EXHIBIT 10.1
------------
PURCHASE AGREEMENT
BETWEEN
DOUBLETREE CORPORATION,
HILTON HOTELS CORPORATION
AND
WESTCOAST HOSPITALITY CORPORATION
DATED AS OF DECEMBER 21, 2001
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND TERMS.............................................1
1.1 Specific Definitions........................................1
1.2 Other Terms.................................................9
1.3 Other Definitional Provisions...............................9
ARTICLE 2 PURCHASE AND SALE.................................................9
2.1 Purchase and Sale of Stock and Exchange of Property.........9
2.2 Excluded Assets.............................................9
2.3 Retention of Liabilities...................................10
2.4 Excluded Liabilities.......................................10
2.5 Deposit....................................................11
2.6 Purchase Price.............................................11
2.7 Post-Closing Adjustments...................................12
2.8 Sublease under the RLH Lease...............................14
2.9 Pre-Closing and Closing....................................15
2.10 Deliveries by Buyer........................................15
2.11 Deliveries by Seller.......................................15
2.12 Deliveries by Seller and Buyer at Closing..................16
2.13 Proration and Taxes........................................16
2.14 Expenses...................................................16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.........................16
3.1 Organization and Qualification.............................17
3.2 Corporate Authorization....................................17
3.3 Consents and Approvals.....................................17
3.4 Non-Contravention..........................................17
3.5 Binding Effect.............................................18
3.6 Financial Statements: Absence of Certain Changes...........18
3.7 Recent Events..............................................18
3.8 Hotel Properties...........................................19
3.9 RLH Companies..............................................19
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3.10 Assets.....................................................19
3.11 Undisclosed Liabilities....................................19
3.12 Litigation and Claims......................................19
3.13 Tax Matters................................................19
3.14 Employee Benefits..........................................20
3.15 Environmental Matters......................................21
3.16 Intellectual Property......................................21
3.17 Labor Matters..............................................21
3.18 Title to Property..........................................22
3.19 Material Contracts.........................................22
3.20 RLH Capital Stock; Title...................................23
3.21 Intentionally Deleted......................................23
3.22 Finders' Fees..............................................23
3.23 Legal Compliance...........................................23
3.24 Real Property..............................................23
3.25 Insurance..................................................24
3.26 Disclosure.................................................24
3.27 Compliance With Securities Laws............................25
3.28 No Other Representations or Warranties; Limitation.........25
3.29 Updating...................................................25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER..........................25
4.1 Organization and Qualification.............................25
4.2 Corporate Authorization....................................25
4.3 Consents and Approvals.....................................26
4.4 Non-Contravention..........................................26
4.5 Binding Effect.............................................26
4.6 Compliance with Securities Laws; Absence
of Adverse Changes.........................................26
4.7 Recent Events..............................................27
(a) Material Adverse Effect on Buyer.......................27
(b) Material Adverse Changes in Buyer's
Financial Condition....................................28
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4.8 Capital Stock; Title.......................................29
4.9 Legal Compliance...........................................29
4.10 Purchase Not for Distribution..............................29
4.11 Litigation and Claims......................................29
4.12 Finders' Fees..............................................30
4.13 Financial Capability.......................................30
4.14 Disclosure.................................................30
4.15 Updating...................................................30
4.16 No Other Representations or Warranties.....................30
ARTICLE 5 COVENANTS........................................................31
5.1 Due Diligence..............................................31
5.2 Access.....................................................31
5.3 Conduct of Business........................................31
5.4 Best Efforts...............................................32
5.5 Settlement of Inter-company Accounts; Cancellation of
Inter-company and Other Agreements.........................32
5.6 Employee Obligations; Compliance with WARN, etc............32
5.7 Further Assurances.........................................33
5.8 Use of Corporate Name and Symbol; Transition License.......33
5.9 Transition Services........................................34
5.10 Transition Management Agreement............................34
5.11 Laundry Services Agreements................................34
5.12 Trademark Agreement........................................34
5.13 Certain Matters Related to Excluded Liabilities............34
5.14 Solicitation...............................................34
5.15 Government Approvals and Third Party Consents..............34
5.16 Non-compete................................................35
5.17 Audited Financial Statements...............................35
5.18 Best Efforts...............................................35
5.19 Superior Coffee Contract...................................35
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ARTICLE 6 TAX MATTERS......................................................35
6.1 Tax Returns................................................35
6.2 Tax Indemnification........................................37
6.3 Cooperation on Tax Matters.................................38
6.4 Certain Taxes and Fees.....................................39
6.5 Tax Related Adjustments....................................39
ARTICLE 7 CONDITIONS TO CLOSING............................................40
7.1 Conditions to the Obligations of Buyer and Seller..........40
7.2 Conditions to the Obligations of Buyer.....................40
7.3 Conditions to the Obligations of Seller....................41
ARTICLE 8 SURVIVAL; INDEMNIFICATION........................................42
8.1 Survival...................................................42
8.2 Indemnification by Buyer...................................42
8.3 Indemnification by Seller..................................42
8.4 Indemnification Procedures.................................43
8.5 Characterization of Indemnification Payments...............44
8.6 Computation of Losses Subject to Indemnification...........44
ARTICLE 9 TERMINATION......................................................44
9.1 Termination................................................44
9.2 Effect of Termination......................................45
ARTICLE 10 MISCELLANEOUS....................................................45
10.1 Notices....................................................45
10.2 Entire Agreement...........................................47
10.3 Further Assurance..........................................47
10.4 Binding Effect and Assignment..............................47
10.5 Fulfillment of Obligations.................................47
10.6 Parties in Interest........................................47
10.7 Public Disclosure..........................................48
10.8 Return of Information......................................48
10.9 Expenses...................................................48
10.10 Schedules..................................................48
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10.11 Bulk Transfer Laws.........................................48
10.12 Arbitration................................................48
10.13 Governing Law..............................................50
10.14 Headings ..................................................50
10.15 Severability...............................................50
10.16 Rules of Interpretation....................................51
10.17 Construction...............................................51
10.18 Amendment; Waiver..........................................51
10.19 Guarantee..................................................52
10.20 Doubletree Guarantee.......................................52
10.21 WestCoast Guarantee........................................52
10.22 Multiple Counterparts......................................52
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SCHEDULES
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Schedule 1.1(a) Hotel Properties, Leases, Management Contracts, Franchises
and Red Lion companies and Ownership Interests Being Sold or
Assigned;
Schedule 1.1(b) Seller's Management Team with Knowledge of Certain Events
Schedule 1.1(c) Material Adverse Issues
Schedule 1.1(d) Modified GAAP Principles
Schedule 1.1(f) Selected Marks
Schedule 1.1(g) Seller Retained Properties
Schedule 1.1(h) Transferred Contracts
Schedule 2.2(j) Centers-transferred Assets
Schedule 2.4(f) Excluded Litigation
Schedule 2.6(b)-1 Designation of Rights and Preferences - Series A Preferred
Stock
Schedule 2.6(b)-2 Designation of Rights and Preferences - Series B Preferred
Stock
Schedule 2.7(e) Purchase Price Refund Methodology
Schedule 2.8(a) RLH Sublease
Schedule 2.8(b) Base Rent Allocation of RLH Lease
Schedule 2.8(c) Reimbursement and Indemnification Agreement
Schedule 2.9 Escrow Agreement
Schedule 2.10(f) Registration of Rights Agreement
Schedule 2.10(g) Assignment and Assumption Agreement (Regarding Transferred
Employees)
Schedule 3.3 Seller Consents and Approvals
Schedule 3.4 Seller Non-Contravention Issues
Schedule 3.6(a) Combined Balance Sheet
Schedule 3.6(b) Combined Statement of Earnings
Schedule 3.12 Litigation Matters and Claims
Schedule 3.13 Tax
Schedule 3.14 Employee Benefits
Schedule 3.15 Environmental Matters
Schedule 3.16 Intellectual Property
Schedule 3.17 Labor Matters
Schedule 3.18 Title Reports - Owned and Leased RLH Properties
Schedule 3.19 Material Contracts
Schedule 3.20 RLH Capital Stock; Title
Schedule 3.25 Seller Insurance Policies
Schedule 4.8 Capital Structure of Buyer
Schedule 5.9 Transition Services Agreement
Schedule 5.10(a) Transition Management Agreement
Schedule 5.10(b) Transition Franchise Agreement
Schedule 5.11 Laundry Service Agreements
Schedule 5.12 Trademark Agreement
Schedule 6.5 Tax Assets Shown on the Adjusted Balance Sheet
Schedule 8.6 Computation of Losses
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of December 21, 2001, is by and
between: DOUBLETREE CORPORATION, a Delaware corporation whose corporate
headquarters are located at 0000 Xxxxx Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000 ("SELLER"); HILTON HOTELS CORPORATION, a Delaware corporation, whose
corporate headquarters are located at 0000 Xxxxx Xxxxxx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000 ("Hilton") with respect to Section 10.19; and WESTCOAST
HOSPITALITY CORPORATION, a Washington corporation whose corporate headquarters
are located at the WHC Building, 000 X. Xxxxx Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxx
00000 ("BUYER").
W I T N E S S E T H:
WHEREAS, Red Lion Hotels, Inc., a Delaware corporation ("RLH") and
wholly-owned subsidiary of Seller, is engaged in the hotel ownership, operation
and franchise business at various locations throughout the United States;
WHEREAS, the Business is supported to some extent by certain activities
of Affiliates of RLH, such as marketing, reservations and guest affinity
programs (some of which activities the Parties intend to have covered by the
Continuing Relationship Agreements, as defined below);
WHEREAS, Hilton is the indirect parent of Seller and will benefit from
this transaction;
WHEREAS, by virtue of being engaged in the Business, RLH or its
subsidiaries, as of the closing of the transaction contemplated hereby, will
own, manage, lease, and franchise certain hotel properties which are all
described on SCHEDULE 1.1(A);
WHEREAS, Seller desires to sell, assign and transfer to Buyer, and
Buyer desires to purchase and assume from Seller, all of the issued and
outstanding shares of RLH's capital stock effective as of the Closing Date (as
hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in reliance upon the representations and warranties
contained herein, Seller and Buyer agree as follows:
ARTICLE 1
DEFINITIONS AND TERMS
---------------------
1.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:
"AAA" shall have the meaning set forth in Section 10.12.
"ADJUSTED CLOSING BALANCE SHEET" shall have the meaning set forth in
Section 2.7(b).
"ADJUSTED PAYMENT AMOUNT" shall mean the meaning set forth in Section
2.7(d).
"AFFILIATES" shall mean, with respect to any Person, at the time in
question, any other Person controlling, controlled by or under common control
with such Person. For purposes of this definition, "control" (including the
terms "controlling", "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities or otherwise.
"AGREEMENT" shall mean this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.3.
"BALANCE SHEET" shall have the meaning set forth in Section 3.6.
"BEST EFFORTS" shall mean all commercially reasonable efforts without
the obligation to expend extraordinary sums of money.
"BOOKS AND RECORDS" shall mean all lists, files and documents owned by
a Party or any of its Affiliates, including without limitation general ledgers
and underlying books of original entry and other financial records, and other
records relating to personnel, payroll, Tax records, customers, suppliers,
products, services, manuals and methodologies in both electronic and paper form.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
day on which banks in Beverly Hills, California are authorized or obligated by
law or executive order to close.
"BUSINESS" shall mean the hotel ownership, operation, management and
franchise business (which includes all supporting activities such as marketing,
reservations and guest affinity programs, but only as such supporting activities
are Related to the RLH Properties).
"BUYER" shall have the meaning set forth in the recitals hereto.
"BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in Section
8.3.
"BUYER'S OBJECTION" shall have the meaning set forth in Section 2.7(b).
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"CENTERS" shall mean the RLH Vancouver office (both corporate and
reservations center) and the RLH Phoenix office, collectively, and the assets
owned by Seller or an Affiliate which are Related to Seller's operation of those
offices.
"CLAIM NOTICE" shall have the meaning set forth in Section 8.4.
"CLOSING" shall mean the closing of the transactions contemplated by
this Agreement on the Closing Date.
"CLOSING BALANCE SHEET" shall have the meaning set forth in Section
2.7(a).
"CLOSING DATE" shall have the meaning set forth in Section 2.9.
"CLOSING WORKING CAPITAL" shall have the meaning set forth in Section
2.7(a).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPOSITE XXXX" shall mean any trademark, service xxxx, brand name,
certification xxxx, trade name or other indication of origin that includes, in
addition to other terms or symbols, a Seller Xxxx but excluding the Selected
Marks.
"CONTINUING RELATIONSHIP AGREEMENTS" shall mean: The Transition
Services Agreement; the Transition Management Agreement; the Laundry Services
Agreements, the Transition Franchise Agreements and the Trademark Agreement.
"CONTRACTS" of a Person shall mean all agreements, contracts, leases,
purchase orders, coupon, trade xxxx back, refund and other arrangements,
incentive agreements, commitments and licenses to which such Person is a party
or to which such Person's Assets are subject.
"CPA FIRM" shall have the meaning set forth in Section 2.7(b).
"DEPOSIT" shall have the meaning set forth in Section 2.5.
"DISPUTES" shall have the meaning set forth in Section 10.12.
"EMPLOYEES" shall mean Persons: (x) who are employed exclusively by any
of the RLH Companies as of the Closing Date, or (y) who are transferred to RLH
under the Assignment and Assumption Agreement attached hereto as SCHEDULE
2.10(G). In the case of items (x) and (y), the category shall include Inactive
Employees fitting that category.
"ENCUMBRANCES" shall mean liens, charges, encumbrances, security
interests, options or any other restrictions or third-party rights.
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"ENVIRONMENTAL CLAIM" shall mean any written claim, notice of violation
or administrative or judicial action by any governmental authority or other
Person resulting from or alleging the violation of any Environmental Law by the
RLH Companies.
"ENVIRONMENTAL LAW" shall mean any applicable federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, order, judgment, decree
or injunction relating to (x) the protection of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface or subsurface land) or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, protection, release or disposal of Hazardous Substances.
"EQUITY INTEREST" shall mean that portion of the Purchase Price that
will be paid in the form of equity in Buyer pursuant to the terms of the
Designation of Rights and Preferences in the form attached as SCHEDULE 2.6(B)-1
and SCHEDULE 2.6 (B)-2 to this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ESCROW AGENT" shall mean the Title Company.
"ESCROW AGREEMENT" shall mean the Agreement set forth as SCHEDULE 2.9.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.2.
"EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.4.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.6.
"FIXTURES AND EQUIPMENT" of a Person shall mean all furniture,
fixtures, furnishings, machinery, vehicles, equipment (including research and
development equipment) and other tangible personal property owned or leased by
such Person.
"FORCE MAJEURE" shall mean fire, earthquake, storm or other casualty;
strikes, lock-outs or other labor interruptions; war, rebellion, riots or other
civil unrest; or any other event beyond the control of Seller or Buyer, as the
case may be, but for purposes hereof, shall not include the terrorists events of
September 11, 2001 and the ensuing bio-terrorism events.
"GAAP" shall mean accounting principles generally accepted in the
United States of America.
"GOVERNMENTAL AUTHORIZATIONS" of a Person shall mean all licenses,
permits, certificates and other authorizations and approvals required to carry
on such Person's business as currently conducted under the applicable laws,
ordinances or regulations of any federal, state, local or foreign governmental
authority.
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"HAZARDOUS SUBSTANCES" shall mean any hazardous substances within the
meaning of 101(14) of CERCLA, 42 U.S.C. 9601(14), or any pollutant or waste that
is regulated under any Environmental Law.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"INACTIVE EMPLOYEE" shall mean any Employee who is temporarily absent
from active employment by reason of disability, illness, injury or leave of
absence which entitle them to re-employment.
"INCOME TAXES" shall mean all Taxes that are based upon or measured by
income, including alternative or add-on minimum taxes, together with any
interest, penalties or additions imposed with respect thereto.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 8.3(a).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 8.4.
"INVENTORY" of a Person shall mean all inventories and shall include
all food and beverage and operating supplies of such Person.
"KNOWLEDGE" or any similar phrase means the actual knowledge of certain
employees of Seller, who are involved in the operations, finance, and management
of the RLH Properties, all of whom are identified on SCHEDULE 1.1(B) (it being
acknowledged that such employees listed on SCHEDULE 1.1(B) shall have made
inquiries of (x) general managers of the RLH Properties as to their actual
knowledge as to matters affecting the particular RLH Property that they manage,
and (y) Xxxxxx Xxxxxxxx and Xxxxxx Xxxxxxx as to their actual knowledge).
"LAUNDRY SERVICES AGREEMENTS" shall have the meaning set forth in
Section 5.11.
