Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
SIX CONTINENTS HOTELS, INC.
CANDLEWOOD HOTEL COMPANY, INC.
AND
CANDLEWOOD HOTEL COMPANY, L.L.C.
October 27, 2003
TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE.....................................................................................2
1.1 Transfer of Assets.....................................................................................2
1.2 Consideration to be Paid by Purchaser..................................................................2
1.3 Assumption of Certain Liabilities......................................................................4
1.4 Closing................................................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS............................................................5
2.1 Organization and Authority of Sellers..................................................................5
2.2 Due Authorization......................................................................................5
2.3 No Conflict; Consents..................................................................................6
2.4 Compliance with Laws...................................................................................6
2.5 Title to Assets; Necessary Properties..................................................................6
2.6 Licenses...............................................................................................6
2.7 Equipment Leases.......................................................................................8
2.8 Litigation; Judgments..................................................................................8
2.9 Benefit Plans..........................................................................................9
2.10 Financial Information.................................................................................10
2.11 Taxes; Other Undisclosed Liabilities..................................................................11
2.12 No Unions.............................................................................................11
2.13 Environmental.........................................................................................12
2.14 Assumed Contracts.....................................................................................13
2.15 Employees.............................................................................................13
2.16 Franchising Intangibles...............................................................................14
2.17 Insurance.............................................................................................15
2.18 Solvency of Sellers...................................................................................15
2.19 FF&E..................................................................................................15
2.20 Certain Relations.....................................................................................15
2.21 Brokers...............................................................................................16
2.22 Full Disclosure.......................................................................................16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................................16
3.1 Organization and Authority of Purchaser...............................................................16
3.2 Due Authorization.....................................................................................16
3.3 No Conflict; Consents.................................................................................16
3.4 Litigation............................................................................................17
3.5 Disclosure Documents..................................................................................17
3.6 Financing.............................................................................................17
3.7 Purchaser's Assets....................................................................................17
3.8 Brokers...............................................................................................17
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ARTICLE IV OTHER COVENANTS.....................................................................................17
4.1 Payment by Sellers of Sellers' Vendors and Other Indebtedness.........................................17
4.2 Sales and Transfer Taxes..............................................................................18
4.3 Employees.............................................................................................18
4.4 Conduct of the Business...............................................................................20
4.5 Proxy Statement.......................................................................................22
4.6 Special Meeting.......................................................................................22
4.7 No Solicitation.......................................................................................23
4.8 Termination Fee.......................................................................................24
4.9 Noncompetition........................................................................................24
4.10 Franchising Receivables...............................................................................25
4.11 Maintenance of Books and Records......................................................................25
4.12 Liability Insurance...................................................................................25
4.13 Further Action; Future Cooperation....................................................................25
4.14 Appropriate Action; Consents; Filings.................................................................26
4.15 Public Announcements..................................................................................26
ARTICLE V CLOSING..............................................................................................27
5.1 Closing Deliveries of Sellers.........................................................................27
5.2 Closing Deliveries of Purchaser.......................................................................28
5.3 Conditions to Each Party's Obligations to Close.......................................................30
5.4 Conditions to Purchaser's Obligation to Close.........................................................30
5.5 Conditions to Sellers' Obligations to Close...........................................................31
ARTICLE VI.....................................................................................................32
6.1 Termination...........................................................................................32
6.2 Effect of Termination.................................................................................32
ARTICLE VII MISCELLANEOUS PROVISIONS...........................................................................33
7.1 Effect of Representations and Warranties..............................................................33
7.2 Non-Survival of Representations and Warranties........................................................34
7.3 Headings..............................................................................................34
7.4 Entire Agreement; Amendment; Waiver...................................................................34
7.5 Counterparts; Copies..................................................................................34
7.6 Binding Effect........................................................................................34
7.7 Expenses..............................................................................................34
7.8 Nature of Representations, Warranties, Covenants and Agreements.......................................34
7.9 Notices...............................................................................................35
7.10 Governing Law.........................................................................................36
7.11 Exhibits..............................................................................................37
7.12 No Third-Party Beneficiary............................................................................37
7.13 Assignment............................................................................................37
7.14 Construction..........................................................................................37
7.15 Disclosure............................................................................................38
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7.16 Non-Recourse..........................................................................................38
7.17 Specific Performance..................................................................................38
EXHIBITS
Exhibit A List of Hotels
Exhibit B Marketing Fund Accounts
Exhibit C General Conveyance, Xxxx of Sale and Assignment and Assumption Agreement
