Wyndham Court, and brands owned by HFS or Promus on the date of this Agreement

 

                                                              EXHIBIT 10.6     
                               
                            AGREEMENT BETWEEN     
                   
                W&S HOTEL L.L.C. & ARGOSY/KOAR GROUP, INC.     
                                                                  
                                                               May 3, 1996     
   
  This shall constitute a binding agreement (the "Agreement") between W&S
Hotel L.L.C., a Delaware limited liability company (in which funds managed by
affiliates of The Goldman Sachs Group L.P. and Starwood Capital Group L.P. are
members) ("Westin"), and Argosy/KOAR Group, Inc., a Georgia corporation, with
respect to the exclusive right of W&S Hotel L.L.C. or Westin Hotel Company
("Westin") and a public company to be formed by the principals of Argosy/KOAR,
Inc. (which public company, for the purposes of this Agreement, shall be
referred to herein as "AKGI") to co-develop Westin Vacation Clubs for the term
of a definitive joint venture agreement to be negotiated by the parties
immediately after the execution hereof (the "Joint Venture Agreement"). W&S
Hotel L.L.C. or Westin may, at its option, designate another entity controlled
by The Goldman Sachs Group L.P. and Starwood Capital Group L.P. or their
affiliates or multiple investor funds managed by affiliates of The Goldman
Sachs Group L.P. and Starwood Capital Group L.P. to make the investments and
developments contemplated by this Agreement. This Agreement sets forth the
substance of the Joint Venture Agreement as follows:     
   
1. TRANSACTION.     
   
  a. Board Representation. Westin will make one non-voting board seat
available to AKGI, and the holder(s) thereof will be entitled to attend all
Westin board meetings (as determined by the Westin board) and receive all non-
confidential information and one set of directors' fees and other compensation
given to board members. Any of Sam Kaneko, Jody Gessow and Steve Kenninger may
interchangeably hold such board seat. AKGI will make one voting board seat
available to Westin/Goldman/Starwood, and Westin shall receive, in respect of
such voting board seat, director's fees and other compensation and
reimbursement of expenses received by the other voting members of the AKGI
board. The holder of such board seat shall be entitled to bring to all of the
non-confidential portions of each AKGI board meeting (as determined by the
AKGI board) such advisors as he deems appropriate. Westin's board member on
the AKGI board will be Juergen Bartels, and in the event Mr. Bartels shall no
longer serve on, or not be nominated to serve on, the AKGI Board of Directors,
Westin shall have the right to designate a successor to Mr. Bartels, which
successor shall be subject to the reasonable approval of the AKGI Board of
Directors. AKGI agrees to use its maximum reasonable efforts to cause Mr.
Bartels or such other person designated by Westin to be nominated and elected
to the AKGI Board of Directors, including nominating such person in the
management slate of nominees to the AKGI Board of Directors, and the
management slate of nominees for any election shall not include more nominees
to the AKGI Board of Directors than there are directors to be elected at such
election. AKGI's board members will stand for election as provided for by the
by-laws and applicable federal and state law. When Westin goes public,
reciprocal provisions in favor of AKGI shall apply.     
   
  b. Exclusive Westin Vacation Club Partners. Subject to the terms and
conditions of the Joint Venture Agreement, AKGI and Westin (on a project by
project basis) shall jointly acquire, develop and sell Westin Vacation Club
projects in North America, Mexico and the Caribbean over a five-year period
with the primary focus of (i) developing vacation ownerships villas
surrounding existing Westin hotel resort properties and (ii) acquiring or
developing hotels which can be operated under the Westin hotel brand while at
the same time being converted to vacation ownership properties (such as an all
suite hotel). Each Westin Vacation Club developed by the parties under the
Joint Venture Agreement will be operated under the Westin name without the
payment of a license, franchise, reservation or fee but subject to a 1.9%
marketing and advertising fee on all revenue for transient hotel use (e.g., 1-
800, telephone and personal calls, calls to the property, walk-ups, etc.),
plus reimbursement to Westin and its affiliates and to unrelated third parties
for all marketing and reservation related expenses without a markup or profit
to Westin (e.g., reservation message unit charges, Westin Premier assessments
and travel agent commissions), but no fee shall be paid on revenue generated
through the marketing     

and sale of the properties for timeshares (e.g., mini-vac and timeshare in-
house and OPC marketing programs). Notwithstanding anything contained herein
to the contrary, Westin may develop timeshare and other properties that are
branded with any lower end "sub-brand" of Westin that does not constitute a
Four Star or higher brand and that does not use an "A" list brand or a "B"
list brand. In the event that Westin determines to develop such "sub-brand" of
Westin, Westin shall promptly notify AKGI of such decision and will consult
with AKGI with respect to the development of such "sub-brand."     
   
