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EXHIBIT 99.1
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
JULY 25, 1997
AMONG
PRIME HOSPITALITY CORP.
PH SUB CORPORATION
AND
HOMEGATE HOSPITALITY, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER.......................................................................1
Section 1.1 The Merger................................................................1
Section 1.2 Effective Date of the Merger..............................................1
ARTICLE II THE SURVIVING CORPORATION.......................................................2
Section 2.1 Certificate of Incorporation..............................................2
Section 2.2 By-Laws...................................................................2
Section 2.3 Board of Directors; Officers..............................................2
Section 2.4 Effects of Merger.........................................................2
ARTICLE III CONVERSION OF SHARES...........................................................2
Section 3.1 Exchange Ratio............................................................2
Section 3.2 Parent to Make Certificates Available.....................................3
Section 3.3 Dividends; Stock Transfer Taxes...........................................3
Section 3.4 No Fractional Shares......................................................4
Section 3.5 Stock Options.............................................................5
Section 3.6 Stockholders' Meetings....................................................6
Section 3.7 Closing of the Company's Transfer Books...................................6
Section 3.8 Assistance in Consummation of the Merger..................................6
Section 3.9 Closing...................................................................6
Section 3.10 Transfer Taxes............................................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT........................................7
Section 4.1 Organization and Qualification............................................7
Section 4.2 Capitalization............................................................7
Section 4.3 Subsidiaries..............................................................8
Section 4.4 Authorization; Binding Agreement..........................................8
Section 4.5 No Violations.............................................................8
Section 4.6 Governmental Approvals....................................................9
Section 4.7 Reports and Financial Statements..........................................9
Section 4.8 Absence of Certain Changes or Events......................................10
Section 4.9 Litigation................................................................11
Section 4.10 Parent Action.............................................................11
Section 4.11 Financial Advisor.........................................................11
Section 4.12 Compliance with Applicable Laws...........................................11
Section 4.13 Liabilities...............................................................12
Section 4.14 No Material Adverse Effect................................................12
Section 4.15 Accounting Matters........................................................12
Section 4.16 Disclosure................................................................13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................13
Section 5.1 Organization and Qualification............................................13
Section 5.2 Capitalization............................................................13
Section 5.3 Subsidiaries..............................................................14
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Section 5.4 Authorization; Binding Agreement........................................15
Section 5.5 No Violations...........................................................15
Section 5.6 Governmental Approvals..................................................15
Section 5.7 Reports and Financial Statements........................................16
Section 5.8 Absence of Certain Changes or Events....................................17
Section 5.9 Litigation..............................................................18
Section 5.10 Employee Benefit Plans..................................................18
Section 5.11 Labor Matters...........................................................21
Section 5.12 Company Action..........................................................21
Section 5.13 Financial Advisor.......................................................21
Section 5.14 Compliance with Applicable Laws.........................................22
Section 5.15 Liabilities.............................................................22
Section 5.16 Taxes...................................................................23
Section 5.17 Certain Agreements......................................................23
Section 5.18 Contracts...............................................................24
Section 5.19 Trademarks..............................................................24
Section 5.20 No Material Adverse Effect..............................................25
Section 5.21 Accounting Matters......................................................25
Section 5.22 Required Vote of Company Common Stock...................................25
Section 5.23 Real Property...........................................................25
Section 5.24 Hotel Zoning; Improvements..............................................27
Section 5.25 Environmental Matters...................................................28
Section 5.26 Development Agreement...................................................28
Section 5.27 Insurance...............................................................29
Section 5.28 Disclosure..............................................................29
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING SUB...................................29
Section 6.1 Organization..............................................................29
Section 6.2 Capitalization............................................................29
Section 6.3 Authority Relative to this Agreement......................................29
ARTICLE VII CONDUCT OF BUSINESS PENDING THE MERGER........................................30
Section 7.1 Conduct of Business by the Company Pending the Merger....................30
Section 7.2 Conduct of Business by Parent Pending the Merger.........................33
Section 7.3 Conduct of Business of Sub...............................................33
ARTICLE VIII ADDITIONAL AGREEMENTS........................................................33
Section 8.1 Access and Information..................................................33
Section 8.2 Registration Statement/Proxy Statement..................................34
Section 8.3 Affiliate and Pooling Agreements........................................35
Section 8.4 Stock Exchange Listing..................................................36
Section 8.5 Employee Plans..........................................................36
Section 8.6 Indemnification and Insurance...........................................36
Section 8.7 Board Representation....................................................37
Section 8.8 Additional Agreements...................................................37
Section 8.9 Alternative Proposals...................................................38
Section 8.10 Advice of Changes; SEC Filings..........................................39
Section 8.11 Letter of the Company's Accountants.....................................39
Section 8.12 Letter of Parent and Sub's Accountants..................................40
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Section 8.13 Tax Certificate.........................................................40
ARTICLE IX CONDITIONS PRECEDENT...........................................................40
Section 9.1 Conditions to Each Party's Obligation to Effect the Merger...............40
Section 9.2 Conditions to Obligation of the Company to Effect the Merger.............41
Section 9.3 Conditions to Obligations of Parent and Sub to Effect the Merger.........42
ARTICLE X TERMINATION, AMENDMENT AND WAIVER...............................................44
Section 10.1 Termination by Mutual Consent...........................................44
Section 10.2 Termination by Either Parent or the Company.............................44
Section 10.3 Termination by the Company..............................................44
Section 10.4 Termination by Parent...................................................45
Section 10.5 Effect of Termination and Abandonment...................................45
ARTICLE XI GENERAL PROVISIONS.............................................................46
Section 11.1 Non-Survival of Representations, Warranties and Agreements..............47
Section 11.2 Notices.................................................................47
Section 11.3 Fees and Expenses.......................................................48
Section 11.4 Publicity...............................................................48
Section 11.5 Specific Performance....................................................48
Section 11.6 Assignment; Binding Effect..............................................49
Section 11.7 Entire Agreement........................................................49
Section 11.8 Amendment...............................................................49
Section 11.9 Governing Law...........................................................49
Section 11.10 Counterparts............................................................49
Section 11.11 Headings and Table of Contents..........................................50
Section 11.12 Interpretation..........................................................50
Section 11.13 Waivers.................................................................50
Section 11.14 Incorporation of Exhibits...............................................50
Section 11.15 Severability............................................................50
Section 11.16 Certain Definitions.....................................................51
Section 11.17 Waiver of Jury Trial....................................................51
Section 11.18 Jurisdiction; Service of Process........................................51
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Schedules:
3.5(a) Stock Options
4.1 Organization and Qualification
5.1 Organization and Qualification
5.3 Subsidiaries
5.5 No Violations
5.8 Absence of Certain Changes or Events
5.9 Litigation
5.10 Employee Benefit Plans
5.13 Financial Advisor
5.16 Taxes
5.17 Certain Agreements
5.18 Contracts
5.19 Trademarks
5.23 Real Property
5.24 Hotel Zoning; Improvements
5.25 Environmental Matters
5.26 Development Agreement
7.1 Conduct of Business by the Company Pending the Merger
8.5 Employee Plans
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
July 25, 1997, by and among Prime Hospitality Corp., a Delaware corporation
("Parent"), PH Sub Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and Homegate Hospitality, Inc., a Delaware
corporation (the "Company"):
W I T N E S S E T H:
WHEREAS, Parent and the Company desire to effect a business
combination by means of the merger of Sub with and into the Company (the
"Merger");
WHEREAS, the Boards of Directors of Parent, Sub and the Company have
approved the Merger, upon the terms and subject to the conditions set forth
herein;
WHEREAS, for accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling of interests"; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, on the Effective Date (as defined in Section 1.2), Sub shall be merged
into the Company and the separate existence of Sub shall thereupon cease, and
the Company, as the corporation surviving the Merger (the "Surviving
Corporation"), shall by virtue of the Merger continue its corporate existence
under the laws of the State of Delaware.
Section 1.2 Effective Date of the Merger. The Merger shall become
effective at the date and time (the "Effective Date") when a properly executed
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware, which filing shall be made as soon as practicable following
fulfillment of the conditions set forth in Article IX hereof, or at such time
thereafter as is provided in such Certificate of Merger.
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ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of the Company as in effect on the Effective Date shall be the
Certificate of Incorporation of the Surviving Corporation, provided that such
Certificate of Incorporation shall be amended and restated immediately following
the Merger in a form satisfactory to Parent and the Surviving Corporation.
Section 2.2 By-Laws. The By-laws of the Sub as in effect on the
Effective Date shall be the By-laws of the Surviving Corporation, and thereafter
may be amended in accordance with its terms and as provided by law and this
Agreement.
Section 2.3 Board of Directors; Officers. The directors of Sub
immediately prior to the Effective Date shall be the directors of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Date shall be the officers of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified.
Section 2.4 Effects of Merger. The Merger shall have the effects set
forth in Section 259 of the Delaware General Corporation Law (the "DGCL").
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. On the Effective Date, by virtue of the
Merger and without any action on the part of any holder of any common stock,
$.01 par value, of the Company ("Company Common Stock"):
(a) All shares of Company Common Stock which are held by the Company
or any Subsidiary (as defined in Section 11.16) of the Company, and any shares
of Company Common Stock owned by Parent, Sub or any other Subsidiary of Parent,
shall be canceled.
(b) Subject to Section 3.4, each remaining outstanding share of
Company Common Stock shall be converted into 0.6073 (the "Exchange Ratio") fully
paid and nonassessable shares of the common stock, $.01 par value, of Parent
("Parent Common Stock").
(c) In the event of any stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares with
respect to, or rights issued in
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respect of, Parent Common Stock or Company Common Stock after the date hereof,
the Exchange Ratio shall be adjusted accordingly.
(d) Each issued and outstanding share of capital stock of Sub shall
be converted into and become one fully paid and nonassessable share of common
stock of the Surviving Corporation.
Section 3.2 Parent to Make Certificates Available.
(a) Prior to the Effective Date, Parent shall select an Exchange
Agent, which shall be Parent's transfer agent or such other person or persons
reasonably satisfactory to the Company, to act as Exchange Agent for the Merger
(the "Exchange Agent"). As soon as practicable after the Effective Date, Parent
shall make available, and each holder of Company Common Stock will be entitled
to receive, upon surrender to the Exchange Agent of one or more certificates
("Certificates") representing such stock for cancellation, certificates
representing the number of shares of Parent Common Stock into which such shares
are converted in the Merger and cash in consideration of fractional shares as
provided in Section 3.4 (the "Share Consideration"). Parent Common Stock into
which Company Common Stock shall be converted in the Merger shall be deemed to
have been issued on the Effective Date.
(b) Any holder of shares of Company Common Stock who has not
exchanged his Certificates for Parent Common Stock in accordance with subsection
(a) within 12 months after the Effective Date shall have no further claim upon
the Exchange Agent and shall thereafter look only to Parent and the Surviving
Corporation for payment in respect of his shares of Company Common Stock. Until
so surrendered, Certificates shall represent solely the right to receive the
Share Consideration.
