EXHIBIT 99.2
KS DRAFT
JUNE 14, 2005
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AGREEMENT AND PLAN OF MERGER
by and among
JQH ACQUISITION LLC,
JQH MERGER CORPORATION
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ HOTELS, INC.
Dated as of June 14, 2005
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TABLE OF CONTENTS
Section 1. Definitions.......................................................................... 1
Section 2. The Merger........................................................................... 12
2.1 General..................................................................... 12
2.2 Certificate of Incorporation................................................ 13
2.3 By-Laws..................................................................... 13
2.4 Directors and Officers...................................................... 13
2.5 Effect on Company Capital Stock............................................. 13
2.6 Company Stock Options....................................................... 15
2.7 Adjustment of the Merger Consideration...................................... 15
2.8 Exchange Procedures; Stock Transfer Books................................... 15
2.9 Further Assurances.......................................................... 17
Section 3. Representations and Warranties of the Company........................................ 17
3.1 Organization and Good Standing.............................................. 17
3.2 Authority; No Conflict...................................................... 18
3.3 Capitalization.............................................................. 19
3.4 SEC Reports................................................................. 21
3.5 Financial Statements........................................................ 22
3.6 Property; Sufficiency of Assets............................................. 22
3.7 Receivables................................................................. 23
3.8 Equipment; Real Property; Leaseholds........................................ 23
3.9 Intellectual Property....................................................... 25
3.10 No Undisclosed Liabilities.................................................. 26
3.11 Taxes....................................................................... 26
3.12 Employee Benefits........................................................... 29
3.13 Compliance with Legal Requirements; Governmental Authorizations............. 31
3.14 Environmental Matters....................................................... 31
3.15 Legal Proceedings........................................................... 33
3.16 Absence of Certain Changes and Events....................................... 33
3.17 Contracts; No Defaults...................................................... 35
3.18 Insurance................................................................... 37
3.19 Labor Matters............................................................... 38
3.20 Interests of Officers and Directors......................................... 38
3.21 Rights Plan; State Antitakeover Laws; DGCL.................................. 38
3.22 Certain Payments............................................................ 39
3.23 Opinion of Financial Advisor................................................ 39
3.24 Brokers..................................................................... 39
3.25 Board Recommendation........................................................ 39
3.26 Proxy Statement and Schedule 13E-3.......................................... 39
3.27 Expense Amount Escrow Agreement............................................. 40
Section 4. Representations and Warranties of Parent and Merger Sub.............................. 40
4.1 Organization and Good Standing.............................................. 40
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4.2 Authority; No Conflict...................................................... 40
4.3 Information Supplied for Proxy Statement and Schedule 13E-3................. 41
4.4 No Undisclosed Agreements or Arrangements with any ▇▇▇▇▇▇▇ Affiliate........ 41
4.5 Fee Amount Escrow Agreement................................................. 42
4.6 Financing................................................................... 42
4.7 ▇▇▇▇▇▇▇ Agreements.......................................................... 42
Section 5. Certain Pre-Closing Covenants........................................................ 42
5.1 Access and Investigation.................................................... 42
5.2 Operation of the Business; Certain Notices; Tax Returns..................... 44
5.3 No Solicitation............................................................. 48
5.4 Financing................................................................... 49
5.5 Company Stock Options....................................................... 50
5.6 Mailing Notice.............................................................. 50
5.7 Agreements Among Parent, Merger Sub and ▇▇▇▇▇▇▇ Affiliates.................. 50
Section 6. Additional Covenants of the Parties.................................................. 50
6.1 Proxy Statement; Schedule 13E-3............................................. 50
6.2 Company Stockholders' Meeting............................................... 51
6.3 Regulatory Approvals; Consents.............................................. 52
6.4 Employee Benefits........................................................... 53
6.5 Indemnification of Officers and Directors................................... 54
6.6 Disclosure.................................................................. 55
6.7 Resignation of Officers and Directors....................................... 55
6.8 Waiver and Release.......................................................... 55
6.9 Expense Reimbursement....................................................... 55
6.10 Financing................................................................... 55
Section 7. Conditions Precedent to Obligations of Each Party.................................... 56
7.1 Stockholder Approval........................................................ 56
7.2 HSR Act..................................................................... 56
7.3 No Restraints............................................................... 56
Section 8. Conditions Precedent to Obligations of Parent and Merger Sub......................... 56
8.1 Accuracy of Representations................................................. 56
8.2 Performance of Covenants.................................................... 57
8.3 No Material Adverse Effect.................................................. 57
8.4 Consents.................................................................... 57
8.5 Agreements and Documents.................................................... 57
8.6 No Litigation............................................................... 57
8.7 ▇▇▇▇▇▇▇ Transactions........................................................ 57
8.8 Management Agreements....................................................... 57
8.9 Management Documents........................................................ 57
8.10 Company Stock Options....................................................... 58
8.11 Real Estate Documents....................................................... 58
8.12 Expense Amount.............................................................. 58
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Section 9. Conditions Precedent to Obligation of the Company.................................... 58
9.1 Accuracy of Representations................................................. 58
9.2 Performance of Covenants.................................................... 58
9.3 Agreements and Documents.................................................... 58
9.4 No Litigation............................................................... 59
9.5 Fee Amount.................................................................. 59
Section 10. Termination.......................................................................... 59
10.1 Termination................................................................. 59
10.2 Effect of Termination....................................................... 61
10.3 Expenses; Termination Fees.................................................. 62
Section 11. Miscellaneous Provisions............................................................. 64
11.1 Amendment................................................................... 64
11.2 Waiver...................................................................... 64
11.3 No Survival................................................................. 65
11.4 Entire Agreement............................................................ 65
11.5 Execution of Agreement; Counterparts; Electronic Signatures................. 65
11.6 Governing Law............................................................... 65
11.7 Jurisdiction; Service of Process............................................ 65
11.8 WAIVER OF JURY TRIAL........................................................ 66
11.9 Schedules................................................................... 66
11.10 Assignments and Successors.................................................. 66
11.11 No Third Party Rights....................................................... 66
11.12 Notices..................................................................... 66
11.13 Cooperation................................................................. 68
11.14 Legal Representation of the Parties......................................... 68
11.15 Headings.................................................................... 68
11.16 Remedies; Specific Performance.............................................. 68
11.17 Severability................................................................ 69
11.18 Time of Essence............................................................. 69
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of June 14, 2005, by and among JQH Acquisition LLC, a Delaware limited
liability company ("Parent"), JQH Merger Corporation, a Delaware corporation and
a wholly-owned subsidiary of Parent ("Merger Sub"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Hotels,
Inc., a Delaware corporation (the "Company").
RECITALS
Parent, Merger Sub and the Company intend to effect a merger (the
"Merger") of Merger Sub with and into the Company in accordance with this
Agreement and the General Corporation Law of the State of Delaware (the "DGCL").
Upon consummation of the Merger, Merger Sub will cease to exist, and the Company
will become a wholly-owned subsidiary of Parent.
The respective boards of directors of Parent, Merger Sub and the Company
have declared the advisability of and approved this Agreement and approved the
Merger.
The board of directors of the Company (the "Board"), based on the
unanimous recommendation of a special committee (the "Special Committee") of the
Board formed for the purpose of evaluating and negotiating the transactions
contemplated hereby on behalf of the holders of the Company Class A Common Stock
(as defined below) (other than the ▇▇▇▇▇▇▇ Affiliates, as defined below) and
making a recommendation to the Board with respect thereto, has approved and
deemed it advisable and in the best interests of the Company's stockholders to
consummate the Merger upon the terms and subject to the conditions set forth
herein.
Concurrently with the execution and delivery of this Agreement, Parent and
Merger Sub have entered into certain agreements with the ▇▇▇▇▇▇▇ Affiliates
providing for the ▇▇▇▇▇▇▇ Transactions (as defined below).
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
Section 1. Definitions. For purposes of this Agreement, the following
terms and variations thereof have the meanings specified or referred to in this
Section 1:
"Acquired Corporation" refers to each of the Company and each Subsidiary
of the Company, and "Acquired Corporations" means the Company and the
Subsidiaries of the Company, collectively.
"Acquisition Proposal" means any offer, proposal, inquiry or indication of
interest (other than an offer, proposal, inquiry or indication of interest by
Parent) contemplating or otherwise relating to any Acquisition Transaction.
"Acquisition Transaction" means any transaction or series of transactions
involving any (i) reorganization, dissolution, liquidation or recapitalization
of any of the Acquired Corporations, (ii) merger, consolidation, share exchange,
business combination, issuance of
securities, acquisition of securities, tender offer, exchange offer or other
similar acquisition of any of the Acquired Corporations, (iii) sale, lease,
exchange, transfer, license, acquisition or disposition of any material amount
of the assets of any of the Acquired Corporations, (iv) direct or indirect
acquisition or purchase of any shares of capital stock, partnership interests or
other equity interests of any Acquired Corporation beneficially owned by any
▇▇▇▇▇▇▇ Affiliate, (v) similar transaction or business combination involving any
Acquired Corporation or any of their respective businesses, shares of capital
stock, partnership interests, other equity interests or assets or (vi) other
transaction, the consummation of which would prevent, impede or delay the
consummation of the Contemplated Transactions or the ▇▇▇▇▇▇▇ Transactions.
"Affiliate" means, as to any specified Person, (i) any trust, shareholder,
equity owner, officer or director of such Person and their family members or
(ii) any other Person which, directly or indirectly, through one or more
intermediaries, controls, is controlled by, employed by or is under common
control with, the specified Person. For the purposes of this definition,
"control" means the possession of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities, by Contract or otherwise.
"Agreement" has the meaning set forth in the opening paragraph of this
Agreement.
"Balance Sheet" has the meaning set forth in Section 3.5.
"Board" has the meaning set forth in the recitals to this Agreement.
"CERCLA" means the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended.
"Certificate" has the meaning set forth in Section 2.5(d).
"Certificate of Merger" has the meaning set forth in Section 2.1(b).
"Certifications" has the meaning set forth in Section 3.4.
"Cleanup" has the meaning ascribed to it in clause (c) of the definition
of the term Environmental Health and Safety Liability.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" has the meaning set forth in Section 2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Letter" means a written commitment or commitments containing
conditions to closing that are no less favorable to the Company than the
conditions to Closing set forth in this Agreement, from a financing source or
sources to provide, in the aggregate, at least $160 million to Parent for the
purpose of consummating the transactions contemplated by this Agreement.
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"Company" has the meaning set forth in the opening paragraph of this
Agreement.
"Company Board Recommendation" has the meaning set forth in Section
6.2(b).
"Company Capital Stock" means the Company Class A Common Stock and the
Company Class B Common Stock.
"Company Class A Common Stock" means the class A common stock, par value
$0.01 per share, of the Company.
"Company Class B Common Stock" means the class B common stock, par value
$$0.01 per share, of the Company.
"Company Preferred Stock" means the preferred stock, par value $0.01 per
share, of the Company.
"Company SEC Reports" has the meaning set forth in Section 3.4.
"Company Stock Option" means each outstanding option to purchase shares of
Company Class A Common Stock under any Company Plan.
"Company Stockholders' Meeting" has the meaning set forth in Section
6.2(a).
"Company Triggering Event" means (i) (x) the failure of the Board of the
Company to recommend that the Company's stockholders vote to adopt this
Agreement, or (y) the withdrawal or modification of the Company Board
Recommendation in a manner adverse to Parent, or (z) the Board of the Company or
the Company, in any written material filed with the SEC, mailed to Company
stockholders or otherwise made publicly available, or in any stockholder or
analyst call, press conference or similar public forum, shall have made any
statements which can reasonably be interpreted to indicate that the Board of the
Company does not believe that the Merger is in the best interests of the
Company's stockholders; (ii) the Company shall have failed to include in the
Proxy Statement the Company Board Recommendation or a statement to the effect
that the Board of the Company has determined and believes that the Merger is in
the best interests of the Company's stockholders; (iii) the Board of the Company
fails to reaffirm, without qualification, the Company Board Recommendation
following the Company's receipt of an Acquisition Proposal, or fails to publicly
state, without qualification, that the Merger is in the best interests of the
Company's stockholders following a public statement by a Person questioning the
advisability of the Merger for Company stockholders, within ten calendar days
after Parent reasonably requests in writing that such action be taken; (iv) the
Board of the Company shall have approved, endorsed or recommended any
Acquisition Proposal; (v) the Company shall have failed to comply with Section
5.3(a) or 5.3(b); (vi) a tender or exchange offer relating to securities of the
Company shall have been commenced by someone other than Parent or its Affiliates
and the Company shall not have sent to its securityholders, within ten business
days after the commencement of such tender or exchange offer, a statement
disclosing that the Board recommends rejection of such tender or exchange offer;
or (vii) any of the Acquired Corporations or any Representative of any of the
Acquired Corporations shall have breached Section 5.3 and such breach results
in, or is a significant contributing factor to the occurrence of, a Company
Triggering Event. Notwithstanding the foregoing, no event or action
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otherwise within the scope of clause (i), (ii) or (iii) shall be deemed to be a
Company Triggering Event if, at the time of such event or action (x) any
representation or warranty of Parent or Merger Sub in this Agreement (tested as
if made on and as of such time) shall be inaccurate in any material respect, (y)
Parent or Merger Sub shall be in breach in any material respect of any of their
respective covenants, agreements or obligations under this Agreement or (z) this
Agreement is subject to termination by the Company pursuant to Section 10.1(i).
"Confidentiality Agreement" means the Confidentiality Agreement, dated as
of November 19, 2004, between JD Holdings, LLC and the Company.
"Consent" means any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
"Contemplated Transactions" has the meaning set forth in Section 3.2(a).
"Continuing Employees" has the meaning set forth in Section 6.4.
"Contract" means any written, oral or other agreement, contract,
subcontract, lease, understanding, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature.
"Covered Parties" has the meaning set forth in Section 6.5(a).
"Debt" means, as to any Person, at a particular time, (i) indebtedness for
borrowed money or for the deferred purchase price of property (which shall not
include accounts payable incurred in the ordinary course of business) in respect
of which such Person is liable, contingently or otherwise, as obligor, guarantor
or otherwise, or in respect of which such Person otherwise assures a creditor
against loss, (ii) obligations under leases which shall have been or should be,
in accordance with GAAP, recorded as capital leases in respect of which
obligations such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which obligations such Person assures a
creditor against loss, (iii) obligations of such Person to purchase or
repurchase accounts receivable, chattel paper or other payment rights sold or
assigned by such Person, (iv) indebtedness or obligations of such Person under
or with respect to letters of credit, notes, bonds or other debt instruments and
(v) all obligations of such Person under any interest rate swap, cap or collar
agreement or other similar agreement or arrangement designed to alter the risks
of that Person arising from fluctuations in interest rates, in each case whether
contingent or matured.
"Dissenting Shares" has the meaning set forth in Section 2.5(f).
"DGCL" has the meaning set forth in the recitals to this Agreement.
"▇▇▇▇▇" has the meaning set forth in Section 3.4.
"Effective Time" has the meaning set forth in Section 2.1(b).
"Encumbrance" means any lien, pledge, hypothecation, charge, mortgage,
easement, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal,
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preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
"Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air, plant and animal life and any other environmental medium or natural
resource.
"Environmental Health and Safety Liabilities" means any cost, damages,
expense, liability, obligation or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative Legal Proceedings, damages, losses, claims, demands and response,
investigative, remedial or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial" and "response action" include the types of
activities covered by CERCLA.
"Environmental Law" means any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
5
(c) reducing the quantities, preventing the release or minimizing
the hazardous characteristics of wastes;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting natural resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other potentially
harmful substances;
(g) cleaning up pollutants that have been released into the
Environment, preventing the threat of any such release, or paying the costs of
such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" has the meaning set forth in Section 3.12(c).
"ERISA Affiliate" means, with respect to any entity, trade or business,
any other entity, trade or business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that
includes the first entity, trade or business, or that is a member of the same
"controlled group" as the first entity, trade or business pursuant to Section
4001(a)(14) of ERISA.
"Escrow Agent" has the meaning set forth in Section 4.5.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Exchange Fund" has the meaning set forth in Section 2.8(a).
"Expense Amount" has the meaning set forth in Section 3.27.
"Expense Amount Escrow Account" has the meaning set forth in Section 3.27.
"Expense Amount Escrow Agreement" has the meaning set forth in Section
3.27.
"Extended Outside Date" has the meaning set forth in Section 10.1(b).
"Facilities" means any real property, including, without limitation, the
Properties, leaseholds or other interests currently or formerly owned in fee
simple or pursuant to a ground leasehold interest or operated by any Acquired
Corporation, together with any buildings, plants, structures or equipment
located thereon, including, but not limited to, hotels, parking lots and
structures, convention centers, meeting facilities, restaurant, bar and lounge
facilities, and all furnishings, fixtures and equipment located therein or
thereon.
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"Fee Amount" has the meaning set forth in Section 4.5.
"Fee Amount Escrow Account" has the meaning set forth in Section 4.5.
"Fee Amount Escrow Agreement" has the meaning set forth in Section 4.5.
"Filed Company SEC Reports" has the meaning set forth in Section 3.4.
"Franchise Agreements" has the meaning set forth in Section 3.8(h).
"GAAP" means the generally accepted accounting principles in the United
States of America.
"Governmental Authorization" means any: (a) permit, license, certificate,
franchise, permission, variance, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or (b)
right under any Contract with any Governmental Body.
"Governmental Body" means any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or other Person and any court or other
tribunal).
"Ground Leased Properties" has the meaning set forth in Section 3.8(b).
"Ground Leases" has the meaning set forth in Section 3.8(b).
"▇▇▇▇▇▇▇ Affiliate" means ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and any Affiliate thereof,
including, without limitation, the Revocable Trust of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ dated
December 28, 1989, as amended and restated.
"▇▇▇▇▇▇▇ Agreements" has the meaning set forth in Section 4.7(a).
"▇▇▇▇▇▇▇ Transactions" means the transactions contemplated by the
agreements set forth on Schedule 1.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about or from the Facilities or any part thereof into the Environment, and any
other act, business, operation or thing relating to Hazardous Materials that
increases the danger, or risk of danger, or poses an unreasonable risk of harm,
to persons or property on or off the Facilities, or would reasonably be likely
to adversely affect the value of the Facilities or the Acquired Corporations.
"Hazardous Materials" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic, or a
7
pollutant or contaminant, under or pursuant to any Environmental Law, and
specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"Indemnification Event" has the meaning set forth in Section 6.5(a).
"Initial Expiration Date" has the meaning set forth in Section 10.1(b).
"Intellectual Property Rights" has the meaning set forth in Section 3.9.
"knowledge": An individual will be deemed to have "knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter, after reasonable investigation.
A Person (other than an individual) will be deemed to have "knowledge" of
a particular fact or other matter if any individual who is serving as a director
or officer of such Person (or in any substantially similar capacity) is actually
aware of such fact or other matter, after reasonable investigation.
"Legal Proceeding" means any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Body or any arbitrator or arbitration panel.
"Legal Requirement" means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Body (or under the authority of The
American Stock Exchange or any other stock exchange, if applicable).
"Mailing Notice" has the meaning set forth in Section 5.6.
"Management Agreements" has the meaning set forth in Section 3.8(i).
"Material Adverse Effect": An event, violation, inaccuracy, circumstance
or other matter will be deemed to have a "Material Adverse Effect" on the
Acquired Corporations if such event, violation, inaccuracy, circumstance or
other matter has had or could reasonably be expected to have a material adverse
effect on (i) the business, condition, capitalization, assets, liabilities,
operations or financial performance of the Acquired Corporations taken as a
whole, (ii) the ability of the Company to consummate the Merger or any of the
Contemplated Transactions or ▇▇▇▇▇▇▇ Transactions or to perform any of its
obligations under this Agreement or (iii) Parent's ability, after the Effective
Time, to vote, receive dividends with respect to or otherwise exercise ownership
rights with respect to the stock of the Surviving Corporation. A "Material
Adverse Effect" on the Acquired Corporations, taken together as a whole, will
also be deemed to have occurred if there is a disruption of or adverse change in
the financial credit or real estate markets,
8
or other change in general economic conditions, or an outbreak or escalation of
hostilities involving the United States, the declaration by the United States of
a national emergency or war, or the occurrence of any act of terrorism and any
action or reaction thereto that has a material adverse effect on Parent's
ability to finance the transactions contemplated by this Agreement, but without
regard to the cost of, or conditions that may be imposed on, such financing. An
event, violation, inaccuracy, circumstance or other matter will be deemed to
have a "Material Adverse Effect" on Parent if such event, violation, inaccuracy,
circumstance or other matter has had or would reasonably be expected to have a
material adverse effect on (i) the business, condition, capitalization, assets,
liabilities, operations or financial performance of Parent and its Subsidiaries
taken as a whole, or (ii) the ability of Parent to consummate the Merger or any
of the Contemplated Transactions or ▇▇▇▇▇▇▇ Transactions or to perform any of
its obligations under this Agreement. For purposes of clarification, no
circumstance, event, violation, inaccuracy, occurrence, change, effect or other
matter attributable to any of the following shall be deemed in itself, or in any
combination, to constitute, and none of the following shall be taken into
account in determining whether there has been or will be, a Material Adverse
Effect on the Acquired Corporations: (a) the negotiation, execution,
announcement, performance, pendency or consummation of any of the transactions
contemplated by this Agreement or any of the other agreements contemplated by
this Agreement or the ▇▇▇▇▇▇▇ Transactions, or (b) compliance with the terms of,
or the taking of any action required by, this Agreement or any of the other
agreements contemplated by this Agreement or the ▇▇▇▇▇▇▇ Transactions.
