1
EXECUTION COPY
EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
among
RED LION INNS LIMITED PARTNERSHIP,
RED LION PROPERTIES, INC.,
RED LION INNS OPERATING L.P.,
XXXXXX HOTEL PROPERTIES, L.P.,
XXXXXX LODGING COMPANY,
XXXXXX ACQUISITION PARTNERSHIP, L.P.,
XXXXXX ACQUISITION CORPORATION I, INC.
and
XXXXXX ACQUISITION CORPORATION II, INC.
__________________
December 30, 1997
__________________
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2
TABLE OF CONTENTS
Page
ARTICLE 1
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 Closing; Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Certificate and Agreement of Limited Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Contribution Following the Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2
CONVERSION OF PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Conversion of Company Units and General Partnership Interest . . . . . . . . . . . . . . . . . . . . . 5
2.2 Treasury Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Conversion of Interests in Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Payment of GP Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Payment of Unit Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Special Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, THE GENERAL PARTNER
AND THE SUBSIDIARY PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Authorized and Outstanding Company Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Authority; Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.5 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.6 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.8 Ownership of Certain Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.9 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.10 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.11 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.12 Condemnation Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.13 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.14 Bankruptcy Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.16 Finders and Investment Bankers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.17 Opinions of Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.18 Vote or Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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3.19 Investigation by the Company, the General Partner and the Subsidiary Partnership . . . . . . . . . . . 27
3.20 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.21 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.22 Work Stoppages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.23 Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.24 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.25 Employees and Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.26 No Ownership of Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.27 Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.28 General Partner Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND THE OPERATING PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 Authorized and Outstanding Capital Shares of the Parent . . . . . . . . . . . . . . . . . . . . . . . 34
4.3 Authority; Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.4 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.5 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.6 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.8 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.9 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.10 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.11 Finders and Investment Bankers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.12 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.13 Investigation by the Parent and the Operating Partnership . . . . . . . . . . . . . . . . . . . . . . 44
4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.15 Condemnation Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.16 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.17 Bankruptcy Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.18 Vote or Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.19 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.20 Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.21 Newly Formed Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 5
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.2 Conduct of Business of the Parent and the Operating Partnership . . . . . . . . . . . . . . . . . . . 53
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5.3 Proxy Statement; Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.4 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.5 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.6 Reasonable Efforts; Additional Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.7 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.8 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.9 Indemnification; Directors and Officers Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.10 Parent Shares Issued Free and Clear of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.11 Satisfaction of Certain Liabilities; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.12 Tax Administration; Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5.13 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5.14 Allocation Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
5.15 Amendment of the Company and the Subsidiary Partnership Agreements . . . . . . . . . . . . . . . . . . . 73
5.16 NYSE Listing of the Parent Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.17 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.18 Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.19 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 6
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.1 Conditions to Each Party's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.2 Conditions to Obligations of the Parent, the Operating Partnership, Newco I, Newco II and Merger Sub . . 77
6.3 Conditions to Obligation of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE 7
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.2 Procedure for and Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE 8
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
8.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
8.2 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.3 Waiver of Compliance; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.8 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
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8.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.12 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.13 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
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Exhibits:
Exhibit A Assignment Agreement
Exhibit B New Management Agreement
Exhibit C Operating Lease
Exhibit D Operating Lease Ancillary Agreement
Exhibit E Owner Agreement
Exhibit F Termination Agreement
Schedules:
Schedule I Allocation Schedule
Schedule II Due Diligence Expenses
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7
Index of Defined Terms
in
Agreement and Plan of Merger
Term Section
---- -------
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5
affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(a)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Allocation Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Alternative Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
Assignment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital (c)
Base Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
BMCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
Break-Up Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
Break-Up Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
Break-Up Fee Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.2
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.1
Company Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12
Company Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
Company 10-K's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
Company 10-Q's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
Company SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
Company Unitholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11
Company Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Constituent Partnerships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4
DRULPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital (a)
Due Diligence Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.25
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.25
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.1
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.1
Filed Company SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
Filed Parent SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7
General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
vi
8
Term Section
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
GP Assignee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital(c)
GP Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
GP Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Ground Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13
Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8.2
Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9.1
Intercompany Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(b)
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(c)
Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4
Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital (e)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8.1
Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital (d)
Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital (d)
Manager Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.25
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(d)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital (a)
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Newco I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Newco II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
New Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(e)
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.16
OGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Omaha Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21
Operating Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(f)
Operating Lease Ancillary Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(g)
Operating Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
Owner Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(h)
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Parent Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.2
Parent Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Parent Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
Parent Long Term Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(i)
Parent Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Parent Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.15
Parent Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11
Parent Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Parent 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6
vii
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Term Section
Parent 10-Q's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6
Parent SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(j)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Qualifying Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
REIT Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11
Releasee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.18
Releasor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.18
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Share Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Special Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital (a)
Special Committee Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
Special Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Springfield Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(k)
Subsidiary Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital (c)
Subsidiary Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Surviving Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Takeover Statute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.27
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
Termination Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(l)
Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(m)
Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12
Unit Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Unitholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.2
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 30, 1997
(the "AGREEMENT") among Red Lion Inns Limited Partnership, a Delaware limited
partnership (the "COMPANY"), Red Lion Inns Operating, L.P., a Delaware limited
partnership which owns title to the Hotels (as defined below) and in which the
Company owns a 99% limited partnership interest (the "SUBSIDIARY PARTNERSHIP"),
Red Lion Properties, Inc., a Delaware corporation and the general partner of
each of the Company and the Subsidiary Partnership (the "GENERAL PARTNER"),
Xxxxxx Hotel Properties, L.P., an Ohio limited partnership (the "OPERATING
PARTNERSHIP"), Xxxxxx Lodging Company, an Ohio corporation and the general
partner of the Operating Partnership (the "PARENT"), Xxxxxx Acquisition
Corporation I, Inc., an Ohio corporation and wholly-owned subsidiary of the
Parent ("NEWCO I"), Xxxxxx Acquisition Corporation II, Inc., an Ohio
corporation and wholly-owned subsidiary of the Parent ("NEWCO II"), and Xxxxxx
Acquisition Partnership, L.P., a Delaware limited partnership in which Newco I
owns a 1% general partnership interest and Newco II owns a 99% limited
partnership interest ("MERGER SUB"). Merger Sub and the Company are sometimes
collectively referred to herein as the "CONSTITUENT PARTNERSHIPS."
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R E C I T A L S :
a. The Board of Directors of the Parent in its
individual capacity, and as general partner of the Operating Partnership, the
Board of Directors of Newco I in its individual capacity and as general partner
of Merger Sub, the Board of Directors of Newco II in its individual capacity
and as limited partner of Merger Sub, the Board of Directors of the General
Partner in its individual capacity and the Board of Directors of the General
Partner, together with the Special Committee thereof (the "SPECIAL COMMITTEE"),
in the General Partner's capacity as general partner of each of the Company and
the Subsidiary Partnership and on behalf of the Company in the Company's
capacity as limited partner of the Subsidiary Partnership, have each approved
this Agreement pursuant to which, among other things, Merger Sub will be merged
with and into the Company (the "MERGER") on the terms and conditions contained
herein and in accordance with the Delaware Revised Uniform Limited Partnership
Act (the "DRULPA").
b. The parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and to
prescribe various conditions to the Merger.
c. Pursuant to a Partnership Interest Assignment
Agreement (the "ASSIGNMENT AGREEMENT") of even date herewith among the General
Partner, the Parent, the Operating Partnership and West Doughboy LLC, an Ohio
limited liability company wholly owned by the Operating Partnership (the "GP
ASSIGNEE"), a copy of
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which Assignment Agreement is annexed hereto as EXHIBIT A, simultaneously with
the consummation of the Merger and the other transactions contemplated by this
Agreement to occur on the Closing Date (as defined below), the General Partner
shall assign to the GP Assignee (the "SUBSIDIARY ASSIGNMENT"), in exchange for
the consideration and on the terms and conditions specified in the Assignment
Agreement, the General Partner's 1% interest as general partner in the
Subsidiary Partnership.
d. Red Lion Hotels, Inc. (the "MANAGER") has consented
to this Agreement, the Merger and the other transactions contemplated hereby
and, subject to the provisions of the Notice and Waiver of even date herewith
executed and delivered by the Manager (a copy of which has previously been
delivered to the Parent or the Operating Partnership), has waived its rights
set forth in Section 9.3(a) of the Management Agreement, dated April 6, 1987,
between the Subsidiary Partnership and the Manager, as amended (the "MANAGEMENT
AGREEMENT").
e. Westboy LLC, an Ohio limited liability company (the
"LESSEE"), has executed and delivered to the General Partner a letter of even
date herewith pursuant to which the Lessee has agreed to enter into the
Operating Lease (as defined below), the Termination Agreement (as defined
below), the New Management Agreement (as defined below) and the Owner Agreement
(as defined below), in each case not later than December 31, 1997, upon the
execution and delivery of such agreements by the other parties thereto.
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NOW THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined below) and in
accordance with the DRULPA, Merger Sub shall be merged with and into the
Company which shall be the surviving partnership in the Merger (the "SURVIVING
PARTNERSHIP"). At the Effective Time, the separate existence of Merger Sub
shall cease and the other effects of the Merger shall be as set forth in
Section 17-211 of the DRULPA.
1.2 Closing; Effective Time. Subject to the provisions
of Article 6, the closing of the Merger (the "CLOSING") shall take place in New
York City at the offices of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, as soon
as practicable but in no event later than 10:00 a.m. New York City time on the
first business day after the date on which each of the conditions set forth in
Article 6 has been satisfied or waived by the party or parties entitled to the
benefit of such conditions, or at such other place, at such other time or on
such other date as the Parent and the Operating Partnership, on the one hand,
and the General Partner and the Company, on the other hand, may mutually agree.
The date on which the Closing actually occurs is hereinafter referred to as the
"CLOSING DATE." At the Closing, the parties hereto shall cause a certificate
of
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merger (the "CERTIFICATE OF MERGER") to be executed and filed with the
Secretary of State of the State of Delaware in accordance with the DRULPA. The
Merger shall become effective as of the date and time (the "EFFECTIVE TIME") of
such filings or at such other time as may be specified in the Certificate of
Merger.
1.3 Certificate and Agreement of Limited Partnership.
The agreement of limited partnership and the certificate of limited partnership
of the Company, as in effect immediately prior to the Effective Time, shall
become, from and after the Effective Time, the agreement of limited partnership
and the certificate of limited partnership of the Surviving Partnership, until
thereafter altered, amended or repealed as provided therein and in accordance
with applicable law.
1.4 Contribution Following the Effective Time.
Immediately after the Effective Time, each of Newco I and Newco II intend to
contribute to the Operating Partnership all of their respective partnership
interests in the Surviving Partnership in exchange for partnership interests in
the Operating Partnership.
ARTICLE 2
CONVERSION OF PARTNERSHIP INTERESTS
2.1 Conversion of Company Units and General Partnership
Interest. The partnership units of the Company, representing limited
partnership interests in the Company (collectively, the "COMPANY UNITS"),
issued and outstanding immediately prior to the Effective Time (other than
those held by the Company or the Subsidiary Partnership) shall, at the
Effective Time, by virtue of the Merger and without any
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action on the part of the holders thereof, be converted into the right to
receive a pro rata portion per Company Unit of the Unit Merger Consideration
(as defined below). The General Partner's general partnership interest in the
Company (the "GP INTEREST") shall, at the Effective Time, by virtue of the
Merger and without any action of the General Partner be converted into the
right to receive the GP Merger Consideration (as defined below). "UNIT MERGER
CONSIDERATION" means that portion of the aggregate Cash Consideration (as
defined below) and that portion of the aggregate Share Consideration (as
defined below) allocated to the Unitholders (as defined below) pursuant to the
allocation schedule attached to this Agreement as Schedule I (the "ALLOCATION
SCHEDULE"). "GP MERGER CONSIDERATION" means that portion of the aggregate Cash
Consideration and that portion of the aggregate Share Consideration allocated
to the General Partner pursuant to the Allocation Schedule. "CASH
CONSIDERATION" means an amount in cash equal to $35,305,000 minus the amount of
cash required to be paid to the General Partner, in its capacity as general
partner of the Subsidiary Partnership, pursuant to the Assignment Agreement.
"SHARE CONSIDERATION" means that number of fully paid and nonassessable common
shares, without par value, of the Parent ("PARENT SHARES") equal to 3,110,048
minus the number of Parent Shares required to be issued to the General Partner,
in its capacity as general partner of the Subsidiary Partnership, under the
Assignment Agreement. "MERGER CONSIDERATION" means the Cash Consideration plus
the Share Consideration. Notwithstanding the foregoing, if between the date of
this Agreement and the Effective Time the outstanding Company Units or Parent
Shares shall have been changed into a
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different number of units or a different class or the percentage interest
represented by the GP Interest shall have changed, by reason of any
distribution, dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of Company Units or other partnership interests in the
Company or Parent Shares, the Merger Consideration shall be correspondingly
adjusted to reflect such distribution, dividend, subdivision, reclassification,
recapitalization, split, combination or exchange.
2.2 Treasury Units. Each Company Unit held by the
Company or the Subsidiary Partnership immediately prior to the Effective Time,
if any, shall, by virtue of the Merger, automatically be canceled and retired
and cease to exist and no consideration shall be delivered in exchange
therefor.
2.3 Conversion of Interests in Merger Sub. Newco I's 1%
general partnership interest in Merger Sub, by virtue of the Merger and without
any action on the part of Newco I, shall be converted into a 1% general
partnership interest in the Surviving Partnership and Newco II's 99% limited
partnership interest in Merger Sub, by virtue of the Merger and without any
action on the part of Newco II, shall be converted into a 99% limited
partnership interest in the Surviving Partnership.
2.4 Payment of GP Merger Consideration. Upon the
Effective Time, the Parent shall deliver to the General Partner (i) a
certificate representing the number of whole Parent Shares constituting the
common share portion of the GP Merger Consideration (as determined pursuant to
the Allocation Schedule), (ii) a payment of cash, in immediately available
funds, constituting the cash portion of the GP Merger Consideration (as
determined pursuant to the Allocation Schedule) and (iii) an amount
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of cash, in immediately available funds, sufficient to make the cash payment in
respect of fractional Parent Shares otherwise issuable to the General Partner,
as contemplated by Section 2.7.
2.5 Payment of Unit Merger Consideration.
2.5.1 Prior to the Closing Date, the Parent shall
appoint National City Bank or another agent mutually acceptable to the Parent
and the Company to act as exchange agent (the "EXCHANGE AGENT") for the Merger.
At the Effective Time, the Parent shall deposit, or cause to be deposited, with
the Exchange Agent (i) certificates evidencing that number of Parent Shares
constituting the Share Consideration portion of the Unit Merger Consideration
(as determined pursuant to the Allocation Schedule), (ii) cash in the aggregate
amount required to make the cash payments constituting the Cash Consideration
portion of the Unit Merger Consideration (as determined pursuant to the
Allocation Schedule), such aggregate sum being referred to as the "EXCHANGE
FUND," and (iii) an amount of cash sufficient to enable the Exchange Agent to
make the cash payments in respect of fractional Parent Shares otherwise
issuable to Unitholders, as contemplated by Section 2.7.
2.5.2 As soon as reasonably practicable following
the Closing Date, the Parent shall instruct the Exchange Agent to mail to each
holder (each a "UNITHOLDER") of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Company Units
(collectively, the "CERTIFICATES"), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of
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the Certificates to the Exchange Agent and shall be in such form and have such
other provisions as the Parent may reasonably specify) and (ii) instructions
for effecting the surrender of the Certificates in exchange for certificates
representing the Share Consideration portion of the Unit Merger Consideration
and an amount in cash representing the Cash Consideration portion of the Unit
Merger Consideration.