Section 3.3 Dividends; Stock Transfer Taxes. No dividends or other
distributions that are declared or made on Parent Common Stock will be paid to
persons entitled to receive certificates representing Parent Common Stock
pursuant to this Agreement until such persons surrender their Certificates
representing Company Common Stock. Upon such surrender, there shall be paid to
the person in whose name the certificates representing such Parent Common Stock
shall be issued (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Date theretofore
payable with respect to such whole shares of Parent Common Stock and not paid,
less the amount of any withholding taxes which may be required thereon, and (ii)
at the appropriate payment date, the amount of dividends or other distributions
with a record
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date after the Effective Date but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock, less the amount of any withholding taxes which may be required
thereon. In no event shall the person entitled to receive such dividends be
entitled to receive interest on such dividends. In the event that any
certificates representing shares of Parent Common Stock are to be issued in a
name other than that in which the Certificates surrendered in exchange therefor
are registered, it shall be a condition of such exchange that the Certificate or
Certificates so surrendered shall be properly endorsed or be otherwise in proper
form for transfer and that the person requesting such exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of Parent Common Stock in a name other than that of
the registered holder of the Certificate or Certificates surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of shares of Company Common
Stock for any shares of Parent Common Stock or dividends thereon delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar laws. In the event any Certificate shall have been lost, stolen or
destroyed, upon the 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, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the shares
of Parent Common Stock and cash in lieu of fractional shares, and unpaid
dividends and distributions on shares of Parent Common Stock as provided in this
Section 3.3, deliverable in respect thereof pursuant to this Agreement.
Section 3.4 No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to Section 3.2. Notwithstanding
any other provision of this Agreement, each holder of Company Common Stock
exchanged pursuant to the Merger who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash in
an amount equal to such fractional part of a share of Parent Common Stock
multiplied by the per-share value of the Parent Common Stock, with such
per-share value being deemed equal to the average composite closing sale price
for Parent Common Stock on the New York Stock Exchange (the "NYSE") for the 10
business days next
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preceding the Effective Date, as reported in each case in the following day's
edition of The Wall Street Journal.
Section 3.5 Stock Options. (a) Each of the Company's stock option
plans (the "Option Plans"), and options to acquire shares of Company Common
Stock outstanding on the date hereof, are set forth in Section 3.5(a) of the
Company Disclosure Schedule (as defined in Section 5.1). Each Option Plan and
all such options which are outstanding immediately prior to the Effective Date,
whether vested or unvested (each, an "Option" and collectively, the "Options"),
shall be assumed by Parent at the Effective Date, and each such Option shall
become an option to purchase a number of shares of Parent Common Stock (a
"Substitute Option") equal to the number of shares of Company Common Stock
subject to such Option multiplied by the Exchange Ratio (rounded to the nearest
whole share). The per share exercise price for each Substitute Option shall be
the current exercise price per share of Company Common Stock divided by the
Exchange Ratio (rounded up to the nearest full cent), and each Substitute Option
otherwise shall be subject to all of the other terms and conditions of the
original Option to which it relates. Prior to the Effective Date, the Company
shall take such additional actions as are necessary under applicable law and the
applicable agreements and Option Plans to ensure that each outstanding Option
shall, from and after the Effective Date, represent only the right to purchase,
upon exercise, shares of Parent Common Stock. There shall not occur as a result
of the Merger any acceleration of vesting or exercisability with respect to any
Option, or any lapse of vesting restrictions with respect to any share of
restricted stock, other than pursuant to the terms of the original grant
agreement, and any such acceleration shall occur without the exercise of
discretion by any person or entity.
(b) As soon as reasonably practicable after the Effective Date,
Parent shall cause to be included under a registration statement on Form S-8 of
Parent all shares of Parent Common Stock which are subject to Substitute
Options, and shall maintain the effectiveness of such registration statement
until all Substitute Options have been exercised, expired or forfeited.
Section 3.6 Stockholders' Meetings. Subject to Section 8.9, the
Company shall take all action necessary, in accordance with applicable law and
its Certificate of Incorporation and By-laws, to convene a special meeting of
the holders of Company Common Stock (the "Company Meeting") as promptly as
practicable for the purpose of considering and taking action upon this
Agreement. Subject to Section 8.9, the Board of Directors of the Company will
recommend that holders of Company Common Stock vote in favor of and
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approve the Merger and the adoption of the Agreement at the Company Meeting.
Section 3.7 Closing of the Company's Transfer Books. At the
Effective Date, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock shall be made thereafter. In the
event that, after the Effective Date, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for Parent Common
Stock and/or cash as provided in Sections 3.1(b) and 3.4.
Section 3.8 Assistance in Consummation of the Merger. Subject to
Section 8.9, each of Parent, Sub and the Company shall provide all reasonable
assistance to, and shall cooperate with, each other to bring about the
consummation of the Merger as soon as possible in accordance with the terms and
conditions of this Agreement. Parent shall cause Sub to perform all of its
obligations in connection with this Agreement.
Section 3.9 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place (i) at the offices of ▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, One Citicorp Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, at 9:00 A.M. local time on the first business day following the day on
which the last of the conditions set forth in Article IX (other than those that
can only be fulfilled on the Effective Date) is fulfilled or waived or (ii) at
such other time and place as Parent and the Company shall agree in writing.
Section 3.10 Transfer Taxes. Parent and Company shall cooperate in
the preparation, execution and filing of all returns, applications or other
documents regarding any real property transfer, stamp, recording, documentary or
other taxes and any other fees and similar taxes which become payable in
connection with the Merger (other than transfer or stamp taxes payable in
respect of transfers pursuant to Section 3.3) (collectively, "Transfer Taxes").
From and after the Effective Date, Parent shall pay or cause to be paid, without
deduction or withholding from any amounts payable to the holders of Company
Common Stock, all Transfer Taxes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 4.1 Organization and Qualification. Parent is a corporation
duly organized, validly existing and
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in good standing under the laws of the State of Delaware and has the corporate
power to carry on its business as it is now being conducted or currently
proposed to be conducted. Parent is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities make
such qualification necessary, except where the failure to be so qualified will
not, individually or in the aggregate, have a material adverse effect on the
business, properties, assets, prospects, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries taken as a
whole (a "Parent Material Adverse Effect"). Complete and correct copies as of
the date hereof of the Certificate of Incorporation and By-laws of Parent have
been delivered to the Company as Section 4.1 of the disclosure schedule
delivered by Parent to the Company in connection with this Agreement (the
"Parent Disclosure Schedule"). The Certificate of Incorporation and By-laws of
Parent and each of its Subsidiaries are in full force and effect. Neither Parent
nor any of its Subsidiaries is in violation of any provision of its respective
Certificate of Incorporation or By-laws.
Section 4.2 Capitalization. The authorized capital stock of Parent
consists of 75,000,000 shares of Parent Common Stock and 20,000,000 shares of
preferred stock, $.10 par value. As of March 31, 1997, 39,926,662 shares of
Parent Common Stock were issued and outstanding, and no shares of preferred
stock were issued and outstanding. All of the shares of Parent Common Stock
issuable in accordance with this Agreement in exchange for Company Common Stock
at the Effective Date in accordance with this Agreement will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and shall be
delivered free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever. As of July 23, 1997, except for (i) options to
acquire an aggregate of 1,979,499 shares of Parent Common Stock pursuant to the
1995 Employee Stock Option Plan, the 1995 Non-Employee Director Stock Option
Plan and the 1992 Stock Option and Performance Incentive Plans, (ii) warrants to
acquire an aggregate of 854,713 shares of Parent Common Stock and (iii)
$75,000,000 aggregate principal amount of Convertible Subordinated Notes due
2002, agreements or commitments presently outstanding obligating Parent to
issue, deliver or sell shares of its capital stock or debt securities, or
obligating Parent to grant, extend or enter into any such option, warrant, call
or other such right, agreement or commitment.
Section 4.3 Subsidiaries. Each Subsidiary of Parent is a
corporation, limited partnership or limited liability company duly organized,
validly existing and in
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good standing under the laws of its jurisdiction of incorporation or formation
and has the corporate, partnership or other power to carry on its business as it
is now being conducted or currently proposed to be conducted. Each Subsidiary of
Parent is duly qualified as a foreign corporation, partnership or limited
liability company to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the nature of
its activities makes such qualification necessary, except where the failure to
be so qualified, when taken together with all such failures, has not had, or
would not reasonably be expected to have, a Parent Material Adverse Effect.
Section 4.4 Authorization; Binding Agreement. Parent has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by Parent's Board
of Directors. No other corporate proceedings on the part of Parent (or its
stockholders) are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement constitutes a valid and binding obligation
of Parent enforceable against Parent in accordance with its terms.
Section 4.5 No Violations. Parent is not subject to or obligated
under (i) any charter, by-law, indenture or other loan document provision or
(ii) any other contract, license, franchise, permit, order, decree, concession,
lease, instrument, judgment, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or their respective properties
or assets, which would be breached or violated, or under which there would be a
default (with or without notice or lapse of time, or both), or under which there
would arise a right of termination, cancellation, modification or acceleration
of any obligation or the loss of a material benefit, by its entering into and
performing this Agreement, other than, in the case of clause (ii) only, any
breaches, violations, defaults, terminations, cancellations, modifications,
accelerations or losses which, either singly or in the aggregate, have not had,
or would not reasonably be expected to have, a Parent Material Adverse Effect or
prevent or unreasonably delay the consummation of the transactions contemplated
hereby.
Section 4.6 Governmental Approvals. Except in connection or in
compliance with the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the corporation, securities or blue sky laws or regulations
of the various states, no filing or registration with, or authorization, consent
or approval of,
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any public body or authority is necessary for the consummation by Parent of the
Merger or the other transactions contemplated by this Agreement other than
filings, registrations, authorizations, consents or approvals the failure of
which to make or obtain have not had, or would not reasonably be expected to
have, either singly or in the aggregate, a Parent Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby or thereby.
Section 4.7 Reports and Financial Statements. Parent has previously
furnished the Company with true and complete copies of its (i) Annual Report on
Form 10-K for the year ended December 31, 1996, as filed with the Securities and
Exchange Commission (the "Commission"), (ii) Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, as filed with the Commission, (iii) proxy
statements related to all meetings of its stockholders (whether annual or
special) since January 1, 1996, and (iv) all other reports or registration
statements filed by Parent with the Commission since January 1, 1996 (except for
preliminary material in the case of clauses (iii) and (iv) above) (clauses (i)
through (iv) being referred to herein collectively as the "Parent SEC Reports").
As of their respective dates, the Parent SEC Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the Commission thereunder
applicable to such Parent SEC Reports. As of their respective dates, the Parent
SEC Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim consolidated financial statements of Parent included in the Parent SEC
Reports comply in all material respects with applicable accounting requirements
and with the published rules and regulations of the Commission with respect
thereto. The consolidated financial statements included in the Parent SEC
Reports: have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto); present fairly, in all material respects, the consolidated
financial position of Parent and its Subsidiaries as at the dates thereof and
the consolidated results of their operations and consolidated cash flows for the
periods then ended subject, in the case of the unaudited interim consolidated
financial statements, to normal year-end audit adjustments, any other
adjustments described therein and the fact that certain information and notes
have been condensed or omitted in accordance with the Exchange Act and the rules
promulgated thereunder; and are in accordance with the books of account and
records of the Parent and its Subsidiaries.
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Section 4.8 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Reports and as contemplated by this Agreement, since
December 31, 1996 through the date hereof, Parent and its Subsidiaries have
conducted their business only in the ordinary and usual course, and there has
not been (i) any transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not in the ordinary course
of business) individually or in the aggregate that has had, or would reasonably
be expected to have, a Parent Material Adverse Effect; (ii) any material damage,
destruction or loss, whether or not covered by insurance; (iii) any investment
by Parent or any of its Subsidiaries in any corporation, partnership or other
entity in excess of $25,000,000 in the aggregate; (iv) any sale, disposition or
other transfer of assets or properties of Parent or any of its Subsidiaries
(other than in the ordinary course of business consistent with past practice) in
excess of $15,000,000 in the aggregate; (v) the incurrence or guarantee of any
indebtedness (other than in the ordinary course of business consistent with past
practice) in excess of $5,000,000 in the aggregate; (vi) any entry into any
other commitment or transaction material to Parent and its Subsidiaries taken as
a whole (other than in the ordinary course of business consistent with past
practice); (vii) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to its capital
stock; (viii) any change in its accounting principles, practices or methods;
(ix) any split, combination or reclassification of any of Parent's capital stock
or the issuance or authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, shares of Parent's capital stock;
(x) any repurchase or redemption with respect to its capital stock; (xi) any
revaluation by Parent of any of its assets (including, without limitation, the
write-off of notes or accounts receivable) in excess of $500,000 in the
aggregate; or (xii) any agreement (whether or not in writing), arrangement or
understanding to do any of the foregoing.