"Material Contract" has the meaning set forth in Section 3.17(a).
"Merger" has the meaning set forth in the recitals to this Agreement.
"Merger Consideration" has the meaning set forth in Section 2.5(d).
"Merger Sub" has the meaning set forth in the opening paragraph of this
Agreement.
"Minimum Required Vote" has the meaning set forth in Section 3.2(a).
"Minority Approval" has the meaning set forth in Section 3.2(a).
"Multiemployer Plan" has the meaning set forth in Section 3.12(h).
"New Plans" has the meaning set forth in Section 6.4.
"Occupational Safety and Health Law" means any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards and designed to provide safe and healthful working
conditions.
"Off-Balance Sheet Arrangement" means with respect to any Person, any
securitization transaction to which that Person or its Subsidiaries is party and
any other transaction, agreement or other contractual arrangement to which an
entity unconsolidated with that Person is a party, under which that Person or
its Subsidiaries, whether or not a party to the arrangement has, or in the
future may have: (a) any obligation under a direct or indirect guarantee or
similar arrangement; (b) a retained or contingent interest in assets transferred
to an unconsolidated entity or similar arrangement; (c) derivatives to the
extent that the fair value thereof is not fully
9
reflected as a liability or asset in the financial statements; or (d) any
obligation or liability, including a contingent obligation or liability, to the
extent that it is not fully reflected in the financial statements (excluding the
footnotes thereto) (for this purpose, obligations or liabilities that are not
fully reflected in the financial statements (excluding the footnotes thereto)
include, without limitation: obligations that are not classified as a liability
according to GAAP; contingent liabilities as to which, as of the date of the
financial statements, it is not probable that a loss has been incurred or, if
probable, is not reasonably estimable; or liabilities as to which the amount
recognized in the financial statements is less than the reasonably possible
maximum exposure to loss under the obligation as of the date of the financial
statements, but exclude contingent liabilities arising out of litigation,
arbitration or regulatory actions (not otherwise related to off-balance sheet
arrangements)).
"Option Consideration" has the meaning set forth in Section 2.6(a).
"Option Holder Notice" has the meaning set forth in Section 2.6.
"Options" has the meaning set forth in Section 3.3.
"Organizational Documents" has the meaning set forth in Section 3.1(b).
"Owned Real Properties" has the meaning set forth in Section 3.8(b).
"Parent" has the meaning set forth in the opening paragraph of this
Agreement.
"Parent Affiliates" has the meaning set forth in Section 4.7(b).
"Parent Expenses" has the meaning set forth in Section 10.3(a)(ii).
"Paying Agent" has the meaning set forth in Section 2.8(a).
"Permitted Encumbrances" means (i) Encumbrances identified on Schedule
1.1, (ii) Encumbrances for Taxes, assessments, governmental charges or levies or
mechanics' and other statutory liens which are not material in amount relative
to the property affected or which are not yet delinquent or are being contested
in good faith and by appropriate proceedings in respect thereof or for which an
appropriate reserve has been established in accordance with GAAP and (iii)
restrictions on transfer generally arising under federal and state securities
laws.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or Governmental Body.
"Plans" has the meaning set forth in Section 3.12(a).
"Pre-Closing Period" has the meaning set forth in Section 5.1.
"Properties" has the meaning set forth in Section 3.8(b).
"Proxy Statement" has the meaning set forth in Section 3.26.
10
"Qualified Plans" has the meaning set forth in Section 3.12(d).
"Replacement Commitment Letter" has the meaning set forth in Section 6.10.
"Representatives" means officers, directors, agents, attorneys,
accountants, advisors and representatives.
"Required Company Stockholder Vote" has the meaning set forth in Section
3.2(a).
"Schedule 13E-3" has the meaning set forth in Section 3.26.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Space Leases" has the meaning set forth in Section 3.8(c).
"Special Committee" has the meaning set forth in the recitals to this
Agreement.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association or other business entity (other than
a corporation), (x) a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof,
and for this purpose, a Person or Persons own a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity's gains or losses or (y)
that Person shall be or control any managing director or general partner of such
business entity (other than a corporation). The term "Subsidiary" shall include
all Subsidiaries of such Subsidiary, and, when used with respect to the Company,
shall include ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Hotels, L.P.
"Superior Proposal" means an unsolicited, bona fide written offer made by
a third party for an Acquisition Transaction involving the Company on terms that
the Board of the Company determines, in its good faith judgment, after
consultation with an independent financial advisor of nationally recognized
reputation, to be more favorable to the Company's stockholders than the terms of
the Merger and is reasonably capable of being consummated; provided, however,
that any such offer shall not be deemed to be a "Superior Proposal" if any
financing required to consummate the transaction contemplated by such offer is
not reasonably likely to be obtained.
"Surviving Corporation" has the meaning set forth in Section 2.1(a).
"Tax" means (i) any tax (including any income tax, franchise tax, capital
gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem
tax, transfer tax, stamp tax, sales tax,
11
use tax, property tax, business tax, withholding tax or payroll tax), levy,
assessment, tariff, duty (including any customs duty), (ii) any related charge
or amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Taxing Authority and (iii) any
liability pursuant to any statute or agreement for an amount described in (i) or
(ii) above owed by another party.
"Tax Return" means any return (including any information return), report,
statement, estimate, schedule, notice, notification, form, election, certificate
or other document filed with, or required to be filed with, any Taxing Authority
in connection with the determination, assessment, collection or payment of any
Tax or in connection with the administration, implementation or enforcement of
or compliance with any Legal Requirement relating to any Tax.
"Taxing Authority" means a Governmental Body responsible for the
imposition, administration or collection of any Tax.
"Title Policies" has the meaning set forth in Section 3.8(f).
"Transaction Agreement" means the Amended and Restated Transaction
Agreement, dated as of the date hereof, among JD Holdings, LLC, Parent, ▇▇. ▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Trustee of the Revocable Trust of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, dated December 28, 1989, as amended and restated, and ▇▇▇▇▇▇▇, Inc.
"Treasury Regulations" means the income tax regulations promulgated under
the Code, as such regulations may be amended from time to time. References to
specific provisions of the Treasury Regulations shall be deemed to include the
corresponding provisions of succeeding provisions of the Treasury Regulations.
"USRPHC" has the meaning set forth in Section 3.11(t).
Section 2. The Merger.
2.1 General.
(a) Upon the terms and subject to the conditions of this
Agreement and in accordance with the DGCL, at the Effective Time, (i) Merger Sub
shall be merged with and into the Company, (ii) the separate corporate existence
of Merger Sub shall cease and (iii) the Company shall be the surviving
corporation (the "Surviving Corporation") and shall continue its corporate
existence under the laws of the State of Delaware.
(b) The Merger shall become effective at the time of filing of
a certificate of merger substantially in the form of Exhibit 2.1(b) attached
hereto (the "Certificate of Merger"), with the Secretary of State of the State
of Delaware in accordance with the provisions of Section 251 of the DGCL, or at
such later date as the parties may mutually agree (the "Effective Time").
Subject to the terms and conditions of this Agreement, the Company and the
Merger Sub shall duly execute and file the Certificate of Merger with the
Secretary of State of the State of Delaware at the time of the closing of the
Merger (the "Closing"). The Closing shall take place at the offices of ▇▇▇▇
▇▇▇▇▇▇▇ LLP, 425 Park Avenue, New York, New York
12
10022, on the date on which the last of the conditions set forth in Sections 7,
8 and 9 have been satisfied or waived or such other date as the parties hereto
may mutually agree upon (the "Closing Date").
(c) At the Effective Time, the effects of the Merger shall be
as provided in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and the
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and Merger Sub
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
(d) On the Closing Date, the Escrow Agent shall release the
Fee Amount to Parent. On the Closing Date, the Escrow Agent shall release (i) to
Parent, from the Expense Amount Escrow Account, an aggregate amount equal to the
Parent Expenses, and (ii) the excess of the Expense Amount over such aggregate
amount of the Parent Expenses to the Surviving Corporation.
2.2 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended as set forth in Exhibit 2.2 and, as so
amended, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided therein or by applicable law.
2.3 By-Laws. The by-laws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the by-laws of the Surviving Corporation
until thereafter amended as provided therein or by applicable law.
2.4 Directors and Officers. From and after the Effective Time, (a)
the directors of Merger Sub at the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and by-laws of the Surviving Corporation, and (b) the officers of
Merger Sub at the Effective Time shall be the initial officers of the Surviving
Corporation, in each case, until their respective successors are duly elected or
appointed and qualified.
2.5 Effect on Company Capital Stock. At the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any stockholder of the Company:
(a) each issued and outstanding share of common stock, par
value $0.01 per share, of Merger Sub shall be converted into one validly issued,
fully paid and nonassessable share of common stock, par value $0.01 per share,
of the Surviving Corporation;
(b) each share of Company Capital Stock then held by the
Company or any wholly-owned Subsidiary of the Company (or held in the Company's
treasury) shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
13
(c) each share of Company Capital Stock then held by Parent or
Merger Sub shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
(d) subject to the provisions of Section 2.8, each share of
Company Class A Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Class A Common Stock canceled and
retired in accordance with Sections 2.5(b) and (c) and any Dissenting Shares)
shall be converted into the right to receive $24.00 in cash per share, without
interest (the "Merger Consideration"). As of the Effective Time, each share of
Company Class A Common Stock shall no longer be outstanding and shall
automatically be canceled and retired, and each holder of record of a
certificate representing any such shares (a "Certificate") shall cease to have
any rights with respect thereto, other than the right to receive the Merger
Consideration, in accordance with Section 2.8.
(e) each share of Company Class B Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Class B Common Stock canceled and retired in accordance with Sections
2.5(b) and (c) and any Dissenting Shares) shall remain outstanding as one share
of common stock, par value $0.01 per share, of the Surviving Corporation with
the rights set forth in the Certificate of Incorporation of the Surviving
Corporation, as amended pursuant to Section 2.2;
(f) Notwithstanding any provision of this Agreement to the
contrary, if required by the DGCL, but only to the extent required thereby,
shares of Company Capital Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by holders of such shares of
Company Capital Stock who have properly exercised appraisal rights with respect
thereto in accordance with Section 262 of the DGCL (the "Dissenting Shares")
will not be converted into the right to receive the Merger Consideration, and
the holders of such Dissenting Shares will be entitled to receive payment of the
appraised value of such shares of Company Capital Stock in accordance with the
provisions of such Section 262 of the DGCL unless and until such holders fail to
perfect or effectively withdraw or lose their rights to appraisal and payment
under the DGCL. If, after the Effective Time, any such holder fails to perfect
or effectively withdraws or loses such right, such shares of Company Capital
Stock will thereupon be treated as if they had been converted into and become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company shall (i) give Parent
prompt notice of any demands received by the Company for appraisals of shares of
Company Capital Stock and (ii) consult with and keep Parent informed, on an
on-going basis, regarding the status and negotiation of such demands. The
Company shall not make any payment or settlement offer, or agree to or effect
any settlement, prior to the Effective Time with respect to any such demand
unless Parent shall have consented in writing to such payment or settlement
offer, which consent shall not be unreasonably withheld.
14
2.6 Company Stock Options. Not later than the earlier of the time at
which the Company gives notice of the transactions contemplated hereby to its
stockholders and the date that is 30 days prior to the Effective Time, the
Company shall notify each holder of a Company Stock Option, in writing, of the
transactions contemplated hereby in accordance with each Company Plan (the
"Option Holder Notice"). Such Option Holder Notice shall (a) apprise the holders
of outstanding Company Stock Options of their ability to exercise the Company
Stock Options in accordance with the applicable Company Plan prior to the
Effective Time, (b) disclose that, if not exercised, such Company Stock Options
will terminate at the Effective Time and (c) disclose that if any Company Stock
Options are not exercised prior to the Effective Time and terminate as
contemplated in clause (b), the holders of such Company Stock Options will be
entitled to receive the Option Consideration (as defined below) in respect of
such Company Stock Options. As of the Effective Time, each outstanding Company
Stock Option shall be terminated by virtue of the Merger and each holder of a
Company Stock Option shall cease to have any rights with respect thereto, other
than the right to receive, in respect of each such terminated Company Stock
Option, a special bonus per Company Stock Option (without interest and subject
to the deduction and withholding of such amounts as the Surviving Corporation is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law) in cash equal to
$24 minus the exercise price for such Company Stock Option (the "Option
Consideration"). Payment of the Option Consideration to each of the holders of
Company Stock Options entitled thereto shall be made by the Surviving
Corporation, subject to the terms and conditions of this Agreement, as soon as
practicable after the Effective Time. Any amounts withheld and paid over to the
appropriate taxing authority by the Surviving Corporation will be treated for
all purposes of this Agreement as having been paid to the holder of the Company
Stock Option in respect of whom such deduction and withholding was made. The
Company shall take all actions required under each Company Plan under which such
Company Stock Options were granted to cause such Company Plan and all Company
Stock Options granted thereunder to terminate at the Effective Time.
2.7 Adjustment of the Merger Consideration. In the event that, prior
to the Effective Date, any stock split, combination, reclassification or stock
dividend with respect to the Company Capital Stock, any change or conversion of
Company Capital Stock into other securities or any other dividend or
distribution with respect to the Company Capital Stock (other than regular
quarterly dividends) should occur or, if a record date with respect to any of
the foregoing should occur, appropriate and proportionate adjustments shall be
made to the Merger Consideration, and thereafter all references to the Merger
Consideration shall be deemed to be to the Merger Consideration as so adjusted.
2.8 Exchange Procedures; Stock Transfer Books.
(a) Prior to the Effective Time, Parent shall appoint a bank
or trust company reasonably acceptable to the Company to act as paying and
exchange agent hereunder (the "Paying Agent"). Prior to the Effective Time,
Parent shall deposit with the Paying Agent cash in an amount necessary to pay
all of the Merger Consideration. Such amount shall hereinafter be referred to as
the "Exchange Fund."
(b) As soon as reasonably practicable (and in no event more
than three business days) after the Effective Time, the Paying Agent shall send
to each Person who was, at
15
the Effective Time, a holder of record of Certificates (i) a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify (including (A) a provision confirming that delivery of
Certificates shall be effected, and risk of loss and title to Certificates shall
pass, only upon delivery of such Certificates to the Paying Agent, and (B) a
form of certification by the Person executing such letter of transmittal to the
effect that either (1) such Person is not "foreign" for purposes of Sections 897
and 1445 of the Code or (2) such Person has not owned, directly or indirectly,
more than 5% of the outstanding Company Capital Stock at any time during the
five years preceding the Effective Time), and (ii) instructions for use in
effecting the surrender of Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate to the Paying Agent, together
with a duly executed letter of transmittal and such other documents as may be
reasonably required by the Paying Agent or Parent, (A) the holder of such
Certificate shall be entitled to receive in exchange therefor the applicable
Merger Consideration, and (B) the Certificates so surrendered shall be canceled.
Until surrendered as contemplated by this Section 2.8, each Certificate shall be
deemed, from and after the Effective Time, to represent only the right to
receive the Merger Consideration as contemplated by this Section 2. If any
Certificate shall have been lost, stolen or destroyed, Parent may, in its
discretion and as a condition precedent to the payment of any portion of the
Merger Consideration, require the owner of such lost, stolen or destroyed
Certificate to provide an appropriate affidavit and to deliver a bond (in such
sum as Parent may reasonably direct) as indemnity against any claims that may be
made against the Paying Agent, Parent or the Surviving Corporation with respect
to such Certificate.
(c) If any Merger Consideration is to be paid to any Person
other than the registered holder of the Certificate surrendered in exchange
therefor, it shall be a condition to such exchange that such surrendered
Certificate shall be properly endorsed and otherwise in proper form for transfer
and such Person either (i) shall pay to the Paying Agent any transfer or other
taxes required as a result of the distribution of such cash payment to such
Person, or (ii) shall establish to the reasonable satisfaction of the Paying
Agent that such tax has been paid or is not applicable. Parent or the Paying
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Class A
Common Stock such amounts as Parent or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Paying Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Class A Common Stock in respect of which such deduction and
withholding was made by Parent or the Paying Agent. All amounts in respect of
taxes received or withheld by Parent shall be disposed of by Parent in
accordance with the Code or such state, local or foreign tax law, as applicable.
(d) As of the Effective Time, all shares of Company Class A
Common Stock (other than shares of Company Class A Common Stock to be canceled
and retired in accordance with Sections 2.5(b) and (c) and any Dissenting
Shares) issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of any such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration upon surrender of the Certificate representing such shares in
accordance with this Section 2.8. The Merger Consideration paid upon the
surrender of Certificates in accordance with the terms of this
16
Section 2.8 shall be deemed to have been delivered (and paid) in full
satisfaction of all rights pertaining to the Company Class A Common Stock
previously represented by such Certificates.
(e) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers of shares of the Company's capital stock on the records of the
Company.
(f) The Paying Agent shall invest any cash included in the
Exchange Fund in liquid debt securities rated AA or higher by at least two
nationally-recognized rating agencies; provided, that no such investment or loss
thereon shall affect the amounts payable to the Company's stockholders pursuant
to this Section 2. Any interest and other income resulting from such investments
shall promptly be paid to Parent.
(g) Any portion of the Exchange Fund that remains
undistributed to holders of Certificates as of the date 180 days after the
Effective Time shall be delivered to Parent upon demand, and any holders of
Certificates who have not theretofore surrendered their Certificates in
accordance with this Section 2.8 shall thereafter look only to Parent for
satisfaction of their claims for any portion of the Merger Consideration.
(h) Neither Parent nor the Surviving Corporation shall be
liable to any holder or former holder of Company Class A Common Stock or to any
other Person with respect to any portion of the Merger Consideration (or
dividends or distributions with respect thereto), or for any cash amounts,
properly delivered to any public official pursuant to any applicable abandoned
property law, escheat law or similar Legal Requirement.
2.9 Further Assurances. If at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either the
Company or Merger Sub, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Merger Sub, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Merger Sub, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company or
Merger Sub, as applicable, and otherwise to carry out the purposes of this
Agreement.
Section 3. Representations and Warranties of the Company. The Company
represents and warrants to Parent and Merger Sub as follows:
3.1 Organization and Good Standing.
(a) Each Acquired Corporation is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with all requisite corporate power and authority to conduct its
business as now being conducted, to own or use the respective properties and
assets that it purports to own or use, and to perform all of its obligations
under all
17
Material Contracts to which it is a party. Each Acquired Corporation is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where the failure to be so
qualified would not be reasonably likely to, individually or in the aggregate,
have a Material Adverse Effect on the Acquired Corporations.
(b) Schedule 3.1(b) lists all Acquired Corporations and
indicates as to each its jurisdiction of organization and, except in the case of
the Company, its stockholders. The Company has delivered to Parent copies of the
certificate or articles of incorporation, by-laws and other organizational
documents (collectively, "Organizational Documents") of each of the Acquired
Corporations, as currently in effect.
(c) The Company has delivered to Parent copies of the charters
of each committee of the Company's Board and any code of conduct or similar
policy adopted by the Company.
3.2 Authority; No Conflict.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and the other agreements
referred to in this Agreement to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the Merger and the other transactions
that it is required to consummate hereby and thereby (the "Contemplated
Transactions"). The execution and delivery of this Agreement by the Company and
the consummation by the Company of the Contemplated Transactions have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Contemplated Transactions (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the then outstanding shares of Company Capital Stock (the "Minimum Required
Vote") and, unless waived by the Special Committee pursuant to Section 7.1,
holders of a majority of the Company Class A Common Stock not held by a ▇▇▇▇▇▇▇
Affiliate who vote with respect to the matter (the "Minority Approval" and,
collectively with the Minimum Required Vote, the "Required Company Stockholder
Vote")) and the filing of appropriate merger documents as required by the DGCL).
