrams, functional specifications and narrative descriptions, flow-charts and other related materials used in connection therewith; and all contract rights. The Intangible Property shall not include any rights to the name "Prudential" or any derivative thereof. (ae) "Inventory" means with respect to each Property Company, all merchandise, inventories, materials and supplies used or intended for use at or held for sale in connection with the operation of the Hotel and owned by such Property Company (and not by tenants or concessionaires) including, without limitation: (i) All beer, wine, spirits and other alcoholic and non-alcoholic beverages (to the extent the same may be legally transferred to the Partnerships); (ii) Food inventory, china, silverware, glassware and other kitchen supplies and equipment; (iii) Office and engineering supplies; (iv) Housekeeping and other cleaning supplies, paper and other supplies including, but not limited to, stationery, toilet paper, writing pens, and menus; (v) Towels, linens, bedding and other guest room supplies, including without limitation, bathing and personal hygiene supplies; (vi) Inventory stocks of furniture, furnishings, carpeting, drapery fabrics and wall coverings; 6 (vii) Supplies used with respect to any recreational facility comprising a portion of the Property; and (viii)Inventories at all sundry shops or other retail outlets located in or comprising a portion of the Real Property. (af) "Investments" means, with respect to any Person, any direct or indirect purchase or other acquisition by such Person of any notes, obligations, instruments, stock, securities or other ownership or beneficial interest (including, without limitation, partnership interests and joint venture interests) in any other Person, and any capital contribution by such Person to any other Person. (ag) "Knowledge" as to the Starwood Parties shall mean the present actual knowledge of Steve Goldman or any of the other persons identified on Schedule 1.02(gg) with respect to the Starwood Parties, and as to the Contributing Parties shall mean the present actual knowledge of Gary Mendell or any of the other persons identified on Schedule 1.02(gg) with respect to the Contributing Parties. As used herein, "Knowledge" of a breach of any covenant, representation or warranty means the actual knowledge of any such individual of the fact or circumstance which constitutes such a breach, whether or not such individual actually knows such fact or circumstance does constitute a breach of this Agreement or the other Transaction Documents. (ah) "Legal Requirements" means all federal, state and local laws, statutes, ordinances, rules and regulations affecting or in any way relating to the Property or its operation, including, without limitation any Environmental Laws, ADA and the Occupational Safety and Health Act of 1970 as amended. (ai) "Liabilities" means any liability, obligation, cost or expense of any nature whatsoever, whether now known or unknown, asserted or unasserted, accrued or unaccrued, liquidated or unliquidated or due or to become due, including, without limitation, any liability in respect of any Taxes or other Legal Requirements. (aj) "License Agreement" means with respect to each Property Company, the franchise and license agreement to which such Property Company is a party as identified opposite its name on Schedule 1.02(jj). (ak) "Lien" means any lien, pledge, encumbrance, security agreement, conditional sale agreement or other title retention device. (al) "Management Agreement" means with respect to each Property Company, the hotel management agreement to which HEI and such Property Company are parties as identified on Schedule 1.02(ll) and "Manager" means HEI in such capacity under the applicable Management Agreement. (am) "Minimum Share Ownership" means either (i) ownership by PRISA II of a total number of SLT OP Units and SLC OP Units plus Paired Shares which (in the aggregate) equals fifty percent (50%) or more of the aggregate number of SLT OP Units, SLC 7 OP Units and Paired Shares (if any) received by PRISA II at Closing as a part of the Contribution Amount, or (ii) that PRISA II is one of the five largest shareholders of the Trust on a fully diluted basis (assuming, for purposes of such calculation, that all outstanding SLT OP Units and SLC OP Units (other than those owned by the Trust and the Corporation) have been converted into Paired Shares). (an) "Miscellaneous Interests" means with respect to each Property Company, all of such Property Company's right, title and interest in and to (i) the business operations conducted by such Property Company directly or through agents with, in or upon the Land, Buildings and/or Tangible Personal Property (the "Hotel Business") including, without limitation, the good will pertaining thereto, (ii) all promotional and advertising literature and materials, catalogs, booklets, manuals, records, guest, tenant and supplier lists and correspondence with guests, tenants and/or suppliers, (iii) transferable telephone exchange numbers, (iv) originals (or, where appropriate, copies) of all financial, personnel and other books, records and files wherever located and held by or on behalf of such Property Company or its agents in connection with the Property, including without limitation, copies thereof in computer readable form (where available) and (v) all other assets, properties, rights and claims of the Property Companies which are used or held for use in connection with the Property and/or the Hotel Business including, without limitation, guest histories and the Hotels' sales and marketing plans. (ao) "Net Working Capital" means as to each Property Company, the aggregate amount as of the Closing Date of (i) all such Property Company's cash, cash equivalents, accounts receivable and other current assets, minus (ii) the aggregate amount of all such Property Company's accounts payable and all other current liabilities, with all such items defined and measured in accordance with GAAP, applied consistently with the Financial Statements for such Property Company. If any item on (or which, under GAAP, should be reflected on) the Financial Statements for such Property Company is not reflected in accordance with GAAP, Net Working Capital for such Property Company will nonetheless be computed in accordance with GAAP. In computing Net Working Capital, all accounting entries will be taken into account regardless of their amount, all known errors and omissions will be corrected and all known proper adjustments will be made. (ap) "New Encumbrances" has the meaning given in Section 3.01(b). (aq) "Ownership Limitation" means the limitations contained in the declaration of trust for the Trust and the Corporation's articles of incorporation prohibiting actual or constructive ownership by any one person or group of related persons of more than 8% of the issued and outstanding Paired Shares taking into account the attribution rules of Section 544(a) of the Code as modified by Section 856(h) of the Code or Section 318(a) of the Code as modified by Section 856(d)(5) of the Code. (ar) "Paired Shares" means one common share of beneficial interest, par value $.01 per share of the Trust and one share of common stock, par value $.01 per share, of the Corporation that are subject to a pairing agreement between the Trust and the Corporation. 8 (as) "Pairing Agreement" means the Pairing Agreement dated as of June 25, 1980, as amended, between the Trust and the Corporation providing, in relevant part, for the pairing of all outstanding Trust Shares and Corporation Shares and requiring, as a condition of transfer, that Trust Shares are transferable only together with an equal number of Corporation Shares and that Corporation Shares are transferable only together with an equal number of Trust Shares. (at) "Partnership Agreements" means the limited partnership agreements for SLC and SLT, including any amendments thereto. (au) "Permitted Encumbrances" has the meaning given in Section 3.01(b). (av) "Person" means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a Governmental Entity. (aw) "PRISA II" means The Prudential Insurance Company of America on behalf of Prudential Property Investment Separate Account II. (ax) [Reserved] (ay) "Proprietary Rights" means, with respect to any Property Company, such Property Company's interest in the following (other than such interest held under a License Agreement): all patents and applications therefor, all trademarks, trademark registrations and applications therefor, all copyrights, copyright registrations and applications owned or held by such Property Company in connection with its Hotel, including, without limitation, those listed on Schedule 1.02(yy) hereto and the right to use the names of the Hotels and their restaurants, dining and meeting rooms (other than pursuant to a License Agreement). (az) "Pursuit Costs" is defined in Section 3.01(d). (ba) "Plan Asset Regulation" is defined in Section 7.02(f). (bb) "SEC Documents" means copies of all reports and statements jointly filed by the Trust and the Corporation with the Securities and Exchange Commission ("SEC") since January 1, 1995. (bc) "Securities Act" means the Securities Act of 1933, as amended. (bd) "Single-Purpose Entity" means a corporation, general or limited partnership or limited liability company which was organized solely for the purpose of owning a Hotel and at all times since its formation: (i) has not engaged in any material business or owned material assets unrelated to such Hotel; 9 (ii) if such entity is a limited partnership, has as its only general partners (A) general partners which were organized solely for the purpose of owning such general partnership interest and which at all times since their formation have not engaged in any material business or owned any material assets unrelated to such general partnership interest, or (B) PRISA II; (iii) has maintained its accounts, books and records separate from any other Person; (iv) subject to the rights and interests of Manager under the applicable Management Agreement for such Hotel (including such rights in or with respect to any accounts for such Hotel), has not commingled its funds or assets with those of any other Person; (v) has conducted its business in its name except for the use of the name of the Hotel and other tradenames in the conduct of its business, which tradenames are set forth on Schedule 1.02(ddd); (vi) has maintained its financial statements and accounting records separate from any other Person; (vii) has paid or reimbursed, directly or through Manager or other independent contractors acting on its behalf, its own liabilities out of its own funds and assets; (viii) has complied in all material respects with the requirements of its Constituent Documents and other applicable corporate, limited liability company or partnership formalities; (ix) has held and identified itself as a separate and distinct entity under its own name (except as provided in clause (v) above) and not as a division or part of any other Person or entity; and (x) has not made loans to or guaranteed the loans or other obligations of any Person or entity. (be) "SLC OP Units" has the meaning given in Section 2.03. (bf) "SLT OP Units" has the meaning given in Section 2.03. (bg) "Starwood Parties" is defined in Recital C. (bh) "Subsidiary" means any Person with respect to which a specified Person has the power to vote or direct the voting of sufficient securities to elect a majority of the directors or persons performing similar functions or with respect to which such Person acts as a general partner or managing member or otherwise controls the day-to-day operations of such entity. 10 (bi) "Tax" means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not, and including any obligation to indemnify or otherwise assume or succeed to such tax liability of any other Person. (bj) "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. (bk) "Title Commitments" has the meaning given in Section 3.01(b). (bl) "Title Insurer" means First American Title Insurance Company. (bm) "Title Policies" has the meaning given in Section 8.01(d) . (bn) "Tenant Lease(s)" means with respect to any Hotel, any lease, license or other occupancy agreement granting to any Person (excluding HEI and the Property Company which owns such Hotel) the right to use and occupy any portion of such Hotel, other than guest room reservations or advance booking agreements entered into in the ordinary course of business or otherwise disclosed in the Schedules to this Agreement. (bo) "Transaction Documents" means this Agreement, the Exchange Rights Agreement, the Registration Rights Agreement, the HEI Contribution Agreement, the Co-Investment Agreement, and all other agreements, instruments, certificates and other documents to be entered into or delivered by any party in connection with the transactions contemplated to be consummated by any of the foregoing. (bp) "Trust Shares" has the meaning given in Section 7.04(f). (bq) "Unpermitted Title Exceptions" has the meaning given in Section 3.01(b). ARTICLE II CONTRIBUTION; CONSIDERATION; DEPOSIT 2.1 Agreement to Contribute. Each of the Contributing Parties hereby jointly and severally agrees to: (i) cause the Property Company in which such Contributing Party owns a Property Company Interest to distribute the Contributed Assets owned by such Property Company to the Contributing Parties owning such Property Company Interests in-kind in proportion to their respective Property Company Interests in such Property Company, (ii) contribute to SLC the Contributed Assets received by such Contributing Party in exchange for SLC OP Units as set forth below; (iii) contribute to SLT a portion of the Property Company 11 Interests owned by such Contributing Party in exchange for Cash and SLT OP Units as set forth below; and (iv) contribute to SLT Financing the remaining portion of the Property Company Interests owned by such Contributing Party in exchange for Cash as set forth below. 2.2 Reserved. 2.3 Consideration for Contribution. In consideration of the contribution of the Contributed Assets and Property Company Interests to the Partnerships by the Contributing Parties, the Partnerships shall cause to be delivered to the Contributing Parties at Closing the following items of value having an agreed upon aggregate value equal to Three Hundred Twelve Million Three Hundred Eighty Thousand Dollars ($312,380,000), (the "Contribution Amount"), subject to adjustment as provided in this Agreement: (1) pay cash in the amount of $80,525,000.00 (the "Cash"); (2) assume or take subject to the Assumed Debt (which shall be repayable by SLT without prepayment penalty or premium); and (3) the balance of the Contribution Amount in limited partnership interests ("OP Units") in the Partnerships (based upon $49.25 per Paired Share), consisting of an equal number of OP Units of SLT ("SLT OP Units") and OP Units of SLC ("SLC OP Units"), exchangeable, subject to the Ownership Limitation, into an equal number of Paired Shares as provided in and subject to the limitations of the Exchange Rights Agreement. The Contributing Parties shall have the right to convert a portion of the SLT OP Units and SLC OP Units so received into Paired Shares immediately following the issuance thereof in accordance with Schedule E attached hereto. The parties agree the allocation of the Contribution Amount among the Contributing Parties shall be as set forth on Schedule 2.03 and that each of the Partnerships is receiving assets with a fair market value substantially equal to the Cash and OP Units in such Partnership issued in exchange therefor. Any sales tax due upon the contribution of the Contributed Assets shall constitute a Transaction Cost (as defined in Section 10.01). 2.4 [Reserved] 2.5 Deposit. (a) The Contributing Parties acknowledge that SLT shall on the date of execution hereof make an earnest money deposit (together with any interest earned thereon, the "Initial Deposit") in the amount of Five Million Dollars ($5,000,000) with First American Title Insurance Company (the "Escrow Agent") pursuant to the terms of the escrow instructions (the "Escrow Agreement") in the form attached as Exhibit "A" hereto. Provided this Agreement has not been sooner terminated, upon the approval or deemed approval of the Schedules of this Agreement (as provided in Section 12.01), SLT shall deposit with the Escrow Agent on or prior to 6:00 P.M. (EST) on January 17, 1997 an additional $5,000,000.00 (the "Additional Deposit" and together with the Initial Deposit and any interest or other earnings on either the "Deposit"), 12 for a total deposit of $10,000,000.00. The Deposit shall be non-refundable except as provided herein. (b) If the Closing shall occur, the Deposit shall be applied to the Cash portion of the Contribution Amount. If this Agreement is terminated pursuant to Section 12.01, the Initial Deposit shall be returned by the Escrow Agreement to SLT. If the Partnerships fail or refuse to close for any reason other than (x) an uncured default by one or more of the Contributing Parties under Section 13.02 of this Agreement, (y) the failure of one or more of the conditions in Section 8.01, or (z) termination of this Agreement pursuant to Article VI, the Deposit shall be paid to the Contributing Parties, as liquidated damages as their sole and exclusive remedy for such default. If (1) one or more of the Contributing Parties fail or refuse to perform their obligations under this Agreement, or (2) if one or more of the conditions set forth in Section 8.01 is not satisfied or waived by the Partnerships, or (3) this Agreement is terminated pursuant to Article VI, then subject to the provisions of Section 13.02, the Deposit shall be refunded and repaid to SLT. (c) The Deposit shall be invested in accordance with the terms of the Escrow Agreement and interest shall accrue for the benefit of and be paid to the party to whom the Deposit is paid pursuant to this Section 2.05. (d) The duties of the Escrow Agent hereunder are purely ministerial in nature, and the Escrow Agent shall have no liability to either party so long as it acts in good faith in accordance with the provisions of the Escrow Agreement. ARTICLE III TITLE 3.1 Title to Property. (a) Prior to or contemporaneously with the execution and delivery of this Agreement, each of the Contributing Parties will deliver to SLT a copy of the most recent surveys of the Real Property as the Contributing Parties have in their possession (the "Old Surveys"). If required by the Title Insurer as a condition to the removal of any survey exceptions from the Title Policies, the Starwood Parties may obtain prior to the Closing a recertification of one or more of the Surveys or a new survey of each parcel of the Real Property, prepared by a licensed surveyor, satisfactory to SLT, and conforming to 1992 ALTA/ACSM Minimum Requirements for Urban Land Title Surveys ("New Surveys" and, together with the Old Surveys, the "Surveys"), including Table A Items Nos. 1-4 and 6-14, and such other standards as the Title Insurer may require. The Surveys shall be so certified (or recertified) to SLT, and Title Insurer in a form satisfactory to such parties. (b) The Partnerships have had a bringdown of title to the Real Property performed by the Title Insurer and shall provide copies thereof (the "Title Commitments") to the applicable Contributing Parties and shall obtain such UCC searches and other evidence of title to the Property Company Interests and the remainder of the Property as the Partnerships 13 shall deem appropriate (the "Searches"). Except as set forth on Schedule 3.01 hereto, the matters disclosed by the Title Commitments and the Old surveys are referred to herein as the "Permitted Encumbrances". The matters set forth on Schedule 3.01 shall be limited to such matters that materially impair the current use, value or continued operation of the affected Hotel and such matters are referred to as "Unpermitted Title Exceptions". Notwithstanding the foregoing, Permitted Encumbrances shall include (and Unpermitted Title Exceptions shall exclude) any and all Liens securing: (i) the Assumed Debt; (ii) unpaid real estate taxes and assessments not yet due and payable; (iii) Uniform Commercial Code vendor liens securing the non-delinquent payment for goods; and (iv) obligations of any Property Company which will be credited at Closing in the Net Working Capital adjustment provided for in Article IV, i.e., Liens securing any current liabilities of such Property Company. In the event that (i) the Searches disclose Liens or other encumbrances not disclosed by the Title Commitments or that are not otherwise Permitted Encumbrances; or (ii) the Partnerships obtain any New Surveys, or any subsequent bringdowns of the Title Commitments or the Searches, and the same disclose matters which are not disclosed by the Old Surveys, Title Commitments or the Searches and are not otherwise Permitted Encumbrances in accordance with the foregoing, the Partnerships shall promptly so notify the applicable Contributing Party, but such additional matters ("New Encumbrances") shall be Permitted Encumbrances unless objected to in writing by the Partnerships prior to Closing, in which event the matters so objected to shall be Unpermitted Title Exceptions, unless the Starwood Parties proceed to consummate the Closing transactions provided for herein notwithstanding such matters, as provided for in Section 3.01(d) below, in which event all matters disclosed to the Starwood Parties prior to Closing shall constitute Permitted Exceptions for purposes of this Agreement. (c) As to any Unpermitted Title Exceptions, the Contributing Parties shall notify the Partnerships as soon as reasonably practicable but in all events prior to Closing, whether the Contributing Parties: (i) will cause the same to be discharged or removed at or prior to Closing (whereupon the Contributing Parties will be obligated to do so); or (ii) will not cause the same to be so discharged. The Contributing Parties' failure to respond shall constitute such Contributing Parties' election to proceed under clause (ii). (d) If the Contributing Parties shall notify the Partnerships pursuant to paragraph (c)(ii) that the Contributing Parties will not cause an Unpermitted Title Exception to be discharged at or prior to Closing, or shall be deemed to have made such election, the Closing 14 shall be deferred, if necessary, to the date which is five (5) business days after receipt of such notice by the Partnerships, and the Partnerships shall notify the Contributing Parties within such five (5) business day period of the Partnerships' election in its sole discretion, either: (i) to accept title subject to such Unpermitted Title Exception(s) as the Contributing Parties shall have declined to cure, without reduction in or offset to the Contribution Amount; or (ii) to terminate this Agreement and receive a prompt refund of the Deposit; provided, however, that if any such Unpermitted Title Exception is a New Encumbrance, the Partnerships shall also be entitled to receive reimbursement by the Contributing Parties of the reasonable out-of-pocket fees and expenses actually incurred by the Starwood Parties in pursuing the transactions contemplated hereby including, without limitation: travel expenses; fees and expenses of third party service providers providing legal, accounting, engineering, or other services in connection with such pursuit; title insurance, survey and other search fees; and other customary analytical or due diligence expenses (collectively, the "Pursuit Costs") up to an amount not to exceed One Million Dollars ($1,000,000) within fifteen (15) days after providing to the Contributing Parties an invoice setting forth in reasonable detail the amount of such Pursuit Costs. The Partnerships' failure to respond on a timely basis shall constitute the Partnerships' election to proceed under clause (ii). The foregoing shall constitute the sole remedies of the Starwood Parties with respect to the matters provided for in this Section 3.01(d) (without limiting the generality of the foregoing, the provisions of Section 13.02(a) shall not apply thereto). ARTICLE IV NET WORKING CAPITAL ADJUSTMENT 4.1 Net Working Capital Adjustment. (a) Estimated Closing Balance Sheet. Net Working Capital for each of the Property Companies shall be determined as of the Closing Date in accordance with the procedure set forth below, and the Cash portion of the Contribution Amount shall be adjusted up or down in accordance with such determination. At least two (2) business days prior to the Closing, each Property Company and the Partnerships in good faith shall prepare an unaudited estimated balance sheet of such Property Company as of the Closing Date (the "Estimated Closing Balance Sheet") and an estimate of the Net Working Capital of the Property Company as of the close of business on the Closing Date (the "Estimated Closing Net Working Capital") based on the Property Company's books and records and other information then available. For purposes of the determination of Estimated Net Working Capital, all of the guest room revenue and applicable tax for the night preceding the Closing Date shall be treated as accounts receivable of such Property Company for the day preceding the Closing Date, but the Starwood Parties shall receive a credit in the determination of Net Working Capital equal to one-half (1/2) 15 of the amount of such accounts receivable for guest room revenue and applicable tax for the night preceding the Closing Date. (b) Adjustment. If the Estimated Closing Net Working Capital for any Property Company is greater than zero, the Cash portion of the Contribution Amount allocated to the Property Company Interests in such Property Company shall be adjusted upwards by such excess. If Estimated Closing Net Working Capital for any Property Company is less than zero, the Cash portion of the Contribution Amount allocated to the Property Company Interest in such Property Company shall be adjusted downwards by such shortfall until the Cash Portion is zero, and thereafter the number of OP Units included in the portion of the Contribution Amount allocated to Property Company Interests in such Property Company shall be reduced based upon the Closing Value, until such shortfall is fully offset. (c) Final Closing Balance Sheet. As promptly as practicable, but in no event later than ninety (90) days after Closing, the Partnerships will cause HEI to deliver to the Contributing Parties a balance sheet of each of the Property Companies as of the Closing (the "Closing Balance Sheet") prepared by HEI on a basis consistent with the most recent balance sheet on the Financial Statements for such Property Company, which Closing Balance Sheet will reflect the HEI's determination (as certified by the chief financial officer of HEI) of the Net Working Capital as of the close of business on the Closing Date (the "Closing Net Working Capital") of such Property Company. (d) Independent Auditor. (i) If the Contributing Parties disagree with HEI's determination of Closing Net Working Capital, the Contributing Parties shall notify the Partnerships in writing of such disagreement (such notice setting forth the basis for such disagreement in reasonable detail) and the Partnerships and the Contributing Parties thereafter shall negotiate in good faith to resolve any such disagreements. If the Partnerships and the Contributing Parties are unable to resolve any such disagreements within thirty (30) days after the Partnerships cause HEI to deliver the Closing Balance Sheet to the Contributing Parties, the Partnerships and the Contributing Parties shall subject the dispute to a "Big Six" public accounting firm jointly selected by the Partnerships and the Contributing Parties (the "Independent Auditor") for resolution. If the Partnerships and the Contributing, Parties are unable to agree upon an Independent Auditor, the independent Auditor shall be selected by lot from a list of four "Big Six" accounting firms (of which two firms shall be selected by each of the Partnerships and the Contributing Parties, but excluding any firm which has previously audited such Property Company's or any of the Starwood Parties' financial statements). (ii) The Partnerships and the Contributing Parties shall use their reasonable best efforts to cause the Independent Auditor to resolve all disagreements over the Closing Net Working Capital as soon as 16 practicable, but in any event within 60 days after submission of the disputes to the Independent Auditor. The resolution of such disagreements and the determination of Closing Net Working Capital by the Independent Auditor shall be final and binding on the Partnerships and the Contributing Parties. (iii) The Independent Auditor will determine the allocation of its costs and expenses in determining the Closing Net Working Capital based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. For example, if the Contributing Parties claim the Closing Net Working Capital is $1,000 greater than the amount determined by the Partnership's accountants, and the Partnerships contest only $500 of the amount claimed by the Contributing Parties, and if the Independent Auditor ultimately resolves the dispute by awarding the Contributing Parties $300 of the $500 contested, then the costs and expenses of arbitration will be allocated 60% (i.e., 300 500) to the Partnerships and 40% (i.e., 200 500) to the Contributing Parties. (e) Final Adjustment. If the Closing Net Working Capital for any Property Company (as finally determined pursuant to Section 4.01(c) or (d), as applicable) is greater than the Estimated Closing Net Working Capital, the Partnerships shall, within three (3) business days after the Closing Net Working Capital is so finally determined, pay to the Contributing Parties owning Property Company Interests in such Property Company in immediately available funds, the difference between the Closing Net Working Capital and the Estimated Closing Net Working Capital. If the Closing Net Working Capital for such Property Company is less than the Estimated Closing Net Working Capital for such Property Company, the Contributing Parties owning Property Company Interests in such Property Company shall, within three (3) business days after the Closing Net Working Capital for such Property Company is so finally determined, pay to the Partnerships, in immediately available funds, the difference between Closing Net Working Capital and Estimated Closing Net Working Capital for such Property Company. All amounts owed pursuant to this Section 4.01 (e) shall include interest thereon, from and excluding the day which is fifteen (15) days after the date on which the party entitled to receive such amount makes written demand for its payment to and including the date of payment, at the "prime" rate as announced by Chase Manhattan Bank N.A. on the date on which such demand is made calculated on the basis of a 365-day year. All determinations pursuant to this Section 4.01(e) shall be made in accordance with GAAP. 4.2 Errors. Notwithstanding the foregoing and in addition to the provisions of Subsections 4.01(a) - (e), if at any time within one year following Closing either party discovers any items which should have been included in the Net Working Capital Adjustments but which were omitted therefrom, or any error in the computation of such adjustments, or any items not previously capable of determination, such items or error shall be properly adjusted as of Closing without interest thereon. 17 ARTICLE V [Reserved] ARTICLE VI RISK OF LOSS 6.1 Risk of Loss. Subject to the following provisions of this Article VI, the Contributing Parties shall bear all risk of all loss or damage to the Property from all causes until Closing. 6.2 Casualty. If one or more of the Hotels is materially damaged by any fire or other casualty prior to Closing, the Property Company owning such damaged Hotel will immediately notify the Partnerships in writing of the same (a "Casualty Notice"). The Casualty Notice will include a reasonably detailed description of the property damage and such Property Company's best estimate of the cost and time required to repair such damage. The cost of repairing such damage to any Hotel as estimated by an architect or other qualified consultant retained by such Property Company is herein referred to as a "Casualty Loss" with respect to such Hotel. 6.3 Eminent Domain. In the event that a portion of one or more of the Hotels are taken by eminent domain or becomes subject to a taking by eminent domain or a deed in lieu of condemnation prior to Closing, the affected Property Company will immediately notify the Partnerships in writing, of the same (a "Eminent Domain Notice"). The reasonably estimated value of the portion of any Hotel taken or subject to taking by eminent domain is herein referred to as a "Condemnation Loss" with respect to such Hotel. 6.4 Elections Upon Casualty or Eminent Domain. If any of the events described in Section 6.02 or Section 6.03 occurs prior to Closing, then the provisions of this Section 6.04 shall apply: (a) Minor Loss. Subject to Section 6.04(c) below, if the amount of the Casualty Loss or the Condemnation Loss, as applicable (the "Loss"), to any Hotel is equal to or less than One Million Dollars ($1,000,000), then the Partnerships shall receive a credit to the Cash portion of the Contribution Amount equal to the Adjustment Amount (as defined in Section 6.05), and in such event the Closing will be as otherwise provided herein with respect to the Property Company Interests and Contributed Assets of the Property Company which owns the Hotel subject to such Loss. (b) Substantial Loss. Subject to Section 6.04(c) below, if the amount of the Loss to any Hotel is greater than One Million Dollars ($1,000,000), then the Partnerships, must elect (as their sole and exclusive remedy) with respect to the Property Company Interests and Contributed Assets of the Property Company owning such Hotel either: (i) to proceed with the transaction without the Property Company Interests and Contributed Assets of such Property Company, with a reduction in the Contribution Amount based on Schedule 2.03; provided, however, that the Partnerships 18 shall not have the right to make such election under this clause (i) with respect to more than two Hotels; or (ii) to proceed with the transaction contemplated by this Agreement with such Property Company Interests and Contributed Assets, including (as assets of such Property Company) such Property Company's rights in any insurance or condemnation proceeds (as applicable) which remain unpaid to such Property Company in connection with such Loss and a credit against the Cash portion of the Contribution Amount equal to the Adjustment Amount, and in such event the Closing will be as otherwise provided herein. Such election must be made by the Partnerships within ten (10) business days following receipt of the Casualty Notice or Eminent Domain Notice (the "Loss Election Date"), as applicable (the "Loss Notice"), and the Closing Date shall be extended, if necessary, to the third (3rd) Business Day following the Loss Election Date. The Partnerships' failure to give timely notice under this Section 6.04(b) will be deemed to be an election under clause (ii). (c) Major Casualty Damage. If the aggregate amount of the Loss with respect to any Hotel is greater than Five Million Dollars ($5,000,000), or if three or more Hotels each have a Loss in excess of One Million Dollars ($1,000,000), then the Partnerships must elect (as their sole and exclusive remedy) either: (i) to proceed in accordance with Section 6.04(b) above; or (ii) to terminate this Agreement by giving notice to such effect to the Contributing Parties not later than the Loss Election Date. In the event of such termination, then the entire amount of the Deposit will be refunded to SLT. The Partnerships' failure to give timely notice under this Section 6.04(c) will be deemed to be an election under clause (ii) of this Section 6.04(c). 6.5 Adjustment Amount. As used in this Article VI, "Adjustment Amount" means the sum of (i) in the case of casualty damage covered by a Property Company's property casualty insurance, the amount of the deductible under such insurance policy with respect to such casualty damage (not to exceed the amount of such casualty damage), plus (ii) any amounts previously paid to such Property Company as insurance or condemnation proceeds, as applicable, and not expended by such Property Company prior to Closing for the purpose for which received (including but not limited to expenditures for restoration of the affected Hotel in connection with such casualty or condemnation); provided, however, that in determining the adjustments to be made to the Cash portion of the Contribution Amount at Closing for the Adjustment Amount (in accordance with this Article VI) and for Net Working Capital (in accordance with Article IV), appropriate adjustment shall be made so as to not double count as current assets of a Property Company any unexpended amounts received by a Property Company as insurance or condemnation proceeds or the right of a Property Company to receive any insurance or condemnation proceeds, and so as to not double count as current liabilities of such Property Company any liabilities of a Property Company for which such insurance or condemnation proceeds have been or will be payable. 