2. AKGI GENERATED FOUR STAR ACQUISITION/DEVELOPMENT OPPORTUNITIES.     
   
  Subject to the exceptions set forth below, AKGI will present to Westin for
its consideration any Four Star (including Four Star "casino only" brands such
as Harrahs, Mirage, Excalibur, etc.) or "B" list acquisition or development
vacation ownership opportunity that AKGI has determined would be worth
pursuing. Westin will have a reasonable amount of time to evaluate the
opportunity and either commit to proceeding or pass on such opportunity (which
it may do in its sole discretion). Notwithstanding the foregoing, AKGI shall
not be required to present any opportunity relating to a casino in Las Vegas
that will have a Four Star "casino only" brand. If Westin elects not to
proceed with an opportunity, AKGI will be free to develop such properties as
unbranded or branded with its own name, as Embassy Vacation Resort, as a "B"
brand (e.g. Sheraton, Hilton, Wyndham, Renaissance, Doubletree, Crowne Plaza,
all "casino only" brands, etc.) or a "C" brand hotel (e.g. Holiday Inn,
Wyndham Court, and brands owned by HFS or Promus on the date of this Agreement
(other than Harrahs)) but may not develop (i) any property having an "A" brand
name (including any casino having an "A" list brand, wherever located) or (ii)
any property having a "B" brand name (including any casino having a "B" list
brand, wherever located) unless Westin "passes" on such property.     
   
  a. Definition of Four Star Resort. A "Four Star" resort or brand shall
include (i) any property which is generally recognized by the hotel rating
industry as a Four Star or higher property (e.g., properties that are flagged
by brands such as Disney, Marriott, Omni, Hyatt, Ritz Carlton, Four
Seasons/Regent, Fairmont, Intercontinental, Nikko, Loews and Meridian and Four
Star "casino only" brands (" "A' brands")) but specifically excluding lower
end "sub-brands" of such flags (e.g., Marriott Courtyard, etc.), which AKGI
shall have the right to use on three star or lower properties, and (ii) any
property which Westin is willing to flag as a "Westin".     
   
  b. Exceptions. Notwithstanding the foregoing, AKGI will be free to pursue
(a) Four Star properties currently flagged by Embassy (e.g., Kaanapali), (b)
Lake Tahoe (to be flagged by Embassy) and Grand Beach, (c) any other future
Four Star opportunity with Embassy if the AKGI board believes in its best
judgment that the opportunity would not otherwise be available to AKGI if the
product is not branded as an Embassy Vacation Resort and/or combination
Embassy hotel and resort (e.g., in the event that the property is brought to
AKGI by an Embassy related party (e.g., FELCOR) or through Promus with another
developer).     
   
  c. Carve-out for Westin opportunities. AKGI will use reasonable efforts to
negotiate management and other agreements without restrictions on the right of
the parties to develop Westin Vacation Clubs under this Agreement or under the
Joint Venture Agreement.     
   
3. WESTIN GENERATED WESTIN VACATION CLUB OPPORTUNITIES.     
   
  Westin will present to AKGI for its consideration any and all Westin
Vacation Club opportunities (other than opportunities relating to a "sub-
brand" of Westin that Westin has notified AKGI of in accordance with this
Agreement) that Westin has determined would be worth pursuing. AKGI will have
a reasonable amount of time to evaluate the opportunity and either commit to
proceeding or pass on such opportunity (which it may do in its sole
discretion). If AKGI elects not to proceed with an opportunity, Westin will be
free to develop such properties as a Westin Vacation Club Resort without
participation by AKGI. The prohibitions contained herein shall apply only
during the term of the Joint Venture Agreement. Westin will use reasonable
efforts to negotiate management and other agreements without restrictions on
the right of the parties to develop Westin Vacation Clubs under this Agreement
or under the Joint Venture Agreement.     

4. AKGI RIGHT TO DEVELOP OR ACQUIRE NON-FOUR STAR RESORTS AND ALL HOTELS.     
   
  Notwithstanding anything to the contrary set forth in this Agreement, AKGI
shall have (i) the absolute right to develop or acquire any below-Four Star
timeshare resort as branded or non-branded timeshare resorts so long as such
timeshare resort does not have an "A" brand name or, unless Westin has passed
on such timeshare resort, a "B" brand name and (ii) the absolute right to
acquire any non-vacation ownership hotel or other property (whether Four Star
or not).     
   
