Exhibit 10.1
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (the "Agreement") is
entered into as of April 3, 2006, by and among CNL HOTELS & RESORTS, INC., a
Maryland corporation ("CHP"), CNL HOTELS & RESORTS ACQUISITION, LLC, a Florida
limited liability company all of the membership interests of which are owned by
CHP ("CHPAC"), CNL HOSPITALITY CORP., a Florida corporation (the "Advisor"), and
CNL REAL ESTATE GROUP, INC., a Florida corporation ("XXXX"), FIVE ARROWS REALTY
SECURITIES II L.L.C., a Delaware limited liability company ("FARS"), Xxxxx X.
Xxxxxx, Xx. ("Xxxxxx"), Xxxxxx X. Xxxxxx ("Xxxxxx"), the other stockholders of
the Advisor listed on the signature page hereto under the heading "Stockholders"
(collectively, the "Other Stockholders") and by this reference made a party
hereof (XXXX, FARS, Seneff, Bourne, and the Other Stockholders, are each
referred to herein as a "Stockholder" and collectively referred to as the
"Stockholders"), CNL FINANCIAL GROUP, INC., a Florida corporation ("Guarantor")
and an Affiliate (as defined below) of XXXX and of Xxxxxx, and CNL HOSPITALITY
PROPERTIES ACQUISITION CORP., a Florida corporation ("Former Merger Sub"). CHP,
CHPAC, the Advisor, the Stockholders and Guarantor are referred to collectively
herein as the "Parties" and individually as a "Party."
RECITALS:
WHEREAS, CHP has been considering a possible acquisition of the Advisor,
and the Board of Directors of CHP formed a special committee comprised of
certain of the independent directors of CHP (the "Special Committee"), among
other things, to consider and evaluate the terms of a possible acquisition of
the Advisor;
WHEREAS, the Special Committee previously recommended and the Board of
Directors of CHP and the stockholders of CHP (at the 2004 annual meeting of the
stockholders of CHP) previously approved the proposed acquisition of the Advisor
pursuant to that certain Agreement and Plan of Merger entered into as of April
29, 2004, as amended by that certain First Amendment to Agreement and Plan of
Merger entered into as of June 17, 2004 (as amended, the "Initial Merger
Agreement");
WHEREAS, certain conditions to the obligations of the parties to consummate
the transactions contemplated by the Initial Merger Agreement have not occurred
and have not been waived, but the Initial Merger Agreement has not been
terminated by the parties thereto, and the Special Committee, on behalf of CHP,
and the Advisor have re-engaged in discussions and negotiations to pursue a
possible acquisition of the Advisor by CHP on mutually acceptable terms and
conditions;
WHEREAS, the Special Committee continues to believe that an acquisition by
CHP of the Advisor is in the best interests of CHP and its stockholders, but in
light of changes in market conditions and other factors, the Special Committee
has sought to modify various terms and conditions of the Initial Merger
Agreement, and the parties to the Initial Merger Agreement (other than Xxxx X.
Xxxxxxxx, who no longer owns Advisor Common Shares (as defined below) and who is
no longer an employee of the Advisor), including Former Merger Sub (which is
only a party to this Agreement because it is a party to the Initial Merger
Agreement, which is being
amended and restated by this Agreement) have agreed to amend and restate the
Initial Merger Agreement on the revised terms and conditions set forth in this
Agreement;
WHEREAS, after due deliberation and consideration of various relevant
factors, the Special Committee, having received a written fairness opinion from
Xxxxxx Brothers, Inc. (the "Fairness Opinion") to the effect that as of the date
of this Agreement, subject to the assumptions, qualifications and limitations
stated therein, the consideration to be paid by CHP in the Merger (as defined
below) is fair, from a financial point of view, to CHP, has determined that it
is advisable and in the best interests of CHP and its stockholders to consummate
a merger whereby the Advisor would be merged with and into CHPAC and CHPAC would
be the surviving company in the merger (such merger, upon the terms and
conditions of this Agreement and in accordance with the Florida Business
Corporation Act, as amended from time to time (the "Florida BCA"), and the
Florida Limited Liability Company Act, as amended from time to time (the
"Florida LLCA"), is hereinafter referred to as the "Merger") and accordingly has
recommended that the Board of Directors of CHP approve the Merger;
WHEREAS, the Board of Directors of CHP (the "CHP Board of Directors")
(excluding any member of the CHP Board of Directors who is a Stockholder or an
Affiliate of any Stockholder or the Advisor), based on the recommendation of the
Special Committee, has determined that the Merger is advisable and in the best
interests of CHP and its stockholders and, accordingly, has approved the Merger
and has directed that the Merger be submitted to the stockholders of CHP for
consideration at an annual or at a special meeting of stockholders of CHP (the
"CHP Stockholder Meeting");
WHEREAS, CHP, the sole member of CHPAC, has determined that the Merger is
advisable and has approved the Merger;
WHEREAS, the Board of Directors of the Advisor has unanimously determined
that the Merger is advisable and in the best interests of the Advisor and the
Stockholders and, accordingly, has unanimously approved the Merger, and the
Stockholders have by unanimous written consent approved this Agreement and the
Merger;
WHEREAS, as an inducement to CHP and CHPAC to enter into this Agreement and
to consummate the Merger, (i) Guarantor has agreed to provide a guarantee of
certain of the obligations of the Stockholders on the terms and subject to the
conditions set forth in this Agreement, (ii) each member of the CNL Group (as
defined below) has agreed to enter into and to honor the terms and conditions of
the covenants contained in Section 9.5 of this Agreement, which covenants,
including the duration thereof, CHP and CHPAC have deemed to be necessary to
protect and enhance the long term financing and business strategy of CHP and the
Surviving Company (as defined herein), and (iii) each of Xxxxxx X. Xxxxxxxxx,
III, Xxxx X. Xxxxxxxx, C. Xxxxx Xxxxxxxxxx and Xxxxx A. N. Xxxxx have
simultaneously with the execution and delivery of this Agreement entered into
employment agreements with CHP effective as of the Effective Time (as defined
below) in form and substance satisfactory to the Compensation Committee of the
Board of Directors of CHP, on behalf of CHP (collectively, the "Employment
Agreements"); and
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WHEREAS, for federal income tax purposes, the Parties intend that the
Merger shall qualify as a reorganization under Section 368(a) of the Code (as
defined below).
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Terms Defined in this Agreement. As used in this Agreement, the
following terms shall have the respective meanings set forth below:
"Actual Knowledge" means an awareness and perception of the facts asserted
or stated.
"Advisor" has the meaning set forth in the preface above.
"Advisor Actions" has the meaning set forth in Section 8.21 below.
"Advisor Amendment" has the meaning set forth in Section 8.19 below.
"Advisor Common Shares" means the shares of the Class A common stock, $1.00
par value per share, and the shares of the Class B common stock, $1.00 par value
per share, of the Advisor.
"Advisor Common Share Certificates" has the meaning set forth in Section
4.1 below.
"Advisory Agreements" means that certain Advisory Agreement dated as of
April 1, 2003, that certain Advisory Agreement dated as of April 1, 2004, that
certain Renewal Agreement dated as of March 31, 2005 by and between CHP and the
Advisor, and any amendment, modification or extension of the terms of any of the
foregoing.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504, or any similar group defined under a similar provision of state,
local or foreign law.
"Agreement" has the meaning set forth in the preface above.
"Articles/Certificate of Merger" has the meaning set forth in Section 2.2
below.
"Assumed Advisor Liabilities" has the meaning set forth in Section 9.10(a)
below.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms the basis for any specified
consequence.
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"Bourne" has the meaning set forth in the preface above.
"Cash Reserve" has the meaning set forth in Section 8.15 below.
"CHP" has the meaning set forth in the preface above.
"CHP Board of Directors" has the meaning set forth in the sixth paragraph
of the Recitals above.
"CHP Charter Amendments" has the meaning set forth in Section 8.6 below.
"CHP Common Shares" means the common shares, par value $0.01 per share, of
CHP.
"CHP Indemnity Claim" has the meaning set forth in Section 12.1 below.
"CHP Note" means that certain Promissory Note dated as of December 30,
2005, in the principal amount of $27 million issued by CHP to and for the
benefit of the Advisor.
"CHP SEC Documents" has the meaning set forth in Section 6.8 below.
"CHP Stockholder Approval" has the meaning set forth in Section 6.4 below.
"CHP Stockholder Meeting" has the meaning set forth in the sixth paragraph
of the Recitals above.
"CHPAC" has the meaning set forth in the preface above.
"Claims" has the meaning set forth in Section 12.6 below.
"Class Action Lawsuit" means the lawsuit styled: In re CNL Hotels &
Resorts, Inc. Securities Litigation, case number 6:04-cv-1231-Orl-31 KRS
(consolidated with case number 6:09-cv-1341-Orl-19JGG), United States District
Court, Middle District of Florida, Orlando Division.
"Closing" has the meaning set forth in Section 2.3 below.
"Closing Date" has the meaning set forth in Section 2.3 below.
"CNL Group" has the meaning set forth in Section 9.5(a) below.
"CNL Group Party" has the meaning set forth in Section 9.5(a)(ii) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"commercially reasonable efforts" means as to a Party, an undertaking by
such Party to perform or satisfy an obligation or duty or otherwise act in a
manner reasonably calculated to obtain the intended result by action or
expenditure not disproportionate or unduly burdensome in the circumstances,
which means, among other things, that such Party shall not be required to (i)
expend funds other than for the payment of the reasonable and customary costs
and expenses of
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employees, counsel, consultants, representatives or agents of such Party in
connection with the performance or satisfaction of such obligation or duty or
other action, (ii) institute litigation or arbitration as a part of its
commercially reasonable efforts or (iii) amend, waive or modify a term or
condition of, or grant any concessions under or with respect to, or pay or
commit to pay any amount under or with respect to, any contract or relationship
with respect to which an approval, consent or waiver is sought or any other
agreement or relationship with such person (other than nominal filing and
application fees and reasonable and customary consent fees).
"Confidential Information" means any information concerning the businesses
and affairs of the Advisor or CHP, if any, that is not already generally
available to the public.
"XXXX" has the meaning set forth in the preface above.
"Deficiency Dividend" means either (a) any deficiency dividend within the
meaning of Section 860(f) of the Code, or (b) any distribution pursuant to
Section 852(e) of the Code or the application of principles similar thereto
pursuant to the regulations promulgated under Section 857(a)(2) of the Code in
connection with the distribution of earnings and profits (within the meaning of
the Code) that have been accumulated in, or are attributable to, any taxable
period of the Advisor through and including the Effective Time.
"Determination" has the meaning set forth in Section 12.1 below.
"Development Company" has the meaning set forth in the Section 7.6 below.
"Disclosure Schedule" has the meaning set forth in the first paragraph of
Article 7 below.
"Effective Time" has the meaning set forth in Section 2.2 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
tax-qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) tax-qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Stock Purchase Agreement" means each of the CNL Hospitality Corp.
Employee Stock Purchase Agreements dated March 23, 2004, by and among the
Advisor, XXXX and each of Xxxxx X. Xxxxxx, Xx., Xxxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxxxxx, III, C. Xxxxx Xxxxxxxxxx, Xxxx X. Xxxxxxxx, and Xxxxx A.N. Xxxxx, as
amended (except as to Xxxxx X. Xxxxxx, Xx. and Xxxxxx X. Xxxxxx) by that certain
First Amendment to CNL Hospitality Corp. Employee Stock Purchase Agreement dated
as of June 17, 2004, and that certain Second Amendment to CNL Hospitality Corp.
Employee Stock Purchase Agreement dated as of July 28, 2004.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
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"Employment Agreements" has the meaning set forth in the ninth paragraph of
the Recitals above.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Person" has the meaning set forth in Section 9.5(a)(i)(4) below.
"Extremely Hazardous Substance" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fairness Opinion" has the meaning set forth in the fifth paragraph of the
Recitals above.
"FARS" has the meaning set forth in the preface above.
"FARS Note" has the meaning set forth in Section 7.30 below.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 7.7 below.
"Florida BCA" has the meaning set forth in the fifth paragraph of the
Recitals above.
"Florida LLCA" has the meaning set forth in the fifth paragraph of the
Recitals above.
"Former Merger Sub" has the meaning set forth in the preface above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Guarantor" has the meaning set forth in the preface above.
"Hospitality Asset" has the meaning set forth in Section 9.5(a)(ii) below.
"Hospitality Asset Agreement" has the meaning set forth in Section
9.5(a)(ii) below.
"Indemnifying Stockholders" has the meaning set forth in Section 12.1
below.
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"Initial Merger Agreement" has the meaning set forth in the second
paragraph of the Recitals above.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation) and domain name registrations, (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever form or
medium).
"Inter-Company FARS Final Payment Funding Note" means a promissory note in
the principal amount of $7,625,000.00 issued by the Advisor to XXXX or its
Affiliate to evidence a loan made by XXXX or its Affiliate to the Advisor that
is solely to enable the Advisor to pay the final principal installment under the
FARS Note due on June 30, 2006 and that has such terms that were approved in
writing by the Special Committee, on behalf of CHP, prior to the making of such
loan.
"IRS" means the Internal Revenue Service.
"Knowledge" means, (i) in the case of the Advisor, CHP and Guarantor, (A)
the Actual Knowledge of the directors and executive officers of such corporation
and (B) the knowledge the directors and executive officers of such corporation
would have following a reasonable investigation and, (ii) in the case of the
Stockholders, (A) the collective Actual Knowledge of all of the Stockholders
(which, in the case of any Stockholder that is a corporation or other entity,
shall mean the Actual Knowledge of the directors and executive officers of such
Stockholder following a reasonable investigation) and (B) the collective
knowledge the Stockholders would have following a reasonable investigation
(which, in the case of any Stockholder that is a corporation or other entity,
shall mean the knowledge the directors and executive officers of such
Stockholder would have following a reasonable investigation). For the purposes
of this Agreement, the knowledge of one Stockholder shall be attributed to the
other Stockholders.
"Known" and "Knowingly" mean that the Advisor, the Stockholders or CHP, as
applicable, had Knowledge of the particular matter or took the action described
with prior Knowledge.
"Liability" means, with respect to any Person, any liability or obligation
of such Person of any kind, character or description (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, joint or several, due or
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to become due, executory, determined, determinable or otherwise, whether or not
the same is required to be accrued on the financial statements of such Person),
including any liability or obligation for or with respect to Taxes or any other
Losses (as defined below).
"Listing" means the actual listing of CHP Common Shares on the NYSE or any
other national securities exchange or U.S. inter-dealer quotation system.
"Losses" has the meaning set forth in Section 12.1 below.
"Luxury Hotel Industry Sector" has the meaning set forth in Section
9.5(a)(i) below.
"Management Stockholders" means all the Stockholders other than CREG,
Seneff, Bourne and FARS.
"Majority Vote Charter Amendment" has the meaning set forth in Section 8.6
below.
"Material Adverse Effect" means, as to any Party, a material adverse effect
on the business, properties, operations, results of operations, condition
(financial or otherwise) or future prospects of such Party; provided, however,
that an adverse change in general business or economic conditions or an adverse
change generally applicable to the industry in which such Party or any of its
subsidiaries operate, and not specifically relating to such Party or any of its
subsidiaries, so long as such adverse change does not have a materially greater
adverse effect on such Party and its subsidiaries, taken as a whole, than on
other participants in the industry in which such Party and its subsidiaries
operate (other than as a result solely of such Party's size relative to other
participants in the industry) shall not be deemed to constitute or shall not be
taken into account in determining the occurrence of a material adverse effect.
"Merger" has the meaning set forth in the fifth paragraph of the Recitals
above.
"Merger Consideration" has the meaning set forth in Section 4.1(a) below.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section 7.7
below.
"Most Recent Fiscal Quarter End" has the meaning set forth in Section 7.7
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"New Brand License Agreement" has the meaning set forth in Section 8.17
below.
"NYSE" means The New York Stock Exchange, Inc.
"Ordinary Course of Business" means the ordinary course of business
consistent with past practice (including with respect to quantity and
frequency).
"Party" or "Parties" has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
"Per Share Price" has the meaning set forth in Section 4.1(c) below.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, a limited liability company, an
unincorporated organization, governmental entity (or any department, agency, or
political subdivision thereof) or other entity.
"Pledge and Security Agreement" has the meaning set forth in Section 8.20
below.
"Post-Closing Straddle Period" has the meaning set forth in Section 9.8(f)
below.
"Post-Closing Straddle Period Taxes" has the meaning set forth in Section
9.8(f) below.
"Pre-Closing Straddle Period" has the meaning set forth in Section 9.8(f)
below.
"Pre-Closing Straddle Period Taxes" has the meaning set forth in Section
9.8(f) below.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"Proposed Indemnity Action" has the meaning set forth in Section 12.9
below.
"Pro Rata Percentage" has the meaning set forth in Section 4.2 below.
"Proxy Statement" has the meaning set forth in Section 8.6 below.
"Recreational Properties and Facilities" has the meaning set forth in
Section 9.5(a)(i) below.
"REIT" has the meaning set forth in Section 8.18 below.
"Registration Rights Agreement" has the meaning set forth in Section 8.14
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Representative" has the meaning set forth in Section 12.3 below.
"Right of First Refusal" has the meaning set forth in Section 9.5(a)(ii)
below.
"ROFR Notice" has the meaning set forth in Section 9.5(a)(ii) below.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
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"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Xxxxxx" has the meaning set forth in the preface above.
"Xxxxxx Family" means Xxxxxx, Xxxxxx'x spouse, and Xxxxxx'x lineal
descendants (including any adopted children) and their spouses.
"Xxxxxx Family Company" means a limited liability company, limited
liability partnership, limited liability limited partnership or limited
partnership of which (a) all of the members or partners, as the case may be,
consist only of Xxxxxx, members of the Xxxxxx Family, one or more Xxxxxx Family
Trusts, or another Xxxxxx Family Company, (b) Xxxxxx is the controlling manager
(in the case of a limited liability company), the controlling managing partner
(in the case of a limited liability partnership) or the controlling general
partner in the case of a limited partnership or limited liability limited
partnership, and (c) its operating agreement (in the case of a limited liability
company) or partnership agreement (in the case of a limited liability
partnership, limited partnership, or limited liability limited partnership)
prohibits the sale, assignment, transfer or gift of any member interest or
partnership interest, as the case may be, to any Person other than (x) a member
of the Xxxxxx Family, (y) a Xxxxxx Family Trust, or (z) another Xxxxxx Family
Company.
"Xxxxxx Family Trust" means a trust (x) as to which the only current
beneficiaries are members of the Xxxxxx Family and (y) whose trust agreement
prohibits the transfer, assignment or distribution of any Advisor Common Stock
owned by or on behalf of such trust to any Person other than Xxxxxx prior to the
Closing.
"Special Committee" has the meaning set forth in the first paragraph of the
Recitals above.
"Stockholder Consideration" has the meaning set forth in Section 12.6
below.
"Stockholder Indemnity Claim" has the meaning set forth in Section 12.2
below.
"Stockholders" has the meaning set forth in the preface above.
"Stockholders' Obligations" has the meaning set forth in Section 13.2
below.
"Straddle Year" has the meaning set forth in Section 9.8(f) below.
"Straddle Year Jurisdiction" has the meaning set forth in Section 9.8(f)
below.
"Subsidiary" means any corporation, partnership, joint venture, limited
liability company or other entity with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the common stock or other voting
interests or has the power to vote or direct the voting of
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sufficient securities or interests to elect a majority of the directors or
otherwise control the management.
"Surviving Company" has the meaning set forth in Section 2.1 below.
"Takeover Statute" has the meaning set forth in Section 8.11 below.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Tax Sharing Agreement" has the meaning set forth in Section 10.2(s) below.
"Third Party Claim" has the meaning set forth in Section 12.4 below.
"Tower II Lease" means that certain Lease Agreement between CNL Plaza II,
Ltd., a Florida limited partnership, as the landlord, and the Advisor, as the
tenant, dated as of November 23, 2005, for the "Premises" (as defined therein).
"Tower II Office Space" means the "Premises" as defined in the Tower II
Lease.
"Transition Services Agreement" has the meaning set forth in Section 8.16
below.
"Two-Thirds Vote Charter Amendment" has the meaning set forth in Section
8.6 below.
"Working Capital Schedule" has the meaning set forth in Section 8.15 below.
ARTICLE 2
MERGER; EFFECTIVE TIME; CLOSING
2.1 Merger. Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the Florida BCA and the Florida LLCA, at the
Effective Time, CHPAC and the Advisor shall consummate the Merger in which (i)
the Advisor shall be merged with and into CHPAC and the separate corporate
existence of the Advisor shall thereupon cease, (ii) CHPAC shall be the
successor or surviving company in the Merger and shall continue to be governed
by the laws of the State of Florida and (iii) the separate existence of CHPAC as
a limited liability company, with all its rights, privileges, immunities, powers
and franchises, shall continue unaffected by the Merger. The legal entity
surviving the Merger is sometimes
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hereinafter referred to as the "Surviving Company." The Merger shall have the
effects set forth in Section 607.11101 of the Florida BCA and Section 608.4383
of the Florida LLCA.