The Board of the Company has approved this Agreement, declared it to be
advisable and resolved to recommend to stockholders of the Company that they
vote in favor of the adoption of this Agreement in accordance with the DGCL.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(b) Except as set forth in Schedule 3.2(b), neither the
execution and delivery of this Agreement nor the consummation of any of the
Contemplated Transactions do or will, directly or indirectly (with or without
notice or lapse of time or both), (i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of any of the
Acquired Corporations, or (B) any resolution adopted by the Board or the
stockholders of any of the Acquired Corporations; (ii) contravene, conflict with
or result in a violation of, or give any Governmental Body or other Person the
right to exercise any remedy or obtain any
18
relief under, any Legal Requirement or any order, writ, injunction or decree to
which any of the Acquired Corporations, or any of the assets owned or used by
any of the Acquired Corporations, is or may be subject; (iii) contravene,
conflict with or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by any of the
Acquired Corporations, or that otherwise relates to the business of, or any of
the assets owned or used by, any of the Acquired Corporations; (iv) cause any of
the Acquired Corporations to become subject to, or to become liable for the
payment of, any Tax; (v) cause any of the assets owned by any of the Acquired
Corporations to be reassessed or revalued by any Taxing Authority or other
Governmental Body; (vi) contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, any Material Contract; (vii) require a Consent
from any Person; or (viii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by any of
the Acquired Corporations, except, in the case of clauses (ii), (iii), (iv),
(v), (vi), (vii) and (viii), for any such contraventions, conflicts, violations,
breaches, defaults or other occurrences that would not prevent or materially
delay consummation of the Merger or have a Material Adverse Effect on the
Acquired Corporations.
(c) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement and the consummation of
the Contemplated Transactions by the Company will not, require any Consent of,
or filing with or notification to, any Governmental Body, except (i) for (A)
applicable requirements, if any, of the Exchange Act, the Securities Act and
state securities or "blue sky" laws, (B) the pre-merger notification
requirements of the HSR Act and (C) filing of a certificate of merger as
required by the DGCL and appropriate corresponding documents with the
appropriate authorities in other states in which the Company is qualified as a
foreign corporation to transact business and (ii) where failure to obtain such
Consents, or to make such filings or notifications, would not prevent or delay
consummation of the Merger or otherwise have a Material Adverse Effect on the
Acquired Corporations.
3.3 Capitalization. The authorized capital stock of the Company
consists of 40,000,000 shares of Company Class A Common Stock, 1,000,000 shares
of Company Class B Common Stock and 2,000,000 shares of Company Preferred Stock.
As of the date hereof: (a) 5,245,212 shares of Company Class A Common Stock are
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable; (b) 294,100 shares of Company Class B Common Stock are
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable; (c) no shares of Company Preferred Stock are issued and
outstanding; (d) 1,754,588 shares of Company Class A Common Stock are reserved
for issuance upon the exercise of outstanding Company Stock Options granted to
the Company's officers, directors and employees pursuant to the Plans; (e) no
shares of Company Class A Common Stock are reserved for issuance upon the
exercise of outstanding warrants; 796,788 shares of Company Class A Common Stock
and no shares of Company Class B Common Stock are held in the treasury of the
Company; and (f) 1,852,213 shares of Company Class A Common Stock are reserved
for issuance under the Plans. The foregoing representation and warranty and each
other representation and warranty of the Company related to the Company Class B
Common Stock assume that no shares of Company Class B Common Stock have been, or
will
19
be, prior to the Effective Time, converted into shares of Company Class A Common
Stock. There are no bonds, debentures, notes or other Debt or, other than the
capital stock and options described in this Section 3.3, securities of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company may vote. Schedule 3.3 sets forth the ownership of the capital stock or
other equity interests of each Acquired Corporation other than the Company that
is not wholly owned, directly or indirectly, by the Company. Except as set forth
in the preceding sentences of this Section 3.3 or in Schedule 3.3, as of the
date hereof, no shares of capital stock or other voting securities of the
Company are issued, reserved for issuance or outstanding and no shares of
capital stock or other voting securities of the Company will be issued or become
outstanding after the date hereof other than upon exercise of the Company Stock
Options outstanding as of the date hereof. No warrants related to securities of
the Company are outstanding. Except as set forth in this Section 3.3 or in
Schedule 3.3, there are no options, stock appreciation rights, warrants or other
rights, Contracts, arrangements or commitments of any character (collectively,
"Options") relating to the issued or unissued capital stock of any of the
Acquired Corporations, or obligating any of the Acquired Corporations to issue,
grant or sell any shares of capital stock of, or other equity interests in, or
securities convertible into equity interests in, the Company or any of its
Subsidiaries. Since December 31, 2004, the Company has not issued any shares of
its capital stock or Options in respect thereof, except (x) upon the conversion
of the securities or the exercise of the options referred to above and (y) with
respect to issuances of shares of capital stock pursuant to the Company's 1999
Non-Employee Director Stock and Stock Option Plan, as set forth on Schedule 3.3.
The Company has delivered to Parent, with respect to each Option granted by any
Acquired Corporation, as of the date of this Agreement, information regarding
the identity of the grantee, the number of Options subject to the grant, the
exercise/conversion price and expiration date and, if applicable, the stock
option plan under which it was issued. All shares of Company Capital Stock
subject to issuance as described above will, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable, be
duly authorized, validly issued, fully paid and nonassessable. The provisions of
Section 2.6(a) are effective and do not conflict with the Company Plans and, as
of the Effective Time, all outstanding Company Stock Options will be terminated
by virtue of the Merger and each holder of a Company Stock Option shall cease to
have any rights with respect thereto, other than the right to receive, in
respect of each such terminated Company Stock Option, the Option Consideration.
Except as set forth in Schedule 3.3, none of the Acquired Corporations has any
Contract or other obligation to repurchase, redeem or otherwise acquire any
shares of Company Capital Stock or other stock of the Company or any capital
stock of any of the Company's Subsidiaries, or to make any investment (in the
form of a loan, capital contribution or otherwise) in any of the Company's
Subsidiaries or any other Person. Each outstanding share of capital stock of
each of the Company's Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable and each such share owned by any of the Acquired
Corporations is free and clear of all Encumbrances other than Permitted
Encumbrances. None of the outstanding equity securities or other securities of
any of the Acquired Corporations was issued in violation of the Securities Act
or any other Legal Requirement. Except as set forth on Schedule 3.3, none of the
Acquired Corporations owns, or has any Contract or other obligation to acquire,
any equity securities or other securities of any Person (other than Subsidiaries
of the Company) or any direct or indirect equity or ownership
20
interest in any other business. Except as set forth on Schedule 3.3, none of the
Acquired Corporations is or has ever been a general partner of any general or
limited partnership.
3.4 SEC Reports. The Acquired Companies have on a timely basis filed
all forms, reports and documents required to be filed by them with the SEC since
January 1, 2003. Schedule 3.4 lists, and the Company has, except to the extent
available in full without redaction on the SEC's website through the Electronic
Data Gathering, Analysis and Retrieval System ("▇▇▇▇▇") two days prior to the
date of this Agreement, delivered to Parent copies in the form filed with the
SEC of, all of the following: (i) the Acquired Corporations' Annual Reports on
Form 10-K for each fiscal year of the Acquired Corporations beginning since
January 1, 2003, (ii) their Quarterly Reports on Form 10-Q for each of the first
three fiscal quarters in each of the fiscal years of the Acquired Corporations
referred to in clause (i) above, (iii) all proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held, and all
information statements relating to stockholder consents, since the beginning of
the first fiscal year referred to in clause (i) above, (iv) the Acquired
Corporations' Current Reports on Form 8-K filed since the beginning of the first
fiscal year referred to in clause (i) above, (v) all other forms, reports,
registration statements and other documents (other than preliminary materials if
the corresponding definitive materials have been provided to Parent pursuant to
this Section 3.4) filed by the Acquired Corporations with the SEC since the
beginning of the first fiscal year referred to in clause (i) above (the forms,
reports, registration statements and other documents referred to in clauses (i),
(ii), (iii), (iv) and (v) above, whether or not available through ▇▇▇▇▇, are,
collectively, the "Company SEC Reports" and, to the extent available in full
without redaction on the SEC's website through ▇▇▇▇▇ two days prior to the date
of this Agreement, are, collectively, the "Filed Company SEC Reports"), (vi) all
certifications and statements required by (x) the SEC's Order dated June 27,
2002 pursuant to Section 21(a)(1) of the Exchange Act (File No. 4-460), (y) Rule
13a-14 or 15d-14 under the Exchange Act, or (z) 18 U.S.C. Section 1350 (Section
906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002) with respect to any report referred to in
clause (i) or (ii) above (collectively, the "Certifications"), and (vii) all
comment letters received by the Acquired Corporations from the Staff of the SEC
since January 1, 2003 and all responses to such comment letters by or on behalf
of the Acquired Corporations. The Company SEC Reports (x) were or will be
prepared in all material respects in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed with the SEC,
or will not at the time they are filed with the SEC, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
Certifications are each true and correct. Except as set forth on Schedule 3.4,
no Subsidiary of the Company is or has been required to file any form, report,
registration statement or other document with the SEC. The Acquired Corporations
maintain disclosure controls and procedures required by Rule 13a-15 or 15d-15
under the Exchange Act; such controls and procedures are designed to ensure that
all material information concerning the Acquired Corporations is made known on a
timely basis to the individuals responsible for the preparation of the Company's
filings with the SEC and other public disclosure documents. The Company has
delivered to Parent copies of all written descriptions of, and all policies,
manuals and other documents promulgating, such disclosure controls and
procedures. The Company is in compliance with the applicable listing rules of
The American Stock Exchange and has not since January 1, 2003 received any
notice from The American Stock Exchange asserting any non-
21
compliance with such rules. To the Company's knowledge, each director and
executive officer of the Company has filed with the SEC on a timely basis all
statements required by Section 16(a) of the Exchange Act and the rules and
regulations thereunder since January 1, 2003. As used in this Section 2.4, the
term "file" shall be broadly construed to include any manner in which a document
or information is furnished, supplied or otherwise made available to the SEC
(regardless of whether public or confidential).
3.5 Financial Statements. The financial statements and notes
contained or incorporated by reference in the Company SEC Reports fairly present
the financial condition and the results of operations, changes in stockholders'
equity and cash flow of the Acquired Corporations as at the respective dates of
and for the periods referred to in such financial statements; all of such
statements and notes have been prepared in accordance with GAAP and Regulation
S-X of the SEC, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the omission of notes to the extent
permitted by Regulation S-X of the SEC (that, if presented, would not differ
materially from notes to the financial statements included in the most recent
Annual Report on Form 10-K included in the Filed Company SEC Reports (the
consolidated balance sheet included in such Annual Report is the "Balance
Sheet")); the financial statements referred to in this Section 3.5 reflect the
consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements. No
financial statements of any Person other than the Acquired Corporations are
required by GAAP to be included in the consolidated financial statements of the
Company. Schedule 3.5 contains a description of all non-audit services performed
by the Company's auditors for the Acquired Corporations since the beginning of
the immediately preceding fiscal year of the Company and the fees paid for such
services; all such non-audit services were approved as required by Section 202
of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. The Acquired Corporations maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Schedule 3.5 lists, and the Company has delivered to Parent copies of, the
documents creating or governing all of the Acquired Corporations' Off-Balance
Sheet Arrangements. The corporate records and minute books of the Acquired
Corporations have been maintained in accordance with all applicable Legal
Requirements and are complete and accurate in all material respects. Financial
books and records and accounts of the Acquired Corporations used in preparation
of the Acquired Corporations' financial statements: (x) have been maintained in
accordance with good business practices on a basis consistent with prior years,
(y) are stated in reasonable detail and reflect the transactions of the Acquired
Corporations in all material respects and (z) reflect the basis for the
Company's consolidated financial statements in all material respects.
3.6 Property; Sufficiency of Assets. The Acquired Corporations have
good and valid title to all property material to the business of the Acquired
Corporations and reflected in the latest audited financial statements included
in the Filed Company SEC Reports as being owned by the Acquired Corporations or
acquired after the date thereof (except for hotels sold as
22
disclosed in subsequent Filed Company SEC Reports and property sold or otherwise
disposed of in the ordinary course of business since the date thereof), free and
clear of all Encumbrances except Permitted Encumbrances.
3.7 Receivables. All existing accounts receivable of the Acquired
Corporations represent valid obligations of customers of the Acquired
Corporations arising from bona fide transactions entered into in the ordinary
course of business.
3.8 Equipment; Real Property; Leaseholds.
(a) To the knowledge of the Company, all material items of
equipment and other tangible assets owned by or leased to the Acquired
Corporations are adequate for the uses to which they are being put, are in good
and safe condition and repair (ordinary wear and tear excepted) and are adequate
for the conduct of the business of the Acquired Corporations in the manner in
which such business is currently being conducted.
(b) Schedule 3.8(b) lists each parcel of real property
currently owned by any Acquired Corporation and sets forth the Acquired
Corporation owning such properties (collectively, the "Owned Real Properties").
Schedule 3.8(b) lists each parcel of real property currently ground leased by
any Acquired Corporation (collectively, the "Ground Leased Properties" and,
together with the Owned Real Properties, the "Properties"), and sets forth the
Acquired Corporation holding such leasehold interest, with the name of the
lessor and the date of the lease, any subleases and assignments, any guarantees
given and each amendment to any of the foregoing (collectively, the "Ground
Leases"). The Acquired Corporation set forth on Schedule 3.8(b) owns fee simple
title to the Owned Real Properties and the Acquired Corporation set forth on
Schedule 3.8(b) owns leasehold title to the Ground Leased Properties, in each
case, free and clear of all Encumbrances, except for Permitted Encumbrances.
None of the Properties is subject to any decree or order of any Governmental
Body to be sold nor is being condemned, expropriated or otherwise taken by any
public authority with or without payment of compensation therefor, nor, to the
knowledge of the Company, has any such condemnation, expropriation or taking
been proposed. No Acquired Corporation has violated in any material respect any
covenants, conditions or restrictions affecting any Properties.
(c) Schedule 3.8(c) lists each real property lease or sublease
(other than the Ground Leases) to which any Acquired Corporation is a party or
subject, as either a tenant, landlord, lessee, lessor, sublandlord or subtenant,
and sets forth the Acquired Corporation holding such interest, the name of the
other party or parties thereto and the date and term of the lease, any sublease
or assignment, any guaranty given or leasing commissions remaining payable by
any Acquired Corporation in connection therewith and each amendment to any of
the foregoing (collectively, the "Space Leases").
(d) Each of the Ground Leases and the Space Leases is valid,
binding and in full force and effect as against the Acquired Corporations and,
to the Company's knowledge, as against the other parties thereto. No Acquired
Corporation has received notice under any of the Ground Leases or the Space
Leases of any default, and, to the Company's knowledge, no event has occurred
which, with notice or lapse of time or both, would constitute a material default
by any Acquired Corporation thereunder.
23
(e) Except as set forth on Schedule 3.8(e), the improvements
on the Properties (including, but not limited to, the mechanical systems,
plumbing, electrical, wiring, appliances, fixtures, heating, air conditioning
and ventilating equipment, elevators, boilers, equipment, roofs, structural
members and furnaces) are in good operating repair and condition, ordinary wear
and tear excepted, and there are no material patent or latent defects or adverse
physical conditions materially and adversely affecting any of the Properties or
any such improvements.
(f) No Acquired Corporation has received any written notice
and is not otherwise aware that valid policies of title insurance or title
commitments for which premiums have been paid (collectively, the "Title
Policies") insuring the Acquired Corporations' fee simple or leasehold title to
the Properties owned or ground leased by any Acquired Corporation are not in
full force and effect. No claim has been made by any Acquired Corporation
against any Title Policies within the last ten years.
(g) There are no Properties under construction as of the date
hereof.
(h) Schedule 3.8(h) lists each parcel of real property in
respect of which an Acquired Corporation has the right, pursuant to a franchise,
license, satellite agreement, franchise development agreement, area development
agreement, development incentive agreement or other Contract (together with any
amendment, guarantees and any ancillary documents and agreements related
thereto, the "Franchise Agreements") to utilize a brand name or other rights of
a hotel chain or system from any Person. Schedule 3.8(h) also identifies the
applicable brand of such property and the Franchise Agreement related thereto.
Each Franchise Agreement is valid, binding and in full force and effect as
against the Acquired Corporations and, to the Company's knowledge, as against
the other parties thereto. No Acquired Corporation has received or delivered
written notice under any of the Franchise Agreements of any material default
including, without limitation, any failure to meet any inspection under any
Franchise Agreement and, to the Company's knowledge, no event has occurred
which, with notice or lapse of time or both, would constitute a material default
by any Acquired Corporation or the other party thereto. Except as set forth on
Schedule 3.8(h), there are no required repairs for any Property, whether
pursuant to a property improvement plan or any other renovation plan necessary
or required to bring any Property into compliance with applicable standards.
(i) Schedule 3.8(i) lists each management agreement relating
to any parcel of real property to which any Acquired Corporation is a party (the
"Management Agreements"). Each Management Agreement is valid, binding and in
full force and effect as against the Acquired Corporations and as against the
other parties thereto. No Acquired Corporation has received or delivered written
notice under any of the Management Agreements of any default and, to the
Company's knowledge, no event has occurred which, with notice or lapse of time
or both, would constitute a material default by any Acquired Corporation or the
other parties thereto.
(j) Schedule 3.8(j) lists each parcel of real property or
leasehold interest in any ground lease conveyed, transferred, assigned or
otherwise disposed of by any Acquired Corporation since January 1, 2003.
24
(k) Except as set forth on Schedule 3.8(k), the Acquired
Corporations own all furniture, fixtures, equipment, operating supplies and
other personal property necessary for the operation of each Property, free and
clear of all Encumbrances except Permitted Encumbrances.
(l) None of the Properties, nor any portion thereof, is
located within any designated historical district or area in which the permitted
uses of land located therein are restricted by Legal Requirements other than
those specified under local generally applicable ordinances.
(m) To the Company's knowledge, all utilities required for the
operation of each of the Properties either enters the Properties through
adjoining public streets or roads, or if they pass through adjoining land, they
do so in accordance with valid public easements or irrevocable private
easements, and all of said utilities are installed and operating and all
installation and connection charges therefor have been paid in full.
(n) No commitments have been made by any Acquired Corporation
to any Governmental Body, utility company, school board, church or other
religious body or any homeowners' association or any other Person relating to
any of the Properties which would impose an obligation upon Parent to make any
contribution or dedication of a material amount of money or land or to
construct, install or maintain, at a material cost to the Acquired Corporations,
any improvements of a public or private nature on or off the real estate
comprising any of the Properties.
3.9 Intellectual Property.
(a) The Acquired Corporations own, or are validly licensed or
otherwise have the right to use, all patents, patent rights, inventions,
discoveries, ideas, processes, formulae, designs, models, industrial designs,
know-how, confidential information, proprietary information, trademarks, trade
secrets, trade names, service marks, brand names, trade dress, slogans, logos,
domain names, copyrights, writing and other copyrightable works and works in
progress, databases, website content, registrations and application for
registration of any of the foregoing; renewals, extensions, continuations,
divisionals, reexaminations or reissues or equivalents or counterparts of any of
the foregoing in any jurisdiction throughout the world, computer programs,
goodwill and other proprietary intellectual property rights (the "Intellectual
Property Rights"), in each case, which are material to the conduct of the
business of the Acquired Corporations as currently conducted. Schedule 3.9 sets
forth a listing of each Intellectual Property Right held by the Acquired
Corporations, in each case, which is material to the conduct of the business of
the Acquired Corporations as currently conducted.
(b) To the Company's knowledge, the conduct by the Acquired
Corporations of their respective businesses has not and does not infringe upon,
misappropriate or conflict with any Intellectual Property Right of any Person,
and there are no pending or, to the Company's knowledge, threatened claims
alleging that any Acquired Corporation infringes, misappropriates or conflicts
in any material respect to the Intellectual Property Rights of any Person.