19 ARTICLE VII REPRESENTATIONS AND WARRANTIES 7.1 Contributing Party's Representation and Warranties. To induce the Starwood Parties to enter into this Agreement each Contributing Party makes the following representations and warranties on behalf of such Contributing Party, and on behalf of or with respect to the Property Company in which such Contributing Party owns Property Company Interests all of which (i) are now true, and (ii) except as expressly provided herein to the contrary, shall be true as of Closing, subject, in each case, to the exceptions set forth on the Schedules attached to this Agreement and on any supplemental schedules thereof as may be delivered to the Starwood Parties prior to the Closing, provided, however, that: (1) prior to Closing, the remedies of the Starwood Properties for any breach of such representations and warranties shall be limited in accordance with Section 13.02(a); (2) an election by the Starwood Parties to complete Closing notwithstanding Knowledge of any breach thereof shall constitute a waiver of such breach in accordance with Section 12.05(b); and (3) after Closing, the liability of the Contributing Parties for any breach of such representations and warranties shall be limited in accordance with Section 14.02(b). Subject to the foregoing, the Contributing Parties represent and warrant as follows: (a) Subsidiaries and Investments. The Property Company has no subsidiaries and does not own, directly or indirectly, any stock, membership interests, partnership interests or joint venture interests in, or similar equity ownership interest issued by, any other Person. (b) Property Company Capitalization; Title to Property Company Interests. (i) The capitalization of the Property Company is completely set forth on Schedule 7.01(b) hereto. There are no restrictions on the transfer of the Property Company Interests other than those set forth in the Property Company's Constituent Documents, true, correct and complete copies of which have been provided to the Partnerships, and those arising from federal and applicable state securities laws. All currently issued and outstanding Property Company Interests were duly authorized and validly issued in accordance with the terms of the Property Company's Constituent Documents and in compliance with applicable laws, and are fully paid and non-assessable. Except as set forth on Schedule 7.01(b) and except as created by this Agreement, there are no outstanding interests, equity interests, subscriptions, purchase rights, subscription rights, conversion rights, exchange rights, options, warrants, preemptive rights, rights of first refusal, rights of first offer, or other rights or other arrangements or commitments outstanding or obligating the Property Company to issue, sell or otherwise cause to be outstanding any Property Company Interests, any security convertible into or exercisable or exchangeable for Property Company Interests, or any other equity participation in the 20 Property Company. At the Closing, upon receipt of the Property Company Interests, SLT and SLT Financing will be admitted as a member partner or joint venturer (as applicable) of the Property Company. (ii) Each Contributing Party severally represents and warrants as follows in this subsection (b)(ii) with respect to the Property Company Interest(s) set forth opposite its name on Schedule 7.01(b) hereto. Such Contributing Party owns all of such Property Company Interest(s) and there are no other holders of all or any portion of or interests in such Property Company Interest(s). Such Property Company Interest(s) contributed to the Partnerships at Closing by such Contributing Party will be free and clear of all Liens. Except as set forth on Schedule 7.01(b) and except as created by this Agreement, there are no outstanding interests, equity interests, subscriptions, purchase rights, subscription rights, conversion rights, exchange rights, options, warrants, preemptive rights, rights of first refusal, rights of first offer, or other rights or other arrangements or commitments outstanding with respect to such Property Company Interest(s) or obligating such Contributing Party to issue, sell or otherwise cause to be outstanding any Property Company Interests, any security convertible into or exercisable or exchangeable for Property Company Interests, or any other equity participation in the Property Company. Such Property Company Interest(s) are not subject to any voting trusts, proxies, or other agreements or understandings. Each Contributing Party that is a Person other than an individual has full power and authority to enter into this Agreement and to assume and perform all of its obligations hereunder and the execution and delivery of this Agreement and the performance by such non-individual Contributing Party of its obligations hereunder have been duly authorized by such partnership, trust, limited liability and/or corporate action (including, without limitation approval by each of the partners and/or shareholders thereof of such Contributing Party) as may be required. Notwithstanding any other provision of this Agreement or the other Transaction Documents, the liability of each Contributing Party for the representations and warranties of such Contributing Party pursuant to this subsection (b)(ii) shall be several and not joint, and no Contributing Party shall be liable or responsible for the representations and warranties made by any other Contributing Party pursuant to this subsection (b)(ii) or pursuant to any similar provision of the other Transaction Documents. (c) Tax Matters. Except as set forth on Schedule 7.01(c): (i) the Property Company has timely filed or shall timely file all Tax Returns which are required to be filed, and all such Tax Returns are true, complete and accurate in all respects and have been prepared in compliance with applicable law. The Property Company is taxed as a "partnership" as defined in ss.761(a) of the Code; (ii) all Taxes due and payable as of the Closing Date by the Property Company, whether or not shown on a Tax Return, have been paid or shall be paid by the Property Company or the Contributing Parties, or adjusted for pursuant to Article IV, and all Taxes accrued but not yet due are shown on the Financial Statements provided pursuant to Section 7.01(q) or the Estimated Closing 21 Balance Sheet or the Closing Balance Sheet in accordance with Section 4.01 and no Taxes are delinquent; (iii) no deficiency for any amount of Tax has been asserted or assessed by a taxing authority against the Property Company or any Contributing Party with respect to the operations of the Property Company and the Contributing Parties have no Knowledge that any such assessment or asserted Tax liability shall be made; (iv) no audits or investigations by any taxing authority are currently pending, or to the Knowledge of the Contributing Parties threatened, and to the Contributing Parties' Knowledge, the Property Company does not reasonably expect any taxing authority to claim or assess any additional Taxes for any period; (v) the Property Company has not consented to extend the time beyond the Closing in which any Tax may be assessed or collected by any Taxing authority; (vi) the Property Company has not been a member of an Affiliated Group (as defined in Section 1504 of the Code) or any similar group defined under local, state or foreign Tax law and has no liability for Taxes of any other Person under Treasury Regulations Section 1.1502-6 or any similar provision of local, state or foreign Tax law; (vii) the Property Company is not a party to or, to the Knowledge of the Contributing Parties, bound by any Tax allocation or Tax sharing agreement and has no contractual obligation to indemnify any other person with respect to Taxes; (viii)the Property Company does not have any obligation to make any payment that will be non-deductible under Section 280G of the Code (or any corresponding provision of state, local or foreign Tax law); (ix) to the Knowledge of the Contributing Parties, no claim has ever been made by a taxing authority in a jurisdiction where the Property Company does not pay Tax or file Tax Returns that the Property Company is subject to Taxes assessed by such jurisdiction; (x) the Property Company has no liability for any Taxes, if any, required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party other than amounts adjusted for pursuant to Article IV; and 22 (xi) Schedule 7.01(c) contains a list of all states, territories and jurisdictions (whether foreign or domestic) in which the Property Company is required to file Tax Returns. (d) Insurance. Schedule 7.01(d) attached hereto lists and briefly describes each insurance policy maintained by the Property Company with respect to its properties, assets and business. All of such insurance policies are in full force and effect and will not, by their terms, terminate by reason of the transactions provided for herein at Closing, and the Property Company is not in default with respect to its obligations under any of such insurance policies and has not received any notification of cancellation of any of such insurance policies and has no claim outstanding which could be expected to cause a material increase in the Property Company's insurance rates. (e) Single-Purpose Entity. Except as set forth on Schedule 7.01(e), the Property Company, at all times since its formation has been a Single-Purpose Entity. (f) Leases. Schedule 7.01(f) contains a true and complete list of all Tenant Lease(s) under which the aggregate remaining payments to the Property Company owning the affected Hotel exceed $25,000.00, including all addenda, amendments and modifications thereto, and the Contributing Party has previously provided to the Partnerships true and correct copies of each such item. Except as noted on Schedule 7.01(f): (i) the Contributing Parties have no Knowledge that the lessor or the lessee under any Lease has failed to pay, perform or observe any of the terms, covenants and conditions on the such party's part to be paid, performed and observed thereunder; (ii) all brokerage, leasing and other commissions and all other compensation and fees due and payable in connection with the Tenant Lease(s), have been fully paid, shall be included in the Net Working Capital adjustment at Closing in accordance with Article IV, or shall be fully paid by the Contributing Party prior to the Closing; (iii) except as shown on Schedule 7.01(f), no tenant has prepaid rent for more than the following month, has received or is entitled to receive a rent concession in connection with its tenancy, or is entitled to any work (not yet performed) or consideration (not yet given) in connection with its tenancy, (iv) the Property Company is the holder of the lessor's interest under each of the Tenant Leases and has not assigned or hypothecated any of such rights other than in respect of the Assumed Debt. (g) Compliance With Laws. The Contributing Parties have no Knowledge of a violation of any Legal Requirements, or any standards and regulations of appropriate supervising Boards of Fire Underwriters and similar agencies, bearing on construction, operation or use of the Property or any part thereof (other than as to matters previously cured), or that any investigation has been commenced or is contemplated respecting any such possible violation other than as disclosed in the written information made available to the Starwood Parties. To the Contributing Parties' Knowledge, all notices, licenses, permits, certificates and authority required in connection with the construction, completion, use or occupancy of the Real Property or any part thereof by the Property Company have been obtained and are and on the Closing Date will be in effect and in good standing. This subsection (g) shall exclude, however, any representation concerning the Edison Crowne Plaza, or the Property Company which owns that Hotel, with regard to all Legal Requirements which constitute Environmental Laws. 23 (h) Contracts. True and complete copies of all Contracts (including all amendments thereto) to which the Property Company is a party or by which it is bound have been delivered to the Partnerships. Except as set forth in Schedule 7.01(h): (i) there are no Contracts to which the Property Company is a party or by which it is bound; (ii) the Property Company has complied with all material provisions of such Contracts and, to the Knowledge of the Contributing Parties, no party thereto is in material default under any of them; and (iii) to the Knowledge of the Contributing Parties, all such Contracts are in full force and effect and no event has occurred which constitutes or which with the passage of time or the giving of notice, or both, would constitute a default under any thereof or would excuse performance by any party thereto. (i) Employees. Except as set forth on Schedule 7.01(i), there are no union contracts, collective bargaining agreements or other labor contracts affecting the Property or any of the employees thereof (other than tenants, concessionaires or other independent contractors other than Manager). The Property Company has no employees and to the Contributing Parties' Knowledge, there are no employees of Manager who by reason of any Legal Requirement, union contract, collective bargaining agreement or other Contract would become employees of the Partnerships by reason of the acquisition of the Property Company Interests by the Partnerships. The Property Company has no single-employer or multi-employer defined benefit pension plans covered by Title IV of ERISA. (j) No Pending Condemnation Proceedings. The Contributing Parties have no Knowledge of pending or proposed condemnation proceedings affecting the Property or any part thereof. (k) Real Estate Taxes. Except as set forth on Schedule 7.01(k), (i) the Property Company has not commenced any proceedings which are pending for the reduction of the assessed valuation of the Real Property or any portion thereof, and (ii) the Contributing Parties have no Knowledge of any special assessment affecting the Property. (l) No Other Interests. Except as set forth on Schedule 7.01(l), to the Knowledge of the Contributing Parties, no Person other than the Contributing Parties has any right to acquire any interest in the Property or any part thereof. (m) No Litigation. Except as set forth on Schedule 7.01(m), neither the Contributing Party, nor the Property Company is a party to, and to the Contributing Parties' Knowledge there is no pending or threatened litigation, claim, action or proceeding by any Person which would materially impair the use, occupancy or value of the Property or any part thereof or which otherwise relates to the Property or the Contributing Parties' Property Company Interests. (n) No Further Action; Execution and Delivery. No further action or approval by any Person is required in order to constitute this Agreement as a binding and enforceable obligation of each Contributing Party. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder on the part of the Contributing Party do not and will not violate its Constituent Documents (if any) or the Constituent Documents of the applicable Property Company, and do not and will not conflict with or result in the breach 24 of any condition or provision of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrances upon any of the property or assets of the applicable Property Company or upon any Property Company Interest by reason of the terms of any contract, mortgage, lien, lease, agreement, indenture, instrument or judgment to which the Contributing Party is a party or which is binding upon the Contributing Party or the applicable Property Company. (o) Good Standing. The Property Company, and each Contributing Party which is a Person other than an individual, is duly organized, validly existing and in good standing under the laws of the State of its organization and the Property Company is qualified to do business and is in good standing in the State in which the Real Property is located. (p) Proprietary Rights. To the best of the Contributing Parties' Knowledge, Schedule 1.02(ll) contains a true and complete list of all Proprietary Rights (including registration numbers, where applicable) and all license agreements (whether as licensor or licensee) relating to such Proprietary Rights. Except as otherwise set forth in Schedule 1.02(ll), the Property Company owns or has the right to use all Proprietary Rights currently used by it in the Property's business as presently conducted, all of which ownership rights are in good standing and, to the Contributing Parties' Knowledge, uncontested. The Contributing Parties have no Knowledge of any claim, action, proceeding or investigation pending or threatened against the Property Company with respect to any such Proprietary Rights or that any party thereto is in substantial default under any license or other agreement relating to such Proprietary Rights, or that any such licenses and agreements are not valid, enforceable and in full force and effect. (q) Financial Statements. Representatives of the Contributing Parties have delivered to the Starwood Parties true and complete copies of all financial statements with respect to each of the Hotels (i) as were delivered to the applicable Property Company by the entity from which the Property Company acquired the Hotel, and (ii) as have been prepared by Manager on behalf of the applicable Property Company with respect to periods since the acquisition of such Hotel by Property Company through the four-week fiscal period which ended November 28, 1996 (collectively, the "Financial Statements"). To the Knowledge of the Contributing Parties, the Financial Statements for each Property Company have been based on information contained in the Property Company's books and records, fairly present the Property Company's financial condition and results of operations as of the times and for the periods referred to therein, and have been prepared in accordance with GAAP. (r) Events Subsequent to November 28, 1996. Since November 28, 1996, to the Contributing Parties' Knowledge, there has not been any material adverse change in the business, assets, financial condition or operating results of the Property Company. Since that date, except as set forth on Schedule 7.01(r) attached hereto, the Property Company has conducted its business in the ordinary course of business consistent with past custom and practice, and has incurred no Liabilities other than in the ordinary course of business consistent with past custom and practice. Except as hereinafter provided, this subsection (r) shall exclude, however, any representation concerning the Edison Crowne Plaza, or the Property Company which owns that Hotel, with regard to Liabilities in respect of those Legal Requirements which 25 constitute Environmental Laws, provided that to the Contributing Parties' Knowledge, there is no material violation of such representation as it relates to such Hotel. (s) Absence of Undisclosed Liabilities. Except as set forth on Schedule 7.01(s), to the Knowledge of the Contributing Parties, the Property Company has no Liabilities of the nature required by GAAP to be shown on a balance sheet, except for; (i) Liabilities reflected or reserved against on the unaudited balance sheet of the Property Company as of November 28, 1996 in the liabilities section of such balance sheet; (ii) Liabilities which have arisen since November 28, 1996 in the ordinary course of business of the Property Company (none of which relates to breach of contract, default, breach of warranty, tort, infringement, violation of any Legal Requirement, or any other action, suit or proceeding); and (iii) Liabilities which will be reflected or reserved against on the Estimated Closing Balance Sheet (as provided for in Section 4.01(a) above) or on the Closing Balance Sheet (as provided for in Section 4.01(c) above) in the liabilities sections of such balance sheets. Except as hereinafter provided, this subsection (s) shall exclude, however, any representation concerning the Edison Crowne Plaza, or the Property Company which owns that Hotel, with regard to Liabilities in respect of those Legal Requirements which constitute Environmental Laws, provided that to the Contributing Parties' Knowledge, there is no material violation of such representation as it relates to such Hotel. (t) No "Foreign Person". The Contributing Party is not a "foreign person," as such term is defined in Section 1445 of the Code. The sale transaction contemplated by this Agreement is not subject to Section 897 of the Code or to the withholding requirements of Section 1445 of the Code. (u) Environmental Matters - No Violations. (i) Except as to the Edison Crowne Plaza, all environmental reports (including all revisions and updates thereto) pertaining to the Property prepared by or on behalf of the Contributing Party or the Property Company or otherwise in its possession or control (the "Environmental Reports") are listed on Schedule 7.01(u) and true and complete copies of such Environmental Reports have been delivered to the Partnerships. As to the Edison Crowne Plaza, to the Knowledge of the Contributing Party, Schedule 7.01(u) lists all Environmental Reports pertaining to such Hotel which disclose material information relating to the environmental condition of such Hotel. The representations and warranties in Section 7.01(u)(ii) and in Section 7.01(v) shall not apply to the Edison Crowne Plaza Hotel or to the Property Company which owns such Hotel, and the representations and warranties in Section 7.01(g), with respect to the Edison Crowne Plaza and such Property Company shall be limited to exclude Environmental Laws from the Legal Requirements applicable to such representations and warranties. 26 (ii) Subject to Section 7.01(u)(i) above, the Contributing Parties have no Knowledge that any condition exists on the Property as a result of its operation or activities thereon which condition constitutes a violation of or which will give rise to Environmental Clean-Up Liabilities or Environmental Claims pursuant to any Environmental Laws relating to the Property. "Environmental Cleanup Liability" means any cost or expense of any nature whatsoever required to be undertaken under or pursuant to any Environmental Law to contain, remove, remedy, respond to, clean up or abate any release of hazardous substance, pollutant, contaminant or waste, or other contamination of surface water, groundwater, land surface or subsurface strata, whether on-site or off-site, arising from activities at the Property including, but not limited to, manufacture, generation, formulation, processing, labeling, distribution, introduction into commerce or on-site or off-site use, treatment, handling, storage, disposal or transportation of any hazardous substance, pollutant, contaminant or waste, but excluding cleaning supplies used in connection with the Hotel Business which are properly packaged and stored, and used in compliance with all Environmental Laws. (v) Environmental Matters - Environmental Claims. Subject to Section 7.01(u)(i) above, except as set forth in the Environmental Reports, the Contributing Parties have no Knowledge of any pending, threatened or contemplated Environmental Claims affecting the Property (excluding the Edison Crowne Plaza). "Environmental Claims" means any claim for reimbursement of remediation expense, personal injury, property damage or damage to natural resources made, asserted or prosecuted by or on behalf of any third party (whether based on negligent acts or omissions, statutory liability, strict liability without fault or otherwise) including, without limitation, any governmental entity, employee, former employee or guest, or their respective legal representatives, heirs, beneficiaries and estates, relating to or arising out of the release of any hazardous substance, pollutant, contaminant or waste or the violation of any Environmental Law. (w) [Reserved] (x) Investment Representation. The Contributing Party is receiving the SLT OP Units and the SLC OP Units (collectively, the "Units") to be delivered pursuant hereto for its own account (other than with respect to PRISA II) with the present intention of holding such Units for purposes of investment, and each such party has no intention of selling Units in a distribution in violation of the federal securities laws or any applicable state securities laws. Except for the individuals listed on Schedule 7.01(x), the Contributing Party and, for each Contributing Party other than PRISA II which is not an individual, each Person owning equity interests in such Contributing Party other than PRISA II (an "Equity Owner"), is an accredited investor as defined in Rule 501 of the Securities Act (an "Accredited Investor") and has sufficient knowledge and experience in financial and business matters and investing in entities similar to the Trust, the Corporation, SLT and SLC so as to be able to evaluate the risks and merits of its investment in SLT and SLC and the Contributing Party, and any Equity Owner therein, has had an opportunity to discuss the business, management and financial affairs of the Trust, the Corporation, SLT and SLC with the management of the Trust and the Corporation. Except for the individuals listed on Schedule 7.01(x), each Permitted Transferee (as defined in the Transfer Restriction and Exchange Rights Agreement) is, and immediately prior to receiving any Units will be, an Accredited Investor. The Contributing Party and any Equity Owner therein understands that (i) the Paired Shares and Units have not been registered under the 27 Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the Securities Act, and (ii) upon any issuance of the Paired Shares pursuant to the Transfer Restriction and Exchange Agreement, such Paired Shares must be held indefinitely unless such Shares are registered upon receipt thereof, or unless a subsequent disposition thereof is registered under the Securities Act and applicable state securities laws or is exempt from such registration. (y) Binding Effect. When executed and delivered by each Contributing Party, the Transaction Documents required to be executed by the respective Contributing Parties will each be duly authorized, valid and binding upon such Contributing Party. (z) Status of Constituent Documents. Schedule 7.01(z) sets forth a true and complete list of each Property Company's Constituent Documents. Each of the Property Company's Constituent Documents is in full force and effect, and true, complete and correct copies thereof have been delivered to the Partnerships. There are no dissolution, termination or liquidation proceedings pending or, to the Knowledge of the Contributing Parties, contemplated with respect to the Property Company. To the Contributing Parties' Knowledge there are no uncured defaults or breaches by any Person under the Constituent Documents for such Property Company. 7.2 The Partnerships' Representations and Warranties. To induce the Contributing Parties to enter into this Agreement, each Partnership makes the following representations and warranties, as to itself, all of which (i) are now true and (ii) shall be true as of the Closing: (a) Power and Authority Non-contravention, Investment. The Partnership has full power and authority to enter into this Agreement and to assume and perform all of its obligations hereunder; the execution and delivery of this Agreement and the performance by the Partnership of its obligations hereunder have been duly authorized by such action as may be required, and no further action or approval is required in order to constitute this Agreement as a binding and enforceable obligation of the Partnership. Neither the execution nor delivery of this Agreement by the Partnership, nor consummation of the transactions contemplated hereby or compliance with or fulfillment of the terms and provisions hereof by the Partnership, will (i) conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights, or result in the creation or imposition of any encumbrance upon any of the assets of the Partnerships under the Partnership's Constituent Documents, or any other instrument, agreement, mortgage, indenture, deed of trust, permit, concession, grant, franchise, license, judgment, order, award, decree or other restriction of which the Partnership is a party or any of its properties is subject or by which any of them is bound or any Legal Requirement affecting any of them, or (ii) require the approval, consent or authorization of, or the making of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, Government Entity or regulatory body, by or on behalf of the Partnership, except for (A) the applicable requirements of the gaming authorities of the State of Nevada and of the Clark County, Nevada Liquor and Gaming Licensing Board (the "Nevada Gaming Approvals") and (B) the filing of appropriate documents with the SEC under the Securities Act. The Partnerships are receiving the Property Company Interests to be delivered hereto for their 28 own account with the present intention of holding such Property Company Interests for purposes of investment, and each Partnership has no intention of selling such Property Company Interests in a distribution in violation of federal securities, laws or any applicable state securities laws. The Partnerships are Accredited Investors and have sufficient knowledge and experience in financial and business matters and investing in entities similar to the Property Companies so as to be able to evaluate the risks and merits of their investment in the Property Companies and the Partnerships have had an opportunity to discuss the business, management and financial affairs of the Property Companies with the management of the Property Companies. (b) Good Standing. The Partnership is duly organized, validly existing and in good standing under the laws of the state of its formation and are qualified to do business in all jurisdictions in which such qualification legally is required. (c) Binding Effect. When executed and delivered by each Partnership, the Transaction Documents required to be executed by the Partnership hereunder will each be duly authorized, valid and shall be binding upon the Partnership. (d) Status of the Constituent Documents. Schedule 7.02(d) sets forth a true and complete list of all of the Partnerships' Constituent Documents. Each of the Partnership's Constituent Documents is in full force and effect, and true, complete and correct copies thereof have been delivered to the Contributing Party. There are no dissolution, termination or liquidation proceedings pending or, to the Knowledge of the Starwood Parties, contemplated with respect to the Partnership. There are no uncured defaults or breaches by the general partner or to the Knowledge of the Starwood Parties, any limited partner under the Partnerships' Constituent Documents. (e) No Litigation; Proceedings. Except as set forth on Schedule 7.02(e), there are no pending or, to Starwood Parties' Knowledge, threatened actions, suits, proceedings or claims against or affecting the Partnership at law or in equity or before or by any Government Entity. (f) Units. The capitalization of each of the Partnerships is as set forth in their respective Partnership Agreements. As of December 31, 1996, 32,682,481 OP Units of each of SLC and SLT were issued and outstanding, of which at least the OP Units of SLT and SLC set forth on Schedule 7.02(f) were held by limited partners that are not affiliated with the Trust within the meaning of the Department of Labor's ERISA plan asset regulation, 29 C.F.R. ss.2510.3-101(f) (the "Plan Asset Regulation"). There are no restrictions on the transfer of the SLT OP Units and SLC OP Units to be issued pursuant to Section 2.03 other than those contained in the respective Partnership's Constituent Documents, the Transfer Restriction and Exchange Rights Agreement or the Registration Rights Agreement and those arising from federal and applicable state securities laws. All currently issued and outstanding OP Units were duly authorized and validly issued in accordance with the terms of the respective Partnership's Constituent Documents and in compliance with applicable laws and are convertible into Paired Shares in accordance with the terms of the Transfer Restriction and Exchange Rights Agreement. Except as set forth on Schedule 7.02(f) and except as created by this Agreement, as of the date hereof, there are no outstanding subscriptions, options, warrants, preemptive or other rights or other arrangements or commitments obligating the Partnerships to issue any Units. If and when 29 issued, the Paired Shares issuable upon exchange of the Units delivered hereunder pursuant to the Transfer Restriction and Exchange Rights Agreement will be duly authorized, validly issued, fully paid and non-assessable. At the Closing, upon receipt of the Property Company Interests and Contributed Assets, the Partnerships will have transferred the Units to be issued hereunder free and clear of all Liens (other than any Liens in favor of the partners of the Partnership pursuant to the Partnership's Constituent Documents), and as of the Closing, the Contributing Partners will be admitted as limited partners of the Partnerships. The issuance of the Units to the Contributing Parties at the Closing will not require any approval or consent of any Person except any such approval that shall have been obtained on or prior to the Closing. Assuming the accuracy of the representations in Section 7.01(x), the issuance of the Units to the Contributing Parties hereunder is exempt from registration under the Securities Act and applicable state securities laws. (g) Financial Statements; Undisclosed Liabilities. True and complete copies of (i) the audited financial statements of SLC and SLT as of December 31, 1995, together with all related notes and schedules thereto, accompanied by the reports thereon of SLC's and SLT's independent auditors, and (ii) the unaudited financial statements of SLC and SLT as of September 30, 1996 and for the nine months then ended, together with all related notes and schedules thereto (collectively, the "Partnerships' Financial Statements"), have been delivered to the Contributing Parties. The Partnerships' Financial Statements were prepared in accordance with the books of account and other financial records of SLC and SLT, present fairly the consolidated financial condition and results of operations of SLC and SLT as of the dates thereof or for the periods covered thereby, and have been prepared in accordance with GAAP. Except as disclosed on Schedule 7.02(g), (i) there are no Liabilities of SLC and SLT of the nature required by GAAP to be shown on a balance sheet, other than Liabilities reflected or reserved against on the balance sheets of SLC and SLT as of September 30, 1996, and (ii) Liabilities which have arisen since that date in the ordinary course of business. (h) Conduct in the Ordinary Course of Business. Except as set forth on Schedule 7.02(h), since September 30, 1996, the business of each of the Partnerships has been conducted in all material respects in the ordinary course, consistent with past practice, and the business of each of the Partnerships will be conducted as aforesaid through the Closing. (i) ERISA Matters. The terms of this transaction are not materially less favorable to PRISA II than the terms that would be available generally in an arms'-length transaction between unrelated parties. Neither Partnership maintains or contributes to an employee benefit plan maintained by an employer or employee organization identified on Schedule 7.02(i). (j) Tax Status. Each Partnership is taxable as a "partnership" as defined in Section 7701(a) of the Code, and is not taxable as a corporation by reason of being a publicly traded partnership within the meaning of Section 7704 of the Code. 7.3 The Corporation's Representation and Warranties. To induce the Contributing Parties to enter into this Agreement, the Corporation makes the following representations and warranties, all of which (i) are now true and (ii) shall be true as of the Closing: 30 (a) Power and Authority, Non-contravention. The Corporation has full power and authority to enter into this Agreement and to assume and perform all of its obligations hereunder, the execution and delivery of this Agreement and the performance by the Corporation of its obligations hereunder have been duly authorized