Exhibit D Franchise Assignments
Exhibit E Closing Agenda
SCHEDULES
Schedule l.l(k) Assets
Schedule 1.2(b) Wiring Instructions of Sellers and Amounts
Schedule 1.2(e) Wire Instructions of Purchaser
Schedule 1.3(b) Excluded Assets
Schedule 2.1 Franchising Jurisdictions
Schedule 2.3 Consents of Sellers
Schedule 2.4(a) Compliance with Laws
Schedule 2.4(b) Permits
Schedule 2.5 Exceptions to Title
Schedule 2.6 Licenses
Schedule 2.7 Equipment Leases
Schedule 2.8 Litigation
Schedule 2.9 Employee Benefit Plans
Schedule 2.11 Undisclosed Liabilities
Schedule 2.13 Environmental Laws
Schedule 2.14 Assumed Contracts
Schedule 2.15 Employees
Schedule 2.16 Franchise Intangibles
Schedule 2.17 Insurance
Schedule 2.19 FF&E
Schedule 2.20 Franchise Relations; Applications and Prospects
Schedule 2.21 Brokers
Schedule 3.3 Consents of Purchaser
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LIST OF DEFINED TERMS
"include", "includes" or "including"..........................................................................38
Accrued Medical Leave of Absence................................................................................4
Accrued Vacation................................................................................................4
Adjustment......................................................................................................3
Adjustment Schedule.............................................................................................3
Agreement.......................................................................................................1
Assets..........................................................................................................2
Assumed Contracts..............................................................................................13
Assumed Liabilities.............................................................................................4
Business........................................................................................................1
Closing.........................................................................................................5
Closing Date....................................................................................................5
Closing Date Payment............................................................................................3
Code............................................................................................................9
Disclosure Schedule.............................................................................................5
Effective Time..................................................................................................5
Environmental Laws.............................................................................................12
Environmental Permits..........................................................................................12
Equipment Leases................................................................................................8
Exchange Act...................................................................................................10
Excluded Assets.................................................................................................5
Excluded Liabilities............................................................................................4
Expiration Date................................................................................................24
FF&E...........................................................................................................15
Franchise Assignments..........................................................................................28
Franchisee......................................................................................................1
Franchising Intangibles........................................................................................14
Franchising Receivables........................................................................................25
GAAP............................................................................................................3
General Conveyance, Xxxx of Sale and Assignment and Assumption Agreement.......................................28
Governmental Entity.............................................................................................6
Hazardous Substances...........................................................................................12
Hired Employees................................................................................................18
Hotels..........................................................................................................1
HPT Agreements..................................................................................................1
HPT Purchase Agreement..........................................................................................1
IACHO...........................................................................................................8
Interface......................................................................................................14
Knowledge......................................................................................................38
Licenses........................................................................................................7
Liens...........................................................................................................6
Marketing Fees..................................................................................................1
Marketing Fund..................................................................................................1
Material Adverse Effect........................................................................................37
Other Filings..................................................................................................17
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Outside Date...................................................................................................32
Party...........................................................................................................1
Permits.........................................................................................................6
Property........................................................................................................4
Prorations......................................................................................................3
Proxy Statement................................................................................................17
Purchase Price..................................................................................................2
Purchaser.......................................................................................................1
Restricted Activity............................................................................................24
SEC............................................................................................................10
Seller..........................................................................................................1
Sellers.........................................................................................................1
Services........................................................................................................1
Special Meeting................................................................................................22
Supplemental Amount.............................................................................................3
Supplemental Amount Schedule....................................................................................3
System..........................................................................................................1
Termination Agreement...........................................................................................1
Territory......................................................................................................24
Transaction Documents...........................................................................................5
Transactions....................................................................................................5
UFOC............................................................................................................7
Vendors........................................................................................................17
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is dated as
of October 27, 2003, by and among Six Continents Hotels, Inc., a Delaware
corporation ("Purchaser"), Candlewood Hotel Company, Inc., a Delaware
corporation ("Candlewood"), and Candlewood Hotel Company, L.L.C., a Delaware
limited liability company ("Franchisor"), (each of Candlewood and Franchisor, a
"Seller", and jointly, "Sellers"; each of Purchaser and each Seller, a "Party",
and collectively, the "Parties").