25
3.10 No Undisclosed Liabilities. Except as set forth on Schedule
3.10, the Acquired Corporations have no liabilities or obligations of any nature
(whether absolute, accrued, contingent, ▇▇▇▇▇▇ or inchoate or otherwise), except
for liabilities or obligations adequately reflected or reserved against in the
Balance Sheet in accordance with GAAP, consistently applied, or disclosed in the
notes thereto, current liabilities incurred since the date of the Balance Sheet
in the ordinary course of business, consistent with past practices, and
contingent or inchoate liabilities that would not reasonably be likely to,
individually or in the aggregate, have a Material Adverse Effect on the Acquired
Corporations.
3.11 Taxes.
(a) Timely Filing of Tax Returns. The Acquired Corporations
have filed or caused to be filed all material Tax Returns that are or were
required to be filed by or with respect to any of them, either separately or as
a member of a group of corporations, pursuant to applicable Legal Requirements.
All material Tax Returns filed by (or that include on a consolidated basis) any
of the Acquired Corporations were in all respects true, complete and correct in
all material respects and filed on a timely basis. To the extent required in
connection with the filing of any Tax Return or under any other Legal
Requirement, including Treasury Regulation Section 1.6662-6(d)(3), the Acquired
Corporations have materially satisfied any contemporaneous documentation
requirements. No Taxing Authority in any jurisdiction in which any Acquired
Corporation does not file Tax Returns has asserted in writing that such Acquired
Corporation is, or may be, subject to any Tax (or required to file any Tax
Return) in that jurisdiction.
(b) Payment of Taxes. The Acquired Corporations have, within
the time and in the manner prescribed by any applicable Legal Requirement, paid
all material Taxes that are due and payable.
(c) Withholding Taxes. Each of the Acquired Corporations has
complied with all material applicable Legal Requirements relating to the
withholding of Taxes (including withholding and reporting requirements under
Code Sections 1441 through 1464, 3401 through 3406, 6041 and 6049 and similar
provisions under any other applicable Legal Requirement) and has, within the
times and in the manner prescribed by any applicable Legal Requirement, paid
over such withheld amounts to the proper Taxing Authorities.
(d) Audits. No Tax Return of any of the Acquired Corporations
is under audit or examination by any Taxing Authority, no written or, to the
Company's knowledge, unwritten notice of such an audit or examination has been
received by any of the Acquired Corporations, the Acquired Corporations have no
knowledge of any threatened audits, investigations or claims for or relating to
Taxes, and, to the Company's knowledge, there are no material matters under
discussion with any Taxing Authority with respect to Taxes of any of the
Acquired Corporations (excluding any discussion in which the identity of the
taxpayer has not been revealed to the Taxing Authority). No material issues
relating to Taxes were raised in writing by the relevant Taxing Authority during
any presently pending audit or examination, and no material issues relating to
Taxes were raised in writing by the relevant Taxing Authority in any completed
audit or examination that can reasonably be expected to recur in a later taxable
period. The Company has made available to Parent copies of all examiner's or
auditor's reports,
26
notices of any material proposed adjustments or similar commissions received by
any of the Acquired Corporations from any Taxing Authority. The United States
federal income Tax Returns of the Acquired Corporations have never been audited
by the Internal Revenue Service.
(e) Tax Reserves. To the Company's knowledge, there exists no
material proposed assessment of Taxes against any of the Acquired Corporations
except as disclosed in Schedule 3.11(e). The financial statements contained in
the Company's most recently Filed Company SEC Reports reflect an adequate
reserve for all Taxes payable by the Company for all taxable periods and
portions thereof through the date of the most recent balance sheet included in
such financial statements.
(f) Tax Sharing Agreements. The Company has made available to
Parent copies of any Tax sharing agreement, Tax allocation agreement, Tax
indemnity obligation or, to the Company's knowledge, any similar material
written or unwritten agreement or arrangement with respect to Taxes to which any
of the Acquired Corporations is a party or by which any of the Acquired
Corporations is bound.
(g) Waiver of Statutes of Limitations. None of the Acquired
Corporations has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to a
material amount of Taxes or any material Tax Return.
(h) Powers of Attorney. No power of attorney currently in
force has been granted by any of the Acquired Corporations concerning a material
amount of Taxes or any material Tax Return.
(i) Tax Rulings. Except as disclosed on Schedule 3.11(i), (i)
none of the Acquired Corporations has received or been the subject of a material
Tax Ruling (as defined below) or a request for a material Tax Ruling, and (ii)
none of the Acquired Corporations has entered into a material Closing Agreement
(as defined below) with any Taxing Authority that would have a continuing effect
after the Closing Date. "Tax Ruling" means a written ruling of a Taxing
Authority relating to Taxes. "Closing Agreement" means a written and legally
binding agreement with a Taxing Authority relating to Taxes (including any
advance pricing agreement).
(j) Availability of Tax Returns. The Company has made
available to Parent copies of all material Tax Returns, and any amendments
thereto, filed by or on behalf of, or which include, any of the Acquired
Corporations, for all taxable periods ending on or after January 1, 2003 and
prior to the Closing Date.
(k) Availability of Books and Records. The Acquired
Corporations have maintained all information, workpapers, schedules or any other
documentation necessary for filing any required material Tax Return that has not
been filed for any tax year that includes any period prior to or including the
Closing Date.
(l) Opinions of Counsel. The Company has made available to
Parent copies of all material memoranda and material written opinions of Tax
counsel, whether inside or outside Tax counsel, and other Tax advisors, which
have been received by any of the
27
Acquired Corporations with respect to material matters relating to Taxes within
the last three taxable years.
(m) Section 481 Adjustments. None of the Acquired Corporations
is required to include in income any material amount in any taxable period
ending after the Closing Date pursuant to an adjustment required under Code
Section 481 by reason of a voluntary change in accounting method initiated by
any of the Acquired Corporations, and the Internal Revenue Service has not
proposed any such change in accounting method.
(n) Net Operating Loss Carryovers and Tax Credit Carryovers.
As of January 1, 2004, the Acquired Corporations, in the aggregate, had net
operating loss carryovers available to offset United States federal income of
not less than $42,000,000. Except as a result of the Contemplated Transactions,
none of the Acquired Corporations has experienced an ownership change within the
meaning of Sections 382 and 383 of the Code after January 1, 1995. None of the
Acquired Corporations is subject to the separate return limitation year
provisions of Treasury Regulation Section 1.1502.
(o) Section 338 Election. No election under Section 338 has
been made by or with respect to any of the Acquired Corporations or any of their
respective assets or properties within the last three taxable years.
(p) Intercompany Transactions. None of the Acquired
Corporations has engaged in any transactions with Affiliates which would require
the recognition of income by any of the Acquired Corporations with respect to
such transaction for any period ending on or after the Closing Date.
(q) Section 280(G). None of the Acquired Corporations is a
party to any agreement, contract or arrangement that could result, separately or
in the aggregate, in the payment of an "excess parachute payment" within the
meaning of Section 280G of the Code.
(r) Section 355. None of the Acquired Corporations has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock intended to qualify for tax-free treatment under Section
355 of the Code (i) at any time during the two-year period ending immediately
prior to the date of this Agreement or (ii) that could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the Contemplated Transactions.
(s) Other Interests. None of the Acquired Corporations owns an
interest in any (i) domestic international sales corporation, (ii) foreign sales
corporation or (iii) passive foreign investment company.
(t) USRPHC. The Company is not a "United States real property
holding corporation" ("USRPHC") within the meaning of Section 897 of the Code
and was not a USRPHC on any "determination date" (as defined in Section
1.897-2(c) of the Treasury Regulations under the Code) that occurred in the
five-year period preceding the Closing.
(u) Section 1504. None of the Acquired Corporations has been a
member of an affiliated group of corporations within the meaning of Section 1504
of the Code,
28
other than an affiliated group of which the Company is the common parent
corporation for purposes of Section 1504 of the Code.
3.12 Employee Benefits.
(a) Schedule 3.12 lists, and the Company has made available to
Parent a copy of (or if there is no written document, a written summary of), all
employee benefit plans, programs, policies, practices and other arrangements
currently providing benefits to any current or former employee, officer or
director of any of the Acquired Corporations or beneficiary or dependent
thereof, whether or not written, and whether covering one person or more than
one person, sponsored or maintained by any such Acquired Corporation or to which
any such Acquired Corporation contributes or is obligated to contribute
("Plans"). Without limiting the generality of the foregoing, the term "Plans"
includes all employee welfare benefit plans within the meaning of Section 3(1)
of ERISA, all employee pension benefit plans within the meaning of Section 3(2)
of ERISA, and all other employee bonus, incentive, deferred compensation, stock
purchase, stock option, severance, change of control and material fringe benefit
plans, programs or agreements, and the related option agreements of the Company.
(b) Except as required under this Agreement or set forth in
Schedule 3.12(b), since January 1, 2003, there has not been (i) any adoption or
material amendment by any of the Acquired Corporations of any Plans (whether or
not legally binding) or any employment agreement providing compensation or
benefits to any current or former employee, officer, director or independent
contractor of the Company or any of its Subsidiaries or any beneficiary thereof,
or entered into, maintained or contributed to, as the case may be, by any of the
Acquired Corporations which would provide for a modification of benefits or
consideration due thereunder which would exceed $1,000,000 in the aggregate
under all Plans (excluding any employment agreements or amendments thereto
listed in Schedule 3.12(b)), or (ii) any adoption of, or amendment to, or change
in employee participation or coverage under, any Plan which would, in either
case, increase materially the expense of maintaining such Plan above the level
of the expense incurred in respect thereof for the fiscal year ended on January
1, 2003. Except as expressly contemplated hereby, neither the execution and
delivery of this Agreement nor the consummation of the Contemplated Transactions
will (either alone or in conjunction with any other event) result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee of the Acquired Corporations.
(c) With respect to each Plan, the Company has delivered or
otherwise made available to Parent a copy of: (i) each writing constituting a
part of such Plan, including all plan documents, benefit schedules, trust
agreements and insurance contracts and other funding vehicles; (ii) the three
most recent Annual Reports (Form 5500 Series) and accompanying schedules, if
any; (iii) the current summary plan description and any material modifications
thereto, if any; (iv) the most recent annual financial report, if any; (v) the
most recent actuarial report, if any; and (vi) the most recent determination
letter from the Internal Revenue Service, if any.
(d) Schedule 3.12(d) identifies each Plan that is intended to
be a "qualified plan" within the meaning of Section 401(a) of the Code
("Qualified Plans"). The Internal Revenue Service has issued a favorable
determination letter with respect to each
29
Qualified Plan that has not been revoked, and, to the knowledge of the Company,
there are no existing circumstances nor any events that have occurred that could
adversely affect the qualified status of any Qualified Plan or the related
trust.
(e) All contributions required to be made to any Plan by
applicable Legal Requirements or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies
funding any Plan, for any period through the date hereof have been made or paid
in full or, to the extent not required to be made or paid on or before the date
hereof, have been fully reflected on the financial statements contained in the
Company SEC Reports to the extent required by GAAP.
(f) The Company has complied, and is now in compliance, in all
material respects with all provisions of ERISA, the Code and all Legal
Requirements applicable to the Plans. There is not now, nor do any circumstances
exist that, to the Company's knowledge, would reasonably be expected to give
rise to, any requirement for the posting of security with respect to a Plan or
the imposition of any Encumbrance on the assets of the Company under ERISA or
the Code. No prohibited transaction has occurred with respect to any Plan which
could result in material liability to the Company.
(g) The Company does not now maintain, and has at no time
maintained, (i) a Plan that is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code, (ii) a "multiemployer pension plan", as defined
in Section 3(37) of ERISA (a "Multiemployer Plan") or (iii) a funded welfare
benefit plan as defined in Section 419 of the Code.
(h) All group health plans maintained by the Company or any
ERISA Affiliate have been operated in material compliance with the requirements
of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA, the
provisions of law enacted by the Health Insurance Portability and Accountability
Act of 1996, and any similar law.
(i) Schedule 3.12(i) identifies any liability for life,
health, medical or other welfare benefits to former employees or beneficiaries
or dependents thereof, except for health continuation coverage as required by
Section 4980B of the Code, Part 6 of Subtitle B of Title I of ERISA or other
applicable Legal Requirement and at no expense to any Acquired Corporation.
(j) To the Company's knowledge, no labor organization or group
of employees of the Acquired Corporations has made a pending demand for
recognition or certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending,
or threatened to be brought or filed, with the National Labor Relations Board or
any other labor relations tribunal or authority. Each of the Acquired
Corporations has complied and will comply with the Worker Adjustment and
Retraining Notification Act and all Legal Requirements relating to the
employment of all personnel, including, but not limited to, employment
discrimination.
(k) There are no material pending or, to the Company's
knowledge, threatened claims (other than claims for benefits in the ordinary
course), lawsuits or arbitrations
30
which have been asserted or instituted against the Plans, any fiduciaries
thereof with respect to their duties to the Plans or the assets of any of the
trusts under any of the Plans which could reasonably be expected to result in
any material liability of any Acquired Corporation.
(l) Schedule 3.12(l) contains an accurate and complete list as
of the date of this Agreement of all material loans and advances made by any of
the Acquired Corporations to any employee, director, consultant or independent
contract, other than routine travel and expense advances made to employees in
the ordinary course of business. The Acquired Corporations have not, since July
30, 2002, extended or maintained credit, arranged for the extension of credit,
or renewed an extension of credit, in the form of a personal loan to or for any
director or executive officer (or equivalent thereof) of the Company. Schedule
3.12(o) identifies any extension of credit maintained by the Acquired
Corporations to which the second sentence of Section 13(k)(1) of the Exchange
Act applies.
3.13 Compliance with Legal Requirements; Governmental
Authorizations. The Acquired Corporations are, and since January 1, 2003 have
been, in compliance in all material respects with each Legal Requirement that is
or was applicable to any of them or to the conduct or operation of their
business or the ownership or use of any of their assets, including, without
limitation, liquor licenses and restaurant permits or licenses, and no event has
occurred or circumstance exists that (with or without notice or lapse of time or
both) (i) may constitute or result in a violation by any of the Acquired
Corporations of, or a failure on the part of any of the Acquired Corporations to
comply with, any Legal Requirement, or (ii) may give rise to any obligation on
the part of any of the Acquired Corporations to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature. Since January 1,
2003, none of the Acquired Corporations has received, at any time, any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding (x) any actual, alleged, possible or potential violation
of, or failure to comply with, any Legal Requirement, or (y) any actual,
alleged, possible or potential obligation on the part of any of the Acquired
Corporations to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
3.14 Environmental Matters.
(a) Each Acquired Corporation is, and at all times has been,
in material compliance with, and has not been and is not in material violation
of or have any material liability under, any Environmental Law. No Acquired
Corporation or any other Person for whose conduct they are or may be held to be
responsible has received any actual or threatened order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential material violation or failure to comply
with any Environmental Law, or of any actual or threatened obligation to
undertake or bear material costs for any Environmental, Health and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Acquired Corporation had
had an interest and for which any Acquired Corporation may be held responsible,
or with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or processed
by any Acquired Corporation, or any other Person for whose
31
conduct they are or may be held responsible, or from which Hazardous Materials
have been transported, treated, stored, handled, transferred, disposed of,
recycled, or received.
(b) There are no pending or, to the knowledge of the Company,
threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any material Environmental, Health and Safety Liabilities or arising under
or pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Acquired Corporation had had an interest and for which any Acquired
Corporation may be held responsible.
(c) No Acquired Corporation has any basis to expect, nor has
any of them or any other Person for whose conduct they are or may be held
responsible, received, any written or, to the Company's knowledge, other
material citation, directive, inquiry, notice, order, summons, warning or other
communication that relates to Hazardous Activities or Hazardous Materials, or
any alleged, actual or potential material violation or failure to comply with
any Environmental Law, or of any alleged, actual or potential obligation to
undertake or bear material costs for any Environmental, Health and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Acquired Corporation had
an interest and for which any Acquired Corporation may be held responsible, or
with respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used or processed by any Acquired
Corporation, or any other Person for whose conduct they are or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed of, recycled or received.
(d) No Acquired Corporation, or any other Person for whose
conduct they are or may be held responsible, has any material Environmental,
Health and Safety Liabilities with respect to the Facilities or with respect to
any other properties and assets (whether real, personal, or mixed) in which any
Acquired Corporation (or any predecessor) has or had an interest, or, to the
knowledge of the Company, at any property geologically or hydrologically
adjoining the Facilities.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or, which originated at the Facility when any
Acquired Corporation owned or operated such Facility and were transported to an
off-site location, or are, to the knowledge of the Company, now at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps or
any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon in a condition, volume or concentration
reasonably likely to result in a material Environmental Health and Safety
Liability. No Acquired Corporation, any other Person for whose conduct they are
or may be held responsible, or to the knowledge of the Company, any other
Person, has permitted or conducted or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which any Acquired Corporation has or had
an interest except for instances which would not be reasonably likely to result
in a material Environmental Health and Safety Liability.
32
(f) There has been no release or, to the knowledge of the
Company, threat of release, by any Person of any Hazardous Materials at or from
the Facilities or at any other locations where any Hazardous Materials were
generated, used, manufactured, refined, transferred, disposed of, produced,
imported, used or processed from or by the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which any Acquired
Corporation has or had an interest, or to the knowledge of the Company, any
geologically or hydrologically adjoining property, except for releases that are
not reasonably likely to result in a material Environmental Health and Safety
Liability.
(g) The Company has delivered to Parent copies and results of
any reports, studies, analyses, tests, correspondence or monitoring possessed or
initiated by any Acquired Corporation pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by any Acquired Corporation, or any other Person for whose conduct they are or
may be held responsible, with Environmental Laws.
3.15 Legal Proceedings.
(a) Except as set forth in Schedule 3.15(a), there is no
pending Legal Proceeding (i) that has been commenced by or against any of the
Acquired Corporations or that otherwise relates to or may affect the business
of, or any of the assets owned or used by, any of the Acquired Corporations,
except for such Legal Proceedings as are normally incident to the business
carried on by the Acquired Corporations and would not reasonably be likely to,
individually or in the aggregate, result in a Material Adverse Effect on the
Acquired Corporations, (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Contemplated Transactions or (iii) against any director or officer of any of the
Acquired Corporations pursuant to Section 8A or 20(b) of the Securities Act or
Section 21(d) or 21C of the Exchange Act.
(b) To the knowledge of the Company, (i) no Legal Proceeding
that if pending would be required to be disclosed under Section 3.15(a) has been
threatened, and (ii) no event has occurred or circumstance exists that would
reasonably be likely to give rise to or serve as a basis for the commencement of
any such Legal Proceeding.
(c) No Acquired Corporation is subject to any outstanding
order, writ, injunction or decree which has had or is likely to have a Material
Adverse Effect on the Acquired Corporations.