by such action as may be required, and no further action or approval is required in order to constitute this Agreement as a binding and enforceable obligation of the Corporation; neither the execution or delivery of this Agreement by the Corporation, nor consummation of the transactions contemplated hereby or compliance with or fulfillment of the terms and provisions hereof by the Corporation, will (i) conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights, or result in the creation or imposition of any encumbrance upon any of the assets of the Corporation, under the Corporation's Constituent Documents, the Pairing Agreement or any other instrument, agreement, mortgage, indenture, deed of trust, permit, concession, grant, franchise, license, judgment, order, award, decree or other restriction of which the Corporation is a party or any of its respective properties is subject or by which any of them is bound, or under any Legal Requirements affecting any of them, or (ii) require the approval, consent or authorization of, or the making of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, Governmental Entity or regulatory body, by or on behalf of the Corporation, except for (A) the Nevada Gaming Approvals, or (B) the filing of appropriate documents with the SEC under the Exchange Act. (b) Good Standing. The Corporation is duly organized, validly existing and in good standing under the laws of the state of its formation and is qualified to do business in all jurisdictions in which such qualification legally is required. (c) Binding Effect. When executed and delivered by the Corporation, the documents required to be executed by the Corporation hereunder will each be duly authorized, valid and shall be binding upon the Corporation. (d) Status of the Constituent Documents. Schedule 7.03(d) sets forth a true and complete list of the Corporation's Constituent Documents. The Corporation's Constituent Documents are in full force and effect, and true, complete and correct copies thereof have been delivered to the Contributing Party. There are no dissolution, termination or liquidation proceedings pending, or contemplated with respect to the Corporation. (e) No Litigation; Proceedings. Except as set forth on Schedule 7.03(e), there are no pending or, to the Starwood Parties' Knowledge, threatened actions, suits, proceedings or claims against or affecting the Corporation at law or in equity or before or by any Government Entity. (f) Capitalization. As of December 31, 1996, the entire authorized capital stock of the Corporation (the "Corporation Shares") consisted of 100,000,000 shares of which 26,718,649 were issued and outstanding and 73,281,351 shares were held in treasury. Each issued and outstanding Corporation Share has been paired with an issued and outstanding Trust Share (as hereinafter defined) pursuant to the terms of the Pairing Agreement. The Paired Shares issued to the Contributing Parties at Closing will be duly authorized, validly issued, fully paid and nonassessable and shall be issued hereunder free and clear of all Liens. Except as set 31 forth on Schedule 7.03(f), there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that require the Corporation to issue, sell, or otherwise cause to become outstanding any Corporation Shares. The Issuance of the Paired Shares to the Contributing Parties at the Closing will not require any approval or consent of any Person except for any such approval that shall have been obtained on or prior to the Closing. Assuming the accuracy of the representations in Section 7.01(x), the issuance of the Paired Shares to the Contributing Parties is exempt from registration under the Securities Act and applicable state securities laws. There are no restrictions on the transfer of the Paired Shares other than those in the Constituent Documents of the Trust and the Corporation, the Transfer Restriction and Exchange Rights Agreement, or the Registration Rights Agreement and those arising from federal and applicable state securities laws. (g) Financial Statements; Undisclosed Liabilities. True and complete copies of (i) the audited financial statements of the Corporation as of December 31, 1995, together with all related notes and schedules thereto, accompanied by the reports thereon of the Corporation's independent auditors, and (ii) the unaudited financial statements of the Corporation as of September 30, 1996 and for the nine months then ended, together with all related notes and schedules thereto (collectively, the "Corporation's Financial Statements"), have been delivered to the Contributing Parties. The Corporation's Financial Statements were prepared in accordance with the books of account and other financial records of the Corporation, present fairly the consolidated financial condition and results of operations of the Corporation as of the dates thereof or for the periods covered thereby, and have been prepared in accordance with GAAP. Except as disclosed on Schedule 7.03(g), (i) there are no Liabilities of the Corporation of the nature required by GAAP to be shown on a balance sheet, other than Liabilities reflected or reserved against on the balance sheets of the Corporation as of September 30, 1996, and (ii) Liabilities which have arisen since that date in the ordinary course of business. (h) Conduct in the Ordinary Course of Business. Except as set forth on Schedule 7.03(h), since September 30, 1996, the business of the Corporation has been conducted in all material respects in the ordinary course, consistent with past practice, and the business of the Corporation will be conducted as aforesaid through the Closing. (i) SEC Documents. The SEC Documents taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (j) Reservation of Shares. Upon Closing, the Corporation shall have reserved for issuance a number of Corporation Shares equal to the number of Paired Shares into which the SLC OP Units included in the Contribution Amount are exchangeable pursuant to the Transfer Restriction and Exchange Rights Agreement. (k) ERISA Matters. The terms of this transaction are not materially less favorable to PRISA II than the terms that would be available generally in an arms'-length transaction between unrelated parties. The Corporation does not maintain or contribute to an employee benefit plan maintained by an employer or employee organization identified on Schedule 7.03(k). 32 7.4 The Trust's Representations and Warranties. To induce the Contributing Parties to enter into this Agreement, the Trust makes the following representations and warranties, all of which (i) are now true and (ii) shall be true as of the Closing: (a) Power and Authority, Non-contravention. The Trust has full power and authority to enter into this Agreement and to assume and perform all of its obligations hereunder; the execution and delivery of this Agreement and the performance by the Trust of its obligations hereunder have been duly authorized by such action as may be required, and no further action or approval is required in order to constitute this Agreement as a binding and enforceable obligation of the Trust; neither the execution or delivery of this Agreement by the Trust, nor consummation of the transactions contemplated hereby or compliance with or fulfillment of the terms and provisions hereof by the Trust, will (i) conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights, or result in the creation or imposition of any encumbrance upon any of the assets of the Trust under the Trust's Constituent Documents, the Pairing Agreement or any other instrument, agreement, mortgage, indenture, deed of trust, permit, concession, grant, franchise, license, judgment, order, award, decree or other restriction to which the Trust is a party or any of its properties is subject or by which it is bound, or under any Legal Requirements affecting it, or (ii) require the approval, consent or authorization of, or the making of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, Government Entity or regulatory body, by or on behalf of the Trust, except for (A) the Nevada Gaming Approvals, or (B) the filing of appropriate documents with the SEC under the Securities Act. (b) Good Standing. The Trust is duly organized, validly existing and in good standing under the laws of the state of its formation and is qualified to do business in all jurisdictions in which such qualification legally is required. (c) Binding Effect. When executed and delivered by the Trust, the documents required to be executed by the Trust hereunder will each be duly authorized, valid and shall be binding upon each Trust. (d) Status of the Constituent Documents. Schedule 7.04(d) sets forth a true and complete list of the Trust's Constituent Documents. The Trust's Constituent Documents are in full force and effect, and a true, complete and correct copy thereof has been delivered to the Contributing Party. There are no dissolution, termination or liquidation proceedings pending or contemplated with respect to the Trust. The Trust has elected to be taxed as a REIT (as defined below) for its taxable year ending December 31, 1995 and the Trust is organized and operated in such a manner as to qualify for taxation as a "real estate investment trust" as defined in Section 856 of the Code ("REIT") for the taxable year ending December 31, 1995 and through the Closing Date. The Trust is grandfathered from the application of Section 269B of the Code pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984. (e) No Litigation; Proceedings. Except as set forth on Schedule 7.04(e), there are no pending or, to the Starwood Parties' Knowledge, threatened actions, suits, proceedings or claims against or affecting the Trust at Law or in equity or before or by any (Government Entity which would prevent or impair the transactions contemplated hereby. 33 (f) Capitalization. The entire authorized shares of beneficial interest of the Trust (the "Trust Shares") as of December 31, 1996 consisted of 100,000,000 shares of which 26,718,649 were issued and outstanding and 73,281,351 shares were held in treasury. Each issued and outstanding Trust Share has been paired with an issued and outstanding of Corporation Share pursuant to the terms of the Pairing Agreement. The Paired Shares issued to the Contributing Parties at Closing will be duly authorized, validly issued, full paid and non-assessable and shall be issued hereunder free and clear of all Liens. Except as set forth on Schedule 7.04(f), there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other Contracts or commitments that require the Trust to issue, sell or otherwise cause to become outstanding any Paired Shares. The Issuance of the Paired Shares to the Contributing Parties at the Closing will not require any approval or consent of any Person except for any such approval that shall have been obtained on or prior to the Closing. Assuming the accuracy of the representations in Section 7.01(x), the issuance of the Paired Shares to the Contributing Parties is exempt from registration under the Securities Act and applicable state securities laws. There are no restrictions on the transfer of the Paired Shares other than those in the Constituent Documents of the Trust and the Corporation, the Transfer Restriction and Exchange Rights Agreement, or the Registration Rights Agreement and those arising from federal and applicable state securities laws. (g) Financial Statements; Undisclosed Liabilities. True and complete copies of (i) the audited financial statements of the Trust as of December 31, 1995, together with all related notes and schedules thereto, accompanied by the reports thereon of the Trust's independent auditors, and (ii) the unaudited financial statements of the Trust as of September 30, 1996 and for the nine months then ended, together with all related notes and schedules thereto (collectively, the "Trust's Financial Statements"), have been delivered to the Contributing Parties. The Trust's Financial Statements were prepared in accordance with the books of account and other financial records of the Trust, present fairly the consolidated financial condition and results of operations of the Trust as of the dates thereof or for the periods covered thereby, and have been prepared in accordance with GAAP. Except as disclosed on Schedule 7.04(g), (i) there are no Liabilities of the Trust of the nature required by GAAP to be shown on a balance sheet, other than Liabilities reflected or reserved against on the balance sheets of the Trust as of September 30, 1996, and (ii) Liabilities which have arisen since that date in the ordinary course of business. (h) Conduct in the Ordinary Course of Business. Except as set forth on Schedule 7.04(h), since September 30, 1996, the business of the Trust has been conducted in all material respects in the ordinary course, consistent with past practice, and the business of the Trust will be conducted as aforesaid through the Closing. (i) SEC Documents. The SEC Documents taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (j) Reservation of Shares. Upon Closing, the Trust shall have reserved for issuance a number of Trust Shares equal to the number of Paired Shares into which the SLT OP Units included in the Contribution Amount are exchangeable pursuant to the Transfer Restriction and Exchange Rights Agreement. 34 (k) ERISA Matters. The terms of this transaction are not less favorable to PRISA II than the terms that would be available generally in an arms'-length transaction between unrelated parties. The Trust does not maintain or contribute to an employee benefit plan maintained by an employer or employee organization identified on Schedule 7.04(k). ARTICLE VIII CONDITIONS 8.1 Conditions to the Partnerships' Obligations. The obligation of the Partnerships to acquire the Property Company Interests and the Contributed Assets from the Contributing Parties and to pay the Contribution Amount is subject to satisfaction prior to or simultaneously with the Closing of the following conditions, any of which may be waived in writing in whole or in part by the Partnerships. Subject to Section 12.05(b), a failure of the circumstances made a condition under this Section 8.01 shall not constitute a waiver of any covenants, warranties and representations provided for elsewhere in this Agreement; provided, however, that notwithstanding the foregoing, (i) the Partnerships' sole remedies in the event any such conditions are not satisfied or waived shall be to terminate this Agreement and receive a refund of the Deposit or to proceed as otherwise contemplated by the provisions of Section 13.02(a); and (ii) if Closing occurs, the liability of the Contributing Parties in connection with any breach of the covenants, representations or warranties provided elsewhere in this Agreement shall be limited as provided in Section 12.05(b) and Section 14.02(a): (a) Exchange Rights Agreement. The Contributing Parties shall have entered into the Transfer Restriction and Exchange Rights Agreement in the form of Exhibit "B" attached hereto (the "Exchange Rights Agreement"), and the Exchange Rights Agreement shall be in full force and effect. (b) HEI Contribution. The HEI Contribution shall have been completed in accordance with the terms of the HEI Contribution Agreement. (c) No Material Misrepresentation etc. There shall not be any material error, misstatement or omission in the representations or warranties made by any Contributing Party in this Agreement. (d) Title to Property. SLT shall have obtained from the Title Insurer an ALTA Owners Policy of Title Insurance, Form B-1970 (or such other form acceptable to SLT), for each of the parcels of Real Property based upon the Title Commitments ("Title Policies"). The Title Policies will be dated as of the Closing Date and must: (i) insure title to the applicable parcels of Real Property and all recorded easements benefiting such parcels, subject only to Permitted Encumbrances; 35 (ii) contain an "extended coverage endorsement" insuring over the general exceptions contained customarily in such policies; and (iii) contain non-imputation and "Fairway" endorsements. The Title Policies must not raise any material survey defect or encroachment from or onto any of the Real Property which has not been cured or insured over prior to the Closing. Title to the Property other than the Real Property shall be subject to no Liens other than Permitted Encumbrances. In addition to the requirements of the Title Policies set forth above, the Partnerships may, at their sole cost and expense, obtain such additional endorsements as they may desire, but the non-availability of any such optional additional endorsements shall not constitute a failure of a condition to Closing. (e) Contributing Parties' Proceedings. All proceedings to be taken by the Contributing Parties and Property Companies in connection with the transactions contemplated by this Agreement shall have been contemplated and all documents to be furnished by them incident thereto shall be reasonably satisfactory in substance and in form to the Partnerships and the Partnerships' counsel. (f) Contributing Party's Performance, Consents. Subject to the provisions of Section 8.01(g) regarding licenses and Section 8.01(h) regarding License Agreements, all covenants, actions and agreements made by each Contributing Party which are to be performed or completed on or before the Closing shall have been performed or completed in all material respects, and all documents to be delivered by each Contributing Party at the Closing shall have been delivered, and each Contributing Party and Property Company shall have received all consents, authorizations and approvals required in connection with the transactions contemplated in this Agreement except where the failure to obtain such consent does not and would not reasonably be expected to have a material adverse effect on the use or value of the Property, the performance by the affected Contributing Party of its obligations hereunder or the ability to operate the affected Hotel after Closing in substantially the same manner in which it is presently operated. (g) Licenses. There shall have been issued all appropriate licenses and/or approvals required to permit the continued operation of all portions of the Property, including without limitation full liquor service at the Property, from and after the Closing, provided that the Contributing Parties and the Partnerships shall cooperate fully to effect the transfer of all licenses, permits and approvals as of Closing, but if despite such efforts any license cannot be transferred as of Closing, the Contributing Parties and the Partnerships shall agree to reasonable alternate arrangements customary in the applicable jurisdiction so as to permit the continued operation of the affected Hotel(s) in the manner in which presently operated and Closing shall proceed as scheduled. (h) Franchise License Agreements. With respect to each License Agreement, the applicable Property Company, shall have received all consents or other relief required from 36 the licensor thereunder to permit the transaction contemplated hereby or shall have terminated such License Agreement effective as of the Closing Date, provided: (i) that the Contributing Parties and the Partnerships shall cooperate fully to attempt to negotiate a mutually acceptable resolution of such matters with each franchisor or licensor under a License Agreement, but if despite such efforts such resolution has not been fully negotiated and agreed to by Closing, the Contributing Parties and the Partnerships shall agree to reasonable alternate arrangements and Closing shall proceed as scheduled; and (ii) that any fees or capital expenditures required to be paid under or in connection with such License Agreement as a condition for the approval by the licensor or franchisor of the transfer, termination or reissuance of the same shall, subject to Section 10.01 hereof, be borne by the Partnerships. (i) Notices. Each Contributing Party or Property Company, as appropriate, shall execute and deliver all notices required by any Contract or permit issued by any Governmental Entity for the transactions contemplated herein. (j) ERISA Limitations. Any limitations on OP Unit ownership by the Contributing Parties reasonably necessary to comply with the Plan Asset Regulation so as to avoid the result that the assets of SLT and/or SLC constitute "Plan Assets" for purposes of the Plan Asset Regulation and which may arise due to the transactions contemplated in this Agreement and in the other Transaction Documents shall be resolved in a manner mutually satisfactory to the Contributing Parties and the Starwood Parties. In resolving any such limitations, the Starwood Parties and the Contributing Parties shall first consider equal decreases in the number of OP Units and increases in the number of Paired Shares to be issued immediately after Closing, and, if the parties do not mutually agree to do so, the parties may alternatively agree to decrease the number of OP Units to be delivered to the Contributing Parties pursuant to Section 2.03 and increase the Cash portion of the Contribution Amount based on the Closing Value of the OP Units not delivered. The parties currently contemplate that immediately following the issuance of the OP Units at the Closing, PRISA II shall convert approximately 1,850,000 OP Units into Paired Shares, leaving PRISA II with approximately 1,150,000 OP Units in each of SLT and SLC. The parties hereby agree to cooperate in all reasonable respects to endeavor to resolve any such limitations without the necessity of increasing the Cash portion of the Contribution Amount. 8.2 Conditions to Contributing Party's Obligations. The obligation of the Contributing Parties to contribute the Property Company Interests and Contributed Assets to the Partnerships is subject to satisfaction simultaneously with the Closing of the following conditions (any of which may be waived in whole or in part by the Contributing Parties, but only in writing at or prior to the Closing). Subject to Section 12.05(b), a failure to discover any circumstances made a condition under this Section 8.02 shall not constitute a waiver of any covenants, warranties and representations provided for elsewhere in this Agreement and the Contributing Parties sole remedies in the event any such conditions are not satisfied or waived shall be to proceed as contemplated by Section 13.02(b) or Article XIV. 37 (a) The Starwood Parties' Proceedings. All proceedings to be taken by the Starwood Parties in connection with the transactions contemplated by this Agreement shall have been completed and all documents to be furnished by them incident thereto shall be reasonably satisfactory in substance and in form to the Contributing Parties and their counsel. (b) The Starwood Parties' Performance. All covenants, actions and agreements made by each Starwood Party which are to be performed or completed on or before the Closing shall have been performed or completed in all material respects, including, without limitation, payment of the Contribution Amount, and all documents to be delivered by each Starwood Party at the Closing shall have been delivered, and each Starwood Party shall have received all consents required in connection with the transactions contemplated in this Agreement except where the failure to obtain such consent does not and would not reasonably be expected to have a material adverse effect on the performance by the affected Starwood Party of its obligations hereunder. (c) No Material Misrepresentation etc. There shall not be any material error, misstatement or omission in the representations or warranties made by the Starwood Parties in this Agreement. (d) Exchange Rights Agreement. The Starwood Parties shall have entered into the Exchange Rights Agreement and the Exchange Rights Agreement shall be in full force and effect. (e) Registration Rights Agreement. The Starwood Parties shall have entered into the Registration Rights Agreement in the form of Exhibit "C" attached hereto (the "Registration Rights Agreement"), and the Registration Rights Agreement shall be in full force and effect. (f) [Reserved] (g) HEI Contribution. The HEI Contribution shall have been completed in accordance with the HEI Contribution Agreement. (h) [Reserved] (i) Partnership Amendments. The Contributing Parties shall have been admitted as limited partners to SLT and SLC pursuant to the terms of an amendment to the partnership agreements of each of SLT and SLC reflecting the issuance of the OP Units to the Contributing Parties and their admission to the respective Partnerships, which amendments shall be in form and substance reasonably satisfactory to the Contributing Parties and their counsel. Such amendments shall provide, in part, that upon receipt by the Partnerships of the Property Company Interests and the Contributed Assets and the admission of the Contributing Parties to the Partnerships, the Partnerships shall indemnify and hold harmless the Contributing Parties of 38 and from Liabilities of the Property Company whose interests have been acquired except for any undisclosed material Liability of such Property Company as of the Closing Date (collectively, the "Excluded Liabilities"); provided, however, that the Excluded Liabilities shall not include: (i) any Liability incurred in the ordinary course of operating the applicable Hotel prior to the Closing Date; (ii) any Liability disclosed by the Transaction Documents, the Schedules or Exhibits thereto, any supplement to such schedules or exhibits delivered to the Starwood Parties prior to Closing, the agreements, reports or other documents referred to in any of the foregoing, the Financial Statements, the financial statements prepared in connection with the Net Working Capital adjustment provided for in Article IV; (iii) any Liability of which the Starwood Parties otherwise had Knowledge prior to Closing; or (iv) any Liability incurred on or after the Closing Date; and the Partnerships shall be obligated to hold the Contributing Parties harmless from all such enumerated Liabilities. (j) ERISA Limitations. Any limitations on OP Unit ownership by the Contributing Parties reasonably necessary to comply with the Plan Asset Regulation so as to avoid the result that the assets of SLT and/or SLC constitute "Plan Assets" for purposes of the Plan Asset Regulation and which may arise due to the transactions contemplated in this Agreement and in the other Transaction Documents shall be resolved in a manner mutually satisfactory to the Contributing Parties and the Starwood Parties. In resolving any such limitations, the Starwood Parties and the Contributing Parties shall first consider equal decreases in the number of OP Units and increases in the number of Paired Shares to be issued immediately after Closing, and, if the parties do not mutually agree to do so, the parties may alternatively agree to decrease the number of OP Units to be delivered to the Contributing Parties pursuant to Section 2.03 and increase the Cash portion of the Contribution Amount based on the Closing Value of the OP Units not delivered. The parties currently contemplate that immediately following the issuance of the OP Units at the Closing, PRISA II shall convert approximately 1,850,000 OP Units into Paired Shares, leaving PRISA II with approximately 1,150,000 OP Units in each of SLT and SLC. The parties hereby agree to cooperate in all reasonable respects to endeavor to resolve any such limitations without the necessity of increasing the Cash portion of the Contribution Amount. 39 ARTICLE IX DOCUMENTS 9.1 The Contributing Parties' Closing Deliveries. At the closing, each Contributing Party shall execute as necessary and deliver or cause to be delivered the following: (a) Assignment of Property Company Interests. Duly executed and acknowledged Assignment and Assumption of the Property Company Interests in form and substance reasonably satisfactory to the Parties and their counsel and sufficient to transfer and convey all right, title and interest in, to and under the Property Company Interests to the respective Partnerships who shall countersign and return a copy of the same to signify such Partnership's assumption of obligations thereunder arising after the Closing, subject to the provisions of Section 8.02(i). (b) Confirmation of Distribution of Contributed Assets. Copies of duly executed instruments whereby each Property Company distributes title to the Contributed Assets owned by such Property Company to the Contributing Parties holding Property Company Interests therein (to permit such Contributing Parties to contribute such assets to SLC in accordance with this Agreement). (c) Bills of Sale and General Assignment. A duly executed and acknowledged Bill of Sale and General Assignment from the Contributing Parties in form and substance reasonably satisfactory to the Parties and their counsel and sufficient to transfer and convey the Contributed Assets to SLC. (d) Affidavits Regarding Authority, "Foreign Person". Affidavits sworn to by each Contributing Party to the effect (1) that the signatures on the instruments executed and delivered by such Contributing Party in connection with the transactions contemplated hereby are sufficient to bind such party; (2), if such Contributing Party is not an individual, that all requisite consents or approvals to the Closing transactions required under the applicable Constituent Documents have been obtained; (3) that the Contributing Party is not a "foreign person" as that term is defined in Section 1445(f)(3) of the Code; and (4) that the U.S. taxpayer identification number of each Contributing Party is as set forth in such affidavit. (e) Title Requirements. Subject to the Constituent Parties' obligations under Section 3.01, any and all certificates, affidavits and other instruments and documents which the Title Company shall reasonably require to permit it to issue the Title Policies in the condition required herein. (f) Transfer Tax Returns. All transfer and other tax returns and information returns as may be required in connection with the transactions contemplated by this Agreement, duly executed by the applicable Property Company. (g) [Reserved] 40 (h) Pay-Off Letters. Pay-off letters with respect to the Assumed Debt indicating all sums required to satisfy and permit the discharge of record of any lien securing the Assumed Debt. (i) Good Standing Certificate. A Certificate (dated not more than ten business days prior to the Closing) of the Secretary of State of the state of formation for each Property Company as to the good standing in such state of each of the Property Companies. (j) Others as Reasonably Required. Such other documents as may be reasonably required to consummate the transactions herein contemplated. 9.2 The Partnerships Closing Deliveries. The Partnerships at Closing shall pay or cause to be paid the Contribution Amount to the Contributing Parties and shall execute, acknowledge and/or deliver to the Contributing Parties: (a) Good Standing Certificate. A certificate (dated not more than ten business days prior to the Closing) of the Secretary of State of the State of Delaware as to the good standing of each of the Partnerships in the State of Delaware. (b) Partnership Amendments. The amendments to the Partnership Agreements for SLT and SLC required by Section 8.02(i). (c) Affidavit. An affidavit sworn to by a general partner or officer of each of the Partnerships to the effect that (1) the signatures on the instruments executed and delivered by the Partnerships in connection with this transaction are sufficient to bind the Partnerships, (2) all requisite consents or approvals to the Closing transactions required under the applicable Constituent Documents have been obtained, and (3) the consummation of the transaction by the Partnerships are not prohibited or restricted in any way either under the Constituent Documents or under Legal Requirements applicable to the transaction. (d) Others as Reasonably Required. Such other documents as may be reasonably required to consummate the transactions herein contemplated. 9.3 Closing Deliveries by the Trust and the Corporation. At Closing, each of the Trust and the Corporation shall respectively execute and deliver to the Contributing Parties the following: (a) Good Standing. A certificate (dated not more than ten business days prior to the Closing) of the Secretary of State of the State of Maryland for each of the Trust and the Corporation as to the good standing of each of the Trust and the Corporation respectively in the State of Maryland. (b) Paired Shares. Such stock certificates or other evidence of the issuance of the Paired Shares, if any, to the Contributing Parties as the Contributing Parties may reasonably request. 41 (c) Affidavit. Affidavits sworn to by an officer of the Corporation and the Trust to the effect that (1) the signatures on the instruments executed and delivered by the Corporation and Trust in connection with this transaction are sufficient to bind the Corporation and the Trust (2) all requisite consents or approvals to the Closing transactions required under the applicable Constituent Documents have been obtained, and (3) the consummation of the transaction by the Corporation and the Trust are not prohibited or restricted in any way either under the Constituent Documents or under Legal Requirements applicable to the transaction. (d) Others as Reasonably Required. Such other documents as may be reasonably required to consummate the transactions herein contemplated. ARTICLE X COSTS 10.1 Transaction Costs. The Partnerships and the Contributing Parties shall each pay one-half (1/2) of the amount of all costs associated with transfer taxes, deed stamps, gains taxes, sales or use taxes relating to the transfer of personal property (collectively "Transfer Costs") and the costs associated with title searches and the issuance of the Title Policies (other than optional endorsements) and preparation of surveys (collectively "Title Costs"). The Partnerships and the Contributing Parties shall each bear and pay one-half (1/2) of any escrow costs and recording fees and charges. Fees, costs and expenses incurred in terminating or assigning the License Agreements or in obtaining replacement franchise agreements therefor shall be borne by the Partnerships; provided, however, that if such costs shall exceed $500,000 with respect to the Atlanta Embassy Suites Hotel, all such costs in excess of such amount with respect to such Hotel shall be borne equally by the Contributing Parties and the Starwood Parties. Fees, costs and expenses incurred in connection with the issuance of all appropriate licenses and/or approvals required to permit the continued operation of full liquor service at the Property shall be borne by the Partnerships. All other costs and expenses incurred by the Contributing Parties in connection herewith, including, without limitation, all attorneys' fees and costs shall be borne by the Contributing Parties. All other costs and expenses incurred by the Starwood Parties in connection herewith, including, without limitation, all attorneys' fees and costs shall be borne by the Starwood Parties. ARTICLE XI BROKERAGE 11.1 Broker. Each Contributing Party and each of the Starwood Parties represents and warrants that it has not dealt with any broker in connection with this transaction other than (i) Goldman, Sachs & Co., whose fees shall be paid by the Contributing Parties, (ii) Prudential Securities Incorporated whose fees shall be paid by HEI (as provided in the HEI Contribution Agreement) and (iii) Merrill, Lynch & Co., whose fees shall be paid by HEI pursuant to its agreement with Merrill, Lynch & Co. Each of the Starwood Parties and each Contributing Party hereby agrees to indemnify, defend and hold the other parties to this Agreement harmless from and against any claim, cost, damage or expense including reasonable attorneys' fees in defense 42 thereof, made by any other broker claiming to have been retained by such Person in connection with the transactions contemplated hereby. ARTICLE XII SCHEDULES, CLOSING, "AS IS" 12.1 Schedules. Each of the parties hereto shall cause to be prepared and delivered to the other parties hereto all Schedules pertaining to such party as soon as reasonably practicable after the date hereof. If, prior to 6:00 P.M. (EST) on January 17, 1997, the Starwood Parties have not terminated this Agreement in accordance with the following sentence, the Starwood Parties shall be deemed to have approved such Schedules and SLT shall be obligated to immediately increase the Deposit by $5,000,000 as provided for in Section 2.05 above. If the Schedules disclose matters which, taken as a whole, materially adversely affect the business prospects, assets, liabilities, financial condition or operating results of the party on whose behalf such Schedule was submitted, then, the party for whose benefit such Schedule was submitted, may, by notice to the party on whose behalf such Schedule was submitted, elect to terminate this Agreement, in which event this Agreement (and all other Transaction Documents) shall terminate and be of no further force and effect, except for those provisions which specifically survive such termination, and the Initial Deposit shall be returned to SLT. 12.2 Access. (a) Access - Partnerships. The Contributing Parties shall permit the Partnerships and their authorized representatives at such time or times as the Partnerships may reasonably request (and either before or after Closing) (i) upon reasonable prior notice, to inspect, review, or copy the books and records, including, without limitation, any financial statements (collectively, the "Property Company Records") of each of the Property Companies and/or their respective agents' relating to the ownership, management and operation of the Property for any periods prior to the Closing Date (the "Property Company Records Review"), (ii) to inspect the physical condition of the Property (the "Physical Inspection"), (iii) to enter the Property for the purpose of observing the taking of any inventories and the counting of house cash, and (iv) to schedule and perform interviews of Hotel employees, provided that all such interviews shall be scheduled through Murray Dow of HEI who shall make all reasonable efforts to accommodate the Partnerships' scheduling requests. The Contributing Parties shall cause the Property Companies to direct the managers of the Hotels to cooperate in such investigations by the Partnerships, and take such steps as may be reasonably within the power of the Property Companies to compel the managers so to cooperate, and the Partnerships shall use commercially reasonable efforts to minimize disruption to the Hotel Business. (b) Access - Contributing Parties. The Starwood Parties shall permit the Contributing Parties and their authorized representatives at such time or times as the Contributing Parties may reasonably request (and either before or after Closing (i) upon reasonable prior notice, to inspect, review, or copy the books and records, including, without limitation, any financial statements (collectively, the "Starwood Records") of each of the Starwood Parties and/or their respective agents' relating to the ownership, management and 43 operation of the Starwood Parties or their hotels (the "Starwood Records Review"), and (ii) to schedule and perform interviews of employees of the Starwood Parties, their affiliates and managers, provided that all such interviews shall be scheduled through Steve Goldman who shall make all reasonable efforts to accommodate the Contributing Parties' scheduling requests. 