"LAWS" shall include any federal; state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree.
"LOSSES" shall have the meaning set forth in Section 8.2.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" shall mean a
change or effect, respectively, that is materially adverse to the value of RLH
or the RLH Properties owned or leased by RLH taken as a whole or materially
adverse to the business or financial condition of RLH or the RLH Properties
owned or leased by RLH taken as a whole or, in respect to Buyer, a change or
effect, respectively, that is materially adverse to the value of Buyer taken as
a whole or materially adverse to the business or financial condition of Buyer
taken as a whole; provided, however, that any change or effect, respectively,
identified on SCHEDULE 1.1(C) shall not constitute a Material Adverse Change or
a Material Adverse Effect; and provided, further that any such change caused by:
(i) an insured casualty affecting the RLH Properties, or Buyer (ii) the general
slow down of the U.S. economy shall not constitute a Material Adverse Change or
Materially Adverse Effect.
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"MODIFIED GAAP" shall mean GAAP, as modified by the principles set
forth in SCHEDULE 1.1(D).
"NOTICE PERIOD" shall have the meaning set forth in Section 8.4.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of
the RLH Companies, consistent with past custom and practice.
"PARTIES" shall mean Seller and Buyer.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in Section
3.18.
"PERSON" shall mean any natural person, corporation, limited liability
company, partnership, limited partnership, firm, joint venture, association,
joint-stock company, trust, business trust, unincorporated organization,
governmental or political subdivision, regulatory body or other entity.
"PRE-CLOSING" shall have same meaning as set forth in Sections 2.9 and
2.10.
"PROPOSED SETTLEMENT" shall have the meaning set forth in Section
6.2(b).
"PURCHASE PRICE" shall mean the purchase-price to be paid pursuant to
Section 2.6, and as adjusted pursuant to Section 2.7.
"RELATED TO" or "RELATING TO" shall mean exclusively related to, or
used exclusively in connection with, prior to the Closing.
"REORGANIZATION TRANSACTIONS" shall mean, collectively, all conveyances
or assignments necessary to effectuate the transfer of the Seller Retained
Properties to Seller or Affiliate of Seller at or prior to the Closing.
"REQUIRED APPROVALS" shall mean the consents, approvals, waivers,
authorizations, notices and filings referred to in Sections 3.3 and 4.3 and
SCHEDULES 3.3 AND 4.3, other than any such consent, approval, waiver,
authorization, notice or filing which, if not obtained or made, would not have a
Material Adverse Effect and would not materially impair or delay the ability of
Seller, on the one hand, or Buyer, on the other hand, as the case may be, to
effect the Closing.
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"RLH " shall have the meaning set forth in the recitals hereto.
"RLH COMPANIES" shall mean, collectively, RLH and each of the
companies, partnerships, limited liability companies, joint ventures and other
business entities in which RLH has an ownership interest and which are set forth
in SCHEDULE 1.1(A) hereof.
"RLH LEASE" shall mean that certain Lease Agreement by and between RLH
Partnership, LP, as Landlord, and RLH, as Tenant, dated as of August 1, 1995, as
amended on February 26, 1996, and further amended on November 8, 1996, and as
further amended on September 15, 1998. The Properties which are subject to the
RLH Lease are sometimes referred to as the "RLH Leased Properties."
"RLH PROPERTIES" shall mean the properties owned, managed, leased or
franchised by the RLH Companies as of the Closing and described on SCHEDULE
1.1(A) hereof.
"RLH OWNED PROPERTIES" shall mean the hotel properties owned by the RLH
Companies and described on SCHEDULE 1.1(A) hereof.
"RLH STOCK" shall mean 313.13 shares of the issued and outstanding
common stock, $.01 par value per share, of RLH, representing all of the issued
and outstanding stock of RLH.
"SELECTED MARKS" shall mean all trademarks and trade names for Red Lion
or owned by RLH Companies, all as listed on SCHEDULE 1.1(F).
"SELLER" shall have the meaning set forth in the recitals hereto.
"SELLER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 8.2.
"SELLER XXXX" shall mean any trademark, service xxxx, brand name,
certification xxxx, trade name, corporate name, or other indication of origin,
owned by Hilton Hotels Corporation or its Affiliates (other than the Selected
Marks), or incorporating or based on the terms "Hilton," "Doubletree," or the
"Hilton" or "Doubletree" logos, or any other similar term or symbol.
"SELLER RETAINED PROPERTIES" shall mean the hotel properties and other
property interests set forth on SCHEDULE 1.1(G) together with the Excluded
Assets.
"SELLER/RLH PLANS" shall have the meaning set forth in Section 3.15.
"SELLERS" shall means Seller, its Subsidiaries and Affiliates other
than the RLH Companies.
"STOCK" shall mean the RLH Stock.
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"SUBSIDIARY" shall mean, with respect to any Person, a Person 50% or
more of the outstanding voting stock or other ownership interests of which are
owned, directly or indirectly, by such Person or one or more other Subsidiaries
of such Person. For the purposes of this definition, "voting stock" means stock
that ordinarily has voting power for the election of directors, whether at all
times or only so far as no senior class of stock has such voting power by reason
of any contingency.
"TAX CLAIM" shall have the meaning set forth in Section 6.1(e)(i).
"TAX RETURNS" shall mean all reports and returns relating to Taxes,
including any schedule, attachment or amendment.
"TAX STATEMENT" shall have the meaning set forth in Section
6.1(f)(iii).
"TAXES" shall mean all federal, state, local or foreign taxes,
including but not limited to income, gross receipts, windfall profits, goods and
services, value added, severance, property, production, sales, use, license,
excise, franchise, employment, withholding or similar taxes, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
"TITLE COMPANY" shall mean Chicago Title Insurance Corporation.
"TRADEMARK AGREEMENT" shall have the meaning set froth in Section 5.12.
"TRANSFERRED CONTRACTS" shall mean all agreements not currently in the
name of the RLH Companies but which are supporting the functions of the RLH
Properties or the Centers and are to be transferred to the RLH Companies prior
to Closing, and which are listed on SCHEDULE 1.1(H).
"TRANSITION FRANCHISE AGREEMENT" shall have the meaning set forth in
Section 2.10.
"TRANSITION MANAGEMENT AGREEMENT" shall have the meaning set forth in
Section 5.10.
"TRANSITION SERVICES AGREEMENT" shall have the meaning set forth in
Section 5.9.
"WARN" shall mean the Worker Adjustment and Retraining Notification
Act, 29 U.S.C.ss.2101, et. seq.
"WORKING CAPITAL" shall mean the current assets (excluding Inventory)
less current liabilities of RLH as determined pursuant to Modified GAAP
calculated on a pro forma basis to exclude all Excluded Assets and Excluded
Liabilities, and to include all Assumed Liabilities.
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1.2 OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof", "herein", and "hereunder" and
words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
dollars.
ARTICLE 2
PURCHASE AND SALE
-----------------
2.1 PURCHASE AND SALE OF STOCK. On the terms and subject to the
conditions set forth herein, at the Closing, Seller agrees to sell, convey,
transfer, assign and deliver to Buyer, and Buyer agrees to purchase from Seller,
the RLH Stock.
2.2 EXCLUDED ASSETS. Notwithstanding anything herein to the contrary
Buyer understands and agrees that, subject to the terms set forth herein, the
appropriate RLH Company shall transfer, assign or distribute to Seller, an
Affiliate designated by Seller or a third party prior to the Closing, the
following assets (collectively, the "EXCLUDED ASSETS"), none of which will be
listed on the Closing Balance Sheet:
(a) all assets (including, without limitation, real property,
tangible personal property, intellectual property and contracts) Related to the
Seller Retained Properties;
(b) all central systems for reservation, accounting, management
information and reporting systems of Seller or its Affiliates, provided this
does not include: (1) hardware located at the RLH Owned Properties or RLH Leased
Properties, (2) any rights RLH has under the ANASAZI, Inc. Central Reservations
System License Agreement dated July, 1994, and RLH's non-exclusive software
license for Guestrac, (3) RLH's non-exclusive rights to data which is Related to
the RLH Properties and is not proprietary to Seller or its Affiliates; and (4)
RLH's non-exclusive rights to use OSCAR software;
(c) all of RLH's interests in the Management Agreement dated
January 1, 1988 between RLH, as Manager, and Westboy LLC, as Owner/Master
Tenant;
(d) all shares of Hilton Hospitality, Inc. held by RLH;
(e) all accounts receivable from Seller and its Affiliates;
9
(f) all prepaid Taxes to the extent such Taxes reflect, or if
not prepaid would be, Excluded Liabilities;
(g) all refunds of Taxes to the extent such Taxes reflect, or
if not paid would be, Excluded Liabilities;
(h) the Seller/RLH Plans;
(i) subject to Section 5.8, all rights to the Seller Marks and
the Composite Marks;
(j) the Centers and all assets Related to the Centers subject,
however, to: (1) use by Buyer of those portions of the Centers Related to the
RLH Properties pursuant to the license granted to Buyer under the Transition
Services Agreement; and (2) Seller's interests, if any, in certain assets
described on SCHEDULE 2.2(J) which interests shall be transferred to Buyer, and
which shall include Seller's interests in certain office furniture, file
cabinets, and computer hardware Related to the RLH Companies but excluding the
central systems as described in Section 2.2(b);
(k) claims or rights for insurance coverage Related to RLH or
the RLH Properties with respect to any time period prior to the Closing Date,
provided that Seller shall transfer to Buyer the unused proceeds of, and claims
for property and casualty insurance for: (i) the Red Lion Coos Bay Hotel (RLH ID
#23) and Red Lion Missoula Hotel (RLH ID #18), and (ii) with respect to
casualties which have occurred between December 1, 2001 and the Closing Date,
less the amount of applicable deductibles;
(l) Seller's rights in and to the RLH Leased Properties to be
subleased to Seller pursuant to Section 2.8; and
(m) All shares of Xxxxxx Lodging Company.
In addition the Seller shall retain ownership of: (i) all Tax Returns that
reflect consolidated treatment with Seller's Affiliates (other than RLH), and
(ii) all Books and Records that are not Related to RLH Companies or an RLH
Property; provided, however, that following Closing Seller shall accommodate
Buyer's reasonable requests for the inspection of Books and Records in any way
related to the RLH Companies and/or RLH Property, all at times and places
reasonably designated by Seller. In addition Buyer shall be permitted to copy
any such Books and records paying one-half of the reasonable charges therefor.
2.3 RETENTION OF LIABILITIES. Except for the Excluded Liabilities,
Buyer understands and agrees that RLH shall retain responsibility for and
discharge or perform when due all of the debts, liabilities or obligations of
the RLH Companies that exist as of the Closing Date (collectively, the "ASSUMED
LIABILITIES").
2.4 EXCLUDED LIABILITIES. Buyer understands and agrees that, subject
to the terms set forth herein, the RLH Companies shall transfer, assign or
distribute to Seller, an Affiliate designated by Seller or a third party, prior
to the Closing, the following liabilities and obligations of Seller which are
not to be retained by any of the RLH Companies and which shall be assumed by
Seller or its designated Affiliate (the "EXCLUDED LIABILITIES"):
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(a) all liabilities Relating to the Seller Retained Properties
or Excluded Assets, except as otherwise specifically provided for in the
Continuing Relationship Agreements, and except as reflected in the Closing
Balance Sheet;
(b) all liabilities and obligations of Seller to pay
compensation and benefits to Employees accrued through the Closing Date except
to the extent the liability is accrued as a current liability in the Closing
Balance Sheet;
(c) Seller's obligations with respect to Taxes in accordance
with Article 6; and
(d) except with respect to liabilities relating to property and
casualty insurance proceeds to be transferred by Seller to Buyer under Section
2.2(k), all liabilities to third parties for which Seller has insurance coverage
(without regard to deductibles), together with the amount of the deductible with
respect to such claims and supervision of the administration of litigation
relating to such insured claims.
(e) all other liabilities and obligations for which Seller has
expressly retained responsibility pursuant to this Agreement.
(f) the litigation matter described in Schedule 2.4(f).
2.5 DEPOSIT. On December 24, 2001, if this Agreement has not been
terminated prior to that date, Buyer will deliver to escrow pursuant to the
Escrow Agreement the sum of Two Million Dollars ($2,000,000) (the "DEPOSIT") as
a good faith deposit towards the consummation of the transactions contemplated
by this Agreement; and the Deposit shall thereupon become nonrefundable unless
either: (1) Seller defaults or fails to satisfy or cause to be satisfied the
Closing Conditions for which Seller is responsible under Sections 7.1 and 7.2,
or (2) the transaction does not close due to failure of Buyer's third party
lender to provide the funds described in Section 7.3(c), in either of which
events, the Deposit will be refunded to Buyer. In the event the transaction
contemplated by this Agreement closes, the Deposit, plus interest accrued
thereon pursuant to the Escrow Agreement, shall be delivered to Seller and
credited towards the cash portion of the Purchase Price to be delivered by Buyer
at Closing.
2.6 PURCHASE PRICE. On the terms and subject to the conditions set
forth herein, Buyer agrees to pay Seller at Closing the Purchase Price in the
aggregate amount of Fifty Million Six Hundred Twenty-Eight Thousand Six Hundred
Thirty-Nine Dollars ($50,628,639.00). Forty percent (40%) of the Purchase Price
(Twenty Million Two Hundred Fifty One Thousand Five Hundred Thirty Nine Dollars
($20,251,539.00)) shall be payable to Seller in cash at Closing. Thirty percent
(30%) (or 303,771 Shares) shall be payable to Seller in the form of Preferred
Stock of Buyer consistent with the Designation of Rights and Preferences of
Series A Preferred Stock and thirty percent (30%) (or 303,771 Shares) in the
form of Preferred Stock of Buyer consistent with the Designation of Rights and
Preferences of Series B Preferred Stock in the form attached as SCHEDULE
2.6(B)-1 and 2.6(B)-2, respectively.
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Additionally, Buyer shall pay to Seller, as additional Purchase Price
following Closing, fifty percent (50%) of the Net Proceeds from the sale,
assignment, or a license which is equivalent of a transfer of substantially all
RLH rights, of the Red Lion brand name (irrespective of whether tangible assets
are also transferred) occurring within seven (7) years following the Closing
Date; provided, however, no such proceeds shall be payable to Seller in
connection with Buyer's licensing of the Red Lion brand name in the Ordinary
Course of Business of such Red Lion Franchise.
2.7 POST-CLOSING ADJUSTMENTS.
(a) Within sixty (60) days following the Closing, Seller shall
prepare and deliver to Buyer a pro forma balance sheet prepared in accordance
with Modified GAAP (the "CLOSING BALANCE SHEET") which shall include the
calculation of the Working Capital of RLH as of the Closing Date (the "CLOSING
WORKING CAPITAL"). The Closing Balance Sheet shall reflect, as accrued current
liabilities, the amount of any capital expenditures for the RLH Properties which
were approved for 2001 ( as reflected on the November 27, 2001 CapX summary
which Seller provided to Buyer, under the headings of ":Balance to Finish
Projects Recommended" and "Payment Due for Work Completed to Date", and November
30, 2001 DoubleTree Boise monthly report on budget expenditures Column 7 o/s
commitment) to the extent they have not been paid by the Closing Date. Any sums
remaining upon completion of such capital expenditures shall be refunded to
Seller.
(b) Buyer and Buyer's accountants shall, within 30 days after
the delivery by Seller of the Closing Balance Sheet, complete their review of
the Closing Working Capital as derived from the Closing Balance Sheet. In the
event that Buyer determines that the Closing Working Capital as derived from the
Closing Balance Sheet has not been determined in accordance with the definition
thereof in this Agreement, Buyer shall inform Seller in writing (the "BUYER'S
OBJECTION"), setting forth a specific description of the basis of Buyer's
Objection and the adjustments to the Closing Working Capital which Buyer
believes should be made, on or before the last day of such 30-day period. Seller
shall then have 15 days to review and respond to Buyer's Objection. If Seller
and Buyer are unable to resolve all of their disagreements with respect to the
determination of the foregoing items within 10 days following the completion of
Seller review of Buyer's Objection, they shall refer their remaining differences
to PricewaterhouseCoopers, with whom neither Buyer nor Seller have a present
relationship, or another internationally recognized firm of independent public
accountants as to which Seller and Buyer mutually agree (the "CPA FIRM"), who
shall, acting as experts and not as arbitrators, determine on the basis of the
standards set forth in SCHEDULE 1.1(D), and only with respect to the remaining
differences so submitted, whether and to what extent, if any, the Closing
Working Capital as derived from the Closing Balance Sheet requires adjustment.
