Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
APPLE HOSPITALITY TWO, INC.
AHT RES ACQUISITION, L.P.
RIBM ONE LLC
AND
MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
DATE: NOVEMBER 28, 2001
TABLE OF CONTENTS
Page
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1. DEFINITIONS.....................................................................................1
2. PLAN OF MERGER..................................................................................2
2.1. The Merger.............................................................................2
2.2. Certificate of Merger; Effective Time..................................................2
2.3. Effects of Merger......................................................................2
2.4. Escrow Deposit.........................................................................3
2.5. Closing................................................................................3
2.6. Exchange and Conversion of Partnership Interests.......................................3
2.7. No Appraisal Rights....................................................................6
2.8. Approval of the Limited Partners.......................................................6
3. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP...............................................6
3.1. Organization, Good Standing and Qualification..........................................6
3.2. Subsidiaries...........................................................................7
3.3. Power, Authority and Enforceability....................................................7
3.4. Capitalization.........................................................................8
3.5. Noncontravention.......................................................................8
3.6. Litigation.............................................................................9
3.7. SEC Documents; Financial Statements; Liabilities......................................10
3.8. No Material Adverse Changes...........................................................11
3.9. Indebtedness..........................................................................11
3.10. Default; Material Contracts...........................................................12
3.11. Tax Matters...........................................................................12
3.12. Employee Matters......................................................................14
3.13. Compliance with Laws..................................................................14
3.14. Environmental Compliance..............................................................15
3.15. Brokers Fees..........................................................................15
3.16. Potential Conflicts of Interest.......................................................15
3.17. Opinion of Financial Advisor..........................................................16
3.18. Vote Required.........................................................................16
3.19. Properties............................................................................16
4. REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER..........................................16
4.1. Organization, Good Standing and Qualification.........................................16
4.2. Power, Authority and Enforceability...................................................17
4.3. Noncontravention......................................................................17
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB.........................................18
5.1. Organization, Good Standing and Qualification.........................................18
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5.2. Power, Authority and Enforceability...................................................18
5.3. Financial Statements..................................................................19
5.4. Noncontravention......................................................................19
5.5. Litigation............................................................................20
5.6. No Material Adverse Changes...........................................................20
5.7. Brokers Fees..........................................................................21
6. COVENANTS......................................................................................21
6.1. Conduct of Business by the Partnership................................................21
6.2. Reasonable Efforts; Further Assurances; Cooperation; Notification.....................23
6.3. No Solicitation.......................................................................25
6.4. Recommendation to the Limited Partners................................................28
6.5. Access to Information.................................................................28
6.6. Public Announcements..................................................................28
6.7. Transfer and Gains Taxes..............................................................28
6.8. Tax Matters...........................................................................29
6.9. [Intentionally Deleted]...............................................................30
6.10. Lender Consent........................................................................30
6.11. Manager Consents......................................................................30
6.12. Financial and Operational Reports.....................................................31
6.13. Indemnification by the General Partner................................................31
6.14. Indemnification by the New Entity.....................................................34
6.15. Adjustment Account....................................................................34
7. CONDITIONS TO CLOSING..........................................................................36
7.1. Conditions to Each Party's Obligations................................................36
7.2. Conditions to Obligations of the Partnership and the General Partner..................37
7.3. Conditions to Obligations of Buyer and Merger Sub.....................................37
8. TERMINATION, EXPENSES, AMENDMENT AND WAIVER....................................................39
8.1. Termination...........................................................................39
8.2. Break-Up Fee..........................................................................41
9. DEFINITIONS....................................................................................42
10. GENERAL PROVISIONS.............................................................................48
10.1. No Survival...........................................................................48
10.2. Expenses..............................................................................48
10.3. Amendment.............................................................................49
10.4. Extension; Waiver.....................................................................49
10.5. Notices...............................................................................49
10.6. Assignment and Binding Effect.........................................................50
10.7. Entire Agreement......................................................................51
10.8. Governing Law.........................................................................51
10.9. Severability..........................................................................51
10.10. Further Assurances....................................................................51
10.11. Counterparts..........................................................................51
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Exhibit A Certificate of Merger
Exhibit B Deposit Escrow Agreement
Exhibit C Buyer's Financial Statements
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of November 28, 2001, by and among Apple Hospitality Two, Inc., a Virginia
corporation ("Buyer"), AHT Res Acquisition, L.P., a Delaware limited partnership
and a wholly owned indirect subsidiary of Buyer ("Merger Sub"), Marriott
Residence Inn Limited Partnership, a Delaware limited partnership (the
"Partnership"), and RIBM One LLC, a Delaware limited liability company and the
sole general partner of the Partnership (the "General Partner").
WHEREAS, the Partnership or a Subsidiary (as defined below) is the
owner of the Residence Inn hotels listed on Schedule 1 attached hereto (the
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"Hotels"); and
WHEREAS, AHT Res I GP, Inc., a Virginia corporation and the sole
general partner of Merger Sub ("Merger Sub GP"), and the General Partner have
deemed it advisable for their respective limited partnerships and the partners
thereof that, upon the terms and subject to the conditions contained herein,
Merger Sub merge with and into the Partnership (the "Merger"), with the
Partnership being the surviving limited partnership (the "Surviving
Partnership") and the outstanding units of limited partnership interest (the
"Partnership Units") and the general partner interest in the Partnership
(collectively, the "Partnership Interests") being converted into the right to
receive the Merger Consideration and the General Partner Consideration,
respectively (each as defined below).
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth and other good and
valuable consideration, the parties, each intending to be legally bound hereby,
agree as follows:
1. DEFINITIONS
For all purposes of this Agreement, certain capitalized terms
specified in Article 9 shall have the meanings specified or referred to in
Article 9, except as otherwise expressly provided.
2. PLAN OF MERGER
2.1. The Merger
Upon the terms and subject to the conditions hereof, and in accordance
with the provisions of Section 17-211 of the Delaware Revised Uniform Limited
Partnership Act (the "DRULPA"), Merger Sub shall be merged with and into the
Partnership at the Effective Time (as defined below), with the holders of
Partnership Interests (the "Partners") receiving the Merger Consideration and
the General Partner Consideration, as applicable, as set forth in Section 2.6
below, and with the partners in Merger Sub becoming the sole partners in the
Partnership. The Partnership shall be the Surviving Partnership and the separate
existence of Merger Sub shall cease. The Surviving Partnership shall continue
its existence as a limited partnership under the laws of the State of Delaware,
and its name shall continue to be "Marriott Residence Inn Limited Partnership."
2.2. Certificate of Merger; Effective Time
Upon the terms and subject to the conditions hereof, at or prior to
the Closing (as defined below), the parties to this Agreement (each, a "Party,"
and collectively, the "Parties") shall execute a certificate of merger (the
"Certificate of Merger") substantially in the form attached hereto as Exhibit A
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and the Partnership shall file the Certificate of Merger with the Office of the
Secretary of State of the State of Delaware in accordance with the provisions of
Section 17-211(c) of the DRULPA. The Merger shall become effective on the time
and date specified in the Certificate of Merger filed with the Secretary of
State of the State of Delaware or, absent any such indication, upon acceptance
of filing (the "Effective Time"). The date on which the Effective Time occurs is
referred to herein as the "Effective Date."
2.3. Effects of Merger
The Merger shall have the effects set forth in the DRULPA. The sole
general partner of the Surviving Partnership shall be Merger Sub GP, which is
the general partner of Merger Sub, until it withdraws or is removed in
accordance with the partnership agreement of the Surviving Partnership, and the
limited partners of the Surviving Partnership shall be the limited partners of
Merger Sub. The Agreement of Limited Partnership of Merger Sub shall be adopted
as the partnership agreement of the Surviving Partnership from and after the
Effective Time and shall continue in full force and effect after the Merger
until further amended in accordance with the terms and conditions thereof and
applicable Delaware law.
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2.4. Escrow Deposit
(a) For and in partial consideration of the execution and delivery of
this Agreement, within 3 business days of the date hereof, Buyer and the
Partnership shall enter into an escrow agreement with the Deposit Escrow Agent
in substantially the form attached hereto as Exhibit B and as may be reasonably
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modified by the Deposit Escrow Agent (the "Deposit Escrow Agreement").
(b) Simultaneously with the execution and delivery of the Deposit
Escrow Agreement, Buyer shall deposit in escrow with the Deposit Escrow Agent
$35,000,000 in cash, such amount and any interest earned thereon to be held as a
deposit (the "Deposit") in accordance with the terms and conditions of the
Deposit Escrow Agreement. Pursuant to the terms of the Deposit Escrow Agreement,
the Deposit shall be invested by the Deposit Escrow Agent in such bonds,
treasury notes and other evidences of indebtedness of the United States, and/or
certificates of deposit in commercial banks and savings and loan associations
organized under the laws of the United States or any state thereof as Buyer
shall select.
(c) In the event that this Agreement shall be terminated pursuant to
Section 8.1 (other than pursuant to Section 8.1(b)), Buyer shall be entitled to
the immediate return of the Deposit.
(d) In the event that this Agreement shall be terminated pursuant to
Section 8.1(b), $3,000,000 of the Deposit shall become the property of and be
delivered to the Partnership and the remaining $32,000,000 of the Deposit shall
be returned to Buyer.
2.5. Closing
The closing of the Merger (the "Closing") will take place as soon as
practicable following the date on which the last condition in Section 7 required
to be satisfied prior to the Closing is satisfied or waived or on such other
date as the Parties may agree (the "Closing Date"), at the offices of ▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. or such other place to which
the Parties may agree.
2.6. Exchange and Conversion of Partnership Interests
(a) At the Effective Time, the issued and outstanding Partnership
Units shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive cash in an amount equal
to $636.43 per Unit (the "Merger Consideration").
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(b) Prior to the Effective Time, Buyer shall designate a bank or trust
company reasonably acceptable to the Partnership to act as Paying Agent in the
Merger (the "Paying Agent") for the purpose of exchanging certificates
representing the Partnership Units (the "Unit Certificates") for the Merger
Consideration. At or before the Effective Time, (i) Buyer and the Partnership
shall issue written instructions to the Deposit Escrow Agent to deliver the
Deposit to the Paying Agent and (ii) Buyer shall deliver to the Paying Agent
cash in an amount equal to the difference between (x) the aggregate Merger
Consideration and (y) the Deposit (such amounts referred to in (i) and (ii)
above collectively referred to herein as the "Exchange Fund").
(c) Promptly after the Effective Time, Buyer shall cause the Paying
Agent to mail to each Partner (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to Unit Certificates
shall pass, only upon proper delivery of the Unit Certificates to the Paying
Agent) and (ii) instructions for use in effecting the surrender of Unit
Certificates in exchange for the Merger Consideration. Upon surrender of a Unit
Certificate to the Paying Agent, together with a duly executed letter of
transmittal and such other documents as may reasonably be required by the Paying
Agent, the holder of such Unit Certificate shall be entitled to receive the
Merger Consideration into which the Partnership Units represented by such Unit
Certificate shall have been converted pursuant to this Section 2.6 and the Unit
Certificate so surrendered shall forthwith be canceled. Until so surrendered,
each Unit Certificate shall represent after the Effective Time for all purposes
only the right to receive the Merger Consideration. In the event of a transfer
of ownership of Partnership Units that is not registered in the transfer books
of the Partnership, payment may be made to a person other than the person in
whose name the Unit Certificate so surrendered is registered, if such Unit
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Unit Certificate or establish to the satisfaction of Buyer that
such tax has been paid or is not applicable. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Unit Certificate.
(d) All Merger Consideration delivered upon the surrender of Unit
Certificates in accordance with the terms of this Section 2.6 shall be deemed to
have been paid in full satisfaction of all rights pertaining to the Partnership
Units represented by such Unit Certificates. At the Effective Time, the transfer
books of the Partnership shall be closed, and there shall be no further
registration of transfers on the transfer books of the Surviving Partnership of
the Partnership Units that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Unit Certificates are presented to the
Surviving Partnership or the Paying Agent for any reason, they shall be canceled
and exchanged for the Merger Consideration as provided in this Section 2.6.
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(e) Promptly following the date which is 180 days after the Effective
Date, the Paying Agent will deliver to Buyer all certificates and other
documents in its possession relating to the transactions contemplated hereby,
and the Paying Agent's duties will terminate. Any portion of the Exchange Fund
(including interest or other income received by the Paying Agent in respect
thereof) that remains unclaimed by the holder of any Partnership Unit 180 days
after the Effective Date shall be delivered to the Surviving Partnership, upon
demand, and any such holder who has not exchanged such holder's Partnership
Units prior to such time shall thereafter look only to the Surviving Partnership
for payment of such holder's claim for Merger Consideration.
(f) If any Unit Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such Unit
Certificate to be lost, stolen or destroyed and, if required by the Paying
Agent, the posting by such person of a bond or other surety in such amount as
the Paying Agent may reasonably direct as indemnity against any claim that may
be made with respect to such Unit Certificate and subject to such other
reasonable conditions as the Paying Agent may impose, the Paying Agent shall
deliver in exchange for such Unit Certificate the Merger Consideration into
which the Partnership Units represented by such Unit Certificate shall have been
converted pursuant to this Section 2.6.
