EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
INTOWN HOLDING COMPANY, L.L.C.,
INTOWN SUITES MANAGEMENT, INC.,
INTOWN SUB, INC.
AND
SUBURBAN LODGES OF AMERICA, INC.
DATED AS OF JANUARY 29, 2002
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER...................................................... 2
SECTION
1.1 The Merger.................................................. 2
SECTION
1.2 Effective Time; Closing..................................... 2
SECTION
1.3 Effect of the Merger........................................ 2
SECTION
1.4 Conversion of Company Common Stock.......................... 2
SECTION
1.5 Dissenting Shares........................................... 3
SECTION
1.6 Stock Option Plans; Change of Control Payments.............. 3
SECTION Surrender of Shares of Company Common Stock; Stock Transfer
1.7 Books....................................................... 4
SECTION
1.8 Escrow Deposit.............................................. 6
ARTICLE II THE SURVIVING CORPORATION...................................... 7
SECTION
2.1 Articles of Incorporation................................... 7
SECTION
2.2 Bylaws...................................................... 7
SECTION
2.3 Directors and Officers...................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 7
SECTION
3.1 Organization and Standing................................... 7
SECTION
3.2 Capitalization; Subsidiaries................................ 7
SECTION
3.3 Authority for Agreement..................................... 8
SECTION
3.4 No Conflict................................................. 9
SECTION
3.5 Required Filings and Consents............................... 9
SECTION
3.6 Compliance.................................................. 10
SECTION
3.7 SEC Filings, Financial Statements........................... 10
SECTION
3.8 Absence of Certain Changes or Events........................ 11
SECTION
3.9 Taxes....................................................... 11
SECTION
3.10 Assets...................................................... 12
SECTION
3.11 Change of Control Agreements................................ 16
SECTION
3.12 Litigation.................................................. 16
SECTION
3.13 Contracts and Commitments................................... 16
SECTION
3.14 Information Supplied........................................ 17
SECTION
3.15 Employee Benefit Plans...................................... 17
SECTION
3.16 Labor and Employment Matters................................ 20
SECTION
3.17 Environmental Compliance and Disclosure..................... 22
SECTION
3.18 Intellectual Property....................................... 23
SECTION
3.19 Brokers..................................................... 24
SECTION
3.20 Insurance Policies.......................................... 24
SECTION
3.21 Notes and Accounts Receivable............................... 25
SECTION
3.22 Transactions with Affiliates................................ 25
SECTION
3.23 No Existing Discussions..................................... 25
SECTION
3.24 Franchising Matters......................................... 25
SECTION
3.25 Major Suppliers, Customers and Franchisees.................. 28
SECTION
3.26 Hotel Matters............................................... 29
SECTION
3.27 Disclosure.................................................. 29
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PAGE
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HOLDING,
PARENT AND SUB............................................................ 29
SECTION
4.1 Organization and Standing................................... 29
SECTION
4.2 Authority for Agreement..................................... 29
SECTION
4.3 No Conflict................................................. 30
SECTION
4.4 Required Filings and Consents............................... 30
SECTION
4.5 Information Supplied........................................ 30
SECTION
4.6 Brokers..................................................... 30
SECTION
4.7 Financing................................................... 30
SECTION
4.8 No Prior Activities......................................... 31
SECTION
4.9 Disclosure.................................................. 31
SECTION
4.10 Litigation.................................................. 31
ARTICLE V COVENANTS....................................................... 31
SECTION
5.1 Conduct of the Business Pending the Merger.................. 31
SECTION
5.2 Access to Information; Confidentiality...................... 33
SECTION
5.3 Notification of Certain Matters............................. 34
SECTION
5.4 Reasonable Efforts; Further Assurances...................... 34
SECTION
5.5 Board Recommendations....................................... 36
SECTION
5.6 Shareholder Litigation...................................... 37
SECTION
5.7 Indemnification............................................. 37
SECTION
5.8 Public Announcements........................................ 38
SECTION
5.9 Acquisition Proposals....................................... 38
SECTION
5.10 Company Shareholders' Meeting............................... 38
SECTION
5.11 Proxy Statement............................................. 39
SECTION
5.12 Director Resignations....................................... 39
SECTION
5.13 Company Options............................................. 39
SECTION
5.14 Third Party Notifications................................... 39
SECTION
5.15 Title Documents and Surveys................................. 39
SECTION
5.16 Unacquired Assets........................................... 40
SECTION
5.17 Other Party Cooperation..................................... 40
SECTION
5.18 Certain Tax Matters......................................... 40
SECTION
5.19 Inventory................................................... 41
SECTION
5.20 Employee Benefit Plans...................................... 41
SECTION
5.21 Environmental Insurance..................................... 42
SECTION
5.22 Software Support............................................ 42
SECTION
5.23 Undertaking of Holding...................................... 42
ARTICLE VI CONDITIONS..................................................... 42
SECTION
6.1 Conditions to the Obligations of Each Party................. 42
SECTION Conditions to Obligations of Holding, Parent and Sub to
6.2 Effect the Merger........................................... 43
SECTION Conditions to Obligations of the Company to Effect the
6.3 Merger...................................................... 44
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................. 44
SECTION
7.1 Termination................................................. 44
SECTION
7.2 Effect of Termination....................................... 45
SECTION
7.3 Amendments.................................................. 47
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SECTION
7.4 Waiver...................................................... 47
ARTICLE VIII GENERAL PROVISIONS........................................... 47
SECTION
8.1 No Third Party Beneficiaries................................ 47
SECTION
8.2 Entire Agreement............................................ 47
SECTION
8.3 Succession and Assignment................................... 47
SECTION
8.4 Counterparts................................................ 48
SECTION
8.5 Headings.................................................... 48
SECTION
8.6 Governing Law............................................... 48
SECTION
8.7 Severability................................................ 48
SECTION
8.8 Specific Performance........................................ 48
SECTION
8.9 Construction................................................ 48
SECTION
8.10 Survival of Representations and Warranties and Agreements... 48
SECTION
8.11 Certain Definitions......................................... 48
SECTION
8.12 Unacquired Assets........................................... 49
SECTION
8.13 Fees and Expenses........................................... 49
SECTION
8.14 Notices..................................................... 50
EXHIBITS
Exhibit 5.1(d) Explanation of Operational Limitations
Exhibit 5.4(f) Form of Lender Estoppel
Exhibit 5.8 Press Release
Exhibit 6.2(f) Opinion of Counsel to the Company
Exhibit 6.2(g) Lender Consents
Exhibit 6.2(h) Indemnification Agreement
[A copy of any exhibit or schedule to this Agreement which has been omitted
from this filing will be provided to the Commission upon request.]
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January
29, 2002 by and among INTOWN HOLDING COMPANY, L.L.C., a
Georgia limited
liability company ("Holding"); INTOWN SUITES MANAGEMENT, INC., a
Georgia
corporation and a wholly owned subsidiary of Holding ("Parent"); INTOWN SUB,
INC., a
Georgia corporation and wholly owned subsidiary of Parent ("Sub"), and
SUBURBAN LODGES OF AMERICA, INC., a
Georgia corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement desire to effect the acquisition of
the Company by Sub;
WHEREAS, in furtherance of the foregoing, upon the terms and subject to the
conditions of this Agreement and in accordance with the
Georgia Business
Corporation Code (the "GBCC"), Sub will merge with and into the Company (the
"Merger"), with the Company as the surviving corporation;
WHEREAS, prior to the Effective Time (as hereinafter defined), the Company
shall (i) cause certain of its Subsidiaries (as hereinafter defined) to
contribute certain of the Unacquired Assets (as hereinafter defined), to
SUBURBAN LIQUIDATING COMPANY, L.L.C., a
Georgia limited liability company (the
"Liquidating Company"), and (ii) contribute certain of the Unacquired Assets to
SUBURBAN LIQUIDATING TRUST, a
Georgia trust (the "Liquidating Trust"), as
further set forth herein;
WHEREAS, as of the date hereof, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ A.D. French, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Sharewell Securities Trading
Ltd. (collectively, the "Principal Shareholders") have the power to vote shares
of the common stock, par value $.01 per share, of the Company (including any and
all rights to be attached thereto to acquire shares of Series A Participating
Cumulative Preferred Stock of the Company pursuant to the Company Rights Plan
(as hereinafter defined), the "Company Common Stock"), representing
approximately 28.86% of the outstanding Company Common Stock;
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to Parent entering into this Agreement, the
Principal Shareholders have entered into a voting agreement, dated as of the
date hereof (the "Voting Agreement"), pursuant to which, among other things, the
Principal Shareholders have granted a proxy in favor of Parent with respect to
the shares of Company Common Stock over which they have the power to vote,
subject to the terms and conditions contained therein;
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Amended and Restated Rights Agreement, dated as of May 4, 2001, between the
Company and American Stock Transfer & Trust Company, as Rights Agent (the
"Company Rights Plan") has been amended to ensure that (i) none of Holding,
Parent or Sub will become an "Acquiring Person" (as defined in the Company
Rights Plan) as a result of this Agreement, the Merger or the Voting Agreement,
(ii) no "Share Acquisition Date" or "Distribution Date" (each as defined in the
Company Rights Plan) will occur as a result of this Agreement, the Merger or the
Voting Agreement and (iii) all outstanding rights to purchase Series A
Participating Cumulative Preferred Stock of the Company issued and outstanding
under the Company Rights Plan will expire at the Closing (as hereinafter
defined);
WHEREAS, the Board of Directors of the Company has unanimously determined
that the Merger and this Agreement are fair to, and in the best interests of,
the Company and the holders of the Company Common Stock (the "Company
Shareholders");
WHEREAS, the Board of Directors of Parent and Sub, and the Membership
Committee of Holding, have each unanimously approved this Agreement and the
Merger, upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has unanimously approved
this Agreement and the Merger, and the transactions contemplated hereby; and
WHEREAS, the Board of Directors of the Company has unanimously resolved to
recommend approval of this Agreement and the Merger to the Company Shareholders.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the GBCC, at the Effective Time (as
hereinafter defined), Sub shall be merged with and into the Company. As a result
of the Merger, the separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation following the Merger (the
"Surviving Corporation"). The corporate existence of the Company, with all its
purposes, rights, privileges, franchises, powers and objects, shall continue
unaffected and unimpaired by the Merger and, as the Surviving Corporation, it
shall be governed by the laws of the State of
Georgia.
SECTION 1.2. Effective Time; Closing. As promptly as reasonably
practicable (and in any event within five (5) business days) after the
satisfaction or waiver of the conditions set forth in Article VI hereof, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger (the "Certificate of Merger"), with the Secretary of State of the
State of
Georgia and by making all other filings or recordings required under
the GBCC in connection with the Merger, in such form as is required by, and
executed in accordance with, the relevant provisions of, the GBCC. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of
Georgia, or at such other time as
the parties hereto agree, which shall be specified in the Certificate of Merger
(the date and time the Merger becomes effective, the "Effective Time"). On the
date of such filing, a closing (the "Closing") shall be held at 10:00 a.m.,
Eastern Standard Time, at the offices of King & Spalding, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other time and location as the parties hereto
shall otherwise agree.
SECTION 1.3. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the GBCC and
this Agreement. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Sub shall vest in the Surviving Corporation, and
all debts, liabilities, obligations, restrictions, disabilities and duties of
the Company and Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.4. Conversion of Company Common Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of Sub, the Company
or the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares canceled
pursuant to Section 1.4(b) and Dissenting Shares (as hereinafter defined),
if any) shall be canceled and, subject to Section 1.5, shall by virtue of
the Merger and without any action on the part of the holder thereof be
converted automatically into the right to receive, upon surrender of the
certificate that formerly evidenced such share of Company Common Stock in
the manner provided in Section 1.7, (i) an amount in cash equal to Eight
and 25/100 Dollars ($8.25) per share, without interest (the "Per Share Cash
Merger Consideration"; the Per Share Cash Merger Consideration multiplied
by the number of issued and outstanding shares of Company Common Stock at
the Effective Time is referred to herein as the "Cash Merger
Consideration") and (ii) one beneficial interest unit in the Liquidating
Trust (a "Beneficial Interest"),
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having the rights and subject to the restrictions set forth in the Trust
Agreement (as hereinafter defined) (the "Per Share Non-Cash Merger
Consideration"; the Per Share Non-Cash Merger Consideration multiplied by
the number of issued and outstanding shares of Company Common Stock at the
Effective Time is referred to herein as the "Non-Cash Merger
Consideration"; and the Cash Merger Consideration and the Non-Cash Merger
Consideration is referred to herein as the "Common Stock Merger
Consideration");
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is owned by Holding, Parent or
Sub and each share of Company Common Stock that is owned by the Company as
treasury stock shall be canceled and retired and cease to exist and no
payment or distribution shall be made with respect thereto;
(c) At the Effective Time, all shares of the Company Common Stock
converted pursuant to Section 1.4(a) shall no longer be outstanding and
shall automatically be canceled and retired and cease to exist, and each
holder of a certificate ("Certificate") representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto,
except the right to receive the Per Share Merger Consideration (as
hereinafter defined) in accordance with Section 1.4(a); and
(d) Each share of common stock, par value $.01 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable
share of common stock, par value $.01 per share, of the Surviving
Corporation and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
SECTION 1.5. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by Company Shareholders who have properly
exercised dissenters' rights with respect to such shares of Company Common Stock
in accordance with Sections 14-2-1321 and 14-2-1323 of the GBCC (the "Dissenting
Shares") shall not be exchangeable for the right to receive the Per Share Cash
Merger Consideration and the Per Share Non-Cash Merger Consideration
(collectively, the "Per Share Merger Consideration") pursuant to Section 1.4(a),
and holders of such Dissenting Shares shall be entitled to receive payment of
the fair value of such Dissenting Shares in accordance with the provisions of
Article 13 of the GBCC unless and until such holders fail to perfect or
effectively withdraw or otherwise lose their rights to demand payment under the
GBCC. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such Dissenting Shares shall
thereupon be deemed to have been converted into and have become exchangeable
for, as of the Effective Time, as described in Section 1.4(a), the right to
receive the Per Share Merger Consideration set forth in such provisions, without
any interest thereon.
(b) The Company shall give Parent (i) prompt notice of any demands for
payment for Dissenting Shares pursuant to Article 13 of the GBCC received by the
Company, withdrawals of such demands, and any other instruments served pursuant
to the GBCC and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for payment pursuant to
Article 13 of the GBCC. The Company shall not, except with the prior written
consent of Parent or as otherwise required by applicable law, make any payment
with respect to any such demands for payment or offer to settle or settle any
such demands.
SECTION 1.6. Stock Option Plans; Change of Control Payments.
(a) The Company shall take all action necessary to ensure that, pursuant to
the Company's Stock Option and Incentive Award Plan (the "1996 Plan"), the
Non-employee Directors' Stock Option and Fee Plan (the "Directors' Plan"), the
Employee Stock Option Plan (the "1997 Plan", which together with the 1996 Plan
and the Directors' Plan, constitute the "Company Stock Option Plans"), all
outstanding options to acquire Company Stock (the "Company Options") shall be
exercisable in full immediately prior to the consummation of the Merger and all
Company Options that are not exercised prior to the consummation
3
of the Merger will be canceled as of the Effective Time in exchange for the
consideration described in Section 1.6(b).
(b) In exchange for the cancellation of each such holder's Company Options
(regardless of exercise price), such holder shall be entitled to receive, as of
the Effective Time (subject to Section 1.7(b)) (i) an amount in cash (which may
be $.00) determined by multiplying (A) the excess, if any, of the Per Share Cash
Merger Consideration over the applicable exercise price per share of the Company
Options by (B) the number of shares of Company Common Stock such holder could
have purchased had such holder exercised such Company Options in full and
assuming the Company Options were fully vested (less any portion of such Company
Options previously exercised) immediately prior to the consummation of the
Merger (the "Cash Option Consideration"; the aggregate Cash Option Consideration
payable to all of the holders of Company Options is sometimes referred to herein
as the "Total Cash Option Consideration"), and (ii) if and with respect only to
the Company Options for which such holder shall be entitled to receive any Cash
Option Consideration greater than $.00 as a result of the foregoing clause, that
number of Beneficial Interests equal to that number of shares of Company Common
Stock such holder could have purchased had such holder exercised such Company
Options in full and assuming the Company Options were fully vested (less any
portion of such Company Options previously exercised) immediately prior to the
consummation of the Merger (the "Non-Cash Option Consideration" and together
with the Cash Option Consideration the "Option Consideration"), and each such
Company Option shall thereafter be canceled.
(c) At the Closing, immediately following the Effective Time, the Surviving
Corporation shall pay to the officers of the Company identified in Section
1.6(c) of the Company Disclosure Letter (as hereinafter defined) the amounts set
forth therein (subject to adjustment as further set forth in Section 1.6(c) of
the Company Disclosure Letter), and (i) as a condition to the receipt of such
amounts at the Closing, each such officer shall release all claims against
Holding, Parent, Sub and the Surviving Corporation other than claims against
Holding, Parent, Sub and the Surviving Company for (A) obligations under each
Change of Control Agreement (as hereinafter defined) to provide such officers
with any continuing benefits required to be provided after the Effective Time,
(B) any rights as an Indemnified Party described in Section 5.7(a) hereof and
(C) any claim for a breach of the covenants set forth in Sections 5.7(b), 5.7(c)
or 5.7(d) hereof (each an "Officer Release"); and (ii) the Surviving Corporation
shall release all claims against such officers other than claims against such
officers for (A) fraud and (B) other claims related to or arising out of this
Agreement or the transactions contemplated by this Agreement. If any officer
refuses to sign the Officer Release applicable to his Change of Control
Agreement, then the determination of what, if any, amounts are due and payable
to such officer pursuant to his Change of Control Agreement will be determined
solely by the terms of his Change of Control Agreement.
SECTION 1.7. Surrender of Shares of Company Common Stock; Stock Transfer
Books.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as agent (the "Paying Agent") for (i) the holders of shares of
Company Common Stock reasonably acceptable to the Company to receive the funds
necessary to make the payments to such holders pursuant to Section 1.4(a)(i)
upon surrender of their Certificates and (ii) for the holders of Company Options
to receive the payment of any Cash Option Consideration provided for in Section
1.6(b) upon surrender and cancellation of the Company Options. Parent will, on
or prior to the Effective Time, deposit with the Paying Agent the Cash Merger
Consideration and Total Cash Option Consideration to be paid in respect of the
shares of Company Stock and Company Options, respectively (the "Fund"). The Fund
shall be invested by the Paying Agent as directed by Parent; provided that such
investments shall be in obligations of, or guaranteed by, the United States of
America or any agency thereof and backed by the full faith and credit of the
United States of America, in commercial paper obligations rated A-1 or P-1 or
better by ▇▇▇▇▇'▇ Investor Services, Inc., or Standard and Poor's Corporation,
respectively, or in deposit accounts, certificates of deposit or banker's
acceptances of, or repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital, surplus
and undivided profits aggregating in excess of US $100 million (based upon the
most recent financial statements of such bank which are then publicly
available). Any net profit resulting from, or interest or income produced by,
such
4
investments, shall be placed in the Fund and be payable to the Surviving
Corporation upon demand of non-disbursed funds pursuant to Section 1.7(d)
hereof. Parent shall promptly replace any monies lost through any investment
made pursuant to this Section 1.7(a) to the extent such loss results in the Fund
being equal to less than the amount initially deposited by Parent (after
adjustment for any payment to holders of shares of Company Common Stock and
Company Options pursuant hereto), and Parent shall in any event be liable for
the payment of the Cash Merger Consideration and Total Cash Option
Consideration, notwithstanding any losses in the Fund. The Fund shall not be
used for any purpose except as expressly provided in this Agreement. The Paying
Agent shall make the payments provided for in Sections 1.4 and 1.6(b).
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of shares of Company Common Stock entitled to receive the Per Share
Merger Consideration pursuant to Section 1.4, a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent) and instructions for use in effecting the surrender of the
Certificates pursuant to such letter of transmittal. Upon surrender to the
Paying Agent of a Certificate, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Per Share Merger Consideration for each share of Company Common Stock formerly
evidenced by such Certificate, and such Certificate shall then be canceled.
Until so surrendered, each such Certificate shall, at and after the Effective
Time, represent for all purposes, only the right to receive such Per Share
Merger Consideration. No interest shall accrue or be paid to any beneficial
owner of shares of Company Common Stock or any holder of any Certificate with
respect to the Per Share Merger Consideration payable upon the surrender of any
Certificate. If payment of the Per Share Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
registered on the stock transfer books of the Company, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed in blank or to
the Paying Agent or otherwise be in proper form for transfer and that the person
requesting such payment shall have paid all transfer and other taxes required by
reason of the payment of the Per Share Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such taxes
either have been paid or are not applicable. If any Certificate shall have been
lost, stolen or destroyed, upon making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation or Parent, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation or Parent may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Paying Agent will issue in exchange for such lost,
stolen or destroyed Certificate the applicable Per Share Merger Consideration
such holder is entitled to receive pursuant to Section 1.4.
(c) Parent and the Surviving Corporation shall cause the Paying Agent to
pay the amount of Cash Option Consideration payable to each holder of a Company
Option pursuant to Section 1.6(b) as soon as reasonably practicable following
the Effective Time.
(d) At any time following one hundred eighty (180) days after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any portion of the Fund which had been made available to the
Paying Agent and not disbursed to holders of shares of Company Common Stock and
holders of Company Options (including, without limitation, all interest and
other income received by the Paying Agent in respect of all amounts held in the
Fund or other funds made available to it), and thereafter each such holder shall
be entitled to look only to (i) the Surviving Corporation (subject to abandoned
property, escheat and other similar laws), and only as general creditors
thereof, with respect to any Per Share Cash Merger Consideration that may be
payable upon due surrender of the Certificates held by such holder and any Cash
Option Consideration payable upon due surrender and cancellation of such Company
Options, and (ii) the Liquidating Trust (subject to abandoned property, escheat
and other similar laws) with respect to any Per Share Non-Cash Merger
Consideration that may be issuable upon
5
due surrender of the Certificates held by such holder and any Non-Cash Option
Consideration issuable upon due surrender and cancellation of such Company
Options. If any Certificates representing shares of Company Common Stock shall
not have been surrendered immediately prior to such date on which the Per Share
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as hereinafter defined), any
such cash, shares, dividends or distributions payable in respect of such
Certificate (other than the Per Share Non-Cash Merger Consideration or any cash,
shares, dividends or distributions payable in respect thereof, which shall
automatically and ratably inure to the benefit of the holders of Beneficial
Interests of the Liquidating Trust) shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto. Notwithstanding
the foregoing, none of Holding, the Surviving Corporation, Parent, Sub, the
Liquidating Trust or the Paying Agent shall be liable to any holder of a share
of Company Common Stock for any Per Share Merger Consideration delivered in
respect of such share of Company Common Stock to a public official pursuant to
any abandoned property, escheat or other similar law.
(e) At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after the
Effective Time, except for Parent and Sub, the holders of shares of Company
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Common Stock except as
otherwise provided herein or by applicable law, and all consideration paid
pursuant to this Article I upon the surrender or exchange of Certificates shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such Certificate.
(f) Holding, Parent, Sub, the Surviving Corporation and the Paying Agent,
as the case may be, shall be entitled to deduct and withhold from the Per Share
Merger Consideration otherwise payable pursuant to this Agreement to any holder
of shares of Company Common Stock and from the Option Consideration otherwise
payable pursuant to this Agreement to any holder of Company Options such amounts
that Holding, Parent, Sub, the Surviving Corporation or the Paying Agent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), the rules and
regulations promulgated thereunder or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by Holding, Parent, Sub, the
Surviving Corporation or the Paying Agent, such amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock or of Company Options, as the case may be, in respect of
which such deduction and withholding was made by Holding, Parent, Sub, the
Surviving Corporation or the Paying Agent. The Surviving Corporation, Holding,
Parent or the Paying Agent, as the case may be, shall timely pay or cause to be
paid any amounts withheld pursuant to this Section 1.7(f) for applicable
foreign, federal, state and local taxes to the appropriate Governmental Entity
on behalf of such holders of Company Common Stock or Company Options.