Seller and Buyer shall direct the CPA Firm to use its Best Efforts to render its
determination within 45 days. The CPA Firm's determination shall be conclusive
and binding upon Buyer and Seller. The fees and disbursements of the CPA Firm
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shall be shared equally by Buyer, on the one hand, and Seller, on the other
hand. Buyer and Seller shall make readily available to the CPA Firm all relevant
Books and Records and any work papers (including those of the parties'
respective accountants) relating to the Balance Sheet and the Closing Balance
Sheet and all other items reasonably requested by the CPA Firm. The "ADJUSTED
CLOSING BALANCE SHEET" shall be (i) the Closing Balance Sheet in the event that
(x) no Buyer's Objection is delivered to Seller during the 30-day period
specified above, or (y) Seller and Buyer so agree, (ii) the Closing Balance
Sheet, adjusted in accordance with the Buyer's Objection in the event that
Seller does not respond to Buyer's Objection within the 15-day period following
receipt by Seller of Buyer's Objection, or (iii) the Closing Balance Sheet, as
adjusted by either (x) the agreement of Seller and Buyer or (y) the CPA Firm.
(c) Buyer shall provide Seller and its accountants full access
to the Books and Records Related to the Business, the RLH Companies or the RLH
Properties, any other information, including work papers of its accountants, and
to any employees to the extent necessary for Seller to prepare the Closing
Balance Sheet. Buyer and its accountants shall have the opportunity to review
all entries and work papers used in connection with the preparation of the
Closing Balance Sheet and shall have full access to all information used by
Seller in preparing the Closing Balance Sheet.
(d) Within 10 Business Days following issuance of the Adjusted
Closing Balance Sheet, Buyer shall make an adjustment payment in an amount equal
to the extent that Working Capital, as derived from the Adjusted Balance Sheet,
is a positive amount, and Seller to Buyer to the extent that Working Capital as
derived from the Adjusted Closing Balance Sheet is a negative amount, plus, in
either case, interest thereon from the Closing Date through the date of payment
at 5.00% per annum (the "ADJUSTED PAYMENT AMOUNT"). The Adjusted Payment Amount
payable pursuant to this Section 2.6(d) shall be paid by wire transfer of
immediately available funds to an account designated by Buyer, on the one hand,
or Seller, on the other hand, as the case may be.
(e) In connection with the RLH Properties, if any franchisees
cancel their franchise agreements with RLH, or the if the licensee under the
Trademark and Reservation System Agreements for Elko, Nevada, Jackson, Wyoming,
or Winnemucca, Nevada properties cancels such Agreements with respect to such
properties as a result of Buyer's discontinuing use of the "Red Lion" brand name
of any such hotels, on or before December 31, 2002, Buyer shall be entitled to a
refund of a portion of the Purchase Price equal to the amount allocated to such
property (in accordance with the SCHEDULE "2.7(E)") and shall return to Seller
all of the franchisor's claims for breach against the franchisees under the
applicable franchise agreements, or in the case of Elko, Xxxxxxx and Winnemucca,
all licensing and other rights with respect to such properties pursuant to the
Trademark and Reservation System Agreements. Notwithstanding the foregoing,
however, there shall be no refund given for any termination of a franchise
agreement: (i) where RLH or Buyer defaults after the Closing Date in its
obligations under the applicable agreement (provided, however, if, as a result
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of Buyer's election to change the brand name of any hotel without changing or
discontinuing the use of the "Principal Name" of the licensed brand, as that
term is defined within the applicable franchise agreement, or the name "Red
Lion" in the case of the Trademark and Reservation System Agreements, or the
failure to maintain an affiliation of a property with Doubletree Corporation or
Hilton Hotels Corporation an owner or franchisee terminates its franchise with
RLH or Buyer (or any of Buyer's Affiliates), such termination shall not be
considered a default); or (ii) if the agreement is terminated because Buyer has
otherwise acquired or leased or operated the relevant RLH Property. Any refund
given with respect to this Section 2.7(e) shall be on a dollar-for-dollar basis
by a reduction in the principal amount of the Equity Interest and such refund
shall be further reduced by forty-three percent (43%) of the aggregate amount of
all franchise fees received by the RLH Companies prior to the effective date of
cancellation. In the event the Buyer becomes entitled to a refund of a portion
of the Purchase Price in accordance with this Section, fifty percent (50%) of
the refund shall be in the form of cancellation of Series A Preferred Stock and
fifty percent (50%) of the refund shall be in the form of cancellation of Series
B Preferred Stock. The Parties shall cooperate in arranging for the prompt
cancellation of the resulting portion of the Equity Interest.
2.8 SUBLEASE UNDER THE RLH LEASE.
(a) At Closing, Seller shall enter into a sublease agreement in
the Form of SCHEDULE 2.8(A), whereby Seller will sublease from RLH the five (5)
Seller Retained Properties subject to the RLH Lease, with rent allocated
pursuant to such subleased Seller Retained Properties as described in Section
2.8(b).
(b) Base rent for the RLH Lease will be allocated between the
five (5) subleased Seller Retained Properties and the remaining RLH Leased
Properties based upon the base rent of each such property as listed on SCHEDULE
2.8(B) and percentage rent will be allocated between the subleased and the
remaining RLH Leased Properties based upon the performance of the properties
subject to each lease unless the aggregate percentage rent for one party would
be negative, in which case such party shall pay no percentage rent and the other
party shall be entitled to claim such negative percentage rent as a credit
against its percentage rent; provided, however, Seller's benefit in the
reduction of percentage rent payable by Seller after closing shall not exceed
$161,753.00 per fiscal year under the RLH Lease.
(c) Promus Hotels, Inc. ("PROMUS") will confirm to Buyer that
it will remain the guarantor of the RLH Lease and Buyer will execute and deliver
to Promus an indemnification agreement in the form attached as SCHEDULE 2.8(C)
whereby Buyer will indemnify and hold Promus harmless from and against any
liability which Promus may incur as a result of RLH's breach of the RLH Lease.
(d) Buyer and Seller will each execute a separate
indemnification agreement in regards to the RLH Lease whereby each party agrees
to indemnify the other from and against any liability which the other may incur
as a result of such party's breach of the RLH Lease; and
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2.9 PRE-CLOSING AND CLOSING. The Pre-Closing shall take place at the
offices of the Escrow Agent on December 21, 2001 or at such other time and place
as the Parties hereto may mutually agree. At the Pre-Closing the parties shall
execute the Escrow Agreement, a copy of which is attached hereto as SCHEDULE
2.9. The Closing shall take place at the offices of the Escrow Agent on December
31, 2001 or at such other time and place as the Parties hereto may mutually
agree. The Closing shall be deemed to be effective for all purposes as of
midnight on December 31, 2001 (the "Closing Date").
2.10 DELIVERIES BY BUYER. At the Pre-Closing, Buyer shall deliver to
the Escrow Agent pursuant to the Escrow Agreement the following:
(a) a letter from Buyer's Lender certifying that it is prepared
to advance to the Escrow Agent for the account of Buyer at Closing the cash
portion of the Purchase Price in immediately available funds by wire transfer to
an account or accounts designated by Seller in accordance with the terms of the
Escrow Agreement;
(b) certificates representing all of the Equity Interest which
will bear the customary legends for unregistered stock, together with such other
instruments, in form and substance as shall reasonably be required by Seller to
convey to Seller all right, title and interest in and to the Equity Interest,
free and clear of any Encumbrance;
(c) the Sublease, the confirmation and the indemnification
agreements with respect to the RLH Lease as described in Section 2.8;
(d) the Continuing Relationship Agreements required by this
Agreement; and
(e) the Escrow Agreement and the certificates and other
documents to be delivered pursuant to Section 7.3 and such other documents and
agreements as are contemplated in this Agreement or the Escrow Agreement.
(f) the Registration of Rights Agreement attached hereto as
SCHEDULE 2.10(F).
(g) the Assignment and Assumption Agreement with respect to
Employees transferred by Seller to RLH prior to Closing in the form attached
hereto as SCHEDULE 2.10(G).
2.11 DELIVERIES BY SELLER. At the Pre-Closing, Seller shall deliver
to the Escrow Agent (pursuant to the Escrow Agreement) the following:
(a) certificates representing all of the RLH Stock, duly
endorsed in blank for transfer or accompanied by duly executed blank stock
powers together with such other instruments as shall reasonably be required by
Buyer to transfer to Buyer all right, title and interest in and to the Stock,
free and clear of any Encumbrance (other than (i) Encumbrances created by Buyer
and (ii) the requirements of the Federal and state securities laws respecting
limitations on the subsequent transfer thereof). All such certificates, stock
powers and instruments shall be in form and content reasonably satisfactory to
Buyer and its counsel;
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(b) the sublease, the confirmation and the indemnification
agreements with respect to the RLH Lease as described in Section 2.8;
(c) the Continuing Relationship Agreements required by this
Agreement;
(d) such other instruments or documents, in form and substance
reasonably acceptable to Buyer, as may be necessary to effect the Closing
pursuant to the terms of this Agreement, including but not limited to those
required to release any encumbrances against the owned or leased RLH Properties
(except for Permitted Encumbrances or Fee Mortgages as to leasehold interests to
be conveyed; and
(e) the Escrow Agreement, the certificates and other documents
to be delivered pursuant to Section 7.2.
(f) the Assignment and Assumption Agreement referred to in
Section 2.10(g).
2.12 DELIVERIES BY SELLER AND BUYER AT CLOSING. At Closing Buyer and
Seller shall each release to the other, as applicable, the documents,
certificates, and agreements referred to in Sections 2.10 and 2.11, and Buyer
shall deliver to Seller the cash portion of the Purchase Price in the amount and
in the manner specified in Section 2.10(a).
2.13 PRORATION AND TAXES. Proration of annual real and personal
property taxes with respect to the RLH Properties will be handled as an
adjustment to Working Capital pursuant to Section 2.7 hereof.
2.14 EXPENSES. Seller will at its expense provide standard form
owner's or leasehold owner's policies of title insurance for each of the RLH
Owned or Leased Properties, allocated among the properties in the same manner as
is the Purchase Price insuring title in RLH subject to the Permitted
Encumbrances. Except as otherwise specifically provided, each party will pay
its own transaction costs in connection with this transaction.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Buyer that, as of the date of this
Agreement, and, except with respect to Excluded Liabilities and except as
disclosed in the Officer's Certificate to be delivered pursuant to Section
7.2(a), as of the Closing Date, the following statements shall be true as
follows:
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3.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate its properties and to carry on its business as
currently conducted. Seller is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the ownership of
its properties or the conduct of its business requires such qualification,
except where the failure to be so qualified or in good standing, as the case may
be, would not have a Material Adverse Effect. RLH is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate its properties and to carry on its business as
currently conducted. RLH is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the ownership of
its properties or the conduct of its business requires such qualification. Each
of the RLH Companies is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it was formed, and has all requisite
power and authority to own and operate its assets and to carry on its business
as currently conducted in those states wherein RLH Properties are located.
3.2 CORPORATE AUTHORIZATION. Seller has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance by Seller of this Agreement
have been duly and validly authorized and no additional corporate authorization
or consent is required in connection with the execution, delivery and
performance by Seller of this Agreement.
3.3 CONSENTS AND APPROVALS. Except as specifically set forth in
SCHEDULE 3.3, no consent, approval, waiver or authorization is required to be
obtained by Seller from, and no notice or filing is required to be given by
Seller to or made by Seller with, any federal, state, local or foreign
governmental authority or other Person in connection with the execution,
delivery and performance by Seller of this Agreement and each of the agreements
which Seller or its Affiliates are required to deliver pursuant to this
Agreement, other than in all cases where the failure to obtain such consent,
approval, waiver or authorization, or to give or make such notice or filing,
would not have a Material Adverse Effect or materially impair or delay the
ability of Seller to effect the Closing.
3.4 NON-CONTRAVENTION. Except as set forth on SCHEDULE 3.4, the
execution, delivery and performance by Seller of this Agreement and the
consummation of the transactions contemplated hereby does not and will not (i)
violate any provision of the charter, bylaws or other organizational documents
of Seller or any of the RLH Companies, (ii) subject to obtaining the consents
referred to in Section 3.3, to the Knowledge of Seller, conflict with, or result
in the breach of, or constitute a default under, or result in the termination,
cancellation or acceleration (whether after the filing of notice or the lapse of
time or both) of any right or obligation of Seller or any of the RLH Companies
under, or in a loss of any benefit to which Seller or any of the RLH Companies
is entitled under any Contract or result in the creation of any Encumbrance upon
any of the RLH Properties; or (iii) assuming compliance with the matters set
forth in Sections 3.3, 4.3 and 5.6 to the Knowledge of Seller, violate, or
17
result in a breach of or constitute a default under any law, rule, regulation,
judgment, injunction, order, decree or other restriction of any court or
governmental authority to which Seller is subject, including any Governmental
Authorization, other than, in the cases of clauses (ii) and (iii), any conflict,
breach, termination, default, cancellation, acceleration, loss, violation or
Encumbrance which, individually or in the aggregate, would not have a Material
Adverse Effect or materially impair or delay the ability of Seller to perform
its obligations hereunder.
3.5 BINDING EFFECT. This Agreement has been duly executed and
delivered by Seller and constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES. The unaudited
pro forma combined balance sheet of the RLH Companies at August 31, 2001 (the
"Balance Sheet") attached as SCHEDULE 3.6(A), and the unaudited pro forma
combined statements of earnings from operations (excluding results from the
Excluded Assets and the Excluded Liabilities) of for the twelve (12) months
ended August 31, 2001 attached as SCHEDULE 3.6(B) (together with the Balance
Sheet, collectively, the "Financial Statements") fairly present, in all material
respects, the financial condition of the RLH Companies (excluding the Excluded
Assets and the Excluded Liabilities) as of the date thereof, or the results of
operations for the period then ended, as the case may be and were prepared in
accordance with Modified GAAP and SCHEDULE 1.1(D).
3.7 RECENT EVENTS. Since the date of the Balance Sheet, there has
not been any Material Adverse Change in the financial condition of the RLH
Properties except as disclosed in this Agreement or the Schedules to this
Agreement. Without limiting the generality of the foregoing, since that date:
(i) none of the RLH Companies has issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
(ii) except as a result of the Reorganization Transactions, none
of the RLH Companies has declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;
(iii) none of the RLH Companies has experienced any material
damage, destruction, or loss to its property which is uninsured;
(iv) none of the RLH Companies has committed to any of the
foregoing.
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3.8 HOTEL PROPERTIES. At the Closing Date, RLH or another of the RLH
Companies will own, manage, lease or franchise the RLH Properties identified by
category on SCHEDULE 1.1(A).
3.9 RLH COMPANIES. At the Closing Date, RLH will own the interests
specified in SCHEDULE 1.1(A) in each of the companies, joint ventures and other
business entities described on that Exhibit.
3.10 ASSETS. Except for the Excluded Assets, at Closing Seller will
own the Stock and the RLH Companies will own or will lease all of the tangible
and intangible assets listed on the Closing Balance Sheet.
3.11 UNDISCLOSED LIABILITIES. None of the RLH Companies has any
liability, except for: (1) liability set forth on the Balance Sheet, attached as
SCHEDULE 3.6(A); (2) liabilities that are not required by Modified GAAP to be
included in a balance sheet; (3) the liabilities disclosed herein and within the
Schedules to this Agreement; and (4) liabilities of the RLH Companies and RLH
Properties which have arisen after the date of the Balance Sheet in the Ordinary
Course of Business.
3.12 LITIGATION AND CLAIMS. Except as set forth in SCHEDULE 3.12
there is no civil, criminal or administrative action, suit, demand, claim,
hearing, proceeding or investigation pending or, to the Knowledge of Seller,
threatened, relating to the Business or any of the RLH Companies or the RLH
Properties. Except as set forth in SCHEDULE 3.12, none of the RLH Companies or
RLH Properties is subject to any order, writ, judgment, award, injunction, or
decree of any court or governmental or regulatory authority of competent
jurisdiction or any arbitrator or arbitrators other than those which,
individually or in the aggregate, would not have a Material Adverse Effect or
materially impair or delay the ability of Seller to effect the Closing.
3.13 TAX MATTERS. (a) Except as set forth on SCHEDULE 3.13, all Tax
Returns required to be filed by the RLH Companies have been or will be filed
when due in accordance with all applicable laws. All Taxes owed by RLH Companies
(whether or not shown on a Tax Return) have been or will be paid in timely
fashion or have been accrued for on the relevant RLH Company's financial
statements. Except as set forth on SCHEDULE 3.13, none of the RLH Companies is
currently the beneficiary of an extension of time within which to file a Tax
Return. To the Knowledge of Seller, there are no security interests on any of
the assets of the RLH Companies that arose in connection with any failure or
alleged failure to pay any tax.