2.5.3 After the Effective Time, each Unitholder
shall surrender and deliver its Certificates to the Exchange Agent together
with a duly completed and executed transmittal letter. Upon such surrender and
delivery, each such Unitholder shall receive (i) a certificate representing the
number of whole Parent Shares into which such Unitholder's Company Units have
been converted pursuant to Section 2.1, (ii) a payment of cash constituting the
portion of the Cash Consideration into which such Unitholder's Company Units
have been converted pursuant to Section 2.1 and (iii) a payment of cash in lieu
of any fractional Parent Share otherwise issuable to the Unitholder, as
provided in Section 2.7. No interest will be paid or accrued on the cash
payable upon the surrender of the Certificates. If the payment is to be made
to a person other than the person in whose name a Certificate surrendered is
registered, it shall be a condition of payment that (a) the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and (b) the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or establish to the satisfaction of the
Parent that such tax has been paid or is not applicable. Until so surrendered
and exchanged, each outstanding Certificate after the Effective Time shall
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be deemed for all purposes to evidence the right to receive the Unit Merger
Consideration and the other cash payments described in this Section 2.5.3. No
dividends with respect to Parent Shares with a record date after the Effective
Time shall be paid to the holder of any Certificate with respect to the Parent
Shares represented thereby and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.7, in each case until
the surrender of such Certificate in accordance with this Article 2.
2.5.4 After the Effective Time, no transfer of
Company Units shall be made, other than transfers of Company Units that have
occurred prior to the Effective Time. In the event that, after the Effective
Time, Certificates are presented to the Surviving Partnership, they shall be
canceled and exchanged for the Unit Merger Consideration, the Special
Distribution (as defined below) and the other cash consideration described in
Section 2.5.3.
2.5.5 Any Parent Shares or cash deposited with the
Exchange Agent pursuant to Section 2.5.1 which remain undistributed to the
former Unitholders for one year after the Effective Time shall be delivered to
the Parent, upon demand, and any former Unitholders of the Company who have not
theretofore complied with this Article 2 shall thereafter look only to the
Parent for payment of their claims for any portion of the Unit Merger
Consideration, any unpaid Special Distribution and any dividends, distributions
or other payments with respect thereto.
2.5.6 None of the General Partner, the Surviving
Partnership, the Parent, the Subsidiary Partnership, the Operating Partnership,
Newco I, Newco II
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and the Exchange Agent shall be liable to any person in respect of any Parent
Shares comprising the Unit Merger Consideration or any cash payable pursuant to
this Article 2 delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
2.6 Special Distribution. Immediately prior to the
Effective Time, the Company shall make a distribution described in this Section
2.6 (the "SPECIAL DISTRIBUTION") to its Unitholders and to the General Partner,
the record date for which shall be the close of business on the last business
day prior to the Effective Time. The Special Distribution shall have two
components. The first component shall be equal to the amount of any
distribution with respect to the Company Units and the GP Interest, calculated
in accordance with the Company's most recent quarterly distribution rates for
each and not yet paid by the Company in respect of each full fiscal quarter
ended prior to the Closing Date. The second component shall be calculated and
payable for any period of less than a full calendar quarter ending on the
Closing Date. This component shall equal the sum of (a) the difference between
(i) the Company's most recent quarterly distribution rates per Company Unit and
with respect to the G.P. Interest and (ii) the Parent's most recent quarterly
dividend rate per Parent Share, such difference multiplied by the number of
Parent Shares constituting the Share Consideration, plus (b) an amount payable
with respect to the Company Units and the GP Interest calculated in accordance
with the Company's most recent quarterly distribution rates for each and
multiplied by 30%, and such sum shall be further multiplied by the number of
days elapsed from the first day of such calendar quarter to
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the Closing Date and divided by 90. The amount of the second component shall
be allocable between the General Partner and the Unitholders in the same
percentage that the GP Merger Consideration bears to the Unit Merger
Consideration. The portion of the Special Distribution payable to the
Unitholders shall be paid by the Company immediately prior to the Effective
Time. The portion of the Special Distribution payable to the General Partner
shall be paid by the Company to the General Partner immediately prior to the
Effective Time. To the extent that the Company does not have sufficient funds
available to make the Special Distribution, the General Partner shall lend to
the Company an amount of cash, in immediately available funds, necessary to
make the Special Distribution as described in this Section 2.6, at an interest
rate not to exceed the then applicable interest rate under the Company Credit
Facility (as defined below) without any other fees and charges and any such
loan shall be repaid in accordance with Section 5.11.
2.7 Fractional Shares. No fractional Parent Shares shall
be issued in the Merger and fractional shares shall not entitle the owner
thereof to vote or to any rights of a shareholder of the Parent. In lieu of
any fractional Parent Shares that a Unitholder would otherwise be entitled to
receive as a result of the Merger such fractional Parent Shares shall be
aggregated and if a fractional Parent Share results from such aggregation, such
Unitholder shall receive an amount in cash determined by multiplying $25.63 by
the fraction of a Parent Share which such Unitholder would otherwise have been
entitled to by virtue of the Merger. In lieu of any fractional Parent Shares
that the General Partner would otherwise be entitled to receive as a result
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of the Merger, the General Partner shall receive an amount in cash determined
by multiplying $25.63 by the fraction of a Parent Share which the General
Partner would otherwise have been entitled to by virtue of the Merger.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, THE GENERAL PARTNER
AND THE SUBSIDIARY PARTNERSHIP
Each of the Company, the General Partner and the Subsidiary
Partnership represents and warrants to the Parent, the Operating Partnership,
Newco I, Newco II and Merger Sub, as follows:
3.1 Existence and Power. Each of the Company, the
General Partner and the Subsidiary Partnership is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Each of the Company, the General Partner and the Subsidiary Partnership is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by the Company or the
Subsidiary Partnership or the nature of the business conducted by the Company
or the Subsidiary Partnership makes such qualification or licensing necessary,
except for such failures to be so duly qualified or licensed and in good
standing that, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect (as defined below) with respect
to the Company. The Company has previously
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delivered or made available to the Parent correct and complete copies of the
agreement of limited partnership and certificate of limited partnership, as
currently in effect, of each of the Company and the Subsidiary Partnership, and
of the certificate of incorporation and bylaws of the General Partner, as
currently in effect. Section 3.1 to the Company Disclosure Letter (as defined
below) sets forth each subsidiary of the Company and of the Subsidiary
Partnership and the ownership interest therein of each of the Company and the
Subsidiary Partnership. Except for the partnership interests in such
subsidiaries, neither the Company nor the Subsidiary Partnership owns, directly
or indirectly, any capital stock, partnership interest or other equity
ownership interest in any person.
3.2 Authorized and Outstanding Company Units. The
Company is authorized to issue 4,940,000 Company Units. As of the date of this
Agreement, 4,133,500 Company Units are issued and outstanding, which represent
all of the limited partnership interests in the Company other than those held
by the Company or the Subsidiary Partnership. As of the date of this
Agreement, the GP Interest is the only outstanding general partnership interest
in the Company. As of the date of this Agreement, except as set forth in this
Section 3.2, no Company Units or other general or limited partnership interests
or voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding Company Units are duly authorized, validly
issued, fully paid and, subject to the DRULPA, not subject to preemptive
rights. The GP Interest is duly authorized, validly issued and, subject to the
DRULPA, not subject to preemptive rights. There are no bonds, debentures,
notes
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or other indebtedness or any other security of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the General Partner or the Unitholders may vote.
Except as set forth in Section 3.2 of the disclosure letter previously provided
by the Company to the Parent (the "COMPANY DISCLOSURE LETTER") and as otherwise
provided in this Agreement, as of the date of this Agreement there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the General
Partner or the Company is a party or by which the General Partner or the
Company is bound, obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional Company Units, additional partnership
interests, voting securities or other ownership interests in the Company or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. Except as set forth in Section 3.2 of the Company Disclosure
Letter, there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire the GP Interest or any Company Units or
other ownership interests in the Company or make any material investment (in
the form of a loan, capital contribution or otherwise) in any person. All of
the issued and outstanding limited partnership interests in the Subsidiary
Partnership are owned by the Company and all of the issued and outstanding
general partnership interests in the Subsidiary Partnership are owned by the
General Partner. Except as provided in Section 3.2 of the Company Disclosure
Letter and in this Agreement, there are no outstanding securities, options,
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warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the General Partner, the Company or the Subsidiary
Partnership is a party or by which the General Partner, the Company or the
Subsidiary Partnership is bound, obligating the Subsidiary Partnership to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
partnership units of the Subsidiary Partnership, voting securities or other
ownership interests in the Subsidiary Partnership or obligating the Subsidiary
Partnership to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking.
3.3 Authority; Binding Agreement. Each of the General
Partner, the Company and the Subsidiary Partnership has the full legal power
and authority to execute and deliver this Agreement and the other Transaction
Documents (as defined below) to which it is a party and, subject to the
adoption of this Agreement and the other Transaction Documents by the
Unitholders in accordance with the immediately succeeding sentence, to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary partnership and corporate action, as
the case may be, on the part of the Company, the Subsidiary Partnership and the
General Partner to the extent it is a party hereto or thereto, subject to the
adoption of this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby by the Unitholders in accordance
with the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the
DRULPA, the rules and regulations of
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the American Stock Exchange, Inc. and the agreements of limited partnership of
the Company and the Subsidiary Partnership. Each of this Agreement and the
other Transaction Documents has been or will be duly and validly executed and
delivered by the Company and the Subsidiary Partnership, to the extent it is a
party hereto or thereto and, subject to the adoption of this Agreement and the
other Transaction Documents and the approval of the transactions contemplated
hereby and thereby by the Unitholders in accordance with the immediately
preceding sentence, constitutes or will constitute a legal, valid and binding
agreement of the Company and the Subsidiary Partnership, to the extent it is a
party hereto or thereto, enforceable against the Company and the Subsidiary
Partnership, to the extent it is a party hereto or thereto, in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or transfer and similar laws now or hereafter
in effect relating to or affecting creditors' rights generally and to general
principles of equity.
3.4 No Conflict or Violation. Subject to (a) the items
set forth in Section 3.4 of the Company Disclosure Letter, (b) obtaining the
requisite Unitholder approval and (c) making the filings and obtaining the
approvals identified in Section 3.5, and except with respect to matters that
would not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect with respect to the Company, neither the execution
and delivery by each of the General Partner, the Company and the Subsidiary
Partnership of this Agreement or the other Transaction Documents to which it is
a party nor the consummation of the transactions
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contemplated hereby and thereby will (i) contravene or conflict with or result
in any breach of any provision of the certificate of limited partnership or the
agreement of limited partnership of the Company or the Subsidiary Partnership
or the certificate of incorporation or bylaws of the General Partner, (ii)
require any consent, approval or notice under or conflict with or result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
(collectively, "CONTRACTS") to which the Company or the Subsidiary Partnership
is a party or by which they or any material portion of their properties or
assets may be bound or (iii) violate any order, judgment, writ, injunction,
determination, award, decree, law, statute, rule or regulation (collectively,
"LEGAL REQUIREMENTS") applicable to the Company or the Subsidiary Partnership
or any material portion of their properties or assets.
3.5 Governmental Approvals. No consent, approval or
authorization of or declaration or filing with any foreign, federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality (each, a "GOVERNMENTAL ENTITY") on the part of the Company
or the Subsidiary Partnership that has not been obtained or made is required in
connection with the execution or delivery by the General Partner, the
Subsidiary Partnership or the Company of this Agreement or the other
Transaction Documents to which it is a party or the consummation by the General
Partner, the Subsidiary Partnership or the Company of
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the transactions contemplated hereby or thereby to which it is a party, other
than (a) the filing of a Certificate of Merger with the Secretary of State of
the State of Delaware, (b) filings and other applicable requirements under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the Exchange
Act, (c) filings, approvals or other actions or authorizations required under
any applicable liquor license laws and regulations, (d) as may be required
under state securities or "blue sky" laws and (e) consents, approvals,
authorizations, declarations or filings that (i) are set forth in Section 3.5
of the Company Disclosure Letter or (ii) if not obtained or made, would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect with respect to the Company or prevent the Company from
consummating the transactions contemplated hereby.
3.6 SEC Filings; Financial Statements. The Company has
made all filings required to be made with the Securities and Exchange
Commission (the "SEC") since December 31, 1995 and has delivered or made
available to the Parent or the Operating Partnership correct and complete
copies of the Company's (a) Annual Reports on Form 10-K for the years ended
December 31, 1995 and December 31, 1996 (together, the "COMPANY 10-K'S"), as
filed with the SEC and (b) all other reports, statements and registration
statements (including Quarterly Reports on Form 10-Q (collectively, the
"COMPANY 10-Q'S") and Current Reports on Form 8-K) filed by the Company with
the SEC since December 31, 1995 (the items identified in clauses (a) and (b)
(in each case including all exhibits and schedules thereto and documents
incorporated by reference therein) being referred to collectively as the
"COMPANY SEC
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FILINGS"). As of their respective dates, the Company SEC Filings, taken
together with all amendments thereto, comply in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations thereunder and do not contain any untrue statement of a
material fact or omit 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. The consolidated financial statements of
the Company included or incorporated by reference in the Company 10-K's and the
Company 10-Q's (a) were prepared in accordance with generally accepted
accounting principles in effect during the periods involved (except, in the
case of unaudited quarterly statements, as permitted by Form 10-Q under the
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes to such financial
statements) and (b) fairly present in all material respects the consolidated
financial position of the Company at the respective dates thereof and the
consolidated results of operations and cash flows for the respective periods
then ended (subject, in the case of unaudited interim financial statements, to
normal year-end audit adjustments).
3.7 Absence of Certain Changes or Events. Except as (a)
disclosed in the Company SEC Filings filed prior to the date hereof (the "FILED
COMPANY SEC FILINGS"), (b) specifically contemplated by this Agreement or (c)
set forth in Section 3.7 of the Company Disclosure Letter, since September 30,
1997, there has not been any condition, event or occurrence that, individually
or in the aggregate, has resulted in a Material Adverse Effect with respect to
the Company.
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3.8 Ownership of Certain Assets.
3.8.1 The General Partner is the sole general
partner of the Subsidiary Partnership and owns a 1% general partnership
interest therein. Except as set forth in Section 3.8.1 of the Company
Disclosure Letter, the Company owns, as its sole assets, a ninety nine percent
(99%) limited partnership interest in the Subsidiary Partnership, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "LIENS"), cash and
cash equivalents derived from its ownership interest in the Subsidiary
Partnership and rights arising from Contracts to which it is a party.
3.8.2 The Subsidiary Partnership is the owner of
good and marketable fee title to the hotels listed in Section 3.8.2A of the
Company Disclosure Letter free and clear of all Liens or other title defects,
except for (a) such Liens or other title defects listed in Section 3.8.2B of
the Company Disclosure Letter, (b) the hotels identified in Section 3.8.2C of
the Company Disclosure Letter, the ownership by the Subsidiary Partnership of
which is subject to the respective ground leases identified in such section of
the Company Disclosure Letter (together with the hotels listed in Section
3.8.2A of the Company Disclosure Letter, the "HOTELS") and (c) such Liens or
other title defects that, individually or in the aggregate, have not resulted
or would not reasonably be expected to result in a Material Adverse Effect with
respect to the Company.
3.9 Absence of Litigation. Except as disclosed in the
Filed Company SEC Filings and as set forth in Section 3.9 of the Company
Disclosure Letter, as of the
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date hereof there are no claims, actions or proceedings pending or, to the
knowledge of the Company, threatened against the Company or the Subsidiary
Partnership or any of their properties or assets, before any court or
Governmental Entity that, individually or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect with respect to the Company.
As of the date hereof, neither the Company nor the Subsidiary Partnership nor
any portion of their properties or assets is subject to any order, judgment,
injunction or decree (collectively, "ORDERS") of any court or Governmental
Entity that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect with respect to the Company.