(g) Except as otherwise provided in this Agreement, the Surviving
Corporation shall pay all charges and expenses, including those of the Paying
Agent, in connection with the exchange of cash for shares of Company Common
Stock.
SECTION 1.8. Escrow Deposit. On the date hereof, Parent has deposited in
escrow with SouthTrust Bank (the "Escrow Agent") in accordance with the terms of
the Escrow Agreement dated the date hereof among Parent, the Company and the
Escrow Agent (the "Escrow Agreement") cash in the amount of Five Million Dollars
($5,000,000) (the "Deposit"), which amount shall be held and disbursed in
accordance with the terms of this Agreement and the Escrow Agreement.
6
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. Articles of Incorporation. The Articles of Incorporation of
the Company as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, until, subject to
Section 5.7(a), the same shall thereafter be altered, amended or repealed in
accordance with applicable law or such Articles of Incorporation.
SECTION 2.2. Bylaws. The Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
until, subject to Section 5.7(a), the same shall thereafter be altered, amended
or repealed in accordance with applicable law, the Articles of Incorporation of
the Surviving Corporation or such Bylaws.
SECTION 2.3. Directors and Officers. From and after the Effective Time,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Sub at the Effective Time shall be the
directors of the Surviving Corporation, and (ii) the officers of Sub at the
Effective Time shall be the officers of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of Holding, Parent and Sub, in
each case except as set forth in the written disclosure letter (which letter
shall in each case specifically identify by reference to Sections of this
Agreement any exceptions to each of the representations and warranties set forth
herein) delivered by the Company to Parent concurrently with the execution and
delivery of this Agreement (the "Company Disclosure Letter"), as follows:
SECTION 3.1. Organization and Standing. Each of the Company and each
Subsidiary (as hereinafter defined) (i) is a corporation or other legal entity
duly organized, validly existing and in good standing (with respect to the
jurisdictions that recognize the concept of good standing) under the laws of the
jurisdiction of its incorporation or organization, (ii) has all requisite
corporate or other power and authority and all necessary government approvals to
own, lease and operate its properties and assets and to conduct its business as
presently conducted and (iii) is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except where the
failure to be in good standing or so qualified or licensed, individually or in
the aggregate, has not had, or would not reasonably be expected to have, a
Company Material Adverse Effect (as hereinafter defined). The Company has
furnished or made available to Parent true and complete copies of its articles
of incorporation the "Company Articles of Incorporation") and bylaws (the
"Company Bylaws") and the articles of incorporation and bylaws (or equivalent
organizational documents) of each Subsidiary, each as amended to date. Such
articles of incorporation, bylaws or equivalent organizational documents are in
full force and effect, and neither the Company nor any Subsidiary is in
violation of any provision of its articles of incorporation, bylaws or
equivalent organizational documents.
SECTION 3.2. Capitalization; Subsidiaries.
(a) The authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock and 5,000,000 shares of preferred stock, $1.00
par value per share (the "Preferred Stock"), including 500,000 shares designated
as Series A Participating Cumulative Preferred Stock (the "Series A Preferred
Stock"). As of the date hereof, (i) 11,975,127 shares of Company Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
nonassessable and free of preemptive rights, (ii) no shares of Company Common
Stock are held in the treasury of the Company, (iii) Company Options to acquire
1,202,574 shares of Company Common Stock in the aggregate are outstanding
pursuant to the Company Stock Option Plans, and 2,099,750 shares of Company
Common Stock are authorized and
7
reserved for future issuance pursuant to the Company Stock Option Plans, and
(iv) no shares of Preferred Stock are issued or outstanding. Section 3.2(a) of
the Company Disclosure Letter sets forth a correct and complete list of the
Company Options (and exercise prices) outstanding as of the date hereof. Except
pursuant to the Company Rights Plan, or as set forth above or in Section 3.2(a)
of the Company Disclosure Letter, there are no options, warrants, convertible
securities, subscriptions, stock appreciation rights, phantom stock plans or
stock equivalents or other rights, agreements, arrangements or commitments
(contingent or otherwise) of any character issued or authorized by the Company
relating to the issued or unissued capital stock of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or options, warrants, convertible securities,
subscriptions or other equity interests in, the Company or any Subsidiary. All
shares of Company Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
Except as set forth in Section 3.2(a) of the Company Disclosure Letter, there
are no outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Stock or any
capital stock of any Subsidiary or to pay any dividend or make any other
distribution in respect thereof or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any person.
(b) Section 3.2(b) of the Company Disclosure Letter sets forth a correct
and complete list of, and the jurisdiction of organization of, each corporation,
association, subsidiary, partnership, limited liability company or other entity
of which the Company controls, directly or indirectly, 10% or more of the
outstanding equity interests (each a "Subsidiary" and collectively, the
"Subsidiaries"). Except as set forth in Section 3.2(b) of the Company Disclosure
Letter, the Company owns, directly or indirectly, beneficially and of record all
of the issued and outstanding capital stock of each Subsidiary and does not own
an equity interest in any other corporation, association, partnership, limited
liability company or other entity, other than in the Subsidiaries. Each
outstanding share of capital stock or interest of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and except as set forth
on Section 3.2(b) of the Company Disclosure Letter, each such share owned by the
Company or another Subsidiary is free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or such other Subsidiary's voting rights, charges
and other encumbrances of any nature whatsoever.
SECTION 3.3. Authority for Agreement.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and, subject to
obtaining necessary shareholder approval, to consummate the Merger and the other
transactions contemplated by this Agreement. The execution, delivery and
performance by the Company of this Agreement, and the consummation by the
Company of the Merger and the other transactions contemplated by this Agreement,
have been duly authorized by all necessary corporate action (including, without
limitation, the unanimous approval of the Board of Directors of the Company) and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement (in each case other than the approval and
adoption of this Agreement by the affirmative vote of a majority of the voting
power of the then outstanding shares of Company Common Stock and the filing and
recordation of appropriate merger documents as required by the GBCC). This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Holding, Parent and Sub,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws (as hereinafter defined) affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity. The affirmative vote of holders of the outstanding shares
of Company Common Stock entitled to vote at a duly called and held meeting of
shareholders is the only vote of the Company's Shareholders necessary to approve
this Agreement, the Merger and the other transactions contemplated by this
Agreement.
8
(b) At a meeting duly called and held on January 28, 2002, the Board of
Directors of the Company unanimously (i) determined that, as of the date
thereof, this Agreement and the Voting Agreement and the other transactions
contemplated hereby and thereby, including the Merger, are fair to, and in the
best interests of, the Company and the Company Shareholders, (ii) approved,
authorized and adopted this Agreement, the Merger and the other transactions
contemplated hereby, (iii) resolved, subject to Section 5.5 of this Agreement,
to recommend approval and adoption of this Agreement and the Merger by the
Company Shareholders, and (iv) amended the Company Rights Plan to ensure that
(x) none of Holding, Parent or Sub will become an "Acquiring Person" (as defined
in the Company Rights Plan) as a result of this Agreement, the Merger or the
Voting Agreement, (y) no "Share Acquisition Date" or "Distribution Date" (each
as defined in the Company Rights Plan) will occur as a result of this Agreement,
the Merger or the Voting Agreement and (z) all outstanding rights to purchase
Series A Participating Cumulative Preferred Stock of the Company issued and
outstanding under the Company Rights Plan will expire at the Closing. The
actions taken by the Board of Directors of the Company constitute approval of
the Merger, this Agreement and the Voting Agreement and the other transactions
contemplated hereby and thereby by the Board of Directors of the Company under
the provisions of Section 14-2-1132 of the GBCC such that Section 14-2-1132 of
the GBCC does not apply to this Agreement, the Merger, the Voting Agreement, or
the transactions contemplated hereby or thereby. Other than Section 14-2-1132 of
the GBCC, no state anti-takeover or similar statute in Georgia, or to the
knowledge of the Company, in any other jurisdiction, is applicable to Holding,
Parent or Sub in connection with the Merger, this Agreement, the Voting
Agreement or any of the transactions contemplated hereby or thereby.
(c) ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. (the "Independent Advisor") has delivered to
the Board of Directors of the Company its written opinion, dated the date of
this Agreement, to the effect that, as of such date and based on the
assumptions, qualifications and limitations contained therein, the Per Share
Merger Consideration is fair, from a financial point of view, to the Company
Shareholders. The Company has provided a complete and accurate copy of such
opinion to Parent solely for informational purposes.
SECTION 3.4. No Conflict. The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the Company and the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement will not, (i) conflict with or violate the
Company Articles of Incorporation or Company Bylaws or equivalent organizational
documents of any of its Subsidiaries, (ii) subject to Section 3.5, conflict with
or violate any United States federal, state or local or any foreign statute,
law, rule, regulation, ordinance, code, order, judgment, decree or any other
requirement or rule of law (a "Law") applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, or (iii) except as set forth in Section 3.4
of the Company Disclosure Letter, result in a breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, give to others any right of termination, amendment, acceleration or
cancellation of, result in triggering any payment or other obligations under, or
result in the creation of a lien or other encumbrance on any property or asset
of the Company or any of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation or Material Contract (as hereinafter defined) to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any property or asset of any of them is bound or
affected, except, in the case of clauses (ii) and (iii) above, to the extent
that any such conflict, violation, breach, default or other occurrences would
not have, either individually or in the aggregate, a Company Material Adverse
Effect.
SECTION 3.5. Required Filings and Consents. Except as set forth in
Section 3.5 of the Company Disclosure Letter, the execution and delivery of this
Agreement by the Company do not, and the performance of this Agreement by the
Company will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any United States federal, state or local or any
foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), except (i) for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
9
securities or "blue sky" laws ("Blue Sky Laws") and filing and recordation of
appropriate merger documents as required by the GBCC, (ii) for filings
contemplated by Section 3.14, and (iii) for other immaterial consents,
approvals, authorizations, permits, filings, registrations and notifications
from or with local authorities or municipalities.
SECTION 3.6. Compliance. Except as set forth in Section 3.6 of the
Company Disclosure Letter, each of the Company and its Subsidiaries (i) has been
operated at all times in compliance in all material respects with all Laws
applicable to the Company or any of its Subsidiaries or by which any property,
business or asset of the Company or any of its Subsidiaries is bound or affected
and (ii) is not in material default or violation of any material notes, bonds,
mortgages, indentures, contracts, agreements, leases, licenses, permits,
franchises, or other instruments or obligations to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as set forth in Section 3.6 of the Company Disclosure Letter,
neither the Company nor any Subsidiary has received any written or, to the
knowledge of the Company, oral communication during the past two (2) years from
a Governmental Entity that alleges that the Company or a Subsidiary is not in
compliance in any material respect with any applicable Law.
SECTION 3.7. SEC Filings, Financial Statements.
(a) The Company and each Subsidiary, as necessary, has filed all forms,
reports, statements and documents required to be filed with the United States
Securities and Exchange Commission (the "SEC") since January 1, 1999
(collectively, the "SEC Reports"), each of which has complied in all material
respects with the applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder, or the Exchange Act, and the rules and regulations promulgated
thereunder, each as in effect on the date so filed. When filed, none of the SEC
Reports (including, but not limited to, any financial statements or schedules
included or incorporated by reference therein) contained any untrue statement of
a material fact or omitted or omits to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the (i) audited consolidated balance sheets of the Company as
of December 31, 2000 and December 31, 1999 and the related consolidated
statements of operations, cash flows and changes in shareholders' equity
included in its Annual Report on Form 10-K for the fiscal year ended December
31, 2000 (the "10-K"), in each case, including any related notes thereto, as
filed with the SEC, and (ii) unaudited consolidated balance sheets of the
Company as of September 30, 2001 and December 31, 2000, and the related
consolidated statements of operations for each of the three month periods ended
September 30, 2001 and September 30, 2000 and the nine month periods ended
September 30, 2001 and September 30, 2000, and consolidated statements of cash
flows for the nine month periods ended September 30, 2001 and September 30,
2000, in each case, including any related notes thereto, as filed with the SEC
(collectively, the "Company Financial Statements"), have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto, or in the case of the unaudited statements, as may be
permitted by Form 10-Q of the SEC and subject, in the case of the unaudited
statements, to normal, recurring audit adjustments) and fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries at the respective date thereof and the consolidated results of its
operations and changes in cash flows for the periods indicated.
(c) Except as disclosed in Section 3.7(c) of the Company Disclosure Letter,
there are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether or not accrued and whether or not contingent or absolute,
that are material to the Company and the Subsidiaries, taken as a whole, other
than (i) liabilities disclosed or provided for in the consolidated balance sheet
of the Company and its Subsidiaries as of September 30, 2001, including the
notes thereto, (ii) liabilities disclosed in the SEC Reports, (iii) liabilities
incurred on behalf of the Company in connection with this Agreement and the
contemplated Merger, and (iv) liabilities incurred in the ordinary course of
business consistent with past
10
practice since September 30, 2001, none of which are, individually or in the
aggregate, reasonably likely to be material to the Company and the Subsidiaries,
taken as a whole. Section 3.7(c) of the Company Disclosure Letter sets forth a
complete and correct list of all indebtedness guaranteed by the Company or any
Subsidiary.
(d) The Company has heretofore furnished or made available to Parent a
complete and correct copy of any amendments or modifications which the Company
intends to file but which have not yet been filed with the SEC to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC as exhibits to the SEC Reports pursuant to the Securities Act and
the rules and regulations promulgated thereunder or the Exchange Act and the
rules and regulations promulgated thereunder.
SECTION 3.8. Absence of Certain Changes or Events.
(a) Except as contemplated by this Agreement or as disclosed in the SEC
Reports filed prior to the date hereof, since December 31, 2000, the Company and
its Subsidiaries have conducted their respective businesses only in the ordinary
course and consistent with prior practice and there has not been (i) any event
or occurrence of any condition that individually or in the aggregate, has had or
could reasonably be expected to have a Company Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend or any other distribution
with respect to any of the capital stock of the Company or any Subsidiary, (iii)
except as set forth in Section 3.8(a) of the Company Disclosure Letter, any
material change in accounting methods, principles or practices employed by the
Company or any Subsidiary, or (iv) except as set forth in Section 3.8(a) of the
Company Disclosure Letter, any action of the type described in Sections 5.1(b)
or 5.1(c) which had such action been taken after the date of this Agreement
would be in violation of any such Section.
(b) Since December 31, 2000, the Company has not received any written or,
to the knowledge of the Company, oral notice of (or, in the case of any
contract, lease or other arrangement that terminates or is extended by its terms
without the giving of notice, has otherwise become aware of) the termination or
extension of any Material Contract (as hereinafter defined), or suffered any
damage, destruction or loss (whether or not covered by insurance) to any Company
Property (as hereinafter defined) or any personal property of the Company or any
Subsidiary which, individually or in the aggregate, could reasonably be expected
to result in the Company's or a Subsidiary's loss of $50,000 or more.
SECTION 3.9. Taxes.
(a) Except as set forth in Section 3.9(a) of the Company Disclosure Letter,
the Company and each of its Subsidiaries have timely filed all material Tax
Returns (as hereinafter defined) required to be filed by any of them. All such
Tax Returns are true, correct and complete in all material respects. All Taxes
(as hereinafter defined) of the Company and its Subsidiaries which are (i) shown
as due on such Tax Returns, (ii) otherwise due and payable or (iii) to the
Company's knowledge, claimed or asserted by any taxing authority to be due, have
been paid, except for those Taxes being contested in good faith and for which
adequate reserves have been established in the financial statements included in
the SEC Reports in accordance with GAAP. The Company and its Subsidiaries have
never received written notice from an authority in a jurisdiction where any of
the Company and its Subsidiaries does not file Tax Returns that any of them is
or may be subject to taxation by that jurisdiction that has not since been cured
by the filing of such return. There are no liens for any Taxes upon the assets
of the Company or any of its Subsidiaries, other than statutory liens for Taxes
not yet due and payable and liens for real estate Taxes contested in good faith.
Except as set forth in Section 3.9(a) of the Company Disclosure Letter, no Tax
Returns of the Company or its Subsidiaries are under audit or examination by any
taxing authority, and the Company does not know of any proposed or threatened
Tax claims, audits or assessments against the Company or any Subsidiary. Neither
the Company nor any of its Subsidiaries has made an election under Section
341(f) of the Code. None of the Company and its Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (B) has any
liability for the Taxes of any person (other than any of the Company and its
Subsidiaries) under Treas. Reg. sec.1.1502-6 (or any similar provision of state,
local, or
11
foreign law), as a transferee or successor, by contract, or otherwise. Neither
the Company nor any of its Subsidiaries has waived any statute of limitations in
respect of Taxes or agreed to any extension of time, in each case beyond the
date of this Agreement, with respect to a Tax assessment or deficiency. Each of
the Company and each Subsidiary has withheld and paid over to the relevant
taxing authority all Taxes required to have been withheld and paid in connection
with payments to employees, independent contractors, creditors, shareholders or
other third parties. Except as set forth in Section 3.9(a) of the Company
Disclosure Letter, the unpaid Taxes of the Company and its Subsidiaries for the
current taxable period did not, as of the most recent Company Financial
Statements, exceed the reserve for Tax liability set forth on the face of the
balance sheet in the most recent Company Financial Statements. For purposes of
this Agreement, (x) "Tax" (and, with correlative meaning, "Taxes") means any
federal, state, local or foreign income, gross receipts, property, sales, use,
occupancy, license, excise, franchise, employment, payroll, premium,
withholding, alternative or added minimum, ad valorem, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty or addition
thereto, whether disputed or not, imposed by any Governmental Entity, and (y)
"Tax Return" means any return, report or similar statement required to be filed
with respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(b) Section 3.9(b) of the Company Disclosure Letter sets forth with
reasonable specificity all jurisdictions in which the Company or any Subsidiary
currently has a presence requiring it to pay Taxes (a "Taxable Presence") and
all jurisdictions in which the Company or any Subsidiary has had a Taxable
Presence since January 1, 1998. The Company has made available to Parent correct
and complete copies of (i) all Tax Returns filed in connection with the three
year period ending on December 31, 2000 and (ii) all correspondence with any Tax
authorities (including, without limitation, all audits, notices and requests for
information from or to taxing authorities) since January 1, 1998.
SECTION 3.10. Assets.
(a) Except as set forth in the 10-K, the SEC Reports filed thereafter, or
in Section 3.10(a) of the Company Disclosure Letter, the Company and each of its
Subsidiaries have good, marketable and, for the real property only, insurable
title to, or a valid leasehold interest in, all of their real and personal
properties and assets reflected in the 10-K or acquired after December 31, 2000
(other than any Unacquired Assets, or assets reflected in any SEC Reports filed
after the 10-K as having been disposed of since December 31, 2000 or otherwise
disposed of since December 31, 2000 in the ordinary course of business
consistent with past practice), in each case free and clear of all title
defects, liens, encumbrances and restrictions, except for (i) liens,
encumbrances or restrictions which secure indebtedness which are properly
reflected in the 10-K; (ii) liens for Taxes accrued but not yet payable; (iii)
liens arising as a matter of law in the ordinary course of business with respect
to obligations incurred after December 31, 2000, provided that the obligations
secured by such liens are not delinquent; (iv) such title defects, liens and
encumbrances and restrictions disclosed in the Title Documents (as hereinafter
defined); and (v) such title defects, liens and encumbrances and restrictions,
if any, that do not individually or in the aggregate, materially detract from
the value of the assets subject thereto or materially impact the operation of
the Company or any Subsidiary. Except as set forth in Section 3.10(a) of the
Company Disclosure Letter, the Company and each of its Subsidiaries either own
or have valid leasehold interests in all properties and assets used by them in
the conduct of their business. At the Effective Time, the personal property of
the Company and each Subsidiary (the "Personal Property") at each Company
Property (as hereinafter defined) shall be in sufficient levels so as to allow
for uninterrupted full service at each such Company Property in a manner
consistent with the Company's ordinary course of business and past practices
with respect to such Company Property.
(b) Except as set forth in Section 3.10(b) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has any legal
obligation, absolute or contingent, to any other person to sell or otherwise
dispose of any of its assets with an individual value of $50,000 or an aggregate
value in excess of $100,000, in each case, other than with respect to any
transfers of Unacquired Assets.
12
(c) Except for such property as shall have been taken out of service on a
temporary basis for repairs or replacement consistent with the Company's past
practices and normal industry practices, the buildings, fixtures and equipment
of the Company and its Subsidiaries are in good operating condition and repair
(ordinary wear and tear excepted), and are adequate for the uses to which they
are being put. The buildings, fixtures and equipment of the Company and its
Subsidiaries are sufficient for the continued conduct of the business of the
Company and its Subsidiaries after the Effective Time in substantially the same
manner as conducted prior to the Effective Time. Section 3.10(c) of the Company
Disclosure Letter sets forth a complete and accurate list of those rooms in any
of the Company's hotels that are not available for occupancy as of a date within
ten (10) days prior to the date hereof, and a brief explanation of why each such
room is not so available.
(d) Section 3.10(d) of the Company Disclosure Letter (and the Title
Documents (as hereinafter defined)) sets forth a correct and complete list of
all real property (i) owned or leased by the Company or a Subsidiary, (ii) as to
which the Company or a Subsidiary has a license, easement or right of way to
use, (iii) as to which the Company or a Subsidiary has the option to purchase,
lease, license or acquire an easement or right of way or (iv) in which the
Company or a Subsidiary has any other interest. The list of real property in
Section 3.10(d) of the Company Disclosure Letter that is identified as being
owned by the Company or a Subsidiary includes a correct and complete list by
owner, property name, city and state of all real property (other than any
Unacquired Assets) owned by the Company or any Subsidiaries (the "Company
Properties"), and correctly identifies which entity is the record owner of title
to each such tract of real property (each being a "Company Property"). With
respect to each such Company Property, the entity identified in Section 3.10(d)
of the Company Disclosure Letter as owner, owns good, marketable and insurable
fee simple title to such Company Property, free and clear of all defects, liens,
encumbrances and restrictions other than (i) those existing title matters listed
as exceptions in the pro forma title policies or title insurance commitments
listed in Section 3.10(d) of the Company Disclosure Letter (the "Title
Documents"), (ii) those matters listed on Section 3.10(d) of the Company
Disclosure Letter as "Company Cure Items", (collectively, the "Company Cure
Items"), (iii) the rights of hotel guests, as hotel guests only, and (iv) such
other matters as shall be set forth on Section 3.10(d) of the Company Disclosure
Letter, (all such matters referenced in clauses (i), (iii) and (iv) hereof being
sometimes collectively called the "Permitted Exceptions"). To the Company's
knowledge, after reasonable inquiry, there are no private restrictions that
affect the Company Properties other than the Permitted Exceptions.
(e) Except as described on Section 3.10(e) of the Company Disclosure Letter
and for the Permitted Exceptions, no Company Property or Personal Property or
any interest of the Company or any Subsidiary in any Company Property or
Personal Property is subject to any outstanding agreements of sale, options or
other rights of third parties to acquire or use any interest therein.
(f) Except as disclosed in Section 3.10(f) of the Company Disclosure
Letter, the Company Properties, and all present uses and operations thereof,
comply in all material respects with all applicable zoning, land-use, building,
fire, health, labor, safety, subdivision and other law and all deed or other
title covenants and restrictions applicable thereto.
(g) The Company has delivered or made available to Parent true, correct and
complete copies of all material engineering, electrical, structural, soils,
seismic, archaeological, ecological, geological, hydrological/water effluence or
other similar reports, maintenance plans, plans and specifications, site plans,
licenses, permits and certificates of occupancy covering all or any portion of
the Company Properties and improvements which are in the possession or control
of the Company, the Subsidiaries, or their respective affiliates.