(b) Each of the RLH Companies has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, stockholder, creditor or other third
party.
(c) Except as set forth on SCHEDULE 3.13, there is no action,
suit, proceeding, investigation, audit or claim now pending with respect to any
Tax of the RLH Companies.
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(d) Except as set forth on SCHEDULE 3.13, there are no
outstanding agreements extending the statutory period of limitation applicable
to any claim for, or the period for the collection or assessment of, Taxes due
from any RLH Company.
(e) SCHEDULE 3.13 lists all federal, state, local and foreign
Income Tax Returns filed with respect to the RLH Companies for taxable periods
ending on or after December 31, 1996, indicates those Income Tax Returns that
have been audited and indicates those Tax Returns that are currently the subject
of an audit. Seller has delivered to Buyer correct and complete copies of (i)
all Income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by any of the RLH Companies since January 1, 1996
and (ii) other Tax Returns specifically requested by Buyer.
(f) None of the RLH Companies has filed a consent under Code
Section 341 concerning collapsible corporations. To the knowledge of Seller,
none of the RLH Companies is obligated to make any payments or is a party to any
agreement that could obligate it to make any payment that will not be deductible
under Code Section 280G. The Seller is not a foreign person within the meaning
of the Code. To the Knowledge of Seller, each of the RLH Companies has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income tax within the meaning of
Code Section 6662. None of the RLH Companies is a party to any tax allocation or
sharing agreement.
(g) SCHEDULE 3.13 sets forth the following information with
respect to each of the RLH Companies as of the most recent practicable date (as
well as on an estimated pro forma basis as of the Closing giving effect to the
consummation of the transactions contemplated by this Agreement): (i) the tax
basis of each RLH Company in its assets; (ii) the amount of any net operating
loss, net capital loss, unused investment tax credit or other unused foreign tax
credit or excess charitable contribution allocable to each RLH Company; and
(iii) the amount of any deferred gain or loss allocable to any RLH Company for
any tax period commencing after the Closing Date arising out of any deferred
inter-company transaction.
(h) None of the RLH Companies will be required to include any
item of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of
any (i) change in method of accounting; (ii) closing agreement as described in
Code Section 7121 (or any corresponding or similar provision of state, local or
foreign law); (iii) deferred inter-company gain or any excess loss account
described in the Treasury Regulations under Code Section 1502 (or any
corresponding or similar provision of state, local or foreign income tax law);
or (iv) installment sale or open transaction disposition made on or prior to the
Closing Date; or (v) prepaid amount received on or prior to the Closing Date.
3.14 EMPLOYEE BENEFITS. SCHEDULE 3.14 lists each employee benefit
plan, as defined in Section 3(3) of ERISA, and each bonus or other incentive
compensation, severance, reduction in force, relocation, salary continuation for
sickness or other disability, vacation or educational assistance program which
Seller and RLH maintains, contributes to or has an obligation to contribute to
20
on behalf of Employees (collectively, the "SELLER/RLH PLANS"). None of the
Seller/RLH Plans constitutes a "multi-employer plan" (as defined in Section
4001(a)(3) of ERISA).
3.15 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.15:
(a) to the Knowledge of Seller, the owned or leased RLH
Properties are in compliance with all applicable Environmental Laws and there
are no liabilities under any Environmental Law with respect to the RLH Companies
and the owned or leased RLH Properties;
(b) neither Seller nor any of the RLH Companies has received or
is in possession of any notice of any material violation or alleged material
violation of, or any liability under, any Environmental Law, related to the
owned or leased RLH Properties; and
(c) Seller has not received any writs, injunctions, decrees,
orders or judgments outstanding, or written notice of any actions, suits,
proceedings or investigations pending or, to the Knowledge of Seller,
threatened, relating to compliance with or liability under any Environmental Law
affecting the owned or leased RLH Properties. 3.16 INTELLECTUAL PROPERTY.
SCHEDULE 3.16 sets forth a list and description (including the country of
registration) of all registered intellectual property Related to the RLH
Properties. With respect to Selected Marks, except as set forth on SCHEDULE
3.16, there are no restrictions that would materially affect the use of the
Selected Marks in connection with the RLH Properties and, the use of the
Selected Marks consistent with Seller's current usage of them does not infringe
upon or otherwise violate the valid rights of any other Person
3.17 LABOR MATTERS. Except as disclosed on SCHEDULE 3.17:
(a) there are no employees at the owned or leased RLH Properties
other than Employees of the RLH Companies or Seller; neither Seller nor the
owned or leased RLH Properties is a party to any labor or collective bargaining
agreement with respect to Employees; no Employees are represented by any labor
organization; to the Knowledge of Seller, there are no organizing activities
(including any demand for recognition or certification proceedings pending or
threatened in writing to be brought or filed with the National Labor Relations
Board or other labor relations tribunal) involving the owned or leased RLH
Properties; and, to the Knowledge of Seller, the RLH Companies have complied
with all applicable, labor and employment laws relating to the Employer.
(b) there are no strikes, work stoppages, slowdowns, lockouts,
unfair labor practice charges, arbitrations or grievances pending or threatened
in writing and received by Seller or the RLH Properties against or involving
Seller or the owned or leased RLH Properties except for those which,
individually or in the aggregate, would not have a Material Adverse Effect.
21
3.18 TITLE TO PROPERTY. Other than Excluded Assets and Transferred
Contracts, the appropriate RLH Company has good title (or lessee's interest in
the case of the RLH Leased Properties) to the real and personal property: (1)
used in the operation of the RLH Lease and of the RLH Owned Properties; or (2)
listed on the Balance Sheet (collectively, the "TANGIBLE ASSETS"). The real
property included within the RLH Lease and RLH Owned Properties is free and
clear of all Encumbrances, except: (i) any matter set forth in the title reports
for the various owned and leased RLH Properties, as listed in SCHEDULE 3.18;
(ii) any liens for liabilities or obligations reflected in the Financial
Statements; (iii) liens for Taxes, assessments and other governmental charges
not yet due and payable or due but being contested in good faith by appropriate
proceedings; (iv) mechanics', workmen's, repairmen's, warehousemen's, carriers,
or other like liens arising or incurred in the Ordinary Course of Business; (v)
with respect to real property, (A) easements, quasi-easements, licenses,
covenants, rights-of-way and other similar restrictions, including, without
limitation, any other agreements, conditions or restrictions which would be
shown by a current title report or other similar report or listing, (B) any
conditions that may be shown by a current title report, survey or physical
inspections and (C) zoning, building and other similar restrictions; and (vi)
with respect to personal property, original purchase price conditional sale
contracts and equipment leases with third parties entered into in the Ordinary
Course of Business; (all items included in the above clauses (i) through (vii)
are referred to collectively herein as the "PERMITTED ENCUMBRANCES"). SELLER
MAKES NO REPRESENTATION IN THIS AGREEMENT AS TO THE PHYSICAL CONDITION OR
USEFULNESS FOR A PARTICULAR PURPOSE OF THE REAL OR TANGIBLE PERSONAL PROPERTY
INCLUDED IN THE RLH PROPERTIES. FURTHER, NOTWITHSTANDING ANY PROVISIONS OF THIS
AGREEMENT TO THE CONTRARY, BUYER ACKNOWLEDGES AND UNDERSTANDS THAT SOME OF THE
MATERIALS DELIVERED BY SELLER TO BUYER HAVE BEEN PREPARED BY PARTIES OTHER THAN
SELLER OR RLH. SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESSED
OR IMPLIED, AS TO THE COMPLETENESS, CONTENT OR ACCURACY OF THE DELIVERED
MATERIALS WHICH WERE NOT PREPARED BY SELLER OR ANY OF THE RLH COMPANIES.
3.19 MATERIAL CONTRACTS. SCHEDULE 3.19 sets forth a list, as of the
date hereof, of each written Contract of Seller or the RLH Companies that is
Related to and/or material to the RLH Companies or RLH Properties (other than
(i) purchase orders in the ordinary and usual course of business, (ii) any
Contract involving the payment of less than $100,000 per year in the aggregate
or with a term of less than one year and (iii) confidentiality agreements
entered into in the usual course of business). Except as set forth in SCHEDULE
3.19, each such Contract is in full force and effect and constitutes a legal,
valid and binding obligation of RLH Company that is a party thereto, enforceable
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors, rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith and fair
dealing. No RLH Company is in breach of its obligations under such Contracts
(such as would have a Material Adverse Effect on the RLH Companies), and to
Seller's Knowledge, no other party is in breach or has repudiated such
Contracts.
22
3.20 RLH CAPITAL STOCK; TITLE. SCHEDULE 3.20 accurately sets forth
the authorized capital stock of each RLH Company and the number of shares of
each class of capital stock of each RLH Company that are issued and outstanding
as of the date hereof. The Stock and all of the issued and outstanding shares of
capital stock of the Subsidiaries of RLH are duly authorized, validly issued,
fully paid and non-assessable and all Stock is owned beneficially and of record
as set forth in SCHEDULE 3.20, free and clear of any Encumbrance except as
provided in the next sentence. Upon delivery of the payment for the Stock as
herein provided and assuming the Buyer has the requisite power and authority to
be the lawful owner of the Stock, Buyer will acquire good title thereto, free
and clear of any Encumbrance (other than (i) Encumbrances created by Buyer and
(ii) the requirements of the Federal and state securities laws respecting
limitations on the subsequent transfer thereof), and will own one hundred
percent of the issued and outstanding shares of capital stock of RLH, and RLH
will own the percentage of issued and outstanding stock of each RLH Company
listed on SCHEDULE 3.20.
3.21 INTENTIONALLY DELETED.
3.22 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Seller who might be entitled to any fee or commission from Seller in
connection with the transactions contemplated by this Agreement.
3.23 LEGAL COMPLIANCE. To the Knowledge of Seller each of the RLH
Companies has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings and charges
thereunder) of federal, state and local governments except for laws (including
the matters in parentheses immediately above) the breach or failure to comply
with would not have a Material Adverse Effect upon the RLH Companies, and no
action, suit, pending hearing, investigation, charge, complaint, claim, demand
or notice has been filed or commenced against any of them, alleging any failures
so to comply or, to the Knowledge of Sellers, has been threatened.
3.24 REAL PROPERTY. SCHEDULE 1.1(A) lists all of the real property
that any of the RLH Companies owns or leases.
3.24.1 With respect to each such parcel of owned RLH Properties:
(a) Seller has not encumbered such real property except as
disclosed in Section 3.18 and SCHEDULE 3.18.
(b) There are no pending or, to the Knowledge of any of the
Seller, any threatened condemnation proceedings, law suits or administrative
actions relating to the property or any matters affecting the current use,
occupancy or value thereof with the exception of The Red Lion Inn at the Quay in
Vancouver with respect to which the local government may exercise rights of
eminent domain;
23
(c) To the Knowledge of Seller all facilities have received all
approvals of governmental authorities, including licenses and permits, required
in connection with the ownership and operation thereof, and to the Knowledge of
Seller have been operated and maintained in accordance with applicable laws,
rules and regulations.
(d) Except as described on SCHEDULE 3.18, there are no leases,
subleases, licenses, concessions or other agreements, written or oral, granting
to any party or parties the right of use or occupancy of any portion of the
parcel of real property.
(e) Since Seller has acquired title to the RLH Properties,
Seller has not granted any options or rights of first refusal to purchase the
parcel of real property or any portion thereof or interest therein.
(f) To the Knowledge of Seller, all facilities located on real
property are supplied with utilities and have access to a publicly dedicated
road
3.24.2 With respect to each lease for the properties leased by any of
the RLH Companies:
(a) The lease is legal, valid, binding, enforceable and in full
force and effect;
(b) No party to the lease is in breach or default or has
repudiated any provision of the lease
(c) To the Knowledge of Seller all facilities leased have
received all approvals of governmental authorities, and have been operated and
maintained substantially in accordance with applicable laws, rules and
regulations.
(d) All leased facilities are supplied with utilities and have
access to publicly dedicated roads.
3.25 INSURANCE. SCHEDULE 3.25 lists each policy of insurance
currently in effect for the RLH Companies and RLH Properties, all of which will
remain in full force and effect through the date of Closing. True and accurate
copies of each insurance policy will be made available to Buyer at Seller's
offices prior to Closing.
3.26 DISCLOSURE. The representations and warranties contained in this
Section do not contain any untrue statement of material fact or omit to state
any material fact necessary in order to make the statement that information
contained in this Section is not materially misleading.
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3.27 COMPLIANCE WITH SECURITIES LAWS. Seller represents to Buyer that
it is acquiring the Equity Interest for its own account and not with a view to
distribution. Seller has no present intent and will not resell, transfer, assign
or distribute the equity interest, except in compliance with the registration
requirements of the Securities Act of 1933 as amended, and all other U.S.
federal, state or foreign securities laws and regulations, or pursuant to an
available exemption therefrom.
3.28 NO OTHER REPRESENTATIONS OR WARRANTIES; LIMITATION. Except for
the representations and warranties contained in this Article 3, neither Seller
nor any other Person makes any other express or implied representation or
warranty on behalf of Seller. Notwithstanding Sections 3.3 and 3.4 or any of the
other representations or warranties contained herein the Seller makes no
representation or warranty concerning whether or not consent or approval of any
of the parties to the management agreements or operating leases is needed or
required. Buyer understands and agrees that information disclosed in any one
Schedule shall be deemed set forth in any other Schedule.
3.29 UPDATING. Notwithstanding anything contained herein to the
contrary, it is understood and agreed that in the event that any breach of any
representation or warranty of Seller is caused by or arises as a result of
events occurring between the date hereof and the Closing Date, and such breach
is disclosed in the Officer's Certificate to be delivered by Seller under
Section 7.2(a), then such breach shall not be considered a breach entitling
Buyer or any other person to indemnification, damages or set off hereunder but
shall simply and only be deemed an additional condition precedent to Buyer's
obligation to close hereunder in which event Buyer may: (A) close and accept
such breach disclosed within the Officer's Certificate as a modification of
Seller's representations or (B) elect not to close and to receive a refund of
the Deposit. All representations and warranties herein, which are phrased in the
present tense, shall be deemed to be representations made as of the date of this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND QUALIFICATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate and to carry on its business as currently
conducted. Buyer is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership of its properties
or the operation of its business requires such qualification, except where the
failure to be so qualified or in good standing, as the case may be, would not
have a Material Adverse Effect.
4.2 CORPORATE AUTHORIZATION. Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance by Buyer of this Agreement
25
have been duly and validly authorized and no additional corporate authorization
or consent is required in connection with the execution, delivery and
performance by Buyer of this Agreement.
4.3 CONSENTS AND APPROVALS. No consent, approval, waiver or
authorization is required to be obtained by Buyer or any Subsidiary of Buyer
from, and no notice or filing is required to be given by Buyer or any Subsidiary
of Buyer to, or made by Buyer or any Subsidiary of Buyer with, any federal,
state, local or other governmental authority or other Person (with the exception
of Buyer's lenders whose approval is the partial subject of Buyer's due
diligence as described in Section 5.1) in connection with the execution,
delivery and performance by Buyer of this Agreement, other than in all cases
where the failure to obtain such consent, or to give or make such notice or
filing, would not have a Material Adverse Effect or materially impair or delay
the ability of Buyer to effect the Closing.
4.4 NON-CONTRAVENTION. The execution, delivery and performance by
Buyer of this Agreement and the consummation of the transactions contemplated
hereby, does not and will not (i) violate any provision of the charter, bylaws
or other organizational documents of Buyer; (ii) subject to obtaining the
consents referred to in Section 4.3, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration (whether after the filing of notice or the lapse of time or both)
of any right or obligation of Buyer under, or in a loss of any benefit to which
Buyer is entitled under, any Contract of Buyer or result in the creation of any
Encumbrance upon any of the Assets of Buyer; or (iii) assuming compliance with
the matters set forth in Sections 3.3 and 4.3, to the knowledge of Buyer's
officers, violate or result in a breach of or constitute a default under any
law, rule, regulation, judgment, injunction, order, decree or other restriction
of any court or governmental authority to which Buyer is subject, including any
Governmental Authorization, other than any conflict, breach, termination,
default, cancellation, acceleration, lose, violation or Encumbrance which,
individually or in the aggregate, would not have a Material Adverse Effect or
materially impair or delay the ability of Buyer to perform its obligations
hereunder.