3.10 Compliance. Except as disclosed in the Filed Company
SEC Filings and as described in Section 3.10 of the Company Disclosure Letter,
neither the Company nor the Subsidiary Partnership is in default or violation
of any term, condition or provision of (a) its certificate of limited
partnership or agreement of limited partnership, or (b) except with respect to
matters that, individually or in the aggregate, have not resulted or would not
reasonably be expected to result in a Material Adverse Effect with respect to
the Company, (i) any Contracts to which it is a party or by which it or any
material portion of the Company's and the Subsidiary Partnership's properties
or assets may be bound or (ii) any Legal Requirements applicable to it or any
material portion of the Company's and the Subsidiary Partnership's properties
or assets, taken as a whole.
3.11 Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (a) the
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registration statement on Form S-4 to be filed with the SEC by the Parent in
connection with the Merger (such registration statement, together with any
amendments or supplements thereto, the "REGISTRATION STATEMENT") and (b) the
Proxy Statement (as defined below) to be filed with the SEC by the Company and
the Parent in connection with the meeting of the Unitholders (the "COMPANY
UNITHOLDERS' MEETING") and the meeting of the shareholders of the Parent (the
"PARENT SHAREHOLDERS' MEETING") to be conducted or held in connection with
their respective approvals of the Merger, the Transaction Documents and the
issuance of the Parent Shares in connection with the Merger, as the case may
be, will, at the time the Registration Statement is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under
the Securities Act or at the time the Proxy Statement is mailed to the
Unitholders and the Parent shareholders, as the case may be, contains any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
3.12 Condemnation Actions. Except as set forth in Section
3.12 of the Company Disclosure Letter, neither the Company nor the Subsidiary
Partnership has received any written notice of and neither of them has
knowledge of any pending condemnation action of any nature with respect to any
of the Hotels, other than any such actions that, individually or in the
aggregate, have not resulted or would not reasonably be expected to result in a
Material Adverse Effect with respect to the Company. If, between the date
hereof and the Effective Time, the Company or the
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Subsidiary Partnership receives a written notice of or obtains knowledge of,
any such pending condemnation action, the Company shall promptly notify the
Parent of such notice or knowledge, and the Parent shall have the right to
consult with the Company in the settlement of any such condemnation action.
3.13 Hazardous Materials. Except as disclosed in the
reports or studies regarding Hazardous Materials (as defined below) or
Environmental Laws (as defined below) made available to the Parent in due
diligence or in Section 3.13 of the Company Disclosure Letter, and except with
respect to matters that, individually or in the aggregate, have not resulted or
would not reasonably be expected to result in a Material Adverse Effect with
respect to the Company, neither the Company nor the Subsidiary Partnership has
received any written notice of and neither of them has knowledge of, (a) any
alleged violation of any Environmental Law with respect to any Hotel, which
violation has not been previously remedied or (b) any investigation by any
Governmental Entity with respect to the existence of any Hazardous Materials at
any of the sites at which an investigation remains open. "HAZARDOUS MATERIALS"
means any asbestos-containing materials, petroleum, urea formaldehyde,
polychlorinated biphenyls (PCBs), and any materials, wastes, substances or
chemicals that are deemed hazardous, toxic, a pollutant or a contaminant under
any Environmental Law. "ENVIRONMENTAL LAW" means, collectively, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), the Resource
Conservation and Recovery Act of 1976,
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as amended (42 U.S.C. Section 6901, et seq.), any comparable law of any state
in which any of the Hotels is located, and all other applicable laws and
regulations relating to the protection of human health and safety, the
environment, or hazardous or toxic substances or wastes, pollutants or
contaminants.
3.14 Bankruptcy Matters. Neither the Company nor the
Subsidiary Partnership has made a general assignment for the benefit of
creditors, filed any voluntary petition in bankruptcy or suffered the filing of
an involuntary petition by its creditors, suffered the appointment of a
receiver to take possession of all or substantially all of its assets, suffered
the attachment or other judicial seizure of all or substantially all of its
assets, admitted its inability to pay its debts as they come due, or made an
offer of settlement, extension or composition to its creditors generally.
3.15 Taxes. Except as disclosed in Section 3.15 of the
Company Disclosure Letter, each of the Company and the Subsidiary Partnership
has filed all tax returns and reports required to be filed by it (after giving
effect to any filing extension properly granted by a Governmental Entity having
authority to do so) and has paid all taxes required to be paid by it, other
than in cases where the failure to pay such taxes, individually or in the
aggregate, has not resulted or would not reasonably be expected to result in a
Material Adverse Effect with respect to the Company, and the financial
statements included in the most recent Company 10-K reflect an adequate reserve
for all material taxes payable by the Company or the Subsidiary Partnership for
all taxable periods and portions thereof through the date of those financial
statements. Except as disclosed in Section 3.15 of the Company Disclosure
Letter, each of the Company and
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the Subsidiary Partnership has been, since its date of formation, and will be,
through the date of Closing, treated as a partnership and not as an association
taxable as a corporation for federal income tax purposes. As used in this
Agreement (unless otherwise specified), "TAXES" shall include all federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever, together with
penalties, interest or additions to tax with respect thereto.
3.16 Finders and Investment Bankers. None of the General
Partner, the Company, the Subsidiary Partnership and the Special Committee has
employed any investment banker, financial advisor, broker or finder in
connection with the transactions contemplated by this Agreement, except for
each of Xxxxxx Xxxxxxx Realty Inc. and Xxxx Xxxxx Xxxx Xxxxxx, Incorporated
(the "SPECIAL COMMITTEE FINANCIAL ADVISORS") which have been engaged as
financial advisors to the Special Committee, or incurred any liability for any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the transactions contemplated
hereby, except for fees payable to the Special Committee Financial Advisors,
all of which fees have been or will be paid by the Company, except as otherwise
provided in Section 5.11. The Company has previously delivered to the Parent
copies of the engagement letters between the Special Committee and each of the
Special Committee Financial Advisors.
3.17 Opinions of Financial Advisors. The Special Committee
has received the oral opinions of each of the Special Committee Financial
Advisors and the written opinion of Xxxx Xxxxx Xxxx Xxxxxx, Incorporated, a
copy of which opinion
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has been delivered to the Parent, to the effect that, as of the date of this
Agreement, the Unit Merger Consideration is fair to the Unitholders from a
financial point of view. The written opinion of Xxxxxx Xxxxxxx Realty
Incorporated will be delivered to the Parent as soon as practicable after the
date hereof following delivery of such written opinion to the Special Committee
by Xxxxxx Xxxxxxx Realty Incorporated.
3.18 Vote or Consent Required. The affirmative vote or
consent of a majority in interest of the Unitholders is the only vote or
consent of Unitholders that is necessary (under applicable law or otherwise) to
enable each of the General Partner, the Company and the Subsidiary Partnership
to enter into this Agreement and the other Transaction Documents to which it is
a party and to perform their respective obligations hereunder and thereunder.
3.19 Investigation by the Company, the General Partner and
the Subsidiary Partnership. In entering into this Agreement, the Company, the
General Partner and the Subsidiary Partnership:
(a) acknowledge that, except as set forth in this
Agreement and in the certificates and other documents and instruments to be
delivered by the Parent and the Operating Partnership at the Closing, neither
the Parent nor the Operating Partnership or any of their respective partners,
directors, officers, employees, affiliates, subsidiaries, agents, advisors or
representatives makes any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information provided
or made available to the Company, the General Partner, the Subsidiary
Partnership or their agents or representatives, and
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(b) agree, to the fullest extent permitted by law
that, except as provided in this Agreement, neither the Parent nor the
Operating Partnership or any of their respective partners, directors, officers,
employees, shareholders, affiliates, subsidiaries, agents, advisors or
representatives shall have any liability or responsibility whatsoever to the
Company, the General Partner or the Subsidiary Partnership on any basis
(including, without limitation, in contract or tort, under federal or state
securities laws or otherwise) based upon any information provided or made
available, or statements made, to the Company, the General Partner or the
Subsidiary Partnership.
3.20 Absence of Undisclosed Liabilities. Except as
reflected in the Filed Company SEC Filings or disclosed in Section 3.20 of the
Company Disclosure Letter, neither the Company nor the Subsidiary Partnership
has any liabilities or obligations of any nature, whether accrued, contingent
or otherwise and whether due or to become due, that, individually or in the
aggregate, has resulted or would reasonably be expected to result in a Material
Adverse Effect with respect to the Company.
3.21 Contracts. All the Contracts that are material to
the business of the Company or the Subsidiary Partnership are described in
Section 3.21 of the Company Disclosure Letter. The Subsidiary Partnership has
a valid leasehold interest in the property demised under the Ground Lease dated
May 1, 1973, as amended, between Xxxxxxx X. Xxxxxx, Xx. and the Subsidiary
Partnership, as assignee (the "SPRINGFIELD GROUND LEASE"), and the Ground Lease
dated October 23, 1968, as amended, between First National Bank of Omaha and
the Subsidiary Partnership, as assignee (the "OMAHA GROUND LEASE", and together
with the Springfield Ground
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Lease, the "GROUND LEASES"), and such Ground Leases are in full force and
effect in accordance with their terms. The Subsidiary Partnership is not in
default under either Ground Lease and, to its, the Company's and the General
Partner's knowledge, the other party to each Ground Lease is not in default
under the Ground Lease to which it is a party, except for any such default
that, in each case, individually or in the aggregate, has not resulted in or
would not reasonably be expected to result in a Material Adverse Effect with
respect to the Company. The Subsidiary Partnership has not heretofore
transferred, mortgaged or pledged its interest under either of the Ground
Leases, except pursuant to the Company Credit Facility (as defined below).
3.22 Work Stoppages. No strike, general work stoppage,
general work slow down, general sick out, concerted refusal to work overtime or
similar concerted conduct that is disruptive of work by the employees of the
Manager exists or, to the knowledge of the Company or the Subsidiary
Partnership, is imminent, which would reasonably be expected to have a Material
Adverse Effect with respect to the Company.
3.23 Intangible Property. Except with respect to matters
that, individually or in the aggregate, have not resulted or would not
reasonably be expected to result in a Material Adverse Effect with respect to
the Company, the Company and the Subsidiary Partnership have the right to use
all patents, trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights necessary for the conduct of their respective businesses, and neither
the Company nor the Subsidiary Partnership has
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knowledge of any claim of infringement by any other person with respect to any
of the foregoing.
3.24 Insurance. All of the insurance policies that are
material to the business of the Company and the Subsidiary Partnership, taken
as a whole, and all material claims thereunder are described in Section 3.24 of
the Company Disclosure Letter.
3.25 Employees and Employee Benefit Plans. (a) Neither
the Company nor the Subsidiary Partnership directly employs any individuals or
maintains any employee benefit plans. Pursuant to the Management Agreement,
the Subsidiary Partnership retains the services of certain employees of the
Manager (the "EMPLOYEES") and pays the Manager for all costs and expenses
incurred by the Manager in respect of such Employees under the terms of Article
II of the Management Agreement. Employee benefit plans maintained by the
Manager in which Employees are participants are hereinafter referred to as
"MANAGER PLANS."
(b) (i) No Manager Plan is subject to Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
Section 412 of the Code (as defined below), or provides welfare benefits to
former employees or beneficiaries or dependents thereof (other than as required
under Section 4980 of the Code and any applicable state laws). None of the
Company, the Subsidiary Partnership and the Manager (or any predecessors
thereof) maintains, has maintained, contributes to or has contributed to a plan
subject to Section 412 of the Code or Title IV of ERISA for the benefit of
persons providing services to the Company or the Subsidiary
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Partnership within the five years preceding this year. No Manager Plan is a
multiemployer plan (within the meaning of Sections 3(37) or 4003(a)(3) of ERISA
or Section 414(f) of the Code).
(ii) Each Manager Plan which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service regarding its qualified status.
(iii) Each Manager Plan has been administered in all material
respects in accordance with its terms and is in compliance in all material
respects with all applicable laws, including ERISA and the Code.
(iv) Except where failure to do so would not result in a
material liability to the Company, full payment has been made, in a timely
manner, of all amounts which the Manager or any of its subsidiaries is required
to pay under the terms of each of the Manager Plans. None of the Manager Plans
nor any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in ERISA), whether or not waived.
(v) None of the Manager or the Company or the Subsidiary
Partnership has engaged in any "prohibited transaction," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, with respect to
any Manager Plan.
3.26 No Ownership of Voting Stock. Neither the Company
nor the Subsidiary Partnership owns ten percent (10%) or more of the voting
securities of any corporation or association taxable as a corporation for
federal income tax purposes.
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3.27 Takeover Statutes. No "fair price," "moratorium,"
"control share acquisition" or other anti-takeover statute or similar statute
or regulation enacted by any state (a "TAKEOVER STATUTE") applies to the Merger
or the other transactions contemplated by this Agreement and the other
Transaction Documents.
3.28 General Partner Conduct. In connection with the
discharge of its duties as general partner of the Company and the Subsidiary
Partnership, the General Partner has not committed one or more acts or
omissions constituting gross negligence or willful misconduct which,
individually or in the aggregate, might reasonably be expected to result in a
Material Adverse Effect with respect to the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND THE OPERATING PARTNERSHIP
Each of the Parent, the Operating Partnership, Merger Sub,
Newco I and Newco II represents and warrants to the Company, the General
Partner and the Subsidiary Partnership, as follows:
4.1 Existence and Power. Each of the Parent, the
Operating Partnership, Merger Sub, Newco I and Newco II and each of their
respective subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Each of the Parent, the
Operating Partnership, Merger Sub, Newco I and Newco II
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and each of their respective subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it, or the nature of the business conducted by it, makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect with respect to the Parent or the Operating Partnership. The Parent has
previously delivered or made available to the Company correct and complete
copies of the articles of incorporation and code of regulations or by-laws for
each of the Parent, Newco I and Newco II and the certificate of limited
partnership and the agreement of limited partnership of each of the Operating
Partnership and Merger Sub, as currently in effect. Section 4.1 to the
disclosure letter previously provided by the Parent to the Company (the "PARENT
DISCLOSURE LETTER") sets forth each subsidiary and the ownership interest
therein of each of the Parent and the Operating Partnership. Except for the
capital stock of or other equity interests in such subsidiaries neither the
Parent nor the Operating Partnership owns, directly or indirectly, any capital
stock or other equity ownership interest, with a fair market value as of the
date of this Agreement greater than $1,000,000 in any person.
4.2 Authorized and Outstanding Capital Shares of the
Parent. The Parent is authorized to issue 40,000,000 Parent Shares, and
10,000,000 preferred shares, without par value (the "PARENT PREFERRED SHARES").
As of the date of this Agreement, 9,542,251 Parent Shares are issued and
outstanding and no Parent Preferred Shares are issued or outstanding. All
issued and outstanding Parent Shares
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have been duly authorized and are validly issued, fully paid, and, subject to
the General Corporation Law of the State of Ohio (the "OGCL"), nonassessable
and not subject to preemptive rights. The Parent has reserved 603,500 Parent
Shares for issuance upon the exercise of outstanding options to purchase Parent
Shares. Except as set forth in this Section 4.2, no Parent Shares, other
voting securities of the Parent or Parent Preferred Shares were issued,
reserved for issuance or outstanding. There are no outstanding stock
appreciation rights relating to the Parent Shares. Upon issuance, each Parent
Share issued to former Unitholders and the General Partner shall be (a) duly
authorized, validly issued, fully paid and, subject to the OGCL, nonassessable
and not subject to preemptive rights and (b) registered under the Securities
Act. There are no bonds, debentures, notes or other indebtedness or any other
securities of the Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of Parent Shares may vote. Except as otherwise disclosed in this
Section 4.2, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Parent is a party or by which the Parent is bound, obligating the
Parent to issue, deliver or sell, or cause to be issued, delivered or sold,
additional Parent Shares, other voting securities, Parent Preferred Shares or
other ownership interests of the Parent or obligating the Parent to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Parent to repurchase, redeem or otherwise
acquire any Parent Shares or other
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ownership interests in the Parent or make any material investment (in the form
of a loan, capital contribution or otherwise) in any person. As of the date of
this Agreement, all of the issued and outstanding common shares of each of
Newco I and Newco II are owned by Parent. Immediately prior to the Effective
Time, 850 common shares of Newco I and 850 common shares of Newco II are issued
and outstanding, all of which shares shall be duly authorized, validly issued,
fully paid and, subject to the OGCL, nonassessable and not subject to
preemptive rights. As of the date of this Agreement, Newco I shall own a 1%
general partnership interest in Merger Sub and Newco II shall own a 99% limited
partnership interest in Merger Sub. As of the date of this Agreement, no other
person shall own a partnership interest, general or limited, in Merger Sub.