Section 4.9 Litigation. Except as disclosed in Parent's Annual
Report on Form 10-K for the year ended December 31, 1996, or the Parent's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, there is no
suit, action or proceeding pending or, to the knowledge of Parent, threatened
against Parent or any of its Subsidiaries which, either alone or in the
aggregate, would reasonably be expected to have a Parent Material Adverse
Effect, nor is there any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against Parent or any of its Subsidiaries having, or
which would reasonably be expected to have, either alone or in the aggregate, a
Parent Material Adverse Effect.
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Section 4.10 Parent Action. The Board of Directors of Parent (at a
meeting duly called and held) has by the requisite vote of all directors present
(a) determined that this Agreement is advisable and in the best interests of
Parent and its stockholders and (b) approved the Merger in accordance with the
provisions of Section 251 of the DGCL.
Section 4.11 Financial Advisor. Parent represents and warrants that,
except for ▇▇▇▇▇▇▇▇▇▇ Securities, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or any of its Subsidiaries.
Section 4.12 Compliance with Applicable Laws. Parent and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all courts, administrative agencies or commissions or other
governmental authorities or instrumentalities, domestic or foreign (each, a
"Governmental Entity") necessary in connection with the conduct of their
business (the "Parent Permits"), except for such permits, licenses, variances,
exemptions, orders and approvals the failure of which to hold have not had, or
would not reasonably be expected to have, either singly or in the aggregate, a
Parent Material Adverse Effect. The Parent and its Subsidiaries are in
compliance with the terms of the Parent Permits, except for such failures to
comply which, singly or in the aggregate, have not had, or would not reasonably
be expected to have, a Parent Material Adverse Effect. The businesses of Parent
and its Subsidiaries are not being conducted in violation of any law, ordinance
or regulation of any Governmental Entity, except for violations which
individually or in the aggregate have not had, or would not reasonably be
expected to have, a Parent Material Adverse Effect. No investigation or review
by any Governmental Entity with respect to Parent or any of its Subsidiaries is
pending or, to the knowledge of Parent, threatened, nor has any Governmental
Entity indicated an intention to conduct the same, other than those the outcome
of which have not had, or would not reasonably be expected to have, either
singly or in the aggregate, a Parent Material Adverse Effect.
Section 4.13 Liabilities. Since the date of the latest consolidated
balance sheet of Parent contained in the Parent SEC Reports through the date
hereof, neither Parent nor any of its Subsidiaries has incurred any material
liabilities or obligations (absolute, accrued, contingent or otherwise) of the
type that is required to be reflected or reserved against in a consolidated
balance sheet of Parent and its Subsidiaries, or in the notes thereto, prepared
in accordance with generally accepted accounting principles,
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other than liabilities incurred in the ordinary course of business and
liabilities which are fully disclosed or provided for in the most recent Parent
SEC Reports. To the knowledge of Parent, there is no basis for any contingent or
unknown liability of any nature against Parent or its Subsidiaries, which has
had, or would reasonably be expected to have, either singly or in the aggregate,
a Parent Material Adverse Effect, other than as reflected in the Parent SEC
Reports.
Section 4.14 No Material Adverse Effect. Except as disclosed in the
Parent SEC Reports, Parent is not aware of any fact or facts which has or have
had, or would reasonably be expected to have, either singly or in the aggregate,
a Parent Material Adverse Effect.
Section 4.15 Accounting Matters. Neither Parent nor, to its
knowledge, any of its affiliates, has through the date hereof, taken or agreed
to take any action that would prevent the Company from accounting for the
business combination to be effected by the Merger as a "pooling of interests" in
accordance with Accounting Principles Board Opinion No. 16, the interpretive
releases issued pursuant thereto and the pronouncements of the Commission. To
the knowledge of Parent, Parent has not taken any action which would prevent the
Merger from constituting a reorganization within the meaning of Section 368(a)
of the Code.
Section 4.16 Disclosure. No representation or warranty by Parent in
this Agreement, and no schedule or certificate delivered by Parent and furnished
to the Company pursuant hereto, or in connection with the transactions
contemplated hereby, is false and misleading in any material respect or contains
any material misstatement of fact or omits to state any material facts required
to be stated to make such information not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 5.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to carry on its business as
it is now being conducted or currently proposed to be conducted. The Company is
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so
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qualified will not, individually or in the aggregate, have a material adverse
effect on the business, properties, assets, prospects, condition (financial or
otherwise), liabilities or results of operations of the Company and its
Subsidiaries taken as a whole (a "Company Material Adverse Effect"). Complete
and correct copies of the Certificate of Incorporation and By-laws of the
Company and each of its Subsidiaries have been delivered to Parent as Section
5.1 of the disclosure schedule delivered by the Company to Parent in connection
with this Agreement (the "Company Disclosure Schedule"). The Certificate of
Incorporation and By-laws of the Company and each of its Subsidiaries are in
full force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any provision of its respective Certificate of Incorporation or
By-laws.
Section 5.2 Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, $.01 par value. As of the date hereof, 10,725,000
shares of Company Common Stock were issued and outstanding, and no shares of
preferred stock were issued and outstanding. There are no bonds, debentures,
notes or other indebtedness issued and outstanding having the right to vote, or
which are convertible into or exercisable for securities having the right to
vote, on any matters on which the Company's shareholders may vote. Except for
options to acquire 641,250 shares of Company Common Stock pursuant to the
Company's 1996 Long Term Incentive Plan (the "1996 Plan"), there are no options,
warrants, calls or other rights, agreements or commitments presently outstanding
obligating the Company to issue, deliver or sell shares of its capital stock or
debt securities, or obligating the Company to grant, extend or enter into any
such option, warrant, call or other such right, agreement or commitment. All of
the shares of Company Common Stock outstanding at the Effective Date will be
duly authorized, validly issued, fully paid and nonassessable. After the
Effective Date, the Surviving Corporation will have no obligation to issue,
transfer or sell any shares of capital stock of the Company or the Surviving
Corporation pursuant to any Company Employee Benefit Plan (as defined in Section
5.10).
Section 5.3 Subsidiaries. The only Subsidiaries of the Company are
disclosed in Section 5.3 of the Company Disclosure Schedule. Each Significant
Subsidiary (as such term is defined in Rule 1-02 of Regulation S-X under the
Securities Act) ("Significant Subsidiary") of the Company has been named in the
Company SEC Reports (as hereinafter defined). Each Subsidiary of the Company is
a corporation or limited partnership duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or formation
and has the corporate or partnership power to carry on its business as it is now
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being conducted or currently proposed to be conducted. Each Subsidiary of the
Company is duly qualified as a foreign corporation or partnership to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified, when
taken together with all such failures, has not had, or would not reasonably be
expected to have, a Company Material Adverse Effect. Section 5.3 of the Company
Disclosure Schedule contains, with respect to each Subsidiary of the Company,
its name and jurisdiction of incorporation and, with respect to each Subsidiary
that is not wholly owned, the number of issued and outstanding shares of capital
stock and the number of shares of capital stock owned by the Company or a
Subsidiary. All the outstanding shares of capital stock of each Subsidiary of
the Company are validly issued, fully paid and nonassessable, and those owned by
the Company or by a Subsidiary of the Company are owned free and clear of any
liens, claims or encumbrances. There are no existing options, warrants, calls or
other rights, agreements or commitments of any character to which the Company or
any of its Subsidiaries is a party relating to the issued or unissued capital
stock or other securities of any of the Subsidiaries of the Company. Except as
set forth in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, the Company does not directly or indirectly own any interest
in any other corporation, partnership, joint venture or other business
association or entity.
Section 5.4 Authorization; Binding Agreement. The Company has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Company's
Board of Directors. Except for the approval of the holders of not less than
two-thirds of the outstanding shares of Company Common Stock, no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
Section 5.5 No Violations. Except as set forth in Section 5.5 of the
Company Disclosure Schedule, the Company is not subject to or obligated under
(i) any charter, by-law, indenture or other loan document provision or (ii) any
other contract, license, franchise, permit, order, decree, concession, lease,
instrument, judgment, statute, law, ordinance, rule or regulation applicable to
the Company or any of its Subsidiaries or their respective properties or assets,
which would be breached or violated,
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or under which there would be a default (with or without notice or lapse of
time, or both), or under which there would arise a right of termination,
cancellation, modification or acceleration of any obligation or the loss of a
material benefit, by its entering into and performing this Agreement, other
than, in the case of clause (ii) only, any breaches, violations, defaults,
terminations, cancellations, modifications, accelerations or losses which,
either singly or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect or prevent or unreasonably delay the
consummation of the transactions contemplated hereby.
Section 5.6 Governmental Approvals. Except in connection or in
compliance with the provisions of the Securities Act, the Exchange Act, and the
corporation, securities or blue sky laws or regulations of the various states,
no filing or registration with, or authorization, consent or approval of, any
public body or authority is necessary for the consummation by the Company of the
Merger or the other transactions contemplated hereby, other than filings,
registrations, authorizations, consents or approvals the failure of which to
make or obtain have not had, or would not reasonably be expected to have, either
singly or in the aggregate, a Company Material Adverse Effect or prevent the
consummation of the transactions contemplated hereby or thereby.
Section 5.7 Reports and Financial Statements. The Company has
previously furnished Parent with true and complete copies of its (i) Annual
Report on Form 10-K for the year ended December 31, 1996, as filed with the
Commission, (ii) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, as filed with the Commission, (iii) proxy statements related to all
meetings of its shareholders (whether annual or special) since October 24, 1996
and (iv) all other reports or registration statements filed by the Company with
the Commission since October 24, 1996 (except for preliminary material in the
case of clauses (iii) and (iv) above) (clauses (i) through (iv) being referred
to herein collectively as the "Company SEC Reports"). As of their respective
dates, the Company SEC Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the Commission thereunder applicable to such
Company SEC Reports. As of their respective dates, the Company SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim consolidated
financial statements of the Company included in the Company SEC Reports comply
in
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all material respects with applicable accounting requirements and with the
published rules and regulations of the Commission with respect thereto. The
consolidated financial statements included in the Company SEC Reports: have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes thereto); present
fairly, in all material respects, the consolidated financial position of the
Company and its Subsidiaries as at the dates thereof and the consolidated
results of their operations and consolidated cash flow for the periods then
ended subject, in the case of the unaudited interim consolidated financial
statements, to normal year-end audit adjustments and any other adjustments
described therein and the fact that certain information and notes have been
condensed or omitted in accordance with the Exchange Act and the rules
promulgated thereunder; and are in accordance with the books of account and
records of the Company and its Subsidiaries.