5. TERMINATION OF AGREEMENT.     
   
  Either party shall have the right to terminate the Joint Venture Agreement
after 3 months notice to the other party and such party's failure to cure
within such 3 month period (or, if such breach or default is capable of being
cured, such party's commencement to cure within such 3 month period and
continuing diligence to cure thereafter until cured) for the following:     
     
    a. Material Adverse Change. A material adverse change occurs in the
  financial condition of either AKGI or Westin's business (e.g., which would
  threaten the long term financial viability of such entity) as determined by
  arbitration.     
     
    b. Performance Clause.     
     
    (i) Either party may terminate the Joint Venture Agreement if the
  terminating party presented 3 consecutive proposed Westin opportunities or
  5 such opportunities in three years which were "passed" (as defined below)
  by the other party.     
     
    (ii) The parties have not acquired, commenced construction on, or entered
  into a binding contract to acquire, operate, market or commence
  construction on at least five Westin Vacation Clubs (whether originated by
  AKGI or Westin) within three years after the date of this Agreement.     
     
    A party shall be deemed to have "passed" on a proposed Westin Opportunity
  if the terms and conditions thereof were set forth in writing (and
  accompanied by information which would be considered sufficient for the
  purpose of submitting the same to W&S Hotel L.L.C.'s Board of Directors)
  and the other party failed to indicate its election to go forward with the
  transaction within 15 days thereafter; provided, however, a party shall not
  be deemed to have "passed" on a deal if it notifies the other party within
  such time that it was not electing to go forward due to (i) a radius clause
  prohibiting such party's involvement in such deal that was set forth in a
  management or other agreement executed prior to the date of this Agreement,
  (ii) force majeure, and (iii) such potential Westin Opportunity being
  located outside of the continental United States. In addition, Westin shall
  not be deemed to have "passed" on a deal if Westin determines that such
  Westin Opportunity is of a standard that is less than a Four Star standard,
  but, as contemplated by Section 2, AKGI may develop any such property as
  long as such property is unbranded or branded with its own name, as an
  Embassy Vacation Resort or with a "B" or "C" brand name. If Westin,
  notwithstanding its reasonable efforts, enters into a new agreement after
  the date hereof which does contain a radius restriction, and AKGI presents
  a potential Westin Opportunity in an area encumbered by such radius
  restriction, the first such potential Westin Opportunity in such area shall
  constitute a "pass" made by Westin while any further opportunities within
  the applicable radius restriction shall not. If AKGI, notwithstanding its
  reasonable efforts, enters into a new agreement after the date hereof which
  contains a radius restriction and Westin presents a potential Westin
  Opportunity in an area encumbered by such radius restriction, the first
  such potential Westin Opportunity in such area shall constitute a "pass"
  made by AKGI while any further opportunities within the applicable radius
  restriction shall not.     
     
    c. Key Man Clause. Westin shall have the right to terminate the Joint
  Venture Agreement if, after the 6 month period referred to below, all three
  of Sam Kaneko, Jody Gessow and Steve Kenninger are no longer associated
  with AKGI. AKGI shall have the right to terminate the Joint Venture
  Agreement if all three of Juergen Bartels, Fred Kleissner and Richard
  Mahoney are no longer associated with Westin. Either party shall have the
  right to "substitute" senior executives for the named individuals within
  six months after their termination of employment unless the substitute is
  reasonably unacceptable to the other party (e.g., if the substitute
  executive is "anti timeshare").     

    d. Merger or other Major Transaction. In the event of a merger between
  AKGI or Westin, on the one hand, and any third party, on the other hand, or
  any acquisition by a third party of greater than 50% of the shares of
  either AKGI or Westin, whichever of AKGI or Westin is a party to such
  transaction may terminate this Agreement or the Joint Venture Agreement
  upon written notice delivered within sixty (60) days of consummation of
  such transaction. In the event of the execution of a letter of intent or
  definitive agreement relating to a merger between AKGI with, or the
  acquisition (other than in connection with a public offering) of more than
  50% of the outstanding shares of AKGI by, a company which owns a Four Star
  hotel brand which does not agree to cease management, franchising,
  acquisition and development of incremental hotels, Westin may, at its
  option upon written notice delivered within sixty (60) days after the
  execution of such letter of intent or definitive agreement, terminate this
  Agreement or the Joint Venture Agreement, in which event (i) Westin will
  become the sole general partner of all partnerships through which Westin
  Opportunities that are located on or adjacent to Westin hotels are pursued
  and (ii) AKGI will become the sole general partner of all partnerships
  through which Westin Opportunities that are not located on or adjacent to
  Westin hotels are pursued. In the event of the execution of a letter of
  intent or definitive agreement relating to a merger between Westin with, or
  the acquisition (other than in connection with a public offering) of more
  than 50% of the outstanding shares of Westin by, a company which is in the
  timeshare business and which does not agree to cease management, sales,
  acquisition and development of incremental timeshare properties outside of
  the Joint Venture Agreement, AKGI may, at its option upon written notice
  delivered within sixty (60) days after the execution of such letter of
  intent or definitive agreement, terminate this Agreement or the Joint
  Venture Agreement, in which event (i) Westin will become the sole general
  partner of all partnerships through which Westin Opportunities that are
  located on or adjacent to Westin hotels are pursued and (ii) AKGI will
  become the sole general partner of all partnerships through which Westin
  Opportunities that are not located on or adjacent to Westin hotels are
  pursued.     
   