2.2 Effective Time. On the Closing Date, subject to the terms and
conditions of this Agreement, CHPAC and the Advisor shall (i) cause to be
executed Articles of Merger in the form required by Section 607.1109 of the
Florida BCA, which shall also constitute a Certificate of Merger in the form
required by Section 608.4382 of the Florida LLCA (the "Articles/Certificate of
Merger"), (ii) cause the Articles/Certificate of Merger to be filed with the
Florida Department of State as provided in Section 607.1109 of the Florida BCA
and Section 608.4382 of the Florida LLCA and (iii) make all other filings or
recordings required under the Florida BCA and the Florida LLCA to consummate the
Merger. The Merger shall become effective upon the later of (i) such time as the
Articles/Certificate of Merger is duly filed with the Florida Secretary of State
or (ii) such other time as is agreed upon by the Representative and CHP and
specified in the Articles/Certificate of Merger. Such time is hereinafter
referred to as the "Effective Time."
2.3 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxxx Xxxxxxx,
LLP, 000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, commencing at
9:00 a.m., Eastern Time, on the fifth (5th) business day following the
fulfillment or waiver (to the extent permitted by applicable law) of the
conditions set forth in Article 10 (other than conditions which by their nature
are intended to be fulfilled at the Closing) or such other place or time or on
such other date, time or place as CHP and the Representative may agree or as may
be necessary to permit the fulfillment or waiver of the conditions set forth in
Article 10 (the "Closing Date").
ARTICLE 3
ARTICLES OF ORGANIZATION; OPERATING AGREEMENT;
AND MANAGING MEMBER OF SURVIVING COMPANY
3.1 Articles of Organization. The articles of organization of CHPAC, as in
effect immediately prior to the Effective Time, shall be the articles of
organization of the Surviving Company until thereafter amended as provided
therein or under applicable law.
3.2 Operating Agreement. The operating agreement of CHPAC, as in effect
immediately prior to the Effective Time, shall be the operating agreement of the
Surviving Company until thereafter changed or amended as provided therein or
under applicable law.
3.3 Managing Member. The managing member of CHPAC immediately prior to the
Effective Time shall be the managing member of the Surviving Company from and
after the Effective Time until its successor has been duly elected, appointed or
qualified or until its earlier removal in accordance with the articles of
organization and operating agreement of the Surviving Company.
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ARTICLE 4
MERGER CONSIDERATION
4.1 Merger Consideration; Conversion or Cancellation of Advisor Common
Shares in Merger; Repayment of FARS Note or Inter-Company FARS Final Payment
Funding Note. (a) At the Effective Time, by virtue of the Merger and without any
action by the Parties, all of the outstanding Advisor Common Shares shall be
converted into the right to receive a total of 3,600,000 CHP Common Shares
(subject to adjustment pursuant to the terms of Section 4.1(c) below), which
total number of shares was calculated by dividing $72.0 million by the Per Share
Price (such CHP Common Shares, the "Merger Consideration") pursuant to the terms
of Section 4.2 below. As of the Effective Time, all Advisor Common Shares shall
cease to be outstanding, and shall be canceled and retired and shall cease to
exist, and each Stockholder, as the holder of certificates representing any of
such Advisor Common Shares (the "Advisor Common Share Certificates"), shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration. As of the Effective Time, all of the membership interests
of CHPAC issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding membership interests of the Surviving Company and
shall be unchanged and remain solely owned by CHP.
(b) In addition to the Merger Consideration payable to the
Stockholders pursuant to this Agreement, at the Closing, (i) if the Closing Date
is on or before June 30, 2006, CHP shall assume and repay, or cause to be
repaid, in full the outstanding principal and accrued and unpaid interest on the
FARS Note otherwise due and payable up to and including the Closing Date and the
FARS Note shall be cancelled, or (ii) if the Closing Date is after June 30,
2006, CHP shall assume and repay, or cause to be repaid, in full the outstanding
principal and accrued and unpaid interest on the Inter-Company FARS Final
Payment Funding Note otherwise due and payable up to and including the Closing
Date and the Inter-Company FARS Final Payment Funding Note shall be cancelled.
(c) For purposes of adjustments to the number of CHP Common Shares
issuable as part of the Merger Consideration and other provisions of this
Agreement that require or call for a price per CHP Common Share, such price
shall be deemed to be $20.00 per CHP Common Share (the "Per Share Price");
provided, however, that the Per Share Price and the number of CHP Common Shares
issuable as part of the Merger Consideration shall be proportionately and
appropriately adjusted in the event the number of outstanding CHP Common Shares
is increased or decreased after the date of this Agreement and before the
Effective Time on account of any recapitalization, reclassification, stock
split, reverse stock split, combination of shares, exchange of shares, stock
dividend or other pro rata distribution payable in capital stock of CHP, but
excluding any CHP Common Shares issued under any dividend reinvestment plan of
CHP.
4.2 Exchange of Certificates; Payment of Merger Consideration. At the
Closing, upon surrender to CHP of the Advisor Common Share Certificates by the
Stockholders for cancellation, properly endorsed for transfer, together with any
other required documents, each of the Stockholders shall receive the Merger
Consideration pro rata based on their relative equity interests in the Advisor
as of the Closing Date, as set forth opposite such Stockholder's name on
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Schedule I to the Agreement (which Schedule I will be amended to reflect any
transfer of any Advisor Common Shares between the date of the Agreement and the
Closing Date as contemplated in Section 4.4 below) (each such Stockholder's
equity percentage set forth on Schedule I, its "Pro Rata Percentage"), and each
of the Advisor Common Share Certificates so surrendered shall forthwith be
canceled. Prior to the Closing, Schedule I shall be amended by CHP and the
Advisor to reflect any adjustments that may be necessary in accordance with this
Agreement to the number of CHP Common Shares to be delivered to each of the
Stockholders pursuant to this Section 4.2 based on their Pro Rata Percentage of
the Merger Consideration. The Stockholders shall also receive cash in lieu of
fractional CHP Common Shares as contemplated by Section 4.3 below. If any
Advisor Common Share Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Stockholder claiming such Advisor
Common Share Certificate to be lost, stolen or destroyed, and, if requested by
CHP, the posting by such Stockholder of a bond in such reasonable amount as CHP
reasonably may direct as indemnity against any claim that may be made against
them with respect to such Advisor Common Share Certificate, CHP will issue in
exchange for such lost, stolen or destroyed Advisor Common Share Certificate the
CHP Common Shares to which the holder thereof is entitled pursuant to this
Section 4.2.
4.3 Fractional CHP Common Shares. No certificates representing fractional
CHP Common Shares shall be issued upon surrender of any Advisor Common Share
Certificates in payment of any Merger Consideration. In connection with the
payment of the Merger Consideration, in lieu of any fractional CHP Common
Shares, there shall be paid to each holder of Advisor Common Shares who
otherwise would be entitled to receive a fractional CHP Common Share an amount
of cash (without interest) determined by multiplying such fraction by the Per
Share Price.
4.4 Transfer of Advisor Common Shares. (a) No transfers of Advisor Common
Shares that are not expressly permitted by this Section 4.4 shall be made on the
stock transfer books of the Advisor after the date of this Agreement, and (b)
each Stockholder agrees not to transfer any Advisor Common Shares after the date
of this Agreement and before the Closing Date to any Person that is not a
Stockholder; provided, however, that, in the event of any transfer by a
Stockholder to another Stockholder, the transferring Stockholder provides to CHP
at least ten (10) business days' prior written notice of such intended transfer,
which notice shall include a reasonably detailed summary of the terms and
conditions of such intended transfer, including the consideration to be received
by the transferring Stockholder for such Advisor Common Shares. Notwithstanding
the foregoing, Xxxxxx may transfer or gift all or some of his Advisor Common
Shares to a Xxxxxx Family Trust or to a Xxxxxx Family Company; provided,
however, that, (i) prior to such transfer, such Xxxxxx Family Trust or Xxxxxx
Family Company execute and deliver an undertaking to become a Party to this
Agreement and, except as provided in the last sentence of this Section 4.4, to
have all the rights and obligations of a Stockholder hereunder and to approve
this Agreement, the Merger and the other transactions contemplated in this
Agreement and (ii) the Xxxxxx Family Trust or a Xxxxxx Family Company, as the
case may be, qualifies as an "accredited investor" within the meaning of the
Securities Act or the transfer to the Xxxxxx Family Trust or Xxxxxx Family
Company is exempt from registration under the Securities Act and will be
registered or exempt from registration under all applicable state securities
laws. In the case of any transfer of Advisor Common Shares made in accordance
with this Section 4.4, CHP shall have the absolute right to amend this Agreement
for the sole purpose of adding such
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transferee (to the extent such transferee is not already a Party to this
Agreement) and to add such transferee's name and Pro Rata Percentage on Schedule
I (or otherwise amend Schedule I to reflect such transfers). Xxxxxx hereby
agrees to assume and be responsible for (and the Xxxxxx Family Trust or Xxxxxx
Family Company shall not be responsible for) the pro rata portion of any
reimbursement, payment, indemnity or other obligation of the Xxxxxx Family Trust
or Xxxxxx Family Company as a Stockholder that may or would otherwise be or have
been attributable to the Xxxxxx Family Trust or a Xxxxxx Family Company pursuant
to this Agreement and is owed or payable to CHP or CHPAC.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders, severally, but not jointly, represents and
warrants to CHP and CHPAC that the statements contained in this Article 5 are
correct and complete as of the date hereof (and will be correct and complete as
of the Closing Date as if made on and as of the Closing Date) with respect to
itself or himself:
5.1 Organization and Qualification. XXXX is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida. FARS is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware.
5.2 Authorization of Transaction. Each of the Stockholders has full power
and authority to execute and deliver this Agreement and to perform its or his
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of XXXX and the Board of Managers of FARS.
No other corporate proceedings on the part of XXXX or FARS are necessary to
authorize the consummation of the transactions contemplated hereby on behalf of
XXXX or FARS. This Agreement has been duly and validly executed and delivered by
each of the Stockholders and constitutes the valid and legally binding
obligation of each of the Stockholders, enforceable against such Stockholders in
accordance with its terms and conditions. No consents, approvals, orders or
authorizations of, or registration, declaration or filing with, any government
or governmental agency is required by or with respect to the Stockholders in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, other than (i) the filing with the SEC
of any reports and filings under the Securities Act and the Securities Exchange
Act as may be required in connection with this Agreement and the Merger, (ii)
the filing of the Articles/Certificate of Merger with the Florida Department of
State, and (iii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as (A) are set forth on Section 5.2 of
the Disclosure Schedule (as defined below) or (B) may be required under the
"blue sky" laws of various states, to the extent applicable.
5.3 Noncontravention. Except as set forth in Section 5.3 of the Disclosure
Schedule, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, by the Stockholders, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
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government, governmental agency, or court to which any Stockholder is subject or
any provision of its articles of incorporation, certificate of formation,
by-laws, limited liability company agreement or other organizational documents,
as applicable, or (B) result in a breach of, constitute a default under, result
in the acceleration of, create in any Person the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any Stockholder is a party or
by which it or he is bound or to which any of its or his assets is subject,
except for any breaches or violations that would not, individually or in the
aggregate, have a Material Adverse Effect on the Advisor or substantially impair
or delay the consummation of the transactions contemplated hereby.
5.4 Investment. (a) Each of the Stockholders who acquires CHP Common Shares
in the Merger: (i) understands that the CHP Common Shares acquired by such
Stockholder pursuant to this Agreement have not been registered under the
Securities Act, or under any state securities laws, and are being exchanged in
reliance upon federal and state exemptions for transactions not involving a
public offering and may not be offered or sold unless (A) such offer or sale has
been registered under the Securities Act, (B) such offer or sale is made in
conformity with the applicable holding period, volume and other limitations of
Rule 144 promulgated by the SEC under the Securities Act, or (C) in the written
opinion of counsel reasonably acceptable to CHP, some other exemption from
registration is available with respect to any proposed sale, transfer or other
disposition of such CHP Common Shares; (ii) is acquiring the CHP Common Shares
solely for its or his own account for investment purposes, and not with a view
towards the distribution thereof; (iii) is an "accredited investor" (as such
term is defined in Regulation D under the Securities Act) and is a sophisticated
investor with knowledge and experience in business and financial matters; (iv)
has received certain information concerning CHP, including, without limitation,
(A) the most recent annual report on Form 10-K, (B) any quarterly reports on
Form 10-Q since the most recent annual report on Form 10-K, (C) any current
reports on Form 8-K since December 31, 2004, in each case as filed by CHP under
the Securities Exchange Act, and (D) the most recent annual report to
stockholders of CHP, and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding CHP Common Shares; and (v) is able to bear the economic risk and lack of
liquidity inherent in holding CHP Common Shares which have not been registered
under the Securities Act.
(b) Each of the Stockholders who acquires CHP Common Shares in the
Merger represents that it or he has been advised and understands that, subject
to applicable federal and state securities laws, stop transfer instructions will
be given to CHP's transfer agent with respect to such CHP Common Shares and that
a legend setting forth the following restrictions on transfer will be set forth
on the certificates for such CHP Common Shares or any substitutions therefor:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), IN RELIANCE UPON THE
EXEMPTION FROM REGISTRATION CONTAINED IN SECTION 4(2) OF THE 1933 ACT AND
REGULATION D OF THE RULES AND REGULATIONS PROMULGATED UNDER THE 1933 ACT, AND IN
RELIANCE UPON THE REPRESENTATION BY THE HOLDER THAT THEY HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO RESALE OR FURTHER
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DISTRIBUTION. SUCH SHARES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER
SALE, HYPOTHECATED, NOR WILL ANY ASSIGNEE OR ENDORSEE HEREOF BE RECOGNIZED AS AN
OWNER HEREOF BY THE ISSUER FOR ANY PURPOSE, UNLESS A REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH SHARES
SHALL THEN BE IN EFFECT OR UNLESS THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION SHALL BE ESTABLISHED TO THE REASONABLE SATISFACTION OF COUNSEL OF
THE ISSUER."
5.5 Advisor Common Shares. Except as set forth in Section 7.2 of the
Disclosure Schedule, each of the Stockholders holds of record and owns
beneficially the number and class of the Advisor Common Shares set forth next to
its or his name in Section 7.2 of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. Except
for the agreements set forth on Section 5.5 of the Disclosure Schedule, none of
the Stockholders is a party to any option, warrant, purchase right, or other
contract or commitment that could require one or more Stockholders to sell,
transfer, or otherwise dispose of any the Advisor Common Shares (other than
pursuant to this Agreement) or is a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any of the Advisor
Common Shares.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CHP AND CHPAC
CHP and CHPAC jointly and severally represent and warrant to the
Stockholders and the Advisor that the statements contained in this Article 6 are
correct and complete as of the date hereof (and will be correct and complete as
of the Closing Date as if made on and as of the Closing Date):
6.1 Organization of CHP and CHPAC. CHP is a corporation, and CHPAC is a
limited liability company, duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation or organization, as
the case may be.
6.2 Capital Stock and Membership Interests. The authorized capital stock of
CHP consists of 3,675,000,000 equity shares, 3,000,000,000 of which are CHP
Common Shares, 75,000,000 of which are preferred shares, par value $.01 per
share, and 600,000,000 of which are excess shares, par value $.01 per share. As
of March 1, 2006, 152,883,062 CHP Common Shares, no preferred shares and no
excess shares were issued and outstanding. Since December 31, 2005, CHP has not
issued any shares of capital stock except pursuant to the exercise of options
outstanding on such date to purchase CHP Common Shares or pursuant to CHP's
dividend reinvestment plan. All outstanding CHP Common Shares are, and all CHP
Common Shares issuable under stock option plans of CHP or pursuant to CHP's
dividend reinvestment plan will be when issued in accordance with the terms
thereof duly authorized, validly issued, fully paid and nonassessable. Except
for the CHP Common Shares reserved for issuance pursuant to stock option plans
of CHP or CHP's dividend reinvestment plan, there are outstanding on the date
hereof no options, warrants, calls, rights, commitments or any other
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agreements of any character to which CHP is a party or by which it may be bound,
requiring it to issue, transfer, sell, purchase, register, redeem or acquire any
shares of capital stock or any securities or rights convertible into,
exchangeable for or evidencing the right to subscribe for or acquire any shares
of its capital stock. CHP is the sole member of CHPAC, and CHPAC has no other
issued and outstanding equity or similar interests.
6.3 Authorization for CHP Common Shares. The CHP Common Shares issued as
Merger Consideration will, when issued, be duly authorized, validly issued,
fully paid and nonassessable, and no stockholder of CHP will have any preemptive
right or similar rights of subscription or purchase in respect thereof. The CHP
Common Shares issued as Merger Consideration will, subject to the accuracy of
the Stockholders' representations contained in Section 5.4 hereof, be exempt
from registration under the Securities Act and will be registered or exempt from
registration under all applicable state securities laws.
6.4 Authorization of Transaction. Each of CHP and CHPAC has full corporate
or lawful power and authority to execute and deliver this Agreement and to
perform its respective obligations hereunder, subject to the approval of the
Merger at the CHP Stockholder Meeting by the affirmative vote of at least a
majority of the votes cast on the Merger by holders of CHP Common Shares
entitled to vote thereon (other than CHP Common Shares owned of record or
beneficially by interested directors or their Affiliates), provided that the
total votes cast represent over 50% of the CHP Common Shares entitled to vote on
the Merger (the "CHP Stockholder Approval"), as required pursuant to this
Agreement. The execution and delivery of this Agreement and the consummation of
the Merger have been duly and validly authorized by the Board of Directors of
CHP and by CHP, as the sole member of CHPAC. Other than the CHP Stockholder
Approval that is required pursuant to this Agreement, no other corporate or
legal proceedings on the part of CHP and CHPAC are necessary to authorize the
consummation of the Merger on behalf of CHP and CHPAC. This Agreement
constitutes the valid and legally binding obligation of each of CHP and CHPAC,
enforceable in accordance with its terms and conditions. No consents, approvals,
orders or authorizations of, or registration, declaration or filing with, any
government or governmental agency is required by or with respect to CHP or CHPAC
in connection with the execution and delivery of this Agreement or the
consummation of the Merger, other than (i) the filing with the SEC of any
reports and filings under the Securities Act and the Securities Exchange Act as
may be required in connection with this Agreement and the Merger, (ii) the
filing of the Articles/Certificate of Merger with the Florida Department of
State, and (iii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the "blue sky"
laws of various states, to the extent applicable.
6.5 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby by CHP
or CHPAC, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which either CHP or CHPAC is
subject or any provision of CHP's articles of incorporation or by-laws or
CHPAC's articles of organization or operating agreement, as the case may be, or
(B) result in a breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which either CHP or CHPAC is a
party or by which it is bound or to which any of its assets is subject, except
for any breaches or violations
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that would not, individually or in the aggregate, have a Material Adverse Effect
on CHP or CHPAC or substantially impair or delay the consummation of the
transactions contemplated hereby.
6.6 Brokers' Fees. Except for the fees and expenses paid or payable to
Xxxxxx Brothers, Inc. with respect to the delivery of the Fairness Opinion to
the Special Committee, including any updates thereto, and in connection with the
Initial Merger Agreement and related advisory services in connection with the
Initial Merger Agreement and this Agreement, neither CHP nor CHPAC has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the Merger.
6.7 Proxy Statement. The Proxy Statement will not at the time filed with
the SEC, at the time of mailing the Proxy Statement to the stockholders of CHP
or at the time of the CHP Stockholder Meeting contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by CHP with respect to statements made therein based on
information supplied by or on behalf of the Stockholders or the Advisor for
inclusion in the Proxy Statement. The Proxy Statement will comply as to form in
all material respects with the provisions of the Securities Exchange Act.
6.8 SEC Documents. Since January 1, 2005, CHP has filed with the SEC all
reports and other documents required to be filed by it during such period under
the Securities Exchange Act (the "CHP SEC Documents"). At the respective times
they were filed, none of the CHP SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading except to the extent
corrected in a subsequently filed CHP SEC Document. The consolidated financial
statements (including in each case any notes thereto) of CHP included in the CHP
SEC Documents were prepared in conformity with GAAP consistently applied
throughout the periods covered thereby (except in each case as described in the
notes thereto) and fairly presented in all material respects the consolidated
financial position, results of operations and cash flows of CHP and its
consolidated subsidiaries as at the respective dates thereof and for the periods
then ended (subject, in the case of unaudited statements to normal year-end
adjustments and to any other adjustments described therein), except to the
extent corrected in a subsequently filed CHP SEC Document.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES CONCERNING THE ADVISOR
The Stockholders (other than FARS and, in the case of Sections 7.11(a) and
7.11(e), other than the Management Stockholders) and the Advisor represent and
warrant to CHP and CHPAC that the statements contained in this Article 7 are
correct and complete as of the date hereof (and will be correct and complete as
of the Closing Date as if made on and as of the Closing Date), except as set
forth in the disclosure schedule delivered by the Stockholders (other than FARS)
and the Advisor to CHP and CHPAC immediately prior to the execution and delivery
of this Agreement (the "Disclosure Schedule"); it being understood that with
respect to any matter
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included in Sections 7.9, 7.10, 7.11(a), 7.11(c), 7.15(f), 7.19, 7.21 or 7.23 of
the Disclosure Schedule, for purposes of the indemnification provided in Article
12, such matter shall be treated as if such matter was not included in the
Disclosure Schedule and shall continue to be the subject of and covered by the
indemnification provisions of Article 12 of this Agreement notwithstanding its
inclusion therein. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein, however,
unless the Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a 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 to the existence of the document or other item itself). The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Article 7.
7.1 Organization, Qualification, and Corporate Power. Each of the Advisor
and the Development Company (as defined below) is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Florida.