(h) Except as disclosed on Section 3.10(h) of the Company Disclosure Letter
or in the Title Documents: (i) there are no outstanding and unpaid impact fees
or other charges in connection with any Company Property; (ii) there are no
pending or, to the Company's knowledge, threatened special assessments or
reassessments with respect to any Company Property or any part thereof; and,
(iii) there is no pending or, to the Company's knowledge, threatened
condemnation, expropriation, requisition (temporary or permanent) or similar
proceeding with respect to any Company Property or any part
13
thereof. Section 3.10(h) of the Company Disclosure Letter sets forth a correct
and complete list of the letters of credit issued on behalf of the Company or
any Subsidiary in favor of any Governmental Entity or other third party as
security for an obligation of the Company or any Subsidiary. Section 3.10(h) of
the Company Disclosure Letter sets forth a correct and complete list of the
performance bonds issued on behalf of, or set-aside agreements entered into by,
the Company or any Subsidiary in favor of any Governmental Entity or other third
party as security for an obligation of the Company or any Subsidiary as of the
date hereof and the amount thereof as of the date hereof.
(i) Except as disclosed in Section 3.10(i) of the Company Disclosure
Letter, the Title Documents, or the surveys for each Company Property that have
been delivered to Parent on or before the date hereof (collectively, the
"Surveys"), water, sewer, electric, telephone, and storm water and drainage
facilities and all other utilities required by Laws and in the normal operation
of all buildings located on each Company Property are available and are
installed across public property or valid easements to the property lines of
such Company Property, and are connected pursuant to valid permits and are
adequate to service such Company Property for its current use.
(j) Except with regard to any of the Unacquired Assets, environmental
matters which are addressed in Section 3.17 or as disclosed in Section 3.10(j)
of the Company Disclosure Letter: (i) all material licenses, concessions,
building, and other permits, certificates of use and occupancy, including (but
not limited to) final or permanent certificates of occupancy, (the "Real Estate
Permits"), have been obtained for the Company Properties as required in
connection with any material construction, renovations, expansions, or other
improvements at any Company Property and in connection with the present use and
operation of the Company Properties; (ii) the Real Estate Permits are the only
licenses, concessions, permits, certificates or other similar requirements
necessary in order to own and operate the Company Properties for their present
use and operation without interruption; (iii) the Real Estate Permits are in
full force and effect and there exists no material violation thereof; (iv) the
Company and/or each Subsidiary, as applicable, is in compliance with all
material terms and conditions of any Real Estate Permits; (v) no action or
proceeding relating to the Real Estate Permits is pending or, to the Company's
knowledge, threatened, which may result in revocation or cancellation of a Real
Estate Permit; (vi) except as referenced in any of the Surveys or Title
Documents, no physical conditions with respect to any of the Company Properties
exist that violate in any material respect any applicable law, code, rule,
ordinance or regulation; (vii) all vendors and suppliers have been paid in full
(and shall be paid in full as of the Closing), except for accounts payable in
the ordinary course of business consistent with past practice, and except as
disclosed in the Title Documents, there are no liens, claims of lien or lien
rights that encumber or materially adversely affect any of the Real Estate
Permits; and (viii) there are no liquor licenses that are held by the Company,
any Subsidiary or any affiliate of any of them, nor are any liquor licenses
necessary for the current operation of the Company Properties or any part
thereof.
(k) Except as disclosed on Section 3.10(k) of the Company Disclosure
Letter, neither the Company nor any Subsidiary, if applicable, is in material
default with respect to any contracts pertaining to the Company Properties, nor,
to the Company's and each Subsidiary's knowledge, are there any facts or
circumstances which with the passage of time or the giving of notice, or both,
would constitute or result in any such default.
(l) Except as disclosed in Section 3.10(l) of the Company Disclosure
Letter, within the immediately preceding twelve (12) month period, there have
not been actual or, to the Company's knowledge, threatened or imminent (i)
changes in the zoning of any of the Company Properties or any part thereof
materially and adversely affecting the current use, occupancy or value thereof;
or (ii) restrictions, limitations or regulations issued. The Company has not
received written or, to the knowledge of the Company, oral notice of any such
changes being proposed or under consideration by any Governmental Entity having
or asserting jurisdiction over any Company Property or the ownership thereof. To
the Company's knowledge, after reasonable inquiry, no sewer moratorium or like
governmental order is in effect which adversely affects the operations of any
Company Property.
14
(m) The Company has made available to Parent correct and complete copies of
all Material Contracts (as hereinafter defined) relating to the Company
Properties, including all modifications, renewals and extensions, together with
any guaranties and any other agreements relating thereto.
(n) Except as set forth in the Title Documents or in Section 3.10(n) of the
Company Disclosure Letter, there are no ad valorem tax protests, appeals or
other similar tax proceedings pending against the Company Properties.
(o) The indebtedness listed in Section 3.10(o) of the Company Disclosure
Letter is a correct and complete list of all indebtedness and all financing that
encumbers the Company Properties or any part thereof (the "Secured Debt"). None
of the Company or any Subsidiary or any Company Property is in material default
or violation of any of the agreements, rights or restrictions relating to any of
the Secured Debt, nor are there any facts or circumstances that with the passage
of time or the giving of notice or both are reasonably likely to constitute or
result in any such default or violation.
(p) Except as set forth in Section 3.10(p) of the Company Disclosure
Letter, no condemnation, eminent domain or similar proceedings have been
instituted or, to the Company's knowledge, threatened against any of the Company
Properties or, to the Company's knowledge, any surrounding properties that could
be likely to have a material adverse effect on any Company Properties or the
operation of the business conducted thereon, and the Company does not know, nor
has the Company or any Subsidiary received notice, of any (i) existing or
proposed plans to widen, modify, realign or close any street or highway adjacent
to or in close proximity to (i.e., within 500 yards of) any Company Properties,
or of any pending condemnation actions or proposed public improvements affecting
any Company Properties (including its improvements), or (ii) pending or
threatened judicial, municipal or administrative proceedings with respect to, or
in any manner affecting, any Company Property including the improvements
thereon.
(q) Except as set forth in Section 3.10(q) of the Company Disclosure
Letter, neither the Company nor any Subsidiary is a party, and no Company
Property nor any portion thereof is subject to any, pending litigation,
arbitration or administrative proceeding (i) with any person or entity having or
claiming any interest in any Company Property, or (ii) affecting or questioning
title to or use of or otherwise affecting the Company, any Subsidiary, any
Company Property or any part thereof or the Company's or any Subsidiary's
ability to perform its obligations under this Agreement nor, to the Company's
knowledge, is such litigation, arbitration or administrative proceeding
threatened. Neither the Company nor any Subsidiary is subject to or in default
under any judgment, order, injunction or decree of any Governmental Entity
applicable to the Company, any Subsidiary or any Company Property.
(r) Section 3.10(r) of the Company Disclosure Letter lists a description
and the amount of all security deposits, letters of credit and/or similar
deposits taken by the Company or by a third party. There are no inducements,
concessions, bonuses, side agreements, free rental, rebates, or other matters
reducing the rental or other sums payable under any Lease (as hereinafter
defined) that will not be satisfied by the Effective Time, except as set forth
in Section 3.10(r) of the Company Disclosure Letter. The Company or its
Subsidiaries own the entire owner's interest in and to all service contracts,
leases, occupancy and/or guest agreements (other than Advance Reservation
Information (as hereinafter defined)) affecting the Company Properties
(collectively, the "Leases"). Except for the Permitted Exceptions, none of the
Leases or the rentals or other sums payable thereunder have been assigned or
otherwise encumbered. There are no defaults under any of such Leases, nor, to
the Company's knowledge, do circumstances exist which, with the giving of notice
or the passage of time, or both, would constitute a default by anyone
whomsoever, and neither the Company nor any Subsidiary has received any notice
from any tenant that the landlord under the Leases is in default under any of
such Leases, or that there exists circumstances which, with the giving of notice
or the passage of time, or both, would constitute a default thereunder. Except
as set forth in Section 3.10(r) of the Company Disclosure Letter, as of the date
of this Agreement there are no leasing commissions binding upon the Company
Properties, the Company or any Subsidiary that will not be satisfied prior to
the Effective Time.
15
(s) Except for the capital expenditures escrow accounts required under the
Company's collateralized mortgage bonds disclosed in Section 3.10(o) of the
Company Disclosure Letter, the Company represents and warrants that there is no
reserve for repair, replacement, or replenishment of furniture, fixtures or
equipment at the Company Properties or any portion thereof.
(t) None of the Company or any Subsidiary is in default or material
non-compliance under any Permitted Exceptions or Company Cure Items which,
individually or in the aggregate, would have a material adverse effect on the
Company, a Subsidiary or any property. No written or, to the Company's
knowledge, oral notices of default or non-compliance have been received by the
Company or any Subsidiary with respect to any Permitted Exceptions or Company
Cure Items.
(u) Except as set forth in Section 3.10(u) of the Company Disclosure Letter
and other than arising in the ordinary course of business after the date hereof,
the Company has no outstanding construction payables to any materialmen,
laborers, vendors or suppliers for any work performed or materials supplied in
connection with any Company Property that may or will give rise to a lien, claim
of lien or any lien rights that would encumber such Company Property.
SECTION 3.11. Change of Control Agreements. Except pursuant to Section
1.6 and as set forth in Section 3.11 of the Company Disclosure Letter, neither
the execution and delivery of this Agreement nor the consummation of the Merger
or the other transactions contemplated by this Agreement, will (either alone or
in conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
current or former director, officer or employee of the Company and/or any
Subsidiary. Except as set forth in Section 3.11 of the Company Disclosure
Letter, without limiting the generality of the foregoing, no amount paid or
payable by the Company or any Subsidiary in connection with the Merger or the
other transactions contemplated by this Agreement, including accelerated vesting
of options, (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) will be an "excess parachute
payment" within the meaning of Section 280G of the Code. The Company represents
and warrants that the amounts determined in accordance with Section 1.6(c) of
the Company Disclosure Letter will be sufficient to satisfy in full all
obligations of the Company to make payments then due and owing under the change
of control agreements with such officers that are identified in Section 1.6(c)
of the Company Disclosure Letter (the "Change of Control Agreements"), provided
that the Surviving Corporation shall thereafter honor all obligations under each
such Change of Control Agreement to provide such officers with any continuing
benefits required to be provided thereafter.
SECTION 3.12. Litigation. Except for such matters disclosed in Section
3.12 of the Company Disclosure Letter and those which, if adversely determined
individually or in the aggregate, are not, and would not reasonably be expected
to be, material to the Company, there are no claims, suits, actions,
investigations, examinations, audits, indictments or information, or
administrative, arbitration or other proceedings ("Litigation") pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries. Except as set forth in Section 3.12 of the Company Disclosure
Letter, and for such matters which individually or in the aggregate, are not,
and would not reasonably be expected to be, material to the Company, there are
no judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency, or by arbitration, pursuant to a
grievance or other procedure) against or relating to the Company or any of its
Subsidiaries which have not yet been paid or satisfied in full.
SECTION 3.13. Contracts and Commitments. Section 3.13 of the Company
Disclosure Letter sets forth a true, correct and complete list of the following
contracts to which the Company or a Subsidiary is a party (including every
amendment, modification or supplement to the foregoing): (i) any contracts of
employment; (ii) any contracts or agreements which limit or restrict the
Company, any Subsidiary or, to the knowledge of the Company, any employee, from
engaging in any business in any jurisdiction; (iii) agreements or arrangements
for the purchase or sale of any assets (otherwise than in the ordinary course of
business or relating to the Unacquired Assets); (iv) all bonds, debentures,
notes, loans, credit or loan agreements or commitments, mortgages, indentures,
warranties or guarantees or other agreements or
16
contracts in each case relating to the borrowing of money; (v) agreements with
unions, material independent contractor agreements and material leased or
temporary employee agreements; (vi) individual leases of any personal property
pursuant to which the Company is required to make annual payments in excess of
$24,000 and groups of two or more leases of personal property with the same or
affiliated counterparties pursuant to which the Company is required to make
aggregate annual payments in excess of $24,000; (vii) any management agreements;
(viii) any agreements that restrict the Company from hiring employees or
acquiring ownership interests in other entities (in each case other than
agreements with staffing or temporary services firms and other agreements which
the Company is prohibited from disclosing pursuant to written confidentiality or
non-disclosure agreements); (ix) franchise agreements, area franchise
agreements, or licenses to operate an extended-stay lodging business or hotel;
(x) all other contracts, agreements or commitments pursuant to which annual
payments made by or to the Company or a Subsidiary exceed $50,000 and groups of
two or more contracts, agreements, or commitments with the same or affiliated
counterparties pursuant to which annual payments made by or to the Company or a
Subsidiary exceed $50,000 in the aggregate (including any such operating
agreements, service and maintenance contracts, equipment leases, vehicle leases,
property leases for employees, supply contracts, billboard, signage, promotional
or other advertising agreements or leases, hotel or operational permits or
licenses affecting or used in connection with the operation of any Company
Property or any portion thereof, but excluding guest contracts entered into in
the ordinary course of business); and (xi) any other contracts material to the
operation of the business of the Company (individually, a "Material Contract"
and collectively, "Material Contracts"). The Company has delivered or made
available true, correct and complete copies of all Material Contracts to Parent
or its representatives. Neither the Company nor any of its Subsidiaries is in
default under any Material Contract, which defaults individually or in the
aggregate would reasonably be expected to be material to the Company or any
Subsidiary, and no circumstances exist that, with the passing of time or the
giving of notice, or both, would result in a default by the Company or any
Subsidiary under any Material Contract, and neither the Company nor any
Subsidiary has received any notice from any party thereto that the Company or
any Subsidiary is in default thereunder, or that circumstances exist which, with
the giving of notice or the passage of time, or both, would constitute a default
thereunder. The Material Contracts are in full force and effect in all material
respects, have been duly executed by the Company or one of its Subsidiaries
where applicable, and none of the Company, its Subsidiaries or, to the knowledge
of the Company, any other party thereto is in material default of its
obligations under such contracts. Except for this Agreement, the Material
Contracts, the Permitted Encumbrances and as set forth on Section 3.13 of the
Company Disclosure Letter, there are no leases, service contracts or other
agreements in force or effect that (a) grant to any person or entity any right,
title, interest or benefit in or to all or any part of the Company Properties,
or (b) grant or create any rights relating to the use, maintenance, operation,
construction or management of all or any part of the Company Properties.
SECTION 3.14. Information Supplied. The proxy statement to be mailed to
the Company Shareholders in connection with the meeting (the "Shareholders'
Meeting") to be called to consider the Merger (the "Proxy Statement") at the
date such document is first published, sent or delivered to Company Shareholders
or, unless promptly corrected, at any time during the pendency of the
Shareholders' Meeting, will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The Proxy Statement will comply as to form
and substance in all material respects with the requirements of the Exchange Act
and the applicable rules and regulations of the SEC thereunder. Notwithstanding
the foregoing, no representation or warranty is made by the Company with respect
to statements made or incorporated by reference therein based on information
both supplied by and relating to Holding, Parent or Sub for inclusion or
incorporation by reference in the foregoing document.
SECTION 3.15. Employee Benefit Plans.
(a) The term "Company Benefit Plan" shall mean each plan, fund, program,
agreement, arrangement or scheme, in each case, that is at any time sponsored or
maintained or required to be sponsored or
17
maintained by the Company or any of its Subsidiaries or to which the Company or
any of its Subsidiaries makes or has made, or has or has had an obligation to
make, contributions providing for employee benefits or for the remuneration,
direct or indirect, of the employees, former employees, directors, officers,
consultants, independent contractors, contingent workers or leased employees of
the Company or any of its Subsidiaries or their dependents (whether written or
oral), including, without limitation, each deferred compensation, bonus,
incentive compensation, pension, retirement, stock purchase, stock option and
other equity compensation plan, "welfare" plan (within the meaning of Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), determined without regard to whether such plan is subject to ERISA);
each "pension" plan (within the meaning of Section 3(2) of ERISA, determined
without regard to whether such plan is subject to ERISA); each severance plan or
agreement, health, vacation, summer hours, supplemental unemployment benefit,
hospitalization insurance, medical, dental, legal and each other employee
benefit plan, fund, program, agreement or arrangement. Section 3.15(a) of the
Company Disclosure Letter contains a complete and accurate list of each Company
Benefit Plan the Company or any of its Subsidiaries has sponsored, maintained or
contributed to within the last three (3) calendar years. Each Company Benefit
Plan currently in effect is identified as a "current plan" on such list.
(b) The term "ERISA Affiliate Plan" shall mean each Company Benefit Plan
sponsored or maintained or required to be sponsored or maintained at any time by
any person (whether incorporated or unincorporated), that together with the
Company would be deemed a "single employer" within the meaning of Section 414 of
the Code, (an "ERISA Affiliate"), or to which such ERISA Affiliate makes or has
made, or has or has had an obligation to make, contributions at any time.
(c) Except as set forth in Section 3.15(c) of the Company Disclosure
Letter,
(i) With respect to each Company Benefit Plan identified in Section
3.15 of the Company Disclosure Letter, the Company has heretofore delivered
or made available to Parent complete and accurate copies of the plan
documents and any amendments thereto (or if the plan is not written, a
written description thereof), any related trust or other funding vehicle,
annual reports required to be filed with any Governmental Entity with
respect to such plan, actuarial reports, funding and financial information
returns and statements, all contracts with any parties providing services
or insurance to such plan, copies of material correspondence with all
Governmental Entities, plan summaries or summary plan descriptions, summary
annual reports, booklets and personnel manuals and any other reports or
summaries required under ERISA, the Code and all other applicable laws,
regulations, orders or other legislative, administrative or judicial
promulgations ("Applicable Benefit Laws"), the most recent determination
letter received from the Internal Revenue Service with respect to each such
plan intended to qualify under Section 401 of the Code, and such other
documentation with respect to any Company Benefit Plan as is reasonably
requested by Parent.
(ii) The Company and its Subsidiaries have maintained all employee
data necessary to administer each Company Benefit Plan, including data
required to be maintained under Sections 107 and 209 of ERISA, and such
data is true and correct and is maintained in a usable form.
(iii) No Company Benefit Plan or ERISA Affiliate Plan is or was
subject to Title IV of ERISA or Section 412 of the Code, nor is any Company
Benefit Plan or ERISA Affiliate Plan a "multiemployer pension plan", as
defined in Section 3(37) of ERISA, or subject to Section 302 of ERISA.
Neither the Company, any of its Subsidiaries, an ERISA Affiliate nor a
predecessor in interest of any of them has or has had an obligation to
reimburse another employer, either directly or indirectly, including
through indemnification or otherwise, for making contributions to a plan
that is or was subject to Title IV of ERISA.
(iv) Each Company Benefit Plan has been established, registered,
qualified, invested, operated and administered in all material respects in
accordance with its terms in compliance with all Applicable Benefit Laws
and in accordance with all understandings, written or oral, between the
Company or its respective current or former employees, directors, officers,
consultants, independent contractors, contingent workers or leased
employees, as applicable. Neither the Company nor any of
18
its Subsidiaries has incurred, and no facts exist which reasonably could be
expected to result in any material liability to the Company or any of its
Subsidiaries with respect to any Company Benefit Plan or any ERISA
Affiliate Plan, including without limitation, any liability, tax, penalty
or fee under ERISA, the Code or any Applicable Benefit Law (other than to
pay premiums, contributions or benefits in the ordinary course).
(v) All obligations regarding each Company Benefit Plan have been
satisfied, and there are no outstanding defaults or violations by any party
to any Company Benefit Plan. No taxes, penalties or fees are owing under
any Company Benefit Plan.
(vi) No fact or circumstance exists that could adversely affect the
tax-exempt status of a Company Benefit Plan that is intended to be
tax-exempt. Further, each Company Benefit Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code and the trusts maintained
thereunder that are intended to be exempt from taxation under Section
501(a) of the Code has received a favorable determination or other letter
indicating that it is so qualified, or intends to submit a request for a
determination letter within the applicable remedial amendment period, and
the Company is not aware of any reason why such determination letter would
not be issued by the Internal Revenue Service.
(vii) The assets of each Company Benefit Plan are reported at their
fair market value on the financial statements of each such plan as of the
dates indicated on such statements.
(viii) No Company Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
current or former employees, directors, officers, consultants, independent
contractors, contingent workers or leased employees (or any of their
dependents, spouses or beneficiaries) of the Company, any or its
Subsidiaries or any predecessor in interest of the Company or any of its
Subsidiaries for periods extending beyond their retirement or other
termination of service, other than continuation coverage mandated by
Applicable Benefit Laws and only to the extent required under such laws.
(ix) All contributions or premiums required to be made by any Company
under the terms of each Company Benefit Plan or by Applicable Benefit Laws
have been made in a timely fashion in accordance with Applicable Benefit
Laws and the terms of the Company Benefit Plan. Each Company Benefit Plan
is fully funded or fully insured on both an ongoing and termination or
wind-up basis.
(x) No insurance policy or any other insurance contract or agreement
affecting any Company Benefit Plan requires or permits a retroactive
increase in premiums or payments due thereunder.
(xi) There have been no improper withdrawals, applications or
transfers of assets from any Company Benefit Plan or the trusts or other
funding media relating thereto, and neither the Company nor any of its
Subsidiaries nor any of their agents has been in breach of any fiduciary
obligation with respect to the administration of any Company Benefit Plan
or the trusts or other funding media relating thereto.
(xii) Each "employee benefit plan" (within the meaning of Section 3(3)
of ERISA) of the Company by its terms or in the summary plan description
for such plan provides that such plan may be amended, revised or terminated
by the Company or the administrator of such plan, subject to contractual
notice requirements.
(xiii) Except as contemplated by Section 1.6, the execution, delivery
and performance of, and consummation of the transactions contemplated by,
this Agreement will not (A) entitle any current or former employee,
director, officer, consultant, independent contractors, contingent worker
or leased employee (or any of their dependents, spouses or beneficiaries)
of the Company or any of its Subsidiaries to severance pay, unemployment
compensation or any other payment, or (B) accelerate the time of payment or
vesting, or increase the amount of compensation due any such individual.
(xiv) Except for payments under the Change of Control Agreements
described in Section 3.11, the Company has not made any payments, is not
obligated to make any payments, and is not a party
19
to any agreement that under certain circumstances could obligate the
Company to make any payments that will not be deductible for federal income
tax purposes by reason of Section 280G of the Code.
(xv) There are no pending, or, to the Company's knowledge, threatened
Litigation by, against, involving or on behalf of any Company Benefit Plan
by any current or former employee, director, officer, consultant,
independent contractors, contingent worker or leased employee (or any of
their dependents, spouses or beneficiaries) of the Company, any of its
Subsidiaries or any predecessor in interest covered under such Company
Benefit Plan, by any Governmental Entities or otherwise involving any such
Company Benefit Plan (other than routine claims for benefits) that and, to
the Company's knowledge, there exists no state of facts which after notice
or lapse of time or both reasonably could be expected to give rise to any
Litigation.