6. AKGI'S OBLIGATION TO MARKET WESTIN HOTELS.     
   
  If so directed by Westin, AKGI will use its reasonable efforts (at no cost
to AKGI) to promote Westin Hotels on a non-exclusive basis (e.g., AKGI may
promote Embassy Suites hotels as well) at its non-branded properties so long
as owners of intervals derive benefits in connection therewith (e.g., a
discount or Westin gold card for AKGI owners that entitled them to discounts).
       
7. WESTIN'S MARKETING OBLIGATIONS TO AKGI IN CONNECTION WITH WESTIN VACATION
CLUBS.     
   
  The detailed terms and conditions of the marketing assistance and support
which Westin will provide to AKGI in connection with the lead generation to
and the marketing and sale of Westin Vacation Club resorts (both with respect
to transient room sales and interval sales) will be set forth in the Joint
Venture Agreement but will include the requirement that Westin actively
promote the Westin Vacation Club concept, utilize customer base to promote and
sell the Westin Vacation Club concept at its hotels and other marketing
programs, provide AKGI with access to guest lists, and, if permitted by the
owner of the relevant property, arrange for on-site desks and in-house
marketing programs at no profit to Westin. Both parties agree, subject to
applicable federal securities laws and such other exceptions as may be agreed
to by the parties, to keep all information provided to the other under this
Agreement or the Joint Venture Agreement confidential. Westin agrees to use
its reasonable best efforts to obtain the permission of owners of hotels to
have on-site desks and in-house marketing programs available, and any amounts
expended by Westin in obtaining such permission should be borne 50/50 by
Westin and AKGI.     
   
8. PROPERTY SPECIFIC PARTNERSHIPS.     
   
  The parties will form a separate partnership, limited liability company or
similar entity for each development or acquisition opportunity proposed by
either Westin or AKGI to be a Westin Vacation Club (each, a "Westin
Opportunity") that the parties agree to jointly pursue as such under this
Agreement or the Joint Venture Agreement. In connection therewith, the parties
agree as follows:     
     
    a. Joint General Partners. Westin and AKGI shall be co-general partners
  or managers of any partnership, limited liability company or similar entity
  formed to pursue a Westin Opportunity. The terms     

  and conditions of each general partner or manager duties and
  responsibilities will be set forth in a proforma draft partnership or
  limited liability company or similar agreement attached to the Joint
  Venture Agreement.     
     
    b. 50/50. Each party shall contribute 50% of all equity needed to develop
  each Westin Opportunity (which may be contributed from each such party's
  own funds or funds raised from third parties who, at the election of the
  party raising the capital, may or may not be constituent partners in each
  deal but in any event any such partner will not have any voting or
  foreclosure rights).     
     
    c. Joint Effort to Arrange Necessary Debt. For any Westin Opportunity,
  AKGI and Westin agree to use commercially reasonable efforts to work
  together to cause a third party to provide any necessary or desirable
  financing for the proposed project on the best possible terms.     
     
    d. Miscellaneous. The agreements for each such partnership or limited
  liability company will provide that (i) until such time as either of the
  parties (with or without constituent partners) own less that 45% (and the
  other party owns the balance of the equity in a particular partnership,
  each decision of the Partnership must be by mutual consent (and, after such
  time, the party with the controlling interest in the partnership will have
  the right to make all such decisions), (ii) in the event one partner fails
  to fund its prorata share of a duly approved capital call, the other
  partner may fund the amount of such shortfall by means of a non-
  subordinated loan that will accrue interest at a rate of 15% per annum that
  must be repaid before any equity distributions may be made to any of the
  partners; and (iii) neither of the partners may transfer any of its equity
  interests (other than to an affiliate) for an agreed upon period of time
  and that both parties will agree upon tag-along and rights of first refusal
  after any such period.     
   