Each of the Advisor and the Development Company is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the failure to so qualify or obtain
authorization would not have a Material Adverse Effect on the Advisor or on the
ability of the Advisor to consummate the Merger. Except as set forth in Section
7.1 of the Disclosure Schedule, each of the Advisor and the Development Company
has full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it except where the failure to
be so licensed, permitted or authorized would not have a Material Adverse Effect
on the Advisor. The Stockholders (other than FARS) have delivered to CHP correct
and complete copies of the articles of incorporation and by-laws of the Advisor
and the Development Company (in each case, as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of each of the Advisor and the Development Company are
correct and complete in all material respects. Each of the Advisor and the
Development Company is not in default under or in violation of any provision of
its articles of incorporation or by-laws. All corporate actions taken by the
Advisor and the Development Company have been taken in compliance with all
applicable provisions of the Florida BCA.
7.2 Capitalization. The entire authorized capital stock of the Advisor
consists of (i) 10,000 shares of Class A common stock, $1.00 par value per
share, of which 2,000 shares are issued and outstanding, and (ii) 5,000 shares
of Class B common stock, $1.00 par value per share, of which 1,377.11 shares are
issued and outstanding. No Advisor Common Shares are held in treasury. All of
the issued and outstanding Advisor Common Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record and
beneficially by the respective Stockholders as set forth in Section 7.2 of the
Disclosure Schedule. The entire authorized capital stock of the Development
Company (as defined below) consists of 1,000 shares of common stock, $1.00 par
value per share, of which 1,000 shares are issued and outstanding. All of the
issued and outstanding shares of capital stock of the Development Company have
been duly authorized, are validly issued, fully paid and non-assessable, and are
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held of record and beneficially by the Advisor. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Advisor or the Development Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Advisor or the Development Company. Except as set
forth in Section 7.2 of the Disclosure Schedule, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting of the
Advisor Common Shares or any shares of capital stock of the Development Company.
7.3 Authorization of Transaction. The Advisor has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of the Advisor. No other corporate proceedings on the
part of the Advisor are necessary to authorize the consummation of the
transactions contemplated hereby on behalf of the Advisor. This Agreement
constitutes the valid and legally binding obligation of the Advisor, enforceable
in accordance with its terms and conditions. No consents, approvals, orders or
authorizations of, or registration, declaration or filing with, any government
or governmental agency is required by or with respect to the Advisor or any
subsidiary of the Advisor in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, other
than (i) the filing with the SEC of any reports and filings under the Securities
Act and the Securities Exchange Act as may be required in connection with this
Agreement and the Merger, (ii) the filing of the Articles/Certificate of Merger
with the Florida Department of State, and (iii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings as (A) are set
forth on Section 7.3 of the Disclosure Schedule or (B) may be required under the
"blue sky" laws of various states, to the extent applicable.
7.4 Noncontravention. Except as set forth in Section 7.4 of the Disclosure
Schedule, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby by the Advisor, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Advisor or the Development Company is
subject or any provision of the articles of incorporation or bylaws of the
Advisor or the Development Company or (ii) result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the right to
accelerate, terminate, modify, or cancel, or require any notice, consent or
approval under any agreement, contract, lease, license, instrument, or other
arrangement to which the Advisor or the Development Company is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets).
7.5 Title to Assets. Except as set forth on Section 7.5 of the Disclosure
Schedule, each of the Advisor and the Development Company has good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by it, located on its premises, or shown on the Most Recent Balance Sheet
or the Most Recent Pro Forma Balance Sheet or acquired after the date thereof,
free and clear of all Security Interests (other than those disclosed in the Most
Recent Balance Sheet), except for properties and assets disposed of in the
Ordinary Course of
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Business since the date of the Most Recent Balance Sheet or the Most Recent Pro
Forma Balance Sheet.
7.6 Subsidiaries. The Advisor's business is conducted entirely by and
through the Advisor and its wholly owned subsidiary, CNL Hotel Development
Company, a Florida corporation (the "Development Company"). The Advisor has no
direct or indirect Subsidiaries, operating or otherwise, other than the
Development Company, nor are there any other entities that the Advisor otherwise
directly or indirectly controls or in which it has any ownership or other
interest, and the Advisor does not have the right or obligation to acquire any
shares of stock or other interest in any other Person. The Stockholders (other
than FARS) or any other Affiliates have not taken or omitted to take any action
which has resulted in, or will result in, the Advisor being or becoming a party
to or bound by, any agreement, arrangement or understanding to which the Advisor
will remain obligated or bound following the Closing, relating to the
acquisition by the Advisor of any entity or all or substantially all of the
assets of any Person.
7.7 Financial Statements. The Advisor has delivered to CHP its (i) audited
balance sheets and statements of income, changes in stockholders' equity, and
cash flow as of and for the fiscal years ended December 31, 2002, December 31,
2003, and December 31, 2004 and (ii) preliminary unaudited balance sheets and
statements of income (the "Most Recent Financial Statements") as of and for the
three- and twelve-months ended December 31, 2005 (the "Most Recent Fiscal
Quarter End") (the financial statements described in clauses (i) and (ii) of
this Section 7.7 are hereinafter referred to as the "Financial Statements"). The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Advisor as of
such dates and the results of operations of the Advisor for such periods, and
are consistent with the books and records of the Advisor (which books and
records are correct and complete in all material respects); provided that, the
Most Recent Financial Statements do not contain any notes.
7.8 Events Subsequent to December 31, 2003. Since December 31, 2003, there
has not been any Material Adverse Effect on the Advisor or on the ability of the
Advisor to consummate the transactions contemplated in this Agreement. Without
limiting the generality of the foregoing, except as set forth on Section 7.8 of
the Disclosure Schedule, since that date:
(a) each of the Advisor and the Development Company has not sold,
leased, transferred, or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
(b) each of the Advisor and the Development Company has not entered
into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than $25,000
or outside the Ordinary Course of Business, other than contracts or subcontracts
entered into in the Ordinary Course of Business by the Development Company
involving less than $100,000;
(c) no Person (including the Advisor and the Development Company) has
accelerated, terminated, modified, or canceled any material agreement, contract,
lease, or license
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(or series of related agreements, contracts, leases, and licenses) to which the
Advisor or the Development Company is a party or by which it is bound;
(d) each of the Advisor and the Development Company has not imposed
any Security Interest upon any of its assets, tangible or intangible other than
in the Ordinary Course of Business;
(e) each of the Advisor and the Development Company has not made any
capital expenditure (or series of related capital expenditures) either involving
more than $50,000 or outside the Ordinary Course of Business;
(f) each of the Advisor and the Development Company has not made any
capital investment in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital investments, loans,
and acquisitions);
(g) each of the Advisor and the Development Company has not issued any
note, bond, or other debt security or created, incurred, assumed, or guaranteed
any indebtedness for borrowed money or capitalized lease obligation;
(h) each of the Advisor and the Development Company has not delayed or
postponed the payment of accounts payable and other Liabilities outside the
Ordinary Course of Business;
(i) each of the Advisor and the Development Company has not canceled,
compromised, waived, or released any right or claim (or series of related rights
and claims) outside the Ordinary Course of Business;
(j) each of the Advisor and the Development Company has not granted
any license or sublicense of any rights under or with respect to any
Intellectual Property;
(k) there has been no change made or authorized in the articles of
incorporation or by-laws of the Advisor or the Development Company;
(l) each of the Advisor and the Development Company has not 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;
(m) each of the Advisor and the Development Company has not 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;
(n) each of the Advisor and the Development Company has not
experienced any material damage, destruction, or loss (whether or not covered by
insurance) to its property;
(o) each of the Advisor and the Development Company has not made any
loan to, or entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
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(p) each of the Advisor and the Development Company has not entered
into any employment contract or collective bargaining agreement, written or
oral, or modified the terms of any such existing contract or agreement;
(q) each of the Advisor and the Development Company has not granted
any increase in the base compensation of any of its directors, officers, and
employees outside the Ordinary Course of Business;
(r) each of the Advisor and the Development Company has not adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(s) each of the Advisor and the Development Company has not made any
other change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business or in the terms of its
agreements with any independent contractors;
(t) each of the Advisor and the Development Company has not made or
pledged to make any charitable or other capital contribution outside the
Ordinary Course of Business;
(u) to the Knowledge of the Stockholders and the Advisor, there has
not been any other material occurrence, event, incident, action, failure to act,
or transaction outside the Ordinary Course of Business involving the Advisor or
the Development Company; and
(v) to the Knowledge of the Stockholders and the Advisor, each of the
Advisor and the Development Company is not under any legal obligation, whether
written or oral, to do any of the foregoing.
7.9 Undisclosed Liabilities. Neither the Advisor nor the Development
Company has any Liability (and to the Knowledge of the Advisor and the
Stockholders, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
it giving rise to any Liability), except for (i) Liabilities which are reflected
in, reserved against or otherwise described in the Most Recent Balance Sheet
(including the notes thereto), and (ii) Liabilities which have arisen after the
Most Recent Fiscal Quarter End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law) and which are not material, individually or in the aggregate. As of the
Closing, the Advisor will not have any Liabilities other than as set forth on
Section 7.9 of the Disclosure Schedule.
7.10 Legal Compliance. Each of the Advisor and the Development Company has
complied in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), the violation of which could have a Material Adverse Effect
on the Advisor or on the ability of the Advisor to consummate the transactions
contemplated in this Agreement, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against
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it alleging any failure so to comply, except as disclosed in Section 7.10 of the
Disclosure Schedule.
7.11 Tax Matters.
(a) Except as disclosed in Section 7.11(a) of the Disclosure Schedule,
all Tax Returns required to have been filed with any taxing authority by or on
behalf of the Advisor or the Development Company, including, without limitation,
any Tax Returns required to be filed with any state, have been timely filed
(taking into account any extensions). All such Tax Returns were correct and
complete in all material respects. All Taxes owed by the Advisor or the
Development Company (whether or not shown on any filed Tax Return and whether or
not yet due) have been paid, or, if such Taxes are not yet due, the obligation
to pay such Taxes is set forth on the Most Recent Financial Statements. Without
limiting the foregoing, neither the Advisor nor the Development Company will
have any Liability for Taxes, whether or not yet payable, for the taxable period
of the Advisor and the Development Company that includes the Effective Time,
other than Taxes payable solely by reason of the Merger failing to qualify as a
reorganization under Section 368(a) of the Code (if such Taxes would not have
been imposed in such taxable period had the Merger qualified as a reorganization
under Section 368(a) of the Code), in excess of the amounts actually paid by or
on behalf of the Advisor or the Development Company at or prior to the Effective
Time to the applicable taxing authority or to be paid timely after the Effective
Time by the Guarantor, on behalf of the Advisor, in connection with any
consolidated, combined or unitary Tax Returns including the Advisor or the
Development Company and the Guarantor. Except as disclosed in Section 7.11(a) of
the Disclosure Schedule, neither the Advisor nor the Development Company is
currently the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where the
Advisor and the Development Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Advisor or the Development Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) Each of the Advisor and the Development Company has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) To the Knowledge of the Advisor and each Stockholder, no Basis
exists for any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any Tax
Liability of the Advisor or the Development Company either (A) claimed or raised
by any authority in writing or (B) as to which the Advisor or any of the
Stockholders has Knowledge. Section 7.11(c) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with respect to the
Advisor and the Development Company for taxable periods ended on or after
December 31, 1999, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit.
(d) Neither the Advisor nor the Development Company has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
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(e) The Advisor has not filed a consent under Code Section 341(f)
concerning collapsible corporations. The Advisor has not made any payments, is
not obligated to make any payments, and is not a party to any agreement that
under any circumstances could obligate it to make any payments (whether in
connection with the Merger or otherwise) that would not be deductible under Code
Section 280G. The Advisor is not and has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). Each of the
Advisor and the Development Company 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.
Neither the Advisor nor the Development Company is a party to any Tax allocation
or sharing agreement, except as disclosed in Section 7.11(e) of the Disclosure
Schedule. Neither the Advisor nor the Development Company (a) has, or as of the
Effective Time will have, incurred any Liability with respect to (i) any
deferred intercompany gain within the meaning of Treas. Reg. Section 1.1502-13
or (ii) any excess loss account (within the meaning of Treas. Reg. Section
1.1502-19) with respect to any subsidiary of the Advisor, or (b) has any
Liability for the Taxes of any Person (other than the Advisor or the Development
Company, as applicable) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(f) Except as set forth on Section 7.11(f) of the Disclosure Schedule,
each of the Advisor and the Development Company does not, and will not as of the
Effective Time, (i) own directly any "securities" of any issuer (within the
meaning of Section 856(c)(4) of the Code, other than assets described in Section
856(c)(4)(A) of the Code); or (ii) own directly an interest in any entity
treated as a partnership or a disregarded entity for federal income tax
purposes.
(g) Neither the Advisor nor the Development Company will have as of
the Effective Time, any current or accumulated earnings and profits (as
calculated for federal income tax purposes).
7.12 Real Property.
(a) Section 7.12 of the Disclosure Schedule lists and describes
briefly all real property owned, leased or subleased to the Advisor and the
Development Company and sets forth a list of all leases and subleases to which
the Advisor or the Development Company is a party. The Stockholders (other than
FARS) have delivered to CHP correct and complete copies of the leases and
subleases listed in Section 7.12 of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in Section 7.12 of the
Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(ii) no consent is required with respect to the lease or sublease
as a result of this Agreement, and the actions contemplated by this Agreement
will not result in the change of any terms of the lease or sublease or otherwise
affect the ongoing validity of the lease or sublease;
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(iii) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or acceleration
thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(vi) the Advisor has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vii) all facilities leased or subleased thereunder have received
and maintained all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained by the Advisor or the Development Company, as
applicable, in accordance with applicable laws, rules, and regulations; and
(viii) all facilities leased or subleased thereunder are supplied with all
utilities and other services necessary for the operation of said facilities.
7.13 Intellectual Property.
(a) Except as set forth on Section 7.13 of the Disclosure Schedule,
each of the Advisor and the Development Company owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property used in the operation of the businesses of the Advisor and the
Development Company as presently conducted. Each item of Intellectual Property
owned or used by the Advisor and the Development Company immediately prior to
the Closing hereunder will be owned or available for use by the Surviving
Company on similar terms and conditions immediately subsequent to the Closing
hereunder, subject to the execution and delivery of the New Brand License
Agreement and the receipt of third party consents and/or other arrangements
described in Section 7.13 of the Disclosure Schedule. Each of the Advisor and
the Development Company has taken all necessary action to maintain and protect
each item of Intellectual Property that it owns or uses. There is no pending
dispute with any current or former officer, employee or consultant of the
Advisor or the Development Company regarding ownership of Intellectual Property
used in the operation of the businesses of the Advisor or the Development
Company as presently conducted. There is no Intellectual Property that is
material to the business of the Advisor or the Development Company other than as
set forth on Section 7.13 of the Disclosure Schedule.
(b) Neither the Advisor nor the Development Company has Knowingly
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and each of the
Stockholders (other than FARS) and the directors and officers (and employees
with responsibility for Intellectual Property matters) of the Advisor and the
Development Company has not ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Advisor or the Development Company must
license or refrain from
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using any Intellectual Property rights of any third party). To the Knowledge of
the Advisor and the Stockholders, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Advisor or the Development Company.
(c) No patent, trademark or copyright registrations have been issued
to or assigned to the Advisor or the Development Company with respect to any
Intellectual Property.
(d) Section 7.13(d) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party, including employees and consultants
of the Advisor or the Development Company, owns and that the Advisor or the
Development Company uses, identifying whether the use is pursuant to license,
sublicense, agreement, or other permission. The Stockholders (other than FARS)
have delivered to CHP correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date).
(e) To the Knowledge of the Advisor and the Stockholders, nothing will
interfere with, infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights of third parties as a result of the
continued operation of the Advisor's and the Development Company's business as
presently conducted.
7.14 Tangible Assets. Except as set forth on Section 7.14 of the Disclosure
Schedule, each of the Advisor and the Development Company owns or leases all
buildings, machinery, equipment, and other tangible assets used in the conduct
of its business as presently conducted and as presently proposed to be
conducted. Except as set forth on Section 7.14 of the Disclosure Schedule, each
such tangible asset is free from all material defects (patent and latent), has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used. The Most Recent
Balance Sheet sets forth all of the assets necessary to conduct the Advisor's
and the Development Company's business as it is currently being conducted and as
it is contemplated to be conducted in the future.
7.15 Contracts. Section 7.15 of the Disclosure Schedule lists the following
contracts and other agreements to which the Advisor or the Development Company
is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $50,000 per annum;
(b) any agreement or arrangement concerning a partnership or joint
venture;
(c) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed money,
or any capitalized lease obligation or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(d) any agreement concerning confidentiality or noncompetition;
(e) any agreement or arrangement between the Advisor or the
Development Company, on the one hand, and any of the Stockholders or their
Affiliates, on the other hand;
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(f) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(g) any agreement or arrangement for the employment of any individual
on a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $100,000 or providing severance benefits;
(h) any agreement or arrangement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside the Ordinary
Course of Business; or
(i) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Advisor or on the
ability of the Advisor to consummate the transactions contemplated in this
Agreement.
The Stockholders (other than FARS) have delivered to CHP a correct and complete
copy of each written agreement listed in Section 7.15 of the Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement or arrangement referred to in Section 7.15 of
the Disclosure Schedule. With respect to each such agreement: (A) the agreement
is legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) the Advisor is not, and to the Knowledge
of the Advisor and the Stockholders, no other party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; and (D) no party has repudiated any provision of the agreement.
7.16 Notes and Accounts Receivable. All notes and accounts receivable of
the Advisor and the Development Company are reflected properly on its books and
records, are valid receivables subject to no setoffs or counterclaims and are
current and collectible in accordance with their terms at their recorded
amounts, subject only to the reserve for bad debts set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past practice of
the Advisor.
7.17 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Advisor or the Development Company except as disclosed
in Section 7.17 of the Disclosure Schedule.
7.18 Insurance. Section 7.18 of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Advisor or the Development Company
has been a party, a named insured, or otherwise the beneficiary of coverage at
any time within the past two years: (i) the name, address, and telephone number
of the agent; (ii) the name of the insurer and the name of the policyholder;
(iii) the policy number and the period of coverage; and (iv) the amount of
coverage. Except as set forth on Section 7.18 of the Disclosure Schedule, with
respect to each such insurance policy to
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the Knowledge of the Stockholders and the Advisor: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Advisor, the Development Company nor any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. Each of the Advisor and the
Development Company has been covered during the past five years by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. Section 7.18 of the Disclosure
Schedule describes any self-insurance arrangements affecting the Advisor and the
Development Company and any claims pending under any insurance policies
currently in effect.
7.19 Litigation. Section 7.19 of the Disclosure Schedule sets forth each
instance in which the Advisor or the Development Company (i) is subject to any
outstanding injunction, judgment, order, decree or ruling or (ii) is a party to,
or to the Knowledge of the Advisor is threatened to be made a party to, any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. Except as otherwise described in
Section 7.19 of the Disclosure Schedule, none of the actions, suits,
proceedings, hearings, and investigations set forth in Section 7.19 of the
Disclosure Schedule could result in any Material Adverse Effect on the Advisor
or on the ability of the Advisor to consummate the transactions contemplated in
this Agreement. None of the Stockholders has any specific reason to believe that
any such action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Advisor.
7.20 Employees. To the Knowledge of the Stockholders and the Advisor, no
executive, key employee, or group of employees currently has any plans to
terminate employment with the Advisor or the Development Company, as applicable,
as a result of this Agreement. Neither the Advisor nor the Development Company
has committed any unfair labor practice. Neither the Advisor nor the Development
Company is or has been a party to any collective bargaining (or other similar)
agreement, nor is any such agreement presently being negotiated. None of the
Stockholders or the Advisor has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Advisor or the Development Company. Section 7.20 of
the Disclosure Schedule sets forth the names of all employees of the Advisor and
the Development Company and the annual salary and bonuses paid or accrued for
the year ended December 31, 2004, and for the period from January 1, 2005
through September 30, 2005, and any commitments by the Advisor or the
Development Company entered into on or prior to the date hereof to pay any
further bonuses for or increase in the salary of each such person set forth in
Section 7.20 of the Disclosure Schedule. The employees of the Advisor and the
Development Company set forth on Section 7.20 of the Disclosure Schedule
constitute all employees necessary in order to conduct the Advisor's business as
it is currently being conducted.
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7.21 Employee Benefits.
(a) Section 7.21 of the Disclosure Schedule lists each Employee
Benefit Plan that the Advisor and the Development Company maintains or has
maintained or to which the Advisor or the Development Company contributes or has
contributed or to which the employees of the Advisor or the Development Company
are subject or have been subject.
(b) Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all respects with the
applicable requirements of ERISA, the Code, and other applicable laws.
(c) Except as set forth on Section 7.21 of the Disclosure Schedule,
all required reports and descriptions (including Form 5500 Annual Reports,
Summary Annual Reports and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title 1 of ERISA and of Code Section
4980B have been met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which are not
yet due have been paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Advisor. All premiums or
other payments for all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(e) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code 401(a) and
has received, within the last two years, a favorable determination letter from
the IRS.
(f) The market value of assets under each such Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any Multiemployer Plan),
subject to Title IV of ERISA, equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(g) The Stockholders (other than FARS) have delivered to CHP correct
and complete copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the IRS, the most recent Form
5500 Annual Report, and all related trust agreements, insurance contracts, and
other funding agreements which implement each such Employee Benefit Plan.