4.5 BINDING EFFECT. This Agreement has been duly executed and
delivered by Buyer and constitutes the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors, rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
4.6 COMPLIANCE WITH SECURITIES LAWS; ABSENCE OF ADVERSE CHANGES.
Buyer represents and warrants to Sellers that (i) it has timely filed all
filings and reports required of it under the Securities and Exchange Act of
1934, as amended, applicable state securities laws and the securities exchanges
upon which its securities are traded; (ii) all such public filings are complete
and do not contain false or misleading information; and (iii) the financial
statements contained in such filings fairly present, in all material respects,
26
the financial condition and operating results of Buyer as of the dates, and for
the periods, indicated therein. Except as set forth in its public filings, Buyer
has no material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the Ordinary Course of Business subsequent to September 30, 2001 and
(ii) obligations under contracts and commitments incurred in the Ordinary Course
of Business which, in both cases, individually or in the aggregate, do not have
Material Adverse Effect on Buyer.
4.7 RECENT EVENTS.
(a) MATERIAL ADVERSE EFFECT ON BUYER. Since September 30, 2001,
none of the following events has occurred in a manner having a Material Adverse
Effect on Buyer:
(i) any damage, destruction or loss, whether or not
covered by insurance, adversely affecting the business, properties, prospects,
or financial condition of Buyer;
(ii) any waiver or compromise by Buyer of a valuable right
or of a debt owed to it;
(iii) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by Buyer, except in the ordinary course
of business;
(iv) any change to a material contract or agreement by
which Buyer or any of its assets is bound or subject;
(v) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(vi) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible or tangible assets
except in the Ordinary Course of Business;
(vii) any resignation or termination of employment of any
officer or key employee of Buyer;
(viii) any mortgage, pledge, transfer or grant of a
security interest in, or lien, created by Buyer, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable and
the security interests that will be created at Closing in favor of Buyer's
Lender;
(ix) any loans or guarantees made by Buyer to or for the
benefit of its employees, officers, stockholders or directors, or any members of
their immediate families, other than travel advances and other advances made in
the ordinary course of its business;
27
(x) any declaration, setting aside or payment or other
distribution in respect of any of Buyer's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any such stock by Buyer;
(xi) any execution of any contract outside of the ordinary
course of business; or
(xii) any arrangement or commitment by Buyer to do any of
the things described in this Section 4.6.
(b) MATERIAL ADVERSE CHANGES IN BUYER'S FINANCIAL CONDITION.
Since September 30, 2001, there has not been any Material Adverse Change in the
Financial condition or results of operations of Buyer, nor have any of the
following events caused any Material Adverse Change in the financial condition
or results of operations of Buyer:
(i) sale, lease, transfer, or assignment of any material
assets, tangible or intangible, outside the Ordinary Course of Business;
(ii) any material agreement, contract, lease, or license
outside the Ordinary Course of Business;
(iii) any termination of or material modifications to, or
canceled any material agreement, contract, lease, or license to which Buyer is a
party or is bound;
(iv) any Encumbrances (except for Permitted Encumbrances)
upon any of its assets, tangible or intangible;
(v) any material capital expenditures outside the Ordinary
Course of Business;
(vi) any material capital investment in, or any material
loan to, any other Person outside the Ordinary Course of Business;
(vii) any creditor guaranteed indebtedness for borrowed
money and capitalized lease obligations outside of the Ordinary Course of
Business, except for the financing from Buyer's Lender which is limited to this
transaction;
(viii) any license or sublicense of any material rights
under or with respect to any Intellectual Property;
(ix) any change made or authorized in the charter or bylaws
of Buyer;
(x) the sale of any of Buyer's capital stock, or grant of
options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
28
(xi) the declaration or payment of any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
acquisition of any of its capital stock;
(xii) any material damage, destruction, or loss to Buyer's
assets;
(xiii) any loan to or transaction between Buyer and any of
its directors, officers, and employees outside the Ordinary Course of Business;
(xiv) any employment contract or collective bargaining
agreement, written or oral, or modification of the terms of any existing such
contract or agreement outside the Ordinary Course of Business;
(xv) any other material change in employment terms for any
of its directors, officers, and employees outside the Ordinary Course of
Business; and
(xvi) any commitment by Buyer to any of the foregoing.
4.8 CAPITAL STOCK; TITLE. SCHEDULE 4.8 accurately sets forth the
authorized capital stock of Buyer and the number of shares of each class of
capital stock of Buyer that are issued and outstanding as of the date hereof.
All of the issued and outstanding shares of capital stock of Buyer are duly
authorized, validly issued, fully paid and non-assessable. Upon delivery of the
payment for the Equity Interest as herein provided and assuming the Seller has
the requisite power and authority to be the lawful owner of the Equity Interest,
Buyer will acquire good title thereto, free and clear of any Encumbrance (other
than (i) Encumbrances created by Seller and (ii) the requirements of the Federal
and state securities laws respecting limitations on the subsequent transfer
thereof), and will own one hundred percent of the issued and outstanding Equity
Interest.
4.9 LEGAL COMPLIANCE. To the Knowledge of Buyer, Buyer has complied
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder) of
federal, state and local governments, except for laws (including the matters in
parenthesis immediately above) the breach or failure to comply with would not
have a Material Adverse Effect upon the Buyer, and no action, suit, pending
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against any of them, alleging any failures so to comply or,
to the Knowledge of Buyer, has been threatened.
4.10 PURCHASE NOT FOR DISTRIBUTION. The Stock will be acquired by
Buyer for its own account and not with a view to distribution. Buyer has no
present intent to and will not resell, transfer, assign or distribute the Stock,
except in compliance with the registration requirements of the Securities Act of
1933, as amended, and all other U.S. federal or state or foreign securities laws
and regulations, or pursuant to an available exemption therefrom.
4.11 LITIGATION AND CLAIMS. There is no civil, criminal or
administrative action, suit, demand, claim, hearing, proceeding or investigation
pending or, to the Knowledge of Buyer, threatened which, individually or in the
29
aggregate, would materially impair or delay the ability of Buyer to effect the
Closing. The Buyer is not subject to any order, writ, judgment, award,
injunction, or decree of any court or governmental or regulatory authority of
competent jurisdiction or any arbitrator or arbitrators which, individually or
in the aggregate, would materially impair or delay the ability of Buyer to
effect the Closing.
4.12 FINDERS' FEES. Other than Xxxxxx Brothers, Inc., there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Buyer or any Subsidiary of Buyer who
might be entitled to any fee or commission from Buyer in connection with the
transactions contemplated by this Agreement. Buyer shall be exclusively
responsible for any fee or commission due Xxxxxx Brothers Inc.
4.13 FINANCIAL CAPABILITY. On December 21, 2001 Buyer shall deliver
to Seller the Financing Commitment referred to in Section 5.1 and the Lender
Letter in the form required under Section 2.10 identifying that Buyer has
sufficient funds to effect the Closing.
4.14 DISCLOSURE. The representations and warranties contained in this
Section do not contain any untrue statement of material fact or omit to state
any material fact necessary in order to make the statement that information
contained in this Section is not materially misleading.
4.15 UPDATING. Notwithstanding anything contained herein to the
contrary, it is understood and agreed that in the event that any breach of any
representation or warranty of Buyer is caused by or arises as a result of events
occurring between the date hereof and the Closing Date, and such breach is
disclosed in the Officer's Certificate to be delivered by Buyer under Section
7.3(a), then such breach shall not be considered a breach entitling Seller or
any other person to indemnification, damages or set off hereunder but shall
simply and only be deemed an additional condition precedent to Seller's
obligation to close hereunder in which event Seller may: (A) close and accept
such breach disclosed within the Officer's Certificate as a modification of
Buyer's representations or (B) elect not to close, in which event Buyer shall
receive a refund of the Deposit. All representations and warranties herein,
which are phrased in the present tense, shall be deemed to be representations
made as of the date of this Agreement.
4.16 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article 4, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of Buyer.
30
ARTICLE 5
COVENANTS
---------
5.1 DUE DILIGENCE. Buyer acknowledges that it has had the
opportunity to review the Books and Records of the Seller and the RLH Companies
(excluding Books and Records Related to Seller Retained Properties), and to
conduct physical inspections of the RLH Owned Properties, conduct environmental
assessments and that Buyer hereby indemnifies and holds harmless Seller from all
loss and damages (including reasonable attorneys' fees and costs) resulting from
such physical inspections) and appraisals with respect thereto, and make
inquiries of employees of the RLH Companies, consult with insurance brokers with
respect to insurance coverages for the RLH Companies and agrees that it shall
use its Best Efforts to obtain, not later than December 24, 2001, a firm
commitment for third party financing required by Buyer to complete the
contemplated transaction (such firm financing commitment being referred to
herein as the "Financing Commitment"). Buyer shall notify Seller on or before 5
p.m. (PST) on December 24, 2001 whether it has obtained the Financing
Commitment. If such notice is not given by Buyer, or if Buyer's Financing
Commitment is not acceptable to Seller, this Agreement will terminate, except
for provisions of this Agreement which are intended to survive termination of
this Agreement.
5.2 ACCESS. Prior to the Closing, Seller and Buyer shall each permit
the other and their respective representatives to have access, during regular
business hours and upon reasonable advance notice, to such other party, subject
to reasonable rules and, and shall furnish or cause to be furnished any
financial and operating data and other information that is available as shall
from time to time be reasonably requested. The parties agree to abide by the
terms of the confidentiality agreements between the parties with respect to such
access and any information furnished to it or its representatives pursuant to
this Section 5.2.
5.3 CONDUCT OF BUSINESS. During the period from August 31, 2001 to
the Closing, except for the Reorganization Transactions or as otherwise
contemplated by this Agreement or as Buyer shall otherwise agree in writing in
advance, Seller covenants and agrees that Seller has conducted and will conduct,
and has caused and will cause the RLH Companies to conduct, the Business in the
ordinary and usual course, and to use reasonable efforts to preserve intact the
RLH Companies and the RLH Properties and their relationships with third parties
in respect thereof. During the period from August 31, 2001 to the Closing,
except as otherwise provided for in this Agreement and except as contemplated by
the Reorganization Transactions or as Buyer shall otherwise consent (which
consent shall not be unreasonably withheld), Seller covenants and agrees that
with respect to the RLH Properties and the Related Business, other than in the
Ordinary Course of Business, it has not and shall cause the RLH Companies not
to:
(a) enter into commitments for new capital expenditures in
excess of $100,000 in the aggregate;
31
(b) dispose of or incur, create or assume any Encumbrance on
any individual fixed asset of any of the RLH Companies with respect to the RLH
Properties if the greater of the book value or the fair market value of such
fixed asset exceeds $50,000, other than Permitted Encumbrances;
(c) enter into any transaction outside of the Ordinary Course
of Business;
(d) grant material salary or wage increases or (as it relates
to Employees) or materially change or amend any Seller/RLH Plan; or
(e) agree, in writing or otherwise, to do any of the foregoing.
(f) except for the distributions contemplated by the
Reorganization Transactions as reflected in the Adjusted Closing Balance Sheet,
distribute any cash or other assets of Seller or any of the RLH Companies to any
Affiliate of any of them.
5.4 BEST EFFORTS. Seller and Buyer will cooperate and use their
respective Best Efforts to fulfill the conditions precedent to the other party's
obligations hereunder, including but not limited to securing as promptly as
practicable all consents, approvals, waivers and authorizations required in
connection with the transactions contemplated hereby.
5.5 SETTLEMENT OF INTER-COMPANY ACCOUNTS; CANCELLATION OF
INTER-COMPANY AND OTHER AGREEMENTS. The parties agree that all inter-company
accounts, including all accounts receivable and accounts payable, (whether or
not currently due and payable) between the RLH Companies, on the one hand, and
Seller and its Affiliates (other than the RLH Companies), on the other hand,
shall be settled in full on or prior to the Closing Date. Except for the
Transition Management Agreement, the Transition Services Agreement or as
otherwise provided in this Agreement, Seller shall cause any Contracts between
any of the RLH Companies, on the one hand, and Seller and its Affiliates (other
than the RLH Companies), on the other hand, to be cancelled, provided, however,
that the Buyer and Seller agree that the Systems 21 licensing agreement shall be
cancelled upon the date of termination or cancellation of the Transition
Management Agreement.
5.6 EMPLOYEE OBLIGATIONS; COMPLIANCE WITH WARN, ETC. Buyer has
furnished Seller with copies of its employee compensation methodology and
benefit plans and agrees to use its Best Efforts to implement such methodology
and make available to Employees such benefit plans (without discrimination
between Employees and Buyer's other employees) in the same general manner as
such are implemented and made available to Buyer's employees, generally;
provided, however, that it is agreed that Buyer shall have the right to amend
and modify its compensation and benefit plans from time to time, as it deems
appropriate; and that the conversion from Seller's compensation plans and
benefit plans may occur following a transition period specified in the
Transition Services Agreement. Buyer shall cause the RLH Companies to employ and
retain for at least ninety (90) days after the closing date that number of
32
employees at each location where Employees are located as of the closing date so
as not to cause a "mass layoff" or "plant closing" as those terms are defined in
the Worker Adjustment and Retraining Notification Act, 29 U.S.C., Section 2101,
et seq. ("WARN"). Moreover, Buyer shall be liable for: (i) employee liabilities
arising prior to Closing to the extent such liabilities are accrued as current
liabilities on the Closing Balance Sheet, and (ii) all liabilities arising out
of the termination of Employees and for severance benefits that Buyer or Seller
may be obligated to pay, if any, with respect to any Employee terminated by
Buyer on or following the Closing Date irrespective of whether the termination
of such Employee creates liability under WARN. From and after the Closing Date,
the RLH Companies shall be solely responsible for the wages, salaries and
benefits of all Employees. Buyer agrees to indemnify and hold harmless Seller,
and its respective successors and assigns, from any against any and all claims,
penalties, damages, liabilities, actions, costs and expenses (including
attorneys' fees) for severance to terminated Employees and under WARN to the
extent arising from a breach of this Section 5.6 by Buyer.
5.7 FURTHER ASSURANCES. At any time after the Closing Date, Seller,
on the one hand, and Buyer, on the other hand, shall, or shall cause Seller or
the RLH Companies to, promptly execute, acknowledge and deliver any other
assurances or documents reasonably requested by Buyer or Seller, as the case may
be, and necessary for them or it to satisfy their or its respective obligations
hereunder or obtain the benefits contemplated hereby.
5.8 USE OF CORPORATE NAME AND SYMBOL; TRANSITION LICENSE. Except as
set forth in this Section 5.8 or as specifically provided for in any Continuing
Relationship Agreements, after the Closing Date, Buyer shall not use the Seller
Marks or the Composite Marks. Except as set forth in this Section 5.8 or as
specifically provided for in any Continuing Relationship Agreements, as promptly
as practicable, but in no event later than 60 days following the Closing Date
(hereinafter the "Phase Out Period"), Buyer shall, and cause the RLH Companies
to, remove, strike over or otherwise obliterate all Seller Marks and Composite
Marks from all materials constituting their properties and assets, including,
without limitation, any business cards, schedules, stationery, displays, signs,
promotional materials, manuals, forms and other materials, if such materials are
distributed or made available or proposed to be distributed or made available to
third parties; provided that (i) the RLH Companies shall immediately cease using
invoice forms and purchase and sale contract forms, and no later than 30 days
after the Closing Date, cease using stationery and business cards containing
Seller Marks and Composite Marks, and (ii) nothing herein contained shall
require or be construed to require Buyer or the RLH Companies to cause customers
of Buyer or the RLH Companies to take any action with respect to property of the
Buyer or the RLH Companies in the possession of any such customers. Seller
hereby grants to Buyer a non-exclusive, royalty-free license during the Phase
Out Period to use Seller Marks and Composite Marks appearing on materials in
inventory on the Closing Date solely as permitted pursuant to this Section 5.8
provided that Buyer complies with Seller's quality standards and specifications.
33
5.9 TRANSITION SERVICES. The Transition Services Agreement in the
form of SCHEDULE 5.9 will be executed on or before the Closing Date.
5.10 TRANSITION MANAGEMENT AGREEMENT. The Transition Management
Agreement in the form of SCHEDULE 5.10(a) (the "Transition Management
Agreement") and the Transition Franchise Agreement in the form attached hereto
as SCHEDULE 2.10(B) will each be executed and delivered into escrow on December
21, 2001 and will become effective on the Closing Date.
5.11 LAUNDRY SERVICES AGREEMENTS. The Laundry Services Agreements in
the form of SCHEDULE 5.11 (the "LAUNDRY SERVICES AGREEMENTS") will be executed
and delivered to the Escrow Agreement on December 21, 2001.
5.12 TRADEMARK AGREEMENT. The Trademark Agreement in the form of
SCHEDULE 5.12 will be executed and delivered to the Escrow Agent on December 21,
2001.