9. VACATION RESORT DEALS TO BE DONE OUTSIDE AKGI OR WESTIN.     
   
  In the event that the public company which is formed by the principals of
AKGI is unable to invest in a particular Westin Opportunity (e.g., in the
event doing so would adversely affect the financial performance or the market
value or the feasibility of a project within the public company), the
principals or their designees may (if they are permitted to do so under the
terms and conditions provided by the AKGI board) create an entity to act as
the general partner in the joint venture formed for that particular
transaction. In the event that Westin becomes a public company and it is
unable to invest in a particular Westin Opportunity (e.g., in the event doing
so would adversely affect the financial performance or the market value or the
feasibility of a project within the public company), W&S Hotel L.L.C. or its
members, or any designee of any of them, may create an entity to act as the
general partner in the joint venture formed for that particular transaction.
       
10. MANAGEMENT OF WESTIN VACATION CLUBS.     
   
  a. During Sell Out. Westin will have the right to manage Westin Vacation
Club resorts during sell out unless otherwise mutually agreed by the parties
(e.g., AKGI's board demonstrates to the reasonable satisfaction of Westin that
not allowing another party to manage the project during sell out (in lieu of
Westin management itself) would be adverse to the project (e.g., Aston Resorts
in Hawaii with respect to a property where that relationship is most
advantageous for marketing purposes)). In any project which is managed by
Westin, Westin will be paid a market management fee and the parties will share
all amounts in excess of the party's reasonable costs in connection therewith.
       
  b. After Sell Out. After the intervals have all been sold in a Westin
Vacation Club, AKGI shall use its reasonable best efforts to cause Westin to
be appointed as manager of the Resort, so long as it can do so on a cost
effective basis. In such event, Westin and AKGI would share on a 50/50 basis
the management fee "profit" from any Westin Vacation Club project.     
   
11. MANAGEMENT OF NON-WESTIN VACATION RESORTS.     
   
  The management of AKGI non-Westin vacation resorts will be outside the scope
of the Joint Venture Agreement. AKGI shall have the right to engage any
manager to manage its non-Westin vacation resorts.     

12. AGREEMENT TO ACT IN GOOD FAITH.     
   
  The parties acknowledge and agree that each will act in good faith and use
its reasonable efforts to amicably negotiate to each party's mutual
satisfaction the definitive joint venture agreement and resolve any
ambiguities, disputes or issues which arise in connection therewith.     
   
13. EFFECTIVE DATE OF AGREEMENT.     
   
  The effective date of the Joint Venture Agreement shall be the date of this
Agreement (i.e., the parties shall immediately begin to discuss possible
Westin Opportunities).     
   
Argosy/KOAR Group, Inc.,     
   
a Georgia corporation     
   
By: /s/ Steven C. Kenninger
    _____________________________    
     
  Its Executive Vice President     
   
W&S Hotel L.L.C.     
   
By: /s/ Stuart Rothenberg
   _____________________________     
     
  Its     
   
By:_____________________________     
     
  Its     

 

Basic Info X:

Name: Wyndham Court, and brands owned by HFS or Promus on the date of this Agreement
Type: the date of this Agreement
Date: Aug. 8, 1996
Company: SUNTERRA CORP
State: Maryland

Other info:

Date:

  • May 3 , 1996

Organization:

  • W & S Hotel L.L.C.
  • ArgosyKOAR , Inc.
  • The Goldman Sachs Group L.P.
  • Starwood Capital Group L.P.
  • AKGI Board of Directors
  • Westin Vacation Club Partners
  • Westin Vacation Club Resort
  • Westin Vacation Clubs
  • Embassy Vacation Resort
  • Joint Effort to Arrange Necessary Debt
  • Joint Venture Agreement
  • ArgosyKOAR Group , Inc.

Location:

  • Delaware
  • North America
  • Mexico
  • Caribbean
  • Harrahs
  • Excalibur
  • Las Vegas
  • Hyatt
  • Grand Beach
  • United States
  • Westin
  • Hawaii
  • Georgia

Person:

  • Ritz Carlton
  • Kaanapali
  • Sam Kaneko
  • Jody Gessow
  • Steve Kenninger
  • Juergen Bartels
  • Fred Kleissner
  • Richard Mahoney
  • Steven C. Kenninger
  • Stuart Rothenberg

Percent:

  • 1.9 %
  • 50 %
  • 45 %
  • 15 %