(g) Buyer, the Surviving Partnership or the Paying Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Partnership Units such amounts as
Buyer, the Surviving Partnership or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority by Buyer, the Surviving Partnership or the Paying
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of Partnership Units in respect of which such
deduction and withholding was made by Buyer, the Surviving Partnership or the
Paying Agent.
(h) None of Buyer, the Surviving Partnership or the Paying Agent shall
be liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(i) At the Effective Time, the general partner interest in the
Partnership shall, by virtue of the Merger and without any action on the part of
the General Partner, be converted into the right to receive cash in an amount
equal to $200,000 (the "General Partner Consideration"). Buyer shall deliver the
General Partner Consideration to the General Partner in accordance with the
terms of Section 6.13(g).
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(j) The Paying Agent shall invest the cash of the Exchange Fund, as
directed by the Surviving Partnership, on a daily basis. Any interest and other
income resulting from such investments shall be payable to the Surviving
Partnership on demand.
2.7. No Appraisal Rights
The holders of Partnership Interests are not entitled under applicable
law to appraisal rights as a result of the Merger.
2.8. Approval of the Limited Partners
The Partnership and the General Partner promptly shall seek the
approval of the holders of a majority of the Partnership Units who have been
admitted as limited partners of the Partnership to the Merger and the related
transactions to the extent required by the Partnership Agreement to effectuate
the transactions contemplated by this Agreement (collectively, the "Limited
Partner Approvals").
3. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership represents and warrants to Buyer as of the date of
this Agreement:
3.1. Organization, Good Standing and Qualification
The Partnership has been duly formed and is validly existing as a
limited partnership in good standing under the DRULPA with the requisite
partnership power and authority to own, lease and operate its properties,
conduct the business in which it is engaged and perform its obligations under
this Agreement. The Partnership is duly qualified to transact business and is in
good standing under the laws of each jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification,
except where the failure to so qualify or be in good standing would not
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of the Partnership and its
Subsidiaries (as defined below) taken as a whole (a "Partnership Material
Adverse Effect"). The Partnership has furnished or made available to Buyer and
Merger Sub correct and complete copies of its Certificate of Limited Partnership
and its Partnership Agreement, as amended or supplemented to the date of this
Agreement.
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3.2. Subsidiaries
(a) Schedule 3.2 sets forth each corporation, partnership, limited
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liability company, joint venture or other legal entity of which the Partnership
owns (either directly or through or together with another Subsidiary of the
Partnership) either (i) a general partner, managing member or other similar
interest, or (ii) voting capital stock or other voting equity interests of such
corporation, partnership, limited liability company, joint venture or other
legal entity (each such entity, a "Subsidiary," collectively, "Subsidiaries").
(b) Except as set forth in Schedule 3.2, (i) all of the outstanding
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shares of capital stock of each Subsidiary that is a corporation have been duly
authorized, validly issued and are (A) fully paid and nonassessable and not
subject to preemptive rights, (B) owned by the Partnership or by another
Subsidiary and (C) owned free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and (ii) all equity interests in each Subsidiary that is
a partnership, joint venture, limited liability company or trust are owned by
the Partnership or by another Subsidiary and are owned free and clear of all
Liens. Each Subsidiary is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has the requisite power
and authority to own, operate, lease and encumber its properties and carry on
its business as now being conducted. Each Subsidiary is duly qualified or
licensed to do business and is in good standing 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
where the failure to be so qualified or licensed, individually or in the
aggregate, would not reasonably be expected to have a Partnership Material
Adverse Effect. Complete and correct copies of the articles of incorporation,
bylaws, organization documents and partnership, joint venture and operating
agreements of each Subsidiary, as amended to the date of this Agreement, have
been previously delivered to Buyer and are listed on Schedule 3.2.
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3.3. Power, Authority and Enforceability
The Partnership has the requisite partnership power and authority to
enter into this Agreement and, subject to the requisite Limited Partner
Approvals, to consummate the Merger and the other transactions contemplated by
this Agreement (including, without limitation, each other agreement in
connection therewith to which the Partnership is or will be a party). The
execution and delivery of this Agreement by the Partnership and the consummation
by the Partnership of the Merger and the other transactions contemplated by this
Agreement (including, without limitation, each other agreement in connection
therewith to which the Partnership is or will be a party) have been duly
authorized by all necessary action on the part of the Partnership, except for
and subject to the
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Limited Partner Approvals. This Agreement has been, and each other agreement in
connection therewith to which the Partnership is or will be a party has been or
will be, duly executed and delivered by the Partnership and constitutes or will
constitute the legal, valid and binding agreement of the Partnership enforceable
against the Partnership in accordance with its terms, except as may be limited
by (a) applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally, and (b) equitable principles of general applicability relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
3.4. Capitalization
As of the date hereof, 65,600 Partnership Units are currently issued
and outstanding. Except as set forth in Schedule 3.4, all outstanding
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Partnership Units are, and all such units that may be issued prior to the
Effective Time will be when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DRULPA, the Partnership
Agreement or any contract, lease, license, indenture, note, bond or other
agreement (a "Contract") to which the Partnership is a party. There are not any
options, warrants, calls, rights, convertible or exchangeable securities, units,
commitments, Contracts, arrangements or undertakings to which the Partnership is
a party (x) obligating the Partnership to issue, deliver or sell, or cause to be
issued, delivered or sold, additional Partnership Units or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any Partnership Unit or other equity interest in, the Partnership or (y)
obligating the Partnership to issue, grant, extend or enter into any such
option, warrant, call, right, security, unit, commitment, Contract, arrangement
or undertaking. As of the date of this Agreement, there are no outstanding
contractual obligations of the Partnership to repurchase, redeem or otherwise
acquire any Partnership Units. There are no agreements among Limited Partners,
voting trusts or other agreements or understandings to which the Partnership is
a party or to which it is bound relating to the holding, voting or disposition
of the Partnership Units.
3.5. Noncontravention
(a) The execution, delivery and performance of this Agreement by the
Partnership and the consummation by the Partnership of the Merger will not (i)
violate the Partnership Agreement or any charter or similar organizational
document adopted by any Subsidiary as in effect on the date hereof or
immediately prior to the Effective Time or (ii) conflict with, or constitute a
violation of or a default (or an event which with notice or lapse of time or
both would become a violation of or a default) under, or grant to others any
rights of termination,
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amendment, acceleration or cancellation of, any other material agreement,
indenture or instrument to which the Partnership or any of its Subsidiaries is a
party, or result in the creation of any Lien upon any of the properties or
assets of the Partnership or any Subsidiary, or result in a violation of any
statute, law, ordinance, regulation, rule, judgment, decree or order
(collectively "Laws") of any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency having jurisdiction (a "Governmental Entity") applicable to
the Partnership or any of its Subsidiaries or by which any of its property or
assets is bound or affected, which conflict, default, grant or violation (A)
except in the case of clause (i) above, would reasonably be expected to have a
Partnership Material Adverse Effect, (B) would impair the ability of the
Partnership to perform its obligations under this Agreement or to consummate the
Merger and the other transactions contemplated by this Agreement or (C) will not
be avoided by the Partnership obtaining at or prior to the Effective Time the
consent of a third party (including, without limitation, the Limited Partner
Approvals) as set forth on Schedule 3.5.
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(b) No consent, approval, license, permit, order or authorization of,
or registration, declaration or filing with, or notice to, or permit from, any
Governmental Entity is required to be obtained or made by or with respect to the
Partnership or any Subsidiary in connection with the execution, delivery and
performance of this Agreement or consummation of the Merger, other than (i) the
filing with the SEC of a consent solicitation statement relating to the Limited
Partner Approvals, (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of the other jurisdictions in which the Partnership is
qualified to do business, (iii) such filings as may be required in connection
with the Taxes described in Section 3.11 and (iv) filings under state securities
laws.
3.6. Litigation
Except as set forth in Schedule 3.6, there is no suit, action or
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proceeding pending against or, to the Knowledge of the Partnership, threatened
against the Partnership or any Subsidiary or any of their respective properties
before any arbitrator, court or other Governmental Entity that, individually or
in the aggregate, if determined adversely to such party, would reasonably be
expected to have a Partnership Material Adverse Effect. As of the date hereof,
there are no suits, actions or proceedings pending or, to the Knowledge of the
Partnership, threatened against the Partnership or any Subsidiary that seek to
prevent, hinder, modify or challenge the transactions contemplated by this
Agreement. Neither the Partnership nor any Subsidiary is subject to any
outstanding judgment against them or naming them as a party that, individually
or in the aggregate, would reasonably be expected to have a Partnership Material
Adverse Effect.
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3.7. SEC Documents; Financial Statements; Liabilities
(a) The Partnership has filed all reports, schedules, forms,
statements and other documents required to be filed with the Securities and
Exchange Commission (the "SEC") since January 1, 1998 through the date hereof
and will file all reports, schedules, forms, statements and other documents
required to be filed with the SEC prior to the Effective Date, including,
without limitation, the Consent Solicitation (as defined below) (the
"Partnership SEC Documents"). The Partnership SEC Documents, as of their
respective filing dates, complied or will comply in all material respects with
the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in each case, the rules and regulations promulgated
thereunder applicable to such Partnership SEC Documents. None of the Partnership
SEC Documents at the time of filing contained or will contain any untrue
statement of a material fact or omitted 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, except to the
extent such statements have been modified or superseded by later Partnership SEC
Documents filed and publicly available prior to the date hereof and with respect
to which any such statement or omission would not reasonably be expected to have
a Partnership Material Adverse Effect. The consolidated financial statements of
the Partnership and its consolidated Subsidiaries, if any, included in the
Partnership SEC Documents complied or will comply as to form 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 ("GAAP") (except, in the case of
unaudited statements, as permitted by the applicable rules and regulations of
the SEC) applied on consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly presented, in accordance with the
applicable requirements of GAAP and the applicable rules and regulations of the
SEC, the consolidated financial position of the Partnership and its consolidated
Subsidiaries, if any, in each case taken as a whole, as of the dates thereof and
the consolidated results of operations and cash flow for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(b) Except as set forth in the most recent financial statements
included in the Partnership SEC Documents or as incurred in the ordinary course
of business since the respective dates thereof, neither the Partnership nor any
Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required by GAAP to be
reflected in the Partnership's financial statements.
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3.8. No Material Adverse Changes
Except as disclosed in the Partnership SEC Documents that were filed
and publicly available prior to the date of this Agreement or in the financial
and other reports of the Partnership set forth on Schedule 3.8, since December
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31, 2000, the Partnership and the Subsidiaries have conducted their respective
businesses only in the ordinary course of business, and there has not been (a)
any material adverse change in the business, financial condition or results of
operations of the Partnership and its Subsidiaries taken as a whole, other than
adverse effects caused by increased competition in the limited service hotel
industry or in specific Hotel markets, changes in the limited service hotel
industry not specifically relating to the Partnership and its Subsidiaries
(including adverse effects or changes resulting from the terrorist acts
committed in the United States on September 11, 2001) or changes in the economy
generally (a "Partnership Material Adverse Change"), nor has there been any
occurrence or circumstance affecting the Partnership or any of its Subsidiaries
that with the passage of time or giving of notice would reasonably be expected
to result in a Partnership Material Adverse Change or would impair the ability
of the Partnership to perform its obligations under this Agreement or to
consummate the Merger and the other transactions contemplated by this Agreement,
(b) any damage, destruction or loss, whether or not covered by insurance that
has had or would reasonably be expected to have a Partnership Material Adverse
Effect, or (c) any change in accounting methods, principles or practices by the
Partnership materially affecting its assets, liabilities or business, except
insofar as may have been disclosed in the Partnership SEC Documents or required
by a change in GAAP. The Partnership has provided Buyer with certain financial
information regarding the Hotels through Period 11 of the Manager's 2001 Fiscal
Year. Buyer acknowledges that such information indicates a decline in the
operating results of the Hotels over such period as compared to the operating
results for the comparable period for the prior fiscal year, and that any
continued decline in the operating results of the Hotels prior to the Closing
shall not constitute a Partnership Material Adverse Change for purposes of this
Agreement.
3.9. Indebtedness
Schedule 3.9 sets forth a complete and correct list of all
------------
indebtedness of the Partnership and its Subsidiaries evidenced by a note
(collectively, "Loans"), including, without limitation, all indebtedness secured
by a mortgage, deed of trust or similar instrument encumbering any of the Hotels
(collectively, "Mortgage Loans"), and sets forth (a) the date on which each Loan
was executed and any amendments or modifications thereto, (b) the original
principal amount, rate of interest, and outstanding principal amount of each
such Loan and (c) if applicable, the Hotel(s) to which each Mortgage Loan
relates.