Section 5.8 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Reports filed prior to the date hereof, as
contemplated by this Agreement, for changes permitted by this Agreement or as
set forth in Section 5.8 of the Company Disclosure Schedule, since December 31,
1996, the Company and its Subsidiaries have conducted their business only in the
ordinary and usual course, and there has not been (i) any transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) individually or in
the aggregate that has had, or would reasonably be expected to have, a Company
Material Adverse Effect; (ii) any material damage, destruction or loss, whether
or not covered by insurance; (iii) any investment by the Company or any of its
Subsidiaries in any corporation, partnership or other entity in excess of
$250,000 in the aggregate; (iv) any sale, disposition or other transfer of
assets or properties of the Company or any of its Subsidiaries (other than in
the ordinary course of business consistent with past practice) in excess of
$250,000 in the aggregate; (v) the incurrence or guarantee of any indebtedness
(other than in the ordinary course of business consistent with past practice) in
excess of $5,000,000 in the aggregate; (vi) any entry into any other commitment
or transaction material to the Company and its Subsidiaries taken as a whole
(other than in the ordinary course of business consistent with past practice);
(vii) any declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) with respect to its capital stock; (viii)
any change in its accounting principles, practices or methods; (ix) any split,
combination or reclassification of any of the Company's capital stock or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of the Company's
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capital stock; (x) any repurchase or redemption with respect to its capital
stock; (xi) any grant of or any amendment of the terms of any option to purchase
shares of capital stock of the Company; (xii) any granting by the Company or any
of its Subsidiaries to any director, officer or employee of the Company or any
of its Subsidiaries of (A) any increase in compensation, except for annual
increases in the base rates and bonuses of officers or employees in the ordinary
course of business, or (B) any increase in severance or termination pay; (xiii)
any entry by the Company or any of its Subsidiaries into any employment,
severance, bonus or termination agreement with any director, officer or employee
of the Company or any of its Subsidiaries; (xiv) any revaluation by the Company
of any of its assets (including, without limitation, the write-off of notes or
accounts receivable); or (xv) any agreement (whether or not in writing),
arrangement or understanding to do any of the foregoing.
Section 5.9 Litigation. Except as disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, or the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, or on
Section 5.9 of the Company Disclosure Schedule, there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries which, either alone or in the aggregate,
would reasonably be expected to have a Company Material Adverse Effect, nor is
there any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Company or any of its Subsidiaries having, or which would reasonably
be expected to have, either alone or in the aggregate, a Company Material
Adverse Effect.
Section 5.10 Employee Benefit Plans. (a) Section 5.10 of the Company
Disclosure Schedule hereto sets forth a list of all "employee benefit plans", as
defined in Section 3(3) of ERISA, and all other material employee benefit
arrangements or payroll practices, including, without limitation, any such
arrangements or payroll practices providing severance pay, sick leave, vacation
pay, salary continuation for disability, retirement benefits, deferred
compensation, bonus pay, incentive pay, stock options (including those held by
directors, employees, and consultants), hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements, that are
maintained by the Company, any Subsidiary of the Company or any Company ERISA
Affiliate (as defined below), with respect to which the Company, any Subsidiary
of the Company or any Company ERISA Affiliate has any present or contingent
liability, or is obligated to contribute thereunder for current or former
employees, independent contractors, consultants and leased employees of the
Company, any
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Subsidiary of the Company or any Company ERISA Affiliate (the "Company Employee
Benefit Plans"). Copies of Company Employee Benefit Plans have been provided to
Parent.
(b) None of the Company Employee Benefit Plans is a "multiemployer
plan", as defined in Section 4001(a)(3) of ERISA (a "Multiemployer Plan"), and
neither the Company nor any Company ERISA Affiliate presently maintains such a
plan. None of the Company, any Subsidiary or Company ERISA Affiliate (subject to
the knowledge of the Company, in the case of any Subsidiary or Company ERISA
Affiliate acquired by the Company, for periods prior to such acquisition), has
withdrawn in a complete or partial withdrawal from any Multiemployer Plan, nor
has any of them incurred any material liability due to the termination or
reorganization of such a Multiemployer Plan.
(c) Neither the Company nor any Company Benefit Plan has incurred
any material liability or penalty under Section 4975 of the Code or Section
502(i) of ERISA.
(d) Except as set forth in Section 5.10 of the Company Disclosure
Schedule or as required by applicable law, the Company does not maintain or
contribute to any plan or arrangement which provides or has any liability to
provide life insurance or medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment,
and the Company has never represented, promised or contracted (whether in oral
or written form) to any employee or former employee that such benefits would be
provided.
(e) Except as set forth on Section 5.10 of the Company Disclosure
Schedule, the execution of, and performance of the transactions contemplated by,
this Agreement will not, either alone or upon the occurrence of subsequent
events, result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee. The only
employment agreements, consulting agreements, severance agreements or severance
policies applicable to the Company or its Subsidiaries are the agreements and
policies specifically referred to in Section 5.10 of the Company Disclosure
Schedule, copies of which have been provided to Parent. No compensation payable
pursuant to any Company Employee Benefit Plan, severance agreements, employment
agreements or otherwise will fail to be deductible for Federal income tax
purposes by reason of Section 280G or Section 162(m) of the Code.
(f) None of the Company Employee Benefit Plans is a "single employer
plan", as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV
of ERISA, and neither
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the Company nor any Company ERISA Affiliate presently maintains such a plan.
None of the Company, any of its Subsidiaries or any ERISA Affiliate has any
material present or contingent liability under Section 4062 of ERISA to the
Pension Benefit Guaranty Corporation or to a trustee appointed under Section
4042 of ERISA. None of the Company, any of its Subsidiaries or any Company ERISA
Affiliate (subject to the knowledge of the Company, in the case of any
Subsidiary of the Company or Company ERISA Affiliate acquired by the Company,
for periods prior to such acquisition) has engaged in any transaction described
in Section 4069 of ERISA.
(g) Each Company Employee Benefit Plan that is intended to qualify
under Section 401 of the Code, and each trust maintained pursuant thereto, has
been determined to be exempt from federal income taxation under Section 501 of
the Code by the IRS, and, to the Company's knowledge, nothing has occurred with
respect to the operation or organization of any such Company Employee Benefit
Plan and there have been no amendments to any such Company Employee Benefit Plan
that would cause the loss of such qualification or exemption or the imposition
of any material liability, penalty or tax under ERISA or the Code.
(h) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Employee Benefit Plans to any funds or trusts established thereunder
or in connection therewith have been made by the due date thereof and no
contributions have been made to the Company Employee Benefit Plans that would be
considered non-deductible under the Code.
(i) There has been no material violation of ERISA or the Code or any
other applicable law with respect to the filing of applicable reports, documents
and notices regarding the Company Employee Benefit Plans or the furnishing of
required reports, documents or notices to the participants or beneficiaries of
the Company Employee Benefit Plans.
(j) True, correct and complete copies of the following documents,
with respect to each of the Company Benefit Plans, have been delivered or made
available to Parent by the Company: (i) all plans and related trust documents
and any other instruments or contracts under which the Company Employee Benefit
Plans are operated, and amendments thereto; (ii) the Forms 5500 since inception;
(iii) summary plan descriptions and (iv) IRS determination letters.
(k) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the
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Company's knowledge, threatened, against the Company Employee Benefit Plans, the
assets of any of the trusts under such plans or the plan sponsor or the plan
administrator, or, to the Company's knowledge, against any fiduciary of the
Company Employee Benefit Plans with respect to the operation of such plans
(other than routine benefit claims).
(l) The Company Employee Benefit Plans have been maintained, in all
material respects, in accordance with their terms and with all provisions of
ERISA and the Code (including rules and regulations thereunder) and other
applicable federal and state laws and regulations.
For purposes of this Agreement, "Company ERISA Affiliate" means any
business or entity which is a member of the same "controlled group of
corporations," under "common control" or an "affiliated service group" with the
Company within the meanings of Sections 414(b), (c) or (m) of the Code, or
required to be aggregated with the entity under Section 414(o) of the Code, or
is under "common control" with the Company, within the meaning of Section
4001(a)(14) of ERISA, or any regulations promulgated or proposed under any of
the foregoing Sections.
Section 5.11 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company or
its Subsidiaries relating to their business. There are no organizational efforts
with respect to the formation of a collective bargaining unit presently being
made or, to the knowledge of the Company, threatened involving employees of the
Company or any of its Subsidiaries. There is no labor strike, material slowdown
or material work stoppage or lockout pending or, to the knowledge of the
Company, threatened against or affecting the Company or its Subsidiaries and
neither the Company nor any Subsidiary has experienced any strike, material
slowdown or material work stoppage or lockout since January 1, 1996.
Section 5.12 Company Action. The Board of Directors of the Company
(at a meeting duly called and held) has by the requisite vote of its directors
(a) determined that the Merger is fair to and in the best interests of the
Company and its shareholders, (b) approved the Merger in accordance with the
provisions of Section 251 of the DGCL and (c) resolved to recommend the approval
of this Agreement and the Merger by the holders of the Company Common Stock and
directed that the Merger be submitted for consideration by the Company's
stockholders at the Company Meeting.
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Section 5.13 Financial Advisor. The Company has received the opinion
of Bear, ▇▇▇▇▇▇▇ & Co. Inc. to the effect that, as of the date hereof, the
Exchange Ratio is fair to the holders of Company Common Stock from a financial
point of view. The Company represents and warrants that (i) except for Bear,
▇▇▇▇▇▇▇ & Co. Inc., no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or any of its Subsidiaries and (ii) the fees and
commissions payable to the Company's financial advisors, as contemplated by this
Section, will not exceed the aggregate amount set forth in that certain letter,
dated July 1, 1997, from Bear, ▇▇▇▇▇▇▇ & Co. Inc. to the Company, a copy of
which is attached to Section 5.13 of the Company Disclosure Schedule.
Section 5.14 Compliance with Applicable Laws. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary in connection with the conduct
of their business (the "Company Permits"), except for such permits, licenses,
variances, exemptions, orders and approvals the failure of which to hold have
not had, or would not reasonably be expected to have, either singly or in the
aggregate, a Company Material Adverse Effect. The Company and its Subsidiaries
are in compliance with the terms of the Company Permits, except for such
failures to comply which, singly or in the aggregate, have not had, or would not
reasonably be expected to have, a Company Material Adverse Effect. The
businesses of the Company and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity, except
for violations which individually or in the aggregate have not had, or would not
reasonably be expected to have, a Company Material Adverse Effect. No
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries is pending or, to the knowledge of the Company,
threatened, nor has any Governmental Entity indicated an intention to conduct
the same, other than those the outcome of which have not had, or would not
reasonably be expected to have, either singly or in the aggregate, a Company
Material Adverse Effect.
Section 5.15 Liabilities. Since the date of the latest balance sheet
of the Company contained in the Company SEC Reports filed prior to the date
hereof, neither the Company nor any of its Subsidiaries has incurred any
material liabilities or obligations (absolute, accrued, contingent or otherwise)
of the type that is required to be reflected or reserved against in a balance
sheet of the Company and its Subsidiaries, or in the notes thereto, prepared in
accordance with generally accepted accounting principles, other than liabilities
incurred in the ordinary
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course of business and liabilities which are fully disclosed or provided for in
the most recent Company SEC Reports filed prior to the date hereof. To the
knowledge of the Company, there is no basis for any contingent or unknown
liability of any nature against the Company or its Subsidiaries, which has had,
or would reasonably be expected to have, either singly or in the aggregate, a
Company Material Adverse Effect, other than as reflected in the Company SEC
Reports.