SECTION 3.16. Labor and Employment Matters. Except as set forth in
Section 3.16 of the Company Disclosure Letter:
(a) Employees of the Company and its Subsidiaries (including both
present and former employees) have not been, and, with respect to current
employees, currently are not, represented by a labor organization or group
which was either certified or voluntarily recognized by any labor relations
board, including, without limitation, the United States National Labor
Relations Board ("NLRB") or certified or voluntarily recognized by any
other Governmental Entity;
(b) The Company and its Subsidiaries have not been and are not a
signatory to a collective bargaining agreement with any trade union, labor
organization or group;
(c) No representation election petition or application for
certification has been filed by employees of the Company or its
Subsidiaries or is pending with the NLRB or any other Governmental Entity
and no union organizing campaign or other attempt to organize or establish
a labor union, employee organization or labor organization or group
involving employees of the Company has occurred, is in progress or, to the
Company's knowledge, is threatened;
(d) Neither the Company nor its Subsidiaries have engaged in any
unfair labor practice and there is no pending or, to the knowledge of the
Company, threatened labor board proceeding of any kind against the Company
or its Subsidiaries or any proceeding (involving claims of unfair
representation of the Company's employees) against any trade union, labor
union, employee organization or labor organization representing the
Company's employees;
(e) No grievance or arbitration demand or proceeding, whether or not
filed pursuant to a collective bargaining agreement, has been threatened,
filed or is pending against the Company or any of its Subsidiaries;
(f) No labor dispute, walk out, strike, slowdown, hand billing,
picketing, or work stoppage (sympathetic or otherwise) involving the
employees of the Company or its Subsidiaries has occurred, is in progress
or has been threatened;
(g) No breach of contract and/or denial of fair representation claim
has been filed or is pending or, to the knowledge of the Company,
threatened against the Company, its Subsidiaries and/or to the knowledge of
the Company, any trade union, labor union, employee organization or labor
organization representing the employees of the Company or its Subsidiaries
(in such union or organization's capacity as a representative of any such
employee during the period that the employee was employed by the Company or
one of its Subsidiaries) based on claims of the Company's past or present
employees;
(h) No claim, complaint, charge or investigation for unpaid wages,
bonuses, commissions, employment withholding taxes, penalties, overtime or
other compensation, benefits, child labor or record keeping violations has
been filed or is pending or threatened under the Fair Labor Standards Act,
▇▇▇▇▇-▇▇▇▇▇ Act, ▇▇▇▇▇-▇▇▇▇▇▇ Act, or Service Contract Act or any other
federal, state, local or foreign law, regulation or ordinance;
20
(i) No discrimination and/or retaliation claim, complaint, charge or
investigation has been filed or is pending or threatened against the
Company or its Subsidiaries under the 1866 or 1964 Civil Rights Acts, the
Equal Pay Act, the Age Discrimination in Employment Act ("ADEA"), the
Americans with Disabilities Act ("ADA"), the Family and Medical Leave Act
("FMLA"), the Fair Labor Standards Act ("FLSA"), ▇▇▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇
("Section 1981") or any other federal law or comparable state fair
employment practices act or foreign law;
(j) If the Company and/or its Subsidiaries are a federal or state
contractor obligated to develop and maintain an affirmative action plan, no
discrimination claim, show cause notice, conciliation proceeding, sanction
or debarment proceeding has been threatened or filed or is pending with the
Office of Federal Contract Compliance Programs or any other federal agency
or any comparable state or foreign agency or court and no desk audit or
on-site review is in progress;
(k) No citation by the Occupational Safety and Health Administration
("OSHA") is pending against the Company or its Subsidiaries and no notice
of contest, claim, complaint, charge, investigation or other administrative
enforcement proceeding involving the Company or its Subsidiaries has been
filed or is pending or threatened against the Company or its Subsidiaries
under OSHA or any other applicable law relating to occupational safety and
health, and Section 3.16(k) of the Company Disclosure Letter sets forth a
true, correct and complete list of all citations, investigations and audits
issued by OSHA involving the Company or any of its Subsidiaries, and, to
the knowledge of the Company, all other violations of OSHA by the Company
or any of its Subsidiaries, in each case occurring within three (3) years
prior to the date of this Agreement;
(l) No workers' compensation or retaliation claim, complaint, charge
or investigation has been filed or is pending against the Company or its
Subsidiaries;
(m) No investigation or citation of the Company or its Subsidiaries is
pending and no enforcement proceeding has been initiated or is pending or
threatened under federal or foreign immigration law;
(n) Neither the Company nor any Subsidiary has taken any action that
would constitute a "mass layoff", "mass termination" or "plant closing"
within the meaning of the United States Worker Adjustment and Retraining
Notification Act ("WARN") or otherwise trigger notice requirements or
liability under any federal, local, state or foreign plant closing notice
or collective dismissal law or failed to comply with those laws;
(o) No wrongful discharge, retaliation, libel, slander or other claim,
complaint, charge or investigation that arises out of the employment
relationship between the Company or any Subsidiary and its respective
employees has been filed or is pending or, to the Company's knowledge,
threatened against the Company or its Subsidiaries under any applicable
law;
(p) The Company and its Subsidiaries have maintained and currently
maintain adequate insurance as required by applicable law with respect to
workers' compensation claims and unemployment benefits claims;
(q) The Company and its Subsidiaries are in material compliance with
all applicable laws, regulations and orders and all contracts or collective
bargaining agreements governing or concerning labor relations, union and
collective bargaining, conditions of employment, employment discrimination
and harassment, wages, hours or occupations safety and health, including,
without limitation, the Immigration Reform and Control Act of 1986, the
National Labor Relations Act, the Civil Rights Acts of 1866 and 1964, the
Equal Pay Act, ADEA, ADA, FMLA, WARN, the Occupational Safety and Health
Act, the ▇▇▇▇▇-▇▇▇▇▇ Act, the ▇▇▇▇▇-▇▇▇▇▇ Act, the Service Contract Act,
Executive Order 11246, FLSA, Section 1981 and the Rehabilitation Act of
1973 and all regulations under such acts (collectively, the "Labor Laws");
21
(r) Neither the Company nor any Subsidiary is liable for any material
liabilities, judgments, decrees, orders, arrearage of wages or taxes, fines
or penalties for failure to comply with any of the Labor Laws, except where
any such liability would not have a Company Material Adverse Effect;
(s) The Company and its Subsidiaries have provided Parent with a copy
of their policy for providing leaves of absence under the FMLA; and
(t) The Company and its Subsidiaries have paid or accrued all current
assessments under workers' compensation legislation, and neither the
Company nor any Subsidiary has been subject to any special or penalty
assessment under such legislation which has not been paid.
SECTION 3.17. Environmental Compliance and Disclosure. Except as set
forth in Section 3.17 of the Company Disclosure Letter:
(a) Each of the Company and its Subsidiaries has filed all notices or
other information that are required under all Environmental Laws (as
hereinafter defined) applicable to the Company or any Subsidiary. Each of
the Company and its Subsidiaries possesses, and is in material compliance
with, all permits, licenses, consents, and any other governmental
authorizations or approvals (hereinafter "Environmental Permits") required
under Environmental Laws. The Company and each of its Subsidiaries is in
material compliance with all applicable limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules
and timetables contained in those Environmental Permits or contained in any
Environmental Laws, including, but not limited to, with respect to the use,
storage, treatment, manufacture, generation, disposal and handling of
Hazardous Materials (as hereinafter defined);
(b) Neither the Company nor any Subsidiary has received notice of
actual, pending or, to the knowledge of the Company, threatened Litigation,
or any judgments, orders, injunctions, decrees, stipulations or awards
(whether rendered by a court, administrative agency, or by arbitration or
other procedure), including liability under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Resource
Conservation and Recovery Act ("RCRA") or any other Environmental Laws,
from any governmental agency or any third party and, to the knowledge of
the Company, there are no facts or circumstances which could form the basis
for the assertion of any claim against the Company or any Subsidiary under
any Environmental Laws including, without limitation, CERCLA and RCRA, with
respect to any on-site or off-site location;
(c) Except as set forth in Section 3.17 of the Company Disclosure
Letter no Hazardous Materials have ever been, are being, or, to the
knowledge of the Company, are threatened to be, spilled, released,
discharged, disposed, placed or otherwise caused to become located in
buildings or the soil, sub-surface strata, air, water or ground water
under, or upon any plant, facility, site, area or property currently or
previously owned or leased by the Company or any Subsidiary or on which the
Company or any Subsidiary is conducting or has conducted its business or
operations in material violation of Environmental Laws and as a result of
the business or operations of the Company or any Subsidiary;
(d) Neither the Company nor any Subsidiary has entered into or agreed
to, nor does it contemplate entering into, any consent decree or order, and
neither the Company nor any Subsidiary is subject to any judgment, decree
or judicial or administrative order relating to compliance with, or the
cleanup of Hazardous Materials under, any applicable Environmental Laws;
(e) Neither the Company nor any Subsidiary has been subject to any
administrative or judicial proceeding pursuant to and, to the knowledge of
the Company, has not been alleged to be in violation of, applicable
Environmental Laws either now or any time during the past five (5) years;
(f) Neither the Company nor any Subsidiary has received notice that it
is subject to any claim, obligation, liability, loss, damage or expense of
whatever kind or nature, contingent or otherwise, incurred or imposed or
based upon any provision of any Environmental Laws and arising out of any
act or omission of the Company or any Subsidiary, its employees, agents or
representatives or, to the
22
knowledge of the Company, arising out of the ownership, use, control or
operation by the Company or any Subsidiary of any plant, facility, site,
area or property (including, without limitation, any plant, facility, site,
area or property currently or previously owned or leased by the Company or
any Subsidiary) or any other area on which the Company or any Subsidiary is
conducting or has conducted its business or operations from which any
Hazardous Materials were released into the environment (the term "release"
meaning any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment, and the term "environment" meaning any surface or ground
water, drinking water supply, soil, surface or subsurface strata or medium,
or the ambient air) and there is no basis for any such notice and, to the
knowledge of the Company, none are threatened or foreseen;
(g) The Company has heretofore provided or made available to Parent
true, correct and complete copies of all material files and, to the
Company's knowledge, other material information in the possession of the
Company and each Subsidiary relating to environmental matters. Neither the
Company nor any Subsidiary has paid any fines, penalties or assessments
within the last five (5) years with respect to environmental matters; and
(h) None of the assets owned by the Company or any Subsidiary or any
real property leased by the Company or any Subsidiary contain any
underground storage tanks, any friable asbestos, dioxins, or lead paint in
such quantities that would require removal or remediation or that would
constitute a material violation of Environmental Laws, or any regulated
polychlorinated biphenyls ("PCBs"), except for those PCBs contained in
electrical transformers owned by a third party.
As used in this Section 3.17, the term "Environmental Laws" means any and
all laws (including without limitation statutes, regulations, and common law) of
the United States, any state or political subdivision thereof, or any other
nation or political subdivision, for the protection of the environment or human
health and safety, including without limitation, judgments, awards, decrees,
regulations, rules, standards, requirements, orders and permits issued by any
court, administrative agency or commission or other Governmental Entity under
such laws, and shall include without limitation CERCLA (42 USC sec.sec. 9601 et
seq.), the Clean Air Act (42 USC sec.sec. 7401 et seq.), RCRA (42 USC sec.sec.
6901 et seq.), the Clean Water Act (33 USC sec.sec. 1251 et seq.), OSHA (29
U.S.C. sec.sec. 651 et seq.), the Toxic Substance Control Act (15 USC sec.sec.
2601 et seq.), and the Safe Drinking Water Act (42 USC sec.sec. 300f et seq.).
As used in this Section 3.17, the term "Hazardous Materials" means any
waste, pollutant, hazardous substance, toxic, radioactive, ignitable, reactive
or corrosive substance, hazardous waste, special waste, controlled waste,
industrial substance, by-product, process intermediate product or waste,
petroleum or petroleum-derived substance or waste, chemical liquids or solids,
liquid or gaseous products, or any constituent of any such substance or waste,
the use, handling or disposal of which is in any way governed by or subject to
any Environmental Law, rule or regulation of any Governmental Entity.
SECTION 3.18. Intellectual Property.
(a) Section 3.18(a) of the Company Disclosure Letter sets forth a true
and complete list of: (i) all United States and foreign patents, trademark,
service ▇▇▇▇ and copyright registrations and applications for any of the
above, and material trademarks, trade names, service marks and copyrights
owned by the Company and its Subsidiaries (the "Intellectual Property
Rights") and (ii) all United States and foreign patents, trademarks, trade
names, service marks and copyrights licensed to the Company or any of its
Subsidiaries (the "Licensed Rights"). Except as set forth on Section
3.18(a) of the Company Disclosure Letter, neither the Company nor any
Subsidiary has (i) any unpatented inventions which have been the subject of
a patent application, (ii) any material copyrightable works of authorship
which have not been the subject of a copyright registration or application
therefor, including but not limited to software code, manuals and other
text works, photographs, video recordings, and audio recordings, or (iii)
any mask works. Prior to the date hereof, the Company has provided Parent
with reasonable access to the Company's and its Subsidiaries' material
trade secrets, proprietary information, databases and data. The Company
represents and warrants that, except as expressly set forth in Section
3.18(a) of the Company Disclosure Letter, (i) the Intellectual Property
23
Rights are free and clear of any liens, claims or encumbrances, are not
subject to any license (royalty bearing or royalty free) and are not
subject to any other arrangement requiring any payment to any person or the
obligation to grant rights to any person in exchange; (ii) the Licensed
Rights are free and clear of any liens, claims, encumbrances, royalties or
other obligations; and (iii) the Intellectual Property Rights and the
Licensed Rights are all such material rights necessary to the conduct of
the business of each of the Company and its Subsidiaries as presently
conducted. Except as set forth in Section 3.18(a) of the Company Disclosure
Letter, the validity of the Intellectual Property Rights and title thereto
and the validity of the Licensed Rights, (i) have not been challenged in
any prior Litigation; (ii) are not being challenged in any pending
Litigation to which the Company or any Subsidiary is a party or is
otherwise bound; and (iii) to the knowledge of the Company, are not the
subject(s) of any threatened or proposed Litigation. The business of each
of the Company and its Subsidiaries, as presently conducted, does not
conflict with and, to the knowledge of the Company, has not been alleged to
conflict with any patents, trademarks, trade names, service marks,
copyrights or other intellectual property rights of others. The
consummation of the transactions contemplated hereby will not result in the
loss or material impairment of any of the Intellectual Property Rights or
the Company's or its Subsidiaries' right to use any of the Licensed Rights.
To the Company's knowledge, there are no third parties using any of the
Intellectual Property Rights material to the business of the Company or its
Subsidiaries as presently conducted, except as expressly authorized by the
Company.
(b) Each of the Company or one or more of its Subsidiaries owns, or
possesses sufficiently broad and valid rights to, each computer software
program that is material to the conduct of the business of the Company and
its Subsidiaries. There are no infringement suits, actions or proceedings
pending or, to the knowledge of the Company, threatened against the Company
or any Subsidiary with respect to any software owned or licensed by the
Company or any Subsidiary. Section 3.18(b) of the Company Disclosure Letter
includes a complete and accurate list of all owned and licensed software
used by the Company or any Subsidiary.
(c) Each of the electronic data processing, communications,
telecommunications, reservation systems disaster recovery services and
other computer systems used in connection with the business of the Company
and its Subsidiaries (collectively, the "Technology Systems") is
functioning in all material respects as designed and, to the knowledge of
the Company, is adequate in all material respects for its intended use and
for the conduct of the business. Such Technology Systems shall continue to
be available to service the business after the Closing. There are no
material malfunctions or design failures with respect to any of the
Technology Systems. Except as set forth in Section 3.18(c) of the Company
Disclosure Letter, all of the Technology Systems have written support
agreements in place that are adequate to support and maintain the
Technology Systems. True, correct and complete copies of all such
agreements have been made available to Parent.
SECTION 3.19. Brokers. Except pursuant to the Independent Advisor
Engagement Letter (as hereinafter defined), a copy of which has been provided to
Parent solely for informational purposes, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement, the Merger or the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. Other
than the Independent Advisor Engagement Letter, there are no agreements between
the Company and the Independent Advisor pursuant to which such firm would be
entitled to any payment relating to this Agreement, the Merger or the other
transactions contemplated by this Agreement.
SECTION 3.20. Insurance Policies. The Company has delivered to Parent
prior to the date hereof a correct and complete list of all insurance policies
in force naming the Company, any of its Subsidiaries or employees thereof as an
insured or beneficiary or as a loss payable payee or for which the Company or
any Subsidiary has paid or is obligated to pay all or part of the premiums,
including, without limitation, all casualty, liability, and other real
estate-related insurance, all of which is listed on Section 3.20 of the Company
Disclosure Letter, together with all deductibles relating thereto. Except as
disclosed in Section 3.20 of the Company Disclosure Letter, all premiums for
such policies and other amounts due in
24
connection therewith have been paid in full. Complete and correct copies of all
premium notices and all renewal notices for such policies received by the
Company or any Subsidiary since January 1, 2001 have been delivered to Parent.
All policies are issued by reputable and financially sound insurers and provide
adequate coverage for the business of the Company in accordance with customary
and sound practice for hotel product of the class maintained by the Company in
its respective jurisdiction. Neither the Company nor any Subsidiary has received
notice of any pending or threatened cancellation or premium increase
(retroactive or otherwise) with respect thereto, and each of the Company and the
Subsidiaries is in compliance in all material respects with all conditions
contained therein. Except as set forth in Section 3.20 of the Company Disclosure
Letter, there are no pending claims against such insurance policies by the
Company or any Subsidiary as to which insurers are defending under reservation
of rights or have denied liability, and there exists no material claim under
such insurance policies that has not been properly filed by the Company or any
Subsidiary.
SECTION 3.21. Notes and Accounts Receivable.
(a) Except as disclosed in Section 3.21(a) of the Company Disclosure
Letter, there are no notes receivable of the Company or any Subsidiary owing by
any director, officer, shareholder, Franchisee or employee of the Company or any
Subsidiary.
(b) Except as disclosed in Section 3.21(b) of the Company Disclosure
Letter, all accounts and notes receivable of the Company and any Subsidiary are
current or covered by adequate reserves for uncollectibility, and there are no
material disputes regarding the collectibility of any such accounts receivable.
(c) Except as described on Section 3.21(c) of the Company Disclosure
Letter, no accounts or notes receivable or any interest of the Company or any
Subsidiary therein is subject to any outstanding agreements of sale, options or
other rights of third parties to acquire any interest therein, nor have any of
the same been collaterally assigned, pledged, liened, hypothecated, encumbered,
or transferred as security or otherwise.
SECTION 3.22. Transactions with Affiliates. Except as set forth in Section
3.22 of the Company Disclosure Letter (other than compensation and benefits
received in the ordinary course of business as an employee or director of the
Company or its Subsidiaries), no director, officer or other "affiliate" or
"associate" (as such terms are hereinafter defined) of the Company or any
Subsidiary or any entity in which, to the knowledge of the Company, any such
director, officer or other affiliate or associate, owns any beneficial interest
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by any such person) has any interest in:
(i) any contract, arrangement or understanding with, or relating to the business
or operations of Company or any Subsidiary; (ii) any loan, arrangement,
understanding, agreement or contract for or relating to indebtedness of the
Company or any Subsidiary; or (iii) any property (real, personal or mixed),
tangible, or intangible, used or currently intended to be used in, the business
or operations of the Company or any Subsidiary.
SECTION 3.23. No Existing Discussions. As of the date hereof, neither the
Company, any Subsidiary, their respective affiliates, nor any of their
respective advisors, is engaged, directly or indirectly, in any negotiations or
discussions with any other party with respect to an Acquisition Proposal (as
hereinafter defined).
SECTION 3.24. Franchising Matters.
(a) Disclosure Documents. The Company's and/or any Subsidiaries' (for
purposes of this Section 3.24, collectively referred to as the "Franchisor")
past and present franchise disclosure documents and/or franchise offering
circulars (collectively "FOCs") utilized for any area franchises, individual
franchises, any other type of franchise the Franchisor offers, and/or, if
applicable, any licenses (for purposes of this Section 3.24, the franchises or
licenses thereunder are collectively referred to as "Franchises" and the
franchisees party to such Franchises are collectively referred to as
"Franchisees") in effect as of the date hereof: (i) materially comply and have
materially complied with all applicable United
25
States Federal Trade Commission ("FTC") franchise disclosure regulations, any
other applicable foreign or federal laws and regulations, and state franchise
and business opportunity sales laws and regulations; (ii) include and accurately
state all material information (including but not limited to the discussion of
litigation matters) set forth in them; (iii) do not omit any information that
would render the statements therein materially misleading; (iv) accurately state
the Franchisor's position as to whether it provides to prospective area or
individual franchisees "earnings claims" information (as that term is defined in
the FTC's franchise disclosure regulations and the North American Securities
Administrators Association's current Uniform Franchise Offering Circular
Guidelines); (v) have been timely revised to reflect any material changes or
developments in the Franchisor's franchise system, agreements, operations,
financial condition, litigation matters, or other matters requiring disclosure
under any applicable foreign, federal, or state law; and (vi) include all
material documents (including but not limited to audited financial statements
for the Franchisor) required by any applicable foreign, federal, or state law to
be provided to prospective franchisees.
(b) Franchise and License Agreements. The Franchisor's past and present
agreements with its Franchisees: (i) materially comply with applicable foreign,
federal, or state laws and regulations; (ii) do not include provisions that
would prevent or otherwise impair the Franchisor's ability to undergo a change
in ownership or control; (iii) do not obligate the Franchisor to buy back or
otherwise acquire the stock, assets, or contractual rights of Franchisees; (iv)
do not impose on the Franchisor an obligation to guarantee the lease
obligations, third party financing obligations, or other material obligations to
third parties of the Franchisees; and (v) impose on Franchisees an obligation to
comply with all applicable federal, state, and local laws and regulations.
Franchisor's current form franchise agreements are attached to its 2001 Uniform
FOC's. Except as set forth in Section 3.24(b) of the Company Disclosure Letter,
Franchisor has made no material commitments (whether oral or written) to
Franchisees not specifically stated in the agreements listed in Section 3.13 of
the Company Disclosure Letter.
(c) Registration and Disclosure Compliance. Except as set forth in Section
3.24(c) of the Company Disclosure Letter, all of the currently effective
Franchises of the Franchisor have been sold in material compliance with
applicable foreign, federal, state, and/or local franchise disclosure and
registration requirements. As a result, except as set forth in Section 3.24(c)
of the Company Disclosure Letter, as to each current franchisee, sale, and to
the extent required by applicable law:
(i) each prospective franchisee was provided with any required FOC in
accordance with applicable law;
(ii) to the Company's knowledge, at least five (5) business days
before execution of any franchise agreements with the Franchisor governed
by U.S. law, each prospective franchisee was provided with a completed
execution copy of the Franchisor's area franchise agreement, individual
franchise agreement, or, if applicable, license agreement, respectively,
together with any related documents (e.g., spousal consent form, phone
transfer agreement, software license, security agreement, equipment lease,
national account agreement) with all pertinent specific information for
such prospective franchisee set forth in those agreements and documents;
(iii) each FOC provided to a prospective franchisee complied in all
material respects at the time of the delivery of such FOC with applicable
foreign, federal, state, and/or local laws regarding such franchise
offering circulars;
(iv) each of the Franchisor's required FOCs were either properly
registered with appropriate franchise regulatory authorities, covered by a
proper notice filing with appropriate franchise regulatory authorities, or
qualified for an exemption from such registration or notice filing
requirements;
(v) each of the Franchisor's offerings were, where applicable, either
properly registered with appropriate business opportunity sales authorities
or qualified for an exemption from such registration requirements;
(vi) the Franchisor obtained signed acknowledgments of receipt for the
delivery of each FOC to prospective area franchisees, individual
franchisees, and, if applicable, licensees;
26
(vii) to the extent that the Franchisor may have experienced lapses in
one or more jurisdictions for its registrations for area franchise
offerings, individual franchise offerings, and/or, if applicable, license
offerings, the Franchisor did not offer or sell during the period of any
such lapses any such area franchises, individual franchises, or, if
applicable, licenses (A) in those jurisdictions, (B) to be operated outside
those jurisdictions by residents of those jurisdictions, or (C) the sale of
which might otherwise have triggered the application of the franchise
registration laws of those jurisdictions during the periods of any such
lapse;
(viii) to the extent required by foreign, federal, state, and/or local
law, the Franchisor has substantially complied with all applicable
franchise advertising, and franchise sales broker filing requirements;
(ix) neither the Franchisor nor, to the knowledge of the Company,
after reasonable inquiry, any area franchisor or any of their employees,
sales agents, or sales brokers for area franchises, individual franchises,
or, if applicable, licenses, have provided information to prospective
Franchisees that materially differs from the information contained in the
FOCs provided to such prospects (including but not limited to "earnings
claim" information);
(x) the Franchisor has substantially complied with the requirements of
appropriate franchise regulatory authorities by filing amendments to its
FOCs to reflect any material changes or developments in the Franchisor's
franchise system, agreements, operations, financial condition, litigation
or other matters requiring disclosure; and
(xi) where required the Franchisor materially complied with foreign,
federal, state, and/or local laws requiring registration, disclosure,
and/or other compliance activities associated with any "material
modifications" made to the Franchisor's then current area franchises,
individual franchises, or, if applicable, licenses.