4.3 Authority; Binding Agreement. Each of the Parent,
the Operating Partnership, Merger Sub, Newco I and Newco II has the full legal
power and authority to execute and deliver this Agreement and the other
Transaction Documents to which it is a party and, subject to the adoption of
this Agreement and the other Transaction Documents and the approval of the
transactions contemplated hereby and thereby by the shareholders of the Parent
in accordance with the immediately succeeding sentence, to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate and partnership action, as the case may
be, on the part of each of the Parent, the Operating Partnership, Merger Sub,
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Newco I and Newco II, to the extent it is a party hereto or thereto, subject to
the adoption of this Agreement and the other Transaction Documents and the
approval of the transactions contemplated hereby and thereby by the
shareholders of the Parent in accordance with the Exchange Act, the OGCL, the
rules and regulations of the New York Stock Exchange, Inc. (as defined below)
and the articles of incorporation and code of regulations of the Parent. Each
of this Agreement and the other Transaction Documents has been or will be duly
and validly executed and delivered by the Parent, the Operating Partnership,
Merger Sub, Newco I and Newco II, to the extent it is a party hereto or thereto
and, subject to the adoption of this Agreement and the other Transaction
Documents and the approval of the transactions contemplated hereby and thereby
by the shareholders of the Parent in accordance with the immediately preceding
sentence, constitutes or will constitute a legal, valid and binding agreement
of each of the Parent, the Operating Partnership, Merger Sub, Newco I and Newco
II, to the extent it is a party hereto or thereto, enforceable against each of
the Parent, the Operating Partnership, Merger Sub, Newco I and Newco II, to the
extent it is a party hereto or thereto, in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or transfer and similar laws now or hereafter in effect relating to
or affecting creditors' rights generally and to general principles of equity.
4.4 No Conflict or Violation. Neither the execution and
delivery by each of the Parent, the Operating Partnership, Newco I, Newco II
and Merger Sub of this Agreement or the other Transaction Documents to which it
is a party nor the
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consummation of the transactions contemplated hereby and thereby will (a)
contravene or conflict with or result in any breach of any provision of the
certificate of limited partnership or the agreement of limited partnership of
each of the Operating Partnership and Merger Sub or the articles of
incorporation or code of regulations or by-laws of each of the Parent, Newco I
and Newco II or (b) except with respect to matters that would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect with respect to the Parent or the Operating Partnership, (i) subject to
obtaining the affirmative vote of a majority of the outstanding Parent Shares
and except as set forth in Section 4.4 of the Parent Disclosure Letter and
except for consents, approvals or notices which have been obtained or made or
such conflicts, violations or defaults which have been properly waived by the
appropriate party, require any consent, approval or notice under or conflict
with or result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any Contracts to which the Parent, the Operating Partnership
or any of their subsidiaries is a party or by which any of them or any material
portion of their properties or assets may be bound or (ii) violate any Legal
Requirements applicable to the Parent, the Operating Partnership or any of
their subsidiaries or any material portion of their properties or assets.
4.5 Governmental Approvals. No consent, approval or
authorization of or declaration or filing with any Governmental Entity on the
part of the Parent, the Operating Partnership or any of their subsidiaries that
has not been obtained or made is
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required in connection with the execution or delivery by the Parent, the
Operating Partnership, Newco I, Newco II or Merger Sub of this Agreement or the
other Transaction Documents, to which it is a party, or the consummation by the
Parent, the Operating Partnership, Newco I, Newco II or Merger Sub of the
transactions contemplated hereby and thereby, to which it is a party, other
than (a) the filing of a Certificate of Merger with the Secretary of State of
the State of Delaware, (b) filings and other applicable requirements under the
Securities Act and the Exchange Act, (c) as may be required under state
securities or "blue sky" laws, (d) filings, approvals or other actions or
authorizations required under any applicable liquor license laws and
regulations and (e) consents, approvals, authorizations, declarations or
filings that, if not obtained or made, could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect with
respect to the Parent or the Operating Partnership or prevent the Parent, the
Operating Partnership, Newco I, Newco II or Merger Sub from consummating the
transactions contemplated hereby.
4.6 SEC Filings; Financial Statements. The Parent has
made all filings required to be made with the SEC since December 31, 1996 and
has delivered or made available to the Company correct and complete copies of
its (a) Annual Report on Form 10-K for the year ended December 31, 1996 (the
"PARENT 10-K"), as filed with the SEC, (b) proxy statements relating to all of
the Parent's meetings of shareholders (whether annual or special) since
December 31, 1996 and (c) all other reports, statements and registration
statements (including Quarterly Reports on Form 10-Q (collectively, the "PARENT
10-Q'S") and Current Reports on Form 8-K) filed
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by the Parent with the SEC since December 31, 1996 (the items identified in
clauses (a), (b) and (c) (in each case including all exhibits and schedules
thereto and documents incorporated by reference therein) being referred to
collectively as the "PARENT SEC FILINGS"). As of their respective dates, the
Parent SEC Filings, taken together with all amendments thereto, comply in all
material respects with the applicable requirements of the Securities Act, the
Exchange Act and the rules and regulations thereunder and do not contain any
untrue statement of a material fact or omit 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. The consolidated
financial statements of the Parent included or incorporated by reference in the
Parent 10-K and the Parent 10-Q's (a) have been prepared in accordance with
generally accepted accounting principles in effect during the periods involved
(except, in the case of unaudited quarterly statements, as permitted by Form
10-Q under the rules and regulations of the SEC) (except as may be indicated in
the notes to such financial statements) and (b) fairly present in all material
respects the consolidated financial position of the Parent and the Operating
Partnership at the respective dates thereof and the consolidated results of
operations and cash flows for the respective periods then ended (subject, in
the case of unaudited interim financial statements, to normal year-end
adjustments).
4.7 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Filings filed prior to the date hereof (the "FILED
PARENT SEC FILINGS") or as specifically contemplated by this Agreement or as
set forth in Section 4.7 of the
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Parent Disclosure Letter, since September 30, 1997 there has not been any
condition, event or occurrence that, individually or in the aggregate, has
resulted in a Material Adverse Effect with respect to the Parent or the
Operating Partnership.
4.8 Absence of Litigation. Except as disclosed in the
Filed Parent SEC Filings or as set forth in Section 4.8 of the Parent
Disclosure Letter, as of the date hereof, there are no claims, actions or
proceedings pending or, to the knowledge of the Parent or the Operating
Partnership, threatened against the Parent or the Operating Partnership or any
of their subsidiaries, or any of their respective properties or assets before
any court or Governmental Entity that, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect with respect to
the Parent or the Operating Partnership. As of the date hereof, neither the
Parent or the Operating Partnership nor any portion of the Parent's and the
Operating Partnership's properties or assets is subject to any Orders of any
court or Governmental Entity, that, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect with respect to
the Parent or the Operating Partnership.
4.9 Compliance. Except as disclosed in the Filed Parent
SEC Filings, none of the Parent, the Operating Partnership and their
subsidiaries is in default or violation of any term, condition or provision of
(a) its certificate of limited partnership, partnership agreement, articles of
incorporation, by-laws, code of regulations or other organizational documents,
as the case may be, or (b) except with respect to matters that, individually or
in the aggregate, have not had or would not reasonably be expected to result in
a Material Adverse Effect with respect to the Parent
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or the Operating Partnership, (i) any Contracts to which the Parent or the
Operating Partnership or any of their subsidiaries is a party or by which any
of them or any material portion of their properties or assets may be bound or
(ii) any Legal Requirements applicable to the Parent or the Operating
Partnership or any of their subsidiaries or any material portion of their
properties or assets.
4.10 Information Supplied. None of the information
supplied or to be supplied by the Parent, the Operating Partnership, Newco I,
Newco II or Merger Sub for inclusion or incorporation by reference in the
Registration Statement or the Proxy Statement to be filed with the SEC by the
Parent and the Company in connection with the Company Unitholders' Meeting and
the Parent Shareholders' Meeting will, at the time the Registration Statement
is filed with the SEC, at any time it is amended or supplemented or at the time
it becomes effective under the Securities Act or at the time the Proxy
Statement is mailed to the Unitholders and the Parent's shareholders, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
4.11 Finders and Investment Bankers. None of the Parent
or the Operating Partnership or any of their subsidiaries has employed any
investment banker, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for Xxxxxx Brothers Inc.
(the "PARENT FINANCIAL ADVISOR"), or incurred any liability for any investment
banking, business consultancy, financial advisory, brokerage or finders' fees
or commissions in connection with the transactions
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contemplated hereby, except for fees payable to the Parent Financial Advisor,
all of which fees have been or will be paid by the Parent. The Parent has
previously delivered to the Company a copy of the engagement letter between the
Parent and the Parent Financial Advisor.
4.12 Sufficient Funds. The Operating Partnership has or
upon the Closing Date will have sufficient funds or financing available
(through existing credit arrangements or otherwise) to (a) repay, in cash, all
indebtedness outstanding under the credit facility provided for pursuant to the
Second Amended and Restated Credit Agreement, dated April 2, 1996, between
Canadian Imperial Bank of Commerce, as agent, and the Subsidiary Partnership
(together with any interest rate hedging agreements entered into pursuant to
Section 6.27 of such credit agreement, the "COMPANY CREDIT FACILITY"), plus
unpaid interest accrued thereon, and any prepayment, breakage or other costs
associated with repayment of amounts under or in connection with the
termination of the Company Credit Facility on the Closing Date, as contemplated
in Section 5.11, (b) pay, in cash, all amounts owed to the Manager by the
Subsidiary Partnership pursuant to the Management Agreement and the Termination
Agreement, as contemplated in Section 5.11, (c) repay all loans and other
obligations owed by the Company to the General Partner and the Manager, as
contemplated in Section 5.11, (d) pay all amounts required to be paid pursuant
to the Assignment Agreement, (e) pay all fees, costs and expenses including,
without limitation, fees and expenses of counsel for each of the Special
Committee, the General Partner and the Company and of the Special Committee
Financial Advisors incurred by the Company
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in connection with this Agreement, the Merger, the other transactions
contemplated hereby, the Operating Lease and related matters (the amounts in
clauses (a) through (e) collectively, the "TRANSACTION EXPENSES"), as
contemplated in Section 5.11 and (f) pay all amounts required to be paid in
cash pursuant to Article 2.
4.13 Investigation by the Parent and the Operating
Partnership. In entering into this Agreement, the Parent, the Operating
Partnership, Newco I, Newco II and Merger Sub:
(a) acknowledge that, except as set forth in this
Agreement and in the certificates and other documents and instruments to be
delivered by the General Partner, the Company and the Subsidiary Partnership at
the Closing, none of the General Partner, the Company, the Subsidiary
Partnership or any of their respective partners, directors (including the
Special Committee), officers, employees, affiliates, agents, advisors or
representatives makes any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information provided
or made available to the Parent, the Operating Partnership or their agents or
representatives, and
(b) agree, to the fullest extent permitted by law
that, except as provided in this Agreement, none of the General Partner, the
Company, the Subsidiary Partnership or any of their respective partners,
directors (including the Special Committee), officers, employees, shareholders,
affiliates, agents, advisors or representatives shall have any liability or
responsibility whatsoever to the Parent or the Operating Partnership on any
basis (including, without limitation, in contract or tort,
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under federal or state securities laws or otherwise) based upon any information
provided or made available, or statements made, to the Parent or the Operating
Partnership.
4.14 Taxes.
4.14.1 Each of the Parent, the Operating Partnership
and their subsidiaries has filed all tax returns and reports required to be
filed by it (after giving effect to any filing extension properly granted by a
Governmental Entity having authority to do so) and has paid all taxes required
to be paid by it other than cases where the failure to pay any such taxes,
individually or in the aggregate, has not resulted or would not reasonably be
expected to result in a Material Adverse Effect with respect to the Parent or
the Operating Partnership, and the financial statements contained in the most
recent Parent 10-K reflect an adequate reserve for all material taxes payable
by the Parent, the Operating Partnership or such subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
Since February 8, 1996, the Parent has incurred no liability for taxes under
Section 857(b), 860(c) or 4981 of the Code (as defined below), and neither the
Parent nor the Operating Partnership has incurred any liability for taxes other
than in the ordinary course of business. Except as set forth in Section 4.14.1
of the Parent Disclosure Letter, to the knowledge of the Parent or the
Operating Partnership, no event has occurred, and no condition or circumstance
exists, which presents a material risk that any material tax described in the
preceding sentence will be imposed upon the Parent.
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4.14.2 The Parent has been, since its date of
formation, and will be through the Closing Date, treated as a real estate
investment trust within the meaning of Section 856 of the Code and has
satisfied all requirements to qualify as a real estate investment trust for
such years, (b) has operated since its date of formation, and intends to
continue to operate, in such a manner as to qualify as a real estate investment
trust and (c) has not taken or omitted to take any action which could result in
a challenge to its status as a real estate investment trust, and to the
Parent's knowledge, no such challenge is pending or threatened. The Operating
Partnership has been since its date of formation, and will be, through the
Closing Date, treated as a Partnership and not as an association taxable as a
corporation for federal income tax purposes. The General Partner agrees that
it will file the final tax returns of the Company for the taxable year of the
Company that ends on the Closing Date as a result of the termination of the
Company pursuant to Section 708(b)(1)(B) of the Code and the General Partner,
the Company, and the Subsidiary Partnership agree, based on advice of competent
tax counsel, that such final tax returns will in all respects reflect and be
consistent with the treatment of the Merger as a transfer by the General
Partner and each Unitholder of their interests in the Company to Parent in
exchange for cash and Parent Shares. Parent, Newco I, Newco II, and Merger Sub
agree to treat the Merger for tax purposes consistent with the treatment
described herein.
4.15 Condemnation Actions. Except as disclosed in Section
4.15 of the Parent Disclosure Letter, neither the Parent, the Operating
Partnership nor any of their respective subsidiaries has received any written
notice of and none of them has knowledge of any pending condemnation action of
any nature with respect to any of the properties
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owned or leased by the Parent or the Operating Partnership or any of such
subsidiaries (collectively, the "PARENT PROPERTIES") other than any such action
that, individually or in the aggregate, has not resulted or would not
reasonably be expected to result in a Material Adverse Effect with respect to
the Parent or the Operating Partnership. If, between the date hereof and the
Effective Time, the Parent, the Operating Partnership or any of such
subsidiaries receives a written notice of or obtains knowledge of any such
pending condemnation action, the Parent shall promptly notify the Company of
such notice or knowledge.
4.16 Hazardous Materials. Except as disclosed in Section
4.16 of the Parent Disclosure Letter and except with respect to matters that,
individually or in the aggregate, have not had or would not reasonably be
expected to result in a Material Adverse Effect with respect to the Parent or
the Operating Partnership, none of the Parent, the Operating Partnership and
their respective subsidiaries has received any written notice of and none of
them has knowledge of (a) any alleged violation of any Environmental Law with
respect to any such property, which violation has not been previously remedied
or (b) any investigation by any Governmental Entity with respect to the
existence of any Hazardous Materials at any of the sites at which an
investigation remains open.
