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AGREEMENT AND PLAN OF MERGER
AMONG
FELCOR LODGING TRUST INCORPORATED,
AND
FELCOR LODGING LIMITED PARTNERSHIP,
ON THE ONE HAND,
AND
MERISTAR HOSPITALITY CORPORATION
AND
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.,
ON THE OTHER HAND
DATED AS OF MAY 9, 2001
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TABLE OF CONTENTS
PAGE
----
ARTICLE 1 - The Merger.....................................................2
1.1 The Merger.........................................................2
1.2 Closing............................................................2
1.3 Effective Time.....................................................2
1.4 Effects of the Merger..............................................2
1.5 Charters and Bylaws................................................2
1.6 Directors and Officers.............................................3
ARTICLE 2 - Treatment of Shares............................................3
2.1 Effect of the Merger on Stock......................................3
2.2 Delivery of Merger Consideration...................................4
ARTICLE 3 - Certain Transactions Relating to the MeriStar OP...............9
3.1 Merger of MeriStar OP and FelCor OP................................9
3.2 Closing and Effectiveness..........................................9
3.3 Effects of OP Merger...............................................9
3.4 Certificate of Limited Partnership and Partnership Agreement.......9
3.5 Effect of the OP Merger on Partnership Interests...................9
3.6 Issuance of New Certificates for FelCor OP Units..................11
ARTICLE 4 - Representations and Warranties of the MeriStar Parties........12
4.1 Organization, Standing and Power of MeriStar......................12
4.2 MeriStar Subsidiaries.............................................13
4.3 MeriStar Structure................................................14
4.4 Organization, Standing and Power of MeriStar OP...................15
4.5 Registration Rights...............................................16
4.6 Authority; Noncontravention; Consents.............................16
4.7 SEC Documents; Financial Statements; Undisclosed Liabilities......17
4.8 Absence of Certain Changes or Events..............................18
4.9 Litigation........................................................18
4.10 Properties........................................................19
4.11 Employee Benefits.................................................21
4.12 Labor Matters; Employees..........................................22
4.13 Taxes ............................................................23
4.14 No Payments to Employees, Officers or Directors...................26
4.15 Brokers, Fees and Expenses........................................26
4.16 Contracts; Debt Instruments.......................................26
4.17 Environmental Matters.............................................27
4.18 Compliance with Laws..............................................27
4.19 Opinion of Financial Advisor......................................28
4.20 Maryland Takeover Law.............................................28
4.21 Information Supplied..............................................28
PAGE
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4.22 Investment Company Act of 1940....................................28
4.23 Definition of Knowledge of MeriStar...............................28
4.24 Voting Requirements...............................................28
4.25 Related Party Agreements..........................................29
ARTICLE 5 - Representations and Warranties of the FelCor Parties..........29
5.1 Organization, Standing and Power of FelCor........................29
5.2 FelCor Subsidiaries...............................................29
5.3 FelCor Structure..................................................31
5.4 Organization, Standing and Power of FelCor OP.....................32
5.5 Authority; Noncontravention; Consents.............................32
5.6 SEC Documents; Financial Statements; Undisclosed Liabilities......34
5.7 Absence of Certain Changes or Events..............................34
5.8 Litigation........................................................35
5.9 Properties........................................................35
5.10 Employee Benefit Plans; Labor Matters.............................37
5.11 Taxes ............................................................39
5.12 No Payments to Employees, Officers or Directors...................41
5.13 Brokers, Fees and Expenses........................................41
5.14 Contracts; Debt Instruments.......................................41
5.15 Environmental Matters.............................................42
5.16 Compliance with Laws..............................................42
5.17 Opinion of Financial Advisor......................................42
5.18 Maryland Takeover Laws............................................43
5.19 Information Supplied..............................................43
5.20 Investment Company Act of 1940....................................43
5.21 Definition of Knowledge of FelCor.................................43
5.22 Voting Requirements...............................................43
ARTICLE 6 - Covenants.....................................................43
6.1 No Solicitation by MeriStar.......................................43
6.2 No Solicitation by FelCor.........................................45
6.3 Conduct of MeriStar's Business Pending Merger.....................47
6.4 Conduct of FelCor's Business Pending Merger.......................49
6.5 Interim Transactions Committee....................................51
6.6 Compliance with the Securities Act................................51
6.7 Filing of Certain Reports.........................................52
6.8 Other Actions.....................................................52
ARTICLE 7 - Additional Covenants..........................................52
7.1 Preparation of the Registration Statement and the Proxy
Statement; MeriStar Stockholders Meeting and FelCor
Stockholders Meeting..............................................52
7.2 Access to Information: Confidentiality............................54
7.3 Regulatory Matters................................................55
7.4 Directors' and Officers' Indemnification..........................55
7.5 Public Announcements..............................................56
ii
PAGE
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7.6 Employment Agreements and Workforce Matters.......................56
7.7 Employee Benefit Plans............................................56
7.8 Stock Option and Other Stock Plans................................57
7.9 Registration Statements...........................................59
7.10 Reorganization Status.............................................59
7.11 NYSE Listing......................................................60
7.12 Transfer Taxes....................................................60
7.13 Payment of MeriStar Debt..........................................60
7.14 Resignations......................................................60
7.15 Assumption of Debt................................................60
7.16 Tax Provision.....................................................60
7.17 Financing.........................................................60
7.18 Relationship with MeriStar Hotels & Resorts.......................61
7.19 Completion of Capital Projects....................................61
7.20 Commercially Reasonable Efforts and Cooperation...................61
7.21 Financing Commitment..............................................61
ARTICLE 8 - Conditions....................................................62
8.1 Conditions to Each Party's Obligation to Effect the Merger........62
8.2 Conditions to Obligations of the MeriStar Parties.................63
8.3 Conditions to Obligations of the FelCor Parties...................64
8.4 Frustration of Closing Conditions.................................65
ARTICLE 9 - Termination, Amendment and Waiver.............................65
9.1 Termination.......................................................65
9.2 Certain Fees and Expenses.........................................67
9.3 Effect of Termination.............................................69
9.4 Amendment.........................................................70
9.5 Extension; Waiver.................................................70
ARTICLE 10 - General Provisions...........................................70
10.1 Nonsurvival of Representations and Warranties.....................70
10.2 Notices...........................................................70
10.3 Interpretation....................................................71
10.4 Counterparts......................................................71
10.5 Entire Agreement; No Third-Party Beneficiaries....................71
10.6 Governing Law.....................................................72
10.7 Assignment........................................................72
10.8 Enforcement.......................................................72
10.9 Severability......................................................72
iii
EXHIBITS
Exhibit "A" Articles of Merger
Exhibit "B" Certificate of Merger for OP Merger
Exhibit "C" Form of Affiliate Agreement
SCHEDULES
Schedule 1.6(a) List of Directors of Surviving Corporation
Schedule 7.18 Term Sheet
MeriStar Disclosure Letter and Schedules
FelCor Disclosure Letter and Schedules
INDEX OF DEFINED TERMS
DEFINED TERM SECTION
------------ -------
1940 Act 4.22
Affiliates 6.6
Agreement Preamble
Amended FelCor Bylaws 1.5
Amended FelCor Charter 1.5
Articles of Merger Recitals
Assumed Option 7.8(a)
Assumed Option Shares 7.8(c)
Base Amount 9.2(d)
Break-Up Expenses 9.2(e)
Break-Up Fee 9.2(d)
Break-Up Fee Ruling 9.2(d)
Break-Up Fee Tax Opinion 9.2(d)
Canceled Shares 2.2(b)
Cash Consideration 2.1(a)
Certificate or Certificates 2.2(b)
Closing 1.2
Closing Date 1.2
Closing Price 9.1(l)
Code Recitals
Confidentiality Agreement 7.2
Continuing Employee 7.7(a)
Controlled Group 4.11
Department 1.3
DRULPA 3.1
Effective Time 1.3
Encumbrances 4.10(a)
Environmental Laws 4.17
ERISA 4.11
Excess Shares 2.2(d)
Exchange Act 4.7
Exchange Agent 2.2(a)
Exchange Factor 3.5(e)
Exchange Fund 2.2(a)
Exchange Ratio 2.1(a)
Exchange Registration 7.9(b)
FelCor Preamble
FelCor Acquisition Proposal 6.2(a)
FelCor Benefit Plans 5.10(a)
FelCor Budget and Schedule 5.9(e)
FelCor Bylaws 1.5
FelCor Charter 1.5
ii
DEFINED TERM SECTION
------------ -------
FelCor Class B Units 5.2(a)
FelCor Class C Units 3.5(c)
FelCor Class D Units 3.5(d)
FelCor Commitment 6.4(h)
FelCor Common Stock 2.1(a)
FelCor Common Units 3.5(a)
FelCor Deferred Stock 5.3(b)
FelCor Disclosure Letter Article 5 Intro
FelCor Financial Statement Date 5.7
FelCor Franchise Agreements 5.9(g)
FelCor Ground Leases 5.9(f)
FelCor LLC 5.2(a)
FelCor Management Agreements 5.9(h)
FelCor Material Adverse Change 5.7
FelCor Material Adverse Effect 5.1
FelCor OP Preamble
FelCor OP Certificate 3.4
FelCor OP Unit Holder 5.2(a)
FelCor OP Units 5.2(a)
FelCor Operating Partnership Agreement 5.2(a)
FelCor Options 5.3(a)
FelCor Parties Preamble
FelCor Plans 5.3(a)
FelCor Properties 5.9(a)
FelCor Restricted Stock Grants 5.3(b)
FelCor SEC Documents 5.6
FelCor Series A Preferred Stock 5.3(a)
FelCor Series A Preferred Units 5.2(a)
FelCor Series B Preferred Stock 5.3(a)
FelCor Series B Preferred Units 5.2(a)
FelCor Stockholder Approval 5.5(a)
FelCor Stockholders Meeting 7.1(e)
FelCor Subsidiary(ies) 5.2(b)
FelCor Superior Proposal 6.2(b)
FelCor Tax Protection Agreements 5.11(k)
FelCor Title Policies 5.9(a)
Final MeriStar Dividend 2.2(c)(ii)
Final MeriStar OP Distribution 2.2(c)(ii)
GAAP 4.7
Governmental Entity 4.6(b)
Hazardous Materials 4.17
Indebtedness 4.16(b)
Indemnified Parties 7.4(a)
Indentures 7.15
iii
DEFINED TERM SECTION
------------ -------
Interim Transactions Committee 6.5
J&G 8.1(h)
Knowledge of FelCor 5.21
Knowledge of MeriStar 4.23
Laws 4.6(b)
Liens 4.2(a)
Market Price 2.2(e)
Merger Recitals
Merger Consideration 2.1(a)
MeriStar Preamble
MeriStar Acquisition Proposal 6.1(a)
MeriStar Benefit Plans 4.11
MeriStar Budget and Schedule 4.10(e)
MeriStar Bylaws 4.1
MeriStar Charter 4.1
MeriStar Class B Units 3.5(b)
MeriStar Class C Units 3.5(c)
MeriStar Class D Units 3.5(d)
MeriStar Commitment 6.3(h)
MeriStar Common Stock 2.1(a)
MeriStar Common Units 3.5(a)
MeriStar Convertible Notes 4.3(a)
MeriStar Disclosure Letter Article 4 Intro
MeriStar Financial Statement Date 4.8
MeriStar Franchise Agreements 4.10(g)
MeriStar GP Interest 3.5(f)
MeriStar Ground Leases 4.10(f)
MeriStar Hotels & Resorts 4.25
MeriStar Incentive Plan 4.3(a)
MeriStar LP 4.2(a)
MeriStar Management Agreements 4.10(h)
MeriStar Material Adverse Change 4.8
MeriStar Material Adverse Effect 4.1
MeriStar OP Preamble
MeriStar OP Partnership Agreement 4.2(a)
MeriStar OP Unit Holder 3.6(a)
MeriStar OP Units 3.5(g)
MeriStar Options 4.3(b)
MeriStar Parties Preamble
MeriStar POP Units 3.5(e)
MeriStar Properties 4.10(a)
MeriStar SEC Documents 4.7
MeriStar Stock Option 7.8(a)
MeriStar Stockholder Approvals 4.6(a)
iv
DEFINED TERM SECTION
------------ -------
MeriStar Stockholders Meeting 7.1(d)
MeriStar Subsidiary(ies) 4.2(b)
MeriStar Superior Proposal 6.1(b)
MeriStar Tax Protection Agreements 4.13(l)
MeriStar Title Policies 4.10(a)
MeriStar Transfer Agent 2.2(c)(ii)
MGCL 1.1
New FelCor OP Units 3.5(g)
NYSE 1.2
OP Merger Recitals
OP Merger Articles 3.2
OP Merger Closing 3.2
POP Unit Plan 3.5(e)
Xxxx Xxxxx 8.1(h)
Payor 9.2(d)
Person 2.2(h)
Proxy Statement 7.1(a)
Qualifying Income 9.2(d)
Ratification Agreement 3.6(a)
Recipient 9.2(d)
Registration Statement 7.1(a)
REIT 4.13(g)
REIT Requirements 9.2(d)
Restated Partnership Agreement 3.4
SEC 4.6(b)
Securities Act 4.7
Share Consideration 2.1(a)
Shelf Registration 7.9(a)
Significant Subsidiary 6.1(a)
Stockholder Approvals 5.5(a)
Subsidiary 4.2(b)
Surviving Corporation 1.1
Surviving Partnership 3.1
Tax(es) 4.13(m)
Tax Returns 4.13(m)
Transactions Recitals
Vested 3.5(e)
WARN 4.12(d)
v
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May
9, 2001, by and among FELCOR LODGING TRUST INCORPORATED, a Maryland corporation
("FelCor"), and FELCOR LODGING LIMITED PARTNERSHIP, a Delaware limited
partnership ("FelCor OP" and, together with FelCor, the "FelCor Parties"), on
the one hand, and MERISTAR HOSPITALITY CORPORATION, a Maryland corporation
("MeriStar"), and MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership ("MeriStar OP" and, together with MeriStar, the "MeriStar
Parties"), on the other hand.
RECITALS:
A. The Board of Directors of FelCor and the Board of Directors of
MeriStar have each determined that a business combination between FelCor and
MeriStar on substantially the terms and conditions set forth in this Agreement
is advisable and in the best interests of their respective companies and
stockholders and presents an opportunity for their respective companies to
achieve long-term strategic and financial benefits and, accordingly, have agreed
to effect the merger (the "Merger") of MeriStar with and into FelCor, with
FelCor being the surviving corporation, upon the terms and subject to the
conditions set forth herein.
B. Upon the terms and conditions set forth herein, MeriStar and
FelCor shall execute Articles of Merger (the "Articles of Merger") in
substantially the form attached hereto as Exhibit "A" and shall file such
Articles of Merger in accordance with applicable Maryland law to effectuate the
Merger.
C. For federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), and
that this Agreement shall constitute a plan of reorganization within the meaning
of Treasury Regulations Section 1.368-2(g).
D. Concurrent with the Merger, the MeriStar Parties and the
FelCor Parties will effect a merger of MeriStar OP with and into FelCor OP as
contemplated by Section 3.1, with FelCor OP as the survivor (the "OP Merger")
(the Merger, together with the other transactions, including without limitation,
the OP Merger, contemplated by this Agreement, being referred to collectively
herein as the "Transactions").
E. The FelCor Parties and the MeriStar Parties desire to make
certain representations, warranties and agreements in connection with the
Transactions.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the Maryland General Corporation Law
("MGCL"), MeriStar shall be merged with and into FelCor at the Effective Time
(as defined in Section 1.3). FelCor shall be the surviving corporation in the
Merger and shall continue its corporate existence under the laws of the State of
Maryland under the name "FelCor Lodging Trust Incorporated." The effects and
consequences of the Merger are set forth in Sections 1.4 through 1.6 and Article
2 hereof. FelCor, after the Effective Time, is sometimes referred to herein as
the "Surviving Corporation."
1.2 CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of Jenkens & Xxxxxxxxx, a Professional Corporation, 0000
Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, at 10:00 A.M. local time, on the
third New York Stock Exchange, Inc. ("NYSE") trading day immediately following
the date on which the last of the conditions set forth in Article 8 hereof
(other than conditions with respect to actions the respective parties will take
at the Closing) is first fulfilled or has been waived, if all such conditions
continue to be so satisfied or waived on such third trading day. If all such
conditions are not so satisfied or waived, the Closing shall be automatically
extended from time to time until the first subsequent trading day on which all
such conditions are again so satisfied or waived, subject, however, to Article 9
hereof. Alternatively, the Closing may occur at such other time, date and place
as MeriStar and FelCor shall mutually agree in writing. The date on which the
Closing occurs is the "Closing Date."
1.3 EFFECTIVE TIME. The Merger shall become effective (the
"Effective Time") at 9:00 a.m., New York City time, on the NYSE trading day
immediately following the Closing Date or, if later, such date and time as the
State Department of Assessments and Taxation of Maryland ("Department") accepts
the Articles of Merger for record, or such other time specified in the Articles
of Merger (not to exceed 30 calendar days after the Articles of Merger are
accepted for record by the Department). Unless otherwise agreed, the parties
will cause the Effective Time to occur at 9:00 a.m., New York City time, on the
NYSE trading day immediately following the Closing Date.
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the MGCL.
1.5 CHARTERS AND BYLAWS. The charter of FelCor, as in effect on
the date hereof (the "FelCor Charter"), and as amended, prior to or at the
Effective Time, to reflect such matters as the parties may agree upon (the
"Amended FelCor Charter"), shall be the charter of the Surviving Corporation
until thereafter amended as provided by applicable law. The bylaws of FelCor, as
in effect on the date hereof (the "FelCor Bylaws"), and as amended, prior to the
Effective Time, to reflect such matters as the parties may agree upon (the
"Amended FelCor Bylaws"), shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by applicable law, the Amended FelCor Charter and
such Amended FelCor Bylaws.
2
1.6 DIRECTORS AND OFFICERS.
(a) The directors of the Surviving Corporation immediately
following the Effective Time shall be the persons named on Schedule 1.6(a) to
this Agreement, each of whom shall serve as a "Class I," "Class II" or "Class
III" director, as specified on such schedule, until the earlier of his
resignation or removal or until his successor is duly elected and qualifies.
(b) FelCor and MeriStar agree that, in the event any person set
forth on Schedule 1.6(a) is unable or otherwise fails to serve, for any reason,
as a director of the Surviving Corporation at the Effective Time, then (i) if
such person was a member of the Board of Directors of MeriStar as of the date
hereof, MeriStar shall have the right to designate another individual, subject
to FelCor's reasonable approval, to serve as a director of the Surviving
Corporation at the Effective Time, (ii) if such person was a member of the Board
of Directors of FelCor as of the date hereof, FelCor shall have the right to
designate another individual, subject to MeriStar's reasonable approval, to
serve as a director of the Surviving Corporation at the Effective Time or (iii)
if such person was not a member of the Board of Directors of either MeriStar or
FelCor as of the date hereof, a majority of the persons set forth on Schedule
1.6(a) shall have the right to designate another individual to serve as a
director of the Surviving Corporation at the Effective Time. FelCor shall use
its best efforts to have any person designated to be a director pursuant to the
previous sentence appointed as a director.
(c) The officers of FelCor immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, each to serve until the
earlier of his resignation or removal or until his successor is duly elected and
qualifies.
ARTICLE 2
TREATMENT OF SHARES
2.1 EFFECT OF THE MERGER ON STOCK.
(a) COMMON STOCK OF MERISTAR. As of the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any stock of
MeriStar, subject to Section 2.1(b), each issued and outstanding share of common
stock, par value $0.01 per share, of MeriStar ("MeriStar Common Stock"), other
than shares of MeriStar Common Stock to be canceled pursuant to Section 2.1(b),
shall be converted into (i) the right to receive cash in the amount of $4.60
(the "Cash Consideration"), without interest, and (ii) 0.784 (the "Exchange
Ratio") of one fully paid and nonassessable share of common stock, par value
$0.01 per share, of FelCor ("FelCor Common Stock"). All such shares of MeriStar
Common Stock automatically shall be canceled and retired and shall cease to
exist and be outstanding, and each certificate previously evidencing any such
shares shall thereafter represent such number of whole shares of FelCor Common
Stock into which such MeriStar Common Stock was converted in accordance with the
Exchange Ratio (the "Share Consideration") and the right to receive, without
interest, the Cash Consideration (collectively with the Share Consideration, the
"Merger Consideration"). The holders of such certificates previously
representing such
3
shares of MeriStar Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares of MeriStar
Common Stock, except as otherwise provided herein or by law. No fractional share
of FelCor Common Stock shall be issued in connection with the Merger. In lieu
thereof, a cash payment shall be made to each holder of a fractional share
interest pursuant to Section 2.2(d) or Section 2.2(e). If, between the date of
this Agreement and the Effective Time, the outstanding shares of MeriStar Common
Stock or FelCor Common Stock shall have been changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Cash Consideration and Exchange Ratio each shall be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(b) CANCELLATION OF CERTAIN SHARES OF MERISTAR COMMON STOCK. As of
the Effective Time, by virtue of the Merger and without any action on the part
of any holder thereof, any shares of MeriStar Common Stock that are owned by
MeriStar or any MeriStar Subsidiary (defined herein) (other than any shares held
in a fiduciary capacity) or by FelCor or any FelCor Subsidiary (as defined
herein) shall be canceled and retired and shall cease to exist, and no Merger
Consideration or other consideration shall be issued or delivered in exchange
therefor.
(c) STOCK OF FELCOR. Each issued and outstanding share of FelCor
Common Stock, FelCor Series A Preferred Stock (as defined herein) and FelCor
Series B Preferred Stock (as defined herein) outstanding immediately prior to
the Effective Time will remain outstanding, and each certificate representing
outstanding shares of FelCor Common Stock, FelCor Series A Preferred Stock and
FelCor Series B Preferred Stock will thereafter represent an equal number of
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock,
as the case may be, of the Surviving Corporation.
2.2 DELIVERY OF MERGER CONSIDERATION.
(a) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable after the
Effective Time, FelCor shall deposit, in trust for the benefit of holders of
shares of MeriStar Common Stock to be converted pursuant to Section 2.1, with
FelCor's transfer agent (the "Exchange Agent"), certificates representing that
number of shares of FelCor Common Stock required to effect the issuance of the
Share Consideration referred to in Section 2.1(a), and cash in the amount
required to effect the payment of the aggregate Cash Consideration referred to
in Section 2.1(a) and the payment of cash in lieu of fractional shares pursuant
to Section 2.2(d) or 2.2(e) (collectively, the "Exchange Fund"). The Exchange
Fund shall not be used for any purpose other than as contemplated by this
Agreement.
(b) DELIVERY PROCEDURES. As soon as practicable after the
Effective Time, FelCor shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates (the "Certificate" or the
"Certificates") which immediately prior to the Effective Time represented
outstanding shares of MeriStar Common Stock (the "Canceled Shares") that were
converted pursuant to Section 2.1(a): (i) a letter of transmittal in customary
and reasonable form (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon actual delivery
of the Certificates to the Exchange Agent)
4
and (ii) instructions for use in effecting the surrender of the MeriStar Common
Stock. For purposes of the immediately preceding sentence, FelCor may rely
conclusively on the stockholder records of MeriStar in determining the identity
of, and the number of Canceled Shares held by, each holder of a Certificate at
the Effective Time. Without limitation to the rights under Section 2.2(c), upon
surrender of a Certificate to the Exchange Agent for cancellation (or to such
other agent or agents as may be appointed by FelCor), together with a duly
executed letter of transmittal and such other customary documents as the
Exchange Agent shall require, the holder of such Certificate shall be entitled
to receive, with respect to the shares of MeriStar Common Stock formerly
represented thereby (A) a certificate or certificates representing that number
of whole shares of FelCor Common Stock into which such shares of MeriStar Common
Stock were converted pursuant to the provisions of Section 2.1(a), (B) a check
in payment of the Cash Consideration, without interest, which such holder has
the right to receive pursuant to the provisions of Section 2.1(a), and (C) a
check in payment of the cash in lieu of fractional shares, without interest,
which such holder is entitled to receive pursuant to Section 2.2(d) or (e).
Until such surrender of a Certificate in compliance with the immediately
preceding sentence, FelCor shall have no obligation to deliver the items
required by clauses (A) through (C) of such sentence. FelCor shall cause all
shares of FelCor Common Stock issued pursuant to the Merger to be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(c) CERTAIN DISTRIBUTIONS.
(i) The FelCor Parties and the MeriStar Parties each
shall authorize under applicable law a dividend or
distribution to their respective stockholders and
partners, as the case may be, for which the record
date shall be the close of business on the Closing
Date; provided, however, that such authorization
shall not be made if the Closing Date occurs within
15 days after the record date for a regularly
scheduled dividend or distribution by the FelCor
Parties, unless FelCor elects in its discretion to
require both such authorizations to occur. The
dividend or distribution shall be equal to such
parties' most recent quarterly dividend or
distribution rate for such stockholders and partners,
as the case may be, multiplied by a fraction, the
numerator of which is the number of days elapsed
since the last dividend record date through and
including the Effective Time, and the denominator of
which is 91. Any dividend or distribution made by the
FelCor Parties pursuant to this Section 2.2(c)(i)
shall be paid in the ordinary course of business
consistent with the past practice of such parties as
to the manner and timing of payment. Any dividend or
distribution made by the MeriStar Parties pursuant to
this Section 2.2(c)(i) shall be paid pursuant to the
procedures set forth in Section 2.2(c)(ii).