5.13 CERTAIN MATTERS RELATED TO EXCLUDED LIABILITIES. Seller shall
have the right, which may be exercised in its sole discretion, to manage and
control the handling of, to assume the defense of and to settle or otherwise
compromise claims relating to Excluded Liabilities. With respect to all Excluded
Liabilities, the Buyer shall cause the Buyer Indemnified Parties to cooperate
with Seller, provide Seller as promptly as possible with notices and other
information received by such parties as well as all relevant materials,
information and data requested by Seller and shall grant Seller, without charge,
reasonable access to employees and Assets. The Buyer shall cause the Buyer
Indemnified Parties not to defend, settle, compromise or make any payments with
respect to claims relating to Excluded Liabilities.
5.14 SOLICITATION. From October 16, 2001 through February 28, 2003,
Buyer or its affiliates shall not solicit for employment or otherwise attempt to
recruit or hire any employee of Seller or its Affiliates, except as provided in
the Transition Services Agreement. Nothing herein shall prohibit Buyer from
general public advertisements in public media (such as radio or newspapers)
soliciting employees generally (provided that such ads are not targeted to
Seller or its Affiliates). From October 16, 2001 through February 28, 2003,
Seller or its Affiliates shall not solicit for employment or otherwise attempt
to recruit or hire any employee of RLH or its subsidiaries; provided this shall
not apply to Mr. Xxxxxx Xxxxxx, who will become an employee of the Seller.
Nothing herein shall prohibit Seller or its Affiliates from general public
advertisements in public media (such as radio or newspapers) soliciting
employees generally (provided that such ads are not targeted to the RLH
Companies).
5.15 GOVERNMENT APPROVALS AND THIRD PARTY CONSENTS. Buyer and Seller
have both agreed and represented to each other that the transactions
contemplated herein do not require a Xxxx-Xxxxx-Xxxxxx filing. Prior to Closing
Seller will use Best Efforts to obtain all necessary third party consents and
without any material change to the terms of any material agreement to which RLH
is a party or which materially affects any of the RLH Properties provided that
34
nothing herein shall require Seller to pay fees or offer other consideration to
any such third party in order to obtain such consents.
5.16 NON-COMPETE. For a period of seven (7) years following the
Closing Date, neither Seller nor Hilton will license any RLH Property, except
that the restriction will have a term of three (3) years for such RLH Properties
for which Buyer receives a refund under Section 2.7(e) as a result of a
termination or cancellation of a franchise or management Agreement with respect
to such RLH Property.
5.17 AUDITED FINANCIAL STATEMENTS. Buyer, at Buyer's expense, may
obtain audited financial statements of the RLH Companies.
5.18 BEST EFFORTS. Seller will use Best Efforts to furnish to Buyer
on the Closing Date a list of Inactive Employees effective as of one (1) week
prior to the Closing Date.
5.19 SUPERIOR COFFEE CONTRACT. Buyer covenants that with respect to
the RLH Properties that are currently buying coffee under the August 9, 2000
Consolidated Agreement between Hilton Hotels, Inc. and Superior Coffee, Buyer
will cause RLH to continue to purchase their requirements for coffee under the
terms of such Agreement provided that RLH shall have no volume commitment under
such Agreement, nor any obligation to repay any portion of the "Pay Back Amount"
under Amendment No. 1 thereof.
ARTICLE 6
TAX MATTERS
-----------
6.1 TAX RETURNS.
(a) Code Section 338 Election/Taxable Periods/Allocations.
(i) With respect to Buyer's purchase of the Stock
hereunder, Buyer agrees not to make any election under Section 338 of the Code.
(ii) Seller and Buyer shall, to the extent permitted by
applicable law, elect with the relevant taxing authority to close the taxable
period of the RLH Companies on the Closing Date. In any case where applicable
law does not permit any RLH Company to close its taxable year on the Closing
Date, then Taxes attributable to the taxable period of such RLH Company
beginning on or before and ending after the Closing Date shall be allocated (A)
to Seller for the period up to and including the Closing Date and (B) to Buyer
for the period subsequent to the Closing Date. Any allocation required to
determine any Taxes attributable to any period beginning on or before and ending
after the Closing Date shall be made by means of a closing of the books and
records of each of the RLH Companies as of the close of business on the Closing
Date and, to the extent not susceptible to such allocation, by apportionment on
the basis of elapsed days.
35
(b) Tax Periods Ending on or Before the Closing Date. Seller
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the RLH Companies for all periods ending on or prior to the Closing
Date which are filed after the Closing Date. Seller shall be responsible for,
shall pay or cause to be paid, any and all Taxes of, or payable by (including by
reason of Treasury Regulation ss.1.1502-6), the RLH Companies (or any
predecessors) with respect to any taxable period ending on or before the Closing
Date, but only to the extent that the Taxes exceed the accrual for current
Income Taxes payable of the RLH Companies on the face of the Adjusted Closing
Balance Sheet (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income).
(c) Tax Periods Beginning Before and Ending After the Closing
Date. Buyer shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the RLH Companies for Tax periods which begin before the
Closing Date and end after the Closing Date. Seller shall pay to Buyer, in the
manner provided for in Section 6.1(d), an amount equal to the portion of such
Taxes allocated to Seller pursuant to Section 6.1(a)(ii) to the extent such
Taxes are not reflected in the stated Tax liability or reserve for Tax liability
shown on the face of the Adjusted Closing Date Balance Sheet (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income).
(d) Consultation/Payment.
(i) Buyer shall deliver, at least 20 days prior to the due
date for filing the Tax Returns (including extensions) to be prepared by Buyer
pursuant to Section 6.1(c), to Seller a statement setting forth the amount of
Tax for which Seller is responsible pursuant to Section 6.1(a)(ii) (the "Tax
Statement") and copies of such Tax Returns. Seller shall have the right to
review such Tax Return and Tax Statement prior to the filing of such Tax Return
and to suggest to Buyer any reasonable changes to such Tax Returns. Seller and
Buyer agree to consult and resolve in good faith any issue arising as a result
of the review of such Tax Return and the Tax Statement and mutually to consent
to the filing as promptly as possible of such Tax Return. In the event the
parties are unable to resolve any dispute within ten days following the delivery
of such Tax Return and the Tax Statement, the parties shall jointly request an
internationally recognized CPA firm mutually agreed upon by Buyer and Seller (as
distinguished from the CPA firm identified in Section 2.7(b) of this Agreement)
to resolve any issue in dispute as promptly as possible. If such CPA firm is
unable to make a determination with respect to any disputed issue within five
Business Days prior to the due date (including extensions) for the filing of the
Tax Return in question, then Buyer may file such Tax Return on the due date
(including extensions) therefor without such determination having been made and
without Seller's consent. Notwithstanding the filing of such Tax Return, such
CPA firm shall make a determination with respect to any disputed issue, and the
amount of Taxes that are allocated to Seller pursuant to Section 6.1(a)(ii)
shall be as determined by such CPA firm. The fees and expenses of such CPA firm
shall be paid one-half by Buyer and one-half by Seller.
36
(ii) Not later than (A) five Business Days before the due
date for the payment of Taxes with respect to such Tax Returns or (B) in the
event of a dispute, five Business Days after notice to Seller of the resolution
thereof, Seller shall pay to Buyer an amount equal to the Taxes shown on the Tax
Statement as being allocable to Seller pursuant to Section 6.1(a)(ii) or in such
notice (as the case may be).
6.2 TAX INDEMNIFICATION.
(a) Seller's Indemnity. Seller shall be responsible for, shall
pay or cause to be paid, and shall indemnify and hold harmless Buyer and its
Affiliates (including, after the Closing, the RLH Companies) from and against
any and all Taxes of, or payable by (including by reason of Treasury Regulation
ss.1.1502-6), the RLH Companies (or any predecessors) (i) with respect to any
Taxable period ending on or before the Closing Date, (ii) with respect to the
transfer by any RLH Company of any Excluded Asset pursuant to Section 2.2,
above, (iii) allocated to Seller as provided in Section 6.1(a)(ii), above, but
only to the extent that such Taxes exceed the accrual for current Taxes payable
of the RLH Companies on the Adjusted Closing Balance Sheet and (iv) any Taxes
described in Section 6.4 for which Seller is responsible.
(b) Buyer's Indemnity. Buyer agrees to indemnify and hold
harmless Seller and its Affiliates from and against (and Seller and its
Affiliates shall have no liability under Section 6.2(a) on account of) (i) any
and all Taxes of the RLH Companies (or any predecessors) that are not described
in Section 6.2(a), (ii) any Taxes of the RLH Companies to the extent of the
accrual therefor on the Adjusted Closing Balance Sheet and (iii) any Taxes
described in Section 6.4 for which Buyer is responsible as provided in Section
6.4.
(c) Indemnity Claims.
(i) Buyer shall promptly notify Seller of the commencement
of any claim, audit, examination, or other proposed change or adjustment by any
taxing authority of which Buyer has knowledge concerning any Tax covered by
Section 6.2(a) (each a "Tax Claim"). Such notice shall contain factual
information (to the extent known by Buyer or any RLH Company) describing the
asserted Tax Claim in reasonable detail and shall include copies of any notice
or other document received from any taxing authority in respect of any such
asserted Tax Claim. If Buyer fails to give Seller prompt notice of any such Tax
Claim and Seller is materially adversely affected thereby, Seller shall not have
any obligation under Section 6.2(a) to indemnify for any Income Taxes arising
out of such Tax Claim.
(ii) Seller shall have the sole right and responsibility to
represent the RLH Companies' interests in any Tax audit or administrative or
court proceeding relating to Taxes described in Section 6.1(b) and to employ
counsel of its choice.
(iii) With respect to any Taxable period of any RLH Company
described in Section 6.1(c), Buyer shall control the defense and settlement of
any Tax audit or administrative or court proceeding relating to Taxes, with
input from Seller and with the right of Seller to participate at its expense,
37
and each party shall cooperate with the other party at its own expense and there
shall be no settlement or closing or other agreement with respect thereto
without the consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that if either party shall refuse to consent to any
settlement, closing or other agreement that the other proposes to accept (a
"Proposed Settlement"), then (A) the liability with respect to the subject
matter of the Proposed Settlement of the party who proposed to accept the
proposed settlement shall be limited to the amount that such liability would
have been if the Proposed Settlement had been accepted and (2) the other party
shall be responsible for all expenses incurred thereafter in connection with the
contest of such Tax audit or proceeding except to the extent that the final
settlement imposes less liability on the party who proposed to accept the
Proposed Settlement than the Proposed Settlement would have imposed.
(iv) The indemnified party shall give the indemnifying
party written notice of a claim for indemnification or payment, which notice
shall include a calculation of the amount of the requested indemnity or other
payment and shall furnish to the indemnifying party copies of all books, records
and other information reasonably requested by indemnifying party to the extent
necessary to substantiate such claim and verify the amount thereof. If
reasonably necessary in order to make or substantiate a claim (or to determine
if a claim should be made), each party shall be permitted access to the other
party's books, records and other information in connection therewith. The
indemnifying party shall deliver to the indemnified party, within 30 days after
receiving the foregoing notice a detailed statement describing its objections
(if any) thereto. The parties shall use reasonable efforts to resolve any such
objections, but if they do not obtain a final resolution within 30 days (or any
longer period mutually agreed to by the parties) after the indemnified party has
received the statement of objections, the CPA firm selected under the provision
of Section 6.1(d)(i) shall resolve any remaining objections.
(v) Any claim for indemnity hereunder may be made at any
time prior to 60 days after the expiration of the applicable Tax statute of
limitations with respect to the relevant Taxable period (including all periods
of extension, whether automatic or permissive).
6.3 COOPERATION ON TAX MATTERS. Buyer, RLH Companies and Sellers
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request and
at its expense) the provision, on a timely basis, of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Buyer, RLH Companies and Sellers agree (A) to retain all books and records with
respect to Tax matters pertinent to the RLH Companies relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
38
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, RLH Companies or
Sellers, as the case may be, shall allow the other party to take possession of
such books and records. Buyer and Sellers further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby). Buyer and Sellers
further agree, upon request, to provide the other party with all information
that either party may be required to report pursuant to Section 6043 of the Code
and all Treasury Department Regulations promulgated thereunder. Seller and Buyer
shall provide to each other, and Buyer shall cause each of the RLH Companies to
provide to Seller, full access, at any reasonable time and from time to time, at
the business location at which the Books and Records are maintained, after the
Closing Date, to such Tax data of each of the RLH Companies as Seller or Buyer,
as the case may be, may from time to time reasonably request and will furnish,
and request the independent accountants and legal counsel of Seller, Buyer or
any RLH Company to furnish to Seller or Buyer, as the case may be, such
additional Tax and other information and documents in the possession of such
persons as Seller or Buyer may from time to time reasonably request.
6.4 CERTAIN TAXES AND FEES. All conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred in
connection with, or as a result of the transfer of the RLH Stock to Buyer shall
be paid by fifty percent (50%) by Seller and fifty percent (50%) by Buyer.
Seller shall pay all transfer taxes applicable to this transaction, including
real estate excise taxes. Each of Seller and Buyer will, at its own expense,
file all necessary Tax Returns and other documentation with respect to all such
Taxes, fees and charges, and, if required by applicable law, Seller and Buyer
will, and will cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation filed by the other party.
6.5 TAX RELATED ADJUSTMENTS.
(a) If Buyer or any of its Affiliates (including, with respect
to taxable periods (or portions thereof) after the Closing Date, the RLH
Companies) realizes during any taxable period a Tax benefit which is
attributable to any liability for Taxes (or the adjustment or other event or
circumstance giving rise thereto) for which Buyer has been indemnified under
Section 6.2(a) or for which Seller is otherwise responsible pursuant to the
terms of this Agreement, Buyer shall pay to Seller the amount of such net Tax
benefit. Any payment due under this Section 6.5 shall be made within five
Business Days from the date a refund of Taxes is received or actual reduction in
Taxes or other net Tax benefit is realized by Buyer.
(b) Except as provided in Section 6.5(c) and SCHEDULE 6.5
concerning tax assets shown on the Adjusted Balance Sheet, Buyer shall pay to
Seller any refund of Taxes received or amount of actual reduction in Taxes
realized (or portion of either thereof) after the Closing Date by Buyer or any
of its Affiliates (including the RLH Companies) relating to Taxes imposed on or
39
with respect to Seller or any of its Affiliates (including the RLH Companies)
with respect to any taxable period (or portion thereof) ending on or prior to
the Closing Date. Buyer shall pay to Seller such refund owed hereunder
(including interest received thereon) or the amount of any such reduction in
Taxes owed hereunder promptly upon receipt thereof by the recipient thereof.
Buyer shall, if Seller requests and at Seller's sole cost, cause the relevant
entity to file for and obtain any refunds or equivalent amounts to which Seller
is entitled under this Section 6.5(b).
(c) Buyer agrees that it shall not cause or permit any RLH
Company to carry back to any taxable period ending on or prior to the Closing
Date any net operating loss, loss from operations or other Tax attribute as to
which an election may be made, and pursuant to the foregoing, Buyer agrees not
to make or cause to be made such election (and all similar elections) and
further agrees that Seller has no obligation under this Agreement to return or
remit any refund or other Tax benefit attributable to a breach by Buyer of the
foregoing undertaking.
ARTICLE 7
CONDITIONS TO CLOSING
---------------------
7.1 CONDITIONS TO THE OBLIGATIONS OF BUYER AND SELLER.
The obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver) prior to the Closing of the following conditions:
(a) NO INJUNCTIONS. No court or governmental authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, non-appealable judgment, decree,
injunction or other order which is in effect on the Closing Date and prohibits
the consummation of the Closing.
(b) CONSENTS AND APPROVALS. All Required Approvals shall have
been obtained.
7.2 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation of Buyer
to effect the Closing is subject to the satisfaction (or waiver) prior to the
Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained herein shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the Closing, as if made as of the Closing (except that
representations and warranties that are made as of a specific date need be true
in all material respects only as of such date and except in accordance with
Section 3.29), and Buyer shall have received certificates to such effect dated
the Closing Date and executed by a duly authorized officer of Seller (the
"Officer's Certificate").
40
(b) COVENANTS. The covenants and agreements of Seller to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Buyer shall have received certificates to such effect
dated the Closing Date and executed by a duly authorized officer of Seller.
7.3 CONDITIONS TO THE OBLIGATIONS OF SELLER. The obligation of
Seller to effect the Closing is subject to the satisfaction (or waiver) prior to
the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained herein shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the Closing, as if made as of the Closing (except that
representations and warranties that are made as of a specific date need be true
in all material respects only as of such date and except as modified in
accordance with Section 4.15), and Seller shall have received a certificate to
such effect dated the Closing Date and executed by a duly authorized officer of
Buyer.