11
3.10. Default; Material Contracts
Except for defaults, events or occurrences, the consequences of which,
individually or in the aggregate, would not reasonably be expected to have a
Partnership Material Adverse Effect, (a) neither the Partnership nor any of its
Subsidiaries is in default or, to the Knowledge of the Partnership, alleged to
be in default with respect to any judgment, order, writ, injunction or decree of
any court or any Governmental Entity; (b) neither the Partnership nor any of its
Subsidiaries is in breach or default or, to the Knowledge of the Partnership,
alleged to be in breach or default under any agreement to which the Partnership
or its Subsidiaries is a party, including the material contracts of the
Partnership and its Subsidiaries set forth on Schedule 3.10 (the "Material
-------------
Contracts"), correct and complete copies of which have been furnished or made
available to Buyer and Merger Sub, and (c) to the Knowledge of the Partnership,
no condition or state of facts exists which reasonably would be expected to
cause or create a default or defaults by the Partnership or any of its
Subsidiaries under any such judgment, order, writ, injunction or decree or
agreement (other than as set forth on Schedule 3.10). All of the Material
-------------
Contracts have been filed as exhibits to the Partnership's SEC Documents and are
in full force and effect.
3.11. Tax Matters
Except as otherwise set forth in Schedule 3.11:
-------------
(a) Except where any failure to do so would not reasonably be expected
to have a Partnership Material Adverse Effect, the Partnership and its
Subsidiaries have filed when due (including extensions) with the appropriate
Governmental Entity, all tax returns, estimates, information and reports ("Tax
Returns") required to be filed by the Partnership or any of its Subsidiaries
with respect to all federal, state, local or foreign taxes, levies, imposts,
duties, licenses and registration fees, and similar charges, including, without
limitation, income taxes, unemployment and social security withholding taxes,
sales and use taxes, real estate transfer taxes, real estate and personal
property taxes, franchise taxes, and interest, penalties and additions to tax
with respect thereto ("Taxes"). Except where any failure to do so would not
reasonably be expected to have a Partnership Material Adverse Effect, the
Partnership and its Subsidiaries have paid all Taxes that have become due and
payable and, to the extent of Taxes not yet due and payable, the Partnership and
its Subsidiaries have made required estimated payments of or accrued or
otherwise adequately reserved in accordance with GAAP for the payment of all
Taxes. All such filed Tax Returns are correct and complete in all material
respects. Neither the Partnership nor any of its Subsidiaries has received
written notice from any Governmental Entity in a jurisdiction in which it does
not file a Tax Return stating that it is or may be subject to taxation by that
12
jurisdiction. Neither the Partnership nor any of its Subsidiaries is a party to
or bound by any agreement providing for the allocation or sharing of Taxes.
(b) No Taxes have been assessed or asserted in writing in respect of
any Tax Returns filed by the Partnership or any of its Subsidiaries or claimed
in writing to be due by any taxing authority or otherwise that are not accrued
or adequately reserved for in accordance with GAAP. No Tax Return of the
Partnership nor any of its Subsidiaries has been or, to the Knowledge of the
Partnership, is currently being examined or audited by the IRS or other taxing
authority (whether foreign or domestic). Neither the Partnership nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement, waiver, or other document extending, or having the effect of
extending, the period for assessment or collection of any Taxes, which extension
or waiver is still in effect. The Partnership has delivered to Buyer correct and
complete copies of all examination reports, statements of deficiencies and
similar documents prepared by the IRS or any other taxing authority with respect
to the Partnership or any of its Subsidiaries that have been received by either
the Partnership or any of its Subsidiaries (if any). All final adjustments made
by the IRS with respect to any Tax Return of the Partnership or any of its
Subsidiaries have been reported to the relevant state, local, or foreign taxing
authorities to the extent required by law, except where the failure to do so
would not reasonably be expected to have a Partnership Material Adverse Effect.
No requests for ruling or determination letters filed by the Partnership or any
of its Subsidiaries are pending with any taxing authority.
(c) Neither the Partnership nor any of its Subsidiaries (i) has a
permanent establishment in any foreign country or operates or conducts a
business through any branch in any foreign country, (ii) has agreed to or is
required to make any adjustment pursuant to Section 481(a) of the Code or any
similar provision of state, local or foreign law by reason of a change in the
accounting method initiated by either the Partnership or any of its
Subsidiaries, (iii) has any Knowledge that the IRS or other Governmental Entity
has proposed any such adjustment or change in accounting method, or (iv) has
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law.
(d) The performance of the transactions contemplated by this Agreement
will not (either alone or upon the occurrence of any additional or subsequent
event) result in any payment that would constitute an "excess parachute payment"
within the meaning of Section 280G of the Code.
(e) Copies of all Tax Returns required to be filed by the Partnership
or any of its Subsidiaries (including any predecessors) for each of the last two
(2)
13
years, together with all schedules and attachments thereto, have been delivered
to Buyer.
3.12. Employee Matters
Neither the Partnership nor any of its Subsidiaries has or ever has
had any employees.
3.13. Compliance with Laws
(a) Except as disclosed in any Partnership SEC Documents and except
for violations, noncompliances and defaults which would not reasonably be
expected to have a Partnership Material Adverse Effect or that are expected to
be remedied pursuant to the implementation of the Residence Inn Asset Protection
Plan, a copy of which has been provided to Buyer, neither the Partnership nor
any of its Subsidiaries has Knowledge that it has violated or failed to comply
with any applicable Law or Permit (as defined below) of any Governmental Entity.
(b) To the Knowledge of the Partnership, the Partnership and each
Subsidiary has in effect all approvals, authorizations, certificates, filings,
franchises, licenses (including, without limitation, liquor licenses), notices,
permits and rights of or with all Governmental Entities ("Permits") necessary
for it to own, lease or otherwise hold and to operate its properties and assets
and to carry on its business and operations as now conducted, except for the
failure to have such Permits that, individually or in the aggregate, has not had
and would not reasonably be expected to have a Partnership Material Adverse
Effect. To the Knowledge of the Partnership, there have occurred no defaults
under, or violations of, any such Permits, except for such defaults and
violations that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Partnership Material Adverse Effect. To the
Knowledge of the Partnership, neither this Agreement nor the Merger, in and of
itself, would cause the revocation or cancellation of any such Permit that,
individually or in the aggregate, would reasonably be expected to have a
Partnership Material Adverse Effect. Buyer acknowledges that the Manager is
responsible for obtaining and maintaining Permits necessary to operate the
Partnership's properties and assets and to carry on the business and operations
of the Hotels as currently conducted, and that the Partnership's Knowledge of
the matters referred to in this Section 3.13(b) is not deemed to include the
Manager's Knowledge of such matters for purposes of this Agreement.
14
3.14. Environmental Compliance
Except as disclosed in the reports listed on Schedule 3.14, to the
-------------
Knowledge of the Partnership, (a) there has been no Release (as defined below)
of Hazardous Materials at, on, under, or from the Hotel properties and (b) none
of the Hotels, the Partnership or any of its Subsidiaries have failed to comply
with Environmental Laws (as defined below), which Release or failure would
reasonably be expected to have a Partnership Material Adverse Effect.
For the purposes of this Agreement, "Hazardous Materials" means any of
the following: asbestos-containing materials, polychlorinated biphenyls,
flammable materials, explosives, radioactive materials, petroleum products and
any materials, wastes, substances, or chemicals that are deemed hazardous,
toxic, or defined as a "hazardous substance" under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601, et seq.) ("CERCLA"), the Hazardous Materials Transportation
-- ---
Act, as amended (49 U.S.C. Section 1801, et seq.), the Resource Conservation and
-- ---
Recovery Act of 1976, as amended (42 U.S.C. Section 6901, et seq.), in the
-- ---
regulations adopted or publications promulgated pursuant thereto, or in any
other applicable Laws of any Governmental Entity in effect on the date hereof
relating to protection of public health, safety or the environment (each such
law, ordinance, rule or regulation, an "Environmental Law"). For purposes of
this Agreement, "Release" shall have the meaning set forth in CERCLA.
3.15. Brokers Fees
Except for fees payable to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. by the Partnership
prior to the Closing in connection with the transactions contemplated by this
Agreement, no Person acting on behalf of the Partnership is, or will be,
entitled to any commission, broker's, finder's or investment banking fees from
any of the Parties or from any Person controlling, controlled by or under common
control with any Party, in connection with the transactions contemplated by this
Agreement. A true, correct and complete copy of the agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇
& Co. pursuant to which such fees are payable has been provided to Buyer prior
to the date of this Agreement.
3.16. Potential Conflicts of Interest
Except as disclosed in the Partnership SEC Documents, there have been
no transactions, agreements, arrangements or understandings between the
Partnership or General Partner, on the one hand, and its affiliates, on the
other hand, that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act.
15
3.17. Opinion of Financial Advisor
The General Partner has received the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.,
the Partnership's financial advisor, on or prior to the date of this Agreement,
to the effect that, as of the date of such opinion, the proposed Merger
Consideration to be received by the Limited Partners pursuant to the Merger is
fair to the Limited Partners from a financial point of view.
3.18. Vote Required
The affirmative vote of the holders of a majority of the outstanding
Partnership Units is the only vote of the holders of Partnership Interests
required to approve the Merger.
3.19. Properties
The real property listed on Schedule 3.19 is the only real property
-------------
currently or previously owned by the Partnership.
4. REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER
The General Partner represents and warrants to Buyer as of the date of
this Agreement:
4.1. Organization, Good Standing and Qualification
The General Partner has been duly formed and is validly existing as a
limited liability company in good standing under the applicable laws of its
jurisdiction of formation with the requisite limited liability company power and
authority to own, lease and operate its properties, conduct the business in
which it is engaged and perform its obligations under this Agreement. The
General Partner is duly qualified to transact business and is in good standing
under the laws of each jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, except where the
failure to so qualify or be in good standing would not reasonably be expected to
have a material adverse effect on the business, financial condition or results
of operations of the General Partner. The General Partner has furnished or made
available to Buyer correct and complete copies of its certificate of formation
and operating agreement, as amended or supplemented to the date of this
Agreement (the "Operating Agreement").
16
4.2. Power, Authority and Enforceability
The General Partner has the requisite limited liability company power
and authority to enter into this Agreement and, subject to amendment of the
Operating Agreement as contemplated by the Operating Agreement Consent, to
approve and consummate the Merger and the other transactions contemplated by
this Agreement and each other agreement in connection therewith to which the
General Partner is or will be a party. The execution and delivery of this
Agreement by the General Partner and the consummation by the General Partner of
the transactions contemplated by this Agreement and each other agreement in
connection therewith to which the General Partner is or will be a party have
been duly authorized by all necessary action on the part of the General Partner.
This Agreement has been, and each other agreement in connection therewith to
which the General Partner is or will be a party has been or will be, duly
executed and delivered by the General Partner and constitutes or will constitute
the legal, valid and binding agreement of the General Partner, enforceable
against the General Partner in accordance with its terms, except as may be
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, and (b) equitable principles of general applicability relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
4.3. Noncontravention
(a) Except as set forth in Schedule 4.3, the execution, delivery and
------------
performance of this Agreement by the General Partner will not (i) violate the
certificate of formation and operating agreement of the General Partner, as in
effect on the date hereof or as in effect as of the Effective Time, or (ii)
conflict with, or constitute a violation of or a default (or an event which with
notice or lapse of time or both would become a violation of or a default) under,
or grant to others any rights of termination, amendment, acceleration or
cancellation of, any other material agreement, indenture or instrument to which
the General Partner is a party or by which any of its property or assets is
bound or affected, or result in the creation of any Lien upon any of the
properties or assets of the General Partner, or result in a violation of any Law
of any Governmental Entity applicable to the General Partner or by which any of
its property or assets is bound or affected, which conflict, default, grant or
violation (A) except in the case of clause (i) above, would reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of the General Partner, (B) would impair the ability of
the General Partner to perform its obligations under this Agreement or to
consummate the Merger and the other transactions contemplated by this Agreement
or (C) will not be avoided by the General Partner obtaining at or prior to the
Effective Time the consent of a third party as set forth in Schedule 4.3.
------------
17
(b) No consent, approval, license, permit, order or authorization of,
or registration, declaration or filing with, or notice to, or permit from, any
Governmental Entity is required to be obtained or made by or with respect to the
General Partner in connection with the execution, delivery and performance of
this Agreement or consummation of the Merger, other than (i) the filing with the
SEC of a consent solicitation statement relating to the Limited Partner
Approvals, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (iii) such filings as may be required in
connection with the Taxes described in Section 3.11 and (iv) filings under state
securities law.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub, jointly and severally, represent and warrant to
the Partnership as of the date of this Agreement:
5.1. Organization, Good Standing and Qualification
Each of Buyer and Merger Sub has been duly formed and is validly
existing as a corporation or partnership in good standing under the applicable
laws of its respective jurisdiction of formation with the requisite corporate or
partnership power and authority to own, lease and operate its respective
properties, conduct the business in which it is engaged and perform its
obligations under this Agreement. Each of Buyer and Merger Sub is duly qualified
to transact business and is in good standing under the laws of each jurisdiction
in which it owns or leases properties, or conducts any business, so as to
require such qualification, except where the failure to so qualify or be in good
standing would not reasonably be expected to have a material adverse effect on
the business, financial condition or results of operations of Buyer or Merger
Sub (a "Buyer Material Adverse Effect"). Each of Buyer and Merger Sub has
furnished or made available to the Partnership correct and complete copies of
its articles of incorporation and bylaws or certificate of limited partnership
and partnership agreement, as the case may be, as amended or supplemented to the
date of this Agreement.