(ii) If, after taking into account (A) the regular
quarterly dividends or distributions declared by
MeriStar to its stockholders with respect to its
taxable year ending at the Effective Time and (B) any
dividend or distribution that is to be paid to
holders of MeriStar Common Stock
5
under Section 2.2(c)(i), MeriStar would fail to
satisfy the requirements of Section 857(a)(1) of the
Code for the taxable year of MeriStar ending at the
Effective Time, then either (X) the amount of the
dividend or distribution with respect to MeriStar
Common Stock under Section 2.2(c)(i) shall be
increased or (Y) if no dividend or distribution was
declared by MeriStar under Section 2.2(c)(i),
MeriStar shall declare a dividend, in either event in
an amount sufficient for MeriStar to satisfy the
requirements of Section 857(a)(1) of the Code for
such period. Any dividend or distribution made by
MeriStar pursuant to Section 2.2(c)(i) and/or
pursuant to this Section 2.2(c)(ii) (the "Final
MeriStar Dividend") shall be declared and paid to
holders of shares of MeriStar Common Stock as of a
record date which shall be the close of business on
the Closing Date. Any Final MeriStar Dividend shall
be paid by MeriStar to the stock transfer agent of
MeriStar (the "MeriStar Transfer Agent") on the
Closing Date, and the MeriStar Transfer Agent shall
pay the Final MeriStar Dividend to the holders of the
MeriStar Common Stock on or before 30 days following
the Closing Date. The FelCor Parties and the MeriStar
Parties, by mutual agreement, may accelerate the
declaration date, the record date, and/or the payment
date of any Final MeriStar Dividend in order to
enable MeriStar to avoid or minimize excise tax
liability under Section 4981 of the Code for its
taxable year ending at the Effective Time. In the
event that MeriStar declares a Final MeriStar
Dividend with respect to the MeriStar Common Stock,
MeriStar OP shall simultaneously declare a
distribution (the "Final MeriStar OP Distribution")
to holders of MeriStar OP Units in an amount per unit
equal to the Final MeriStar Dividend payable per
share of MeriStar Common Stock, the record date for
which shall be the close of business on the Closing
Date. Any Final MeriStar OP Distribution shall be
paid by MeriStar OP to the MeriStar Transfer Agent on
the Closing Date and the MeriStar Transfer Agent
shall pay such distribution to the holders of the
MeriStar OP Units on or before 30 days following the
Closing Date. MeriStar shall notify FelCor of the
expected amount of any MeriStar Final Dividend at
least 20 days prior to the date for the declaration
of any Final MeriStar Dividend.
(iii) Except for (A) regular quarterly dividends or
distributions declared and paid by the MeriStar
Parties and the FelCor Parties to their respective
stockholders and partners in the ordinary and normal
course of business, having record and payment dates
consistent with their respective past practices and
being in amounts not greater than the respective
party's last dividend or distribution prior to the
date hereof, and (B) the dividend or distribution
contemplated by Section 2.2(c)(i) and Section
2.2(c)(ii), neither the MeriStar Parties nor the
FelCor Parties will declare or pay any dividend or
distribution to their respective stockholders or
partners prior to the Effective Time.
6
(iv) No dividends or other distributions declared or made
after the Effective Time with respect to shares of
FelCor Common Stock with a record date after the
Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares
of FelCor Common Stock represented thereby until the
holder of such Certificate shall surrender such
Certificate in the manner provided in Section 2.2(b).
Subject to the effect of unclaimed property, escheat
and other applicable laws, following surrender of any
such Certificate, in addition to the Merger
Consideration, there shall be paid to the holder of
the certificates representing whole shares of FelCor
Common Stock issued in consideration therefor,
without interest, (i) at the time of such surrender,
the amount of dividends or other distributions
thereon with a record date after the Effective Time
and theretofore paid with respect to such whole
shares of FelCor Common Stock and (ii) at the
appropriate payment date, the amount of dividends or
other distributions thereon, with a record date after
the Effective Time but prior to such surrender and
having a payment date subsequent to such surrender.
(d) NO FRACTIONAL SECURITIES. Notwithstanding any other provision
hereof, no fractional shares of FelCor Common Stock will be issued in connection
with the Merger. No holder of a fractional share interest will be entitled to
dividends, voting rights or any other stockholder rights in respect of such
fractional share. Instead, as soon as practicable after the Effective Time, the
Exchange Agent will determine the excess of (i) the number of whole shares of
FelCor Common Stock delivered to the Exchange Agent by FelCor pursuant to
Section 2.1(a) over (ii) the aggregate number of whole shares of FelCor Common
Stock to be distributed to holders of MeriStar Common Stock pursuant to Section
2.2(b) (such excess, the "Excess Shares"). FelCor will instruct the Exchange
Agent (i) to sell the Excess Shares at then-prevailing prices on the NYSE
through one or more member firms of the NYSE and (ii) to use reasonable efforts
to complete the sale of the Excess Shares as promptly following the Effective
Time as, in the Exchange Agent's sole judgment, is practicable consistent with
obtaining the best execution of such sales in light of prevailing market
conditions and, in any event, within ten calendar days following the Effective
Time. The Exchange Agent will hold such proceeds in trust for the holders of
MeriStar Common Stock who would otherwise be entitled to receive a fraction of a
share of FelCor Common Stock, and will determine the portion of the proceeds to
which each such holder is entitled, if any, by multiplying the amount of the
aggregate net proceeds of such sale by a fraction, the numerator of which is the
amount of the fractional share interest to which each such holder is entitled,
and the denominator of which is the aggregate amount of fractional share
interests to which all such holders of MeriStar Common Stock are entitled. The
Surviving Corporation will pay all commissions, transfer taxes, Exchange Agent's
fees and other out-of-pocket transaction costs incurred in connection with the
sale of such Excess Shares.
(e) ALTERNATIVE CASH PAYMENT. Notwithstanding the provisions of
Section 2.2(d), FelCor may elect at its option, exercised prior to the Effective
Time, in lieu of the issuance and sale of Excess Shares and the making of
payments pursuant to Section 2.2(d), to pay
7
each holder of MeriStar Common Stock who would otherwise be entitled to receive
a fraction of a share of FelCor Common Stock, an amount in cash equal to the
Market Price determined as of the Closing Date, without interest, multiplied by
the fraction of a share of FelCor Common Stock to which such holder would
otherwise be entitled. For purposes of this Agreement, "Market Price" means the
average of the closing sale prices of a share of FelCor Common Stock (as
reported in the NYSE Composite Tape) for the ten consecutive NYSE trading days
ending two trading days prior to the date as of which such determination is to
be made.
(f) CLOSING OF TRANSFER BOOKS; ETC. From and after the Effective
Time, the stock transfer books of MeriStar shall be closed and no registration
of any transfer of stock of MeriStar shall thereafter be made on the records of
MeriStar. In the event of a transfer of ownership of Canceled Shares which is
not registered in the transfer records of MeriStar, a certificate representing
the proper number of shares of FelCor Common Stock and a check or checks for the
Cash Consideration and cash in lieu of fractional shares may be issued to a
transferee in the proper amount or amounts if the Certificate representing such
Canceled Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. In the event any Certificate(s)
shall have been lost, stolen or destroyed, upon the making of any affidavit of
that fact by the person claiming such certificates to be lost, stolen or
destroyed and, if required by FelCor or the Exchange Agent, upon the posting by
such person of a bond, in an amount reasonably determined by FelCor or the
Exchange Agent, as indemnity against any claim that may be made against it with
respect to such Certificate(s), the Exchange Agent will issue in respect of such
lost, stolen or destroyed Certificate(s), the Merger Consideration to be
received in exchange therefor (together with any cash in lieu of fractional
shares payable in accordance with Section 2.2(d) or (e)).
(g) WITHHOLDING RIGHTS. FelCor or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of shares of MeriStar Common Stock,
such amounts as FelCor or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
FelCor or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
MeriStar Common Stock in respect of which such deduction and withholding was
made by FelCor or the Exchange Agent.
(h) TERMINATION OF EXCHANGE. Any certificates representing Share
Consideration deposited with the Exchange Agent pursuant to Section 2.2(a) and
not exchanged within one year after the Effective Time pursuant to this Section
2.2 shall be returned by the Exchange Agent to FelCor, which shall thereafter
act as Exchange Agent. All funds held by the Exchange Agent for payment to the
holders of unsurrendered Certificates and unclaimed at the end of one year from
the Effective Time shall be returned to FelCor. Thereafter, any holder of
unsurrendered Certificates shall look solely to FelCor for the payment of any
funds to which such holder may be entitled, subject to applicable law. FelCor
shall not be liable to any Person for such shares or funds delivered by it to a
public official pursuant to any
8
applicable abandoned property, escheat or similar law. As used in this
Agreement, the term "Person" shall mean any natural person, corporation, general
or limited partnership, limited liability company, joint venture, trust,
association, unincorporated organization or entity of any kind.
ARTICLE 3
CERTAIN TRANSACTIONS RELATING TO THE MERISTAR OP
3.1 MERGER OF MERISTAR OP AND FELCOR OP. At the Effective Time,
MeriStar and FelCor shall cause MeriStar OP to merge with and into FelCor OP in
accordance with the Delaware Revised Uniform Limited Partnership Act ("DRULPA")
and the partnership agreements of FelCor OP and MeriStar OP, with FelCor OP as
the surviving entity. The effects and consequences of the OP Merger are set
forth in this Article Three and the DRULPA. FelCor OP, after the effectiveness
of the OP Merger, is sometimes referred to herein as the "Surviving
Partnership."
3.2 CLOSING AND EFFECTIVENESS. The closing of the OP Merger (the
"OP Merger Closing") shall take place at the same time and place as the Closing.
All of the documents and transactions relating to the OP Merger Closing shall be
deemed to be part of the Closing. The OP Merger shall be conditioned upon prior
effectiveness of the Merger and shall be effective at the Effective Time of the
Merger. At the OP Merger Closing, MeriStar shall cause MeriStar OP to execute
the Certificate of Merger (the "OP Merger Articles") in the form attached hereto
as Exhibit "B", which certificate shall then be executed by FelCor OP and filed
with the Delaware Secretary of State.
3.3 EFFECTS OF OP MERGER. The OP Merger shall have the effects set
forth in the DRULPA. FelCor shall be the sole general partner of the Surviving
Partnership.
3.4 CERTIFICATE OF LIMITED PARTNERSHIP AND PARTNERSHIP AGREEMENT.
The certificate of limited partnership of FelCor OP as in effect immediately
prior to the Effective Time (the "FelCor OP Certificate") shall be the
certificate of limited partnership of the Surviving Partnership. The limited
partnership agreement of FelCor OP as amended and restated in a form reasonably
satisfactory to the parties (the "Restated Partnership Agreement") shall be the
limited partnership agreement of the Surviving Partnership, until thereafter
amended as provided by applicable law or therein.
3.5 EFFECT OF THE OP MERGER ON PARTNERSHIP INTERESTS.
(a) COMMON UNITS OF MERISTAR OP. As of the effectiveness of the OP
Merger, by virtue of the OP Merger and without any action on the part of any
holder of the partnership interests in MeriStar OP known as "OP Units" (herein
called "MeriStar Common Units"), each outstanding MeriStar Common Unit shall be
converted into the right to receive (i) the number of units of partnership
interest in FelCor OP known as "Partnership Units" or "Common Units" (herein
called "FelCor Common Units") equal to the Exchange Ratio, and (ii) cash in an
amount equal to the Cash Consideration, without interest.
9
(b) CLASS B UNITS OF MERISTAR OP. As of the effectiveness of the
OP Merger, there shall be no holders of the partnership interests in MeriStar OP
known as "Class B Units" (herein called "MeriStar Class B Units").
(c) CLASS C UNITS OF MERISTAR OP. As of the effectiveness of the
OP Merger, by virtue of the OP Merger and without any action on the part of any
holder of the partnership interests in MeriStar OP known as "Class C Units"
(herein called "MeriStar Class C Units"), each outstanding MeriStar Class C Unit
shall be converted into the right to receive (i) the number of units of
partnership interest in FelCor OP known as "Class C Units" (herein called
"FelCor Class C Units") equal to the Exchange Ratio, and (ii) cash in an amount
equal to the Cash Consideration, without interest.
(d) CLASS D UNITS OF MERISTAR OP. As of the effectiveness of the
OP Merger, by virtue of the OP Merger and without any action on the part of any
holder of the partnership interests in MeriStar OP known as "Class D Units"
(herein called "MeriStar Class D Units"), each outstanding MeriStar Class D Unit
shall be converted into the right to receive one unit of partnership interest in
FelCor OP known as "Class D Units" (herein called "FelCor Class D Units").
(e) POP UNITS OF MERISTAR OP. As of the effectiveness of the OP
Merger, by virtue of the OP Merger and without any action on the part of any
holder of the partnership interests in MeriStar OP known as "POP Units" (herein
called "MeriStar POP Units"), each outstanding MeriStar POP Unit that is Vested
(as defined below) shall be converted into the right to receive (i) the number
of FelCor Common Units equal to the product of the Exchange Ratio times the
Exchange Factor (as defined below) and (ii) cash in an amount equal to the
product of the Cash Consideration, without interest, times the Exchange Factor
(as defined below). The term "Vested" means those MeriStar POP Units that are
fully vested and not subject to forfeiture as of the Effective Time, assuming
the Merger was completed, under the respective Restricted Unit Agreements (as
defined in the MeriStar Profits-Only Operating Partnership Units Plan (the "POP
Unit Plan")) dated effective as of March 29, 2000 and April 16, 2001 between
MeriStar, MeriStar OP and each of the respective holders of such MeriStar POP
Units. The term "Exchange Factor" shall mean 1.0. As of the effectiveness of the
OP Merger, by virtue of the OP Merger and without any action on the part of any
holder of the POP Units, each outstanding MeriStar POP Unit that is not Vested
shall be cancelled and cease to exist, and no consideration shall be issued or
delivered in exchange therefor.
(f) GENERAL PARTNER INTERESTS OF MERISTAR OP. As of the
effectiveness of the OP Merger, by virtue of the OP Merger and without any
action on the part of MeriStar as the holder of the general partner's
partnership interest in MeriStar OP (the "MeriStar GP Interest"), each unit of
partnership interest that constitutes part of the MeriStar GP Interest shall be
converted into the right to receive (i) the number of FelCor Common Units equal
to the Exchange Ratio, and (ii) cash in an amount equal to the Cash
Consideration, without interest.
(g) EFFECT ON MERISTAR OP UNITS. All MeriStar Common Units,
MeriStar Class B Units, MeriStar Class C Units, MeriStar Class D Units, MeriStar
POP Units and MeriStar GP Interest (collectively, the "MeriStar OP Units") shall
no longer be outstanding and shall
10
automatically be canceled and retired and shall cease to exist, and each
MeriStar OP Unit shall thereafter represent the right to receive, upon making
the deliveries required by Section 3.6(a), such number of whole FelCor Common
Units, FelCor Class C Units, and FelCor Class D Units (collectively the "New
FelCor OP Units"), and certificates representing such FelCor OP Units, into
which such MeriStar OP Units were converted in accordance with Section
3.5(a)-(f) plus any applicable Cash Consideration, without interest. The holders
of such MeriStar OP Units outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such MeriStar OP Units except as
otherwise provided herein or by law. No fractional New FelCor OP Units shall be
issued, and, in lieu thereof, a cash payment, without interest, shall be made
pursuant to Section 3.6(c).
3.6 ISSUANCE OF NEW CERTIFICATES FOR FELCOR OP UNITS.
(a) DELIVERY PROCEDURES. As soon as practicable after the
Effective Time, FelCor OP shall mail to each holder of record of a MeriStar OP
Unit (a "MeriStar OP Unit Holder"), a ratification and joinder agreement (a
"Ratification Agreement") by which the MeriStar OP Unit Holder ratifies and
agrees to be bound by the Restated Partnership Agreement, waives any rights they
have under their exchange rights agreements with MeriStar and MeriStar OP,
acknowledges the termination of the MeriStar OP Partnership Agreement and is
admitted as a limited partner in FelCor OP as a holder of the respective New
FelCor OP Units which the MeriStar OP Unit Holder is entitled to receive by
virtue of the OP Merger. The Ratification Agreement to be executed by holders of
MeriStar POP Units will also contain a waiver of any rights they have under the
agreements by which their POP Units were granted or under the POP Unit Plan.
Without limitation to the rights under Section 3.6(b), upon delivery to FelCor
OP of a duly executed Ratification Agreement, together with such other customary
documents as FelCor OP may require, the MeriStar OP Unit Holder shall be
entitled to receive, with respect to such MeriStar OP Units (i) a certificate or
certificates representing that number of whole New FelCor OP Units which such
MeriStar OP Unit Holder has the right to receive pursuant to Section 3.5, (ii) a
check in payment of the Cash Consideration, if any, without interest, which such
MeriStar OP Unit Holder has the right to receive pursuant to Section 3.5, and
(iii) a check in payment of the cash in lieu of fractional New FelCor OP Units,
without interest, which such holder is entitled to receive pursuant to Section
3.6(c). FelCor OP shall cause all FelCor OP Units issued pursuant to the OP
Merger to be duly authorized, validly issued, fully paid and non-assessable and
not subject to preemptive rights.
(b) DISTRIBUTIONS AFTER EFFECTIVE TIME. No distributions declared
or made after the Effective Time with respect to New FelCor OP Units with a
record date after the Effective Time shall be paid to any MeriStar OP Unit
Holder with respect to New FelCor OP Units until such MeriStar OP Unit Holder
executes and delivers to FelCor OP a Ratification Agreement. Subject to the
effect of unclaimed property, escheat and other applicable laws, following
delivery to FelCor OP of any such Ratification Agreement, in addition to the
consideration required by Section 3.5, there shall be paid to the holder of the
certificates representing whole New FelCor OP Units issued in consideration
therefor, without interest, (i) at the time of such delivery, the amount of
distributions with a record date after the Effective Time theretofore paid with
respect to such whole New FelCor OP Units and (ii) at the appropriate payment
date, the amount of distributions with a record date after the
11
Effective Time but prior to delivery and a payment date subsequent to delivery
payable with respect to such whole New FelCor OP Units.
(c) NO FRACTIONAL FELCOR OP UNITS. Notwithstanding any other
provision hereof, no fractional New FelCor OP Units will be issued in connection
with the OP Merger. In lieu of issuance of a fractional New FelCor OP Unit,
FelCor OP shall pay each MeriStar OP Unit Holder who would otherwise be entitled
to receive a fraction of a New FelCor OP Unit, an amount in cash, without
interest, equal to the Market Price determined as of the Closing Date multiplied
by the fraction of a New FelCor OP Unit to which such holder would otherwise be
entitled.
(d) WITHHOLDING RIGHTS. FelCor OP shall be entitled to deduct and
withhold from the consideration otherwise payable under Section 3.5 to any
holder of MeriStar OP Units, such amounts as FelCor OP is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by FelCor OP, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the MeriStar OP Units, in
respect of which such deduction and withholding was made by FelCor OP.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE MERISTAR PARTIES
Except as set forth in the letter of even date herewith signed by the
Chairman of the Board or President of MeriStar and delivered to the FelCor
Parties prior to the execution hereof (the "MeriStar Disclosure Letter"), the
MeriStar Parties, jointly and severally, represent and warrant to the FelCor
Parties as follows:
4.1 ORGANIZATION, STANDING AND POWER OF MERISTAR. MeriStar is a
corporation duly organized and validly existing under the laws of the State of
Maryland, having the requisite corporate power to carry on its business as now
being conducted. MeriStar is duly qualified or licensed to do business as a
foreign corporation 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 have a material adverse effect on the business, properties, assets,
financial condition or results of operations of MeriStar and the MeriStar
Subsidiaries (as defined below), taken as a whole, or on the ability of the
MeriStar Parties to perform any of their respective substantive obligations
under this Agreement (any such effect, a "MeriStar Material Adverse Effect").
MeriStar has delivered to the FelCor Parties complete and correct copies of
MeriStar's Second Articles of Amendment and Restatement (the "MeriStar Charter")
and the Bylaws of MeriStar (the "MeriStar Bylaws"), in each case, as amended or
supplemented to the date of this Agreement.
12
4.2 MERISTAR SUBSIDIARIES.
(a) MeriStar is the record and beneficial owner of all of the
issued and outstanding shares of capital stock of MeriStar LP, Inc., a Nevada
corporation ("MeriStar LP"). As of the date of hereof, MeriStar LP owns
43,978,936 MeriStar Common Units, representing approximately 90.3% of the issued
and outstanding MeriStar Common Units. There are issued and outstanding (i) an
aggregate of 2,883,111 MeriStar Common Units, (ii) an aggregate of 964,227
MeriStar Class C Units, (iii) an aggregate of 392,157 MeriStar Class D Units,
and (iv) an aggregate of 802,292 MeriStar POP Units. MeriStar also owns an
approximate 1% general partnership interest in MeriStar OP, constituting all of
the general partner interests in MeriStar OP. All of the MeriStar OP Units owned
by MeriStar LP, the general partner interest in MeriStar OP owned by MeriStar,
and the issued and outstanding capital stock of MeriStar LP owned by MeriStar,
are free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens")
other than those listed on Schedule 4.2(a) to the MeriStar Disclosure Letter.
The MeriStar OP Units are validly issued and outstanding, fully paid and
nonassessable. Schedule 4.2(a) of the MeriStar Disclosure Letter sets forth the
name of each MeriStar OP Unit Holder and the number and type of MeriStar OP
Units owned by each such MeriStar OP Unit Holder in MeriStar OP as of the date
of this Agreement. The MeriStar OP Units are subject to no restriction except as
set forth in the limited partnership agreement of MeriStar OP (the "MeriStar OP
Partnership Agreement") and pursuant to applicable securities laws. MeriStar OP
has not issued or granted and is not a party to any outstanding commitments of
any kind relating to, or any presently effective agreements or understandings
with respect to, interests in MeriStar OP, whether issued or unissued, or
securities convertible into or exchangeable for interests in MeriStar OP or
preemptive rights to purchase or rights of first refusal with respect to such
interests. Except as listed on Schedule 4.2(a) to the MeriStar Disclosure
Letter, no MeriStar OP Units, or other interests therein, have been authorized
or reserved for issuance to anyone other than MeriStar LP or MeriStar.
(b) Schedule 4.2(b) to the MeriStar Disclosure Letter sets forth
(i) each Subsidiary (as defined below) of MeriStar (the "MeriStar Subsidiary" or
"MeriStar Subsidiaries"), (ii) the ownership interest therein of MeriStar, (iii)
if not wholly-owned by MeriStar, the identity and ownership interest of each of
the other owners of each MeriStar Subsidiary, (iv) each hotel (identified by
name and location) and other real property owned or leased by such MeriStar
Subsidiary, and (v) each entity not constituting a MeriStar Subsidiary in which
MeriStar or any MeriStar Subsidiary holds an ownership interest, indicating the
name, nature and business of such entity and the ownership interest therein held
by MeriStar, each MeriStar Subsidiary and each other Person. As used in this
Agreement, "Subsidiary" of any Person means any corporation, partnership,
limited liability company, joint venture, trust or other legal entity of which
such Person (either directly or through or together with another Subsidiary of
such Person) owns 50% or more of the capital stock or other equity interests of
such corporation, partnership, limited liability company, joint venture, trust
or other legal entity, except for passive investments held solely for investment
purposes and which are not material in amount.
13
(c) Except as set forth in Schedule 4.2(c) to the MeriStar
Disclosure Letter, (i) all the outstanding shares of capital stock of each
MeriStar Subsidiary that is a corporation have been duly and validly issued and
are (A) fully paid and nonassessable, (B) owned by MeriStar or by another
MeriStar Subsidiary and (C) owned free and clear of all Liens and (ii) all
equity interests owned by MeriStar or a MeriStar Subsidiary in another MeriStar
Subsidiary that is a partnership, joint venture, limited liability company or
trust are owned free and clear of all Liens. Each MeriStar Subsidiary, that is a
corporation is duly incorporated and validly existing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted, and each MeriStar
Subsidiary that is a partnership, limited liability company or trust is duly
organized and validly existing under the laws of its jurisdiction of
organization and has the requisite power and authority to carry on its business
as now being conducted. Each MeriStar 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 have a MeriStar Material Adverse Effect. Copies of the articles or
certificates of incorporation, bylaws, organizational documents and partnership,
joint venture and operating agreements of each MeriStar Subsidiary, in each case
as amended to the date of this Agreement, have been previously delivered or made
available to the FelCor Parties. Neither MeriStar nor any of the MeriStar
Subsidiaries is in breach of any provision of any agreement, document or
contract governing its rights in or to the interests owned or held by it other
than breaches which could not reasonably be expected to have a MeriStar Material
Adverse Effect. To the Knowledge of MeriStar (as defined in Section 4.23), the
other parties to such agreements, documents or contracts are not in breach of
any of their respective obligations under such agreements, documents or
contracts other than breaches which could not reasonably be expected to have a
MeriStar Material Adverse Effect.