(d) Franchise and Related Litigation. The Franchisor's 2001 FOCs are the
most recent form of FOCs. The Franchisor has not received notice of any
threatened administrative, criminal and/or civil action against it and/or any
persons disclosed in Item II of the Franchisor's most recent applicable FOCs for
its area franchise agreement and individual franchise agreement where such
threatened administrative, criminal and/or material civil action alleges a
violation of a foreign and/or United States franchise, antitrust law, or
securities law, fraud, unfair or deceptive practices, or comparable allegations
as well as actions other than ordinary routine litigation incidental to the
Franchisor's business which are significant in the context of the number of the
Franchisor's franchisees and the size, nature, or financial condition of the
franchise system or its business operations.
(e) Advertising Fund. Except as set forth in Section 3.24(e) of the
Company Disclosure Letter, the Franchisor is not aware of any material
allegations that any of the expenditures from the Advertising Funds (as
hereinafter defined) have been unauthorized, paid to the Franchisor for anything
other than expressly permitted by the contractual provisions associated with the
Advertising Fund, or was otherwise improper. Franchisor has maintained and
administered any collective advertising funds comprised of money paid by
Franchisees ("Advertising Funds") in compliance with all applicable state,
national, and international laws. The only covenants or agreements governing the
Advertising Funds are contained in the franchise agreements.
(f) Franchise Terminations. Since 1991, to the knowledge of the Company,
after reasonable inquiry, the Franchisor's termination of or effort to terminate
or refusal to renew any Franchisee has materially complied with applicable
foreign, federal, state, and/or local franchise termination laws and
regulations, including, without limitation, but not limited to, having provided
any such Franchisee involved in such a nonrenewal or termination any statutorily
required notice and opportunity to cure. Since 1991, the Franchisor has complied
with all other applicable foreign, federal or state laws and/or regulations
relating to ongoing franchise relationships, the termination of such
relationships, and/or the non-renewal of such relationships.
27
(g) Defaults. Except as set forth in Section 3.24(g) of the Company
Disclosure Letter, the Franchisor is not in default on any area franchise
agreement, individual franchise agreement or license agreement with any current
Franchisee, and a true, correct and complete list of all such agreements with
Company affiliates is set forth in Section 3.24(g) of the Company Disclosure
Letter, none of which have been collaterally assigned, pledged, liened,
hypothecated, encumbered, or transferred as security or otherwise, and all of
the same are in full force and effect. Except as set forth in Section 3.24(g) of
the Company Disclosure Letter, no current franchisee, is in default of any area
franchise agreements, individual franchise agreements or licenses and neither
the Franchisor nor any current franchisee has purported to terminate any of the
foregoing. Except as set forth in Section 3.24(g) of the Company Disclosure
Letter, there have been no fees received by Franchisor pursuant to an area
franchising agreement, franchise agreement, or license (if applicable) that are,
or will be after the consummation of this transaction, subject to a claim of
refund.
Section 3.25. Major Suppliers, Customers and Franchisees.
(a) Section 3.25(a) of the Company Disclosure Letter sets forth a list of
each supplier of goods or services to Company and the Subsidiaries to whom the
Company and the Subsidiaries paid in the aggregate more than $50,000 during the
12-month period ended December 31, 2001 (each a "Major Supplier" and,
collectively, "Major Suppliers"), together with in each case the amount paid
during such period. Except as set forth in Section 3.25(a) of the Company
Disclosure Letter, neither the Company nor any Subsidiary is engaged in any
material dispute with any Major Supplier and, to the knowledge of the Company,
no Major Supplier intends to terminate, limit or reduce its business relations
with the Company or any Subsidiary. Except as set forth in Section 3.25(a) of
the Company Disclosure Letter, the Company has no reason to believe that the
consummation of the transactions contemplated hereunder will have any material
adverse effect on the business relationship of the Company or any Subsidiary
with any Major Supplier. Except as set forth in Section 3.25(a) of the Company
Disclosure Letter, none of the officers or directors of the Company or any
Subsidiary, or any "affiliate" or "associate" of any officer or director of the
Company or any Subsidiary, or any company or other organization in which any
officer or director of the Company or any Subsidiary or any "affiliate" or
"associate" of any officer or director of the Company or any Subsidiary has a
direct or indirect or indirect financial interest, has any financial interest in
any Major Supplier of the Company or any Subsidiary (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any such persons).
(b) Section 3.25(b) of the Company Disclosure Letter sets forth a list of
each corporate customer which accounted for net revenue to the Company and the
Subsidiaries in the aggregate of more than $50,000 during the 12-month period
ended November 30, 2001 or December 31, 2001 (as reflected in Section 3.25(b) of
the Company Disclosure Letter) (each a "Major Customer" and, collectively,
"Major Customers") together with, in each case, the amount of net revenue
produced during such period. Except as set forth in Section 3.25(b) of the
Company Disclosure Letter, neither the Company nor any Subsidiary is engaged in
any material dispute with any Major Customer and, to the knowledge of the
Company, no Major Customer intends to terminate, limit or reduce its business
relations with the Company or any Subsidiary. Except as set forth in Section
3.25(b) of the Company Disclosure Letter, the Company has no reason to believe
that the consummation of the transactions contemplated hereunder will have any
material adverse effect on the business relationship of the Company or any
Subsidiary with any Major Customer. Except as set forth in Section 3.25(b) of
the Company Disclosure Letter, none of the officers or directors of the Company
or any Subsidiary, or any "affiliate" or "associate" of any officer or director
of the Company or any Subsidiary, or any company or other organization in which
any officer or director of the Company or any Subsidiary or any "affiliate" or
"associate" of any officer or director of the Company or any Subsidiary has a
direct or indirect financial interest, has any financial interest in any Major
Customer of the Company or any Subsidiary (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any such persons).
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(c) Section 3.25(c) of the Company Disclosure Letter sets forth a correct
and complete list of the Company's and each Subsidiaries' franchisees, and a
correct and complete list of the applicable renewal or termination date under
the applicable franchise agreement for each such franchisee. Except as set forth
in Section 3.25(c) of the Company Disclosure Letter, no Franchisee of the
Company or any of its Subsidiaries during the current calendar year has notified
the Company or any Subsidiary that it will alter its relationship with the
Company or its Subsidiaries, or notified the Company or any Subsidiary that it
has filed or intends to file suit in connection with such relationship, or
notified the Company or any Subsidiary of any other dispute that such franchisee
has with respect to such relationship.
SECTION 3.26. Hotel Matters.
(a) The Company has, except as set forth in Section 3.26(a) of the Company
Disclosure Letter, timely and correctly accounted for any and all customer
deposits and any and all guest related charge backs in all material respects,
pursuant to the laws of the applicable jurisdiction.
(b) Section 3.26(b) of the Company Disclosure Letter sets forth a correct
and complete listing of any advance reservations for guest rooms in the Company
Properties as of the dates specified therein (collectively, "Advance Reservation
Information").
SECTION 3.27. Disclosure. No representation or warranty made by the
Company in this Agreement or in the Company Disclosure Letter contains an untrue
statement of a material fact or omits to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein, in the circumstances in which they were made, not misleading. The
information and disclosures contained in each section of the Company Disclosure
Letter shall be deemed to be a part of, and qualify, the particular
representation or warranty to which such section expressly relates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF HOLDING, PARENT AND SUB
Each of Holding, Parent and Sub jointly and severally represents and
warrants to the Company as follows:
SECTION 4.1. Organization and Standing. Such person (a) is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, (b) has all
requisite corporate or other power and authority to own, lease and operate its
properties and assets and to conduct its business as presently conducted and (c)
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except where the failure to be in good standing or so
qualified or licensed would not, individually or in the aggregate, have a
material adverse effect on Holding, Parent or Sub, as applicable.
SECTION 4.2. Authority for Agreement. Such person has all necessary
corporate or other power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Merger and the other
transactions contemplated by this Agreement. The execution, delivery and
performance by such person of this Agreement, and the consummation by each such
person of the Merger and the other transactions contemplated by this Agreement,
have been duly authorized by all necessary corporate or other action and no
other corporate or other proceedings on the part of such person are necessary to
authorize this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement (other than, with respect to the Merger, the
filing and recordation of appropriate merger documents as required by the GBCC).
This Agreement has been duly executed and delivered by such person and, assuming
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each such person, enforceable against such
person in accordance with its terms.
29
SECTION 4.3. No Conflict. The execution and delivery of this Agreement by
such person do not, and the performance of this Agreement by such person and the
consummation of the Merger and the other transactions contemplated by this
Agreement will not, (i) conflict with or violate the articles of incorporation
or bylaws or other organizational documents (as applicable) of such person, (ii)
conflict with or violate any Law applicable to such person or by which any
property or asset of such person is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, give to others any right of
termination, amendment, acceleration or cancellation of, result in triggering
any material payment obligation (other than pursuant hereto) or result in the
creation of a lien or other encumbrance on any property or asset of such person
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which such
person is a party or by which such person or any property or asset of either of
them is bound or affected, except in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which would
not, individually or in the aggregate, prevent or materially delay the
performance by such person of its respective obligations under this Agreement or
the consummation of the Merger or the other transactions contemplated by this
Agreement.
SECTION 4.4. Required Filings and Consents. The execution and delivery of
this Agreement by each of Holding, Parent and Sub do not, and the performance of
this Agreement by such person will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except (i) for applicable requirements, if any, of the Exchange Act,
Blue Sky Laws and filing and recordation of appropriate merger documents as
required by the GBCC, (ii) for filings contemplated by Section 3.14, and (iii)
where failure to obtain any such consents, approvals, authorizations or permits,
or to make any such filings or notifications, would not, individually or in the
aggregate, prevent or materially delay the performance by such person of any of
its respective obligations under this Agreement or the consummation of the
Merger or the other transactions contemplated by this Agreement.
SECTION 4.5. Information Supplied. None of the information supplied or to
be supplied by such person for inclusion or incorporation by reference in the
Proxy Statement will, at the date such document is first published, sent or
delivered to Company Shareholders or, unless promptly corrected, at any time
during the pendency of the Shareholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, no representation or warranty is made by such person with respect
to statements made or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by reference in the
foregoing document.
SECTION 4.6. Brokers. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose fees and
expenses are the sole responsibility of Holding, Parent and Sub, no broker,
finder, investment banker or other person is entitled to any brokerage,
financial advisor's, finder's or other similar fee or commission payable by such
person in connection with this Agreement, the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Holding, Parent or Sub.
SECTION 4.7. Financing. Either Holding, Parent or Sub has available and
has reserved, or has received written commitments from third-party lenders to
obtain, subject to the terms and conditions contained therein (the "Financing
Commitments"), together with cash to be acquired from the Company in connection
with the Merger, all of the funds necessary to consummate the Merger, including,
the payment in full of the Cash Merger Consideration and the Total Cash Option
Consideration in accordance with the terms of Article I, hereof and to pay all
of its fees and expenses related to the transactions contemplated by this
Agreement. Such Financing Commitments have not been amended, except for such
amendments in writing that have previously been provided to the Company, or
rescinded, and remain in full force and effect as of the date hereof. None of
such persons is aware of any facts or circumstances that create a reasonable
basis for any such persons to believe it will not be able to obtain financing in
accordance with the Financing Commitments.
30
SECTION 4.8. No Prior Activities. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement, the Merger and the transactions contemplated
hereby, Sub has not incurred any obligations or liabilities, and has not engaged
in any business or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person or entity.
SECTION 4.9. Disclosure. No representation or warranty made by such
person in this Agreement contains an untrue statement of a material fact or
omits to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not misleading.
SECTION 4.10. Litigation. There is no Litigation pending or, to the
knowledge of such party, threatened against such party before or by any
Governmental Entity that questions the validity of this Agreement, or any action
to be taken by such person in connection with the consummation of the Merger, or
would otherwise prevent or delay the consummation of the Merger.
ARTICLE V
COVENANTS
SECTION 5.1. Conduct of the Business Pending the Merger.
(a) The Company covenants and agrees that between the date of this
Agreement and the Effective Time, without Parent's prior written consent (which
consent or denial shall not be unreasonably delayed) and except as otherwise
contemplated or authorized by this Agreement, (i) the business of the Company
and its Subsidiaries shall be conducted only in, and the Company and its
Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with prior practice; (ii) the Company and
its Subsidiaries shall use commercially reasonable efforts to preserve intact
their business organizations, to keep available the services of their current
officers and employees and to preserve the current relationships of the Company
and its Subsidiaries with customers, suppliers and other persons with which the
Company or its Subsidiaries has material business relations; (iii) the Company
and its Subsidiaries will comply in all material respects with all applicable
Laws and regulations wherever its business is conducted, including, without
limitation, the timely filing of all reports, forms or other documents with the
SEC required pursuant to the Securities Act or the Exchange Act; (iv) the
Company will not take any action or fail to take any action, the taking of which
or the failure of which to take would have, either individually or in the
aggregate, a material adverse impact on the assets or financial condition of the
Company as reflected on the balance sheet of the Company as of September 30,
2001 (disregarding, for purposes of this Section 5.1(a)(iv), any such adverse
impact resulting from seasonal trends or changes in the economy or the hotel
industry generally and any other adverse effect that would be disregarded for
purposes of determining whether a Company Material Adverse Effect has occurred
pursuant to the definition thereof set forth in Section 8.11(b) hereof); (v) the
Company will continue to operate its properties (including by expending money
for repairs, maintenance and replacements) in a manner consistent with the
operating and capital budgets of the Company for 2002, complete and accurate
copies of which are included in Section 5.1(a) of the Company Disclosure Letter;
and (vi) the Company will continue to make adequate reserves on its balance
sheet for Tax liabilities that accrue through the Closing Date consistent with
the past custom and practice of the Company and its Subsidiaries in filing their
Tax Returns.
(b) The Company covenants and agrees that between the date of this
Agreement and the Effective Time, the Company shall not, nor shall the Company
permit any of its Subsidiaries to, (i) declare or pay any dividends on or make
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, except for purposes of effectuating the Divestiture (as
hereinafter defined), and dividends by a wholly owned Subsidiary of the Company
to the Company or another wholly owned Subsidiary of the Company (including,
without limitation, any direct or indirect distributions of or in respect of
amounts received in connection with any sale, transfer or other disposition of
any of the Unacquired Assets);
31
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire any shares of its capital stock; (iv) issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of its
capital stock or any securities convertible into any such shares of its capital
stock, or any rights, warrants or options to acquire any such shares or
convertible securities or any stock appreciation rights, phantom stock plans or
stock equivalents, other than the issuance of shares of Company Common Stock
upon the exercise of Company Options outstanding as of the date of this
Agreement; (v) amend the Company Rights Plan except as necessary to comply with
the provisions of this Agreement; (vi) modify or adjust any Company Options or
other options to acquire shares of Company Common Stock except as necessary to
comply with the provisions of this Agreement; or (vii) subject to Sections 5.5
and 5.9 hereof, take any action that would, or could reasonably be expected to,
result in any of the conditions set forth in Article VI not being satisfied.
(c) Except as expressly contemplated or authorized by this Agreement or as
set forth on Section 5.1(c) of the Company Disclosure Letter, the Company
covenants and agrees that between the date of this Agreement and the Effective
Time, without the prior written consent of Parent (which consent or denial shall
not be unreasonably delayed), the Company shall not, nor shall the Company
permit any of its Subsidiaries to, (i) amend its articles of incorporation or
bylaws or other equivalent organizational documents; (ii) create, assume or
incur any indebtedness for borrowed money or guaranty any such indebtedness of
another person, other than indebtedness owing to, or guaranties of indebtedness
owing to, the Company; (iii) make any loans or advances to any other person
other than loans or advances between any Subsidiaries of the Company or between
the Company and any of its Subsidiaries; (iv) sell, transfer, assign, mortgage,
pledge, lease or otherwise dispose of any of its assets or properties, or permit
any of its property, business or assets to be subject to any mortgage, lien,
security interest, deed to secure debt, deed of trust or other encumbrance,
restriction or charge of any kind, or enter into, amend, or cancel any
agreement, contract, commitment or arrangement for any of the foregoing, or
cause or allow any of the foregoing to occur; (v) merge or consolidate with any
other entity in any transaction, or sell any business or assets in a single
transaction or series of transactions; (vi) change its accounting policies
except as required by GAAP or applicable Law; (vii) amend or terminate any
existing employment, severance, consulting, or other compensation agreement or
arrangement or enter into any new employment, severance, consulting or other
compensation agreement or arrangement or increase in any manner the base
compensation of, or enter into any new bonus or incentive agreement with any
directors or officers of the Company; (viii) amend or terminate any existing
employment, severance, consulting, or other compensation agreement or
arrangement (other than documented terminations for cause in material compliance
with applicable laws) or enter into any new employment, severance, consulting or
other compensation agreement or arrangement (other than any at-will employment
arrangement to fill an employment vacancy for the same general compensation and
benefits as the predecessor employee) or increase in any manner the base
compensation of, or enter into any new bonus or incentive agreement with any
non-officer employees or consultants; (ix) adopt, amend or terminate any Company
Benefit Plan or increase the benefits provided under any Company Benefit Plan or
make any promise or commitment to undertake any of the forgoing in the future,
except as required by applicable Law; (x) amend any existing collective
bargaining agreement or enter into a new collective bargaining agreement; (xi)
amend or cancel or agree to the amendment or cancellation of any Material
Contract (other than agreements with customers in the ordinary course of
business); (xii) renew any Material Contract (other than agreements with
customers in the ordinary course of business), or enter into any new contract,
agreement or commitment, that, in each case, is not terminable by the Company
upon 30 days notice (or less) without a fee or other penalty to the Company
(including, without limitation any contract, commitment or agreement to acquire
additional Technology Systems); provided, however, that this clause (xii) shall
not prohibit the Company from entering into any new franchise agreement with any
new or existing Franchisees substantially in the form of the agreements attached
to the Company's 2001 FOCs; (xiii) pay, loan or advance (other than the payment
of compensation, directors' fees or reimbursement of expenses in the ordinary
course of business) any amount to, or market, sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or intangible) to, or
enter into any agreement with, any of its officers or
32
directors or any "affiliate" or "associate" of any of its officers or directors;
(xiv) except to the extent contemplated by the transactions described in Section
5.16, form or commence the operations of any business or any corporation,
partnership, joint venture, business association or other business organization
or division thereof; (xv) file any Tax Returns or make any tax election (in each
case other than in the ordinary course of business consistent with past
practice) or settle or compromise any tax liability involving amounts in excess
of $50,000 in the aggregate; (xvi) pay, discharge, settle or satisfy any claims,
litigation, or any lien, in each case, involving amounts in excess of $50,000 in
the aggregate; provided that the Company shall remedy and satisfy (i.e., not
bond over) prior to Closing, in a fashion approved by the Parent in the Parent's
reasonable discretion, all Company Cure Items (without regard to the dollar
limitations set forth in this clause (xvii)), including all "standard
exceptions" and mechanic's, materialmen's and similar liens, so as to cause none
of the title policies delivered at Closing to have any exceptions for any
Company Cure Items); (xviii) pay, discharge or satisfy any liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), charge or encumbrance, in each case, involving amounts paid to a
single recipient in excess of $50,000 individually, and $150,000 in the
aggregate; (xix) acquire any real property or Personal Property, other than
acquisitions of Personal Property that are in the ordinary course of business
and consistent with past practice; (xx) fail to timely and correctly account for
any and all customer deposits and any and all guest related charge backs; and
(xxi) commit or agree to take any of the actions described in this Section
5.1(c); provided, however, that Parent's prior written consent may not be
unreasonably withheld in connection with the covenants set forth in Sections
5.1(c)(viii), 5.1(c)(xi) or 5.1(c)(xii) hereof. Further, Parent acknowledges
that its consent rights under Sections 5.1(a) and 5.1(c) are subject to the
implied duty of good faith, as applicable to contracts governed by Georgia law.
Notwithstanding anything in this Agreement to the contrary, Holding, Parent and
Sub agree that the Company may incur and pay reasonable fees, costs and expenses
in connection with consummation of the transactions contemplated by this
Agreement, and may maintain, administer and make expenditures from the
Advertising Funds.
(d) As soon as is reasonably practicable after the date hereof, the Company
shall deliver to its (i) executive officers, (ii) regional managers, (iii)
district managers and (iv) property level managers an explanation of the
operational limitations imposed by the provisions contained herein substantially
in the form of Exhibit 5.1(d).
SECTION 5.2. Access to Information; Confidentiality.
(a) To the extent permitted by applicable Law, from the date hereof to the
Effective Time, the Company shall, and shall cause the officers, directors,
employees, auditors, attorneys, financial advisors, lenders and other agents
(collectively, the "Representatives") of the Company to, afford the
Representatives of Holding, Parent and Sub reasonable access at all reasonable
times to the officers, employees, agents, properties, offices and other
facilities, books and records of the Company and its Subsidiaries, and shall
furnish Holding, Parent and Sub with all financial, operating and other data and
information as Holding, Parent or Sub, through its Representatives, may
reasonably request. Nothing in this Section 5.2 shall require the Company to
provide access to or disclose information where such access or disclosure would
(i) result in the loss of any attorney-client privilege or (ii) be prohibited by
any confidentiality or non-disclosure agreement binding on the Company or any
Subsidiary. The parties hereto shall make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of clause (i) of the
preceding sentence apply. The Company shall furnish to Holding, Parent and Sub
monthly financial and operating data and information of the Company and all
Subsidiaries normally prepared by the Company as promptly as possible, but in no
event later than twenty-five (25) days following the end of each calendar month.
Holding and the Company will remain subject to the terms of a confidentiality
agreement between Holding and the Company dated October 2, 2000 (the
"Confidentiality Agreement"), and by executing this Agreement, Parent and Sub
shall become a party to the Confidentiality Agreement and agree to be bound by
the terms thereof to the extent Holding is so bound.
(b) Without limiting the generality of the foregoing, the Company agrees
and acknowledges that, from and after the date hereof and until the earlier of
the Effective Time or the termination of this Agreement, Parent shall be
permitted, except to the extent it would expressly violate applicable Law, to
33
have a representative present at the Company or any Subsidiary for purposes of
assuring compliance with the terms of this Agreement. The Company shall have the
right to have one or more representatives present at all times of any
inspections, interviews and communications conducted by Parent or its
representatives pursuant to this Section 5.2. Any investigations, inspections,
interviews and communications pursuant to this Section 5.2 shall be reasonably
related to the transactions contemplated hereby and conducted in such manner as
not to interfere unreasonably with the conduct of the business of the Company
and its Subsidiaries.
(c) No investigation pursuant to this Section 5.2 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 5.3. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence, or nonoccurrence, of any event which would be reasonably
likely to cause any representation or warranty made by it contained in this
Agreement to be materially untrue or inaccurate (without giving effect to any
qualifier with respect to materiality (including "Company Material Adverse
Effect") contained therein) and (ii) any failure by such party (or Holding or
Sub, in the case of Parent) in any material respect to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.3 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice. If any event or matter arises after the date
of this Agreement which, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described in the Company Disclosure
Letter or which is necessary to correct any information in the Company
Disclosure Letter which has been rendered inaccurate thereby, then the Company
shall, for informational purposes only, promptly supplement, or amend, and
deliver to Parent the Company Disclosure Letter which it has delivered pursuant
to this Agreement.