5.2. Power, Authority and Enforceability
Each of Buyer and Merger Sub has the requisite corporate or
partnership power and authority to enter into this Agreement and to consummate
the Merger and the other transactions contemplated by this Agreement (including,
without limitation, each other agreement in connection therewith to which Buyer
or Merger Sub, as the case may be, is or will be a party). The execution and
delivery of this Agreement by each of Buyer and Merger Sub and the consummation
by each of Buyer and Merger Sub of the Merger and the other transactions
contemplated by this Agreement (including, without limitation, each other
agreement in connection therewith to which Buyer or Merger Sub, as the case may
be, is or will be a party) have been duly authorized by all necessary action on
the part of Buyer and Merger Sub, as the case may be. This Agreement has been,
and each other agreement in connection
18
therewith to which Buyer or Merger Sub is or will be a party has been or will
be, duly executed and delivered by Buyer and Merger Sub, as the case may be, and
constitutes or will constitute the legal, valid and binding agreement of Buyer
and Merger Sub, as the case may be, enforceable against each of Buyer and Merger
Sub in accordance with its terms, except as may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, and (b)
equitable principles of general applicability relating to the availability of
specific performance, injunctive relief, or other equitable remedies.
5.3. Financial Statements
Attached hereto as Exhibit C are the financial statements of Buyer and
---------
its consolidated subsidiaries, if any, for the period of January 17, 2001
through June 30, 2001 and for the period of January 17, 2001 through September
30, 2001 (collectively the "Buyer's Financial Statements"). Buyer's Financial
Statements comply or will comply as to form in all material respects with
applicable accounting requirements, have been prepared in accordance with GAAP
applied on consistent basis during the periods involved (except as may be
indicated in the notes thereto), are correct and complete and fairly present, in
accordance with the applicable requirements of GAAP, the consolidated financial
position of Buyer and its consolidated subsidiaries, if any, in each case taken
as a whole, as of the dates thereof, and are consistent with the books and
records of Buyer (which books and records are materially correct and complete),
and the consolidated results of operations and cash flow for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
5.4. Noncontravention
(a) Except as set forth in Schedule 5.4, the execution, delivery and
------------
performance of this Agreement by each of Buyer and Merger Sub and the
consummation by each of Buyer and Merger Sub of the Merger will not (i) violate
the articles of incorporation, bylaws or the partnership agreement, as the case
may be, of Buyer or Merger Sub, as in effect on the date hereof or immediately
prior to the Effective Time, or (ii) conflict with, or constitute a violation of
or a default (or an event which with notice or lapse of time or both would
become a violation of or a default) under, or grant to others any rights of
termination, amendment, acceleration or cancellation of, any other material
agreement, indenture or instrument to which any of Buyer or Merger Sub is a
party or by which any of their property or assets is bound or affected, or
result in the creation of any Lien upon any of the properties or assets of Buyer
or Merger Sub or result in a violation of any
19
Law of any Governmental Entity applicable to any of Buyer or Merger Sub or by
which any of their property or assets is bound or affected, which conflict,
default, grant or violation (A) except in the case of clause (i) above, would
reasonably be expected to have a Buyer Material Adverse Effect, (B) would impair
the ability of either Buyer or Merger Sub to perform its obligations under this
Agreement or to consummate the Merger and the other transactions contemplated by
this Agreement or (C) will not be avoided by Buyer or Merger Sub obtaining at or
prior to the Effective Time the consent of a third party as set forth in
Schedule 5.4.
------------
(b) No consent, approval, license, permit, order or authorization of,
or registration, declaration or filing with, or notice to, or permit from, any
Governmental Entity is required to be obtained or made by or with respect to
Buyer or Merger Sub in connection with the execution, delivery and performance
of this Agreement or consummation of the Merger, other than (i) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and (ii) such filings as may be required in connection with the Taxes described
in Section 3.11.
5.5. Litigation
Except as set forth in Schedule 5.5, there is no suit, action or
------------
proceeding pending against or, to the Knowledge of Buyer or Merger Sub,
threatened against Buyer or Merger Sub or any of their respective properties
before any arbitrator, court or other Governmental Entity that, individually or
in the aggregate, if determined adversely to such party, would reasonably be
expected to impair the ability of either Buyer or Merger Sub to perform its
obligations under this Agreement or to consummate the Merger and the other
transactions contemplated by this Agreement. As of the date hereof, there are no
suits, actions or proceedings pending against Buyer or Merger Sub that seek to
prevent, hinder, modify or challenge the transactions contemplated by this
Agreement. Neither Buyer nor Merger Sub is subject to any outstanding judgment
against them or naming them as a party that, individually or in the aggregate,
would reasonably be expected to impair the ability of either Buyer or Merger Sub
to perform its obligations under this Agreement or to consummate the Merger and
the other transactions contemplated by this Agreement.
5.6. No Material Adverse Changes
Since June 30, 2001, Buyer has conducted its business only in the
ordinary course of business and there has not been any material adverse change
in the business, financial condition or results of operations of Buyer and its
consolidated subsidiaries (if any) taken as a whole (a "Buyer Material Adverse
Change"), nor has there been any occurrence or circumstance affecting Buyer or
its subsidiaries that with the passage of time or giving of notice would
reasonably be
20
expected to result in a Buyer Material Adverse Change or would impair the
ability of either Buyer or Merger Sub to perform its obligations under this
Agreement or to consummate the Merger and the other transactions contemplated by
this Agreement.
5.7. Brokers Fees
Except as disclosed to the Partnership in writing prior to the date
hereof, no Person acting on behalf of Buyer or Merger Sub is, or will be,
entitled to any commission, broker's, finder's or investment banking fees from
any of the Parties or from any Person controlling, controlled by or under common
control with any Party, in connection with the transactions contemplated by this
Agreement.
6. COVENANTS
6.1. Conduct of Business by the Partnership
From the date of this Agreement to the Effective Time, except as
required in connection with the Merger and the other transactions contemplated
by this Agreement or unless the Partnership obtains the prior written consent of
Buyer, the Partnership shall and shall cause each of its Subsidiaries to:
(a) carry on its business as currently conducted and only in the usual
and ordinary course;
(b) make no amendment to the Material Contracts or any charter or
similar organizational document adopted by any Subsidiary;
(c) use its commercially reasonable efforts to preserve its business
organization intact and cause the Manager to continue to (i) operate the Hotels
in a good and businesslike fashion consistent with past practices and in
accordance with the terms of the Management Agreement, (ii) maintain the Hotels
in good working order and condition in a manner consistent with past practices
and in accordance with the terms of the Management Agreement and (iii) maintain
the present level of insurance with respect to the Hotels in full force and
effect;
(d) not incur any material liability or make any material commitment
(including, without limitation, making or entering into any new Loan) or enter
into any other material transaction except in the ordinary and usual course of
business or pursuant to agreements existing on the date hereof;
(e) not issue, deliver, sell, grant, pledge, transfer (other than a
transfer in the transfer books of the Partnership to reflect a transfer of
ownership of Partnership Units by a Limited Partner in accordance with the
Partnership
21
Agreement) or otherwise encumber or dispose of or subject to any Lien, (i) any
Partnership Interests or (ii) any options or rights to purchase Partnership
Interests or securities convertible into or exchangeable for Partnership
Interests and not redeem, purchase or otherwise acquire any of its Partnership
Interests;
(f) not organize any subsidiary and not acquire or enter into an
agreement to acquire, by merger, consolidation or purchase of stock, interests
in or assets of, any business or entity;
(g) not enter into, modify, amend or terminate any material agreement
with respect to any of the Hotels, other than in the ordinary course of business
or pursuant to agreements existing on the date hereof, which would encumber or
be binding upon the Hotels from and after the Effective Time;
(h) not make any distributions to the Partners except for
distributions of Partnership Cash made after receipt of the Limited Partner
Approvals, provided the condition set forth in Section 7.3(d) can continue to be
satisfied following any such distribution of Partnership Cash;
(i) make or change any material Tax election or settle or compromise
any material Tax liability or refund;
(j) adopt a plan or agreement of, or resolutions providing for or
authorizing, complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization;
(k) make any change in accounting methods, principles or practices
affecting the reported assets, liabilities or results of operations of the
Partnership or any Subsidiary, except as required by a change in GAAP;
(l) (i) incur, assume or prepay any indebtedness for borrowed money or
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any indebtedness or obligation of another person
or issue or sell any debt securities or warrants or other rights to acquire any
debt securities of the Partnership or any Subsidiary, or (ii) make or forgive
any loans, advances or capital contributions to, or investments in, any other
person;
(m) pay, discharge, settle or satisfy any claims, liabilities,
obligations or litigation of or against the Partnership, other than the payment,
discharge, settlement or satisfaction, in the ordinary course of business or in
accordance with their terms, of liabilities reflected or reserved against in the
most recent financial statements (or the notes thereto) of the Partnership
included in the Partnership SEC Documents or incurred since the date of such
financial statements in the ordinary course of business; and
22
(n) authorize, or commit or agree to take, any of the foregoing
actions or take any action that would make any representation or warranty in
Article III hereof untrue or incorrect in any material respect.
Nothing set forth in this Section 6.1 shall restrict the right of the
Manager under the Management Agreement to enter into, terminate, amend or
otherwise modify any contracts or agreements related to the Hotels (or the
Partnership entering into, terminating, amending or otherwise modifying any such
contracts or agreements where required by the Manager based on the Manager's
right under the Management Agreement to effect the same), or take any other
actions related to the Hotels permitted by the Management Agreement, except that
the Partnership shall not consent to, approve of or execute the same (to the
extent that the Partnership has the right under the Management Agreement to
withhold such consent or approval) except in accordance with the requirements of
this Section 6.1.
6.2. Reasonable Efforts; Further Assurances; Cooperation; Notification
Subject to the terms and conditions hereof, each of the Parties shall
use its commercially reasonable efforts to take, or cause to be taken or do, or
cause to be done, all things necessary, proper or advisable under applicable Law
to obtain all required regulatory approvals and shall cooperate fully with each
other and their respective managers, directors, officers, general partners,
employees, agents, counsel, accountants and other designees in connection with
any steps required to be taken as a part of its obligations under this
Agreement. Each Party shall do such things as may be reasonably requested by the
other Parties in order to more effectively consummate the Merger and the other
transactions contemplated by this Agreement, including, without limitation:
(a) As promptly as practicable after the date of this Agreement, the
Partnership shall prepare and file with the SEC under the Exchange Act a consent
solicitation statement relating to the consent of the Limited Partners with
respect to the Limited Partner Approvals (the "Consent Solicitation"); provided,
--------
however, the Partnership shall not be required to mail the Consent Solicitation
-------
to the Limited Partners prior to receipt by the Partnership of (i) evidence of
the Buyer Consents from the Manager and (ii) evidence of the Partnership
Consents from the Manager. The Partnership will cause the Consent Solicitation
to comply as to form in all material respects with the applicable provisions of
the Exchange Act and the rules and regulations thereunder. The information
supplied by the Partnership and its Subsidiaries for inclusion in the Consent
Solicitation shall not, at the date the Consent Solicitation (or any amendment
thereof or supplement thereto) is first mailed to the Limited Partners or at the
termination of the consent solicitation period, contain any untrue statement of
a material fact or omit to state any
23
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.
(b) The Partnership and General Partner shall use their commercially
reasonable efforts to respond as promptly as practicable to any comments of the
SEC with respect to the Consent Solicitation as filed in preliminary form. The
Partnership shall notify the Buyer promptly of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Consent Solicitation or for additional information and
shall supply Buyer with copies of all correspondence between the Partnership or
any of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Consent Solicitation. If at any time prior to
the termination of the consent solicitation period, there shall occur any event
that should be set forth in an amendment or supplement to the Consent
Solicitation, the Partnership shall promptly prepare and mail to the Limited
Partners such an amendment or supplement. No filing of, or amendment to, the
Consent Solicitation will be made by the Partnership or General Partner without
providing the Buyer the opportunity to review and comment thereon. Subject to
the provisions of Section 6.2(a), the Partnership shall use its commercially
reasonable efforts to cause the Consent Solicitation to be mailed to the Limited
Partners as promptly as practicable after the SEC has completed its review of
the Consent Solicitation.