4.3 MERISTAR STRUCTURE.
(a) The authorized shares of stock of MeriStar consist of
100,000,000 shares of preferred stock, $0.01 par value per share, none of which
is issued or outstanding, and 250,000,000 shares of MeriStar Common Stock, of
which 44,465,990 shares were issued and outstanding as of the date hereof. On
the date hereof, (i) 4,549,561 shares of MeriStar Common Stock have been
reserved for issuance, and MeriStar has proposed an increase in the number of
shares reserved for issuance to an aggregate of 5,558,249 shares, under
MeriStar's Incentive Plan (the "MeriStar Incentive Plan"), under which options
in respect of 4,470,348 shares of MeriStar Common Stock have been granted and
are outstanding on the date hereof, (ii) 125,000 shares of MeriStar Common Stock
have been reserved for issuance, and MeriStar has proposed an increase in the
number of shares reserved for issuance to an aggregate of 500,000 shares, under
the MeriStar Directors' Plan, (iii) 5,782,940 shares of MeriStar Common Stock
have been reserved for issuance upon the exchange of MeriStar OP Units, (iv)
4,538,235 shares of MeriStar Common Stock have been reserved for issuance upon
the conversion of MeriStar's 4.75% Convertible Subordinated Notes due 2004 (the
"MeriStar Convertible Notes"), (v) 500,000 shares of MeriStar Common Stock have
been reserved for issuance under MeriStar's Employee Stock Purchase Plan, and
(vi) 5,000,000
14
shares of MeriStar Common Stock have been reserved for issuance under MeriStar's
Dividend Reinvestment Plan, which will be terminated prior to the Effective
Time. On the date hereof, except as set forth in this Section 4.3 and the
Schedules referenced in this Section 4.3, no shares of MeriStar Common Stock or
other voting securities of MeriStar were issued, reserved for issuance or
outstanding.
(b) Set forth in Schedule 4.3(b) to the MeriStar Disclosure Letter
is a true and complete list of the following: each qualified or nonqualified
option to purchase shares of MeriStar Common Stock granted under the MeriStar
Incentive Plan, the Directors' Plan or any other formal or informal stock-based
compensation arrangement ("MeriStar Options"). As of the date of this Agreement,
other than MeriStar Options, there were no outstanding warrants or other rights
to acquire stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units, restricted stock grants and performance shares
granted under the MeriStar Incentive Plan or rights to receive shares of
MeriStar Common Stock on a deferred basis granted by MeriStar under the MeriStar
Incentive Plan. Schedule 4.3(b) to the MeriStar Disclosure Letter also sets
forth for each MeriStar Option the name of the grantee, the date of the grant,
status of the option as qualified or nonqualified under Section 422 of the Code,
the number of shares of MeriStar Common Stock subject to such option, the number
of shares subject to options that are currently exercisable, the exercise price
per share, the expiration date, and the number of such shares subject to stock
appreciation rights.
(c) All outstanding shares of MeriStar Common Stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except for the MeriStar Convertible Notes, there are no
bonds, debentures, notes or other indebtedness of MeriStar having the right to
vote (or that are convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of MeriStar may vote.
(d) Except (i) as set forth in this Section 4.3, in Schedule
4.3(b) or 4.3(d) to the MeriStar Disclosure Letter, or in the MeriStar OP
Partnership Agreement (as defined herein) and (ii) for the MeriStar OP Units
held by partners in the MeriStar OP (which, subject to certain restrictions, may
be exchanged by the holders thereof for either cash or, at MeriStar's option,
shares of MeriStar Common Stock on a one-for-one basis), (A) there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which MeriStar or any
MeriStar Subsidiary is a party or by which such entity is bound, obligating
MeriStar or any MeriStar Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of MeriStar Common Stock, voting
securities or other ownership interests of MeriStar or of any MeriStar
Subsidiary or obligating MeriStar or any MeriStar Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking (other than to MeriStar or a
MeriStar Subsidiary), and (B) there are no outstanding obligations of MeriStar
or any MeriStar Subsidiary to repurchase, redeem or otherwise acquire any shares
of capital stock or ownership interest in MeriStar or any MeriStar Subsidiary.
4.4 ORGANIZATION, STANDING AND POWER OF MERISTAR OP. MeriStar OP
is a limited partnership duly organized and validly existing under the laws of
Delaware and has
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the requisite power and authority to carry on its business as now being
conducted. MeriStar OP 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 have a MeriStar
Material Adverse Effect. MeriStar has delivered to the FelCor Parties complete
and correct copies of the MeriStar OP Partnership Agreement as amended or
supplemented to the date of this Agreement.
4.5 REGISTRATION RIGHTS. Except as set forth in Schedule 4.5 to
the MeriStar Disclosure Letter, no Person has any right to require the
registration of any shares of MeriStar Common Stock or any other securities of
MeriStar or any MeriStar Subsidiary.
4.6 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) MeriStar has the requisite corporate power to enter into this
Agreement and, subject to the requisite stockholder approval of the Merger (the
"MeriStar Stockholder Approvals"), to consummate the transactions contemplated
by this Agreement. MeriStar OP has the requisite partnership power and authority
to enter into this Agreement, and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement by the MeriStar
Parties and the consummation by the MeriStar Parties of the transactions
contemplated by this Agreement have been duly authorized by all necessary action
on the part of the MeriStar Parties, except for and subject to the MeriStar
Stockholder Approvals with respect to MeriStar and the approvals set forth on
Schedule 4.6(a) to the MeriStar Disclosure Letter. This Agreement has been duly
executed and delivered by the MeriStar Parties and constitutes a valid and
binding obligation of the MeriStar Parties, enforceable against the MeriStar
Parties in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
(b) Except as set forth in Schedule 4.6(b) to the MeriStar
Disclosure Letter, the execution and delivery of this Agreement by the MeriStar
Parties do not, and the consummation of the transactions contemplated by this
Agreement (including, without limitation, the Transactions), and compliance by
the MeriStar Parties with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any substantive obligation or to loss of a substantive benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the MeriStar Parties or any MeriStar Subsidiary, under, (i) the
MeriStar Charter, the MeriStar Bylaws or the charter, organizational documents,
limited liability company agreement, partnership agreement or other governing
document (as the case may be) of any MeriStar Subsidiary, each as amended or
supplemented to the date of this Agreement, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, reciprocal easement agreement, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
MeriStar or any MeriStar Subsidiary or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation (collectively, "Laws") applicable to
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MeriStar or any MeriStar Subsidiary, or their respective properties or assets,
other than, in the case of clause (ii) or (iii), any such conflicts, violations,
defaults, rights, loss or Liens that individually or in the aggregate would not
(x) have a MeriStar Material Adverse Effect or (y) prevent the consummation of
the transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required in connection with the execution and
delivery of this Agreement by the MeriStar Parties or the consummation by the
MeriStar Parties of the transactions contemplated by this Agreement, except for
(i) the filing with the Securities and Exchange Commission (the "SEC") of the
Proxy Statement (as defined in Section 7.1), (ii) the acceptance for record of
the Articles of Merger by the Department, (iii) such filings as may be required
in connection with the payment of any transfer and gain taxes, and (iv) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings (A) as are set forth in Schedules 4.6(a) and (b) to the MeriStar
Disclosure Letter, (B) as may be required under (y) federal, state or local
environmental or Tax laws or (z) the "blue sky" laws of various states, to the
extent applicable; or (C) which, if not obtained or made, would not prevent or
delay in any material respect the consummation of any of the transactions
contemplated by this Agreement or otherwise prevent the MeriStar Parties from
performing their obligations under this Agreement in any material respect or
have, individually or in the aggregate, a MeriStar Material Adverse Effect.
4.7 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
MeriStar and its predecessors have filed all required reports, schedules, forms,
statements and other documents with the SEC since July 31, 1996 through the date
hereof (the "MeriStar SEC Documents"). Except as set forth on Schedule 4.7 to
the MeriStar Disclosure Letter, no MeriStar Subsidiary is required to file any
form, report, registration statement, prospectus or other document with the SEC.
All of the MeriStar SEC Documents (other than preliminary materials), as of
their respective filing dates, complied in all material respects with all
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 MeriStar SEC Documents. None of the MeriStar SEC
Documents at the time of filing contained 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 MeriStar SEC Documents filed and
publicly available prior to the date of this Agreement. The consolidated
financial statements of MeriStar included in the MeriStar SEC Documents complied
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 a 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
as of the dates thereof and the consolidated results of
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operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments) of MeriStar and the
MeriStar Subsidiaries. Except for liabilities and obligations set forth in the
MeriStar SEC Documents or in Schedule 4.7 to the MeriStar Disclosure Letter,
neither MeriStar nor any of the MeriStar Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
which are required by GAAP to be set forth on a consolidated balance sheet of
MeriStar or in the notes thereto and which, individually or in the aggregate,
would have a MeriStar Material Adverse Effect.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters
disclosed in the MeriStar SEC Documents or on Schedule 4.8 to the MeriStar
Disclosure Letter, (ii) the Transactions and the dividends and distributions
contemplated by Section 2.2(c), and (iii) the transactions permitted by Section
6.3, since the date of the most recent audited financial statements included in
the MeriStar SEC Documents (the "MeriStar Financial Statement Date"), MeriStar
and the MeriStar Subsidiaries have conducted their business only in the ordinary
and normal course (taking into account prior practices, including the
acquisition of properties and issuance of securities) and there has not been,
from the MeriStar Financial Statement Date through the date of this Agreement,
(a) any material adverse change in the business, financial condition or results
of operations of MeriStar and the MeriStar Subsidiaries taken as a whole,
including, without limitation, any increase in market rates of interest and
related costs of financing which results in yields for new issues of unsecured
senior notes issued by companies with a comparable debt rating to FelCor and
MeriStar exceeding an amount which the members of the Interim Transactions
Committee (as defined in Section 6.5) agree, in the exercise of their good faith
business judgment, makes the issuance of such debt not economically prudent (a
"MeriStar Material Adverse Change"), (b) any occurrence or circumstance that
with the passage of time would reasonably be expected to result in a MeriStar
Material Adverse Change, or (c) any action taken by MeriStar or any MeriStar
Subsidiary during the period from the MeriStar Financial Statement Date through
the date of this Agreement that, if taken during the period from the date of
this Agreement through the Effective Time, would constitute a breach of Section
6.3.
4.9 LITIGATION. Except as disclosed in the MeriStar SEC Documents
or in Schedule 4.9 to the MeriStar Disclosure Letter, and other than personal
injury and other routine tort litigation arising from the ordinary course of
operations of MeriStar and the MeriStar Subsidiaries (a) which are covered by
adequate insurance or (b) for which all material costs and liabilities arising
therefrom are reimbursable pursuant to common area maintenance or similar
agreements, there is no suit, action or proceeding pending (in which service of
process has been received by an employee or agent of MeriStar or any MeriStar
Subsidiary) or, to the Knowledge of MeriStar, threatened in writing against or
affecting MeriStar or any MeriStar Subsidiary that, individually or in the
aggregate, could reasonably be expected to have a MeriStar Material Adverse
Effect or to prohibit, restrict or interfere with the consummation of any of the
Transactions, nor is there any judgment, decree, injunction, rule or order of
any court or Governmental Entity or arbitrator outstanding against MeriStar or
any of the MeriStar Subsidiaries having, or which, insofar as reasonably can be
foreseen, in the future could have, any such Effect.
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4.10 PROPERTIES.
(a) Schedule 4.10(a) to the MeriStar Disclosure Letter sets forth
a complete and accurate list and the address of all real property owned or
leased by MeriStar or any MeriStar Subsidiary (collectively, and together with
the land at each address referenced in Schedule 4.10(a) to the MeriStar
Disclosure Letter and all buildings, structures and other improvements and
fixtures located on or under such land and all easements, rights and other
appurtenances to such land, the "MeriStar Properties"). MeriStar or the MeriStar
Subsidiaries, owns or own, as the case may be, good and insurable fee simple
title (or, if so indicated in Schedule 4.10(a) to the MeriStar Disclosure
Letter, leasehold title) to each of the MeriStar Properties, in each case free
and clear of liens, mortgages or deeds of trust, claims against title, charges
which are liens, security interests or other encumbrances on title
(collectively, "Encumbrances"), except for such mortgages as are set forth on
Schedule 4.16(b) to the MeriStar Disclosure Letter or for which no disclosure is
required by Section 4.16(b), the Lien of real estate taxes not yet due and
payable and such Encumbrances as individually, and in the aggregate, could not
reasonably be expected to have a MeriStar Material Adverse Effect. Except for
such of the following as individually, or in the aggregate, could not reasonably
be expected to have a MeriStar Material Adverse Effect, policies of title
insurance (or marked title insurance commitments having the same force and
effect as title insurance policies) have been issued by national title insurance
companies insuring the fee simple or leasehold, as applicable, title of MeriStar
or its Subsidiaries, as applicable, to each of the MeriStar Properties in
amounts at least equal to the portion of the purchase price thereof allocated to
real estate (the "MeriStar Title Policies"), and, to MeriStar's Knowledge, the
MeriStar Title Policies are valid and in full force and effect and no claim has
been made under any such policy (except claims which have previously been fully
resolved).
(b) Except as set forth in Schedule 4.10(b) to the MeriStar
Disclosure Letter, and except for matters which would not, individually or in
the aggregate, reasonably be expected to have a MeriStar Material Adverse Effect
or to materially and adversely affect the use or occupancy (or, if applicable,
any proposed development) of the MeriStar Properties, MeriStar has no Knowledge
that any currently required certificate, permit or license (including building
permits and certificates of occupancy) from any Governmental Entity having
jurisdiction over any MeriStar Property or any agreement, easement or other
right which is necessary to permit the lawful use, occupancy or operation of the
existing buildings, structures or other improvements which constitute a part of
any of the MeriStar Properties has not been obtained or is not in full force and
effect, or of any pending modification or cancellation of any of the same.
(c) Schedule 4.10(c) to the MeriStar Disclosure Letter sets forth
a complete and accurate list of all definitive agreements made or entered into
by MeriStar or any MeriStar Subsidiary as of the date hereof, which are
scheduled to close or be consummated after the date hereof, (x) to sell,
mortgage, pledge, hypothecate, lease or sublease any MeriStar Property, which,
individually or in the aggregate, are material, (y) to enter into a material
transaction in respect of the ownership or financing of any MeriStar Property or
(z) to purchase, lease or otherwise acquire any real property.
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(d) Except as set forth in Schedule 4.10(d) to the MeriStar
Disclosure Letter, none of the MeriStar Properties is subject to any outstanding
purchase option, right of first refusal, right of first offer or similar right,
other than such rights as would not reasonably be expected to have a MeriStar
Material Adverse Effect, nor has MeriStar or any MeriStar Subsidiary entered
into any outstanding contracts with others for the sale, mortgage, pledge,
hypothecation, assignment, sublease or lease of any material portion of any
MeriStar Property or other transfer of all or any material part of any MeriStar
Property as of the date hereof, which are scheduled to close or be consummated
after the date hereof, and no Person has any right or option to acquire, or
right of first refusal or right of first offer with respect to, any interest of
MeriStar or any MeriStar Subsidiary in any MeriStar Property or any material
part thereof.
(e) Schedule 4.10(e) to the MeriStar Disclosure Letter sets forth
the capital expenditure budget and schedule of MeriStar and each MeriStar
Subsidiary for each MeriStar Property, describing the capital expenditures which
MeriStar or any MeriStar Subsidiary has budgeted for such MeriStar Property for
the period running through December 31, 2001 (the "MeriStar Budget and
Schedule").
(f) The ground leases underlying the leased MeriStar Properties
(collectively, the "MeriStar Ground Leases") are listed on Schedule 4.10(f) to
the MeriStar Disclosure Letter. Each of the MeriStar Ground Leases is valid,
binding and in full force and effect as against MeriStar or any MeriStar
Subsidiary and, to MeriStar's Knowledge, as against the other party thereto,
except to the extent the failure to be binding and in full force and effect
would not reasonably be expected to have a MeriStar Material Adverse Effect.
There does not exist under any of the MeriStar Ground Leases any default, and,
to MeriStar's Knowledge, no event has occurred which, with notice or lapse of
time or both, would constitute such a default, except as would not, individually
or in the aggregate, reasonably be expected to result in a MeriStar Material
Adverse Effect.
(g) Schedule 4.10(g) to the MeriStar Disclosure Letter sets forth
a list of the hotel franchise, license or other agreements relating to the
names, marks or systems (the "MeriStar Franchise Agreements") under which each
of the MeriStar Properties is being operated. Each of the MeriStar Franchise
Agreements is in full force and effect and, to the Knowledge of MeriStar, there
are no defaults thereunder by either party thereto, nor have any events occurred
which, with the giving notice or the passage of time or both would constitute a
default or event of default thereunder, except for those which either
individually or in the aggregate would not constitute a MeriStar Material
Adverse Effect.
(h) Schedule 4.10(h) to the MeriStar Disclosure Letter sets forth
a list of the hotel management agreements (the "MeriStar Management Agreements")
pursuant to which each of the MeriStar Properties is being managed. Each of the
MeriStar Management Agreements is in full force and effect and, to the Knowledge
of MeriStar, there are no defaults thereunder by either party thereto, nor have
any events occurred which, with the giving notice or the passage of time or both
would constitute a default or event of default thereunder, except for those
which either individually or in the aggregate would not constitute a MeriStar
Material Adverse Effect.
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4.11 EMPLOYEE BENEFITS. With respect to all MeriStar Benefit Plans
(as defined below), except for such matters, as, individually or in the
aggregate, could not reasonably be expected to have a MeriStar Material Adverse
Effect, (a) each MeriStar Benefit Plan and any related trust intended to be
qualified under Sections 401(a) and 501(a) of the Code has received a favorable
determination letter from the IRS that it is so qualified and, to the Knowledge
of MeriStar, nothing has occurred since the date of such letter that could
reasonably be expected to materially adversely affect the qualified status of
such MeriStar Benefit Plan or related trust, (b) each MeriStar Benefit Plan has
been operated in all material respects in accordance with its terms and with the
terms and requirements of applicable law and all required returns and filings
for each MeriStar Benefit Plan have been timely made, (c) neither MeriStar nor
any MeriStar Subsidiary has incurred any tax, fine, lien, penalty or other
liability imposed under ERISA (defined below), the Code or other applicable
laws, rules and regulations, in connection with any MeriStar Benefit Plan, and
no administrative investigation, audit or other administrative proceeding by the
Department of Labor, the Pension Benefit Guaranty Corporation, the Internal
Revenue Service or other governmental agencies are pending, in progress or, to
the Knowledge of MeriStar or any MeriStar Subsidiary, threatened, and no fact or
event exists that could reasonably be expected to give rise to any such material
liability, (d) all contributions due and payable on or before the date hereof in
respect of each MeriStar Benefit Plan have been made in full and in proper form,
(e) neither MeriStar nor any MeriStar Subsidiary has ever sponsored or been
obligated to contribute to any "multiemployer plan" (as defined in Section 3(37)
of ERISA), any plan subject to Section 413 of the Code, or any "defined benefit
plan" (as defined in Section 3(35) of ERISA), (f) except as otherwise required
under ERISA, the Code and applicable laws, no MeriStar Benefit Plan currently or
previously maintained by MeriStar or any MeriStar Subsidiary provides any
post-employment health or life insurance coverage or benefits, except as
required under Section 4980B of the Code; (g) neither MeriStar, nor any MeriStar
Subsidiary, is a member of a "Controlled Group" (defined as any organization
which is a member of a controlled group of organizations within the meaning of
Code Section 414(b), (c), (m) or (o)), which has members other than themselves;
(h) all material reporting, disclosure and notice obligations imposed under
ERISA and the Code have been satisfied with respect to each MeriStar Benefit
Plan, and (i) except as set forth in Schedule 4.11 to the MeriStar Disclosure
Letter, no benefit or amount payable, or which may become payable in connection
with the Transactions, by MeriStar or any MeriStar Subsidiary pursuant to any
MeriStar Benefit Plan, agreement or contract with any employee, constitutes an
"excess parachute payment" which would not be deductible by reason of Section
280G of the Code. Schedule 4.11 to the MeriStar Disclosure Letter contains a
complete list of each "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") excluding "multiemployer plans" within the meaning of ERISA Section
3(37)), and all stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or not,
under which any current or former employee, officer or director of MeriStar or
any MeriStar Subsidiary has any present or future right to benefits sponsored or
maintained by
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MeriStar or any MeriStar Subsidiary or under which MeriStar or any MeriStar
Subsidiary has had or has any present or could reasonably be expected to have
any future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "MeriStar Benefit Plans."
With respect to each MeriStar Benefit Plan, MeriStar has provided to FelCor a
current, accurate and complete copy (or, to the extent no such copy exists, an
accurate description) thereof and, to the extent applicable: (i) any related
trust agreement or other funding instrument; (ii) the most recent determination
letter, if applicable; (iii) any summary plan description and other written
communications (or a description of any oral communications) by MeriStar or any
MeriStar Subsidiary to their employees concerning the extent of the benefits
provided under a MeriStar Benefit Plan; and (iv) for the most recent year (A)
the Form 5500 and attached schedules, (B) audited financial statements, and (C)
attorney's response to an auditor's request for information.
4.12 LABOR MATTERS; EMPLOYEES.
(a) Except as set forth on Schedule 4.12(a) to the MeriStar
Disclosure Letter, neither MeriStar nor any of its Subsidiaries is a party to,
or bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor union organization. MeriStar has
delivered true, correct and complete copies of such agreements to the FelCor
Parties. There is no unfair labor practice or labor arbitration proceeding
pending or, to MeriStar's Knowledge, threatened against MeriStar or any of its
Subsidiaries relating to their business which, if determined adversely to
MeriStar or any of its Subsidiaries, would have a MeriStar Material Adverse
Effect.
(b) Schedule 4.12(b) to the MeriStar Disclosure Letter sets forth
all employment agreements between MeriStar or any of its Subsidiaries and any
other Person.
(c) Neither MeriStar, nor any MeriStar Subsidiary, is delinquent
in payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses, benefits or other compensation for any services or
otherwise arising under any policy, practice, agreement, plan, program or Law,
which delinquency would, in the aggregate, have a MeriStar Material Adverse
Effect. None of MeriStar's or any MeriStar Subsidiary's employment policies or
practices is currently being audited or investigated by any Governmental Entity
or court. There is no pending or, to the Knowledge of MeriStar, threatened
litigation, unfair labor practice charge, or other charge or inquiry against
MeriStar or any MeriStar Subsidiary brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of any of them with respect to employment practices which could
reasonably be expected to have a MeriStar Material Adverse Effect.
(d) Neither MeriStar nor any MeriStar Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation or other order by, any
Governmental Entity relating to employees or employment practices. MeriStar and
each MeriStar Subsidiary are in compliance in all material respects with all
applicable Laws, Contracts, and policies relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including the
obligations of the Worker Adjustment and Retraining Notification
22
Act of 1988, as amended ("WARN"), and has not planned or implemented any early
retirement, separation or window program within the past five years.
4.13 TAXES.
(a) Except as set forth on Schedule 4.13(a) to the MeriStar
Disclosure Letter, each of MeriStar and the MeriStar Subsidiaries has timely
filed or caused to be timely filed all material Tax Returns (as defined below)
required to be filed by it and for any partnerships for which any of them is a
general partner (after giving effect to any filing extension properly granted by
a Governmental Entity having authority to do so) and has paid (or MeriStar has
paid on its behalf) all Taxes (as defined below) required to be paid as shown on
such returns and all such Tax Returns were, when filed, complete and accurate in
all material respects, except where the failure to file such Tax Returns, the
failure to pay such Taxes and the failure of such Tax Returns to be complete and
accurate in all material respects could not be reasonably expected to have a
MeriStar Material Adverse Effect. No material deficiencies for any Taxes have
been or are currently being proposed, asserted or assessed in writing, or to the
Knowledge of MeriStar, threatened in writing by any taxing authority against
MeriStar or any MeriStar Subsidiary. Neither MeriStar nor a MeriStar Subsidiary
has executed or filed with any taxing authority any agreement now in effect
extending the period for assessment of Taxes. No Tax Returns of MeriStar or any
MeriStar Subsidiary have been or are currently being audited by any applicable
taxing authority, and neither MeriStar nor any MeriStar Subsidiary has received
any written notice that such audit is contemplated. There are no material Tax
liens on any properties of MeriStar or any MeriStar Subsidiary other than liens
for current Taxes not yet due and payable. The most recent audited financial
statements contained in the MeriStar SEC Documents reflect an adequate accrual
in accordance with GAAP for all Taxes and deferred Taxes payable by MeriStar and
its Subsidiaries for all taxable periods and portions thereof through the date
of such financial statements. Except as would not have a MeriStar Material
Adverse Effect, MeriStar and each MeriStar Subsidiary have complied with all
applicable Laws relating to the payment, collection, withholding and deposit, as
the case may be, of Taxes and, to the extent required, have paid over to the
appropriate governmental authorities or are properly holding for such payment
all taxes, unemployment insurance and other amounts required by law to be
withheld or collected.
(b) MeriStar is not required to include in income any amount for
an adjustment pursuant to Section 481 of the Code, and except as set forth on
Schedule 4.13(b) to the MeriStar Disclosure Letter, is neither a party to nor
obligated under any agreement or other arrangement providing for the payment of
any amount that is not or would not be deductible by MeriStar by reason of
Section 280G of the Code or Section 162(m) of the Code.
(c) Neither MeriStar nor any MeriStar Subsidiary has taken or will
take any action that would create a material risk that the Merger would not
qualify as a reorganization within the meaning of Section 368(a) of the Code.
(d) Neither MeriStar nor any MeriStar Subsidiary is a party to or
has any obligation under any Tax sharing agreements or similar contract or
arrangement that would have a MeriStar Material Adverse Effect. No closing
agreement pursuant to Section 7121 of
23
the Code (or any similar provision of state, local or foreign law) has been
entered into by MeriStar or any MeriStar Subsidiary that would have a MeriStar
Material Adverse Effect.
(e) Except as set forth on Schedule 4.13(e) to the MeriStar
Disclosure Letter, neither MeriStar nor any MeriStar Subsidiary has any material
liability for Taxes of any Person under Treasury Regulations Section 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise, that would have a MeriStar Material Adverse
Effect.