(h) Except as set forth in Section 7.21(h) of the Disclosure Schedule,
with respect to each Employee Benefit Plan that the Advisor or the Development
Company maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
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(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan), subject to Title IV of ERISA,
has been completely or partially terminated or been the subject of a Reportable
Event as to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit Plan
(other than any Multiemployer Plan) has been instituted or threatened.
(ii) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or threatened. None of the
Stockholders has any Knowledge of any Basis for any such action, suit,
proceeding, hearing, or investigation.
(iii) Neither the Advisor nor the Development Company has
incurred, and none of the Stockholders and the directors and officers (and
employees with responsibility for employee benefits matters) of the Advisor or
the Development Company has any reason to expect that the Advisor or the
Development Company will incur, any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any such Employee Benefit Plan
which is an Employee Pension Benefit Plan.
(i) Neither the Advisor nor the Development Company contributes to,
has ever contributed to, or has ever been required to contribute to, any
Multiemployer Plan or has ever had any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(j) Neither the Advisor nor the Development Company maintains or
contributes to, or has ever maintained or contributed to, or has ever been
required to contribute to, any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents (other than
in accordance with Code Section 4980B).
7.22 Guaranties. Except as described in Section 7.22 of the Disclosure
Schedule, neither the Advisor nor the Development Company is a guarantor of or
is otherwise liable for, any Liability or obligation (including indebtedness) of
any other Person.
7.23 Environment, Health, and Safety.
(a) Each of the Advisor and the Development Company has complied with
all Environmental, Health, and Safety Laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against it alleging any failure so to comply. Without
limiting the generality of the preceding sentence, each of the Advisor and the
Development Company has obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental,
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Health, and Safety Laws. A list of all permits, licenses and other
authorizations required by Environmental, Health and Safety Laws is listed on
Section 7.23 of the Disclosure Schedule and none of such permits, licenses and
authorizations require notice or consent or any other action to remain in full
force and effect following consummation of the transactions contemplated by this
Agreement.
(b) Neither the Advisor nor the Development Company has any material
Liability, and there are no Known facts, circumstances or conditions that could
result in material Liability, and neither the Advisor nor the Development
Company has handled or disposed of any substance, arranged for the treatment or
disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any
manner that could form the Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
the Advisor or the Development Company giving rise to any Liability with respect
to any site, location, or body of water (surface or subsurface), for any illness
of or personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(c) Except as set forth on Section 7.23(c) of the Disclosure Schedule,
all properties and equipment owned or leased by the Advisor and the Development
Company have been free of friable asbestos in concentrations greater than one
percent (1%), PCBs, toxic mold, underground storage tanks, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
(d) The Advisor has furnished to CHP copies of all environmental
assessments, reports, audits, and other documents in its possession or under its
control that relate to the environmental condition of any real property
currently or formerly owned or operated by the Advisor or the Development
Company and the Advisor's and the Development Company's compliance with
Environmental Health and Safety Laws. All such information and documents are
accurate and complete.
7.24 Proxy Statement. To the Knowledge of the Stockholders and the Advisor,
none of the information supplied or to be supplied by any of the Stockholders or
the Advisor for inclusion in the Proxy Statement will, at the time of filing the
Proxy Statement with the SEC, at the time of mailing the Proxy Statement to the
stockholders of CHP or at the time of the CHP Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements contained in such information, in light of the
circumstances under which they are made, not misleading.
7.25 Relationships with Tenants and Managers. The Advisor's and the
Development Company's respective relationships with CHP's existing tenants and
managers are sound, and there is no Basis to believe that any of CHP's primary
tenants and managers will materially and adversely change the manner in which
they currently conduct business with CHP.
7.26 Brokers' Fees. Except for the fees and expenses paid to Xxxxxx,
Xxxxxxxx & Co., Inc., successor by acquisition to Xxxx Xxxxx Xxxx Xxxxxx,
Incorporated, with respect to the Merger or in connection with the Initial
Merger Agreement as previously disclosed in writing by the Advisor to CHP, which
fees and expenses are to be paid by the Advisor at or prior to the
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Closing (consistent with Section 8.15), the Advisor has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement or in connection with
the Initial Merger Agreement. The Advisor has delivered to CHP a copy of any
engagement letter or similar agreement between the Advisor and Xxxxxx, Xxxxxxxx
& Co., Inc., successor by acquisition to Xxxx Xxxxx Xxxx Xxxxxx, Incorporated.
7.27 Transactions with Related Parties. There is no (i) loan outstanding
from or to the Advisor or the Development Company from or to any employee,
officer, director or Affiliate of the Advisor or the Development Company, (ii)
agreement between the Advisor or the Development Company, on the one hand, and
any employee, officer, director or Affiliate, on the other hand, that is not
reflected in Section 7.15 of the Disclosure Schedule, (iii) agreement requiring
payments to be made on a direct or indirect change of control of the Advisor or
the Development Company or otherwise as a result of the consummation of the
Merger or any of the other transactions contemplated by this Agreement with
respect to any employee, officer or director of the Advisor or the Development
Company or (iv) agreement between the Advisor or the Development Company and any
Person giving any Person the right to appoint or nominate any person as a
director of the Advisor or the Surviving Company or the Development Company.
7.28 Books and Records. The books and records of each of the Advisor and
the Development Company are complete and correct and have been maintained in
accordance with good business practices and applicable legal requirements, and
contain a true and complete record of all meetings or proceedings of the Board
of Directors and stockholders of the Advisor and the Development Company. The
stock ledger of each of the Advisor and the Development Company is complete and
reflects all issuances, transfers, repurchases and cancellations of shares of
capital stock of the Advisor and the Development Company, respectively.
7.29 Disclosure. The representations and warranties contained in this
Article 7 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 7 not misleading.
7.30 FARS Note. The aggregate amount of principal and accrued and unpaid
interest outstanding as of the date hereof on that certain promissory note dated
as of June __, 2001 issued by the Advisor to and for the benefit of FARS (the
"FARS Note") is $7,875,000 and the amortization and payment schedule for the
FARS Note is described on Section 7.30 of the Disclosure Schedule.
7.31 Net Working Capital. The working capital (i.e., current assets minus
current liabilities) of the Advisor as of the Closing Date will not be less than
zero, after giving effect to the Cash Reserve and not taking into account the
FARS Note or the Inter-Company FARS Final Payment Funding Note, as applicable.
Section 7.31 of the Disclosure Schedule sets forth all Known Liabilities of the
Advisor other than current liabilities, including the amounts thereof,
outstanding as of the date of this Agreement and expected to be outstanding as
of the Closing Date.
7.32 Expenses. Section 7.32(a) of the Disclosure Schedule sets forth a
complete list, listed by type and by estimated amount, of all anticipated fees
and expenses, that the Advisor has Knowledge could accrue or be payable by CHP
to the Advisor, any member of the CNL Group,
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the CNL Group or any of their respective Affiliates between the date of this
Agreement and the Closing Date pursuant to the applicable Advisory Agreement or
pursuant to any other agreements or arrangements between CHP and the Advisor,
any member of the CNL Group, the CNL Group or any of their respective Affiliates
in effect as of the date of this Agreement. From and after the Closing Date, to
the Knowledge of the Advisor, except as set forth on Section 7.32(b) of the
Disclosure Schedule, no additional fees or expenses are contemplated to be
required to be paid by CHP or the Surviving Company to any member of the CNL
Group, the CNL Group or any of their respective Affiliates in order to enable
the Surviving Company to conduct its businesses following the Merger in
substantially the same manner as the business of the Advisor was conducted prior
to the Merger.
7.33 Knowledge of Certain Transactions. Except as described in Section 7.33
of the Disclosure Schedule, neither the Advisor nor any Stockholder has
Knowledge of (a) any arrangements or understandings within the past twelve (12)
months with third parties relating to a sale of all or substantially all of
CHP's assets or a merger, business combination, direct or indirect change of
control transaction or any similar transaction involving CHP (other than the
Merger), and there are no discussions or negotiations regarding any such
arrangements or understandings with third parties regarding any such
transactions, or (b) any facts or circumstances that would make any
representation or warranty of CHP or CHPAC which is contained in this Agreement
or in any schedule, exhibit or certificate delivered pursuant hereto not true or
correct.
7.34 Transition Services Agreement and New Brand License Agreement. CHP
will receive under the Transition Services Agreement and the New Brand License
Agreement all of the administrative services (except for those administrative
services provided directly by the Advisor or otherwise provided to CHP by one or
more third parties) and other rights from the applicable Affiliate(s) of
Guarantor reasonably necessary to operate the Advisor's business in the same
manner as conducted by the Advisor immediately prior to the Closing Date.
ARTICLE 8
ADDITIONAL COVENANTS
8.1 General.
(a) Notwithstanding anything in this Article 8 to the contrary, FARS
shall not be subject to any obligation or liabilities under any of the
provisions of this Article 8 other than Section 8.14.
(b) During the period from the date of this Agreement until the
Effective Time, each of the Parties will use commercially reasonable efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the Merger (including satisfaction, but not
waiver, of the closing conditions set forth in Article 10 below).
8.2 Notices and Consents. During the period from the date of this Agreement
until the Effective Time, (i) the Advisor shall give any notices to third
parties and shall use commercially reasonable efforts to obtain any third party
consents that CHP may reasonably
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request in connection with the matters listed on Section 7.4 of the Disclosure
Schedule or referred to in Section 7.4 above, and (ii) each of the Parties shall
give any notices to, make any filings with, and use its commercially reasonable
efforts to obtain any authorizations, consents, and approvals of governments and
governmental agencies listed on Section 5.2 or 7.3 of the Disclosure Schedule
and in connection with the matters referred to in Section 5.2, Section 6.4, and
Section 7.3 above.
8.3 Maintenance of Business; Prohibited Acts. During the period from the
date of this Agreement until the Effective Time, the Advisor will, and the
Advisor and the Stockholders will not take any action and the Stockholders will
not cause or permit the Advisor to take any action that adversely affects the
ability of the Advisor to, (i) pursue its business in the Ordinary Course of
Business, (ii) seek to preserve intact its current business organizations, (iii)
keep available the service of its current officers and employees, (iv) preserve
its relationships with customers, suppliers and others having business dealings
with it and (v) consummate the Merger and the transactions contemplated thereby
(including the satisfaction but not the waiver of any of the conditions set
forth in Article 10 of this Agreement); and the Advisor will not and the
Stockholders will not cause or permit the Advisor or the Development Company to,
without the approval of the Special Committee on behalf of CHP in its sole
discretion:
(a) issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, delivery, sale, disposition or pledge or
other encumbrances of (i) any additional shares of its capital stock of any
class (including the Advisor Common Shares), or any securities or rights
convertible into, exchangeable for or evidencing the right to subscribe for any
shares of its capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire any
shares of its capital stock or any other securities or rights convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock, or (ii) any other securities in respect of, in lieu of or in
substitution for the Advisor Common Shares outstanding on the date hereof;
provided, however, the restrictions on transfer of the Advisor Common Shares
contained in this Section 8.3(a) shall not apply to any transfers made in
accordance with Section 4.4 of this Agreement;
(b) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including the
Advisor Common Shares);
(c) split, combine, subdivide or reclassify any shares of its capital
stock or otherwise make any payments to the Stockholders in their capacities as
stockholders of the Advisor; provided, however, that nothing shall prohibit: (i)
the payment of any ordinary distribution or dividend in respect of its capital
stock at such times and in such manner and amount as may be consistent with the
Advisor's past practice (which in any event shall include any and all
compensation paid or payable or expenses reimbursed or reimbursable for the
period from April 1, 2004 through the Effective Time, to the extent not
otherwise paid or distributed to the Stockholders), (ii) the payment of any
dividend as shall be required to be paid by the Advisor in order to permit
PricewaterhouseCoopers LLP to issue the letter required by Section 10.2(h),
(iii) any distribution of property necessary for the representation and warranty
set forth in Section 7.11(g) to be true and correct, (iv) distributions to
reduce to zero the Advisor's accumulated and current earnings and profits, (v)
distributions of cash by the Advisor to the Stockholders immediately prior to
the Closing, provided that the Advisor shall have provided to
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CHP the Working Capital Schedule and otherwise complied with the terms and
conditions of Section 8.15 of this Agreement and provided further that such
distributions shall not result in a breach of any of the representations and
warranties in Section 7.31 of this Agreement, or (vi) the dividend contemplated
by Section 10.2(d) of this Agreement;
(d) (i) grant any increases in the compensation of any of its
directors, officers or executives (except as approved by the Special Committee
on behalf of CHP in its sole discretion) or grant any increases in compensation
to any of its employees outside the Ordinary Course of Business (except as
approved by the Special Committee on behalf of CHP in its sole discretion), (ii)
pay or agree to pay any pension retirement allowance or other employee benefit
not required or contemplated by any Employee Benefit Plan as in effect on the
date hereof to any such director, officer or employee, whether, past or present,
(iii) enter into any new or amend any existing employment or severance agreement
with any such director, officer or employee, except as approved by the Special
Committee on behalf of CHP in its sole discretion, (iv) pay or agree to pay any
bonus to any director, officer or employee (whether in the form of cash, capital
stock or otherwise) except as approved by the Special Committee on behalf of CHP
in its sole discretion, or (v) except as may be required to comply with
applicable law, amend any existing, or become obligated under any new, Employee
Benefit Plan, except in the case of (i) through (v) inclusive, under and
pursuant to the Employment Agreements;
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
(other than the Merger);
(f) make any acquisition, by means of merger, consolidation or
otherwise, of any direct or indirect ownership interest in or assets comprising
any business enterprise or operation;
(g) adopt any amendments to its articles of incorporation or by-laws,
except as contemplated in Section 8.19 of this Agreement;
(h) incur any indebtedness for borrowed money or guarantee such
indebtedness or agree to become contingently liable, by guaranty or otherwise,
for the obligations or indebtedness of any other person or make any loans,
advances or capital contributions to, or investments in, any other corporation,
any partnership or other legal entity or to any other persons, except for bank
deposits and other investments in marketable securities and cash equivalents
made in the Ordinary Course of Business;
(i) engage in the conduct of any business the nature of which is
different from the business in which the Advisor or the Development Company, as
applicable, is currently engaged;
(j) enter into any agreement providing for acceleration of payment or
performance or other consequence as a result of a direct or indirect change of
control of the Advisor or the Development Company;
(k) forgive any indebtedness owed to the Advisor or the Development
Company or convert or contribute by way of capital contribution any such
indebtedness owed;
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(l) authorize or enter into any agreement providing for management
services to be provided by the Advisor or the Development Company to any third
party or an increase in management fees paid by any third party under existing
management agreements;
(m) except as set forth in Section 7.22 of the Disclosure Schedule,
mortgage, pledge, encumber, sell, lease or transfer any assets of the Advisor or
the Development Company except as approved by the Special Committee on behalf of
CHP in its sole discretion or as contemplated by this Agreement;
(n) take any of the actions that would otherwise be prohibited under
Section 9.5 of this Agreement if such Section 9.5 were in effect at such time;
(o) authorize or announce an intention to do any of the foregoing, or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing; or
(p) perform any act or omit to take any action that would make any of
the representations made above inaccurate or materially misleading as of the
Effective Time.
8.4 Full Access. During the period from the date of this Agreement until
the Effective Time, the Advisor shall permit representatives of CHP and CHPAC to
have full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of the Advisor to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to the Advisor and the Development Company.
8.5 Meeting of Stockholders. During the period from the date of this
Agreement until the Effective Time, CHP will take all action necessary in
accordance with applicable law and CHP's charter and by-laws to arrange for its
stockholders to consider and vote upon the approval of the Merger at the CHP
Stockholder Meeting to be held in connection with, among other things, the
transactions contemplated by this Agreement. Subject to the fiduciary duties of
CHP's Board of Directors under applicable law and after consultation with
counsel, the Board of Directors of CHP shall recommend that the CHP stockholders
approve the Merger. In connection with such recommendation, CHP shall use its
commercially reasonable efforts to obtain such approval.
8.6 Proxy Materials. As promptly as practicable after the execution and
delivery of this Agreement, CHP shall prepare, and the Advisor and the
Stockholders shall cooperate in the preparation of, a proxy statement and a form
of proxy to be used in connection with the vote of CHP's stockholders with
respect to the Merger on the terms and conditions of this Agreement (such proxy
statement, together with any amendments thereof or supplements thereto, in each
case in the form or forms mailed to CHP's stockholders, is herein called the
"Proxy Statement"). CHP shall include in the Proxy Statement proposals with
respect to amendments to the charter of CHP to reflect that CHP will have become
self-advised and to conform more closely to the articles of incorporation of
companies that are Listed, it being understood that certain of such amendments
may require only the affirmative vote of holders of a majority of CHP's
outstanding CHP Common Shares entitled to vote thereon (the "Majority Vote
Charter Amendment") in substantially the form attached to this Agreement as
Exhibit A or in such other form as CHP and the Advisor shall mutually agree in
writing, and that certain of such amendments may require the
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affirmative vote of holders of two-thirds of CHP's outstanding CHP Common Shares
entitled to vote thereon (the "Two-Thirds Vote Charter Amendment" and together
with the Majority Vote Charter Amendment, the "CHP Charter Amendments"), with
Exhibit B attached hereto reflecting both CHP Charter Amendments. CHP shall file
the Proxy Statement with the SEC as soon as reasonably practicable after the
date hereof, shall use its commercially reasonable efforts to cause the Proxy
Statement to be mailed to stockholders of CHP at the earliest practicable date
as permitted by the SEC and shall take all such action as may be reasonably
necessary to qualify any CHP Common Shares to be received as Merger
Consideration for offering and sale under applicable state securities or "blue
sky" laws. If at any time prior to the Effective Time any event relating to or
affecting the Advisor, the Stockholders or CHP shall occur as a result of which
it is necessary, in the opinion of counsel for the Advisor and the Stockholders
or of counsel for CHP to supplement or amend the Proxy Statement in order to
make such document not misleading in light of the circumstances existing at the
time the CHP Stockholder Approval is sought, the Advisor, the Stockholders and
CHP, respectively, will promptly notify the others thereof and, in the case of
the Advisor or the Stockholders, will cooperate with CHP in the preparation of,
and, in the case of CHP, will prepare and file, an amendment or supplement with
the SEC and, if required, applicable state securities authorities, such that the
Proxy Statement, as so supplemented or amended, will not at such time contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
existing at such time, not misleading, and CHP will, as required by law,
disseminate to its stockholders such amendment or supplement.
8.7 Notice of Developments. During the period from the date of this
Agreement until the Effective Time, each Party will give prompt written notice
to the others of any material adverse development Known to such Party which
results in, or is reasonably likely to result in, any of its or his own
representations and warranties set forth in this Agreement above becoming
untrue. No disclosure by any Party pursuant to this Section 8.7, however, shall
be deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
8.8 Tax Matters. Each of the Stockholders, the Advisor, CHP and CHPAC
agrees to report the Merger on all Tax Returns and, if applicable, other filings
as a reorganization under Section 368(a) of the Code to the extent permitted by
law.
8.9 Reorganization. During the period from the date of this Agreement until
the Effective Time, none of the Advisor, the Stockholders, CHP or CHPAC shall
take or cause to be taken an action, or fail to take an action, that could
reasonably be expected to disqualify the Merger as a reorganization under
Section 368(a) of the Code.
8.10 Delivery of Certain Financial Statements. Promptly after they become
available, and in any event not later than the tenth business day prior to the
Closing Date, the Advisor shall provide CHP with true and correct copies of its
unaudited consolidated balance sheet as of September 30, 2005 and true and
correct copies of its unaudited balance sheet as of the last day of each month
occurring after the date thereof and prior to the Closing Date and the related
unaudited statements of income and cash flows for the year to date ending on the
last day of each such month. In addition, promptly after they become available
and in any event not later than the tenth business day prior to the Closing Date
(if the Closing Date is subsequent to March 31,
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2006), the Advisor shall provide CHP with true and correct copies of its audited
consolidated balance sheet as of December 31, 2005 and the related audited
statements of income and cash flows for the year ended December 31, 2005.
Delivery of such financial statements shall be deemed to be a representation by
the Advisor and the Stockholders (other than FARS) that such balance sheet
(including the related notes, if any) presents fairly, in all material respects,
the financial position of the Advisor as of the specified date, and the other
related statements (including the related notes, if any) included therein
present fairly, in all material respects, the results of its operations and cash
flows for the respective periods or as of the respective dates set forth
therein, all in conformity with GAAP consistently applied during the periods
involved, except as otherwise stated in the notes thereto, subject to normal
year-end audit adjustments, as applicable.
8.11 State Takeover Statutes. Each of CHP, CHPAC, the Advisor, the
Stockholders (other than FARS) and the members of their respective Boards of
Directors shall (i) take all action necessary so that no "fair price," "business
combination," "moratorium," "control share acquisition" or any other
anti-takeover statute or similar statute enacted under state or federal laws of
the United States or similar statute or regulation (each, a "Takeover Statute")
is or becomes applicable to the Merger, this Agreement or any of the other
transactions contemplated by this Agreement and (ii) if any Takeover Statute
becomes applicable to the Merger, this Agreement or any other transaction
contemplated by this Agreement, take all action necessary to minimize the effect
of such Takeover Statute on the Merger and the other transactions contemplated
by this Agreement.