SECTION 5.4. Reasonable Efforts; Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all appropriate action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement including, without limitation, using all commercially
reasonable efforts to obtain all licenses, permits, approvals, consents,
authorizations, qualifications and orders of each Governmental Entity and any
other third parties that are necessary, proper or advisable to consummate the
Merger and the transactions contemplated hereby (each a "Required Approval") and
to cause the conditions to Closing set forth in Article VI to be satisfied.
(b) Each of the parties hereto shall, in connection with the efforts
referenced in Section 5.4(a) to obtain all Required Approvals, use its
commercially reasonable efforts to (i) cooperate in all respects with each other
in connection with any filing or submissions and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, (ii) promptly inform the other party of any communication received by
such party from, or given by such party to, the Antitrust Division of the
Department of Justice (the "DOJ") or any other Governmental Entity and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, and (iii) promptly inform the other party of the timing and content of
any communications with the DOJ or any such other Governmental Entity or, in
connection with any proceeding by a private party, with any other person, and to
the extent permitted by the DOJ or such other applicable Governmental Entity or
other person, give the other party the opportunity to attend and participate in
such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 5.4(a) and 5.4(b), if any administrative or judicial
action or proceeding, including any proceeding by a private party, is instituted
(or threatened to be instituted) challenging any transaction contemplated by
this Agreement as violative of any Regulatory Law (as hereinafter defined), or
if any statute, rule, regulation, executive order, decree, injunction or
administrative order is enacted, entered, promulgated or enforced by a
Governmental Entity which would make the Merger or the transactions contemplated
hereby illegal or
34
would otherwise prohibit or materially impair or delay the consummation of the
Merger or the transactions contemplated hereby, each of the parties hereto shall
cooperate in all respects with each other and use its respective commercially
reasonable efforts to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any decree, judgment, injunction
or other action or order, whether temporary, preliminary or permanent, that is
in effect and that prohibits, prevents or restricts consummation of the Merger
or the transactions contemplated by this Agreement and to have such statute,
rule, regulation, executive order, decree, injunction or administrative order
repealed, rescinded or made inapplicable. Notwithstanding any provision of this
Agreement to the contrary, neither Parent nor the Surviving Corporation shall be
required under the terms of this Agreement to dispose of or hold separate all or
any portion of the businesses or assets of the Company or any of its
Subsidiaries or of Parent or any of its Subsidiaries in order to remedy or
otherwise address the concerns (whether or not formally expressed) of any
Governmental Entity under any antitrust statute or regulation. For purposes of
this Agreement, "Regulatory Law" means the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇
Act, as amended, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, the Federal Trade Commission Act, as amended, and all other Federal,
state and foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to regulate mergers, acquisitions or other business combinations.
(d) At and after the Effective Time, the officers and directors of the
Surviving Corporation and Parent will be authorized to execute and deliver, in
the name and on behalf of the Company, any deeds, bills of sale, assignments or
assurances and to take any other actions and do any other things, in the name
and on behalf of the Company, reasonably necessary to vest, perfect, or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
(e) In connection with, and without limiting the foregoing, the Company
shall (i) use commercially reasonable efforts to ensure that no state
anti-takeover statute or similar statute or regulation is or becomes operative
with respect to this Agreement, the Merger or any other transactions
contemplated by this Agreement or the Voting Agreement and (ii) if any state
anti-takeover statute or similar statute or regulation is or becomes operative
with respect to this Agreement, the Voting Agreement, the Merger or any other
transaction contemplated by this Agreement or the Voting Agreement, use its
commercially reasonable efforts to ensure that this Agreement, the Voting
Agreement, the Merger and any other transactions contemplated by this Agreement
or the Voting Agreement may be consummated as promptly as reasonably practicable
on the terms contemplated by this Agreement and the Voting Agreement and
otherwise to minimize the effect of such statute or regulation on the Merger and
the other transactions contemplated by this Agreement and the Voting Agreement.
(f) Without limiting the generality of the foregoing, the Company agrees to
use commercially reasonable efforts and to cooperate with Holding, Parent and
Sub for purposes of (i) obtaining all consents and/or notifications required in
connection with the transactions contemplated by this Agreement and continuation
of the Secured Debt, on terms no less favorable than the terms currently
applicable to the Company; (ii) obtaining an estoppel certificate substantially
in the form of Exhibit 5.4(f)(ii) hereto (the "Lender Estoppel") from all
lenders of Secured Debt (the "Secured Lenders"); (iii) obtaining consents and/or
notifications necessary to re-brand any Suburban branded assets as Intown Suites
branded assets; and (iv) providing for the termination and/or transfer of any or
all of the third party management agreements listed in Section 5.4(f) of the
Company Disclosure Letter, in each case upon or following the consummation of
the Merger. In addition, the Company acknowledges and agrees that Parent intends
to finance some or all of the Cash Merger Stock Consideration and the Total Cash
Option Consideration from one or more financing sources pursuant to the
Financing Commitments. Toward that end, the Company agrees to cooperate in good
faith and use commercially reasonable efforts to assist the Parent in obtaining
such financing.
(g) Without limiting the generality of the foregoing, the parties agree to
cooperate in good faith and use their commercially reasonable efforts to ensure
that each of Chicago Title Insurance Company and
35
LandAmerica Financial Group, Inc. (the "Title Companies") is prepared at the
Closing to issue with respect to the Company Properties a title insurance policy
(ALTA Owner's Title Insurance Policy -- Form B), and a corresponding lender's
title insurance policy, and all endorsements attached to the Title Documents in
accordance with each of the Title Documents subject only to the Permitted
Exceptions (upon receipt of its required title insurance premium and performance
of any actions necessary to be performed by Parent or the Company or the
Subsidiaries under or in connection with such Title Documents, execution and
delivery to the Title Companies of standard seller title affidavits and such
other usual and customary obligations such as delivery of organizational
documents, authorizing resolutions and consents, and evidence of good standing).
SECTION 5.5. Board Recommendations.
(a) In connection with the Merger and Shareholders' Meeting, the Board of
Directors of the Company shall (i) subject to Section 5.5(b), recommend to the
Shareholders that they vote in favor of the Merger and use all commercially
reasonable efforts to obtain the necessary approvals by the Company Shareholders
of this Agreement and (ii) otherwise comply with all legal requirements
applicable to such meeting.
(b) Neither the Board of Directors of the Company, nor any committee
thereof, shall, except as expressly permitted by this Section 5.5(b) (i)
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify,
in a manner adverse to Parent, the approval or recommendation of the Board of
Directors or such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any transaction
involving an Acquisition Proposal (as hereinafter defined) from a third party
(an "Alternative Transaction"), or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Alternative
Transaction. Notwithstanding the foregoing, if, prior to the approval of this
Agreement by the Company Shareholders, the Board of Directors of the Company
determines in good faith, after it has received a Superior Proposal (as
hereinafter defined) in compliance with Section 5.9 and after taking into
consideration advice from outside counsel with respect to its fiduciary duties
to Company Shareholders under applicable Georgia law, that such action is
required for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company Shareholders under applicable law, the Board of
Directors of the Company may (subject to this and the following sentences)
inform Company Shareholders and publicly announce that it no longer believes
that the Merger is advisable and no longer recommends approval (a "Subsequent
Determination") and enter into an Acquisition Agreement with respect to a
Superior Proposal and approve or recommend such Superior Proposal, but only at a
time that is after the third business day (or the second business day in the
case of a material amendment to a Superior Proposal) following Parent's receipt
of written notice advising Parent that the Board of Directors of the Company is
prepared to accept a Superior Proposal. Such written notice shall specify the
material terms and conditions of such Superior Proposal (and include a copy
thereof with all accompanying documentation, if in writing), identify the person
making such Superior Proposal and state that the Board of Directors of the
Company intends to make a Subsequent Determination. During such three (3)
business day period, the Company shall provide an opportunity for Parent to
propose such adjustments to the terms and conditions of this Agreement as would
enable the Board of Directors to proceed with its recommendation to its
shareholders without a Subsequent Determination. For purposes of this Agreement,
a "Superior Proposal" means any proposal (on its most recently amended or
modified terms, if amended or modified) made by a third party to enter into an
Alternative Transaction which the Board of Directors of the Company determines
in its good faith judgment (after receiving the advice of an independent
financial advisor) to be more favorable to the Company Shareholders than the
Merger from a financial point of view taking into account all relevant factors
(including whether, in the good faith judgment of the Board of Directors of the
Company (after receiving the advice of an independent financial advisor), the
third party is reasonably able to finance the transaction, and any proposed
changes to this Agreement that may be proposed by Parent in response to such
Alternative Transaction prior to the date of such determination).
36
(c) Nothing contained in this Section 5.5 or any other provision hereof
shall prohibit the Company or any member of the Board of Directors of the
Company from (i) taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act with respect to
a tender or exchange offer by a third party, or (ii) from making any disclosure
to the Company Shareholders if, in the good faith judgment of the Board of
Directors of the Company, or such member, after consultation with outside
counsel, failure so to disclose would be inconsistent with applicable Law;
provided, however, neither the Company, its Board of Directors or any committee
of the Board of Directors, shall, except as specifically permitted by Section
5.5(b), withdraw, qualify, or modify, or propose to withdraw, qualify or modify,
its position with respect to the Merger or this Agreement or approve or
recommend, or propose to approve or recommend an Alternative Transaction.
Subject to the first sentence of this Section 5.5(c), the taking and disclosure
of a position contemplated by Rule 14e-2(a)(2) and (3) promulgated under the
Exchange Act shall not constitute a withdrawal, qualification or modification of
the Company's position with respect to the Merger or this Agreement.
SECTION 5.6. Shareholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any shareholder
Litigation against the Company and its directors relating to the transactions
contemplated by this Agreement or the Merger; provided, however, that no such
settlement shall be agreed to without Parent's consent which consent will not be
unreasonably withheld.
SECTION 5.7. Indemnification.
(a) It is understood and agreed that all rights to indemnification by the
Company now existing in favor of each present and former director and officer of
the Company or its Subsidiaries (the "Indemnified Parties") as provided in the
Company Articles of Incorporation or the Company Bylaws, in each case as in
effect on the date of this Agreement, or pursuant to any other agreements in
effect on the date hereof, copies of which have been provided to Parent, shall
survive the Merger and Parent shall (i) cause the Surviving Corporation to
continue in full force and effect for a period of at least six (6) years from
the Effective Time and (ii) perform, or cause the Surviving Corporation to
perform, in a timely manner, the Surviving Corporation's obligations with
respect thereto. Parent and Sub agree that any claims for indemnification
hereunder as to which they have received written notice prior to the sixth
anniversary of the Effective Time shall survive, whether or not such claims
shall have been finally adjudicated or settled.
(b) Parent shall cause the Surviving Corporation to, and the Surviving
Corporation shall, maintain in effect for six (6) years from the Effective Time,
if available, the current directors' and officers' liability insurance policies
("D&O Insurance") for the benefit of those persons covered by such policies
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 5.7(b) more than an amount per year equal to
two hundred percent (200%) of current annual premiums paid by the Company for
such insurance (such amount, the "Maximum Premium"). In the event that, but for
the proviso to the immediately preceding sentence, the Surviving Corporation
would be required to expend more than two hundred percent (200%) of current
annual premiums, the Surviving Corporation shall obtain the maximum amount of
such insurance obtainable by payment of annual premiums equal to two hundred
percent (200%) of current annual premiums. If the Surviving Corporation elects
to reduce the amount of insurance coverage pursuant to the preceding sentence,
it will furnish to the officers and directors currently covered by such D&O
coverage reasonable notice of such reduction in coverage and shall, to the
extent additional coverage is available, afford such persons the opportunity to
pay such additional premiums as may be necessary to maintain the existing level
of D&O Insurance Coverage.
(c) If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall assume the obligations
set forth in this Section 5.7.
37
(d) The obligations set forth in this Section 5.7 shall be joint and
several obligations of Parent and the Surviving Corporation, and each of the
Company's current and former officers and directors who may be Indemnified
Parties or covered by the D&O Insurance shall be intended third party
beneficiaries thereof and shall be entitled to enforce such obligations directly
against Parent or the Surviving Corporation, as the case may be.
SECTION 5.8. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with a national
securities exchange or trading system to which Parent or the Company is a party.
The parties agree that the initial press release to be issued with respect to
the transactions contemplated by this Agreement will be as set forth in Exhibit
5.8 to this Agreement.
SECTION 5.9. Acquisition Proposals. The Company shall not, nor shall it
authorize or permit any of its Subsidiaries or Representatives to, directly or
indirectly, (a) solicit, initiate or encourage the submission of any Acquisition
Proposal or (b) participate in or encourage any discussion or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to knowingly facilitate any inquiries with respect to,
or the making of, any proposal that constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal; provided, however, that the foregoing
shall not prohibit the Board of Directors of the Company from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal prior to the approval of
this Agreement by the Company Shareholders if, and to the extent that, (A) the
Board of Directors of the Company, after taking into consideration advice of
independent outside legal counsel, determines in good faith that such action is
required for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company Shareholders under applicable Georgia law, (B) prior
to taking such action, the Company receives from such person or entity an
executed agreement in reasonably customary form relating to the confidentiality
of information to be provided to such person or entity and (C) the Board of
Directors of the Company concludes in good faith (after receiving the advice of
an independent financial advisor), that the Acquisition Proposal is a Superior
Proposal. The Company shall provide immediate oral and written notice to Parent
of (a) the receipt of any such Acquisition Proposal or any inquiry which could
reasonably be expected to lead to any Acquisition Proposal, (b) the material
terms and conditions of such Acquisition Proposal or inquiry, (c) the identity
of such person or entity making any such Acquisition Proposal or inquiry and (d)
the Company's intention to furnish information to, or enter into discussions or
negotiations with, such person or entity. The Company shall continue to keep
Parent informed of the status and details of any such Acquisition Proposal or
inquiry. For purposes of this Agreement, "Acquisition Proposal" means any bona
fide proposal with respect to a merger, consolidation, share exchange, tender
offer or similar transaction involving the Company or any Subsidiary, or any
purchase or other acquisition of all or any portion of the assets of the Company
or any Subsidiary or any equity interest in the Company (other than in the
ordinary course of business consistent with past practice).
SECTION 5.10. Company Shareholders' Meeting.
(a) The Company shall cause the Shareholders' Meeting to be duly called and
held as soon as reasonably practicable for the purpose of voting on the approval
and adoption of this Agreement and the Merger. The Company shall take all action
necessary in accordance with applicable Law and the Company Articles of
Incorporation and Company Bylaws to duly call, give notice of, and convene the
Shareholders' Meeting.
(b) Subject to Sections 5.5 and 5.9 hereof, the Company shall solicit from
holders of shares of Company Stock entitled to vote at the Shareholders' Meeting
proxies in favor of such approval and shall take all other action as shall be
reasonably necessary to secure the vote or consent of such holders required by
the GBCC or this Agreement to effect the Merger.
38
SECTION 5.11. Proxy Statement.
(a) In consultation with Parent, the Company will as promptly as reasonably
practicable following the execution of this Agreement prepare, and file the
Proxy Statement with the SEC and will use all commercially reasonable efforts to
respond to the comments of the SEC and to cause the Proxy Statement to be mailed
to the Company Shareholders at the earliest reasonably practical time. The
Company shall furnish all information concerning it and the holders of its
capital stock as Parent may reasonably request in connection with this Agreement
and the transactions contemplated by this Agreement. Each party to this
Agreement will notify the other parties promptly of the receipt of the comments
of the SEC, if any, and of any request by the SEC for amendments or supplements
to the Proxy Statement or for additional information with respect thereto, and
will supply the other parties with copies of all correspondence between such
party or its Representatives, on the one hand, and the SEC or members of its
staff, on the other hand, with respect to the Proxy Statement or the Merger. If
(i) at any time prior to the Shareholders' Meeting, any event should occur
relating to the Company or any of its Subsidiaries that, in the good faith
judgment of the Company, should be set forth in an amendment of, or a supplement
to, the Proxy Statement, the Company will promptly inform Holding and Parent and
(ii) if at any time prior to the Shareholders' Meeting, any event should occur
relating to Parent or Sub or any of their respective associates or affiliates,
or relating to the plans of any such persons for the Company after the Effective
Time that, in the good faith judgment of Parent, should be set forth in an
amendment of, or a supplement to, the Proxy Statement, Parent will promptly
inform the Company, and in the case of (i) or (ii) the Company will, upon
learning of such event, promptly prepare, and the Company shall file and, if
required, mail such amendment or supplement to the Company Shareholders;
provided, prior to such filing or mailing, the Company and Parent shall consult
with each other with respect to such amendment or supplement and shall
incorporate the other's reasonable comments thereon. Parent shall vote, or cause
to be voted, in favor of the Merger and this Agreement all shares of Company
Stock directly or indirectly beneficially owned by it.
(b) The Company hereby consents to the inclusion in the Proxy Statement of
the recommendation of the Board of Directors of the Company described in Section
3.3, subject to any modification, amendment or withdrawal thereof, and
represents that the Independent Advisor has, subject to the terms of its
engagement letter with the Company (the "Independent Advisor Engagement
Letter"), consented to the inclusion of its opinion in the Proxy Statement. The
Company and its counsel shall permit Parent and its counsel to participate in
all communications with the SEC and its staff, including any meetings and
telephone conferences, relating to the Proxy Statement, the Merger or this
Agreement.
SECTION 5.12. Director Resignations. The Company shall cause to be
delivered to Parent resignations of all the directors of the Company's
Subsidiaries to be effective upon the consummation of the Merger. The Company
shall cause such directors, prior to resignation, to appoint new directors
nominated by Parent to fill such vacancies.
SECTION 5.13. Company Options. As promptly as practicable following the
date hereof, the Company shall take all action necessary to ensure that all
outstanding Company Options shall be exercisable in full immediately prior to
the consummation of the Merger and that all Company Options that are not
exercised prior to the Merger will be canceled as of the Effective Time in
exchange for the Option Consideration described in Section 1.6 of this
Agreement. The Company will provide evidence of cancellation reasonably
satisfactory to Parent for each Company Option at or prior to the Effective
Time.
SECTION 5.14. Third Party Notifications. As soon as is reasonably
practicable after the date hereof, the Company shall deliver to each of (i) its
Major Suppliers and (ii) its Major Customers a notice relating to certain
restrictions applicable to the Company, in form reasonably acceptable to the
Company and Parent.
SECTION 5.15. Title Documents and Surveys. The Company agrees to use its
commercially reasonable efforts to address matters related to the Title
Documents or the Surveys as may be reasonably requested by Parent.
39
SECTION 5.16. Unacquired Assets. Prior to the Effective Time, the
Company, or its Subsidiaries, (a) shall (i) create the Liquidating Trust, which
shall be governed by a trust agreement having substantially the terms set forth
on Section 5.16 of the Company Disclosure Letter (the "Trust Agreement") and
(ii) organize the Liquidating Company, which shall be governed by an operating
agreement and plan of liquidation having substantially the terms set forth on
Section 5.16 of the Company Disclosure Letter (the "Operating Agreement") and
(b) shall have taken all steps necessary, in a fashion reasonably acceptable to
Holding, Parent and Sub, to complete the transactions set forth in Section 5.16
of the Company Disclosure Letter with respect to the assets of the Company and
its Subsidiaries identified therein (the "Unacquired Assets") (the transactions
set forth in Section 5.16 of the Company Disclosure Letter are referred to
herein as the "Divestiture"). The parties hereto understand and agree that all
of the Unacquired Assets will be owned by the Liquidating Trust or the
Liquidating Company from and after the Effective Time, provided, however, that
none of Holding, Parent, Sub, the Surviving Corporation or any of their
respective officers, directors, employees, agents, affiliates, successors or
assigns shall have any liability or responsibility for the consummation of the
Divestiture, or for any cost, expense or liability associated therewith
(including without limitation the administration of the Liquidating Trust and
Liquidating Company), or for any cost, expense or liability attributable to any
of the Unacquired Assets, including those surviving liabilities in connection
with the acquisition agreements for the Unacquired Assets, which liabilities
will be expressly assumed by the Liquidating Company. The Liquidating Trust and
Liquidating Company shall indemnify, defend and hold harmless Holding, Parent,
Sub and the Surviving Corporation, and their respective officers, directors,
employees, agents, affiliates, successors and assigns for any cost, expense or
liability incurred by any of the foregoing in connection with the Divestiture,
or any of the Unacquired Assets under the terms of the Indemnification Agreement
(as hereinafter defined). Notwithstanding any other provision of this Agreement
to the contrary, and subject to all documents related to the Divestiture being
reasonably acceptable to Parent, it is understood and agreed that consummation
of the Divestiture as more fully described in Section 5.16 of the Company
Disclosure Letter will not constitute or result in (i) breach or violation of
any representation, warranty, covenant or agreement of the Company set forth
herein, or (ii) a Company Material Adverse Effect, or a change or event that
will be considered in determining whether a Company Material Adverse Effect has
occurred. At or prior to the Effective Time, the Company shall complete the
Divestiture in a manner that does not require the Divestiture to be registered
under applicable state and Federal securities laws. Notwithstanding any other
provision of this Agreement to the contrary, the Divestiture will be
restructured to the extent necessary to ensure that it is completed in a manner
that does not require that the Divestiture be registered under applicable state
and Federal securities laws.
SECTION 5.17 Other Party Cooperation. Upon request from Parent from time
to time prior to the Effective Time, the Company shall use commercially
reasonable efforts prior to the Effective Time to obtain appropriate approval or
nonopposition letters from landowners of certain properties adjacent to certain
of the Company Properties in connection with Parent's attempt to obtain certain
variances or similar actions which Parent may elect to pursue with respect to
such Company Properties as well as consents, estoppels or subordination,
non-disturbance or attornment agreements from certain parties to or
beneficiaries of agreements, declarations or covenants that affect any of the
Company Properties, or Governmental Entities regarding any of the Company
Properties (each, a "Real Property Estoppel"), each as reasonably requested in
writing by Parent.
SECTION 5.18 Certain Tax Matters.
(a) Tax Periods Ending on or Before the Effective Time. Parent shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and its Subsidiaries for all periods ending on or prior to the
Effective Time which are filed after the Effective Time. Parent agrees to file
all such Tax Returns in a manner that treats the Divestiture for Tax purposes
consistently, except as otherwise required by law, with the Tax treatment
described in Section 5.16 of the Company Disclosure Letter. Parent agrees to
deliver to the trustee of the Liquidating Trust a copy of all such tax returns
at least ten (10) days before the date such tax returns are filed; provided,
that Parent acknowledges that the
40
date of delivery for such tax returns will be the date that a tax return in
substantially the form as the return filed is delivered to the trustee of the
Liquidating Trust.
(b) Tax Periods Beginning Before and Ending After the Effective
Time. Parent shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Company and its Subsidiaries for Tax periods which
begin before the Effective Time and end after the Effective Time. Parent agrees
to file all such Tax Returns in a manner that treats the Divestiture for Tax
purposes consistently, except as otherwise required by law, with the Tax
treatment described in Section 5.16 of the Company Disclosure Letter. Parent
agrees to provide the trustee of the Liquidating Trust a copy of all such tax
returns at least ten (10) days before the date such tax returns are filed;
provided, that Parent acknowledges that the date of delivery for such tax
returns will be the date that a tax return in substantially the form as the
return filed is delivered to the trustee of the Liquidating Trust
(c) Tax Sharing Agreements. Any tax sharing agreement with respect to or
involving the Company (or any of its Subsidiaries) shall be terminated as of the
Effective Time and shall have no further effect for any taxable year (whether
the current year, a future year, or a past year).