(f) Since the MeriStar Financial Statement Date, (i) MeriStar has
incurred no material liability for Taxes under Section 857(b), 860(c) or 4981 of
the Code, including, without limitation, any Tax arising from a prohibited
transaction described in Section 857(b)(6) of the Code, and (ii) neither
MeriStar nor a MeriStar Subsidiary has incurred any material liability for Taxes
other than in the ordinary course of business except where such liability for
Taxes could not reasonably be expected to have a MeriStar Material Adverse
Effect. No event has occurred, and no condition or circumstance exists, which
presents a material risk that any material Tax described in this paragraph (f)
will be imposed upon MeriStar.
(g) MeriStar or its predecessors (other than CapStar Hotel
Company) (i) for all taxable years commencing with its taxable year beginning
July 31, 1996 and ended December 31, 1996, and through December 31, 2000 has
been subject to taxation as a real estate investment trust within the meaning of
Section 856 of the Code (a "REIT") and has satisfied all requirements to qualify
as a REIT for such years, and (ii) has operated, and intends to continue to
operate, in such manner as to qualify as a REIT for the taxable year ending at
the Effective Time. To MeriStar's Knowledge, no action, proceeding or
investigation that could reasonably be expected to result in the termination of
MeriStar's status as a REIT has been taken or omitted or is pending or
threatened.
(h) Except as set forth on Schedule 4.13(h) to the MeriStar
Disclosure Letter, MeriStar has not made an election under IRS Notice 88-19 or
Temporary Treasury Regulations Section 1.337(d)-5T(b)(3).
(i) Except as set forth on Schedule 4.13(i) to the MeriStar
Disclosure Letter, each of MeriStar OP and each other subsidiary of MeriStar
that is organized as a partnership, limited liability company or trust
(including entities in which MeriStar directly or indirectly owns less than 50%
of the equity ownership interests) has been at all times since August 3, 1998,
and will be through the Closing Date, treated for federal income tax purposes as
either (i) a partnership that is not either an association taxable as a
corporation or a publicly traded partnership under Section 7704 of the Code,
(ii) a publicly traded partnership that is eligible for partnership status under
Section 7704(c) of the Code, or (iii) a disregarded entity.
(j) Except as set forth on Schedule 4.13(j) to the MeriStar
Disclosure Letter, each of the corporations in which MeriStar owns a direct or
indirect equity ownership interest has been at all times since August 3, 1998,
and through the Closing Date will be, treated for federal income tax purposes as
either (i) a "qualified REIT subsidiary" within the meaning of
24
Section 856(i) of the Code or (ii) a "taxable REIT subsidiary" within the
meaning of Section 856(l) of the Code.
(k) Schedule 4.13(k) to the MeriStar Disclosure Letter sets forth
a list of the entities for which MeriStar has made taxable REIT subsidiary
elections under Section 856(l) and the effective dates of such elections.
MeriStar has made a taxable REIT subsidiary election for each entity that it
intends to treat as a taxable REIT subsidiary for its 2001 taxable year.
(l) Except for the agreements or with respect to the transactions
that will be set forth on Schedule 4.13(l) to the MeriStar Disclosure Letter
(such Schedule 4.13(l) to be delivered within 14 business days from the date of
this Agreement), neither MeriStar nor any MeriStar Subsidiary has entered into
or is subject to any "MeriStar Tax Protection Agreements." The MeriStar Parties
represent and warrant that the MeriStar Tax Protection Agreements listed on
Schedule 4.13(l) shall contain only such terms and provisions as are usual and
customary in agreements for similar purposes. As used herein, a MeriStar Tax
Protection Agreement is a written agreement (A) that has as one of its purposes
to permit a Person to take the position that such Person could defer federal
taxable income that otherwise might have been recognized upon a transfer of
property to the MeriStar OP or any other MeriStar Subsidiary that is treated as
a partnership for federal income tax purposes and that as a result of such
purpose (i) prohibits or restricts in any manner the disposition of any assets
of the MeriStar OP or such MeriStar Subsidiary or requires the MeriStar OP or
such MeriStar Subsidiary to indemnify or reimburse any Person for a loss of
federal income tax deferral as a result of any such asset disposition; (ii)
requires that the MeriStar OP or such MeriStar Subsidiary maintain, put in
place, or replace, indebtedness, whether or not secured by one or more of the
MeriStar Properties; or (iii) requires that the MeriStar OP or such MeriStar
Subsidiary offer to any Person at any time the opportunity to guarantee or
otherwise assume, directly or indirectly (including, without limitation, through
a "deficit restoration obligation," guarantee (including, without limitation, a
"bottom" guarantee), indemnification agreement, reimbursement agreement or other
similar arrangement), the risk of loss for federal income tax purposes for
indebtedness or other liabilities of the MeriStar OP or such MeriStar
Subsidiary, (B) that specifies or relates to a method of taking into account
book-tax disparities under Section 704(c) of the Code or the Treasury
Regulations promulgated thereunder with respect to one or more assets of the
MeriStar OP or such MeriStar Subsidiary or (C) that requires a particular method
for allocating one or more liabilities of MeriStar or such MeriStar Subsidiary
under Section 752 of the Code or the Treasury Regulations promulgated
thereunder. Except as would not have a MeriStar Material Adverse Effect, neither
MeriStar nor any MeriStar Subsidiary is in violation of or in default under any
MeriStar Tax Protection Agreement.
(m) As used in this Agreement, "Tax" or "Taxes" means any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind
25
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not. "Tax Returns" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
4.14 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS. Except as
disclosed on Schedule 4.14 to the MeriStar Disclosure Letter, there are no cash
or non-cash payments which will become payable to any employee, officer or
director of MeriStar or any MeriStar Subsidiary as a result of the Merger and
the Transactions, and there is no employment or severance contract, or other
agreement requiring payments, cancellation of indebtedness or other obligation
to be made upon a change of control or otherwise as a result of the consummation
of any of the transactions contemplated by this Agreement, with respect to any
employee, officer or director of MeriStar or any MeriStar Subsidiary.
4.15 BROKERS, FEES AND EXPENSES. No broker, investment banker,
financial advisor or other person, other than Xxxxxxx Xxxxx Xxxxxx Inc., the
fees and expenses of which are as described in the engagement letter between
Xxxxxxx Xxxxx Barney Inc. and MeriStar, a true and correct copy of which has
previously been delivered to the FelCor Parties, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated hereby, based upon arrangements made by or on
behalf of MeriStar or any MeriStar Subsidiary.
4.16 CONTRACTS; DEBT INSTRUMENTS.
(a) Except as set forth in Schedule 4.16(a) to the MeriStar
Disclosure Letter, and except as, individually or in the aggregate, would not
have a MeriStar Material Adverse Effect, neither MeriStar nor any MeriStar
Subsidiary has received a written notice that MeriStar or any MeriStar
Subsidiary is in violation of or in default under (nor to the Knowledge of
MeriStar does there exist any condition which upon the passage of time or the
giving of notice or both would cause such a violation of or default under) any
loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties or
assets is bound, nor to the Knowledge of MeriStar does such a violation or
default exist.
(b) Except for any of the following expressly identified in
MeriStar SEC Documents, Schedule 4.16(b) to the MeriStar Disclosure Letter sets
forth a list of each loan or credit agreement, note, bond, mortgage, indenture
and any other agreement and instrument pursuant to which any Indebtedness (as
defined below) in excess of $10,000,000 of MeriStar or of any MeriStar
Subsidiary, other than such Indebtedness payable to MeriStar or a MeriStar
Subsidiary, is outstanding or may be incurred. For purposes of this Agreement,
"Indebtedness" shall mean (i) indebtedness for borrowed money, whether secured
or unsecured, (ii) obligations under conditional sale or other title retention
agreements relating to property purchased by such Person, (iii) capitalized
lease obligations, (iv) obligations under interest rate cap, swap, collar or
similar transactions or currency hedging transactions (valued at the termination
value thereof), and (v) guarantees of any such Indebtedness of any other Person.
26
4.17 ENVIRONMENTAL MATTERS. Except as, individually or in the
aggregate, would not have a MeriStar Material Adverse Effect and except as
disclosed in the MeriStar SEC Documents filed prior to the date of this
Agreement, none of MeriStar, any of the MeriStar Subsidiaries or, to the
Knowledge of MeriStar, any other Person has caused or permitted (a) the unlawful
presence of any Hazardous Materials (as defined below) on any of the MeriStar
Properties or properties formerly owned by MeriStar or (b) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred on
MeriStar Properties or properties formerly owned by MeriStar or be presently
occurring on or from the MeriStar Properties, which presence or occurrence,
individually or in the aggregate, could reasonably be expected to have a
MeriStar Material Adverse Effect; and, in connection with the construction on or
operation and use of the MeriStar Properties, neither MeriStar nor any MeriStar
Subsidiary has failed to comply in any material respect with any applicable
Environmental Laws (as defined below), except to the extent such failure to
comply, individually or in the aggregate, could not be reasonably expected to
have a MeriStar Material Adverse Effect. No notice, notification, demand,
request for information, citation, summons, complaint or order has been received
by or is pending, or to the Knowledge of MeriStar, is threatened by, any Person
against MeriStar or any MeriStar Subsidiary, other than where such notice,
notification, demand, request for information, citation, summons, complaint or
order has been fully resolved, or individually and in the aggregate, could not
be reasonably expected to result in a MeriStar Material Adverse Effect. MeriStar
has previously delivered or made available to FelCor or its counsel true and
complete copies of all internally prepared or commissioned environmental
studies, assessments and reports in the possession or under the control of
MeriStar that relate to the MeriStar Properties and/or MeriStar's compliance
with Environmental Laws.
As used in this Agreement, "Environmental Laws" means any and all
federal, state, foreign, interstate, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decisions, injunctions, orders,
decrees, requirements of any Governmental Entity, any and all common law
requirements, rules and bases of liability regulating, relating to or imposing
liability or standards of conduct concerning pollution, Hazardous Materials or
protection of human health, safety or the environment, as currently in effect
and includes the Comprehensive Environmental Response Act, 49 U.S.C. ss.ss.1801,
et seq., the Resource Conservation and Recovery Act, 42 U.S.C.ss.ss.6901, et
seq., the Clean Water Act, 33 U.S.C.ss.ss.1251, et seq., the Clean Air Act, 33
U.S.C.ss.ss.2601, et seq., the Toxic Substances Control Act, 15
U.S.C.ss.ss.2601, et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C.ss.ss.136, et seq., Occupational Safety and Health Act, 29
U.S.C.ss.ss.651, et seq. and the Oil Pollution Act of 1990, 33 U.S.C.ss.ss.2701,
et seq., as such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and all analogous state or local statutes. As used
in this Agreement, "Hazardous Materials" means any materials or wastes, defined,
listed, classified or regulated as hazardous, toxic, a pollutant, a contaminant
or dangerous in or under any Environmental Laws which includes, but is not
limited to, petroleum, petroleum products, friable asbestos, urea formaldehyde,
radioactive materials and polychlorinated biphenyls.
4.18 COMPLIANCE WITH LAWS. Except as disclosed in the MeriStar SEC
Documents, neither MeriStar nor any MeriStar Subsidiary has violated or failed
to comply with any Law, permit, judgment, decree or order of any Governmental
Entity applicable to its
27
business, properties or operations, except to the extent that such violation or
failure could not reasonably be expected to have a MeriStar Material Adverse
Effect.
4.19 OPINION OF FINANCIAL ADVISOR. The Board of Directors of
MeriStar has received the opinion of Xxxxxxx Xxxxx Xxxxxx Inc., dated the date
of this Agreement, to the effect that the Merger Consideration is fair, from a
financial point of view, to the holders of shares of MeriStar Common Stock.
4.20 MARYLAND TAKEOVER LAW. The Maryland Business Combination Act
and the Maryland Control Share Acquisition Act will not apply to MeriStar in
connection with this Agreement and the other transactions contemplated hereby.
The provisions of Article II, Section 10 of the Bylaws of MeriStar relating to
the Maryland Control Share Acquisition Act have not been rescinded or revoked.
4.21 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by MeriStar specifically for inclusion or incorporation by reference
in (i) the Registration Statement (as defined in Section 7.1(a)), at the time
the Registration Statement is filed with the SEC or at the time it becomes
effective under the Securities Act, or (ii) the Proxy Statement (as defined in
Section 7.1(a)), at the date it is first mailed to MeriStar's stockholders or at
the time of the MeriStar Stockholders Meeting (as defined in Section 7.1(d)),
will contain any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and Proxy Statement will comply in all
material respects with the requirements of the Securities Act and the Exchange
Act, respectively, and the rules and regulations thereunder, except that no
representation or warranty is made by MeriStar with respect to statements made
or incorporated by reference therein based on information supplied by FelCor
specifically for inclusion or incorporated by reference in the Proxy Statement
or contained in any FelCor SEC Documents incorporated by reference in the
Registration Statement or the Proxy Statement.
4.22 INVESTMENT COMPANY ACT OF 1940. Neither MeriStar nor any
MeriStar Subsidiary is, or at the Effective Time will be, required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
4.23 DEFINITION OF KNOWLEDGE OF MERISTAR. As used in this
Agreement, the phrase "Knowledge of MeriStar" (or words of similar import) means
the knowledge of those individuals identified in Schedule 4.23 to the MeriStar
Disclosure Letter.
4.24 VOTING REQUIREMENTS. The MeriStar Stockholder Approvals, which
shall consist of the affirmative vote of holders of shares entitled to cast a
majority of all votes entitled to be cast on the matter at the MeriStar
Stockholders Meeting, which shall be a duly convened meeting at which a quorum
is present and acting throughout, to approve the Merger are the only votes of
the holders of any class or series of MeriStar's stock necessary to approve the
Merger and the other transactions contemplated by this Agreement. MeriStar,
acting as the general partner of MeriStar OP, has the power to cause MeriStar OP
to effect
28
the OP Merger without obtaining any consent or approval of the limited partners
of MeriStar OP.
4.25 RELATED PARTY AGREEMENTS. Except as listed on Schedule 4.25 to
the MeriStar Disclosure Letter, there is no binding contract, agreement,
undertaking, or commitment between MeriStar or any MeriStar Subsidiary, on the
one hand, and MeriStar Hotels & Resorts, Inc. ("MeriStar Hotels & Resorts"), MIP
Lessee, L.P., MeriStar Investment Partners, L.P., or any of their affiliated,
related or associated Persons (other than another MeriStar Subsidiary), on the
other hand.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE FELCOR PARTIES
Except as set forth in the letter of even date herewith signed by the
Chairman of the Board or President of FelCor and delivered to the MeriStar
Parties prior to the execution hereof (the "FelCor Disclosure Letter"), the
FelCor Parties, jointly and severally, represent and warrant to the MeriStar
Parties as follows:
5.1 ORGANIZATION, STANDING AND POWER OF FELCOR. FelCor is a
corporation duly organized and validly existing under the laws of the State of
Maryland, having the requisite corporate power to carry on its business as now
being conducted. FelCor is duly qualified or licensed to do business as a
foreign corporation 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 have a material adverse effect on the business, properties, assets,
financial condition or results of operations of FelCor and the FelCor
Subsidiaries (as defined below), taken as a whole, or the ability of the FelCor
Parties to perform any of their respective substantive obligations under this
Agreement (any such effect a "FelCor Material Adverse Effect"). FelCor has
delivered to the MeriStar Parties complete and correct copies of the FelCor
Charter and the FelCor Bylaws.
5.2 FELCOR SUBSIDIARIES.
(a) FelCor is the record and beneficial owner of all of the issued
and outstanding membership interests of FelCor Nevada Holdings, L.L.C., a Nevada
limited liability company ("FelCor LLC"). As of the date hereof, FelCor LLC owns
57,782,448 FelCor Common Units representing approximately 86.6% of the issued
and outstanding FelCor Common Units. There are issued and outstanding (i) an
aggregate of 66,757,265 FelCor Common Units, (ii) an aggregate of 39,229 Class
B, Series II units of limited partnership interest in FelCor OP (the "FelCor
Class B Units"), (iii) an aggregate of 5,980,600 Series A Cumulative Convertible
Preferred Units (the "FelCor Series A Preferred Units"), and (iv) an aggregate
of 57,500 Series B Cumulative Redeemable Preferred Units (the "FelCor Series B
Preferred Units") (collectively, together with the FelCor Common Units, FelCor
Class B Units, FelCor Series A Preferred Units and FelCor Series B Preferred
Units, the "FelCor OP Units"). FelCor also owns an approximately 1.6% general
partner interest in FelCor OP, constituting all of the general partner interests
in FelCor OP. All of the FelCor OP Units
29
owned by FelCor and FelCor LLC, the general partner interest in FelCor OP owned
by FelCor, and the issued and outstanding membership interests in FelCor LLC
owned by FelCor, are free and clear of all Liens, other than those listed on
Schedule 5.2(a) to the FelCor Disclosure Letter. The FelCor OP Units are validly
issued and outstanding, fully paid and nonassessable. Schedule 5.2(a) to the
FelCor Disclosure Letter sets forth the name of each holder of a FelCor OP Unit
(each a "FelCor OP Unit Holder") and the number and type of FelCor OP Units
owned by each such FelCor OP Unit Holder in FelCor OP as of the date of this
Agreement. The FelCor OP Units are subject to no restriction except as set forth
in the FelCor OP limited partnership agreement (the "FelCor Operating
Partnership Agreement") and pursuant to applicable securities laws. FelCor OP
has not issued or granted and is not a party to any outstanding commitments of
any kind relating to, or any presently effective agreements or understandings
with respect to, interests in FelCor OP, whether issued or unissued, or
securities convertible into or exchangeable for interests in FelCor OP or
preemptive rights to purchase or rights of first refusal with respect to such
interests. Except as listed on Schedule 5.2(a) to the FelCor Disclosure Letter,
no FelCor OP Units, or other interests therein, have been authorized or reserved
for issuance to anyone other than FelCor LLC or FelCor.
(b) Schedule 5.2(b) to the FelCor Disclosure Letter sets forth (i)
each Subsidiary of FelCor (the "FelCor Subsidiary" or "FelCor Subsidiaries"),
(ii) the ownership interest therein of FelCor, (iii) if not wholly-owned by
FelCor, the identity and ownership interest of each of the other owners of such
FelCor Subsidiary, (iv) each hotel (identified by name and location) and other
real property owned or leased by such FelCor Subsidiary, and (v) each entity not
constituting a FelCor Subsidiary in which FelCor or any FelCor Subsidiary holds
an ownership interest, indicating the name, nature and business of such entity
and the ownership interest therein held by each FelCor Subsidiary and each other
Person.
(c) Except as set forth in Schedule 5.2(c) to the FelCor
Disclosure Letter, (i) all the outstanding shares of capital stock of each
FelCor Subsidiary that is a corporation have been duly and validly issued and
are (A) fully paid and nonassessable, (B) owned by FelCor or another FelCor
Subsidiary and (C) owned free and clear of all Liens and (ii) all equity
interests owned by FelCor or a FelCor Subsidiary in another FelCor Subsidiary
that is a partnership, joint venture, trust or limited liability company are
owned free and clear of all Liens. Each FelCor Subsidiary, that is a corporation
is duly incorporated and validly existing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its business as now being conducted, and each FelCor Subsidiary that is a
partnership, limited liability company, trust or joint venture is duly organized
and validly existing under the laws of its jurisdiction of organization and has
the requisite power and authority to carry on its business as now being
conducted. Each FelCor 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 have a FelCor
Material Adverse Effect. Copies of the articles or certificates of
incorporation, bylaws, organizational documents and partnership, joint venture
and operating agreements of each FelCor Subsidiary, in each case as amended to
the date of this Agreement, have been previously delivered or made available
30
to the MeriStar Parties. Neither FelCor nor any of the FelCor Subsidiaries is in
breach of any provision of any agreement, document or contract governing its
rights in or to the interests owned or held by it other than breaches, which
could not reasonably be expected to have a FelCor Material Adverse Effect. To
the Knowledge of FelCor (as defined in Section 5.21), the other parties to such
agreements, documents or contracts are not in breach of any of their respective
obligations under such agreements, documents or contracts other than breaches,
which could not reasonably be expected to have a FelCor Material Adverse Effect.
5.3 FELCOR STRUCTURE.
(a) The authorized shares of stock of FelCor consist of
200,000,000 shares of FelCor Common Stock and 20,000,000 shares of preferred
stock, $0.01 par value per share, of which 6,050,000 shares have been designated
as $1.95 Series A Cumulative Convertible Preferred Stock ("FelCor Series A
Preferred Stock") and 57,500 shares have been designated as 9% Series B
Cumulative Redeemable Preferred Stock ("FelCor Series B Preferred Stock"). As of
the date hereof, (i) 53,159,146 shares of FelCor Common Stock were issued and
outstanding, (ii) 5,980,600 shares of FelCor Series A Preferred Stock were
outstanding, (iii) 57,500 shares of FelCor Series B Preferred Stock were
outstanding and represented by 5,750,000 Depositary Receipts, each representing
1/100 of a share of FelCor Series B Preferred Stock, (iv) 3,092,614 shares of
FelCor Common Stock have been reserved for issuance, and FelCor may propose an
increase in the number of shares reserved for issuance to an aggregate of
4,092,614 shares, under FelCor's Restricted Stock and Stock Option Plans, as
amended (the "FelCor Plans"), (v) 1,737,111 shares of FelCor Common Stock were
issuable upon exercise of outstanding stock options (the "FelCor Options") to
purchase shares of FelCor Common Stock, (vi) 5,500 shares of Common Stock
issuable pursuant to FelCor's Deferred Compensation Plan, (vii) 9,014,046 shares
of FelCor Common Stock were reserved for issuance upon redemption of FelCor OP
Units, and (viii) 4,636,161 shares of FelCor Common Stock were reserved for
issuance upon conversion of the FelCor Series A Preferred Stock. On the date
hereof, except as set forth in this Section 5.3 and the Schedules referenced in
this Section 5.3, no shares of FelCor Common Stock or other voting securities of
FelCor were issued, reserved for issuance or outstanding.
(b) Set forth in Schedule 5.3(b) to the FelCor Disclosure Letter
is a true and complete list of the following: (i) each qualified or nonqualified
option to purchase shares of FelCor Common Stock granted under the FelCor Plans
or any other formal or informal stock-based compensation arrangement, (ii) each
grant of shares of FelCor Common Stock to employees which are subject to any
risk of forfeiture ("FelCor Restricted Stock Grants") and (iii) shares issuable
pursuant to the FelCor Deferred Compensation Plan ("FelCor Deferred Stock"). As
of the date of this Agreement, other than FelCor Options, FelCor Restricted
Stock Grants, and FelCor Deferred Stock, there were no outstanding warrants or
other rights to acquire stock, stock appreciation rights, phantom stock,
dividend equivalents, performance units and performance shares granted under the
FelCor Plans or rights to receive shares of FelCor Common Stock on a deferred
basis granted under the FelCor Plans. Schedule 5.3(b) to the FelCor Disclosure
Letter also sets forth for each FelCor Option the name of the grantee, the date
of the grant, status of the option as qualified or nonqualified under Section
422 of the Code, the number of shares of FelCor Common Stock subject to such
option, the
31
number of shares subject to options that are currently exercisable, the exercise
price per share, the expiration date and the number of such shares subject to
share appreciation rights. For each FelCor Restricted Stock Grant, Schedule
5.3(b) to the FelCor Disclosure Letter sets forth the name of the grantee, the
date of the grant and the number of shares of FelCor Common Stock granted and
the date any risk of forfeiture with respect to such shares lapses.
(c) All outstanding shares of FelCor Common Stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of FelCor having the right to vote (or that are convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of FelCor may vote.
(d) Except (i) as set forth in this Section 5.3, in Schedule
5.3(b) or 5.3(d) to the FelCor Disclosure Letter, or in the FelCor Operating
Partnership Agreement (as defined herein) and (ii) for FelCor OP Units held by
partners in the FelCor OP (which, subject to certain restrictions, may be
redeemed by the holders thereof for either cash or, at FelCor's option, shares
of FelCor Common Stock on a one-for-one basis), (A) there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which FelCor or any FelCor
Subsidiary is a party or by which such entity is bound, obligating FelCor or any
FelCor Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of FelCor Common Stock, voting securities or other
ownership interests of FelCor or of any FelCor Subsidiary or obligating FelCor
or any FelCor Subsidiary to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking (other than to FelCor or a FelCor Subsidiary), and (B) there are no
outstanding obligations of FelCor or any FelCor Subsidiary to repurchase, redeem
or otherwise acquire any shares of capital stock or ownership interest in FelCor
or any FelCor Subsidiary.
5.4 ORGANIZATION, STANDING AND POWER OF FELCOR OP. FelCor OP is a
limited partnership duly organized and validly existing under the laws of
Delaware and has the requisite power and authority to carry on its business as
now being conducted. FelCor OP 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 have a FelCor Material
Adverse Effect. FelCor has delivered to the MeriStar Parties complete and
correct copies of the FelCor Operating Partnership Agreement as amended or
supplemented to the date of this Agreement.