8.12 Exclusivity. During the period from the date of this Agreement until
the Effective Time or the earlier termination of this Agreement, none of the
Stockholders or the Advisor shall (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities or any portion of the assets of
the Advisor (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. Each of the Stockholders agrees that it shall not vote any
Advisor Common Shares in favor of any such acquisition, including any such
acquisition structured as a merger, consolidation, or share exchange (other than
the Merger). The Stockholders and the Advisor shall notify CHP immediately if
any Person makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing.
8.13 Payment of FARS Note or Inter-Company FARS Final Payment Funding Note.
During the period from the date of this Agreement through the earlier to occur
of (x) the Closing Date or (y) June 30, 2006, the Advisor shall pay any
principal and interest as it becomes due under the FARS Note. If the Closing has
not occurred on or before June 30, 2006, during the period from June 30, 2006
through the Closing Date, the Advisor shall pay any interest as it becomes due
under the Inter-Company FARS Final Payment Funding Note.
8.14 Registration Rights Agreement. At the Closing, CHP and the
Stockholders shall enter into a registration rights agreement in substantially
the form attached hereto as Exhibit C, except for such changes therein as may be
agreed upon by the Representative and the Special Committee, on behalf of CHP,
in their sole discretion, and provided that any change thereto that
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adversely affects the rights and obligations of FARS thereunder must also be
approved in writing by FARS, which approval shall not be unreasonably withheld
or delayed, it being acknowledged and agreed by the Parties that FARS would not
be unreasonably withholding approval if FARS reasonably determines that such
withholding is necessary in relation to its own interests (the "Registration
Rights Agreement").
8.15 Payment of Expenses/Cash Reserve. Prior to the Closing, the Advisor
shall have satisfied or shall have set aside a cash reserve of the Advisor in an
amount sufficient to satisfy (i) the payment of all Liabilities of the Advisor
and the Stockholders in connection with the negotiation, execution and delivery
of this Agreement, including the payment of any expenses due to any counsel of
the Advisor or the Stockholders and to any brokers, finders or other agents of
such Parties described in Section 7.26; it being understood and agreed that
neither the Surviving Company nor CHP shall have any liability for the payment
of such expenses or other liabilities except to the extent such amounts are
included in the Cash Reserve), (ii) any Tax obligations of the Advisor with
respect to any periods ending on or before the Closing Date (excluding amounts
due for any Taxes with respect to the Advisor's participation in Guarantor's
consolidated federal and state Tax Returns, all of which Taxes are and shall
continue to be after the Effective Time a Liability of Guarantor), and (iii) any
other Liabilities of the Advisor other than the FARS Note and any other
Liabilities set forth on Section 8.15 of the Disclosure Schedule (collective,
the "Cash Reserve"). At least two business days prior to the Closing, the
Advisor shall provide CHP with a schedule showing the amount of the Cash Reserve
and the amount of the estimated working capital of the Advisor as of the Closing
before and after giving effect to such Cash Reserve (the "Working Capital
Schedule"). No part of the Cash Reserve shall be distributed to the Stockholders
at any time.
8.16 Transition Services Agreement. At the Closing, CHP shall enter into a
transition services agreement with Guarantor or its Affiliate in substantially
the form agreed upon by CHP and Guarantor immediately prior to execution and
delivery of this Agreement by the Parties (the "Transition Services Agreement").
8.17 New Brand License Agreement. At the Closing, CHP shall enter into a
licensing agreement with Guarantor or its Affiliate in substantially the form
agreed upon by CHP and Guarantor immediately prior to execution and delivery of
this Agreement by the Parties (the "New Brand License Agreement").
8.18 Cooperation with Auditors. Prior to the Closing, the Stockholders
shall provide to PricewaterhouseCoopers LLP all information reasonably available
to the Stockholders that is necessary to calculate the accumulated and current
earnings and profits of the Advisor as of the Effective Time, including, but not
limited to, all necessary federal income Tax information relating to the
Advisor, working papers created with respect to such Advisor Tax information,
and information with respect to any federal income Tax controversy, either
pending or resolved, with respect to such returns. Any information shall be
treated as strictly confidential by PricewaterhouseCoopers LLP and every
employee of, and advisor to, CHP and PricewaterhouseCoopers LLP; provided,
however, that the foregoing shall not preclude CHP from sharing such information
(i) with its tax counsel for purposes of permitting such counsel to render
opinions from and after the time of the Merger with respect to the qualification
of CHP as a real estate investment trust as defined within Section 856 of the
Code ("REIT") or (ii) with any
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third party, including investment banks and their counsel, performing due
diligence with respect to CHP's continued qualification as a REIT following the
Merger. The aforesaid confidentiality provisions shall not apply to the
Surviving Company, as the successor to the Advisor in the Merger, or to CHP, as
the parent of the Surviving Company, following the Merger.
8.19 Amendment to the Articles of Incorporation of the Advisor. Prior to
the Closing, the Advisor shall adopt and make effective any and all amendments
to the articles of incorporation of the Advisor that are reasonably requested by
the Special Committee on behalf of CHP to facilitate the Merger, subject to
approval of the Advisor, which approval shall not be unreasonably withheld or
delayed (the "Advisor Amendment").
8.20 Pledge and Security Agreement. At the Closing, the Indemnifying
Stockholders and CHP shall enter into a pledge and security agreement in
substantially the form attached hereto as Exhibit D, except for such changes
therein as may be agreed upon by the Representative and the Special Committee on
behalf of CHP in its sole discretion (the "Pledge and Security Agreement").
8.21 Additional Advisor Actions. The Advisor shall take all actions
reasonably necessary to effect the transactions described on Section 8.21 of the
Disclosure Schedule (the "Advisor Actions").
8.22 CHP Note. At the Closing, the Advisor shall assign the CHP Note to the
Stockholders in such manner as determined by the Stockholders and described in
Section 8.22 of the Disclosure Schedule.
8.23 Tower II Lease. At the Closing, the Advisor shall assign the Tower II
Lease and all of its rights and obligations as tenant thereunder to CHP, and CHP
shall (i) assume all of the Advisor's rights and obligations as tenant under the
Tower II Lease and (ii) reimburse Guarantor for its reasonably documented
out-of-pocket costs and expenses incurred or paid as of the Closing Date in
connection with (A) the purchase, on behalf of the Advisor, of the Advisor's
furniture, fixtures and equipment for the Tower II Office Space, and (B) amounts
paid by the Guarantor, on behalf of the Advisor, to the landlord under the Tower
II Lease for the cost of improvements to the Tower II Office Space that are in
excess of the tenant improvement allowance under said lease. Section 8.23 of the
Disclosure Schedule includes a reasonably detailed description of the
out-of-pocket costs and expenses and other amounts referred to in the
immediately preceding clause (ii) incurred or paid by the Guarantor without any
xxxx-up or profit by Guarantor, on behalf of the Advisor, as of the date of this
Agreement and reasonably expected to be incurred or paid by the Guarantor, on
behalf of the Advisor, prior to or as of the Closing Date.
ARTICLE 9
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
9.1 General. In the event that at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take
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such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Article 12 below). The Stockholders
acknowledge and agree that from and after the Closing, the Surviving Company and
CHP will be entitled to possession of all documents, books, records (including
Tax records), agreements, and financial data of any sort relating to the
Advisor.
9.2 Litigation Support. Without limiting Section 9.10, in the event and for
so long as any Party actively is contesting or defending against any third party
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand in connection with (i) any transaction contemplated under this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Advisor, each of the
other Parties will reasonably cooperate with such Party and its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be reasonably necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Article 12 below).
9.3 Transition. None of the Stockholders will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Advisor or the
Development Company from maintaining the same business relationships with the
Surviving Company after the Closing as it maintained with the Advisor and the
Development Company prior to the Closing.
9.4 Confidentiality. Each of the Stockholders will treat and hold as
confidential all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to CHP or destroy, at the request and option of CHP, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
its possession. In the event that any of the Stockholders is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Stockholders will notify
CHP promptly of the request or requirement so that CHP may seek an appropriate
protective order or waive compliance with the provisions of this Section 9.4.
If, in the absence of a protective order or the receipt of a waiver hereunder,
any of the Stockholders is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, then
such Stockholder may disclose the Confidential Information to such tribunal;
provided, however, that the disclosing Stockholder shall use his or its
commercially reasonable efforts to obtain, at the request of CHP, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as CHP shall designate.
The foregoing provisions shall not apply to any Confidential Information which
is generally available to the public immediately prior to the time of
disclosure.
9.5 Covenant Not to Compete; Right of First Refusal; Non-Solicitation.
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(a) In consideration of CHP, CHPAC's and the Advisor's entering into
this Agreement pursuant to which, among other things, the Advisor Common Shares
owned by each of XXXX, Xxxxx X. Xxxxxx, Xx. and Xxxxxx X. Xxxxxx will be
converted into the right to receive such Party's respective Pro Rata Percentage
of the Merger Consideration as contemplated herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
acknowledging hereby that each of CHP, CHPAC and the Advisor would not have
agreed to enter into this Agreement and CHP would not have agreed to cause the
payment of any portion of the Merger Consideration to such Party, in each case
without such Party agreeing to enter into, and to honor the terms and conditions
of this Section 9.5(a), each of Guarantor, XXXX, Xxxxx X. Xxxxxx, Xx. and Xxxxxx
X. Xxxxxx (collectively, the "CNL Group") hereby acknowledges that such Party
shall be subject to, and hereby covenants and agrees to honor and comply with,
the terms and conditions of this Section 9.5 following the Closing as follows:
(i) During the period commencing on the Closing Date and
terminating on the seventh (7th) anniversary of the Closing Date, each member of
the CNL Group shall not, and shall cause each of their respective Affiliates not
to, directly or indirectly engage in any activities within the United States of
America, Canada and Europe relating to the ownership, acquisition, development
or management of luxury and upper upscale hotels and luxury resorts, each as
classified by Xxxxx Travel Research (the "Luxury Hotel Industry Sector"),
including, but not limited to, (A) sponsoring or organizing, or assisting any
other Person in sponsoring or organizing, an investment vehicle investing in the
Luxury Hotel Industry Sector or (B) providing asset management or other advisory
services to, or directly assisting another Person in providing asset management
or advisory services to, any investment vehicle investing in the Luxury Hotel
Industry Sector; provided, however, that (1) except as otherwise provided in
clause (5) below, activities taken by any member of the CNL Group, the CNL Group
or any of their respective Affiliates with respect to the investment in
recreational facilities or recreational properties, including golf courses, ski
resorts, campgrounds, recreational vehicle parks and marinas (the "Recreational
Properties and Facilities"), in which activities relating to the Luxury Hotel
Industry Sector is only incidental to the primary purpose of such facility or
property, shall not be deemed to violate this Section 9.5(a)(i), (2) activities
taken by any member of the CNL Group, the CNL Group or any of their respective
Affiliates with respect to facilities, such as condominiums and time share
properties, in which 50% or more of the ownership interests of such facility
exist on a fractional basis, shall not be deemed to violate this Section
9.5(a)(i), (3) the investment by any member of the CNL Group or any of their
respective Affiliates in the properties listed on Section 9.5 of the Disclosure
Schedule in which such Persons have interests as of the date of this Agreement,
shall not be deemed to violate this Section 9.5(a)(i), (4) activities taken by a
Person that has issued securities that are registered under Sections 12(b) or
12(g) of the Securities Exchange Act and that is a member of the CNL Group or an
Affiliate of a member of the CNL Group shall not be deemed to violate this
Section 9.5(a)(i) if, at the time such Person becomes actively involved in
pursuing plans to engage, and has knowingly taken affirmative steps to engage in
such activities and for twelve (12) consecutive calendar months thereafter, no
member of the CNL Group or Affiliate of a member of the CNL Group (A) serves as
a director, officer or employee of or consultant to such Person or holds a
similar position with such Person or its Subsidiary or direct or indirect parent
corporation or entity (which may, for example, require a member of the CNL Group
to resign from such positions with such Person or its Subsidiary or direct or
indirect parent corporation or entity) or (B) beneficially owns more
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than five percent (5%) of the issued and outstanding securities of such Person
(which may, for example, require a member of the CNL Group to dispose or
disclaim beneficial ownership of certain securities of such Person or its
Subsidiary or direct or indirect parent corporation or entity), as applicable
(such Person or Affiliate referred to in the immediately preceding clause (A) or
(B), an "Excluded Person"), (5) activities taken by CNL Income Properties, Inc.
with respect to the investment in recreational facilities or recreational
properties, including golf courses, ski resorts, campgrounds, recreational
vehicle parks and marinas, in which activities relating to the Luxury Hotel
Industry Sector generated fifty percent (50%) or more of the revenues of such
recreational facility or recreational property during the most recently
completed fiscal year or is reasonably expected to generate fifty percent (50%)
or more of the revenue of such recreational facility or recreational property in
the fiscal year following the stabilization of operations of such recreational
facility or recreational property, shall not be deemed to violate this Section
9.5(a)(i) if and to the extent the applicable members of the CNL Group and its
or their applicable Affiliates comply or cause compliance with the Right of
First Refusal in Section 9.5(a)(ii) as if and to the same extent such
recreational facility or recreational property was a Hospitality Asset for
purposes of Section 9.5(a)(ii), in any case without regard to whether CNL Income
Properties, Inc. is an Excluded Person, and (6) the covenant not to compete in
this Section 9.5(a)(i) may be waived by prior written consent of CHP acting with
and based upon the approval in their sole discretion of at least a majority of
all of CHP's disinterested directors who are non-employee directors, it being
understood that, for purposes of this Agreement, a director of CHP will be
deemed not to be disinterested if such director is a member of the CNL Group or
an Affiliate of any member of the CNL Group.
(ii) During the period commencing on the Closing Date and
terminating on the third (3rd) anniversary of the Closing Date, in the event
that a member of the CNL Group or any of their respective Affiliates (other than
an Excluded Person) (such member of the CNL Group or Affiliate thereof, the "CNL
Group Party") enters into or executes and delivers any binding agreement,
contract, letter agreement or other binding arrangement (a "Hospitality Asset
Agreement") relating to the ownership or acquisition of any hotel, or other
lodging asset in the United States of America, Canada or Europe outside of the
Luxury Hotel Industry Sector (such hotel, resort, motel or other lodging asset,
the "Hospitality Asset"), such CNL Group Party shall offer to CHP the right of
first refusal to assume and perform (or cause one of its Subsidiaries to assume
and perform) such Hospitality Asset Agreement (the "Right of First Refusal") in
accordance with this Section 9.5(a)(ii), it being acknowledged and agreed by the
Parties that (A) a Hospitality Asset Agreement would for purposes of this
Section 9.5(a)(ii) be deemed to be binding even if the only obligation of any
party thereto is an obligation to negotiate definitive documentation in good
faith and (B) such CNL Group Party(ies) shall not enter into or execute and
deliver such Hospitality Asset Agreement unless and until such Hospitality Asset
Agreement includes (1) an assignment provision that would enable such
Hospitality Asset Agreement to be assigned by the CNL Group Party(ies) to CHP or
one of its reasonably qualified Subsidiaries without the consent of the proposed
counterparty(ies) thereto if CHP exercises its Right of First Refusal and (2) a
requirement that if CHP exercises its Right of First Refusal the proposed
counterparty(ies) to the Hospitality Asset Agreement produce or make available
to CHP such financial information concerning the Hospitality Asset so as to
enable CHP to produce the financial statements and information required under
the federal securities laws to be filed by CHP in connection with the ownership
or acquisition of such Hospitality Asset(s); provided, however, that the Right
of First Refusal shall not apply to a Hospitality Asset
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Agreement entered into by any member of the CNL Group or any of their respective
Affiliates relating to the ownership or acquisition of (Y) any Recreational
Properties and Facilities in which activities relating to any Hospitality Asset
is only incidental to the primary purpose of such Recreational Property or
Facility, or (Z) facilities, such as condominiums and time share properties in
which 50% or more of the ownership interests of such facility exists on a
fractional basis. Promptly following the execution and delivery of the
Hospitality Asset Agreement, which in no event shall be later than the tenth
(10th) day following the execution and delivery of the Hospitality Asset
Agreement by all parties thereto, the applicable CNL Group Party shall deliver
to CHP written notice of the proposed Hospitality Asset Agreement, which notice
(the "ROFR Notice") shall include (A) a complete and correct copy of the
Hospitality Asset Agreement, (B) a detailed description of the Hospitality
Asset(s) subject to such Hospitality Asset Agreement and (C) copies of all
written information provided to any member of the CNL Group Party and/or its
financial and other advisors (other than legal counsel) by the counterparty(ies)
to the Hospitality Asset Agreement concerning the Hospitality Asset Agreement
and the Hospitality Asset(s), including, if so provided, photographs of the
Hospitality Asset(s), environmental reports and title surveys of and concerning
the Hospitality Asset and financial information of the operating history of the
Hospitality Asset. In addition, upon delivery to CHP of the ROFR Notice, such
CNL Group Party shall provide or cause to be provided to CHP and to CHP's
authorized representatives reasonable access upon reasonable notice during
normal business hours to the properties, books, records, contracts, commitments,
facilities, premises and equipment that may be the subject of the Hospitality
Asset Agreement and that may otherwise comprise the Hospitality Asset, subject
to an appropriate confidentiality agreement not more restrictive on CHP than any
confidentiality agreement entered into by the CNL Group Party(ies) with such
counterparty(ies). Within forty-five (45) days after CHP's receipt of the ROFR
Notice, CHP shall notify the CNL Group Party whether CHP exercises its Right of
First Refusal. If CHP elects to exercise its Right of First Refusal, then such
CNL Group Party shall assign, and CHP shall assume or shall cause a reasonably
qualified Subsidiary to assume, all of the CNL Group Party(ies) rights and
obligations to and under the Hospitality Asset Agreement. If CHP elects not to
exercise its Right of First Refusal or does not inform such CNL Group Party that
it has elected to exercise its Right of First Refusal within such forty-five day
period, then such CNL Group Party may consummate the transactions contemplated
by the Hospitality Asset Agreement for the price and on terms materially no more
favorable to such CNL Group Party than were described in the ROFR Notice;
provided, however, that if CHP elects not to exercise its Right of First Refusal
or does not inform such CNL Group Party that it has elected to exercise its
Right of First Refusal within such forty-five (45) day period and such CNL Group
Party does not consummate the transactions contemplated by the Hospitality Asset
Agreement within one hundred eighty (180) days after CHP's receipt of the ROFR
Notice, then such CNL Group Party may not consummate the transactions
contemplated by the Hospitality Asset Agreement without again complying with the
restrictions contained in this Section 9.5(a)(ii). Notwithstanding anything to
the contrary contained herein, any CNL Group Party shall inform, and shall cause
each of his or its respective Affiliates to inform, each prospective
counterparty to a Hospitality Asset Agreement of CHP's Right of Refusal with
respect to such Hospitality Asset at the same time such CNL Group Party or any
of his or its respective Affiliates commences discussions with a prospective
counterparty(ies) to a Hospitality Asset Agreement relating to the ownership or
acquisition, of a Hospitality Asset.
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(iii) During the period commencing on the Closing Date and
continuing through the seventh (7th) anniversary of the Closing Date, each of
Guarantor, XXXX, Xxxxx X. Xxxxxx, Xx. and Xxxxxx X. Xxxxxx shall not, without
CHP's prior written consent, and shall cause each of their respective Affiliates
(other than an Excluded Person) not to, directly or indirectly, Knowingly
solicit for employment or encourage to leave the employment or other service of
CHP or any of its Subsidiaries, any employee thereof or hire (on his or its
behalf or on behalf of any other Person) any employee who has left the
employment or other service of CHP or any of its Subsidiaries (or any
predecessor of either) within one (1) year of the termination of such employee's
employment with CHP or any of its Subsidiaries.
(b) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 9.5 is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
9.6 CHP Common Shares. Each certificate issued to the Stockholders who are
acquiring CHP Common Shares in the Merger representing such CHP Common Shares
will be imprinted with a legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), IN
RELIANCE UPON THE EXEMPTION FROM REGISTRATION CONTAINED IN SECTION
4(2) OF THE 1933 ACT AND REGULATION D OF THE RULES AND REGULATIONS
PROMULGATED UNDER THE 1933 ACT, AND IN RELIANCE UPON THE
REPRESENTATION BY THE HOLDER THAT THEY HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO RESALE OR FURTHER
DISTRIBUTION. SUCH SHARES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED
AFTER SALE, HYPOTHECATED, NOR WILL ANY ASSIGNEE OR ENDORSEE HEREOF BE
RECOGNIZED AS AN OWNER HEREOF BY THE ISSUER FOR ANY PURPOSE, UNLESS A
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH SHARES SHALL THEN BE IN EFFECT OR
UNLESS THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION SHALL BE
ESTABLISHED TO THE REASONABLE SATISFACTION OF COUNSEL OF THE ISSUER."
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Each such Stockholder desiring to transfer any of the CHP Common Shares received
in connection with the Merger, other than in a registered offering or pursuant
to a sale which counsel for CHP confirms is in compliance with Rule 144 of the
Securities Act, must first furnish CHP with (i) a written opinion satisfactory
to CHP in form and substance from counsel reasonably satisfactory to CHP to the
effect that such Stockholder may transfer the CHP Common Shares as desired
without registration under the Securities Act and (ii) a written undertaking
executed by the desired transferee reasonably satisfactory to CHP in form and
substance agreeing to be bound by the restrictions on transfer contained herein.
Each of the Stockholders who hold Class B Advisor Common Shares subject to an
Employee Stock Purchase Agreement shall hold any CHP Common Shares received as
the Merger Consideration subject to the restrictions of the applicable Employee
Stock Purchase Agreement.