(c) In connection with the preparation of the Consent Solicitation,
Buyer will provide the Partnership in writing with all information relating to
Buyer and Merger Sub that is required to be included in the Consent Solicitation
pursuant to the Exchange Act and the rules and regulations thereunder and any
other applicable Law. The written information supplied by Buyer and Merger Sub
for inclusion in the Consent Solicitation shall not, at the date the Consent
Solicitation (or any amendment thereof or supplement thereto) is first mailed to
the Limited Partners or at the termination of the consent solicitation period,
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. If at any time prior to the termination of the consent solicitation
period any event or circumstance relating to Buyer or Merger Sub should be
discovered by Buyer or Merger Sub which should be set forth in an amendment or a
supplement to the Consent Solicitation, Buyer shall promptly inform the
Partnership.
(d) The Partnership and Buyer shall promptly make their respective
required material filings and submissions with Governmental Entities and shall
take, or cause to be taken, all actions and do, or cause to be done, all things
necessary, proper or advisable under applicable material Laws to obtain any
24
required material consent or approval of any third party or any Governmental
Entity necessary to perform their respective obligations under this Agreement.
(e) The Partnership and Buyer shall cooperate and keep each other
informed regarding all filings with the SEC.
(f) If any claim, action, suit, investigation or other proceeding by
any Governmental Entity or other Person is commenced which questions the
validity or legality of the Merger or any of the other transactions contemplated
by this Agreement or seeks damages in connection therewith, the Parties shall
cooperate and use commercially reasonable efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction or other
order is issued in any such action, suit or other proceeding, to use
commercially reasonable efforts to have such injunction or other order lifted,
and to cooperate reasonably regarding any other impediment to the consummation
of the Merger or any of the other transactions contemplated by this Agreement.
(g) Each Party shall give prompt written notice to the others of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
causes or would reasonably be expected to cause any representation or warranty
of such Party contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Effective
Time or that will or is reasonably expected to result in the failure to satisfy
any of the conditions specified in Article 7 of this Agreement, (ii) any failure
of such Party to perform or comply, in any material respect with any covenant or
other agreement required to be performed or compiled with under this Agreement
and (iii) any applicable update to the schedules to this Agreement; provided,
--------
however, that no such notification or update shall affect the representations,
-------
warranties, covenants, agreements or schedules of the Parties or the conditions
to the obligations of the Parties under this Agreement.
(h) The Partnership shall use commercially reasonable efforts to
obtain from its accountants access to all work papers relating to audits of the
Partnership performed by its accountants, and the continued cooperation of its
accountants with regard to the preparation of consolidated financial statements
for the Surviving Partnership.
6.3. No Solicitation
(a) Prior to the Effective Time, except as otherwise permitted hereby:
(i) neither the Partnership nor the General Partner shall invite,
initiate, solicit or encourage, directly or indirectly, any inquiries,
proposals, discussions or negotiations or the making or implementation of any
proposal or offer
25
(including, without limitation, any proposal or offer to the partners of the
Partnership) with respect to a merger, acquisition, tender offer, exchange
offer, transaction resulting in the issuance of equity securities of the
Partnership, consolidation, share exchange, business combination, sale, lease,
exchange, mortgage, pledge, transfer or other disposition of the assets (other
than in the ordinary course of business) or equity securities (including,
without limitation, Partnership Interests) of the Partnership, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"), or engage in any
discussions or negotiations concerning or provide any confidential or non-public
information or data to any Person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal;
(ii) neither the Partnership nor the General Partner shall permit
any of its managers, directors, officers, affiliates, agents, investment
bankers, financial advisors, attorneys, accountants, brokers, finders or other
representatives retained by the Partnership to engage in any of the activities
described in Section 6.3(a)(i);
(iii) the Partnership and the General Partner shall immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing and will use their commercially reasonable efforts to cause the
individuals or entities referred to in Section 6.3(a)(ii) to immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing; and
(iv) the Partnership or the General Partner shall notify Buyer
immediately if the Partnership or the General Partner receives any such inquiry
or proposal, or any request for such information, or if any such negotiations or
discussions are sought to be initiated or continued with the Partnership.
(b) Notwithstanding Section 6.3(a), the Partnership and the General
Partner shall not be prohibited from furnishing information to or entering into
discussions or negotiations with any Person that makes a bona fide written
Acquisition Proposal to the Partnership or the General Partner after the date
hereof which was not invited, initiated, solicited or encouraged, directly or
indirectly, by the Partnership, the General Partner or any individual or entity
referred to in Section 6.3(a)(ii) if (i) the General Partner determines in good
faith, after consultation with its independent financial advisors of nationally
recognized reputation, that such Acquisition Proposal is reasonably likely to
result in a Superior Acquisition Proposal (as defined herein), (ii) the General
Partner determines in good faith, after consultation with its outside legal
counsel, that such action is appropriate for the General Partner to comply with
its fiduciary duty to
26
the Limited Partners imposed by Delaware law; (iii) the Partnership and the
General Partner comply with all of their obligations under this Agreement, (iv)
prior to furnishing such information to, or entering into discussions or
negotiations with, such Person, the Partnership or the General Partner provides
written notice to Buyer to the effect that it is furnishing information to, or
entering into discussions with such Person, (v) the Partnership or the General
Partner provides Buyer with a copy of such Acquisition Proposal and any
subsequent written amendments thereto, and (vi) the Partnership enters into a
confidentiality agreement with such Person the material terms of which are
(without regard to the terms of such Acquisition Proposal) in all material
respects no less favorable to the Partnership, and no less restrictive to the
Person making such Acquisition Proposal, than those contained in the
Confidentiality Agreement, dated April 6, 2001, between the Partnership and
Buyer (the "Confidentiality Agreement").
(c) Notwithstanding anything to the contrary set forth in Section
6.3(a) or 6.3(b), in the event that an Acquisition Proposal constitutes a
Superior Acquisition Proposal, nothing contained in this Section 6.3 shall
prohibit the General Partner from withdrawing, modifying, amending or qualifying
its recommendation of this Agreement and the Merger as required under Section
6.4 hereof and recommending such Superior Acquisition Proposal to the Partners:
(i) if but only if, (A) the General Partner and the Partnership comply fully
with this Section 6.3 and (B) the General Partner provides Buyer with at least
three (3) business days' prior written notice of its intent to withdraw, modify,
amend or qualify its recommendation of this Agreement or the Merger, (ii) if, in
the event that during such three (3) business days Buyer makes a counter
proposal to such Superior Acquisition Proposal (any such counter proposal being
referred to in this Agreement as the "Buyer Counter Proposal"), the General
Partner in good faith, taking into account the advice of its outside financial
advisors of nationally recognized reputation, determines that the Buyer Counter
Proposal is not at least as favorable to the Partners as the Superior
Acquisition Proposal, from a financial point of view, and (iii) the General
Partner and the Partnership shall have terminated this Agreement in accordance
with Section 8.1(g).
(d) For all purposes of this Agreement, "Superior Acquisition
Proposal" means a bona fide written proposal made by a third party to acquire,
directly or indirectly, the Partnership pursuant to a tender or exchange offer,
merger, share exchange, consolidation or sale of all or substantially all of the
assets of the Partnership or otherwise (i) on terms which the General Partner
determines in good faith, after consultation with its independent financial
advisors of nationally recognized reputation, are superior, from a financial
point of view, to the Partners to those provided for in the Merger, (ii) for
which financing, to the extent required, in the reasonable judgment of the
General Partner is capable of being obtained and (iii) which the General Partner
determines in good faith is reasonably capable of being consummated without
undue delay.
27
(e) Any disclosure that the Partnership or the General Partner may be
compelled to make with respect to the receipt of an Acquisition Proposal in
order to comply with its duties imposed by applicable Law or Rule 14d-9 or 14e-2
of the Exchange Act will not constitute a violation of this Section 6.3.
6.4. Recommendation to the Limited Partners
The General Partner shall, as soon as practicable following the date
of this Agreement (but in no event sooner than 20 business days following the
date the Consent Solicitation is mailed to the Limited Partners), seek to obtain
the Limited Partner Approvals. The General Partner shall recommend to the
Limited Partners approval of this Agreement, the Merger and the transactions
contemplated by this Agreement and include such recommendation in the Consent
Solicitation; provided, however, that prior to the expiration of the
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solicitation period for the Limited Partner Approvals (as the same may be
extended by the Partnership in its sole discretion), such recommendation may be
withdrawn, modified or amended in accordance with Section 6.3.
6.5. Access to Information
The Partnership shall afford to the other Parties and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other Parties, reasonable access during normal business hours prior to the
Effective Time to all of its respective properties, books, agreements,
commitments, personnel and records; provided, Buyer shall give the Partnership
reasonable prior notice of its intent to visit and inspect any of the Hotels.
6.6. Public Announcements
Each Party will consult with each other Party before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other written public statements which address in any manner the transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such written public statement prior to such consultation, except as may
be required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
6.7. Transfer and Gains Taxes
Each Party shall cooperate in the preparation, execution and filing of
all returns, questionnaires, applications or other documents regarding any real
property transfer or gains, sales, use, transfer, value added, stock transfer
and stamp taxes, any transfer, recording, registration and other fees and any
similar
28
taxes which become payable in connection with the transactions contemplated by
this Agreement (together with any related interests, penalties or additions to
tax, "Transfer and Gains Taxes").
6.8. Tax Matters
The following provisions shall govern the allocation of responsibility
as between Buyer, the Partnership and the New Entity (as defined below) with
respect to the payment of Taxes and the filing of Tax Returns from and after the
Closing Date:
(a) The Partnership shall be responsible for the payment of all Taxes
of the Partnership for or with respect to the period ending on or before the
Effective Date, and Buyer shall be responsible for the payment of all Taxes of
the Partnership for or with respect to the period commencing on the date
following the Effective Date. Taxes owed by the Partnership with respect to
periods ending on or before the Effective Date that are not paid by the
Partnership at or prior to Closing or pursuant to Section 6.8(b) shall be paid
by the New Entity in accordance with Section 6.15(e).
(b) The Partnership on or prior to the Effective Date, and the New
Entity, on behalf of the Partnership, after the Effective Date, shall prepare or
cause to be prepared and file or cause to be filed all Tax Returns for the
Partnership for or with respect to all taxable periods (or portions thereof)
ending on or before the Effective Date. The Partnership on or prior to the
Effective Date, and the New Entity, on behalf of the Partnership, after the
Effective Date, shall pay all Taxes, if any, at the time that any related Tax
Return is filed, and, in any event, on or prior to the date such Taxes are due,
including extensions; provided, however, that income Tax Returns for fiscal year
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2001 shall be filed by the Partnership or the New Entity, as applicable, on or
before April 15, 2002, and income Tax Returns for the taxable period in 2002, if
any, ending on the Effective Date shall be filed by the Partnership or the New
Entity, as applicable, within 105 days after the Effective Date.
(c) Buyer shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns of the Partnership for Tax periods which end on or
after the date following the Effective Date (including for Tax periods which
begin before the Effective Date and end on or after the date following the
Effective Date). All determinations of tax items and the timing thereof shall be
made in a manner consistent with prior tax practices of the Partnership.
29
6.9. [Intentionally Deleted]
6.10. Lender Consent
(a) Buyer shall use its commercially reasonable efforts to take, or
cause to be taken, or do, or cause to be done, all things necessary, proper or
advisable, including permitting ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. and/or the General Partner
to assist Buyer in its efforts, to obtain, as soon as practicable following the
date of this Agreement, all consents of the Partnership's lenders set forth on
Schedule 6.10, which consents are required to be obtained in connection with the
-------------
transactions contemplated by this Agreement.
(b) The General Partner shall use its commercially reasonable efforts
to take, or cause to be taken, or do, or cause to be done, all things necessary,
proper or advisable to obtain, as soon as practicable following the date of this
Agreement, all consents of the Partnership's lenders, including, without
limitation, consent to amend the Operating Agreement, necessary to permit the
General Partner under the Operating Agreement to approve and consummate the
Merger and the other transactions contemplated by this Agreement and each other
agreement in connection therewith to which the General Partner is or will be a
party (the "Operating Agreement Consent"). Upon receipt of the Operating
Agreement Consent, the General Partnership shall promptly amend the Operating
Agreement as contemplated by the Operating Agreement Consent.
6.11. Manager Consents
(a) Buyer shall use its commercially reasonable efforts to take, or
cause to be taken, or do, or cause to be done, all things necessary, proper or
advisable, to obtain, as soon as practicable following the date of this
Agreement, (i) the consent of the Manager to the changes to the Management
Agreement listed on Schedule 6.11(a), which changes are deemed necessary by
----------------
Buyer to permit or facilitate Merger Sub's proposed real estate investment trust
structure, (ii) the consent of the Manager under Section 17.01 of the Management
Agreement to the assignment of the Management Agreement by the Surviving
Partnership to an affiliate of the Surviving Partnership and (iii) the waiver by
the Manager of any rights it may have under Section 18.01 of the Management
Agreement with respect to the transactions (the "Proposed Transactions")
contemplated by this Agreement or which are necessary to implement Merger Sub's
proposed real estate investment trust structure (collectively, the "Buyer
Consents"). Notwithstanding anything to the contrary in this Section 6.11(a),
Buyer shall not be obligated to make any payment to the Manager in consideration
for the Manager's agreement to grant the Buyer Consents.