12.3 Certain Definitions. For the purposes of Section 12.02: (a) Records (of the Property Companies or the Starwood Parties, as applicable) shall include, without limitation, all past and current, rent rolls, paid bill files, depreciation schedules, canceled checks, payroll tax returns and any additional records reasonably requested by the Partnerships or the Contributing Parties, as the case may be (excluding bank statements) in the possession of the Property Companies or the Starwood Parties, or their respective agents; and (b) Physical Inspection may include, without limitation, the roofs, foundation, interiors, soil, landscaping, painting, pools, dumpster pads, heating systems, electrical systems, plumbing, sewerage systems, water supply, painting, appliances, carpeting, drapes, clubhouse, roads, parking areas and inspection for evidence of termite infestation and/or environmental matters. 12.4 Deliveries. The Contributing Parties shall fully cooperate with the Partnerships and the Partnerships' representatives in making the foregoing review, audit and inspection, and shall upon request from the Partnerships deliver to the Partnerships such information, reports or other records as may be relevant to such review and within the possession of the Contributing Parties or the Property Companies. The Starwood Parties shall fully cooperate with the Contributing Parties and the Contributing Parties' representatives in making the foregoing review, audit and inspection, and shall upon request from the Partnerships deliver to the Partnerships such information, reports or other records as may be relevant to such review and within the possession of the Starwood Parties or the Property Companies. 12.5 Effect of Inspections, "As Is". (a) Upon completion of the Closing, the Partnerships will be deemed to have accepted the Property on an "As Is" basis, subject to the provisions of Articles VII, XIV and XVI (as limited in accordance with Sections 12.05(b), 13.02(a) and 14.02(b) of this Agreement) and the terms and conditions of the other Transaction Documents. The sole obligation of the Contributing Parties with respect to the physical condition of the Property will be to contribute the Property Company Interests and the Contributed Assets to the Partnerships with the Property in substantially the same physical condition (excluding normal wear and tear) as existed on the date of execution and delivery of this Agreement. Subject to the provisions of Articles VII, XIV, and XVI (as limited in accordance with Sections 12.05(b), 13.02(a) and 14.02(b) of this Agreement), the Partnerships have agreed to accept possession of the Property Company Interests and Contributed Assets on the Closing Date with the Property and Hotel Business of each Hotel on an "As Is" basis. The Partnerships and Contributing Parties agree that at Closing the Property will be "As Is," and, except as expressly set forth in Section 7.01 hereof, such Closing transactions will be without representation or warranty of any kind, express or implied (including, without limitation, warranty of income potential, operating expenses, uses, 44 merchantability or fitness for a particular purpose), and the Partnerships do hereby disclaim and renounce any such representation or warranty other than as expressly made pursuant to Section 7.01 (but subject to the limitations and qualifications provided for in this Agreement). For purposes of this Agreement, the term "As Is" means, as and where the Property presently exist as of the date of execution and delivery of this Agreement, including, without limitation, all faults, defects, claims, Liens, and other conditions of every kind or description with respect to (a) the physical and environmental condition of the Property and the Hotels (including defects seen and unseen and conditions natural and artificial), (b) subject to Article III, the Property Companies' title to the Real Property and the Hotels, (c) subject to Article III, the Property Companies' title to the Tangible Personal Property, Intangible Property, Proprietary Interests and Miscellaneous Interests, (d) all Legal Requirements to which the Property is subject, (e) the financial operations of the Hotels, demands, actions, or causes of action that relate in any way to the Hotels or the ownership and operations thereof and, (f) all other matters related in any way to the ownership and operation of the Property and the Hotels, whether known or unknown, subject in each case to the obligations of the Contributing Parties under Articles VII, XIV and XVI (as limited in accordance with Sections 12.05(b), 13.02(a) and 14.02(b) of this Agreement) and the terms of the other Transaction Documents. (b) The right of inspection, review and audit referred to in Section 12.02(a) of this Agreement, and the exercise of such right by the Partnerships shall not constitute a waiver by the Partnerships of the breach of any covenant, representations or warranty of the Contributing Parties; provided, however, that if the Starwood Parties have Knowledge of any such breach at the time of Closing, and elect to complete the Closing in accordance with the terms hereof notwithstanding such Knowledge, then the Starwood Parties shall irrevocably be deemed to have waived any such breach of which the Starwood Parties had Knowledge at Closing. Likewise, the review, investigation and analysis of the Starwood Parties, the OP Units and the Paired Shares by the Contributing Parties shall not constitute a waiver by the Contributing Parties of the breach of any covenant, representation or warranty of the Starwood Parties; provided, however, that if the Contributing Parties have Knowledge of any such breach at the time of Closing, and elect to complete the Closing notwithstanding such Knowledge, then the Contributing Parties shall irrevocably be deemed to have waived any such breach of which the Contributing Parties had Knowledge at Closing. For purposes of this Section 12.05(b) and Article XIII and XIV, Knowledge with respect to a party shall include the present actual Knowledge of the individual attorneys actively representing such party in connection with the transactions contemplated hereby. (c) [Reserved] 12.6 Delivery of Property Company Records. The Contributing Parties shall cause the Property Company Records to remain with the Property Companies upon the contribution of the Property Company Interests and Contributed Assets to the Partnerships at Closing. The Partnerships agree for a period of five (5) years subsequent to the Closing Date, upon request of the Contributing Parties, to make available to the Contributing Parties all information and statements in the Partnerships' possession (including, without limitation, the Property Company Records) with regard to any period prior to the Closing Date which may be reasonably required by the Contributing Parties in connection with the Property Companies' control of the Property or the operation thereof. 45 12.7 The Partnerships' Indemnification. The Partnerships agree to indemnify, defend and hold the Contributing Parties harmless from and against any claim, damage or expense, including reasonable attorneys' fees, incurred by the Contributing Parties and arising from the Partnerships' entry upon the Property for the performance of the Partnerships' due diligence reviews and such indemnification shall survive the Closing or termination of this Agreement. 12.8 Date and Location Closing. The Closing of the transactions contemplated by this Agreement (the "Closing") shall take place on January 31, 1997 at 10:00 a.m. at the offices of Kirkland & Ellis, 153 East 53rd Street, New York, NY, or at such other time and place as the parties may mutually determine (the "Closing Date"), provided that either party hereto may adjourn the Closing for a period not to exceed thirty (30) days for the purpose of obtaining the consents required pursuant to Section 8.01(h) (provided that such period shall be sixty (60) days with respect to the consent required from Hilton Hotels Corp.) ARTICLE XIII EARNEST MONEY, DEFAULT AND REMEDIES 13.1 Duties of Escrow Agent. The duties of Escrow Agent will be as provided in the Escrow Agreement and shall include: (a) Earnest Money Deposits. During the term of this Agreement, Escrow Agent will hold, deposit, invest and deliver the Deposits in accordance with the terms and provisions of this Agreement. (b) Disputes. If this Agreement is terminated by the mutual written agreement of the Contributing Parties and the Starwood Parties, or if Escrow Agent is unable to determine at any time to whom any of the Deposit should be delivered, or if a dispute develops between the Contributing Parties and the Starwood Parties concerning to whom the Deposit should be delivered, then in any such event, Escrow Agent will request joint written instructions from the Contributing Parties and the Starwood Parties and will deliver the Deposit in accordance with such joint written instructions. In the event that such written instructions are not received by Escrow Agent within ten (10) days after Escrow Agent has served a written request for instructions upon the Contributing Parties and the Starwood Parties, Escrow Agent will have the right to pay the Deposit into a court of competent jurisdiction and interplead the Contributing Parties and the Starwood Parties in respect thereof, and thereafter Escrow Agent will be discharged of any obligations in connection with this Agreement. (c) Costs. If costs or expenses are incurred by Escrow Agent because of litigation or a dispute between the Contributing Parties and the Starwood Parties arising out of the holding of the Deposit in escrow, the Contributing Parties and the Starwood Parties will each pay Escrow Agent one-half of such reasonable and direct costs and expenses. Except for such costs and expenses, no fee or charge will be due or payable to Escrow Agent for its services as escrow holder other than its usual and customary investment fees, if any. (d) Limited Duties. By joining in the Escrow Agreement, Escrow Agent undertakes only to perform the duties and obligations imposed upon it under the terms of the 46 Escrow Agreement and expressly does not undertake to perform any of the other covenants, terms and provisions incumbent upon the Contributing Parties and the Starwood Parties hereunder. (e) Liability. The Starwood Parties and the Contributing Parties hereby agree and acknowledge that Escrow Agent assumes no liability in connection herewith except for gross negligence or willful misconduct; that Escrow Agent will never be responsible for the validity, correctness or genuineness of any document or notice referred to under this Agreement; and that Escrow Agent may seek advice from its own counsel and will be fully protected in any action taken by it in good faith in accordance with the opinion of its counsel. 13.2 Default. (a) Contributing Parties Default. Notwithstanding any other provision of this Agreement, if the Contributing Parties, or any one of them, fail to perform any of their material obligations or agreements within fifteen (15) days following written demand for such performance contained herein and if the Starwood Parties are not then in default of any of their material obligations and agreements contained herein, then as their sole and exclusive remedy the Starwood Parties may elect to: (i) terminate this Agreement by giving written notice of termination and the reasons therefor to the Contributing Parties, in which event neither the Contributing Parties nor the Starwood Parties will have any further obligations or liabilities one to the other hereunder (except for any indemnity of one party by the other which expressly survives Closing or termination of this Agreement), and the Contributing Parties and Escrow Agent will immediately thereafter return the entire Deposit to SLT and the Contributing Parties shall reimburse the Starwood Parties for all Pursuit Costs actually incurred by the Starwood Parties in pursuing the transactions contemplated hereby up to an amount not to exceed One Million Dollars ($1,000,000); (ii) waive such default and complete the Closing as contemplated by this Agreement without any adjustment to or reduction in the Contribution Amount as a result of such default (except to the extent to the same affects the Net Working Capital Adjustment pursuant to Section 4.01); or (iii) waive all other actions, rights or claims for damages, other than costs and expenses incurred in enforcing this Agreement and bring an equitable action for specific performance of the terms of this Agreement (i.e., to compel any Contributing Party to comply with its covenants under this Agreement). If the Starwood Parties shall elect to proceed pursuant to clause (iii) above and shall successfully prosecute such action for specific performance, the Contributing Parties shall reimburse the Starwood Parties for all fees, costs and expenses incurred in prosecuting such action including, without limitation, reasonable attorneys fees, but if the Contributing Parties shall prevail in any such action, the Starwood Parties shall reimburse the Contributing Parties for all fees, costs and expenses incurred in defending such action including, without limitation, reasonable attorneys fees. 47 (b) Starwood Parties' Default. If the Starwood Parties fail to close the transaction contemplated hereby (except for permitted terminations set forth herein) and the Contributing Parties are not then in default of any of their material obligations or agreements contained herein, then the Contributing Parties' sole option hereunder will be to terminate this Agreement, whereupon Escrow Agent will pay the Deposit to the Contributing Parties as liquidated damages, and the Starwood Parties will have no further obligations or liabilities hereunder (except for any indemnity or liability specifically stated to survive termination of this Agreement). The Contributing Parties' election to receive the Deposit as liquidated damages is agreed to due to the difficulty, inconvenience, and uncertainty of ascertaining actual damages for such breach by the Starwood Parties and the Starwood Parties agree that the same is a reasonable and fair estimate of such damages. The Starwood Parties waive and release any right to (and covenant that they will not) sue the Contributing Parties or the Property Companies or seek or claim a refund of all or any portion of the Deposit on the grounds that it is unreasonable in amount and exceeds the Contributing Parties' actual damages or that its retention by the Contributing Parties constitutes a penalty. (c) [Reserved] ARTICLE XIV INDEMNIFICATION 14.1 Survival. Subject to the provisions of Section 12.05(b) and Section 13.02, and to the completion of the Closing, all representations, warranties, covenants and agreements set forth in the Transaction Documents or in any certificate or other writing delivered in connection with the Transaction Documents shall survive such Closing, and the consummation of the transactions contemplated thereby notwithstanding any examination made for or on behalf of the Starwood Parties or the Contributing Parties; provided that the Contributing Parties' obligation to indemnify the Starwood Parties and the Starwood Parties' obligation to indemnify the Contributing Parties in respect of breaches thereof shall be subject to the limitations set forth below. The provisions of this Article XIV shall apply only after Closing, and none of the Starwood Parties, the Contributing Parties or the Property Companies shall have any liability or obligation under the provisions of this Article XIV unless and until the Closing occurs. 14.2 Indemnification by Contributing Parties. (a) Subject to the provisions of Sections 12.05(b) and 13.02(a), and the limitations set forth in Section 14.02(b) below, as the exclusive remedy of the Starwood Parties under this Agreement after Closing, the Contributing Parties hereby jointly and severally (except as otherwise provided in Section 7.01(b)(ii) above, with respect to the representations and warranties therein made severally by the Contributing Parties and as to which the indemnification obligations created hereby shall also be several), agree to indemnify each of the Starwood Parties (who for purposes of this Article XIV, shall include each of their respective Affiliates, officers, directors, partners, employees, agents, representatives, successors and permitted assigns) and hold each of them harmless against and pay on behalf of or reimburse such Starwood Parties in respect of any liability (including, without limitation, interest, penalties, reasonable attorneys 48 fees and expenses, court costs and amounts paid in investigation, defense or settlement of any of the foregoing) (collectively, "Losses") which any such Starwood Party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of the breach of any covenant, representation or warranty made by the Contributing Parties under this Agreement (a "Breach"). (b) The indemnification provided for in Section 14.02(a) above is subject to the following limitations: (i) Each Contributing Party will be liable to the Starwood Parties under Section 14.02(a) with respect to a Breach only (a) if Starwood Parties had no Knowledge of such Breach on or before the Closing Date; and (b) the Starwood Parties give the Contributing Party written notice of such claim under Section 14.02(a): (A) within the earlier of (i) six months after the Closing Date or (ii) thirty (30) days following completion of the final determination of Closing Net Working Capital of any Property Company pursuant to Section 4.01(d) for claims arising from or relating to any Breach except a breach of the representations and warranties of Contributing Parties under Sections 7.01(b)(i), (b)(ii), (c), (e), (n) or (x); (B) within twelve (12) months after the Closing Date for claims arising from or relating to any breaches of the representations and warranties of the Contributing Parties under Section 7.01(b)(i); (C) within eighteen (18) months after the Closing Date for claims arising from or relating to any breaches of the representations and warranties of the Contributing Parties under Section 7.01(e); or (D) within 30 days following expiration of all applicable statutes of limitations for claims relating to any Breach under Section 7.01(c) and at any time after the Closing Date for claims arising from or relating to any breaches of the representations and warranties of the Contributing Parties under Sections 7.01 (b)(ii), (n) or (x). (ii) The Contributing Parties will not be liable for any Loss arising from any Breach unless and until the aggregate amount of all such Losses relating to all such Breaches exceeds $100,000 (the "Threshold"), in which case the Contributing Parties, shall be liable for the amount of all such Losses in excess of the Threshold; provided that the aggregate liability of the Contributing Parties 49 hereunder shall not exceed: (i) $500,000 in respect of Losses relating to any single Hotel; and (ii) $2,750,000 (the "Cap Amount") in respect of all Losses for which indemnification is sought by the Starwood Parties pursuant hereto. 14.3 Indemnification by Starwood Parties. (a) Subject to the provisions of Sections 12.05(b) and 13.02(a), and the limitations set forth in Section 14.03(b) below, as the exclusive remedy of the Contributing Parties under this Agreement after Closing, each Starwood Party hereby severally agrees to indemnify each of the Contributing Parties (who for purposes of this Article XIV, shall include each of their respective Affiliates, officers, directors, partners, employees, agents, representatives, successors and permitted assigns) and hold each of them harmless against and pay on behalf of or reimburse such Contributing Parties in respect of any liability (including, without limitation, interest, penalties, reasonable attorneys fees and expenses, court costs and amounts paid in investigation, defense or settlement of any of the foregoing) (collectively, "Losses") which any such Contributing Party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of the breach of any covenant, representation or warranty made by such Starwood Party under this Agreement (a "Breach"). (b) The Indemnification provided for in Section 14.03(a) above is subject to the following limitations; (i) Each Starwood Party will be liable to the Contributing Parties with respect to claims referred to in subsection (a)(i) above only if (a) the Contributing Parties had no Knowledge of such claim on or before the Closing Date and (b); if the Contributing Parties give the applicable Starwood Party written notice of such claim: (A) within the earlier of (i) six months after the Closing Date or (ii) thirty (30) days following completion of the final determination of Closing Net Working Capital of any Property Company pursuant to Section 4.01(d) for claims arising from or relating to breaches of the representations and warranties set forth in Sections 7.02 (e), (g), and (h), 7.03 (e), (g), and (h) and 7.04 (e) (g) and (h); (B) within twelve (12) months after the Closing Date for claims arising from or relating to any breaches of the representations and warranties set forth in Section 7.03(f) or 7.04(f); (C) at any time after the Closing Date for claims arising from or relating to breaches of the representations and warranties set forth in Section 7.02(a) - (d), (f), or (i) - (j), 7.03 (a) -(d), or (i) - (k) or 7.04 (a) - (d), or (i) - (k). 50 (ii) No Starwood Party shall be liable for any Loss arising from any breach of any covenant, representation or warranty contained in this Agreement or any Schedule or Exhibit hereto unless and until the aggregate amount of all such Losses relating to all such breaches by all of the Starwood Parties exceeds the Threshold, in which case the applicable Starwood Party, shall be liable for the amount of all such Losses in excess of the Threshold; subject to a maximum aggregate collective liability among the Starwood Parties for all such Losses in the amount of the Cap Amount. 14.4 Procedures. (a) If a party hereto seeks indemnification under this Article XIV such party (the "Indemnified Party") shall give written notice to the other party (the "Indemnifying Party") of the facts and circumstances giving rise to the claim. In that regard, if any suit, action, claim, liability or obligations shall be brought or asserted by any third party which, if adversely determined, would entitle the Indemnified Party to indemnity pursuant to this Article XIV, the Indemnified Party shall promptly notify the Indemnifying Party of the same in writing, specifying in detail the basis of such claim and the facts pertaining thereto and the Indemnifying Party, if it so elects, shall assume and control the defense thereof (and shall consult with the Indemnified Party with respect thereto), including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all necessary expenses; provided that the Indemnifying Party shall not have the right to assume control of such defense if the claim which the Indemnifying Party seeks to assume control (1) seeks non-monetary relief; or (2) involves criminal or quasi-criminal allegations. In the event that the Indemnified Party retains control of the defense of such claim, the Indemnified Party shall use good faith efforts, consistent with prudent business judgment, to defend such claim. If the Indemnifying Party is permitted to assume and control the defense and elects to do so, the Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnified Party unless (A) the employment thereof has been specifically authorized by the Indemnifying Party in writing, (B) the Indemnifying Party has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party and such counsel advises the Indemnifying Party of the general nature of such conflict, (C) the Indemnifying Party has failed to assume the defense and employ counsel, or (D) the Indemnified Party has reasonably determined that an adverse outcome could have a material adverse effect on its business, reputation or could reasonably be expected to have a materially adverse precedential effect; in which case the fees and expenses of the Indemnified Party's counsel shall be paid by the Indemnifying Party. The Indemnifying Party shall not be liable for any settlement of any such action or proceeding effected without the written consent of the Indemnifying Party, however, if there shall be a final judgment for the plaintiff in any such action, the Indemnifying Party agrees to indemnify and hold harmless the Indemnified Party from and against any loss or liability by reason of such judgment. (b) In the event any Indemnified Party which is an individual, or any senior officer (including, without limitation, any president or vice-president) of any other Indemnified Party or any general partner or member thereof, has actual knowledge of any valid claim or 51 defense (and not merely any facts or circumstances which may give rise to such claim or defense) against a third party who is a party to the applicable claim in connection with any Loss as to which such Indemnified Party seeks indemnification pursuant to this Article XIV and such Indemnified Party without good reason fails to notify the Indemnifying Party of such claim or defense or without good reason fails to assert such claim or defense on its own behalf, then the Indemnified Party shall not be entitled to receive indemnification from the Indemnifying Party to the extent of the Loss which is proven by the Indemnifying Party to have been occasioned by such failure to notify or such failure to assert such claim or defense. The determination of whether a party had "good reason" for failure to notify or failure to assert any claim or defense shall be made by the Arbitrator pursuant to subsection (i) below. (c) In the event any Indemnified Party is insured pursuant to an unexpired insurance policy against any occurrence giving rise to any Loss as to which such Indemnified Party seeks indemnification pursuant to this Article XIV (including, without limitation, pursuant to any insurance policy maintained by any Property Company before or after Closing), the Indemnified Party shall promptly give notice of such insurance coverage to the Indemnifying Party and the Indemnifying Party shall, in its reasonable discretion, elect either (i) to require the Indemnified Party to make a claim pursuant to such insurance policy for such Loss and the Indemnifying Party's obligation to indemnify the Indemnified Party shall thereafter be reduced by the amount of insurance proceeds received by the Indemnified Party as a result of such claim or (ii) to indemnify the Indemnified Party without requiring a claim to be made by the Indemnified Party on such insurance policy. In the event the Indemnifying Party elects to require the Indemnified Party to make a claim on such insurance policy pursuant to clause (i) above, the Indemnifying Party shall pay any increase in insurance premiums resulting directly and proximately from such claim by the Indemnified Party on such insurance policy; provided that if any such increase in such insurance premium is caused by one or more claims on such insurance policy as a result of Losses which are not subject to indemnification pursuant to this Article XIV, then the Indemnifying Party shall be obligated to pay such increase in insurance premiums only to the extent such increase is attributable to claims made by the Indemnified Party pursuant to clause (i) above. The determination of the amount of such increase in insurance premiums attributable to any claim made pursuant to clause (i) above shall be made by the mutual agreement of the Parties acting in good faith, and in the event the Parties are unable to so agree shall be made by the Arbitrator pursuant to subsection (i) below. The Indemnified Party shall provide to the Indemnifying Party such documentation relating to such increase in insurance premium as shall be necessary to establish the amount of such increase and shall otherwise cooperate with the Indemnifying Party in establishing the amount of such increase attributable to the claim made pursuant to clause (i) above. (d) In the event that the Starwood Parties are entitled to any indemnification hereunder from the Contributing Parties, within 15 days after a final determination of the amount of such indemnification pursuant to the terms of this Article XIV (the "Indemnification Amounts"), the Contributing Parties shall make an election to pay (and shall pay) such Indemnification Amount either (i) by payment of immediately available funds to the Starwood Parties or (ii) by delivering or causing the Partnerships to cancel on their respective books and records an equal number of SLT OP Units and SLC OP Units held by the Contributing Parties having a current market value (based upon the Paired Share price as of the date of the final determination of such Indemnification Amount) equal to the Indemnification Amount, and to the 52 extent such delivery or cancellation of SLT OP Units and SLC OP Units is insufficient to pay such Indemnification Amount, immediately available funds for the remaining balance of such Indemnification Amount. In the event that the Contributing Parties are entitled to any indemnification hereunder from the Starwood Parties, within 15 days after a final determination of the amount of such indemnification pursuant to the terms of this Article XIV, the Starwood Parties shall satisfy such obligation by payment of immediately available funds to the Contributing Parties. (e) Any dispute, controversy, or claim arising under or relating to this Article XIV ("Dispute") shall be resolved by final and binding arbitration administered by the American Arbitration Association ("AAA") under its Commercial Arbitration Rules, subject to the following: (i) Either party may demand that any Dispute be submitted to binding arbitration. The demand for arbitration shall be in writing, shall be served on the other party in the manner prescribed herein for the giving of notices, and shall set forth a short statement of the factual basis for the claim, specifying the matter or matters to be arbitrated. (ii) The arbitration shall be conducted by an arbitrator appointed by the AAA (the "Arbitrator") who shall conduct such evidentiary or other hearings as such arbitrator deems necessary or appropriate and thereafter shall make a final determination as soon as practicable. Any arbitration pursuant hereto shall be conducted by the Arbitrator as the parties may mutually agree or, if the parties do not so agree, under the guidance of the Federal Rules of Civil Procedure and the Federal Rules of Evidence, but the Arbitrator shall not be required to comply strictly with such Rules in conducting any such arbitration. All such arbitration proceedings shall take place in New York, New York. (iii) Except as provided herein: (A) each party shall bear its own "Costs and Fees," which are defined as all reasonable pre-award expenses of the arbitration, including travel expenses, out-of-pocket expenses (including but not limited to, copying and telephone) witness fees, and reasonable attorney's fees and expenses; (B) the fees and expenses of the Arbitrator and all other costs and expenses incurred in connection with the arbitration ("Arbitration Expenses") shall be borne equally by the parties; and (C) notwithstanding the foregoing, the Arbitrator shall be empowered to require any one or more of the parties to bear all or any portion of such Costs and Fees and/or the fees and expenses of the Arbitrator in the event that the Arbitrator determines such party has acted unreasonably or in bad faith. (iv) The Arbitrator shall have the authority to award damages, including costs but shall not have the authority to award punitive damages, to impose sanctions for 53 abuse or frustration of the arbitration process, or to compel specific performance. The decision of the Arbitrator and any award pursuant thereto shall be in writing and counterpart copies thereof shall be delivered to each party. The decision and award of the Arbitrator shall be binding on all parties. In rendering such decision and award, the Arbitrator shall not add to, subtract from or otherwise modify the provisions of this Article XIV. Either party to the arbitration may seek to have judgment upon the award rendered by the Arbitrator entered in any court having jurisdiction thereof. (v) Each party agrees that it will not file any suit, motion, petition or otherwise commence any legal action or proceeding for any matter which is required to be submitted to arbitration as contemplated herein except in connection with the enforcement of an award rendered by the Arbitrator and except to seek non-monetary equitable relief including, with limitation, the issuance of an injunction or temporary restraining order pending a final determination by the Arbitrator. Upon the entry of any order dismissing or staying any action or proceeding filed contrary to the preceding sentence, the party which filed such action or proceeding shall promptly pay to the other party the reasonable attorney's fees, costs and expenses incurred by such other party prior to the entry of such order. (vi) All aspects of the arbitration shall be considered confidential and shall not be disseminated by any party with the exception of the ability and opportunity to prosecute its claim or assert its defense to any such claim. The Arbitrator shall be required to issue prescriptive orders as may be required to enforce and maintain this covenant of confidentiality during the course of the arbitration and after the conclusion of same so that the result and the underlying data, information, materials and other evidence are forever withheld from public dissemination with the exception of its subpoena by a court of competence jurisdiction in an unrelated proceeding brought by a third party. (f) Nothing in this Article XIV shall limit or restrict any party's right to maintain or recover on any action based upon fraud. ARTICLE XV FURTHER ASSURANCES 15.1 Further Assurances. The Contributing Parties, the Property Companies and the Starwood Parties, at or after Closing, and without further consideration, shall execute, acknowledge and deliver to the other such other documents and instruments, and take such other actions, as either shall reasonably request or as may be necessary more effectively to transfer to the Partnerships the Property in accordance with this Agreement. 