AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 1, 1997
AMONG
DOUBLETREE CORPORATION,
PROMUS HOTEL CORPORATION
AND
PARENT HOLDING CORP.
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TABLE OF CONTENTS
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ARTICLE I. THE MERGERS........................................................................... 9
Section 1.1. Certificate of Incorporation and Bylaws of Parent..................................... 9
Section 1.2. The Doubletree Merger................................................................. 9
Section 1.3. The Promus Merger..................................................................... 9
Section 1.4. Effective Time of the Mergers......................................................... 9
Section 1.5. Closing............................................................................... 9
Section 1.6. Effect of the Mergers................................................................. 9
Section 1.7. Certificate of Incorporation and Bylaws of the Surviving Corporations................. 10
Section 1.8. Directors and Officers of the Surviving Corporations.................................. 10
ARTICLE II. CONVERSION OF SECURITIES.............................................................. 10
Section 2.1. Conversion of Doubletree Capital Stock................................................ 10
Section 2.2. Conversion of Promus Capital Stock.................................................... 11
Section 2.3. Cancellation of Parent Stock.......................................................... 11
Section 2.4. Exchange of Certificates.............................................................. 11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DOUBLETREE.......................................... 14
Section 3.1. Organization of Doubletree............................................................ 14
Section 3.2. Doubletree Capital Structure.......................................................... 14
Section 3.3. Authority; No Conflict; Required Filings and Consents................................. 15
Section 3.4. SEC Filings; Financial Statements..................................................... 16
Section 3.5. No Undisclosed Liabilities............................................................ 17
Section 3.6. Absence of Certain Changes or Events.................................................. 17
Section 3.7. Taxes................................................................................. 17
Section 3.8. Properties............................................................................ 18
Section 3.9. Intellectual Property................................................................. 18
Section 3.10. Agreements, Contracts and Commitments................................................. 18
Section 3.11. Litigation............................................................................ 19
Section 3.12. Environmental Matters................................................................. 19
Section 3.13. Employee Benefit Plans................................................................ 19
Section 3.14. Compliance With Laws.................................................................. 20
Section 3.15. Accounting and Tax Matters............................................................ 20
Section 3.16. Registration Statement; Joint Proxy Statement/Prospectus.............................. 21
Section 3.17. Labor Matters......................................................................... 21
Section 3.18. Insurance............................................................................. 21
Section 3.19. Doubletree Long-Range Plans........................................................... 22
Section 3.20. Opinion of Financial Advisor.......................................................... 22
Section 3.21. No Existing Discussions............................................................... 22
Section 3.22. Section 203 of the DGCL Not Applicable................................................ 22
Section 3.23. Doubletree Rights Plan................................................................ 22
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PROMUS.............................................. 22
Section 4.1. Organization of Promus................................................................ 22
Section 4.2. Promus Capital Structure.............................................................. 23
Section 4.3. Authority; No Conflict; Required Filings and Consents................................. 23
Section 4.4. SEC Filings; Financial Statements..................................................... 24
Section 4.5. No Undisclosed Liabilities............................................................ 25
Section 4.6. Absence of Certain Changes or Events.................................................. 25
Section 4.7. Taxes................................................................................. 25
Section 4.8. Properties............................................................................ 26
Section 4.9. Intellectual Property................................................................. 26
Section 4.10. Agreements, Contracts and Commitments................................................. 26
Section 4.11. Litigation............................................................................ 26
Section 4.12. Environmental Matters................................................................. 27
Section 4.13. Employee Benefit Plans................................................................ 27
Section 4.14. Compliance With Laws.................................................................. 28
Section 4.15. Accounting and Tax Matters............................................................ 28
Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus.............................. 28
Section 4.17. Labor Matters......................................................................... 29
Section 4.18. Insurance............................................................................. 29
Section 4.19. Promus Long-Range Plans............................................................... 29
Section 4.20. Opinion of Financial Advisor.......................................................... 29
Section 4.21. No Existing Discussions............................................................... 29
Section 4.22. Section 203 of the DGCL Not Applicable................................................ 29
Section 4.23. Promus Rights Plan.................................................................... 29
ARTICLE V. COVENANTS............................................................................. 29
Section 5.1. Conduct of Business................................................................... 29
Section 5.2. Cooperation; Notice; Cure............................................................. 31
Section 5.3. No Solicitation....................................................................... 31
Section 5.4. Joint Proxy Statement/Prospectus; Registration Statement.............................. 32
Section 5.5. NASDAQ Quotation and NYSE Listing..................................................... 32
Section 5.6. Access to Information................................................................. 33
Section 5.7. Stockholders' Meetings................................................................ 33
Section 5.8. Legal Conditions to Merger............................................................ 33
Section 5.9. Public Disclosure..................................................................... 34
Section 5.10. Nonrecognition Exchange............................................................... 34
Section 5.11. Pooling Accounting.................................................................... 34
Section 5.12. Affiliate Agreements.................................................................. 34
Section 5.13. NYSE Listing.......................................................................... 34
Section 5.14. Stock Plans........................................................................... 35
Section 5.15. Brokers or Finders.................................................................... 36
Section 5.16. Indemnification....................................................................... 36
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Section 5.17. Letter of Promus's Accountants........................................................ 36
Section 5.18. Letter of Doubletree's Accountants.................................................... 37
Section 5.19. Stock Option Agreements............................................................... 37
Section 5.20. Post-Merger Corporate Governance; Employment Arrangements............................. 37
Section 5.21. Name of Parent........................................................................ 38
Section 5.22. Parent Stockholder Rights Plan; Amendment of Promus Rights Plan....................... 38
Section 5.23. GEPT Warrant; Doubletree Registration Rights Agreement................................ 39
Section 5.24. Conveyance Taxes...................................................................... 39
Section 5.25. Transfer Taxes........................................................................ 39
Section 5.26. Stockholder Litigation................................................................ 39
Section 5.27. Employee Benefits; Severance.......................................................... 40
ARTICLE VI. CONDITIONS TO MERGER.................................................................. 40
Section 6.1. Conditions to Each Party's Obligation to Effect the Mergers........................... 40
Section 6.2. Additional Conditions to Obligations of Doubletree.................................... 41
Section 6.3. Additional Conditions to Obligations of Promus........................................ 42
ARTICLE VII. TERMINATION AND AMENDMENT............................................................. 42
Section 7.1. Termination........................................................................... 42
Section 7.2. Effect of Termination................................................................. 44
Section 7.3. Fees and Expenses..................................................................... 44
Section 7.4. Amendment............................................................................. 45
Section 7.5. Extension; Waiver..................................................................... 45
ARTICLE VIII. MISCELLANEOUS......................................................................... 46
Section 8.1. Nonsurvival of Representations, Warranties and Agreements............................. 46
Section 8.2. Notices............................................................................... 46
Section 8.3. Interpretation........................................................................ 46
Section 8.4. Counterparts.......................................................................... 47
Section 8.5. Entire Agreement; No Third Party Beneficiaries........................................ 47
Section 8.6. Governing Law......................................................................... 47
Section 8.7. Assignment............................................................................ 47
EXHIBITS
Exhibit A Stock Option Agreement (Doubletree)
Exhibit B Stock Option Agreement (Promus)
Exhibit C Stockholder Support Agreement
Exhibit D Certificate of Incorporation of Parent
Exhibit E Bylaws of Parent
Exhibit F Form of Doubletree Affiliate Agreement
Exhibit G Form of Promus Affiliate Agreement
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TABLES OF DEFINED TERMS
CROSS REFERENCE
TERMS IN AGREEMENT
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Acquisition Proposal........................................................................... Section 5.3(a)
Affiliate...................................................................................... Section 5.12
Affiliate Agreement............................................................................ Section 5.12
Agreement...................................................................................... Preamble
Alternative Transaction........................................................................ Section 7.3(e)
Bankruptcy and Equity Exception................................................................ Section 3.3(a)
Certificate of Merger.......................................................................... Section 1.4
Certificates................................................................................... Section 2.4(b)
Closing........................................................................................ Section 1.5
Closing Date................................................................................... Section 1.5
Code........................................................................................... Preamble
Confidentiality Agreements..................................................................... Section 5.3(a)
DGCL........................................................................................... Section 1.2
Doubletree..................................................................................... Preamble
Doubletree Balance Sheet....................................................................... Section 3.4(b)
Doubletree Common Stock........................................................................ Section 2.1
Doubletree Director............................................................................ Section 5.20(a)
Doubletree Disclosure Schedule................................................................. Article III
Doubletree Employee Plans...................................................................... Section 3.13(a)
Doubletree Employees........................................................................... Section 5.27(b)
Doubletree Exchange Ratio...................................................................... Section 2.1(c)
Doubletree Material Adverse Effect............................................................. Section 3.1
Doubletree Material Contracts.................................................................. Section 3.10(a)
Doubletree Merger.............................................................................. Section 1.2
Doubletree Preferred Stock..................................................................... Section 3.2(a)
Doubletree Rights Plan......................................................................... Section 3.2(b)
Doubletree SEC Reports......................................................................... Section 3.4(a)
Doubletree Stock Option........................................................................ Section 5.14(a)
Doubletree Stock Option Agreement.............................................................. Preamble
Doubletree Stock Plans......................................................................... Section 3.2(a)
Doubletree Stockholders' Meeting............................................................... Section 3.16
Doubletree Sub................................................................................. Section 1.2
Doubletree Surviving Corporation............................................................... Section 1.6
Effective Time................................................................................. Section 1.4
Environmental Law.............................................................................. Section 3.12(b)
ERISA.......................................................................................... Section 3.13(a)
ERISA Affiliate................................................................................ Section 3.13(a)
Exchange Act................................................................................... Section 3.3(c)
Exchange Agent................................................................................. Section 2.4(a)
Exchange Fund.................................................................................. Section 2.4(a)
GEPT Warrant................................................................................... Section 3.2(b)
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CROSS REFERENCE
TERMS IN AGREEMENT
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Governmental Entity............................................................................ Section 3.3(c)
Hazardous Substance............................................................................ Section 3.12(c)
HSR Act........................................................................................ Section 3.3(c)
Indemnified Parties............................................................................ Section 5.16(a)
IRS............................................................................................ Section 3.7(b)
Joint Proxy Statement/Prospectus............................................................... Section 3.16
Material Lease(s).............................................................................. Section 3.8(a)
Mergers........................................................................................ Section 1.3
NYSE........................................................................................... Section 2.4(e)
Order.......................................................................................... Section 5.8(b)
Outside Date................................................................................... Section 7.1(b)
Parent......................................................................................... Preamble
Parent Common Stock............................................................................ Section 2.1(c)
Parent Rights Plan............................................................................. Section 5.22
Promus......................................................................................... Preamble
Promus Balance Sheet........................................................................... Section 4.4(b)
Promus Common Stock............................................................................ Section 2.2
Promus Director................................................................................ Section 5.20(a)
Promus Disclosure Schedule..................................................................... Article IV
Promus Employee Plans.......................................................................... Section 4.13(a)
Promus Employees............................................................................... Section 5.27(b)
Promus Exchange Ratio.......................................................................... Section 2.2(c)
Promus Material Adverse Effect................................................................. Section 4.1
Promus Material Contracts...................................................................... Section 4.10(a)
Promus Merger.................................................................................. Section 1.3
Promus Preferred Stock......................................................................... Section 4.2(a)
Promus Rights Plan............................................................................. Section 4.2(b)
Promus SEC Reports............................................................................. Section 4.4(a)
Promus Special Stock........................................................................... Section 4.2(a)
Promus Stock Option............................................................................ Section 5.14(a)
Promus Stock Option Agreement.................................................................. Preamble
Promus Stock Plans............................................................................. Section 4.2(a)
Promus Stockholders' Meeting................................................................... Section 3.16
Promus Sub..................................................................................... Section 1.3
Promus Surviving Corporation................................................................... Section 1.6
Registration Statement......................................................................... Section 3.16
Rule 145....................................................................................... Section 5.12
SEC............................................................................................ Section 3.3(c)
Securities Act................................................................................. Section 2.4(j)
Stock Option Agreements........................................................................ Preamble
Stockholder Support Agreement.................................................................. Preamble
Subsidiary..................................................................................... Section 3.1
Superior Proposal.............................................................................. Section 5.3(a)
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CROSS REFERENCE
TERMS IN AGREEMENT
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Surviving Corporation.......................................................................... Section 1.6
Tax............................................................................................ Section 3.7(a)
Taxes.......................................................................................... Section 3.7(a)
Third Party.................................................................................... Section 5.3(a)
Transfer Taxes................................................................................. Section 5.25
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September 1,
1997, by and among DOUBLETREE CORPORATION, a Delaware corporation
("Doubletree"), PROMUS HOTEL CORPORATION, a Delaware corporation ("Promus") and
PARENT HOLDING CORP., a newly-formed Delaware corporation with nominal
capitalization, one-half of the issued and outstanding capital stock of which is
nominally owned by each of Doubletree and Promus ("Parent").
WHEREAS, the Boards of Directors of Doubletree and Promus deem it advisable
and in the best interests of each corporation and its respective stockholders
that Doubletree and Promus combine in a "merger of equals" in order to advance
the interests of Doubletree and Promus and their respective stockholders;
WHEREAS, the combination of Doubletree and Promus shall be effected by the
terms of this Agreement through (i) a merger of a wholly-owned subsidiary of
Parent with and into Doubletree and (ii) a merger of another wholly-owned
subsidiary of Parent with and into Promus, such that Doubletree and Promus
become wholly-owned subsidiaries of Parent and the stockholders of Doubletree
and Promus become stockholders of Parent;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Doubletree's and Promus's willingness
to enter into this Agreement, Doubletree and Promus have entered into (i) a
Stock Option Agreement dated as of the date of this Agreement and attached
hereto as Exhibit A (the "Doubletree Stock Option Agreement"), pursuant to which
Promus granted Doubletree an option to purchase shares of common stock of Promus
under certain circumstances, and (ii) a Stock Option Agreement dated as of the
date of this Agreement and attached hereto as Exhibit B (the "Promus Stock
Option Agreement" and, together with the Doubletree Stock Option Agreement, the
"Stock Option Agreements"), pursuant to which Doubletree granted Promus an
option to purchase shares of common stock of Doubletree under certain
circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Promus's willingness to enter into this
Agreement, certain stockholders of Doubletree have entered into a Stockholder
Support Agreement with Promus dated as of the date of this Agreement and
attached hereto as Exhibit C (the "Stockholder Support Agreement"), pursuant to
which such stockholders have agreed, among other things, to vote all voting
securities of Doubletree beneficially owned by them in favor of approval and
adoption of the Agreement and the Doubletree Merger (as defined in Section 1.2);
WHEREAS, for Federal income tax purposes, it is intended that (i) the
Doubletree Merger shall qualify as a reorganization described in Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code") and/or, taken
together with the Promus Merger (as defined in Section 1.3), as a transfer of
property to Parent by holders of Doubletree Common Stock (as defined in Section
2.1) described in Section 351 of the Code and (ii) the Promus Merger shall
qualify as a reorganization described in Section 368(a) of the Code and/or,
taken together with the Doubletree Merger, as a transfer of property to Parent
by holders of Promus Common Stock described in Section 351 of the Code;
WHEREAS, for accounting purposes, it is intended that the transactions
contemplated by this Agreement shall be accounted for as a pooling of interests;
and
WHEREAS, the Boards of Directors of Doubletree and Promus have approved this
Agreement, the Stock Option Agreements and the Stockholder Support Agreement.
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGERS
Section 1.1 CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT. Doubletree
and Promus shall cause the Certificate of Incorporation and Bylaws of Parent to
be amended prior to the Effective Time (as defined in Section 1.4) to be
substantially in the form of Exhibit D and Exhibit E hereto, respectively. From
the date hereof until the Effective Time, Doubletree and Promus shall consult
with each other prior to causing or permitting Parent to take any action and
neither shall cause or permit Parent to take any action inconsistent with the
provisions of this Agreement without the written consent of the other.
Section 1.2. THE DOUBLETREE MERGER. Doubletree and Promus shall cause
Parent to form a wholly-owned subsidiary named Doubletree Acquisition Corp.
("Doubletree Sub") under the laws of the State of Delaware. Doubletree and
Promus will cause Parent to cause Doubletree Sub to execute and deliver this
Agreement. Upon the terms and subject to the provisions of this Agreement, and
in accordance with the Delaware General Corporation Code (the "DGCL"),
Doubletree Sub will merge with and into Doubletree (the "Doubletree Merger") at
the Effective Time (as defined in Section 1.4). Doubletree Sub will be formed
solely to facilitate the Doubletree Merger and will conduct no business or
activity other than in connection with the Doubletree Merger.
Section 1.3. THE PROMUS MERGER. Doubletree and Promus shall cause Parent
to form a wholly-owned subsidiary named Promus Acquisition Corp. ("Promus Sub")
under the laws of the State of Delaware. Doubletree and Promus will cause Parent
to cause Promus Sub to execute and deliver this Agreement. Upon the terms and
subject to the provisions of this Agreement, and in accordance with the DGCL,
Promus Sub will merge with and into Promus (the "Promus Merger" and together
with the Doubletree Merger, the "Mergers") at the Effective Time (as defined in
Section 1.4). Promus Sub will be formed solely to facilitate the Promus Merger
and will conduct no business or activity other than in connection with the
Promus Merger.
Section 1.4. EFFECTIVE TIME OF THE MERGERS. Subject to the provisions of
this Agreement, a certificate of merger with respect to each Merger in such form
as is required by the relevant provisions of the DGCL (individually, a
"Certificate of Merger" with respect to one of the Mergers, and collectively
with respect to both Mergers, the "Certificates of Merger") shall be duly
prepared, executed and acknowledged and thereafter delivered to the Secretary of
State of the State of Delaware for filing, as provided in the DGCL, as early as
practicable on the Closing Date (as defined in Section 1.5). Each Merger shall
become effective at such time as is specified in the Certificate of Merger (the
time at which both Mergers have become fully effective being hereinafter
referred to as the "Effective Time").
Section 1.5 CLOSING. The closing of the Mergers (the "Closing") will take
place at such time and place to be agreed upon by the parties hereto, on a date
to be specified by Promus and Doubletree, which shall be no later than the
second business day after satisfaction or, if permissible, waiver of the
conditions set forth in Article VI (the "Closing Date"), unless another date is
agreed to in writing by Promus and Doubletree.
Section 1.6. EFFECT OF THE MERGERS. As a result of the Doubletree Merger,
the separate corporate existence of Doubletree Sub shall cease and Doubletree
shall continue as the surviving corporation (the "Doubletree Surviving
Corporation"). As a result of the Promus Merger, the separate corporate
existence of Promus Sub shall cease and Promus shall continue as the surviving
corporation (the "Promus Surviving Corporation" and together with the Doubletree
Surviving Corporation, the "Surviving Corporations"). Upon becoming effective,
the Mergers shall have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, (i) all
properties, rights, privileges,
9
powers and franchises of Doubletree and Doubletree Sub shall vest in the
Doubletree Surviving Corporation, and all debts, liabilities and duties of
Doubletree and Doubletree Sub shall become the debts, liabilities and duties of
the Doubletree Surviving Corporation and (ii) all properties, rights,
privileges, powers and franchises of Promus and Promus Sub shall vest in the
Promus Surviving Corporation, and all debts, liabilities and duties of Promus
and Promus Sub shall become the debts, liabilities and duties of the Promus
Surviving Corporation.
Section 1.7. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATIONS. At the Effective Time, (i) the Certificate of Incorporation and
Bylaws of the Doubletree Surviving Corporation shall be amended to be identical
to the Certificate of Incorporation and Bylaws, respectively, of Doubletree Sub
as in effect immediately prior to the Effective Time (except that the name of
the Doubletree Surviving Corporation shall be Doubletree Inc.), in each case
until duly amended in accordance with applicable law, and (ii) the Certificate
of Incorporation and Bylaws of the Promus Surviving Corporation shall be amended
to be identical to the Certificate of Incorporation and Bylaws, respectively, of
Promus Sub as in effect immediately prior to the Effective Time (except that the
name of the Promus Surviving Corporation shall be Promus Acquisition Corp.), in
each case until duly amended in accordance with applicable law.
Section 1.8. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATIONS
(a) DOUBLETREE SURVIVING CORPORATION. The directors of Doubletree Sub
immediately prior to the Effective Time shall be the initial directors of the
Doubletree Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Doubletree Surviving Corporation.
The officers of Doubletree immediately prior to the Effective Time shall be the
initial officers of the Doubletree Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Doubletree
Surviving Corporation.
(b) PROMUS SURVIVING CORPORATION. The directors of Promus Sub immediately
prior to the Effective Time shall be the initial directors of the Promus
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Promus Surviving Corporation. The officers of
Promus immediately prior to the Effective Time shall be the initial officers of
the Promus Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Promus Surviving Corporation.
ARTICLE II.
CONVERSION OF SECURITIES
Section 2.1. CONVERSION OF DOUBLETREE CAPITAL STOCK. At the Effective
Time, by virtue of the Doubletree Merger and without any action on the part of
any of the parties hereto or the holders of any shares of Common Stock, par
value $.01 per share, of Doubletree ("Doubletree Common Stock") or common stock
of Doubletree Sub:
(a) CAPITAL STOCK OF DOUBLETREE SUB. Each issued and outstanding share
of the common stock, par value $.01 per share, of Doubletree Sub shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Doubletree Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PROMUS-OWNED STOCK. All shares
of Doubletree Common Stock that are owned by Doubletree as treasury stock
and any shares of Doubletree Common Stock owned by Promus or any
wholly-owned Subsidiary (as defined in Section 3.1) of Promus shall be
canceled and retired and shall cease to exist and no stock of Parent or
other consideration shall be delivered in exchange therefor.
(c) EXCHANGE RATIO FOR DOUBLETREE COMMON STOCK. Subject to Section
2.4(e), each issued and outstanding share of Doubletree Common Stock (other
than shares to be canceled in accordance with
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Section 2.1(b)) shall be converted into the right to receive one share (the
"Doubletree Exchange Ratio") of Common Stock, par value $.01 per share, of
Parent ("Parent Common Stock"). All such shares of Doubletree Common Stock,
when so converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any ownership
or other rights with respect thereto, except the right to receive the shares
of Parent Common Stock and an amount equal to certain dividends and other
distributions described in Section 2.4(c), without interest, upon the
surrender of such certificate in accordance with Section 2.4.
Section 2.2. CONVERSION OF PROMUS CAPITAL STOCK. At the Effective Time, by
virtue of the Promus Merger and without any action on the part of any of the
parties hereto or the holders of any shares of Common Stock, par value $.10 per
share, of Promus ("Promus Common Stock") or common stock of Promus Sub:
(a) CAPITAL STOCK OF PROMUS SUB. Each issued and outstanding share of
the common stock, par value $.01 per share, of Promus Sub shall be converted
into and become one fully paid and nonassessable share of Common Stock, par
value $.01 per share, of the Promus Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND DOUBLETREE-OWNED STOCK. All
shares of Promus Common Stock that are owned by Promus as treasury stock and
any shares of Promus Common Stock owned by Doubletree or any wholly-owned
Subsidiary (as defined in Section 3.1) of Doubletree shall be canceled and
retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE RATIO FOR PROMUS COMMON STOCK. Subject to Section 2.4(e),
each issued and outstanding share of Promus Common Stock (other than shares
to be canceled in accordance with Section 2.2(b)) shall be converted into
the right to receive 0.925 shares (the "Promus Exchange Ratio") of Parent
Common Stock. All such shares of Promus Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any ownership or other
rights with respect thereto, except the right to receive the shares of
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock to be issued or paid in consideration therefor and an amount equal to
certain dividends and other distributions described in Section 2.4(c), in
each case upon the surrender of such certificate in accordance with Section
2.4 and without interest.
Section 2.3. CANCELLATION OF PARENT STOCK. At the Effective Time, by
virtue of the Mergers and without any action on the part of any holder of any
capital stock of Doubletree, Promus or Parent, each share of Parent Common Stock
issued and outstanding immediately prior to the Effective Time shall be
surrendered and canceled, and the amount paid by Doubletree and Promus for the
shares of Parent Common Stock held by them shall be returned by Parent to them.
Section 2.4. EXCHANGE OF CERTIFICATES. The procedures for exchanging
certificates which prior to the Effective Time represented shares of Doubletree
Common Stock and Promus Common Stock for certificates representing Parent Common
Stock pursuant to the Mergers are as follows:
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit
with a bank or trust company designated by Promus and Doubletree (the
"Exchange Agent"), for the benefit of the holders of shares of Doubletree
Common Stock and shares of Promus Common Stock outstanding immediately prior
to the Effective Time, for exchange in accordance with this Section 2.4,
through the Exchange Agent, certificates representing the shares of Parent
Common Stock and, with respect to shares of Promus Common Stock, cash in
lieu of fractional shares (such shares of Parent Common Stock and cash in
lieu of fractional shares, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund"),
issuable pursuant to Sections 2.1 and
11
2.2 in exchange for shares of Doubletree Common Stock and Promus Common
Stock, respectively, outstanding immediately prior to the Effective Time.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Doubletree Common Stock or Promus Common
Stock (collectively, the "Certificates") whose shares were converted
pursuant to Section 2.1 or Section 2.2 into the right to receive shares of
Parent Common Stock (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Doubletree and
Promus may reasonably specify) and (ii) instructions for effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock (plus cash in lieu of fractional shares, if
any, of Parent Common Stock as provided below). Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of
whole shares of Parent Common Stock, the amount of any cash payable in lieu
of fractional shares of Parent Common Stock (with respect to shares of
Promus Common Stock) and an amount equal to certain dividends and other
distributions which such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
immediately be canceled. In the event of a transfer of ownership of
Doubletree Common Stock or Promus Common Stock prior to the Effective Time
which is not registered in the transfer records of Doubletree or Promus,
respectively, a certificate representing the number of shares of Parent
Common Stock issuable and any amounts payable in accordance with this
Agreement may be issued and paid to a transferee if the Certificate
representing such Doubletree Common Stock or Promus Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No amount in
respect of dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock the holder
thereof is entitled to receive in respect thereof and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to
subsection (e) below until the holder of record of such Certificate shall
surrender such Certificate to Parent in accordance herewith. Subject to the
effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable
in lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to subsection (e) below and an amount equal to the amount
of dividends or other distributions with a record date after the Effective
Time previously paid with respect to whole shares of Parent Common Stock,
and (ii) at the appropriate payment date, an amount equal to the amount of
dividends or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable
with respect to whole shares of Parent Common Stock, in each case without
interest.
(d) NO FURTHER OWNERSHIP RIGHTS IN DOUBLETREE COMMON STOCK AND PROMUS
COMMON STOCK. All shares of Parent Common Stock issued upon the surrender
for exchange of Certificates in accordance with the terms hereof (including
any cash paid pursuant to subsection (c) or (e) of this Section 2.4) shall
be deemed to have been issued in full satisfaction of all rights pertaining
to the shares of Doubletree Common Stock or Promus Common Stock theretofore
represented by such Certificates, subject, however, to the applicable
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared
12
or made by Doubletree on such shares of Doubletree Common Stock or by Promus
on such shares of Promus Common Stock, as the case may be, in accordance
with the terms of this Agreement (to the extent permitted under Section 5.1)
prior to the date hereof and which remain unpaid at the Effective Time, and
from and after the Effective Time there shall be no further registration of
transfers on the stock transfer books of the Doubletree Surviving
Corporation or the Promus Surviving Corporation, as the case may be, of the
shares of Doubletree Common Stock or Promus Common Stock, respectively,
which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to one of the Surviving
Corporations or Parent for any reason, such Certificates shall be canceled
and exchanged as provided in this Section 2.4.
(e) NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates representing shares of Promus Common Stock, and
such fractional share interests will not entitle the owner thereof to vote
or to any other rights of a stockholder of Parent. Notwithstanding any other
provision of this Agreement, each holder of shares of Promus Common Stock
outstanding immediately prior to the Effective Time exchanged pursuant to
the Promus Merger who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Parent Common Stock multiplied by the per share sales price of Parent Common
Stock (as reported on the New York Stock Exchange Composite Tape) on the
closing of the first day of regular-way trading of Parent Common Stock on
the New York Stock Exchange (the "NYSE") after the Effective Time.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of Doubletree or
Promus for 180 days after the Effective Time shall be delivered to Parent
upon demand, and any former stockholder of Doubletree or Promus who has not
previously complied with this Section 2.4 shall thereafter look only to
Parent for payment of such former stockholder's claim for Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock and any
amounts in respect of dividends or distributions with respect to Parent
Common Stock.
(g) NO LIABILITY. None of Doubletree, Promus, Parent or the Exchange
Agent shall be liable to any holder of shares of Doubletree Common Stock or
Promus Common Stock, as the case may be, for any shares of Parent Common
Stock (or cash in lieu of fractional shares of Parent Common Stock or any
dividends or distributions with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(h) WITHHOLDING RIGHTS. Parent and each of the Surviving Corporations
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Certificates which prior
to the Effective Time represented shares of Doubletree Common Stock or
Promus Common Stock such amounts as it 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 one of the Surviving Corporations, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Doubletree Common Stock or
Promus Common Stock, as the case may be, in respect of which such deduction
and withholding was made.
(i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by Parent or one of the Surviving Corporations, the posting by such person
of a bond in such reasonable amount as Parent or such Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of Parent Common Stock
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and any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect
thereof pursuant to this Agreement.
(j) AFFILIATES. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in
Section 5.12) of Doubletree or Promus shall not be exchanged until (i)
Parent has received an Affiliate Agreement (as defined in Section 5.12) from
such Affiliate or (ii) until the later of such date as such shares of Parent
Common Stock are freely tradable without jeopardizing the pooling of
interests accounting treatment of the Mergers and without violating the
Securities Act of 1933, as amended (the "Securities Act").
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF DOUBLETREE
Doubletree represents and warrants to Promus that the statements contained
in this Article III are true and correct except as set forth herein and in the
disclosure schedule delivered by Doubletree to Promus on or before the date of
this Agreement (the "Doubletree Disclosure Schedule"). The Doubletree Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article III and the disclosure in any
paragraph shall qualify other paragraphs in this Article III only to the extent
that it is reasonably apparent from a reading of such disclosure that it also
qualifies or applies to such other paragraphs.
Section 3.1. ORGANIZATION OF DOUBLETREE. Each of Doubletree and its
Subsidiaries (as defined below) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power to own, lease and operate its property and to carry on its
business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the business, properties, financial condition
or results of operations of Doubletree and its Subsidiaries, taken as a whole
(an "Doubletree Material Adverse Effect"). A true and correct copy of the
Certificate of Incorporation and Bylaws of Doubletree has been delivered to
Promus. Except as set forth in Doubletree SEC Reports (as defined in Section
3.4) filed prior to the date hereof, neither Doubletree nor any of its
Subsidiaries directly or indirectly owns (other than ownership interests in
Doubletree or in one or more of its Subsidiaries) any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding (i) securities in any publicly traded company held for investment by
Doubletree and comprising less than five percent (5%) of the outstanding stock
of such company and (ii) any investment or series of related investments with a
book value of less than $15 million. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding partnerships
the general partnership interests of which held by such party or any Subsidiary
of such party do not have a majority of the economic interests in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.
Section 3.2. DOUBLETREE CAPITAL STRUCTURE.
(a) The authorized capital stock of Doubletree consists of 100,000,000
shares of Common Stock, $.01 par value, and 5,000,000 shares of Preferred Stock,
$.01 par value ("Doubletree Preferred Stock"). As of the date hereof, (i)
39,688,458 shares of Doubletree Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable and (ii) no shares of
Doubletree Common Stock were held in the treasury of Doubletree or by
Subsidiaries of Doubletree. The Doubletree Disclosure
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Schedule shows the number of shares of Doubletree Common Stock reserved for
future issuance pursuant to stock options granted and outstanding as of the date
hereof and the plans under which such options were granted (collectively, the
"Doubletree Stock Plans"). As of the date of this Agreement, none of the shares
of Doubletree Preferred Stock is issued and outstanding. There are no
obligations, contingent or otherwise, of Doubletree or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any shares of Doubletree Common Stock
or the capital stock of any Subsidiary or to provide funds to or make any
material investment (in the form of a loan, capital contribution or otherwise)
in any such Subsidiary or any other entity other than guarantees of bank
obligations or indebtedness for borrowed money of Subsidiaries entered into in
the ordinary course of business and other than any obligation the failure of
which to perform or satisfy would not have a Doubletree Material Adverse Effect.
All of the outstanding shares of capital stock or other ownership interests of
each of Doubletree's Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable and all such shares (other than directors' qualifying
shares in the case of foreign Subsidiaries) are owned by Doubletree or another
Subsidiary of Doubletree free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Doubletree's voting rights, charges
or other encumbrances of any nature.
(b) Except as set forth in this Section 3.2 or as reserved for future grants
of options under the Doubletree Stock Plans or the Promus Stock Option Agreement
and except for the preferred stock purchase rights issued and issuable under the
Rights Agreement dated as of September 1, 1997 between Doubletree and ▇▇▇▇▇▇
Trust Company of California (the "Doubletree Rights Plan"), options to purchase
an aggregate of 20,000 shares of Doubletree Common Stock, issued on June 30,
1994, to GE Investment Hotel Partners I, Limited Partnership and the Warrants to
purchase an aggregate of 262,753 shares of Doubletree Common Stock, issued on
November 8, 1996, to PT Investments Inc. (the "GEPT Warrant"), (i) there are no
shares of capital stock of any class of Doubletree, or any security exchangeable
into or exercisable for such equity securities, issued, reserved for issuance or
outstanding; (ii) there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which Doubletree or any of
its Subsidiaries is a party or by which it is bound obligating Doubletree or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other ownership interests of
Doubletree or any of its Subsidiaries or obligating Doubletree or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement; and
(iii) to the best knowledge of Doubletree, there are no voting trusts, proxies
or other voting agreements or understandings with respect to the shares of
capital stock of Doubletree. All shares of Doubletree Common Stock subject to
issuance as specified in this Section 3.2 are duly authorized and, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, shall be validly issued, fully paid and nonassessable.
Section 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Doubletree has all requisite corporate power and authority to enter into
this Agreement and the Stock Option Agreements and to consummate the
transactions contemplated by this Agreement and the Stock Option Agreements. The
execution and delivery of this Agreement and the Stock Option Agreements and the
consummation of the transactions contemplated by this Agreement and the Stock
Option Agreements by Doubletree have been duly authorized by all necessary
corporate action on the part of Doubletree, subject only to the approval and
adoption of this Agreement and the Doubletree Merger by Doubletree's
stockholders under the DGCL. This Agreement and the Stock Option Agreements have
been duly executed and delivered by Doubletree and constitute the valid and
binding obligations of Doubletree, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles (the "Bankruptcy and Equity
Exception").
(b) The execution and delivery of this Agreement and the Stock Option
Agreements by Doubletree does not, and the consummation of the transactions
contemplated by this Agreement and the Stock Option Agreements will not, (i)
conflict with, or result in any violation or breach of, any provision of the
15
Certificate of Incorporation or Bylaws of Doubletree or any of its Subsidiaries,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Doubletree or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound (other than pursuant to the Credit Agreement dated as of
November 8, 1996 by and among Doubletree, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Senior Funding, Inc.,
The Bank of Nova Scotia and the lenders identified therein) or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Doubletree or
any of its Subsidiaries or any of its or their properties or assets, except in
the case of (ii) and (iii) for any such conflicts, violations, defaults,
terminations, cancellations or accelerations which (x) are not, individually or
in the aggregate, reasonably likely to have a Doubletree Material Adverse Effect
or (y) would not substantially impair or delay the consummation of the
Doubletree Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Doubletree or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and the Stock
Option Agreements or the consummation of the transactions contemplated hereby or
thereby, except for (i) the filing of the pre-merger notification report under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended ("HSR
Act"), (ii) the filing of a Certificate of Merger with respect to the Doubletree
Merger with the Delaware Secretary of State, (iii) the filing of the Joint Proxy
Statement/Prospectus (as defined in Section 3.16 below) with the Securities and
Exchange Commission (the "SEC") in accordance with the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the Securities Act, (iv) such
consents, approvals, orders, authorizations, permits, filings or registrations
related to, or arising out of, compliance with statutes, rules or regulations
regulating the consumption, sale or serving of alcoholic beverages, (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the laws
of any foreign country and (vi) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not (x) be
reasonably likely to have a Doubletree Material Adverse Effect or (y)
substantially impair or delay the consummation of the Doubletree Merger.
Section 3.4. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Doubletree has filed and made available to Promus all forms, reports and
documents required to be filed by Doubletree with the SEC since January 1, 1996
(collectively, the "Doubletree SEC Reports"). The Doubletree SEC Reports (i) at
the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Doubletree SEC Reports or necessary in order to
make the statements in such Doubletree SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of Doubletree's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) of Doubletree contained in the Doubletree SEC Reports
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q under the Exchange Act) and fairly presented the consolidated
financial position of Doubletree and its Subsidiaries as of the dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements
16
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount. The audited balance sheet of
Doubletree as of December 31, 1996 is referred to herein as the "Doubletree
Balance Sheet."
Section 3.5. NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Doubletree SEC Reports filed prior to the date hereof, and except for normal or
recurring liabilities incurred since December 31, 1996 in the ordinary course of
business consistent with past practices, Doubletree and its Subsidiaries do not
have any liabilities, either accrued, contingent or otherwise (whether or not
required to be reflected in financial statements in accordance with generally
accepted accounting principles), and whether due or to become due, which
individually or in the aggregate are reasonably likely to have a Doubletree
Material Adverse Effect.
Section 3.6. ABSENCE OF CERTAIN CHANGES OF EVENTS. Except as disclosed in
the Doubletree SEC Reports filed prior to the date hereof, since the date of the
Doubletree Balance Sheet, Doubletree and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any event, development,
state of affairs or condition, or series or combination of events, developments,
states of affairs or conditions, which, individually or in the aggregate, has
had or is reasonably likely to have a Doubletree Material Adverse Effect (other
than events, developments, states of affairs or conditions that are the effect
or result of actions taken by Promus or economic factors affecting the economy
as a whole or the industry in which Doubletree competes); (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to
Doubletree or any of its Subsidiaries which is reasonably likely to have a
Doubletree Material Adverse Effect; (iii) any material change by Doubletree in
its accounting methods, principles or practices to which Promus has not
previously consented in writing; (iv) any revaluation by Doubletree of any of
its assets which is reasonably likely to have a Doubletree Material Adverse
Effect; or (v) any other action or event that would have required the consent of
Promus pursuant to Section 5.1 of this Agreement had such action or event
occurred after the date of this Agreement other than such actions or events
that, individually or in the aggregate, have not had or are not reasonably
likely to have a Doubletree Material Adverse Effect.
Section 3.7. TAXES.
(a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes,"
means any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes based
upon or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, gains, franchise, withholding, payroll,
recapture, employment, excise, unemployment insurance, social security, business
license, occupation, business organization, stamp, environmental and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts. For purposes of this Agreement, "Taxes" also includes any
obligations under any agreements or arrangements with any other person with
respect to Taxes of such other person (including pursuant to Treas. Reg. Section
1.1502-6 or comparable provisions of state, local or foreign tax law) and
including any liability for Taxes of any predecessor entity.
(b) Doubletree and each of its Subsidiaries have (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or accruals that are not reasonably likely, individually or in
the aggregate, to have a Doubletree Material Adverse Effect. Neither the
Internal Revenue Service (the "IRS") nor any other taxing authority has asserted
any claim for Taxes, or to the actual knowledge of the executive officers of
Doubletree, is threatening to assert any claims for Taxes, which claims,
individually or in the aggregate, are reasonably likely to have a Doubletree
Material Adverse Effect. Doubletree and each of its Subsidiaries have withheld
17
or collected and paid over to the appropriate governmental authorities (or are
properly holding for such payment) all Taxes required by law to be withheld or
collected, except for amounts that are not reasonably likely, individually or in
the aggregate, to have a Doubletree Material Adverse Effect. Neither Doubletree
nor any of its Subsidiaries has made an election under Section 341(f) of the
Code, except for any such election that shall not have a Doubletree Material
Adverse Effect. There are no liens for Taxes upon the assets of Doubletree or
any of its Subsidiaries (other than liens for Taxes that are not yet due or
delinquent or that are being contested in good faith by appropriate
proceedings), except for liens that are not reasonably likely, individually or
in the aggregate, to have a Doubletree Material Adverse Effect.
(c) Neither Doubletree nor any of its Subsidiaries is or has been a member
of an affiliated group of corporations filing a consolidated federal income tax
return (or a group of corporations filing a consolidated, combined or unitary
income tax return under comparable provisions of state, local or foreign tax
law) for any taxable period beginning on or after the taxable period ending
December 31, 1993, other than a group the common parent of which is or was
Doubletree or any Subsidiary of Doubletree.
(d) Neither Doubletree nor any of its Subsidiaries has any obligation under
any agreement or arrangement with any other person with respect to Taxes of such
other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable
provisions of state, local or foreign tax law) and including any liability for
Taxes of any predecessor entity, except for obligations that are not reasonably
likely, individually or in the aggregate, to have a Doubletree Material Adverse
Effect.
Section 3.8. PROPERTIES.
(a) Neither Doubletree nor any of its Subsidiaries is in default under any
leases for real property providing for the occupancy, in each case, of (i) a
hotel or (ii) other facilities in excess of 50,000 square feet (collectively
"Material Lease(s)"), except where the existence of such defaults, individually
or in the aggregate, is not reasonably likely to have a Doubletree Material
Adverse Effect.
(b) With respect to each item of real property that Doubletree or any of its
Subsidiaries owns, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Doubletree Material Adverse
Effect: (i) Doubletree or its Subsidiary has good and clear record and
marketable title to such property, insurable by a recognized national title
insurance company at standard rates, free and clear of any security interest,
easement, covenant or other restriction, except for recorded easements,
covenants and other restrictions which do not materially impair the current uses
or occupancy of such property; and (ii) the improvements constructed on such
property are in good condition, and all mechanical and utility systems servicing
such improvements are in good condition, free in each case of material defects.
Section 3.9. INTELLECTUAL PROPERTY Doubletree owns, or is licensed or
otherwise possesses legally enforceable rights to use, all trademarks, trade
names, service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are necessary to conduct the business of Doubletree as currently conducted,
subject to such exceptions that, individually and in the aggregate, would not be
reasonably likely to have a Doubletree Material Adverse Effect. Doubletree has
no knowledge of any assertion or claim challenging the validity of any of such
intellectual property.
Section 3.10. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Doubletree has not breached, or received in writing any claim or notice
that it has breached, any of the terms or conditions of any material agreement,
contract or commitment filed as an exhibit to the Doubletree SEC Reports
("Doubletree Material Contracts") in such a manner as, individually or in the
aggregate, are reasonably likely to have a Doubletree Material Adverse Effect.
Each Doubletree Material Contract that has not expired by its terms is in full
force and effect.
(b) Without limiting Section 3.10(a), each of the management contracts and
franchise agreements to which Doubletree is a party and each of Doubletree's
Material Leases (i) is valid and binding in
18
accordance with its terms and is in full force and effect, (ii) neither
Doubletree nor any of its Subsidiaries is in default in any material respect
thereof, nor does any condition exist that with notice or lapses of time or both
would constitute a material default thereunder, and (iii) no party has given any
written or (to the knowledge of Doubletree) oral notice of termination or
cancellation thereof or that such party intends to assert a breach thereof, or
seek to terminate or cancel, any such agreement, contract or lease, in each case
as a result of the transactions contemplated hereby, subject to such exceptions
that, individually and in the aggregate, would not be reasonably likely to have
a Doubletree Material Adverse Effect.
Section 3.11. LITIGATION. Except as described in the Doubletree SEC
Reports filed prior to the date hereof, there is no action, suit or proceeding,
claim, arbitration or investigation against Doubletree pending or as to which
Doubletree has received any written notice of assertion, which, individually or
in the aggregate, is reasonably likely to have a Doubletree Material Adverse
Effect or a material adverse effect on the ability of Doubletree to consummate
the transactions contemplated by this Agreement.
Section 3.12. ENVIRONMENTAL MATTERS.
(a) To the knowledge of Doubletree and except as disclosed in the Doubletree
SEC Reports filed prior to the date hereof and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Doubletree
Material Adverse Effect: (i) Doubletree and its Subsidiaries have complied with
all applicable Environmental Laws (as defined in Section 3.12(b)); (ii) the
properties currently owned or operated by Doubletree and its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances (as defined in Section 3.12(c));
(iii) the properties formerly owned or operated by Doubletree or any of its
Subsidiaries were not contaminated with Hazardous Substances during the period
of ownership or operation by Doubletree or any of its Subsidiaries; (iv) neither
Doubletree nor its Subsidiaries are subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) neither
Doubletree nor any of its Subsidiaries has been associated with any release or
threat of release of any Hazardous Substance; (vi) neither Doubletree nor any of
its Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that Doubletree or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vii) neither Doubletree nor
any of its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving Doubletree or any of its Subsidiaries that
could reasonably be expected to result in any claims, liability, investigations,
costs or restrictions on the ownership, use or transfer of any property of
Doubletree or any of its Subsidiaries pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (A) the protection, investigation
or restoration of the environment, health and safety, or natural resources, (B)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property.
(c) As used herein, the term "Hazardous Substance" means any substance that
is: (A) listed, classified or regulated pursuant to any Environmental Law; (B)
any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; or (C) any other substance which is the subject of
regulatory action by any Governmental Entity pursuant to any Environmental Law.
Section 3.13. EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the "Doubletree Employee Plans" shall
mean all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
stock option, stock purchase, incentive, deferred compensation,
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supplemental retirement, severance and other similar employee benefit plans, and
all unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of Doubletree or any trade or
business (whether or not incorporated) which is under common control with
Doubletree within the meaning of Section 414 of the Code (an "ERISA Affiliate"),
or any Subsidiary of Doubletree (together, the "Doubletree Employee Plans").
Doubletree has listed in Section 3.13 of the Doubletree Disclosure Schedule all
Doubletree Employee Plans other plans that are "employee welfare benefit plans"
within the meaning of Section 3(1) of ERISA.
(b) With respect to each Doubletree Employee Plan, Doubletree has made
available to Promus, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Doubletree Employee Plan and
all amendments thereto, (iii) each trust agreement and group annuity contract,
if any, and all amendments thereto relating to such Doubletree Employee Plan and
(iv) the most recent actuarial report or valuation relating to a Doubletree
Employee Plan subject to Title IV of ERISA.
(c) With respect to the Doubletree Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Doubletree, there
exists no condition or set of circumstances in connection with which Doubletree
could be subject to any liability that is reasonably likely to have a Doubletree
Material Adverse Effect under ERISA, the Code or any other applicable law.
(d) With respect to the Doubletree Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Doubletree, except for obligations which, individually or in the
aggregate, are not reasonably likely to have a Doubletree Material Adverse
Effect.
(e) Except as disclosed in the Doubletree SEC Reports filed prior to the
date of this Agreement, and except as provided for in this Agreement, neither
Doubletree nor any of its Subsidiaries is a party to any oral or written (i)
agreement with any officer or other key employee of Doubletree or any of its
Subsidiaries, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Doubletree of
the nature contemplated by this Agreement, (ii) agreement with any officer of
Doubletree providing any term of employment or compensation guarantee extending
for a period longer than one year from the date hereof and for the payment of
compensation in excess of $100,000 per annum, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, the
vesting of the benefits of which will be accelerated or the funding of benefits
of which will be required, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
Section 3.14. COMPLIANCE WITH LAWS. Doubletree has complied with, is not
in violation of, and has not received any notices of violation with respect to,
any federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for failures to comply or violations which, individually or in the aggregate,
have not had and are not reasonably likely to have a Doubletree Material Adverse
Effect.
Section 3.15. ACCOUNTING AND TAX MATTERS.
(a) To the best knowledge of Doubletree, after consulting with its
independent auditors with respect to clause (i) below and its tax advisors with
respect to clause (ii) below, neither Doubletree nor any of its Affiliates (as
defined in Section 5.12) has taken or agreed to take any action which would (i)
prevent Parent from accounting for the business combination to be effected by
the Mergers as a pooling of interests or (ii) prevent the Doubletree Merger from
qualifying as a reorganization described in Section 368(a) of the Code and/or,
taken together with the Promus Merger, as a transfer of property to Parent
20
by holders of Doubletree Common Stock described in Section 351 of the Code.
Except as contemplated by the Doubletree Option Agreement, neither Doubletree
nor any of its Subsidiaries owns any shares of Promus Common Stock or other
securities convertible into shares of Promus Common Stock (exclusive of any
shares owned by Doubletree's employee benefit plans).
(b) To the best knowledge of Doubletree, the stockholders of Doubletree as a
group have no present plan, intention or arrangement to sell or otherwise
dispose of such number of the shares of Parent Common Stock received in the
Doubletree Merger as would reduce their ownership in Parent Common Stock to a
number of shares having a value, as of the date of the Doubletree Merger, of
less than eighty percent (80%) of the value of all the formerly outstanding
stock of Doubletree as of the same date.
Section 3.16. REGISTRATION STATEMENT; JOINT PROXY
STATEMENT/PROSPECTUS. The information to be supplied by Doubletree for
inclusion in the registration statement on Form S-4 pursuant to which shares of
Parent Common Stock issued in the Mergers will be registered under the
Securities Act (the "Registration Statement"), shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated in the Registration Statement or necessary in order to make the
statements in the Registration Statement, in light of the circumstances under
which they were made, not misleading. The information supplied by Doubletree for
inclusion in the joint proxy statement/prospectus to be sent to the stockholders
of Promus and Doubletree in connection with the meeting of Doubletree's
stockholders (the "Doubletree Stockholders' Meeting") and the meeting of
Promus's stockholders (the "Promus Stockholders' Meeting") to consider this
Agreement and the Mergers (the "Joint Proxy Statement/Prospectus") shall not, on
the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of
Doubletree or Promus, at the time of the Doubletree Stockholders' Meeting and
the Promus Stockholders' Meeting and at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
shall be made, is false or misleading with respect to any material fact, omit to
state any material fact necessary in order to make the statements made in the
Joint Proxy Statement/Prospectus not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Doubletree Stockholders'
Meeting or the Promus Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Doubletree or any of its Affiliates, officers or directors should be discovered
by Doubletree which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/ Prospectus, Doubletree
shall promptly inform Promus.
Section 3.17. LABOR MATTERS. Except as disclosed in the Doubletree SEC
Reports filed prior to the date hereof, neither Doubletree nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is Doubletree or any of its
Subsidiaries the subject of any material proceeding asserting that Doubletree or
any of its Subsidiaries has committed an unfair labor practice or is seeking to
compel it to bargain with any labor union or labor organization nor, as of the
date of this Agreement, is there pending or, to the knowledge of the executive
officers of Doubletree, threatened, any material labor strike, dispute, walkout,
work stoppage, slow-down or lockout involving Doubletree or any of its
Subsidiaries.
Section 3.18. INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Doubletree or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Doubletree and its Subsidiaries and
their respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a Doubletree Material Adverse Effect.
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Section 3.19. DOUBLETREE LONG-RANGE PLANS. Doubletree has provided to
Promus copies of Doubletree's most recent long-range plans prepared in draft
form by Doubletree's management and Doubletree has not adopted any other
long-range plans since January 1, 1997.
Section 3.20. OPINION OF FINANCIAL ADVISOR. The financial advisor of
Doubletree, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, has delivered to Doubletree an
opinion dated the date of this Agreement to the effect that the Doubletree
Exchange Ratio is fair to the holders of Doubletree Common Stock from a
financial point of view.
Section 3.21. NO EXISTING DISCUSSIONS. As of the date hereof, Doubletree
is not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to an Acquisition Proposal (as defined in Section
5.3).
Section 3.22. SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in DGCL Section 203) will not apply to the authorization, execution,
delivery and performance of this Agreement or the Stock Option Agreements by
Doubletree or the Stockholder Support Agreement by the parties thereto or the
consummation of the Doubletree Merger by Doubletree. No other "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation is applicable to Doubletree or (by reason of Doubletree's
participation therein) the Doubletree Merger or the other transactions
contemplated by this Agreement.
Section 3.23. DOUBLETREE RIGHTS PLAN. Under the terms of the Doubletree
Rights Plan, neither the execution of this Agreement, the Promus Stock Option
Agreement, the Stockholder Support Agreement, nor the transactions contemplated
hereby or thereby, will cause a Distribution Date to occur or cause the rights
issued pursuant to the Doubletree Rights Plan to become exercisable, and all
such rights shall become non-exercisable at the Effective Time.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PROMUS
Promus represents and warrants to Doubletree that the statements contained
in this Article IV are true and correct, except as set forth in the disclosure
schedule delivered by Promus to Doubletree on or before the date of this
Agreement (the "Promus Disclosure Schedule"). The Promus Disclosure Schedule
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article IV and the disclosure in any paragraph
shall qualify other paragraphs in this Article IV only to the extent that it is
reasonably apparent from a reading of such document that it also qualifies or
applies to such other paragraphs.
Section 4.1. ORGANIZATION OF PROMUS. Each of Promus and its Subsidiaries
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power to own, lease and
operate its property and to carry on its business as now being conducted and as
proposed to be conducted, and is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
business, properties, financial condition or results of operations of Promus and
its Subsidiaries, taken as a whole (a "Promus Material Adverse Effect"). A true
and correct copy of the Certificate of Incorporation and Bylaws of Promus has
been delivered to Doubletree. Except as set forth in the Promus SEC Reports (as
defined in Section 4.4) filed prior to the date hereof, neither Promus nor any
of its Subsidiaries directly or indirectly owns (other than ownership interests
in Promus or in one or more of its Subsidiaries) any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding (i) securities in any publicly traded company held for investment by
Promus and comprising less than five percent (5%) of the outstanding stock of
such company and (ii) any investment or series of related investments with a
book value of less than $15 million.
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Section 4.2. PROMUS CAPITAL STRUCTURE.
(a) The authorized capital stock of Promus consists of 360,000,000 shares of
Common Stock, $.10 par value, 150,000 shares of Preferred Stock, $100.00 par
value ("Promus Preferred Stock") and 5,000,000 shares of Special Stock, par
value $1.12 1/2 ("Promus Special Stock"). As of the date hereof, (i) 49,896,911
shares of Promus Common Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable, and (ii) 1,580,101 additional
shares of Promus Common Stock were held in the treasury of Promus or by
Subsidiaries of Promus. The Promus Disclosure Schedule shows the number of
shares of Promus Common Stock reserved for future issuance pursuant to stock
options granted and outstanding as of the date hereof and the plans under which
such options were granted (collectively, the "Promus Stock Plans"). As of the
date of this Agreement, none of the shares of Promus Preferred Stock or Promus
Special Stock are issued and outstanding. There are no obligations, contingent
or otherwise, of Promus or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of Promus Common Stock or the capital stock of any
Subsidiary or to provide funds to or make any material investment (in the form
of a loan, capital contribution or otherwise) in any such Subsidiary or any
other entity other than guarantees of bank obligations or indebtedness for
borrowed money of Subsidiaries entered into in the ordinary course of business
and other than any obligation the failure of which to perform or satisfy would
not have a Promus Material Adverse Effect. All of the outstanding shares of
capital stock or other ownership interests of each of Promus's Subsidiaries are
duly authorized, validly issued, fully paid and nonassessable and all such
shares (other than directors' qualifying shares in the case of foreign
Subsidiaries) are owned by Promus or another Subsidiary of Promus free and clear
of all security interests, liens, claims, pledges, agreements, limitations in
Promus's voting rights, charges or other encumbrances of any nature.
(b) Except as set forth in this Section 4.2 or as reserved for future grants
of options under the Promus Stock Plans or the Doubletree Stock Option
Agreement, and except for the preferred stock purchase rights issued and
issuable under the Rights Agreement dated as of June 30, 1995 between Promus and
Continental Stock Transfer & Trust Company (the "Promus Rights Plan"), (i) there
are no shares of capital stock of any class of Promus, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding; (ii) there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any character to which
Promus or any of its Subsidiaries is a party or by which it is bound obligating
Promus or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other ownership
interests of Promus or any of its Subsidiaries or obligating Promus or any of
its Subsidiaries to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement; and
(iii) to the best knowledge of Promus, there are no voting trusts, proxies or
other voting agreements or understandings with respect to the shares of capital
stock of Promus. All shares of Promus Common Stock subject to issuance as
specified in this Section 4.2 are duly authorized and, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be validly issued, fully paid and nonassessable.
Section 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Promus has all requisite corporate power and authority to enter into
this Agreement, the Stock Option Agreements and the Stockholder Support
Agreement and to consummate the transactions contemplated by this Agreement, the
Stock Option Agreements and the Stockholder Support Agreement. The execution and
delivery of this Agreement, the Stock Option Agreements and the Stockholder
Support Agreement and the consummation of the transactions contemplated by this
Agreement, the Stock Option Agreements and the Stockholder Support Agreement by
Promus have been duly authorized by all necessary corporate action on the part
of Promus, subject only to the approval and adoption of this Agreement and the
Promus Merger by Promus's stockholders under the DGCL. This Agreement, the Stock
Option Agreements and the Stockholder Support Agreement have been duly executed
and delivered by Promus and constitute the valid and binding obligations of
Promus, enforceable in accordance with their terms, subject to the Bankruptcy
and Equity Exception.
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(b) The execution and delivery of this Agreement, the Stock Option
Agreements and the Stockholder Support Agreement by Promus does not, and the
consummation of the transactions contemplated by this Agreement, the Stock
Option Agreements and the Stockholder Support Agreement will not, (i) conflict
with, or result in any violation or breach of, any provision of the Certificate
of Incorporation or Bylaws of Promus or any of its Subsidiaries, (ii) result in
any violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which Promus or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound (other
than pursuant to the Tranche A Credit Agreement or the Tranche B Credit
Agreement, each dated as of June 7, 1995, as amended, by and among Promus and
certain of its subsidiaries and NationsBank, N.A. (Carolinas)) or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Promus or any
of its Subsidiaries or any of its or their properties or assets, except in the
case of (ii) and (iii) for any such conflicts, violations, defaults,
terminations, cancellations or accelerations which (x) are not, individually or
in the aggregate, reasonably likely to have a Promus Material Adverse Effect or
(y) would not substantially impair or delay the consummation of the Promus
Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Promus or any of its Subsidiaries in connection with the execution
and delivery of this Agreement, the Stock Option Agreements and the Stockholder
Support Agreement or the consummation of the transactions contemplated hereby or
thereby, except for (i) the filing of the pre-merger notification report under
the HSR Act, (ii) the filing of a Certificate of Merger with respect to the
Promus Merger with the Delaware Secretary of State, (iii) the filing of the
Joint Proxy Statement/Prospectus with the SEC in accordance with the Exchange
Act and the Securities Act, (iv) such consents, approvals, orders,
authorizations, permits, filings, or registrations related to, or arising out
of, compliance with statutes, rules or regulations regulating the consumption,
sale or serving of alcoholic beverages, (v) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the laws of any foreign country and (vi)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not (x) be reasonably likely to have a Promus
Material Adverse Effect or (y) substantially impair or delay the consummation of
the Promus Merger.
Section 4.4. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Promus has filed and made available to Doubletree all forms, reports and
documents required to be filed by Promus with the SEC since January 1, 1996
(collectively, the "Promus SEC Reports"). The Promus SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such Promus SEC Reports or necessary in order to make the statements in such
Promus SEC Reports, in the light of the circumstances under which they were
make, not misleading. Other than Promus Hotels, Inc., none of Promus's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) of Promus contained in the Promus SEC Reports complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q under the Exchange Act) and fairly presented the consolidated
24
financial position of Promus and its Subsidiaries as of the dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount. The audited balance sheet of Promus as of December 31,
1996 is referred to herein as the "Promus Balance Sheet."
Section 4.5. NO UNDISCLOSED LIABILITIES. Except as disclosed in the Promus
SEC Reports filed prior to the date hereof, and except for normal or recurring
liabilities incurred since December 31, 1996 in the ordinary course of business
consistent with past practices, Promus and its Subsidiaries do not have any
liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), and whether due or to become due, which individually or
in the aggregate, are reasonably likely to have a Promus Material Adverse
Effect.
Section 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Promus SEC Reports filed prior to the date hereof, since the date of the
Promus Balance Sheet, Promus and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any event, development,
state of affairs or condition, or series or combination of events, developments,
states of affairs or conditions, which, individually or in the aggregate, has
had or which is reasonably likely to have a Promus Material Adverse Effect
(other than events, developments, states of affairs or conditions that are the
effect or result of actions taken by Doubletree or economic factors affecting
the economy as a whole or the industry in which Promus competes); (ii) any
damage, destruction or loss (whether or not covered by insurance) with respect
to Promus or any of its Subsidiaries which is reasonably likely to have a Promus
Material Adverse Effect; (iii) any material change by Promus in its accounting
methods, principles or practices to which Doubletree has not previously
consented in writing; (iv) any revaluation by Promus of any of its assets which
is reasonably likely to have a Promus Material Adverse Effect; or (v) any other
action or event that would have required the consent of Doubletree pursuant to
Section 5.1 of this Agreement had such action or event occurred after the date
of this Agreement, other than such actions or events that, individually or in
the aggregate, have not had or are not reasonably likely to have a Promus
Material Adverse Effect.
Section 4.7. TAXES.
(a) Promus and each of its Subsidiaries have (i) filed all federal, state,
local and foreign Tax returns and reports required to be filed by them prior to
the date of this Agreement (taking into account all applicable extensions), (ii)
paid or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes
for which a notice of assessment or collection has been received (other than
amounts being contested in good faith by appropriate proceedings), except in the
case of clauses (i), (ii) or (iii) for any such filings, payments or accruals
that are not reasonably likely, individually or in the aggregate, to have a
Promus Material Adverse Effect. Neither the IRS nor any other taxing authority
has asserted any claim for Taxes, or to the actual knowledge of the executive
officers of Promus, is threatening to assert any claims for Taxes, which claims,
individually or in the aggregate, are reasonably likely to have a Promus
Material Adverse Effect. Promus and each of its Subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities (or are
properly holding for such payment) all Taxes required by law to be withheld or
collected, except for amounts that are not reasonably likely, individually or in
the aggregate, to have a Promus Material Adverse Effect. Neither Promus nor any
of its Subsidiaries has made an election under Section 341(f) of the Code,
except for any such election that shall not have a Promus Material Adverse
Effect. There are no liens for Taxes upon the assets of Promus or any of its
Subsidiaries (other than liens for Taxes that are not yet due or delinquent or
that are being contested in good faith by appropriate proceedings), except for
liens that are not reasonably likely, individually or in the aggregate, to have
a Promus Material Adverse Effect.
25
(b) Neither Promus nor any of its Subsidiaries is or has been a member of an
affiliated group of corporations filing a consolidated federal income tax return
(or a group of corporations filing a consolidated, combined or unitary income
tax return under comparable provisions of state, local or foreign tax law) for
any taxable period beginning on or after February 7, 1990, other than a group
the common parent of which is or was The Promus Companies Incorporated, Promus
or any Subsidiary of Promus.
(c) Neither Promus nor any of its Subsidiaries has any obligation under any
agreement or arrangement with any other person with respect to Taxes of such
other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable
provisions of state, local or foreign tax law) and including any liability for
Taxes of any predecessor entity, except for obligations that are not reasonably
likely, individually or in the aggregate, to have an Promus Material Adverse
Effect.
Section 4.8. PROPERTIES.
(a) Neither Promus nor any of its Subsidiaries is in default under any
Material Leases, except where the existence of such defaults, individually or in
the aggregate, is not reasonably likely to have a Promus Material Adverse
Effect.
(b) With respect to each item of real property that Promus or any of its
Subsidiaries owns, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Promus Material Adverse Effect:
(i) Promus or its Subsidiary has good and clear record and marketable title to
such property, insurable by a recognized national title insurance company at
standard rates, free and clear of any security interest, easement, covenant or
other restriction, except for recorded easements, covenants and other
restrictions which do not materially impair the current uses or occupancy of
such property; and (ii) the improvements constructed on such property are in
good condition, and all mechanical and utility systems servicing such
improvements are in good condition, free in each case of material defects.
Section 4.9. INTELLECTUAL PROPERTY. Promus owns, or is licensed or
otherwise possesses legally enforceable rights to use, all trademarks, trade
names, service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, know-how, computer software programs
or applications, and tangible or intangible proprietary information or material
that are necessary to conduct the business of Promus as currently conducted,
subject to such exceptions that, individually and in the aggregate, would not be
reasonably likely to have a Promus Material Adverse Effect. Promus has no
knowledge of any assertion or claim challenging the validity of any of such
intellectual property.
Section 4.10. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Promus has not breached, or received in writing any claim or notice that
it has breached, any of the terms or conditions of any material agreement,
contract or commitment filed as an exhibit to the Promus SEC Reports ("Promus
Material Contracts") in such a manner as, individually or in the aggregate, are
reasonably likely to have a Promus Material Adverse Effect. Each Promus Material
Contract that has not expired by its terms is in full force and effect.
(b) Without limiting Section 4.10(a), each of the management contracts and
franchise agreements to which Promus is a party and each of Promus's Material
Leases (i) is valid and binding in accordance with its terms and is in full
force and effect, (ii) neither Promus nor any of its Subsidiaries is in default
in any material respect thereof, nor does any condition exist that with notice
or lapses of time or both would constitute a material default thereunder, and
(iii) no party has given any written or (to the knowledge of Promus) oral notice
of termination or cancellation thereof or that such party intends to assert a
breach thereof, or seek to terminate or cancel, any such agreement, contract or
lease, in each case as a result of the transactions contemplated hereby, subject
to such exceptions that, individually and in the aggregate, would not be
reasonably likely to have a Promus Material Adverse Effect.
Section 4.11. LITIGATION. Except as described in the Promus SEC Reports
filed prior to the date hereof, there is no action, suit or proceeding, claim,
arbitration or investigation against Promus pending or
26
as to which Promus has received any written notice of assertion, which,
individually or in the aggregate, is reasonably likely to have a Promus Material
Adverse Effect or a material adverse effect on the ability of Promus to
consummate the transactions contemplated by this Agreement.
Section 4.12. ENVIRONMENTAL MATTERS. To the knowledge of Promus and except
as disclosed in the Promus SEC Reports filed prior to the date hereof and except
for such matters that, individually or in the aggregate, are not reasonably
likely to have a Promus Material Adverse Effect: (i) Promus and its Subsidiaries
have complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by Promus and its Subsidiaries (including soils,
groundwater, surface water, buildings or other structures) are not contaminated
with any Hazardous Substances; (iii) the properties formerly owned or operated
by Promus or any of its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by Promus or any of its
Subsidiaries; (iv) neither Promus nor its Subsidiaries are subject to liability
for any Hazardous Substance disposal or contamination on any third party
property; (v) neither Promus nor any of its Subsidiaries has been associated
with any release or threat of release of any Hazardous Substance; (vi) neither
Promus nor any of its Subsidiaries has received any notice, demand, letter,
claim or request for information alleging that Promus or any of its Subsidiaries
may be in violation of or liable under any Environmental Law; (vii) neither
Promus nor any of its Subsidiaries is subject to any orders, decrees,
injunctions or other arrangements with any Governmental Entity or is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances; and (viii)
there are no circumstances or conditions involving Promus or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any property of Promus or any of its Subsidiaries pursuant to any
Environmental Law.
Section 4.13. EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the "Promus Employee Plans" shall mean
all employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar employee benefit plans, and all
unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of Promus or any ERISA Affiliate of
Promus, or any Subsidiary of Promus (together, the "Promus Employee Plans").
Promus has listed in Section 4.13 of the Promus Disclosure Schedule all Promus
Employee Plans other than plans that are "employee welfare benefit plans" within
the meaning of Section 3(1) of ERISA.
(b) With respect to each Promus Employee Plan, Promus has made available to
Doubletree, a true and correct copy of (i) the most recent annual report (Form
5500) filed with the IRS, (ii) such Promus Employee Plan and all amendments
thereto, (iii) each trust agreement and group annuity contract, if any, and all
amendments thereto relating to such Promus Employee Plan and (iv) the most
recent actuarial report or valuation relating to a Promus Employee Plan subject
to Title IV of ERISA.
(c) With respect to the Promus Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Promus, there exists
no condition or set of circumstances in connection with which Promus could be
subject to any liability that is reasonably likely to have a Promus Material
Adverse Effect under ERISA, the Code or any other applicable law.
(d) With respect to the Promus Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Promus, except for obligations which, individually or in the
aggregate, are not reasonably likely to have a Promus Material Adverse Effect.
27
(e) Except as disclosed in the Promus SEC Reports filed prior to the date of
this Agreement, and except as provided for in this Agreement, neither Promus nor
any of its Subsidiaries is a party to any oral or written (i) agreement with any
officer or other key employee of Promus or any of its Subsidiaries, the benefits
of which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Promus of the nature contemplated by this
Agreement, (ii) agreement with any officer of Promus providing any term of
employment or compensation guarantee extending for a period longer than one year
from the date hereof or for the payment of compensation in excess of $100,000
per annum, or (iii) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, the vesting of the benefits of which
will be accelerated or the funding of benefits of which will be required, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
Section 4.14. COMPLIANCE WITH LAWS. Promus has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which, individually or in the aggregate, have
not had and are not reasonably likely to have a Promus Material Adverse Effect.
Section 4.15. ACCOUNTING AND TAX MATTERS.
(a) To the best knowledge of Promus, after consulting with its independent
auditors with respect to clause (i) below and its tax advisors with respect to
clause (ii) below, neither Promus nor any of its Affiliates (as defined in
Section 5.12) has taken or agreed to take any action which would (i) prevent
Parent from accounting for the business combination to be effected by the
Mergers as a pooling of interests, or (ii) prevent the Promus Merger from
qualifying as a reorganization described in Section 368(a) of the Code and/or,
taken together with the Doubletree Merger, as a transfer of property to Parent
by holders of Promus Common Stock described in Section 351 of the Code. Except
as contemplated by the Promus Option Agreement, neither Promus nor any of its
Subsidiaries owns any shares of Doubletree Common Stock or other securities
convertible into shares of Doubletree Common Stock (exclusive of any shares
owned by Promus's employee benefit plans).
(b) To the best knowledge of Promus, the stockholders of Promus as a group
have no present plan, intention or arrangement to sell or otherwise dispose of
such number of the shares of Parent Common Stock received in the Promus Merger
as would reduce their ownership in Parent Common Stock to a number of shares
having a value, as of the date of the Promus Merger, of less than eighty percent
(80%) of the value of all the formerly outstanding stock of Promus as of the
same date.
Section 4.16. REGISTRATION STATEMENT; JOINT PROXY
STATEMENT/PROSPECTUS. The information to be supplied by Promus for inclusion in
the Registration Statement shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information to be supplied by Promus for inclusion in the Joint
Proxy Statement/ Prospectus shall not, on the date the Joint Proxy
Statement/Prospectus is first mailed to stockholders of Promus or Doubletree, at
the time of the Promus Stockholders' Meeting and the Doubletree Stockholder's
Meeting and at the Effective Time, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, omit to state any material fact
necessary in order to make the statements made in the Joint Proxy Statement/
Prospectus not false or misleading, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Promus Stockholders' Meeting or the Doubletree
Stockholders' Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to Promus or any of its Affiliates,
officers or directors should be
28
discovered by Promus which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
Promus shall promptly inform Doubletree.
Section 4.17. LABOR MATTERS. Except as disclosed in the Promus SEC Reports
filed prior to the date hereof, neither Promus nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor,
as of the date hereof, is Promus or any of its Subsidiaries the subject of any
material proceeding asserting that Promus or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization nor, as of the date of this Agreement, is
there pending or, to the knowledge of the executive officers of Promus,
threatened, any material labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving Promus or any of its Subsidiaries.
Section 4.18. INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Promus or any of its Subsidiaries are
with reputable insurance carriers, provide full and adequate coverage for all
normal risks incident to the business of Promus and its Subsidiaries and their
respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a Promus Material Adverse Effect.
Section 4.19. PROMUS LONG-RANGE PLANS. Promus has provided to Doubletree
copies of Promus's long-range plans that are substantially identical to the
long-range plans presented by Promus's management to, and adopted by, the Board
of Directors of Promus on July 23, 1997, and Promus has not adopted any other
long-range plans since such date.
Section 4.20. OPINION OF FINANCIAL ADVISOR. The financial advisor of
Promus, ▇▇ ▇▇▇▇▇▇▇▇▇▇, has delivered to Promus an opinion dated the date of this
Agreement to the effect that the Promus Exchange Ratio is fair to holders of
Promus Common Stock from a financial point of view.
Section 4.21. NO EXISTING DISCUSSIONS. As of the date hereof, Promus is
not engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal.
Section 4.22. SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in Section DGCL 203) will not apply to the authorization, execution,
delivery or performance of this Agreement or the Stock Option Agreements by
Promus or the consummation of the Promus Merger by Promus. No other "fair
price," "moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation is applicable to Promus or (by reason of Promus's
participation therein) the Promus Merger or the other transactions contemplated
by this Agreement.
Section 4.23. PROMUS RIGHTS PLAN. Under the terms of the Promus Rights
Plan, neither the execution of this Agreement or the Doubletree Stock Option
Agreement, nor the transactions contemplated hereby or thereby will cause a
Distribution Date to occur or cause the rights issued pursuant to the Promus
Rights Plan to become exercisable, and all such rights shall become
non-exercisable at the Effective Time.
ARTICLE V.
COVENANTS
Section 5.1. CONDUCT OF BUSINESS. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Doubletree and Promus each agrees as to itself and its
respective Subsidiaries (except to the extent that the other party shall
otherwise consent in writing) to carry on its business in the usual, regular and
ordinary course in substantially the same manner as previously conducted, to pay
its debts and taxes when due subject to good
29
faith disputes over such debts or taxes, to pay or perform its other obligations
when due, and, to the extent consistent with such business, use all reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, and others having business dealings with it. Except as
expressly contemplated by this Agreement or the Stock Option Agreements or as
set forth in Section 5.1 of the Doubletree Disclosure Schedule, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Doubletree and Promus each
shall not (and shall not permit any of its respective Subsidiaries to), without
the written consent of the other party:
(a) Accelerate, amend or change the period of exercisability of options
or restricted stock granted under any employee stock plan of such party or
authorize cash payments in exchange for any options granted under any of
such plans except as required by the terms of such plans or any related
agreements (including severance agreements) in effect as of the date of this
Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock,
or split, combine or reclassify any of its capital stock 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 purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service to such party;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than (i) the grant of options consistent with past
practices to employees or directors, which options represent in the
aggregate the right to acquire no more than 25,000 shares (net of
cancellations) of Doubletree Common Stock or Promus Common Stock, as the
case may be, (ii) the issuance of shares of Doubletree Common Stock or
Promus Common Stock, as the case may be, pursuant to the exercise of options
or warrants outstanding on the date of this Agreement, and (iii) the
issuance of capital stock under the Doubletree Rights Plan or the Promus
Rights Plan if required by the respective terms thereof;
(d) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire
or agree to acquire any assets (other than hotel properties, inventory and
other immaterial assets, in each case in the ordinary course of business);
(e) Sell, lease, license or otherwise dispose of any of its material
properties or assets, except for transactions (including sales, leases,
licenses or dispositions of hotel properties, inventory and other immaterial
assets) in the ordinary course of business;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary
or wages of employees (other than officers) in accordance with past
practices, (ii) grant any additional severance or termination pay to, or
enter into any employment or severance agreements with, any employees or
officers, (iii) enter into any collective bargaining agreement (other than
as required by law or extensions to existing agreements in the ordinary
course of business), (iv) establish, adopt, enter into or amend any bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
30
(g) Amend or propose to amend its Certificate of Incorporation or Bylaws
except as contemplated by this Agreement;
(h) Incur any indebtedness for borrowed money other than in the ordinary
course of business;
(i) Take any action that would or is reasonably likely to result in a
material breach of any provision of this Agreement or the Stock Option
Agreements or in any of its representations and warranties set forth in this
Agreement or the Stock Option Agreements being untrue on and as of the
Closing Date;
(j) Make or rescind any material express or deemed election relating to
Taxes, settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes, or make any material change to any of its methods of reporting income
or deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
December 31, 1996, except as may be required by applicable law;
(k) Settle any litigation relating to the transactions contemplated
hereby other than any settlement which would not (i) have a Doubletree
Material Adverse Effect (if settled by Doubletree), a Promus Material
Adverse Effect (if settled by Promus) or a material adverse effect on the
business, properties, financial condition or results of operations of Parent
(if settled by either Doubletree or Promus) or (ii) adversely effect the
consummation of the transactions contemplated hereby; or
(l) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (k) above.
Section 5.2. COOPERATION; NOTICE; CURE. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of
Doubletree and Promus shall confer on a regular and frequent basis with one or
more representatives of the other party to report on the general status of
ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Mergers and the transactions contemplated
hereby and thereby. Each of Doubletree and Promus shall promptly notify the
other in writing of, and will use all commercially reasonable efforts to cure
before the Closing Date, any event, transaction or circumstance, as soon as
practical after it becomes known to such party, that causes or will cause any
covenant or agreement of Doubletree or Promus under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
Doubletree or Promus contained in this Agreement. No notice given pursuant to
this paragraph shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
Section 5.3. NO SOLICITATION.
(a) Doubletree and Promus each shall not, directly or indirectly, through
any officer, director, employee, financial advisor, representative or agent of
such party (i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer for
a merger, consolidation, business combination, sale of substantial assets, sale
of shares of capital stock (including without limitation by way of a tender
offer) or similar transaction involving such party or any of its Subsidiaries,
other than the transactions contemplated by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions with any person (or group
of persons) other than Doubletree or Promus or their respective affiliates (a
"Third Party") concerning, or provide any non-public information to any person
or entity relating to, any Acquisition Proposal, or (iii) agree to or recommend
any Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent Doubletree or Promus, or their respective Board of
Directors, from (A) furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide
31
written Acquisition Proposal by such person or entity or modifying or
withdrawing its recommendation with respect to the transactions contemplated
hereby or recommending an unsolicited bona fide written Acquisition Proposal to
the stockholders of such party, if and only to the extent that (1) the Board of
Directors of such party believes in good faith (after consultation with its
financial advisor) that such Acquisition Proposal is reasonably capable of being
completed on the terms proposed and, after taking into account the strategic
benefits anticipated to be derived from the Mergers and the prospects of
Doubletree and Promus as a combined company, would, if consummated, result in a
transaction more favorable to the stockholders of such party over the long term
than the transaction contemplated by this Agreement (a "Superior Proposal") and
the Board of Directors of such party determines in good faith after consultation
with outside legal counsel that such action is required for such Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law and (2) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such person or entity, such Board of Directors
receives from such person or entity an executed confidentiality and standstill
agreement with terms no less favorable to such party than those contained in the
Confidentiality Agreements, each dated August 16, 1997 between Promus and
Doubletree (the "Confidentiality Agreements"); or (B) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal. Each
of Doubletree and Promus agrees not to release any third party from, or waive
any provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another person who has made, or who may
reasonably be considered likely to make, an Acquisition Proposal, unless its
Board of Directors determines in good faith after consultation with outside
legal counsel that such action is required for such Board of Directors to comply
with its fiduciary duties to stockholders under applicable law.
(b) Doubletree and Promus shall each notify the other party immediately
after receipt by Doubletree or Promus (or any of their advisors) of any
Acquisition Proposal or any request for nonpublic information in connection with
an Acquisition Proposal or for access to the properties, books or records of
such party by any person or entity that informs such party that it is
considering making, or has made, an Acquisition Proposal. Such notice shall be
made orally and in writing and shall indicate in reasonable detail the identity
of the offeror and the terms and conditions of such proposal, inquiry or
contact. Such party shall continue to keep the other party hereto informed, on a
current basis, of the status of any such discussions or negotiations and the
terms being discussed or negotiated.
Section 5.4. JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practical after the execution of this Agreement,
Doubletree and Promus shall prepare and file with the SEC the Joint Proxy
Statement/Prospectus and the Registration Statement in which the Joint Proxy
Statement/Prospectus will be included as a prospectus, provided that Doubletree
and Promus may delay the filing of the Registration Statement until approval of
the Joint Proxy Statement/ Prospectus by the SEC. Doubletree and Promus shall
use all reasonable efforts to cause the Registration Statement to become
effective as soon after such filing as practical. The Joint Proxy
Statement/Prospectus shall include the recommendation of the Board of Directors
of Doubletree in favor of adoption of this Agreement and the Doubletree Merger
and the recommendation of the Board of Directors of Promus in favor of adoption
of this Agreement and the Promus Merger; provided that the Board of Directors of
either party may modify or withdraw such recommendation if such Board of
Directors believes in good faith after consultation with outside legal counsel
that the modification or withdrawal of such recommendation is required for such
Board of Directors to comply with its fiduciary duties under applicable law.
(b) Doubletree and Promus shall make all necessary filings with respect to
the Merger under the Securities Act, the Exchange Act, applicable state blue sky
laws and the rules and regulations thereunder.
Section 5.5. NASDAQ QUOTATION AND NYSE LISTING. Each of Doubletree and
Promus agrees to continue the quotation and listing of Doubletree Common Stock
and Promus Common Stock, respectively, on NASDAQ National Market and the NYSE,
respectively, during the term of this Agreement.
32
Section 5.6. ACCESS TO INFORMATION. Upon reasonable notice, Doubletree and
Promus shall each (and shall cause each of their respective Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its personnel, properties, books,
contracts, commitments and records and, during such period, each of Doubletree
and Promus shall, and shall cause each of their respective Subsidiaries to,
furnish promptly to the other (a) copies of monthly financial reports and
development reports, (b) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal securities laws and (c) all other information concerning
its business, properties and personnel as such other party may reasonably
request. The parties will hold any such information which is nonpublic in
confidence in accordance with the Confidentiality Agreements. No information or
knowledge obtained in any investigation pursuant to this Section 5.6 shall
affect or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Merger.
Section 5.7. STOCKHOLDERS' MEETINGS. Doubletree and Promus each shall call
a meeting of its respective stockholders to be held as promptly as practicable
for the purpose of voting, in the case of Doubletree, upon this Agreement and
the Doubletree Merger and, in the case of Promus, upon this Agreement and the
Promus Merger. Subject to Sections 5.3 and 5.4, Doubletree and Promus shall,
through their respective Boards of Directors, recommend to their respective
stockholders adoption of this Agreement and approval of such matters and shall
coordinate and cooperate with respect to the timing of such meetings and shall
use their best efforts to hold such meetings on the same day and as soon as
practicable after the date hereof. Unless otherwise required to comply with the
applicable fiduciary duties of the respective directors of Doubletree and
Promus, as determined by such directors in good faith after consultation with
outside legal counsel, each party shall use all reasonable efforts to solicit
from stockholders of such party proxies in favor of such matters. Doubletree and
Promus intend to submit additional proposals to their respective stockholders at
the Doubletree Stockholders' Meeting and the Promus Stockholders' Meeting,
respectively, separate from the proposals referred to in the first sentence of
this Section 5.7. The approval by Doubletree's stockholders or Promus's
stockholders, as the case may be, of such additional proposals shall not be a
condition to the closing of the Mergers under this Agreement.
Section 5.8. LEGAL CONDITIONS TO MERGER.
(a) Doubletree and Promus shall each use all reasonable efforts to (i) take,
or cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary and proper under applicable law to consummate and make
effective the transactions contemplated hereby as promptly as practicable, (ii)
obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by Doubletree or Promus or any of their Subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby including, without
limitation, the Mergers, and (iii) as promptly as practicable, make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Mergers required under (A) the Securities Act
and the Exchange Act, and any other applicable federal or state securities laws,
(B) the HSR Act and any related governmental request thereunder, and (C) any
other applicable law. Doubletree and Promus shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested
in connection therewith. Doubletree and Promus shall use their reasonable
efforts to furnish to each other all information required for any application or
other filing to be made pursuant to the rules and regulations of any applicable
law (including all information required to be included in the Joint Proxy
Statement/Prospectus and the Registration Statement) in connection with the
transactions contemplated by this Agreement.
(b) Doubletree and Promus agree, and shall cause each of their respective
Subsidiaries, to cooperate and to use their respective reasonable efforts to
obtain any government clearances required for Closing
33
(including through compliance with the HSR Act and any applicable foreign
government reporting requirements), to respond to any government requests for
information, and to contest and resist any action, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an "Order") that restricts, prevents or prohibits the
consummation of the Mergers or any other transactions contemplated by this
Agreement. The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act or any other federal, state or
foreign antitrust or fair trade law. Doubletree and Promus shall cooperate and
work together in any proceedings or negotiations with any Governmental Entity
relating to any of the foregoing. Notwithstanding anything to the contrary in
this Section 5.8, neither Doubletree nor Promus, nor any of their respective
Subsidiaries, shall be required to take any action that would reasonably be
expected to substantially impair the overall benefits expected, as of the date
hereof, to be realized from the consummation of the Mergers.
(c) Each of Doubletree and Promus shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, all reasonable efforts to obtain any
third party consents related to or required in connection with the Mergers.
Section 5.9. PUBLIC DISCLOSURE. Doubletree and Promus shall agree on the
form and content of the initial press release regarding the transactions
contemplated hereby and thereafter shall consult with each other before issuing,
and use all reasonable efforts to agree upon, any press release or other public
statement with respect to any of the transactions contemplated hereby and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law.
Section 5.10. NONRECOGNITION EXCHANGE. From and after the date hereof and
until the Effective Time, neither Doubletree nor Promus, nor any of their
respective Subsidiaries or other Affiliates shall knowingly take any action, or
knowingly fail to take any action, that is reasonably likely to jeopardize the
treatment of either of the Mergers as a reorganization described in Section
368(a) of the Code and/or, taken together with the other of the Mergers, as a
transfer of property to Parent by holders of Doubletree Common Stock or Promus
Common Stock, as applicable, described in Section 351 of the Code.
Section 5.11. POOLING ACCOUNTING. From and after the date hereof and until
the Effective Time, neither Doubletree nor Promus, nor any of their respective
Subsidiaries or other Affiliates shall knowingly take any action, or knowingly
fail to take any action, that is reasonably likely to jeopardize the treatment
of the Mergers as a pooling of interests for accounting purposes.
Section 5.12. AFFILIATE AGREEMENTS. Upon the execution of this Agreement,
Doubletree and Promus will provide each other with a list of those persons who
are, in Doubletree's or Promus's respective reasonable judgment, "affiliates" of
Doubletree or Promus, respectively, within the meaning of Rule 145 (each such
person who is an "affiliate" of Doubletree or Promus within the meaning of Rule
145 is referred to as an "Affiliate") promulgated under the Securities Act
("Rule 145"). Doubletree and Promus shall provide each other such information
and documents as the other party shall reasonably request for purposes of
reviewing such list and shall notify the other party in writing regarding any
change in the identity of its Affiliates prior to the Closing Date. Doubletree
and Promus shall each use all reasonable efforts to deliver or cause to be
delivered to each other by October 15, 1997 (and in any case prior to the
Effective Time) from each of its Affiliates, an executed Affiliate Agreement, in
substantially the form of Exhibit F (with respect to affiliates of Doubletree)
or Exhibit G (with respect to affiliates of Promus) attached hereto (each, an
"Affiliate Agreement," and together, the "Affiliate Agreements").
Section 5.13. NYSE LISTING. Doubletree and Promus shall cause Parent to
promptly prepare and submit to the NYSE a listing application covering the
shares of Parent Common Stock to be issued in the Mergers and upon exercise of
Doubletree Stock Options, the GEPT Warrant and Promus Stock Options,
34
and shall use all reasonable efforts to cause such shares to be approved for
listing on the NYSE, prior to the Effective Time, subject to official notice of
issuance.
Section 5.14. STOCK PLANS.
(a) At the Effective Time, each outstanding option to purchase shares of
Doubletree Common Stock (an "Doubletree Stock Option") under the Doubletree
Stock Plans and each outstanding option to purchase shares of Promus Common
Stock (a "Promus Stock Option") under the Promus Stock Plans, in each case
whether vested or unvested, shall be deemed to constitute an option to acquire,
on the same terms and conditions as were applicable under such Doubletree Stock
Option or Promus Stock Option, as the case may be, the same number of shares of
Parent Common Stock as the holder of such Doubletree Stock Option or Promus
Stock Option, as the case may be, would have been entitled to receive pursuant
to the Doubletree Merger or the Promus Merger, respectively, had such holder
exercised such option in full immediately prior to the Effective Time (rounded
downward to the nearest whole number), at a price per share (rounded downward to
the nearest whole cent) equal to (y) the aggregate exercise price for the shares
of Doubletree Common Stock or Promus Common Stock, as the case may be,
purchasable pursuant to such Doubletree Stock Option or such Promus Stock Option
immediately prior to the Effective Time divided by (z) the number of full shares
of Parent Common Stock deemed purchasable pursuant to such Doubletree Stock
Option or Promus Stock Option, as the case may be, in accordance with the
foregoing.
(b) As soon as practicable after the Effective Time, Parent shall deliver to
the participants in the Doubletree Stock Plans and the Promus Stock Plans
appropriate notice setting forth such participants' rights pursuant thereto and
the grants pursuant to Doubletree Stock Plans or Promus Stock Plans, as the case
may be, shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 5.14 after giving effect to the
Mergers).
(c) Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery under
Doubletree Stock Plans and Promus Stock Plans assumed in accordance with this
Section 5.14. As soon as practicable after the Effective Time, Parent shall file
a registration statement on Form S-8 (or any successor or other appropriate
forms), or another appropriate form with respect to the shares of Parent Common
Stock subject to such options and shall use its reasonable efforts to maintain
the effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
(d) The Board of Directors of each of Doubletree and Promus shall, prior to
or as of the Effective Time, take all necessary actions, pursuant to and in
accordance with the terms of the Doubletree Stock Plans and the instruments
evidencing the Doubletree Stock Options, or the Promus Stock Plans and the
instruments evidencing the Promus Stock Options, as the case may be, to provide
for the conversion of the Doubletree Stock Options and the Promus Stock Options
into options to acquire Parent Common Stock in accordance with this Section 5.14
without obtaining consent of the holders of the Doubletree Stock Options or
Promus Stock Options in connection with such conversion; provided, however, that
Promus shall use all reasonable efforts to obtain from each holder of Promus
Stock Options a waiver of any right of such holder to receive any cash payment
which may become due with respect to any Promus Stock Options that are
exercisable immediately prior to the Effective Time as a result of the
consummation of the transactions contemplated hereby.
(e) The Board of Directors of each of Doubletree and Promus shall, prior to
or as of the Effective Time, take appropriate action to approve the deemed
cancellation of the Doubletree Stock Options or Promus Stock Options, as the
case may be, for purposes of Section 16(b) of the Exchange Act. The Board of
Directors of Parent shall, prior to or as of the Effective Time, take
appropriate action to approve the deemed grant of options to purchase Parent
Common Stock under the Doubletree Stock Options and the Promus Stock Options (as
converted pursuant to this Section 5.14) for purposes of Section 16(b) of the
Exchange Act.
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Section 5.15. BROKERS OR FINDERS. Each of Doubletree and Promus
represents, as to itself, its Subsidiaries and its Affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement
except ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, whose fees and expenses will be paid
by Doubletree in accordance with Doubletree's agreement with such firm (a copy
of which has been delivered by Doubletree to Promus prior to the date of this
Agreement), and ▇▇ ▇▇▇▇▇▇▇▇▇▇, whose fees and expenses will be paid by Promus in
accordance with Promus's agreement with such firm (a copy of which has been
delivered by Promus prior to the date of this Agreement). Each of Promus and
Doubletree agrees to indemnify and hold the other harmless from and against any
and all claims, liabilities or obligations with respect to any such fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or any of its Affiliates.
Section 5.16. INDEMNIFICATION.
(a) From and after the Effective Time, Parent agrees that it will, and will
cause the Surviving Corporations to, indemnify and hold harmless each present
and former director and officer of Doubletree and Promus (the "Indemnified
Parties"), against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities or amounts paid in settlement
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that Doubletree or Promus, as the case may be, would
have been permitted under Delaware law and its certificate of incorporation or
bylaws in effect on the date hereof to indemnify such Indemnified Party (and
Parent and the Surviving Corporation shall also advance expenses as incurred to
the fullest extent permitted under applicable law, provided the Indemnified
Party to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Indemnified Party is not
entitled to indemnification).
(b) For a period of six years after the Effective Time, Parent shall
maintain or shall cause the Surviving Corporations to maintain (to the extent
available in the market) in effect a directors' and officers' liability
insurance policy covering those persons who are currently covered by
Doubletree's or Promus's directors' and officers' liability insurance policy
(copies of which have been heretofore delivered by Doubletree and Promus to each
other) with coverage in amount and scope at least as favorable as Doubletree's
or Promus's existing coverage; provided that in no event shall Parent or the
Surviving Corporations be required to expend in the aggregate in excess of 200%
of the annual premium currently paid by Doubletree and Promus for such coverage;
and if such premium would at any time exceed 200% of the such amount, then the
Parent or the Surviving Corporations shall maintain insurance policies which
provide the maximum and best coverage available at an annual premium equal to
200% of such amount.
(c) The provisions of this Section 5.16 are intended to be an addition to
the rights otherwise available to the current officers and directors of
Doubletree and Promus by law, charter, statute, bylaw or agreement, and shall
operate for the benefit of, and shall be enforceable by, each of the Indemnified
Parties, their heirs and their representatives.
Section 5.17. LETTER OF PROMUS'S ACCOUNTANTS. Promus shall use all
reasonable efforts to cause to be delivered to Doubletree and Promus a letter of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, Promus's independent auditors, dated a date within two
business days before the date on which the Registration Statement shall become
effective and addressed to Doubletree, in form reasonably satisfactory to
Doubletree and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
36
Section 5.18. LETTER OF DOUBLETREE'S ACCOUNTANTS. Doubletree shall use all
reasonable efforts to cause to be delivered to Promus and Doubletree a letter of
KPMG Peat Marwick LLP, Doubletree's independent auditors, dated a date within
two business days before the date on which the Registration Statement shall
become effective and addressed to Promus, in form reasonably satisfactory to
Promus and customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement.
Section 5.19. STOCK OPTION AGREEMENTS. Promus and Doubletree each agree to
fully perform their respective obligations under the Stock Option Agreements.
Section 5.20. POST-MERGER CORPORATE GOVERNANCE; EMPLOYMENT ARRANGEMENTS.
(a) At the Effective Time, the total number of persons serving on the Board
of Directors of Parent shall be fourteen (unless otherwise agreed in writing by
Doubletree and Promus prior to the Effective Time), half of whom shall be
Doubletree Directors and half of whom shall be Promus Directors (as such terms
are defined below), all of which Doubletree Directors and Promus Directors shall
be spread as evenly as possible among Parent's three classes of Directors. The
persons to serve initially on the Board of Directors of Parent at the Effective
Time who are Doubletree Directors shall be selected solely by and at the
absolute discretion of the Board of Directors of Doubletree prior to the
Effective Time; and the persons to serve initially on the Board of Directors of
Parent at the Effective Time who are Promus Directors shall be selected solely
by and at the absolute discretion of the Board of Directors of Promus prior to
the Effective Time. In the event that, prior to the Effective Time, any person
so selected to serve on the Board of Directors of Parent after the Effective
Time is unable or unwilling to serve in such position, the Board of Directors
which selected such person shall designate another of its members to serve in
such person's stead in accordance with the provisions of the immediately
preceding sentence. From and after the Effective Time and until December 31,
2002, (a) the Board of Directors of Parent and each Committee of the Board of
Directors of Parent as constituted following each election of Directors shall
consist of an equal number of Doubletree Directors and Promus Directors, and (b)
the size of the Board of Directors of Parent and each Committee of the Board of
Directors of Parent shall not be increased unless such increase is approved by
75% of the members thereof. It is the intention of the parties hereto that ▇▇.
▇▇▇▇ ▇▇▇▇ shall be designated as the initial Chairman of the Human Resources
Committee of Parent immediately following the Effective Time. If, at any time
during the period referenced in the second preceding sentence, the number of
Doubletree Directors and Promus Directors serving, or that would be serving
following the next stockholders' meeting at which Directors are to be elected,
as Directors of Parent or as members of any Committee of the Board of Directors
of Parent, would not be equal, then, subject to the fiduciary duties of the
Directors of Parent, the Board of Directors and the Nominating Committee thereof
shall nominate for election at the next stockholders' meeting at which Directors
are to be elected, such person or persons as may be requested by the remaining
Doubletree Directors (if the number of Doubletree Directors is, or would
otherwise become, less than the number of Promus Directors) or by the remaining
Promus Directors (if the number of Promus Directors is, or would otherwise
become, less than the number of Doubletree Directors) to ensure that there shall
be an equal number of Doubletree Directors and Promus Directors. The provisions
of the preceding sentence shall not apply in respect of any stockholders'
meeting which takes place after December 31, 2002. The term "Doubletree
Director" means (i) any person serving as a Director of Doubletree or any of its
Subsidiaries on the date hereof who becomes a Director of Parent at the
Effective Time and (ii) any person who becomes a Director of Parent pursuant to
the second preceding sentence and who is designated by the Doubletree Directors;
and the term "Promus Director" means (i) any person serving as a Director of
Promus or any of its Subsidiaries on the date hereof who becomes a Director of
Parent at the Effective Time and (ii) any person who becomes a Director of
Parent pursuant to the second preceding sentence and who is designated by the
Promus Directors.
(b) At the Effective Time, pursuant to the terms of the employment contracts
referred to in Section 5.20(c) hereof, (i) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the current Chief
Executive Officer of Promus, shall hold
37
the position of Chief Executive Officer and Chairman of the Board of Parent,
(ii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the current President and Chief Executive Officer of
Doubletree, shall hold the position of President and Chief Operating Officer of
Parent, (iii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the current Executive Vice President and
Chief Financial Officer of Doubletree, shall hold the position of Executive Vice
President and Chief Financial Officer of Parent and (iv) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the
current Executive Vice President, Development of Promus, shall hold the position
of Executive Vice President, Development of Parent. ▇▇. ▇▇▇▇▇▇▇ will continue as
Chairman of the Board and Chief Executive Officer of Parent until his retirement
no later than December 31, 1999, and, pursuant to the terms of the employment
contracts referred to in Section 5.20(c) hereof and subject to the Bylaws of
Parent, ▇▇. ▇▇▇▇▇▇▇▇ will succeed ▇▇. ▇▇▇▇▇▇▇ as Chairman of the Board and Chief
Executive Officer of Parent. If any of the persons identified above in this
Section 5.20(b) is unable or unwilling to hold such offices as set forth above,
his successor shall be selected by the Board of Directors of Parent in
accordance with the Bylaws of Parent. The authority, duties and responsibilities
of the Chairman and Chief Executive Officer, the President and Chief Operating
Officer, the Executive Vice President and Chief Financial Officer and the
Executive Vice President, Development shall be set forth in the employment
contracts entered into pursuant to Section 5.20(c) hereof, which employment
contracts shall also set forth in their entirety the rights and remedies of
Messrs. Schultz, Kelleher, Perocchi and ▇▇▇▇▇▇▇ with respect to employment by
Parent , and none of them shall have any right, remedy or cause of action under
this Section 5.20, nor shall they be third party beneficiaries of this Section
5.20.
(c) Prior to the Closing, Parent shall offer to enter into employment
agreements with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ on substantially the terms previously agreed to by Doubletree
and Promus.
(d) At the Effective Time, Parent shall have an Executive Committee which
initially will be comprised of the following four members of the Board of
Directors of Parent: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇. In addition, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall be an ex-officio
member of the Executive Committee with the right to attend but not vote at all
meetings of the Executive Committee. The Executive Committee shall have
responsibility for developing Parent's long-term strategic plans, making
significant capital allocation decisions and such other duties and
responsibilities as specified by the Board of Directors of Parent at or after
the Effective Time. The Executive Committee also shall be required to oversee
the implementation of Promus's existing 100% guest satisfaction guarantee
program at all of Promus's and Doubletree's hotel properties following the
Effective Time. Each member of the Executive Committee that is not an employee
of Parent will be entitled to receive $300,000 per year as compensation for
serving on the Executive Committee.
(e) Each of Doubletree and Promus shall cause Parent to incorporate the
provisions contained in this Section 5.20 into the Bylaws of Parent in effect at
the Effective Time, which provisions shall thereafter be amended only with the
approval of 75% of the members of the Board of Directors of Parent.
Section 5.21. NAME OF PARENT. At the Effective Time, Parent shall change
its corporate name to Promus Hotel Corporation.
Section 5.22. PARENT STOCKHOLDER RIGHTS PLAN. Prior to the Effective Time,
Doubletree and Promus shall cause Parent to adopt a Stockholder Rights Plan (the
"Parent Rights Plan") that is substantially similar to the Promus Rights Plan,
with such modifications as are acceptable to both Doubletree and Promus.
38
Section 5.23. GEPT WARRANT; DOUBLETREE REGISTRATION RIGHTS AGREEMENT
(a) At the Effective Time, Parent shall assume all obligations under the
GEPT Warrant, and the holder of the GEPT Warrant thereafter shall have the right
to acquire, on the same pricing and payment terms and conditions as are
currently applicable under the GEPT Warrant, the same number of shares of Parent
Common Stock as the holder of the GEPT Warrant would have been entitled to
receive pursuant to the Doubletree Merger had such holder exercised the GEPT
Warrant in full immediately prior to the Effective Time (rounded downward to the
nearest whole number), at the price per share (rounded downward to the nearest
whole cent) equal to (y) the aggregate exercise price for the shares of
Doubletree Common Stock purchasable pursuant to the GEPT Warrant immediately
prior to the Effective Time divided by (z) the number of full shares of Parent
Common Stock deemed purchasable pursuant to the GEPT Warrant in accordance with
the foregoing.
(b) At the Effective Time, Doubletree and Promus shall cause Parent to enter
into a Registration Rights Agreement (the "Parent Registration Rights
Agreement") substantially similar to the Incorporation and Registration Rights
Agreement dated as of December 16, 1993, as amended on June 30, 1994, February
27, 1996 and November 8, 1996 by and among Doubletree and certain stockholders
of Doubletree (the "Doubletree Registration Rights Agreement") pursuant to which
Parent will provide registration rights to parties to the Doubletree
Registration Rights Agreement (other than Doubletree) with respect to all shares
of Parent Common Stock issued in the Doubletree Merger on account of the shares
of Doubletree Common Stock covered by the Doubletree Registration Rights
Agreement.
Section 5.24. CONVEYANCE TAXES. Doubletree and Promus shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees or any similar taxes which become payable
in connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
Section 5.25. TRANSFER TAXES. Doubletree shall pay, and Promus shall pay,
on behalf of the stockholders of Doubletree and Promus, respectively, any New
York State Real Estate Transfer Tax, New York City Real Property Transfer Tax,
New York State Stock Transfer Tax and any similar taxes imposed on the
stockholders of Doubletree and Promus, respectively, by any other State of the
United States (and any interest with respect to such taxes) (the "Transfer
Taxes"), which become payable in connection with the transactions contemplated
by this Agreement. Doubletree and Promus shall cooperate in the preparation,
execution and filing of any required returns with respect to such Transfer Taxes
(including returns on behalf of the stockholders of Doubletree and Promus) and
in the determination of the portion of the consideration allocable to the real
property of Doubletree and the Doubletree Subsidiaries and Promus and the Promus
Subsidiaries in New York State and City (or in any other jurisdiction, if
applicable). The Joint Proxy Statement/Prospectus shall provide that the
stockholders of Doubletree and Promus shall be deemed to have (i) authorized
Doubletree and Promus, respectively, to prepare, execute and file any tax
returns relating to Transfer Taxes and pay any Transfer Taxes arising in
connection with the Mergers, in each case, on behalf of such holders and (ii)
agreed to be bound by the values and allocations established by Doubletree and
Promus in the preparation of any return with respect to the Transfer Taxes, if
applicable.
Section 5.26. STOCKHOLDER LITIGATION. Each of Doubletree and Promus shall
give the other the reasonable opportunity to participate in the defense of any
stockholder litigation against Doubletree or Promus, as applicable, and its
directors relating to the transactions contemplated hereby.
39
Section 5.27. EMPLOYEE BENEFITS; SEVERANCE.
(a) Parent shall cause to continue to be maintained the Doubletree and
Promus annual bonus plans for management employees for the 1997 fiscal year and
shall calculate the amounts payable to participants thereunder on a basis
consistent with the terms of each such plan and the past practice of Doubletree
or Promus, as applicable.
(b) For purposes of determining eligibility to participate, vesting,
entitlement to benefits and in all other respects where length of service is
relevant (except for pension benefit accruals) under any employee benefit plan
or arrangement covering employees of Doubletree and its Subsidiaries
("Doubletree Employees") employees of Promus and its Subsidiaries ("Promus
Employees") following the Effective Time, Parent shall cause such plans or
arrangements to recognize service credit for service with Doubletree or Promus
(as applicable) and any of their respective Subsidiaries to the same extent such
service was recognized under the applicable employee benefit plans immediately
prior to the Effective Time.
(c) At the Effective Time, Parent shall assume and honor in accordance with
their terms the severance agreements and severance pay policies identified in
Section 5.27 of the Doubletree Disclosure Schedule and Section 5.27 of the
Promus Disclosure Schedule.
(d) Promus and Doubletree agree that each may enter into retention and
transition bonus arrangements with its employees prior to the Effective Time,
with the terms and amounts of such payments to be determined jointly by the
Chief Executive Officers of Promus and Doubletree; provided, however, that in no
event shall the aggregate of all such payments exceed approximately $2.5
million.
(e) Promus agrees to use all reasonable efforts, including obtaining any
necessary employee consents, to prevent the automatic funding of any escrow,
trust or similar arrangement pursuant to any employment agreement, arrangement
or benefit plan that arises in connection with the execution of this Agreement
or the consummation of any of the transactions contemplated hereby.
ARTICLE VI.
CONDITIONS TO MERGER
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS. The respective obligations of each party to this Agreement to effect
the Mergers shall be subject to the satisfaction or waiver by each party prior
to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement, the Doubletree Merger and
the Promus Merger shall have been approved in the manner required under the
DGCL by the respective holders of the issued and outstanding shares of
capital stock of Doubletree and Promus.
(b) HSR ACT. The waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated.
(c) APPROVALS. Other than the filing provided for by Section 1.4, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity
the failure of which to file, obtain or occur is reasonably likely to have a
Doubletree Material Adverse Effect or a Promus Material Adverse Effect shall
have been filed, been obtained or occurred.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(e) NO INJUNCTIONS. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any order, executive order, stay, decree,
judgment or injunction or statute, rule,
40
regulation which is in effect and which has the effect of making the Mergers
illegal or otherwise prohibiting consummation of the Mergers.
(f) POOLING LETTERS. Doubletree and Promus shall have received letters
from KPMG Peat Marwick LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, respectively, addressed
to Doubletree and Promus, respectively, regarding their concurrence with the
respective conclusions of management of Doubletree and Promus, as to the
appropriateness of the pooling of interests accounting, under Accounting
Principles Board Opinion No. 16 for the transactions contemplated hereby, it
being agreed that Doubletree and Promus shall each provide reasonable
cooperation to KPMG Peat Marwick LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to enable them
to issue such letters.