Section 5.16 Taxes. For the purposes of this Agreement, the term
"Tax" shall include all Federal, state, local and foreign income, profits,
franchise, gross receipts, payroll, sales, employment, use, real and personal
property, withholding, excise and other taxes, duties and assessments of any
nature whatsoever together with all interest, penalties and additions imposed
with respect to such amounts. Except as set forth in Section 5.16 of the Company
Disclosure Schedule, (i) each of the Company and its Subsidiaries has filed all
material Tax returns required to be filed by any of them (taking into account
all valid extensions of filing dates) and has paid (or the Company has paid on
its behalf), or has set up an adequate reserve for the payment of, all material
Taxes required to be paid in respect of the periods covered by such returns;
(ii) the information contained in such Tax returns is true, complete and
accurate in all material respects; (iii) neither the Company nor any Subsidiary
of the Company is delinquent in the payment of any Tax, except where such
delinquency has not had, or would not reasonably be expected to have, a Company
Material Adverse Effect; (iv) no material deficiencies for any Taxes have been
proposed, asserted or assessed against the Company or any of its Subsidiaries
that have not been finally settled or paid in full, neither the Company nor any
of its Subsidiaries are under audit (or has received any notification of such an
audit) by any taxing authority, and no consents to extend the time to assess any
Tax have been granted or requested; and (v) none of the Company and its
Subsidiaries is obligated, or is reasonably expected to be obligated, to make
any payments, or is a party to any agreement that under certain circumstances
would obligate it, or reasonably be expected to obligate it, to make any
payments that will not be deductible under Section 280G of the Code.
Section 5.17 Certain Agreements. Except as set forth in Section 5.17
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to (i) any agreement (oral or written) with any
executive officer or other key employee of the Company or any of its
Subsidiaries the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
of the nature contemplated by this Agreement; (ii) any agreement (oral or
written) with respect to any executive officer or other key
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employee of the Company or any of its Subsidiaries providing any term of
employment or compensation guarantee extending beyond the Effective Date; or
(iii) any plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of the
transactions contemplated by this Agreement.
Section 5.18 Contracts. All material contracts and agreements are
listed in Section 5.18 of the Company Disclosure Schedule, and true, complete
and correct copies of all such contracts and agreements (together with all
amendments thereto) have been delivered to Parent prior to the date hereof. All
such contracts and agreements are valid and binding and are in full force and
effect and enforceable against the other parties thereto in accordance with
their respective terms (except with respect to the real estate purchase
contracts, which will be so valid and binding and in full force and effect and
enforceable upon the incorporation of an adequate legal description of the
property into such contracts), subject to applicable bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights generally. Except as set forth in
Section 5.18 of the Company Disclosure Schedule, (i) no approval or consent of,
or notice to, any person is needed in order that such contract or agreement (and
the real estate purchase contracts to the extent set forth in the preceding
sentence) shall continue in full force and effect in accordance with its terms
without penalty, acceleration or rights of early termination following
consummation of the transactions contemplated by this Agreement, except for such
penalties, accelerations or rights which have not had, and would not reasonably
be expected to have, either singly or in the aggregate, a Company Material
Adverse Effect and (ii) the Company is not in violation or breach of or default
under any such contract or agreement which violation or breach or default has
had, or would reasonably be expected to have, either singly or in the aggregate,
a Company Material Adverse Effect, nor, to the Company's knowledge, is any other
party to such contract or agreement. There is no contract or agreement required
to be described in or filed as an exhibit to any Company SEC Report that is not
described in or filed as required by the Securities Act or the Exchange Act, as
the case may be.
Section 5.19 Trademarks. The Company and its Subsidiaries own or
have valid rights to use all trademarks, trade names, service marks, trade
secrets, copyrights and licenses and other proprietary intellectual property
rights
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and licenses as are material to the businesses of the Company and its
Subsidiaries (the "Intellectual Property"), all of which are listed on Section
5.19 of the Company Disclosure Schedule, and there is no conflict with the
rights of the Company and its Subsidiaries therein or any conflict with the
rights of others therein which have had, or would reasonably be expected to
have, either singly or in the aggregate, a Company Material Adverse Effect.
Neither the Merger nor the transactions contemplated hereby will adversely
affect the rights of the Company or any of its Subsidiaries in respect of any of
the Intellectual Property.
Section 5.20 No Material Adverse Effect. Except as disclosed in the
Company SEC Reports filed prior to the date hereof, the Company is not aware of
any fact or facts which has or have had, or would reasonably be expected to
have, either singly or in the aggregate, a Company Material Adverse Effect.
Section 5.21 Accounting Matters. Neither the Company nor, to its
knowledge, any of its affiliates, has through the date hereof, taken or agreed
to take any action that would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests" in
accordance with Accounting Principles Board Opinion No. 16, the interpretive
releases issued pursuant thereto and the pronouncements of the Commission. To
the knowledge of the Company, the Company has not taken any action which would
prevent the Merger from constituting a reorganization within the meaning of
Section 368(a) of the Code.
Section 5.22 Required Vote of Company Common Stock. The approval of
the holders of not less than two-thirds of the outstanding shares of Company
Common Stock is required to adopt this Agreement and approve the Merger and the
other transactions contemplated hereby. No other vote of the stockholders of the
Company is required by law, the Certificate of Incorporation or By-laws of the
Company or otherwise to adopt this Agreement and approve the Merger and the
other transactions contemplated hereby.
Section 5.23 Real Property. (a) The Company and its Subsidiaries
have good and indefeasible title to (i) the real property reflected on the
consolidated balance sheet of the Company and its Subsidiaries as at March 31,
1997 and own all of the improvements located thereon and the real property (and
the improvements thereon) thereafter acquired, all of which (as of the date
hereof) are listed in Section 5.23(a) of the Company Disclosure Schedule
(collectively, the "Operating Real Property") and (ii) the real property under
development (and the improvements thereon), all of which (as of the date hereof)
are listed in Section 5.23(a) of the Company Disclosure Schedule (collectively,
the
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"Development Properties"), in each case free and clear of any lien except
Permitted Exceptions. "Permitted Exceptions" shall mean, with respect to the
individual property comprising the Operating Real Property and the Development
Properties, (a) liens set forth in Section 5.23(a) of the Company Disclosure
Schedule; (b) any liens for real estate taxes and assessments not yet delinquent
or which are being contested by the Company in good faith and for which the
Company has taken appropriate reserves in accordance with generally accepted
accounting principles consistently applied; (c) any imperfection of title that,
individually or in the aggregate with other such liens, does not materially and
adversely interfere with the current or intended use of the property subject
thereto or detract from the indefeasibility and insurability (at standard rates
by a title company of nationally recognized standing) of the property subject
thereto or materially impair the operations of the Company; (d) mechanics' liens
with respect to the Development Properties; (e) the rights of hotel guests; and
(f) the encumbrances set forth on the owner's title insurance policy or
commitments therefor issued to the Company for such property, delivered to
Parent prior to the date hereof.
(b) As of the date hereof, the Company has executed only the letters
of intent or contracts for the acquisition and development of additional hotel
sites (the sites which are the subject of such letters of intent or contracts
being referred to as "Contract Properties") which are listed in Section 5.23(b)
of the Company Disclosure Schedule.
(c) All utilities and services necessary for the use and operation
of the Operating Real Property (including road access, gas, water, electricity
and telephone) are available thereto, and are of sufficient capacity to meet
adequately all needs and requirements necessary for current use and operation of
such respective Operating Real Property and for their respective intended
purposes.
(d) The Development and Construction Agreements, Development Plans,
Completion Guaranties, Construction Contracts and Project Schedules entered into
pursuant to the Master Development Assistance Agreement, dated as of February 9,
1996 (the "Master Development Agreement"), and the Management Agreements entered
into pursuant to the Extended-Stay Management Assistance Agreement, dated as of
August 26, 1996 (the "Master Management Agreement"), in each case delivered by
the Company to Parent, are all agreements in existence as of the date hereof
(other than architect's agreements and sub-contracts) with respect to the
development, construction and management of the Development Properties as of the
date hereof and are true, correct and complete copies thereof and, to the
knowledge of the
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Company, are in full force and effect and enforceable in accordance with their
terms and no party to any such document has committed a default thereunder or
any act or thing which with the giving of notice or the passage of time may
constitute such a default. The Company reasonably anticipates that substantial
completion of the Development Properties will occur on or before the dates
specified in Section 5.23(d) to the Company Disclosure Schedule, in accordance
with the Development Budgets attached to the Company Disclosure Schedule and in
accordance with all requirements of the Development Agreements and Development
Plans. If constructed in accordance with the Development Plans, the Development
Properties shall comply in all material respects with all applicable codes and
zoning laws and resolutions.
(e) None of the Operating Real Property, the Development Properties
or, to the Company's knowledge, the Contract Properties is subject to any right
or option of any other person to purchase or lease or otherwise obtain title to
or an interest in such property.
(f) There is no outstanding violation by the Company or its
Subsidiaries of a condition or agreement contained in any easement, restrictive
covenant or any similar instrument or agreement affecting any Operating Real
Property or Development Properties, except to the extent the same would not
individually or in the aggregate have a Company Material Adverse Effect.
Section 5.24 Hotel Zoning; Improvements. Except as set forth in
Section 5.24 of the Company Disclosure Schedule, each of the Operating Real
Properties complies in all material respects with all applicable codes and
zoning laws and resolutions, and there is no pending or, to the knowledge of the
Company or its Subsidiaries, threatened condemnation, zoning change or other
proceeding or action that will in any material respect affect the size of, use
of, improvements on, construction on or access to the Operating Real Properties.
The improvements comprising any portion of each Operating Real Property (the
"Improvements") are free of physical, mechanical, structural, design or
construction defects which would, singly or in the aggregate, have a Company
Material Adverse Effect and the mechanical, electrical and utility systems
servicing the Improvements (including, without limitation, all water, electric,
sewer, plumbing, heating, ventilation, gas and air conditioning) are in good
condition and proper working order and are free of defects (for which provision
to repair has not been made) which have had or would reasonably be expected to
have, either singly or in the aggregate, a Company Material Adverse Effect.
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Section 5.25 Environmental Matters. The Company and its Subsidiaries
have obtained and maintained in effect all licenses, permits and other
authorizations required under all applicable laws, regulations and other
requirements of governmental or regulatory authorities relating to pollution,
public health and safety or the environment ("Environmental Laws") and are in
compliance with all Environmental Laws and with all such licenses, permits and
authorizations, except to the extent such failure to obtain, maintain or comply
have not had, or would not reasonably be expected to have, either singly or in
the aggregate, a Company Material Adverse Effect. Neither the Company nor any of
its Subsidiaries has performed or suffered any act which could give rise to, or
has otherwise incurred, liability to any person (governmental or not) under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or any other Environmental Laws, which has had, or would reasonably be expected
to have, either singly or in the aggregate, a Company Material Adverse Effect;
nor has the Company or any of its Subsidiaries received notice of any such
liability or any claim therefor or submitted notice pursuant to CERCLA to any
governmental agency with respect to any of their respective assets. Except as
set forth in Section 5.25 of the Company Disclosure Schedule, no hazardous
substance, hazardous waste, contaminant, petroleum product, chemical, pollutant
or toxic substance (as such terms are defined in any applicable Environmental
Law) has been released, placed, dumped, emitted or otherwise come to be located
on, at or beneath any of the assets or properties of the Company or any of its
Subsidiaries or any surface waters or groundwaters thereon or thereunder which
has had, or would reasonably be expected to have, either singly or in the
aggregate, a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries owns or operates, or has ever owned or operated, an underground
storage tank containing a regulated substance, as such term is defined in the
Resource Conservation and Recovery Act. There is no asbestos at or in any of the
assets or properties of the Company or any of its Subsidiaries.
Section 5.26 Development Agreement. The Master Development
Agreement, filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, is in full force and effect and, except as set
forth in Section 5.26 of the Company Disclosure Schedule, has not been amended
or modified, and neither the Company nor its Subsidiaries has received any
notice of default or termination, or have knowledge of any event that, with
notice or lapse of time, or both, would constitute a default or termination,
under such agreement.