5.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) FelCor has the requisite power to enter into this Agreement
and, subject to the requisite stockholder approval of the Merger (the "FelCor
Stockholder Approval" and, together with the MeriStar Stockholder Approval, the
"Stockholder Approvals"), to consummate the transactions contemplated by this
Agreement. Except as set forth in Schedule 5.5(a) to the FelCor Disclosure
Letter, FelCor OP has the requisite partnership power and authority to enter
into this Agreement, and to consummate the transactions
32
contemplated by this Agreement. The execution and delivery of this Agreement by
the FelCor Parties and the consummation by the FelCor Parties of the
transactions contemplated by this Agreement have been duly authorized by all
necessary action on the part of the FelCor Parties, except for and subject to
the FelCor Stockholder Approval and the approvals set forth on Schedule 5.5(a)
to the FelCor Disclosure Letter. This Agreement has been duly executed and
delivered by the FelCor Parties and constitutes a valid and binding obligation
of the FelCor Parties, enforceable against the FelCor Parties in accordance with
and subject to its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
(b) Except as set forth in Schedule 5.5(b) to the FelCor
Disclosure Letter, the execution and delivery of this Agreement by the FelCor
Parties do not, and the consummation of the transactions contemplated by this
Agreement, (including, without limitation,) the Transactions, and compliance by
the FelCor Parties with the provisions of this Agreement will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any substantive obligation or to loss of a substantive benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the FelCor Parties or any FelCor Subsidiary under, (i) the FelCor
Charter, FelCor Bylaws or the charter, organizational documents, limited
liability company agreement, partnership agreement or other governing document
(as the case may be) of any FelCor Subsidiary, each as amended or supplemented
to the date of this Agreement, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, reciprocal easement agreement, lease or other agreement,
instrument, permit, concession, franchise or license applicable to FelCor or any
FelCor Subsidiary or their respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any Laws applicable to FelCor or any FelCor Subsidiary or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights, loss or Liens that
individually or in the aggregate would not (x) have a FelCor Material Adverse
Effect or (y) prevent the consummation of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to FelCor or any FelCor Subsidiary in connection with the execution and
delivery of this Agreement or the consummation by the FelCor Parties of any of
the transactions contemplated by this Agreement, except for (i) the filing with
the SEC of the Registration Statement and the Proxy Statement, (ii) the
acceptance for record of the Articles of Merger by the Department and the filing
of the Certificate of Merger with the Delaware Secretary of State, (iii) such
filings as may be required in connection with the payment of any transfer and
gains taxes, and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedule 5.5(a)
or (b) to the FelCor Disclosure Letter or (B) as may be required under (y)
federal, state or local environmental or Tax laws or (z) the "blue sky" laws of
various states, to the extent applicable, or (C) which, if not obtained or made,
would not prevent or delay in any material respect the consummation of any of
the transactions contemplated by this Agreement or otherwise prevent the FelCor
Parties from performing their obligations under this Agreement in any material
respect or have, individually or in the aggregate, a FelCor Material Adverse
Effect.
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5.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
FelCor has filed all required reports, schedules, forms, statements and other
documents with the SEC since July 28, 1994 through the date hereof (the "FelCor
SEC Documents"). All of the FelCor SEC Documents (other than preliminary
material), as of their respective filing dates, complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act and, in each case, the rules and regulations promulgated thereunder
applicable to such FelCor SEC Documents. None of the FelCor SEC Documents (other
than preliminary materials) at the time of filing contained 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 FelCor SEC Documents
filed and publicly available prior to the date of this Agreement. The
consolidated financial statements of FelCor and the FelCor Subsidiaries included
in the FelCor SEC Documents complied 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 GAAP
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the SEC) applied on a 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, as of the dates thereof and the consolidated results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments) of FelCor and the FelCor
Subsidiaries. Except for liabilities and obligations set forth in the FelCor SEC
Documents or in Schedule 5.6 to the FelCor Disclosure Letter, neither FelCor nor
any FelCor Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which are required by GAAP to be set
forth on a consolidated balance sheet of FelCor or in the notes thereto and
which, individually or in the aggregate, would have a FelCor Material Adverse
Effect.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for (i) matters
disclosed in the FelCor SEC Documents or in Schedule 5.7 to the FelCor
Disclosure Letter, and (ii) the Transactions and the dividends and distributions
contemplated by Section 2.2(c), and (iii) the transactions permitted by Section
6.4, since the date of the most recent audited financial statements included in
the FelCor SEC Documents (the "FelCor Financial Statement Date"), FelCor and the
FelCor Subsidiaries have conducted their business only in the ordinary and
normal course (taking into account prior practices, including the acquisition of
properties and issuance of securities) and there has not been, from the FelCor
Financial Statement Date through the date of this Agreement, (a) any material
adverse change in the business, financial condition or results of operations of
FelCor and the FelCor Subsidiaries taken as a whole, including, without
limitation, any increase in market rates of interest and related costs of
financing which results in yields for new issues of unsecured senior notes
issued by companies with a comparable debt rating to FelCor and MeriStar
exceeding an amount which the members of the Interim Transactions Committee (as
defined in Section 6.5) agree, in the exercise of their good faith business
judgment, makes the issuance of such debt not economically prudent (a "FelCor
Material Adverse Change"), (b) any occurrence or circumstance that with the
passage of time would reasonably be expected to result in
34
a FelCor Material Adverse Change, or (c) any action taken by FelCor or any
FelCor Subsidiary during the period from the FelCor Financial Statement Date
through the date of this Agreement that, if taken during the period from the
date of this Agreement through the Effective Time, would constitute a breach of
Section 6.4.
5.8 LITIGATION. Except as disclosed in the FelCor SEC Documents or
in Schedule 5.8 to the FelCor Disclosure Letter, and other than personal injury
and other routine tort litigation arising from the ordinary course of operations
of FelCor and the FelCor Subsidiaries (a) which are covered by adequate
insurance or (b) for which all material costs and liabilities arising therefrom
are reimbursable pursuant to common area maintenance or similar agreements,
there is no suit, action or proceeding pending (in which service of process has
been received by an employee or agent of FelCor or a FelCor Subsidiary) or, to
the Knowledge of FelCor, threatened in writing against or affecting FelCor or
any FelCor Subsidiary that, individually or in the aggregate, could reasonably
be expected to have a FelCor Material Adverse Effect or to prohibit, restrict or
interfere with the consummation of any of the Transactions, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against FelCor or any FelCor Subsidiary having, or which,
insofar as reasonably can be foreseen, in the future could have, any such
Effect.
5.9 PROPERTIES.
(a) Schedule 5.9(a) to the FelCor Disclosure Letter sets forth a
complete and accurate list and the address of all real property owned or leased
by FelCor or any FelCor Subsidiary (collectively, and together with the land at
each address referenced in Schedule 5.9(a) to the FelCor Disclosure Letter and
all buildings, structures and other improvements and fixtures located on or
under such land and all easements, rights and other appurtenances to such land,
the "FelCor Properties"). FelCor or the FelCor Subsidiaries, owns or own, as the
case may be, good and insurable fee simple title (or, if so indicated in
Schedule 5.9(a) to the FelCor Disclosure Letter, leasehold title) to each of the
FelCor Properties, in each case free and clear of Encumbrances, except for such
mortgages as are set forth on Schedule 5.14(b) to the FelCor Disclosure Letter
or for which no disclosure is required by Section 5.14(b), the Lien of real
estate taxes not yet due and payable and such Encumbrances as individually, and
in the aggregate, could not reasonably be expected to have a FelCor Material
Adverse Effect. Except for such of the following as individually, or in the
aggregate, could not reasonably be expected to have a FelCor Material Adverse
Effect, policies of title insurance (or marked title insurance commitments
having the same force and effect as title insurance policies) have been issued
by national title insurance companies insuring the fee simple or leasehold, as
applicable, title of FelCor or its Subsidiaries, as applicable, to each of the
FelCor Properties in amounts at least equal to the portion of the purchase price
thereof allocated to real estate (the "FelCor Title Policies"), and, to FelCor's
Knowledge, the FelCor Title Policies are valid and in full force and effect and
no claim has been made under any such policy (except claims which have
previously been fully resolved).
(b) Except as set forth in Schedule 5.9(b) to the FelCor
Disclosure Letter, and except for matters which would not, individually or in
the aggregate, reasonably be expected to have a FelCor Material Adverse Effect
or to materially and adversely affect the use or
35
occupancy (or, if applicable, any proposed development) of the FelCor
Properties, FelCor has no Knowledge that any currently required certificate,
permit or license (including building permits and certificates of occupancy)
from any Governmental Entity having jurisdiction over any FelCor Property or any
agreement, easement or other right which is necessary to permit the lawful use,
occupancy or operation of the existing buildings, structures or other
improvements which constitute a part of any of the FelCor Properties has not
been obtained or is not in full force and effect, or of any pending modification
or cancellation of any of the same.
(c) Schedule 5.9(c) to the FelCor Disclosure Letter sets forth a
complete and accurate list of all definitive agreements made or entered into by
FelCor or any FelCor Subsidiary as of the date hereof, which are scheduled to
close or be consummated after the date hereof, (x) to sell, mortgage, pledge,
hypothecate, lease or sublease any FelCor Property, which, individually or in
the aggregate, are material, (y) to enter into a material transaction in respect
of the ownership or financing of any FelCor Property, or (z) to purchase, lease
or otherwise acquire any real property.
(d) Except as set forth in Schedule 5.9(d) to the FelCor
Disclosure Letter, none of the FelCor Properties is subject to any outstanding
purchase option, right of first refusal, right of first offer or similar right
other than such rights as would not reasonably be expected to have a FelCor
Material Adverse Effect, nor has FelCor or any FelCor Subsidiary entered into
any outstanding contracts with others for the sale, mortgage, pledge,
hypothecation, assignment, sublease or lease of any material portion of any
FelCor Property or other transfer of all or any part of any FelCor Property as
of the date hereof, which are scheduled to close or be consummated after the
date hereof, and no Person has any right or option to acquire, or right of first
refusal or right of first offer with respect to, any interest of FelCor or any
FelCor Subsidiary in any FelCor Property or any material part thereof.
(e) Schedule 5.9(e) to the FelCor Disclosure Letter sets forth the
capital expenditure budget and schedule of FelCor and each FelCor Subsidiary for
each FelCor Property, describing the capital expenditures which FelCor or any
FelCor Subsidiary has budgeted for such FelCor Property for the period running
through December 31, 2001 (the "FelCor Budget and Schedule").
(f) The ground leases underlying the leased FelCor Properties
(collectively, the "FelCor Ground Leases") are listed on Schedule 5.9(f) to the
FelCor Disclosure Letter. Each of the FelCor Ground Leases is valid, binding and
in full force and effect as against FelCor or any FelCor Subsidiary and, to
FelCor's Knowledge, as against the other party thereto, except to the extent the
failure to be binding and in full force and effect would not reasonably be
expected to have a FelCor Material Adverse Effect. There does not exist under
any of the FelCor Ground Leases any default, and, to FelCor's Knowledge, no
event has occurred which, with notice or lapse of time or both, would constitute
such a default, except as would not, individually or in the aggregate,
reasonably be expected to result in a FelCor Material Adverse Effect.
(g) Schedule 5.9(g) to the FelCor Disclosure Letter sets forth a
list of the hotel franchise, license or other agreements relating to the names,
marks or systems (the "FelCor
36
Franchise Agreements") under which each of the FelCor Properties is being
operated. Each of the FelCor Franchise Agreements is in full force and effect
and, to the Knowledge of FelCor, there are no defaults thereunder by either
party thereto, nor have any events occurred which, with the giving of notice or
the passage of time or both, would constitute a default or event of default
thereunder, except for those which either individually or in the aggregate would
not constitute a FelCor Material Adverse Effect.
(h) Schedule 5.9(h) to the FelCor Disclosure Letter sets forth a
list of the hotel management agreements (the "FelCor Management Agreements")
pursuant to which each of the FelCor Properties is being managed. Each of the
FelCor Management Agreements is in full force and effect and, to the Knowledge
of FelCor, there are no defaults thereunder by either party thereto, nor have
any events occurred which, with the giving notice or the passage of time or both
would constitute a default or event of default thereunder, except for those
which either individually or in the aggregate would not constitute a FelCor
Material Adverse Effect.
5.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to all FelCor Benefit Plans (as defined below),
except for such matters, as, individually or in the aggregate, could not
reasonably be expected to have a FelCor Material Adverse Effect, (a) each FelCor
Benefit Plan and any related trust intended to be qualified under Sections
401(a) and 501(a) of the Code has received a favorable determination letter from
the IRS that it is so qualified and, to the Knowledge of FelCor, nothing has
occurred since the date of such letter that could reasonably be expected to
materially adversely affect the qualified status of such FelCor Benefit Plan or
related trust, (b) each FelCor Benefit Plan has been operated in all material
respects in accordance with its terms and the terms and requirements of
applicable law and all required returns and filings for each FelCor Benefit Plan
have been timely made, (c) neither FelCor nor any FelCor Subsidiary has incurred
any tax, fine, lien, penalty or other liability imposed under ERISA, the Code or
other applicable laws, rules and regulations, in connection with any FelCor
Benefit Plan, and no administrative investigation, audit or other administrative
proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation,
the Internal Revenue Service or other governmental agencies are pending, in
progress or, to the Knowledge of FelCor or any FelCor Subsidiary, threatened,
and no fact or event exists that could reasonably be expected to give rise to
any such material liability, (d) all contributions due and payable on or before
the date hereof in respect of each FelCor Benefit Plan have been made in full
and in proper form, (e) neither FelCor nor any FelCor Subsidiary has ever
sponsored or been obligated to contribute to any "multiemployer plan" (as
defined in Section 3(37) of ERISA), any plan subject to Section 413 of the Code
or any "defined benefit plan" (as defined in Section 3(35) of ERISA), (f) except
as otherwise required under ERISA, the Code and applicable laws, no FelCor
Benefit Plan currently or previously maintained by FelCor or any FelCor
Subsidiary provides any post-employment health or life insurance coverage or
benefits except as required under Section 4980B of the Code; (g) neither FelCor,
nor any FelCor Subsidiary, is a member of a Controlled Group which has members
other than themselves, (h) all material reporting, disclosure and notice
obligations imposed under ERISA and the Code have been satisfied with respect to
each FelCor Benefit Plan, and (i) no
37
benefit or amount payable, or which may become payable in connection with the
Transactions by FelCor or any FelCor Subsidiary pursuant to any FelCor Benefit
Plan, agreement or contract with any employee, constitutes an "excess parachute
payment" which would not be deductible by reason of Section 280G of the Code.
Schedule 5.10 to the FelCor Disclosure Letter contains a complete list of each
"employee benefit plan" (within the meaning of Section 3(3) of ERISA, excluding
"multiemployer plans" within the meaning of ERISA Section 3(37)), and all stock
purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA (including any funding mechanism
therefor now in effect or required in the future as a result of the transaction
contemplated by this Agreement or otherwise), whether formal or informal, oral
or written, legally binding or not, under which any current or former employee,
officer or director of FelCor or any FelCor Subsidiary has any present or future
right to benefits sponsored or maintained by FelCor or any FelCor Subsidiary or
under which FelCor or any FelCor Subsidiary has had or has any present or could
reasonably be expected to have any future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as the
"FelCor Benefit Plans." With respect to each FelCor Benefit Plan, FelCor has
provided to MeriStar a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by FelCor or any FelCor Subsidiary to their employees concerning
the extent of the benefits provided under a FelCor Benefit Plan; and (iv) for
the most recent year (A) the Form 5500 and attached schedules, (B) audited
financial statements, and (C) attorney's response to an auditor's request for
information.
(b) Neither FelCor, nor any FelCor Subsidiary, is delinquent in
payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses, benefits or other compensation for any services or
otherwise arising under any policy, practice, agreement, plan, program or Law,
which delinquency would, in the aggregate, have a FelCor Material Adverse
Effect. None of FelCor's or any FelCor Subsidiary's employment policies or
practices is currently being audited or investigated by any Governmental Entity
or court. There is no pending or, to the Knowledge of FelCor, threatened
litigation, unfair labor practice charge, or other charge or inquiry against
FelCor or any FelCor Subsidiary brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of any of them with respect to employment practices which could
reasonably be expected to have a FelCor Material Adverse Effect.
(c) Neither FelCor nor any FelCor Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation or other order by, any
Governmental Entity relating to employees or employment practices. FelCor and
each FelCor Subsidiary are in compliance in all material respects with all
applicable Laws, Contracts, and policies relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including the
obligations of the WARN, and has not planned or implemented any early
retirement, separation or window program within the past five years.
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5.11 TAXES.
(a) Each of FelCor and the FelCor Subsidiaries has timely filed or
caused to be timely filed all material Tax Returns required to be filed by it
and for any partnerships for which any of them is a general partner (after
giving effect to any filing extension properly granted by a Governmental Entity
having authority to do so) and has paid (or FelCor has paid on its behalf) all
Taxes required to be paid as shown on such returns and all such Tax Returns
were, when filed, complete and accurate in all material respects, except where
the failure to file such Tax Returns, the failure to pay such Taxes and the
failure of such Tax Returns to be complete and accurate in all material respects
could not be reasonably expected to have a FelCor Material Adverse Effect. No
material deficiencies for any Taxes have been or are currently being proposed,
asserted or assessed in writing, or to the Knowledge of FelCor, threatened in
writing by any taxing authority against FelCor or any FelCor Subsidiary. Neither
FelCor nor a FelCor Subsidiary has executed or filed with any taxing authority
any agreement now in effect extending the period for assessment of Taxes. No Tax
Returns of FelCor or any FelCor Subsidiary have been or are currently being
audited by any applicable taxing authority, and neither FelCor nor any FelCor
Subsidiary has received any written notice that such audit is contemplated.
There are no material Tax liens on any properties of FelCor or any FelCor
Subsidiary other than liens for current Taxes not yet due and payable. The most
recent audited financial statements contained in the FelCor SEC Documents
reflect an adequate accrual in accordance with GAAP for all Taxes and deferred
Taxes payable by FelCor and its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements. Except as would
not have a FelCor Material Adverse Effect, FelCor and each FelCor Subsidiary
have complied with all applicable Laws relating to the payment, collection,
withholding and deposit, as the case may be, of Taxes and, to the extent
required, have paid over to the appropriate governmental authorities or are
properly holding for such payment all taxes, unemployment insurance and other
amounts required by law to be withheld or collected.
(b) FelCor is not required to include in income any amount for an
adjustment pursuant to Section 481 of the Code, and except as set forth on
Schedule 5.11(b) to the FelCor Disclosure Letter, is neither a party to nor
obligated under any agreement or other arrangement providing for the payment of
any amount that is not or would not be deductible by FelCor by reason of Section
280G of the Code or Section 162(m) of the Code.
(c) Neither FelCor nor any FelCor Subsidiary has taken or will
take any action that would create a material risk that the Merger would not
qualify as a reorganization within the meaning of Section 368(a) of the Code.
(d) Neither FelCor nor any FelCor Subsidiary is a party to or has
any obligation under any Tax sharing agreements or similar contract or
arrangement that would have a FelCor Material Adverse Effect. No closing
agreement pursuant to Section 7121 of the Code (or any similar provision of
state, local or foreign law) has been entered into by FelCor or any FelCor
Subsidiary that would have a FelCor Material Adverse Effect.
(e) Except as set forth on Schedule 5.11(e) to the FelCor
Disclosure Letter, neither FelCor nor any FelCor Subsidiary has any material
liability for Taxes of any Person
39
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or otherwise,
that would have a FelCor Material Adverse Effect.
(f) Since the FelCor Financial Statement Date, (i) FelCor has
incurred no material liability for Taxes under Section 857(b), 860(c) or 4981 of
the Code, including, without limitation, any Tax arising from a prohibited
transaction described in Section 857(b)(6) of the Code, and (ii) neither FelCor
nor a FelCor Subsidiary has incurred any material liability for Taxes other than
in the ordinary course of business except where such liability for Taxes could
not reasonably be expected to have a FelCor Material Adverse Effect. No event
has occurred, and no condition or circumstance exists, which presents a material
risk that any material Tax described in this paragraph (f) will be imposed upon
FelCor.
(g) FelCor (i) for all taxable years commencing with its taxable
year beginning July 28, 1994, and ended December 31, 1994, and through December
31, 2000, has been subject to taxation as a REIT and has satisfied all
requirements to qualify as a REIT for such years, and (ii) has operated, and
intends to continue to operate, in such manner as to qualify as a REIT for the
taxable year ending December 31, 2001 and subsequent taxable years. To FelCor's
Knowledge, no action, proceeding or investigation that could reasonably be
expected to result in the termination of FelCor's status as a REIT has been
taken or omitted or is pending or threatened.
(h) Except as set forth on Schedule 5.11(h) to the FelCor
Disclosure Letter, each of FelCor OP and each other subsidiary of FelCor that is
organized as a partnership, limited liability company or trust (including
entities in which FelCor directly or indirectly owns less than 50% of the equity
ownership interests) has been at all times since the date of its formation, and
will be through the Closing Date, treated for federal income tax purposes as
either (i) a partnership that is not either an association taxable as a
corporation or a publicly traded partnership under Section 7704 of the Code,
(ii) a publicly traded partnership that is eligible for partnership status under
Section 7704(c) of the Code or (iii) a disregarded entity.
(i) Except as set forth on Schedule 5.11(i) to the FelCor
Disclosure Letter, each of the corporations in which FelCor owns a direct or
indirect equity ownership interest has been at all times since the date of its
formation, and through the Closing Date will be, treated for federal income tax
purposes as either (i) a "qualified REIT subsidiary" within the meaning of
Section 856(i) of the Code or (ii) a "taxable REIT subsidiary" within the
meaning of Section 856(l) of the Code.
(j) Schedule 5.11(j) to the FelCor Disclosure Letter sets forth a
list of the entities for which FelCor has made taxable REIT subsidiary elections
under Section 856(l) and the effective dates of such elections. FelCor has made
a taxable REIT subsidiary election for each entity that it intends to treat as a
taxable REIT subsidiary for its 2001 taxable year.
(k) Except as listed on Schedule 5.11(k) to the FelCor Disclosure
Letter, neither FelCor nor any FelCor Subsidiary has entered into or is subject,
directly or indirectly, to any "FelCor Tax Protection Agreements." As used
herein, a FelCor Tax Protection Agreement is an agreement, oral or written, (A)
that has as one of its purposes to permit a Person to take
40
the position that such Person could defer federal taxable income that otherwise
might have been recognized upon a transfer of property to the FelCor OP or any
other FelCor Subsidiary that is treated as a partnership for federal income tax
purposes, and that (i) prohibits or restricts in any manner the disposition of
any assets of FelCor or any FelCor Subsidiary or requires FelCor or any FelCor
Subsidiary to indemnify or reimburse any Person for a loss of Tax deferral as a
result of any such asset disposition; (ii) requires that FelCor or any FelCor
Subsidiary maintain, put in place, or replace, indebtedness, whether or not
secured by one or more of the FelCor Properties, or (iii) requires that FelCor
or any FelCor Subsidiary offer to any Person at any time the opportunity to
guarantee or otherwise assume, directly or indirectly (including, without
limitation, through a "deficit restoration obligation," guarantee (including,
without limitation, a "bottom" guarantee), indemnification agreement,
reimbursement agreement or other similar arrangement), the risk of loss for
federal income tax purposes for indebtedness or other liabilities of FelCor or
any FelCor Subsidiary, (B) that specifies or relates to a method of taking into
account book-tax disparities under Section 704(c) of the Code or the Treasury
Regulations promulgated thereunder with respect to one or more assets of FelCor
or a FelCor Subsidiary, or (C) that requires a particular method for allocating
one or more liabilities of FelCor or any FelCor Subsidiary under Section 752 of
the Code or the Treasury Regulations promulgated thereunder. Except as would not
have a FelCor Material Adverse Effect, neither FelCor nor any FelCor Subsidiary
is in violation of or in default under any FelCor Tax Protection Agreement.
5.12 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS. Except as set
forth on Schedule 5.12 to the FelCor Disclosure Letter, there are no cash or
non-cash payments which will become payable to any employee, officer or director
of FelCor or any FelCor Subsidiary as a result of the Merger and the
Transactions and there is no employment or severance contract, or other
agreement requiring payments, cancellation of indebtedness or other obligation
to be made upon a change of control or otherwise as a result of the consummation
of any of the transactions contemplated by this Agreement, with respect to any
employee, officer or director of FelCor or any FelCor Subsidiary.
5.13 BROKERS, FEES AND EXPENSES. No broker, investment banker,
financial advisor or other person, other than Deutsche Banc Alex. Xxxxx and X.X.
Xxxxxx Securities Inc., the fees and expenses of which are as described in their
engagement letters between Deutsche Banc Alex. Xxxxx and FelCor, and X.X. Xxxxxx
Securities Inc. and FelCor, respectively, a true and correct copy of each of
which has previously been delivered to the MeriStar Parties, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby, based upon arrangements
made by or on behalf of FelCor or any FelCor Subsidiary.
5.14 CONTRACTS; DEBT INSTRUMENTS.
(a) Except as set forth in Schedule 5.14(a) to the FelCor
Disclosure Letter, and except as, individually or in the aggregate, would not
have a FelCor Material Adverse Effect, neither FelCor nor any FelCor Subsidiary
has received a written notice that FelCor or any FelCor Subsidiary is in
violation of or in default under (nor to the Knowledge of FelCor does there
exist any condition, which upon the passage of time or the giving of notice or
both, would cause such a violation of or default under) any loan or credit
agreement, note, bond,
41
mortgage, indenture, lease, permit, concession, franchise, license or any other
contract, agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound, nor to the Knowledge of
FelCor does such a violation or default exist.
(b) Except for any of the following expressly identified in FelCor
SEC Documents, Schedule 5.14(b) to the FelCor Disclosure Letter sets forth a
list of each loan or credit agreement, note, bond, mortgage, indenture and any
other agreement and instrument pursuant to which any Indebtedness in excess of
$10,000,000 of FelCor or of any FelCor Subsidiary, other than such Indebtedness
payable to FelCor or a FelCor Subsidiary, is outstanding or may be incurred.