4.17 Bankruptcy Matters. None of the Parent, the
Operating Partnership or their respective subsidiaries has made a general
assignment for the benefit of creditors, filed any voluntary petition in
bankruptcy or suffered the filing of an involuntary petition by its creditors,
suffered the appointment of a receiver to take possession of all or substan-
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tially all of its assets, suffered the attachment or other judicial seizure of
all or substantially all of its assets, admitted its inability to pay its debts
as they come due, or made an offer of settlement, extension or composition to
its creditors generally.
4.18 Vote or Consent Required. The affirmative votes of
the holders of a majority of the outstanding Parent Shares is the only vote or
consent of the holders of any class or series of capital stock of the Parent,
Newco I or Newco II or partnership interests in the Operating Partnership or
Merger Sub not previously obtained that is necessary (under applicable law or
otherwise) to enable each of Parent, Newco I, Newco II, Merger Sub and the
Operating Partnership to enter into and consummate this Agreement and the other
Transaction Documents to which it is a party and perform their respective
obligations hereunder and thereunder.
4.19 Opinion of Financial Advisor. The Parent has
received an opinion of the Parent Financial Advisor to the effect that, as of
the date of this Agreement, the Merger Consideration is fair to the Parent from
a financial point of view.
4.20 Takeover Statutes. No Takeover Statute applies to
the Merger or the other transactions contemplated by this Agreement and the
other Transaction Documents.
4.21 Newly Formed Subsidiaries. Each of Merger Sub, Newco
I and Newco II is a newly formed, wholly-owned subsidiary of the Parent and,
except for the activities incident to this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby, none of Newco
I, Newco II and Merger Sub has engaged in any business activities of any type
or kind whatsoever. Each of Newco I and
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Newco II is a "qualified REIT subsidiary" within the meaning of Section
856(i)(2) of the Code.
ARTICLE 5
COVENANTS
5.1 Conduct of Business of the Company. Except as
contemplated by this Agreement and the other Transaction Documents (including,
without limitation, as contemplated in the immediately succeeding sentence),
during the period commencing on the date hereof and ending at the Effective
Time, the Company shall, and the General Partner shall cause the Subsidiary
Partnership to, conduct its operations in the ordinary course of business
consistent with past practice and to use all commercially reasonable efforts to
preserve intact its business organization and to maintain satisfactory
relationships with its customers and suppliers and others having business
relationships with it. Without limiting the generality of the foregoing, and
except as otherwise contemplated by this Agreement, prior to the Effective
Time, the Company will not, and the General Partner will cause the Subsidiary
Partnership not to, without the prior written consent of the Parent or the
Operating Partnership:
(a) amend its certificate of limited partnership
or agreement of limited partnership except as contemplated by Section 5.15
hereof;
(b) authorize for issuance, issue, sell, pledge,
deliver or agree or commit to issue, sell, pledge or deliver (whether through
the issuance or granting of any options, warrants, calls, subscriptions or
other rights or other agreements) any Company
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Units or other general or limited partnership interests of any class or any
securities convertible into or exchangeable for partnership units or other
general or limited partnership interests of any class in the Company or the
Subsidiary Partnership;
(c) split, combine or reclassify any Company
Units or declare, pay or set aside for payment any distribution (other than (x)
regularly scheduled quarterly distributions on the Company Units of $.55 per
Company Unit and corresponding quarterly distributions on the GP Interest at
the rate provided for in the Company's agreement of limited partnership, which
shall be paid in the ordinary course of business, and (y) the Special
Distribution) in respect of the Company Units or the GP Interest;
(d) acquire, sell, lease or dispose of any assets
(whether by merger, transfer of securities or otherwise) which in the aggregate
are material to the Company and the Subsidiary Partnership taken as a whole;
(e) (i) incur or assume any long-term or
short-term debt or issue any debt securities except for (A) borrowings under
existing lines of credit in the ordinary course of business consistent with
past practice, (B) borrowings from the General Partner necessary to enable the
Company or the Subsidiary Partnership to pay operating expenses incurred in the
ordinary course of business, to make capital expenditures otherwise permitted
under Section 5.1(f) and to make regularly scheduled distributions to
Unitholders and the General Partner to the extent such distributions are
permitted to be made under Section 5.1(c) and to make the Special Distribution;
and (C) borrowings from the General Partner in amounts necessary to enable the
Company or the Subsidiary Partnership to prepay the amount owed to any lender
under the
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Company Credit Facility, so long as the interest rate charged by the General
Partner in connection with such borrowings is equal to or lower than the
interest rate that would have been applicable to the prepaid amount under the
Company Credit Facility during the period in which such borrowings are made and
remain outstanding; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the material
obligations of any other person (other than the Subsidiary Partnership), except
in the ordinary course of business consistent with past practice in an amount
not material to the Company and the Subsidiary Partnership taken as a whole;
(iii) make any material loans, advances or capital contributions to, or
investments in, any other person (other than the Subsidiary Partnership), other
than in the ordinary course of business consistent with past practice; (iv)
pledge or otherwise encumber any interests in the Subsidiary Partnership; or
(v) mortgage or pledge any of its material tangible or intangible assets or
voluntarily create any lien, charge, security interest or encumbrance of any
kind with respect to any such asset securing an obligation or indebtedness in
any one occurrence of $100,000 or more or, in the aggregate, in excess of
$1,000,000;
(f) (i) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof or any material equity interest therein (other
than purchases of marketable securities in the ordinary course of business);
(ii) enter into any contract or agreement other than in the ordinary course of
business consistent with past practice which would be material to the Company
and the Subsidiary Partnership taken as a whole; (iii) other
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than capital expenditures provided for in the Company's 1997 and 1998 capital
expenditures budgets (provided that substitution of budget line items shall be
permitted so long as aggregate capital expenditures budgets are not exceeded),
which budgets have been delivered or made available to the Parent, authorize
any new capital expenditure or expenditures which, individually, is in excess
of $100,000 or, in the aggregate, are in excess of $1,000,000, provided,
however, that such limits may be exceeded if and to the extent such
expenditures are required in order to comply with the law or in the event of an
emergency at one or more of the Hotels that could result in significant harm to
the affected property; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action which would be
prohibited hereunder;
(g) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such liquidation or a
dissolution, winding up, merger, consolidation, restructuring, recapitalization
or other reorganization;
(h) materially change any of the accounting
methods used by it unless required by generally accepted accounting principles,
the SEC or applicable law;
(i) settle or compromise any claim (including
arbitration) or litigation, which after insurance reimbursement is material to
the Company and the Subsidiary Partnership taken as a whole, without the prior
written consent of the Parent, which consent will not be unreasonably withheld;
or
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(j) authorize or enter into an agreement to do
any of the foregoing.
Notwithstanding anything to the contrary in this Section 5.1, the Company
intends to and shall be permitted to take advantage of the grandfather
extension under the Taxpayer Relief Act of 1997 for a publicly traded
partnership by electing the application of Section 7704(g) of the Code and
consenting to the application of the tax imposed by paragraph (3) of Section
7704(g) of the Code.
5.2 Conduct of Business of the Parent and the Operating
Partnership. Except as contemplated by this Agreement and the other
Transaction Documents, during the period commencing on the date hereof and
ending at the Effective Time, each of the Parent and the Operating Partnership,
Newco I, Newco II and Merger Sub shall, and shall cause its subsidiaries to,
use all commercially reasonable efforts to preserve intact its business
organization and to maintain satisfactory relationships with its customers,
suppliers and employees and others having business relationships with it.
Except as otherwise contemplated in this Agreement, prior to the Effective
Time, neither the Parent nor the Operating Partnership will, or will permit its
subsidiaries to, without the prior written consent of the Special Committee
(acting on behalf of the General Partner):
(a) amend its articles of incorporation, code of
regulations, certificate of limited partnership, agreement of limited
partnership or other governing or organizational documents;
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(b) except in connection with the Parent's Long
Term Incentive Plan (as defined below) and options outstanding on the date
hereof or as contemplated by the agreement of limited partnership of the
Operating Partnership in respect of the issuance of Parent Shares in exchange
for Operating Partnership Units, or in respect of the issuance of Operating
Partnership Units in connection with the issuance of Parent Shares, or in
connection with any conversion of the Intercompany Note (as defined below),
authorize for issuance, issue, sell, pledge, deliver or agree or commit to
issue, sell, pledge or deliver (whether through the issuance or granting of any
options, warrants, calls, subscriptions or other rights or other agreements)
any capital stock or partnership units or interests, as the case may be, of any
class or any securities convertible into or exchangeable for capital stock or
partnership units or interests, as the case may be, of any class of the Parent
or the Operating Partnership which represents (after giving effect to the
exchange of any such partnership units for Parent Shares) more than 50% (prior
to giving effect to the Merger) of the voting stock of the Parent on a fully
diluted basis (after giving effect to the exchange of all currently outstanding
Operating Partnership Units for shares of Parent Shares);
(c) split, combine or reclassify any Parent
Shares or declare, pay or set aside for payment any dividend (other than
regularly scheduled quarterly dividends on the Parent Shares of $.45 per Parent
Share, which shall be paid in the ordinary course of business) in respect of
any Parent Shares or other interests in the Parent, or redeem, purchase or
otherwise acquire any of its capital stock;
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(d) (i) incur or assume any long-term or
short-term debt or issue any debt securities if such transaction would result
in the ratio of net debt to market capitalization of the Parent and the
Operating Partnership on a consolidated basis (but excluding for the purposes
of such calculation the Intercompany Note) exceeding .45; or (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the material obligations of any other person or
persons if such transaction would result in such ratio of net debt to market
capitalization exceeding .45;
(e) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof or any material equity interest therein (other
than purchases of marketable securities in the ordinary course of business) or
otherwise issue any equity securities or any securities convertible into or
exchangeable for equity securities which, in any case, would require the
approval of the Parent's shareholders;
(f) effect any merger, consolidation or other
business combination with any person in which such person will become, after
the consummation of such transaction, the surviving entity of the transaction;
(g) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such liquidation or a
dissolution, winding-up, merger, consolidation, restructuring, recapitalization
or other reorganization;
(h) take any action that would cause the
representation set forth in Section 4.21 to become untrue at or prior to the
Effective Time; or
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(i) authorize or enter into an agreement to do
any of the foregoing.
5.3 Proxy Statement; Registration Statement. As promptly
as practicable after the execution of this Agreement, (a) the Company and the
Parent shall prepare and file with the SEC (with appropriate requests for
confidential treatment) under the Exchange Act a joint proxy
statement/prospectus and a form of a proxy (such proxy statement/prospectus or
joint proxy statement/prospectus, as the case may be, together with any
amendments thereof or supplements thereto, in each case in the form or forms
delivered to the Unitholders of the Company and the shareholders of the Parent,
the "PROXY STATEMENT") relating to the solicitation of approval from the
Unitholders and the shareholders of the Parent with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and (b) the
Parent shall file with the SEC under the Securities Act the Registration
Statement, in which the Proxy Statement will be included as a prospectus, in
connection with the registration under the Securities Act of the Parent Shares
to be issued and distributed to the Unitholders and the General Partner
pursuant to the Merger. The Parent and the Company will cause the Registration
Statement and the Proxy Statement to comply in all material respects with the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Each of the Parent and the Company shall use all commercially reasonable
efforts to have or cause the Registration Statement to become effective
(including clearing the Proxy Statement with the SEC) as promptly as
practicable thereafter, and shall take any and all actions required under any
applicable federal or
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state securities or "blue sky" laws in connection with the issuance of shares
of Parent Shares pursuant to the Merger. Without limiting the generality of
the foregoing, each of the Parent and the Company agrees to use all
commercially reasonable efforts, after consultation with the other such party,
to respond as promptly as possible to any comments made by the SEC with respect
to the Proxy Statement (including each preliminary version thereof) and the
Registration Statement (including each amendment thereof and supplement
thereto). Each of the Parent and the Company shall, and shall cause its
respective representatives to, cooperate fully with the other such party with
all information concerning it and its affiliates, directors, officers and
stockholders as the other may reasonably request in connection with the
preparation of the Proxy Statement and the Registration Statement. The Proxy
Statement shall include the determination and recommendation of the (a) Board
of Directors of the General Partner and the Special Committee and (b) the Board
of Directors of the Parent, that the Unitholders and the shareholders of the
Parent, respectively, vote in favor of the approval and adoption of the Merger,
this Agreement, the other Transaction Documents, the transactions contemplated
hereby and thereby and the issuance of the Parent Shares in connection with the
Merger, as the case may be; provided, however, that the Board of Directors of
the General Partner and the Special Committee may withdraw, modify or change
such respective recommendation if any of them determines in good faith, based
upon the advice of outside counsel, that making such recommendation, or the
failure to so withdraw, modify or change its recommendation, or the failure to
recommend any other offer or proposal, could reasonably be deemed to cause them
to breach their
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fiduciary duties under applicable law. As promptly as practicable after the
Registration Statement shall have become effective, the Company and the Parent
shall cause the Proxy Statement to be mailed to the Unitholders and the
shareholders of the Parent, respectively.
5.3.1 Without limiting the generality of the
foregoing, (a) the General Partner, the Company and the Subsidiary Partnership,
on the one hand, and the Parent, the Operating Partnership, Newco I, Newco II
and Merger Sub, on the other hand, shall each notify the other as promptly as
practicable upon becoming aware of any event or circumstance which should be
described in an amendment of, or a supplement to, the Proxy Statement or the
Registration Statement, and (b) the Company and the Parent shall each notify
the other as promptly as practicable after the receipt by it of any written or
oral comments of the SEC on, or of any written or oral request by the SEC for
amendments or supplements to, the Proxy Statement or the Registration
Statement, and shall promptly supply the other with copies of all
correspondence between it or any of its representatives and the SEC with
respect to any of the foregoing filings.
5.3.2 The information supplied by the General
Partner, Company and the Subsidiary Partnership for inclusion or incorporation
by reference in the Proxy Statement and the Registration Statement shall not
(a) at the time the Registration Statement is declared effective, (b) at the
time the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the Unitholders and the shareholders of the Parent, (c) at the
time of the (i) Company Unitholders' Meeting or
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(ii) the Parent Shareholders' Meeting, and (d) at the Effective Time, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading. If
at any time prior to the Effective Time any event or circumstance relating to
the General Partner, Company, the Subsidiary Partnership or any of their
subsidiaries or affiliates or their respective officers or directors is
discovered by the Company and the Subsidiary Partnership which should be set
forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement, the General Partner, the Company or the Subsidiary Partnership
shall promptly inform the Parent of such event or circumstance. The
information supplied by the Parent, Newco I, Newco II, Merger Sub and the
Operating Partnership for inclusion or incorporation by reference in the Proxy
Statement and the Registration Statement shall not (w) at the time the
Registration Statement is declared effective, (x) at the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the Unitholders and the shareholders of the Parent, (y) at the time of (A) the
Company Unitholders' Meeting or (B) the Parent Shareholders' Meeting and (z) at
the Effective Time, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which the are made,
not misleading. If at any time prior to the Effective Time any event or
circumstance relating to the Parent, Newco I, Newco II, Merger Sub, the
Operating Partnership or any of their subsidiaries or affiliates or their
respective officers or directors is discovered by the Parent, Newco
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I, Newco II, Merger Sub and the Operating Partnership which should be set forth
in an amendment to the Registration Statement or a supplement to the Proxy
Statement, the Parent, Newco I, Newco II, Merger Sub or the Operating
Partnership shall promptly inform the Company of such event or circumstance.
5.3.3 As promptly as practicable after the date of
this Agreement, the Company and the Board of Directors of the General Partner
will (a) duly call and hold a special meeting of the Unitholders for the
purpose of considering and voting upon the approval of this Agreement, the
other Transaction Documents and the transactions contemplated hereby and
thereby (which special meeting shall, to the extent feasible, be held on the
same day or as soon as practicable after the date on which the Registration
Statement becomes effective) and (b) use all commercially reasonable efforts to
solicit from the Unitholders proxies in favor of such approvals and to secure
the vote or consent of the Unitholders required by the DRULPA and the Company's
agreement of limited partnership.