30
(b) The Partnership shall use its commercially reasonable efforts to
take, or cause to be taken, or do, or cause to be done, all things necessary,
proper or advisable, to obtain, as soon as practicable following the date of
this Agreement, (i) confirmation by the Manager that no Net Sales Proceeds (as
that term is defined in the Management Agreement) will result from the Proposed
Transactions, and no Contingent Management Fees (IMF) (as that term is defined
in the Management Agreement) will become payable under the Management Agreement
as a result of the Proposed Transactions or as a condition to the Manager's
agreement to grant the Buyer Consents or the Partnership Consents, (ii)
confirmation by the Manager that the amount of Adjusted Capital Contributions
(as that term is defined in the Management Agreement) shall not decrease as a
result of the Proposed Transactions or as a condition to the Manager's agreement
to grant the Buyer Consents or the Partnership Consents and (iii) confirmation
by the Manager of the amount of each item set forth on Schedule 6.11(b) as of
----------------
the date set forth therein with respect to such item (collectively, the
"Partnership Consents"). Notwithstanding anything to the contrary in this
Section 6.11(b), the Partnership shall not be obligated to make any payment to
the Manager in consideration for the Manager's agreement to grant the
Partnership Consents.
(c) Buyer and the Partnership shall cooperate with each other and
provide such assistance as may be necessary or appropriate or reasonably
requested by the other Party to obtain the Buyer Consents and the Partnership
Consents.
6.12. Financial and Operational Reports
Promptly following their preparation or receipt, as applicable, the
Partnership will forward to Buyer copies of (i) the Partnership's quarterly and
annual financial reports, (ii) the periodic rent letters prepared by the Manager
relating to the Hotels, (iii) the Hotel level income statements prepared by the
Manager with respect to the Hotels and (iv) any other financial or capital
expenditure reports prepared by the Manager and delivered to the Partnership.
6.13. Indemnification by the General Partner
(a) The General Partner (the "Indemnifying Party") shall indemnify and
hold harmless Buyer, Merger Sub, the Surviving Partnership, the general partners
of Merger Sub and the Surviving Partnership and any of their assignees and all
of their respective officers, directors, employees and representatives and all
of their respective heirs, legal representatives and successors (each, an
"Indemnified Party," collectively, the "Indemnified Parties") from and against
any and all Losses (as defined below) which any of the Indemnified Parties may
sustain. "Losses" means all damages, liabilities, losses, costs and expenses,
including all reasonable attorneys' fees and expenses, resulting from
complaints, actions, suits, proceedings, hearings, investigations, claims,
31
demands, judgments, orders, decrees, stipulations or injunctions asserted
against or imposed upon any Indemnified Party arising out of any claims,
disputes, proceedings, litigation or similar actions by a Limited Partner
against the Partnership or the General Partner with respect to any matter or
event occurring prior to the Closing Date other than any claims, disputes,
proceedings, litigation or similar actions by a Limited Partner with respect to
the transactions contemplated by this Agreement.
(b) Any Indemnified Party proposing to assert the right to
indemnification under this Section 6.13 shall, promptly after receipt of notice
of commencement of any action against such Indemnified Party in respect of which
a claim is to be made under this Section 6.13, notify the Indemnifying Party of
the commencement of such action, enclosing a copy of all papers served;
provided, however, that the failure to provide such notice shall not affect the
obligations of the Indemnifying Party except to the extent such failure to
notify materially prejudices the Indemnifying Party. Thereafter, the Indemnified
Party shall deliver to the Indemnifying Party, promptly (and in any event within
10 days thereof) after the Indemnified Party's receipt, delivery or filing
thereof, copies of all notices and documents (including court papers) received,
delivered or filed by the Indemnified Party relating to such action.
(c) If any such action is brought against any Indemnified Party, the
Indemnified Party shall assume the defense or settlement of such action, and the
Indemnifying Party may participate therein at its sole cost and expense. If the
Indemnified Party does not proceed diligently to defend such action, the
Indemnifying Party shall have the right, but not the obligation, to undertake
the defense of such action.
(d) The Indemnified Party and the Indemnifying Party shall cooperate
in defending any action for which indemnification is sought pursuant to this
Section 6.13, and the Indemnifying Party shall provide to the Indemnified Party
reasonable access to the books, records and personnel in the possession or
control of the Indemnifying Party that are pertinent to such defense.
(e) Notwithstanding anything to the contrary set forth in this
Agreement, the Indemnifying Party (A) shall not be liable for any settlement
effected without its prior written consent, which consent shall not be
unreasonably withheld; provided, however, that if the Indemnified Party is
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Buyer, the Surviving Partnership or the general partner of the Surviving
Partnership, such action may be settled without the consent of the Indemnifying
Party on 10 days' prior written notice to the Indemnifying Party if such action
is then materially interfering with the business or operations of the Surviving
Partnership and the settlement is commercially reasonable under the
circumstances, and (B) shall not have any obligation hereunder to any
Indemnified Party to the extent that a court of
32
competent jurisdiction shall determine in a final and non-appealable order that
such indemnification is not required under this Agreement or is prohibited by
applicable law.
(f) Notwithstanding the foregoing provisions of this Section 6.13, the
Indemnifying Party shall have no obligation to provide indemnification under
this Section 6.13 for any Losses which result from any claims, disputes,
proceedings, litigation or similar actions by a Limited Partner for which the
Indemnifying Party has not received notice pursuant to Section 6.13(b) prior to
the second anniversary of the Effective Date (the "Termination Date").
(g) Notwithstanding the foregoing provisions of this Section 6.13, the
Indemnifying Party's liability under this Section 6.13 shall not exceed, in the
aggregate, $500,000. Buyer shall withhold the General Partner Consideration
until the Termination Date in order to satisfy the Indemnifying Party's
obligations under this Section 6.13. Buyer shall deduct from the General Partner
Consideration, and pay to an Indemnified Party, the amount of any Losses for
which such Indemnified Party shall be indemnified pursuant to this Section 6.13.
On the Termination Date, Buyer shall deliver to the General Partner (i) the
General Partner Consideration, less any deductions provided for in the previous
sentence, by cashier's or certified check payable to the order of, or by wire
transfer to an account specified by, the General Partner and (ii) a statement
indicating the amounts deducted from the General Partner Consideration and a
description of the Losses for which the Indemnified Party's were indemnified. If
a claim with respect to which an Indemnified Party has asserted its right to
indemnification pursuant to Section 6.13(b) has not been definitively resolved
prior to the Termination Date, Buyer may continue to withhold after the
Termination Date that amount of the General Partner Consideration that it
reasonably believes in good faith to be equal to the value of such claim.
Promptly after the definitive resolution of such claim, Buyer shall pay to the
General Partner that amount of the General Partner Consideration withheld after
the Termination Date that is not needed to satisfy the Indemnifying Party's
obligations with respect to such claim. Any Losses for which the Indemnified
Parties shall be indemnified pursuant to this Section 6.13 that exceed the
General Partner Consideration in the aggregate shall be paid directly by the
Indemnifying Party.
(h) If the General Partner Consideration retained by Buyer is not
sufficient to satisfy the Indemnifying Party's obligations under this Section
6.13, an Indemnified Party shall request payment from the Indemnifying Party
pursuant to this Section 6.13 by delivering to the Indemnifying Party written
notification of the need for indemnification. Such notification shall indicate
(i) the amount of the Losses for which the Indemnified Party shall be
indemnified and (ii) a description of the Losses for which indemnification is
being requested.
33
6.14. Indemnification by the New Entity
(a) The New Entity shall indemnify and hold harmless the Indemnified
Parties from and against any and all damages, liabilities, losses, costs and
expenses, including all reasonable attorneys' fees and expenses, which any of
the Indemnified Parties may sustain and which result from complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations or injunctions asserted against or imposed upon
any Indemnified Party in any of the litigation set forth on Schedule 3.6 hereof,
------------
as may be subsequently amended pursuant to Section 6.2(g); provided, however,
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the New Entity shall have no obligation to provide indemnification under this
Section 6.14(a) for any damages, liabilities, losses, costs and expenses which
have been reserved for by the Manager or which shall be reimbursed or otherwise
covered by the Partnership's insurance.
(b) Notwithstanding the foregoing provisions of this Section 6.14, the
New Entity's obligations under this Section 6.14 shall terminate on the
Termination Date.
6.15. Adjustment Account
(a) Prior to the Closing, the Partnership shall establish an entity of
which the Partnership is the sole member and which will be managed by the
General Partner as its sole manager (the "New Entity"), the purpose of which is
to hold certain contingent assets of the Partnership and to facilitate certain
post-Closing actions of the Parties.
(b) Promptly after the establishment of the New Entity and prior to
the Closing, the Partnership shall assign all of the Partnership's right, title
and interest in the Contingent Assets (as defined below) to the New Entity.
Following such assignment and prior to the Closing, the Partnership shall
distribute to the Limited Partners all of its interest in the New Entity on a
pro rata basis based upon each Limited Partner's ownership of Partnership Units
as of the time of such distribution. Immediately prior to such distribution, the
Partnership shall contribute $1,500,000 of Partnership Cash to the New Entity to
enable the New Entity to pursue certain Contingent Assets and to satisfy certain
obligations of the Partnership. As the sole manager of the New Entity, the
General Partner shall not permit the New Entity to take any actions that would
cause this amount to be used for any purpose other than to (i) pursue certain
Contingent Assets, (ii) satisfy the Partnership's obligations to the General
Partner under the Partnership Agreement and (iii) satisfy the obligations of the
New Entity under this Agreement; provided, however, the New Entity may
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distribute such amount to its members once such obligations are satisfied.
34
(c) For purposes of this Section 6.15, "Contingent Assets" shall
include (i) one-half of the Refunded Incentive Management Fee, (ii) the Prorated
Tax Adjustment (as defined below), if positive, (iii) the Refunded Litigation
Reserves, (iv) any Other Manager Payments (as defined below) and (v) all claims
or demands of any nature whatsoever, known or unknown, anticipated or
unanticipated, accrued or unaccrued, which have been or may be asserted by or on
behalf of the Partnership, and which arise out of events occurring prior to the
Closing with respect to the Material Contracts.
(d) Promptly after receipt from the Manager, the Surviving Partnership
shall deliver or pay to the New Entity (i) one-half of the Refunded Incentive
Management Fee, (ii) the Refunded Litigation Reserves and (iii) any other
payments received by the Surviving Partnership from the Manager ("Other Manager
Payments") that represent refunds or returns of money to the Partnership as a
result of overpayment by the Partnership or underpayment by the Manager of such
amount during the period prior to the Closing (if the Surviving Partnership is
required to make any payments to the Manager as a result of an underpayment by
the Partnership or overpayment by the Manager with respect to the period prior
to the Closing, Buyer shall request in writing that the New Entity pay such
amount and the New Entity shall, after receipt of such documentation from Buyer
that the New Entity reasonably believes is necessary to support such request,
promptly pay such amount). The parties acknowledge that the Final Net Profit
Payment shall be the property of the Surviving Partnership and not subject to
the provisions of this Section 6.15(d).
(e) Promptly after the Surviving Partnership's tax liability for the
2001 tax year and the period in 2002 ending on the Effective Date, if any, is
determined, the Surviving Partnership shall deliver or pay to the New Entity the
difference, if positive, between the prorated Taxes paid or accrued by the
Partnership at or prior to the Closing for the respective period and the actual
amount of such Taxes due and payable by the Partnership for such period (if the
prorated Taxes paid or accrued at or prior to the Closing are less than the
actual amount of such Taxes due and payable for the relevant period, Buyer shall
request in writing that the New Entity pay the difference and the New Entity
shall, after receipt of such documentation from Buyer that the New Entity
reasonably believes is necessary to support such request, promptly pay such
amount) (the "Prorated Tax Adjustment").
(f) Within 3 business days after the Closing, the Surviving
Partnership shall deliver or pay to the New Entity the amount, if any, of the
scheduled debt service with respect to the indebtedness of the Partnership and
its Subsidiaries set forth on Schedule 3.9 that has been paid by the Partnership
------------
prior to Closing with respect to the Final Net Profit Payment Period.
35
(g) Until all payments are made pursuant to Section 6.15(d), the
Surviving Partnership shall not agree to any modification to the Management
Agreement that would reduce the amount of the Refunded Incentive Management Fee.
7. CONDITIONS TO CLOSING
7.1. Conditions to Each Party's Obligations
The obligations of each Party to effect the Merger and to consummate
the other transactions contemplated by this Agreement to occur at the Effective
Time shall be subject to satisfaction at or prior to the Effective Time of the
following conditions:
(a) The Limited Partner Approvals shall have been obtained.
(b) No Law shall have been enacted by any Governmental Entity that
makes the consummation of the Merger or any other material transaction
contemplated by this Agreement illegal.