5.15 ENVIRONMENTAL MATTERS. Except as, individually or in the
aggregate, would not have a FelCor Material Adverse Effect and except as
disclosed in the FelCor SEC Documents filed prior to the date of this Agreement,
none of FelCor, any of the FelCor Subsidiaries or, to the Knowledge of FelCor,
any other Person has caused or permitted (a) the unlawful presence of any
Hazardous Materials on any of the FelCor Properties or properties formerly owned
by FelCor or (b) any unlawful spills, releases, discharges or disposal of
Hazardous Materials to have occurred on FelCor Properties or properties formerly
owned by FelCor or be presently occurring on or from the FelCor Properties,
which presence or occurrence, individually or in the aggregate, could reasonably
be expected to have a FelCor Material Adverse Effect; and, in connection with
the construction on or operation and use of the FelCor Properties, neither
FelCor nor any FelCor Subsidiary has failed to comply in any material respect
with any applicable Environmental Laws, except to the extent such failure to
comply, individually or in the aggregate, could not be reasonably expected to
have a FelCor Material Adverse Effect. No notice, notification, demand, request
for information, citation, summons, complaint or order has been received by or
is pending, or to the Knowledge of FelCor, is threatened by, any Person against
FelCor or any FelCor Subsidiary, other than where such notice, notification,
demand, request for information, citation, summons, complaint or order has been
fully resolved, or, individually and in the aggregate, could not be reasonably
expected to result in a FelCor Material Adverse Effect. FelCor has previously
delivered or made available to MeriStar or its counsel true and complete copies
of all internally prepared or commissioned environmental studies, assessments
and reports in the possession or under the control of FelCor that relate to the
FelCor Properties and/or FelCor 's compliance with Environmental Laws.
5.16 COMPLIANCE WITH LAWS. Except as disclosed in the FelCor SEC
Documents, neither FelCor nor any FelCor Subsidiary has violated or failed to
comply with any Law, permit, judgment, decree or order of any Governmental
Entity applicable to its business, properties or operations, except to the
extent that such violation or failure could not reasonably be expected to have a
FelCor Material Adverse Effect.
5.17 OPINIONS OF FINANCIAL ADVISOR. The Board of Directors of
FelCor has received the opinions of Deutsche Banc Alex. Xxxxx and X.X. Xxxxxx
Securities Inc. dated the date of this Agreement, to the effect that, as of such
date, the Merger Consideration is fair, from a financial point of view, to
FelCor.
42
5.18 MARYLAND TAKEOVER LAWS. The Maryland Business Combination Act
and the Maryland Control Share Acquisition Act will not apply to FelCor in
connection with this Agreement and the other transactions contemplated hereby.
The provisions of Article XIII of the FelCor Charter relating to the Maryland
Control Share Acquisition Act have not been rescinded or revoked.
5.19 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by FelCor specifically for inclusion or incorporation by reference
in (i) the Registration Statement, at the time the Registration Statement is
filed with the SEC or at the time it becomes effective under the Securities Act,
or (ii) the Proxy Statement, at the date it is first mailed to FelCor's
stockholders or at the time of the FelCor Stockholders Meeting, (as defined in
Section 7.1(e)) will contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement and Proxy Statement will comply
in all material respects with the requirements of the Securities Act and the
Exchange Act, respectively, and the rules and regulations thereunder, except
that no representation or warranty is made by FelCor with respect to statements
made or incorporated by reference therein based on information supplied by
MeriStar specifically for inclusion or incorporated by reference in the Proxy
Statement or contained in any MeriStar SEC Documents incorporated by reference
in the Registration Statement or the Proxy Statement.
5.20 INVESTMENT COMPANY ACT OF 1940. Neither FelCor nor any FelCor
Subsidiary is, or at the Effective Time will be, required to be registered under
the 0000 Xxx.
5.21 DEFINITION OF KNOWLEDGE OF FELCOR. As used in this Agreement,
the phrase "Knowledge of FelCor" (or words of similar import) means the
knowledge of those individuals identified in Schedule 5.21 to the FelCor
Disclosure Letter.
5.22 VOTING REQUIREMENTS. The FelCor Stockholder Approvals, which
shall consist of the affirmative vote of holders of shares entitled to cast a
majority of all votes entitled to be cast on the matter at the FelCor
Stockholders Meeting, which shall be a duly convened meeting at which a quorum
is present and acting throughout, to approve the Merger, and the affirmative
vote of the holders of a majority of the outstanding FelCor OP Units to approve
the OP Merger, are the only votes of the holders of any class or series of
FelCor's stock or FelCor OP's partnership interests necessary to approve the
Merger and the other transactions contemplated by this Agreement.
ARTICLE 6
COVENANTS
The parties agree as follows with respect to the period from and after
the date of this Agreement to the Effective Time.
6.1 NO SOLICITATION BY MERISTAR.
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(a) MeriStar shall not, nor shall it permit any of the MeriStar
Subsidiaries to, nor shall it authorize or permit any officer, director or
employee of or any investment banker, attorney, accountant, agent or other
advisor or representative of MeriStar or any MeriStar Subsidiary to, (i)
solicit, initiate or encourage the submission of, any MeriStar Acquisition
Proposal (as defined below), (ii) except to the extent permitted by paragraph
(b) enter into any agreement with respect to any MeriStar Acquisition Proposal,
or (iii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any MeriStar Acquisition Proposal; provided,
however, that prior to the MeriStar Stockholder Meeting, to the extent required
by the duties of the Board of Directors of MeriStar under Maryland law, as
determined in good faith by a majority of the disinterested members thereof,
having received the advice of outside counsel, MeriStar may, in response to
unsolicited requests therefor, participate in discussions or negotiations with,
or furnish information pursuant to an appropriate confidentiality agreement to,
any Person that makes or expresses a bona fide intention to make an unsolicited
MeriStar Acquisition Proposal, if the Board of Directors of MeriStar first
determines in good faith, based on the vote of a majority of the disinterested
members thereof, that such Person has the ability to consummate a MeriStar
Superior Proposal (as defined below). Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by an officer, director or employee of or any investment banker,
attorney, accountant, agent or other advisor or representative of MeriStar or
any MeriStar Subsidiary, whether or not such person is purporting to act on
behalf of MeriStar, a MeriStar Subsidiary or otherwise, shall be deemed to be a
breach of this paragraph by MeriStar. For all purposes of this Agreement,
"MeriStar Acquisition Proposal" means any proposal, other than a proposal by
FelCor or FelCor OP, for a merger, consolidation, share exchange, business
combination or other similar transaction involving MeriStar or any of its
Significant Subsidiaries (as defined below) or any proposal or offer (including,
without limitation, any proposal or offer to stockholders of MeriStar), other
than a proposal or offer by FelCor or FelCor OP, to acquire in any manner,
directly or indirectly, more than a 10% equity interest in any voting securities
of, or 10% or more of the consolidated assets of, MeriStar or any of its
Significant Subsidiaries. MeriStar immediately shall cease and cause to be
terminated all existing discussions or negotiations with any persons conducted
heretofore with respect to, or that could reasonably be expected to lead to, any
MeriStar Acquisition Proposal. For all purposes of this Agreement, a
"Significant Subsidiary" means any Subsidiary that would constitute a
"significant subsidiary" within the meaning of Article 1, Rule 1-02 of
Regulation S-X of the SEC.
(b) Neither the Board of Directors of MeriStar nor any committee
thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify,
in a manner adverse to FelCor or FelCor OP, the approval or recommendation by
the Board of Directors of MeriStar or any committee thereof of this Agreement or
the Merger or (ii) approve or recommend, or propose to approve or recommend, any
MeriStar Acquisition Proposal. Notwithstanding the foregoing, the Board of
Directors of MeriStar, to the extent required by its duties under Maryland law,
as determined in good faith by a majority of the disinterested members thereof,
having received the advice of outside counsel, may approve or recommend (and, in
connection therewith, withdraw or modify its approval or recommendation of this
Agreement
44
or the Merger) a MeriStar Superior Proposal (as defined below). For purposes of
this Agreement, a "MeriStar Superior Proposal" means a bona fide written
proposal made by a third party to acquire MeriStar or any of its Significant
Subsidiaries pursuant to a tender or exchange offer, a merger, a share exchange,
a sale of all or substantially all of its assets or otherwise, in any such case,
on terms which a majority of the disinterested members of the Board of Directors
of MeriStar determines in their good faith judgment (after consultation with
independent financial advisors) to be more favorable to MeriStar and its
stockholders than the Merger and for which financing, to the extent required, is
then fully committed or which, in the good faith judgment of a majority of such
disinterested members (after consultation with independent financial advisors),
is reasonably capable of being financed by such third party.
(c) MeriStar shall promptly advise FelCor orally and in writing of
any MeriStar Acquisition Proposal or any inquiry with respect to, or which could
reasonably be expected to lead to, any MeriStar Acquisition Proposal, the
material terms and conditions of such MeriStar Acquisition Proposal or inquiry
and the identity of the Person making any such MeriStar Acquisition Proposal or
inquiry. MeriStar will keep FelCor fully informed of the status and details of
any such MeriStar Acquisition Proposal or inquiry. MeriStar shall give FelCor at
least one day's advance notice of any information to be supplied to, and at
least three days' advance notice of any agreement to be entered into with, any
Person making a MeriStar Acquisition Proposal.
(d) Nothing contained in this Section 6.1 will prohibit MeriStar
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
MeriStar's stockholders if the MeriStar Board of Directors determines that such
disclosure is necessary in order to comply with the MeriStar Board of Directors'
duties under Maryland law; provided, however, that neither MeriStar nor the
MeriStar Board of Directors nor any committee thereof may, except in accordance
with Section 6.1(b), withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, a MeriStar Acquisition
Proposal.
6.2 NO SOLICITATION BY FELCOR.
(a) FelCor shall not, nor shall it permit any of the FelCor
Subsidiaries to, nor shall it authorize or permit any officer, director or
employee of or any investment banker, attorney, accountant, agent or other
advisor or representative of FelCor or any FelCor Subsidiary to, (i) solicit,
initiate or encourage the submission of, any FelCor Acquisition Proposal (as
defined below), (ii) except to the extent permitted by paragraph (b), enter into
any agreement with respect to any FelCor Acquisition Proposal, or (iii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any FelCor Acquisition Proposal; provided, however, that
prior to the FelCor Stockholder Meeting, to the extent required by the duties of
the Board of Directors of FelCor under Maryland law, as determined in good faith
by a majority of the disinterested members thereof , having received the advice
of outside counsel, FelCor may, in response to unsolicited requests therefor,
participate in discussions or negotiations with, or
45
furnish information pursuant to an appropriate confidentiality agreement to, any
Person that makes or expresses a bona fide intention to make an unsolicited
FelCor Acquisition Proposal, if the Board of Directors of FelCor first
determines in good faith, based on the vote of a majority of the disinterested
members thereof, that such Person has the ability to consummate a FelCor
Superior Proposal (as defined below). Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by an officer, director or employee of or any investment banker,
attorney, accountant, agent or other advisor or representative of FelCor or any
FelCor Subsidiary, whether or not such person is purporting to act on behalf of
FelCor, a FelCor Subsidiary or otherwise, shall be deemed to be a breach of this
paragraph by FelCor. For all purposes of this Agreement, "FelCor Acquisition
Proposal" means any proposal other than a proposal by MeriStar or MeriStar OP,
for a merger, consolidation, share exchange, business combination or other
similar transaction involving FelCor or any of its Significant Subsidiaries or
any proposal or offer (including, without limitation, any proposal or offer to
stockholders of FelCor), other than a proposal or offer by MeriStar or MeriStar
OP, to acquire in any manner, directly or indirectly, more than a 10% equity
interest in any voting securities of, or 10% or more of the consolidated assets
of, FelCor or any of its Significant Subsidiaries. FelCor immediately shall
cease and cause to be terminated all existing discussions or negotiations with
any persons conducted heretofore with respect to, or that could reasonably be
expected to lead to, any FelCor Acquisition Proposal.
(b) Neither the Board of Directors of FelCor nor any committee
thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify,
in a manner adverse to MeriStar or MeriStar OP, the approval or recommendation
by the Board of Directors of FelCor or any committee thereof of this Agreement
or the Merger or (ii) approve or recommend, or propose to approve or recommend,
any FelCor Acquisition Proposal. Notwithstanding the foregoing, the Board of
Directors of FelCor, to the extent required by its duties under Maryland law, as
determined in good faith by a majority of the disinterested members thereof
having received the advice of outside counsel, may approve or recommend (and, in
connection therewith, withdraw or modify its approval or recommendation of this
Agreement or the Merger) a FelCor Superior Proposal (as defined below). For
purposes of this Agreement, a "FelCor Superior Proposal" means a bona fide
written proposal made by a third party to acquire FelCor or any of its
Significant Subsidiaries pursuant to a tender or exchange offer, a merger, a
share exchange, a sale of all or substantially all of its assets or otherwise,
in any such case, on terms which a majority of the disinterested members of the
Board of Directors of FelCor determines in their good faith judgment (after
consultation with independent financial advisors) to be more favorable to FelCor
and its stockholders than the Merger and for which financing, to the extent
required, is then fully committed or which, in the good faith judgment of a
majority of such disinterested members (after consultation with independent
financial advisors), is reasonably capable of being financed by such third
party.
(c) FelCor shall promptly advise MeriStar orally and in writing of
any FelCor Acquisition Proposal or any inquiry with respect to, or which could
reasonably be expected to lead to, any FelCor Acquisition Proposal, the material
terms and conditions of such FelCor Acquisition Proposal or inquiry and the
identity of the Person making any such FelCor Acquisition Proposal or inquiry.
FelCor will keep MeriStar fully informed of the status and
46
details of any such FelCor Acquisition Proposal or inquiry. FelCor shall give
MeriStar at least one day's advance notice of any information to be supplied to,
and at least three days' advance notice of any agreement to be entered into
with, any Person making an FelCor Acquisition Proposal.
(d) Nothing contained in this Section 6.2 will prohibit FelCor
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
FelCor's stockholders if the FelCor Board of Directors determines that such
disclosure is necessary in order to comply with the FelCor Board of Directors'
duties under Maryland law; provided, however, that neither FelCor nor the FelCor
Board of Directors nor any committee thereof may, except in accordance with
Section 6.2(b), withdraw or modify, or propose publicly to withdraw or modify,
its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, a FelCor Acquisition
Proposal.
6.3 CONDUCT OF MERISTAR'S BUSINESS PENDING MERGER. Prior to the
Effective Time, (i) except as expressly provided for in this Agreement, (ii)
except as consented to in writing by FelCor or approved by the Interim
Transactions Committee (as hereinafter defined), or (iii) except as otherwise
set forth in Schedule 6.3 to the MeriStar Disclosure Letter, MeriStar shall, and
shall cause each MeriStar Subsidiary to:
(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted;
(b) preserve intact its business organization and goodwill and use
its reasonable efforts to keep available the services of its officers and
employees;
(c) not acquire, enter into any option to acquire, or exercise any
option or contract to acquire, additional real property (including, without
limitation, any hotel property), incur additional indebtedness, encumber assets
or commence construction of, or enter into any agreement or commitment to
develop or construct, other real estate or hotel projects, except that MeriStar
may incur additional indebtedness under its revolving credit facility as in
effect on the date hereof;
(d) not amend the MeriStar Charter or MeriStar Bylaws, the
MeriStar OP Partnership Agreement, or other comparable organizational documents
of any MeriStar Subsidiary;
(e) (x) make no change in the number of shares of capital stock,
membership interests or units (or their equivalent) of partnership interest
issued and outstanding with respect to MeriStar or any MeriStar Subsidiary,
other than pursuant to (i) the exercise of options disclosed in Schedule 4.3(b)
to the MeriStar Disclosure Letter, or (ii) any exchange, redemption or
conversion of the MeriStar OP Units or MeriStar Convertible Notes into shares of
MeriStar Common Stock in accordance with the existing agreements governing same,
and (y) not grant any rights, warrants or options to acquire any such shares,
membership or partnership interests;
47
(f) not (i) authorize, declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of MeriStar
Common Stock or partnership interests in MeriStar OP except as contemplated in
Section 2.2(c) or (ii) directly or indirectly redeem, purchase or otherwise
acquire any shares of capital stock, membership interests or units of
partnership interest or any option, warrant or right to acquire, or security
convertible into, shares of capital stock, membership interests, or units of
partnership interest in MeriStar or any MeriStar Subsidiary except for the
exchange of MeriStar OP Units for shares of MeriStar Common Stock pursuant to an
exchange agreement in existence on the date of this Agreement;
(g) not sell, lease, mortgage, subject to Lien or otherwise
dispose of any of the MeriStar Properties except for leases or subleases of
long-term stay rental units, newsstands, gift shops, rooftop antenna spaces and
other facilities customarily leased to third parties, that are entered into in
the ordinary and normal course of business with unrelated third parties and
that, individually or in the aggregate, are not material to the business or
operations of the MeriStar Property to which they relate;
(h) not enter into any commitment, contractual obligation, capital
expenditure or transaction (each, a "MeriStar Commitment") which may result in
total payments or liability by or to it in excess of $500,000 or aggregate
MeriStar Commitments in excess of $1,000,000, except for the capital
expenditures disclosed in the MeriStar Budget and Schedule, and not make any
capital expenditures except in conformance in all material respects with the
MeriStar Budget and Schedule;
(i) not settle any stockholder derivative or class action claims
arising out of, relating to or connected with any of the transactions
contemplated by this Agreement;
(j) not enter into or amend any MeriStar Commitment or employment,
compensation or severance agreement with any of its officers, directors,
employees or Affiliates (as defined herein), other than waivers by employees of
benefits under such agreements;
(k) confer on a regular basis with one or more representatives of
FelCor to report operational matters of a material nature and, subject to
Sections 6.1 and 6.5, any proposals to engage in material transactions; (l)
promptly notify FelCor of any material emergency or other material change in its
business, financial condition, results of operations or prospects;
(m) maintain its books and records in accordance with GAAP,
consistently applied, and not change in any material manner any of its methods,
principles or practices of accounting in effect at the applicable MeriStar
Financial Statement Date, except as may be required by applicable Law or GAAP;
(n) not make or rescind any express or deemed election relative to
Taxes which would have a MeriStar Material Adverse Effect (unless required by
Law or necessary to preserve MeriStar's status as a REIT or the status of any
MeriStar Subsidiary as a partnership
48
for Tax purposes or as a qualified REIT subsidiary or a taxable REIT subsidiary
under Section 856(i) of the Code and Section 856(l) of the Code, respectively);
(o) not adopt any new employee benefit plan or amend any existing
plans or rights, except for changes which are required by Law or changes which
are not more favorable to participants than provisions presently in effect;
(p) not amend any contract to which MeriStar or any MeriStar
Subsidiary is a party that is listed or identified in the MeriStar Disclosure
Letter, or any schedule thereto, in a manner adverse to FelCor without obtaining
the prior written consent of FelCor or the approval of the Interim Transactions
Committee (as defined herein);
(q) not change the ownership of any MeriStar Subsidiary;
(r) promptly notify FelCor of any action, suit, proceeding, claim
or audit pending or threatened against or with respect to MeriStar or any
MeriStar Subsidiary where there is a reasonable possibility of a determination
or decision which could have a MeriStar Material Adverse Effect;
(s) continue to maintain and repair all of the MeriStar Properties
in a manner consistent with past practices;
(t) maintain all licenses and permits material to the conduct of
business at any MeriStar Property or as may be required by any Governmental
Entity administering Laws regulating the MeriStar Properties, and take whatever
action is reasonably necessary to maintain such licenses and permits; and
(u) not make any loans, advances or capital contributions to, or
investments in, any other Person, except loans, advances and capital
contributions to MeriStar Subsidiaries in existence as of the date hereof and
ordinary course expense advances to employees and except in connection with a
transaction permitted by Section 6.3(c).
6.4 CONDUCT OF FELCOR'S BUSINESS PENDING MERGER. Prior to the
Effective Time, (i) except as expressly provided for in this Agreement, (ii)
except as consented to in writing by MeriStar or approved by the Interim
Transactions Committee or (iii) except as otherwise set forth in Schedule 6.4 to
the FelCor Disclosure Letter, FelCor shall, and shall cause each FelCor
Subsidiary to:
(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted;
(b) preserve intact its business organization and goodwill and use
its reasonable efforts to keep available the services of its officers and
employees;
(c) not acquire, enter into any option to acquire, or exercise any
option or contract to acquire, additional real property (including, without
limitation, any hotel property), incur additional indebtedness, encumber assets
or commence construction of, or enter into any agreement or commitment to
develop or construct, other real estate or hotel projects, except
49
that FelCor may incur additional indebtedness (x) in connection with this
Agreement and the Transactions contemplated herein and (y) under its revolving
credit facility as in effect on the date hereof;
(d) not amend the FelCor Charter or FelCor Bylaws, the FelCor OP
Partnership Agreement, or other comparable organizational documents of any
FelCor Subsidiary;
(e) (x) make no increase in the number of shares of stock of
FelCor, membership interests or units (or their equivalent) of partnership
interest issued and outstanding with respect to FelCor or any FelCor Subsidiary,
other than pursuant to (i) the exercise of options disclosed in Schedule 5.3(c)
to the FelCor Disclosure Letter, or (ii) any exchange or redemption of FelCor OP
Units for shares of FelCor Common Stock in accordance with the existing
agreements governing same, and (y) not grant any rights, warrants or options to
acquire any such shares, membership or partnership interests;
(f) not (i) authorize, declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of FelCor
Common Stock or partnership interests in FelCor OP except as contemplated in
Section 2.2(c) or (ii) directly or indirectly redeem, purchase or otherwise
acquire any shares of capital stock, membership interests or units of
partnership interest or any option, warrant or right to acquire, or security
convertible into, shares of capital stock, membership interests, or units of
partnership interest except for the exchange of FelCor OP Units for shares of
FelCor Common Stock pursuant to the FelCor OP Partnership Agreement;
(g) not sell, lease, mortgage, subject to Lien or otherwise
dispose of any of the FelCor Properties except for leases or subleases of
long-term stay rental units, newsstands, gift shops, rooftop antenna spaces and
other facilities customarily leased to third parties, that are entered into in
the ordinary and normal course of business with unrelated third parties and
that, individually or in the aggregate, are not material to the business or
operations of the FelCor Property to which they relate;
(h) not enter into any commitment, contractual obligation, capital
expenditure or transaction (each, a "FelCor Commitment") which may result in
total payments or liability by or to it in excess of $500,000 or aggregate
FelCor Commitments in excess of $1,000,000, except for the capital expenditures
disclosed in the FelCor Budget and Schedule;
(i) not settle any stockholder derivative or class action claims
arising out of, relating to or connected with any of the transactions
contemplated by this Agreement;
(j) not enter into or amend any FelCor Commitment or employment,
compensation or severance agreement with any of its officers, directors,
employees or Affiliates, other than waivers by employees of benefits under such
agreements;
(k) confer on a regular basis with one or more representatives of
MeriStar to report operational matters of a material nature and, subject to
Sections 6.2 and 6.5, any proposals to engage in material transactions;
50
(l) promptly notify MeriStar of any material emergency or other
material change in its business, financial condition, results of operations or
prospects;
(m) maintain its books and records in accordance with GAAP,
consistently applied, and not change in any material manner any of its methods,
principles or practices of accounting in effect at the applicable FelCor
Financial Statement Date, except as may be required by applicable Law or GAAP;
(n) not make or rescind any express or deemed election relative to
Taxes which would have a FelCor Material Adverse Effect (unless required by Law
or necessary to preserve FelCor's status as a REIT or the status of any FelCor
Subsidiary as a partnership for Tax purposes or as a qualified REIT subsidiary
or a taxable REIT subsidiary under Section 856(i) of the Code and Section 856(l)
of the Code, respectively);
(o) not change the ownership of any FelCor Subsidiary; and
(p) promptly notify MeriStar of any action, suit, proceeding,
claim or audit pending or threatened against or with respect to FelCor or any
FelCor Subsidiary where there is a reasonable possibility of a determination or
decision which could have a FelCor Material Adverse Effect.
6.5 INTERIM TRANSACTIONS COMMITTEE. Promptly following the
execution of this Agreement, MeriStar and FelCor will constitute and establish a
committee (the "Interim Transactions Committee") which will evaluate and
consider any proposed commitment, contractual obligation, capital expenditure or
transaction of the type referred to in Sections 6.3 or 6.4 of this Agreement, or
the settlement of any stockholder derivative or class action claims arising out
of or in connection with any of the transactions contemplated by this Agreement
between the date hereof and the Effective Time. The Interim Transactions
Committee will consist of the President and Chief Executive Officer of FelCor,
or such other individual selected by FelCor who is reasonably acceptable to
MeriStar, and the Chairman and Chief Executive Officer of MeriStar, or such
other individual selected by MeriStar who is reasonably acceptable to FelCor.
The Interim Transactions Committee will act only by the affirmative vote of both
members thereof. The Interim Transactions Committee will be abolished at the
Effective Time.
6.6 COMPLIANCE WITH THE SECURITIES ACT. Prior to the Effective
Time, MeriStar shall cause to be prepared and delivered to FelCor a list
(reasonably satisfactory to counsel for FelCor) identifying all persons who, at
the time of the FelCor and MeriStar Stockholders Meetings, may be deemed to be
"affiliates" of MeriStar as that term is used in paragraphs (c) and (d) of Rule
145 under the Securities Act (the "Affiliates"). MeriStar shall use its best
efforts to cause each person who is identified as an Affiliate in such list to
deliver to FelCor on or prior to the Effective Time a written agreement, in the
form attached hereto as Exhibit "C", that such Affiliate will not sell, pledge,
transfer or otherwise dispose of any FelCor Common Stock issued to such
Affiliate pursuant to the Merger, except pursuant to an effective registration
statement under the Securities Act, in compliance with paragraph (d) of Rule 145
or pursuant to an exemption from the registration requirements of the Securities
Act. FelCor shall be entitled to place legends as specified in such written
agreements on the
51
certificates representing any FelCor Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the FelCor Common Stock,
consistent with the terms of such agreements.