54 ARTICLE XVI PRE-CLOSING OPERATIONS 16.1 Contributing Party's Conduct of Business. Except as required by applicable Legal Requirements, until the Closing or earlier termination of this Agreement, each Contributing Party shall with respect to the Property Company in which it owns Property Company Interests: (a) operate or cause HEI as manager, to operate the Property in accordance with the terms of the Management Agreements applicable thereto diligently and only in the ordinary course of business consistent with past practices so as to preserve its business and goodwill intact, and reserve for the Partnerships the goodwill and relationships of the Property Companies with their suppliers, tenants, and others having relations with them and so as to: (i) maintain the Property in material compliance with all Legal Requirements; (ii) maintain all insurance presently maintained thereon in full force and effect, and (iii) comply in all material respects with any License Agreement applicable to each Hotel; (b) not sell, transfer, pledge or convey any Property Company Interest (except for distributions to the holders of equity interests in a Contributing Party), or permit the Property Company or HEI, except in the ordinary course of business, to sell, assign, or convey any right, title, or interest whatever in or to the Property or any part thereof, or any Inventory or create or permit to exist any Lien thereon without promptly discharging the same (other than in the ordinary course of business) or with respect to Permitted Encumbrances; (c) promptly inform the Partnerships in writing of any variances from the representations and warranties contained in Section 7.01; (d) use reasonable efforts to cooperate with the Partnerships in order to attempt to obtain all third party and governmental approvals and consents necessary or desirable to consummate the transactions contemplated hereby and to cause the other conditions to the parties obligations hereunder to be satisfied; and (e) maintain its books, accounts and records in accordance with GAAP consistently applied. 16.2 On-Site Representative. After the date of execution and delivery of this Agreement, the Partnerships shall be entitled to have their representatives on-site at the Hotels to participate in and receive all information pertaining to the operation and management of each Hotel Business, and the parties shall reasonably cooperate in such efforts. 55 ARTICLE XVII NOTICES 17.1 Procedure for Notice. All notices, demands, consents, approvals and other communications which are required or desired to be given hereunder shall be in writing and shall be sent by Federal Express or other similar courier, with a simultaneous copy by facsimile transmission, to the recipient as set forth below or at such other address as such parties shall have last designated by notice to the other: If to the Contributing Parties: c/o HEI Hotels LLC 55 Greens Farms Road Westport Corporate Office Park Westport, CT 06880 Fax No. 203/454-7678 c/o Prudential Real Estate Investors 8 Campus Drive Parsippany, NJ 07054 Attention: Gary L. Kauffman (Fax: 201/683-1790) Joseph D. Margolis, Esq. (Fax: 201/683-1788) James P. Walker, Esq. (Fax: 201/683-1788) with copies to: O'Melveny & Myers LLP 153 East 53rd Street New York, New York 10022 Attention: Robert S. Insolia, Esq. (Fax No. 212/326-2061) William N. Cooney, Esq. (Fax No. 213/669-6407) Willkie, Farr & Gallagher 153 East 53rd Street New York, New York 10022 Attention: Bruce M. Montgomerie, Esq. Fax No. 212/821-8927 56 If to the Starwood Parties: SLT Operating Limited Partnership c/o Starwood Lodging Trust 2231 East Camelback Road, Suite 410 Phoenix, AZ 85016 Telephone: (602) 852-3900 Telecopy: (602) 852-0984 Attention: Steven R. Goldman SLC Operating Limited Partnership c/o Starwood Lodging Corporation 2231 East Camelback Road, Suite 400 Phoenix, AZ 85016 Telephone: (602) 852-3900 Telecopy: (602) 852-0984 Attention: Nir Margalit, Esq. Starwood Lodging Trust 2231 East Camelback Road, Suite 410 Phoenix, AZ 85016 Telephone: (602) 852-3900 Telecopy: (602) 852-0984 Attention: Steven R. Goldman Starwood Lodging Corporation 2231 East Camelback Road, Suite 400 Phoenix, AZ 85016 Telephone: (602) 852-3900 Telecopy: (602) 852-0984 Attention: Nir Margalit, Esq. with copies to: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Telecopy: (312) 861-2200 Attention: Stephen G. Tomlinson, Esq. Sidley & Austin 555 West Fifth Street Los Angeles, CA 90013 Telephone: 213/896-6000 Telecopy: 213/896-6600 Attention: Sherwin L. Samuels, Esq. 57 Notices signed by the parties' respective attorneys shall be deemed sufficient within the meaning of this Section without the signatures of the parties themselves. Notices, demands, consents, approvals, and other communications shall be deemed given one (1) day after delivery to such courier. During the existence of a strike, notice and other communications may be given by personal service and such notices and communications shall be effective when delivered. ARTICLE XVIII ADDITIONAL COVENANTS 18.1 Board Representation. (a) Not later than fifteen (15) days after the Closing Date, the Trust shall: (i) take all necessary action, if any, to increase the number of trustees of the Trust by two, and (ii), subject to the Nevada Gaming Approvals, nominate and support for election to the board of trustees of the Trust Gary M. Mendell and Roger S. Pratt. (b) For so long as PRISA II shall maintain the Minimum Share Ownership, PRISA II shall continue to be entitled to designate, subject to the Nevada Gaming Approvals, one representative to be nominated for election to the board of trustees of the Trust, and the Trust shall cause the board of trustees of the Trust to so nominate such designee, and to support such nomination along with the other nominees of management and the board of directors, for election to the board of trustees of the Trust at any annual or special meeting of the shareholders of the Trust called for the purpose of electing trustees. Roger Pratt is the individual so designated by PRISA II as of the date of this Agreement. If the representative designated by PRISA II shall be elected to the board of trustees of the Trust, such right of PRISA II shall be suspended until such representative is up for re-election or the seat occupied thereby otherwise becomes vacant. Upon the death, disability, retirement, removal (with or without cause) or resignation of any such trustee designated by PRISA II, PRISA II shall have the right to designate a replacement for such individual to fill such capacity and serve as a trustee of the Trust for the remainder of the departing trustee's term, and the trustees of the Trust shall appoint such replacement individual to the board of trustees of the Trust to fill such vacancy. If PRISA II shall at any time fail to maintain the Minimum Share Ownership, then the rights granted to PRISA II by this Section 18.01 shall immediately terminate and the party designated by PRISA II, if then a Trustee of the Trust, shall promptly resign such trusteeship. (c) The election and removal of trustees of the Trust shall at all times remain subject to the terms and conditions of the Trust's Constituent Documents. The provisions of this Section 18.01 shall survive Closing. 18.2 Obligation of the Contributing Parties As to Closing Conditions. The Contributing Parties shall use commercially reasonable efforts to satisfy or cause to be satisfied all closing conditions pursuant to Sections 8.01 and 8.02 which are within the reasonable control of the Contributing Parties, including, without limitation, attempting to obtain the consent, authorization or approval of any Person required in connection with the transactions 58 contemplated in this Agreement. Such consents or approvals with respect to licenses and with respect to the License Agreements shall be subject to the specific provisions of Section 8.01(g) and Section 8.01(h), respectively. 18.3 Obligation of The Starwood Parties As to Closing Conditions. The Starwood Parties shall use commercially reasonable efforts to satisfy or cause to be satisfied all Closing conditions pursuant to Sections 8.01 and 8.02 which are within the reasonable control of the Starwood Parties, including, without limitation, obtaining the consent, authorization or approval of any Person required in connection with the transactions contemplated in this Agreement. ARTICLE XIX [RESERVED] ARTICLE XX MISCELLANEOUS 20.1 Modifications and Waivers. This Agreement may not be changed or terminated orally. No waiver of any party of any breach hereunder shall be deemed a waiver of any other or subsequent breach. 20.2 Governing Law. This Agreement shall be construed, interpreted and applied in accordance with the internal laws of the State of New York without giving effect to doctrines relating to conflicts of laws. 20.3 Captions etc. The titles of the Articles, Sections or subsections of this Agreement are nor convenience only and shall not be considered or referred to in resolving questions of interpretation or construction. 20.4 Rules of Construction. This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing this Agreement to be drafted. If any words or phrases in this Agreement shall have been stricken out or otherwise eliminated, whether or not any other words or phrases have been added, this Agreement shall be construed as if the words or phrases so stricken out or otherwise eliminated were never included in this Agreement and no implication or inference shall be drawn from the fact that such words or phrases were so stricken out or otherwise eliminated. All terms and words used in this Agreement, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. 20.5 Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the parties hereto and to their respective heirs, executors, administrators and successors and assigns, it being the intention of the parties not to confer any benefits hereunder upon any other persons, firms, corporations or other entities. 59 20.6 Entire Agreement. This Agreement and the Exhibits and Schedules hereto, which are incorporated in and form a part of this Agreement, contains all of the terms agreed upon between the parties with respect to the subject matter hereof and supersedes all prior understandings, if any, with respect thereto. 20.7 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which shall constitute but one and the same instrument. 20.8 Starwood Lodging Trust. The name "Starwood Lodging Trust" is a designation of Starwood Lodging Trust 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 and as further amended subsequent thereto, which states that all persons dealing with Starwood Lodging Trust shall look solely to the assets of Starwood Lodging Trust for enforcement of any claims against Starwood Lodging Trust, and the trustees, officials, agents and security holders of Starwood Lodging Trust assume no personal liability for obligations entered into on behalf of Starwood Lodging Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. 20.9 Confidentiality and Exclusivity. (a) Each party acknowledges that the information, observations and data relating to the business of the other parties hereto of a proprietary and/or confidential nature which the such party possess or which any such party has obtained or will obtain during the course of the transactions provided for herein are the property of such other parties ("Confidential Information"). Each party agrees that it or he shall not, directly or indirectly, use for its or his own purposes or disclose to any third party any of such Confidential Information without the prior written consent of the other parties, unless and to the extent that the aforementioned matters (a) become generally known to and available for use by the hotel and hospitality industry other than as a result of any party's acts or omissions to act; (b) are rightfully received by a party from a party who was not subject to any obligations of confidentiality; or (c) to the extent a party is required by order of a court of competent jurisdiction (by subpoena or similar process) to disclose or discuss any Confidential Information (provided that in such case, such party shall promptly inform the other parties of such event, shall cooperate with the such other parties in attempting to obtain a protective order or to otherwise restrict such disclosure and shall only disclose Confidential Information to the minimum extent necessary to comply with any such court order). Notwithstanding the foregoing, after the Closing, the Starwood Parties may use for their own purposes or disclose to any third party any Confidential Information relating solely to the business of the Property Companies acquired pursuant hereto without the prior written consent of the other parties hereto. (b) During the period from the date of execution of this Agreement to the earliest of (i) the date of termination of this Agreement, (ii) the Closing Date, or (iii) February 15, 1997, neither the Contributing Parties nor any Property Company will, directly or indirectly, without the prior written consent of the Starwood Parties: (i) submit, solicit, initiate, encourage, or pursue any proposal or offer from any Person or enter into any agreement or accept any offer relating to any (a) reorganization, liquidation, dissolution or recapitalization of any Property Company, (b) merger or consolidation involving the Property Companies, (c) purchase or sale 60 of any assets owned by, or equity ownership interests in, any Property Company, or (d) any similar transaction or business combination involving the Property Companies or substantially all of the assets of any of them (each of the foregoing actions described in clauses (a) - (d), a "Restricted Transaction"; or (ii) furnish any information with respect to, assist or participate in or facilitate in any manner any Restricted Transaction. The Contributing Parties each agree to notify the Starwood Parties immediately if any Person makes any written proposal or offer with respect to a Restricted Transaction to any of them or to any Property Company. (c) The parties hereto agree that they may each suffer irreparable harm from a breach by any other party of any of the covenants or agreements contained herein. In the event of an alleged or threatened breach by any party of any of the provisions of this Section 20.09, the other parties or their successors or assigns may, in addition to all other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof. Each party agrees that the covenants made in Section 20.09 shall be construed as an agreement independent of any other provision of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision of this Agreement. 20.10 Several Liability. The liability of SLT, SLC, SLT Financing, the Corporation and the Trust under this Agreement shall be several only and not joint. 20.11 Press Releases. Except as may otherwise be required by law or mutually agreed by the Parties, the timing and content of all press releases and other public announcements and all announcements to the Contributing Parties' and Property Companies customers, suppliers or licensors relating to the transactions contemplated by the Transaction Documents shall be determined jointly by the Starwood Parties and the Contributing Parties. 20.12 Expiration. The offer made in this Agreement by the Starwood Parties execute the transactions contemplated hereby shall expire, if not sooner accepted by the Contributing Parties by execution and delivery of this Agreement, at 5:00 P.M. E.S.T. on January 16, 1997 and shall be of no force or effect thereafter. 61 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. SLT: SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: STARWOOD LODGING TRUST, a Maryland real estate investment trust, General Partner By: /S/ STEVEN R. GOLDMAN --------------------------------------- Name: Steven R. Goldman Its: Senior Vice President SLT Financing: SLT FINANCING PARTNERSHIP, a Delaware general partnership By: SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: STARWOOD LODGING TRUST, a Maryland real estate investment trust, General Partner By: /S/ STEVEN R. GOLDMAN --------------------------------------- Name: Steven R. Goldman Its: Senior Vice President SLC: SLT OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership By: STARWOOD LODGING corporation, a Maryland corporation, Managing General Partner By: /S/ ERIC A. DANZIGER --------------------------------------- Name: Eric A. Danziger Its: President Trust: STARWOOD LODGING TRUST, a Maryland real estate investment trust By: /S/ STEVEN R. GOLDMAN ----------------------------------------- Name: Steven R. Goldman Its: Senior Vice President Corporation: STARWOOD LODGING CORPORATION, a Maryland corporation By: /S/ ERIC A. DANZIGER ----------------------------------------- Name: Eric A. Danziger Its: President THE PROPERTY COMPANIES PRUDENTIAL HEI JOINT VENTURE By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President By: ATLANTA HOTEL ASSOCIATES, LP By: HOSPITALITY EQUITY INVESTORS, INC. Its Majority General Partner By: /S/ GARY M. MENDELL ----------------------------------------- Gary M. Mendell President VIRGINIA HOTEL ASSOCIATES, L.P. By: PRUWEST NORFOLK, L.L.C., Its Partner By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Partner By: /S/ GARY L. KAUFFMAN ----------------------------------------- Gary L. Kauffman Vice President By: WESTPORT NORFOLK ASSOCIATES LIMITED PARTNERSHIP By: WESTPORT HOSPITALITY, INC. Its General Partner By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell President EDISON HOTEL ASSOCIATES, L.P. By: PRUWEST EDISON, L.L.C., Its Partner By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------- Gary L. Kauffman Vice President By: WESTPORT RARITAN, L.L.C., Its Partner By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member BW HOTEL REALTY, L.P. By: PRUWEST BALTIMORE, L.L.C., Its Partner By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------- Gary L. Kauffman Vice President By: WESTPORT BWI, L.L.C., Its Partner By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member NOVI HOTEL ASSOCIATES, L.P. By: PRUWEST NOVI, L.L.C., Its Partner By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------- Gary L. Kauffman Vice President By: WESTPORT NOVI, L.L.C., Its Partner By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member PARK RIDGE HOTEL ASSOCIATES, L.P. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Partner By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President By: WESTPORT PARK RIDGE, L.P., Its Partner By: WESTPORT PARK RIDGE, L.L.C., Its General Partner By: /S/ GARY M. MENDELL ----------------------------------------- Gary M. Mendell Managing Member By: WESTPORT PARK RIDGE, L.L.C., Its Partner By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member LONG BEACH HOTEL ASSOCIATES, L.L.C. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President By: WESTPORT LONG BEACH, L.L.C., Its Member By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member CHARLESTON HOTEL ASSOCIATES, L.L.C. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President By: WESTPORT CHARLESTON, L.L.C., Its Member By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member SANTA ROSA HOTEL ASSOCIATES, L.L.C. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President By: WESTPORT SANTA ROSA, L.L.C., Its Member By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member CRYSTAL CITY HOTEL ASSOCIATES, L.L.C. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President By: WESTPORT CRYSTAL CITY, L.L.C., Its Member By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member THE CONTRIBUTING PARTIES THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President ATLANTA HOTEL ASSOCIATES, LP By: HOSPITALITY EQUITY INVESTORS, INC. Its Majority General Partner By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell President PRUWEST NORFOLK, L.L.C. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President PRUWEST EDISON, L.L.C. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President PRUWEST BALTIMORE, L.L.C. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President PRUWEST NOVI, L.L.C. By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II, Its Member By: /S/ GARY L. KAUFFMAN ----------------------------------------------- Gary L. Kauffman Vice President WESTPORT NORFOLK ASSOCIATES LIMITED PARTNERSHIP By: WESTPORT HOSPITALITY, INC. Its General Partner By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell President WESTPORT RARITAN, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT BWI, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT NOVI, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT PARK RIDGE, L.P. By: WESTPORT PARK RIDGE, L.L.C., Its General Partner By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT PARK RIDGE, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT LONG BEACH, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT CHARLESTON, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT SANTA ROSA, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT CRYSTAL CITY, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member WESTPORT HOSPITALITY, INC. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell President WESTPORT HOLDINGS, L.L.C. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell Managing Member By: /S/ MURRAY L. DOW, II ----------------------------------------------- Murray L. Dow, II Managing Member By: /S/ ORNA L. SHULMAN ----------------------------------------------- Orna L. Shulman Managing Member HOSPITALITY EQUITY INVESTORS, INC. By: /S/ GARY M. MENDELL ----------------------------------------------- Gary M. Mendell President THE GARY MENDELL FAMILY TRUST By: /S/ ELEANOR MENDELL ----------------------------------------------- Eleanor Mendell Trustee ZAPCO INTEREST HOLDINGS LIMITED PARTNERSHIP By: ZAPCO VERMONT AVENUE, INC. Its General Partner By: /S/ ORNA L. SHULMAN ----------------------------------------- Orna L. Shulman Vice President LOUDOUN INTERTECH DEVELOPMENT CORPORATION By: /S/ ORNA L. SHULMAN ----------------------------------------------- Orna L. Shulman Vice President /S/ GARY M. MENDELL - ----------------------------------------------- Gary M. Mendell /S/ STEVE MENDELL - ----------------------------------------------- Steve Mendell /S/ MURRAY L. DOW, II - ----------------------------------------------- Murray L. Dow, II /S/ JUDITH K. RUSHMORE - ----------------------------------------------- Judith K. Rushmore /S/ ELLEN-JO MENDELL - ----------------------------------------------- Ellen-Jo Mendell /S/ ORNA L. SHULMAN - ----------------------------------------------- Orna L. Shulman /S/ FELIX J. CACCIATO, JR. - ----------------------------------------------- Felix J. Cacciato, Jr. /S/ ARTHUR C. GREEN - ----------------------------------------------- Arthur C. Green /S/ MARK J. ROSINSKY - ----------------------------------------------- Mark J. Rosinsky /S/ RANDI L. ROSINSKY - ----------------------------------------------- Randi L. Rosinsky /S/ JOHN DAILY - ----------------------------------------------- John Daily /S/ MICHAEL D. HALL - ----------------------------------------------- Michael D. Hall /S/ HARVEY MOORE - ----------------------------------------------- Harvey Moore /S/ TRACEY DRISCOLL - ----------------------------------------------- Tracey Driscoll /S/ TOM CLEARWATER - ----------------------------------------------- Tom Clearwater EX-2 3 PROMISSORY NOTE SLT REALTY LIMITED PARTNERSHIP STARWOOD LODGING TRUST PURCHASE MONEY PROMISSORY NOTE $97,500,000.00 New York, New York February 14, 1997 WHEREAS, pursuant to that certain Contribution Agreement dated as of January 15, 1997 (the "Realty Contribution Agreement"), by and among SLT Realty Limited Partnership, a Delaware limited partnership ("Realty Partnership"), Starwood Lodging Trust, a Maryland real estate investment trust ("Trust" and together with Realty Partnership, "Makers"), Starwood Lodging Corporation, SLC Operating Limited Partnership, The Prudential Insurance Company of America, on behalf of Prudential Property Investment Separate Account II ("Payee"), the other Contributing Parties (as defined therein) and the Property Companies (as defined therein), Makers are purchasing interests in the Property Companies; WHEREAS, as partial payment of the Purchase Price (as defined in the Realty Contribution Agreement) for the Property Companies, Makers (and their affiliates) have requested that Payee accept this Note and Payee has agreed to accept this Note as such partial payment; and WHEREAS, unless otherwise indicated, capitalized terms shall have the meanings set forth in Section 7 hereof. NOW, THEREFORE, Makers, jointly and severally, agree as follows: FOR VALUE RECEIVED, each Maker, jointly and severally, unconditionally promises to pay to the order of Payee in the manner and at the place hereinafter provided, the principal amount of NINETY SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($97,500,000.00) on the Maturity Date, subject to the obligation of Makers to prepay a portion of this Note on or prior to February 20, 1997 pursuant to Section 1(b) hereof. Makers also promise to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at a fixed rate per annum equal to 7.00%; provided that any principal amount not paid when due and, to the extent permitted by applicable law, any interest not paid when due, in each case whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (both before as well as after judgment), shall bear interest payable upon demand at a rate that is 6.00% 1 per annum in excess of the rate of interest otherwise payable under this Note. Interest on this Note shall be payable upon any prepayment of this Note (to the extent accrued on the amount being prepaid) and on the Maturity Date. All computations of interest shall be made by Payee on the basis of a 360 - day year, for the actual number of days elapsed in the relevant period (including the first day but excluding the last day of such period). In no event shall the interest rate payable on this Note exceed the maximum rate of interest permitted to be charged under applicable law. 1. Payments. (a) All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds, payable in accordance with the wire instructions set forth in Schedule I hereto, or at such other place as Payee may direct in writing. Whenever any payment on this Note is stated to be due on a day that is not a Business Day, such payment shall instead be made on the next Business Day, and such extension of time shall be included in the computation of interest payable on this Note. Each payment made hereunder shall be credited first to interest then due and the remainder of such payment shall be credited to principal, and interest shall thereupon cease to accrue upon the principal so credited. Each of Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of Makers hereunder with respect to payments of principal or interest on this Note. (b) Makers shall prepay $25,500,000.00 of the principal amount of this Note together with interest accrued thereon on or prior to February 20, 1997. (c) Makers may elect to extend the Maturity Date from April 15, 1997 to May 14, 1997 by giving written notice of such extension to Payee on or prior to 5:00 p.m. (New York City time) on April 11, 1997 (with time being of the essence). 2. Prepayments. Makers shall have the right at any time and from time to time to prepay the principal of this Note in whole or in part, without premium or penalty, upon at least 2 days' notice; provided that each such prepayment shall be in a minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount (subject to Section 1(b) hereof). Any prepayment hereunder shall be accompanied by interest on the principal amount of the Note being prepaid to the date of prepayment. 3. Covenants. Each Maker, jointly and severally, covenants and agrees that until this Note is paid in full it will: 2 (a) promptly provide to Payee all financial and operational information with respect to such Maker as Payee may reasonably request; (b) promptly after the occurrence of an Event of Default or an event, act or condition that, with notice or lapse of time or both, would constitute an Event of Default, provide Payee with a certificate of the chief executive officer or chief financial officer of such Maker specifying the nature thereof and such Maker's proposed response thereto; (c) maintain a net worth equal to $275,000,000 plus seventy five percent (75%) of any equity issued by Makers after the date hereof; and (d) not merge or consolidate with any other Person, or sell, lease or otherwise dispose of all or any substantial part of its property or assets to any other Person outside the ordinary course of business. 4. Representations and Warranties. Each Maker, jointly and severally, hereby represents and warrants to Payee that: (a) Realty Partnership is a duly organized and validly existing partnership in good standing under the laws of the State of Delaware and has the partnership power and authority to own and operate its properties, to transact the business in which it is now engaged and to execute and deliver this Note; (b) Trust is a duly organized and validly existing real estate investment trust in good standing under the laws of the State of Maryland and has the power and authority to own and operate its properties, to transact the business in which it is now engaged and to execute and deliver this Note; (c) this Note constitutes the duly authorized, legally valid and binding obligation of such Maker, enforceable against such Maker in accordance with its terms; (d) all consents and grants of approval required to have been granted by any Person in connection with the execution, delivery and performance of this Note have been granted; (e) the execution, delivery and performance by such Maker of this Note do not (i) violate any law, governmental rule or regulation, court order or agreement to which it is subject or by which its properties are bound or the agreement of limited partnership, as amended, or any other organizational documents of such Maker or (ii) result in the creation of any lien or other encumbrance with respect to the property of such Maker; 3 (f) there is no action, suit, proceeding or governmental investigation pending or, to the knowledge of such Maker, threatened against such Maker or any of its subsidiaries or any of their respective assets which, if adversely determined, would have a material adverse effect on the business, operations, properties, assets, condition (financial or otherwise) or prospects of such Maker and its subsidiaries, taken as a whole, or the ability of such Maker to comply with its obligations hereunder; and (g) the representations and warranties of Realty Partnership contained in Section 7.02 of the Realty Contribution Agreement and of Trust contained in Section 7.04 of the Realty Contribution Agreement (in each case, which, by this reference, are incorporated herein in their entirety) are and will be true, correct and complete on and as of the date hereof to the same extent as though made on and as of the date hereof, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete on and as of such earlier date. 5. Events of Default. The occurrence of any of the following events shall constitute an "Event of Default": (a) failure of Makers to pay any principal, interest or other amount due under this Note when due, whether at stated maturity, by required prepayment (including without limitation as required under Section 1(b) hereof), declaration, acceleration, demand or otherwise; or (b) failure of any Maker to pay, or the default in the payment of, amounts due under or in respect of any promissory note, indenture or other agreement or instrument relating to any indebtedness for borrowed money of $1,000,000 or more owing by such Maker, to which it is a party or by which such Maker or any of its property is bound beyond any applicable grace period; or the occurrence of any other event or circumstance and notice or lapse of time or both which permits acceleration of such indebtedness; or (c) failure of any Maker to perform or observe in all material respects any other term, covenant or agreement to be performed or observed by it pursuant to this Note; or (d) any representation or warranty made by any Maker to Payee in connection with this Note shall prove to have been false in any material respect when made (including, without limitation, the representations and warranties contained in Sections 7.02 and 7.04 of the Realty Contribution Agreement and incorporated by reference herein in accordance with Section 4(f)); or 4 (e) any order, judgment or decree shall be entered against any Maker decreeing the dissolution or split-up of such Maker; or (f) suspension of the usual business activities of any Maker or the complete liquidation, or liquidation of a substantial portion, of any Maker's business; or (g) (i) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of any Maker or any of its respective affiliates in an involuntary case under Title 11 of the United States Code entitled "Bankruptcy" (as now and hereinafter in effect, or any successor thereto, the "Bankruptcy Code") or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against any Maker or any of its respective affiliates under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Maker or any of its respective affiliates or over all or a substantial part of its property shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of any Maker or any of its respective affiliates for all or a substantial part of its property shall have occurred; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of any Maker or any of its respective affiliates, and, in the case of any event described in this clause (ii), such event shall have continued for 30 days unless dismissed, bonded or discharged; or (h) an order for relief shall be entered with respect to any Maker or any of its respective affiliates or any Maker or any of its respective affiliates shall commence a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or any Maker or any of its respective affiliates shall make an assignment for the benefit of creditors; or any Maker or any of its respective affiliates shall be unable or fail, or shall admit in writing its inability, to pay its debts as such debts become due; or the partners of any Maker or any of its respective affiliates (or any committee thereof) shall adopt any resolution or otherwise authorize action to approve any of the foregoing; or 5 (i) any Maker shall challenge, or institute any proceedings to challenge, the validity, binding effect or enforceability of this Note or any endorsement of this Note or any other obligation to Payee. 6. Remedies. Upon the occurrence of any Event of Default specified in Section 5(g) or 5(h) above, the principal amount of this Note together with accrued interest thereon shall become immediately due and payable, without presentment, demand, notice, protest or other requirements of any kind (all of which are hereby expressly waived by Makers). Upon the occurrence and during the continuance of any other Event of Default Payee may, by written notice to Makers, declare the principal amount of this Note together with accrued interest thereon to be due and payable, and the principal amount of this Note together with such interest shall thereupon immediately become due and payable without presentment, further notice, protest or other requirements of any kind (all of which are hereby expressly waived by Makers). 7. Definitions. The following terms used in this Note shall have the following meanings (and any of such terms may, unless the context otherwise requires, be used in the singular or the plural depending on the reference): "Business Day" means any day other than a Saturday, Sunday or legal holiday under the laws of the State of New York or any other day on which banking institutions located in such state are authorized or required by law or other governmental action to close. "Event of Default" means any of the events set forth in Section 5. "Maturity Date" means April 15, 1997, unless Makers notify Payee of Makers' election to extend the Maturity Date in accordance with Section 1(b) hereof, in which case "Maturity Date" shall mean May 14, 1997. "Person" means any individual, partnership, joint venture, firm, corporation, association, bank, trust or other enterprise, whether or not a legal entity, or any government or political subdivision or any agency, department or instrumentality thereof. 