Section 5.27 Insurance. The Company and each of its Subsidiaries
maintain insurance against losses and risks
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in accordance with customary industry practice in amounts that are adequate to
protect the Company and each of its Subsidiaries and their respective
businesses.
Section 5.28 Disclosure. No representation or warranty by the
Company in this Agreement and no schedule or certificate delivered by the
Company and furnished or to be furnished to Parent pursuant hereto, or in
connection with the transactions contemplated hereby, is false and misleading in
any material respect or contains any material misstatement of fact or omits to
state any material facts required to be stated to make such information not
misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
Section 6.1 Organization. Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Sub has not engaged in any business since it was incorporated other than in
connection with its organization and the transactions contemplated by this
Agreement.
Section 6.2 Capitalization. The authorized capital stock of Sub
consists of 1,000 shares of Common Stock, par value $.01 per share, 1,000 shares
of which are validly issued and outstanding, fully paid and nonassessable and
are owned by Parent free and clear of all liens, claims and encumbrances.
Section 6.3 Authority Relative to this Agreement. Sub has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by its Board of
Directors and sole stockholder, and no other corporate proceedings on the part
of Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. Except as referred to herein or in connection or in
compliance with the provisions of the Securities Act, the Exchange Act and the
corporation, securities or blue sky laws or regulations of the various states,
no filing or registration with, or authorization, consent or approval of, any
public body or authority is necessary for the consummation by Sub of the Merger
or the transactions contemplated by this Agreement.
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ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
Section 7.1 Conduct of Business by the Company Pending the Merger.
Prior to the Effective Date, unless Parent shall otherwise consent in writing:
(i) the Company shall, and shall cause its Subsidiaries to, carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall, and shall
cause its Subsidiaries to, use their best efforts to preserve intact their
present business organizations and preserve their relationships with
customers, suppliers and others having business dealings with them with the
intent that their goodwill and on-going businesses are unimpaired at the
Effective Date, except as set forth in Section 7.1 of the Company
Disclosure Schedule;
(ii) except as required by this Agreement, the Company and its
Subsidiaries shall not and shall not propose to (a) sell or pledge or agree
to sell or pledge any capital stock owned by the Company in any of its
Subsidiaries; (b) amend its Certificate of Incorporation or By-laws; (c)
split, combine or reclassify its outstanding 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, or declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property; or (d) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of its
capital stock;
(iii) the Company shall not, nor shall it permit any of its
Subsidiaries to, (a) issue, deliver, sell, transfer or otherwise dispose of
or agree to issue, deliver, sell, transfer or otherwise dispose of any
additional shares of, or rights of any kind to acquire any shares of, its
capital stock of any class, any indebtedness having the right to vote, or
which are convertible into or exercisable for securities having the right
to vote, with respect to matters on which the Company's shareholders may
vote, or any option, rights or warrants to acquire, or securities
convertible into, shares of capital stock other than pursuant to the
exercise of vested Options outstanding on the date hereof under the Option
Plans; (b) acquire (including by merger, consolidation or
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acquisition of stock or assets), lease, pledge, encumber or dispose or
agree to acquire (including by merger, consolidation or acquisition of
stock or assets), lease, pledge, encumber or dispose of any capital assets
or any other assets other than in accordance with the Master Development
Agreement (and with Parent's prior written consent with respect to proposed
development sites); (c) incur additional indebtedness, assume, guarantee,
endorse or otherwise become responsible for the obligations of any person,
make loans or advances or encumber or grant a security interest in any
asset or enter into any other material transaction in excess of $250,000 in
the aggregate; (d) acquire or agree to acquire by merging or consolidating
with, or by purchasing an equity interest in excess of $250,000 in the
aggregate in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof; (e) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing; (f) with respect to the Contract
Properties, enter into any material amendment to the agreement to acquire
any Contract Property or modify in any material respect any letter of
intent to acquire any Contract Property or waive any material diligence
contingencies; (g) amend, modify or terminate any contracts or agreements
with respect to the Operating Real Property or the Development Property,
except if such amendment, modification or termination would not have a
material adverse effect on the respective Operating Real Property or
Development Property; or (h) enter into any new contracts or agreements,
including any leases, with respect to the Operating Real Property or the
Development Property, except if such contract or agreement would not have a
material adverse effect on the respective Operating Real Property or
Development Property;
(iv) the Company shall not, nor shall it permit any of its
Subsidiaries to, except as required to comply with applicable law and
except as provided in Section 8.5 hereof, enter into any new (or amend any
existing) Company Employee Benefit Plan or any new (or amend any existing)
employment, severance, executive compensation (including without limitation
stock option and restricted stock agreements between the Company and any
employee or any other person or entity) or consulting agreement, grant any
general increase in the compensation of directors, officers or employees
(including any such increase pursuant to any bonus, pension, profit-sharing
or other plan or commitment), grant any stock options or other stock-based
awards or take any action to accelerate any stock options or other
stock-based awards, or grant any increase in the compensation payable or to
become payable to any director, officer or employee, except for annual
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increases in the base rates and bonuses of officers or employees consistent
with past practices;
(v) the Company shall not, nor shall it permit any of its
Subsidiaries to, make any investments in non-investment grade securities;
(vi) the Company shall not, nor shall it permit any of its
Subsidiaries to, take any action to change accounting principles, policies
or procedures (including, without limitation, procedures with respect to
revenue recognition, payment of accounts payable and collection of accounts
receivable);
(vii) the Company shall not, nor shall it permit any of its
Subsidiaries to, enter into any transaction or series of transactions with
any Affiliate (as defined in Section 11.16) except pursuant to the Master
Management Agreement and the Master Development Agreement and except for
reasonable and customary brokerage commissions payable to ▇▇▇▇▇▇▇▇ ▇▇▇▇
Company and its Affiliates on market terms for services rendered;
(viii) the Company shall, and shall cause its Subsidiaries to, (a)
maintain insurance coverages and its books, accounts and records in the
usual manner consistent with prior practices; (b) comply with all laws,
ordinances and regulations of Governmental Entities applicable to the
Company and its Subsidiaries; (c) maintain and keep its properties and
equipment in good repair, working order and condition; and (d) perform its
obligations under all material contracts and commitments to which it is a
party or by which it is bound;
(ix) the Company shall not, nor shall it permit any of its
Subsidiaries to, take, or agree in writing or otherwise to take, any action
which would cause a breach of any of the representations or warranties of
the Company contained in this Agreement or prevent the Company from
performing or cause the Company not to perform its covenants hereunder;
(x) except as set forth in this Agreement or with the prior written
consent of Parent, the Company shall not submit any matters to its
shareholders for approval; and
(xi) the Company shall not, nor shall it permit any of its
Subsidiaries to, take or cause to be taken any action which would
disqualify the Merger as a "pooling of interests" for accounting purposes
or as a
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"reorganization" within the meaning of Section 368(a) of the Code.
Notwithstanding anything set forth in this Section 7.1, the Company
and its Subsidiaries may enter into management agreements pursuant to the Master
Management Agreement and (i) the hotel development transactions and (ii) the
financing transactions with Parent (or its Affiliates) or Bank One, Texas, NA
(or its Affiliates), in each case as set forth in Section 7.1 of the Company
Disclosure Schedule and in accordance with the Master Development Agreement and
the terms and conditions set forth therein, without the prior written consent of
Parent.
Section 7.2 Conduct of Business by Parent Pending the Merger. Prior
to the Effective Date, unless the Company shall otherwise agree in writing or
except as otherwise required by this Agreement, Parent shall, and shall cause
its Subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted;
provided that Parent may engage in acquisitions and dispositions in the
hospitality business and related businesses and may engage in debt or equity
financing or enter into sale/leaseback agreements or other financing
arrangements with respect to properties.
Section 7.3 Conduct of Business of Sub. During the period from the
date of this Agreement to the Effective Date, Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information. Each of the Company and Parent
and their respective Subsidiaries shall afford to the other and to the other's
accountants, counsel and other representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree)
throughout the period prior to the Effective Date to all of its properties,
books, contracts, commitments, records and personnel and, during such period,
each shall furnish promptly to the other (i) a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of federal
or state securities laws, and (ii) all other information concerning its
business, properties and personnel as the other may reasonably request. Each of
the Company and Parent shall hold, and shall cause their respective employees
and agents to hold, in confidence all such information in accordance with the
terms of the Confidentiality Agreement dated February 11, 1997 between Parent
and the Company.
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Section 8.2 Registration Statement/Proxy Statement. Parent and the
Company shall cooperate and promptly prepare, and Parent shall file with the
Commission as soon as practicable, a Registration Statement on Form S-4 (the
"Form S-4") under the Securities Act, with respect to the Parent Common Stock
issuable in the Merger, portions of which Registration Statement shall also
serve as the proxy statement with respect to the Company Meeting (the "Proxy
Statement/Prospectus"). The respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply in all material respects with
the applicable provisions of the Securities Act, the Exchange Act and the rules
and regulations thereunder. Parent shall use all reasonable efforts, and the
Company will cooperate with Parent, to have the Form S-4 declared effective by
the Commission as promptly as practicable and to keep the Form S-4 effective as
long as is necessary to consummate the Merger. Parent shall, as promptly as
practicable, provide copies of any written comments received from the Commission
with respect to the Form S-4 to the Company and advise the Company of any oral
comments with respect to the Form S-4 received from the Commission. Parent shall
use its best efforts to obtain, prior to the effective date of the Form S-4, all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by the Merger Agreement and will pay all
expenses incident thereto. Parent agrees that none of the information supplied
or to be supplied by Parent for inclusion or incorporation by reference in the
Form S-4 or the Proxy Statement/Prospectus (i) in the case of the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Company Meeting, or (ii) in the case of
the Form S-4 and each amendment or supplement thereto, at the time it is filed
or becomes effective, will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees that none of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
the Form S-4 or the Proxy Statement/Prospectus (i) in the case of the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Company Meeting, or, (ii) in the case of
the Form S-4 or any amendment or supplement thereto, at the time it is filed or
becomes effective, will contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. For purposes of the foregoing, it is understood and agreed that
information concerning or related to Parent will be deemed to have been supplied
by Parent and information concerning or related to the Company and the
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Company Meeting shall be deemed to have been supplied by the Company. No
amendment or supplement to the Proxy Statement/Prospectus will be made by Parent
or the Company without the approval of the other party. Parent will advise the
Company, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of Parent Common
Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the Commission for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the Commission for additional information.
Section 8.3 Affiliate and Pooling Agreements. As soon as practicable
after the date hereof, the Company shall deliver to Parent a list of names and
addresses of those persons who are "affiliates" (each such person, an
"Affiliate") of the Company within the meaning of Rule 145 (or any successor
rule, for so long as such rule is in effect) of the rules and regulations
promulgated under the Securities Act (and shall keep such list current through
the record date for the Company Meeting). The Company shall use all reasonable
efforts to obtain and deliver or cause to be delivered to Parent, prior to the
Effective Date, from each of the Affiliates of the Company identified in the
foregoing list, an Affiliate Letter in form and substance satisfactory to Parent
to the effect that such Affiliate will not offer to sell, sell or otherwise
dispose of any shares of Parent Common Stock issued to such Affiliate in
connection with the Merger, except pursuant to an effective registration
statement or in compliance with Rule 145 or in a transaction that, in the
opinion of counsel satisfactory to Parent, is exempt from the registration
requirements of the Securities Act and otherwise in a manner consistent with
applicable accounting requirements so that the Merger qualifies as a "pooling of
interests" (an "Affiliate Letter"). Parent shall be entitled to place legends as
specified in such Affiliate Letters on the certificates evidencing any Parent
Common Stock to be received by such Affiliates pursuant to the terms of the
Merger, and to issue appropriate stop transfer instructions to the transfer
agent for the Parent Common Stock, consistent with the terms of such Affiliate
Letters.