(c) At the Effective Time, no temporary restraining order, preliminary
or permanent injunction or other order, legal restraint or prohibition issued by
any Governmental Entity preventing the consummation of the Merger or any of the
other material transactions contemplated by this Agreement shall be in effect.
(d) All consents, authorizations, orders and approvals of (or filing
or registration with) any Governmental Entity required in connection with the
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been obtained.
(e) All required third-party consents to the Merger and the other
transactions contemplated by this Agreement shall have been received, including,
without limitation, (i) the Buyer Consents, (ii) the Partnership Consents, (iii)
the Operating Agreement Consent and (iv) those required consents set forth on
Schedule 7.1.
------------
(f) The Operating Agreement shall have been amended as contemplated by
the Operating Agreement Consent.
36
7.2. Conditions to Obligations of the Partnership and the General Partner
The obligations of the Partnership and the General Partner to effect
the Merger and to consummate the other transactions contemplated by this
Agreement to occur at the Effective Time shall be subject to satisfaction at or
prior to the Effective Time of each of the following further conditions:
(a) Each of the representations and warranties of Buyer and Merger Sub
set forth in this Agreement, disregarding all qualifications and exceptions
contained therein relating to materiality or a Buyer Material Adverse Effect,
shall be true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except to the extent that
such representations and warranties are expressly limited by their terms to
another date, in which case such representations and warranties shall be true
and correct as of such other date), except where the failure of such
representations and warranties to be true and correct would not, individually or
in the aggregate, reasonably be expected to have a Buyer Material Adverse
Effect, and the Partnership shall have received a certificate (which certificate
may be qualified by Knowledge to the same extent as such representations and
warranties of Buyer and Merger Sub contained herein are so qualified) signed on
behalf of Buyer by the chief executive officer or the chief financial officer of
Buyer, in such capacity, to such effect.
(b) Buyer and Merger Sub shall have performed in all material respects
all obligations required to be performed by them under this Agreement at or
prior to the Effective Time.
7.3. Conditions to Obligations of Buyer and Merger Sub
The obligations of Buyer and Merger Sub to effect the Merger and to
consummate the other transactions contemplated by this Agreement to occur at the
Effective Time shall be subject to satisfaction at or prior to the Effective
Time of each of the following further conditions:
(a) Each of the representations and warranties of the Partnership and
the General Partner set forth in this Agreement, disregarding all qualifications
and exceptions contained therein relating to materiality or a Partnership
Material Adverse Effect, shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent that such representations and warranties are
expressly limited by their terms to another date, in which case such
representations and warranties shall be true and correct as of such other date),
except where the failure of such representations and warranties to be true and
correct would not, individually or in the aggregate, reasonably be expected to
have a Partnership Material Adverse Effect, and Buyer
37
and Merger Sub shall have received a certificate (which certificate may be
qualified by Knowledge to the same extent as such representations and warranties
of the Partnership or the General Partner contained herein are so qualified)
signed on behalf of the Partnership by the General Partner, in such capacity, to
such effect.
(b) The Partnership and General Partner shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Effective Time.
(c) Since the date of this Agreement, there shall have been no
Partnership Material Adverse Change.
(d) Buyer shall have received a certificate signed by the General
Partner on behalf of the Partnership stating that, as of the Closing Date, the
aggregate amount of Partnership Cash remaining in the Partnership is not less
than the sum of (i) $5,000,000 and (ii) any amount delivered or paid by the
Manager to the Partnership prior to the Closing with respect to the Final Net
Profit Payment.
(e) Hospitality Properties Trust shall have waived in writing any
rights of first offer it may have under the Purchase-Sale and Option Agreement,
dated February 3, 1995, by and among HMH Courtyard Properties, Inc., HMH
Properties, Inc. and Hospitality Properties, Inc., as amended through the date
hereof, with respect to the transactions contemplated by this Agreement.
(f) Buyer shall have received, to its reasonable satisfaction,
evidence that the actions contemplated by Section 6.15(b) with respect to the
New Entity shall have occurred.
(g) The Partnership shall have, to the reasonable satisfaction of
Buyer, corrected, settled, discharged, satisfied or provided a bond with respect
to, as the case may be, all material title deficiencies (including those title
deficiencies set forth on Schedule 7.3(g)(i)) and all tax and judgment liens
-------------------
affecting the Partnership or its properties, except, in the case of title
deficiencies other than the title deficiencies set forth on Schedule 7.3(g)(i),
------------------
where the failure to so correct such deficiencies would not reasonably be
expected to have a Partnership Material Adverse Effect. For the purposes of this
Section 7.3(g), the failure to correct, settle, discharge, satisfy or provide a
bond with respect to the title deficiencies set forth on Schedule 7.3(g)(ii)
-------------------
shall not constitute a Partnership Material Adverse Effect.
38
8. TERMINATION, EXPENSES, AMENDMENT AND WAIVER
8.1. Termination
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after the Limited Partner Approvals are obtained or the
Certificate of Merger has been filed with the Delaware Secretary of State
(provided the Effective Time has not yet occurred):
(a) by mutual written consent of the Parties;
(b) by the Partnership, upon a breach of any representation, warranty,
covenant, obligation or agreement on the part of Buyer or Merger Sub set forth
in this Agreement, or if any representation or warranty of Buyer or Merger Sub
shall become untrue, in either case such that the conditions set forth in
Section 7.2(a) or Section 7.2(b), as the case may be, would be incapable of
being satisfied as of the date of such breach, which breach or failure to be
true either is not capable of being cured or, if it is capable of being cured,
has not been cured within 30 days following written notice to the Partnership
from Buyer or Merger Sub of such breach; provided that the Partnership may not
terminate this Agreement pursuant to this Section 8.1(b) if the Partnership or
the General Partner is then in material breach of its obligations under this
Agreement;
(c) by Buyer, upon a breach of any representation, warranty, covenant,
obligation or agreement on the part of the Partnership or the General Partner
set forth in this Agreement, or if any representation or warranty of the
Partnership or the General Partner shall become untrue, in either case such that
the conditions set forth in Section 7.3(a) or Section 7.3(b), as the case may
be, would be incapable of being satisfied as of the date of such breach, which
breach or failure to be true either is not capable of being cured or, if it is
capable of being cured, has not been cured within 30 days following written
notice to the Buyer from the Partnership or General Partner of such breach;
provided that Buyer may not terminate this Agreement pursuant to this Section
8.1(c) if Buyer or Merger Sub is then in material breach of its obligations
under this Agreement;
(d) by either Buyer or the Partnership, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Merger shall have become final and
non-appealable;
(e) by either Buyer or the Partnership, if the Merger shall not have
been consummated within 150 days after the date hereof (or such later date to
which Buyer and the Partnership may have extended the Closing deadline);
provided, however, that a Party may not terminate pursuant to this clause (e) if
-------- -------
the terminating Party shall have breached in any material respect its
obligations under
39
this Agreement in any manner that shall have been the primary cause of the
occurrence of the failure referred to in this clause;
(f) by either Buyer or the Partnership if the Limited Partner
Approvals shall not have been obtained prior to the expiration of the
solicitation period set forth in the Consent Solicitation (as the same may be
extended by the Partnership in its sole discretion);
(g) by the Partnership (i) if the General Partner shall have
withdrawn, modified, amended or qualified in any manner adverse to Buyer its
approval or recommendation of either of the Merger or this Agreement in
connection with, or approved or recommended, any Superior Acquisition Proposal,
or, (ii) in order to enter into a binding written agreement with respect to a
Superior Acquisition Proposal, provided that, in each case, the Partnership and
the General Partner shall have complied with the terms of Section 6.3 and, prior
to terminating pursuant to this Section 8.1(g), the Partnership has paid to
Buyer (provided the Partnership is not entitled to terminate this Agreement
pursuant to Section 8.1(b)) the Break-Up Fee (as defined below) as provided by
Section 8.2 hereof;
(h) by Buyer, if (i) prior to the Effective Time, the General Partner
shall have withdrawn, modified, amended or qualified in any manner adverse to
Buyer its approval or recommendation of either of the Merger or this Agreement
in connection with, or approved or recommended, any Superior Acquisition
Proposal, (ii) the Partnership shall have entered into any agreement for any
Superior Acquisition Proposal, or (iii) the General Partner shall have resolved
to do any of the foregoing;
(i) by Buyer, if the weekly occupancy rate of the Hotels is less than
45% for four consecutive weeks at any time prior to the Closing, provided, for
purposes of this Section 8.1(i), the weeks of November 17, 2001 through November
30, 2001 and December 22, 2001 through January 4, 2002 shall be excluded from
such calculation;
(j) by the Partnership, if Buyer has not, within 45 days after the
date hereof, obtained the Buyer Consents; provided, however, the Partnership, in
-------- -------
its sole discretion, may extend the period of time during which the Buyer
Consents may be obtained for up to 30 days;
(k) by Buyer, if the Partnership has not, within 45 days after the
date hereof, obtained the Partnership Consents; provided, however, Buyer, in its
-------- -------
sole discretion, may extend the period of time during which the Partnership
Consents may be obtained for up to 30 days;
40
(l) by Buyer, if the amount confirmed by the Manager pursuant to
Section 6.11(b)(iii) with respect to any item set forth on Schedule 6.11(b) is
----------------
different than the amount set forth on Schedule 6.11(b) with respect to such
----------------
item;
(m) by either Buyer or the Partnership, if Hospitality Properties
Trust shall not have waived, prior to the expiration of the solicitation period
set forth in the Consent Solicitation (as the same may be extended by the
Partnership in its sole discretion), its rights of first offer, if any, under
the Purchase-Sale and Option Agreement, dated February 3, 1995, by and among HMH
Courtyard Properties, Inc., HMH Properties, Inc. and Hospitality Properties,
Inc., as amended through the date hereof, with respect to the transactions
contemplated by this Agreement; or
(n) by the Partnership, if Buyer has not, within 3 business days after
the date hereof, deposited the Deposit into escrow with the Deposit Escrow Agent
in accordance with the terms and conditions of the Deposit Escrow Agreement.
8.2. Break-Up Fee
(a) If this Agreement shall be terminated pursuant to Section 8.1(g)
or 8.1(h), then the Partnership thereupon shall pay to Buyer (provided that the
Partnership was not entitled to terminate this Agreement pursuant to Section
8.1(b) at the time of such termination) a fee equal to the Break-Up Fee. The
payment of the Break-Up Fee shall be compensation for the loss suffered by Buyer
as a result of the failure of the Merger to be consummated (including, without
limitation, out-of-pocket costs and expenses) and to avoid the difficulty of
determining damages under the circumstances. The Break-Up Fee shall be paid by
the Partnership to Buyer, in immediately available funds, within five (5)
business days after the date the event giving rise to the obligation to make
such payment occurred (except as otherwise provided in Section 8.1(g)). As used
in this Agreement, "Break-Up Fee" shall be an amount equal to $1,200,000.
(b) In the event that (i)(A) this Agreement is terminated by the Buyer
or Merger Sub pursuant to Section 8.1(c) (where the breach by the Partnership is
willful), (B) prior to such termination an Acquisition Proposal has been
publicly announced, disclosed or communicated and (C) on the date of such
termination, neither Buyer nor Merger Sub is in material breach of this
Agreement, and (ii) within nine months after such termination pursuant to clause
(i)(A), the Partnership shall consummate or enter into an agreement with respect
to such Acquisition Proposal or any subsequent Acquisition Proposal made in
response to or in competition with such Acquisition Proposal, the Partnership
shall pay the Break-Up Fee concurrently with the consummation of such
transaction.
41
9. DEFINITIONS
"Accounting Period" shall have the meaning set forth in the Management
Agreement.
"Acquisition Proposal" shall have the meaning set forth in Section
6.3(a) of this Agreement.
"Agreement" shall mean this Agreement and Plan of Merger.
"Break-Up Fee" shall be an amount equal to $1,200,000.
"Buyer" shall mean Apple Hospitality Two, Inc., a Virginia
corporation.
"Buyer's Financial Statements" shall have the meaning set forth in
Section 5.3 of this Agreement.
"Buyer Consents" shall have the meaning set forth in Section 6.11(a)
of this Agreement.
"Buyer Counter Proposal" shall have the meaning set forth in Section
6.3(c) of this Agreement.
"Buyer Material Adverse Change" means any material adverse change in
the business, financial condition or results of operations of Buyer and its
consolidated subsidiaries (if any) taken as a whole.
"Buyer Material Adverse Effect" shall have the meaning set forth in
Section 5.1 of this Agreement.
"CERCLA" shall have the meaning set forth in Section 3.14 of this
Agreement.
"Certificate of Limited Partnership" shall mean the Certificate of
Limited Partnership of the Partnership.
"Certificate of Merger" shall have the meaning set forth in Section
2.2 of this Agreement.
"Closing" shall have the meaning set forth in Section 2.5 of this
Agreement.
"Closing Date" shall have the meaning set forth in Section 2.5 of this
Agreement.
42
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the confidentiality agreement
between Buyer and the Partnership, dated April 6, 2001.