3.16 Absence of Certain Changes and Events. Except as set forth in
Schedule 3.16, since the date of the Balance Sheet, (a) the Acquired
Corporations have conducted their businesses only in the ordinary course of
business consistent with past practice and there has not been any Material
Adverse Effect on the Acquired Corporations, and (b) no event has occurred or
circumstance exists that could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect on the Acquired Corporations,
and there has not been:
(a) any material loss, damage or destruction to, or any
interruption in the use of, any of the assets of any of the Acquired
Corporations (whether or not covered by insurance);
33
(b) (i) any declaration, accrual, set aside or payment of any
dividend or any other distribution in respect of any shares of capital stock of
any Acquired Corporation, or (ii) any repurchase, redemption or other
acquisition by any Acquired Corporation of any shares of capital stock or other
securities;
(c) assuming no shares of Company Class B Common Stock have
been converted into shares of Company Class A Common Stock, any sale, issuance
or grant, or authorization of the issuance of, (i) any capital stock or other
security of any Acquired Corporation (except for Company Class A Common Stock
issued upon the valid exercise of outstanding Company Stock Options), (ii) any
option, warrant or right to acquire any capital stock or any other security of
any Acquired Corporation (except for Company Stock Options) or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security of any Acquired Corporation;
(d) any amendment or waiver of any of the rights of any
Acquired Corporation under, or acceleration of vesting under, (i) any provision
of any of the Company's stock option plans, (ii) any provision of any Contract
evidencing any outstanding Company Stock Option (other than pursuant to the
Option Termination Agreements), or (iii) any restricted stock purchase
agreement;
(e) any amendment to any Organizational Document of any of the
Acquired Corporations, any merger, consolidation, share exchange, business
combination, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction involving any Acquired Corporation;
(f) any receipt by the Acquired Corporations of any
Acquisition Proposal;
(g) any creation of any Subsidiary of an Acquired Corporation
or acquisition by any Acquired Corporation of any equity interest or other
interest in any other Person;
(h) any capital expenditure by any Acquired Corporation which,
when added to all other capital expenditures made on behalf of the Acquired
Corporations since the date of the Balance Sheet, exceeds $30,000,000 in the
aggregate;
(i) except in the ordinary course of business and consistent
with past practice, any action by the Acquired Corporations to (i) enter into or
cause any of the assets owned or used by it to become bound by any Material
Contract, or (ii) amend or terminate, or waive any material right or remedy
under, any Material Contract;
(j) any (i) acquisition, lease or license by any Acquired
Corporation of any right or other asset from any other Person, (ii) sale or
other disposal or lease or license by any Acquired Corporation of any right or
other asset to any other Person or (iii) waiver or relinquishment by any
Acquired Corporation of any right, except for rights or other assets acquired,
leased, licensed or disposed of in the ordinary course of business and
consistent with past practices;
34
(k) any write-off as uncollectible, or establishment of any
extraordinary reserve with respect to, any material account receivable or other
Debt of an Acquired Corporation;
(l) any pledge of any assets of, or sufferance of any of the
assets of, an Acquired Corporation to become subject to any Encumbrance, except
for pledges of immaterial assets made in the ordinary course of business and
consistent with past practices;
(m) any (i) loan by an Acquired Corporation to any Person,
(ii) guarantee by an Acquired Corporation of any Debt, (iii) payments made in
respect of Debt of any Acquired Corporation other than scheduled interest and
amortization payments, if any, required to be made under the agreements
evidencing Debt of the Acquired Companies or (iv) acceleration or prepayment of
any portion of any Debt;
(n) any (i) adoption, establishment, entry into or amendment
by an Acquired Corporation of any Plan or (ii) payment of any bonus or any
profit sharing or similar payment to, or material increase in the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of the directors, officers or employees of any
Acquired Corporation;
(o) any change of the methods of accounting or accounting
policies of any Acquired Corporation in any material respect, except as may be
required by the SEC, applicable law or GAAP;
(p) any material Tax election by any Acquired Corporation;
(q) any commencement or settlement of any material Legal
Proceeding by any Acquired Corporation; or
(r) any agreement or commitment to take any of the actions
referred to in clauses (c) through (q) above.
3.17 Contracts; No Defaults.
(a) Schedule 3.17(a) lists, and, except to the extent filed in
full without redaction as an exhibit to a Filed Company SEC Report, the Company
has delivered to Parent copies of, each of the following instruments and
documents to which any Acquired Corporation is a party (including any amendment
to any of the foregoing):
(i) described in paragraphs (b)(3), (b)(4), (b)(9) or
(b)(10) of Item 601 of Regulation S-K of the SEC;
(ii) with any director or officer or Affiliate of the
Company;
(iii) evidencing, governing or relating to Debt or any
guarantee by any Acquired Corporation of Debt of any other Person in excess of
$500,000;
35
(iv) not entered into in the ordinary course of business
that involves expenditures or receipts in excess of $200,000;
(v) that in any way purports to restrict the business
activity of any Acquired Corporation or any of their Affiliates or to limit the
freedom of any Acquired Corporation or any of their Affiliates to engage in any
line of business or to compete with any Person or in any geographic area or to
hire or retain any Person;
(vi) relating to the acquisition, transfer, development,
sharing or license of any Intellectual Property Rights that are material to the
conduct of the business of any of the Acquired Corporations (except for any
Contract pursuant to which any Intellectual Property Right is licensed to the
Acquired Corporations under any third-party software license generally available
to the public);
(vii) providing for indemnification of any officer,
director, employee or agent;
(viii) (A) relating to the acquisition, issuance,
voting, registration, sale or transfer of any securities, (B) providing any
Person with any preemptive right, right of participation, right of maintenance
or any similar right with respect to any securities or (C) providing any of the
Acquired Corporations with any right of first refusal with respect to, or right
to repurchase or redeem, any securities, except for Contracts evidencing Company
Stock Options;
(ix) providing for or relating to any guaranty, any
warranty or any indemnity or similar obligation;
(x) relating to any currency hedging;
(xi) (A) imposing any confidentiality obligation on any
of the Acquired Corporations or any other Person, or (B) containing "standstill"
or similar provisions;
(xii) (A) to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations, or (B) directly
or indirectly benefiting any Governmental Body, except for those instruments or
documents entered into by the Acquired Corporations in the ordinary course of
their respective businesses, the absence of which, individually or in the
aggregate, would not have a Material Adverse Effect on the Acquired
Corporations;
(xiii) requiring that any of the Acquired Corporations
give any notice or provide any information to any Person prior to considering or
accepting any Acquisition Proposal or similar proposal, or prior to entering
into any discussions, agreement, arrangement or understanding relating to any
Acquisition Transaction or similar transaction;
(xiv) contemplating or involving the payment or delivery
of cash or other consideration in an amount or having a value in excess of
$200,000 in the aggregate, or contemplating or involving the performance of
services having a value in excess of $200,000 in the aggregate;
36
(xv) relating to collective bargaining or other
agreement or understanding with a labor union or labor organization;
(xvi) that could reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations;
(xvii) relating to the future sale or exchange of, or
option to sell or exchange, any real property, or to the purchase or exchange
of, or option to purchase or exchange, any real property, including, without
limitation, current title policies, title reports, environmental reports,
insurance policies, surveys and engineering and maintenance reports;
(xviii) relating to the future development or
construction of, or additions or expansions to, any real property, including,
without limitation, final plans and specifications, architects agreements,
construction contracts and current operating manuals, other than Contracts for
ordinary repair and maintenance;
(xix) relating to the operations of the Properties,
including, without limitation, the Franchise Agreements, all material
advertising and marketing agreements, credit card agreements and the Management
Agreements;
(xx) any other Contract, if a breach of such Contract
could reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations.
Each of the foregoing is a "Material Contract."
(b) Each Material Contract is valid and in full force and
effect, and is enforceable in accordance with its terms.
(c) Except as set forth in Schedule 3.17(c): (i) none of the
Acquired Corporations has violated or breached, in any material respect, or
committed any material default under, any Material Contract; and, to the
knowledge of the Company, no other Person has violated or breached, in any
material respect, or committed any material default under, any Material
Contract; (ii) to the knowledge of the Company, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will or would reasonably be likely to, (A) result in a material violation or
breach of any of the provisions of any Material Contract, (B) give any Person
the right to declare a default or exercise any remedy under any Material
Contract, (C) give any Person the right to receive or require a rebate,
chargeback, penalty or change in delivery schedule under any Material Contract,
(D) give any Person the right to accelerate the maturity or performance of any
Material Contract or (E) give any Person the right to cancel, terminate or
modify any Material Contract; and (iii) none of the Acquired Corporations has
received any written notice of any actual or alleged violation or breach of, or
default under, any Material Contract.
3.18 Insurance. Schedule 3.18 sets forth a list of each material
insurance policy maintained by the Acquired Corporations. All such policies are
in full force and effect, all premiums due thereon have been paid, and the
Acquired Corporations have complied in all material respects with the provisions
of such policies and, except as set forth in Schedule 3.18, will remain in full
force and effect after consummation of the Contemplated Transactions. The
37
Acquired Corporations have not been advised of any defense to coverage in
connection with any claim to coverage asserted or noticed by the Acquired
Corporations under or in connection with any of their extant insurance policies.
The Acquired Corporations have not received any written notice from or on behalf
of any insurance carrier issuing policies or binders relating to or covering any
of the Acquired Corporations that there will be a cancellation or non-renewal of
existing policies or binders, or that alteration of any equipment or any
improvements to real estate occupied by or leased to or by the Acquired
Corporations, purchase of additional equipment, or material modification of any
of the methods of doing business, will be required.
3.19 Labor Matters. Except as set forth in Schedule 3.19: (a) none
of the Acquired Corporations is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization; nor is any application for certification with
respect to a union-organizing campaign outstanding; nor has any request for
recognition by a labor union or labor organization been made to any of the
Acquired Corporations; (b) none of the Acquired Corporations is the subject of
any Legal Proceeding asserting that any of the Acquired Corporations has
committed an unfair labor practice or seeking to compel it to bargain with any
labor organization as to wages or conditions of employment; (c) there is no
strike, work stoppage or other labor dispute involving any of the Acquired
Corporations pending or, to the Company's knowledge, threatened; (d) no
complaint, charge or Legal Proceeding by or before any Governmental Body brought
by or on behalf of any employee, prospective employee, former employee, retiree,
labor organization or other representative of its employees is pending or
threatened against any of the Acquired Corporations; (e) no grievance is pending
or, to the Company's knowledge, threatened against any of the Acquired
Corporations; and (f) none of the Acquired Corporations is a party to, or
otherwise bound by, any consent decree with, or citation by, any Governmental
Body relating to employees or employment practices. Except as set forth in
Schedule 3.19, there are no grants or subsidies from any Governmental Body to
any Acquired Corporation related to employment, employee training and/or
employment practices that are subject to any repayment obligation on the part of
any Acquired Corporation.
3.20 Interests of Officers and Directors. Except as set forth in
Schedule 3.20 or disclosed in the Filed Company SEC Reports and other than the
normal rights of a stockholder and rights under the Plans and the Company Stock
Options, none of the officers or directors of any of the Acquired Corporations
has any interest in any property, real or personal, tangible or intangible, used
in the business of the Acquired Corporations or in any supplier, distributor or
customer of the Acquired Corporations (but excluding ownership of
publicly-traded securities), or any relationship, contract, agreement,
arrangement or understanding with the Acquired Corporations that would be
required to be disclosed in a Company SEC Report.
3.21 Rights Plan; State Antitakeover Laws; DGCL. The Company has not
entered into, and its Board has not adopted or authorized the adoption of, a
stockholder rights plan or similar arrangement. Other than Section 203 of the
DGCL, no state takeover statute or similar statute or regulation of the State of
Delaware (and, to the knowledge of the Company, of any other state or
jurisdiction) applies or purports to apply to this Agreement or the Contemplated
Transactions and no provision of the certificate of incorporation, by-laws or
other Organizational Documents of the Company or any of its Subsidiaries or the
terms of any plan or agreement of the Company would, directly or indirectly,
restrict or impair the ability of Parent to
38
vote, or otherwise to exercise the rights of a stockholder with respect to,
securities of the Company and its Subsidiaries that may be acquired or
controlled by Parent or permit any stockholder to acquire securities of the
Company or of Parent or any of their respective Subsidiaries on a basis not
available to Parent in the event that Parent were to acquire securities of the
Company. The Company has taken all appropriate actions so that the restrictions
on business combinations contained in Section 203 of the DGCL will not apply to
Parent or Merger Sub with respect to or as a result of any of the Contemplated
Transactions.
3.22 Certain Payments. Since January 1, 2003, none of the Company or
any of its Subsidiaries, nor any director, officer, designated agent or employee
of the Company or any of its Subsidiaries, or to the Company's knowledge, any
other Person acting for or on behalf of the Company or any of its Subsidiaries,
has directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback or other payment to any Person, private or
public, regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any of its
Subsidiaries, in each case which is in violation of any Legal Requirement or
order or decree of any Governmental Body or (b) established or maintained any
fund or asset that is required by the Exchange Act to be recorded in the books
and records of the Company which has not been so recorded.
3.23 Opinion of Financial Advisor. The Special Committee has
received the opinion of ▇▇▇▇▇▇ Brothers (a copy of whose engagement letter has
been provided to Parent) dated June 14, 2005, to the effect that, as of such
date, the consideration to be received by the stockholders of the Company's
Class A Common Stock (other than the ▇▇▇▇▇▇▇ Affiliates) pursuant to the Merger
is fair to such stockholders from a financial point of view. A copy of that
opinion has been delivered to Parent.
3.24 Brokers. No broker, finder, investment banker or other Person
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger and the Contemplated Transactions based upon arrangements made
by or on behalf of any Acquired Corporation. The Company has heretofore
furnished to Parent a copy of all Material Contracts between the Company and
▇▇▇▇▇▇ Brothers Inc. pursuant to which such firm would be entitled to any
payment relating to the Contemplated Transactions.
3.25 Board Recommendation. The Board of the Company, at a meeting
duly called and held, has by vote of all of the directors then in office (other
than ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, who abstained) (a) determined that this Agreement and
the Contemplated Transactions, including the Merger, are advisable and are fair
to and in the best interests of the stockholders of the Company, and (b)
resolved to recommend that the holders of shares of capital stock of the Company
adopt this Agreement.
3.26 Proxy Statement and Schedule 13E-3. The definitive proxy
statement of the Company (the "Proxy Statement") and the Transaction Statement
on Schedule 13E-3 (the "Schedule 13E-3") to be filed with the SEC in connection
with the Contemplated Transactions, including, without limitation, the Merger,
and any amendments or supplements thereto will, when filed, comply in all
material respects with the applicable requirements of the Exchange
39
Act. At the time of the filing of the Proxy Statement and the Schedule 13E-3, at
the time the Proxy Statement or any amendment or supplement thereto is first
mailed to stockholders of the Company, at the time such stockholders vote on the
adoption of this Agreement and approval of the Merger, and at the Effective
Time, the Proxy Statement and the Schedule 13E-3, as supplemented or amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
3.27 Expense Amount Escrow Agreement. Within two business days of
the date hereof, the Company will have deposited $8 million (the "Expense
Amount") in escrow (the "Expense Amount Escrow Account") with the Escrow Agent,
pursuant to an Escrow Agreement, dated as of the date hereof, among the Company,
Parent and the Escrow Agent (the "Escrow Amount Escrow Agreement").
Section 4. Representations and Warranties of Parent and Merger Sub. Parent
and Merger Sub represent and warrant to the Company as follows:
4.1 Organization and Good Standing. Parent and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, with all requisite corporate or
limited liability company, as the case may be, power and authority to conduct
its business as now being conducted, to own or use the respective properties and
assets that it purports to own or use, and to perform all of its obligations
under material Contracts to which Parent or any of its Subsidiaries is party or
by which Parent or any of its Subsidiaries or any of their respective assets are
bound. Parent and each of its Subsidiaries are duly qualified to do business as
foreign corporations or limited liability companies, as the case may be, and are
in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by them, or the
nature of the activities conducted by them, requires such qualification, except
where the failure to be so qualified would not be reasonably likely to,
individually or in the aggregate, adversely affect Parent and its Subsidiaries,
taken as a whole, in any material respect.
4.2 Authority; No Conflict.
(a) Parent has all necessary limited liability company power
and authority to execute and deliver this Agreement and the other agreements
referred to in this Agreement, to perform its obligations hereunder and
thereunder and to consummate the Contemplated Transactions. The execution and
delivery of this Agreement by Parent and the consummation by Parent of the
Contemplated Transactions have been duly and validly authorized by all necessary
limited liability company and member action and no other limited liability
company or member proceedings on the part of Parent or its members are necessary
to authorize this Agreement or to consummate the Contemplated Transactions
(other than, with respect to the Merger, the filing of appropriate merger
documents as required by the DGCL). This Agreement has been duly and validly
executed and delivered by Parent and constitutes the legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms.
40
(b) Neither the execution and delivery of this Agreement nor
the consummation of any of the Contemplated Transactions do or will, directly or
indirectly (with or without notice or lapse of time or both), (i) contravene,
conflict with, or result in a violation of (A) any provision of the
Organizational Documents of Parent or any of its Subsidiaries, or (B) any
resolution adopted by manager or the members of Parent or any of its
Subsidiaries; (ii) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ, injunction or
decree to which Parent or any of its Subsidiaries, or any of the assets owned or
used by Parent or any of its Subsidiaries, is or may be subject; (iii)
contravene, conflict with or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by Parent or any of its Subsidiaries, or that otherwise relates to the
business of, or any of the assets owned or used by, Parent or any of its
Subsidiaries; (iv) cause Parent or any of its Subsidiaries to become subject to,
or to become liable for the payment of, any Tax; (v) cause any of the assets
owned by Parent or any of its Subsidiaries to be reassessed or revalued by any
Taxing Authority or other Governmental Body; (vi) contravene, conflict with or
result in a violation or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate or modify, any Contract to
which Parent or any of its Subsidiaries is party or by which Parent or any of
its Subsidiaries or any of their respective assets are bound; (vii) require a
Consent from any Person; or (viii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by Parent or
any of its Subsidiaries, except, in the case of clauses (ii), (iii), (iv), (v),
(vi), (vii) and (viii), for any such contraventions, conflicts, violations,
breaches, defaults or other occurrences that would not prevent or materially
delay consummation of the Merger or otherwise prevent Parent from performing any
of its obligations under this Agreement, and could not reasonably be expected
to, individually or in the aggregate, adversely affect Parent and its
Subsidiaries, taken as a whole, in any material respect.
4.3 Information Supplied for Proxy Statement and Schedule 13E-3.
None of the information included in the Proxy Statement and Schedule 13E-3 will,
as of the date the Proxy Statement is mailed to the Company's stockholders,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein, or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading; provided, that the foregoing representation and warranty is only
made to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Proxy Statement or the Schedule
13E-3 in reliance upon and in conformity with written information furnished to
the Company by or on behalf of Parent expressly for use therein.
4.4 No Undisclosed Agreements or Arrangements with any ▇▇▇▇▇▇▇
Affiliate. Neither Parent nor Merger Sub, nor any of their respective
Affiliates, has entered into, or will enter into at any time prior to the
Effective Time, any agreement, arrangement or understanding with any ▇▇▇▇▇▇▇
Affiliate for the acquisition of, or relating to, any equity interest in the
Company, or any equity interest in any Company Subsidiary or providing for any
payment or benefit to any ▇▇▇▇▇▇▇ Affiliate, other than the ▇▇▇▇▇▇▇ Agreements
or as expressly provided for in, or contemplated by, the Transaction Agreement
as of the date hereof. Parent is not a party to any other undisclosed agreements
with any ▇▇▇▇▇▇▇ Affiliates.
41
4.5 Fee Amount Escrow Agreement. Within two business days of the
date hereof, Parent will have deposited $3 million (the "Fee Amount") in escrow
(the "Fee Amount Escrow Account") with ▇▇▇▇▇ Fargo, National Association, as
escrow agent (the "Escrow Agent"), pursuant to an Escrow Agreement, dated as of
the date hereof, among the Company, Parent and the Escrow Agent (the "Fee Amount
Escrow Agreement").
4.6 Financing. At the Effective Time, Parent will have sufficient
funds, in cash, to pay the Merger Consideration, Option Consideration and any
other amounts payable by Parent under this Agreement, together with all fees and
expenses of Parent incurred in connection with the transactions contemplated by
this Agreement, and to effect the transactions contemplated by this Agreement.
4.7 ▇▇▇▇▇▇▇ Agreements.
(a) Parent has delivered to the Special Committee true and
correct copies of the Transaction Agreement, together with the Exhibits thereto
(none of which has been executed as of the date hereof), each of which is set
forth on Schedule 1, pertaining to the ▇▇▇▇▇▇▇ Transactions (the "▇▇▇▇▇▇▇
Agreements") (including any amendment to any of the ▇▇▇▇▇▇▇ Agreements). As of
the date hereof, there are not, and as of the Closing Date, there will not be,
any agreements, commitments or understandings, whether written or oral, among
the Parent Affiliates (as defined below), on the one hand, and any of the
▇▇▇▇▇▇▇ Affiliates, on the other hand, other than (i) the ▇▇▇▇▇▇▇ Agreements
listed on Schedule 1, and (ii) any amendments, modifications or alterations to
any of the ▇▇▇▇▇▇▇ Agreements that have been consented to by the Special
Committee pursuant to Section 5.7.
(b) The Transaction Agreement is valid and in full force and
effect, and is enforceable against Parent, Merger Sub and their respective
Affiliates (collectively, the "Parent Affiliates") (to the extent a party
thereto) in accordance with its terms.
(c) Except as set forth in Schedule 4.7(c): (i) none of the
Parent Affiliates has violated or breached, in any material respect, or is in
material default under, the Transaction Agreement; and, to the knowledge of
Parent and Merger Sub, no other Person has violated or breached, in any material
respect, or is in material default under, the Transaction Agreement; (ii) to the
knowledge of Parent and Merger Sub, no event has occurred that (with or without
notice or lapse of time) will or would reasonably be likely to permit any
▇▇▇▇▇▇▇ Affiliate to terminate the Transaction Agreement; and (iii) none of the
Parent Affiliates has received any written notice of any actual or alleged
violation or breach of, or default under, the Transaction Agreement.