5.3.4 As promptly as practicable after the date of
this Agreement, the Parent and its Board of Directors will, (a) duly call and
hold a special meeting of its shareholders for the purpose of considering and
voting upon the approval of the issuance of the Parent Shares in connection
with the Merger (which special meeting shall, to the extent feasible, be held
on the same day or as soon as practicable after the date on which the
Registration Statement becomes effective) and (b) use all commercially
reasonable efforts to solicit from its shareholders proxies in favor of such
approvals and to secure the vote or consent of shareholders required by the
rules and
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regulations promulgated by the NYSE and the OGCL to effect the Merger. In
connection with the preparation of the Proxy Statement and the Registration
Statement, the Parent shall use reasonable efforts to cause to be delivered to
the Company prior to the mailing of the Proxy Statement to the Unitholders and
to include in the Proxy Statement, the opinion of independent counsel for the
Parent dated the date of the Proxy Statement, that (i) the Parent was organized
and has operated in conformity with the requirements for qualification as a
real estate investment trust within the meaning of the Code since its date of
formation and that, after giving effect to the Merger, the Parent's proposed
method of operation will enable it to continue to meet the requirements for
qualification and taxation as a real estate investment trust under the Code and
(ii) the Operating Partnership has been since its date of formation, and
continues to be, treated as of the date of the Proxy Statement, for federal
income tax purposes, as a partnership and not as a corporation or an
association taxable as a corporation.
5.4 Access and Information.
5.4.1 Between the date of this Agreement and the
Effective Time, the Company shall afford each of the Parent and the Operating
Partnership and its authorized representatives (including its accountants,
financial advisors and legal counsel) reasonable access during normal business
hours to all of the properties, personnel, Contracts, books and records of the
Company and the Subsidiary Partnership and shall promptly deliver or make
available to the Parent (a) a copy of each report, schedule and other document
filed by the Company pursuant to the
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requirements of federal or state securities laws and (b) all other information
concerning the business, the properties and assets of the Company and the
Subsidiary Partnership as the Parent may from time to time reasonably request.
Each of the Parent and the Operating Partnership and their subsidiaries shall
hold, and shall cause its Representatives (as defined in the letter agreement
dated July 17, 1997 (the "COMPANY CONFIDENTIALITY AGREEMENT") between the
Company and the Parent) to hold, all Evaluation Material (as defined in the
Company Confidentiality Agreement) in confidence in accordance with the terms
of the Company Confidentiality Agreement and, in the event of the termination
of this Agreement for any reason, the Parent shall promptly return or destroy
all Evaluation Material in accordance with the terms of the Company
Confidentiality Agreement.
5.4.2 Between the date of this Agreement and the
Effective Time, each of the Parent, the Operating Partnership, Newco I, Newco
II and Merger Sub shall, and shall cause their respective subsidiaries to,
afford the General Partner, the Company and their authorized representatives
(including their accountants, financial advisors and legal counsel and those of
the Special Committee) reasonable access during normal business hours to all of
the properties, personnel, Contracts, books and records of the Parent, the
Operating Partnership and their subsidiaries and shall promptly deliver or make
available to the Company (a) a copy of each report, schedule and other document
filed by the Parent pursuant to the requirements of federal or state securities
laws and (b) all other information concerning the business, the properties and
assets of the Parent, the Operating Partnership and their subsidiaries as the
Company
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may from time to time reasonably request. The Company, the General Partner and
the Subsidiary Partnership shall hold, and shall cause their Representatives
(as defined in the letter agreement dated November 24, 1997 (the "PARENT
CONFIDENTIALITY AGREEMENT") between the Parent and the General Partner) to
hold, all Evaluation Material (as defined in the Parent Confidentiality
Agreement) in confidence in accordance with the terms of the Parent
Confidentiality Agreement and, in the event of the termination of this
Agreement for any reason, the Company shall promptly return to the Parent or
the Operating Partnership or destroy all Evaluation Material in accordance with
the terms of the Parent Confidentiality Agreement.
5.5 No Solicitation. Except as otherwise contemplated by
this Agreement, from and after the date hereof, the Company shall not, and the
General Partner shall cause the Subsidiary Partnership not to, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any person or group (other
than the Parent, the Operating Partnership, Newco I, Newco II, Merger Sub or
any affiliate, associate or designee of the Parent or the Operating
Partnership) concerning any proposal for an acquisition of all or substantially
all of the business and properties or partnership units or interests of the
Company or the Subsidiary Partnership, whether by merger, tender offer,
purchase of assets or partnership units or otherwise (any such proposal made
after the date hereof, including any renewal of any such proposal, or new
proposal, made after the date hereof by a party (other than the Parent, the
Operating Partnership, Newco I, Newco II, Merger Sub or any affiliate,
associate or designee of the Parent or the Operating
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Partnership) that made any such proposal prior to the date hereof, an
"ACQUISITION PROPOSAL"). As of the date of this Agreement, each of the
Company, the General Partner and the Subsidiary Partnership hereby (a)
represents that as of such date it and the Special Committee have (or
immediately following the public announcement of the execution and delivery of
this Agreement shall have) discontinued discussions or negotiations with all
persons or groups (other than the Parent, the Operating Partnership, Newco I,
Newco II, Merger Sub or any affiliate, associate or designee of the Parent or
the Operating Partnership) with whom discussions or negotiations have
previously been held concerning any proposal for an acquisition of all or
substantially all of the business and properties or partnership units or
interests of the Company or the Subsidiary Partnership, whether by merger,
tender offer, purchase of assets or partnership units or otherwise, and (b)
agrees not to, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide information to any such
person or group concerning any proposal for an acquisition of all or
substantially all of the business and properties or partnership units or
interests of the Company or the Subsidiary Partnership, whether by merger,
tender offer, purchase of assets or partnership units or otherwise other than
in compliance with the provisions of this Section 5.5. Notwithstanding the
foregoing, (i) the Board of Directors of the General Partner or the Special
Committee may take, and disclose to the Unitholders, a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with respect to any
tender offer for Company Units and (ii) the Company, the General Partner and
the Subsidiary Partnership may, directly or indirectly, furnish information
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and access and may participate in discussions and negotiate with any person or
group concerning any Acquisition Proposal which the Board of Directors of the
General Partner or the Special Committee determines in its good faith judgment,
after consultation with its independent legal counsel, that it is necessary to
do so in the exercise of its fiduciary obligations.
5.6 Reasonable Efforts; Additional Actions.
5.6.1 Upon the terms and subject to the conditions
of this Agreement and the other Transaction Documents, each of the parties
hereto shall use all commercially reasonable efforts to take, or cause to be
taken, all action, and to do or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and the other Transaction Documents, including
using all commercially reasonable efforts to (a) obtain all consents,
amendments to or waivers under the terms of any of the Company's, the
Subsidiary Partnership's, the Parent's and the Operating Partnership's
borrowing or other contractual arrangements or those of their respective
subsidiaries, required for the transactions contemplated by this Agreement and
the other Transaction Documents (other than consents, amendments or waivers the
failure of which to obtain would not, individually or in the aggregate, result
or reasonably be expected to result in a Material Adverse Effect with respect
to the Company and the Subsidiary Partnership or the Parent and the Operating
Partnership, as the case may be) including, but not limited to, the consent of
the lessor under the Springfield Ground Lease to the execution and
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delivery of the Operating Lease by the Subsidiary Partnership; provided,
however, that the failure to obtain such consent shall not be a breach of this
Agreement or a failure of a condition to effect the Merger, (b) effect promptly
all necessary or appropriate registrations and filings with Governmental
Entities, including, without limitation, filings and submissions pursuant to
the Securities Act, the Exchange Act, the DRULPA and applicable regulations of
state liquor licensing authorities, (c) defend any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby and (d) fulfill or
cause the fulfillment of the conditions to Closing set forth in Article 6.
5.6.2 If, at any time after the Effective Time, the
Surviving Partnership shall determine or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Partnership the right, title or interest in, to or under any of the rights, the
properties or assets of either of the Constituent Partnerships acquired or to
be acquired by the Surviving Partnership as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the Surviving Partnership
shall be authorized to execute and deliver, in the name and on behalf of each
of the Constituent Partnerships or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
each of the Constituent Partnerships or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in,
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to and under such rights, the properties or assets in the Surviving Partnership
or otherwise to carry out this Agreement.
5.7 Notification of Certain Matters. The General
Partner, the Company and the Subsidiary Partnership shall give notice to the
Parent and the Operating Partnership, and the Parent, Newco I, Newco II, Merger
Sub and the Operating Partnership shall give notice to the General Partner and
the Company, promptly upon becoming aware of (a) any occurrence, or the failure
to occur, of any event, which occurrence or failure to occur has caused or
could reasonably be expected to cause any representation or warranty in this
Agreement to be untrue or inaccurate in any material respect at any time after
the date hereof and prior to the Effective Time and (b) any material failure on
its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided that the delivery of any
notice pursuant to this Section 5.7 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
5.8 Public Announcements. The initial press release or
releases with respect to the transactions contemplated by this Agreement shall
be in the form agreed to by the Parent, on the one hand, and the General
Partner and the Company, on the other hand. Thereafter, for as long as this
Agreement is in effect, the Parent, Newco I, Newco II, Merger Sub and the
Operating Partnership, on the one hand, and the Company, the General Partner
and the Subsidiary Partnership, on the other hand, shall not issue or cause the
publication of any press release or any other announcement with respect to the
Merger, this Agreement, the other Transaction Documents or the other
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transactions contemplated hereby or thereby without the consent of the other,
except when such release or announcement is required by applicable law or
pursuant to any listing agreement with, or the rules or regulations of, any
securities exchange or any other regulatory requirement.
5.9 Indemnification; Directors and Officers Insurance.
5.9.1 To the fullest extent permitted by law, the
current members and any prior members of the Board of Directors of the General
Partner and the current and prior officers of the General Partner (each
individually, an "INDEMNITEE") shall each be indemnified and held harmless by
each of the Parent and the Operating Partnership, jointly and severally, from
and against any and all losses, claims, damages, liabilities, joint and
several, expenses (including legal fees and expenses), judgments, fines,
settlements and other amounts arising from and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative, in
which the Indemnitee may be involved, or threatened to be involved, as a party
or otherwise by reason of or in connection with his status as a director or
officer of the General Partner or as a member of the Special Committee prior to
the Effective Time (including, without limitation, in connection with the
Merger and the other transactions contemplated by this Agreement), for a period
of six years after the Effective Time if (a) the Indemnitee acted in good faith
and in a manner he in good faith believed to be in, or not opposed to, the best
interests of the Company, and, with respect to any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) the Indemnitee's
conduct did not constitute gross negligence or willful or wanton
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misconduct. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that the Indemnitee
acted in a manner contrary to that specified in (a) or (b) above. The Parent
and the Operating Partnership shall pay all reasonable expenses (including
legal fees and expenses) that are incurred by an Indemnitee in enforcing this
Section 5.9.
5.9.2 To the fullest extent permitted by law,
expenses (including legal fees and expenses of counsel selected by the
Indemnitee) incurred by an Indemnitee in defending, investigating or
participating as a third-party witness in connection with any claim, demand,
action, suit or proceeding contemplated by Section 5.9.1 shall, from time to
time, be advanced by the Parent or the Operating Partnership prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Parent or the Operating Partnership of an undertaking by or on behalf of
the Indemnitee to repay such amount if it shall be determined in a
nonappealable adjudication that the Indemnitee is not entitled to be
indemnified as authorized in this Section 5.9. An Indemnitee wishing to claim
indemnification under this Section 5.9, upon learning of any such claim,
demand, action, suit or proceeding, shall notify the Parent and the Operating
Partnership thereof, provided that the failure to so notify shall not affect
the obligations of the Parent and the Operating Partnership except to the
extent such failure to notify materially prejudices the Parent. The Parent
and the Operating Partnership shall not, without the prior written consent of
the Indemnitee, settle or compromise any claim, or permit a default or consent
to the entry
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of any judgment in respect thereof, unless such settlement, compromise or
consent includes, as an unconditional term thereof, the giving by the claimant
to the Indemnitee an unconditional and irrevocable release from all liability
in respect of such claim.
5.9.3 The indemnification provided by this Section
5.9 shall be in addition to any other rights to which an Indemnitee may be
entitled under any agreement, as a matter of law or otherwise, as to action in
the Indemnitee's capacity as a director or officer of the General Partner or as
a member of the Special Committee, and shall continue as to an Indemnitee who
has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns and administrators of the Indemnitee.
5.9.4 Either the Parent or the Operating
Partnership shall purchase and cause to be maintained in effect for a period of
six years after the Effective Time, for the benefit of the directors and
officers of the General Partner who are covered by directors and officers
liability insurance policies maintained by the General Partner on the date of
this Agreement, directors and officers liability insurance policies, covering
matters arising out of or in connection with such person's status as a director
or officer of the General Partner or as a member of the Special Committee prior
to the Effective Time, of at least the same coverage as, and which contain
terms and conditions that are not less advantageous to such directors and
officers of the General Partner than, the directors' and officers' liability
insurance policies maintained by the General Partner. On each anniversary of
the Effective Time up to and including the sixth anniversary thereof, the
Parent or the Operating Partnership shall deliver a
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certificate to each such director and officer certifying compliance with
respect to the provisions of this Section 5.9.4.
5.9.5 This covenant is intended to be for the
benefit of, and shall be enforceable by, each of the Indemnitees and their
respective heirs and legal representatives.
5.10 Parent Shares Issued Free and Clear of Liens. The
Parent hereby represents, warrants and covenants for the benefit of each
Unitholder and the General Partner that all of the Parent Shares required to be
issued to each Unitholder and the General Partner pursuant to this Agreement
shall be duly authorized, validly issued and free and clear of any Liens.
5.11 Satisfaction of Certain Liabilities; Indemnity. Upon
the Effective Time, the Operating Partnership shall (a) pay to the Manager, in
cash, all obligations then payable by the Subsidiary Partnership to the Manager
under the Management Agreement or the Termination Agreement, including, without
limitation, those obligations relating to the subjects of incentive and
deferred compensation, (b) repay all loans and other obligations owed by the
Company to the General Partner and the Manager (including, without limitation,
any loan made in connection with the Special Distribution), (c) repay, in cash,
all indebtedness outstanding under the Company Credit Facility together with
unpaid interest accrued thereon, and any prepayment, breakage or other costs
associated with repayment of amounts under or in connection with the
termination of the Company Credit Facility, and (d) pay, in cash, all
Transaction Expenses. The Parent and the Operating Partnership shall, as of
the
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Effective Time, assume all of the indemnification obligations of the Company
set forth in the Company's agreement of limited partnership.
5.12 Tax Administration; Elections. The General Partner,
as general partner of the Company, shall prepare and file on a timely basis all
tax returns and reports relating to income of the Company for all taxable
periods ending on or before the Closing Date in a manner consistent with prior
years' tax returns of the Company using, to the extent permitted by law,
consistent methods, conventions and elections to those previously used by the
Company; provided, however, that the Company intends to take advantage of the
grandfather extension under the Taxpayer Relief Act of 1997 for a publicly
traded partnership by electing the application of Section 7704(g) of the Code
and consenting to the application of the tax imposed by paragraph (3) of
Section 7704(g) of the Code. The Parent and the Operating Partnership shall
cooperate with the General Partner in connection with the preparation of such
tax returns and reports.
5.13 Other Actions. Each of the Company, the General
Partner and the Subsidiary Partnership, on the one hand, and the Parent, Newco
I, Newco II, Merger Sub and the Operating Partnership, on the other hand, shall
not and shall cause its respective subsidiaries not to take any action (a) that
would result in any of the representations and warranties of such party
(without giving effect to the "knowledge" qualification) set forth in this
agreement becoming untrue in any material respect or (b) that would impair in
any material respect the ability of such party to consummate the transactions
contemplated by this Agreement.