SECTION 5.19 Inventory. No later than the Effective Time, the Company
shall deliver to Parent a reasonably complete and correct inventory of all
Personal Property of the Company and its Subsidiaries as of a date that is
within ten (10) days prior to the date of the Closing.
SECTION 5.20 Employee Benefit Plans.
(a) The Company shall amend the Suburban Lodges of America, Inc. Employee
Savings Plan ("401(k) Plan") to bring it into compliance with applicable law
prior to the Closing, to terminate the 401(k) Plan effective immediately prior
to the Closing, to cease all further contributions to the 401(k) Plan for pay
periods beginning on or after the Closing (other than as required to repay loans
made thereunder), to cease making any additional loans to participants under the
401(k) Plan effective as of the termination of such plan. Within a reasonable
period prior to the Closing, the Company shall provide to Parent a copy of the
amended 401(k) Plan, a completed Internal Revenue Service Form 5310 with
attachments in respect of the termination of the 401(k) Plan and written
resolutions authorizing the termination of the 401(k) Plan and other actions
contemplated by this Section 5.20(b), each of which shall be reasonably
satisfactory to Parent.
(b) From and after the date hereof, the Company shall (i) provide all
documentation and information requested by or on behalf of Parent with respect
to the Company Benefit Plans, including, but not limited to nondiscrimination
testing data for the 401(k) Plan for 1995 through 1998, a copy of the Section
125/cafeteria plan document, a copy of the insurance policy for the Company's
long term disability policy, and all information needed to file Internal Revenue
Service Form 5310 or to make such other filings with the Internal Revenue
Service or the Department of Labor as Parent may require; (ii) take all action
necessary to correct any compliance deficiencies identified in any schedule or
annex to this Agreement or otherwise identified with reasonable detail to
Company or its Subsidiaries by Parent with respect to any Company Benefit Plan;
and (iii) provide evidence reasonably satisfactory to Parent of such
corrections.
(c) Parent agrees that within twelve (12) months of the Closing all
employees of the Company who continue employment with the Surviving Corporation
or any subsidiary thereof after the Effective Time ("Continuing Employees") will
be eligible to participate in employee benefit programs maintained for the
benefit of employees of the Surviving Corporation, any Subsidiary of the
Surviving Corporation, Parent or Holding (each a "Parent Benefit Plan") on the
same basis and subject to the same terms and conditions as similarly situated
employees of the Surviving Corporation, Parent and Holding or any of their
respective subsidiaries; provided that the determination of "similarly situated"
and the effective time of such participation shall be in the discretion of
Parent or Holding. Prior to the commencement of eligibility to participate in a
Parent Benefit Plan by any Continuing Employee, Parent agrees to continue the
corresponding Company Benefit Plan and the Continuing Employee's participation
in such plan. Notwithstanding the foregoing, the Continuing Employees shall be
eligible to participate in the Intown
41
Suites Management, Inc. 401(k) Salary Reduction Plan and Trust as of the first
entry date following the Closing, which is expected to be July 1, 2002, subject
to the terms of such plan. Each of Holding and Parent shall, or shall cause its
subsidiaries to, cause each Parent Benefit Plan to treat the prior service with
the Company and its affiliates of each Continuing Employee immediately prior to
the Closing as service rendered to Parent or its subsidiaries, as the case may
be, for purposes of eligibility to participate in and vesting thereunder (but
not benefit accrual) to the same extent such service is recognized under
corresponding plans, programs or arrangements of the Company or its affiliates
prior to the Closing; provided, however, that each such employee shall be given
credit for his or her service with the Company or any of its Subsidiaries prior
to the Effective Time for purposes of determining the amount of vacation to
which such employee is entitled in accordance with Parent's policies following
the Effective Time; provided, further, that such crediting of service shall not
operate to duplicate any benefit or the funding of such benefit. Parent agrees
that the Surviving Corporation shall be responsible for providing all legally-
mandated continuation coverage for Continuing Employees and their covered
dependents who experience a loss of coverage due to a "qualifying event" (within
the meaning of Section 603 of ERISA) which occurs at any time on or after the
Effective Time, as well as for all former employees of the Company and its
affiliates who, as of the Effective Time, have elected or are eligible to and
within the applicable time periods, elect continuation coverage. Nothing in this
Section 5.20(c) is intended to create any employment obligation other than as
employees at will who may be terminated with or without cause.
(d) The Company agrees that three (3) business days prior to the Effective
Time, it will provide a schedule to Parent which identifies (i) each employee
who will be on FMLA leave at the Effective Time and his or her job title and
description, salary and benefits; (ii) each employee who has requested FMLA
leave to begin after the Effective Time; (iii) a description of the leave
requested; and (iv) a copy of all notices provided to such employee regarding
that leave.
SECTION 5.21 Environmental Insurance. On or prior to the date hereof, the
Company has provided to Parent a form of environmental insurance policy relating
to the Company's ▇▇▇▇ ▇▇▇▇▇ site (the "Environmental Policy"). The Company shall
use its reasonable best efforts to cause the Environmental Policy to be provided
to Parent at the Closing, to be effective at such time.
SECTION 5.22 Software Support. Prior to the Effective Time, the Company
agrees to use its commercially reasonable efforts and to cooperate with Parent
to cause Radiant Systems, Inc. to enter into an agreement with the Company in
form and substance reasonably satisfactory to Parent for the provision of
transition support for the legacy system.
SECTION 5.23. Undertaking of Holding. Holding shall perform, or cause to
be performed, when due, all obligations of each of Parent, Sub and Surviving
Corporation under this Agreement.
ARTICLE VI
CONDITIONS
SECTION 6.1. Conditions to the Obligations of Each Party. The respective
obligations of Parent, Sub and the Company to effect the Merger are subject to
the satisfaction at the Effective Time of the following conditions, unless
waived in writing by all parties:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the Company Shareholders, if and to the extent
required by the GBCC, the Company Articles of Incorporation and the Company
Bylaws;
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Merger or the Divestiture shall be in effect; provided, however, that the
parties invoking this condition shall use all commercially reasonable
efforts to have any such order or injunction vacated; and
42
(c) All actions by or in respect of or filings with any Governmental
Entity required to permit the consummation of the Merger shall have been
obtained or made.
SECTION 6.2. Conditions to Obligations of Holding, Parent and Sub to
Effect the Merger. The obligations of Holding, Parent and Sub to effect the
Merger are further subject to satisfaction or waiver at or prior to the
Effective Time of the following conditions:
(a) (i) The representations and warranties of the Company set forth in
Article III of this Agreement (A) shall have been true and correct in all
material respects as of the date of this Agreement and (B) shall be true
and correct in all material respects as of the Effective Time, in each case
except to the extent that such representations and warranties address
matters only as of a particular date, in which case such representations
and warranties shall be true and correct in all material respects as of
such earlier date, and in the case of clauses (A) and (B) without giving
effect to any exceptions or qualifications for "material" or "materiality"
or "Company Material Adverse Effect" contained in the text of the
representation or warranty; provided, however, that the condition to the
obligations of Holding, Parent and Sub set forth in this Section 6.2(a)(i)
shall be deemed to be satisfied in full unless, in the aggregate, all such
failures of the Company's representations and warranties to be true and
correct as set forth above will cost Holding, Parent, the Company and/or
any Subsidiary, or would reasonably be expected to cost Holding, Parent,
the Company and/or any Subsidiary, an amount, net of insurance proceeds
actually received or reasonably certain to be received, equal to or in
excess of $5,000,000 (for the avoidance of doubt, and without limiting the
generality of the foregoing, the parties are agreed that, for the purpose
of the foregoing determination, (A) each breach of any representation or
warranty (without giving effect to any exceptions or qualifications with
respect to materiality contained therein), regardless of whether it is
material in and of itself, shall be counted for this purpose, and (B) the
dollar threshold contained in Section 3.8(b) shall not apply), (ii) the
Company shall have performed in all material respects all agreements,
covenants and obligations required to be performed and complied with by it
under this Agreement (it being understood that for purposes of Section
6.2(a)(ii), but without limiting the generality of the language contained
therein, the Company shall be deemed to have failed to perform "in all
material respects" covenants required to be performed and complied with by
it under this Agreement to the extent it breaches in any respect whatsoever
any covenant set forth in Section 5.1(b)(i), 5.1(c)(ii) or 5.1(c)(vii)),
and (iii) the Company shall have delivered to Parent a certificate to the
effect that each of the conditions specified in (i) and (ii) above is
satisfied in all respects;
(b) There shall not be pending any action, proceeding, application or
counterclaim by any third party before any court or governmental regulatory
or administrative agency, authority or tribunal which challenges or seeks
to challenge, restrain or prohibit the consummation of the Merger or the
Divestiture;
(c) Since the date of this Agreement, there shall not have occurred
any change, condition, event or development that has resulted in, or could
reasonably be expected to result in, whether individually or in the
aggregate, a Company Material Adverse Effect;
(d) Other than as expressly permitted herein, from and after the date
of this Agreement, there shall have been no sale, transfer, license,
conveyance, pledge or other disposition of all or any part of the Company
Properties;
(e) Parent shall have received owner's title insurance policies and
endorsements for all of the Company Properties hereunder and lender's title
insurance policies and endorsements for all of the Company Properties, with
each such policy subject only to the Permitted Exceptions and such other or
additional exceptions as shall be reasonably acceptable to Parent and
otherwise in substantially the form of the Title Documents referenced in
Section 3.10(d) to the Company Disclosure Letter (with all Company Cure
Items remedied and satisfied to the reasonable satisfaction of Parent) (for
the avoidance of doubt, any changes or modifications to the exceptions
listed in the Title Documents or the endorsements attached thereto that
shall not be reasonably satisfactory to Parent shall be deemed to be
substantial);
43
(f) ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, counsel to the Company, shall have
delivered to Parent its signed opinion in form and substance reasonably
satisfactory to Parent, as to the matters set forth on Exhibit 6.2(f)
hereof and, with respect to the Divestiture, to the effect that the
issuance of the Beneficial Interests in conformity with the terms of the
Agreement is not required to be registered under Section 5 of the
Securities Act;
(g) The Company shall have delivered to Parent evidence reasonably
satisfactory to Parent to the effect that those certain lenders to the
Company and its Subsidiaries identified on Exhibit 6.2(g) hereto shall have
consented to the rebranding of Suburban Lodges branded assets as Intown
Suites branded assets and (i) written confirmation from each of the lenders
under its Secured Debt (other than SouthTrust Bank) (A) as to the
outstanding principal balance of the loan, (B) to the effect that, to the
lender's knowledge, the Company is not in default thereunder, and (C)
setting forth a list of the instruments or agreements constituting the loan
documents thereunder, or (ii) such other evidence of such matters as shall
be reasonably satisfactory to Parent;
(h) The Company, the Liquidating Trust and the Liquidating Company
shall have entered into an Indemnification Agreement substantially in the
form of Exhibit 6.2(h) hereto (the "Indemnification Agreement"); and
(i) The Company shall have delivered to Parent a policy of
environmental liability insurance substantially in the form of the
Environmental Policy, effective as of the Effective Time.
SECTION 6.3. Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger are further subject
to satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of Holding, Parent and Sub in
this Agreement that are qualified by materiality shall be true and correct
in all respects as of the date of this Agreement and as of the Effective
Time;
(b) The representations and warranties of Holding, Parent and Sub in
this Agreement that are not qualified by materiality shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time;
(c) Holding, Parent and Sub shall have performed in all material
respects all obligations required to be performed by them under this
Agreement at or prior to the Effective Time;
(d) Holding, Parent and Sub shall have delivered to the Company a
certificate to the effect that each of the conditions specified in Sections
6.3(a), (b) and (c) is satisfied in all respects; and
(e) There shall not be pending any action, proceeding, application or
counterclaim by any third party before any court or governmental regulatory
or administrative agency, authority or tribunal which challenges or seeks
to challenge, restrain or prohibit the consummation of the Merger.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of matters presented in connection with the Merger by the Company
Shareholders:
(a) by mutual written consent of duly authorized representatives of
Parent and the Company;
(b) by any of Holding, Parent, Sub or the Company if any court of
competent jurisdiction or other Governmental Entity shall have issued an
order, decree, ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and nonappealable; provided,
however, that the party
44
terminating this Agreement pursuant to this Section 7.1(b) shall use all
commercially reasonable efforts to have such order, decree, ruling or
action vacated;
(c) by any of Holding, Parent, Sub or the Company if the Merger shall
not have been consummated by May 14, 2002 for any reason; provided,
however, that the right to terminate this Agreement under this Section
7.1(c) shall not be available to Holding, Parent or Sub if the failure of
any of such parties to fulfill any obligation of such party under this
Agreement has been the primary cause of, or resulted in, the failure to
consummate the Merger on or before such date, and the right to terminate
this Agreement under this Section 7.1(c) shall not be available to the
Company if the failure of the Company to fulfill any obligation of such
party under this Agreement has been the primary cause of, or resulted in,
the failure to consummate the Merger on or before such date;
(d) by Holding, Parent or Sub if the Board of Directors of the Company
or any committee of the Board of Directors of the Company (i) shall have
withdrawn or shall have modified in a manner adverse to Holding, Parent or
Sub its approval or recommendation of the Merger or this Agreement, (ii)
causes the Company to enter into an agreement with respect to an
Alternative Transaction, (iii) shall have endorsed, approved or recommended
any Alternative Transaction or (iv) shall have resolved to do any of the
foregoing;
(e) by any of the Company, Holding, Parent or Sub, if this Agreement
and the Merger shall fail to be approved and adopted by the Company
Shareholders at the Shareholders' Meeting (including any adjournment
thereof);
(f) By Holding, Parent or Sub, if either (i) any of the conditions set
forth in Sections 6.1 or 6.2 shall have become incapable of fulfillment and
shall not have been waived by Holding, Parent and Sub or (ii) (A) the
Company shall breach in any material respect any of its representations,
warranties, covenants or other obligations hereunder or, as of any date
after the date of this Agreement, the representations and warranties of the
Company shall fail to be true and correct in all material respects as of
such date such that, in either such case, the condition to the obligations
of Holding, Parent and Sub set forth in Section 6.2(a) would not then be
satisfied, and (B) if and to the extent such breach or failure is capable
of being cured by Company, within ten (10) business days after written
notice of such breach or failure to the Company from Parent, the Company
shall not have taken or caused to be taken such actions as shall be
necessary to cure such breach or failure to the extent necessary in order
for the condition to the obligations of Holding, Parent and Sub set forth
in Section 6.2(a) to be satisfied on or before the Effective Time;
(g) by the Company, if (i) any of the conditions set forth in Sections
6.1 or 6.3 shall have become incapable of fulfillment and shall not have
been waived by the Company or (ii) Holding, Parent or Sub shall breach in
any material respect any of their respective representations, warranties or
obligations hereunder and, within ten (10) days after written notice of
such breach to Parent from the Company, such breach shall not have been
cured in all material respects or waived by the Company and Parent or Sub,
as the case may be, shall not have provided reasonable assurance to the
Company that such breach will be cured in all material respects on or
before the Effective Time;
(h) by the Company if, in compliance with its obligations under
Sections 5.5 and 5.9, (i) the Board of Directors of the Company shall have
withdrawn or shall have modified in a manner adverse to Holding, Parent or
Sub its approval or recommendation of the Merger or this Agreement and (ii)
the Company shall have entered into an agreement with respect to a Superior
Proposal; or
(i) by Holding, Parent or Sub, for any other reason in its sole
discretion, regardless of whether the conditions in Article VI have been
satisfied.
SECTION 7.2. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to Section
7.1 hereof, this Agreement shall forthwith be terminated and have no further
effect except as specifically provided herein and, except as provided in this
Section 7.2 and in Section 8.12, there shall be no liability on the part of any
party
45
hereto, provided that nothing herein shall relieve any party from liability for
fraud in connection with, or any willful breach of, this Agreement.
(b) If Holding, Parent or Sub exercises its right to terminate this
Agreement under Section 7.1(d), or the Company exercises its right to terminate
this Agreement under Section 7.1(h), the Company shall pay to Parent upon demand
Five Million Dollars ($5,000,000) less any amount previously paid or then
payable to Parent pursuant to Section 7.2(d) hereof (the "Termination Fee"),
payable in same-day funds.
(c) If within one year after termination of this Agreement pursuant to
Section 7.1(f)(ii) (but only to the extent (i) the Company is not entitled to
terminate this Agreement pursuant to Section 7.1(g)(ii) at the time of such
termination and (ii) such termination is the result of (x) one or more breaches
of representations or warranties of the Company which were known to the Company
to be false when made or (y) a knowing and willful breach by the Company of the
agreements and covenants required to be performed and complied with by it under
this Agreement), the Company shall enter into any agreement relating to, or
consummate, an Acquisition Proposal with a person other than Holding, Parent or
Sub, then immediately prior to, and as a condition of, consummation of such
transaction the Company shall pay to Parent upon demand the Termination Fee,
payable in same-day funds; provided that no such amount shall be payable if the
Termination Fee shall have been paid in accordance with Section 7.2(b) of this
Agreement; provided further that, solely for purposes of this Section 7.2(c),
the term Acquisition Proposal shall not include any: (i) proposals related to
the sale or transfer of certain assets that the Company decides, based on the
advice of tax counsel, are necessary in order to meet the asset and income test
requirements of Section 856(c) of the Code if the Company elects to become
taxable as a real estate investment trust beginning with its taxable year ended
December 31, 2002 or December 31, 2003, or for any merger effected for the
purpose of converting the Company into a real estate investment trust so long as
such merger qualifies as a reincorporation pursuant to Section 368(A)(1)(f) of
the Code and does not result in a change in beneficial ownership of shares of
Company Common Stock, (ii) proposals related to the sale or transfer of fifteen
(15) or fewer Company Properties (in the aggregate) during the one year
following the termination of this Agreement and (iii) proposals related to the
sale or transfer of all or any portion of the Company's franchise business.
(d) If Holding, Parent or Sub exercises its right to terminate this
Agreement under Section 7.1(f)(ii) (but only to the extent (i) the Company is
not entitled to terminate this Agreement pursuant to Section 7.1(g)(ii) at the
time of such termination and (ii) such termination is the result of (x) one or
more breaches of representations or warranties of the Company which were known
to the Company to be false when made or (y) a knowing and willful breach by the
Company of the agreements and covenants required to be performed and complied
with by it under this Agreement), then the Company shall pay to Parent upon
demand, payable in same day funds, the actual, documented out-of-pocket costs
and expenses of Holding, Parent or Sub reasonably incurred in connection with
this Agreement and the transactions contemplated by this Agreement (including,
without limitation, any financing fees, costs and expenses, and the reasonable
fees of attorneys, accountants, brokers, investment advisors and other
representatives and advisors), up to a maximum of $3,000,000 less any amounts
previously paid to Parent by the Company in respect thereof (the "Expense
Reimbursement"); provided that no such amount shall be payable if the
Termination Fee shall have been paid or is then payable in accordance with
Section 7.2(b) or 7.2(c) of this Agreement.
(e) If Holding, Parent or Sub exercises its right to terminate this
Agreement under Section 7.1(i), or the conditions precedent to the obligations
of Holding, Parent and Sub set forth in Sections 6.1 and 6.2 shall be satisfied
or waived and Holding, Parent or Sub shall nonetheless fail to consummate the
Closing as and when required to do so hereunder, then Parent shall, upon demand,
sign and deliver written instructions directing the Escrow Agent to release the
Deposit to the Company, in accordance with the terms of the Escrow Agreement, as
payment of liquidated damages and not as a penalty, to reimburse the Company for
its time, expense and lost opportunity costs of pursuing the Merger. The parties
hereto understand and agree that the Deposit is reasonable as liquidated damages
in light of the costs and expenses that would be incurred by the Company if such
a termination were to occur, and in light of the
46
difficulty of proving the amount of actual damages that would be suffered by the
Company in such an event.
(f) Notwithstanding anything to the contrary set forth in this Agreement,
(i) if either party fails promptly to pay to the other any amounts due under
this Section 7.2, such party shall pay the costs and expenses (including
reasonable legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee or obligation at the publicly
announced prime rate of Citibank, N.A. in effect from time to time from the date
such fee or obligation was required to be paid; and (ii) each of Holding, Parent
and Sub acknowledges and expressly agrees that neither the Company nor any of
its Subsidiaries shall have any liability for any breach of a representation,
warranty, covenant or other agreement hereunder except to the extent such breach
results in the Company's obligation to provide Parent with the Expense
Reimbursement pursuant to Section 7.2(d).
SECTION 7.3. Amendments. This Agreement may not be amended, modified or
altered except by action of the board of directors or other governing body of
each of the parties hereto set forth in an instrument in writing signed on
behalf of each of the parties hereto; provided, however, that after approval of
the Merger by the Company Shareholders (if required), no amendment may be made
without the further approval of the Company Shareholders if the effect of such
amendment would be to reduce the Per Share Merger Consideration or change the
form thereof.
SECTION 7.4. Waiver. At any time prior to the Effective Time, whether
before or after the Shareholders' Meeting, any party hereto, by action taken by
its board of directors, may (i) extend the time for the performance of any of
the covenants, obligations or other acts of any other party hereto or (ii) waive
any inaccuracy of any representations or warranties or compliance with any of
the agreements, covenants or conditions of any other party or with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party by its duly authorized
officer. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
The waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. No Third Party Beneficiaries. Other than the provisions of
Sections 1.6(c), 5.7 and 5.20(c) hereof, nothing in this Agreement shall confer
any rights or remedies upon any person other than the parties hereto.
SECTION 8.2. Entire Agreement. This Agreement, the Confidentiality
Agreement and the other documents, schedules and instruments referred to herein
and to be delivered pursuant hereto constitute the entire agreement among the
parties with respect to the subject matter hereof and supersedes any prior
understandings, agreements, or representations by or among the parties, written
or oral, with respect to the subject matter hereof. The parties hereby agree
that for purposes of this Agreement (including, but not limited to conditions to
Closing) neither party has made to the other any representations, warranties or
covenants or other disclosures other than those specifically contained in this
Agreement or the Company Disclosure Letter.
SECTION 8.3. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other parties; provided, however, that Sub may freely assign its rights to
another wholly owned subsidiary of Parent without such prior written approval
but no such assignment shall relieve Sub of any of its obligations hereunder.
47
SECTION 8.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
SECTION 8.5. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia, without regard to
principles of conflicts of law thereof.
SECTION 8.7. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
SECTION 8.8. Specific Performance. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other party shall be entitled to seek an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
SECTION 8.9. Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.10. Survival of Representations and Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that (i) the agreements set
forth in Articles I and VIII and Sections 5.4, 5.7, 5.16 and 5.20(c) shall
survive the Effective Time indefinitely, and (ii) the agreements set forth in
Sections 5.2 and 7.2 and in Article VIII shall survive the termination of this
Agreement indefinitely.
SECTION 8.11. Certain Definitions.
(a) For purposes of this Agreement, the terms "associate" and "affiliate"
shall have the same meaning as set forth in Rule l2b-2 promulgated under the
Exchange Act, and the term "person" shall mean any individual, corporation,
partnership (general or limited), limited liability company, limited liability
partnership, trust, joint venture, joint-stock company, syndicate, association,
entity, unincorporated organization or government or any political subdivision,
agency or instrumentality thereof.
