Starwood 2005 Annual Report Download - page 12

violation. Furthermore, a supervisor could be appointed by the Nevada Commission to operate the gaming
property and, under certain circumstances, earnings generated during the supervisor's appointment (except for
reasonable rental value of the aÅected gaming property) could be forfeited to the State of Nevada. Any
suspension or revocation of the licenses, registrations or approvals, or the appointment of a supervisor, would
not have a material adverse eÅect on the Company given the limited nature and extent of the investment by
the Company in casino gaming.
The Company is also required to submit certain Ñnancial and operating reports to the Nevada
Commission. Further, certain loans, leases, sales of securities and similar Ñnancing transactions by the
Company must be reported to or approved by the Nevada Commission. The Company has a Nevada ""shelf''
approval for certain public oÅerings, which expires in August 2006 and which the Company will seek to renew.
The Nevada Gaming Authorities may investigate and require a Ñnding of suitability of any holder of any
class of the Company's voting securities at any time. Nevada law requires any person who acquires more than
5 percent of any class of the Company's voting securities to report the acquisition to the Nevada Commission
and such person may be investigated and found suitable or unsuitable. Any person who becomes a beneÑcial
owner of more than 10 percent of any class of the Company's voting securities must apply for Ñnding of
suitability by the Nevada Commission within 30 days after the Nevada Board Chairman mails a written notice
requiring such Ñling. The applicant must pay the costs and fees incurred by the Nevada Board in connection
with the investigation.
Under certain circumstances, an ""institutional investor,'' as deÑned by the Nevada Act, that acquires
more than 10 percent but no more than 15 percent of the Company's voting securities may apply to the
Nevada Commission for a waiver of such Ñnding of shareholder suitability requirements if such institutional
investor holds the voting securities for investment purposes only. An institutional investor will not be deemed
to hold voting securities for investment purposes unless the voting securities were acquired and are held in the
ordinary course of business as a institutional investor and not for the purpose of causing, directly or indirectly,
the election of a majority of the members of either the Board of Directors of the Company, any change in the
Company's corporate charter, bylaws, management, policies or operations or any of the Company's casino
gaming operations, or any other action which the Nevada Commission Ñnds to be inconsistent with holding
the Company's voting securities for investment purposes only. The Nevada Commission also may in its
discretion require the holder of any debt security of a registered company to Ñle an application, be investigated
and be found suitable to own such debt security.
Any beneÑcial owner of the Company's voting securities who fails or refuses to apply for a Ñnding of
suitability or a license within 30 days after being ordered to do so by the Nevada Commission or by the
Chairman of the Nevada Board may be found unsuitable. Any person found unsuitable who holds, directly or
indirectly, any beneÑcial ownership of the Company's debt or equity voting securities beyond such periods or
periods of time as may be prescribed by the Nevada Commission may be guilty of a gross misdemeanor. The
Company could be subject to disciplinary action if, without prior approval of the Nevada Commission, and
after receipt of notice that a person is unsuitable to be an equity or debt security holder or to have any other
relationship with the Company, either (i) pays to the unsuitable person any dividend, interest or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any form; (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction; or,
(v) fails to pursue all lawful eÅorts to require such unsuitable person to relinquish his securities including, if
necessary, the immediate purchase of such securities for cash at fair market value.
Regulations of the Nevada Commission provide that control of a registered publicly traded corporation
cannot be changed through merger, consolidation, acquisition or assets, management or consulting agree-
ments, or any form of takeover without the prior approval of the Nevada Commission. Persons seeking
approval to control a registered publicly traded corporation must satisfy the Nevada Commission as to a
variety of stringent standards prior to assuming control of such corporation. The failure of a person to obtain
such approval prior to assuming control over the registered publicly traded corporation may constitute grounds
for Ñnding such person unsuitable.
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