Section 5. Certain Pre-Closing Covenants
5.1 Access and Investigation. During the period from the date of
this Agreement through the Effective Time (the "Pre-Closing Period"), the
Company shall, and shall cause the respective Representatives of the Acquired
Corporations to: (i) provide Parent and Parent's Representatives with reasonable
access to the Acquired Corporations' Representatives, personnel and assets and
to all existing books, records, Tax Returns, work papers and other documents,
and with such additional financial, operating and other data and information
regarding the Acquired Corporations, including the Company's officers
responsible for the
42
preparation of the financial statements, internal controls and disclosure
controls and procedures of the Acquired Corporations; (ii) provide Parent and
Parent's Representatives with reasonable access to the Properties for purposes
of (A) environmental and engineering inspections of the Properties, (B) review
of any leases, expenses, correspondence, management reports, engineering and
environmental assessments, records and other current and historical information
relating to the Properties and (C) interviewing managers, staff and employees of
the Properties; and (iii) cause its officers to confer regularly with Parent
concerning the status of the Company's business, in each case as Parent may
reasonably request with reasonable notice. Without limiting the generality of
the foregoing, during the Pre-Closing Period, the Company shall promptly provide
Parent with copies of: (A) all material operating and financial reports prepared
by the Company and its Subsidiaries for the Company's senior management,
including copies of the unaudited monthly consolidated financial statements; (B)
any written materials or communications sent by or on behalf of the Company to
its stockholders; (C) any material notice, report or other document sent by or
on behalf of any of the Acquired Corporations to any party to any Material
Contract or sent to any of the Acquired Corporations by any party to any
Material Contract; (D) any notice, report or other document filed with or sent
to any Governmental Body in connection with the Merger or any of the other
Contemplated Transactions; and (E) any notice, report or other document received
by any of the Acquired Corporations from any Governmental Body. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement through the Effective Time, Parent shall be permitted to perform
environmental reviews (including subsurface testing) of the properties of the
Acquired Corporations.
5.2 Operation of the Business; Certain Notices; Tax Returns.
(a) During the Pre-Closing Period, except as permitted by this
Agreement, as required for the consummation of the ▇▇▇▇▇▇▇ Transactions, as set
forth in Schedule 5.2(a) or as consented to in writing by Parent: (i) the
Company shall ensure that each of the Acquired Corporations conducts its
business and operations only (A) in the ordinary course of business and in
accordance with past practices and (B) in compliance in all material respects
with all applicable Legal Requirements and the requirements of all Material
Contracts (which for purposes of this Section shall include any Contract that
would be a Material Contract if existing on the date of this Agreement); (ii)
the Company shall use all reasonable efforts to ensure that each of the Acquired
Corporations preserves intact its current business organization, keeps available
the services of its current officers and key employees and maintains its
relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the respective Acquired Corporations that are material to their business as
presently conducted; (iii) the Company keep in full force all insurance policies
referred to in Section 3.18; and (iv) the Company shall promptly notify Parent
of (A) any notice from any Person, or other communication or information of
which the Company has knowledge, alleging that the Consent of such Person is or
may be required in connection with the Contemplated Transactions, and (B) any
Legal Proceeding commenced or threatened in writing against, relating to or
involving or otherwise affecting any of the Acquired Corporations.
(b) During the Pre-Closing Period, except as set forth in
Schedule 5.2(b) or as consented to in writing by Parent, the Company shall not
(without the prior
43
written consent of Parent, which Parent may withhold in its sole discretion),
and shall not permit any of the other Acquired Corporations to:
(i) declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock or other
equity or voting securities, split, combine or reclassify any of its capital
stock or other equity or voting securities, or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock or other equity or voting securities, or repurchase, redeem
or otherwise reacquire any shares of capital stock or other securities of any
Acquired Corporation or any options, warrants, calls or rights to acquire any
such shares or other securities (including any Company Stock Options (other than
pursuant to the Option Termination Agreements) or shares of restricted stock
except pursuant to forfeiture conditions of such restricted stock), or take any
action that would result in any amendment, modification or change of any term of
any debt security of any Acquired Corporation;
(ii) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other equity or voting interests or any
securities convertible into, or exchangeable for, or any options, warrants,
calls or rights to acquire or receive, any such shares, interests or securities
or any stock appreciation rights, phantom stock awards or other rights that are
linked in any way to the price of the Company Capital Stock or the value of the
Company or any part thereof;
(iii) amend or permit the adoption of any amendment to
its certificate of incorporation or by-laws or other Organizational Documents,
or effect or become a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction;
(iv) acquire by merger or consolidation, or by
purchasing all or a substantial portion of the assets of, or by purchasing all
or a substantial equity or voting interest in, or by any other manner, any
business of any Person;
(v) form any Subsidiary;
(vi) enter into any lease or sublease of real property
(whether as a lessor, sublessor, lessee or sublessee) or change, terminate or
fail to exercise any right to renew any lease or sublease of real property;
(vii) sell, grant a license in, mortgage or otherwise
encumber or subject to any Encumbrance or otherwise dispose of any of its real
properties, hotels or other properties or assets other than the sale of
inventory and the granting of licenses in the ordinary course of business
consistent with past practices;
(viii) make any payments in respect of their Debt other
than scheduled interest and amortization payments, if any, required to be made
under the agreements evidencing Debt of the Acquired Corporations or repurchase,
accelerate, prepay or incur any Debt or guarantee any Debt of another Person or
issue or sell any debt securities or options, warrants, calls or other rights to
acquire any debt securities of any Acquired Corporation, guarantee any debt
securities of another Person, enter into any "keep well" or other agreement to
44
maintain any financial statement condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing;
(ix) make any loans, advances or capital contributions
to, or investments in, any other Person, other than the Company or any direct or
indirect wholly-owned Subsidiary of the Company;
(x) other than in the ordinary course of business, enter
into or become bound by any Material Contract, or amend or terminate, or waive
or exercise any material right or remedy under, any Material Contract;
(xi) change or terminate any Contract to which any
Acquired Corporation is a party, or waive, release or assign any rights or
claims thereunder, in each case in a manner materially adverse to the Acquired
Corporations taken as a whole;
(xii) acquire, lease or license any right or other asset
from any other Person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person (except in each case for assets
acquired, leased, licensed or disposed of by the Company in the ordinary course
of business and consistent with past practices), or waive or relinquish any
material right, other than in the ordinary course of business;
(xiii) hire any new employee with an annual base salary
in excess of $100,000, promote any employee except in order to fill a position
vacated after the date of this Agreement, or engage any consultant or
independent contractor for a period exceeding 30 days unless such engagement may
be cancelled without penalty upon not more than 30 days' notice;
(xiv) increase in any manner the compensation or
benefits of, or pay any bonus to, any employee, officer, director or independent
contractor of any Acquired Corporation, except for increases in the ordinary
course of business consistent with past practices in base compensation for any
employee;
(xv) change any of its personnel policies in any
material respect, or any of its methods of accounting or accounting policies in
any respect except as may be required by GAAP or any Legal Requirement;
(xvi) except as required by any applicable Legal
Requirement, adopt or enter into any collective bargaining agreement or other
labor union Contract applicable to the employees of any Acquired Corporation, or
take action to terminate the employment of any employee of any Acquired
Corporation that has an employment, severance or similar agreement or
arrangement with any Acquired Corporation providing for the payment of any
severance in excess of amounts generally provided to employees of such Acquired
Corporation;
(xvii) make or change any material Tax election, change
any material annual Tax accounting period, adopt or change any material method
of Tax accounting, file any amended Tax Return, enter into any closing
agreement, settle any material Tax claim or assessment (other than real estate
assessment settlements negotiated in the ordinary course of business), surrender
any right to claim a material Tax refund, consent to the extension or waiver of
the limitations period applicable to any material Tax claim or assessment;
45
(xviii) (a) pay, discharge, settle or satisfy any
material claims (including claims of stockholders and any stockholder litigation
relating to this Agreement, the Merger or any other Contemplated Transaction or
otherwise), liabilities or obligations (whether absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business or as required by their terms as
in effect on the date of this Agreement of claims, liabilities or obligations
reflected or reserved against in the Balance Sheet (or the notes thereto) or
incurred since the date of the Balance Sheet in the ordinary course of business,
(b) waive, release, grant or transfer any right of material value other than in
the ordinary course of business or (c) commence any Legal Proceeding;
(xix) make any material expenditure in connection with
any advertising or marketing, or adopt, renew, terminate, change or increase the
liability or other material obligations of any Acquired Corporation under any
operating standards, loyalty programs or amenity packages, other than in the
ordinary course of business consistent with past practice;
(xx) make any expenditure at the real property known as
Chateau on the Lake Resort and Convention Center, located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇;
(xxi) effectuate a "plant closing" or "mass layoff," as
those terms are defined in the Worker Adjustment and Retraining Notification
Act;
(xxii) take any action or omit to take any action that
would reasonably be likely to cause the representations or warranties set forth
in Section 3 not to be true at the Closing, such that the condition set forth in
Section 8.1 would not be satisfied at the Closing;
(xxiii) agree or commit to take any of the actions
described in this Section 5.2(b).
(c) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of: (i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
material breach of any covenant or obligation of the Company; (iii) any Legal
Proceeding pending against or with respect to the Acquired Corporations in
respect of any Tax matter; (iv) any event, condition, fact or circumstance that
would make the timely satisfaction of any of the conditions set forth in Section
7 or 8 impossible or unlikely or that has had or is reasonably likely to have a
Material Adverse Effect on the Acquired Corporations; and (v) (A) any notice or
other communication from any Person alleging that the Consent of such Person is
or may be required in connection with the Contemplated Transactions and (B) any
Legal Proceeding or material claim threatened, commenced or asserted against or
with respect to any of the Acquired Corporations or the Contemplated
Transactions. In addition, on each three-month anniversary of the date hereof
until the earlier of the date on which this Agreement is terminated in
accordance with its terms and the Effective Time, the Company shall notify
Parent in writing of any event, condition, fact or circumstance that has
occurred, arisen or existed after
46
the date of this Agreement but prior to such date that would cause or constitute
a material inaccuracy in any representation or warranty made by the Company in
this Agreement if (A) such representation or warranty had been made as of the
time of the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; provided, however,
that to the extent any such event, condition, fact or circumstance had or is
reasonably likely to have a Material Adverse Effect on the Acquired
Corporations, taken as a whole, the Company shall notify Parent promptly in
writing of any such event, condition, fact or circumstances. No notification
given to Parent pursuant to this Section 5.2(c) shall limit or otherwise affect
any of the representations, warranties, covenants or obligations of any party
contained in this Agreement.
(d) The Company agrees that all Tax Returns with respect to
the Company and each other Acquired Corporation that are not required to be
filed on or before the date hereof, to the extent required to be filed on or
before the Closing Date, (i) will be filed when due in accordance with all
applicable Legal Requirements, and (ii) as of the time of filing, will be true,
complete and correct in all material respects. The Company and each other
Acquired Corporation will pay all Taxes shown as due on such Tax Returns and all
other Taxes which the Company or any other Acquired Corporation is required to
pay on or before the Closing Date (other than Taxes it is contesting in good
faith).
5.3 No Solicitation.
(a) The Company shall not directly or indirectly, and shall
not authorize or permit any of the other Acquired Corporations or any
Representative of any of the Acquired Corporations directly or indirectly to,
(i) solicit, initiate, encourage, induce or facilitate the making, submission or
announcement of any Acquisition Proposal or take any action that could
reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any
nonpublic information regarding any of the Acquired Corporations to any Person
in connection with or in response to an Acquisition Proposal or an inquiry or
indication of interest that could reasonably be expected to lead to an
Acquisition Proposal, (iii) engage in discussions or negotiations with any
Person with respect to any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any Contract contemplating or otherwise relating to any
Acquisition Transaction; provided, however, that prior to the adoption of this
Agreement by the Required Company Stockholder Vote, or, if the Minority Approval
requirement is waived by the Special Committee, the Minimum Required Vote, this
Agreement (including this Section 5.3(a)) shall not prohibit the Company from
furnishing nonpublic information regarding the Acquired Corporations to, or
entering into or conducting discussions or negotiations with, any Person in
response to a Superior Proposal that is submitted to the Company by such Person
(and not withdrawn) if (1) neither the Company nor any Representative of any of
the Acquired Corporations shall have violated any of the restrictions set forth
in this Section 5.3 in any respect that results in, or is a significant
contributing factor to the occurrence of, such Superior Proposal, (2) the Board
of the Company concludes in good faith, after consultation with the Company's
outside legal counsel, that failure to take such action would be inconsistent
with the fiduciary obligations of the Board of the Company to the Company's
stockholders under applicable Legal Requirements, (3) at least two business days
prior to furnishing any such nonpublic information to, or entering into
discussions
47
with, such Person, the Company gives Parent written notice of the identity of
such Person and of the Company's intention to furnish nonpublic information to,
or enter into discussions with, such Person, and the Company receives from such
Person an executed confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral information furnished
to such Person by or on behalf of the Company and customary "standstill"
provisions (it being understood and agreed that use and disclosure limitations
and "standstill" provisions that are at least as favorable to the Company as
those contained in the Confidentiality Agreement shall satisfy the requirements
of this clause), and (4) at least two business days prior to furnishing any such
nonpublic information to such Person, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Without limiting the generality
of the foregoing, the Company acknowledges and agrees that any violation of or
the taking of any action inconsistent with any of the restrictions set forth in
the preceding sentence by any Representative of any of the Acquired
Corporations, whether or not such Representative is purporting to act on behalf
of any of the Acquired Corporations, shall be deemed to constitute a breach of
this Section 5.3 by the Company.
(b) The Company shall promptly (and in no event later than 24
hours after receipt of any (i) Acquisition Proposal, (ii) inquiry or indication
of interest that the Special Committee believes (or should, in the exercise of
good faith, believe) is likely to lead to an Acquisition Proposal or (iii)
request for nonpublic information), advise Parent orally and in writing of any
such Acquisition Proposal, any such inquiry or indication of interest that the
Special Committee believes (or should, in the exercise of good faith, believe),
is likely to lead to an Acquisition Proposal, or any such request for nonpublic
information relating to any of the Acquired Corporations (including the identity
of the Person making or submitting such Acquisition Proposal, inquiry,
indication of interest or request, and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. The Company shall keep
Parent fully informed with respect to the status of any such Acquisition
Proposal, inquiry, indication of interest or request and any modification or
proposed modification thereto.
(c) The Company shall immediately cease any existing
discussions with any Person that relate to any Acquisition Proposal.
(d) The Company agrees not to release or permit the release of
any Person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill" or similar agreement to which any of the Acquired
Corporations is a party, and will use its commercially reasonable efforts to
enforce or cause to be enforced each such agreement at the request of Parent.
The Company also will promptly request each Person that has executed, within 18
months prior to the date of this Agreement, a confidentiality agreement in
connection with its consideration of a possible Acquisition Transaction or
equity investment to return all confidential information heretofore furnished to
such Person by or on behalf of any of the Acquired Corporations.
5.4 Financing. The Company shall provide such assistance as Parent
shall reasonably request in connection with Parent's efforts to arrange
financing for the transactions contemplated hereby (including, without
limitation, reasonable and necessary costs and expenses, not to exceed
$1,000,000 in the aggregate, to obtain environmental surveys, Phase I
48
reports and similar analyses in accordance with the budget set forth on Schedule
5.4, to the extent such costs and expenses are incurred in connection with any
efforts by Parent to refinance existing Debt of the Acquired Corporations after
the Effective Time), including, without limitation, facilitating customary due
diligence, arranging for senior officers of the Company to meet with prospective
lenders, negotiating with and obtaining from the Company's landlords, lessors
and franchisors such estoppel certificates, waivers and other consents as may be
requested by Parent's lenders, and providing reliance letters for customary
legal opinions of the Company's attorneys; provided, that the Company shall not
be required to pay any commitment or similar fees. If the Company expends any
funds prior to Closing at Parent's request in connection with the performance of
its obligations under this Section 5.4, Parent will reimburse the Company for
the documented amount of such funds if this Agreement is terminated prior to the
Closing, subject to Section 11.16.
5.5 Company Stock Options. No later than the earlier of the time at
which the Company gives notice of the transactions contemplated hereby to its
stockholders and the date that is 30 days prior to the Effective Time, the
Company shall deliver the Option Holder Notice. The Company shall provide Parent
with a copy of the Option Holder Notice prior to its delivery to the holders of
Company Stock Options, and will consider in good faith comments provided by
Parent regarding the Option Holder Notice, which shall be in form and substance
reasonably acceptable to Parent. The Company shall take all actions required
under each Plan under which Company Stock Options were granted to cause such
Plan and all Company Stock Options granted thereunder to terminate at the
Effective Time.
5.6 Mailing Notice. Not later than 10 days prior to the date on
which the Company intends to mail the Proxy Statement to its stockholders (if
Parent has not previously delivered the Commitment Letter or Replacement
Commitment Letter, as the case may be, to the Company), which Proxy Statement is
contemplated to include the Company Board Recommendation or a statement to the
effect that the Board of the Company has determined and believes that the Merger
is in the best interests of the Company's stockholders, the Company may provide
written notice of such intention (the "Mailing Notice") to Parent, which Mailing
Notice, if given, shall constitute a covenant of the Company to commence mailing
such Proxy Statement to its stockholders on or about the date specified in the
Mailing Notice, which date shall be not more than five business days following
the date on which Parent delivers the Commitment Letter to the Company. Parent
shall deliver to the Company the Commitment Letter or Replacement Commitment
Letter, if applicable, not later than seven days following the date on which
Parent receives the Mailing Notice. Notwithstanding the foregoing, if the
Company reasonably believes the Proxy Statement is, in all material respects, in
definitive form but for information to be provided by, or regarding, Parent,
then the Company may notify Parent of such deficiency and its intent to commence
mailing of the Proxy Statement once it receives the requisite information from
Parent, in which case, such notice shall constitute a "Mailing Notice" for
purposes of this Agreement.
5.7 Agreements Among Parent, Merger Sub and ▇▇▇▇▇▇▇ Affiliates.
Parent and Merger Sub will not enter into any agreements, arrangements or
understandings with any of the ▇▇▇▇▇▇▇ Affiliates during the Pre-Closing Period,
nor amend, modify or otherwise alter any of the ▇▇▇▇▇▇▇ Agreements, in each case
without the prior approval of the Special Committee, which approval will not be
withheld unless, in the reasonable opinion of the Special Committee,
49
after consultation with the Special Committee's outside legal counsel, the
Special Committee concludes that failing to withhold such approval would be
inconsistent with the fiduciary obligations of the Special Committee under
applicable Legal Requirements.
Section 6. Additional Covenants of the Parties.
6.1 Proxy Statement; Schedule 13E-3.
(a) As soon as practicable following the date of this
Agreement, the Company shall prepare and file with the SEC the Proxy Statement
with respect to the Company Stockholders' Meeting. The Company will use its
reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after the Proxy Statement is
cleared by the SEC. The Company shall provide Parent with a copy of the
preliminary Proxy Statement and all modifications thereto prior to filing or
delivery to the SEC and will consult with Parent in connection therewith and
consider in good faith comments provided by Parent regarding the Proxy
Statement. The Company will inform Parent, promptly after it receives notice
thereof, of any request by the SEC for the amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information, and will furnish to Parent copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement, the Merger or any
other filings in connection herewith or therewith and will consult with Parent
in connection therewith. If at any time prior to the Effective Time any
information relating to the Company or Parent, or any of their respective
Affiliates, officers or directors, should be discovered by the Company or Parent
which should be set forth in an amendment or supplement to the Proxy Statement,
so that any of such document would not include any misstatement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the party that discovers such information shall promptly notify the
other parties hereto and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the stockholders of the Company.
(b) As soon as practicable following the date of this
Agreement, the Company shall prepare and file with the SEC the Schedule 13E-3.
Each of Parent and the Company will inform the other promptly after it receives
notice of any request by the SEC for any amendment of the Schedule 13E-3 or
comments thereon and responses thereto or requests by the SEC for additional
information, and will furnish to the other copies of such request, comments or
responses. If at any time prior to the Effective Time, any information relating
to the Company, Parent or any of their respective Affiliates should be
discovered by the Company or Parent which should be set forth in an amendment or
supplement to the Schedule 13E-3, so that the Schedule 13E-3 would not include
any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, the party that discovers such information shall
promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed by the Company
with the SEC and, to the extent required by law, disseminated to the
stockholders of the Company.