(b) For purposes of this Agreement, the phrase "Company Material Adverse
Effect" shall mean, with respect to the Company, any change, event or effect
that, when taken together with all other adverse changes, events or effects that
have occurred, is or is reasonably likely to (i) be materially adverse to the
business, operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of the
Company and its Subsidiaries taken as a whole or (ii) prevents or materially
delays the performance by the Company of any of its material obligations under
this Agreement beyond May 14, 2002; provided, however, that a Company Material
Adverse Effect shall not include (x) in and of itself failure by the Company to
meet analysts' earnings forecasts or estimates or changes in
48
the market price of the Company Common Stock in and of itself or (y) any effect
resulting from any change in general economic conditions or any other change
affecting the hotel industry generally, including any such change in general
economic conditions due to any act of war, terrorism or threat of war or
terrorism which changes do not disproportionately affect the Company and its
Subsidiaries (provided that it is understood and agreed that the foregoing
exclusion shall not exclude any change, event or effect that would otherwise be
a Company Material Adverse Effect caused by any act of war or terrorism or
threat of war or terrorism directed at the hotel industry which
disproportionately affects the Company and its Subsidiaries as compared to the
hotel industry as a whole), or (z) any change, event or effect resulting from
actions taken (or omitted) at the request of Holding, Parent or Sub or any other
actions of the Company or any Subsidiary (or omissions to act) required or
contemplated by this Agreement; provided, further, that for purposes of clause
(i) of this definition, a change, event or effect shall be deemed to be
"material" only if it will cost Parent, the Company and/or any Subsidiary, or
would be reasonably expected to cost Parent, the Company and/or any Subsidiary,
an amount equal to or in excess of $5,000,000 in the aggregate.
(c) For purposes of this Agreement, the phrases "to the knowledge of the
Company," "known to the Company," and similar formulations shall mean the actual
knowledge of the executive officers of the Company and, with respect to any
particular matter, any other officers of the Company having primary
responsibility for such matter.
SECTION 8.12 Unacquired Assets. Notwithstanding anything in this
Agreement to the contrary, prior to the Effective Time, the Company may sell,
transfer, assign, mortgage, pledge, lease or otherwise dispose of the Unacquired
Assets, or permit the Unacquired Assets to be subject to any mortgage, lien,
security interest, deed to secure debt, deed of trust or other encumbrance,
restriction or charge of any kind, or enter into, amend, or cancel any
agreement, contract, commitment or arrangement for any of the foregoing, or
cause or allow any of the foregoing to occur; provided, however, that the
Company must obtain Parent's consent, not to be unreasonably withheld or
delayed, prior to taking any such action with respect to the Unacquired Assets
to the extent any such action would impose any obligation or liability on the
Company that would survive the Effective Time; provided, further, that, to the
extent the Company enters into any contract related to the sale, transfer,
assignment, mortgage, pledge, lease or other disposition of any of the
Unacquired Assets, the Company agrees to provide in such contract that the
contract will be freely assignable by the Company in connection with a transfer
of the related Unacquired Asset and that upon any such assignment the Company
shall be released from any and all obligations or liabilities under such
contract. Without limiting the generality of the foregoing, the parties agree
that any exception to the representations and warranties in Article III hereof
that refers to the Unacquired Assets shall be deemed to be excepted from the
relevant representation or warranty only to the extent there are no obligations,
liabilities or other material adverse implications that would inure to Parent,
the Company or any Subsidiary as a result of the relevant act, omission or
circumstance relating to the Unacquired Assets.
SECTION 8.13. Fees and Expenses. Except as provided in Section 7.2, and
as provided below, all costs and expenses incurred by the parties hereto in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
49
SECTION 8.14. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses, or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 8.14:
If to Holding, Parent or Sub:
Intown Suites Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to the Company:
Suburban Lodges of America, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
50
IN WITNESS WHEREOF, the Company, Holding, Parent and Sub have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SUBURBAN LODGES OF AMERICA, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Title: CEO
--------------------------------------
INTOWN HOLDING COMPANY, L.L.C.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: Managing Member
--------------------------------------
INTOWN SUITES MANAGEMENT, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: CEO
--------------------------------------
INTOWN SUB, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: President
--------------------------------------
51
EXHIBIT 6.2(h)
FORM OF
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") dated as of January 28,
2002 is entered into by and among Intown Holding Company, L.L.C., a Georgia
limited liability company ("Holding"), Intown Suites Management, Inc., a Georgia
corporation and a wholly owned subsidiary of Holding ("Parent"); Intown Sub,
Inc., a Georgia corporation and wholly owned subsidiary of Parent ("Sub"),
Suburban Lodges of America, Inc., a Georgia corporation (the "Company"),
[TRUSTEE], a , as trustee ("Trustee") of the Suburban Liquidating
Trust, a Georgia trust (the "Liquidating Trust"), and Suburban Liquidating
Company, L.L.C., a Georgia limited liability company (the "Liquidating LLC" and
together with the Liquidating Trust, the "Indemnitors").
W I T N E S S E T H:
WHEREAS, Holding, Parent, Sub and the Company have entered into an
Agreement and Plan of Merger (the "
Merger Agreement") dated as of January 28,
2002, which provides for, among other things, the merger of Sub with and into
the Company (the "Merger"), with the Company as the surviving corporation, in
accordance with the provisions of the Georgia Business Corporation Code
("GBCC");
WHEREAS, at the Effective Time, the Company Shareholders and certain
holders of Company Options (the "Beneficiaries") will own all of the beneficial
interests (the "Beneficial Interests") in the Liquidating Trust, which will own
at least 99% of the outstanding limited liability interests in the Liquidating
LLC;
WHEREAS, at or prior to the Effective Time, and as of the result of the
transactions described in Section 5.16 of the Company Disclosure Letter (the
"Divestiture"), the Indemnitors will own the Unacquired Assets;
WHEREAS, in consideration of each of Holding's, Parent's and Sub's
agreements herein and in the
Merger Agreement, the Indemnitors have agreed to
cooperate with Holding, Parent and Sub with respect to the acquisition of the
Company by Holding, Parent and Sub upon the terms and subject to the conditions
set forth in the
Merger Agreement, and to indemnify Holding, Parent, Sub and
certain other related parties as contemplated herein.
NOW, THEREFORE, in contemplation of the foregoing and in consideration of
the mutual agreements, covenants, representations and warranties contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION 1. Definitions. Except as expressly provided herein to the
contrary, or as otherwise defined herein, all of the capitalized terms used
herein shall have the meanings assigned to them in the
Merger Agreement.
SECTION 2. Representation and Warranties of the Indemnitors and the
Company. Each of the Indemnitors and the Company jointly and severally hereby
represents and warrants to Holding, Parent and Sub, as follows:
SECTION 2.1. Organization; Standing; Purpose and Duration.
(a) The Liquidating Trust (i) is a trust, duly organized, validly existing
and in good standing under the laws of the state of Georgia, (ii) has all
requisite trust power and authority to own, lease and operate its properties and
assets and to conduct its affairs in accordance with the Trust Agreement and
(iii) has as its sole purpose the holding of the Unacquired Assets (either
directly, or indirectly through the Liquidating LLC) and the liquidation of the
Unacquired Assets and distribution of the proceeds thereof (net of any
obligations of the Liquidating Trust or the Liquidating LLC) to the
Beneficiaries in accordance with the
Trust Agreement. The existence of the Liquidating Trust shall terminate on the
earliest to occur of (i) the exhaustion of the trust estate through the
distribution to the Beneficiaries, payment or discharge of the liabilities of
the Liquidating Trust, or the payment of expenses of, and claims against the
Liquidating Trust, (ii) a termination required by the applicable laws of the
State of Georgia, (iii) a termination by action of the Beneficiaries in
accordance with the Trust Agreement or (iv) the third anniversary of the
Effective Time; provided, that the term of the Liquidating Trust may be extended
beyond the third anniversary of the Effective Time upon the Trustee's receipt of
no-action assurances from the Securities and Exchange Commission ("SEC")
Division of Corporation Finance regarding the registration and reporting
requirements of the Liquidating Trust under the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and any other
applicable federal securities act, based on such extension, and then only
pursuant to (a) the provisions of a no-action letter received from the SEC or
(b) guidelines outlined in an oral no-action position taken by the SEC staff
that are confirmed by the Trustee in a letter to the SEC (the date on which the
Liquidation Trust terminates pursuant to the foregoing, the "Termination Date").
The Beneficial Interests in the Liquidating Trust are not certificated and are
not transferable or assignable except by will, intestate succession, by
operation of law, or upon divorce or incapacity of the beneficiary, or some
other similar event.
(b) The Liquidating LLC (i) is a limited liability company, duly organized,
validly existing and in good standing under the laws of the state of Georgia,
(ii) has all requisite limited liability company power and authority to own,
lease and operate its properties and assets and to conduct its affairs in
accordance with the Operating Agreement, (iii) is duly qualified or licensed to
do business as a limited liability company and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not,
individually or in the aggregate, have a material adverse effect on the
Liquidating LLC or the Liquidating Trust, (iv) has as its sole purpose the
holding and liquidation of the Unacquired Assets and the distribution of the
proceeds thereof to the Liquidating Trust in accordance with the Operating
Agreement and (v) will dissolve at a date and time no later than the termination
of the existence of the Liquidating Trust. The Operating Agreement provides that
only the Liquidating Trust and the managing member of the Liquidating LLC may be
members of the Liquidating LLC.
SECTION 2.2. Authority for Agreement. Each of the Indemnitors and the
Company has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution, delivery and
performance by the Indemnitors and the Company of this Agreement, and the
consummation by the Indemnitors and the Company of the transactions contemplated
by this Agreement, have been duly authorized by all necessary corporate or other
action and no other corporate or other proceedings on the part of the
Indemnitors or the Company are necessary to authorize this Agreement or the
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by the Indemnitors and the Company and, assuming due
authorization, execution and delivery by Holding, Parent and Sub, constitutes a
legal, valid and binding obligation of each of the Indemnitors and the Company,
enforceable against them in accordance with its terms.
SECTION 2.3. No Conflict. The execution and delivery of this Agreement by
each of the Indemnitors and the Company do not, and the performance of this
Agreement by each of the Indemnitors and the Company and the consummation of the
transactions contemplated by this Agreement will not, (a) conflict with or
violate the articles of incorporation or organization, bylaws, trust agreement,
operating agreement, or other governing documents of the Indemnitors or the
Company, as applicable, (b) conflict with or violate any United States federal,
state or local or any foreign statute, law, rule, regulation, ordinance, code,
order, judgment, decree or any other requirement or rule of law applicable to
the Indemnitors or the Company, or by which any property or asset of the
Indemnitors or the Company is bound or affected, or (c) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or
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asset of the Indemnitors or the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Indemnitors or the Company is a party or
by which the Indemnitors, the Company, or any property or asset of either of
them is bound or affected, except in each case, for any such conflicts,
violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, prevent or materially delay the performance by
the Indemnitors or the Company of their respective obligations under this
Agreement or the consummation of the transactions contemplated by this
Agreement.
SECTION 2.4. Required Filings and Consents. The execution and delivery of
this Agreement by the Indemnitors and the Company do not, and the performance of
this Agreement by the Indemnitors and the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity.
SECTION 2.5 Ownership. At or prior to the Effective Time, and as a result
of the Divestiture, the Indemnitors will own the Unacquired Assets and except as
set forth on Schedule 2.5 attached hereto (a) as to any real property included
as part of the Unacquired Assets, will have good, marketable and insurable fee
simple title, in each case free and clear of all liabilities, claims, liens,
options, charges, participations and encumbrances of any kind or character
whatsoever (collectively, "Liens") and (b) as to any promissory notes included
as part of the Unacquired Assets, will own such promissory notes free and clear
of all Liens.
SECTION 3. Survival of Representations and Warranties. The respective
representations and warranties of the Indemnitors contained herein shall not be
deemed waived or otherwise affected by any investigation made by the other party
hereto, and each representation and warranty contained herein shall survive the
closing of the transactions contemplated hereby until the earlier to occur of
the Termination Date or the expiration of the applicable statute of limitations,
including extensions thereof.
SECTION 4. Indemnification.
SECTION 4.1 General Indemnification. The Indemnitors shall defend and
indemnify Holding, Parent, Sub and the Company, and their respective agents,
affiliates, subsidiaries, controlling persons, officers, directors, employees,
successors and assigns (collectively, the "Indemnitees") for, and hold the
Indemnitees wholly harmless from and against, any and all losses, liabilities,
damages, costs (including, without limitation, court costs) and expenses
(including, without limitation, reasonable attorneys' fees) incurred by any such
Indemnitee as a result of, or in connection with, any one or more of the
following:
(a) the Divestiture (including, without limitation, to the extent such
steps are taken, the formation of the Indemnitors, the transfer of the
Unacquired Assets to the Indemnitors, the transfer by Suburban Holdings, LP
of all of its limited liability company interest in the Liquidating LLC to
SLA Properties, Inc. ("SLAPI") and Suburban Management, Inc. ("SMI"), the
transfer by Suburban Construction, Inc. ("SCI"), SLAPI and SMI of their
respective limited liability company interests in the Liquidating LLC to
the Company, the issuance of a 1% limited liability company interest in the
Liquidating LLC to its managing member, the transfer by the Company of all
of its limited liability company interest in the Liquidating LLC to the
Trustee, the transfer of Beneficial Interests to the Beneficiaries, any tax
consequences associated with any of the foregoing and any liability
(including, without limitation, any environmental liability or litigation)
arising out of or related to any of the Unacquired Assets);
(b) all matters otherwise relating to the Indemnitors, whether arising
or occurring prior to or after the Effective Time;
(c) the failure of the Divestiture to comply with applicable state and
Federal securities laws; and
(d) the amounts paid to holders of Dissenting Shares to the extent any
such amounts are attributable to Beneficial Interests as determined by a
court in accordance with Section 14-2-1330 of the GBCC.
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Any of the foregoing described in clauses (a), (b), (c) or (d) above are
collectively herein referred to as "Losses".
SECTION 4.2 Procedures
(a) In the event that an Indemnitee shall receive written notice of any
claim or proceeding by a third party other than an Indemnitor (a "Third Party
Claimant") against such Indemnitee that, if successful, might result in Losses
for which such Indemnitee is entitled to be indemnified under Section 4.1 (a
"Third Party Claim"), such Indemnitee shall give the Indemnitors promptly (and
in any event within ten (10) business days) written notice of such claim,
together with a copy of the written notice of the Third Party Claimant asserting
the Third Party Claim (collectively, the "Claim Notice"); provided, however,
that failure to make such delivery shall not affect the indemnification provided
hereunder except to the extent that such failure materially prejudices
Indemnitor's ability to contest such Third Party Claim.
(b) If a Third Party Claim is made against an Indemnitee, the Indemnitors
shall be entitled to participate in the defense thereof and, if the Indemnitors
so choose, assume the defense thereof with counsel of its choice reasonably
acceptable to the Indemnitee. Should the Indemnitors so elect to assume the
defense of a Third Party Claim, the Indemnitors shall not be liable to the
Indemnitee for any legal expenses incurred by the Indemnitee in connection with
the defense thereof, except as provided below. If the Indemnitors assume such
defense, the Indemnitee shall have the right, but not the obligation, to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnitors; provided that if the
incurrence of any such fees and expenses of counsel was reasonably necessary to
respond timely to legal process for any period after the Claim Notice is given
during which the Indemnitors have not assumed the defense thereof such fees and
expenses shall be paid by the Indemnitors if and to the extent that they are
reasonable and the Indemnitors are responsible for indemnifying Indemnitee for
such Third Party Claim. If the Indemnitors do not assume the defense of a Third
Party Claim within ten (10) days after the giving by the Indemnitee to the
Indemnitors of a valid Claim Notice with respect to the Third Party Claim, the
Indemnitors shall be liable to the Indemnitee for all reasonable fees and
expenses of counsel employed by the Indemnitee if and in proportion to the
extent that the Indemnitee is responsible for indemnifying Indemnitee for such
Third Party Claim. If the Indemnitors choose to defend any Third Party Claim,
all the Indemnified Parties shall reasonably cooperate in the defense thereof at
the expense of the Indemnitors. Such cooperation shall include the retention and
(upon the Indemnitors' request) the provision to the Indemnitors of
non-privileged records and information which are relevant to such Third Party
Claim, and making employees reasonably available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder and to act as a witness or respond to legal process. Regardless of
whether the Indemnitors assume the defense of a Third Party Claim, the
Indemnitee shall not admit any liability with respect to, or settle, compromise
or discharge, such Third Party Claim without the Indemnitors' prior written
consent (which consent shall not be unreasonably withheld or delayed). If the
Indemnitors assume the defense of the Third Party Claim, the Indemnitors may
agree to settle the Third Party Claim, so long as such settlement releases the
Indemnitee completely and unconditionally in connection with such Third Party
Claim (and with any claims arising therefrom or related thereto) and such
settlement is not otherwise prejudicial (financially or otherwise) to the
Indemnitee. Notwithstanding the foregoing, the Indemnitors shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the Indemnitee in defending
such Third Party Claim) if the Third Party Claim seeks an order, injunction or
other equitable relief or relief for other than money damages against the
Indemnitee that the Indemnitee reasonably determines, after conferring with
outside counsel, cannot be separate from any related claim for money damages. If
such equitable relief or other relief portion of the Third Party Claim can be so
separate from that for money damages, the Indemnitors shall be entitled to
assume the defense of the portion relating to money damages as provided above.
(c) In the event that an Indemnitee claims right to payment pursuant to
this Agreement (other than pursuant to a Third Party Claim), such Indemnitee
shall send written notice of such claim (a "Direct Claim Notice") to the
Indemnitors promptly upon learning of the facts forming the basis of such claim
(a "Direct Claim"); provided, however, that failure to promptly deliver such a
notice shall not affect the
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indemnification provided hereunder except to the extent that such failure
materially prejudices Indemnitor's ability to contest such Direct Claim. Such
notice shall specify the basis for such claim. As promptly as possible after the
Indemnitee has given such notice, the Indemnitee and Indemnitors shall establish
the merits and amount of such claim (by mutual agreement, litigation,
arbitration or otherwise) and as soon as reasonably practicable, and in no event
more than ten (10) business days of the final determination of the merits and
amount of such claim, the Indemnitors shall deliver to the Indemnitee
immediately available funds in an amount determined sufficient to satisfy such
claim in accordance with the terms hereof.
SECTION 4.3 (a) Claims Period. Neither Indemnitor shall be required to
indemnify any Indemnitees under Section 4.1 with respect to any Losses or any
Direct Claim unless either Indemnitor shall have been properly notified of a
Third Party Claim or a Direct Claim pursuant to Section 4.2 giving rise to such
Losses on or before the earlier to occur of the second anniversary of the
Effective Time or termination of the Liquidating Trust in accordance with its
terms. Notwithstanding the foregoing, if, prior to the close of business on the
earlier to occur of the second anniversary of the Effective Time or termination
of the Liquidating Trust in accordance with its terms, either Indemnitor shall
have been properly notified of a Third Party Claim or a Direct Claim pursuant to
Section 4.2 and such Third Party Claim or Direct Claim, as the case may be,
shall not have been finally resolved or disposed of at such date, such Third
Party Claim or Direct Claim, as the case may be, shall continue to survive and
shall remain a basis for indemnity hereunder until such claim is finally
resolved or disposed of in accordance with the terms hereof.
(b) Limit on Liability. The claims for indemnity of Indemnitees hereunder
shall be payable solely by, and shall be enforceable solely against, the
Indemnitors, it being specifically understood and agreed that no holder of
Beneficial Interests shall have any personal liability to any Indemnitee for any
claim for indemnification hereunder and that the Indemnitees shall look solely
to the Indemnitor for payment or satisfaction of any and all such claims for
indemnification.
(c) Remedies. To the maximum extent permitted by law, and except for any
claims for equitable relief or claims involving fraud or bad faith, the
indemnities set forth in this Agreement shall be the exclusive remedies of the
Indemnitees for the recovery of any money damages for all Losses and any Direct
Claim, and the Indemnitees shall not be entitled to any other indemnification
rights or other remedies of any nature whatsoever with respect thereto, all of
which are hereby waived.
SECTION 4.4 Holdback. Each of the Indemnitors agrees that it will not,
prior to the first anniversary of the Effective Time, declare or make any
distributions (other than payment of fees, costs and out-of-pocket expenses of
Trustee and the managing member of the Liquidating Company) to the members of
the Liquidating Company or Beneficiaries, as applicable (the "Initial Holdback
Period"). Following the Initial Holdback Period, each of the Indemnitors agrees
that it will not declare or make distributions (other than payment of fees,
costs and out-of-pocket expenses of Trustee and the managing member of the
Liquidating Company) to the members of the Liquidating Company or Beneficiaries,
as applicable, to the extent of the disputed amount of any Third Party Claim or
Direct Claim for which either Indemnitor shall have been properly notified
pursuant to Section 4.2 which are pending at the expiration of the Initial
Holdback Period until such claim is finally resolved or disposed of in
accordance with the terms hereof; provided, however, that the Indemnitors may
declare or make distributions to the extent that the Indemnitors have cash on
hand greater than the disputed amount of any such pending Third Party Claims or
Direct Claims.
SECTION 5. Miscellaneous.
SECTION 5.1 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective representatives and permitted successors and assigns.
SECTION 5.2 Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements and
understandings between the parties with respect to its subject
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matter. This Agreement may be amended only by a written instrument duly executed
by the parties hereto. No amendment, modification or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
SECTION 5.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Time is of the essence with respect to all
provisions of this Agreement.
SECTION 5.4 Assignment. This Agreement may not be transferred or assigned
by Indemnitors but may be assigned by Holding, Parent or Sub to any of its
affiliates or to any successor to its business and will be binding upon and
inure to the benefit of any such affiliate or successor.
SECTION 5.5 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be an original, but both of which together
shall constitute one and the same Agreement.
SECTION 5.6 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) by delivery, telegram or telecopy,
or by mail (registered or certified mail, postage prepaid, return receipt
requested) or by any national courier service, provided that any notice
delivered as herein provided shall also be delivered by telecopy at the time of
such delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice, provided that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to Holding, Parent or Sub:
Intown Suites Management, Inc.
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
King & Spalding
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(b) If to the Company or the Indemnitors:
Suburban Lodges of America, Inc.
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
SECTION 5.7 No Distribution. The Liquidating Trust covenants and agrees
that it will not sell, transfer or otherwise dispose of the limited liability
company interests in the Liquidating LLC held by it.
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SECTION 5.8 Disclosure.
(a) As soon as practicable after the close of each fiscal year (including
the year in which the Liquidating Trust terminates in accordance with its
terms), but in any event within ninety (90) days thereafter, the Trustee shall
prepare and mail to each of the Beneficiaries a report for such fiscal year
showing the assets and liabilities of the Liquidating Trust and of the
Liquidating Company at the end of each such fiscal year and the receipts and
disbursements of the Liquidating Trust and the Liquidating Company for the
period, including dates and amounts of distribution made by the Trustee. Such
report shall also describe the changes in the Liquidating Trust's and the
Liquidating Company's assets during the period and the actions taken by the
Trustee during the period or such other disclosure as the SEC may indicate. The
financial statements contained in such report shall be prepared in accordance
with generally accepted accounting principles, but need not be audited by an
independent public accountant.
(b) During the course of a fiscal year, whenever a material event relating
to the Liquidating Trust's or the Liquidating Company's assets occurs, the
Trustee shall, within a reasonable period of time after such occurrence, prepare
and mail to the Beneficiaries an interim report describing such event. The
occurrence of a material event need not be reported on an interim report if an
annual report will be issued at approximately the same time that such interim
report would be issued and such annual report describes the material event as it
would be discussed in an interim report.
SECTION 5.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia,
without regard to its principles of conflicts of laws.
SECTION 5.10 Enforceability The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
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IN WITNESS WHEREOF, the Company, Indemnitors, Holding, Parent and Sub have
caused this Agreement to be duly executed as of the day and year first above
written.
INTOWN HOLDING COMPANY, L.L.C.
By:
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Name:
Title:
INTOWN SUITES MANAGEMENT, INC.
By:
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Name:
Title:
INTOWN SUB, INC.
By:
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Name:
Title:
SUBURBAN LODGES OF AMERICA, INC.
By:
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Name:
Title:
SUBURBAN LIQUIDATING TRUST
By:
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Name:
Title:
SUBURBAN LIQUIDATING COMPANY L.L.C.
By:
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Name:
Title:
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