(b) COVENANTS. The covenants and agreements of Buyer to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Seller shall have received a certificate to such effect
dated the Closing Date and executed by a duly authorized officer of Buyer.
(c) DUE DILIGENCE AND BUYER FINANCING. Buyer shall have on or
before 5:00 P.M. (Pacific Time) December 21, 2001, delivered to Seller Buyer's
Financing Commitment pursuant to Section 5.1 and the Lender Letter described in
Section 2.10. Seller shall in its sole discretion determine whether or not such
Financing Commitment and Lender Letter satisfy the provisions hereof.
(d) REMOVAL OF DIVIDEND RESTRICTIONS. Buyer shall have
delivered to Seller written confirmation in a form acceptable to Seller in all
respects that so long as Buyer is not in default in its obligations to the
primary Lenders, such Lenders will allow the payment of dividends to holders of
the Series A Preferred Stock and the Series B Preferred Stock of Buyer and will
also allow for the redemption of the Series A Preferred Stock and the Series B
Preferred Stock consistent with the Designation of Rights and Preferences for
each. As a covenant, Buyer agrees that it shall not obtain future financing of
Buyer which imposes any restriction on the payment of dividends to holders of
preferred stock of Buyer, other than (x) during the continuation of an event of
default or (y) if the payment would result in a default under financial
covenants, which are usual and customary for financings of the type obtained by
Buyer, after Buyer's use of Best Efforts to obtain financial covenants no more
restrictive with respect to the payment of dividends than Buyer's current
financing. This covenant shall survive Closing until the Series A Preferred
Stock and Series B Preferred Stock is redeemed, notwithstanding anything
contained in this Agreement to the contrary.
41
ARTICLE 8
SURVIVAL; INDEMNIFICATION
-------------------------
8.1 SURVIVAL. The representations and warranties contained in this
Agreement shall survive the Closing only for the applicable period set forth in
this Section 8.1. All of the representations and warranties of Seller and Buyer
obtained in this Agreement and all claims and causes of action with respect
thereto shall terminate upon expiration of eighteen (18) months after the
Closing Date, except that the obligations specified in Article 6 shall continue
for the period specified in Article 6, and the Seller representations and
warranties in Section 3.20, and the Buyer representations and warranties in
Section 4.8, shall continue for seven (7) years after the Closing Date. In the
event notice of any claim for indemnification under Section 8.2 or Section
8.3(a)(i) is given (within the meaning of Section 10.1) within the applicable
survival period, the representations and warranties that are the subject of such
indemnification claim shall survive until such time as such claim is finally
resolved.
8.2 INDEMNIFICATION BY BUYER. Buyer hereby agrees that it shall
indemnify, defend and hold harmless Sellers, their Affiliates and, if
applicable, their respective directors, officers, shareholders, partners,
attorneys, accountants, agents and employees and their heirs, successors and
assigns (the "SELLER INDEMNIFIED PARTIES") from, against and in respect of any
damages, claims, losses, charges, actions, suits, proceedings, deficiencies,
Taxes, interest, penalties, and reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees, removal costs, remediation
costs, closure costs, fines, penalties and expenses of investigation and ongoing
monitoring) (collectively, the "LOSSES") imposed on, sustained, incurred or
suffered by or asserted against any of the Seller Indemnified Parties, directly
or indirectly, relating to or arising out of (i) any breach of any
representation or warranty made by Buyer contained in this Agreement for the
period such representation or warranty survives, (ii) the Assumed Liabilities,
and (iii) the breach of any covenant or agreement of Buyer contained in this
Agreement, except in all cases to the extent any such matter is specifically
addressed in Article 6. Seller acknowledges that this Article 8 constitutes
Seller's sole remedy with respect to any matters referred to herein.
8.3 INDEMNIFICATION BY SELLER.
(a) Seller hereby agrees that it shall indemnify, defend
and hold harmless Buyer, its Affiliates and, if applicable, their respective
directors, officers, shareholders, partners, attorneys, accountants, agents and
employees (other than Employees) and their heirs, successors and assigns (the
"BUYER INDEMNIFIED PARTIES" and, collectively with the Seller Indemnified
Parties, the "INDEMNIFIED PARTIES") from, against and in respect of any Losses
imposed on, sustained, incurred or suffered by or asserted against any of the
Buyer Indemnified Parties, directly or indirectly, relating to or arising out of
(i) subject to the provisions of Section 8.3(b), any breach of any
representation or warranty made by Seller contained in this Agreement (or
incorporated herein via a Schedule) for the period such representation or
warranty survives, (ii) all Excluded Liabilities; and (iii) subject to the
provisions of Section 8.3(b), the breach of any covenant or agreement of Seller
42
contained in this Agreement except in all cases to the extent any such matter is
specifically addressed in Article 6. Buyer acknowledges that this Article 8
constitutes Buyer's sole remedy with respect to any of the matters referred to
herein.
(b) Notwithstanding anything contained herein to the contrary,
Seller shall not be liable to the Buyer Indemnified Parties for any Losses with
respect to breaches of covenants, representations or warranties, except to the
extent (and then only to the extent) the Losses therefrom exceed an aggregate
amount equal to $500,000 (the "Bucket"), and then only all such Losses in excess
thereof up to an aggregate amount equal to 25% of the Purchase Price (the
"Cap"); provided, however, that the Bucket shall not apply to the obligations of
Seller under Section 3.6 (but the Cap shall apply) nor shall the Bucket or Cap
apply to any obligations arising under Section 2.4, Section 2.7, Article 6,
Sections 3.13, 3.20, or arising out of fraud or intentional misrepresentation.
8.4 INDEMNIFICATION PROCEDURES. With respect to third-party claims,
all claims for indemnification by any Indemnified Party under this Article 8
shall be asserted and resolved as set forth in this Section 8.4. In the event
that any written claim or demand for which Buyer or Seller, as the case may be
(an "INDEMNIFYING PARTY"), would be liable to any Indemnified Party hereunder is
asserted against or sought to be collected from any Indemnified Party by a third
party, such Indemnified Party shall promptly, but in no event more than 15 days
following such Indemnified Party's receipt of such claim or demand, notify the
Indemnifying Party of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim or demand) (the "CLAIM NOTICE").
The Indemnifying Party shall have 90 days from the personal delivery or mailing
of the Claim Notice (the "NOTICE PERIOD") to notify the Indemnified Party (a)
whether or not the Indemnifying Party disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such claim or demand
and (b) whether or not it desires to defend the Indemnified Party against such
claim or demand. All costs and expenses incurred by the Indemnifying Party in
defending such claim or demand shall be a liability of, and shall be paid by,
the Identifying Party; provided, however, that the amount of such costs and
expenses that shall be a liability of the Indemnifying Party hereunder shall be
subject to the limitations set forth in Section 8.3(b). Except as hereinafter
provided, in the event that the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the Indemnified Party
against such claim or demand, the Indemnifying Party shall have the right to
defend the Indemnified Party by appropriate proceedings and shall have the sole
power to direct and control such defense. If any Indemnified Party desires to
participate in any such defense, it may do so at its sole cost and expense. The
Indemnified Party shall not settle a claim or demand without the consent of the
Indemnifying Party. The Indemnifying Party shall not, without the prior written
consent of the Indemnified Party, settle, compromise or offer to settle or
compromise any such claim or demand on a basis which would result in the
imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the Indemnified Party or any Subsidiary or
Affiliate thereof. If the Indemnifying Party elects not to defend the
43
Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the amount
of any such claim or demand or, if the same be contested by the Indemnified
Party, then that portion thereof as to which such defense is unsuccessful (and
the reasonable costs and expenses pertaining to such defense), shall be the
liability of the Indemnifying Party hereunder, subject to the limitations set
forth in Section 8.3(b). To the extent the Indemnifying Party shall direct,
control or participate in the defense or settlement of any third-party claim or
demand, the Indemnified Party will give the Indemnifying Party and its counsel
access to, during normal business hours, the relevant business records and other
documents, and shall permit them to consult with the employees and counsel of
the Indemnified Party. The Indemnified Party shall use its Best Efforts in the
defense of all such claims.
8.5 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. All amounts paid
by Buyer or Seller, as the case may be, under Article 2 (other than Section
2.7(d)), Article 5, Article 6 or this Article 8 shall be treated as adjustments
to the Purchase Price for all Tax purposes.
8.6 COMPUTATION OF LOSSES SUBJECT TO INDEMNIFICATION. The amount of
any Losses for which indemnification is provided under this Article 8 shall: (i)
be computed net of any insurance or eminent domain proceeds or Tax benefits
(determined based upon the highest statutory rate) received or receivable by the
Indemnified Party in connection with such Loss, (ii) with respect to claims
pertaining to an individual RLH Property, the lost profits component of such
Losses, shall be limited to the sums set forth for each such RLH Property as
shown on SCHEDULE 8.6, (iii) be limited by the provisions of Section 8.3(b), and
(iii) exclude incidental, special, indirect and punitive damages.
ARTICLE 9
TERMINATION
-----------
9.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual, written agreement between Buyer and Seller;
(b) by either Buyer or Seller by giving written notice of such
termination to the other, if the Pre-Closing shall not have occurred on or
before December 21, 2001, or Closing shall not have occurred on or prior to
December 31, 2001; provided that the right to terminate this Agreement under
this Section 9.1(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement shall have been the cause of, or resulted
in, the failure of the Pre-Closing or Closing to occur on or before the
applicable date; or
(c) by either Buyer or Seller if there shall be in effect any
law or regulation that prohibits the consummation of the Closing or if
consummation of the Closing would violate any non-appealable final order, decree
or judgment of any court or governmental body having competent jurisdiction; or
44
(d) by Seller if, as a result of its due diligence, Seller
determines by December 14, 2001 that it is not satisfied with its due diligence
review of Buyer; or
(e) by Buyer if, as a result of its due diligence, the Buyer
determines on or before the Diligence Completion Date that it is not satisfied,
in its sole discretion with the results of its due diligence review; or
(f) by either of the Parties if the other Party is in breach of
its obligations under this Agreement and fails to cure such breach within five
(5) days following receipt of default from the nonbreaching Party.
9.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement in accordance with Section 9.1, this Agreement shall thereafter become
void and have no effect, and no party hereto shall have any liability to the
other party hereto or their respective Affiliates, directors, officers or
employees, except for the obligations of the parties hereto contained in this
Section 9.2 and in Sections 10.1, 10.9, 10.10, 10.11 and 10.12, and except that
nothing herein will relieve any party from liability for any breach of this
Agreement prior to such termination. Notwithstanding any provision in this
Agreement to the contrary, if the transactions contemplated by this Agreement
are not consummated by December 31, 2001 due to a breach by Buyer, then Seller
shall be entitled to receive the Deposit as liquidated damages (but Seller shall
not be entitled in such instance to specific performance or other equitable
remedy or any other damage remedy) and Buyer shall take such action as Seller
may request to cause Escrow Agent to deliver the Deposit to Seller.
Notwithstanding any provision in this Agreement to the contrary, if the
transactions contemplated by this Agreement are not consummated by December 31,
2001 due to a breach by Seller, then Buyer shall be entitled to immediate
receipt of the Deposit and shall be entitled to liquidated damages of
$2,000,000; but shall not be entitled in such instance to specific performance
or other equitable remedy or any other damage remedy.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 NOTICES. Any notice, demand, request, offer, consent, approval
or communications (collectively, a "Notice") to be provided under this Agreement
shall be in writing and sent by one of the following methods: (i) postage
prepaid, United States certified or registered mail with a return receipt
requested, addressed to Buyer or Seller, as appropriate, at the addresses set
forth below; (ii) overnight delivery with a nationally recognized and reputable
air courier (with electronic tracking requested) addressed to Buyer or Seller,
as appropriate, at the addresses set forth below; (iii) personal delivery to
Buyer or Seller, as appropriate, at the addresses set forth below; or (iv) by
confirmed facsimile or telecopier transmission to Buyer or Seller, as
appropriate, at the facsimile numbers set forth below and in such case of
facsimile transmission, a copy must also be contemporaneously sent by one of the
45
methods described in the preceding clause (i), (ii) or (iii) of this Section
10.1 (it being understood and agreed, however, that such Notice shall be deemed
received upon receipt of electronic transmission). Any such Notice shall be
deemed given upon receipt thereof, or, in case of any Notice sent pursuant to
clause (i), (ii) or (iii) above, the refusal thereof by the intended recipient.
Notwithstanding the foregoing, in the event any Notice is sent by overnight
delivery or personal delivery and it is received (or delivery is attempted)
during non-business hours (i.e., other than during 8:30 a.m. to 5:00 p.m.
Pacific Time, Monday through Friday, excluding holidays), then such Notice shall
not be deemed to have been received until the next business day. Either party
may designate a different address for receiving Notices hereunder by notice to
the other party in accordance with the provisions of this Section 10.1. Further
notwithstanding the foregoing, if any Notice is sent by either party hereto to
the other and such Notice has not been sent in compliance with this Section 10.1
but has in fact actually been received by the other party, then such Notice
shall be deemed to have been duly given by the sending party and received by the
recipient party effective as of such date of actual receipt.
To Buyer: WESTCOAST HOSPITALITY CORPORATION
WHC Building
000 X. Xxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx, Executive Vice President
and Chief Financial Officer
Telephone: 000-000-0000
Fax: 000-000-0000
with a copy to: WESTCOAST HOSPITALITY CORPORATION
WHC Building
000 X. Xxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
General Counsel
Telephone: 000-000-0000
Fax: 000-000-0000
To Seller: DOUBLETREE HOTELS CORPORATION
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
46
with a copy to: HILTON HOTELS CORPORATION
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Telephone: 000-000-0000
Fax: 000-000-0000
Notwithstanding anything in this Section 10.1 to the contrary, any
Notice delivered in accordance herewith to the last designated address of any
person or party to which a Notice may be or is required to be delivered pursuant
to this Agreement shall not be deemed ineffective if actual delivery cannot be
made due to a change of address of the person or party to which the Notice is
directed or the failure or refusal of such person or party to accept delivery of
the Notice.
10.2 ENTIRE AGREEMENT. This Agreement (including the exhibits and
schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter. The
exhibits and schedules constitute a part hereof as though set forth in full
above. This Agreement is not intended to confer upon any person, other than the
parties hereto, any rights or remedies hereunder.
10.3 FURTHER ASSURANCE. From time to time after the Closing Date,
Seller will, without further consideration, execute and deliver such other
instruments of conveyance and transfer, and take such other action including,
without limitation, assistance in connection with litigation, as Buyer
reasonably may request to more effectively convey and transfer to and vest in
Buyer and to put Buyer in possession of the assets to be transferred hereunder.
10.4 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party. Nothing in this Agreement, express or implied, is intended to confer upon
any person or entity other than the parties hereto and their respective
permitted successors and assigns, any rights, benefits or obligations hereunder.
10.5 FULFILLMENT OF OBLIGATIONS. Any obligation of any Party to any
other Party under this Agreement or any of the Ancillary Agreements, which
obligation is performed, satisfied or fulfilled by an Affiliate of such Party,
shall be deemed to have been performed, satisfied or fulfilled by such Party per
such action by such Affiliate.
10.6 PARTIES IN INTEREST. This Agreement shall inure to the benefit
of and be binding upon the Parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
confer upon any Person other than Buyer, Seller, the Indemnified Parties or
their respective successors or permitted assigns, any rights or remedies under
or by reason of this Agreement.
47
10.7 PUBLIC DISCLOSURE. The Parties have already disclosed the
negotiation of this Agreement and are engaged in public comment on that
announcement and interaction with third parties in the course of this
transaction. Notwithstanding the foregoing, each of the Parties to this
Agreement hereby agrees with the other Party or Parties hereto that, except as
may be required to comply with the requirements of any applicable Laws and the
rules and regulations of each stock exchange upon which the securities of one of
the Parties (or its Affiliate) is listed (in which case the disclosing Party
shall use its reasonable Best Efforts to advise the other Party or Parties prior
to making such disclosure), no press release or similar public announcement or
communication shall announce the financial details of this Agreement prior to
Closing. unless specifically approved in advance by all Parties hereto. Subject
to the prior sentence, Seller and Buyer shall cooperate with each other in the
development and distribution of all news releases and other public announcements
with respect to this Agreement or any of the transactions contemplated hereby.
10.8 RETURN OF INFORMATION. If for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, each Party
shall promptly return to the other Party all Books and Records furnished by the
other Party relating to the transaction contemplated herein, and shall not
(except as required by law) use or disclose the information contained in such
Books and Records for any purpose or make such information available to any
other entity or person.