9.7 Merger Consideration. Each Stockholder who acquires CHP Common Shares
in the Merger hereby agrees to be bound by the provisions of the lock-up letter
contemplated by the Registration Rights Agreement.
9.8 Tax Matters.
(a) The Stockholders (other than FARS and other than the Management
Stockholders) shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Advisor and the Development Company for all
periods ending on or prior to the Closing Date which are to be filed after the
Closing Date as part of the Guarantor's consolidated federal and state Tax
Returns or otherwise. The Stockholders (other than FARS and other than the
Management Stockholders) shall permit CHP to review and comment on each Tax
Return described in the preceding sentence (or, if any such Tax Return is to be
filed on a consolidated basis, the pro forma Tax Return of the Advisor and the
Development Company to be used in such consolidation) for such periods prior to
filing. The Stockholders (other than FARS) shall be responsible for the timely
payment of any Taxes of the Advisor or the Development Company with respect to
such periods.
(b) Any refund or credit of Taxes (including any statutory interest
thereon) received by CHP, CHPAC or any of their Subsidiaries with respect to the
Advisor or the Development Company that are attributable to periods ending on or
prior to or including the Closing Date shall reduce any CHP Indemnity Claim that
the Stockholders (other than FARS) owe CHP pursuant to Article 12 below by an
amount equal to the amount of such refund or credit; provided, however, that to
the extent any such refund or credit exceeds the aggregate amount of any and all
CHP Indemnity Claims that the Stockholders owed CHP pursuant to this Agreement,
the excess amount of such refund or credit shall be paid to the Representative
for distribution to the Stockholders on a pro rata basis upon the expiration, in
accordance with Section 12.5 of this Agreement, of all rights of CHP to seek
indemnification pursuant to Article 12, but in any event not later than the end
of the eighteen (18) month period following the Closing Date.
(c) In the event that CHP, CHPAC or any of their Subsidiaries receives
notice, whether orally or in writing, of any pending or threatened federal,
state, local or foreign tax examinations, claims settlements, proposed
adjustments or related matters with respect to Taxes that would reasonably be
expected to affect Advisor or any of the Stockholders, or if Advisor or
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any of the Stockholders receives notice of such matters that would reasonably be
expected to affect CHP, CHPAC or any of their Subsidiaries, the Party receiving
such notice shall promptly notify in writing the potentially affected Party. The
failure of either Party to give the notice required by this Section 9.8(c) shall
not impair such Party's rights under this Agreement except to the extent that
the other Party demonstrates that it has been damaged thereby.
(d) The Stockholders (other than FARS) shall have the responsibility
for, and shall be entitled, at their expense, to contest, control, compromise,
settle or appeal all proceedings with respect to pre-closing Taxes, provided,
however, that any decision or action with respect to any of the foregoing that
reasonably could be expected to affect either CHP or CHPAC adversely shall
require the prior written consent of CHP acting with and based upon the approval
in their sole discretion of at least a majority of all of CHP's disinterested
directors who are non-employee directors, it being understood that, for purposes
of this Agreement, a director of CHP will be deemed not to be disinterested if
such director is a member of the CNL Group or an Affiliate of any member of the
CNL Group, and provided further that the Stockholders (other than FARS), in
accordance with his or its Pro Rata Percentage of the Merger Consideration,
shall indemnify CHP and CHPAC from any and all costs incurred by CHP and CHPAC
in connection with or as a result thereof.
(e) XXXX hereby additionally agrees to assume and be responsible for
the pro rata portion of any reimbursement, payment, indemnity or other
obligation of FARS as a Stockholder that may or would otherwise have been
attributable to FARS pursuant to this Section 9.8 and is owed or payable to CHP
or CHPAC.
(f) In the event that any taxable period for the Advisor or the
Development Company shall commence prior to the Closing Date and end after the
Closing Date (a "Straddle Year") under the applicable law of any taxing
jurisdiction (a "Straddle Year Jurisdiction"), then (i) the Stockholders (other
than FARS) shall prepare or cause to be prepared a pro forma Tax Return for the
Straddle Year Jurisdiction for the portion of the Straddle Year commencing prior
to the Closing Date and ending with the close of business on the Closing Date
(the "Pre-Closing Straddle Period") and shall deliver such pro forma Tax Return
to CHP, together with an amount of cash equal to all Taxes that would be payable
to the Straddle Year Jurisdiction with respect to the Pre-Closing Straddle
Period (referred to as "Pre-Closing Straddle Period Taxes") and (ii) CHP shall
prepare or cause to be prepared a pro forma Tax Return for the Straddle Year
Jurisdiction for the portion of the Straddle Year commencing on the day
following the Closing Date and ending on the last day of the Straddle Year (the
"Post-Closing Straddle Period") and shall deliver such pro forma Tax Return to
the Representative for his review, provided that CHP shall have the right to
make all determinations with respect thereto. CHP will be responsible for
preparing and filing with the Straddle Year Jurisdiction all required Tax
Returns for the Straddle Year, and shall be responsible for all Taxes
attributable to the Post-Closing Straddle Period (with such Taxes referred to as
"Post-Closing Straddle Period Taxes"). To the maximum extent practicable, the
rights and responsibilities of the Stockholders with respect to Pre-Closing
Straddle Period Taxes shall be as set forth in subparagraphs (a) through (e)
with respect to Taxes for periods ending on or prior to the Closing Date.
9.9 Post-Closing Employment Arrangements. At or prior to the Closing, the
Advisor and its Affiliates will have entered into agreements or arrangements in
form and substance
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satisfactory to the Special Committee on behalf of CHP in its sole discretion,
for the continuation and/or substitution of benefits to employees of the Advisor
and the Development Company following the Merger.
9.10 Assumption of Certain Liabilities of the Advisor Concerning the Class
Action Lawsuit and Related Matters.
(a) Without limiting the Indemnifying Stockholders' obligations under
Article 12, as of the Effective Time and without any further action by any of
the Parties, the Indemnifying Stockholders shall, according to his or its Pro
Rata Percentage, be deemed to have assumed and hereby expressly acknowledge and
agree that they shall assume from the Advisor and otherwise succeed to all the
rights and Liabilities of the Advisor, if any, with respect to the Class Action
Lawsuit and the matters out of which the Class Action Lawsuit arose as if such
rights and Liabilities originally were the rights and Liabilities of the
Indemnifying Stockholders (such Liabilities, the "Assumed Advisor Liabilities"),
provided that XXXX hereby additionally agrees to assume and be responsible for
the pro rata portion of any Assumed Advisor Liabilities that otherwise would
have been attributable to FARS. The Indemnifying Stockholders shall diligently
pursue, control and bear the expense, including attorneys' fees, of the defense,
settlement, adjustment or compromise of the Assumed Advisor Liabilities, if any,
with counsel reasonably acceptable to CHP (and CHP acknowledges that the
Advisor's current counsel is acceptable), provided that the Indemnifying
Stockholders shall obtain the written consent of CHP and Surviving Company
before entering into any settlement, adjustment or compromise of such Assumed
Advisor Liabilities (if CHP is not a party to said settlement, adjustment, or
compromise), if any, or ceasing to defend against such Assumed Advisor
Liabilities, if any, if as a result thereof, or pursuant thereto, there would be
imposed on CHP and/or Surviving Company any additional Liability not covered by
the indemnity obligations of the Indemnifying Stockholders under this Agreement
and resulting from such settlement, adjustment or compromise (including, without
limitation, any injunctive relief or other remedy). The Parties intend and agree
that, by operation of this Section 9.10 and Article 12, (i) the Merger would not
diminish CHP's rights or increase CHP's Liabilities, if any, with respect to the
Class Action Lawsuit or the matters out of which the Class Action Lawsuit arose
and (ii) the Indemnifying Stockholders' rights and Liabilities with respect to
the Class Action Lawsuit or the matters out of which the Class Action Lawsuit
arose after the Effective Time be identical to the Advisor's rights and
Liabilities with respect to the Class Action Lawsuit and the matters out of
which the Class Action Lawsuit arose had this Agreement not been executed and
delivered by the Parties and had the Merger not occurred, including, but not
limited to, any rights or Liabilities with respect to any applicable fee sharing
agreements, arbitration awards, or court orders with respect to the Class Action
Lawsuit and the matters out of which the Class Action Lawsuit arose.
(b) The Indemnifying Stockholders shall cooperate reasonably with CHP
and Surviving Company and with their respective representatives in connection
with any steps to be taken as part of their obligations under this Section 9.10
and shall (i) furnish upon request to each other and to CHP and Surviving
Company such further information, (ii) execute and deliver to each other and to
CHP and/or Surviving Company such other documents and (iii) do such other acts
and things, each as may be reasonably requested by CHP and/or the Surviving
Company for the purpose of carrying out the intent of this Section 9.10.
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(c) The Indemnifying Stockholders may allocate among themselves by
written agreement responsibility for their obligations under this Section 9.10
with respect to the Assumed Advisor Liabilities, subject to CHP's prior written
consent, which consent shall not be unreasonably be withheld, it being
understood that any such allocation shall not affect CHP's and/or the Surviving
Company's rights under Article 12.
ARTICLE 10
CONDITIONS TO OBLIGATION TO CLOSE
10.1 Conditions to Each Party's Obligation. The respective obligations of
CHP, CHPAC, the Advisor and the Stockholders to consummate the Merger are
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, which conditions may be waived upon the written consent of
the Special Committee on behalf of CHP and the Representative:
(a) CHP Stockholder Approval. CHP shall have obtained the CHP
Stockholder Approval.
(b) Governmental Approvals. The Parties shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
listed on and Sections 5.2 and 7.3 of the Disclosure Schedule and otherwise
referred to in Section 5.2, Section 6.4, and Section 7.3 above and such consents
shall remain in effect as of the Closing Date.
(c) Opinions. (i) CHP and CHPAC and the Stockholders shall have
received an opinion dated as of the Closing Date from Xxxxxxxxx Xxxxxxx, LLP,
counsel to CHP and CHPAC, addressed to the Special Committee on behalf of CHP in
the form agreed upon by CHP, CHPAC, the Stockholders and Xxxxxxxxx Traurig, LLP
immediately prior to the execution and delivery of this Agreement by the
Parties.
(ii) CHP and CHPAC shall have received an opinion dated as of the
Closing Date from Xxxxxxxxx Xxxxxxx, LLP, counsel to CHP and CHPAC, addressed to
the Special Committee on behalf of CHP in the form agreed upon by CHP, CHPAC and
Xxxxxxxxx Traurig, LLP immediately prior to the execution and delivery of this
Agreement by the Parties. CHP, CHPAC and the Advisor shall provide
representation letters to Xxxxxxxxx Xxxxxxx, LLP in the form agreed upon by CHP,
CHPAC, the Advisor and Xxxxxxxxx Traurig, LLP immediately prior to the execution
and delivery of this Agreement by the Parties.
(iii) The Advisor and the Stockholders shall have received an
opinion dated as of the Closing Date from Xxxxxx & Xxxxxx LLP, special tax
counsel to the Advisor, addressed to the Advisor and the Stockholders in the
form agreed upon by the Advisor, the Stockholders and Xxxxxx & Xxxxxx LLP
immediately prior to the execution and delivery of this Agreement by the
Parties. CHP, CHPAC and the Advisor shall provide representation letters to
Xxxxxx & Xxxxxx LLP in the form agreed upon by CHP, CHPAC, the Advisor and
Xxxxxx & Xxxxxx LLP immediately prior to the execution and delivery of this
Agreement by the Parties.
10.2 Conditions to Obligation of CHP and CHPAC. The obligations of CHP and
CHPAC to consummate the Merger and take the actions to be performed by them in
connection
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with the Closing are subject to satisfaction or waiver by the Special Committee
on behalf of CHP, in its sole discretion, of the following conditions:
(a) No Injunction or Proceedings. There shall not be in effect any
action, suit, or proceeding pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree or ruling that would, in the reasonable judgment of the
Special Committee on behalf of CHP, (i) prevent consummation of the Merger, (ii)
cause the Merger to be rescinded following consummation, (iii) affect adversely
the right of CHP to own the capital stock of the Surviving Company, or (iv)
affect adversely the right of the Surviving Company to own its assets and to
operate its businesses (and no such injunction, judgment, order, decree, ruling,
or charge is in effect);
(b) Officers Certificate. Each of the Stockholders and the chief
executive officer of the Advisor shall have delivered to CHP a certificate to
the effect that, to the Actual Knowledge of such certifying Person (it being
acknowledged and agreed by the Parties that, for purposes of this Section
10.2(b), the Actual Knowledge of the chief executive officer of the Advisor
shall mean the Actual Knowledge of such officer following a reasonable
investigation, the Actual Knowledge of the certifying Stockholder shall mean the
individual Actual Knowledge of such certifying Stockholder, and the Actual
Knowledge of such individual Stockholder shall not be attributed to the other
Stockholders):
(i) the representations and warranties set forth in Article 5 and
Article 7 above applicable to it that are qualified as to materiality shall be
true and correct, and those applicable to it not so qualified shall be true and
correct in all material respects, as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except that the
representation and warranty made in Section 7.30 shall be true and correct in
all material respects as of the date of this Agreement;
(ii) the Stockholders and the Advisor shall have performed and
complied in all material respects with all of their covenants and obligations to
be performed by it under this Agreement at or prior to the Closing Date,
including the Advisor's performance of the actions contemplated by Section
10.2(d) below;
(iii) the Advisor and the Stockholders have procured all of the
third party consents specified in Section 5.3 and 7.4 above and such consents
shall remain in effect as of the Closing Date; and
(iv) no action, suit, or proceeding is pending or threatened
against the Advisor or such Stockholder before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order, decree
or ruling that would (A) prevent consummation of the Merger, (B) cause the
Merger to be rescinded following consummation, (C) affect adversely the right of
CHP to own the membership interests of the Surviving Company, or (D) affect
adversely the right of the Surviving Company to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree or ruling is in
effect) other than any action, suit, proceeding or claim that is pending or
threatened against the Advisor as of the date hereof;
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(c) Certain Advisor Actions. All of the Advisor Actions shall have
been effected prior the Closing Date and shall not have otherwise been rescinded
or be subject to rescission as of or following the Closing Date;
(d) Declaration and Payment of Dividend by Advisor. The Board of
Directors of the Advisor shall have adopted the resolutions in substantially the
form presented to CHP by the Advisor and the Stockholders immediately prior to
the execution and delivery of this Agreement, such resolutions shall not have
been withdrawn, modified or otherwise rescinded as of the Closing Date, and the
Advisor shall have effected all of the actions contemplated by such resolutions,
including the payment of the dividend to the Stockholders declared by the Board
of Directors of the Advisor pursuant thereto;
(e) Certain Agreement Among Stockholders. The Stockholders shall have
executed and delivered to each other and CHP an agreement in substantially the
form presented to CHP by the Advisor and the Stockholders immediately prior to
the execution and delivery of this Agreement concerning certain post-Closing
obligations of the Stockholders;
(f) Pledge and Security Agreement. The Pledge and Security Agreement
shall have been executed and delivered by the parties thereto.
(g) Opinion of LDDK&R. CHP and CHPAC shall have received an opinion
dated as of the Closing Date from Lowndes, Drosdick, Doster, Xxxxxx & Xxxx,
P.A., counsel to the Advisor, in substantially the form agreed upon by CHP,
CHPAC, and Lowndes, Drosdick, Doster, Xxxxxx & Xxxx, P.A. immediately prior to
the execution and delivery of this Agreement by the Parties;
(h) Comfort Letter. CHP shall have received written comfort in form
and substance reasonably satisfactory to the Special Committee from
PricewaterhouseCoopers LLP that the Advisor will not have any accumulated or
current earning and profits within the meaning of Section 312 of the Code as of
the Effective Time, which written comfort tax counsel to CHP will be permitted
to rely upon for purposes of rendering opinions from and after the time of the
Merger with respect to the qualification of CHP as a REIT;
(i) Fairness Opinion. Xxxxxx Brothers, Inc. shall have not withdrawn
its Fairness Opinion issued in connection with the Merger and, if requested by
the Special Committee, shall have issued to the Special Committee an updated
opinion dated as of the Closing Date;
(j) Resignations. CHP shall have received copies of the resignations,
effective as of the Closing, of each director and officer of the Advisor and the
Development Company other than those whom the Special Committee on behalf of
CHP, in its sole discretion, shall have specified in writing prior to the
Closing;
(k) Bonus Arrangements. CHP shall have received satisfactory evidence
that all bonus plans under which officers, directors or employees of the Advisor
or the Development Company are beneficiaries have been terminated as of the
Closing Date;
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(l) Employment Agreements. Each of the Employment Agreements shall
become effective in accordance with its terms, effective as of the Effective
Time, and CHP shall not as of the Closing Date have any good faith reason to
believe that the counterparty to each such Employment Agreement does not intend
to perform his obligations under his Employment Agreement in accordance with the
terms thereof;
(m) Transition Services Agreement, New Brand License Agreement and
Other Agreements. Guarantor or its Affiliate shall have executed and delivered
the Transition Services Agreement and the New Brand License Agreement referred
to in Sections 8.16 and 8.17, respectively, and any other agreements necessary
for the Surviving Company to conduct its business in substantially the same
manner as conducted by the Advisor immediately prior to the Closing Date
(including any furniture or equipment leases or subleases, office space leases
or subleases, and software licenses), in each case in form and substance
reasonably satisfactory to the Special Committee on behalf of CHP, in its sole
discretion, and CHP shall have obtained insurance for the Surviving Company of a
similar type to that maintained for the Advisor as of the date of this Agreement
on terms reasonably satisfactory to the Special Committee on behalf of CHP, in
its sole discretion;
(n) Material Adverse Effect. Since December 31, 2003, there shall not
have occurred any Material Adverse Effect on the Advisor;
(o) Advisor Amendment. The Advisor shall have filed any and all
Advisor Amendments with the Florida Department of State, and the Advisor
Amendment shall have become effective;
(p) Opinion of Compensation Consultant. The Special Committee shall
have received a written report from the independent compensation consultant
engaged by the Compensation Committee of the CHP Board of Directors that would
provide a basis for such committees, in their sole discretion, to determine that
the terms and conditions of the Employment Agreements are fair and reasonable to
CHP;
(q) Majority Vote Charter Amendment. The Majority Vote Charter
Amendment shall have been filed with the Maryland State Department of
Assessments and Taxation and shall have become effective;
(r) Stockholders' Agreement. The Stockholders' Agreement dated as of
February 24, 1999 by and among the Advisor, XXXX, FARS and the other
Stockholders identified therein, shall have been amended, modified or terminated
by the parties thereto, effective as of the Effective Time, as and to the extent
determined to be necessary or appropriate by the Special Committee, on behalf of
CHP, in its sole discretion;
(s) Tax Sharing Agreement. The Tax Sharing Agreement dated as of
February 24, 1999 by and between CNL Group, Inc., the predecessor to the
Guarantor, and CNL Hospitality Advisors, Inc., the predecessor to the Advisor,
as the same shall have been amended from time to time (the "Tax Sharing
Agreement"), shall have been terminated as of the Effective Time with respect to
the Advisor and all Subsidiaries of the Advisor, with the Advisor and all of the
Subsidiaries of the Advisor expressly and unconditionally relieved of any and
all monetary
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Liability of any kind or nature thereunder to the Guarantor and any other member
of the "Affiliated Group" (as defined in the Tax Sharing Agreement) attributable
to taxable years of the Advisor and/or its Subsidiaries ending after the
Effective Time. The termination of the Tax Sharing Agreement shall contain such
other terms and conditions as the Special Committee, on behalf of CHP, in its
sole discretion, shall determine to be necessary or appropriate. Any and all
amounts payable by the Surviving Company (as the successor to the Advisor under
the Tax Sharing Agreement) to the "Parent" (as defined in the Tax Sharing
Agreement) pursuant to or as a result of the Tax Sharing Agreement shall be a
CHP Indemnity Claim (as defined in Section 12.1 below) under Section 12.1(iv)
below, and shall be covered by the guaranty of the Guarantor pursuant to Section
13.2 of this Agreement. The termination of the Tax Sharing Agreement shall
provide that the Surviving Company (as the successor to the Advisor under the
Tax Sharing Agreement) shall have the right to satisfy any and all obligations
for payment thereunder by assigning to the party to which such payment is owed,
the Surviving Company's rights to the corresponding CHP Indemnity Claim
(including its rights against the Guarantor with respect thereto); and
(t) Appraisal Rights. Holders of, in the aggregate, 1% or more of the
CHP Common Shares outstanding as of the date of the CHP Stockholder Meeting
shall not have exercised or purported to have exercised appraisal rights under
applicable provisions of Maryland General Corporation Law with respect to one or
more of the amendments contained in the CHP Charter Amendments by filing with
CHP a written objection thereto and not otherwise voting in favor thereof (or by
taking such other actions required to be taken at such time in order to exercise
appraisal rights pursuant to applicable provisions of Maryland General
Corporation Law).