8. Miscellaneous. (a) All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telefacsimile or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered as follows: if to Makers, at its address specified opposite its signature below; and if to Payee, at c/o Prudential Real Estate Investors, 8 Campus Drive Parsippany, NJ 07054, Attention: Gary L. Kauffman (Fax 201-683-1790), James P. Walker, Esq. (Fax 201-683-1788), with copies to: 6 O'Melveny & Myers LLP, 153 East 53rd Street, New York, New York 10022; Attention: Robert S. Insolia, Esq. (Fax 212-326-2061), or in each case at such other address as shall be designated in writing from time to time by Payee or Makers. All such notices and communications shall be effective when received by the other party. (b) Makers agree to indemnify Payee against any losses, claims, damages and liabilities and related expenses, including counsel fees and expenses, incurred by Payee arising out of or in connection with or as a result of the loan evidenced by this Note. In particular, Makers promise to pay all costs and expenses, including reasonable attorneys' fees, incurred in connection with the collection and enforcement of this Note. Makers agree to pay all reasonable out-of-pocket expenses of Payee incurred in connection with the enforcement and administration of this Note, the documents and instruments referred to herein and any amendments, waivers or consents relating hereto or thereto including, without limitation, the reasonable fees and expenses of outside counsel for Payee. In addition, Makers agree to pay, and to save Payee harmless from all liability for, any stamp or other documentary taxes which may be payable in connection with Makers' execution or delivery of this Note. (c) No failure or delay on the part of Payee or any other holder of this Note to exercise any right, power or privilege under this Note and no course of dealing between Makers and Payee shall impair such right, power or privilege or operate as a waiver of any default or an acquiescence therein, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies expressly provided in this Note are cumulative to, and not exclusive of, any rights or remedies that Payee would otherwise have. No notice to or demand on Maker in any case shall entitle Makers to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Payee to any other or further action in any circumstances without notice or demand. (d) Makers and any endorser of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. (e) If any provision in or obligation under this Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. (f) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF MAKERS AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS 7 OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. (g) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY MAKER ARISING OUT OF OR RELATING TO THIS NOTE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS NOTE EACH MAKER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. Each Maker hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to such Maker at its address set forth below its signature hereto, such service being hereby acknowledged by Maker to be sufficient for personal jurisdiction in any action against such Maker in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Payee to bring proceedings against such Maker in the courts of any other jurisdiction. (h) EACH MAKER AND, BY THEIR ACCEPTANCE OF THIS NOTE, PAYEE AND ANY SUBSEQUENT HOLDER OF THIS NOTE, HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS NOTE AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each Maker and, by their acceptance of this Note, Payee and any subsequent holder of this Note, each (i) acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this relationship, and that each will continue to rely on this waiver in their related future dealings and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS NOTE. In the event of litigation, this provision may be filed as a written consent to a trial by the court. 8 (i) Makers agree that each Maker shall be jointly and severally liable for each and every obligation set forth in this Note. (j) Each Maker hereby waives the benefit of any statute or rule of law or judicial decision which would otherwise require that the provisions of this Note be construed or interpreted most strongly against the party responsible for the drafting thereof. (k) Realty Partnership is a partnership and the agreement herein contained shall remain in full force and effect notwithstanding any changes in the individuals composing such partnership, and the terms "Realty Partnership" and "Maker," as used herein, shall include any alternate or successor partnerships, but any predecessor partnerships and their respective partners shall not thereby be released from any liability. Payee may renew or extend any of the liabilities of any of the partners of the partnership and may make additional advances or extensions of credit to any of them or release or fail to set off any deposit account or credit of any of them or grant other indulgences to any of them, all from time to time, before or after the maturity hereof, with or without further notice to or assent from any of the other partners or other parties liable with respect hereto. (l) Makers agree and acknowledge that time is of the essence in this Note. (m) The name "Starwood Lodging Trust" is a designation of Starwood Lodging Trust 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 and as further amended subsequent thereto, which states that all persons dealing with Starwood Lodging Trust shall look solely to the assets of Starwood Lodging Trust for enforcement of any claims against Starwood Lodging Trust, and the trustees, officials, agents and security holders of Starwood Lodging Trust assume no personal liability for obligations entered into on behalf of Starwood Lodging Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. [Remainder of Page Intentionally Left Blank] 9 IN WITNESS WHEREOF, each Maker has caused this Note to be executed and delivered by its duly authorized general partner, as of the day and year and at the place first above written. SLT REALTY LIMITED PARTNERSHIP By: STARWOOD LODGING TRUST, Its General Partner By: /S/ STEVEN R. GOLDMAN --------------------------------- Name: Steven R. Goldman Title: Senior Vice President STARWOOD LODGING TRUST By: /S/ STEVEN R. GOLDMAN --------------------------------------- Name: Steven R. Goldman Title: Senior Vice President Notice address for Makers: Starwood Lodging Trust 2231 East Camelback Road, Suite 410 Phoenix, AZ 85016 Telephone: (602) 852-3900 Telecopy: (602) 852-0984 Attention: Steven R. Goldman Attention: Nir Margalit, Esq. with a copy to: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Telecopy: (312) 861-2200 Attention: Stephen G. Tomlinson, Esq. S-1 TRANSACTIONS ON PROMISSORY NOTE Amount of Amount of Outstanding Amount of Principal Interest Principal Loan Made Paid Paid Balance Notation Date This Date This Date This Date This Date Made By - ---- --------- --------- --------- --------- ------- SCHEDULE I WIRE INSTRUCTIONS Wire instructions for Payee: State Street Bank & Trust Company Boston, MA ABA#: 011-000-028 Reference#: 99B PR2 "REIT DEAL" EX-3 4 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made as of February 14, 1997 among Starwood Lodging Trust, a real estate investment trust organized under the laws of the State of Maryland (the "Trust"), Starwood Lodging Corporation, a Maryland corporation (the "Corporation") and the persons and entities whose names appear under the heading "Holders" on the signature pages hereto (the "Holders") and, with respect to Section 11 of this Agreement, Realty Partnership and Operating Partnership (as such terms are defined below). Unless otherwise indicated, capitalized terms used herein are used herein as defined in Section 1.1. RECITALS WHEREAS, pursuant to a Contribution Agreement dated as of January 15, 1997 (the "Unit Contribution Agreement") among the Trust, the Corporation, the entities listed on Schedule A-1 hereto (the "Unit Holders") and certain other parties (i) on the date hereof the Unit Holders are making capital contributions to SLT Realty Limited Partnership, a Delaware limited partnership (the "Realty Partnership"), in return for the issuance by the Realty Partnership to the Unit Holders of Units (as defined in the Limited Partnership Agreement of the Realty Partnership) of the Realty Partnership (such Units issued by the Realty Partnership to the Unit Holders on the date hereof being hereinafter called the "Realty Units") and (ii) on the date hereof the Unit Holders are making capital contributions to SLC Operating Limited Partnership, a Delaware limited partnership (the "Operating Partnership"), in return for the issuance by the Operating Partnership to the Unit Holders of Units (as defined in the Limited Partnership Agreement of the Operating Partnership) of the Operating Partnership (such Units issued by the Operating Partnership to the Unit Holders on the date hereof being hereinafter called the "Operating Units"); WHEREAS, pursuant to a Contribution Agreement dated as of January 15, 1997 (the "Class A Contribution Agreement") among the Corporation, Operating Partnership, the entities listed on Schedule A-2 hereto (the "Class A Holders") and certain other parties, on the date hereof the Class A Holders are making capital contributions to the Corporation and the Operating Partnership, in return for the issuance of Class A Units (as that term is defined in the Class A Contribution Agreement); and WHEREAS, pursuant to the Unit Contribution Agreement and the Class A Contribution Agreement, the parties hereto desire to set forth the rights of the Holders and the obligations of the Trust and the Corporation to cause the registration of the Registrable Securities pursuant to the Securities Act; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions and Usage. 1.1. Definitions. As used in this Agreement: Beneficially Owning. "Beneficially Owning" means owning Trust Shares directly, indirectly or constructively by a Person through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code, or Section 544 of the Code, as modified by Section 856(h) of the Code. Business Day. "Business Day" means any day other than Saturday, Sunday and any day on which commercial banks are not open to do business in New York, New York. Class A Contribution Agreement. "Class A Contribution Agreement" shall have the meaning set forth in the recitals. Class A Exchange Rights Agreement. "Class A Exchange Rights Agreement" shall refer to the agreement dated the date hereof among the Corporation, the Operating Partnership and certain other parties. Class A Holders. "Class A Holders" shall have the meaning set forth in the recitals. Class A Units. "Class A Units" shall have the meaning set forth in the recitals. Code. "Code" shall mean the Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder, as amended from time to time. Commission. "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. Continuously Effective. "Continuously Effective", with respect to a specified registration statement, shall mean that such registration statement shall not cease to be effective and available for Transfers of Registrable Securities thereunder for longer than either (i) any ten (10) consecutive Business Days, or (ii) an aggregate of fifteen (15) Business Days during the period specified in the relevant provision of this Agreement. Corporation Shares. "Corporation Shares" shall mean the shares of common stock, par value $.01 per share, of the Corporation. Demand Registration. "Demand Registration" shall have the meaning set forth in Section 2.1. Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Exchange Rights Agreements. "Exchange Rights Agreements" shall mean: (i) the Units Exchange Rights Agreement and (ii) the Class A Exchange Rights Agreement. Holders. "Holders" shall have the meaning set forth in the recitals. Issuance Percentages. "Issuance Percentage", when used with respect to the Trust, shall mean 95% and, when used with respect to the Corporation, shall mean 5%; provided that the Trust and the Corporation may from time to time change the Issuance Percentages based on their joint determination of the relative values of the Trust Shares and Corporation Shares. Lockup Period. "Lockup Period" shall have the meaning set forth in Section 2.5. Majority Selling Holders. "Majority Selling Holders" means those Selling Holders whose Registrable Securities included in such registration represent a majority of the Registrable Securities of all Selling Holders included therein. Operating Partnership. "Operating Partnership" shall have the meaning set forth in the recitals. Operating Units. "Operating Units" shall have the meaning set forth in the recitals. Ownership Limit. "Ownership Limit" when used with respect to Trust Shares, has the meaning set forth in the Declaration of Trust of the Trust and, when used with respect to the Corporation Shares, has the meaning set forth in the Restated Articles of Incorporation of the Corporation, in each case as amended from time to time. Paired Shares. "Paired Shares" shall mean the Trust Shares and shares of Corporation Stock which are "paired" pursuant to the Pairing Agreement dated June 25, 1980 between the Trust and the Corporation, as it may be amended from time to time. Person. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or other agency or political subdivision thereof. Piggyback Registration. "Piggyback Registration" shall have the meaning set forth in Section 3. PRISA. "PRISA" shall refer to Prudential Property Investment Separate Account II, which is a Holder. Realty Partnership. "Realty Partnership" shall have the meaning set forth in the recitals. Realty Units. "Realty Units" shall have the meaning set forth in the recitals. Register, Registered and Registration. "Register", "registered", and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. Registrable Securities. "Registrable Securities" shall mean: (i) the Paired Shares issued upon exchange of Realty Units and Operating Units pursuant to the Units Exchange Rights Agreement, (ii) the Paired Shares issued upon exchange of the Class A Units of the Operating Partnership pursuant to the Class A Exchange Rights Agreement; (iii) any Paired Shares or other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Trust and the Corporation generally for, or in replacement by the Trust and the Corporation generally of, such Paired Shares; and (iv) any securities issued in exchange for Paired Shares in any merger or reorganization of the Trust and the Corporation; provided, however, that Registrable Securities shall not include any securities which have theretofore been registered and sold pursuant to the Securities Act or which have been sold to the public pursuant to Rule 144 or any similar rule promulgated by the Commission pursuant to the Securities Act, and, provided further, the Trust and the Corporation shall have no obligation under Sections 2 and 3 to register any Registrable Securities if the Trust and the Corporation shall deliver to the Holders of such Registrable Securities an opinion of counsel to the effect that the proposed sale or disposition of all of the Registrable Securities for which registration was requested does not require registration under the Securities Act for a sale or disposition in a single public sale, and offers to remove any and all legends restricting transfer from the certificates evidencing such Registrable Securities. Registrable Securities then outstanding. "Registrable Securities then outstanding" shall mean, with respect to a specified determination date, the Registrable Securities owned by all Holders on such date and the Registrable Securities which are issuable upon exchange of Realty Units, Operating Units and Class A Units owned by all Holders on such date. Registration Expenses. "Registration Expenses" shall have the meaning set forth in Section 6.1. REIT Requirements. "REIT Requirements" shall mean the requirements for the Trust to (i) qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder, (ii) avoid any federal income or excise tax liability, (iii) retain its status as grandfathered pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984 and (iv) retain the benefits of that certain private letter ruling issued by the Internal Revenue Service to the Trust dated as of January 4, 1980. Required Holders. "Required Holders" shall have the meaning set forth in Section 2.1. Securities Act. "Securities Act" shall mean the Securities Act of 1933 and the rules and regulations of the Commission thereunder, all as the same may be in effect at the time. Selling Holders. "Selling Holders" shall mean, with respect to a specified registration pursuant to this Agreement, Holders whose Registrable Securities are included in such registration. Shelf Registration. "Shelf Registration" shall have the meaning set forth in Section 2.2. Tender Registration. "Tender Registration" shall have the meaning set forth in Section 2.3. Transfer. "Transfer" shall mean and include the act of selling, giving, transferring, creating a trust (voting or otherwise), assigning or otherwise disposing of (other than pledging, hypothecating or otherwise transferring as security) (and correlative words shall have correlative meanings); provided however, that any transfer or other disposition upon foreclosure or other exercise of remedies of a secured creditor after an event of default under or with respect to a pledge, hypothecation or other transfer as security shall constitute a "Transfer". Trust Shares. "Trust Shares" shall mean the shares of beneficial interest, $.01 par value, of the Trust. Underwriters' Representative. "Underwriters' Representative" shall mean the managing underwriter, or, in the case of a co-managed underwriting, the managing underwriter designated as the Underwriters' Representative by the co- managers. Units. "Units" shall mean Realty Units, Operating Units and Class A Units. Unit Contribution Agreement. "Unit Contribution Agreement" shall have the meaning set forth in the recitals. Units Exchange Rights Agreement. "Units Exchange Rights Agreement" shall refer to the agreement dated the date hereof among the Trust, the Corporation, the Realty Partnership, the Operating Partnership and certain other parties. Unit Holders. "Unit Holders" shall have the meaning set forth in the recitals. Violation. "Violation" shall have the meaning set forth in Section 7.1. 1.2. Usage. (i) References to a Person are also references to its assigns and successors in interest (by means of merger, consolidation or sale of all or substantially all the assets of such Person or otherwise, as the case may be). (ii) References to Registrable Securities "owned" by a Holder shall include Registrable Securities beneficially owned by such Person but which are held of record in the name of a nominee, trustee, custodian, or other agent, but shall exclude Paired Shares held by a Holder in a fiduciary capacity for customers of such Person. (iii) References to a document are to it as amended, waived and otherwise modified from time to time and references to a statute or other governmental rule are to it as amended and otherwise modified from time to time (and references to any provision thereof shall include references to any successor provision). (iv) References to Sections or to Schedules or Exhibits are to sections hereof or schedules or exhibits hereto, unless the context otherwise requires. (v) The definitions set forth herein are equally applicable both to the singular and plural forms and the feminine, masculine and neuter forms of the terms defined. (vi) The term "including" and correlative terms shall be deemed to be followed by "without limitation" whether or not followed by such words or words of like import. (vii) The term "hereof" and similar terms refer to this Agreement as a whole. (viii) The "date of" any notice or request given pursuant to this Agreement shall be determined in accordance with Section 12. Section 2. Demand, Shelf and Tender Registrations. 2.1. Subject to Section 2.7, from and after expiration of the applicable Lockup Period, if the holders of at least 25% of the Registrable Securities (the "Required Holders") shall make a written request to the Trust and the Corporation to effect any registration (a "Demand Registration") with respect to all or any portion of the Registrable Securities, then the Trust and the Corporation shall (i) promptly give written notice of the proposed registration to all other Holders of Registrable Securities and (ii) as soon as practicable cause there to be filed with the Commission a registration statement under the Securities Act and (subject to Section 2.10) the Trust and the Corporation shall include therein all or any portion of the Registrable Securities requested by the Required Holders, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Trust and the Corporation within ten (10) Business Days after written notice from the Trust and the Corporation is given above; provided, however, that no request may be made pursuant to this Section 2.1 if within 90 days prior to the date of such request a Demand Registration statement pursuant to this Section 2.1 shall have been declared effective by the Commission. Any request made pursuant to this Section 2.1 shall be addressed to the attention of the Secretary of each of the Trust and the Corporation, and shall specify the number of Registrable Securities to be registered, the intended methods of disposition thereof and that the request is for a Demand Registration pursuant to this Section 2.1. 2.2. Subject to Section 2.7, from and after the expiration of the applicable Lockup Period, if the Required Holders shall make a written request to the Trust and the Corporation to effect a registration on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration") with respect to all or any portion of the Registrable Securities, then the Trust and the Corporation shall (i) promptly give written notice of the proposed registration to all other Holders of Registrable Securities and (ii) as soon as practicable cause there to be filed with the Commission such Shelf Registration. The Trust and the Corporation shall include therein all or any portion of the Registrable Securities requested by the Required Holders, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Trust and the Corporation within ten (10) Business Days after written notice from the Trust and the Corporation is given above; provided, however, that no request may be made pursuant to this Section 2.2 if within ninety (90) days prior to the date of such request a Shelf Registration statement pursuant to this Section 2.2 shall have been declared effective by the Commission. Any request made pursuant to this Section 2.2 shall be addressed to the attention of the Secretary of each of the Trust and the Corporation, and shall specify the number of Registrable Securities to be registered, the possible intended methods of disposition thereof and that the request is for a Shelf Registration pursuant to this Section 2.2. 2.3. If (i) there is a Paired Share Tender Reduction (as defined in Section 6 of the Exchange Rights Agreements) and (ii) the tendering Holder of Delayed Payment Units (as defined in Section 6 of the Exchange Rights Agreements) shall make a written request to the Trust and the Corporation, then the Trust and the Corporation shall cause there to be filed with the Commission a registration statement under the Securities Act (a "Tender Registration"), and the Trust and the Corporation shall register and sell pursuant thereto a number of Paired Shares (such Paired Shares being considered to be "Registrable Securities" for purposes of this Agreement) equal to the number of Unissued Paired Shares (as defined in Section 6 of the Exchange Rights Agreements) that such Holder(s) shall request in such written request. The Trust and the Corporation shall pay the net proceeds of such sale (after underwriting discounts and commissions) to the tendering holder of the Delayed Payment Units (as defined in Section 6 of the Exchange Rights Agreements) pursuant to the Exchange Rights Agreements. Any request made pursuant to this Section 2.3 shall be addressed to the attention of the Secretary of each of the Trust and the Corporation, and shall specify the number of Reduced Paired Shares to be registered, the intended methods of disposition thereof and that the request is for a Tender Registration pursuant to this Section 2.3. 2.4. In lieu of the registration rights set forth in Sections 2.1 and 2.2 above, the Trust and the Corporation shall, prior to the expiration of the Lockup Period, file a registration statement under Rule 415 under the Securities Act relating to the issuance to Holders of Paired Shares upon redemption or exchange of their Units (including the Paired Shares issued to PRISA upon the conversion of Units immediately following the closing of the transactions contemplated by the Unit Contribution Agreement, as set forth in and contemplated by the penultimate sentence of Section 8.02(j) of the Unit Contribution Agreement) (the "HEI/PRISA Registration Statement"). The Trust and the Corporation shall use reasonable efforts to cause the HEI/PRISA Registration Statement to be declared effective by the Commission for all Paired Shares covered thereby. The Corporation and the Trust agree to use their reasonable efforts to keep the HEI/PRISA Registration Statement Continuously Effective until the date on which all the Registrable Securities under the HEI/PRISA Registration Statement have been disposed of in a manner described in such registration statement. In the event that the Trust and the Corporation are unable to cause the HEI/PRISA Registration Statement to be declared effective by the Commission or are unable to keep such Registration Statement effective for such period, then the rights of the Holders set forth in Sections 2.1 and 2.2 above shall be restored. 2.5. (i) The Trust and the Corporation shall be entitled to postpone for up to 90 days the filing of any registration statement otherwise required to be prepared and filed pursuant to this Section 2, if the Trust and the Corporation shall furnish to the Selling Holders a certificate signed by the Secretary of each of the Trust and the Corporation stating that the Board of Trustees of the Trust and the Board of Directors of the Corporation has in good faith determined that such registration and the Transfer of Registrable Securities contemplated thereby would interfere with, or require premature disclosure of, any material financing, acquisition, disposition, reorganization or other transaction involving the Realty Partnership, the Operating Partnership, the Trust or the Corporation or any of their respective subsidiaries and the Trust or the Corporation, as the case may be, promptly gives the Holders requesting such registration notice of such determination. If a disclosure of such transactions occurs prior to the end of the 90-day period, such postponement shall terminate on such earlier day. Such Holder or Holders hereby acknowledge that any notice given by the Trust or the Corporation pursuant to this Section 2.5(i) shall constitute material non-public information and that the United States securities laws prohibit any Person who has material non-public information about a company from purchasing or selling securities of such company or from communicating such information to any other Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities. (ii) The Trust and the Corporation shall not be obligated to file any Demand Registration statement or any Tender Registration statement pursuant to this Section 2 if, within twenty (20) days after their receipt of the written request of the requesting Holders, the Trust and the Corporation notify such Holders that, prior to their receipt of such request, they had a plan or intention promptly to register equity securities under the Securities Act. The Trust and the Corporation shall not be obligated to file any Demand Registration statement or any Tender Registration statement pursuant to the preceding sentence, only if the Trust and the Corporation are actively employing in good faith all reasonable efforts to cause such registration statements to become effective. Holders of Registrable Securities shall have rights to participate in any such registration on the terms provided in Section 3 hereof. (iii) Notwithstanding anything to the contrary contained in this Agreement, (x) with respect to Holders other than PRISA, such Holders shall have no right to cause the Trust and the Corporation to effect a registration pursuant to Section 2 or 3 prior to the first anniversary of the date of this Agreement without the consent of the Trust and the Corporation, and (y) with respect to PRISA, PRISA shall have no right to cause the Trust and the Corporation to effect a registration pursuant to Section 2 or 3 prior to the date 6 months after the date of this Agreement without the consent of the Trust and the Corporation (the applicable period being referred to herein as the "Lockup Period"). No Holder shall be entitled to participate in any Piggyback Registration pursuant to which securities registered thereunder are to be offered or sold prior to expiration of the Lockup Period. 2.6. Following receipt of a request for a Demand Registration, a Shelf Registration or a Tender Registration, the Trust and the Corporation shall: (i) File the registration statement with the Commission as promptly as practicable, and shall use their respective reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering. (ii) Use their respective reasonable efforts to keep the relevant registration statement Continuously Effective (x) if a Demand Registration or a Tender Registration, for up to sixty (60) days or until such earlier date as of which all the Registrable Securities under the Demand Registration statement or Tender Registration statement shall have been disposed of in the manner described in the registration statement and (y) if a Shelf Registration, until such date as of which all the Registrable Securities under the Shelf Registration statement have been disposed of in a manner described in the registration statement. Notwithstanding the foregoing, if for any reason the effectiveness of a registration pursuant to this Section 2 is suspended or, in the case of a Demand Registration or a Tender Registration, postponed as permitted by Section 2.5(i), the relevant foregoing period shall be extended by the aggregate number of days of such suspension or postponement. 2.7. Notwithstanding anything in this Agreement to the contrary, (a) in no event will the Trust or the Corporation be obligated to effect more than a total of four Demand Registrations, (b) in no event will the Trust or the Corporation be obligated to effect any Demand Registration for less than the number of Paired Shares to be issued upon exchange of at least 10% of all Units issued pursuant to the Unit Contribution Agreement and Class A Contribution Agreement, (c) in no event will the Trust or the Corporation be obligated to effect any Shelf Registration unless the Holder(s) of Registrable Securities requesting registration propose to dispose of Paired Shares with a market value of at least $5,000,000 (based upon the closing trading price of the Paired Shares on the date of such request), (d) in no event will the Trust or the Corporation be obligated to effect a Demand Registration or a Tender Registration if the Registrable Securities proposed to be registered therein shall be covered by a Shelf Registration statement, (e) no registration shall be effected under this Agreement and no Transfer of Registrable Securities may be effected if as a result thereof the Trust would not satisfy the REIT Requirements in any respect or if such registration or Transfer would result in any Person Beneficially Owning Paired Shares in excess of the Ownership Limit and (f) the Trust and the Corporation will not be obligated to effect a Shelf Registration or Demand Registration if the effect of such a registration is that more than 50% of the Paired Shares issuable to PRISA pursuant to the Exchange Rights Agreements will have been sold in the first six-month period following the Lockup Period applicable to PRISA. For purposes of the preceding sentence, registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, or (ii) if after such registration statement has become effective, the related offer, sale or distribution of Registrable Securities thereunder is prohibited by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such prohibition is not thereafter eliminated. If the Trust and the Corporation shall have complied with their respective obligations under this Agreement, a right to demand a registration pursuant to this Section 2 shall be deemed to have been satisfied (A) if a Demand Registration or a Tender Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the Registration Statement, and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 60 days, and (B) if a Shelf Registration, upon the effective date of such Shelf Registration, provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. 2.8. A registration pursuant to this Section 2 shall be on such appropriate registration form of the Commission as shall be selected by the Trust and the Corporation and shall permit the disposition of the Registrable Securities in accordance with the intended method or methods of disposition specified in the request pursuant to Sections 2.1, 2.2 or 2.3, respectively. 2.9. If any Demand Registration or Shelf Registration pursuant to Section 2 involves an underwritten offering (whether on a "firm commitment", "best efforts" or "all reasonable efforts" basis or otherwise), the Majority Selling Holders shall select the underwriter or underwriters and manager or managers to administer such underwritten offering; provided, however, that each Person so selected shall be acceptable to the Trust and the Corporation. 2.10. Whenever the Trust and the Corporation shall effect a registration pursuant to this Section 2 in connection with an underwritten offering by one or more Selling Holders of Registrable Securities: (i) if such Selling Holders have requested the inclusion therein of more than one class of Registrable Securities and the Underwriters' Representative advises the Selling Holders that, in its opinion, the inclusion of more than one class of Registrable Securities would adversely affect such offering, the Majority Selling Holders shall decide which class of Registrable Securities shall be included therein in such offering and the related registration and the other class shall be excluded and (ii) if the Underwriters' Representative advises the Selling Holders that, in its opinion, the amount of securities requested to be included in such offering (whether by Selling Holders or others, including the Trust and the Corporation) exceeds the amount which can be sold in such offering within a price range acceptable to the Majority Selling Holders, securities shall be included in such offering and the related registration, to the extent of the amount which can be sold within such price range in the following order of priority: first, the Registrable Securities requested to be included in such registration pursuant to this Section 2, pro rata based on the estimated gross proceeds from the sale thereof; and second all other securities requested to be included in such registration. Section 3. Piggyback Registration. 3.1. If at any time the Trust and the Corporation propose to register securities (either for itself or for another holder of the securities of the Trust, and the Corporation pursuant to registration rights granted by the Trust and the Corporation to such holder pursuant to a registration rights or similar agreement) under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2, S-3, or S- 11 (or any replacement or successor forms), the Trust and the Corporation shall promptly give the Holders written notice of such registration. Upon the written request of each Holder given as promptly as practicable but in any event within twenty (20) days following the date of such notice, the Trust and the Corporation shall cause to be included in such registration statement and use their respective reasonable efforts to be registered under the Securities Act all the Registrable Securities that each such Holder shall have requested to be registered; provided, however, that such right of inclusion shall not apply to any registration statement covering an offering of debt securities or convertible debt securities (any such registration in which Holders participate pursuant to this Section 3.1 being referred to as a "Piggyback Registration"). The Trust and the Corporation shall have the absolute right to delay, withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 3 without any obligation or liability to any Holder, it being understood that any Registrable Securities previously included in any such withdrawn Registration Statement shall not cease to be Registrable Securities by reason of such inclusion or withdrawal. Any Holder of Registrable Securities who has requested inclusion of such securities in a Piggyback Registration may withdraw therefrom by written notice to the Trust, the Corporation and the underwriter and the other Selling Holders, provided such withdrawal is made prior to the effective date of the relevant registration statement. 