"Consent Solicitation" shall have the meaning set forth in Section
6.2(a) of this Agreement.
"Contingent Assets" shall have the meaning set forth in Section
6.15(c) of this Agreement.
"Contract" shall have the meaning set forth in Section 3.4 of this
Agreement.
"Deposit" shall have the meaning set forth in Section 2.4 of this
Agreement.
"Deposit Escrow Agent" means First Union National Bank or such other
escrow agent to the Deposit Escrow Agreement as shall be mutually determined by
the Parties.
"DRULPA" shall mean the Delaware Revised Uniform Limited Partnership
Act.
"Effective Date" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Effective Time" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Environmental Law" shall have the meaning set forth in Section 3.14
of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Fund" shall have the meaning set forth in Section 2.6(b) of
this Agreement.
"Final Net Profit Payment" shall mean the aggregate amount of
Operating Profit delivered or paid by the Manager to the Partnership or the
Surviving Partnership pursuant to the terms of the Management Agreement with
respect to the last full Accounting Period (and any portion of the subsequent
Accounting Period) occurring prior to the Closing.
43
"Final Net Profit Payment Period" shall mean the last full Accounting
Period and any portion of the subsequent Accounting Period occurring prior to
the Closing.
"Fiscal Year" shall have the meaning set forth in the Management
Agreements.
"GAAP" shall mean generally accepted accounting principles.
"General Partner" shall mean RIBM One LLC, a Delaware limited
liability company and the sole general partner of the Partnership.
"General Partner Consideration" shall have the meaning set forth in
Section 2.6(i) of this Agreement.
"Governmental Entity" shall mean any federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency having jurisdiction applicable to the
Partnership or any of its Subsidiaries (if any).
"Hazardous Materials" shall have the meaning set forth in Section 3.14
of this Agreement.
"Hotels" shall mean the Residence Inn hotels owned by the Partnership
or any of its Subsidiaries and which are described on Schedule 1 to this
Agreement.
"Indemnifying Party" shall have the meaning set forth in Section
6.13(a) of this Agreement.
"Indemnified Party" or "Indemnified Parties" shall have the meaning
set forth in Section 6.13(a) of this Agreement.
"IRS" means the Internal Revenue Service.
"Knowledge" shall mean information which is actually known by an
executive officer of such Person with responsibility for the matters in question
or which a prudent individual in such position would reasonably be expected to
discover with due inquiry.
"Laws" shall have the meaning set forth in Section 3.5(a) of this
Agreement.
"Liens" shall have the meaning set forth in Section 3.2(b) of this
Agreement.
44
"Limited Partners" shall mean the holders of Partnership Units who
have been admitted as limited partners of the Partnership prior to the Effective
Time.
"Limited Partner Approvals" shall mean the approval of the holders of
a majority of the Partnership Units who have been admitted as limited partners
of the Partnership to the Merger and the related transactions to the extent
required by the Partnership Agreement to effectuate the transactions
contemplated by this Agreement.
"Loans" shall have the meaning set forth in Section 3.9 of this
Agreement.
"Losses" shall have the meaning set forth in Section 6.13(a) of this
Agreement.
"Manager" shall mean Residence Inn by Marriott, Inc., the manager of
the Hotels.
"Management Agreement" shall mean that certain Management Agreement,
dated March 29, 1988, between the Partnership and Residence Inn by Marriott,
Inc., the manager of the Hotels.
"Material Contracts" shall have the meaning set forth in Section 3.10
of this Agreement.
"Merger" shall mean the merger of Merger Sub with and into the
Partnership pursuant to the terms and conditions of this Agreement.
"Merger Consideration" shall have the meaning set forth in Section
2.6(a) of this Agreement.
"Merger Sub" shall mean AHT Res Acquisition, L.P., a Delaware limited
partnership and a wholly owned indirect subsidiary of Buyer.
"Merger Sub GP" shall mean AHT Res I GP, Inc., a Virginia corporation
and a wholly owned indirect subsidiary of Buyer.
"Mortgage Loans" shall have the meaning set forth in Section 3.9 of
this Agreement.
"Operating Agreement" shall have the meaning set forth in Section 4.1
of this Agreement.
"Operating Agreement Consent" shall have the meaning set forth in
Section 6.10 of this Agreement.
45
"Operating Profit" shall have the meaning set forth in the Management
Agreement.
"Other Manager Payments" shall have the meaning set forth in Section
6.15(d) of this Agreement.
"Parties" or "Party" shall have the meaning set forth in Section 2.2
of this Agreement.
"Partners" shall mean the General Partner and the Limited Partners of
the Partnership.
"Partnership" shall mean Marriott Residence Inn Limited Partnership, a
Delaware limited partnership.
"Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of the Partnership.
"Partnership Cash" shall mean all cash of the Partnership except for
(a) amounts available in the Partnership's FF&E reserve accounts, (b) any
escrowed funds, reserves or other deposits made by the Partnership or a
Subsidiary pursuant to any Loan or Mortgage Loan and held by any of the
Partnership's lenders and (c) all ▇▇▇▇▇ cash and working capital funds held in
accounts of the Hotels.
"Partnership Interests" shall mean the partnership interests in the
Partnership.
"Partnership Material Adverse Change" shall have the meaning set forth
in Section 3.8 of this Agreement.
"Partnership Consents" shall have the meaning set forth in Section
6.11(b) of this Agreement.
"Partnership Material Adverse Effect" shall have the meaning set forth
in Section 3.1 of this Agreement.
"Partnership SEC Documents" shall have the meaning set forth in
Section 3.7(a) of the Agreement.
"Partnership Units" shall mean the units of limited partnership
interest in the Partnership.
"Paying Agent" shall have the meaning set forth in Section 2.6(b) of
this Agreement.
46
"Permits" shall have the meaning set forth in Section 3.13(b) of this
Agreement.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or other
form of business or legal entity.
"Proposed Transactions" shall have the meaning set forth in Section
6.11(a) of this Agreement.
"Prorated Tax Adjustment" shall have the meaning set forth in Section
6.15(e) of this Agreement. "Release" shall have the meaning set forth in Section
3.14 of this Agreement.
"Refunded Incentive Management Fee" shall mean the cash amount, if
any, delivered or paid by the Manager to the Surviving Partnership or any
subsidiary of the Surviving Partnership after the Closing, pursuant to Sections
5.04(B) and (C) and Section 8.01 of the Management Agreement, with respect to
excess Incentive Management Fees (as that term is defined in the Management
Agreement), and any interest earned thereon, which have been retained by the
Manager for the Partnership's 2001 Fiscal Year.
"Refunded Litigation Reserves" shall mean the amount, if any, of the
cash reserves retained by the Manager with respect to any damages, liabilities,
losses, costs and expenses described in Section 6.14(a) that is returned by the
Manager to the Surviving Partnership or any subsidiary of the Surviving
Partnership after the Closing.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiaries" or "Subsidiary" shall have the meaning set forth in
Section 3.2(a) of this Agreement.
"Superior Acquisition Proposal" shall have the meaning set forth in
Section 6.3(d) of this Agreement.
"Surviving Partnership" shall mean the surviving entity of the Merger.
"Tax Returns" shall have the meaning set forth in Section 3.11(a) of
this Agreement.
47
"Taxes" shall have the meaning set forth in Section 3.11(a) of this
Agreement.
"Termination Date"" shall have the meaning set forth in Section
6.13(f) of this Agreement.
"Transfer and Gains Taxes" shall have the meaning set forth in Section
6.7 of this Agreement.
"Unit Certificates" shall have the meaning set forth in Section 2.6(b)
of this Agreement.
10. GENERAL PROVISIONS
10.1. No Survival
None of the representations, warranties, covenants or agreements in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time; provided, however, the foregoing shall not limit any
-------- -------
covenant, agreement or indemnity of any Party which by its terms contemplates
performance after the Effective Time, including, without limitation, Section
6.13, Section 6.14 and Section 6.15.
10.2. Expenses
(a) All fees and expenses incurred in connection with the negotiation,
preparation and execution of this Agreement and the performance of the
transactions contemplated hereby shall be paid by the Party incurring such
expenses, including, without limitation, any finder's fees, investment banking
fees, attorneys' fees or other professional fees, provided that (i) the
Partnership shall pay all fees and expenses associated with (A) the Consent
Solicitation, (B) the solicitation of the Partnership Consents and (C) the
solicitation of any third-party consents, other than lender consents and the
Buyer Consents, required to be obtained from parties to contracts with the
Partnership in connection with the transactions contemplated by this Agreement,
and (ii) Buyer shall pay all fees and expenses associated with (A) the
solicitation of any consents of the Partnership's lenders required to be
obtained in connection with the transactions contemplated by this Agreement, (B)
the solicitation of the Buyer Consents, (C) Buyer's due diligence investigation
of the Partnership and (D) all Transfer and Gain Taxes. Notwithstanding the
foregoing, in the event that, following distribution of the Consent Solicitation
to the Limited Partners, the Partnership does not receive the Limited Partner
Approvals, the Partnership shall reimburse Buyer for up to $150,000 of its
reasonable third-party due diligence expenses (including legal fees)
48
incurred in connection with Buyer's due diligence review of the Partnership and
the Hotels. The Partnership and Buyer shall each pay one-half of all title
insurance premiums (including additional premiums attributable to extended
coverage) up to an aggregate amount of $100,000 each, and Buyer shall pay the
amount of such premiums that exceeds $200,000 in the aggregate.
(b) If any Party fails to promptly pay any amounts due pursuant to
this Agreement (including, without limitation, pursuant to Section 2.6 and
Section 8.2) and, for the purpose of obtaining payment, a Party commences a suit
which results in a judgment against another Party for any amounts owed pursuant
hereto, the losing party shall pay to the prevailing party its costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit.
10.3. Amendment
This Agreement may be amended by the Parties in writing at any time
before or after any Limited Partner Approvals are obtained and prior to the
Effective Time; provided, however, that, after the Limited Partner Approvals are
-------- -------
obtained, no such amendment shall be made which by law requires the further
approval of the Limited Partners without first obtaining such further approval.
10.4. Extension; Waiver
At any time prior to the Effective Time, the Parties 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 Agreement or in any document delivered
pursuant to this Agreement or (c) subject to the proviso of Section 10.3 and to
the extent lawful, waive compliance with any of the agreements or conditions of
any Party contained in this Agreement. Any agreement on the part of a Party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such Party and then only to the extent expressly
specified therein. The delay or failure of any Party to exercise or assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
10.5. Notices
All notices, requests, claims, demands and other communications under
this Agreement shall be in writing and shall be delivered personally, sent by
overnight courier (providing proof of delivery) to the Parties or sent by
telecopy (providing confirmation of transmission) at the following addresses or
telecopy numbers (or at such other address or telecopy number for a Party as
shall be specified by like notice):
49
(a) if to the Partnership
or the General Partner, to:
Marriott Residence Inn Limited Partnership
c/o Host Marriott Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Buyer
or Merger Sub to:
Apple Hospitality Two, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Jenkens & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
10.6. Assignment and Binding Effect
This Agreement and the rights and obligations of the Parties hereunder
may not be assigned by any Party without the prior written consent of
50
each of the other Parties. This Agreement shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and assigns.
10.7. Entire Agreement
This Agreement, the Confidentiality Agreement, the Deposit Escrow
Agreement and the other agreements entered into in connection with the Merger
constitute the entire agreement and supersede all prior agreements (except the
Confidentiality Agreement) and understandings, both written and oral, between
the Parties with respect to the subject matter of this Agreement.
10.8. Governing Law
This Agreement, the rights and obligations of the Parties, and any
claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of the State of Delaware (excluding the choice of law
rules thereof).
10.9. Severability
If any part of any provision of this Agreement shall be invalid or
unenforceable in any respect, such part shall be ineffective to the extent of
such invalidity or unenforceability only, without in any way affecting the
remaining parts of such provision or the remaining provisions of this Agreement.
10.10. Further Assurances
In connection with this Agreement and the transactions contemplated
hereby, each Party shall execute and deliver any additional documents and
instruments and perform any additional acts that may be necessary or appropriate
or reasonably requested by another Party to effectuate and perform the
provisions of this Agreement and such transactions.
10.11. Counterparts
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the signatures
of, or on behalf of, each Party, or that the signatures of all persons required
to bind any Party, appear on each counterpart; but it shall be sufficient that
the signature of, or on behalf of, each Party, or that the signatures of the
persons required to bind any Party, appear on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It shall not
be necessary in making proof of this
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Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the Parties.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement and
Plan of Merger, or have caused this Agreement and Plan of Merger to be duly
executed on their behalf, as of the day and year first above written.
APPLE HOSPITALITY TWO, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title:
-------------------------------
AHT RES ACQUISITION, L.P.
By: AHT Res I GP, its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title:
-------------------------------
MARRIOTT RESIDENCE INN
LIMITED PARTNERSHIP
By: RIBM ONE LLC, its sole general
partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President
RIBM ONE LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------------
Title: President
--------------------------------
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