6.7 FILING OF CERTAIN REPORTS. The Surviving Corporation shall
file the reports required to be filed by it under the Exchange Act and the rules
and regulations adopted by the SEC thereunder, and it will take such further
action as any Affiliate of MeriStar or FelCor may reasonably request, all to the
extent required from time to time to enable such Affiliate to sell shares of
stock of the Surviving Corporation received by such Affiliate in the Merger
without registration under the Securities Act pursuant to (i) Rule 145(d)(1)
under the Securities Act, as such rule may be amended from to time, or (ii) any
successor rule or regulation hereafter adopted by the SEC.
6.8 OTHER ACTIONS. Each of MeriStar on the one hand and FelCor on
the other hand shall not, and shall use commercially reasonable efforts to cause
their respective Subsidiaries not to, take any action that would result in (i)
any of the representations and warranties of such party (without giving effect
to any "knowledge" qualification) set forth in this Agreement that are qualified
as to materiality becoming untrue, (ii) any of such representations and
warranties (without giving effect to any "knowledge" qualification) that are not
so qualified becoming untrue in any material respect or (iii) except as
contemplated by Section 6.1 or 6.2 (as the case may be), any of the conditions
to the Merger set forth in Article 8 not being satisfied.
ARTICLE 7
ADDITIONAL COVENANTS
The parties additionally agree as follows with respect to the period
from and after the date of this Agreement to the Effective Time.
7.1 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT; MERISTAR STOCKHOLDERS MEETING AND FELCOR STOCKHOLDERS MEETING.
(a) The parties shall cooperate and promptly prepare and FelCor
shall file with the SEC as soon as practicable a Registration Statement on Form
S-4 under the Securities Act (the "Registration Statement") covering the FelCor
Common Stock issuable in the Merger, a portion of which registration statement
shall also serve as the joint proxy statement with respect to the meetings of
the stockholders of FelCor and MeriStar in connection with the Merger (the
"Proxy Statement"). FelCor shall use commercially reasonable efforts, and
MeriStar shall use commercially reasonable efforts to cooperate with FelCor, to
(i) respond to any comments of the SEC and (ii) have the Registration Statement
declared effective under the Securities Act and the rules and regulations
promulgated thereunder as promptly as practicable after such filing and to keep
the Registration Statement effective as long as is necessary to consummate the
Merger and the transactions contemplated hereby. Each of MeriStar and FelCor
will use its reasonable best efforts to cause the Proxy Statement to be mailed
to its respective stockholders as promptly as practicable after the Registration
52
Statement is declared effective under the Securities Act. Each party agrees to
date its Proxy Statement as of the same date, which shall be the approximate
date of mailing to the stockholders of the respective parties. FelCor will
notify MeriStar promptly of the receipt of any comments from the SEC and of any
request by the SEC for amendments or supplements to the Registration Statement
or the Proxy Statement or for additional information and will supply MeriStar
with copies of all correspondence between such party or any of its
representatives and the SEC, with respect to the Registration Statement or the
Proxy Statement. Whenever any event occurs which is required to be set forth in
an amendment or supplement to the Registration Statement or the Proxy Statement,
MeriStar or FelCor, as the case may be, shall promptly inform the other of such
occurrences and cooperate in filing with the SEC and/or mailing to the
stockholders of MeriStar or FelCor such amendment or supplement to the
Registration Statement or Proxy Statement. Each party hereto shall also take
such action as may be reasonably required to cause the shares of FelCor Common
Stock issuable in connection with the Merger to be registered or to obtain an
exemption from registration under applicable state "blue sky" or securities
laws; provided, however, that no party shall be required to register or qualify
as a foreign corporation or to take other action which would subject it to
general service of process in any jurisdiction where the Surviving Corporation
will not be, following the Merger, so subject. Each of the parties hereto shall
furnish all information concerning itself which is required or customary for
inclusion in the Proxy Statement and Registration Statement. The MeriStar
Parties and the FelCor Parties also shall use commercially reasonable efforts to
cause their respective legal counsel designated in Section 8.1(f), (g) and (h)
to deliver any opinions, which opinions shall be filed as exhibits to the
Registration Statement, addressing federal income tax matters and other matters
as are required to be addressed in the Registration Statement and the Proxy
Statement under the applicable rules of the SEC. MeriStar OP shall promptly
complete the accounting audit of its financial statements for the 1998, 1999 and
2000 fiscal years so that such financial statements are available for inclusion
in any filings, reports or registration statements (including the Registration
Statement) if and to the extent such inclusion is required under applicable
regulations of the SEC. The information provided by any party hereto for use in
the Proxy Statement and Registration Statement shall be true and correct in all
material respects without omission of any material fact which is required to
make such information not false or misleading. No representation, covenant or
agreement is made by any party hereto with respect to information supplied by
any other party for inclusion in the Proxy Statement and Registration Statement.
(b) MeriStar shall use commercially reasonable efforts to cause to
be delivered to FelCor letters of KPMG Peat Marwick LLP, dated a date within two
business days before the date of the Proxy Statement and Registration Statement,
and addressed to FelCor, in form and substance reasonably satisfactory to FelCor
and customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements on
Form S-4.
(c) FelCor shall use commercially reasonable efforts to cause to
be delivered to MeriStar a letter of PricewaterhouseCoopers L.L.P., dated a date
within two business days before the date of the Proxy Statement and Registration
Statement, and addressed to MeriStar, in form and substance reasonably
satisfactory to MeriStar and customary in scope
53
and substance for "cold comfort" letters delivered by independent public
accountants in connection with registration statements on Form S-4.
(d) MeriStar will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold (no sooner than 20
business days following the date the Proxy Statement is mailed to the
stockholders of MeriStar) a meeting of its stockholders (the "MeriStar
Stockholders Meeting") for the purpose of obtaining the MeriStar Stockholder
Approval. MeriStar will, through its Board of Directors, recommend to its
stockholders approval of this Agreement, the Merger and the other transactions
contemplated by this Agreement, which recommendation shall also be stated in the
Proxy Statement. Prior to the MeriStar Stockholders Meeting, such recommendation
may be withdrawn, modified or amended only in accordance with Section 6.1 of
this Agreement.
(e) FelCor will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold (no sooner than 20
business days following the date the Proxy Statement is mailed to the
stockholders of FelCor) a meeting of its stockholders (the "FelCor Stockholders
Meeting") for the purpose of obtaining the FelCor Stockholder Approval. FelCor
will, through its Board of Directors, recommend to its stockholders approval of
this Agreement, the Merger and the other transactions contemplated by this
Agreement, which recommendation shall also be stated in the Proxy Statement.
Prior to the FelCor Stockholders Meeting, such recommendation may be withdrawn,
modified or amended only in accordance with Section 6.2 of this Agreement.
(f) MeriStar and FelCor shall use commercially reasonable efforts
to hold their respective stockholder meetings on the same day, which day,
subject to the provisions of Section 7.1(d) and 7.1(e), shall be a day not later
than 45 days after the date the Proxy Statement is mailed.
(g) If on the date for the MeriStar Stockholders Meeting and the
FelCor Stockholders Meeting established pursuant to Section 7.1(d) and (e),
respectively, either MeriStar or FelCor has not received a sufficient number of
proxies to approve this Agreement, the Merger and the other transactions
contemplated by this Agreement, then both parties will adjourn their respective
stockholders meetings until the first to occur of (i) the date ten calendar days
after the originally scheduled date of the stockholders meetings or (ii) the
date on which the requisite number of proxies approving this Agreement, the
Merger and the other transactions contemplated by this Agreement has been
obtained.
7.2 ACCESS TO INFORMATION: CONFIDENTIALITY. Subject to the
requirements of confidentiality agreements with third parties, each of MeriStar
and FelCor shall, and shall cause each of its Subsidiaries to, afford to the
other party and to the officers, employees, accountants, counsel, financial
advisors and other representatives of such other party, reasonable access during
normal business hours prior to the Effective Time to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, each of MeriStar and FelCor shall, and shall cause each of its
Subsidiaries to, furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and (b)
all other information concerning its business, properties and personnel
54
as such other party may reasonably request. Each of MeriStar and FelCor shall
cause its Subsidiaries to, and shall use commercially reasonable efforts to
cause its officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to, hold any nonpublic information in
confidence to the extent required by, and in accordance with, and will comply
with the provisions of the letter agreement dated as of March 7, 2001 between
MeriStar and FelCor (the "Confidentiality Agreement"), the terms of which are
incorporated herein and made a part of this Agreement.
7.3 REGULATORY MATTERS. Each party hereto shall cooperate and use
its best efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals and authorizations of all governmental
authorities, including, without limitation, the NYSE, National Association of
Securities Dealers or the American Stock Exchange (as applicable), necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement.
7.4 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) MERISTAR INDEMNIFICATION. From and after the Effective Time,
the Surviving Corporation will provide indemnification for each individual who
is now or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, an officer or director of MeriStar or any MeriStar
Subsidiary (the "Indemnified Parties") which is the same as the indemnification
provided to the Indemnified Parties by MeriStar and the MeriStar Subsidiaries in
the MeriStar Charter and Bylaws or the applicable charter or other
organizational document of such MeriStar Subsidiary, as in effect on the date
hereof; provided, that such indemnification covers actions on or prior to the
Effective Time, including without limitation all transactions contemplated by
this Agreement, whether asserted before, at or after the Effective Time.
(b) INSURANCE. The Surviving Corporation shall obtain, at its
expense, so-called "tail insurance" providing for the extension of the directors
and officers liability insurance maintained by MeriStar for six years after the
Closing Date.
(c) CONTINUING INDEMNIFICATION. The Surviving Corporation will
continue in force and effect after the Effective Time each indemnification
agreement between MeriStar or any MeriStar Subsidiary, on the one hand, and any
Person, on the other hand, which was in force and effect immediately prior to
the date of this Agreement.
(d) SUCCESSORS. In the event the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then and in either such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 7.4.
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(e) BENEFIT. The provisions of this Section 7.4 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, and his
or her heirs, representatives, administrators, successors and assigns.
7.5 PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
obligations imposed by law, MeriStar and FelCor will cooperate with each other
in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto or thereto without the consent of the other party
(which consent shall not be unreasonably withheld or delayed). In this regard,
the parties shall comply with the requirements of any applicable rules and
regulations of the SEC, including Regulation FD and Rule 165. To the extent
required by such rules and regulations, the parties shall cooperate to make any
required filings or to issue any required public disclosures thereunder. It is
understood and agreed that this Section 7.5 is intended to address matters with
respect to this Agreement and the transactions contemplated hereby (e.g.,
status, terms, etc.), and is not intended to address disclosure of confidential
non-public information of a party obtained by the other party in connection with
this Agreement and the transactions contemplated hereby, which information is
subject to the Confidentiality Agreement and Section 7.2 hereof.
7.6 EMPLOYMENT AGREEMENTS AND WORKFORCE MATTERS.
(a) Prior to the Closing Date, FelCor, on behalf of the Surviving
Corporation, shall tender employment agreements or make offers of employment (as
applicable) to the MeriStar employees set forth on Schedule 7.6(a) to the FelCor
Disclosure Letter, upon the terms and subject to the conditions set forth on
such schedule. FelCor shall have the right, but not the obligation, to tender
offers of employment to other MeriStar employees as determined by FelCor in its
sole discretion.
(b) After the Effective Time, FelCor agrees to comply with and pay
the severance and bonus arrangements of former MeriStar or MeriStar OP
employees, as described on Schedule 7.6(b) to the MeriStar Disclosure Letter, if
(i) such employees continue in good faith to perform their duties as employees
through the Closing Date and (ii) except for prorated bonuses paid for the 2001
year, such employees are not employed with the Surviving Corporation or with
MeriStar Hotels & Resorts or their Subsidiaries with substantially the same
compensation and duties as applicable to such employees as of the date hereof.
7.7 EMPLOYEE BENEFIT PLANS.
(a) MERISTAR BENEFIT PLANS. After the Effective Time, each
employee of MeriStar or any MeriStar Subsidiary who is employed by the Surviving
Corporation or the Surviving Partnership ("Continuing Employee") shall be
eligible to participate in each FelCor Benefit Plan for which FelCor, in its
sole discretion, determines that such Continuing Employee participated in a
similar MeriStar Benefit Plan, at the level of similarly situated employees of
the Surviving Corporation or the Surviving Partnership; provided, however, if
the Surviving Corporation or the Surviving Partnership, in its sole discretion,
determines it is not
56
practicable for such Continuing Employees to participate in one or more FelCor
Benefit Plans as described above, the Surviving Corporation or Surviving
Partnership shall adopt and continue the corresponding MeriStar Benefit Plan,
and continue such Continuing Employee's participation therein, until such time
as the Surviving Corporation or the Surviving Partnership determines it is
practicable to include such Continuing Employee in its corresponding FelCor
Benefit Plan; and provided, further, that the Surviving Corporation or the
Surviving Partnership may make such adjustments and impose such conditions on
such Continuing Employee's participation in any FelCor Benefit Plan, or
continued MeriStar Benefit Plan, as, in their sole discretion, they shall
reasonably determine as necessary or appropriate to insure that a Continuing
Employee shall not receive a duplicate benefit, or any benefit to which an
employee of FelCor would not have been entitled, under comparable circumstances.
FelCor shall have the right, exercisable in its sole discretion, to instruct
MeriStar and any MeriStar Subsidiary (i) to terminate MeriStar's employee stock
purchase plan effective at the end of the current option exercise period
(however denominated in such plan), and (ii) to terminate any one or more
MeriStar Benefit Plans prior to the Closing Date effective immediately prior to
the Effective Time.
(b) CREDIT FOR PAST SERVICES. Without limitation of the foregoing
provisions of this Section 7.7, each Continuing Employee shall receive credit
for service with MeriStar or any MeriStar Subsidiary, or their predecessors for
purposes of (i) eligibility to participate (including waiting periods and
without being subject to any subsequent entry date requirement for which the
waiting period has already been satisfied), vesting and eligibility to receive
benefits (including without pre-existing conditions limitations) under any
FelCor Benefit Plan, or continued MeriStar Benefit Plan, in which they are
designated by the Surviving Corporation as eligible to participate, and (ii)
benefit accrual under only the severance or vacation pay plan of the Surviving
Corporation or Surviving Partnership in which such Continuing Employee is
designated by the Surviving Corporation or Surviving Partnership as eligible to
participate, if any; and provided, however, that FelCor, in its sole discretion,
may adjust the crediting of service so as to insure that a Continuing Employee
shall not receive a duplicate benefit, or any benefit to which an employee of
FelCor would not have been entitled based on a comparable period of service.
With respect to any FelCor Benefit Plan which is a medical plan or a cafeteria
plan, where a Continuing Employee is designated as eligible to participate in
the corresponding FelCor Benefit Plan(s), the Surviving Corporation and
Surviving Partnership shall cause to be waived any pre-existing condition
limitation to the same extent such pre-existing condition was waived under the
corresponding MeriStar Benefit Plan, and shall give effect, in determining any
deductible and maximum out-of-pocket limitations, the claims incurred and
amounts paid by, and amounts reimbursed to, such Continuing Employee with
respect to the similar plans maintained by MeriStar or a MeriStar Subsidiary
immediately prior to the Closing Date; provided, further, and without
limitation, that FelCor, in its sole discretion, may adjust the benefits under
such FelCor Benefit Plan(s) so as to insure that a Continuing Employee shall not
receive a duplicate benefit, or any benefit to which an employee of FelCor would
not have been entitled, under comparable circumstances.
7.8 STOCK OPTION AND OTHER STOCK PLANS.
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(a) EXCHANGE OF STOCK OPTIONS. As of the Effective Time, each
option to purchase shares of MeriStar Common Stock (a "MeriStar Stock Option")
which is outstanding as of the Effective Time shall be assumed (or a substitute
option granted) by the Surviving Corporation and shall continue as an option
("Assumed Option") to purchase the number of shares of FelCor Common Stock
(rounded up to the nearest whole share) equal to the number of shares of
MeriStar Common Stock subject to such option multiplied by the Exchange Ratio,
at an exercise price per share of FelCor Common Stock (rounded down to the
nearest xxxxx) equal to the former exercise price per share of MeriStar Common
Stock under such MeriStar Stock Option immediately prior to the Effective Time
minus the Cash Consideration. Each Assumed Option will be in the form determined
by FelCor, and furnished to MeriStar at least 10 days prior to the Closing Date;
provided, however, that the provisions of each such Assumed Option shall not
differ from the provisions of the corresponding MeriStar Stock Option except to
the extent such provisions could have been added, or changed, by amendment under
the terms of the MeriStar Incentive Plan and the MeriStar Stock Option without
the consent of option holders. Without limiting the generality of the forgoing,
FelCor shall not be required to offer employment to an employee of MeriStar, or
MeriStar OP, including, without limitation, a person set forth on Schedule
7.6(a), unless such employee furnishes FelCor with a written waiver, in a form
acceptable to FelCor, of any acceleration in the vesting of his MeriStar Stock
Option(s) which otherwise would occur as a result of the Merger.
(b) ADOPTION OF THE MERISTAR INCENTIVE PLAN. In its sole
discretion, and without limiting the generality of the forgoing provisions of
this Section 7.8, FelCor shall have the right to assume the MeriStar Incentive
Plan.
(c) OTHER ACTIONS. As soon as practicable after the Effective
Time, the Surviving Corporation shall deliver the Assumed Options to the holders
of MeriStar Stock Options upon surrender of the corresponding MeriStar Stock
Options. On, or as soon as practicable after, the Effective Time, the Surviving
Corporation will cause to be filed one or more registration statements on Form
S-3 or Form S-8 under the Securities Act (or any successor or other appropriate
forms), in order to register those shares of FelCor Common Stock subject to
Assumed Options ("Assumed Option Shares") not previously registered, or
post-effective amendments on Form S-3 or Form S-8 to the Registration Statement,
to the extent permitted by applicable law, to describe and cover the Assumed
Option Shares. The Surviving Corporation shall use its best efforts to maintain
the effectiveness of such registration statements (and maintain the current
status of the prospectuses contained therein) for so long as such Assumed
Options remain outstanding. FelCor shall use its best efforts to cause such
registration statements (or post-effective amendments) on Form S-3 to become
effective within 60 days after the date of filing. At or prior to the Effective
Time, the Surviving Corporation shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of FelCor Common Stock for
delivery in connection with (i) the Assumed Options, (ii) the exchange of
MeriStar OP Units and (iii) the conversion of the outstanding MeriStar
Convertible Notes. The Surviving Corporation shall take all corporate action
necessary or appropriate to obtain stockholder approval with respect to the
Assumed Options to the extent, if any, such approval is required for purposes of
the Code or other applicable law. With respect to the those individuals who
subsequent to the Merger will be
58
subject to the reporting requirements under Section 16(a) of the Exchange Act
with respect to equity securities of the Surviving Corporation, the Surviving
Corporation shall administer such Assumed Options, where applicable, in a manner
that complies with Rule 16b-3 promulgated under the Exchange Act.
7.9 REGISTRATION STATEMENTS.
(a) SHELF REGISTRATION. As soon as practicable after the date
hereof, the Surviving Corporation shall cause to be filed a registration
statement (a "Shelf Registration") on Form S-3 or any other appropriate form
under the Securities Act for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 thereunder or any similar rule that may be adopted by
the SEC and permitting sales in ordinary course brokerage or dealer transactions
not involving an underwritten public offering covering all shares of FelCor
Common Stock issuable after the Effective Time to former holders of MeriStar OP
Units. The Surviving Corporation shall use its reasonable best efforts to have
such Shelf Registration declared effective on or prior to the Closing Date and
remain effective until all shares registered thereunder are sold or are eligible
to be sold under Rule 144(k) promulgated under the Securities Act. The Surviving
Corporation shall pay all registration expenses (other than sales commission and
discounts) incurred in connection with the Shelf Registration. In lieu of the
Shelf Registration, if permitted under applicable SEC regulations, FelCor may
elect to include such offering by the former holders of MeriStar OP Units as
part of the Registration Statement.
(b) EXCHANGE REGISTRATION. As soon as practicable after the date
hereof, each of MeriStar and FelCor shall cause to be filed a registration
statement (an "Exchange Registration") on Form S-4 or any other appropriate form
under the Securities Act, registering the offer to exchange (i) in the case of
MeriStar, $300 million in principal amount of new Series A and Series B 9%
Senior Notes Due 2008 and $200 million in principal amount of new Series C and
Series D 9?% Senior Notes Due 2011, for $300 million in principal amount of
outstanding old Series A and Series B 9% Senior Notes Due 2008 and $200 million
in principal amount of outstanding old Series C and Series D 9?% Senior Notes
Due 2011, in each case, which had been issued without registration under the
Securities Act, and (ii) in the case of FelCor, $100 million in principal amount
of new 9 1/2% Senior Notes Due 2008 for $100 million in principal amount of
outstanding old 9 1/2% Senior Notes Due 2008 which had been issued without
registration under the Securities Act. In each case, MeriStar or FelCor, as
applicable, shall use commercially reasonable efforts to have such Exchange
Registration declared effective, and to have its respective exchange offer
completed, on or prior to the Closing Date. Each of MeriStar and FelCor shall
pay all registration expenses incurred in connection with its respective
Exchange Registration.
7.10 REORGANIZATION STATUS. Each party hereto agrees, as to itself
and to each of its Subsidiaries, that after the date hereof and prior to the
Effective Time or earlier termination of this Agreement, except as expressly
contemplated or permitted in this Agreement, neither party hereto shall, nor
shall either party hereto permit any of its Subsidiaries or any employees,
officers or directors of such party or of any of its Subsidiaries to, take any
actions which would, or would be reasonably likely to, adversely affect the
59
ability of the Merger to qualify as a reorganization under Section 368(a)(1)(A)
of the Code, and each party hereto shall use all reasonable efforts to achieve
such result and to obtain the opinions of counsel described in Section 8.1(h).
7.11 NYSE LISTING. FelCor shall use commercially reasonable efforts
to cause the shares of FelCor Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Effective Time.
7.12 TRANSFER TAXES. MeriStar and FelCor shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees or any similar taxes which become payable in
connection with the Transactions that are required or permitted to be filed on
or before the Effective Time.
7.13 PAYMENT OF MERISTAR DEBT. MeriStar and FelCor agree that
immediately prior to, or upon, the Effective Time, the Surviving Corporation
shall pay to the applicable MeriStar lenders the amount necessary to discharge
and terminate MeriStar's $1.0 billion Senior Secured Credit Facility.
7.14 RESIGNATIONS. On the Closing Date, MeriStar shall cause the
directors, managers and officers of each MeriStar Subsidiary to submit their
resignations from such positions, effective as of the Effective Time.
7.15 ASSUMPTION OF DEBT. With respect to the debt issued by
MeriStar or the MeriStar OP under indentures qualified under the Trust Indenture
Act of 1939 (the "Indentures"), FelCor, as to debt issued by MeriStar, and
FelCor OP, as to debt issued by MeriStar OP, shall execute and deliver to the
trustees under the respective Indentures, Supplemental Indentures, in form
satisfactory to the respective trustees, expressly assuming the obligations of
MeriStar or MeriStar OP with respect to the due and punctual payment of the
principal of and interest, if any, on all debt securities issued by MeriStar or
MeriStar OP under the respective Indentures and the due and punctual performance
of all the terms, covenants and conditions of the respective Indentures to be
kept or performed by MeriStar or MeriStar OP, and shall deliver such
Supplemental Indentures to the respective trustees under the Indentures.
7.16 TAX PROVISION. Except as otherwise required under the
agreements listed in Schedule 4.13(l) to the MeriStar Disclosure Letter with
respect to the properties previously contributed to MeriStar OP, FelCor OP shall
use the traditional method contained in the Treasury Regulations promulgated
under Section 704(c) of the Code with respect to all properties contributed by
MeriStar OP to FelCor OP in the OP Merger.
7.17 FINANCING. The MeriStar Parties acknowledge that a portion of
the financing to be obtained by the FelCor Parties in order to consummate the
Transactions may be secured by assets of the MeriStar Parties. The MeriStar
Parties shall use all reasonable commercial efforts to provide such information
regarding MeriStar, the MeriStar Subsidiaries and the MeriStar Properties as may
be reasonably requested by the Persons (or their representatives
60
or agents) providing such financing, to answer inquiries by such Persons and to
otherwise cooperate in any reasonable manner to assist the FelCor Parties in
obtaining such financing.
7.18 RELATIONSHIP WITH MERISTAR HOTELS & RESORTS.
(a) The MeriStar Parties shall deliver to the FelCor Parties, on
or before the Closing Date, a fully executed agreement with MeriStar Hotels &
Resorts and any of its Subsidiaries, in form reasonably satisfactory to the
FelCor Parties, that amends that certain Revolving Credit Agreement between
MeriStar OP and MeriStar H&R Operating Company, L.P., dated August 3, 1998, as
amended February 29, 2000, to reflect the agreements set forth in the Term Sheet
attached as Schedule 7.18 hereto. The MeriStar Parties shall use best efforts to
obtain on or before May 21, 2001 any necessary consents or approvals of any
lenders of MeriStar Hotels & Resorts to such amendment agreement.
(b) The MeriStar Parties shall request and obtain, under the
MeriStar Management Agreements, an estoppel certificate, dated as of a date
within ten (10) days prior to the Closing Date, from MeriStar Hotels & Resorts
or any subsidiary of MeriStar Hotels & Resorts that is a party to any such
agreement with respect to the status of the MeriStar Management Agreements, (i)
confirming that such agreements are in full force and effect, (ii) confirming
that there are no defaults, and no facts or circumstances that could reasonably
be expected to give rise to a default, thereunder, and (iii) acknowledging the
amount of the Aggregate New Management Credits, as defined in the MeriStar
Management Agreements.