10.3 Conditions to Obligation of the Stockholders and the Advisor. The
obligation of the Stockholders and the Advisor to consummate the Merger and take
the actions to be performed by them in connection with the Closing is subject to
satisfaction or waiver by the Representative of the following conditions:
(a) No Injunction or Proceedings. There shall not be in effect any
action, suit, or proceeding pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree or ruling that would, in the reasonable judgment of the
Advisor, (i) prevent consummation of the Merger, (ii) cause the Merger to be
rescinded following consummation or (iii) affect adversely the right of the
Stockholders to receive the Merger Consideration;
(b) Officers Certificate. The chief executive officer of CHP and the
Manager of CHPAC each shall have delivered to the Stockholders and the Advisor a
certificate to the effect that, to their Actual Knowledge, following a
reasonable investigation:
(i) the representations and warranties set forth in Article 6
above that are qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct in all material respects, as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except that the representation and warranty made in Section
6.2 shall be true and correct in all material respects as of the date of this
Agreement;
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(ii) CHP and CHPAC shall have performed and complied in all
material respects with all of its covenants and obligations to be performed by
it under this Agreement at or prior to the Closing Date; and
(iii) no action, suit, or proceeding shall be pending or
threatened against CHP or CHPAC before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order, decree
or ruling would (A) prevent consummation of the Merger or (B) cause the Merger
to be rescinded following consummation (and no such injunction, judgment, order,
decree or ruling shall be in effect) other than any action, suit, proceeding or
claim that is pending or threatened against CHP as of the date hereof;
(c) Merger Consideration. CHP shall have delivered to the Stockholders
the Merger Consideration pursuant to Section 4.2;
(d) Material Adverse Effect. Since the date hereof, there shall not
have occurred any Material Adverse Effect on CHP;
(e) Registration Rights Agreement. The Registration Rights Agreement
shall have been executed and delivered by the parties thereto; and
(f) FARS Note or Inter-Company FARS Final Payment Funding Note. CHP
shall have assumed and concurrently with the Closing shall repay in full, by
wire transfer to an account designated by FARS in writing not less than two (2)
business days prior to the Closing, the FARS Note; provided, however, that in
the event that prior to the Closing the Advisor has paid in full all of the
outstanding interest and principal due and payable under the FARS Note, then CHP
shall have assumed and concurrently with the Closing shall repay in full the
Inter-Company FARS Final Payment Funding Note by wire transfer to an account
designated by XXXX in writing not less than two (2) business days prior to the
Closing.
ARTICLE 11
TERMINATION
11.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the stockholders of CHP, by the mutual written consent of
the Advisor and the Special Committee on behalf of CHP.
11.2 Termination by Either CHP or the Advisor. This Agreement may be
terminated and the Merger may be abandoned (a) by action of the Special
Committee on behalf of CHP (i) in the event of a failure of a condition to the
obligations of CHP and CHPAC set forth in Section 10.1 or Section 10.2 of this
Agreement or, (ii) no later than the time of the CHP Stockholder Meeting, in the
event that the Special Committee shall have determined that it is not satisfied,
in its sole discretion, with the results of its examination of the books,
records, assets, liabilities, prospects and business of the Advisor; (b) by the
Representative in the event of a failure of a condition to the obligations of
the Stockholders or the Advisor set forth in Section 10.1 or Section 10.3 of
this Agreement; (c) by either CHP or the Advisor in the event the Closing has
not
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occurred on or before December 31, 2006; or (d) by either CHP or the Advisor in
the event that a United States federal or state court of competent jurisdiction
or United States federal or state governmental agency shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and non-appealable; provided, however, that the right to terminate this
Agreement pursuant to clause (a), (b), or (c) above shall not be available to
any Party whose breach of this Agreement has been a principal cause for the
failure of the condition referred to in said clause.
11.3 Effect of Termination and Abandonment. In the event of termination of
this Agreement and abandonment of the Merger pursuant to this Article 11, no
Party hereto (or any of its directors or officers) shall have any Liability or
further obligation to any other Party to this Agreement, except that nothing
herein will relieve any Party from Liability for any willful breach of this
Agreement.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnity Obligations of the Stockholders. Subject to Section 12.5 and
Section 12.6 hereof, each of the Stockholders, other than FARS (the
"Indemnifying Stockholders"), hereby severally, in accordance with his or its
Pro Rata Percentage of the Merger Consideration, agrees to indemnify and hold
CHP and the Surviving Company harmless from, and to reimburse CHP and the
Surviving Company for, any CHP Indemnity Claims arising under the terms and
conditions of this Agreement; provided, however, that XXXX hereby additionally
agrees to assume and be responsible for the pro rata portion of any CHP
Indemnity Claim that would otherwise have been attributable to FARS as a
Stockholder pursuant to this Article 12. For purposes of this Agreement, the
term "CHP Indemnity Claim" shall mean any loss, damage, deficiency, claim,
liability, obligation, suit, action, fee, cost or expense of any nature
whatsoever (collectively, "Losses") to the extent resulting from (i) any breach
of any representation and warranty of the Indemnifying Stockholders or the
Advisor which is contained in this Agreement or in any Schedule, Exhibit or
certificate delivered pursuant hereto; (ii) any breach or non-fulfillment of, or
any failure to perform, any of the covenants, agreements or undertakings of the
Stockholders or the Advisor which are contained in or made pursuant to this
Agreement; (iii) any Liability for Taxes of the Advisor or the Development
Company for the taxable period of the Advisor and the Development Company that
includes the Effective Time; provided, however, that this clause (iii) shall not
apply to any Tax payable with respect to such taxable period solely by reason of
the Merger failing to qualify as a reorganization under Section 368(a) of the
Code (if such Tax would not have been imposed in such taxable period had the
Merger qualified as a reorganization under Section 368(a) of the Code); (iv) any
Taxes which may be imposed upon the Advisor or any Subsidiary of the Advisor (or
any successor to any of the foregoing) pursuant to Treas. Reg. Section 1.1502-6
(or any similar provision of state, local or foreign law) with respect to any
taxable period by reason of the inclusion of the Advisor or any Subsidiary of
the Advisor (or any predecessor to any of the foregoing), at any time prior to
or including the Effective Time, in any "affiliated group of corporations" as
defined for purposes of Section 1504 of the Code, whether pursuant to the Tax
Sharing Agreement or otherwise; (v) any amounts required to be
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paid by CHP to the IRS or any state or local taxing authority by reason of or in
connection with a determination by any taxing authority or CHP (referred to as a
"Determination") that either the Advisor or the Development Company had, as of
the Effective Time, any accumulated earnings and profits (as calculated for
federal income tax purposes), with the indemnification hereunder to include, but
not be limited to, any Taxes required to be paid by CHP because distributions
made by CHP after the Effective Time are treated as distributions of any such
earnings and profits, rather than as dividends that are deductible in computing
the "real estate investment trust taxable income" of CHP under Section 857(b) of
the Code, any payment made by CHP pursuant to Section 860(c)(1) of the Code in
connection with any "deficiency dividend" paid by CHP in connection with or as a
result of any such determination, and/or any interest charge required to be paid
by reason of the application of the principles of Section 852(e)(3) of the Code
to CHP by reason of it being determined to have earnings and profits of a "C
corporation" as a result of the Merger, provided, however, that in the event
that there shall have been a Determination, CHP thereafter shall have an
affirmative duty to mitigate claims under this clause (v) to the extent such
steps are permitted under applicable Tax law and in the reasonable judgment of
CHP, after good faith consultation with its Tax advisors, the Representative and
the Representative's Tax advisor, would have the effect of mitigating the claims
under this clause (v), by (A) paying Deficiency Dividends and/or other
dividends, or (B) paying any amounts required in order to satisfy the
requirements of Section 856(g)(5) of the Code (the "REIT Savings" provisions) to
the extent permitted under applicable Tax law (with any such amounts payable
pursuant to the REIT Savings provisions to be subject to indemnification under
this clause (v)), provided, further that in the event that CHP shall, following
a Determination, fail to take either of the steps described in subclauses (A)
and (B) and such steps were available under applicable Tax law, and if taken,
would have mitigated the amounts payable under this clause (v)), the CHP
Indemnity Claim pursuant to this clause (v) shall be (A) reduced to take into
account the effect of any allowable deduction, under the applicable Tax law, for
any Deficiency Dividends or other dividends that could have been, but were not,
paid and (B) increased for (1) any interest charge that would have been payable
by CHP as a result of or in connection with such dividend or Deficiency
Dividend, and (2) any interest charge or penalty that would have been payable by
CHP as a result of or in connection with satisfying the requirements under
Section 856(g)(5) of the Code; and provided, further that a Loss pursuant to
this clause (v) or clause (i) of this Section 12.1 shall not in any event be
considered to include the actual amount of any Deficiency Dividend or other
dividend paid by CHP in connection herewith; (vi) any and all Liabilities of the
Advisor relating to any action, suit, proceeding or claim that is pending or
threatened against the Advisor immediately prior to the Effective Time or
instituted after the Effective Time based on actions or omissions of the Advisor
prior to or at the Effective Time; and (vii) all interest, penalties, costs and
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) and other Losses arising out of or related to any indemnification
made under this Section 12.1. The Parties hereby expressly acknowledge and agree
that the Liabilities of the Advisor described in clause (vi) of the preceding
sentence include, with respect to the Class Action Lawsuit, only (A) any and all
Liabilities relating to or arising out of the Class Action Lawsuit or the
matters out of which the Class Action Lawsuit arose that would have been
attributed to the Advisor but for the Merger and that instead may become or have
become Liabilities of CHP and/or Surviving Company as a result of the Merger and
(B) any and all Liabilities that the Advisor would have had to CHP relating to
or arising out of the Class Action Lawsuit or the matters out of which the Class
Action Lawsuit arose had the Merger not occurred, including any obligation of
indemnity
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or contribution of the Advisor (including, without limitation, any obligation of
indemnity pursuant to the Advisory Agreement in effect at the time the acts or
omissions that gave rise to such Liability occurred). In addition, the Parties
hereby expressly acknowledge and agree that any amounts that may become due and
payable by the Indemnifying Stockholders pursuant to clause (vi) of this Section
12.1 shall be offset by that amount that would have been due and payable to the
Advisor by CHP pursuant to any obligation of CHP to indemnify the Advisor for
such Liabilities arising out of CHP's charter and the Advisory Agreement in
effect at the time the acts or omissions that gave rise to such Liability
occurred, it being understood and agreed that the intent of such offset is to
provide the Indemnifying Stockholders the benefit of such indemnity rights to
the same extent that the Advisor would have benefited from such indemnities, if
at all, had the Merger not occurred.
12.2 Indemnity Obligations of CHP. CHP and the Surviving Company hereby
jointly and severally agree to indemnify and hold each of the Stockholders
harmless from, and to reimburse each of the Stockholders for, any Stockholder
Indemnity Claims arising under the terms and conditions of this Agreement. For
purposes of this Agreement, the term "Stockholder Indemnity Claim" shall mean
any Loss incurred by any of the Stockholders resulting from (a) any breach of
any representation and warranty of CHP and CHPAC which is contained in this
Agreement or any schedule, exhibit or certificate delivered pursuant hereto, (b)
any breach or non-fulfillment of, or failure to perform, any of the covenants,
agreements or undertakings of CHP and CHPAC which are contained in or made
pursuant to the terms and conditions of this Agreement, and (c) all interest,
penalties, costs and expenses (including, without limitation, all reasonable
fees and disbursements of counsel) and other Losses arising out of or related to
any indemnification made under this Section 12.2. In addition, the term
Stockholder Indemnity Claim shall mean, with respect only to the Indemnifying
Stockholders, any Loss incurred by any of the Indemnifying Stockholders from a
Third Party Claim relating to the Assumed Advisor Liabilities that would have
been due and payable to the Advisor by CHP pursuant to any obligation of CHP to
indemnify the Advisor for such Third Party Claim or Loss arising out of CHP's
charter and the Advisory Agreement in effect at the time the acts or omissions
that gave rise to such Loss occurred, it being understood and agreed that the
intent of such indemnification obligation of CHP and the Surviving Company is to
provide the Indemnifying Stockholders the benefit of such indemnity rights to
the same extent that the Advisor would have benefited from such indemnities, if
at all, had the Merger not occurred. Notwithstanding anything to the contrary
contained in this Section 12.2, neither CHP nor the Surviving Company shall be
obligated to indemnify and hold any of the Stockholders harmless from (i) any
breach of any representation and warranty of CHP and CHPAC which is contained in
this Agreement or any schedule, exhibit or certificate delivered pursuant hereto
or (ii) any breach or non-fulfillment of, or failure to perform, any of the
covenants, agreements or undertakings of CHP and CHPAC which are contained in or
made pursuant to the terms and conditions of this Agreement if, in either case,
the Advisor or any Stockholder had Knowledge of any facts or circumstances that
(A) would have reasonably affected CHP or CHPAC's ability to make any
representation or warranty of CHP or CHPAC contained in this Agreement or any
schedule, exhibit or certificate delivered pursuant hereto or (B) would have
reasonably affected CHP or CHPAC's ability to fulfill or perform any of the
covenants, agreements or undertakings of CHP and CHP which are contained in or
made pursuant to the terms of this Agreement, and the Advisor did not inform CHP
and CHPAC of such facts and circumstances prior to making such representation or
warranty or undertaking to fulfill or perform such covenants, agreements or
undertakings.
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12.3 Appointment of Representative. Each of the Stockholders (other than
FARS) hereby appoints Xxxxx X. Xxxxxx, Xx. as its exclusive agent to act on its
behalf with respect to any and all Stockholder Indemnity Claims and any and all
CHP Indemnity Claims arising under this Agreement and for such other purposes
specified in this Agreement. In the event that Xxxxx X. Xxxxxx, Xx. is unable or
unwilling to serve in such capacity, then another representative of the
Stockholders (other than FARS) may be appointed by a majority in interest of the
Stockholders (other than FARS). Such agent is herein referred to as the
"Representative." The Representative shall take, and the Stockholders (other
than FARS) agree that the Representative shall take, any and all actions which
the Representative believes are necessary or appropriate under this Agreement
for and on behalf of the Stockholders (other than FARS), as fully as if such
Parties were acting on their own behalf, including, without limitation,
asserting Stockholder Indemnity Claims against CHP, defending all CHP Indemnity
Claims, consenting to, compromising or settling all Stockholder Indemnity Claims
and CHP Indemnity Claims, conducting negotiations with CHP and its
representatives regarding such claims, taking any and all other actions
specified in or contemplated by this Agreement and engaging counsel, accountants
or other representatives in connection with the foregoing matters. CHP shall
have the right to rely upon all actions taken or omitted to be taken by the
Representative pursuant to this Agreement, all of which actions or omissions
shall be legally binding upon the Stockholders (other than FARS). The
Representative, acting pursuant to this Section 12.3, shall not be liable to any
other Stockholder for any act or omission, except in connection with any act or
omission that was the result of the Representative's bad faith or gross
negligence.
12.4 Notification of Claims. Subject to the provisions of Section 12.5 and
Section 12.9, in the event of the occurrence of an event which any Party asserts
constitutes a CHP Indemnity Claim or a Stockholder Indemnity Claim, as
applicable, such Party shall provide the indemnifying Party with prompt notice
of such event and shall otherwise make available to the indemnifying Party all
relevant information which is material to the claim and which is in the
possession of the indemnified Party. If such event involves the claim of any
third party (a "Third Party Claim"), the indemnifying Party shall have the right
to elect to join in the defense, settlement, adjustment or compromise of any
such Third Party Claim, and to employ counsel to assist such indemnifying Party
in connection with the handling of such claim, at the sole expense of the
indemnifying Party, and no such claim shall be settled, adjusted or compromised,
or the defense thereof terminated, without the prior written consent of the
indemnifying Party unless and until the indemnifying Party shall have failed,
after the lapse of a reasonable period of time, but in no event more than 30
days after written notice to it of the Third Party Claim, to join in the
defense, settlement, adjustment or compromise of the same. An indemnified
Party's failure to give timely notice or to furnish the indemnifying Party with
any relevant data and documents in connection with any Third Party Claim shall
not constitute a defense (in part or in whole) to any claim for indemnification
by such Party, except and only to the extent that such failure shall result in
any material prejudice to the indemnifying Party. If so desired by any
indemnifying Party, such Party may elect, at such Party's sole expense, to
assume control of the defense, settlement, adjustment or compromise of any Third
Party Claim, with counsel reasonably acceptable to the indemnified Parties,
insofar as such claim relates to the Liability of the indemnifying Party,
provided that such indemnifying Party shall obtain the written consent of all
indemnified Parties before entering into any settlement, adjustment or
compromise of such claims, or ceasing to defend against such claims, if as a
result thereof, or pursuant thereto, there would be imposed on an indemnified
Party any Liability not covered by the indemnity
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obligations of the indemnifying Parties under this Agreement (including, without
limitation, any injunctive relief or other remedy). In connection with any Third
Party Claim, the indemnified Party, or the indemnifying Party if it has assumed
the defense of such claim pursuant to the preceding sentence, shall diligently
pursue the defense of such Third Party Claim.
12.5 Survival. All representations and warranties contained in or made
pursuant to this Agreement, and the rights of the Parties to seek
indemnification hereunder with respect to such representations and warranties,
shall survive for a period equal to eighteen (18) months after the Closing Date;
provided, however, (a) the representations and warranties contained in Sections
5.2, 6.2, 6.4, 7.3, 7.9, 7.10, 7.11, 7.19, 7.20, 7.21, 7.23 and 7.33, and the
rights of the Parties to seek indemnification hereunder with respect to such
representations and warranties, shall survive until the expiration of the
applicable statute of limitations with respect to the matters covered thereby
and (b) the representations and warranties contained in Sections 6.7 and 6.8
shall not survive the Closing. Except as otherwise provided in the preceding
sentence or the last sentence of this Section 12.5, all covenants and agreements
of the Parties contained in or made pursuant to this Agreement, and the rights
of the Parties to seek indemnification hereunder with respect to such covenants
and agreements (other than Section 9.10, which shall survive indefinitely),
shall survive until the later of (i) eighteen (18) months after the Closing
Date, (ii) sixty (60) days after the expiration of the statute of limitations
applicable to the subject matter of such covenant or agreement, or (iii) sixty
(60) days after the end of the time period expressly set forth in such covenant
or agreement. No indemnification claim hereunder shall be made after expiration
of the applicable survival period, but (A) the expiration of the survival period
with respect to a representation and warranty or covenant and agreement shall
not limit or affect the right of a Party to obtain indemnification hereunder
after any such expiration date with respect to any Claim duly made in accordance
with this Agreement prior to such expiration date, (B) notwithstanding anything
to the contrary contained in this Agreement, CHP and the Surviving Company shall
be entitled to make a CHP Indemnity Claim, and indemnification rights of CHP and
the Surviving Company pursuant to clause (vi) of Section 12.1 with respect to
all matters relating to the Class Action Lawsuit shall survive, until eighteen
(18) months after the entry of a final judgment in such Class Actions Lawsuit
that is not subject to further review, and (C) notwithstanding anything to the
contrary contained in this Agreement, the Indemnifying Stockholders shall be
entitled to make a Stockholder Indemnity Claim of the type described in the
third sentence of Section 12.2, and indemnification rights of the Indemnifying
Stockholders pursuant to Section 12.2 with respect only to such type of
Stockholder Indemnity Claim shall survive, until eighteen (18) months after the
entry of a final judgment in the Class Action Lawsuit that is not subject to
further review.
12.6 Limitations. Notwithstanding the foregoing provisions of this Article
12, subject to the last sentence of this Section 12.6, in no event (i) shall the
Stockholders or any of them have any liability to CHP and/or CHPAC on account of
any CHP Indemnity Claim or for any claim for breach of warranty or for
misrepresentation, or any other claim whatsoever arising under this Agreement or
in connection with the transactions contemplated herein (individually a "Claim"
and collectively, "Claims") or for any Losses directly resulting from Claims
unless, until and only to the extent that the accumulated amount of all Losses
exceeds the amount of $200,000 in the aggregate, nor (ii) shall the individual
liability of any Stockholder on account of Claims and Losses exceed an amount
equal to the sum of the following (the "Stockholder Consideration"): (A) the
amount of cash received by such Stockholder hereunder as Merger
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Consideration in lieu of fractional shares, plus (B) the value of the CHP Common
Shares received by such Stockholder hereunder as Merger Consideration,
calculated based on the Per Share Price, provided, however, that in the case of
XXXX, the amount of Stockholder Consideration received by FARS shall be added to
CREG's Stockholder Consideration. To the extent that any Claim is asserted
against one or more Stockholders, each Stockholder shall be liable only for such
Stockholder's pro rata share based upon the amount of the Stockholder
Consideration received by each such Stockholder (except for XXXX, which will
also be liable for any Claims against FARS). If a Listing has occurred, any
Claim against a Stockholder, including a CHP Indemnity Claim, may be satisfied
by such Stockholder, in such Stockholder's sole discretion, by surrendering to
the claimant(s) CHP Common Shares at a value equal to the average closing price
per share of such shares on the NYSE for the 30-trading day period preceding the
date such CHP Common Shares are surrendered for payment. Notwithstanding the
foregoing, the limitations set forth in this Section 12.6 shall not apply to
Claims or Losses arising as a result of (i) a breach of the representations and
warranties contained in Sections 7.11, 7.31 and 7.33 of this Agreement, (ii) any
breach or non-fulfillment of, or any failure to perform, any of the covenants,
agreements or undertakings of the Stockholders or the Advisor which are
contained in or made pursuant to Sections 8.8, 8.13, 8.15, 9.5, 9.8 and 9.10 of
this Agreement, (iii) Taxes or other amounts described in clauses (iii), (iv) or
(v) of Section 12.1 of this Agreement, except that no Management Stockholder
shall be liable for Taxes or other amounts described in clauses (iii), (iv) or
(v) of Section 12.1 of this Agreement that exceed the Stockholder Consideration
received by such Management Stockholder, and XXXX hereby additionally agrees to
assume and be responsible for the pro rata portion of any indemnity or other
obligation of the Management Stockholders that otherwise would have been
attributable to such Management Stockholders for Taxes or other amounts
described in clauses (iii), (iv) or (v) of Section 12.1 of this Agreement but
for the exception in this clause (iii), or (iv) any and all Liabilities
described in clause (vi) of Section 12.1.