Section 8.4 Stock Exchange Listing. Parent shall use its best
efforts to list on the NYSE, upon official notice of issuance, the Parent Common
Stock to be issued pursuant to the Merger.
Section 8.5 Employee Plans. (a) Parent agrees to honor all contracts
and agreements of the Company or any of its Subsidiaries authorized by the
Company or any of its Subsidiaries prior to the date hereof which apply to any
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current or former employee or current or former director of the Company or any
of its Subsidiaries and which are set forth in Section 8.5 of the Company
Disclosure Schedule. Parent agrees to provide the employment or severance
arrangements as set forth on Schedule 8.5; and
(b) Parent agrees to provide to officers and employees of the
Company and its Subsidiaries who become or remain regular (full-time) employees
of Parent or any of its Subsidiaries, employee benefits, other than salary,
bonus and stock options, no less favorable than those provided by Parent and its
Subsidiaries to their similarly situated officers and employees. Any employee of
the Company or any of its Subsidiaries who becomes a participant in any employee
benefit plan, program, policy or arrangement of Parent or any of its
Subsidiaries after the Effective Date shall be given credit under such plan,
program, policy or arrangement for all service with the Company or any of its
Subsidiaries, and, if applicable, with Parent or any of its Subsidiaries, prior
to becoming such a participant for purposes of eligibility and vesting.
Section 8.6 Indemnification and Insurance. (a) From and after the
Effective Date, Parent shall indemnify, defend and hold harmless the officers,
directors and employees of the Company (the "Indemnified Parties") against all
losses, expenses, claims, damages or liabilities arising out of the transactions
contemplated by this Agreement to the fullest extent permitted or required under
applicable law; provided, however, that the requirement to advance expenses
shall be limited to those instances in which the Indemnified Party undertakes to
repay such amount if it shall ultimately be determined that he is not required
to be indemnified under Section 145(c) of the DGCL. Parent agrees that all
rights to indemnification existing in favor of the directors, officers or
employees of the Company as provided in the Company's Certificate of
Incorporation or Bylaws, as in effect as of the date hereof, with respect to
matters occurring through the Effective Date, shall survive the Merger and shall
continue in full force and effect, and the obligations of the Surviving
Corporation are hereby unconditionally guaranteed by Parent, for a period of not
less than six years from the Effective Date; provided, that in the event any
claim or claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims.
(b) Parent agrees to maintain or cause the Surviving Corporation to
maintain in effect for not less than three years after the Effective Date
policies of directors' and officers' liability insurance equivalent to those
maintained by the Company with respect to matters occurring prior to the
Effective Date; provided, however,
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that the Surviving Corporation shall not be required to pay an annual premium
for such insurance in excess of 200% of the current annual premiums paid by the
Company for such insurance, but in such case shall purchase as much coverage as
possible for such amount.
(c) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated by this Agreement is
commenced, whether before or after the Effective Date, the parties hereto agree
to cooperate and use their respective reasonable efforts to vigorously defend
against and respond thereto.
Section 8.7 Board Representation. (a) Parent acknowledges its
intent to discuss the potential nomination or appointment to its Board of
Directors of a nominee of the Company and to that end will consider the
potential nomination or appointment of such qualified persons as may be proposed
by the Company; provided, however, that such acknowledgment shall not obligate
Parent to nominate or appoint any such person to its Board of Directors.
(b) On or prior to the Effective Date, the Company shall use all
reasonable efforts to deliver to Parent evidence satisfactory to Parent of the
resignations of the directors of the Company, such resignations to be effective
immediately prior to the Closing.
Section 8.8 Additional Agreements. (a) Subject to the terms and
conditions herein provided (including without limitation Section 8.9), each of
the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions 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 transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals, to
effect all necessary registrations and filings (including, but not limited to,
filings with all applicable Governmental Entities) and to lift any injunction to
the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible).
(b) In case at any time after the Effective Date any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and/or directors of Parent, the Company and the Surviving
Corporation shall take all such necessary action.
(c) Following the Effective Date, Parent shall use its best efforts
to conduct the business, and shall cause the Surviving Corporation to use its
best efforts to conduct its business, except as otherwise contemplated by
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this Agreement, in a manner which would not jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
Section 8.9 Alternative Proposals. Prior to the Effective Date, the
Company agrees (a) that neither it nor any of its Subsidiaries shall, and it and
they shall direct and use its and their best efforts to cause its and their
respective officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its stockholders) with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of, the Company or any of its
Subsidiaries (any such proposal or offer made prior to the termination of this
Agreement (and any subsequent amended proposal or offer made by the same or an
affiliated party) being hereinafter referred to as an "Alternative Proposal") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Alternative
Proposal, or release any third party from any obligations under any existing
standstill agreement or arrangement relating to any Alternative Proposal, or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal; (b) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and it will take the necessary
steps to inform the individuals or entities referred to above of the obligations
undertaken in this Section 8.9; and (c) that it will notify Parent immediately
if any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it; provided, however, that nothing contained in
this Section 8.9 shall prohibit the Board of Directors of the Company from (i)
furnishing information to or entering into discussions or negotiations with, any
person or entity that makes or proposes to make an unsolicited bona fide
proposal to acquire the Company pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of assets, business combination or
other similar transaction, if, and only to the extent that, (A) the Board of
Directors of the Company determines in good faith that such action is required
for the Board of Directors to comply with its fiduciary duties to stockholders
imposed by law, (B) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the Company provides
written
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notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person or entity and (C)
the Company keeps Parent promptly informed of the status and all material terms
and conditions of any such discussions or negotiations (including identities of
parties); and (ii) to the extent applicable, complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Alternative Proposal.
Nothing in this Section 8.9 shall (x) permit the Company to terminate this
Agreement (except as specifically provided in Article X hereof), (y) permit the
Company to enter into any agreement with respect to an Alternative Proposal
during the term of this Agreement (it being agreed that during the term of this
Agreement, the Company shall not enter into any agreement with any person that
provides for, or in any way facilitates, an Alternative Proposal), or (z) affect
any other obligation of the Company under this Agreement.
Section 8.10 Advice of Changes; SEC Filings. The Company shall
confer on a regular basis with Parent on operational matters. Parent and the
Company shall promptly advise each other orally and in writing of any change or
event that has had, or could reasonably be expected to have, a Company Material
Adverse Effect or a Parent Material Adverse Effect, as the case may be. The
Company and Parent shall promptly provide each other (or their respective
counsel) copies of all filings made by such party with the Commission or any
other state or federal Governmental Entity in connection with this Agreement and
the transactions contemplated hereby.
Section 8.11 Letter of the Company's Accountants. The Company shall
use its best efforts to cause to be delivered to Parent and Sub at the time of
mailing of the Proxy Statement/Prospectus a "comfort" letter from Ernst & Young
LLP of the kind contemplated by the Statement of Auditing Standards with respect
to Letters to Underwriters promulgated by the American Institute of Certified
Public Accountants (the "AICPA Statement"), dated the date of such mailing, in
form and substance reasonably satisfactory to Parent and Sub, in connection with
the procedures undertaken by them with respect to the financial statements of
the Company contained or incorporated by reference in the Form S-4 and the other
matters contemplated by the AICPA Statement and customarily included in comfort
letters relating to transactions similar to the Merger.
Section 8.12 Letter of Parent and Sub's Accountants. Parent and Sub
shall use their respective best efforts to cause to be delivered to the Company
at the time of mailing of the Proxy Statement/Prospectus a "comfort" letter from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, of the kind contemplated by the AICPA Statement, dated the
date of such mailing, in form and substance reasonably satisfactory to the
Company, in
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connection with the procedures undertaken by them with respect to the financial
statements of Parent contained or incorporated by reference in the Form S-4 and
the other matters contemplated by the AICPA Statement and customarily included
in comfort letters relating to transactions similar to the Merger.
Section 8.13 Tax Certificate. The Company shall use all reasonable
efforts to provide Parent a certificate of non-foreign status in the manner
provided in Treasury Regulation Sec. 1.1445-2 from each Company stockholder
owning, actually or constructively, five percent (5%) or more of the Company
Common Stock.
ARTICLE IX
CONDITIONS PRECEDENT
Section 9.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the holders of the
Company Common Stock.
(b) The Form S-4 shall have become effective in accordance with the
provisions of the Securities Act. No stop order suspending the effectiveness of
the Form S-4 shall have been issued by the Commission and remain in effect and
all necessary approvals under state securities laws relating to the issuance or
trading of the Parent Common Stock to be issued to stockholders of the Company
in connection with the Merger shall have been obtained.
(c) No preliminary or permanent injunction or other order by any
federal or state court in the United States of competent jurisdiction which
prevents the consummation of the Merger shall have been issued and remain in
effect (each party agreeing to use its reasonable efforts to have any such
injunction lifted).
(d) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective
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Date and except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a material
adverse effect on the business, properties, assets, prospects, condition
(financial or otherwise), liabilities or results of operations of Parent and the
Company (and their respective Subsidiaries), taken as a whole, following the
Effective Date.
(e) The Parent Common Stock to be issued to Company stockholders in
connection with the Merger shall have been approved for listing on the NYSE,
subject only to official notice of issuance.
Section 9.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the additional following
conditions, unless waived by the Company:
(a) Parent and Sub shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Effective Date, and the representations and warranties of Parent
and Sub contained in this Agreement that are qualified as to materiality shall
be true, and those that are not so qualified shall be true in all material
respects, when made and on and as of the Effective Date as if made on and as of
such date (except to the extent they relate to a particular date), except as
expressly contemplated or permitted by this Agreement, and the Company shall
have received a certificate of the President or Chief Executive Officer or a
Vice President of Parent and Sub to that effect.
(b) The Company shall have received an opinion from ▇▇▇▇▇▇ & ▇▇▇▇▇▇
L.L.P., based upon certificates and letters from the Company, Parent and Sub and
certain stockholders of the Company (reasonably requested by such counsel), to
the effect that the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code. In rendering such opinion, such counsel may
receive and rely upon representations of fact contained in certificates and
letters as specified in the preceding sentence.
(c) The Company shall have received a "comfort" letter from ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, of the kind contemplated by the AICPA Statement, dated the
Effective Date, in form and substance reasonably satisfactory to the Company, in
connection with the procedures undertaken by them with respect to the financial
statements of Parent contained or incorporated by reference in the Form S-4 and
the other matters contemplated by the AICPA Statement and customarily
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included in comfort letters relating to transactions similar to the Merger.
(d) From the date of this Agreement through the Effective Date,
there shall not have occurred any change, individually or together with other
changes, that has had, or would reasonably be expected to have, a material
adverse change in the financial condition, business, results of operations or
prospects of Parent and its Subsidiaries, taken as a whole.
Section 9.3 Conditions to Obligations of Parent and Sub to Effect
the Merger. The obligations of Parent and Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the additional
following conditions, unless waived by Parent:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Date, and the representations and warranties of the Company
contained in this Agreement that are qualified as to materiality shall be true,
and those that are not so qualified shall be true in all material respects, when
made and on and as of the Effective Date as if made on and as of such date
(except to the extent they relate to a particular date), except as expressly
contemplated or permitted by this Agreement, and Parent and Sub shall have
received a certificate of the President or Chief Executive Officer or a Vice
President of the Company to that effect.