7.19 COMPLETION OF CAPITAL PROJECTS. Each of MeriStar and FelCor
will continue in the ordinary and normal course of business to pursue the
completion of existing capital expenditure projects in accordance with the
MeriStar Budget and Schedule and FelCor Budget and Schedule, respectively. Any
significant deviations from the MeriStar Budget and Schedule or the FelCor
Budget and Schedule for any particular project shall be reported in writing to
the Interim Transactions Committee as soon as practicable after such party
becomes aware of the possibility of such deviation.
7.20 COMMERCIALLY REASONABLE EFFORTS AND COOPERATION. Upon the
terms and subject to the conditions of this Agreement, each of the parties
hereto will use all commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to permit and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate or make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including
without limitation, (i) obtaining all consents, approvals and waivers from third
parties prior to the Effective Time, (ii) defending any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any adverse order entered by any court or other Governmental Entity vacated
or reversed and (iii) executing and delivering any additional instruments
necessary to consummate the transactions contemplated by, and to carry out
fully, the purposes of this Agreement. In addition, and without limiting the
generality of the foregoing, MeriStar will cooperate with FelCor to ensure that
FelCor continues to qualify as a REIT following the Effective Time.
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7.21 FINANCING COMMITMENT. FelCor will deliver to MeriStar, within
30 days after the date of this Agreement, either (i) a commitment for financing
issued by Deutsche Bank Alex. Xxxxx, X. X. Xxxxxx Securities Inc., or another
comparable investment or commercial banking firm or firms, for an aggregate
amount of at least $500 million and for a term of not less than seven years, and
with such other terms and provisions as may be reasonably acceptable to FelCor
and MeriStar, or (ii) evidence reasonably satisfactory to MeriStar that the
holders of a majority of the aggregate outstanding principal amount of
MeriStar's Series A and Series B 9% Senior Notes Due 2008 and Series C and
Series D 9? % Senior Notes Due 2011 (collectively, the "Senior Notes") have
waived their right to be offered the opportunity to tender their Senior Notes
following the Merger pursuant to a Change of Control Offer as defined in the
Indenture governing the Senior Notes.
ARTICLE 8
CONDITIONS
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) STOCKHOLDER APPROVALS. Each of the Stockholder Approvals will
have been obtained.
(b) LISTING OF SHARES. The NYSE shall have approved for listing
the shares of FelCor Common Stock to be issued in the Merger, subject to
official notice of issuance.
(c) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings by the SEC seeking a stop order.
(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other transactions contemplated hereby
shall be in effect.
(e) BLUE SKY LAWS. The Surviving Corporation shall have received
all state securities or "blue sky" permits and other authorizations necessary to
issue shares of FelCor Common Stock to the stockholders of MeriStar.
(f) TAX OPINIONS RELATING TO REIT STATUS OF FELCOR AND PARTNERSHIP
STATUS OF FELCOR OP. The FelCor Parties and the MeriStar Parties shall have
received an opinion of Hunton & Xxxxxxxx, reasonably satisfactory to the FelCor
Parties and the MeriStar Parties, that (i) commencing with its taxable year
ended December 31, 1994, FelCor was organized and has operated in conformity
with the requirements for qualification as a REIT under the Code, (ii) FelCor OP
has been since its formation in 1994, and continues to be, treated for federal
income tax purposes as a partnership and not as a corporation or association
taxable as a corporation, and (iii) the Transactions will not prevent FelCor
from continuing to operate
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in conformity with the requirements for qualification as a REIT under the Code
(with customary exceptions, assumptions and qualifications and based upon
customary representations).
(g) TAX OPINIONS RELATING TO REIT STATUS OF MERISTAR AND
PARTNERSHIP STATUS OF MERISTAR OP. The FelCor Parties and the MeriStar Parties
shall have received an opinion of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx,
reasonably satisfactory to the FelCor Parties and the MeriStar Parties, that (i)
commencing with its taxable year ended December 31, 1996, MeriStar or its
predecessor was organized and has operated in conformity with the requirements
for qualification, as a REIT under the Code, and (ii) MeriStar OP has been since
its formation in 1996, and continues to be, treated for federal income tax
purposes as a partnership and not as a corporation or association taxable as a
corporation (with customary exceptions, assumptions and qualifications and based
upon customary representations).
(h) TAX OPINION RELATING TO MERGER. The FelCor Parties shall have
received an opinion dated the Closing Date from Jenkens & Xxxxxxxxx, P.C.
("J&G") reasonably satisfactory to the FelCor Parties, and the MeriStar Parties
shall have received an opinion dated the Closing Date from Xxxx, Weiss, Rifkind,
Xxxxxxx & Xxxxxxxx ("Xxxx Xxxxx"), reasonably satisfactory to the MeriStar
Parties, based upon certificates and letters, which letters and certificates are
in the form agreed upon by the parties and dated the Closing Date, to the effect
that the Merger will qualify as a reorganization under the provisions of Section
368(a)(1)(A) of the Code.
(i) CHANGE IN TAX LAWS. There shall not have been any federal
legislative or regulatory change that would cause FelCor or MeriStar to cease to
qualify as a REIT for federal income tax purposes.
8.2 CONDITIONS TO OBLIGATIONS OF THE MERISTAR PARTIES. The
obligation of the MeriStar Parties to effect the Merger and to consummate the
other transactions contemplated to occur on the Closing Date is further subject
to the following conditions, any one or more of which may be waived by the
MeriStar Parties:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the FelCor Parties set forth in this Agreement that are qualified
as to materiality shall be true and correct, and the representations and
warranties of the FelCor Parties that are not so qualified shall be true and
correct in all material respects, in each case, 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 the representation or warranty is expressly limited by its terms
to another date, and the MeriStar Parties shall have received a certificate
(which certificate may be qualified by Knowledge to the same extent as the
representations and warranties of the FelCor Parties contained herein are so
qualified) signed on behalf of the FelCor Parties by the chief executive officer
and the chief financial officer or principal accounting officer of FelCor, in
such capacity, to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE FELCOR PARTIES. Each of the
FelCor Parties shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Effective
Time, and the MeriStar Parties shall have
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received a certificate of the FelCor Parties signed on behalf of the FelCor
Parties by the chief executive officer and the chief financial officer or
principal accounting officer of FelCor, in such capacity, to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no FelCor Material Adverse Change, and the MeriStar
Parties shall have received a certificate of the chief executive officer and
chief financial officer or principal accounting officer of FelCor, in such
capacity, certifying to such effect.
(d) CONSENTS. All consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the Transactions shall have been obtained,
other than such consents and waivers from third parties, which, if not obtained,
would not result, individually or in the aggregate, in a FelCor Material Adverse
Effect or a MeriStar Material Adverse Effect, and all consents and waivers from
franchisors and ground lessors of the MeriStar Properties and lenders of
MeriStar debt necessary in connection with the consummation of the Transactions
shall have been obtained.
8.3 CONDITIONS TO OBLIGATIONS OF THE FELCOR PARTIES. The
obligations of the FelCor Parties to effect the Merger and to consummate the
other transactions contemplated to occur on the Closing Date are further subject
to the following conditions, any one or more of which may be waived by the
FelCor Parties:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the MeriStar Parties set forth in this Agreement that are
qualified as to materiality shall be true and correct, and the representations
and warranties of the MeriStar Parties that are not so qualified shall be true
and correct in all material respects, in each case, 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 the representation or warranty is expressly limited
by its terms to another date, and the FelCor Parties shall have received a
certificate (which certificate may be qualified by Knowledge to the same extent
as the representations and warranties of the MeriStar Parties contained herein
are so qualified) signed on behalf of the MeriStar Parties by the chief
executive officer and the chief financial officer or principal accounting
officer of MeriStar, in such capacity, to such effect. Notwithstanding the
foregoing, MeriStar shall not be deemed to be in breach of Section 4.13(f)
regarding Sections 857(b) and 4981 of the Code with respect to the period ending
on the Closing Date so long as it complies with the provisions of Section
2.2(c)(i) and (ii).
(b) PERFORMANCE OF OBLIGATIONS OF THE MERISTAR PARTIES. Each of
the MeriStar Parties shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Effective Time, and the FelCor Parties shall have received a certificate
signed on behalf of the MeriStar Parties by the chief executive officer and the
chief financial officer or principal accounting officer of MeriStar, in such
capacity, to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no MeriStar Material Adverse Change, and the FelCor
Parties shall have received a
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certificate of the chief executive officer and chief financial officer or
principal accounting officer of MeriStar, in such capacity, certifying to such
effect.
(d) CONSENTS. All consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the Transactions shall have been obtained,
other than such consents and waivers from third parties, which, if not obtained,
would not result, individually or in the aggregate, in a FelCor Material Adverse
Effect or a MeriStar Material Adverse Effect, and all consents and waivers from
franchisors and ground lessors of the MeriStar Properties and lenders of
MeriStar debt necessary in connection with the consummation of the Transactions
shall have been obtained.
(e) AFFILIATES LETTER. Each of the Affiliates referred to in
Section 6.6 shall have delivered to FelCor the written agreement contemplated by
Section 6.6.
(f) RELATIONSHIP WITH MERISTAR HOTELS & RESORTS. The MeriStar
Parties shall have fully performed their obligations set forth in Section 7.18.
8.4 FRUSTRATION OF CLOSING CONDITIONS. Neither the MeriStar
Parties nor the FelCor Parties may rely on the failure of any condition set
forth in Section 8.1, 8.2 or 8.3, as the case may be, to be satisfied if such
failure was caused by such party's failure to use commercially reasonable
efforts to commence or complete the Merger and the other transactions
contemplated by this Agreement.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time
prior to the filing of the Articles of Merger with the Department, whether
before or after either of the Stockholder Approvals are obtained:
(a) by mutual written consent duly authorized by both the Board of
Directors of FelCor and the Board of Directors of MeriStar;
(b) by FelCor, upon a breach of any representation, warranty,
covenant, obligation or agreement on the part of the MeriStar Parties set forth
in this Agreement, in either case such that the conditions set forth in Section
8.3(a) or Section 8.3(b), as the case may be, would be incapable of being
satisfied by October 31, 2001 (or as otherwise extended);
(c) by MeriStar, upon a breach of any representation, warranty,
covenant, obligation or agreement on the part of the FelCor Parties set forth in
this Agreement, in either case such that the conditions set forth in Section
8.2(a) or Section 8.2(b), as the case may be, would be incapable of being
satisfied by October 31, 2001 (or as otherwise extended);
65
(d) by either FelCor or MeriStar, 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
nonappealable;
(e) by either FelCor or MeriStar, if the Merger shall not have
been consummated before October 31, 2001; provided, 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 this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
referred to in this clause;
(f) by either FelCor or MeriStar if, upon a vote at a duly held
MeriStar Stockholders Meeting or any adjournment thereof, the MeriStar
Stockholder Approval shall not have been obtained as contemplated by Section
7.1;
(g) by either FelCor or MeriStar if, upon a vote at a duly held
FelCor Stockholders Meeting or any adjournment thereof, the FelCor Stockholder
Approval shall not have been obtained as contemplated by Section 7.1;
(h) by MeriStar, if prior to the MeriStar Stockholders Meeting,
the Board of Directors of MeriStar shall have withdrawn or modified, in
accordance with Section 6.1 hereof, in any manner adverse to FelCor, its
approval or recommendation of the Merger or this Agreement in connection with,
or approved or recommended, a MeriStar Superior Proposal; provided that such
termination pursuant to this clause (h) shall not be effective until MeriStar
has made payment of the Break-Up Fee (as defined below) required by Section
9.2(c) hereof;
(i) by FelCor, if prior to the FelCor Stockholders Meeting, the
Board of Directors of FelCor shall have withdrawn or modified, in accordance
with Section 6.2 hereof, in any manner adverse to MeriStar, its approval or
recommendation of the Merger or this Agreement in connection with, or approved
or recommended, any FelCor Superior Proposal; provided that such termination
pursuant to this clause (i) shall not be effective until FelCor has made payment
of the Break-Up Fee required by Section 9.2(b) hereof;
(j) by FelCor if (i) prior to the MeriStar Stockholders Meeting,
the Board of Directors of MeriStar shall have withdrawn or modified, in any
manner adverse to FelCor, its approval or recommendation of the Merger or this
Agreement in connection with, or approved or recommended, any MeriStar
Acquisition Proposal, (ii) prior to the MeriStar Stockholders Meeting, MeriStar
shall have entered into any agreement with respect to a MeriStar Acquisition
Proposal (other than a confidentiality agreement as contemplated and permitted
by Section 6.1(a)) or (iii) the Board of Directors of MeriStar shall have
resolved to do any of the foregoing;
(k) by MeriStar if (i) prior to the FelCor Stockholders Meeting,
the Board of Directors of FelCor shall have withdrawn or modified, in any manner
adverse to MeriStar, its approval or recommendation of the Merger or this
Agreement in connection with, or approved or recommended, any FelCor Acquisition
Proposal, (ii) prior to the FelCor Stockholders Meeting, FelCor shall have
entered into any agreement with respect to a FelCor
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Acquisition Proposal (other than a confidentiality agreement as contemplated and
permitted by Section 6.2(a)) or (iii) the Board of Directors of FelCor shall
have resolved to do any of the foregoing; and
(l) by either FelCor or MeriStar if, during any ten consecutive
trading days between the date hereof and the Closing Date, the average Closing
Price (as defined below) of the FelCor Common Stock is less than $18.40, and the
party desiring such termination provides notice to the other party within three
business days after the end of such ten trading-day period. For purposes hereof,
"Closing Price" shall mean the last reported sale price per share of FelCor
Common Stock as reported on the NYSE consolidated tape on the trading day in
question.
9.2 CERTAIN FEES AND EXPENSES.
(a) Except as otherwise specified in this Agreement or agreed in
writing by the parties, all out-of-pocket costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, all expenses relating to the transfer of any
hotel franchises) shall be paid by the party incurring such cost or expense.
(b) FelCor agrees that if this Agreement shall be terminated
pursuant to Section 9.1(c), (i) or (k), then FelCor will pay as directed by
MeriStar a fee in an amount equal to the Break-Up Fee (as defined below). In the
event of a termination pursuant to Section 9.1(g), FelCor shall pay as directed
by MeriStar an amount equal to the Break-Up Expenses (as defined below). Payment
of any of such amounts shall be made, as directed by MeriStar, by wire transfer
of immediately available funds immediately upon the occurrence of the event
giving rise to the payment of such fee or expenses. The payment of the Break-Up
Fee shall be full compensation for the loss suffered by MeriStar as a result of
the failure of the Merger to be consummated under the circumstances giving rise
to the payment of such fee, and to avoid the difficulty of determining damages
under such circumstances, and neither party shall have any other liability to
the other, other than the payment of the Break-Up Fee, under such circumstances.
The payment of the Break-Up Expenses shall be full compensation for the loss
suffered by MeriStar as the result of the failure of the Merger to be
consummated under the circumstances giving rise to the payment of such expenses,
and to avoid the difficulty of determining damages under such circumstances, and
neither party shall have any other liability to the other, other than the
payment of the Break-Up Expenses, under such circumstances.
(c) MeriStar agrees that if this Agreement shall be terminated
pursuant to Section 9.1(b), (h) or (j), then MeriStar will pay as directed by
FelCor a fee in an amount equal to the Break-Up Fee. In the event of a
termination pursuant to Section 9.1(f), then MeriStar will pay, as directed by
FelCor, an amount equal to the Break-Up Expenses. Payment of any of such amounts
shall be made, as directed by FelCor, by wire transfer of immediately available
funds immediately upon the occurrence of the event giving rise to payment of
such fee or expenses. The payment of the Break-Up Fee shall be full compensation
for the loss suffered by FelCor as a result of the failure of the Merger to be
consummated under the circumstances giving rise to the payment of such fee, and
to avoid the difficulty of determining damages under the circumstances, and
neither party shall have any other liability to the other, other
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than the payment of the Break-Up Fee. The payment of the Break-Up Expenses shall
be full compensation for the loss suffered by FelCor as the result of the
failure of the Merger to be consummated under the circumstances giving rise to
the payment of such expenses, and to avoid the difficulty of determining damages
under such circumstances, and neither party shall have any other liability to
the other, other than the payment of the Break-Up Expenses, under such
circumstances.
(d) As used in this Agreement, "Break-Up Fee" shall be an amount
equal to $35 million plus Break-Up Expenses (the "Base Amount"); provided,
however, that such fee shall not exceed the sum of (A) the maximum amount that
can be paid to FelCor or MeriStar, as the case may be (the "Recipient") without
causing it to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute income
described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code
("Qualifying Income"), as determined by independent accountants to the
Recipient, and (B) in the event the Recipient receives an opinion from outside
counsel (a "Break-Up Fee Tax Opinion") or a ruling from the IRS (a "Break-Up Fee
Ruling"), in either case holding that the Recipient's receipt of the Base Amount
would either constitute Qualifying Income or would be excluded from gross income
within the meaning of Sections 856(c)(2) and (3) of the Code (the "REIT
Requirements") or that the receipt by the Recipient of the remaining balance of
the Base Amount following the receipt of and pursuant to such ruling or opinion
would not be deemed constructively received prior thereto, the Base Amount less
the amount payable under clause (A) above; provided, however, that, if the
Break-Up Fee Tax Opinion or the Break-Up Fee Ruling is based on the absence of
constructive receipt, the amount that will be paid upon the receipt of the
Break-Up Fee Tax Opinion or the Break-Up Fee Ruling will be the maximum amount
that can be paid at that time without causing the Recipient to fail the REIT
Requirements, as determined by the Recipient's independent accountants based on
the Break-Up Fee Tax Opinion or Break-Up Fee Ruling, and any remaining amount
payable to the Recipient pursuant to clause (B) shall be paid as soon as it
shall be possible to do so without causing the Recipient to fail the REIT
Requirements, as determined by the Recipient's independent accountants based on
the Break-Up Fee Tax Opinion or Break-Up Fee Ruling. The other party's
obligation to pay (the "Payor") any unpaid portion of the Break-Up Fee shall
terminate five years from the date of this Agreement. In the event that the
Recipient is not able to receive the full Base Amount, the Payor shall place the
unpaid amount in escrow and shall not release any portion thereof to the
Recipient unless and until the Payor receives either a Break-Up Fee Tax Opinion
or a Break-Up Fee Ruling, in which event the Payor shall pay to the Recipient
the unpaid Base Amount; provided, however, that, if the Break-Up Fee Tax Opinion
or the Break-Up Fee Ruling is based on the absence of constructive receipt, the
amount that will be paid upon the receipt of the Break-Up Fee Tax Opinion or the
Break-Up Fee Ruling will be the maximum amount that can be paid at that time
without causing the Recipient to fail the REIT Requirements, as determined by
the Recipient's independent accountants based on the Break-Up Fee Tax Opinion or
Break-Up Fee Ruling, and any remaining amount payable to the Recipient shall be
paid as soon as it shall be possible to do so without causing the Recipient to
fail the REIT Requirements, as determined by the Recipient's independent
accountants based on the Break-Up Fee Tax Opinion or Break-Up Fee Ruling.
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(e) The "Break-Up Expenses" payable to the Recipient shall be an
amount equal to the lesser of (i) $5 million and (ii) the Recipient's
out-of-pocket expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, all attorneys',
accountants', commercial bankers' and investment bankers' fees and expenses);
provided, however, such expenses shall not exceed the sum of (A) the maximum
amount that can be paid to the Recipient without causing it to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code determined as if the
payment of such amount did not constitute Qualifying Income, as determined by
independent accountants to the Recipient, and (B) in the event the Recipient
receives a Break-Up Fee Tax Opinion or a Break-Up Fee Ruling holding that the
Recipient's receipt of the Break-Up Expenses would either constitute Qualifying
Income or would be excluded from gross income within the meaning of the REIT
Requirements or that receipt by the Recipient of the remaining balance of the
Break-Up Expenses following the receipt of and pursuant to such ruling or
opinion would not be deemed constructively received prior thereto, the Break-Up
Expenses less the amount payable under clause (A) above; provided, however,
that, if the Break-Up Fee Tax Opinion or Break-Up Fee Ruling is based on the
absence of constructive receipt, the amount that will be paid upon the receipt
of the Break-Up Fee Tax Opinion or the Break-Up Fee Ruling will be the maximum
amount that can be paid at that time without causing the Recipient to fail the
REIT Requirements, as determined by the Recipient's independent accountants
based on the Break-Up Fee Tax Opinion or Break-Up Fee Ruling, and any remaining
amount payable to the Recipient pursuant to clause (B) shall be paid as soon as
it shall be possible to do so without causing the Recipient to fail the REIT
Requirements, as determined by the Recipient's independent accountants based on
the Break-Up Fee Tax Opinion or Break-Up Fee Ruling. The obligation of the Payor
to pay any unpaid portion of the Break-Up Expenses shall terminate five years
from the date of this Agreement. In the event that the Recipient is not able to
receive the full Break-Up Expenses, the Payor shall place the unpaid amount in
escrow and shall not release any portion thereof to the Recipient unless and
until the Payor receives either a Break-Up Fee Tax Opinion or a Break-Up Fee
Ruling with respect to the Break-Up Expenses, in which event the Payor shall pay
to the Recipient the unpaid Break-Up Expenses; provided, however, if the
Break-Up Fee Tax Opinion or the Break-Up Fee Ruling is based on the absence of
constructive receipt, the amount that will be paid upon the receipt of the
Break-Up Fee Tax Opinion or the Break-Up Fee Ruling will be the maximum amount
that can be paid at that time without causing the Recipient to fail the REIT
Requirements, as determined by the Recipient's independent accountants based on
the Break-Up Fee Tax Opinion or Break-Up Fee Ruling, and any remaining amount
payable to the Recipient shall be paid as soon as it shall be possible to do so
without causing the Recipient to fail the REIT Requirements, as determined by
the Recipient's independent accountants based on the Break-Up Fee Tax Opinion or
Break-Up Fee Ruling.
9.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either MeriStar or FelCor as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of FelCor, or MeriStar, other than pursuant to the
last sentence of Section 7.2, Section 9.2, this Section 9.3 and Article 10.
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9.4 AMENDMENT. This Agreement may be amended by the parties in
writing by action of their respective Board of Directors at any time before or
after any Stockholder Approvals are obtained and prior to the filing of the
Articles of Merger with the Department; provided, however, that, after the
Stockholder Approvals are obtained, no such amendment, modification or
supplement shall be made which by law requires the further approval of
stockholders without obtaining such further approval. The parties agree to amend
this Agreement in the manner provided in the immediately preceding sentence to
the extent required to (a) continue the status of FelCor or MeriStar as a REIT
or (b) preserve the Merger as a reorganization under Section 368 of the Code.
9.5 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 party, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 9.4, waive compliance with any of the agreements or
conditions of the other 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. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE 10
GENERAL PROVISIONS
10.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Effective Time. This Section 10.1 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
10.2 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):
(a) if to FelCor, to:
FelCor Lodging Trust Incorporated
000 X. Xxxx Xxxxxxxxx Xxxx., Xxx. 0000
Xxxxxx, XX 00000-0000
Attention: President and CEO
Fax No. (000) 000-0000
with a copy to:
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Jenkens & Xxxxxxxxx, a Professional Corporation
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax No. (000) 000-0000
(b) if to MeriStar, to:
MeriStar Hospitality Corporation
0000 Xxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Chairman of the Board and CEO
Fax No. (000) 000-0000
with copies to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No. (000) 000-0000
and
XxXxxxx, Diamond & Ash
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Fax No. (000) 000-0000
All notices shall be deemed given only when actually received.
10.3 INTERPRETATION. When a reference is made in this Agreement to
a Section or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
10.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
10.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. Except as
provided in Section 7.4, this Agreement, the MeriStar Disclosure Letter, the
FelCor Disclosure Letter, the Confidentiality Agreement and the other agreements
entered into in connection with the
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Merger or OP Merger constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and are not intended to confer
upon any person other than the parties hereto any rights or remedies.
10.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF
LAWS THEREOF (OTHER THAN SECTION 5-1401 OF NEW YORK'S GENERAL OBLIGATIONS LAWS),
EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE OF MARYLAND OR DELAWARE ARE
MANDATORILY APPLICABLE.
10.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
10.8 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in the
Southern District of New York or in any state court located in New York, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself
(without making such submission exclusive) to the personal jurisdiction of any
federal court located in the Southern District of New York or any state court
located in New York in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement and (b) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court.
10.9 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, the FelCor Parties and the MeriStar Parties have
caused this Agreement to be signed by their respective officers thereunto duly
authorized all as of the date first written above.
ATTEST: FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation
By: /s/ Xxxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
------------------------- -------------------------------------
Name: Xxxxxx X. Xxxxxxxx, Xx.
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
FELCOR LODGING LIMITED PARTNERSHIP
a Delaware limited partnership
By: FelCor Lodging Trust Incorporated,
its general partner
By: /s/ Xxxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
------------------------- -------------------------------------
Name: Xxxxxx X. Xxxxxxxx, Xx.
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
ATTEST: MERISTAR HOSPITALITY CORPORATION,
a Maryland corporation
By: /s/ Xxxxxxxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxx
-------------------------- -------------------------------------
Name: Xxxx X. Xxxxxxxx
-------------------------------------
Title: Chief Executive Officer
-------------------------------------
MERISTAR HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited
partnership
By: MeriStar Hospitality Corporation,
its general partner
By: /s/ Xxxxxxxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxx
-------------------------- -------------------------------------
Name: Xxxx X. Xxxxxxxx
-------------------------------------
Title: Chief Executive Officer
-------------------------------------
73