12.7 Exclusive Provisions; No Rescission. Except as set forth in this
Agreement, no Party is making any representation, warranty, covenant or
agreement with respect to the matters contained herein. Anything herein to the
contrary notwithstanding, no breach of any representation, warranty, covenant or
agreement contained herein or in any certificate or other document delivered
pursuant hereto relating to the Merger shall give rise to any right on the part
of any Party, after the consummation of the Merger, to rescind this Agreement or
the transactions contemplated by this Agreement. Following the consummation of
the Merger, the rights of the Parties under the provisions of Articles 12 and
13, Sections 9.8 and 9.10, and in any agreement that is both executed and
delivered by a Party to another Party in connection with the Merger and referred
to in this Agreement, including the Pledge and Security Agreement, shall be the
sole and exclusive remedy available to the Parties with respect to claims,
assertions, events or proceedings arising out of or relating to the Merger,
except (i) for any statutory or common law remedy for fraud and (ii) for any
liability for willful breach by FARS of the representations and warranties
contained in Article 5 of this Agreement, solely as they relate to FARS, and of
the covenants contained in Article 8 of this Agreement, solely as they relate to
FARS. The Parties hereby expressly acknowledge and agree that nothing in this
Agreement is intended by the Parties to affect (a) any directors' and officers'
insurance coverage for named insureds who are or were officers and/or directors
of CHP or the Advisor (or their respective
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Affiliates, to the extent directors and officers of such Affiliates were
included in such insurance coverage) in their respective capacities as officers
and/or directors of CHP or the Advisor (or their respective Affiliates, to the
extent directors and officers of such Affiliates were included in such insurance
coverage) and (b) indemnification agreements between CHP and Persons who are or
were officers and/or directors of CHP in their capacities as such, it being
understood that the obligations of the Indemnifying Stockholders in Sections 9.8
and 9.10 and Article 12 are not obligations incurred by them as either (i)
present or former officers, directors or employees of CHP or (ii) present or
former officers, directors or employees of the Advisor or any of their
Affiliates and thus are not indemnifiable by CHP or any of its present or future
Subsidiaries, including Surviving Company, pursuant to (x) any obligation CHP
may have to indemnify present or former officers, directors or employees of CHP
or (y) any obligation the Advisor may have to indemnify present or former
officers, directors or employees of the Advisor or any of their Affiliates.
12.8 Certain Claims for Indemnification. If and to the extent that any
Stockholder would in its capacity as a former stockholder of the Advisor or
Affiliate of the Advisor prior to the Effective Time have been entitled to seek
directly or indirectly any claim against CHP and/or the Surviving Company for
indemnification under the Advisory Agreements or the charter or bylaws of CHP,
each such Stockholder hereby waives and releases CHP and/or the Surviving
Company from any such potential claim for indemnification.
12.9 Further Cooperation. Prior to taking any action or position, making
any election or filing any document, report, notice or return with respect to
any matter which may result in a CHP Indemnity Claim under Section 12.1(iii) (a
"Proposed Indemnity Action"), CHP shall notify the Representative or its
designee, of the Proposed Indemnity Action, including any relevant data and
documents of CHP supporting the Proposed Indemnity Action. CHP shall consult in
good faith with and permit the Representative a reasonable period of time not to
exceed ten (10) business days to comment on its proposed course of action
regarding such Proposed Indemnity Action prior to taking such action.
ARTICLE 13
REPRESENTATIONS, WARRANTIES AND GUARANTEES OF GUARANTOR
13.1 Representations, Warranties and Covenants. Guarantor hereby
represents, warrants and covenants to CHP and CHPAC that:
(a) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida, and has the full and
unrestricted corporate power and authority to execute and deliver this Agreement
and to carry out the obligations contemplated hereby, (b) this Agreement, when
executed and delivered by Guarantor, will be the legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, (c) the execution, delivery and performance of this Agreement, the
fulfillment of and compliance with the terms and provisions hereof, and the
obligations contemplated hereby by Guarantor do not and will not (i) conflict
with, or constitute a breach or default under, Guarantor's articles or
certificate of incorporation or bylaws or any agreement, contract, commitment,
or instrument to which Guarantor is a party or to which it is bound or subject,
(ii) require the consent, approval or authorization of, or notice, declaration,
filing or registration with, any third party or (iii) conflict with, or violate
any applicable law, and (d) Guarantor has
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not previously granted and will not grant any rights to any third party which
are, nor contract with any third party in any manner which is, inconsistent with
the rights granted herein.
(b) Guarantor owns, and as of the Effective Time will own, all of the
outstanding shares of capital stock of XXXX and has, and will maintain through
the later to occur of (x) the seventh (7th) anniversary of the Closing Date or
(y) the date on which all CHP Indemnity Claims asserted prior to the seventh
(7th) anniversary of the Closing Date have been resolved or otherwise satisfied
in accordance with Section 12.1, a net worth of not less than $75 million.
(c) There are no actions, suits, claims, arbitrations, proceedings or
investigations pending, or threatened against, affecting or involving Guarantor
that would affect Guarantor's ability to perform its obligations and agreements
in this Agreement, and there is no Basis for any such actions, suits, claims,
arbitrations, proceedings or investigations.
13.2 Guarantee.
(a) Guarantor hereby irrevocably, absolutely and unconditionally
guarantees to CHP and the Surviving Company the full and punctual payment and
performance of the obligations of each and every Stockholder pursuant to Section
9.8 and Article 12 of this Agreement (individually, a "Stockholder's
Obligations", and collectively referred to as "Stockholders' Obligations").
Guarantor consents to any and all amendments, modifications, forbearances and
extensions of time of payment and performance of the Stockholders' Obligations
under this Agreement as may be agreed in writing by the Advisor and/or the
Representative and CHP and/or the Surviving Company and to any and all changes
in terms, covenants, and conditions thereof as may be agreed in writing by the
Advisor and/or the Representative and CHP and/or the Surviving Company, it being
acknowledged and agreed by the Parties that, notwithstanding anything to the
contrary contained in this Agreement, (i) Guarantor shall be liable as a
principal with respect to the Stockholders' Obligations and (ii) CHP and the
Surviving Company will not be required to pursue or exhaust any remedies as
against any Stockholder as a condition to enforcing Guarantor's obligations
under this Section 13.2. It is further acknowledged and agreed by the Parties
that, notwithstanding anything to the contrary contained in this Agreement, (A)
Guarantor may be called upon by CHP and/or the Surviving Company to perform any
one or more Stockholders' Obligations in Section 9.8 of this Agreement beginning
at such time as CHP and/or the Surviving Company delivers to the applicable
Stockholder or Stockholders a written notice to the effect that such Stockholder
or Stockholders are required to reimburse or pay to CHP and/or the Surviving
Company or otherwise indemnify CHP and/or the Surviving Company for, any amount
pursuant to Section 9.8 of this Agreement and (B) Guarantor may be called upon
by CHP and/or the Surviving Company to perform any one or more Stockholders'
Obligations in Article 12 of this Agreement beginning on the thirtieth (30th)
day following the date on which CHP and/or the Surviving Company delivers to the
applicable Stockholder or Stockholders written notice of a CHP Indemnity Claim
in accordance with Section 12.4 of this Agreement, provided, however, that CHP
and/or the Surviving Company shall not be required to provide any further notice
or notices pursuant to Section 12.4 of this Agreement or otherwise in connection
with making any subsequent calls upon the Guarantor to perform such
Stockholders' Obligations relating to any CHP Indemnity Claim that previously
has been the subject of any written notice and (ii) CHP and/or the Surviving
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Company, as the case may be, shall simultaneously provide to Guarantor copies of
all notices delivered to a Stockholder referred to in clauses (A) or (B) of this
sentence. In the event that Guarantor is required to pay any amount pursuant to
this Section 13.2(a), Guarantor shall have a right of subrogation and
contribution as to each Stockholder (other than FARS) for the Stockholder's pro
rata share (determined pursuant to Section 12.6 of this Agreement) of such
amount. Furthermore, neither CHP nor Surviving Company nor their respective
successors shall take any action to impair or diminish such right to subrogation
or contribution against or rights to implead such Stockholder.
(b) Guarantor agrees that the obligations of Guarantor as a guarantor
shall not be impaired, modified, changed, released, or limited in any manner
whatsoever by any impairment, modification, change, release or limitation of
liability of any Stockholder resulting from the operation of any present or
future provision of the federal bankruptcy laws or other successor or similar
statute, or from the decision of any court applying, interpreting or enforcing
such laws. Without limiting the preceding sentence, it is expressly understood
and agreed among the Parties and Guarantor that Guarantor's obligation to CHP
and the Surviving Company will continue notwithstanding any Stockholder's
bankruptcy.
(c) Guarantor agrees that in the event that CHP and/or the Surviving
Company demands in writing that Guarantor fulfill its obligations under this
Article 13 and Guarantor does not comply, then if CHP and/or the Surviving
Company retains or engages an attorney or attorneys to enforce this guarantee in
a court proceeding and CHP and/or the Surviving Company prevails in enforcement
of this guarantee in such court proceeding, Guarantor will reimburse CHP and/or
the Surviving Company for all reasonable expenses incurred by CHP and/or the
Surviving Company, including reasonable attorneys' fees and disbursements.
(d) Guarantor agrees that, through the later to occur of (x) the
seventh (7th) anniversary of the Closing Date or (y) the date on which all CHP
Indemnity Claims asserted prior to the seventh (7th) anniversary of the Closing
Date have been resolved or otherwise satisfied in accordance with Section 12.1,
it will not enter into any transaction, including a merger, consolidation, sale
of all or substantially all of its assets, or similar transaction, unless the
obligations of the Guarantor pursuant to this Article 13 are expressly assumed
by the acquiring corporation or entity.
(e) Guarantor waives any defense arising by reason of any disability
or other defense of any Stockholder, or the cessation from any cause whatsoever
of the liability of such Stockholder for any Stockholders' Obligations, except
for a voluntary release of the Stockholders' Obligations by CHP, Surviving
Company, or their respective successors, arising by operation of law or any
bankruptcy, insolvency or debtor relief proceeding, or from any other cause,
including any such defense or cessation of liability arising from or as a result
of any claim of fraudulent transfer or preference, or any claim that Guarantor's
obligations exceed or are more burdensome than the Stockholders' Obligations.
Guarantor waives any defense arising by reason of any statute of limitations
affecting any Stockholders' Obligations if a Stockholder was called upon to
perform the applicable Stockholders' Obligations prior to the expiration of such
statute of limitations. Until the Stockholders' Obligations are satisfied in
full, Guarantor waives all rights and defenses arising out of an election of
remedies by CHP or the Surviving Company,
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even though that election of remedies, such as a nonjudicial foreclosure with
respect to security for the Guaranteed Obligations, has eliminated Guarantor's
rights of subrogation and reimbursement against any Stockholder and all rights
or defenses the Guarantor may have by reason of protection afforded to a
Stockholder with respect to such Stockholders' Obligations pursuant to the
antideficiency laws of any jurisdiction limiting or discharging such
Stockholders' Obligations.
(f) Guarantor waives any right to enforce any remedy which any
Stockholder now has or may hereafter have against CHP or the Surviving Company
and waives any benefit of and any right to participate in any security now or
hereafter held by CHP or the Surviving Company to secure any Stockholders'
Obligations or Guarantor's guarantee thereof.
(g) Guarantor waives any right or defense it may have at law or
equity, including a fair market value hearing or action to determine a
deficiency judgment after a foreclosure in connection with the payment and
performance of its obligations pursuant to this Article 13. Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
guarantee and of the existence, creation, or incurring of new or additional
Stockholders' Obligations.
(h) If any payment or transfer of any interest in property by a
Stockholder to CHP or the Surviving Company in fulfillment of any Stockholder's
Obligation is rescinded or must at any time (including after the return or
cancellation of this guarantee) be returned, in whole or in part, by CHP or the
Surviving Company to such Stockholder or any other Person, upon the insolvency,
bankruptcy or reorganization of such Stockholder or otherwise, this guarantee
shall be reinstated with respect to any such payment or transfer, regardless of
any such prior return or cancellation.
13.3 Additional Guarantor Covenants. Through the later to occur of (x) the
seventh (7th) anniversary of the Closing Date or (y) the date on which all CHP
Indemnity Claims asserted prior to the seventh (7th) anniversary of the Closing
Date have been resolved or otherwise satisfied in accordance with Section 12.1,
Guarantor will:
(a) (i) preserve and maintain its existence as a corporation and all
rights, privileges and franchises necessary and desirable in the normal conduct
of its business, in the operation and ownership of its properties and assets,
and in the performance of its obligations hereunder and not dissolve or
otherwise discontinue its existence or operations and (ii) take no action or
suffer any actions to be taken by others which would alter, change or destroy
its status as a corporation or would reasonably be expected to adversely affect
its ability to perform its obligations hereunder;
(b) comply with the requirements of all applicable laws, rules, and
regulations (including those related to Taxes), non-compliance with which would
have a Material Adverse Effect on Guarantor's business, properties or condition,
financial or otherwise, or would reasonably be expected to have a Material
Adverse Effect on the Guarantor's ability to perform its obligations hereunder;
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(c) maintain insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which it operates;
(d) pay when due all of its obligations and liabilities, except where
the same are being contested in good faith by appropriate proceedings diligently
prosecuted and appropriate reserves or other provision, if any, as shall be
required in conformity with GAAP shall have been made therefor; and
(e) furnish to CHP and the Surviving Company:
(i) as soon as possible, and in any event within five (5)
business days, after any officer of Guarantor obtains Knowledge of any condition
or event that constitutes a breach of or default under any covenant in this
Article 13, or any event, development or occurrence reasonably likely to have a
Material Adverse Effect continuing on the date of such statement, a statement of
the chief executive officer or person holding a similar position of Guarantor
setting forth details of such breach or default, or any such event, development
or occurrence and the action that Guarantor has taken and proposes to take with
respect thereto; and
(ii) no later than sixty (60) days after the end of each of
Guarantor's fiscal year, an officer's certificate of Guarantor stating that the
signing officer has reviewed the terms of Article 13 of this Agreement and has
made, or caused to be made under his or her supervision, a review in reasonable
detail of the transactions and condition of Guarantor and its Subsidiaries
during the fiscal year and that such review has not disclosed the existence
during or at the end of such fiscal year, and that the signing officer does not
have Knowledge of the existence as at the date of such officer's certificate, of
any condition or event that constitutes a breach or default of this Article 13,
or, if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action Guarantor has taken, is taking and
proposes to take with respect thereto.
ARTICLE 14
MISCELLANEOUS
14.1 Limitation on Obligations of FARS. Notwithstanding anything in this
Agreement to the contrary, FARS shall not have any liabilities or obligations
pursuant to this Agreement as a Stockholder or otherwise as a Party to this
Agreement, including pursuant to Article 8 of this Agreement, except (i) as set
forth in Article 4 of this Agreement in connection with the procedures for the
surrender of any Advisor Common Share Certificates in exchange for the payment
of the Merger Consideration, (ii) any liability for the willful breach by FARS
of the representations and warranties contained in Article 5 of this Agreement,
solely as they relate to FARS (it being acknowledged and agreed by the Parties
that, for the avoidance of doubt and notwithstanding anything to the contrary
contained in this Agreement, the representations and warranties of FARS in
Article 5 relate only to matters respecting or concerning FARS and not any other
Stockholder), and (iii) any liability for the willful breach by FARS of the
covenants of FARS set forth in the immediately succeeding sentence, as described
below. Notwithstanding
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anything in this Agreement to the contrary, FARS (x) shall not take any action,
or omit to take any action, that would be reasonably likely to adversely affect
the ability of the Advisor, CHP or CHPAC to consummate the Merger on the terms
set forth in this Agreement, and (y) shall reasonably cooperate with the other
Parties to this Agreement in order to effectuate the consummation of the Merger
on the terms set forth in this Agreement; it being understood and agreed that
FARS shall not have any liability or obligation with respect to the covenants
contained in this sentence except to the extent of a willful breach thereof by
FARS. The Parties acknowledge that FARS would not have agreed to enter into this
Agreement without the limitations on its liabilities and obligations as a Party
to this Agreement specified in this Section 14.1.
14.2 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of CHP
and the Representative; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law (in which
case the disclosing Party will use its commercially reasonable efforts to
consult with the other Parties prior to making the disclosure).
14.3 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
14.4 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof, including the Initial Merger Agreement.
14.5 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
rights, interests, or obligations hereunder without the prior written approval
of CHP and the Representative; provided, however, that CHP may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases CHP nonetheless shall remain responsible
for the performance of all of its obligations hereunder).
14.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
14.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.8 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then
effective two business days after) it is sent by
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registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Advisor, the Stockholders or Guarantor:
c/o Xxxxx X. Xxxxxx, Xx.
CNL Center II at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
With copy to:
Lowndes, Drosdick, Doster, Xxxxxx & Xxxx, P.A.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
Xxxxxx & Xxxxxx LLP
000 Xxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
If to FARS:
Five Arrows Realty Securities II, L.L.C.
c/o Xxxx X. XxXxxx, President
Xxxxxxx X. Xxxxxx, Managing Director
Rothschild Realty Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
With copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx, Esq.
Telecopy: (000) 000-0000
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If to CHP, CHPAC or Former Merger Sub:
Xxxxxx X. Xxxxxxxxx, III
Chief Executive Officer
CNL Hotels & Resorts, Inc.
CNL Center II at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
With copy to:
Special Committee of CNL Hotels & Resorts, Inc.
CNL Center II at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Chairman of the Special Committee
Telecopy: (000) 000-0000
Xxxxxxxxx Traurig, LLP
The MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
Xxxxx & Xxxxxxx L.L.P.
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: J. Xxxxxx Xxxxxxx, Xx., Esq.
Telecopy: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
14.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW
YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK (EXCEPT FOR THE RELATIVE
RIGHTS AND OBLIGATIONS OF THE STOCKHOLDERS OF CHPAC AND
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THE ADVISOR, WHICH WILL BE GOVERNED BY THE CORPORATE LAWS OF THE STATES OF
FLORIDA).
14.10 Amendments and Waivers. This Agreement may be amended by CHP and the
Representative at any time before or after receipt of the CHP Stockholder
Approval; provided, however, that (a) after receipt of the CHP Stockholder
Approval, there shall be made no amendment that by applicable law requires
further approval by the stockholders of CHP without the further approval of such
stockholders, it being acknowledged and agreed that, following the receipt of
CHP Stockholder Approval, if the parties agree to amend this Agreement to reduce
the amount of the Merger Consideration, no approval of the stockholders of CHP
shall be required for such amendment to be effected, (b) no amendment shall be
made to this Agreement after the Effective Time and (c) except as provided above
no amendment of this Agreement shall require the approval of the stockholders of
CHP. This Agreement may not be amended except by an instrument in writing signed
by CHP and the Representative. Any amendment that adversely affects the rights
and obligations of FARS pursuant to this Agreement must also be approved in
writing by FARS. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent occurrence.
14.11 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
14.12 Expenses. Each of the Parties will bear his, her or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby; it being understood and
agreed that the expenses of Xxxx Xxxxx as set forth in Section 7.26 and of
counsel to the Advisor will be paid by the Advisor prior to the Closing
(consistent with Section 8.15 above).
14.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring 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. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. 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.
14.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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14.15 Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in Section 13.15
below), in addition to any other remedy to which they may be entitled, at law or
in equity.
14.16 Submission to Jurisdiction. EACH OF THE PARTIES SUBMITS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF NEW YORK, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES
THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
CNL HOTELS & RESORTS, INC.
By: /s/ Xxxxxxxx X. XxXxxxxx
------------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief General Counsel and
Corporate Secretary
CNL HOTELS & RESORTS ACQUISITION, LLC
By: /s/ Xxxxxxxx X. XxXxxxxx
------------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief General Counsel and
Corporate Secretary
CNL HOSPITALITY PROPERTIES ACQUISITION
CORP.
By: /s/ Xxxxxxxx X. XxXxxxxx
------------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief General Counsel and
Corporate Secretary
ADVISOR:
CNL HOSPITALITY CORP.
By /s/ Xxxxx X. Xxxxxx, Xx.
-------------------------------------
Name: Xxxxx X. Xxxxxx, Xx.
Title: Chairman
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STOCKHOLDERS:
CNL REAL ESTATE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Director and Vice President
/s/ Xxxxx X. Xxxxxx, Xx.
----------------------------------------
Xxxxx X. Xxxxxx, Xx.
/s/ Xxxxxx X.Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
/s/ C. Xxxxx Xxxxxxxxxx
----------------------------------------
C. Xxxxx Xxxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx, III
----------------------------------------
Xxxxxx X. Xxxxxxxxx, III
/s/ Xxxx X. Xxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxx
/s/ Xxxxx A. N. Bloom
----------------------------------------
Xxxxx A.N. Xxxxx
/s/ Xxxxxx Xxxxxxx
----------------------------------------
Xxxxxx Xxxxxxx
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FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Manager
GUARANTOR:
CNL FINANCIAL GROUP, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
------------------------------------
Name: Xxxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
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