(b) Parent and Sub shall have received an opinion from ▇▇▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, based upon certificates and letters from the Company, Parent and
Sub and certain stockholders of the Company (reasonably requested by such
counsel), to the effect that the Merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code. In rendering such opinion, such
counsel may receive and rely upon representations of fact contained in
certificates and letters as specified in the preceding sentence.
(c) Parent and Sub shall have received a "comfort" letter from Ernst
& Young LLP, of the kind contemplated by the AICPA Statement, dated the
Effective Date, in form and substance reasonably satisfactory to Parent, in
connection with the procedures undertaken by them with respect to the financial
statements of the Company contained or incorporated by reference in the Form S-4
and the other matters contemplated by the AICPA Statement and customarily
included in comfort letters relating to transactions similar to the Merger.
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(d) From the date of this Agreement through the Effective Date,
there shall not have occurred any change, individually or together with other
changes, that has had, or would reasonably be expected to have, a material
adverse change in the financial condition, business, results of operations or
prospects of the Company and its Subsidiaries, taken as a whole.
(e) The Company shall have received estoppel certificates, in a form
satisfactory to Parent, executed by the third parties to the Master Development
Agreement.
(f) The Agreement Regarding Termination of Management Agreements,
dated the date hereof, between the Company and VPS I, L.P., Parent, Crow Hotel
Realty Investors, L.P., Wyndham Management Corporation, Wyndham Hotel
Corporation and Wyndham IP Corporation with respect to, among other things,
termination of the Management Agreements under the Master Management Agreement
shall be in full force and effect and shall not have been amended or modified,
and the parties thereto shall have performed their respective obligations
required to be performed thereunder at or prior to the Effective Date.
(g) The Company shall have received the consent of each of Bank One,
Texas, NA (or its Affiliates or agents) and Nomura Asset Capital Corporation, in
a form satisfactory to Parent, with respect to this Agreement and the
transactions contemplated hereby.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Date, before or after the approval of this Agreement by the stockholders of the
Company, by the mutual consent of Parent and the Company.
Section 10.2 Termination by Either Parent or the Company. This
Agreement may be terminated and the Merger may be abandoned by action of the
Board of Directors of either Parent or the Company if (a) the Merger shall not
have been consummated by December 31, 1997, or (b) the approval of the Company's
stockholders required by Section 3.6 shall not have been obtained at a meeting
duly convened therefor or at any adjournment or postponement thereof, or (c) a
United States federal or state court of competent jurisdiction or United States
federal or state governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such
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order, decree, ruling or other action shall have become final and
non-appealable; provided, that the party seeking to terminate this Agreement
pursuant to this clause (c) shall have used all reasonable efforts to remove
such injunction, order or decree; and provided, in the case of a termination
pursuant to clause (a) above, that the terminating party shall not have breached
in any material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure to consummate the Merger.
Section 10.3 Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Date, before or after the adoption and approval by the stockholders of the
Company referred to in Section 3.6, by action of the Board of Directors of the
Company, if (a) in the exercise of its good faith judgment as to fiduciary
duties to its stockholders imposed by law, the Board of Directors of the Company
determines that such termination is required by reason of an Alternative
Proposal being made, or (b) there has been a breach by Parent or Sub of any
representation or warranty contained in this Agreement which would have or would
be reasonably likely to have a Parent Material Adverse Effect, or (c) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of Parent, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by the
Company to Parent or (d) a change or changes having the effect specified in
Section 9.2(d) shall have occurred.
Section 10.4 Termination by Parent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Date, by
action of the Board of Directors of Parent, if (a) the Board of Directors of the
Company shall have withdrawn or modified in a manner adverse to Parent its
approval or recommendation of this Agreement or the Merger or shall have
recommended an Alternative Proposal to the Company stockholders, (b) there has
been a breach by the Company of any representation or warranty contained in this
Agreement which has had, or would be reasonably expected to have, a Company
Material Adverse Effect, (c) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of the Company,
which breach is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by Parent to the Company or (d) a change
or changes having the effect specified in Section 9.3(d) shall have occurred.
Section 10.5 Effect of Termination and Abandonment. (a) In the event
that (x) any person shall have made an Alternative Proposal and thereafter this
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Agreement is terminated by the Company pursuant to Section 10.3(a), (y) the
Board of Directors of the Company shall have withdrawn or modified in a manner
adverse to Parent its approval or recommendation of this Agreement or the Merger
or shall have recommended an Alternative Proposal to the Company stockholders
and Parent shall have terminated this Agreement pursuant to Section 10.4(a) or
(z) any person shall have made an Alternative Proposal and thereafter this
Agreement is terminated by either party pursuant to Section 10.2(b), or by
Parent pursuant to Section 9.3(a) as a result of the Company's intentional
failure to perform one of its agreements contained in this Agreement or
intentional breach of one of its representations and warranties contained in
this Agreement and within 12 months thereafter such Alternative Proposal shall
have been consummated, then in the case of either (x), (y) or (z) above, the
Company shall promptly, but in no event later than two days after such
termination (in the case of (x) or (y)) or consummation (in the case of (z)),
pay Parent a fee of $3,325,000, which amount shall be payable by wire transfer
of same day funds. The Company acknowledges that the agreements contained in
this Section 10.5(a) are an integral part of the transactions contemplated in
this Agreement, and that, without these agreements, Parent and Sub would not
enter into this Agreement; accordingly, if the Company fails to promptly pay the
amount due pursuant to this Section 10.5(a), and, in order to obtain such
payment, Parent or Sub commences a suit which results in a judgment against the
Company for the fee set forth in this Section 10.5(a), the Company shall pay to
Parent its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the rate of 12%
per annum.
(b) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article X, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 10.5 and Section 11.3 and except for the provisions of Sections
8.1, 11.6, 11.7, 11.9, 11.11, 11.12 and 11.15. Moreover, in the event of
termination of this Agreement pursuant to Section 10.2, 10.3 or 10.4, nothing
herein shall prejudice the ability of the non-breaching party from seeking
damages from any other party for any breach of this Agreement, including without
limitation, attorneys' fees and the right to pursue any remedy at law or in
equity; provided, that following termination of this Agreement upon the
occurrence of any of the events described in clauses (x), (y) or (z) of Section
10.5, and provided that the fee payable pursuant to Section 10.5 shall after
such termination (in the case of (x) or (y)) or consummation (in the case of
(z)) be paid, neither Parent nor Sub shall (i) have any rights whatsoever in
respect of or in connection with the representation, and warranties,
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covenants and agreements of the Company, (ii) assert or pursue in any manner,
directly or indirectly, any claim or cause of action based in whole or in part
upon alleged tortious or other interference with rights under this Agreement
against any entity or person submitting an Alternative Proposal or (iii) assert
or pursue in any manner, directly or indirectly, any claim or cause of action
against the Company or any of its officers or directors based in whole or in
part upon its or their receipt, consideration, recommendation, or approval of an
Alternative Proposal, the payment of the fee therein described being Parent's
sole and exclusive remedy; provided, further, that Parent may waive its right to
receive the fee following termination of this Agreement upon the occurrence of
any of the events described in clause (z) of Section 10.5 by written notice to
the Company in which case the foregoing proviso shall not be applicable.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Non-Survival of Representations, Warranties and
Agreements. All representations and warranties set forth in this Agreement shall
terminate at the Effective Date. All covenants and agreements set forth in this
Agreement shall survive the Effective Date or the termination of this Agreement,
as applicable, in accordance with their terms or as set forth in Section 10.5(b)
hereof, respectively.
Section 11.2 Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable, telegram, telex
or other standard form of telecommunications, or by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to Parent or Sub:
Prime Hospitality Corp.
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
One Citicorp Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Homegate Hospitality, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Operating Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 11.3 Fees and Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, except as expressly provided herein and except that (a)
the filing fee in connection with the filing of the Form S-4 or Proxy
Statement/Prospectus with the Commission and (b) the expenses incurred in
connection with printing and mailing the Form S-4 and the Proxy
Statement/Prospectus, shall be shared equally by the Company and Parent.
Section 11.4 Publicity. So long as this Agreement is in effect,
Parent, Sub and the Company agree to consult with each other in issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated by this Agreement, and none of them shall issue any
press release or make any public statement prior to such consultation, except as
may be required by law or by obligations pursuant to any listing agreement with
any national securities exchange. The commencement of litigation relating to
this Agreement or the transactions contemplated hereby or any proceedings in
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connection therewith shall not be deemed a violation of this Section 11.4.
Section 11.5 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
Section 11.6 Assignment; Binding Effect. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, with the
exception of Section 8.5 of the Parent Disclosure Schedule and Section 8.6
hereof, which are intended to have third party beneficiary effect with respect
to the individuals described or named therein.
Section 11.7 Entire Agreement. This Agreement, the Exhibits, the
Company Disclosure Schedule, the Parent Disclosure Schedule, the Confidentiality
Agreement dated February 11, 1997, between the Company and Parent, the letter
described in Section 8.5(a) and any documents delivered by the parties in
connection herewith and therewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
Section 11.8 Amendment. This Agreement may be amended by the parties
hereto, by action taken by their respective Boards of Directors, at any time
before or after approval of matters presented in connection with the Mergers by
the stockholders of the Company, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without
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obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 11.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its rules of conflict of aws.
Section 11.10 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
Section 11.11 Headings and Table of Contents. Headings of the
Articles and Sections of this Agreement and the Table of Contents are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
Section 11.12 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
Section 11.13 Waivers. At any time prior to the Effective Date, the
parties hereto, by or pursuant to action taken by their respective Boards of
Directors, may (i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any documents delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
Section 11.14 Incorporation of Exhibits. The Company Disclosure
Schedule, the Parent Disclosure Schedule
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and all Exhibits attached hereto and referred to herein are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein.
Section 11.15 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section 11.16 Certain Definitions. As used in this Agreement, the
word "Subsidiary" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such party
is a general partner. As used in this Agreement, an "Affiliate" of a person or
entity is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person or entity.
Section 11.17 Waiver of Jury Trial. PARENT, SUB AND THE COMPANY
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS (A) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR (B) ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
Section 11.18 Jurisdiction; Service of Process. EACH PARTY TO THIS
AGREEMENT HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF DELAWARE AND OF ANY FEDERAL COURT SITTING IN THE STATE OF DELAWARE, AND
AGREES THAT VENUE IN EACH OF SUCH COURTS IS PROPER IN CONNECTION WITH ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED IN CONNECTION HEREWITH.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
PRIME HOSPITALITY CORP.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice
President and Chief
Financial Officer
PH SUB CORPORATION
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
HOMEGATE HOSPITALITY, INC.
/s/ ▇▇▇▇▇▇ ▇. Faith
----------------------------------------
By: ▇▇▇▇▇▇ ▇. Faith
Title: Chairman of the Board,
Chief Executive
Officer and President
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VIA ELECTRONIC TRANSMISSION
August 8, 1997
Securities and Exchange Commission
Filing Desk
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Re: Homegate Hospitality, Inc.
Ladies and Gentlemen:
On behalf of CRI/ESH Partners, L.P., JMI/Greystar Extended Stay Partners, L.P.,
Developer Extended Stay Partners, L.P., ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇. Faith,
JMI/Greystar Realty Partners, L.P., Crow Family, Inc., Crow Hotel Realty
Investors, L.P. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Reporting Persons"), we enclose for
filing, pursuant to the Securities Exchange Act of 1934 and Rule 13d-1
promulgated thereunder, one copy of a Schedule 13D of the Reporting Persons with
respect to the common stock, par value $.01 per share, of Homegate Hospitality,
Inc.
Please direct any questions to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ of
this office at (▇▇▇) ▇▇▇-▇▇▇▇.
Sincerely,
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Enclosure