3.2. If the Underwriters' Representative shall advise the Trust and the Corporation that, in its opinion, the amount or type of Registrable Securities requested to be included in a Piggyback Registration would adversely affect such offering, or the timing thereof, then the Trust and the Corporation will include in such registration, to the extent of the amount and class which the Trust and the Corporation are so advised can be sold without such adverse effect in such offering: first, all securities, if any, requested to be included in a registration statement pursuant to the exercise of demand registration rights granted by the Trust and the Corporation; second, all securities proposed to be sold by the Trust and the Corporation for their own accounts; and third, the Registrable Securities requested to be included in such registration by Holders pursuant to this Section 3 and all other securities requested to be included in such registration pursuant to the exercise of piggyback rights granted pursuant to registration rights agreements with Starwood Capital Group, L.P., a Delaware limited partnership, and Philadelphia HSR Limited Partnership, a Massachusetts limited partnership, and other entities pro rata based on the estimated gross proceeds from the sale thereof. Section 4. Registration Procedures. Whenever required under Section 2 or Section 3 to effect the registration of any Registrable Securities, the Trust and the Corporation shall, as expeditiously as practicable: 4.1. Prepare and file with the Commission a registration statement with respect to such Registrable Securities and use their respective reasonable efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, the Trust and the Corporation shall furnish to one firm of counsel for the Selling Holders, copies of all such documents in the form substantially as proposed to be filed with the Commission and provide reasonable opportunity to comment. 4.2. Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Trust and the Corporation shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 4.5. If the registration statement is for a Shelf Registration, the Trust and the Corporation shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for the period specified in Section 2.6(ii), and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Trust or the Corporation shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Registrable Securities covered by such registration statement. Pending any such amendment or supplement described in this Section 4.2, each such Holder shall cease making offers or Transfers of Registrable Shares pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Agreement remain unsold at the end of the period during which the Trust and the Corporation are obligated to use their respective reasonable efforts to maintain the effectiveness of such registration statement, the Trust and the Corporation may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. 4.3. Furnish to each Selling Holder of Registrable Securities, without charge, such numbers of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. 4.4. Use their respective reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states where an exemption from registration is not available and as shall be reasonably requested by the Underwriters' Representative and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any state, at the earliest possible moment; provided, however, that neither the Trust nor the Corporation shall be required in connection therewith or as a condition thereto to qualify to do business or to consent to general service of process in any state. 4.5. In the event of any underwritten offering, use their respective reasonable efforts to enter into and perform their respective obligations under an underwriting agreement (including indemnification and contribution obligations of underwriters), in usual and customary form, with the managing underwriter or underwriters of such offering. The Trust and the Corporation shall also cooperate with the Majority Selling Holders, and the Underwriters' Representative for such offering in the marketing of the Registerable Securities, including making available the officers, accountants, counsel, premises, books and records of the Trust and the Corporation for such purpose; provided, however, that neither the Trust nor the Corporation shall be required to incur any material out-of-pocket expense pursuant to this sentence and; provided, further, that the officers of the Trust and the Corporation will not be required to participate in more than one "roadshow" in any twelve month period. 4.6. Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. 4.7. Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and Underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and Underwriter the reasonable opportunity to discuss the business affairs of the Trust and the Corporation with their principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Trust or the Corporation determine to be confidential and which the Trust or the Corporation advise such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Trust and the Corporation or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Trust and the Corporation. 4.8. Use their respective reasonable efforts to obtain a so-called "comfort letter" from the independent public accountants of the Trust and the Corporation, and legal opinions of counsel to the Trust and the Corporation addressed to the Selling Holders, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. 4.9. Use their respective reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Paired Shares are then listed on a securities exchange or included for quotation in a recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Trust and the Corporation to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. 4.10. Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. Section 5. Holders' Obligations. It shall be a condition precedent to the obligations of the Trust and the Corporation to take any action pursuant to this Agreement with respect to the Registrable Securities of any Selling Holder of Registrable Securities that such Selling Holder shall: 5.1. Furnish to the Trust and the Corporation such information regarding such Selling Holder, the number of the Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate fully with the Trust and the Corporation in preparing such registration. 5.2. Except as set forth in Sections 2.10 and 3.1, agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Trust and the Corporation or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 2) or the Trust and the Corporation and the Majority Selling Holders (in the case of a registration under Section 3). Section 6. Expenses of Registration. Expenses in connection with registrations pursuant to this Agreement shall be allocated and paid as follows: 6.1. With respect to each Demand Registration, Shelf Registration and Tender Registration, each of the Trust and the Corporation shall bear and pay all expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Registration for each Selling Holder, including all registration, filing and National Association of Securities Dealers, Inc. fees, all fees and expenses of complying with securities or blue sky laws, all printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Trust and the Corporation, and of the independent public accountants for the Trust and the Corporation, including the expenses of "cold comfort" letters required by or incident to such performance and compliance (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) and all fees and expenses of counsel for the Selling Holders; provided, however, that the Trust and the Corporation shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2 if the registration is subsequently withdrawn as a result of the failure of the Selling Holders to satisfy their obligations under this Agreement (in which case the Selling Holders that fail to satisfy their obligations under this Agreement shall bear such expenses), unless, in the case of a Demand Registration or a Shelf Registration, Holders whose Registrable Securities constitute a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall have constituted one of the Demand or Shelf Registrations available to them under Section 2 hereof. The Trust and the Corporation each agree between themselves that they shall bear and pay Registration Expenses in an amount equal to their respective Issuance Percentage of such Registration Expenses and that they shall reimburse each other to the extent necessary to cause each of them to so bear and pay such respective amounts. 6.2. The Trust and the Corporation shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 3, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) and all fees and expenses of counsel for the Selling Holders. Section 7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Agreement: 7.1. To the extent permitted by applicable law, each of the Trust and the Corporation, severally and not jointly, shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including reasonable attorneys' fees and disbursements and reasonable expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) Any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; or (ii) The omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; provided, however, that the indemnification required by this Section 7.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Trust or the Corporation (which consent shall not be unreasonably withheld), nor shall the Trust or the Corporation be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with information furnished to the Trust or the Corporation by the indemnified party in writing expressly for use in connection with such registration; and provided, further, that the indemnity agreement contained in this Section 7 shall not apply to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if an underwriter or Selling Holder was under an obligation to deliver such final prospectus and failed to do so. 7.2. To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Trust, the Corporation, each of the Trustees of the Trust, each of the directors of the Corporation, each of the officers of the Trust or the Corporation who shall have signed the registration statement, each Person, if any, who controls the Trust or the Corporation within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including reasonable attorneys' fees and disbursements and reasonable expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, but only insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any Violation, in each case to the extent that such Violation arises out of or is based upon information furnished by such Selling Holder in writing expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 7.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the relevant Selling Holder (which consent shall not be unreasonably withheld) and (y) in no event shall the amount of any indemnity under this Section 7.2 exceed the gross proceeds from the applicable offering received by such Selling Holder. 7.3. Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 7, such indemnified party shall deliver to the indemnifying party a written notice thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 7 to the extent of such prejudice but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 7. Any fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). 7.4. If the indemnification required by this Section 7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. 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 Section 7.1 and Section 7.2, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7.4 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 7.4(i). 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. 7.5. If indemnification is available under this Section 7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 7.4. 7.6. The obligations of the Trust, the Corporation and the Selling Holders of Registrable Securities under this Section 7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Agreement, and otherwise. Section 8. Holdback. (a) Each Holder, if so requested by the Underwriters' Representative in connection with an offering of any securities covered by a registration statement filed by Trust and the Corporation, whether or not Holder's securities are included therein, shall not effect any public sale or distribution of Paired Shares or any securities convertible into or exchangeable or exercisable for Paired Shares, including a sale pursuant to Rule 144 under the Securities Act (except as part of such underwritten registration), during the 15-day period prior to, and during the 90-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission. In order to enforce the foregoing covenant, the Trust and the Corporation shall be entitled to impose stop-transfer instructions with respect to the Registrable Securities of each Holder until the end of such period. Holders of Registrable Securities shall have the right to participate in any such registration on the terms provided in Section 3 hereof. (b) Each of the Trust and the Corporation agrees not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 15-day period prior to and during the 90-day period beginning on the effective date of any underwritten Demand Registration (except pursuant to (i) registrations on Form S-8 or any successor form, (ii) registrations on Form S-4 or any successor form and (iii) registrations of securities in connection with a dividend reinvestment plan on form(s) applicable to such securities) unless the underwriters managing the registered public offering otherwise agree. Section 9. Amendment, Modification and Waivers; Further Assurances. (i) This Agreement may be amended with the consent of the Trust and the Corporation and the Trust and the Corporation may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Trust and the Corporation shall have obtained the written consent of the Required Holders to such amendment, action or omission to act and no consent or agreement of any Holder shall be required for such amendment, action or omission to act. (ii) No waiver of any terms or conditions of this Agreement shall operate as a waiver of any other breach of such terms and conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof. No written waiver hereunder, unless it by its own terms explicitly provides to the contrary, shall be construed to effect a continuing waiver of the provisions being waived and no such waiver in any instance shall constitute a waiver in any other instance or for any other purpose or impair the right of the party against whom such waiver is claimed in all other instances or for all other purposes to require full compliance with such provision. (iii) Each of the parties hereto shall execute all such further instruments and documents and take all such further action as any other party hereto may reasonably require in order to effectuate the terms and purposes of this Agreement. Section 10. Assignment; Benefit. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the parties hereto other than the Corporation and the Trust, shall also be for the benefit of and enforceable by any subsequent holder of any Registrable Securities, subject to all the provisions herein, including those respecting the minimum numbers or percentages of shares of Registrable Securities required in order to be entitled to certain rights, or take certain actions, contained herein. Section 11. Condition Precedent to Paired Share Election and Combined Election under the Exchange Rights Agreement. The (i) Trust and the Corporation, individually and as the general partners of the Realty Partnership and the Operating Partnership, respectively and (ii) the Realty Partnership and the Operating Partnership, acknowledge and agree that, notwithstanding anything in the Exchange Rights Agreement to the contrary, the rights of the Trust or the Corporation under the Exchange Rights Agreement to issue Paired Shares pursuant to a Paired Share Election or Combined Election (each as defined in the Exchange Rights Agreement) shall be conditioned upon the Paired Shares issued in exchange for tendered Units having been registered pursuant to a registration statement that has been declared effective by the Commission under the Securities Act. In the event that such registration statement has not been declared effective by the Commission as of the date of issuance of the Paired Shares pursuant to such Paired Share or Combined Election, the tender date shall be extended until the date on which such registration statement has been so declared effective; provided that, if such registration statement has not been declared effective within sixty (60) days following the delivery of the Letter of Transmittal (as defined in the Exchange Rights Agreement), such Letter of Transmittal may be withdrawn in the sole discretion of the tendering Holder of Units. Section 12. Miscellaneous. 12.1. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving regard to the conflict of laws principles thereof. 12.2. Notices. All notices and requests given pursuant to this Agreement shall be in writing and shall be made by hand-delivery, first-class mail (registered or certified, return receipt requested), confirmed facsimile or overnight air courier guaranteeing next Business Day delivery to the relevant address specified in the Unit Contribution Agreement or Class A Contribution Agreement, as the case may be. Except as otherwise provided in this Agreement, the date of each such notice and request shall be deemed to be, and the date on which each such notice and request shall be deemed given shall be: at the time delivered, if personally delivered or mailed; when receipt is acknowledged, if sent by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next Business Day delivery. 12.3. Entire Agreement; Integration. This Agreement supersedes all prior agreements between or among any of the parties hereto with respect to the subject matter contained herein and therein, and such agreements embody the entire understanding among the parties relating to such subject matter. 12.4. Section Headings. Section headings are for convenience of reference only and shall not affect the meaning of any provision of this Agreement. 12.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which shall together constitute one and the same instrument. All signatures need not be on the same counterpart. 12.6. Severability. If any provision of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall not affect the validity and enforceability of the remaining provisions of this Agreement, unless the result thereof would be unreasonable, in which case the parties hereto shall negotiate in good faith as to appropriate amendments hereto. 12.7. Termination. This Agreement may be terminated at any time by a written instrument signed by the Trust, the Corporation and the unanimous consent of the Holders. Unless sooner terminated in accordance with the preceding sentence, this Agreement (other than Section 7 hereof) shall terminate in its entirety on such date as there shall be (a) no Registrable Securities outstanding, and (b) no securities outstanding which are convertible or exchangeable into Registrable Securities; provided that any Paired Shares previously subject to this Agreement shall not be Registrable Securities following the sale of any such shares in an offering registered pursuant to this Agreement. 12.8. Starwood Lodging Trust. The parties hereto understand and agree that the name "Starwood Lodging Trust" is a designation of the Trust and its Trustees (as Trustees but not personally) under the Declaration of Trust, and all persons dealing with the Trust shall look solely to the Trust's assets for the enforcement of any claims against the Trust, and that the Trustees, officers, agents and security holders of the Trust assume no personal liability for obligations entered into on behalf of the Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. 12.9. Other Registration Rights. Without the prior written consent of the Required Holders (which consent shall not be unreasonably withheld), the Trust and the Corporation will not in the future grant directly or indirectly to any Persons the right to request the Trust and the Corporation to register any equity securities of the Trust and the Corporation, or any securities convertible or exchangeable into or exercisable for such securities if such grant conflicts with the rights of priority granted to the Holders pursuant to Section 2.10. 12.10. Submission to Jurisdiction. Each of the parties hereto and each of the Holders irrevocably submits and consents to the jurisdiction of the United States District Court for the Southern District of New York in connection with any action or proceeding arising out of or relating to this Agreement, and irrevocably waives any immunity from jurisdiction thereof and any claim of improper venue, forum non conveniens or any similar basis to which it might otherwise be entitled in any such action or proceeding. 12.11. Specific Performance. Each of the parties acknowledges and agrees that in the event of any breach of this Agreement, the non-breaching party or parties would be irreparably harmed and could not be made whole by monetary damages. The parties hereby agree that in addition to any other remedy to which they may be entitled at law or in equity, they shall be entitled to compel specific performance of this Agreement in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction for such action. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first written above. STARWOOD LODGING TRUST, a Maryland real estate investment trust By: /S/ STEVEN R. GOLDMAN ------------------------------------- Name: Steven R. Goldman Title: Vice President STARWOOD LODGING CORPORATION, a Maryland corporation By: /S/ NIR MARGALIT ------------------------------------- Name: Nir Margalit Title: Vice President HOLDERS: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II By: /S/ GARY L. KAUFFMAN ------------------------------------- Gary L. Kauffman Vice President THE GARY MENDELL FAMILY TRUST By: /S/ ELEANOR MENDELL ------------------------------------- Eleanor Mendell Trustee /S/ GARY M. MENDELL ------------------------------------- Gary M. Mendell /S/ STEVE M. MENDELL ------------------------------------- Steve Mendell /S/ ELLEN-JO MENDELL ------------------------------------- Ellen-Jo Mendell /S/ FELIX J. CACCIATO, JR. ------------------------------------- Felix J. Cacciato, Jr. /S/ JUDITH K. RUSHMORE ------------------------------------- Judith K. Rushmore /S/ MURRAY L. DOW, II ------------------------------------- Murray L. Dow, II /S/ ORNA L. SHULMAN ------------------------------------- Orna L. Shulman /S/ ARTHUR C. GREEN ------------------------------------- Arthur C. Green /S/ MARK J. ROSINSKY ------------------------------------- Mark J. Rosinsky /S/ RANDI L. ROSINSKY ------------------------------------- Randi L. Rosinsky /S/ JOHN DAILY ------------------------------------- John Daily /S/ MICHAEL D. HALL ------------------------------------- Michael D. Hall /S/ HARVEY MOORE ------------------------------------- Harvey Moore /S/ TRACEY DRISCOLL ------------------------------------- Tracey Driscoll /S/ TOM CLEARWATER ------------------------------------- Tom Clearwater ZAPCO COMMUNICATIONS, INC. By: /S/ ORNA L. SHULMAN ------------------------------------- Orna L. Shulman Vice President ZAPCO INTEREST HOLDINGS LIMITED PARTNERSHIP By: Zapco Vermont Avenue, Inc. its General Partner By: /S/ ORNA L. SHULMAN ------------------------------- Orna L. Shulman Vice President LOUDOUN INTERTECH DEVELOPMENT CORPORATION By: /S/ ORNA L. SHULMAN ------------------------------------- Orna L. Shulman Vice President WESTPORT HOSPITALITY, INC. By: /S/ GARY M. MENDELL ------------------------------------- Name: Gary M. Mendell Title: President OPERATING PARTNERSHIP AND REALTY PARTNERSHIPS (for the purposes of acknowledging their obligations under Section 11 of this Agreement): SLT REALTY LIMITED PARTNERSHIP, By: STARWOOD LODGING TRUST, general partner By: /S/ STEVEN R. GOLDMAN ------------------------------------- Name: Steven R. Goldman Title: Vice President SLC OPERATING LIMITED PARTNERSHIP By: STARWOOD LODGING CORPORATION, general partner By: /S/ NIR MARGALIT ------------------------------------- Name: Nir Margalit Title: Vice President SCHEDULE A-1 TO REGISTRATION RIGHTS AGREEMENT Unit Holders Prudential Property Investment Separate Account II The Gary Mendell Family Trust Zapco Interest Holdings L.P. Loudoun Intertech Development Corporation Gary M. Mendell Steve Mendell Murray L. Dow, II Judith K. Rushmore Ellen-Jo Mendell Orna L. Shulman Felix J. Cacciato, Jr. Arthur C. Green Mark J. Rosinsky Randi L. Rosinsy John Daily Michael D. Hall Harvey Moore Tracey Driscoll Tom Clearwater Zapco Communications, Inc. Westport Hospitality, Inc. SCHEDULE A-2 TO REGISTRATION RIGHTS AGREEMENT Class A Holders Westport Hospitality, Inc. Judith Rushmore Murray Dow Steve Mendell Gary Mendell EX-4 5 UNITS EXCHANGE RIGHTS AGREEMENT UNITS EXCHANGE RIGHTS AGREEMENT This Units Exchange Rights Agreement (this "Agreement") is made as of February 14, 1997 among Starwood Lodging Trust, a real estate investment trust organized under the laws of the State of Maryland (the "Trust"), Starwood Lodging Corporation, a Maryland corporation (the "Corporation"), SLT Realty Limited Partnership, a Delaware limited partnership (the "Realty Partnership"), SLC Operating Limited Partnership, a Delaware limited partnership (the "Operating Partnership"), and each of the limited partners of the Realty Partnership and the Operating Partnership listed on the signature pages hereto (the "Starwood Partners"). Unless otherwise indicated, capitalized terms used herein are used herein as defined in Section 11. WHEREAS, pursuant to a Contribution Agreement dated as of January 15, 1997 (the "Contribution Agreement") among the Trust, the Corporation, Starwood Partners and other parties (i) on the date hereof the Starwood Partners are making capital contributions to the Realty Partnership in return for the issuance by the Realty Partnership to the Starwood Partners of Units (as defined in the Limited Partnership Agreement of the Realty Partnership (the "Realty Partnership Agreement")) of the Realty Partnership (such Units issued by the Realty Partnership to the Starwood Partners on the date hereof, together with any Units of the Realty Partnership issued to the Starwood Partners after the date hereof, being hereinafter called the "Realty Units") and (ii) on the date hereof the Starwood Partners are making capital contributions to the Operating Partnership in return for the issuance by the Operating Partnership to the Starwood Partners of Units (as defined in the Limited Partnership Agreement of the Operating Partnership (the "Operating Partnership Agreement")) of the Operating Partnership (such Units issued by the Operating Partnership to the Starwood Partners on the date hereof, together with any Units of the Operating Partnership issued to the Starwood Partners, being hereinafter called the "Operating Units"); and WHEREAS, pursuant to the Contribution Agreement the parties hereto are entering into this Agreement to provide for the rights of the Starwood Partners to tender Realty Units and Operating Units in exchange for either Paired Shares (as defined herein), cash or a combination of Paired Shares and cash, on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the parties hereto agree as follows: Section 1. Right to Tender Starwood Units. (a) Upon the terms and subject to the conditions of this Agreement, each holder of Starwood Units (as defined below) shall have the right to tender to the Trust outstanding Realty Units and the right to tender to the Corporation outstanding Operating Units. Notwithstanding anything to the contrary contained in this Agreement (i) no Realty Unit may be tendered to the Trust unless simultaneously therewith the tendering holder also tenders to the Corporation an Operating Unit and no Operating Unit may be tendered to the Corporation unless simultaneously therewith the tendering holder also tenders to the Trust a Realty Unit (a Realty Unit tendered for exchange and the Operating Unit simultaneously tendered for exchange being hereinafter collectively referred to as a "Starwood Unit") and (ii) any attempted tender of a Realty Unit or an Operating Unit which is not accompanied by a simultaneous tender of an Operating Unit or Realty Unit, respectively, shall be void and of no effect; it being understood that a simultaneous tender of unequal numbers of Realty Units and Operating Units shall be valid under this sentence to the extent of the lesser of the number of Realty Units or Operating Units, as the case may be, included in such tender. (b) Notwithstanding any other provision of this Agreement, no Paired Shares or cash shall be issued or paid in respect of any tender of Starwood Units (i) if, notwithstanding the provisions of Section 6 of this Agreement, the right to tender Starwood Units and receive Paired Shares or cash would result in the Trust not satisfying the REIT Requirements in any respect or would result in any person or entity Beneficially Owning Trust Shares exceeding the Ownership Limit, (ii) if, with respect to all Starwood Partners other than Prudential Property Investment Separate Account II, the tender pursuant to Section 1(a) is prior to the first anniversary of the date of this Agreement, (iii) prior to the expiration or termination of the waiting period applicable to such exchange and issuance, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as it may be amended from time to time, or (iv) prior to the receipt of all governmental and regulatory approvals which are required to be obtained prior to such tender and issuance or payment, including, without limitation, any required approvals of the gaming authorities of the State of Nevada and of Clark County, Nevada (the "Gaming Approvals"). Prior to the receipt of Gaming Approvals, such holder shall, as a condition to any tender of Starwood Units which would (if the Paired Share Option (as defined below) were to be elected in respect of such tender) cause such holder to beneficially own, in the aggregate, Paired Shares representing more than 4.9% of the then issued and outstanding Paired Shares, give not less than 90 days' written notice to the Trust and the Corporation (at the offices provided pursuant to Section 10) of its intent to tender Starwood Units; provided, however, that the ownership by Prudential Property Investment Separate Account II of Paired Shares as contemplated by the penultimate sentence of Section 8.02(j) of the Contribution Agreement shall not require any such written notice to the Trust and Corporation. In the event that the ability to receive Paired Shares or cash would result in the Trust not satisfying the REIT Requirements in any respect or would result in any person or entity Beneficially Owning Trust Shares exceeding the Ownership Limit, and as a result thereof no Paired Shares or cash may be issued or paid in respect of any tender of Starwood Units pursuant to Section 1(b)(i) above, the parties hereto shall use their respective best efforts to restructure the terms and provisions of this Agreement (and, if necessary, the Partnership Agreements and the Registration Rights Agreement (as defined in Section 6)), or to agree to terms and provisions in addition to such terms and provisions, so as to provide to each such party the same substantive rights (or substantive rights as close thereto as is reasonably practicable) as those provided by this Agreement, the Partnership Agreements and the Registration Rights Agreement. (c) The rights to exchange Starwood Units pursuant to this Agreement constitute a continuous offer and may not be withdrawn, amended or modified by the Trust or the Corporation without the prior written consent of each holder of outstanding Starwood Units adversely affected by such withdrawal, amendment or modification; provided that any withdrawal, amendment or modification that does not adversely affect any holder of outstanding Starwood Units may be effected without the consent of such holder. Section 2. Acceptance of Tender; Election of Method of Payment for Tendered Starwood Units. (a) Upon the terms and subject to the conditions of this Agreement, the Trust and the Corporation shall accept Starwood Units validly tendered in proper form and meeting all of the requirements of this Agreement. In order for Starwood Units to be validly tendered pursuant to this Agreement, the registered holder thereof shall deliver to the Trust and the Corporation, at the address provided pursuant to Section 10, (i) a completed and duly executed Letter of Transmittal in the form attached hereto as Exhibit A (the "Letter of Transmittal") and any other documents required by the Letter of Transmittal and (ii) a calculation, to the best knowledge of such registered holder after due inquiry (together with such supporting documentation as the Trust may reasonably request), of the maximum number of Paired Shares that may be issued to such registered holder without causing either (x) the Trust to not satisfy the REIT Requirements in any respect or (y) any person or entity to Beneficially Own Trust Shares exceeding the Ownership Limit. The Trust and the Corporation shall make all determinations as to the validity and form of any tender of Starwood Units in accordance with the provisions of this Agreement and upon rejection of a tender shall give the tendering holder written notice of such rejection, which shall include the reasons therefor. (b) Unless otherwise determined by agreement of the Trust and the Corporation, tenders of Starwood Units pursuant to this Agreement shall be irrevocable and shall not be subject to withdrawal or modification; provided that if the Trust and the Corporation make the Paired Share Election with respect to a tender, then within 5 days after such Election the tendering holder may elect to revoke such tender so long as (i) no public disclosure of such tender has been made prior to such revocation and (ii) such tendering holder reimburses the Trust and the Corporation for all reasonable costs and expenses incurred in connection with such tender. (c) Within 15 days after the valid tender pursuant to this Agreement of Starwood Units, the Trust and the Corporation shall make an election to pay for such Starwood Units by delivering either (i) Paired Shares (the "Paired Share Election"), (ii) cash (the "Cash Election") or (iii) a combination of Paired Shares and cash (the "Combined Election"). Such election shall be made pursuant to an agreement as to such election between the Trust and the Corporation. If the Trust and the Corporation do not so agree within such 15-day period, they shall be deemed to have made the Cash Election. Section 3. Paired Share Election. (a) If with respect to any tender of Starwood Units pursuant to this Agreement, the Trust and the Corporation make the Paired Share Election, then, except as provided in Section 2(b), within fifteen days after the expiration of the 5-day period referred to in Section 2(b), the Trust and the Corporation shall deliver to the tendering holder one Paired Share for each Starwood Unit validly tendered pursuant to the provisions of this Agreement. (b) No fractional Paired Shares or scrip representing fractional Paired Shares shall be issued upon exchange of Starwood Units pursuant to this Agreement. If more than one Letter of Transmittal shall be delivered at one time by the same holder, the number of full Paired Shares which shall be issuable upon exchange of the Starwood Units tendered thereby shall be computed on the basis of the aggregate number of Starwood Units so tendered. Instead of any fractional Paired Shares which would otherwise be issuable upon exchange of any Starwood Units, the Trust and the Corporation shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Paired Share Closing Price on the last Business Day preceding the date of exchange. (c) If a holder exchanges Starwood Units pursuant to this Agreement, the Trust and the Corporation shall pay any documentary, stamp or similar issue or transfer tax due on any issue of Paired Shares upon such exchange. Such holder, however, shall (i) pay to the Trust and the Corporation the amount of any additional documentary, stamp or similar issue or transfer