50
6.2 Company Stockholders' Meeting.
(a) The Company shall take all action necessary under all
applicable Legal Requirements to call, give notice of and hold a meeting of the
holders of capital stock of the Company to vote on a proposal to adopt this
Agreement (the "Company Stockholders' Meeting") and shall submit such proposal
to such holders at the Company Stockholders' Meeting. The Company (in
consultation with Parent) shall set a record date for Persons entitled to notice
of, and to vote at, the Company Stockholders' Meeting. The Company Stockholders'
Meeting shall be held (on a date selected by the Company in consultation with
Parent) as promptly as practicable. The Company shall ensure that all proxies
solicited in connection with the Company Stockholders' Meeting are solicited in
compliance with all applicable Legal Requirements.
(b) Subject to Section 6.2(c): (i) the Proxy Statement shall
include a statement to the effect that the Board of the Company recommends that
the Company's stockholders vote to adopt this Agreement at the Company
Stockholders' Meeting (such recommendation of the Company's Board that the
Company's stockholders vote to adopt this Agreement being referred to as the
"Company Board Recommendation"); and (ii) the Company Board Recommendation shall
not be withdrawn or modified in a manner adverse to Parent, and no resolution by
the Board of the Company or any committee thereof to withdraw or modify the
Company Board Recommendation in a manner adverse to Parent shall be adopted or
proposed.
(c) Notwithstanding anything to the contrary contained in
Section 6.2(b), at any time prior to the adoption of this Agreement by the
Required Company Stockholder Vote or, if the Minority Approval requirement is
waived by the Special Committee, the Minimum Required Vote, the Company Board
Recommendation may be withdrawn or modified in a manner adverse to Parent if:
(i) an Acquisition Proposal is made to the Company and is not withdrawn; (ii)
the Company provides Parent with at least five business days prior notice of any
meeting of the Company's Board at which such Board will consider and determine
whether such Acquisition Proposal is a Superior Proposal; (iii) the Company's
Board determines in good faith (based upon a written opinion of an independent
financial adviser of nationally recognized reputation) that such Acquisition
Proposal constitutes a Superior Proposal; (iv) the Company's Board determines in
good faith, after having taken into account the advice of the Company's outside
legal counsel, that, in light of such Superior Proposal, the withdrawal or
modification of the Company Board Recommendation is required in order for the
Company's Board to comply with its fiduciary obligations to the Company's
stockholders under applicable law; and (v) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in Section
5.3 which violation results in, or is a significant contributing factor to the
occurrence of, an Acquisition Proposal being made to the Company.
6.3 Regulatory Approvals; Consents.
(a) Subject to Sections 6.3(c) and (d), Parent and the Company
shall use all reasonable efforts to take, or cause to be taken, all actions
necessary to consummate the Merger and make effective the other Contemplated
Transactions. Without limiting the generality of the foregoing, but subject to
Sections 6.3(c) and (d), Parent and the Company (i) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in
51
connection with the Merger and the other Contemplated Transactions and shall
submit promptly any additional information requested in connection with such
filings and notices, (ii) shall use all reasonable efforts to obtain each
Consent (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger or any of the other Contemplated Transactions and (iii) shall use all
reasonable efforts to oppose or lift any restraint, injunction or other legal
bar to the Merger. Each of the Company and Parent shall promptly deliver to the
other a copy of each such filing made, each such notice given and each such
Consent obtained during the Pre-Closing Period.
(b) Without limiting the generality of Section 6.3(a), the
Company and Parent shall, promptly after the date of this Agreement, prepare and
file the notifications required under the HSR Act and any applicable foreign
antitrust laws or regulations in connection with the Merger. The Company and
Parent shall respond as promptly as practicable to any inquiries or requests
received from any Governmental Body in connection with antitrust laws or related
matters. Each of the Company and Parent shall (1) give the other party prompt
notice of the commencement or threat of commencement of any Legal Proceeding by
or before any Governmental Body with respect to the Merger or any of the other
Contemplated Transactions, (2) keep the other party informed as to the status of
any such Legal Proceeding or threat and (3) promptly inform the other party of
any communication concerning antitrust laws to or from any Governmental Body
regarding the Merger. Except as may be prohibited by any Governmental Body or by
any Legal Requirement, the Company and Parent will consult and cooperate with
one another, and will consider in good faith the views of one another, in
connection with any analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal made or submitted in connection with any Legal
Proceeding under or relating to the HSR Act or any other antitrust law. Subject
to the foregoing, Parent shall be principally responsible for and in control of
the process of dealing with any Governmental Body concerning the effect of
applicable antitrust laws on the Contemplated Transactions. In addition, except
as may be prohibited by any Governmental Body or by any Legal Requirement, in
connection with any Legal Proceeding under or relating to the HSR Act or any
other foreign, federal or state antitrust law or fair trade law or any other
similar Legal Proceeding, each of the Company and Parent will permit authorized
Representatives of the other to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Governmental Body in connection with any such Legal Proceeding.
(c) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose, transfer or hold separate, or cause any of its Subsidiaries to dispose,
transfer or hold separate any assets or operations, or to commit or to cause any
of the Acquired Corporations to dispose of any assets; (ii) to discontinue or
cause any of its Subsidiaries to discontinue offering any product or service, or
to commit to cause any of the Acquired Corporations to discontinue offering any
product or service; (iii) to make or cause any of its Subsidiaries to make any
commitment (to any Governmental Body or otherwise) regarding its future
operations or the future operations of any of the Acquired Corporations.
52
(d) The Company shall use its best efforts to obtain the
Consents and waivers required to satisfy Parent's and Merger Sub's condition to
Closing set forth in Section 8.4.
6.4 Employee Benefits. If any employee of the Acquired Corporations
who continue employment with Parent, the Surviving Corporation or any Subsidiary
thereof following the Effective Time (the "Continuing Employees") begin
participating in any employee benefit plan (within the meaning of Section 3(3)
of ERISA maintained by Parent or any Subsidiary thereof (the "New Plans")), each
such Continuing Employee shall be credited under any such New Plan with his or
her periods of service with the Company before the Closing for purposes of
participation, vesting and benefits levels where length of service is relevant
to benefit levels, but not for benefit accrual under any plan or any accrual
that would result in any duplication of benefits.
6.5 Indemnification of Officers and Directors.
(a) From the Effective Time through the sixth anniversary of
the date on which the Effective Time occurs, each of Parent and the Surviving
Corporation shall, jointly and severally, indemnify and hold harmless, to the
fullest extent not prohibited by applicable law, each person who was or is or
becomes, or is threatened to be made, a party to or witness or other participant
in, or was or is or becomes obligated to furnish or furnishes documents in
response to a subpoena or otherwise in connection with any threatened, pending
or completed claim, action, suit, proceeding, arbitration or alternative dispute
resolution mechanism, investigation, inquiry, administrative hearing, appeal or
any other actual, threatened or completed proceeding, whether brought in the
right of a Covered Party (as defined below) or otherwise and whether of a civil
(including intentional or unintentional tort claims), criminal, administrative,
arbitrative or investigative nature (each, an "Indemnification Event") by reason
of the fact that such person is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, a director or officer of the
Company or any of its Subsidiaries (the "Covered Parties"), from (x) any and all
direct and indirect fees and costs, retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating, printing and
binding costs, telephone charges, postage and delivery service fees and all
other disbursements or expenses of any type or nature whatsoever reasonably
incurred by a Covered Party (including reasonable attorneys' fees), and (y) any
and all losses, claims, damages, liabilities, judgments, fines, penalties,
settlement payments, awards and amounts of any type whatsoever incurred by such
Covered Party in connection with or arising from any Indemnification Event
arising out of or pertaining to the fact that the Covered Party is or was an
officer or director of the Company or any of its Subsidiaries (including the
taking of any action or the failure to take any action as a director or officer
of any Acquired Corporation in connection with the Contemplated Transactions),
whether asserted or claimed prior to, at or after the Effective Time. Each
Covered Party will be entitled, subject to applicable Legal Requirements, to
advancement of expenses incurred in the defense of or other participation in any
such claim, action, suit, proceeding or investigation from each of Parent and
the Surviving Corporation within ten business days of receipt by Parent or the
Surviving Corporation from the Covered Party of a request therefor; provided,
that any person to whom expenses are advanced provides an undertaking, to the
extent required by the DGCL, to repay such advances if it is ultimately
determined that such person is not entitled to indemnification.
53
(b) The Organizational Documents of the Surviving Corporation
shall contain, and Parent shall cause the Organizational Documents of the
Surviving Corporation to so contain, provisions no less favorable to the Covered
Parties with respect to indemnification, advancement of expenses and exculpation
of present and former directors and officers of the Company and its Subsidiaries
than are presently set forth in the Organizational Documents of the Company and
its Subsidiaries.
(c) In the event that Parent or the Surviving Corporation or
any of its successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its stock, properties or assets to any Person, then, and in each such
case, proper provision shall be made so that the successors or assigns of Parent
or the Surviving Corporation, as the case may be, shall succeed to the
obligations set forth in this Section 6.5.
(d) The Company has purchased a "tail" policy under the
Company's existing directors' and officers' liability insurance policy. Until
the sixth anniversary of the Effective Time, Parent shall cause the Company (i)
to maintain such "tail" policy in full force and effect, (ii) not to amend or
otherwise modify such "tail" coverage or take any action that would result in
the cancellation, termination, amendment or modification of such "tail" policy
and (ii) to continue to honor its obligations under such "tail" coverage.
6.6 Disclosure. Except as otherwise may be required by Legal
Requirements or by stock exchange rule, regulation or listing agreement, Parent
and the Company shall consult with each other before issuing any press release
or otherwise making any public statement with respect to the Merger or any of
the other Contemplated Transactions or the ▇▇▇▇▇▇▇ Transactions. Without
limiting the generality of the foregoing, neither Parent nor the Company shall,
and shall not permit any of its Representatives to, make any disclosure
regarding the Merger or any of the other Contemplated Transactions unless (a)
the other shall have approved such disclosure or (b) such party shall have
determined in good faith, after taking into account the advice of its outside
legal counsel, that such disclosure is required by applicable Legal
Requirements.
6.7 Resignation of Officers and Directors. The Company shall use all
reasonable efforts to obtain and deliver to Parent prior to the Closing (to be
effective as of the Effective Time) the resignation of each officer and director
of each of the Acquired Corporations whose resignation shall have been requested
by Parent not less than ten business days before the Closing Date.
54
6.8 Waiver and Release. The Company shall have (a) been reimbursed
by ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ for, and (b) received from ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ a waiver
and release of the Company and its Affiliates relating to, all expenditures,
including, without limitation, refinancing fees and expenses, made prior to the
Effective Time on the real property known as Chateau on the Lake Resort and
Convention Center, located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, Missouri.
6.9 Expense Reimbursement. Following the Effective Time, the
aggregate amount of the Parent Expenses shall be paid through a distribution of
the Expense Amount from the Expense Amount Escrow Account.
6.10 Financing. Parent shall use commercially reasonable efforts to
satisfy the requirements of the Commitment Letter that are within its control
and to obtain the funding contemplated by the Commitment Letter on the terms
contained therein. If the Commitment Letter is terminated prior to the Effective
Time or the funding contemplated thereby shall not otherwise be available at the
Effective Time, Parent shall use its best efforts consistent with prudent
business judgment to find alternative financing and enter into a written
commitment or commitments reflecting such alternative financing (the
"Replacement Commitment Letter") in form and substance that is not less
favorable in any material respect to Parent, Merger Sub and the Acquired
Corporations (from and after the Effective Time) to that provided in the
Commitment Letter and otherwise reasonably acceptable to the Company, which
Replacement Commitment Letter shall be delivered to the Company and the Special
Committee promptly following execution by the parties thereto. Parent shall
promptly disclose to the Company and the Special Committee any amendment,
termination or cancellation of the Commitment Letter or Replacement Commitment
Letter or any information known to Parent that makes it reasonably likely that
the financing set forth in the Commitment Letter or Replacement Commitment
Letter will not be obtained.
Section 7. Conditions Precedent to Obligations of Each Party. The
obligation of each party to effect the Merger and otherwise consummate the
Contemplated Transactions is subject to the satisfaction, as of or prior to the
Closing, of each of the following conditions:
7.1 Stockholder Approval. This Agreement shall have been duly
adopted, and the Merger shall have been duly approved, by the Required Company
Stockholder Vote; provided, that notwithstanding the foregoing, the Special
Committee may waive the requirement for the Minority Approval, in which case the
only condition precedent to the obligations of each of the parties to effect the
Merger and consummate the Contemplated Transactions required by this Section 7.1
will be that this Agreement shall have been duly adopted, and the Merger shall
have been duly approved, by the Minimum Required Vote.
7.2 HSR Act. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
7.3 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction or any other
Governmental Body and shall remain in effect, and there shall not be any Legal
Requirement enacted, adopted or deemed applicable to the
55
Merger that makes consummation of the Merger illegal or otherwise prohibits
consummation of the Merger.
Section 8. Conditions Precedent to Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the Contemplated Transactions are subject to the satisfaction, as of
or prior to the Closing of each of the following conditions:
8.1 Accuracy of Representations. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date as
though made at such time, except (a) to the extent that any such representation
or warranty relates to any earlier date (in which case such representation or
warranty shall be true and correct as of such date) and (b) where the failure of
such representations and warranties to be true and correct would not reasonably
be expected to have a Material Adverse Effect on the Acquired Corporations,
without giving effect to any investigation by Parent of, updating or supplements
by the Company to, or knowledge of Parent with respect to, the information
contained in the Schedules attached hereto.
8.2 Performance of Covenants. Each of the covenants and obligations
that the Company is required to comply with or to perform as of or prior to the
Closing shall have been complied with or performed in all material respects.
8.3 No Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect on the Acquired
Corporations, taken together as a whole, and no event shall have occurred or
circumstance shall exist as of the Closing that, in combination with any other
events or circumstances as of the Closing, is reasonably likely to have a
Material Adverse Effect on the Acquired Corporations, taken together as a whole.
8.4 Consents. The Consents set forth on Schedule 8.4 shall have been
obtained, made or given and shall be in full force and effect.
8.5 Agreements and Documents. There shall have been delivered to
Parent a certificate, dated as of the Closing Date, executed on behalf of the
Company by an executive officer of the Company, confirming that the conditions
set forth in Sections 8.1, 8.2, 8.3 and 8.4 have been duly satisfied.
8.6 No Litigation. There shall not be any pending Legal Proceeding
instituted by a Governmental Body, or any Legal Proceeding threatened by a
Governmental Body: (a) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other Contemplated Transactions; (b)
relating to the Merger and seeking to obtain from Parent or any of its
Subsidiaries any damages that, if adversely determined, would reasonably be
likely to be material to Parent; (c) seeking to prohibit or limit in any
material respect Parent's ability, after the Effective Time, to vote, receive
dividends with respect to or otherwise exercise ownership rights with respect to
the stock of the Surviving Corporation or its Subsidiaries; (d) which would
materially and adversely affect the right of the Surviving Corporation to own
the assets or operate the business of the Acquired Corporations; (e) seeking to
compel Parent or the Company or any Subsidiary of Parent or the Company to
dispose of or hold separate any material assets, as
56
a result of the Merger or any of the other Contemplated Transactions; or (f)
which, if adversely determined, would reasonably be likely to have a Material
Adverse Effect on the Acquired Corporations or Parent.
8.7 ▇▇▇▇▇▇▇ Transactions. The ▇▇▇▇▇▇▇ Transactions shall have closed
contemporaneously with the Closing, except for components of the ▇▇▇▇▇▇▇
Transactions that are to be consummated following the Effective Time, as to
which no substantial reason shall exist that would cause a reasonable person to
conclude that such transactions will not be so consummated.
8.8 Management Agreements. The Management Agreements set forth on
Schedule 8.8 shall have been terminated and shall have no further force or
effect..
8.9 Management Documents. All books, records, bills, invoices, lease
files, credit reports and other documents relating to the ownership and
operation of the business of the Acquired Corporations, including, without
limitation, all "as built" plans, shall be in the possession of the Acquired
Corporations on the Closing Date.
8.10 Company Stock Options. The Company shall have performed in all
respects its obligations under Section 5.5.
8.11 Real Estate Documents.
(a) The Company shall have delivered to Parent evidence of
satisfaction in full of, and Encumbrance releases with respect to, all Debt of
the Acquired Corporations set forth in Schedule 8.11(a).
(b) The Company shall have delivered to Parent the documents
set forth in Schedule 8.11(b). The consummation of the Contemplated Transactions
shall not contravene, conflict with or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any document set forth in Schedule 8.11(b) except for any
such contraventions, conflicts, breaches, defaults or other occurrences that
would not prevent or materially delay consummation of the Merger or have a
Material Adverse Effect on the Acquired Corporations.
8.12 Expense Amount. The Company shall have delivered the Expense
Amount to the Escrow Agent to be held in the Expense Amount Escrow Account
pursuant to the Expense Amount Escrow Agreement.
Section 9. Conditions Precedent to Obligation of the Company. The
obligation of the Company to effect the Merger and otherwise consummate the
Contemplated Transactions is subject to the satisfaction, as of or prior to the
Closing, of each of the following conditions:
9.1 Accuracy of Representations. The representations and warranties
of Parent and Merger Sub set forth in this Agreement (other than to the extent
the representations and warranties in Section 4.7 (x) relate to any breach,
violation or default of any of the ▇▇▇▇▇▇▇ Agreements by any ▇▇▇▇▇▇▇ Affiliate
or (y) are not true and correct as a result of
57
any modification to the ▇▇▇▇▇▇▇ Agreements consented to by the Special Committee
pursuant to Section 5.7) shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as though made at such
time, except (a) to the extent that any such representation or warranty relates
to any earlier date (in which case such representation or warranty shall be true
and correct as of such date) and (b) where the failure of such representations
and warranties to be true and correct would not reasonable be expected to,
individually or in the aggregate, adversely affect Parent and its Subsidiaries,
taken as a whole, in any material respect, without giving effect to any
investigation of, updating or supplements to, or knowledge with respect to, the
information contained in the Schedules attached hereto
9.2 Performance of Covenants. Each of the covenants and obligations
that Parent and Merger Sub are required to comply with or to perform as of or
prior to the Closing shall have been complied with or performed in all material
respects.
9.3 Agreements and Documents. There shall have been delivered to the
Company a certificate, dated as of the Closing Date, executed on behalf of
Parent by an executive officer of Parent, confirming that the conditions set
forth in Sections 9.1 and 9.2 have been duly satisfied.
9.4 No Litigation. There shall not be any pending Legal Proceeding
instituted by a Governmental Body, or any Legal Proceeding threatened by a
Governmental Body, seeking a remedy against any officers or directors of an
Acquired Corporation in connection with a Legal Proceeding challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
other Contemplated Transactions.
9.5 Fee Amount. Parent shall have delivered the Fee Amount to the
Escrow Agent to be held in the Fee Amount Escrow Account pursuant to the Fee
Amount Escrow Agreement.
Section 10. Termination.