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5.14 Allocation Indemnity. If, after the closing of the
transactions contemplated hereby, a court of competent jurisdiction pursuant to
a binding and nonappealable final judgment determines that the allocation of
the Merger Consideration provided for herein between the Unitholders, on the
one hand, and the General Partner, on the other hand, is contrary to the
allocation required under the Company's agreement of limited partnership, the
General Partner shall indemnify the Parent and the Operating Partnership
against all claims and costs of any nature incurred by the Parent or the
Operating Partnership as a consequence thereof.
5.15 Amendment of the Company and the Subsidiary
Partnership Agreements. Subject to the approval by the Unitholders, the
General Partner, in its capacity as general partner of the Subsidiary
Partnership, and the Company, as the limited partner of the Subsidiary
Partnership, agree to amend the agreements of limited partnership of each of
the Company and the Subsidiary Partnership in order to facilitate the
transactions contemplated by this Agreement and the Assignment Agreement.
5.16 NYSE Listing of the Parent Shares. The Parent shall
use all commercially reasonable efforts to cause the Parent Shares to be issued
in the Merger to be approved for listing on the New York Stock Exchange, Inc.
(the "NYSE") (subject to official notice of issuance) prior to the Effective
Time.
5.17 Books and Records. After the Closing Date, the
Parent, the Operating Partnership, the Subsidiary Partnership and the General
Partner agree to, and to cause their respective subsidiaries to, cooperate with
and make available to the other parties, during normal business hours, all
books and records retained and remaining in
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existence after the Closing which are necessary in connection with the
preparation of any tax returns or other reports, or any tax inquiry, audit,
investigation or dispute with respect to the Company or the Subsidiary
Partnership. The party requesting such books and records shall bear all
out-of-pocket costs and expenses (including attorneys' fees and expenses)
reasonably incurred in connection with providing such books and records, and
shall maintain the confidentiality of all such information in accordance with
Sections 5.4.1 and 5.4.2 of this Agreement.
5.18 Release. Following consummation of the Merger, none
of the General Partner, Doubletree Corporation, or any of their respective
affiliates, predecessors or successors, or any directors, officers, stockholder
or representative of such entities (each of the foregoing, a "Releasee") shall
have any liability or obligation to the Company, the Subsidiary Partnership,
the Parent, Operating Partnership or any of their affiliates (each of the
foregoing, a "Releasor") in connection with or arising out of (i) the Amended
and Restated Agreement of Limited Partnership of Red Lions Inns Limited
Partnership, as amended, or the Amended and Restated Agreement of Limited
Partnership of Red Lion Inns Operating L.P., as amended; (ii) their capacity as
general partner or limited partner of the Company or the Subsidiary
Partnership, or as an owner or controlling person of a general partner or
limited partner, except in the case of clause (i) or clause (ii) of this
Section 5.18, (A) as otherwise provided in Section 5.14, and (B) for
liabilities incurred by any Releasor after the date hereof to third parties
arising out of fraud or willful misconduct by such Releasee, or (iii) any event
or condition existing prior to the Effective Time related to the business,
operations, assets,
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liabilities or employees of the Company or the Subsidiary Partnership,
excluding in the case of this clause (iii) any liability or obligation arising
under any contractual obligation of the applicable Releasee to the applicable
Releasor.
5.19 Dissolution. None of the Parent, Newco I and Newco
II shall, for at least six (6) months following the Closing Date, cause or take
any action, corporate or otherwise, to cause the dissolution, liquidation or
termination of existence of either Newco I or Newco II.
5.20 Certain Income of the Company. For the period
January 1, 1998 through the Closing Date, at least 91% of the gross income of
the Company will be "qualifying income" within the meaning of Section 7704(d)
of the Code.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) Unitholders/Shareholder Approval. This
Agreement and the transactions contemplated hereby shall have been (i) adopted
and approved by the affirmative vote or consent of the Unitholders owning that
number of Company Units required therefor under the agreement of limited
partnership of the Company and applicable law; and (ii) adopted and approved by
the affirmative vote of the shareholders of the Parent owning that number of
Parent Shares required therefor under
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the Parent's articles of incorporation, code of regulations and other
organizational documents, the rules and regulations of the NYSE and applicable
law;
(b) No Order. No Legal Requirements shall have
been enacted, entered, promulgated or enforced by any court or Governmental
Entity that prohibit or prevent the consummation of the Merger;
(c) Registration Statement. The Registration
Statement shall have become effective under the Securities Act and shall not be
the subject of any stop order or proceedings seeking a stop order;
(d) Government and Regulatory Consents. (i) All
consents, authorizations, orders and approvals of (or filings or registrations
with) any Governmental Entity required in connection with the execution,
delivery and performance of this Agreement shall have been obtained or made (as
the case may be), except for the filings described in Section 1.2 and any other
documents required to be filed after the Effective Time and except where the
failure to have obtained or made any such consent, authorization, order,
approval, filing or registration would not have a Material Adverse Effect with
respect to the Parent after giving effect to the Merger or with respect to the
consummation of the transactions contemplated hereby and (ii) such consents,
authorizations, orders and approvals shall be subject to no conditions other
than conditions that would not reasonably be expected to result in a Material
Adverse Effect with respect to the Parent after giving effect to the Merger.
(e) Subsidiary Assignment. The Subsidiary
Assignment shall have been consummated as contemplated by the Assignment
Agreement; and
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(f) Certain Agreements. The Operating Lease, the
New Management Agreement, the Termination Agreement and the Owner Agreement
shall each have been executed and delivered by the parties thereto and shall
remain in full force and effect.
6.2 Conditions to Obligations of the Parent, the
Operating Partnership, Newco I, Newco II and Merger Sub. The obligations of
Merger Sub to effect the Merger and of each of the Parent, the Operating
Partnership, Newco I and Newco II to perform its obligations under this
Agreement required to be performed at Closing shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) Agreements and Covenants. The Company shall
have performed in all material respects the covenants and obligations required
to be performed by it under this Agreement on or prior to the Effective Time;
(b) Representations and Warranties. The
representations and warranties of the Company, the General Partner and the
Subsidiary Partnership contained in this Agreement (x) that are not qualified
as to materiality shall be true and correct in all material respects and (y)
that are so qualified, shall be true and correct, in each case on and as of the
Effective Time as if made on and as of such date (except to the extent that any
such representation or warranty had by its terms been made as of a specific
date in which case such representation or warranty shall have been true and
correct as of such specific date);
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(c) Certificate. The Parent shall have received
a certificate signed by an executive officer of the General Partner to the
effect of Sections 6.2(a) and (b); and
(d) Tax Opinions. The Parent and the Operating
Partnership shall have received an opinion of Xxxxxx & Xxxxxxx, counsel for the
Company and the Subsidiary Partnership, in form and substance reasonably
satisfactory to the Parent (and subject to customary assumptions and
qualifications), that each of the Company and the Subsidiary Partnership has
been, since its date of formation, and will be, through the date of Closing,
treated as a partnership and not as an association taxable as a corporation for
federal income tax purposes. Such opinion shall state that the rent received
by the Subsidiary Partnership from Westboy LLC is "qualifying income" for
purposes of Section 7704(d) of the Code and that the client has represented
that at least ninety percent (90%) or more of the Subsidiary Partnership gross
income from January 1, 1998 through the Closing Date consists of such
"qualifying income." Such opinion may not be based on (i) a lack of trading
under Section 7704 of the Code or the regulations issued thereunder or (ii) the
fact that the Company has made an election pursuant to Section 7704(g) of the
Code or the regulations issued thereunder to protect its status as a
partnership for federal income tax purposes.
6.3 Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger and of the General Partner and
the Subsidiary Partnership to perform its obligations under this Agreement
required to be performed at
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Closing shall be subject to the fulfillment or waiver at or prior to the
Effective Time of the following additional conditions:
(a) Agreements and Covenants. Each of the
Parent, the Operating Partnership, Newco I, Newco II and Merger Sub shall have
performed in all material respects the covenants and obligations required to be
performed by it under this Agreement on or prior to the Effective Time;
(b) Representations and Warranties. The
representations and warranties of the Parent, the Operating Partnership, Newco
I, Newco II and Merger Sub contained in this Agreement (x) that are not
qualified as to materiality shall be true and correct in all material respects
and (y) that are so qualified, shall be true and correct, in each case on and
as of the Effective Time as if made on and as of such date (except to the
extent that any such representation or warranty had by its terms been made as
of a specific date in which case such representation or warranty shall have
been true and correct as of such specific date);
(c) Certificate. The Company shall have received
a certificate signed by an executive officer of the Parent to the effect of
Sections 6.3 (a) and (b); and
(d) Tax Opinion. The Company shall have received
the opinion of Xxxxx & Xxxxxxxxx LLP, counsel for the Parent and the Operating
Partnership, in form and substance reasonably satisfactory to it, that (i)
commencing with its taxable year ended December 31, 1996, the Parent has met
the requirements for qualification and taxation as a real estate investment
trust and that, after giving
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effect to the Merger, the Parent's proposed method of operation will enable it
to continue to meet the requirements for qualification and taxation as a real
estate investment trust under the Code and (ii) the Operating Partnership has
been since February 8, 1996, and continues to be, treated for federal income
tax purposes as a partnership, and not as a corporation or an association
taxable as a corporation (in the case of (i) and (ii) above with customary
assumptions and qualifications).
(e) NYSE Listing of the Parent Shares. The NYSE
shall have approved for listing (subject to official notice of issuance) the
Parent Shares to be issued in the Merger.
ARTICLE 7
TERMINATION
7.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the filing
of the Certificate of Merger, whether before or after its adoption by the
Unitholders and the Parent's shareholders:
(a) By the mutual written consent of the Board of
Directors of each of the Parent and the General Partner;
(b) By action of the Board of Directors of either
the Parent or the General Partner:
(i) if a court of competent jurisdiction
or other Governmental Entity shall have issued an Order or taken any
other action
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permanently restraining, enjoining or otherwise prohibiting the Merger
and such Order or other action shall have become final and
nonappealable (provided that the party seeking to terminate this
Agreement pursuant to this clause (i) shall have used reasonable
efforts to remove such injunction, order or decree); or
(ii) if the Effective Time shall not have
occurred on or before June 30, 1998, provided, however, that the right
to terminate this Agreement under this Section 7.1(b)(ii) shall not be
available to any party the failure of which to fulfill materially any
covenant or obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before
such date;
(c) By the Board of Directors of either of the
Parent or the General Partner, if the Unitholder approval referred to in
Section 6.1(a) shall not have been obtained by reason of the failure to obtain
the requisite vote or consent of the Unitholders pursuant to the Company
Unitholders' Meeting;
(d) By the Board of Directors of either of the
Parent or the General Partner, if the Parent shareholder approval referred to
in Section 6.1(a) shall not have been obtained by reason of the failure to
obtain the requisite vote at the Parent Shareholders Meeting or any adjournment
thereof;
(e) By the General Partner, if the Company
receives an Acquisition Proposal from any person or group and the Board of
Directors of the General Partner (with participation by the Special Committee)
determines that such
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Acquisition Proposal is more favorable to the Company and its Unitholders than
the transactions contemplated by this Agreement;
(f) By the Board of Directors of the Parent, if
the General Partner Board or the Special Committee (i) shall have withdrawn, or
modified or changed in a manner adverse to the Parent its approval or
recommendation of this Agreement or the Merger or (ii) shall have recommended
an Alternative Transaction (as defined below), or the Company shall have
entered into an agreement in principle (or similar agreement) or definitive
agreement providing for an Alternative Transaction with a person or entity
other than the Parent;
(g) By the Board of Directors of the Parent, upon
a breach of any representation, warranty, covenant or agreement on the part of
the Company, the General Partner or the Subsidiary Partnership set forth in
this Agreement, or if any representation or warranty of the Company, General
Partner or the Subsidiary Partnership shall have become untrue, in either case
such that the conditions set forth in Section 6.2(a) or (b) would be incapable
of being satisfied by June 30, 1998 (as otherwise extended); or
(h) By the General Partner, upon a breach of any
representation, warranty, covenant or agreement on the part of Parent, Newco I,
Newco II, Merger Sub or the Operating Partnership set forth in this Agreement,
or if any representation or warranty of Parent, Newco I, Newco II, Merger Sub
or the Operating Partnership shall have become untrue, in either case such that
the conditions
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set forth in Section 6.3(a) or (b) would be incapable of being satisfied by
June 30, 1998 (as otherwise extended).
7.2 Procedure for and Effect of Termination.
7.2.1 In the event that this Agreement is
terminated and the Merger is abandoned by the Board of Directors of the Parent,
on the one hand, or by the General Partner, on the other hand, pursuant to
Section 7.1(a), (b), (c), (d), (g) or (h), written notice of such termination
and abandonment shall forthwith be given to the other parties and this
Agreement shall terminate and the Merger shall be abandoned without any further
action. If this Agreement is terminated as provided in this Section 7.2.1, no
party hereto shall have any liability or further obligation to any other party
under the terms of this Agreement except with respect to the willful breach by
any party hereto and except as provided in Section 8.4; provided, however,
that, if this Agreement is terminated pursuant to Section 7.1(g) or Section
7.1(h), the foregoing provisions of this sentence shall not relieve a party
from liability for breach of contract based upon negligence in making any
representation or warranty pursuant to this Agreement as of the date hereof.
7.2.2 In the event that this Agreement is
terminated by the General Partner pursuant to Section 7.1(e) or by the Board of
Directors of the Parent pursuant to Section 7.1(f), the Company shall (a)
reimburse the Parent and Xxxxxx Management Company Limited Liability Company
("BMCL") in cash for all Break-Up Expenses (as defined below), and (b) if, in
any case, a termination pursuant to Section 7.1(e) or pursuant to Section
7.1(f) if at the time of such withdrawal or change in
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recommendation an Acquisition Proposal has been made to the Company or publicly
announced and within twelve months following termination the Company executes a
definitive agreement providing for an Alternative Transaction, pay to the Parent
a fee in an amount equal to the sum of the Break-Up Fee (as defined below). The
"BREAK-UP FEE" shall be $5,500,000 payable to BMCL (which the parties
specifically recognize as a third- party beneficiary of this Agreement) and
Parent, allocated between them as BMCL and Parent agree (the amount agreed by
Parent and BMCL to be received by Parent herein referred to as the "BASE
AMOUNT") subject to compliance with the Code such that Parent shall not be
entitled to receive more than the sum of (A) the maximum amount that can be paid
to the Parent without causing it to fail to meet the requirements of Sections
856(c)(2) and (3) of the Internal Revenue Code of 1986, as amended (the "CODE"),
determined as if the payment of such amount did not constitute income described
in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code ("QUALIFYING
INCOME"), as determined by independent accountants to the Parent, plus (B) in
the event the Parent receives a letter from outside counsel (the "BREAK-UP FEE
TAX OPINION") indicating that the Parent has received a ruling from the Internal
Revenue Service (the "IRS") holding that the Parent's receipt of the Base Amount
would (i) constitute Qualifying Income, (ii) be excluded from gross income
within the meaning of Sections 856(c)(2) and (3) of the Code (the "REIT
REQUIREMENTS") or (iii) would merely be taxable income to Parent but would not
adversely affect the REIT status of Parent, and that the receipt by the Parent
of the remaining balance of the Base Amount following the receipt of and
pursuant to such ruling would not be deemed
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constructively received prior thereto, the Base Amount less the amount payable
under clause (A) above. The Company's obligation to pay the Break-Up Fee shall
terminate eighteen months from the date of the termination of this Agreement.