tax which is due (or shall establish to the satisfaction of the Trust and the Corporation the payment thereof) as a result of Paired Shares being issued in a name other than the name of such holder and (ii) be responsible for all income or other taxes as a result of such exchange. Section 4. Cash Election. (a) If with respect to any tender of Starwood Units pursuant to this Agreement, the Trust and the Corporation make or are deemed to have made the Cash Election, then within 20 days after such tender the Trust and the Corporation shall pay to the tendering holder an aggregate amount of cash (the "Aggregate Cash Payment") equal to the product of (i) the number of Paired Shares which would have been delivered to such holder if the Trust and the Corporation had made the Paired Share Election with respect to such tender and (ii) the average Paired Share Closing Price for the ten trading day period ending one day prior to the date of such tender. (b) In connection with any Aggregate Cash Payment pursuant to Section 4(a) or any cash payment pursuant to Section 5(a)(ii), the Trust shall pay 95% of such Aggregate Cash Payment or such cash payment and the Corporation shall pay 5% of such Aggregate Cash Payment or such cash payment (such percentages being herein called the "Issuance Percentages"); provided that the Trust and the Corporation may from time to time change the Issuance Percentages based on their determination of the relative fair values of the Trust Shares and the Corporation Shares. Section 5. Combined Election. (a) If with respect to any tender of Units pursuant to this Agreement, the Trust and the Corporation shall make the Combined Election, then, except as provided in Section 2(b), within 15 days after the expiration of the 5-day period referred to in Section 2(b), the Trust and the Corporation shall (i) notify the tendering holder of the number of such tendered Units which will be exchanged for cash (the "Cash Units") and the number of such tendered Units which will be exchanged for Paired Shares (the "Paired Share Units"), (ii) pay to the tendering holder, in respect of each Cash Unit validly tendered pursuant to the provisions of this Agreement, an amount of cash (with each of the Trust and the Corporation paying its then respective Issuance Percentage of such amount of cash) equal to the average Paired Share Closing Price for the ten trading day period ending one day prior to the date of such tender and (iii) deliver to the tendering holder one Paired Share for each Paired Share Unit validly tendered pursuant to the provisions of this Agreement. (b) The provisions of Sections 3(b) and 3(c) of this Agreement shall apply to the issuance of Paired Shares pursuant to Section 5(a). Section 6. Registration Rights. If at any time after six (6) months from the date of this Agreement, (a) a Starwood Partner validly tenders Starwood Units pursuant to the provisions of this Agreement, (b) the Trust and the Corporation make the Paired Share Election or the Combined Election with respect to such tender, (c) as a result of the Ownership Limit such Starwood Partner cannot receive the full number of Paired Shares otherwise issuable to such Starwood Partner pursuant to such tender and such Election (without giving effect to the Ownership Limit) (the event described in clauses (a), (b) and (c) being referred to as a "Paired Share Tender Reduction"; the number of such Paired Shares which such Starwood Partner cannot receive pursuant to such tender as a result of the Ownership Limit being referred to as the "Unissued Paired Shares"; and the Starwood Units tendered in respect of such Unissued Paired Shares being referred to as the "Delayed Payment Units"), then subject to the other terms and conditions of this Agreement, such Starwood Partner shall be entitled to receive the number of Paired Shares which it can receive pursuant to such tender, such Election and the Ownership Limit and then, pursuant to the terms of the Registration Rights Agreement, the Trust and the Corporation shall cause there to be filed with the Securities and Exchange Commission a registration statement and the Trust and the Corporation shall register and sell pursuant thereto a number of Paired Shares equal to the number of such Unissued Paired Shares requested by Starwood to be registered pursuant to Section 2.3 of the Registration Rights Agreement. Within two Business Days after the receipt by the Trust and the Corporation of the proceeds of any sale (after underwriting discounts and commissions) of such Paired Shares pursuant to such registration, the Trust and the Corporation shall pay such proceeds to the tendering holder of the Delayed Payment Units, in full payment for the tender of such Delayed Payment Units. Section 7. Representations of Tendering Holder. Each tender of Starwood Units shall constitute a representation and warranty by the tendering holder of each of the representations and warranties set forth in the form of Letter of Transmittal. Without limiting the generality of the foregoing, unless, at the time of a tender for exchange of Starwood Units pursuant to this Agreement, a registration statement relating to any Paired Shares to be delivered upon such tender is effective under the Securities Act of 1933, as amended (the "Securities Act"), such tender shall constitute a representation and warranty by the tendering holder to the Trust and the Corporation that such tendering holder (i) is an "accredited investor" within the meaning of Rule 501 under the Securities Act, (ii) has sufficient knowledge and experience in financial and business matters and in investing in entities similar to the Partnerships, the Trust and the Corporation so as to be able to evaluate the risks and merits of its investment in the Partnerships, the Trust and the Corporation and it is able financially to bear the risks thereof, (iii) has had an opportunity to discuss the business, management and financial affairs of the Trust, the Corporation and the Partnerships with the management of the Trust, the Corporation and the Partnerships, and (iv) understands that the Paired Shares have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the Securities Act and such Paired Shares must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable state securities laws or is exempt from such registration. Section 8. Status of Tendering Holder. Until the holder of Starwood Units tendered pursuant to this Agreement becomes a holder of record of the Paired Shares issued in exchange therefor (in the case of a Paired Share Election or a Combined Election) or until such holder has received cash in exchange therefor (in the case of a Cash Election or a Combined Election), such holder shall continue to hold and own such Starwood Units for all purposes of the Realty Partnership Agreement and the Operating Partnership Agreement. In the case of a Paired Share Election or a Combined Election, no such holder shall have any rights as a shareholder of the Trust or a stockholder of the Corporation in respect of such Paired Shares until such holder becomes a holder of record of such Paired Shares. Section 9. Reservation of Shares; Closing of Transfer Books. (a) The Trust shall reserve and shall at all times have reserved out of its authorized but unissued Trust Shares, solely for the purpose of effecting the exchange of Realty Units pursuant to this Agreement and the Class A Units pursuant to the Class A Exchange Rights Agreement, enough Trust Shares to permit the exchange of the then outstanding Realty Units and, in the case of the Class A Exchange Rights Agreement, Class A Units. The Corporation shall reserve and shall at all times have reserved out of its authorized but unissued Corporation Shares, solely for the purpose of effecting the exchange of Operating Units pursuant to this Agreement, enough Corporation Shares to permit the exchange of the then outstanding Operating Units. All Paired Shares which may be issued upon exchange of Starwood Units shall be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof other than income taxes resulting from such exchange. (b) The Trust shall not close its transfer books so as to prevent the timely issuance of Trust Shares pursuant to this Agreement and the Class A Exchange Rights Agreement. The Corporation shall not close its transfer books so as to prevent the timely issuance of Corporation Shares pursuant to this Agreement. Section 10. Notices. All notices, documents and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally or by overnight mail or when sent by facsimile transmission, or four days after being mailed (by registered mail, return receipt requested) to a party at the following address (or to such other address as such party may have specified by notice given to the other parties pursuant to this provision): (a) If to the Trust or the Realty Partnership, to: Starwood Lodging Trust 2231 E. Camelback Road, Suite 410 Phoenix, AZ 85016 Attention: Chief Financial Officer Telecopy No.: (602) 852-0984 Telephone No.: (602) 852-3900 with a copy to: Sidley & Austin 555 West 5th Street Los Angeles, California 90013 Attention: Sherwin L. Samuels Telecopy No.: (213) 896-6600 Telephone No.: (213) 896-6000 (b) If to the Corporation or the Operating Partnership, to: Starwood Lodging Corporation 2231 E. Camelback Road, Suite 400 Phoenix, AZ 85016 Attention: General Counsel Telecopy No.: (602) 852-0686 Telephone No.: (602) 852-3900 with a copy to: Sidley & Austin 555 West 5th Street Los Angeles, California 90013 Attention: Sherwin L. Samuels Telecopy No.: (213) 896-6600 Telephone No.: (213) 896-6000 (c) If to Prudential: Prudential Real Estate Investors 8 Campus Drive Parsippany, NJ 07054 Attention: Gary L. Kauffman Telecopy No.: (201) 683-1790 Telephone No.: (201) 683-1612 Attention: Joseph D. Margolis, Esq. James P. Walker, Esq. Telecopy No.: (201) 683-1788 Telephone No.: (201) 683-1694 or 1690 with a copy to: O'Melveny & Myers LLP 153 East 53rd Street New York, NY 10022 Attention: Robert S. Insolia, Esq. Telecopy No.: (212) 326-2061 Telephone No.: (212) 326-2000 (d) If to any other Holder, to the address specified on Schedule A hereto. with a copy to: Willkie Farr & Gallagher 153 East 53rd Street New York, NY 10022 Attention: Bruce M. Montgomerie, Esq. Telecopy No.: (212) 821-8111 Telephone No.: (212) 821-8000 Section 11. Definitions. For purposes of this Agreement: "Beneficially Owning" means owning Trust Shares directly, indirectly or constructively by a person or entity through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code, or Section 544 of the Code, as modified by Section 856(h) of the Code. The term "Beneficially Own" shall have a correlative meaning. "Business Day" means any day other than Saturday, Sunday and any day on which banks are not open to do business in New York, New York. "Class A Exchange Rights Agreement" means the Exchange Rights Agreement dated the date hereof among the Corporation, the Operating Partnership and certain other parties. "Code" means the Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder, as amended from time to time. "Corporation Shares" means the shares of common stock, par value $.01 per share, of the Corporation. "Declaration of Trust" means the Declaration of Trust of the Trust dated August 25, 1969, as amended and restated as of June 6, 1988, and as further amended on February 1, 1995 and as amended from time to time after the date of this Agreement. "Disinterested Members" when used with respect to the Trust has the meaning set forth in the Code of Regulations of the Trust and, when used with respect to the Corporation, has the meaning set forth in the By-Laws of the Corporation, in each case as amended from time to time. "Ownership Limit" when used with respect to Trust Shares, has the meaning set forth in the Declaration of Trust and, when used with respect to the Corporation Shares, has the meaning set forth in the Restated Articles, in each case as amended from time to time. "Paired Share" means a Corporation Share and a Trust Share which are paired pursuant to the Pairing Agreement. "Paired Share Closing Price" shall mean, with respect to a particular date, the last reported sales price regular way on such date or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices regular way on such date, in either case on the New York Stock Exchange, or if the Paired Shares are not then listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Paired Shares are then listed or admitted to trading or, if not then listed or admitted to trading on any national securities exchange, the closing sale price on such date of the Paired Shares or, in case no reported sale takes place on such date then, the average of the closing bid and asked prices on such date, on NASDAQ or any comparable system. If the Paired Shares are not then quoted on NASDAQ or any comparable system, the Board of Trustees of the Trust and the Board of Directors of the Corporation shall in good faith determine the Paired Share Closing Price. "Pairing Agreement" means the Pairing Agreement dated June 25, 1980 between the Trust and the Corporation, as it may be amended from time to time. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date first written above between the Trust, the Corporation and certain other parties. "REIT Requirements" shall mean the requirements for the Trust to (i) qualify as a REIT under the Code and the rules and regulations promulgated thereunder, (ii) avoid any federal income or excise tax liability, (iii) retain its status as grandfathered pursuant to Section 132(c)(3) of the Deficit Reduction Act of 1984 and (iv) retain the benefits of that certain private letter ruling issued by the Internal Revenue Service to the Trust dated as of January 4, 1980. "Restated Articles" means the Restated Articles of Incorporation of the Corporation, as amended from time to time after the date of this Agreement. "Trust Shares" means the shares of beneficial interest, $.01 par value, of the Trust. Section 12. Determinations and Interpretation. All agreements between the Trust and the Corporation provided for in this Agreement shall be made on behalf of the Trust and the Corporation by their respective Disinterested Members, including, without limitation, any agreement between the Trust and the Corporation as to the election of the Paired Share Election, the Cash Election or the Combined Election with respect to a tender of Starwood Units pursuant to Section 2(c), any agreement to permit the revocation, withdrawal or modification of a tender of Starwood Units pursuant to Section 1(c) and any adjustment of the Issuance Percentages pursuant to Section 4(b). All interpretations of the terms of this Agreement shall be resolved on behalf of the Trust and the Corporation by their respective Disinterested Members. Section 13. Partial Invalidity. In case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein unless the deletion of such provision or provisions would result in such a material change as to cause completion of the transactions contemplated hereby to be unreasonable. Section 14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors or assigns. In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the parties hereto other than the Corporation, the Trust, the Realty Partnership and the Operating Partnership, shall also be for the benefit of and enforceable by any subsequent holder of any Units. Section 15. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original counterpart, and shall become a binding agreement when the Trust, the Corporation, the Realty Partnership, the Operating Partnership, and each of the Starwood Partners shall have each executed a counterpart of this Agreement. Section 16. Titles and Headings. Titles and headings to Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Section 17. Exhibits. The Exhibits referred to in this Agreement shall be construed with, and as an integral part of, this Agreement to the same extent as if the same had been set forth verbatim herein. Section 18. Entire Agreement; Amendments and Waivers. This Agreement, including the Exhibits, contains the entire understanding of the parties hereto with regard to the subject matter contained herein. In addition to amendments and modifications permitted by Section 1(c), the parties hereto, by mutual agreement in writing, may amend, modify and supplement this Agreement; provided that any such amendment, modification or supplement shall be approved by a majority of the Disinterested Members of each of the Trust and the Corporation. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of such party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. Section 19. Governing Law. Except to the extent that Maryland law is mandatorily applicable to the rights and obligations of the shareholders of the Trust and the stockholders of the Corporation, this Agreement, and the application or interpretation thereof, shall be governed exclusively by its terms and by the internal laws of the State of New York, without regard to principles of conflicts of laws as applied in the State of New York or any other jurisdiction which, if applied, would result in the application of any laws other than the internal laws of the State of New York. Section 20. Starwood Lodging Trust. The parties hereto understand and agree that the name "Starwood Lodging Trust" is a designation of the Trust and its Trustees (as Trustees but not personally) under the Declaration of Trust, and all persons dealing with the Trust shall look solely to the Trust's assets for the enforcement of any claims against the Trust, and that the Trustees, officers, agents and security holders of the Trust assume no personal liability for obligations entered into on behalf of the Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. Section 21. Submission to Jurisdiction. Each of the parties hereto irrevocably submits and consents to the jurisdiction of the United States District Court for the Southern District of New York in connection with any action or proceeding arising out of or relating to this Agreement, and irrevocably waives any immunity from jurisdiction thereof and any claim of improper venue, forum non conveniens or any similar basis to which it might otherwise be entitled in any such action or proceeding. Section 22. Specific Performance. Each of the parties acknowledges and agrees that in the event of any breach of this Agreement, the non-breaching party or parties would be irreparably harmed and could not be made whole by monetary damages. The parties hereby agree that in addition to any other remedy to which they may be entitled at law or in equity, they shall be entitled to compel specific performance of this Agreement in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction for such action. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the parties hereto or by their duly authorized officers, all as of the date first above written. STARWOOD LODGING TRUST, a Maryland real estate investment trust By: /S/ STEVEN R. GOLDMAN -------------------------------------- Name: Steven R. Goldman Title: Vice President STARWOOD LODGING CORPORATION, a Maryland corporation By: /S/ NIR MARGALIT -------------------------------------- Name: Nir Magalit Title: Vice President SLT REALTY LIMITED PARTNERSHIP, By: STARWOOD LODGING TRUST, general partner By: /S/ STEVEN R. GOLDMAN --------------------------------- Name: Steven R. Goldman Title: Vice President SLC OPERATING LIMITED PARTNERSHIP By: STARWOOD LODGING CORPORATION, general partner By: /S/ NIR MARGALIT --------------------------------- Name: Nir Margalit Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on behalf of PRUDENTIAL PROPERTY INVESTMENT SEPARATE ACCOUNT II By: /S/ GARY L. KAUFFMAN ------------------------------------ Gary L. Kauffman Vice President THE GARY MENDELL FAMILY TRUST By: /S/ ELEANOR MENDELL ------------------------------------ Eleanor Mendell Trustee /S/ GARY M. MENDELL -------------------------------------- Gary M. Mendell /S/ STEVE MENDELL -------------------------------------- Steve Mendell /S/ ELLEN-JO MENDELL -------------------------------------- Ellen-Jo Mendell /S/ FELIX J. CACCIATO, JR. -------------------------------------- Felix J. Cacciato, Jr. /S/ JUDITH K. RUSHMORE -------------------------------------- Judith K. Rushmore /S/ MURRAY L. DO, II -------------------------------------- Murray L. Dow, II /S/ ORNA L. SHULMAN -------------------------------------- Orna L. Shulman /S/ ARTHUR C. GREEN -------------------------------------- Arthur C. Green /S/ MARK J. ROSINSKY -------------------------------------- Mark J. Rosinsky /S/ RANDI L. ROSINSKY -------------------------------------- Randi L. Rosinsky /S/ JOHN DAILY -------------------------------------- John Daily /S/ MICHEAL D. HALL -------------------------------------- Michael D. Hall /S/ HARVEY MOORE -------------------------------------- Harvey Moore /S/ TRACEY DRISCOLL -------------------------------------- Tracey Driscoll /S/ TOM CLEARWATER -------------------------------------- Tom Clearwater ZAPCO HOLDINGS, INC. By: /S/ ORNA L. SHULMAN ------------------------------------ Orna L. Shulman Vice President ZAPCO HOLDINGS, INC. DEFERRED COMPENSATION PLAN TRUST By: /S/ NANCY S. HEINRICH ------------------------------------ Nancy S. Heinrich Trustee SCHEDULE A TO UNITS EXCHANGE RIGHTS AGREEMENT NOTICE ADDRESS FOR HOLDERS [To be provided at Closing] EXHIBIT A TO UNITS EXCHANGE RIGHTS AGREEMENT LETTER OF TRANSMITTAL To Tender Units Pursuant to the Units Exchange Rights Agreement Dated as of February ___, 1997 TO: Starwood Lodging Trust 2231 E. Camelback Road, Suite 410 Phoenix, AZ 85016 Starwood Lodging Corporation 2231 E. Camelback Road, Suite 400 Phoenix, AZ 85016 Description of Units - -------------------------------------------------------------------------------- Names(s) and Address(es) Units Tendered (Attach of Registered Owners additional list if necessary) Realty Units: Operating Units: _______________________________________ Total NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Starwood Lodging Trust (the "Trust") the above-described Realty Units (as defined in the Units Exchange Rights Agreement dated as of February ___, 1997 (the "Units Exchange Rights Agreement")) and hereby tenders to Starwood Lodging Corporation (the "Corporation") the above-described Operating Units (as defined in the Units Exchange Rights Agreement) in accordance with the terms and conditions of the Units Exchange Rights Agreement and this Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged. All terms used herein but not defined herein are used as defined in the Units Exchange Rights Agreement. Subject to, and effective upon the issuance of Paired Shares and/or the payment of cash, as the case may be, for the Starwood Units tendered hereby, the undersigned hereby assigns and transfers (i) to the Trust all right, title and interest in and to all the Realty Units that are being tendered hereby and irrevocably constitutes and appoints the Trust (the "Realty Unit Agent"), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) transfer such Realty Units on the books of the Realty Partnership and (b) receive all rights, privileges and benefits, and any and all obligations and liabilities appertaining thereto and otherwise exercise all rights of beneficial ownership of such Realty Units, all in accordance with the terms of the Offer and (ii) to the Corporation all right, title and interest in and to all the Operating Units that are being tendered hereby and irrevocably constitutes and appoints the Corporation (the "Operating Unit Agent" and, together with the Realty Unit Agent, the "Agents"), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) transfer such Operating Units on the books of the Operating Partnership and (b) receive all rights, privileges and benefits, and any and all obligations and liabilities appertaining thereto and otherwise exercise all rights of beneficial ownership of such Operating Units, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants (i) to the Trust that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Realty Units and that upon payment therefor, the Trust will acquire unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim, (ii) to the Corporation that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Operating Units and that upon payment therefor, the Corporation will acquire unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim, (iii) to the Trust and the Corporation that the tender complies with each and every provision of Section 1 of the Units Exchange Rights Agreement, and (iv) attached hereto is a calculation, to the best knowledge of the undersigned after due inquiry (together with such supporting documentation as the Trust may reasonably request) of the maximum number of Paired Shares that may be issued to the undersigned without causing either (x) the Trust to not satisfy the REIT Requirements in any respect or (y) any person or entity to Beneficially Own Trust Shares exceeding the Ownership Limit. The undersigned will, upon request, execute any additional documents deemed by the Trust or the Corporation to be reasonably necessary or desirable to complete the sale, assignment and transfer of the tendered Starwood Units. Unless a registration statement relating to any Paired Shares to be delivered to the undersigned is effective under the Securities Act of 1933, as amended (the "Securities Act"), the undersigned hereby represents and warrants to the Trust and the Corporation that the undersigned (A) is an "accredited investor" within the meaning of Rule 501 under the Securities Act, or (B) has sufficient knowledge and experience in financial and business matters and in investing in entities similar to the Partnerships, the Trust and the Corporation so as to be able to evaluate the risks and merits of its investment in the Partnerships, the Trust and the Corporation and it is able financially to bear the risks thereof, and in either case, (i) has had an opportunity to discuss the business, management and financial affairs of the Trust, the Corporation and the Partnerships with the management of the Trust, the Corporation and the Partnerships, and (ii) understands that any such Paired Shares have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the Securities Act and any such Paired Shares must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable state securities laws or is exempt from such registration. If not sold pursuant to an effective registration statement, any such Paired Shares will bear an appropriate legend indicating that such Paired Shares have not been registered under the Securities Act and resale of such Paired Shares is restricted under applicable securities laws. All authority conferred or agreed to be conferred in this Letter of Transmittal shall not be affected by, and shall survive, the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned. The undersigned understands that, except as provided in Section 2(b) of the Units Exchange Rights Agreement, a tender of Starwood Units pursuant to the Units Exchange Rights Agreement is irrevocable and constitutes a binding agreement between the undersigned and the Trust and the Corporation upon the terms and subject to the conditions of the Units Exchange Rights Agreement. Unless otherwise indicated under "Special Delivery Instructions", please mail any Paired Shares issuable upon exchange of the Starwood Units tendered hereby (or, if the Cash Election or the Combined Election is made, the cash payment payable pursuant thereto) to the address(es) of the registered holder(s) appearing under "Description of Units." In the event that the Special Delivery Instructions are completed, please issue the Paired Shares (or, if the Cash Election or the Combined Election is made, the cash payment payable pursuant thereto) in the name of the registered holder(s) and transmit the same to the person or persons so indicated. The Trust, the Corporation and the undersigned agree that they will cooperate with each other and will make, execute, acknowledge, deliver, record and file, or cause to be made, executed, acknowledged, delivered, recorded and filed, at such times and places as the other may reasonably deem necessary, all other and further documents and instruments, and will take all other and further actions, as the other may reasonably request from time to time in order to effectuate the purposes and provisions of the tender made pursuant to this Letter of Transmittal. SPECIAL DELIVERY INSTRUCTIONS (See Instructions 4 and 5) To be completed ONLY if Paired Shares or the cash payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that above. Mail certificate(s) for Paired Shares or cash payment to: Name____________________________________________________________________________ (please print) Address_________________________________________________________________________ ________________________________________________________________________________ (include Zip Code) ________________________________________________________________________________ ________________________________________________________________________________ (Tax Identification or Social Security Number) SIGN HERE Complete Substitute Form W-9 included ________________________________________________________________________________ ________________________________________________________________________________ (Signature(s) of holder of Units) (Must be signed by registered holder(s) as name(s) appear(s) on books and records of the Partnership. If signature is by trustees, executors, administrators, guardians, attorneys-in--fact, officers of corporations or others acting in a fiduciary or representative capacity, please set forth full title and see instruction 4. Dated___________________________________________________________________________ Name(s)_________________________________________________________________________ (please print) Capacity (Full Title)____________________________________________________________________ Address_________________________________________________________________________ (include Zip Code) Area Code and Tel. No.__________________________________________________________ Tax Identification or Social Security No._____________________________________________________________ (Complete Substitute Form W-9) Guarantee of Signature(s) (See Instruction 1) Authorized Signature_______________________________________________________________________ Name of Firm____________________________________________________________________________ Dated___________________________________________________________________________ INSTRUCTIONS Forming Part of the Terms and Conditions of the Units Exchange Rights Agreement 1. Guarantee of Signature. No signature guarantee on this Letter of Transmittal is required unless the registered holder of the Starwood Units has completed the box entitled "Special Delivery Instructions". In such case all signatures on this Letter of Transmittal must be guaranteed by a member firm of any registered national securities exchange in the United States or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company (not a savings bank or a savings and loan association) having an office, branch or agency in the United States. 2. Delivery of Letter of Transmittal. This Letter of Transmittal is to be completed by the holder of Starwood Units. A properly completed and duly executed Letter of Transmittal and any other documents required by this Letter of Transmittal must be received by the Agents. No alternative, conditional or contingent tenders will be accepted, except as permitted pursuant to the Units Exchange Rights Agreement. 3. Inadequate Space. If the space provided herein is inadequate, the Units tendered and/or other information required should be listed on a separate schedule attached hereto. 4. Signatures on Letter of Transmittal. The signature must correspond with the name as shown on the books and records of the Partnerships without any change whatsoever. If any of the Starwood Units tendered hereby are owned of record by two or more joint owners, all such owners must sign the Letter of Transmittal. If any tendered Starwood Units are registered in different names, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations. If this Letter of Transmittal is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, each person should so indicate when signing, and proper evidence satisfactory to the Agents of their authority so to act must be submitted. 5. Special Delivery Instructions. If a certificate for Paired Shares or the cash payment is to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. 6. Waiver of Conditions. Each of the Trust and the Corporation reserves the right to waive in its sole discretion any of the specified conditions of the Offer in the case of the Starwood Units tendered; provided that any such waiver shall not adversely affect any holder of outstanding Starwood Units without the consent of such holder. 7. Back-up Withholding. Under the Federal income tax law, a person surrendering Starwood Units must provide the Agents with his correct taxpayer identification number ("TIN") on Substitute Form W-9 below unless an exemption applies. If the correct TIN is not provided, a $50 penalty may be imposed by the Internal Revenue Service and payments made in exchange for the surrendered Starwood Units may be subject to back-up withholding of that rate provided by the Federal income tax law (such rate being at the date of the Units Exchange Rights Agreement, 31%). The TIN that must be provided is that of the registered holder of the Starwood Units. The TIN for an individual is his social security number. 8. Requests for Assistance or Additional Copies. Questions and requests for assistance or additional copies of the Units Exchange Rights Agreement and the Letter of Transmittal may be directed to the Agents at the address set forth above. IMPORTANT TAX INFORMATION Under Federal income tax laws, a holder whose tendered Starwood Units are accepted for payment is required by law to provide the Agents (as payers) with his correct taxpayer identification number on Substitute Form W-9 below. If such holder is an individual, the taxpayer identification number is his social security number. If the Agents are not provided with the correct taxpayer identification number, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such holder with respect to Starwood Units purchased pursuant to the Offer may be subject to back-up withholding. If back-up withholding applies, the Agents are required to withhold, at that rate provided by the Federal income tax law (such rate being at the date of the Units Exchange Rights Agreement 31%), of any such payments made to the holder of Starwood Units. Paired Shares otherwise deliverable hereunder may, at the expense (and with all risk of loss for the account) of the undersigned, be sold to pay such amounts. Back-up withholding is not an additional tax. Rather, the tax liability of persons subject to back-up withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. Purpose of Substitute Form W-9 To prevent back-up withholding on payments that are made to a holder of Starwood Units purchased pursuant to the Offer, the holder is required to notify the Agents of his correct taxpayer identification number by completing the form below certifying that the taxpayer identification number provided on Substitute Form W-9 is correct. What Number to Give the Agent The holder is required to give the Agents the social security number or employer identification number of the record owner of the Starwood Units. PAYER'S NAME: Starwood Lodging Trust Starwood Lodging Corporation
================================================================================================ Substitute Part 1 - Please provide your TIN in the box at Social Security Form W-9 right and certify by signing and dating below Number/Employer Identification Number - ------------------------------------------------------------------------------------------------ Department of the Certification - Under the penalties of perjury, Treasury/Internal (i) I certify that the information provided on this Revenue Service form is true, correct and complete and (ii) I am not subject to backup withholding because: (a) I am exempt from backup Service withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. - ------------------------------------------------------------------------------------------------ Signature ________________________________________ Date ______________ ================================================================================================
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP WITHHOLDING AT THAT RATE PROVIDED BY THE FEDERAL INCOME TAX LAW (SUCH RATE BEING AT THE DATE OF THE UNITS EXCHANGE RIGHTS AGREEMENT 31%) OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. -----END PRIVACY-ENHANCED MESSAGE-----