10.1 Termination. This Agreement may be terminated prior to the
Effective Time (whether before or after adoption of this Agreement by the
Company's stockholders, unless otherwise set forth below):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company by notice to the other if
the Merger shall not have been consummated by (i) December 31, 2005, or (ii)
February 28, 2006 if, on December 31, 2005, there is a pending Legal Proceeding
instituted by a Governmental Body, or any Legal Proceeding threatened by a
Governmental Body, challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other Contemplated Transactions, but
each other condition set forth in Sections 7, 8 and 9 (other than such
conditions that by their nature are to be satisfied on the Closing Date) shall
have been satisfied (the later of the dates set forth in clauses (i) and (ii) is
referred to herein as the "Initial Expiration Date"); provided, however, that
if, as of the Initial Expiration Date, (w) each of the conditions set forth in
Sections 7, 8 and 9 (other than such conditions that by their nature are to be
satisfied on the Closing Date) shall have been satisfied other than the
condition specified in Section 8.7 (the "▇▇▇▇▇▇▇
58
Transactions Condition"), (x) the ▇▇▇▇▇▇▇ Transactions Condition has not been
satisfied for a reason other than a failure of any party other than a ▇▇▇▇▇▇▇
Affiliate to perform under the ▇▇▇▇▇▇▇ Agreements, (y) the Commitment Letter or
the Replacement Commitment Letter, if applicable, has not been terminated and
(z) the Parent Affiliates are attempting to cause the ▇▇▇▇▇▇▇ Transactions
Condition to be satisfied in a timely manner by pursuing in good faith a Legal
Proceeding seeking to enforce the ▇▇▇▇▇▇▇ Agreements, then neither Parent nor
the Company may terminate this Agreement pursuant to this Section 10.1(b) until
the earliest of (in each case, the "Extended Outside Date"): (1) the six month
anniversary of the Initial Expiration Date, (2) 60 days following any
termination of the Commitment Letter or the Replacement Commitment Letter, if
applicable, if either the Commitment Letter or the Replacement Commitment
Letter, if applicable, has been terminated and the Parent Affiliates have not
provided a Replacement Commitment Letter within 60 days after such termination
and (3) the date on which the Parent Affiliates cease to pursue in good faith a
Legal Proceeding seeking to enforce the ▇▇▇▇▇▇▇ Agreements; notwithstanding
anything to the contrary set forth herein, no party may terminate the Merger
Agreement pursuant to this Section 10.1(b) if the failure to consummate the
Merger results from a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party as of or prior to the proposed date of termination;
(c) by either Parent or the Company by notice to the other if
a court of competent jurisdiction or other Governmental Body shall have issued a
final and nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger;
(d) by either Parent or the Company by notice to the other if
(i) the Company Stockholders' Meeting (including any adjournments and
postponements thereof) shall have been held and completed and the Company's
stockholders shall have voted on a proposal to adopt this Agreement, and (ii)
(A) this Agreement shall not have been adopted at such meeting (and shall not
have been adopted at any adjournment or postponement thereof) by the Required
Company Stockholder Vote unless the Special Committee has waived the requirement
for the Minority Approval, or (B) this Agreement shall not have been adopted at
such meeting (and shall not have been adopted at any adjournment or postponement
thereof) by the Minimum Required Vote; provided, however, that a party shall not
be permitted to terminate this Agreement pursuant to this Section 10.1(d) if the
failure to obtain such stockholder approval is attributable to a failure on the
part of such party to perform any material obligation required to be performed
by such party as of or prior to the proposed date of termination;
(e) by Parent by notice to the Company (at any time prior to
the adoption of this Agreement by the Required Company Stockholder Vote or, if
the Minority Approval requirement is waived by the Special Committee, the
Minimum Required Vote) if a Company Triggering Event shall have occurred;
(f) by the Company by notice to Parent (at any time prior to
the adoption of this Agreement by the Required Company Stockholder Vote or, if
the Minority Approval requirement is waived by the Special Committee, the
Minimum Required Vote) if (i) the Company has complied with Section 5.3, except
that any non-compliance with Section 5.3 shall not be considered for purposes of
this Section 10.1(f) to the extent that it has not resulted in,
59
or been a significant contributing factor to the occurrence of, the Company's
termination of this Agreement pursuant to this Section 10.1(f); (ii) the Board
of the Company shall have authorized the Company, subject to complying with the
terms of this Agreement, to enter into a written agreement for a transaction
that constitutes a Superior Proposal and the Company shall have notified Parent
in writing that it intends to enter into such an agreement, attaching the most
current version of such agreement to such notice; and (iii) Parent does not
make, within 72 hours after receiving the Company's written notice of its
intention to enter into a binding agreement for a Superior Proposal, an offer
from Parent that the Board of the Company, in its good faith judgment, after
consultation with its financial and legal advisors, determines is at least as
favorable to the holders of the Company Class A Common Stock as the Superior
Proposal; provided, that during such 72-hour period, the Company shall negotiate
in good faith with Parent (to the extent Parent wishes to negotiate) to enable
Parent to make such an offer; provided, however, that any such purported
termination pursuant to this Section 10.1(f) shall be void and of no force or
effect unless the Company, prior to the time of, and as a condition to the
effectiveness of, such termination pays to Parent the amounts required pursuant
to Section 10.3;
(g) by Parent by notice to the Company (i) if any of the
Company's representations and warranties shall have been inaccurate as of the
date of this Agreement, such that the condition set forth in Section 8.1 would
not be satisfied, or (ii) if any of the Company's representations and warranties
become inaccurate as of a date subsequent to the date of this Agreement (as if
made on such subsequent date), such that the condition set forth in Section 8.1
would not be satisfied, or (iii) any of the Company's covenants contained in
this Agreement shall have been breached, such that the condition set forth in
Section 8.2 would not be satisfied, and in each case, the inaccuracy or breach
shall not have been cured within 30 days after notice by Parent to the Company
pursuant to this Section 10.1(g);
(h) by the Company by notice to Parent (i) if any of Parent's
representations and warranties shall have been inaccurate as of the date of this
Agreement, such that the condition set forth in Section 9.1 would not be
satisfied, or (ii) if any of Parent's representations and warranties shall have
become inaccurate as of a date subsequent to the date of this Agreement (as if
made on such subsequent date), such that the condition set forth in Section 9.1
would not be satisfied, or (iii) if any of Parent's covenants contained in this
Agreement shall have been breached such that the condition set forth in Section
9.2 would not be satisfied, and in each case, the inaccuracy or breach shall not
have been cured within 30 days after notice by the Company to Parent pursuant to
this Section 10.1(h);
(i) by the Company, if Parent has not delivered the Commitment
Letter or the Replacement Commitment Letter, if applicable, to the Company by
the later of (i) 60 days following the date of this Agreement, and (ii) seven
days following Parent's receipt of the Mailing Notice; provided that the Company
is not then in breach of any of its covenants, agreements or obligations under
this Agreement in any material respect;
(j) by either Parent or the Company if ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has
died and the Transaction Agreement has been terminated prior to the consummation
of the ▇▇▇▇▇▇▇ Transactions other than by reason of a voluntary termination of
the Transaction Agreement by the Parent Affiliates (if this Agreement is
terminated at a time at which it may be terminated under
60
either Section 10.1(b) or this Section 10.1(j), it shall be deemed to have been
terminated under this Section 10.1(j)); or
(k) by either Parent or the Company if the Transaction
Agreement shall have been terminated by any of the ▇▇▇▇▇▇▇ Affiliates pursuant
to Section 6.1(a)(iii) of the Transaction Agreement as in effect on the date
hereof, other than upon the death of ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
10.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 10.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 10.2, Section 10.3 and
Section 11 shall survive the termination of this Agreement and shall remain in
full force and effect and (ii) the termination of this Agreement shall not
relieve any party from any liability for any material inaccuracy in or breach of
any representation or warranty or any material breach of any covenant or other
provision contained in this Agreement.
10.3 Expenses; Termination Fees.
(a) Except as set forth in this Section 10.3, all fees and
expenses incurred in connection with this Agreement and the Contemplated
Transactions shall be paid by the party incurring such expenses, whether or not
the Merger is consummated; provided, however, that:
(i) Parent and the Company shall share equally all fees
and expenses, other than attorneys' fees, incurred in connection with the filing
by the parties hereto of the premerger notification and report forms relating to
the Merger under the HSR Act and the filing of any notice or other document
under any applicable foreign antitrust law or regulation.
(ii) if this Agreement is terminated by (A) Parent or
the Company pursuant to Section 10.1(d), Section 10.1(j) or Section 10.1(k), (B)
Parent pursuant to Section 10.1(e) or Section 10.1(g), (C) the Company pursuant
to Section 10.1(f), (D) the Company after the Extended Outside Date pursuant to
Section 10.1(b) (unless the Extended Outside Date means a date earlier than the
six month anniversary of the Initial Expiration Date), or (E) Parent or the
Company pursuant to Section 10.1(b) if, following the date of this Agreement
and, in the case of this clause (E), at or prior to the time of the termination
of this Agreement, an Acquisition Proposal shall have been disclosed, announced,
commenced, submitted or made, then the Company shall pay to Parent, subject to
the limitations set forth in Section 10.3(g), an amount equal to the lesser of
(x) $8,000,000 and (y) the aggregate amount of the fees and expenses (including
all attorneys' fees, accountants' fees, financial advisory fees, investment
banking fees, incremental overhead expenses, costs and expenses related to
interest rate ▇▇▇▇▇▇, filing fees and printing and mailing expenses) that have
been paid or that become payable by or on behalf of Parent in connection with
the preparation, negotiation and enforcement of this Agreement and otherwise in
connection with the Contemplated Transactions or its consideration of the
Contemplated Transactions (the "Parent Expenses"). The Company shall deliver,
within two business days following the date on which notice of termination is
given, instructions to the Escrow Agent to pay any fee payable to Parent by the
Company pursuant to this Section 10.3(a)(ii) through a distribution of the
Expense Amount to Parent from
61
the Expense Amount Escrow Account. The excess of the Expense Escrow Amount over
the aggregate amount of the Parent Expenses shall be distributed by the Escrow
Agent to the Company from the Expense Amount Escrow Account promptly following
the distribution to Parent of the Parent Expenses from the Expense Amount Escrow
Account pursuant to the preceding sentence.
(b) In addition to any amounts payable to Parent pursuant to
Section 10.3(a), and subject to the limitations set forth in Section 10.3(g),
the Company shall pay to Parent an amount equal to $4,000,000 if this Agreement
is terminated as follows:
(i) by Parent or the Company pursuant to Section 10.1(d)
if, following the date of this Agreement and at or prior to the time of the
termination of this Agreement, an Acquisition Proposal (x) shall not have been
disclosed, announced, commenced, submitted or made, or (y) shall have been
disclosed, announced, commenced, submitted or made and the Company has rejected
such Acquisition Proposal; or
(ii) by Parent or the Company pursuant to Section
10.1(j).
(c) In addition to any amounts payable to Parent pursuant to
Section 10.3(a), the Company shall pay to Parent an amount equal to $15,000,000,
but in each case, minus any amount paid to Parent pursuant to Section 10.3(b),
and subject to the limitations set forth in Section 10.3(g), if this Agreement
is terminated as follows:
(i) by Parent pursuant to Section 10.1(e) or by the
Company pursuant to Section 10.1(f);
(ii) by Parent or the Company pursuant to Section
10.1(b) or pursuant to Section 10.1(d) if, following the date of this Agreement
and at or prior to the time of the termination of this Agreement, an Acquisition
Proposal shall have been disclosed, announced, commenced, submitted or made, and
(x) the Company has rejected such Acquisition Proposal and, within 18 months of
the date of termination of this Agreement, the Company consummates or enters
into an agreement to consummate or otherwise approves, accepts or publicly
announces an Acquisition Transaction with the party that made such rejected
Acquisition Proposal (or any of its Affiliates), or (y) the Company shall not
have rejected such Acquisition Proposal;
(iii) by (x) the Company after the Extended Outside Date
pursuant to Section 10.1(b) (unless the Extended Outside Date means a date
earlier than the six month anniversary of the Initial Expiration Date), or (y)
Parent or the Company pursuant to Section 10.1(j) or Section 10.1(k) if, in any
such case, within 18 months of the date of termination of this Agreement, the
Company consummates or enters into an agreement to consummate or otherwise
approves, accepts or publicly announces an Acquisition Transaction.
(d) If this Agreement is terminated by the Company pursuant to
Section 10.1(h) or Section 10.1(i), then the Fee Amount shall be distributed to
the Company from the Fee Amount Escrow Account. If this Agreement is terminated
for any reason other than by the Company pursuant to Section 10.1(h) or Section
10.1(i), then the Fee Amount shall be distributed to Parent from the Fee Amount
Escrow Account. The Fee Amount shall secure all
62
of Parent's payment obligations pursuant to this Section 10.3. The maximum
aggregate liability of Parent under this Section 10.3, or under any other
circumstances if the Merger does not occur, shall be equal to the Fee Amount.
(e) Any fee payable pursuant to this Section 10.3 pursuant to
a termination of this Agreement by the Company shall be paid prior to the time
of, and as a condition to the effectiveness of, such termination (including,
without limitation, any amount to be distributed to Parent from the Expense
Amount Escrow Account pursuant to Section 10.3(a)(ii)); provided, that any fee
payable pursuant to Section 10.3(c)(ii) or Section 10.3(c)(iii) shall be made
prior to and as a condition to the consummation of the applicable Acquisition
Transaction. Parent shall deliver, within two business days following the date
on which notice of termination is given, instructions to the Escrow Agent to pay
any fee payable to the Company by Parent pursuant to this Section 10.3 through a
distribution of the Fee Amount to the Company from the Fee Amount Escrow
Account.
(f) The Company acknowledges that the agreements contained in
this Section 10.3 are an integral part of the Contemplated Transactions and
that, without these agreements, Parent would not enter into this Agreement.
Accordingly, if the Company fails promptly to pay any amount due pursuant to
this Section 10.3, and, in order to obtain such payment, Parent commences a suit
which results in a judgment against the Company for any fee set forth in this
Section 10.3, the Company shall pay to Parent its costs and expenses (including
reasonable attorneys' fees and expenses) in connection with such suit, together
with interest on the amount of the fee at the prime rate of interest as most
recently reported in The Wall Street Journal as of the date such payment was
required to be made.
(g) The maximum aggregate amount payable by the Company to
Parent pursuant to this Section 10.3, or under any other circumstances if the
Merger does not occur, shall not exceed $20,000,000. Notwithstanding anything to
the contrary set forth herein, Parent agrees that, at any time prior to the
delivery of the Commitment Letter or the Replacement Commitment Letter to the
Company, any payment obligations of the Company to Parent pursuant to this
Section 10.3, or under any other circumstances if the Merger does not occur,
shall not exceed in the aggregate $3,000,000.
Section 11. Miscellaneous Provisions.
11.1 Amendment. This Agreement may be amended only by an instrument
in writing signed by the Company, Merger Sub and Parent at any time (whether
before or after adoption of this Agreement by the stockholders of the Company);
provided, however, that (i) each amendment shall have been duly authorized by
the respective Boards of Directors of the Company and Merger Sub and (ii) after
adoption of this Agreement by the Company's stockholders, no amendment shall be
made which by law requires further approval of the stockholders of the Company
without the further approval of such stockholders.
11.2 Waiver.
(a) Neither any failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or any of the
documents referred to in this
63
Agreement will operate as a waiver of such right, power or privilege and no
single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law, (i) no claim or right arising out of this Agreement or any of
the documents referred to in this Agreement can be discharged by one party, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (ii) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(iii) no notice to or demand on one party will be deemed to be a waiver of any
obligation of that party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
(b) At any time prior to the Effective Time, Parent (with
respect to the Company) and the Company (with respect to Parent and Merger Sub),
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of such party to this Agreement, (ii) waive
any inaccuracies in the representation and warranties contained in this
Agreement or any document delivered pursuant to this Agreement and (iii) waive
compliance with any covenants, obligations or conditions contained in this
Agreement. Any agreement on the part of a party to this Agreement to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
11.3 No Survival. None of the representations and warranties, or any
covenant to be performed prior to the Effective Time, contained in this
Agreement shall survive the Effective Time.
11.4 Entire Agreement.
(a) This Agreement (including the documents relating to the
Merger referred to in this Agreement) and the Confidentiality Agreement
constitute the entire agreement among the parties to this Agreement with respect
to the subject matter hereof and thereof and supersede all other prior
agreements and understandings, both written and oral, among or between any of
the parties with respect thereto.
(b) If there is any conflict between the provisions of this
Agreement and the Confidentiality Agreement, the provisions of this Agreement
shall supersede the provisions of the Confidentiality Agreement.
11.5 Execution of Agreement; Counterparts; Electronic Signatures.
(a) This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument, and shall become effective when counterparts have been
signed by each of the parties and delivered to the other parties; it being
understood that all parties need not sign the same counterpart.
(b) Notwithstanding the Electronic Signatures in Global and
National Commerce Act (15 U.S.C. Sec. 7001 et seq.), the Uniform Electronic
Transactions Act, or any other Legal Requirement relating to or enabling the
creation, execution, delivery or recordation
64
of any contract or signature by electronic means, and notwithstanding any course
of conduct engaged in by the parties, no party shall be deemed to have executed
this Agreement or any other document contemplated by this Agreement (including
any amendment or other change thereto) unless and until such party shall have
executed this Agreement or such document on paper by a handwritten original
signature or any other symbol executed or adopted by a party with current
intention to authenticate this Agreement or such other document contemplated.
11.6 Governing Law. This Agreement will be governed by the laws of
the State of Delaware, without regard to conflicts of laws principles.
11.7 Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement shall be brought against any of the parties only in the Courts of the
State of Delaware or, if it has or can acquire jurisdiction, in the United
States District Court for the District of Delaware, and each of the parties
consents to the exclusive jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
11.8 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS
VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.8.
11.9 Schedules.
(a) The information disclosed in any numbered or lettered
Schedule shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
section, and shall not be deemed to relate to or to qualify any other
representation or warranty unless the relevance of such disclosure is reasonably
apparent or manifest from the face of the applicable Schedule.
(b) If there is any inconsistency between the statements in
this Agreement and those in the Schedules (other than an exception set forth as
such in the Schedules), the statements in this Agreement will control.
65
11.10 Assignments and Successors. This Agreement shall be binding
upon, and shall be enforceable by and inure solely to the benefit of, the
parties hereto and their respective successors and assigns; provided, however,
that neither this Agreement nor any of the Company's rights hereunder may be
assigned by the Company without the prior written consent of Parent. Any
attempted assignment of this Agreement or of any such rights by the Company
without such consent shall be void and of no effect.
11.11 No Third Party Rights. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person (other than the parties
hereto) any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement; provided, however, that after the Effective Time, the Covered
Parties shall be third party beneficiaries of, and entitled to enforce, Section
6.5.
11.12 Notices. All notices, Consents, waivers and other
communications required or permitted by this Agreement shall be in writing and
shall be deemed given to a party when (a) delivered to the appropriate address
by hand or by nationally recognized overnight courier service (costs prepaid);
or (b) sent by facsimile or e-mail with confirmation of transmission by the
transmitting equipment confirmed with a copy delivered as provided in clause
(a), in each case to the following addresses, facsimile numbers or e-mail
addresses and marked to the attention of the person (by name or title)
designated below (or to such other address, facsimile number, e-mail address or
person as a party may designate by notice to the other parties), provided, that
any communication delivered or sent on a day that is not a business day or after
5:00 p.m. (local time) on a business day shall be deemed to have been delivered
or sent on the next following business day; provided further, that the
immediately preceding proviso shall not apply to any notification provisions
herein set forth in terms of hours, which notifications shall be deemed to have
been delivered or sent when actually delivered or sent:
Company (before the Closing):
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Hotels, Inc.
300 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Husch & Eppenberger, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ ▇'▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
66
and a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Rosenman LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
Parent and Merger Sub:
JQH Acquisition LLC
Carnegie Hall Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇ LLC
Three First National Plaza
41st Floor
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
11.13 Cooperation. Subject to the terms and conditions of this
Agreement, the Company agrees to cooperate fully with Parent and to execute and
deliver such further documents, certificates, agreements and instruments and to
take such other actions as may be reasonably requested by Parent to evidence or
reflect the transactions contemplated by this Agreement and to carry out the
intent and purposes of this Agreement.
11.14 Legal Representation of the Parties. This Agreement was
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring this Agreement to be
construed or interpreted against any party shall not apply to any construction
or interpretation hereof.
11.15 Headings. The headings contained in this Agreement are for the
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
67
11.16 Remedies; Specific Performance.
(a) Without limiting the right to receive any payment it may
be entitled to receive under Section 10.3, the Company agrees that, to the
extent it incurs losses or damages in connection with this Agreement, the
maximum aggregate liability of Parent and Merger Sub for such losses or damages
shall be limited to the Fee Amount and the Company shall proceed solely against
the Fee Amount Escrow Account in respect of such losses or damages, and in no
event shall the Company seek to recover any money damages from Parent, Merger
Sub or their respective Representatives and Affiliates in connection therewith.
Any amount payable by Parent pursuant to Section 10.3 shall be made by the
Escrow Agent from the Fee Amount Escrow Account, and the Company shall be
entitled to recover solely from the Fee Amount Escrow Account in respect of any
such amount.
(b) The parties hereto agree that irreparable damages would
occur in the event any provision of this Agreement were not performed by the
Company in accordance with the terms hereof and that, prior to the termination
of this Agreement pursuant to Section 10.1, Parent and Merger Sub shall be
entitled to specific performance of the terms hereof and other temporary,
preliminary or permanent equitable relief (and no bond or other security shall
be required in connection therewith), in addition to any other remedy at law or
equity. The parties acknowledge that the Company shall not be entitled to an
injunction or injunctions to prevent breaches of this Agreement by Parent or
Merger Sub or to enforce specifically the terms and provisions of this Agreement
or to obtain any other equitable relief, and that the Company's sole and
exclusive remedy with respect to any such breach shall be the remedy set forth
in Section 11.16(a) and 10.3(a)(iv).
11.17 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
11.18 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
* * * * *
68
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
JQH ACQUISITION LLC
By: _______________________________
Name:
Title:
JQH MERGER CORPORATION
By: _______________________________
Name:
Title:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ HOTELS, INC.
By: _______________________________
Name:
Title: