EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of December 2, 1997
by and among
INTERSTATE HOTELS COMPANY,
a Pennsylvania corporation,
PATRIOT AMERICAN HOSPITALITY, INC.,
a Delaware corporation
and
PATRIOT AMERICAN HOSPITALITY OPERATING COMPANY,
a Delaware corporation
TABLE OF CONTENTS
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I. THE MERGER
1.01. The Merger.................................................... 2
1.02. Closing....................................................... 2
1.03. Effective Time................................................ 2
1.04. Effects of the Merger......................................... 2
1.05. Certificate of Incorporation and Bylaws....................... 2
1.06. Boards, Committees and Officers............................... 2
1.07. Subscription Agreement........................................ 3
1.08. Subscribed Shares and Rights.................................. 3
II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATION; EXCHANGE OF CERTIFICATES
2.01. Effect on Capital Stock....................................... 3
2.02. Exchange of Certificates...................................... 6
2.03. Company Stock Plans........................................... 11
III. REPRESENTATIONS AND WARRANTIES
3.01. Representations and Warranties of the Company................. 12
3.02. Representations and Warranties of Patriot..................... 21
IV. COVENANTS RELATING TO CONDUCT OF BUSINESS
4.01. Conduct of Business........................................... 27
4.02. No Solicitation by the Company................................ 31
4.03. The Company's Accumulated and Current Earnings and Profits.... 33
V. ADDITIONAL COVENANTS
5.01. Preparation of the Form S-4 and the Joint Proxy Statement;
Shareholders Meetings......................................... 33
5.02. Access to Information; Confidentiality........................ 34
5.03. Regulatory Filings............................................ 35
5.04. Reasonable Efforts............................................ 35
5.05. Employee Benefit Matters...................................... 36
5.06. Certain Employee and Other Matters............................ 37
5.07. Fees and Expenses............................................. 37
5.08. Public Announcements.......................................... 39
5.09. Affiliates; Etc............................................... 40
5.10. Listing of Paired Shares...................................... 40
5.11. Shareholder Litigation........................................ 40
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5.12. Tax Treatment................................................. 40
5.13. Indemnification, Exculpation and Insurance.................... 40
5.14. Interim Transactions.......................................... 41
5.15 Ownership Restrictions........................................ 41
5.16 Termination of Stock Purchase Plan............................ 41
VI. CONDITIONS PRECEDENT
6.01. Conditions to Each Party's Obligation To Effect the Merger.... 42
6.02. Conditions to Obligations of Patriot and OPCO................. 42
6.03. Conditions to Obligation of the Company....................... 43
6.04. Frustration of Closing Conditions............................. 44
VII. TERMINATION, AMENDMENT AND WAIVER
7.01. Termination................................................... 44
7.02. Effect of Termination......................................... 46
7.03. Amendment..................................................... 46
7.04. Extension; Waiver............................................. 46
7.05. Procedure for Termination, Amendment, Extension or Waiver..... 46
VIII. GENERAL PROVISIONS
8.01. Nonsurvival of Representations and Warranties................. 46
8.02. Notices....................................................... 46
8.03. Certain Definitions........................................... 48
8.04. Interpretation................................................ 48
8.05. Counterparts.................................................. 49
8.06. Entire Agreement; No Third-Party Beneficiaries................ 49
8.07. Governing Law................................................. 49
8.08. Assignment.................................................... 49
8.09. Enforcement................................................... 49
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 2, 1997, among
Interstate Hotels Company, a Pennsylvania corporation (the "Company"), Patriot
American Hospitality, Inc., a Delaware corporation ("Patriot"), and Patriot
American Hospitality Operating Company, a Delaware corporation ("OPCO" and,
together with Patriot, the "Patriot Companies").
RECITALS
A. The respective Boards of Directors of Patriot, OPCO and the Company
have each determined that it is advisable and in the best interests of their
respective stockholders to consummate, and have therefore approved, the business
combination transaction provided for herein in which the Company would merge
with and into Patriot, and wherein each issued and outstanding share of Common
Stock, par value $0.01 per share, of the Company ("Company Common Stock") not
owned directly or indirectly by Patriot, OPCO or the Company will be converted
into the right to receive the Merger Consideration on the terms and subject to
the conditions of this Agreement (the "Merger");
B. The parties desire to make certain representations, warranties and
covenants in connection with the Merger and to prescribe various conditions to
the Merger;
C. For federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
D. Contemporaneously with the execution of this Agreement, the
Company, Patriot and certain other Persons (such other Persons, collectively,
the "Principal Shareholder") have entered into a Shareholders Agreement (the
"Shareholders Agreement") pursuant to which the Principal Shareholder has agreed
to refrain from taking certain actions and Patriot, OPCO and the Principal
Shareholder have agreed to take certain actions on the terms and subject to the
conditions set forth in the Shareholders Agreement; and
E. The shares of common stock, par value $.01 per share, of Patriot
(the "Patriot Common Stock") and the shares of common stock, par value $.01 per
share, of OPCO (the "OPCO Common Stock") are paired and transferable and traded
only in combination as a single unit (the "Paired Shares") on the New York Stock
Exchange (the "NYSE").
NOW, THEREFORE, in consideration of the representations, warranties
and covenants contained in this Agreement, the parties agree as follows:
I. THE MERGER
1.01. The Merger. On the terms and subject to the conditions set forth in
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this Agreement, and in accordance with the Pennsylvania Business Corporation Law
(the "PBCL") and the Delaware General Corporation Law (the "DGCL"), the Company
will be merged with and into Patriot at the Effective Time. Following the
Effective Time, Patriot will be the surviving corporation in the Merger (the
"Surviving Corporation") and will succeed to and assume all the rights and
obligations of the Company in accordance with the PBCL and the DGCL.
1.02. Closing. The closing of the Merger (the "Closing") will take place
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at 10:00 a.m. on a date to be specified by the parties (the "Closing Date"),
which (subject to satisfaction or waiver of the conditions set forth in Article
VI) will be no later than the second business day after satisfaction or waiver
of the conditions set forth in Article VI, unless another time or date is agreed
to by the parties hereto. The Closing will be held at the offices of ▇▇▇▇▇,
Day, ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, unless another
place is agreed to in writing by the parties hereto.
1.03. Effective Time. Subject to the provisions of this Agreement, as soon
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as practicable on or after the Closing Date, the parties will file articles or a
certificate of merger or other appropriate documents (the "Articles of Merger")
executed in accordance with the relevant provisions of the PBCL and the DGCL and
will make all other filings or recordings required under the PBCL and the DGCL
in order to effect the Merger. The Merger will become effective at such time as
the Articles of Merger for the Merger have been duly filed with the Pennsylvania
Department of State and the Secretary of State of Delaware or at such subsequent
date or time as Patriot and the Company agree and specify in the Articles of
Merger (the time the Merger becomes effective being herein referred to as the
"Effective Time").
1.04. Effects of the Merger. The Merger will have the effects set forth in
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Section 1929 of the PBCL and Section 259 of the DGCL.
1.05. Certificate of Incorporation and Bylaws. (a) The Amended and
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Restated Certificate of Incorporation of Patriot in effect immediately prior to
the Effective Time will be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by Law.
(b) The Amended and Restated Bylaws of Patriot in effect immediately
prior to the Effective Time will be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable Law.
1.06. Boards, Committees and Officers. The individuals serving as the
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members of the Board of Directors, committees of the Board of Directors
(including chairmen thereof) and officers of Patriot as of the Effective Time
will serve as such for the Surviving Corporation until the earlier of the
resignation or removal of any such individual or until their respective
successors are duly elected and qualified, as the case may be. In addition,
effective as of immediately after the Effective Time, the Board of Directors of
Patriot will be increased by one and the vacancy so created will be filled in
accordance with the Shareholders Agreement.
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1.07. Subscription Agreement. Immediately prior to the Closing, the
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Company, OPCO and Patriot will enter into a contract in the form agreed upon by
all of the parties (the "Company/Patriot Subscription Agreement") pursuant to
which consistent with this Agreement the Company will pay for, and OPCO will
issue directly to the shareholders of the Company as part of the consideration
to be paid to such shareholders in the Merger, a number of shares (the
"Subscribed Shares") of OPCO Common Stock equal to the number of shares of
Patriot Common Stock to be issued to shareholders of the Company pursuant to the
Merger.
1.08. Subscribed Shares. The parties acknowledge and agree that the
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Subscribed Shares will be issued in accordance with Sections 2.01(d) and (g) to
the shareholders of the Company in connection with the Merger and will be paired
with the Patriot Common Stock issued in the Merger and that neither the Company
nor Patriot will at any time become a stockholder of OPCO.
II. EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES
2.01. Effect on Capital Stock. As of the Effective Time, by virtue of the
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Merger and without any action on the part of the holder of any shares of Company
Common Stock outstanding immediately prior to the Effective Time ("Shares"):
(a) Cancellation of Treasury Stock and Patriot-Owned Stock. Each
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Share that is owned by the Company or by any wholly owned Subsidiary of the
Company, or by Patriot or OPCO or any wholly owned Subsidiary of either of them,
will automatically be canceled and retired and will cease to exist, and no
consideration will be delivered in exchange therefor.
(b) Cancellation of Other Shares. Each Share, other than those
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described in Section 2.01(a), will no longer be outstanding and will
automatically be canceled and retired and cease to exist and each holder of a
certificate representing any such Share (a "Certificate") will cease to have any
rights with respect thereto, except (i) the right to receive the Merger
Consideration and any additional cash in lieu of fractional Paired Shares to be
issued or paid in consideration therefor upon surrender of such Certificate in
accordance with Section 2.02, without interest, or (ii) as provided in Section
2.02(j) in respect of Dissenting Shares.
(c) Electing Shares. Subject to Sections 2.01(a), (f) and (g), each
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Share with respect to which a Form of Election to receive cash has been properly
made and not revoked pursuant to Section 2.01(e) will, at the Effective Time, be
converted into, and the holder thereof will be entitled to receive therefor,
$37.50 in cash (the "Maximum Cash Consideration Per Share"). The cash
consideration payable with respect to each Electing Share and, to the extent
applicable pursuant to Section 2.01(h), each Non-Electing Share is hereinafter
referred to as "Cash Consideration," and each Share with respect to which an
election to be converted into cash is duly made as herein provided is herein
referred to as an "Electing Share."
(d) Non-Electing Shares. Each Share other than (1) an Electing Share,
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(2) a Share cancelled in accordance with Section 2.01(a), and (3) a Dissenting
Share is herein referred
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to as a "Non-Electing Share." Subject to Section 2.01(h), each Non-Electing
Share and each Electing Share described in Section 2.01(g)(ii) will at the
Effective Time be converted into the right to receive the number of Paired
Shares (the "Exchange Ratio") determined as follows:
(i) If the Meeting Date Price is greater than or equal to $27.970,
but less than or equal to $34.186, then the Exchange Ratio will be the
number determined by dividing $37.50 by the Meeting Date Price;
(ii) If the Meeting Date Price is less than $27.970, but greater
than or equal to $26.416, then the Exchange Ratio will be 1.341;
(iii) If the Meeting Date Price is greater than $34.186, but (x)
less than or equal to $37.294, if the Closing Date is on or before
March 30, 1998 or (y) less than or equal to $38.848, if the Closing
Date is after March 30, 1998, then the Exchange Ratio will be 1.097;
(iv) If the Meeting Date Price is greater than $37.294 and the
Closing Date is on or before March 30, 1998, then the Exchange Ratio
will be the number determined by dividing $40.912 by the Meeting Date
Price;
(v) If the Meeting Date Price is greater than $38.848 and the
Closing Date is after March 30, 1998, then the Exchange Ratio will be
the number determined by dividing $42.616 by the Meeting Date Price;
and
(vi) If the Meeting Date Price is less than $26.416, then the
Company will have the right to terminate this Agreement pursuant to
Section 7.01(g) by giving written notice (the "Termination Notice") of
its election to do so to Patriot prior to 5:00 p.m., New York City
time, on the second Trading Day after the Measurement Date; provided,
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however, that the Termination Notice will be deemed to be rescinded
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and will have no effect if, prior to 5:00 p.m., New York City time, on
the second Trading Day following the date of delivery by the Company
to Patriot of such Termination Notice, Patriot has given the Company
written notice that it has exercised its right to increase the
Exchange Ratio to the number determined by dividing $35.424 by the
Meeting Date Price. If this subparagraph (vi) applies but the Company
fails to give the Termination Notice, the Exchange Ratio will be
1.341.
In determining the Exchange Ratio as provided above, the final number will be
rounded to three decimal places, rounding up from 0.0005. In the event of any
stock dividend or other distribution or a subdivision, combination or
modification of Patriot Common Stock or OPCO Common Stock with a record date
after the date hereof and prior to the Effective Time, the Exchange Ratio will
be equitably adjusted. For purposes of this Agreement, (a) the term "Meeting
Date Price" means the average per share closing price for a Paired Share as
reported on the NYSE Transactions Tape (as reported in the Wall Street Journal
or, if not reported thereby, by another authoritative source) over the 20
consecutive Trading Day period ending on the Trading Day (the "Measurement
Date") immediately preceding the fifth Trading Day prior to the date on which
the
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meeting of the Company's shareholders pursuant to Section 5.01(b) hereof is
to be initially convened; (b) the "Closing Date" means the date on which the
Closing occurs; (c) the term "Stock Consideration" means the consideration
described in the second sentence of this Section 2.01(d); (d) the term "Merger
Consideration" means the Cash Consideration and Stock Consideration; and (e) the
term "Trading Day" means a day on which the NYSE is open for trading.
(e) Form of Election. The Company will mail a form of election ("Form of
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Election") to all holders of record of Shares as of the record date of the
Company Shareholder Meeting. In addition, the Company will use all reasonable
efforts to make the Form of Election and Joint Proxy Statement available to all
persons who become shareholders of the Company during the period between such
record date and the third Trading Day prior to the date of the initial convening
of the Company Shareholder Meeting. Any election to receive Cash Consideration
contemplated by Section 2.01(c) hereof shall have been properly made only if the
Exchange Agent has received at its designated office or offices, by 5:00 p.m.,
New York City time, on the last Trading Day preceding the date of the initial
convening of the Company Shareholder Meeting, a Form of Election properly
completed and accompanied by certificates representing the Shares to which such
Form of Election relates, duly endorsed in blank or otherwise acceptable for
transfer on the books of the Company (or an appropriate guarantee of delivery),
as set forth in such Form of Election. An election to receive Cash
Consideration may be revoked only by written notice received by the Exchange
Agent prior to 5:00 p.m., New York City time, on the last business day preceding
the date of the initial convening of the Company Shareholder Meeting. In
addition, all elections to receive Cash Consideration will automatically be
revoked if the Exchange Agent is notified in writing by Patriot and Company that
the Merger has been abandoned. If an election to receive Cash Consideration is
so revoked, the Certificates (or guarantees of delivery, as appropriate) for the
Shares to which such election to receive Cash Consideration relates will be
promptly returned to the person submitting the same to the Exchange Agent.
(f) Limitations on Cash Payments. Anything in this Article II to the
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contrary notwithstanding and subject to Section 6.03(d), holders of Electing
Shares will not be entitled to, and Patriot will not be obligated in
implementing Section 2.01(c) to pay, the Maximum Cash Consideration Per Share in
respect of the number of Electing Shares that exceeds 14,168,500 Shares minus
the number of Shares equal to the number of Dissenting Shares, if any, in excess
of 100,000. The maximum number of Electing Shares entitled to the Maximum Cash
Consideration Per Share pursuant to this Section 2.01(f) is hereinafter referred
to as the "Maximum Cash Shares," and the amount of cash equal to the Maximum
Cash Consideration Per Share times the Maximum Cash Shares is hereinafter
referred to as the "Total Cash Consideration."
(g) Proration of Electing Shares. In the event that the aggregate number
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of Electing Shares exceeds the Maximum Cash Shares, all Electing Shares will at
the Effective Time be converted into the right to receive Merger Consideration
in the following manner:
(i) The number of Electing Shares covered by each Form of Election
to be converted into the right to receive the Cash Consideration will
be determined by multiplying the number of Electing Shares covered by
such Form of Election by a fraction, the numerator of which is the
Maximum Cash Shares and the
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denominator of which is the total number of Electing Shares, rounded
down to the nearest whole Share; and
(ii) Each Electing Share not converted into the right to receive
the Cash Consideration in accordance with Section 2.01(g)(i) will be
converted into the right to receive the Stock Consideration and no
longer considered to be an Electing Share.
(h) Minimum Cash Consideration for Non-Electing Shares. In the event
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that the aggregate number of Electing Shares is less than the Maximum Cash
Shares, each Non-Electing Share will be converted at the Effective Time into the
right to receive:
(i) Cash in an amount (the "Minimum Cash Consideration Per Share")
equal to (A)(1) the Total Cash Consideration minus (2) the product of
the Maximum Cash Consideration Per Share times the aggregate number of
Electing Shares, divided by (B) the aggregate number of Non-Electing
Shares; and
(ii) The number of Paired Shares equal to the product of (A) the
Exchange Ratio times (B) a fraction (the "Share Fraction"), the
numerator of which is 37.50 minus the Minimum Cash Consideration Per
Share, and the denominator of which is 37.50.
If this Section 2.01(h) is applicable, then (A) the Minimum Cash Consideration
Per Share with respect to Non-Electing Shares pursuant to clause (i) hereof will
be deemed to be the "Cash Consideration" for such shares, (B) the stock
consideration with respect to Non-Electing Shares pursuant to clause (ii) hereof
will be deemed to be the "Stock Consideration" for such shares, and (C) such
Cash Consideration and Stock Consideration, together, will be deemed to be the
"Merger Consideration" for such shares.
2.02. Exchange of Certificates. (a) Prior to the Effective Time,
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Patriot and OPCO will enter into an agreement with American Stock Transfer and
Trust Company ("AST&T") or such other bank or trust company as may be designated
by Patriot, OPCO and the Company (the "Exchange Agent"), such agreement to
provide that as of the Effective Time (i) Patriot will deposit, or will cause to
be deposited, with the Exchange Agent, for the benefit of the holders of Shares,
for exchange in accordance with this Article II, through the Exchange Agent, a
certificate representing the shares of Patriot Common Stock issuable pursuant to
Section 2.01 in exchange for outstanding Shares, and simultaneously (ii) OPCO
will deposit, or will cause to be deposited, with the Exchange Agent, for
exchange in accordance with this Article II, through the Exchange Agent, a
certificate representing the Subscribed Shares, to be paired with the shares of
Patriot Common Stock described in clause (i) above. The certificates for shares
of Patriot Common Stock and Subscribed Shares, together with any dividends or
distributions with respect thereto with a record date after the Effective Time,
any Excess Shares and any cash (including cash proceeds from the sale of the
Excess Shares) in lieu of any fractional Paired Shares and Cash Consideration,
are hereinafter referred to as the "Exchange Fund."
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(b) Exchange Procedures. As soon as reasonably practicable after the
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Effective Time, the Exchange Agent will mail or otherwise make available to each
holder of record of a Certificate which immediately prior to the Effective Time
represented outstanding Shares converted into the right to receive the Merger
Consideration pursuant to Section 2.01: (i) a letter of transmittal (which will
specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon delivery of the Certificates to the Exchange
Agent and will be in such form and have such other provisions as Patriot may
specify consistent with this Agreement) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate will be entitled to receive in exchange therefor the Merger
Consideration and cash, if any, which such holder has the right to receive
pursuant to the provisions of this Article II, and the Certificate so
surrendered will forthwith be canceled. In the event of a transfer of ownership
of Shares which is not registered in the transfer records of the Company, the
Merger Consideration may be issued or paid to a Person other than the Person in
whose name the Certificate so surrendered is registered if such Certificate is
properly endorsed or otherwise in proper form for transfer and the Person
requesting such issuance or payment pays any transfer or other taxes required by
reason of the issuance or payment of the Merger Consideration to a Person other
than the registered holder of such Certificate or establishes to the
satisfaction of Patriot that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.02, each Certificate will be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration which the holder thereof
has the right to receive in respect of such Certificate pursuant to the
provisions of this Article II. No interest will be paid or will accrue on any
cash payable to holders of Certificates pursuant to the provisions of this
Article II, but all payments of cash, if any, which holders have the right to
receive pursuant to the provisions of the Article II will be made in immediately
available funds. Certificates surrendered for exchange by any person who is an
"affiliate" of the Company for purposes of Rule 145, as such rule may be amended
from time to time, under the Securities Act, will not be exchanged until Patriot
has received an agreement substantially in the form of Schedule 5.09(a) from
such person.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
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other distributions with respect to Patriot Common Stock or OPCO Common Stock
with a record date after the Effective Time and no cash payment in lieu of
fractional shares will be paid pursuant to Section 2.02(e) to the holder of any
unsurrendered Certificate with respect to the Paired Shares represented thereby,
and all such dividends, other distributions and cash in lieu of fractional
Paired Shares will be paid by Patriot or OPCO to the Exchange Agent promptly
after the Effective Time and will be included in the Exchange Fund, in each case
in accordance with this Article II. Subject to the effect of applicable escheat
or similar Laws, following surrender of any Certificate in accordance herewith
there will be paid to the holder of the certificates representing whole Paired
Shares issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Paired
Shares and the amount of any cash payable in lieu of fractional Paired Shares to
which such holder is entitled pursuant to Section 2.02(e) and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after
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the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole Paired Shares.
(d) No Further Ownership Rights in Shares. All Paired Shares issued
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and all cash paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article II will be deemed to have been issued and paid in
full satisfaction of all rights pertaining to the Shares theretofore represented
by such Certificates. If, after the Effective Time, Certificates are presented
to Patriot, the Surviving Corporation or the Exchange Agent for any reason, they
will be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
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fractional Paired Shares will be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Patriot will relate to such
fractional share interests and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a shareholder of Patriot.
(ii) As promptly as practicable following the Effective Time, the Exchange
Agent will determine the excess of (A) the number of whole Paired Shares
delivered to the Exchange Agent by Patriot and OPCO pursuant to Section 2.02(a)
over (B) the aggregate number of whole Paired Shares to be distributed to
holders of Shares pursuant to Section 2.02(b) (such excess being herein called
the "Excess Shares"). Subject to Section 2.01(e)(iv), following the Effective
Time, the Exchange Agent will sell the Excess Shares, all in the manner provided
in Section 2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent will be
executed on the NYSE through one or more member firms of the NYSE and will be
executed in round lots to the extent practicable. The Exchange Agent will use
all reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. Until the net proceeds of such sale or sales
have been distributed to the prior holders of Shares, the Exchange Agent will
hold such proceeds in trust for such holders entitled thereto (the "Shares
Trust"). The Surviving Corporation will pay out of the Shares Trust all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent incurred in connection with
such sale of the Excess Shares. The Exchange Agent will determine the portion
of the Shares Trust to which each holder of Shares is entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Shares Trust
by a fraction, the numerator of which is the amount of the fractional share
interest to which such holder of Shares is entitled (after taking into account
all Shares held at the Effective Time by such holder) and the denominator of
which is the aggregate amount of fractional share interests to which all holders
of Shares are entitled.
(iv) Notwithstanding the provisions of Section 2.02(e)(ii) and (iii),
Patriot may elect at its option, exercised prior to the Effective Time, in lieu
of the issuance and sale of Excess Shares and the making of the payments
hereinabove contemplated, to cause to be paid to each holder of Shares an amount
in cash equal to the product obtained by multiplying (A) the fractional share
interest to which such holder (after taking into account all Shares held at the
Effective Time by such holder) would otherwise be entitled by (B) the average
closing price for a Paired Share as reported on the NYSE Composite Transactions
Tape (as reported in the Wall Street Journal, or,
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if not reported thereby, any other authoritative source) for the 20 consecutive
Trading Days ending on the Trading Day immediately prior to the Closing Date
and, in such case, all references herein to the cash proceeds of the sale of the
Excess Shares and similar references will be deemed to mean and refer to the
payments calculated as set forth in this Section 2.02(e)(iv). In no event will
Patriot be required to cause such payment to be funded prior to the Effective
Time.
(v) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Shares with respect to any fractional share
interests, the Exchange Agent will make available such amounts to such holders
of Shares subject to and in accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
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which remains undistributed to the holders of the Certificates for six months
after the Effective Time will be delivered to Patriot and OPCO, in accordance
with Patriot's instructions, upon demand, and any holders of the Certificates
who have not theretofore complied with this Article II will thereafter look only
to Patriot for payment of their claim for Merger Consideration, any cash in lieu
of fractional Paired Shares and any dividends or distributions with respect to
Paired Shares.
(g) No Liability. None of Patriot, the Company or the Exchange Agent
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will be liable to any Person in respect of any Paired Shares (or dividends or
distributions with respect thereto) or cash from the Exchange Fund delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar Law. If any Certificate has not been surrendered prior to one year
after the Effective Time (or immediately prior to such earlier date on which any
Merger Consideration, any cash in lieu of fractional Paired Shares or any
dividends or distributions payable to the holder of such Certificate would
otherwise escheat to or become the property of any Governmental Entity), any
such Merger Consideration, cash, dividends or distributions in respect of such
Certificate will become the property of the Surviving Corporation (subject to
the Subscription Agreement), free and clear of all claims or interest of any
Person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent will invest any
---------------------------
cash included in the Exchange Fund in one or more bank accounts or in high-
quality, short-term investments, as directed by Patriot, on a daily basis. Any
interest and other income resulting from such investments will be paid to
Patriot (or OPCO to the extent of OPCO's cash contributions, if any, to the
Exchange Fund).
(i) Lost Certificates. If any Certificate is lost, stolen or
-----------------
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration and, if applicable, any cash in lieu of fractional shares, and
unpaid dividends and distributions on Paired Shares or deliverable in respect
thereof, pursuant to this Agreement.
9
(j) Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary, no Share, the holder of which has properly complied with the
provisions of Subchapter D of Chapter 15 of the PBCL as to appraisal rights
(including without limitation any Share the holder of which has given notice of
his or her intention to demand that such holder be paid the fair value of such
Shares as provided in Section 1575 of Subchapter D of Chapter 15 of the PBCL) (a
"Dissenting Share"), will be deemed to be converted into and to represent the
right to receive the Merger Consideration hereunder and the holders of
Dissenting Shares, if any, will be entitled to payment, solely from the
Surviving Corporation, of the appraised value of such Dissenting Shares to the
extent permitted by and in accordance with the provisions of Subchapter D of
Chapter 15 of the PBCL; provided, however, that (i) if any such holder fails to
-------- -------
establish his or her entitlement to rights to payment as provided in such
Subchapter or (ii) if neither the holder of Dissenting Shares nor the Surviving
Corporation has instituted a proceeding to determine the rights of holders of
Dissenting Shares and to fix the fair value of Dissenting Shares in any of the
circumstances described in Section 1579 of Subchapter D of Chapter 15 within the
time provided in such Section, such holder will forfeit such right to payment
for such Dissenting Shares pursuant to such Subchapter D of Chapter 15 and, as
of the later of the Effective Time or the occurrence of such event, each such
Share shall no longer be deemed a Dissenting Share and shall be deemed to be a
Non-Electing Share, subject to Section 2.01(h), and such holder's Certificate
formerly representing shares of Company Common Stock will automatically be
converted into and represent only the right to receive the Merger Consideration
as a Non-Electing Share pursuant to Section 2.01, including Section 2.01(h),
without any interest thereon, upon surrender of the Certificate or Certificates
formerly representing such shares of Company Common Stock. The Company will
give Patriot (A) prompt notice of any written demands for appraisal of any
Dissenting Shares and any other instruments received by the Company relating to
shareholders' rights of appraisal, (B) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under the
PBCL, and (C) the right to approve any settlement of any such demand.
(k) Exchange of Certificates for Cash Consideration. Without limiting
-----------------------------------------------
the generality or effect of any other provision hereof, the Exchange Agent will
have discretion to determine whether or not elections to receive Cash
Consideration have been properly made or revoked pursuant to this Article II
with respect to Shares and when elections and revocations were received by it.
If the Exchange Agent determines that any election to receive Cash Consideration
was not properly made with respect to Shares, absent manifest error, such Shares
will be treated by the Exchange Agent as, and for all purposes of this Agreement
will be deemed to be, Non-Electing Shares at the Effective Time, and such Shares
will be converted in the Merger into Stock Consideration pursuant to Section
2.01(d), subject to Section 2.01(h). The Exchange Agent will also make
computations as to the allocation, proration and equitable adjustments
contemplated by this Article II and any such computation will be, absent
manifest error, conclusive and binding on the holders of Electing Shares
pursuant to this Article II. The Exchange Agent may, with the mutual agreement
of Patriot and the Company, make such equitable changes in the procedures set
forth herein for the implementation of the cash elections provided for in this
Article II as it determines to be necessary or desirable to effect fully such
elections.
10
2.03. Company Stock Plans. (a) The Company will take all actions necessary
-------------------
to provide that, upon the Effective Time, (i) each outstanding option (each, an
"Option") to purchase Company Common Stock under the Company's Equity Incentive
Plan (the "Equity Incentive Plan") or Stock Option Plan for Non-Employee
Directors (the "Director Plan"), (ii) each outstanding stock appreciation right,
deferred share, performance share or performance unit granted under the
Company's Equity Incentive Plan (each, an "Incentive Plan Award"), and (iii)
each outstanding share of restricted Company Common Stock issued under the
Company's Equity Incentive Plan or Management Bonus Plan ("Restricted Shares"
and, together with Options and Incentive Plan Awards, "Awards"), whether or not
then exercisable or vested, all of which Awards are listed in Section 2.03(a)
of the Company Disclosure Schedule (as defined in Section 3.01), will become
fully exercisable and vested.
(b) As soon as practicable after the date hereof, the Company will
deliver to holders of Awards appropriate notices setting forth such holders'
rights pursuant to the respective Company Stock Plans, the agreements evidencing
the grants of such Awards and this Agreement. Holders of Options identified on
Section 2.03(b) of the Company Disclosure Schedule will be entitled, at their
election, to have any or all of their Options (i) assumed by Patriot pursuant to
and in accordance with Section 2.03(c) or (ii) canceled or repurchased pursuant
to and in accordance with Section 2.03(d). All other Options will be canceled
or repurchased pursuant to and in accordance with Section 2.03(d).
(c) At the Effective Time, the Company's obligations with respect to
each Option for which the holder thereof has elected pursuant to the second
sentence of Section 2.03(b) to be assumed by Patriot (an "Assumed Option"), will
be assumed by Patriot. The Assumed Options will continue to have, and be
subject to, the same terms and conditions as set forth in the Company's Equity
Incentive Plan or Director Plan (as the case may be) and related option
agreements (as in effect immediately prior to the Effective Time) pursuant to
which the Assumed Options were issued, provided that (i) all references to the
Company will be deemed to be references to Patriot, and all references to the
Company Common Stock will be deemed to be references to Paired Shares, (ii) each
Assumed Option will be exercisable for that number of whole Paired Shares equal
to the product of the number of shares of the Company Common Stock covered by
the Assumed Option immediately prior to the Effective Time multiplied by the
Exchange Ratio and rounded to the nearest whole number of Paired Shares, and
(iii) the exercise price per share of Paired Shares under each Assumed Option
will be equal to the exercise price per share of the Company Common Stock under
the Assumed Option immediately prior to the Effective Time divided by the
Exchange Ratio, rounded to the nearest cent. Pursuant to this Agreement and in
accordance with the Subscription Agreement, Patriot will (A) reserve for
issuance or hold the number of Paired Shares that will become issuable upon the
exercise of such Assumed Options pursuant to this Section 2.03(b) and (B)
promptly after the Effective Time issue to each holder of an outstanding Assumed
Option a document evidencing the assumption by Patriot of the Company's
obligations with respect thereto under this Section 2.03(b).
(d) Immediately prior to the Effective Time, each Option which is not
an Assumed Option will be canceled or repurchased, as appropriate, and in
consideration of such cancellation or repurchase, as the case may be, the
Company will pay to the holder of each such Option an amount in respect thereof
equal to the product of (i) the Applicable Amount, multiplied
11
by (ii) the number of shares of Company Common Stock subject thereto (such
payment to be net of applicable withholding taxes). The term "Applicable Amount"
means the excess of (1) $37.50 over (2) the exercise price of each such Option.
III REPRESENTATIONS AND WARRANTIES
3.01. Representations and Warranties of the Company. Except as disclosed in
---------------------------------------------
the Company Filed SEC Documents or as set forth on the Disclosure Schedule
delivered by the Company to Patriot prior to the execution of this Agreement
(the "Company Disclosure Schedule"), the Company represents and warrants to
Patriot and OPCO as follows:
(a) Organization, Standing and Corporate Power. The Company and each
------------------------------------------
of its Significant Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing (with respect to jurisdictions
which recognize such concept) under the Laws of the jurisdiction in which it is
organized and has the requisite corporate, partnership or limited liability
company power, as the case may be, and authority to carry on its business as now
being conducted. The Company and each of its Significant Subsidiaries is duly
qualified or licensed to do business and is in good standing (with respect to
jurisdictions which recognize such concept) in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions in which
the failure to be so qualified or licensed or to be in good standing
individually or in the aggregate could not be reasonably expected to have a
material adverse effect on the business, financial condition or results of
operations of the Company and each of its Subsidiaries, taken as a whole, or on
the ability of the Company to perform any of its obligations under this
Agreement (any such effect, a "Company MAE"). The Company has delivered to
Patriot prior to the execution of this Agreement complete and correct copies of
its articles of incorporation and bylaws and has made available to Patriot the
certificate of incorporation and bylaws (or comparable organizational documents)
of each of its Subsidiaries, in each case as amended to date.
(b) Subsidiaries. Exhibit 21.1 to the Company's Annual Report on Form
------------
10-K for the fiscal year ended December 31, 1996 includes all of the Significant
Subsidiaries of the Company. All the outstanding shares of capital stock of, or
other equity interests in, each such Subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by the
Company, free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
(c) Capital Structure. The authorized capital stock of the Company
-----------------
consists of 75,000,000 Shares and 25,000,000 shares of preferred stock of the
Company ("Company Preferred Shares"). At the close of business on the last
business day immediately preceding the date hereof (the "Representation Date"),
(i) 35,421,478 Shares were issued and outstanding, (ii) no Shares were held by
the Company in its treasury, (iii) 3,039,933 Shares were reserved for issuance
pursuant to the Equity Incentive Plan, the Director Plan, the Management Bonus
Plan and the employee stock purchase plan (collectively, the "Company Stock
Plans"), and (iv) no Company Preferred Shares have been designated or issued.
Except as set forth above, at the close of business on the Representation Date,
no shares of capital stock or other voting securities
12
of the Company were issued, reserved for issuance or outstanding. At the close
of business on the Representation Date, there were no outstanding stock options,
stock appreciation rights or rights (other than employee stock option or other
rights ("Company Stock Options") to purchase or receive Company Common Stock
granted under the Company Stock Plans) to receive shares of Company Common Stock
on a deferred basis granted under the Company Stock Plans or otherwise. The
Company Disclosure Schedule sets forth a complete and correct list, as of the
Representation Date, of the number of shares of Company Common Stock subject to
Company Stock Options. All outstanding shares of capital stock of the Company
are, and all shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights. As of the close of business on the Representation Date, there were no
bonds, debentures, notes, other indebtedness or securities of the Company having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which shareholders of the Company may vote.
Except as set forth above, as of the close of business on the Representation
Date, there were no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company 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 voting securities of the Company or of any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Except for agreements entered into with
respect to the Company Stock Plans, as of the close of business on the
Representation Date, there were no outstanding contractual obligations of the
Company or any of its Subsidiaries to issue, repurchase, redeem, exchange or
otherwise acquire any shares of capital stock of the Company or any of its
Subsidiaries. As of the close of business on the Representation Date, there were
no outstanding contractual obligations of the Company to vote or to dispose of
any shares of the capital stock of any of its Subsidiaries.
(d) Authority; Noncontravention. The Company has all requisite
---------------------------
corporate power and authority to enter into this Agreement, and, subject to the
Company Shareholder Approval, to consummate the transactions contemplated
hereby. On or prior to the date hereof, the Board of Directors of the Company
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and resolved to recommend that the holders of Company Common
Stock adopt this Agreement. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company, subject to Company Shareholder Approval. This Agreement has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, conflict with, breach or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company or any of its
Significant Subsidiaries under, (i) assuming Company Shareholder Approval, the
articles of incorporation or by-laws of the Company or the comparable
organizational documents of any of its Subsidiaries, (ii) any loan
13
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Significant Subsidiaries or their respective properties or assets,
or (iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order or decree ("Order"), or statute,
law, ordinance, rule or regulation ("Law") applicable to the Company or any of
its Subsidiaries or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate could
not be reasonably expected to have a Company MAE. No Order, consent, approval or
authorization of, or registration, declaration or filing with, any federal,
state, local or foreign government or any court, administrative or regulatory
agency or commission or other governmental authority, agency or instrumentality
(a "Governmental Entity") is required by or with respect to the Company or any
of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby except for (1) the filing of a premerger notification and
report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"); (2) the filing with the Securities
and Exchange Commission (the "SEC") of (A) a proxy statement relating to the
Company Shareholder Meeting (such proxy statement, together with the proxy
statement relating to the Patriot/OPCO Shareholder Meetings, in each case as
amended or supplemented from time to time, the "Joint Proxy Statement") and
(B) such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated hereby; (3) the filing of Articles of Merger with the
Pennsylvania Department of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business and
such filings with Governmental Entities to satisfy the applicable requirements
of state securities or "blue sky" laws; (4) the filing of a Certificate of
Merger with the Secretary of State of Delaware; and (5) such consents,
approvals, Orders, authorizations, registrations, declarations or filings, the
failure of which to be made or obtained, individually or in the aggregate, could
not reasonably be expected to have a Company MAE.
(e) SEC Documents; Undisclosed Liabilities. The Company has timely
--------------------------------------
filed all required reports, schedules, forms, statements and other documents
with the SEC (the "Company SEC Documents"). As of their respective dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents, and none of the Company SEC
Documents when filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except to the extent that information contained
in any Company SEC Document has been revised or superseded by a later Company
Filed SEC Document, as of the date hereof, none of the Company SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Company SEC
Documents comply as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally
14
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to year-end adjustments).
Except (i) as reflected in such financial statements or in the notes thereto,
(ii) for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, and (iii) for liabilities and obligations
incurred since September 30, 1997 in the ordinary course of business consistent
with past practice, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), including liabilities arising under any Laws relating to the
protection of health, safety or the environment ("Environmental Laws"), which
are required by generally accepted accounting principles to be reflected in a
consolidated balance sheet of the Company and its consolidated Subsidiaries and
which, individually or in the aggregate, could reasonably be expected to have a
Company MAE.
(f) Information Supplied. None of the information supplied or to be
--------------------
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed with the SEC by
Patriot in connection with the issuance of Patriot Common Stock in the Merger
(the "Form S-4"), at the time the Form S-4 is filed with the SEC or at the
time it becomes effective under the Securities Act, or (ii) the Joint Proxy
Statement, at the date it is first mailed to the Company's shareholders or at
the time of the Company Shareholder Meeting, will contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Patriot specifically for inclusion or incorporation by reference in the Joint
Proxy Statement or contained in any Patriot Filed SEC Documents incorporated by
reference in the Form S-4 or the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except (i) as disclosed in
------------------------------------
the Company SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the " Company Filed SEC
Documents"), (ii) for the transactions provided for herein or permitted by
Section 4.01(a), and (iii) for liabilities incurred in connection with or as a
result of this Agreement, since September 30, 1997, the Company has conducted
its business only in the ordinary course, and there has not been (1) any Company
MAE, (2) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company stock, (3) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
the Company's capital stock, (4) any granting by the Company or any of its
Subsidiaries to any director, executive officer or other key employee of the
Company of any increase in compensation, (5) any granting by the Company or any
of its Subsidiaries to any such director, executive officer or key employee of
any increase in severance or termination pay, except as was
15
required under any employment, severance or termination agreements in effect as
of the date of the most recent financial statements included in the Company
Filed SEC Documents, (6) any entry by the Company or any of its Subsidiaries
into any employment, severance or termination agreement with any such director,
executive officer or key employee, or (7) except insofar as may be required by a
change in generally accepted accounting principles, any change in accounting
methods, principles or practices by the Company. For purposes of this Agreement,
"key employee" means any employee (other than an employee whose
responsibilities relate principally to a single hotel) whose current salary and
targeted bonus exceeds $200,000 per annum. Section 3.01(g) of the Company
Disclosure Schedule contains a true and complete list of all agreements or plans
providing for termination or severance pay to any key employee.
(h) Litigation. There are no suits, actions or proceedings pending
----------
or, to the Knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries or, to the Knowledge of the Company, any of its
directors, officers or other employees in their capacities as such, that
individually or in the aggregate could reasonably be expected to have a Company
MAE, nor are there any Orders of any Governmental Entity or arbitrator
outstanding against the Company or any of its Subsidiaries or, to the Knowledge
of the Company, any of its directors, officers or other employees in their
capacities as such, having, or which, individually or in the aggregate, could
reasonably be expected to have a Company MAE.
(i) Voting Requirements. The affirmative vote of a majority of the
-------------------
votes cast by all shareholders entitled to vote thereon at the Company
Shareholder Meeting, which shall be a duly convened meeting at which a quorum
was present and acting throughout (the "Company Shareholder Approval"), to
adopt this Agreement is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve and adopt this Agreement and
the transactions contemplated hereby.
(j) State Takeover Statutes. The Company Board has approved this
-----------------------
Agreement, the Merger, the other transactions contemplated hereby and the
Shareholders Agreement. Such approval constitutes approval of the Merger and
the other transactions contemplated hereby by the Company Board under, and the
Company Board has taken all other action necessary or advisable, so as to render
inoperative with respect to the Merger, the other transactions contemplated
hereby and the Shareholders Agreement, the provisions of Section 2538 and
Subchapters 25F, G, H, I and J of the PBCL. No other Pennsylvania takeover
statutes are applicable to the Merger, this Agreement or the transactions
contemplated hereby.
(k) Brokers. No broker, investment banker, financial advisor or other
-------
Person, other ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and Blackstone Real
Estate Advisors, L.P., the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company. The
Company has furnished to Patriot true and complete copies of all agreements
under which any such fees or expenses are payable and all indemnification and
other agreements related to the engagement of the Persons to whom such fees are
payable.
16
(l) Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ to the effect that, as of the date thereof, the Merger
Consideration is fair to the Company's shareholders from a financial point of
view.
(m) Ownership of Paired Shares. Neither the Company nor, to its
--------------------------
Knowledge, any of its subsidiaries, directors or executive officers beneficially
owns (as such term is defined in Rule 13d-3 under the Exchange Act) any Paired
Shares.
(n) Compliance with Laws; Permits. Neither the Company nor any of its
-----------------------------
Subsidiaries is in violation of any Order or any Law applicable to the Company
or any of its Subsidiaries or any of their respective properties or assets,
except for such of the foregoing as, individually or in the aggregate, could not
be reasonably expected to have a Company MAE. The Company and its Subsidiaries
have obtained all licenses, permits and other authorizations and have taken all
actions required by applicable law or governmental regulations in connection
with their business as now conducted, where the failure to obtain any such
license, permit or authorization or to take any such action, individually or in
the aggregate, could reasonably be expected to have a Company MAE.
(o) Tax Matters. Except as, individually or in the aggregate, could
-----------
not be reasonably expected to have a Company MAE (other than with respect to
subsection (vi) below):
(i) The Company and each of its Subsidiaries has paid or caused to
be paid all federal, state, local, foreign and other taxes, including
without limitation, income taxes, estimated taxes, alternative minimum
taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross
receipts taxes, franchise taxes, capital stock taxes, employment and
payroll-related taxes, withholding taxes, stamp taxes, transfer taxes,
windfall profit taxes, environmental taxes and real and personal property
taxes, whether or not measured in whole or in part by net income, and all
deficiencies, or other additions to tax, interest, fines and penalties
(collectively, "Taxes"), required to be so paid prior to the date hereof
and has made provision, in accordance with generally accepted accounting
principles, for all Taxes owed or accrued through the date hereof;
(ii) The Company and each of its Subsidiaries has timely filed all
federal, state, local and foreign tax returns required to be filed by
any of them through the date hereof, and all such returns completely
and accurately set forth the amount of any Taxes relating to the
applicable period;
(iii) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting by written notice to the
Company or any of its Subsidiaries or, to the Knowledge of the
Company, threatening to assert against the Company or any of its
Subsidiaries any deficiency or claim for additional Taxes. No written
claim has been made since July 1, 1996 by a taxing authority in a
jurisdiction where the Company does not file reports and returns that
the Company is or may be subject to taxation by that jurisdiction.
There are no security interests on any of the assets of the Company or
any of its Subsidiaries
17
that arose in connection with any failure (or alleged failure) to pay
any Taxes. The Company has not since July 1, 1996 entered into a
closing agreement pursuant to Section 7121 of the Code;
(iv) The Company has not received written notice of any audit of
any tax return filed by the Company, and the Company has not been
notified in writing by any tax authority that any such audit is
contemplated or pending. Neither the Company nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing
authority any agreement now in effect extending the period for
assessment or collection of any income or other Taxes, and no
extension of time with respect to any date on which a tax return was
or is to be filed by the Company is in force. True, correct and
complete copies of all federal, state and local income or franchise
tax returns filed by the Company and each of the Company's
Subsidiaries since January 1, 1994 and all communications relating
thereto since that date have been delivered to Patriot or made
available to representatives of Patriot;
(v) The Company and each of its Subsidiaries has withheld and paid
all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other party; and
(vi) The Company estimates that as of December 31, 1996, the
accumulated and current earnings and profits ("E&P") of the Company
(as determined for federal income tax purposes) was not in excess of
$12.0 million.
(p) Employee Benefit Plans. With respect to all the employee benefit
----------------------
plans, programs and arrangements maintained for the benefit of any current or
former employee, officer or director of the Company or any of its Subsidiaries
(the "Company Benefit Plans"), except for such matters as, individually or in
the aggregate, could not be reasonably expected to have a Company MAE, (a) each
Company Benefit Plan and any related trust intended to be qualified under
Sections 401(a) and 501(a) of the Code has received a favorable determination
letter from the IRS that it is so qualified and nothing has occurred since the
date of such letter that could reasonably be expected to materially adversely
affect the qualified status of such Company Benefit Plan or related trust, (b)
each Company Benefit Plan has been operated in all material respects in
accordance with the terms and requirements of applicable law and all required
returns and filings for each Company Benefit Plan have been timely made, (c)
neither the Company nor any of its Subsidiaries has incurred any direct or
indirect material liability under, arising out of or by operation of Title I or
Title IV of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), in connection with any Company Benefit Plan or other retirement plan
or arrangement, and no fact or event exists that could reasonably be expected to
give rise to any such material liability, (d) all material contributions due and
payable on or before the date hereof in respect of each Company Benefit Plan
have been made in full and in proper form, (e) neither the Company nor any of
its Subsidiaries have ever sponsored or been obligated to contribute to any
"multiemployer plan" (as defined in Section 3(37) of ERISA), "multiple employer
plan" (as defined in Section 413 of the Code) or "defined benefit plan" (as
defined in Section 3(35) of ERISA), (f) except as otherwise required under
ERISA, the Code and applicable state laws, no
18
Company Benefit Plan currently or previously maintained by the Company or any of
its Subsidiaries provides any post-retirement health or life insurance benefits,
and neither the Company nor any of its Subsidiaries maintains any obligations to
provide post-retirement health or life insurance benefits in the future, (g) all
material reporting and disclosure obligations imposed under ERISA and the Code
have been satisfied with respect to each Company Benefit Plan, and (h) no
benefit or amount payable or which may become payable by the Company or any of
its Subsidiaries pursuant to any Company Benefit Plan, agreement or contract
with any employee, shall constitute an "excess parachute payment,"within the
meaning of Section 280G of the Code, which is or may be subject to the
imposition of any excise tax under Section 4999 of the Code or which would not
be deductible by reason of Section 280G of the Code.
(q) Properties. All of the real estate properties owned or leased by
----------
the Company and each of its Subsidiaries as of the date hereof are listed in
Section 3.01(q) of the Company Disclosure Schedule. The Company has no direct
or indirect ownership interest in any real property as of the date hereof other
than the properties owned by the Company and its Subsidiaries and set forth in
Sections 3.01(s) and 3.01(q) of the Company Disclosure Schedule. The Company and
each of its Subsidiaries own fee simple or leasehold title (each as indicated in
Section 3.01(q) of the Company Disclosure Schedule) to each of the real
properties identified in Section 3.01(q) of the Company Disclosure Schedule (the
"Company Properties"), free and clear of liens, mortgages or deeds of trust,
claims against title, charges which are liens, security interests or other
encumbrances on title (collectively, "Encumbrances"), except for such
Encumbrances as, individually and in the aggregate, could not be reasonably
expected to have a Company MAE. Except for such of the following as,
individually and in the aggregate, could not be reasonably expected to have a
Company MAE, the Company Properties are not subject to any easements, rights of
way, covenants, conditions, restrictions or other written agreements, laws,
ordinances and regulations affecting building use or occupancy, or reservations
of an interest in title (collectively, "Property Restrictions"), except for (i)
Encumbrances and Property Restrictions, (ii) Property Restrictions imposed or
promulgated by Law or any governmental body or authority with respect to real
property, including zoning regulations, that do not adversely affect the current
use of the property, materially detract from the value of or materially
interfere with the present use of the property, (iii) Encumbrances and Property
Restrictions disclosed on existing title policies, commitments (and the
documents listed as exceptions therein), reports, certificates of title, title
opinions or current surveys (in each case copies of which title policies,
commitments (and the documents listed as exceptions therein), reports and
surveys have been delivered or made available to Patriot and are listed in
Section 3.01(q) of the Company Disclosure Schedule), and (iv) mechanics',
carriers', supplier's workmen's or repairmen's liens and other Encumbrances,
Property Restrictions and other limitations of any kind, if any, which,
individually or in the aggregate, are not material in amount, do not materially
detract from the value of or materially interfere with the present use of any of
the Company Properties subject thereto or affected thereby, and do not otherwise
materially impair business operations conducted by the Company and its
Subsidiaries and which have arisen or been incurred only in the ordinary course
of business. Except for such of the following as, individually and in the
aggregate, could not be reasonably expected to have a Company MAE, valid
policies of title insurance have been issued insuring the Company's or its
applicable Subsidiary's fee simple (or leasehold to the extent disclosed in
Section 3.01(q) of the Company Disclosure Schedule) title to each of the Company
Properties in amounts at least equal to the purchase price thereof or, if
acquired through merger,
19
the stipulated value thereof, and such policies are, at the date hereof, in full
force and effect and no claim has been made against any such policy and the
Company has no knowledge of any facts or circumstances which would constitute
the basis for such a claim. Except for such of the following as, individually
and in the aggregate, could not be reasonably expected to have a Company MAE, to
the Knowledge of the Company, (A) no certificate, permit or license from any
governmental authority having jurisdiction over any of the Company Properties or
any agreement, easement or other right which is necessary to permit the lawful
use and operation of the buildings and improvements on any of the Company
Properties as currently operated or which is necessary to permit the lawful use
and operation of all driveways, roads and other means of egress and ingress to
and from any of the Company Properties (a "REA Agreement") has not been obtained
and is not in full force and effect, and there is no pending threat of
modification or cancellation of any of same nor is the Company or any of its
Subsidiaries currently in default under any REA Agreement and the Company
Properties are in full compliance with all governmental permits, licenses and
certificates, except for such defaults which or where such noncompliance could
not reasonably be expected to have a Company MAE; (B) no written notice of any
violation of any federal, state or municipal law, ordinance, order, regulation
or requirement affecting any portion of any of the Company Properties has been
issued by any governmental authority; (C) there are no material structural
defects relating to any of the Company Properties; (D) there is no Company
Property whose building systems are not in working order in any material
respect; (E) there is no physical damage to any Company Property in excess of
$500,000 for which there is no insurance in effect (other than reasonable and
customary deductibles) covering the full cost of the restoration; and (F) there
is no current renovation or restoration or tenant improvements to any Company
Property or any portion thereof in process or committed to be performed, the
cost of which exceeds $500,000. Except for such of the following as,
individually and in the aggregate, could not be reasonably expected to have a
Company MAE, the use and occupancy of each of the Company Properties complies in
all material respects with all applicable codes and zoning laws and regulations,
and the Company has no knowledge of any pending or threatened proceeding or
action that will in any manner affect the size of, use of, improvements on,
construction on, or access to any of the Company Properties, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such Company Properties. Except for such of the following
as, individually and in the aggregate, could not be reasonably expected to have
a Company MAE, neither the Company nor any of its Subsidiaries has received any
written notice to the effect that (x) any betterment assessments have been
levied against, or any condemnation or rezoning proceedings are pending or
threatened with respect to any of the Company Properties or (y) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the Company Properties or by the continued
maintenance, operation or use of the parking areas. Except for such of the
following as, individually and in the aggregate, could not be reasonably
expected to have a Company MAE, following a casualty, each of the Company
Properties could be reconstructed and used for hotel purposes under applicable
zoning laws and regulations, except that in certain circumstances such
reconstruction would have to comply with the dimensional requirements of
applicable zoning laws and regulations in effect at the time of reconstruction.
Except as otherwise could not be reasonably expected to have a Company MAE,
there are no outstanding abatement proceedings or appeals with respect to the
assessment of any Company Property for the purpose of real property taxes, and
there are no agreements with any governmental authority with respect to such
assessments or tax rates on any
20
Company Property. None of the Company Properties is subject to any contractual
restriction on the sale or other disposition thereof or on the financing or
release of financing thereon.
(r) Other Interests. Except for such Other Interests of the Company
---------------
or any of its Subsidiaries that, individually or in the aggregate, could not be
reasonably expected to have a Company MAE, neither the Company nor any of its
Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust
or other entity (other than investments in short-term investment securities)
(collectively "Other Interests").
(s) Related Party Transactions. The Company Filed SEC Documents
--------------------------
and/or the Company Disclosure Schedule disclose all arrangements, agreements and
contracts entered into by the Company or any of its Subsidiaries (which are or
will be in effect as of or after the date of this Agreement) involving payments
in excess of $60,000 with any person who is an officer or director of the
Company, any member of the immediate family, spouse, grandchild or, to the
Knowledge of the Company, any other relative of any of the foregoing or any
entity of which any of the foregoing is an Affiliate. Copies of all such
documents have previously been provided or made available to Patriot and its
counsel.
3.02. Representations and Warranties of Patriot and OPCO. Except as
--------------------------------------------------
disclosed in the Patriot Filed SEC Documents, or as set forth on the Disclosure
Schedule delivered by the Patriot Companies to the Company prior to the
execution of this Agreement (the "Patriot Disclosure Schedule"), the Patriot
Companies jointly and severally represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of the Patriot
------------------------------------------
Companies and each of their respective Significant Subsidiaries is a corporation
or other legal entity duly organized, validly existing and in good standing
(with respect to jurisdictions which recognize such concept) under the Laws of
the jurisdiction in which it is organized and has the requisite corporate or
other power, as the case may be, and authority to carry on its business as now
being conducted. The Patriot Companies and each of their respective Significant
Subsidiaries are duly qualified or licensed to do business and in good standing
(with respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of their respective businesses or the ownership
or leasing of their respective properties makes such qualification or licensing
necessary, other than in such jurisdictions in which the failure to be so
qualified or licensed or to be in good standing individually or in the aggregate
could not be reasonably expected to have a material adverse effect on the
business, financial condition or results of operations of the Patriot Companies
and their respective Subsidiaries, taken as a whole, or on the ability of the
Patriot Companies to perform any of their obligations under this Agreement (any
such effect, a "Patriot MAE"). The Patriot Companies have delivered to the
Company prior to the execution of this Agreement complete and correct copies of
their respective articles of incorporation and bylaws, in each case as amended
to date and have made available to the Company the articles of incorporation and
bylaws (or comparable organizational documents) of each of their respective
Subsidiaries, in each case as amended to date.
21
(b) Subsidiaries. Exhibit 21.1 to Patriot's Annual Report on Form 10-
-------------
K for the fiscal year ended December 31, 1996 and Section 3.02 of the Patriot
Disclosure Schedule list all of the Significant Subsidiaries of the Patriot
Companies as of the date hereof.
(c) Capital Structure. The authorized capital stock of Patriot
------------------
consists of 1.5 billion shares of capital stock including (i) 650 million shares
of Patriot Common Stock, (ii) 100 million shares of preferred stock, par value
$.01 per share ("Patriot Preferred Stock"), and (iii) 750 million shares of
excess stock, par value $.01 per share ("Patriot Excess Stock"). The authorized
capital stock of OPCO consists of 1.5 billion shares of capital stock including
(x) 650 million shares of OPCO Common Stock, (y) 100 million shares of preferred
stock, par value $.01 per share ("OPCO Preferred Stock"), and (z) 750 million
shares of excess stock, par value $.01 per share ("OPCO Excess Stock"). At the
close of business on the Representation Date, (i) 70,120,137 shares of Patriot
Common Stock and 70,120,137 shares of OPCO Common Stock were issued and
outstanding, (ii) no shares of Patriot Preferred Stock and no shares of OPCO
Preferred Stock were issued and outstanding, (iii) no shares of Patriot Excess
Stock and no shares of OPCO Excess Stock were issued and outstanding, (iv) no
shares of Patriot Common Stock and no shares of OPCO Common Stock were held by
Patriot or OPCO in their respective treasuries, (v) 7,975,970 shares of Patriot
Common Stock and 7,975,970 shares of OPCO Common Stock (plus 10% of the net
increase in the total number of outstanding shares of Patriot Common Stock and
OPCO Common Stock since October 1, 1997) were reserved for issuance pursuant to
equity plans filed in the Patriot Filed SEC Documents (collectively, the
"Patriot Stock Plans"), and (vi) 780,000 shares of Patriot Common Stock and
780,000 shares of OPCO Common Stock were reserved for issuance upon the exercise
of options granted outside the Patriot Stock Plans, and (vii) 12,795,851 shares
of Patriot Common Stock and 12,795,851 shares of OPCO Common Stock were reserved
for issuance upon Patriot's election to acquire in exchange for Paired Shares
units of limited partnership interest in Patriot American Hospitality
Partnership, L.P. and Patriot American Hospitality Operating Partnership, L.P.
tendered by redeeming unit holders. Except as set forth above, at the close of
business on the Representation Date, no shares of capital stock or other voting
securities of the Patriot Companies were issued, reserved for issuance or
outstanding. At the close of business on the Representation Date, there were no
outstanding stock options, stock appreciation rights or rights (other than
employee stock options or other rights ("Patriot Employee Stock Options") to
purchase or receive Patriot Common Stock granted under the Patriot Stock Plans)
to receive shares of Patriot Common Stock on a deferred basis granted under the
Patriot Stock Plans or otherwise. Section 3.02(c) of the Patriot Disclosure
Schedule sets forth a complete and correct list, as of the Representation Date,
of the number of Paired Shares subject to Patriot Employee Stock Options. All
outstanding shares of capital stock of the Patriot Companies are, and all shares
which may be issued, including shares to be issued pursuant to this Agreement,
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. As of the close of business
on the Representation Date, there were no bonds, debentures, notes or other
indebtedness or securities of the Patriot Companies having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which shareholders of Patriot and OPCO may vote. Except as set
forth above, as of the close of business on the Representation Date, there were
no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Patriot
Companies or any of their respective Subsidiaries is a party or by which any of
them is bound obligating the Patriot
22
Companies or any of their respective Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Patriot Companies or of any of their respective
Subsidiaries or obligating the Patriot Companies or any of their respective
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. Except
for agreements entered into with respect to the Patriot Stock Plans, as of the
close of business on the Representation Date, and except as would not be
required to be disclosed pursuant to the Patriot Filed SEC Documents, there were
no outstanding contractual obligations of the Patriot Companies or any of their
respective Subsidiaries to issue, repurchase, redeem or otherwise acquire any
shares of capital stock of the Patriot Companies or any of their respective
Subsidiaries. As of the close of business on the Representation Date, there were
no outstanding contractual obligations of the Patriot Companies to vote or to
dispose of any shares of the capital stock of any of their respective
Subsidiaries.
(d) Authority; Noncontravention. Patriot and OPCO have all requisite
----------------------------
corporate power and authority to enter into this Agreement and, subject to the
Patriot/OPCO Shareholder Approvals, to consummate the transactions contemplated
by this Agreement. On or prior to the date hereof, the Board of Directors of
each of Patriot and OPCO approved this Agreement and the other transactions
contemplated by this Agreement and resolved to recommend that the holders of
Patriot/OPCO Common Stock adopt this Agreement, and the Board of Directors of
Patriot has approved the Merger. The execution and delivery of this Agreement
by Patriot and OPCO and the consummation by Patriot and OPCO of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Patriot and OPCO, subject, in the case of the
adoption of this Agreement, to Patriot/OPCO Shareholder Approvals as defined
below. This Agreement has been duly executed and delivered by Patriot and OPCO
and constitutes valid and binding obligations of Patriot and OPCO, enforceable
against each of them in accordance with its terms. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, breach, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the Patriot Companies or any of their respective Significant
Subsidiaries under, (i) assuming Patriot/OPCO Shareholder Approvals, the
articles of incorporation or bylaws of the Patriot Companies or the comparable
organizational documents of any of their respective Subsidiaries, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Patriot
Companies or any of their respective Significant Subsidiaries or their
respective properties or assets, or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any Order or Law
applicable to the Patriot Companies or any of their respective Subsidiaries or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, breaches, violations, defaults, rights, losses or
Liens that individually or in the aggregate could not be reasonably expected to
have a Patriot MAE. No Order, consent, approval or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to the Patriot Companies or any of their respective Subsidiaries
in connection with the execution and delivery of this Agreement by Patriot and
OPCO or the consummation by Patriot and OPCO of the transactions contemplated
hereby,
23
except for (1) the filing of a premerger notification and report form by
the Patriot Companies under the HSR Act; (2) the filing with the SEC of (A) the
Joint Proxy Statement relating to the Patriot/OPCO Shareholder Meetings, (B) the
Form S-4, and (C) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby; (3) the
filing of Articles of Merger with the Pennsylvania Department of State and
appropriate documents with the relevant authorities of other states in which the
Patriot Companies are qualified to do business and such filings with
Governmental Entities to satisfy the applicable requirements of state securities
or "blue sky" laws; (4) the filing of a Certificate of Merger with the
Secretary of State of Delaware; (5) such filings with and approvals of the NYSE
to permit the Paired Shares that are to be issued in the Merger to be listed or
quoted for trading thereon; (6) such other filings and consents as may be
required under any Environmental Law pertaining to any notification, disclosure
or required approval necessitated by the Merger or the transactions contemplated
by this Agreement; and (7) such consents, approvals, Orders or authorizations
the failure of which to be made or obtained, individually or in the aggregate,
could not reasonably be expected to have a Patriot MAE.
(e) SEC Documents; Undisclosed Liabilities. Patriot and OPCO have
--------------------------------------
filed all required reports, schedules, forms, statements and other documents
with the SEC since January 1, 1996 (the "Patriot SEC Documents"). As of their
respective dates, the Patriot SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Patriot SEC Documents, and none of the Patriot SEC Documents when filed
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any Patriot SEC
Document has been revised or superseded by a later Patriot Filed SEC Document,
as of the date hereof none of the Patriot SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Patriot and OPCO included in the Patriot SEC Documents comply as
to form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of Patriot and OPCO and their respective consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). Except (i) as reflected in such
financial statements or in the notes thereto, (ii) as contemplated hereunder,
(iii) for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby (including without limitation financing
relating to the transactions contemplated hereby), and (iv) for liabilities and
obligations incurred since September 30, 1997 in the ordinary course of business
consistent with past practice, neither Patriot, OPCO nor any of their
respective Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise), including liabilities
arising under any Environmental Laws, required by generally accepted accounting
principles to be
24
reflected in a consolidated balance sheet of Patriot and OPCO and their
respective consolidated Subsidiaries and which, individually or in the
aggregate, could reasonably be expected to have a Patriot MAE.
(f) Information Supplied. None of the information supplied or to be
--------------------
supplied by the Patriot Companies specifically for inclusion or incorporation by
reference in (i) the Form S-4, at the time the Form S-4 is filed with the SEC or
at the time it becomes effective under the Securities Act or (ii) the Joint
Proxy Statement, at the date it is first mailed to the shareholders of Patriot
and OPCO or at the time of the Patriot/OPCO Shareholder Meetings will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement and the Form S-4 will comply as to form
in all material respects with the requirements of the Exchange Act and the
Securities Act, respectively, and the rules and regulations thereunder, except
that no representation or warranty is made by Patriot or OPCO with respect to
statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation by reference
in the Joint Proxy Statement or the Form S-4 or contained in any Company Filed
SEC Documents incorporated by reference in the Joint Proxy Statement or the Form
S-4.
(g) Absence of Certain Events. Except (i) as disclosed in the Patriot
-------------------------
SEC Documents filed and publicly available prior to the date of this Agreement
(as amended to the date of this Agreement, the "Patriot Filed SEC Documents"),
(ii) for the transactions provided for herein or permitted by Section 4.01(b),
and (iii) for liabilities incurred in connection with or as a result of this
Agreement, since September 30, 1997, the Patriot Companies have conducted their
respective business only in the ordinary course, and there has not been (1) any
Patriot MAE, (2) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
Patriot's or OPCO's capital stock, other than regular quarterly cash dividends
at the rate in effect for the three quarters of 1997, as increased by the Board
of Directors of Patriot and OPCO in the ordinary course ("Regular Patriot
Quarterly Dividends"), (3) any split, combination or reclassification of any of
Patriot's or OPCO's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Patriot's or OPCO's capital stock, or (4) except insofar as may be
required by a change in generally accepted accounting principles, any change in
accounting methods, principles or practices by the Patriot Companies.
(h) Litigation. There are no suits, actions or proceedings pending
----------
or, to the Knowledge of Patriot or OPCO, threatened against or affecting the
Patriot Companies or any of their respective Subsidiaries or, to the Knowledge
of Patriot or OPCO, any of their respective directors, officers or other
employees in their capacities as such, that individually or in the aggregate
could reasonably be expected to have a Patriot MAE, nor are there any Orders of
any Governmental Entity or arbitrator outstanding against Patriot or OPCO or any
of their respective Subsidiaries or, to the Knowledge of Patriot or OPCO, any of
their respective directors, officers or other employees in their capacities as
such, having, or which, individually or in the aggregate, could reasonably be
expected to have a Patriot MAE.
25
(i) Voting Requirements. The affirmative vote of the holders of a
-------------------
majority of the voting power of all outstanding shares of (x) Patriot Common
Stock, voting as a single class, at the Patriot Shareholder Meeting, which shall
be a duly convened meeting at which a quorum was present and acting throughout
(the "Patriot Shareholder Approval"), to adopt this Agreement and approve the
issuance of Patriot Common Stock in connection with the Merger and (y) OPCO
Common Stock, voting as a single class, at the OPCO Shareholder Meeting, which
shall be a duly convened meeting at which a quorum was present and acting
throughout (the "OPCO Shareholder Approval" and together with the Patriot
Shareholder Approval, the "Patriot/OPCO Shareholder Approvals"), to approve the
issuance of OPCO Common Stock in connection with the Merger are the only votes
of the holders of any class or series of Patriot's or OPCO's capital stock
necessary to approve and adopt this Agreement, the Subscription Agreement and
the transactions contemplated hereby and thereby.
(j) Brokers. No broker, investment banker, financial advisor or other
-------
Person, other than ▇▇▇▇▇ ▇▇▇▇▇▇ Incorporated ("▇▇▇▇▇ ▇▇▇▇▇▇"), the fees and
expenses of which will be paid by the Patriot Companies or, if the Merger
occurs, the Surviving Corporation, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Patriot Companies. Patriot has furnished to the Company true
and complete copies of all agreements under which any such fees or expenses are
payable and all indemnification and other agreements related to the engagement
of the Persons to whom such fees are payable.
(k) Opinion of Financial Advisor. The Patriot Companies have received
----------------------------
the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇ to the effect that, as of the date hereof, the
Merger Consideration is fair to the shareholders of the Patriot Companies from a
financial point of view.
(l) Ownership of Company Common Stock. Patriot, OPCO and, to their
---------------------------------
Knowledge, their respective Affiliates (excluding for purposes hereof any
director of Patriot or OPCO other than Unaffiliated Directors) beneficially own
(as such term is defined in Rule 13d-3 under the Exchange Act) collectively less
than 25,000 shares of the capital stock of the Company. Except for the
shareholder agreements, dated as of the date hereof, among Patriot, OPCO and
certain shareholders of the Company entered into in contemplation of the
execution and delivery of this Agreement, neither Patriot nor OPCO nor, to their
knowledge, any of their respective Affiliates (excluding for purposes hereof any
director of Patriot or OPCO other than Unaffiliated Directors) is a party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of shares of capital stock of the Company.
(m) Tax Matters. The Patriot Companies have no plan or intention to
-----------
take any action that could reasonably be expected to cause the Merger not to
qualify and continue to qualify as a reorganization under Section 368(a) of the
Code.
(n) Pairing Agreement. The agreement pursuant to which the shares of
-----------------
Patriot Common Stock and OPCO Common Stock are paired (the "Pairing Agreement")
is duly and validly authorized and is a valid and binding agreement, enforceable
against the Patriot Companies in accordance with its terms. The Patriot Common
26
Stock is paired with the OPCO Common Stock pursuant to the Pairing Agreement;
such pairing does not cause the activities of OPCO to be attributed to Patriot
pursuant to Section 269B(a)(3) of the Code.
(o) Wyndham Approval. The execution and delivery of this Agreement by
----------------
the Patriot Companies and the performance of their obligations hereunder have
been approved by the Interim Transactions Committee (as defined in the Agreement
and Plan of Merger, dated April 14, 1997 (the "Wyndham Agreement"), between
Patriot and Wyndham Hotel Corporation ("Wyndham")) in accordance with Section
8.2(f) of the Wyndham Agreement.
(p) Post-Merger Transfer of Assets. The Patriot Companies have no
------------------------------
plan or intention, following the Merger, of selling or otherwise disposing of
any of the assets held by the Company at the Effective Time, except for (i)
dispositions of such assets in the ordinary course of business, (ii) transfers
that are consistent with Section 368(a)(2)(C) of the Code, (iii) liquidations or
similar dispositions of interests in subsidiary entities of the Company, (iv)
transfers to "qualified REIT subsidiaries" within the meaning of Section 856 of
the Code, or (v) transfers other than those described above that do not in the
aggregate result in the transfer of assets which had a value at the Effective
Time in excess of 25% of the value of all assets held by the Company at the
Effective Time.
IV. COVENANTS RELATING TO CONDUCT OF BUSINESS
4.01. Conduct of Business. (a) Conduct of Business by the Company. Except
------------------- ----------------------------------
as set forth in Section 4.01(a) of the Company Disclosure Schedule, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will cause its Significant Subsidiaries to, carry on their respective
businesses in all material respects in the ordinary course thereof in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable Laws and, to the extent consistent
therewith, use all reasonable efforts to preserve intact their current business
organizations, use all reasonable efforts to keep available the services of
their current officers and other key employees and preserve their relationships
with those Persons having business dealings with them to the end that their
goodwill and ongoing businesses will be unimpaired at the Effective Time.
Except as set forth in Section 4.01(a) of the Company Disclosure Schedule,
without limiting the generality or effect of the foregoing, during the period
from the date of this Agreement to the Effective Time, the Company will not, and
will not permit any of its Subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned Subsidiary of the
Company to its Patriot, or by a Subsidiary that is partially owned by the
Company or any of its Subsidiaries, provided that the Company or any such
Subsidiary receives or is to receive its proportionate share thereof, (A)
declare, set aside or pay any dividends on, or make any other distributions
in respect of, any of its capital stock, (B) 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 (C) other than pursuant to Awards outstanding as of the
date hereof, purchase, redeem or otherwise acquire any shares of
27
capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) other than pursuant to Awards outstanding as of the date
hereof, issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities;
(iii) amend its articles of incorporation, bylaws or other
comparable organizational documents;
(iv) except for (a) such transactions as are permitted by Section
5.14, (b) pending transactions disclosed in the Company Filed SEC
Documents, and (c) the purchase of equipment, supplies and similar items in
the ordinary course of business, acquire any assets of, or acquire by
merging or consolidating with, or by any other manner, any business or any
corporation, limited liability company, partnership, joint venture,
association or other business organization or division thereof
("Transactions") involving a purchase price (determined in accordance with
generally accepted accounting principles and inclusive of any indebtedness
to be assumed in connection therewith) that, when taken together with all
previous Transactions entered into by the Company and not described in
clauses (a), (b) or (c) of this clause (iv), (A) after the date of this
Agreement and on or before February 28, 1998, would exceed $50,000,000 or
(B) after February 28, 1998 and before the Effective Time would exceed
$50,000,000;
(v) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets, other
than (i) in the ordinary course of business consistent with past practice,
(ii) (A) in the case of any real property, in a transaction that is the
subject of a binding contract in existence on the date of this Agreement
and disclosed in Section 4.01(a)(v) of the Company Disclosure Schedule or
(B) in the case of personal property or intangible property, in a
transaction that is not material individually or in the aggregate, or (iii)
any Lien incurred pursuant to the Existing Credit Agreement;
(vi) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its Subsidiaries, guarantee any debt securities of another Person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having
the economic effect of any of the foregoing, except (1) for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, (2) as permitted under the Company's existing credit facility
with Credit Lyonnais, as Administrative Agent (the "Existing Credit
Agreement"), after giving effect to subordinated indebtedness contemplated
by clause (3) hereof but not in excess of $100,000,000, to the extent used
for purposes which are not otherwise prohibited under this Agreement, or
(3) up to $100,000,000 of subordinated indebtedness contemplated by Credit
Lyonnais' letter, dated November 19, 1997 (the "Credit Lyonnais Letter"),
to the Company (a copy of which has
28
been provided to Patriot) to the extent used for purposes which are not
otherwise prohibited under this Agreement; or (B) make any loans, advances
or capital contributions to, or investments in, any other Person, other
than to the Company or any Subsidiary of the Company or to officers and
employees of the Company or any of its Subsidiaries for travel, business,
relocation or similar costs and expenses in the ordinary course of
business;
(vii) make or agree to make any capital expenditure or capital
expenditures, other than (A) in accordance with the capital budgets
previously furnished to the Patriot Companies, provided that the amount of
such capital expenditures may exceed budgeted amounts by not more than, as
to any specifically budgeted matter, 10% or, as to all such capital
expenditures, 5% or (B) as permitted by Section 4.01(a)(iv);
(viii) make any change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;
(ix) except as required by Law or contemplated hereby, enter into,
adopt or amend in any material respect or terminate any Company employee
benefit plan or any other agreement, plan or policy involving the Company
or any of its Subsidiaries and one or more of their directors, officers or
employees, or materially change any actuarial or other assumptions used to
calculate funding obligations with respect to any Company pension plans, or
change the manner in which contributions to any Company pension plans are
made or the basis on which such contributions are determined;
(x) except as disclosed in Sections 4.01(a) and 5.06 of the Company
Disclosure Schedule, increase the compensation of any director, officer or
other employee of the Company or any of its Subsidiaries earning more than
$50,000 per annum or enter into or amend any employment agreement with any
such Person, or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of this Agreement to any such Person;
(xi) settle any shareholder derivative or class action claims
arising out of or in connection with any of the transactions contemplated
by this Agreement;
(xii) modify or amend (1) any agreement with any franchisor with
respect to any real property assets owned or leased by the Company or any
of its Subsidiaries in any respect which is material with respect to any
one or more hotel assets, or extend the term thereof, or (2) any agreements
under which the Company or any of its Subsidiaries provides hotel
management services, without in the case of clause (2) the prior consent of
Patriot, which consent will not be unreasonably withheld or delayed;
(xiii) enter into any agreement with any franchisor with respect to
any real property assets owned or leased by the Company or any of its
Subsidiaries or any agreement under which the Company or any of its
Subsidiaries would provide hotel management services, without the prior
consent of Patriot, which consent will not be unreasonably withheld or
delayed; or
29
(xiv) authorize, or commit or agree to take, any of the foregoing
actions.
(b) Conduct of Business by Patriot. Except as set forth in Section
------------------------------
4.01(b) of the Patriot Disclosure Schedule, during the period from the date of
this Agreement to the Effective Time, the Patriot Companies will, and will cause
their respective Significant Subsidiaries to, carry on their respective
businesses in all material respects in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable Laws and, to the extent consistent
therewith, use all reasonable efforts to preserve intact their current business
organizations, use all reasonable efforts to keep available the services of
their current officers and other key employees and preserve their relationships
with those Persons having business dealings with them to the end that their
goodwill and ongoing businesses will be unimpaired at the Effective Time.
Except as set forth in Section 4.01(b) of the Patriot Disclosure Schedule,
without limiting the generality or effect of the foregoing, during the period
from the date of this Agreement to the Effective Time, the Patriot Companies
will not, and will not permit any of their respective Subsidiaries to:
(i) other than (A) dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned Subsidiary
of Patriot or OPCO to its parent, or by a Subsidiary that is partially
owned by Patriot or OPCO or any of their respective Subsidiaries, provided
that Patriot, OPCO or any such Subsidiary receives or is to receive its
proportionate share thereof, (B) dividends required in the reasonable
judgment of Patriot in order to preserve Patriot's status as a REIT or to
avoid federal income or excise taxes on its undistributed income, (C)
Regular Patriot Quarterly Dividends, and (D) special dividends and
distributions which the Board of Directors of each of Patriot and OPCO
determines are in the best interests of the Patriot Companies, their
shareholders and, assuming the consummation of the Merger, the Company's
shareholders, (1) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (2) 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 (3) purchase or offer to
purchase any capital stock of either of the Patriot Companies, other than
purchases (w) made in the open market in accordance with Regulation M under
the Exchange Act, (x) in accordance with any agreement filed or matter
described in the Patriot Filed SEC Documents, (y) by either of the Patriot
Companies of its capital stock held by the other Patriot Company, and (z)
by either of the Patriot Companies of newly issued common stock of the
other Patriot Company for the purposes of pairing shares of Patriot Common
Stock and OPCO Common Stock;
(ii) incur or guarantee any Indebtedness, issue or sell any debt
securities or warrants or other rights to acquire any debt securities or
enter into any arrangement having the economic effect of any of the
foregoing (any such event, an "Incurrence"), such that the consolidated
Indebtedness of Patriot and OPCO, giving effect to such Incurrence, would
exceed an amount equal to 50% of the combined market capitalization of the
Patriot Companies. (For purposes of this Agreement, "Indebtedness" means,
with respect to any Person, all obligations of such Person (including the
current portion thereof) that
30
would be required to be reflected as indebtedness on a consolidated balance
sheet for such Person prepared in accordance with generally accepted
accounting principles.);
(iii) directly or indirectly through a Subsidiary enter into any
agreement, or participate in active negotiations with any third party,
relating to any tender or exchange offer, merger, consolidation, sale of
all or substantially all of the capital stock or assets of Patriot or OPCO
or other form of business transaction the reasonably foreseeable effect of
which would be (A) to delay the Effective Time beyond May 31, 1998 or to
prevent the Effective Time from occurring, or (B) result in the Merger not
being treated as a tax-free reorganization for federal income tax purposes;
(iv) take any action or fail to take any action which could
reasonably be expected to terminate Patriot's status as a REIT; or
(v) authorize, or commit or agree to take, any of the foregoing
actions.
(c) Other Actions. Except as required by Law, neither the Company,
-------------
on the one hand, nor Patriot or OPCO, on the other hand, will, nor will they
permit any of their respective Subsidiaries to, voluntarily take any action that
could reasonably be expected to result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect, or (iii) any
of the conditions to the Merger set forth in Article VII not being satisfied.
(d) Advice of Changes. The Company and Patriot will promptly advise
-----------------
the other party orally and in writing of (i) any representation or warranty made
by it or, in the case of Patriot, OPCO contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it or, in the case of
Patriot, OPCO to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement, or (iii) any change or event having, or which, insofar
as can reasonably be foreseen, could reasonably be expected to have, a material
adverse effect on such party or on the truth of their respective representations
and warranties or the ability of the conditions set forth in Article VII to be
satisfied; provided, however, that no such notification will affect the
-------- -------
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
4.02. No Solicitation by the Company. (a) The Company represents and
------------------------------
warrants that, as of the date hereof, it has terminated any discussion or
negotiations relating to, or that may reasonably be expected to lead to, any
Company Takeover Proposal (as defined below). The Company will not, nor will it
permit any of its Subsidiaries to, nor will it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly through another Person, (i) solicit,
initiate or encourage the submission of any proposal which constitutes a Company
Takeover Proposal or (ii) participate in any substantive discussions or
negotiations regarding, or furnish to any Person any information with respect
to, or take any other
31
action, for the purpose of facilitating the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Company Takeover
Proposal; provided, however, that, prior to the meeting of the Company's
-------- -------
shareholders that is to be convened pursuant to Section 5.01(b), the Company
may, in response to a Company Takeover Proposal not solicited by any such Person
in breach of this Agreement (an "Unsolicited Company Takeover Proposal"), if the
Company Board determines (after consultation with the Company's financial
advisors) that the failure to take such action would result in a breach of the
Company Board's fiduciary duties under applicable law, (A) furnish information
with respect to the Company and each of its Subsidiaries to any Person pursuant
to a customary confidentiality agreement (as determined by the Company after
consultation with its outside counsel) and (B) participate in discussions or
negotiations regarding such Company Takeover Proposal. For purposes of this
Agreement, "Company Takeover Proposal" means any inquiry, proposal or offer from
any Person, other than a proposal or offer by Patriot or OPCO, relating to a
merger, consolidation, business combination or other similar transaction
involving the Company or any of its Significant Subsidiaries or any proposal or
offer (including without limitation any proposal or offer to shareholders of the
Company), other than a proposal or offer by Patriot or OPCO, to acquire in any
manner, directly or indirectly, more than a 10% equity interest in any voting
securities of the Company or a substantial portion of the assets of the Company
and its Subsidiaries, taken as a whole.
(b) Neither the Company Board nor any committee thereof may (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Patriot or OPCO, the approval or recommendation by the Company Board
or such committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Company Takeover Proposal, or
(iii) authorize or otherwise cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
related to any Company Takeover Proposal (each, a "Company Acquisition
Agreement"). Notwithstanding the foregoing, in response to an Unsolicited
Company Takeover Proposal, if the Company Board determines (after consultation
with the Company's financial advisors) that (i) such Unsolicited Company
Takeover Proposal is reasonably likely to be, involve or result in a Company
Takeover Proposal that is reasonably capable of being completed on the terms
proposed and would, if consummated, result in a transaction more favorable to
the Company's shareholders than the transactions contemplated by this Agreement
(a "Superior Proposal"), and (ii) the failure to take such action would result
in a breach of the Company Board's fiduciary duties under applicable law, the
Company Board may withdraw or modify its approval or recommendation of the
Merger or this Agreement, approve or recommend such Superior Proposal, authorize
or otherwise cause the Company to enter into a Company Acquisition Agreement or
terminate this Agreement pursuant to Section 7.01(f).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company will as promptly as
practicable (i) advise Patriot orally and in writing of any Company Takeover
Proposal or any inquiry with respect to or which could reasonably be expected to
lead to any Company Takeover Proposal, including without limitation any request
for information, and the material terms and conditions of such Company Takeover
Proposal or inquiry and the identity of the Person making such Company Takeover
Proposal or inquiry and (ii) keep Patriot fully informed of the status of any
such Company Takeover Proposal or inquiry.
32
(d) Nothing contained in this Section 4.02 will prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if the Company Board determines that such disclosure is
necessary in order to comply with the Company Board's fiduciary duties under
applicable Law; provided, however, that neither the Company nor the Company
-------- -------
Board nor any committee thereof may, except in accordance with Section 4.02(b),
withdraw or modify, or propose publicly to withdraw or modify, its position with
respect to this Agreement or the Merger or approve or recommend, or propose
publicly to approve or recommend, a Company Takeover Proposal.
4.03. The Company's Accumulated and Current Earnings and Profits. At the
----------------------------------------------------------
Closing, the Company shall deliver to Patriot (i) a statement of accumulated and
current earnings and profits ("E&P") of the Company (as determined for federal
income tax purposes) as of a date not more than 30 days prior to the Closing
Date, together with evidence of such accumulated and current E&P of the Company
(as determined for federal income tax purposes) from Coopers & ▇▇▇▇▇▇▇ LLP in a
form reasonably satisfactory to Patriot and (ii) a statement of estimated
accumulated and current E&P of the Company (as determined for federal income tax
purposes) as of the Closing Date. The Company further agrees that, prior to the
Closing Date, it will cooperate in Patriot's efforts to obtain from Coopers &
▇▇▇▇▇▇▇ LLP such firm's computation, or confirmation of the Company's
computation, of accumulated and current E&P of the Company (as determined for
federal income tax purposes) at the Effective Time.
V. ADDITIONAL COVENANTS
5.01. Preparation of the Form S-4 and the Joint Proxy Statement;
----------------------------------------------------------
Shareholders Meetings. (a) As soon as practicable following the date of this
---------------------
Agreement, the Company, Patriot and OPCO will prepare and file with the SEC the
Joint Proxy Statement. Patriot will prepare and file, not later than promptly
after the Joint Proxy Statement has been cleared by the SEC, with the SEC the
Form S-4, in which the Joint Proxy Statement will be included as a prospectus.
Each of the Company and Patriot will use all reasonable efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use all reasonable efforts to cause the Joint
Proxy Statement to be mailed to the Company's shareholders, and Patriot and OPCO
will use all reasonable efforts to cause the Joint Proxy Statement to be mailed
to Patriot's and OPCO's shareholders, in each case as promptly as practicable
after the Form S-4 is declared effective under the Securities Act. Patriot and
OPCO will also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state securities
Laws in connection with the issuance of Paired Shares in the Merger and under
the Company Stock Plans and Patriot Stock Plans and the Company will furnish all
information concerning the Company and the holders of Company Common Stock as
may be reasonably requested in connection with any such action.
(b) Subject to its rights to terminate this Agreement pursuant to
the applicable provisions of Section 7.01, the Company will as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its shareholders (the "Company Shareholder
Meeting") for the purpose of obtaining the Company Shareholder
33
Approval and, through the Company Board, subject to the provisions of Section
4.02 recommend to Shareholders the approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby. Without limiting the
generality or effect of the foregoing but subject to the Company's right to
terminate this Agreement pursuant to Section 4.02, the Company's obligations
pursuant to the first sentence of this Section 5.01(b) will not be affected by
the commencement, public proposal, public disclosure or communication to the
Company of any Company Takeover Proposal.
(c) Subject to its rights to terminate this Agreement under the
applicable provisions of Section 7.01, each of Patriot and OPCO will, as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its shareholders (the "Patriot/OPCO Shareholder
Meetings") for the purpose of obtaining the Patriot/OPCO Shareholder Approvals
and, through Patriot's Board of Directors, recommend that its shareholders
approve the adoption of this Agreement and the approval of the issuance of
Paired Shares pursuant to the Merger.
(d) Patriot, OPCO and the Company will use reasonable efforts to hold
the Patriot/OPCO Shareholder Meetings and the Company Shareholder Meeting on the
same date and as soon as practicable after the date hereof.
5.02. Access to Information; Confidentiality. Each of the Company, Patriot
--------------------------------------
and OPCO will, and will cause each of its respective Subsidiaries to, afford to
the other party and to the officers, employees, accountants, counsel, financial
advisors and other representatives of such other party, reasonable access during
normal business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of the Company, Patriot and OPCO will, and will cause
each of its respective Subsidiaries to, furnish promptly to the other parties
(a) a copy of each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of federal or state
securities Laws and (b) all other information concerning its business, financial
condition, results of operations, properties and personnel as such other parties
may reasonably request. Subject to the requirements of applicable Law, and
except for such actions as are necessary to disseminate any documents necessary
to consummate the Merger, the parties will, and will instruct each of their
respective Affiliates, associates, partners, employees, agents and advisors to,
hold in confidence all such information as is confidential or proprietary, will
use such information only in connection with the Merger and, if this Agreement
is terminated in accordance with its terms, will deliver promptly to the others
(or destroy and certify to the other the destruction of) all copies of such
information (and any copies, compilations or extracts thereof or based thereon)
then in their possession or under their control.
5.03. Regulatory Filings. (a) Within twenty calendar days after the date
------------------
hereof, Patriot, OPCO and the Company will make such filings, if any, as may be
required by the HSR Act with respect to the consummation of the transactions
contemplated by this Agreement. Thereafter, Patriot, OPCO and the Company will
file or cause to be filed as promptly as practicable with the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
(the "DOJ") supplemental information, if any, which may be required or requested
by the FTC or the DOJ pursuant to the HSR Act. All filings referred to in this
Section 5.03(a) will
34
comply in all material respects with the requirements of the respective Laws
pursuant to which they are made.
(b) Without limiting the generality or effect of Section 5.03(a), each
of the parties will (i) use their respective reasonable efforts to comply as
expeditiously as possible with all lawful requests of Governmental Entities for
additional information and documents pursuant to the HSR Act, if applicable,
(ii) not (A) extend any waiting period under the HSR Act or (B) enter into any
agreement with any Governmental Entity not to consummate the transactions
contemplated by this Agreement, except with the prior consent of each of the
other parties hereto, and (iii) cooperate with each other and use reasonable
efforts to prevent the entry of, and to cause the lifting or removal of any
temporary restraining order, preliminary injunction or other judicial or
administrative order which may be entered into in connection with the
transactions contemplated by this Agreement, including without limitation the
execution, delivery and performance by the appropriate entity of such
divestiture agreements or other actions, as the case may be, as may be necessary
to secure the expiration or termination of the applicable waiting periods under
the HSR Act or the removal, dissolution, stay or dismissal of any temporary
restraining order, preliminary injunction or other judicial or administrative
order which prevents the consummation of the transactions contemplated hereby or
requires as a condition thereto that all or any part of the Business be held
separate and, prior to or after the Closing, pursue the underlying litigation or
administrative proceeding diligently and in good faith.
5.04. Reasonable Efforts and Cooperation. (a) Upon the terms and subject
----------------------------------
to the conditions set forth in this Agreement, each of the parties will use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including without limitation, (i) obtaining all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and making all necessary registrations and filings
(including filings with Governmental Entities) and taking all reasonable steps
as may be necessary to obtain an approval or waiver from, or to avoid an action
or proceeding by, any Governmental Entity, (ii) obtaining all necessary
consents, approvals or waivers from third parties prior to the Effective Time,
(iii) defending any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any adverse Order
entered by any court or other Governmental Entity vacated or reversed, and (iv)
executing and delivering any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In addition, and without limiting the generality of the foregoing:
(a) the Company will cooperate with Patriot to ensure that Patriot continues to
qualify as a REIT following the Effective Time, including by taking actions and
engaging in transactions reasonably requested by Patriot if such actions or
transactions would have no material impact on the Company or adversely affect
its shareholders and (b) the Company will use its reasonable best efforts to
obtain for the benefit of Patriot or OPCO, as the case may be, and to cooperate
with Patriot and OPCO in obtaining, prior to the Effective Time, all consents,
approvals, waivers and agreements as may be necessary from third parties in
order to enable the Patriot Companies to hold the Company's assets and to
operate its business in a manner which, in Patriot's reasonable judgment,
preserves Patriot's status as a REIT, maximizes the tax efficiencies associated
with the
35
Patriot Companies' paired share REIT structure, and enables the Patriot
Companies to implement their respective long-term business strategies; provided,
--------
however, that in connection with obtaining (or assisting Patriot or OPCO in
-------
obtaining) any such consent, approval, waiver or agreement, the Company will not
be required (1) to incur under this Agreement any out-of-pocket costs and
expenses (except for insignificant costs incident to compliance with this
covenant) unless Patriot shall have first agreed in writing to cause the Company
to be reimbursed therefor, or (2) to enter into or amend any management or
franchise agreement or other contract or incur any liability in a manner that
the Company reasonably determines is adverse to it or its Subsidiaries.
Nothing set forth in this Section 5.04(a) will limit or affect actions permitted
to be taken pursuant to Section 4.01 or 4.02.
(b) Without limiting the generality or effect of any provision of
Sections 5.03, 5.04(a) or Article VI, if any Governmental Entity having
jurisdiction over any party issues or otherwise promulgates any injunction,
decree or similar order prior to the Closing which prohibits the consummation of
the transactions contemplated hereby, the parties will use their respective
reasonable efforts to have such injunction dissolved or otherwise eliminated as
promptly as possible and, prior to or after the Closing, to pursue the
underlying litigation diligently and in good faith.
(c) In connection with and without limiting the foregoing, the
Company, Patriot and OPCO will (i) take all action available to them to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to the Merger or any of the other transactions contemplated hereby,
and (ii) if any state takeover statute or similar statute or regulation becomes
applicable thereto, take all action available to them to ensure that the Merger
and such other transactions may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise to minimize the effect of such statute
or regulation thereon.
5.05. Employee Benefit Matters. (a) With respect to each Patriot or OPCO
------------------------
"employee benefit plan," as defined in Section 3(3) of ERISA, including plans or
policies providing severance benefits and vacation entitlement (collectively,
the "Patriot Plans"), if the Effective Time occurs, service with the Company
will be treated as service with the Patriot Companies for purposes of
determining eligibility to participate, vesting and entitlement to benefits
(other than the accrual of benefits under any defined benefit pension plan);
provided, however, that such service will not be recognized to the extent that
-------- -------
such recognition would result in a duplication of benefits. Such service also
will apply for purposes of satisfying any waiting periods, evidence of
insurability requirements or the application of any preexisting condition
limitations under any Patriot Plan. Employees of the Company will be given
credit under any Patriot Plan in which they are eligible to participate for
amounts paid under a corresponding Company benefit plan during the same period
for purposes of applying deductibles, copayments and out-of-pocket maximums as
though such amounts had been paid in accordance with the terms and conditions of
the Patriot Plans.
(b) Following the Effective Time, Patriot will cause the Surviving
Corporation to honor in accordance with their terms all employment, severance
and other compensation agreements and arrangements, including but not limited to
severance benefit plans, the existence
36
or terms of which do not involve any material breach of any representation,
warranty or covenant of the Company hereunder.
5.06. Certain Employee and Other Matters. Each of the parties will take
----------------------------------
the actions specified to be taken or caused to be taken by it in Section 5.06 of
the Company Disclosure Schedule.
5.07. Fees and Expenses. (a) Except as otherwise set forth in this Section
-----------------
5.07, all fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated thereby and hereby will be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated, except that each of Patriot and the Company will bear and pay one-
half of the costs and expenses incurred in connection with the filing, printing
and mailing of the Joint Proxy Statement (excluding SEC filing fees).
(b)(i) In the event that this Agreement is terminated by the Company
pursuant to Section 7.01(f), the Company will deposit into escrow for the
benefit of Patriot, by wire transfer of same day funds, an amount in cash equal
to $50.0 million (the "Company Termination Fee") with an escrow agent selected
by Patriot (the "Escrow Agent") and on such terms (subject to Section 5.07(c)),
as shall be agreed upon by Patriot and the Escrow Agent (the "Escrow
Agreement").
(ii) In the event that (A) a Company Takeover Proposal is made public, or
any Person publicly announces an intention (whether or not conditional) to make
a Company Takeover Proposal, after the date of this Agreement and thereafter (x)
this Agreement is terminated by either Patriot or the Company pursuant to
Section 7.01(b)(i) or 7.01(b)(ii) and (y) prior to the date that is 12 months
after the date of such termination the Company enters into a Company Acquisition
Agreement or an Alternative Transaction (as defined below) occurs, or (B) this
Agreement is terminated by Patriot pursuant to Section 7.01(c), the Company will
deposit with the Escrow Agent pursuant to the Escrow Agreement for benefit of
Patriot by wire transfer of same-day funds, an amount in cash equal to the
Company Termination Fee.
(iii) As used in this Agreement, (A) "Alternative Transaction" means: (x)
a transaction other than a Private Transaction pursuant to which any Third Party
(as defined below) acquires more than 25% of the shares of Company Common Stock
pursuant to a tender offer or exchange offer or otherwise, (y) a merger or other
business combination involving the Company or any of its Affiliates pursuant to
which any Third Party acquires more than 25% of the shares (after giving effect
to such business combination) of Company Common Stock or of the entity surviving
such merger or business combination, or (z) any other transaction pursuant to
which any Third Party acquires control of assets (including for this purpose the
equity securities of Subsidiaries of the Company and the entity surviving any
merger or business combination including any of them) of the Company having a
fair market value equal to more than 25% of the fair market value of all the
assets of the Company and its Subsidiaries, taken as a whole, immediately prior
to such transaction, (B) "Third Party" means any Person other than Patriot,
OPCO or an Affiliate of either of them, and (C) "Private Transaction" means a
single privately negotiated sale (directly or indirectly) by a Company
shareholder to a Third Party of shares aggregating in excess of 25% of the
shares of Company Common Stock which shares were beneficially owned by such
shareholder on the date of this Agreement.
37
(iv) If any termination described in Section 5.07(b)(i) occurs, the Company
Termination Fee will be deposited immediately prior to and as a condition to the
effectiveness of such termination. If any termination described in Section
5.07(b)(ii)(B) occurs, the Company Termination Fee will be deposited immediately
after such termination. If any termination described in Section 5.07(b)(ii)(A)
occurs, the Company Termination Fee will thereafter be deposited immediately
prior to the first to occur of the entry by the Company into a Company
Acquisition Agreement or an Alternative Transaction (in either case within 12
months after the date of such termination).
(v) The Company acknowledges that the agreements contained in this Section
5.07(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Patriot and OPCO would not enter into this
Agreement; accordingly, if the Company fails promptly to deposit the amount due
pursuant to this Section 5.07(b), and, in order to obtain such payment, Patriot
or OPCO commences a suit which results in a judgment against the Company for the
fee set forth in this Section 5.07(b), the Company will pay to Patriot and OPCO
their costs and expenses (including reasonable attorneys' fees and expenses) in
connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank N.A. in effect on the date such payment was required
to be made, provided that payment of such costs, expenses and interest shall be
subject to the limitations of Section 5.07(c) (determined as if such expenses
were included in the Company Termination Fee).
(c) In the event that the Company is obligated to deposit with the
Escrow Agent the Company Termination Fee as provided in Section 5.07(b), the
Escrow Agent will pay to Patriot from the Company Termination Fee deposited into
escrow an amount equal to the lesser of (i) the Company Termination Fee and (ii)
the sum of (A) the maximum amount that can be paid to Patriot without causing
Patriot to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute income
described in Sections 856(c)(2)(A)-(H) or 856(c)(3)(A)-(i) of the Code
("Qualifying Income"), as determined by Patriot's certified public accountant,
plus (B) in the event Patriot receives either (1) a letter from Patriot's
counsel indicating that Patriot has received a ruling from the IRS as described
below or (2) an opinion from Patriot's counsel as described below, an amount
equal to the Company Termination Fee less the amount payable under clause (A)
above. The Escrow Agreement will provide that the Company Termination Fee in
escrow or any portion thereof shall not be released to Patriot unless the Escrow
Agent receives any one or combination of the following: (x) a letter from
Patriot's certified public accountants indicating the maximum amount that can be
paid by the Escrow Agent to Patriot without causing Patriot to fail to meet the
requirements of Sections 856(c)(2) and
38
(3) of the Code determined as if the payment of such amount did not constitute
Qualifying Income or a subsequent letter from Patriot's accountants revising
that amount, in which case the Escrow Agent will release such amount to Patriot,
or (y) a letter from Patriot's counsel indicating that Patriot received a ruling
from the IRS holding that the receipt by Patriot of the Company Termination Fee
would either constitute Qualifying Income or would be excluded from gross income
within the meaning of Section 856(c)(2) and (3) of the Code (or alternatively,
Patriot's legal counsel has rendered a legal opinion to Patriot to the effect
that the receipt by Patriot of the Company Termination Fee would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code), in which case the Escrow
Agent will release the remainder of the Company Termination Fee to Patriot. The
Company agrees to amend this Section 5.07 at the request of Patriot as may
reasonably be necessary (and without substantial cost or burden to the Company)
in order to (I) maximize the portion of the Company Termination Fee that may be
distributed to Patriot hereunder without causing Patriot to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code, (II) improve Patriot's
chances of securing a favorable ruling described in this Section 5.07(c), or
(III) assist Patriot in obtaining a favorable legal opinion from its counsel as
described in this Section 5.07(c); provided that Patriot's legal counsel has
rendered a legal opinion to Patriot to the effect that such amendment would not
cause Patriot to fail to meet the requirements of Section 856(c)(2) or (3) of
the Code. The Escrow Agreement will also provide that any portion of the Company
Termination Fee held in escrow for 15 years will be released by the Escrow Agent
to the Company. The Company will not bear any cost of or have liability
resulting from the Escrow Agreement.
(d) In the event that this Agreement is terminated by the Company
pursuant to Section 7.01(d), Patriot will promptly, but in no event later than
two business days after the date of such termination, pay the Company a fee
equal to $50.0 million payable by wire transfer of same-day funds. In the event
that this Agreement is terminated by the Company or Patriot pursuant to Section
7.01(b)(iii) then Patriot will pay the Company an amount in cash equal to the
Company's documented out-of-pocket fees and expenses ("Expenses") actually
incurred by it prior to such termination in connection with this Agreement and
the transactions contemplated hereby, including without limitation reasonable
fees and expenses of accountants, attorneys and investment bankers; provided
that the aggregate amount of Expenses required to be reimbursed pursuant to this
Section 5.07(d) will not exceed $9,000,000 and, provided, further, that in the
case of such a termination by the Company or Patriot, such amount will be
payable only if the Company is not in material breach at the time of termination
of this Agreement (which breach has continued for more than 30 days after notice
or cannot reasonably be expected to be cured within such period (unless such
breach was caused by or resulted from a breach of this Agreement by Patriot or
OPCO)). Patriot acknowledges that the agreements contained in this Section
5.07(d) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, the Company would not enter into this
Agreement; accordingly, if Patriot fails promptly to pay the amount due pursuant
to this Section 5.07(d), and, in order to obtain such payment, the Company
commences a suit which results in a judgment against Patriot or OPCO for the fee
set forth in this Section 5.07(d), Patriot will pay to the Company its costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit, together with interest on the amount of the fee at the prime rate of
Citibank N.A. in effect on the date such payment was required to be made.
5.08. Public Announcements. Patriot and the Company will consult with each
--------------------
other before issuing, and provide each other the opportunity to review, comment
upon and concur with, any press release or other public statements with respect
to the transactions contemplated by this Agreement, and will not issue any such
press release or make any such public statement prior to such consultation,
except as either party may determine is required by applicable Law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement will be
in the form heretofore agreed to by the parties.
39
5.09. Affiliates; Etc. (a) Prior to the Closing Date, the Company will
---------------
deliver to Patriot a letter identifying all Persons who are, at the time this
Agreement is submitted for adoption by to the shareholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company will use all reasonable efforts to cause each such Person to deliver
to Patriot on or prior to the Closing Date a written agreement substantially in
the form attached as Schedule 5.09(a) hereto.
----------------
(b) Registration Rights. Effective as of the Effective Time, Patriot
-------------------
and OPCO will cause the actions specified in Schedule 5.09(b) to be taken with
----------------
respect to the registration rights agreements specified thereon.
5.10. Listing of Paired Shares. Each of Patriot and OPCO will use all
------------------------
reasonable efforts to cause the Paired Shares to be issued in the Merger and
under the Company Stock Plans to be approved prior to the Effective Time for
listing on the NYSE, subject to official notice of issuance.
5.11. Shareholder Litigation. Each of the Company, Patriot and OPCO will
----------------------
give the other the reasonable opportunity to participate in the defense of any
shareholder litigation against the Company, Patriot or OPCO, as applicable, or
their respective directors relating to the transactions contemplated by this
Agreement.
5.12. Tax Treatment. Each of Patriot, the Company and OPCO will use
-------------
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code.
5.13. Indemnification, Exculpation and Insurance. (a) All rights to
------------------------------------------
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time existing in favor of the current or former
directors or officers of the Company or each of its Subsidiaries as provided in
their respective certificates of incorporation or bylaws (or comparable
organizational documents) and existing indemnity contracts will be assumed by
Patriot and Patriot will be directly responsible for such indemnification,
without further action, as of the Effective Time and will continue in full force
and effect in accordance with their respective terms for a period not less than
six years from the Effective Time. In addition, from and after the Effective
Time, directors and officers of the Company who become or remain directors or
officers of Patriot, OPCO or any Subsidiary thereof will be entitled to the same
indemnity rights and protections (including those provided by directors' and
officers' liability insurance) as are afforded to directors and officers of
Patriot, OPCO or such Subsidiary, as the case may be. Notwithstanding any other
provision hereof, the provisions of this Section 5.13 (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
(b) Patriot will maintain in effect for not less than six years after
the Effective Time one or more policies of directors' and officers' liability
insurance that provide coverage for the current directors and officers of the
Company that is substantially similar to that provided by the policies
maintained by or on behalf of the Company and its Subsidiaries on the date
hereof
40
with respect to matters existing or occurring at or prior to the Effective Time;
provided, however, that if the aggregate annual premiums for such insurance at
-------- -------
any time during such period exceed 150% of the per annum rate of premium
currently paid by the Company and its Subsidiaries for such insurance on the
date of this Agreement, then Patriot will cause the Surviving Corporation to,
and the Surviving Corporation will, provide the maximum coverage that will then
be available at an annual premium equal to 150% of such rate.