10.9 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by the Party incurring
such expenses.
10.10 SCHEDULES. The disclosure of any matter in any schedule to this
Agreement shall be deemed to be a disclosure for all purposes of this Agreement
to which such matter could reasonably be expected to be pertinent, but shall
expressly not be deemed to constitute an admission by Buyer or Seller or to
otherwise imply that any such matter is material for the purposes of this
Agreement.
10.11 BULK TRANSFER LAWS. Buyer acknowledges that Seller have not
taken, and do not intend to take, any action required to comply with any
applicable bulk sale or bulk transfer laws or similar laws and Buyer waives the
right to any claim, suit or action with respect to, or Losses arising from, such
non-compliance.
10.12 ARBITRATION. Any and all claims, disputes or controversies
(collectively, "DISPUTES"), to the extent not otherwise consensually resolved
between the Parties hereto, arising out of or relating in any manner or way to
the RLH Companies or the RLH Properties, this Agreement or the breach thereof,
including but not limited to any Dispute over (a) the interpretation and/or
enforceability of this Agreement, (b) whether or not an agreement between the
parties exists, or (c) whether or not a Dispute is arbitrable, shall be resolved
48
by arbitration as provided for in this Section 10.12. Notwithstanding the
foregoing, Seller and Buyer hereby expressly waive and release all claims for
rescission, reformation or repudiation of this Agreement, and for attorney's
fees and costs, and punitive or exemplary damages, in connection with any
Dispute submitted to arbitration hereunder. Except as otherwise provided herein,
any such arbitration shall take place in DELAWARE and shall be conducted in
accordance with the Commercial Dispute Resolution Procedures of the American
Arbitration Association ("AAA").
To initiate arbitration seeking any award for money damages, Seller or
Buyer shall deliver written demand to the other Party stating that the party
delivering such notice desires to have the then unresolved Dispute(s) arbitrated
pursuant to the provisions of this Agreement. The demand shall also set forth
the identity and address of the individual selected by the notifying Party as
its arbitrator and describes the Dispute(s) to be arbitrated and such Party's
suggested resolution thereof. After receipt of the foregoing demand, the other
Party shall select an individual to act as its arbitrator and shall deliver a
written response with the identity and address of such arbitrator to the Party
initiating arbitration within twenty (20) days of the receipt of the demand. The
response shall set forth a suggested resolution of the Dispute(s) described in
the demand. The Party delivering the response shall simultaneously deliver a
copy thereof and the demand to the arbitrators identified therein. If a response
is not timely delivered pursuant to the terms of this subparagraph, the
suggested resolution of the Dispute(s) described in the demand shall become the
resolution thereof and shall be binding on Buyer and Seller hereunder.
Within fourteen (14) days of their receipt of the response, the
arbitrators identified in the demand and the response shall select a third
arbitrator, and if they are unable to agree on such third arbitrator, then (i)
either of them, on five (5) days' written notice to the other, or (ii) both of
them, shall apply to the AAA to designate and appoint a third arbitrator. The
two (2) arbitrators selected by the Parties shall then notify Buyer and Seller
promptly upon the selection of the third arbitrator. On a date set by the
arbitrators, but in no event more than sixty (60) days after the third
arbitrator is selected pursuant to the preceding subparagraph, the Parties shall
deliver to the arbitrators and each other a written statement of their
respective positions with respect to the Dispute(s) at issue and their reasons
in support thereof. Within fourteen (14) days thereafter, the Parties may submit
to the arbitrators and, if so, deliver to each other, a written response to the
other Party's statement.
Unless requested by the arbitrators, no hearing shall be required in
connection with any arbitration, and the arbitrators may elect to base their
award on the written material submitted by the Parties; provided, however, that
the Parties shall submit to hearings, and be prepared to present testimony, if
so requested by the arbitrators. If the arbitrators require a hearing then,
except as otherwise directed by the arbitrators, the parties shall (i) produce
relevant documents and information to each other as if Rule 34 of the Federal
Rules of Civil Procedure applied to the arbitration proceeding, and (ii) be
entitled to take no more than three (3) depositions, which shall be noticed and
taken in a manner consistent with the Federal Rules of Civil Procedure as if
those Rules applied to the arbitration proceeding. Any such discovery shall be
completed within the sixty (60) day period provided for in this Section 10.12.
49
Following receipt of the written materials from each Party provided for
in this Section 10.12), and following any hearing held in connection with such
arbitration, the arbitrators shall render their award. The Parties agree that
the award of the arbitrators shall be binding upon Buyer and Seller, and that
judgment on the award rendered by the arbitrators may be entered in any court of
competent jurisdiction. Each of the Parties shall bear their own costs and
expenses in connection with any arbitration, including the attorneys' fees and
costs of its counsel and the fees and costs of the arbitrator it selects. The
Parties, however, shall each pay one-half of the fees and expenses of any third
arbitrator appointed pursuant to Section 10.12. Notwithstanding the foregoing,
an arbitration award may determine a different allocation of any of the
foregoing costs, expenses or fees.
The third arbitrator appointed pursuant to Section 10.12 shall be an
individual having not less than ten (10) years' experience in the management and
operation of first-class hotels of generally the same class and category as the
Hotel, or not less than ten (10) years' prior experience in the financial or
economic evaluation or appraisal of such first-class hotels, but no such
arbitrator shall (i) then be in the employ of any Person which, at the time of
such arbitration, shall be a hotel Buyer or hotel management company, or (ii)
have ever been in the employ of Seller or Buyer or any of their respective
Affiliates.
THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ANY PUNITIVE OR
EXEMPLARY DAMAGES OR TO VARY OR IGNORE THE TERMS OF THIS AGREEMENT, AND SHALL BE
BOUND BY CONTROLLING LAW.
10.13 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the state of DELAWARE.
10.14 HEADINGS. The heading references herein and the table of
contents hereto are for convenience purposes only, do not constitute a part of
this Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
10.15 SEVERABILITY. If any clause or provision of this Agreement is
illegal, invalid or unenforceable under applicable present or future law, the
remainder of this Agreement shall not be affected. In lieu of each clause or
provision of this Agreement that is illegal, invalid or unenforceable, there
shall be added as a part of this Agreement a clause or provision as nearly
identical as may be possible and as may be legal, valid and enforceable. In the
event any clause or provision of this Agreement is illegal, invalid or
unenforceable as aforesaid and the effect of such illegality, invalidity or
unenforceability is that either party no longer has the substantial benefit of
its bargain under this Agreement and a clause or provision as nearly identical
as may be possible cannot be added, then, in such event, such party may in its
discretion cancel and terminate this Agreement provided such party exercises
such right within a reasonable time after such occurrence.
50
10.16 RULES OF INTERPRETATION. Except as otherwise expressly provided
in this Agreement, the following rules shall apply hereto: (i) the singular
includes the plural and plural includes the singular; (ii) "or" is not exclusive
and "include" and "including" are not limiting; (iii) a reference to any
agreement or other contract includes any permitted supplements and amendments;
(iv) a reference in this Agreement to a section or exhibit is a reference to a
section or exhibit within or attached to this Agreement unless otherwise
expressly provided; (v) a reference to a section or paragraph in this Agreement
shall, unless the context clearly indicates to the contrary, refer to all
sub-parts or sub-components of any said section or paragraph; (vi) words such as
"hereunder", "hereto", "hereof", and "herein", and other words of like import
shall, unless the context clearly indicates to the contrary, refer to the whole
of this Agreement and not to any particular clause hereof; (vii) the headings of
the articles or sections and the ordering or position thereof are for
convenience only and shall not in any way be deemed to affect the meaning of
this Agreement; (viii) a reference in this Agreement to a "person" or "party"
(whether in the singular or the plural) shall (unless otherwise indicated
herein) include both natural persons and unnatural persons (including, but not
limited to, corporations, partnerships, limited liability companies or
partnerships, trusts, etc.); and (ix) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP.
10.17 CONSTRUCTION. The parties agree and acknowledge that they have
jointly participated in the negotiation and drafting of this Agreement and that
this Agreement has been fully reviewed and negotiated by the parties and their
respective counsel. In the event of an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumptions or burdens of proof shall arise favoring any
party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant. The mere
listing (or inclusion of copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty relates solely to the existence of the
document or other items itself).
10.18 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other except as may be specifically limited herein.
51
10.19 GUARANTEE. Hilton hereby guarantees: (a) any payment obligations
of Seller that Seller may have under this Agreement as a result of Seller having
made the representations contained in Section 3.6 with respect to Financial
Statements and Section 3.13 with respect to Taxes and (b) the full and timely
performance of Seller under Article 6; provided, however, that: (i) in respect
to a breach of the representations contained in Section 3.6, the combined
liability of Hilton and Seller under Section 8.3(a) shall be limited as provided
in Section 8.3(b), and (ii) the limitations of Section 8.3(b) shall not apply to
a breach of the representations contained in Section 3.13 concerning Taxes. For
purposes of clarification it is understood and agreed that except as specified
in the immediately proceeding sentence, Hilton shall not have any liability to
the extent that Seller's liability is limited by other provisions of this
Agreement, including Sections 8.1, 8.3 or 8.6.
10.20 DOUBLETREE GUARANTEE. Seller hereby guarantees the performance
of its Affiliates under each of the Continuing Relationship Agreements.
10.21 WESTCOAST GUARANTEE. Buyer hereby guarantees the performance of
its Affiliates under each of the Continuing Relationship Agreements.
10.22 MULTIPLE COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument. A telecopy signature of
any Party shall be considered to have the same binding legal effect as an
original signature.
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
DOUBLETREE CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WESTCOAST HOSPITALITY CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
HILTON HOTELS CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Schedule 1.1(a)
Hotel Properties, Leases, Management Contracts,
-----------------------------------------------
Franchises and Red Lion companies and Ownership Interests Being Sold or Assigned
--------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
No. Hotel Address City ST Ownership Interest Red Lion Interest Held By
--- ----- ------- ---- -- ------------------ -------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
1. RL Sacramento 0000 Xxxxx Xxx Xxxxxxxxxx XX Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
2. RL Missoula 000 Xxxx Xxxxxxxx Missoula MT Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
3. RL Astoria 000 Xxxxxxxx Xxxxxx Xxxxxxx XX Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
4. RL Bend - North 0000 X.X. Xxxxx Xxxxxx Xxxx XX Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
5. RL Coos Bay 1313 North Bayshore Dr. Coos Bay OR Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
6. RL Eugene 000 Xxxxxx Xxxx Xxxxxx XX Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
7. XX Xxxxxxx 000 Xxxxx Xxxxxxxxx Xxx. Xxxxxxx XX Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
8. XX Xxxxxxxxx 000 X.X. Xxx Xxxxxx Xxxxxxxxx XX Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
9. XX Xxxxx/Longview 000 Xxxxx Xxxxx Xxxxx XX Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
10. RL at the Quay 000 Xxxxxxxx Xxxxxx Xxxxxxxxx XX Lessee* Red Lion Hotels, Inc.
------------------------------------------------------------------------------------------------------------------------------------
11. RL Wenatchee 0000 Xxxxx Xxxxxxxxx Xxx. Xxxxxxxxx XX Lessee* Red Lion Hotels, Inc.
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12. DT Boise -Downtown 0000 Xxxxxxxx Xxxxxx Xxxxx XX Lessee* Red Lion Hotels, Inc.
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13. RL Wyoming Inn of 000 Xxxx Xxxxxxxx Xxxxxxx WY Franchisor / TRS Red Lion Hotels, Inc.
Jackson Agt.
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14. RL Hotel and Casino - 000 Xxxx Xxxxxxxxxx Xxxx. Winnemucca MV Franchisor / TRS Red Lion Hotels, Inc.
Winnemucca Agt.
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15. RL Hotel and Casino - 0000 Xxxxx Xxxxxx Xxxx XX Franchisor / TRS Red Lion Hotels, Inc.
Elko Agt.
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16. RL Phoenix North 00000 Xxxxx 00xx Xxxxx Xxxxxxx XX Franchisor Red Lion Hotels, Inc.
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17. XX Xxxxxxx 0000 Xxxx Xxxx Xxxxxxx XX Franchisor Red Lion Hotels, Inc.
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18. RL San Diego Hanalei 0000 Xxxxx Xxxxxx Xxxxx Xxx Xxxxx XX Franchisor Red Lion Hotels, Inc.
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19. RL San Diego South Bay 000 Xxxxxxxx Xxxx Xxxx. Xxxxxxxx Xxxx XX Franchisor Red Lion Hotels, Inc.
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20. RL Colorado Springs - 000 X. Xxxxx Xxxxxx Xxxxxxxx XX Franchisor Red Lion Hotels, Inc.
Downtown Springs
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21. RL Pagosa Springs 000 Xxxxxxx Xxxxx Xxxxxx Xxxxx XX Franchisor Red Lion Hotels, Inc.
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22. RL North Springfield 0000 Xxxx Xxxxxxxxx Xxxxxxxxxxx XX Franchisor Red Lion Hotels, Inc.
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23. RL South Springfield 0000 X. Xxxxxxxxxxx Xxxx Xxxxxxxxxxx XX Franchisor Red Lion Hotels, Inc.
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24. RL Butte 0000 Xxxxxxx Xxxxxx Xxxxx XX Franchisor Red Lion Hotels, Inc.
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No. Hotel Address City ST Ownership Interest Red Lion Interest Held By
--- ----- ------- ---- -- ------------------ -------------------------
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25. RL Omaha 0000 Xxxxxx Xxxxxx Xxxxx XX Franchisor Red Lion Hotels, Inc.
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26. RL McMinnville 0000 XX Xxxxx Xxxx Xxxx XxXxxxxxxxx XX Franchisor Red Lion Hotels, Inc.
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27. RL Portland Airport 0000 XX 000xx Xxxxxx Xxxxxxxx XX Franchisor Red Lion Hotels, Inc.
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28. RL Seattle-South at 00000 Xxxxxxx Xxxxxxx Xxxxx Xxxxxxx XX Franchisor Red Lion Hotels, Inc.
Boeing Field
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29. RL St. Xxxx 0000 Xxx Xxxxxx Xxxx Xx. Xxxx XX Franchisor Red Lion Hotels, Inc.
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30. RL Bakersfield 0000 Xxxxxx Xxx Xxx Xx Xxxxxxxxxxx XX Franchisor Red Lion Hotels, Inc.
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31. RL Denver Downtown 0000 Xxxxxx Xxxxxx Xxxxxx XX Franchisor Red Lion Hotels, Inc.
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32. RL Lewiston 000 00xx Xxxxxx Xxxxxxxx XX Franchisor Red Lion Hotels, Inc.
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33. XX Xxxxx 0000 Xxxxxx Xxxxxx, X.X. Salem OR Franchisor Red Lion Hotels, Inc.
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34. RL Los Angeles - 00000 Xxxxxxx Xxx (Xxxxxx Xxxxxx Xxxx XX Franchisor Red Lion Hotels, Inc.
Warner Center Ctr.)
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35. RL Eureka 0000 Xxxxxx Xxxxxx Xxxxxx XX Owner Red Lion Hotels, Inc.
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36. RL Port Angeles 000 Xxxxx Xxxxxxx Xxxx Xxxxxxx XX Owner Red Lion Hotels, Inc.
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37. XX Xxxxxxx 0000 Xxxxxxx Xxxxx Xxxxxxx XX Owner Red Lion Hotels, Inc.
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38. RL Richland - Hanford 000 Xxxxxx Xxxxxxxxxx Xxx Xxxxxxxx XX Owner Red Lion Properties, Inc.
House
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39. RL Aberdeen 000 Xxxx Xxxxxxx Xxxxxxxx XX Owner Red Lion Hotels, Inc.
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40. RL Bend - South 000 X.X. Xxxxx Xxxxxx Xxxx XX Owner Red Lion Hotels, Inc.
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41. RL Kalispell 0000 Xxxxxxx 0 Xxxx Xxxxxxxxx XX Owner Red Lion Hotels, Inc.
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42. RL Klamath Falls 0000 Xxxxx Xxxxx Xxxxxxx Xxxxx XX Owner Red Lion Hotels, Inc.
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43. XX Xxxxx 0000 Xxxxx 00xx Xxxxxx Xxxxx XX Owner Red Lion Hotels, Inc.
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* Hotels 1 through 12 are all leased pursuant to one lease agreement: Lease dated August 1, 1995, between RLH
Partnership, L.P., a Delaware limited partnership (Landlord) and Red Lion Hotels, Inc. (Tenant), amended on November
8, 1996, September 15, 1998, and February 26, 1999 (the "iStar Lease").