(g) NYSE LISTING. The shares of Parent Common Stock to be issued in
the Merger and upon exercise of Doubletree Options, the GEPT Warrant and
Promus Options shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(h) CORPORATE GOVERNANCE. Doubletree and Promus shall have taken all
actions necessary so that (i) not later than the Effective Time, the
Certificate of Incorporation and Bylaws of Parent shall have been amended to
be substantially in the form of Exhibit D and Exhibit E hereto; (ii) at the
Effective Time, the composition of the Board of Directors of Parent and of
each Committee of the Board of Directors of Parent shall comply with Section
5.20 hereof (assuming Doubletree has designated the Doubletree Directors and
Promus has designated the Promus Directors, in each case as contemplated by
Section 5.20(a) hereof); and (iii) not later than the Effective Time, Parent
shall have adopted the Parent Rights Plan.
Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF DOUBLETREE. The
obligation of Doubletree to effect the Doubletree Merger is subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by Doubletree:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Promus set forth in this Agreement shall be true and correct as of the
date of this Agreement and (except to the extent such representations speak
as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, except for, (i) changes contemplated by this Agreement and
(ii) inaccuracies which, individually or in the aggregate, have not had and
are not reasonably likely to have a Promus Material Adverse Effect or a
material adverse effect upon the consummation of the transactions
contemplated hereby; and Doubletree shall have received a certificate signed
on behalf of Promus by the chief executive officer and the chief financial
officer of Promus to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PROMUS. Promus shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and Doubletree shall
have received a certificate signed on behalf of Promus by the chief
executive officer and the chief financial officer of Promus to such effect.
(c) TAX OPINION. Doubletree shall have received the opinion of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, counsel to Doubletree, based upon reasonably requested
representation letters and dated the Closing Date, to the effect that the
Doubletree Merger will be treated as a reorganization described in Section
368(a) of the Code and/or, taken together with the Promus Merger, as a
transfer of property to Parent by holders of Doubletree Common Stock
described in Section 351 of the Code.
(d) NO TRIGGER OF PROMUS RIGHTS PLAN. No event shall have occurred
that has or would result in the triggering of any right or entitlement of
stockholders of Promus under the Promus Rights Plan, or will occur as a
result of the consummation of the Mergers.
41
Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PROMUS. The
obligations of Promus to effect the Promus Merger are subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by Promus:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Doubletree set forth in this Agreement shall be true and correct as of
the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except for, (i) changes contemplated by
this Agreement and (ii) inaccuracies which, individually or in the
aggregate, have not had and are not reasonably likely to have a Doubletree
Material Adverse Effect, or a material adverse effect upon the consummation
of the transactions contemplated hereby; and Promus shall have received a
certificate signed on behalf of Doubletree by the chief executive officer
and the chief financial officer of Doubletree to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF DOUBLETREE. Doubletree shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date; and Promus shall
have received a certificate signed on behalf of Doubletree by the chief
executive officer and the chief financial officer of Doubletree to such
effect.
(c) TAX OPINION. Promus shall have received the opinion of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, counsel to Promus, based upon reasonably requested representation
letters and dated the Closing Date, to the effect that the Promus Merger
will be treated as a reorganization described in Section 368(a) of the Code
and/or, taken together with the Doubletree Merger, as a transfer of property
to Parent by holders of Promus Common Stock described in Section 351 of the
Code.
(d) NO TRIGGER OF DOUBLETREE RIGHTS PLAN. No event shall have occurred
that has or would result in the triggering of any right or entitlement of
stockholders of Doubletree under the Doubletree Rights Plan, or will occur
as a result of the consummation of the Mergers.
ARTICLE VII.
TERMINATION AND AMENDMENT
Section 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(h), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Mergers by the
stockholders of Doubletree or Promus:
(a) by mutual written consent of Doubletree and Promus; or
(b) by either Doubletree or Promus if the Mergers shall not have been
consummated by January 31, 1998 (provided that (i) either Doubletree or
Promus may extend such date to March 31, 1998 by providing written notice
thereof to the other party on or prior to January 31, 1998 (January 31,
1998, as it may be so extended, shall be referred to herein as the "Outside
Date") and (ii) the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the Mergers to occur on or before such date); or
(c) by either Doubletree or Promus if a court of competent jurisdiction
or other Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Mergers; or
(d) (i) by Doubletree or Promus, if, at the Promus Stockholders' Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of Promus in favor of the approval and adoption of this
Agreement and the Promus Merger shall not have been obtained; or
42
(ii) by Promus or Doubletree if, at the Doubletree Stockholders' Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of Doubletree in favor of the approval and adoption of this
Agreement and the Doubletree Merger shall not have been obtained; or
(e) by Doubletree, if (i) the Board of Directors of Promus shall have
withdrawn or modified its recommendation of this Agreement or the Promus
Merger (provided that Doubletree's right to terminate this Agreement under
such clause (i) shall not be available if at such time Promus would be
entitled to terminate this Agreement under Section 7.1(h) without giving
effect to the cure period); (ii) after the receipt by Promus of an
Acquisition Proposal, Doubletree requests in writing that the Board of
Directors of Promus reconfirm its recommendation of this Agreement and the
Promus Merger to the stockholders of Promus and the Board of Directors of
Promus fails to do so within 10 business days after its receipt of
Doubletree's request; (iii) the Board of Directors of Promus shall have
recommended to the stockholders of Promus an Alternative Transaction (as
defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or
more of the outstanding shares of Promus Common Stock is commenced (other
than by Doubletree or an Affiliate of Doubletree) and the Board of Directors
of Promus recommends that the stockholders of Promus tender their shares in
such tender or exchange offer; or (v) for any reason Promus fails to call
and hold the Promus Stockholders' Meeting by the Outside Date (provided that
Doubletree's right to terminate this Agreement under such clause (v) shall
not be available if at such time Promus would be entitled to terminate this
Agreement under Section 7.1(h) without giving effect to the cure period); or
(f) by Promus, if (i) the Board of Directors of Doubletree shall have
withdrawn or modified its recommendation of this Agreement or the Doubletree
Merger (provided that Promus's right to terminate this Agreement under such
clause (i) shall not be available if at such time Doubletree would be
entitled to terminate this Agreement under Section 7.1(h) without giving
effect to the cure period); (ii) after the receipt by Doubletree of an
Acquisition Proposal, Promus requests in writing that the Board of Directors
of Doubletree reconfirm its recommendation of this Agreement and the
Doubletree Merger to the stockholders of Promus and the Board of Directors
of Doubletree fails to do so within 10 business days after its receipt of
Promus's request; (iii) the Board of Directors of Doubletree shall have
recommended to the stockholders of Doubletree an Alternative Transaction (as
defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or
more of the outstanding shares of Doubletree Common Stock is commenced
(other than by Promus or an Affiliate of Promus) and the Board of Directors
of Doubletree recommends that the stockholders of Doubletree tender their
shares in such tender or exchange offer; or (v) for any reason Doubletree
fails to call and hold the Doubletree Stockholders' Meeting by the Outside
Date (provided that Promus's right to terminate this Agreement under such
clause (v) shall not be available if at such time Doubletree would be
entitled to terminate this Agreement under Section 7.1(h) without giving
effect to the cure period); or
(g) by Doubletree or Promus, prior to the approval of this Agreement by
the stockholders of such party, if, as a result of a Superior Proposal
received by such party from a Third Party, the Board of Directors of such
party determines in good faith after consultation with outside legal counsel
that accepting such Superior Proposal is required for such Board of
Directors to comply with its fiduciary duties to stockholders under
applicable law; provided, however, that no termination shall be effective
pursuant to this Section 7.1(g) under circumstances in which a termination
fee is payable by the terminating party pursuant to Section 7.3(b)(iii) or
(c)(iii), unless concurrently with such termination, such termination fee is
paid in full by the terminating party in accordance with Section 7.3(b)(iii)
or (c)(iii), as applicable; or
(h) by Doubletree or Promus, if (A) there has been a breach of any
representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) will cause the
conditions set forth in Section 6.2(a) or (b) (in the case of termination by
Doubletree) or 6.3(a) or (b) (in the case of termination by Promus) not to
be satisfied, and (ii) shall not have been cured within 20 business days
following receipt by the breaching party of written notice of such breach
43
from the other party; or (B) any event shall have occurred which makes it
impossible for the conditions set forth in Article VI hereof (other than
Section 6.1(a), 6.1(e), 6.2(d) and 6.3(d)) to be satisfied, provided that
any termination pursuant to this clause (B) shall not be effective until 20
business days after notice thereof is delivered by the party seeking to
terminate to the other party, and shall be automatically rescinded if (1)
such condition is solely for the benefit of the party receiving such notice
and (2) such party, prior to such 20th business day, irrevocably waives
satisfaction of such condition based on such event.
Section 7.2. EFFECT OF TERMINATION. In the event of termination of
this Agreement as provided in Section 7.1, this Agreement shall immediately
become void and there shall be no liability or obligation on the part of
Doubletree, Promus, Parent or their respective officers, directors,
stockholders or Affiliates, except as set forth in Sections 5.15 and 7.3 and
except that such termination shall not limit liability for a willful breach
of this Agreement; provided that, the provisions of Sections 5.15 and 7.3 of
this Agreement, the Stock Option Agreements and the Confidentiality
Agreements shall remain in full force and effect and survive any termination
of this Agreement.
Section 7.3. FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not
the Mergers are consummated.
(b) Doubletree shall pay Promus a termination fee of $45 million upon
the earliest to occur of the following events:
(i) the termination of this Agreement by either Promus or Doubletree
pursuant to Section 7.1(d)(ii), if a proposal for an Alternative
Transaction (as defined below) involving Doubletree shall have been
publicly announced prior to the Doubletree Stockholders' Meeting and
either a definitive agreement for an Alternative Transaction is entered
into, or an Alternative Transaction is consummated, within eighteen
months of such termination;
(ii) the termination of this Agreement by Promus pursuant to Section
7.1(f); or
(iii) the termination of this Agreement by Doubletree pursuant to
Section 7.1(g).
Doubletree's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of Promus against Doubletree and any
of its Subsidiaries and their respective directors, officers, employees,
agents, advisors or other representatives with respect to the occurrences
giving rise to such payment; provided that this limitation shall not apply
in the event of a willful breach of this Agreement by Doubletree.
Notwithstanding the foregoing, if and to the extent that Promus has
purchased shares of Doubletree Common Stock pursuant to the Promus Stock
Option Agreement prior to the payment of the $45 million fee provided for
herein (the "Fee Payment Date"), the amount payable to Promus under this
Section 7.3(b), together with (i)(x) the net cash amount received by Promus
prior to the Fee Payment Date pursuant to Doubletree's repurchase of Shares
(as defined in the Promus Stock Option Agreement) pursuant to Section 7 of
the Promus Stock Option Agreement, less (y) Promus's purchase price for such
Shares, and (ii)(x) the amounts received by Promus prior to the Fee Payment
Date pursuant to the sale of Shares (or any other securities into which such
Shares are converted or exchanged), less (y) Promus's purchase price for
such Shares, shall not exceed $65 million.
(c) Promus shall pay Doubletree a termination fee of $45 million upon
the earliest to occur of the following events:
(i) the termination of this Agreement by either Doubletree or Promus
pursuant to Section 7.1(d)(i), if a proposal for an Alternative
Transaction (as defined below) involving Promus shall have been publicly
announced prior to the Promus Stockholders' Meeting and either an
44
Alternative Transaction is entered into, or an Alternative Transaction is
consummated, within eighteen months of such termination;
(ii) the termination of this Agreement by Doubletree pursuant to
Section 7.1(e); or
(iii) the termination of this Agreement by Promus pursuant to Section
7.1 (g).
Promus's payment of a termination fee pursuant to this subsection shall
be the sole and exclusive remedy of Doubletree against Promus and any of its
Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving
rise to such payment; provided that this limitation shall not apply in the
event of a willful breach of this Agreement by Promus. Notwithstanding the
foregoing, if and to the extent that Doubletree has purchased shares of
Promus Common Stock pursuant to the Doubletree Stock Option Agreement prior
to the Fee Payment Date, the amount payable to Doubletree under this Section
7.3(c), together with (i)(x) the net cash amount received by Doubletree
prior to the Fee Payment Date pursuant to Promus's repurchase of Shares (as
defined in the Doubletree Stock Option Agreement) pursuant to Section 7 of
the Doubletree Stock Option Agreement, less (y) Doubletree's purchase price
for such Shares, and (ii)(x) the amounts received by Doubletree prior to the
Fee Payment Date pursuant to the sale of Shares (or any other securities
into which such Shares are converted or exchanged), less (y) Doubletree's
purchase price for such Shares, shall not exceed $65 million.
(d) The fees payable pursuant to Section 7.3(b) or 7.3(c) shall be paid
concurrently with the first to occur of the events described in Section
7.3(b)(i), (ii) or (iii) or 7.3(c)(i), (ii) or (iii), respectively.
(e) As used in this Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any Third Party acquires more than 20%
of the outstanding shares of Doubletree Common Stock or Promus Common Stock,
as the case may be, pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving Doubletree
or Promus pursuant to which any Third Party (or the stockholders of a Third
Party) acquires more than 20% of the outstanding shares of Doubletree Common
Stock or Promus Common Stock, as the case may be, or the entity surviving
such merger or business combination, (iii) any other transaction pursuant to
which any Third Party acquires control of assets (including for this purpose
the outstanding equity securities of Subsidiaries of Doubletree or Promus,
and the entity surviving any merger or business combination including any of
them) of Doubletree or Promus having a fair market value (as determined by
the Board of Directors of Doubletree or Promus, as the case may be, in good
faith) equal to more than 20% of the fair market value of all the assets of
Doubletree or Promus, as the case may be, and their respective Subsidiaries,
taken as a whole, immediately prior to such transaction, or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing.
Section 7.4. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Mergers by the stockholders of Doubletree or Promus,
but, after any such approval, no amendment shall be made which by law
requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto; provided, however,
that this Agreement may be amended in writing without obtaining the
signatures of Doubletree, Promus or Parent solely for the purpose of adding
Doubletree Sub and Merger Sub as parties to this Agreement.
Section 7.5. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or
45
conditions contained here. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Sections
1.6, 2.1, 2.2, 2.4, 5.16, 5.19, 5.20 and 5.27 and Article VIII, and the
agreements of the Affiliates delivered pursuant to Section 5.12. The
Confidentiality Agreements shall survive the execution and delivery of this
Agreement.
Section 8.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Doubletree, to
Doubletree Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Promus, to
Promus Hotel Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Section 8.3. INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made
46
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. The phrases "the date of this Agreement", "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to September 1, 1997.
Section 8.4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more 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.
Section 8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and all documents and instruments referred to herein (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.16 are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality Agreements shall remain in full force and
effect until the Effective Time. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, neither Doubletree
nor Promus makes any other representations or warranties, and each hereby
disclaims any other representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement or
the transactions contemplated hereby, notwithstanding the delivery or disclosure
to the other or the other's representatives of any documentation or other
information with respect to any one or more of the foregoing.
Section 8.6. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
Section 8.7. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
47
SIGNATURES
IN WITNESS WHEREOF, Doubletree, Promus and Parent have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
written above.
DOUBLETREE CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President & CEO
PROMUS HOTEL CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President & Chief Executive
Officer
PARENT HOLDING CORP.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Chief Executive Officer &
Chairman of the Board
48