5.14. Interim Transactions. (a) Pending Transactions. Notwithstanding
-------------------- --------------------
any other provisions to the contrary contained in this Agreement, including
without limitation Section 4.01(a), the Company or any directly or indirectly
wholly owned Subsidiary of the Company may enter into an agreement regarding,
and consummate, an acquisition transaction or business combination involving the
businesses and/or assets set forth in Section 4.01(a) of the Company Disclosure
Schedule on substantially the terms set forth therein.
(b) Interim Transactions Committee. Promptly following the execution
------------------------------
of this Agreement, Patriot and the Company will constitute and establish a
committee which will evaluate and consider proposed Transactions by the Company
or any of its Subsidiaries between the date hereof and the Effective Time (the
"Interim Transactions Committee"). The Interim Transactions Committee will
consist of two individuals selected by Patriot who are reasonably satisfactory
to the Company and two individuals selected by the Company who are reasonably
acceptable to Patriot and will act only by the vote of at least three of the
four members thereof. For purposes hereof, the Chairman, Chief Operating
Officer and Chief Financial Officer of each of the Company and Patriot will be
deemed to be satisfactory to the other. The Interim Transactions Committee will
be abolished at the Effective Time. The Interim Transactions Committee will
have the power to make all of the determinations contemplated to be made by it
pursuant to this Agreement.
5.15. Ownership Restrictions. The Company will cooperate with Patriot to
----------------------
determine whether the issuance of Paired Shares pursuant to the Merger will
violate the provisions in Patriot's or OPCO's Amended and Restated Certificate
of Incorporation restricting the amount of Patriot Common Stock or OPCO Common
Stock, as the case may be, that may be held (directly, indirectly or by
attribution) by any Person.
5.16. Termination of Stock Purchase Plan. The Company will cause the
----------------------------------
Interstate Hotels Company Employee Stock Purchase Plan to be terminated on or
prior to the Closing Date.
VI. CONDITIONS PRECEDENT
6.01. Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger and the other
transactions contemplated herein is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions, any or all of which may
be waived, in whole or in part by the parties hereto, to the extent permitted by
applicable law:
(a) Shareholder Approval. Each of the Company Shareholder Approval
--------------------
and the Patriot/OPCO Shareholder Approvals shall have been obtained;
41
(b) No Injunctions or Restraints. No Order or Law enacted, entered,
----------------------------
promulgated, enforced or issued by any court of competent jurisdiction or other
Governmental Entity or other legal restraint or prohibition (collectively, "
Restraints") preventing the consummation of the Merger shall be in effect;
(c) HSR Act. Any waiting period under the HSR Act applicable to the
-------
Merger shall have expired or been terminated;
(d) Form S-4. The Form S-4 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) Tax Opinion. ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel to the Patriot
-----------
Companies, shall have delivered to Patriot and the Company an unqualified
opinion, or ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company, shall have so
delivered such an opinion, dated as of the Closing Date, to the effect that,
based upon representations, assumptions and conditions customary for
transactions such as the Merger, the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code and that Patriot and the Company will each be a party to such
reorganization within the meaning of Section 368(b) of the Code.
(f) Listing of Paired Shares. The Paired Shares issuable to the
------------------------
Company's shareholders pursuant to this Agreement and under the Company Stock
Plans shall have been approved for listing on the NYSE, subject to official
notice of issuance; and
(g) Change in Tax Laws. There shall not have been any federal
------------------
legislative or regulatory change that would cause Patriot to cease to qualify as
a "real estate investment trust" for federal income tax purposes.
6.02. Conditions to Obligations of Patriot and OPCO. The obligation of
---------------------------------------------
Patriot and OPCO to effect the Merger is further subject to satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company in Section 3.01 that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Company
in Section 3.01 that are not so qualified shall be true and correct in all
material respects, in each case as of the Closing Date as if made anew on such
date, except for representations and warranties made as of a specified date
(which shall be true and correct in all material respects (except for those
qualified as to materiality, which shall be true and correct) as of such
specified date);
(b) Performance of Obligations of the Company. The Company 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 Patriot shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect;
42
(c) No Company Material Adverse Effect. At any time after the date
----------------------------------
of this Agreement there shall not have occurred any event which, individually or
when considered with any other such event, could reasonably be expected to
result in a Company MAE;
(d) Letters from Company Affiliates. Patriot shall have received
-------------------------------
from each person named in the letter referred to in Section 5.09(a) an executed
copy of an agreement substantially in the form of Schedule 5.09(a) hereto;
----------------
(e) Dissenting Shares. There shall be no more than 1,600,000
-----------------
Dissenting Shares in the aggregate;
(f) Certain Consents. The Company shall have received to Patriot's
----------------
reasonable satisfaction the consents specified in Schedule 6.02(f); and
(g) E&P Statement. Coopers & ▇▇▇▇▇▇▇ LLP or Ernst & Young L.L.P. (i)
-------------
shall have delivered to Patriot, at or prior to the Closing, a statement of
accumulated and current E&P of the Company (as determined for federal income tax
purposes) as of a then recent date and (ii) shall have confirmed to Patriot that
Patriot shall be entitled to rely on such statement for purposes of preparing
and filing its federal, state, local and foreign tax returns required to be
filed by it, determining the amount of dividends to be paid to stockholders and
paying any Taxes owed by it.
6.03. Conditions to Obligation of the Company. The obligation of the
---------------------------------------
Company to effect the Merger is further subject to satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Patriot in Section 3.02 that are qualified as to materiality shall
be true and correct, and the representations and warranties of the Patriot
Companies in Section 3.02 that are not so qualified shall be true and correct in
all material respects, in each case as of the Closing Date as if made anew on
such date, except for representations and warranties made as of a specified date
(which shall be true and correct in all material respects (except for those
qualified as to materiality, which shall be true and correct) as of such
specified date); provided, however, that the obligation of the Company to effect
-------- --------
the Merger shall not be subject to the continued accuracy of the representation
set forth in Section 3.02(p) if prior to the Effective Time, Patriot has
received a private letter ruling from the Internal Revenue Service holding that
such transfer will not cause the Merger to fail to qualify as a tax-free
reorganization under Section 368(a) of the Code or the proposed Treasury
Regulation Sections 1.368-1(d) and (f) are finalized in substantially their
current form but with an effective date that causes them to apply to the Merger.
(b) Performance of Obligations of Patriot and OPCO. Patriot and OPCO
----------------------------------------------
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Patriot by the
chief executive officer and the chief financial officer of Patriot to such
effect;
43
(c) No Patriot Material Adverse Effect. At any time after the date
----------------------------------
of this Agreement there shall not have occurred any event which, individually or
when considered with any other such event, could reasonably be expected to
result in a Patriot MAE; and
(d) Dissenting Shares. There shall be no more than 3,542,131
-----------------
Dissenting Shares in the aggregate; provided, however, that the Company may not
-------- -------
rely on the failure of such condition to be satisfied if, prior to the Closing,
Patriot has given the Company written notice that, notwithstanding Section
2.01(f), the number of Dissenting Shares in excess of 3,542,131 will not be
subtracted in calculating the Maximum Cash Shares pursuant to Section 2.01(f).
6.04. Frustration of Closing Conditions. Neither Patriot nor the Company
---------------------------------
may rely on the failure of any condition set forth in Section 6.01, 6.02 or
6.03, as the case may be, to be satisfied if such failure was caused by such
party's failure to use reasonable efforts to commence or complete the Merger and
the other transactions contemplated by this Agreement, as required by and
subject to Section 6.03.
VII TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after Company Shareholder Approval or
Patriot/OPCO Shareholder Approvals:
(a) by mutual written consent of Patriot and the Company;
(b) by either Patriot or the Company:
(i) if the Merger has not been consummated by May 31, 1998;
provided, however, that the right to terminate this Agreement
-------- -------
pursuant to this Section 7.01(b)(i) will not be available to any
party whose failure to perform any of its obligations under this
Agreement results in the failure of the Merger to be consummated by
such time;
(ii) if the Company Shareholder Approval shall not have been
obtained at a Company Shareholder Meeting duly convened therefor or
at any adjournment or postponement thereof;
(iii) if the Patriot/OPCO Shareholder Approvals shall not have
been obtained at Patriot/OPCO Shareholder Meetings duly convened
therefor or at any adjournment or postponement thereof; or
(iv) if any Governmental Entity shall have issued a Restraint or
taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the Merger or any of the
other transactions contemplated by this Agreement and such Restraint
or other action shall have become final and nonappealable;
44
(c) by Patriot, if the Company Board or any committee thereof shall
have (i) withdrawn, modified or amended in a manner adverse to Patriot its
approval or recommendation of the Merger or this Agreement, (ii) failed to
include such recommendation in the Joint Proxy Statement, (iii) approved or
recommended, or proposed publicly to approve or recommend, any Company Takeover
Proposal other than the Merger, (iv) caused the Company to enter into a Company
Acquisition Agreement, or (v) resolved to take any of the foregoing actions;
(d) by the Company, if the Patriot Board or the OPCO Board or any
committee of either of them thereof shall have (i) withdrawn, modified or
amended in a manner adverse to the Company its approval or recommendation of the
Merger or this Agreement, (ii) failed to include such recommendation in the
Joint Proxy Statement, or (iii) resolved to take any of the foregoing actions;
(e) by the Company, if Patriot or OPCO shall have breached or failed
to perform in any material respect any of its representations, warranties or
covenants required to be performed by them under this Agreement, which breach or
failure to perform cannot be or has not been cured within 30 days after the
giving of written notice to Patriot and OPCO of such breach (provided that the
--------
Company is not then in material breach of any representation, warranty, covenant
or other agreement contained in this Agreement that cannot or has not been cured
within 30 days after giving notice to the Company of such breach);
(f) by the Company in accordance with Section 4.02(b), provided that
--------
it has complied with all provisions of Section 4.02;
(g) by the Company, in accordance with and subject to Section 2.01(d),
if the Meeting Date Price is less than $26.416 (as may be adjusted pursuant to
Section 2.01(d)); and
(h) by Patriot, if the Company shall have breached or failed to
perform in any material respect any of its representations, warranties or
covenants required to be performed by it under this Agreement, which breach or
failure to perform cannot be or has not been cured within 30 days after the
giving of written notice to the Company of such breach (provided that neither
--------
Patriot nor OPCO is then in material breach of any representation, warranty,
covenant or other agreement contained in this Agreement that cannot or has not
been cured within 30 days after giving notice to Patriot of such breach).
7.02. Effect of Termination. In the event of termination of this Agreement
---------------------
by either the Company or Patriot as provided in Section 7.01, this Agreement,
other than the provisions of Section 3.01(k), Section 3.02(j), Section 5.02,
Section 5.07, this Section 7.02 and Article VIII, will forthwith become void and
have no effect, without any liability or obligation on the part of Patriot, the
Company or OPCO, except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
7.03. Amendment. This Agreement may be amended by the parties at any time
---------
before or after the Company Shareholder Approval or the Patriot/OPCO Shareholder
Approvals; provided, however, that, after any such approval, there may not be
-------- -------
made any amendment that by Law
45
requires further approval by the shareholders of the Company, Patriot or OPCO
without the further approval of such shareholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
7.04. Extension; Waiver. At any time prior to the Effective Time, a party
-----------------
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreements or in any document
delivered pursuant to this Agreement, or (c) subject to the proviso of Section
7.03, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver will be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
7.05. Procedure for Termination, Amendment, Extension or Waiver. A
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termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to Section
7.04 will, in order to be effective, require, in the case of Patriot, OPCO or
the Company, action by its Board of Directors or a duly authorized committee
thereof.
VII GENERAL PROVISIONS
8.01. Nonsurvival of Representations and Warranties. None of the
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representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement will survive the Effective Time. This Section 8.01
will not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
8.02. Notices. All notices, requests, claims, demands and other
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communications under this Agreement will be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as specified by like notice):
(a) if to Patriot, to:
Patriot American Hospitality, Inc.
Tri-West Plaza
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
46
with copies to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, P.C. and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ III, P.C.
(b) if to OPCO, to:
Patriot American Hospitality Operating Company
Tri-West Plaza
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, P.C. and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ III, P.C.
(c) if to the Company, to:
Interstate Hotels Company
▇▇▇▇▇▇ Plaza Ten
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇.
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
8.03. Certain Definitions. For purposes of this Agreement:
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47
(a) An "Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person;
(b) a "Subsidiary" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person. A "Significant Subsidiary" means any subsidiary of the Company or
Patriot, as the case may be, that would constitute a "significant subsidiary"
of such party within the meaning of Rule 1-02 of Regulation S-X of the SEC;
(c) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(d) "Knowledge" of any Person which is not an individual means the
knowledge of any of such Person's executive officers (as listed in the last
proxy statement or registration statement of such Person filed with the SEC or,
if any such listed officer is no longer employed by such Person, the successor
to such officer's responsibilities) after reasonable inquiry.
8.04. Interpretation. When a reference is made in this Agreement to an
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Article, Section, Annex or Exhibit, such reference will be to an Article or
Section of, or an Annex or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and will 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 will be deemed to be followed
by the words "without limitation". The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement will refer to
this Agreement as a whole and not to any particular provision of this Agreement.
All terms used herein with initial capital letters have the meanings ascribed to
them herein and all terms defined in this Agreement will have such defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein
or in any agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and
assigns.
8.05. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
8.06. Entire Agreement; No Third-Party Beneficiaries. This Agreement
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(including the documents and instruments referred to herein), and the
Confidentiality Agreement (a) constitute
48
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter of
this Agreement and (b) except for the provisions of Article II and Sections
5.05, 5.06 and 5.13 are not intended to confer upon any Person other than the
parties any rights or remedies.
8.07. Governing Law. This Agreement will be governed by, and construed in
-------------
accordance with, the Laws of the Commonwealth of Pennsylvania regardless of the
Laws that might otherwise govern under applicable principles of conflict of Laws
thereof.
8.08. Assignment. Neither this Agreement nor any of the rights, interests
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or obligations under this Agreement may be assigned, in whole or in part, by
operation of law or otherwise by either of the parties hereto without the prior
written consent of the other party. Any assignment in violation of the
preceding sentence will be void. 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.
8.09. Enforcement. The parties agree that irreparable damage would occur
-----------
and that the parties would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties will be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this
Agreement in any federal court of the Western District of Pennsylvania or in
Pennsylvania state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any federal court
located in the Western District of Pennsylvania or any Pennsylvania state court
in the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a federal court sitting in the Western District of Pennsylvania or a
Pennsylvania state court.
49
IN WITNESS WHEREOF, Patriot, OPCO and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: Office of the Chairman
PATRIOT AMERICAN HOSPITALITY OPERATING COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇
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Name: ▇▇▇▇▇▇ ▇▇
Title: Senior Vice President
INTERSTATE HOTELS COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇
Chairman of the Board