In the event that the Parent is not able to receive the full Base Amount, the
Company shall place the unpaid amount in escrow and shall not release any
portion thereof to the Parent unless and until the Company receives any one or
combination of the following: (w) a letter from the Parent's independent
accountants indicating the maximum amount that can be paid at that time to the
Parent without causing the Parent to fail to meet the REIT Requirements or (x)
a Break-Up Fee Tax Opinion, in which event the Company shall pay to the Parent
the unpaid Base Amount. The "BREAK-UP EXPENSES" shall be an amount equal to
the Parent's and BMCL's actual and documented out-of-pocket expenses incurred
in connection with the negotiation, execution and delivery of this Agreement
and the other Transaction Documents, the Parent's and BMCL's due diligence
related thereto, the preparation and filing of a registration statement, proxy
materials and other materials contemplated by Section 5.3, and the performance
of other obligations required to be performed pursuant to the terms of this
Agreement but in no event in an amount greater than $1,000,000; provided,
however, that if this Agreement is terminated by the Parent pursuant to Section
7.1 (f)(i) and at the time of such withdrawal or change in recommendation no
Acquisition Proposal has been made to the Company or publicly announced,
"Break-up Expenses" shall mean the Parent's and BMCL'S actual and documented
out-of-pocket expenses incurred in connection with the negotiation, execution
and delivery of this Agreement and the other
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Transaction Documents, the Parent's and BMCL's due diligence related thereto,
the preparation and filing of a registration statement, proxy materials and
other materials contemplated by Section 5.3, and the performance of other
obligations required to be performed pursuant to the terms of this Agreement
but in no event in an amount, in the aggregate, greater than $2,000,000. The
term "ALTERNATIVE TRANSACTION" shall mean any transaction resulting from an
Acquisition Proposal made or publicly announced after the date hereof and prior
to or within twelve months after the termination of this Agreement pursuant to
Section 7.1.
ARTICLE 8
MISCELLANEOUS
8.1 Certain Definitions. For purposes of this Agreement,
the following terms shall have the meanings ascribed to them in this Section
8.1:
(a) "AFFILIATE," with respect to any person,
shall mean any person controlling, controlled by or under common control with
such first person;
(b) "INTERCOMPANY NOTE" shall mean the
Intercompany Convertible Note dated October 8, 1997, in the principal amount of
$40,000,000, executed by Xxxxxx Hotel Properties, L.P. in favor of Xxxxxx
Lodging Company.
(c) "KNOWLEDGE," with respect to (i) any
corporation, shall mean the actual knowledge of any executive officer or
director of such corporation and (ii) any partnership, shall mean the actual
knowledge of any executive officer or director of its general partner;
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(d) "MATERIAL ADVERSE EFFECT," with respect to
any person, shall mean a material adverse effect on or change in the financial
condition, assets or results of operations of such person and its subsidiaries
(including any subsidiary partnership) taken as a whole (without regard,
however, to changes in conditions generally applicable to the hotel industry or
general economic conditions globally, in the United States or in the
geographical regions thereof in which such person conducts business, and any
changes in the financial condition or results of operations or assets of such
person and its subsidiaries, taken as a whole, that are caused primarily or
substantially by such changes or events or as a result of the announcement of
this Agreement and the transactions contemplated hereby, including the payment
of any costs, expenses, fees or similar charges incurred by such person's
contemplation, negotiation, execution or consummation of this Agreement or the
transactions contemplated hereby);
(e) "NEW MANAGEMENT AGREEMENT" shall mean an
agreement between the Lessee, as lessee, and the Manager, with respect to the
operation of the Hotels, in the form attached hereto as Exhibit B;
(f) "OPERATING LEASE" shall mean an agreement
between the Subsidiary Partnership, as lessor, and the Lessee, as lessee, with
respect to the Hotels, in the form attached hereto as Exhibit C;
(g) "OPERATING LEASE ANCILLARY AGREEMENT" shall
mean an agreement among the Subsidiary Partnership, the Manager, and the
Lessee, in the form attached hereto as Exhibit D;
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(h) "OWNER AGREEMENT" shall mean an agreement
among the Subsidiary Partnership, the Manager and the Lessee in the form
attached hereto as Exhibit E;
(i) "PARENT LONG TERM INCENTIVE PLAN" shall mean
the incentive plan approved by the Board of Directors of the Parent on June 18,
1996;
(j) "PERSON" shall mean and include an
individual, a company, a partnership, a joint venture, a limited liability
company, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof;
(k) "SUBSIDIARY," with respect to any person,
shall mean any corporation 50% or more of the outstanding voting power of
which, or any partnership, joint venture, limited liability company or other
entity 50% or more of the total equity interest of which, is directly or
indirectly owned by such person. For purposes of this Agreement, all
references to "subsidiaries" of a person shall be deemed to mean "subsidiary"
if such person has only one subsidiary;
(l) "TERMINATION AGREEMENT" shall mean an
agreement between the Manager and the Subsidiary Partnership in the form
attached hereto as Exhibit F; and
(m) "TRANSACTION DOCUMENTS" shall mean this
Agreement, the Assignment Agreement, the Operating Lease, Operating Lease
Ancillary Agreement, the New Management Agreement, the Owner Agreement, the
Termination Agreement
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and all other agreements and documents evidencing the transactions contemplated
hereby and thereby.
8.2 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified or supplemented only by a written
agreement signed by the Parent and the General Partner acting in its capacity
as general partner of the Company at any time prior to the Effective Time with
respect to any of the terms contained herein; provided, however, that after
this Agreement is adopted by the Unitholders pursuant to Section 5.3, no such
amendment or modification shall (a) alter or change the amount or kind of the
consideration to be delivered to the Unitholders or (b) alter or change any of
the terms or conditions of this Agreement if such alteration or change would
adversely affect the Unitholders.
8.3 Waiver of Compliance; Consents. Any failure of the
Parent, Newco I, Newco II, Merger Sub or the Operating Partnership, on the one
hand, or the Company, the General Partner or the Subsidiary Partnership, on the
other hand, to comply with any obligation, covenant, agreement or condition
herein may be waived by the Parent or the members of the Special Committee and
the Board of Directors of the General Partner acting on behalf of the General
Partner in its capacities as general partner of the Company and the Subsidiary
Partnership, as the case may be, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf
of any
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party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
8.3.
8.4 Survival. None of the representations or warranties
set forth in this Agreement, other than those set forth in Section 5.10, shall
survive the Closing hereunder. Section 1.4, Article 2, Sections 3.19, 4.13,
5.6.2, 5.9, 5.10, 5.11, 5.12, 5.14, 5.17, 5.18, 5.19, 7.2 and Article 8 and any
other covenant or agreement which contemplates performance after the Effective
Time shall survive the consummation of the transactions contemplated hereby.
Section 5.8, Section 7.2 and Article 8, and the second sentence of each of
Sections 5.4.1 and 5.4.2 shall survive the termination of this Agreement
pursuant to Section 7.1.
8.5 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person, by telecopier (with a confirmed receipt thereof) or
registered or certified mail (postage prepaid, return receipt requested), and
on the next business day when sent by overnight courier service, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to the Parent, the Operating Partnership
Newco I, Newco II or Merger Sub, to:
Xxxxxx Lodging Company
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Chief Executive Officer
Telecopier: (000) 000-0000
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with a copy to:
Xxxxx & Xxxxxxxxx LLP
0000 Xxxxxxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
(b) if to the Company or the Subsidiary
Partnership, to:
Special Committee of the Board of Directors of
Red Lion Properties, Inc.,
as General Partner of
Red Lion Inns Limited Partnership
000 Xxxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
and
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
(c) if to the General Partner, to:
Red Lion Properties, Inc.
000 Xxxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx Xxxxxxx
Telecopier: (000) 000-0000
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with a copy to:
Xxxxxx & Xxxxxxx
00 Xxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
8.6 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
either of the parties hereto without the prior written consent of the other
party.
8.7 Expenses. All fees, charges and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such fees, charges or expenses, except for (a)
the expenses described on Schedule II (the "DUE DILIGENCE EXPENSES"), for which
the Company and its affiliates were reimbursed by the Parent upon the execution
of this Agreement, (b) the payment of the Transaction Expenses by the Operating
Partnership pursuant to Section 5.11 and (c) amounts payable to the Parent
under Section 7.2.2 if this Agreement is terminated pursuant to Section 7.1(e)
or (f).
8.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS
OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT
OF LAWS THEREOF, EXCEPT TO THE EXTENT THAT THE
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MERGER OR OTHER TRANSACTIONS CONTEMPLATED HEREBY ARE REQUIRED TO BE GOVERNED BY
THE DRULPA.
8.9 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.10 Interpretation. The Article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
8.11 Entire Agreement. This Agreement (including the
schedules, exhibits, documents or instruments referred to herein), the Company
Confidentiality Letter, the Parent Confidentiality Letter and the other
Transaction Documents embody the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof and
supersede all prior agreements and understandings, both written and oral, among
the parties, or between any of them, with respect to the subject matter hereof
and thereof.
8.12 Third Party Beneficiaries. Except for Sections 2.1,
2.3, 2.4, 5.3, 5.9, 5.10, 5.11, 5.18, 5.19 and 7.2, this Agreement is not
intended to, and does not, create any rights or benefits of any party other
than the parties hereto.
8.13 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent
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breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the State of New
York, this being in addition to any other remedy to which they are entitled at
law or in equity.
8.14 Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be executed by a person duly authorized to do so as of the date
first above written.
RED LION INNS LIMITED PARTNERSHIP
By Red Lion Properties, Inc.,
its general partner
By /s/ Xxxxxx Xxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxx
Title: VP/Treas/Sec
RED LION PROPERTIES, INC.,
By /s/ Xxxxxx Xxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxx
Title: VP/Treas/Sec
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RED LION INNS OPERATING L.P.
By Red Lion Properties, Inc.,
its general partner
By /s/ Xxxxxx Xxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxx
Title: VP/Treas/Sec
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XXXXXX LODGING COMPANY
By /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXX HOTEL PROPERTIES, L.P.
By Xxxxxx Lodging Company,
its general partner
By /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXX ACQUISITION
PARTNERSHIP, L.P.
By Xxxxxx Acquisition Corporation I
its general partner
By /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXX ACQUISITION
CORPORATION I, INC.
By /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
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XXXXXX ACQUISITION
CORPORATION II, INC.
By /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
106
SCHEDULE I TO AGREEMENT
AND PLAN OF MERGER DATED
AS OF DECEMBER 30, 1997
ALLOCATION SCHEDULE
On the Closing Date, the aggregate Merger Consideration shall
be allocated between the General Partner, on the one hand, and the Unitholders,
on the other hand, as follows:
1. Prior to making such allocation, the aggregate value
of the Merger Consideration (the "AGGREGATE CONSIDERATION VALUE") shall be
calculated by adding (a) an amount equal to the aggregate Cash Consideration
and (b) an amount equal to the aggregate value of the Share Consideration based
on the closing price for Parent Shares on the NYSE Composite Tape, as printed
in The Wall Street Journal (or if not printed therein, as printed in any other
authoritative source), on the trading day prior to the Closing Date (the
"CLOSING SHARE PRICE").
2. The Aggregate Consideration Value calculated pursuant
to paragraph 1 of this Schedule I shall be allocated between the General
Partner, on the one hand, and the Unitholders, on the other hand, as follows
(capitalized terms used in this paragraph 2 and not defined in the Agreement
shall have the meanings defined in the Company's Amended and Restated Agreement
of Limited Partnership (the "PARTNERSHIP AGREEMENT")):
(a) first, 99% to the Unitholders and 1% to the
General Partner until the Aggregate Consideration Value allocated to the
Unitholders, when added to all prior distributions of Cash Flow Available for
Distribution and all prior distributions of Sale or Refinancing Proceeds (other
than distributions pursuant to Section 5.3(b) of the Partnership Agreement)
made to the Unitholders and the Special Distribution and the amount of any
dividend on the Parent Shares payable to the Unitholders that is attributable
to any time period prior to the Effective Time, equals a 12% cumulative,
non-compounded return on the aggregate weighted average balances of the
Unitholders' aggregate Net Invested Capital outstanding from time to time prior
to the Closing Date;
(b) second, 99% to the Unitholders and 1% to the
General Partner until the Aggregate Consideration Value allocated to the
Unitholders, when added to all prior distributions to the Unitholders of Sale
or Refinancing Proceeds (other than distributions made pursuant to Section
5.3(a) of the Partnership Agreement) equals the Unitholders' aggregate Net
Invested Capital outstanding on the Closing Date; and
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(c) thereafter, with respect to any remaining
Aggregate Consideration Value, 70.71% to the Unitholders and 29.29% to the
General Partner; provided, however, that
(d) the portion of the Aggregate Consideration
Value allocated to the General Partner pursuant to the foregoing provisions of
this paragraph 2 shall be reduced by $997,880 (which is an amount equal to the
amount required to be contributed to the Company by the General Partner
pursuant to Sections 4.1) and such amount shall be reallocated to the
Unitholders and the General Partner pursuant to clauses (a), (b) and (c) of
this paragraph 2, as applicable after giving effect to the allocation of the
Aggregate Consideration Value as provided for in this paragraph 2, in the order
of priority specified therein as if such amount had been included in the
definition of Aggregate Consideration Value and provided, further, that
(e) the portion of the Aggregate Consideration
Value allocated to the General Partner pursuant to clauses (a), (b), (c) and
(d) of this paragraph 2 shall be reduced by the amount, if any, that would be
required to be contributed to the Company by the General Partner in order to
restore to zero any negative balance in the General Partner's Capital Account
pursuant to Section 14.3(b) of the Partnership Agreement if the Company were
dissolved and liquidated as of the Closing Date (after giving effect to the
reduction referred to in clause (d) of this paragraph 2 as if it were a
contribution to the General Partner's Capital Account) and 100% of such amount
shall be reallocated to the Unitholders.
3. Following the allocation of Aggregate Consideration
Value pursuant to paragraph 2 of this Schedule I, an allocation shall be made
as follows:
(a) An amount equal to the Share Percentage (as
defined below) multiplied by the portion of the Aggregate Consideration Value
allocated to the General Partner pursuant to paragraph 2 of this Schedule I
shall be distributed in the form of Parent Shares (valued by reference to the
Closing Share Price) to the General Partner in accordance with Section 2.4 of
the Agreement;
(b) An amount equal to the Cash Percentage (as
defined below) multiplied by the portion of the Aggregate Consideration Value
allocated to the General Partner pursuant to paragraph 2 of this Schedule I,
shall be paid in cash to the General Partner in accordance with Section 2.4 of
the Agreement;
(c) An amount equal to the Share Percentage
multiplied by the portion of the Aggregate Consideration Value allocated to the
Unitholders pursuant to paragraph 2 of this Schedule I (the "UNITHOLDER
AGGREGATE SHARE AMOUNT"), shall be delivered in the form of Parent Shares
(valued by reference to the Closing Share Price) to the Exchange Agent and
distributed to the Unitholders by the Exchange Agent
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in accordance with Section 2.5 of the Agreement, such that each Unitholder
shall receive a number of Parent Shares for each of such Unitholder's Company
Units equal to the quotient obtained by dividing (w) the Unitholder Aggregate
Share Amount by (x) the number of Company Units outstanding on the Closing
Date; and
(d) An amount equal to the Cash Percentage
multiplied by the portion of the Aggregate Consideration Value allocated to the
Unitholders pursuant to paragraph 2 of this Schedule I (the "UNITHOLDER
AGGREGATE CASH AMOUNT"), shall be delivered in cash to the Exchange Agent and
paid to the Unitholders by the Exchange Agent in accordance with Section 2.5 of
the Agreement, such that each Unitholder shall receive for each of such
Unitholder's Company Units, an amount in cash equal to the quotient obtained by
dividing (y) the Unitholder Aggregate Cash Amount by (z) the number of Company
Units outstanding on the Closing Date.
"SHARE PERCENTAGE" means the percentage obtained by dividing
the aggregate value of the Share Consideration (determined by reference to the
Closing Share Price) by the Aggregate Consideration Value.
"CASH PERCENTAGE" means the percentage obtained by dividing
the aggregate value of the Cash Consideration by the Aggregate Consideration
Value.