BACKGROUND STATEMENT
Sellers have developed and own a concept and distinctive system
("System") for the design, decor, establishment, operation and image of hotels
under certain proprietary trademarks and service marks, and utilizing certain
trade secrets, of Sellers in connection with providing mid-priced, extended-stay
lodging accommodations. Sellers are the exclusive franchisors of this System and
provide certain services as a franchisor (the "Services") to extended-stay
hotels operating or which may in the future operate under the trade name
"Candlewood Suites" (collectively with the System and the Services, the
"Business"), including sales and marketing, quality assurance, information
technology, and access to a nationwide reservation system. In connection with
the Business, Franchisor has entered into franchise or license agreements with
the owner-operators (each a "Franchisee") for each of the hotels identified on
Exhibit A (the "Hotels"). Candlewood provides the Services to the Franchisees
and the Hotels pursuant to the terms of the Licenses (as defined herein). In
addition, Candlewood owns the names "Candlewood"(R), "Candlewood Suites"(R) and
"Where Value Stays"(R), and certain other names and other trade names, service
marks, trademarks, logos, emblems, or other indication of origin which are part
of Sellers' System and related to the Business. Pursuant to the terms of the
Licenses, the Franchisees pay to Franchisor certain sums as royalty fees and as
marketing fees (the "Marketing Fees"), which amounts are deposited into deposit
accounts (in respect of the Marketing Fees, the "Marketing Fund") owned or
controlled by Candlewood and identified on Exhibit B. Purchaser desires to
purchase and assume, and Sellers desire to sell and assign, the assets relating
to the operation of the Business and certain specified liabilities relating to
the operation of the Business.
Contemporaneously with the execution of this Agreement, Candlewood and
certain of its subsidiaries and Hospitality Properties Trust, a Maryland real
estate investment trust ("HPT") are entering into that certain Purchase and Sale
Agreement (the "HPT Purchase Agreement") as well as that certain Termination
Agreement (the "Termination Agreement" and, together with the HPT Purchase
Agreement, the "HPT Agreements").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Transfer of Assets. Subject to the terms and conditions of this
Agreement, at the Closing and as of the Effective Time, Sellers agree to sell,
convey, assign and deliver to Purchaser and Purchaser agrees to purchase and
accept from Sellers, the following assets (other than any Excluded Assets) of
the Business of Sellers, in each case free and clear of all liens of any kind or
nature, including all right, title and interest of Sellers in and to the
following, as the same shall exist at the Effective Time (collectively, the
"Assets"):
(a) The Licenses (as defined in Section 2.6);
(b) The Franchising Intangibles (as defined in
Section 2.16);
(c) The Marketing Fund (as defined in the Background
Statement);
(d) All of the goodwill of Sellers related to the
Business;
(e) The Permits (as defined in Section 2.4);
(f) The Assumed Contracts (as defined in Section 2.14);
(g) The FF&E (as defined in Section 2.19);
(h) The Equipment Leases; (as defined in Section 2.7);
(i) The files and records related to the Business,
original copies of the Licenses, Assumed Contracts and Permits, guest
history records, prototype plans and construction documents, model
Candlewood guest room FF&E, future bookings, and training or other
manuals related to the Business;
(j) All sales and marketing materials and records
(whether or not current) that any Seller owns or uses in connection
with the operation of the Hotels or the solicitation of franchises;
(k) The assets specified on Schedule l.l(k);
(1) All other items of personal property of any kind,
tangible or intangible, owned by any Seller and used or held for use in
the operation of the Business.
1.2 Consideration to be Paid by Purchaser. The consideration to be
paid by Purchaser to Sellers hereunder shall be determined, paid and allocated
as provided herein below:
(a) Consideration; Allocation; Fair Value. The
consideration to be paid by Purchaser for the Assets will equal (i) the
sum of $15,000,000 minus (ii) the sum of the Supplemental Amount
(determined pursuant to Section 1.2(c)) and the Adjustment (determined
pursuant to Section 1.2(d)) (the "Purchase Price")) and, in addition,
Purchaser will assume the Assumed Liabilities to the extent provided in
Section 1.3.
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(b) Closing Payment. At the Closing, in addition to the
assumption of the Assumed Liabilities by Purchaser at the Effective
Time, Purchaser will pay to or for the accounts of Sellers (allocated
among Sellers in accordance with the percentages and pursuant to the
wiring instructions set forth on Schedule 1.2(b)) by wire transfer of
immediately available funds the amount by which (i) $15,000,000 exceeds
(ii) the sum of the Supplemental Amount (without giving effect to the
Adjustment) and the aggregate of the amounts paid by Purchaser to third
party creditors of any Seller pursuant to pay off letters delivered to
Purchaser on or before the Closing Date and/or pursuant to written
instructions signed by Sellers (the "Closing Date Payment").
(c) Supplemental Amount. Except as otherwise provided
herein, all charges and fees attributable to the Assumed Contracts
shall be prorated by and between Sellers and Purchaser as of the close
of business on the Closing Date, with the aggregate amount of such
prorations being deemed a positive value if such aggregate results in
an amount payable by Sellers to Purchaser, and with the aggregate
amount of such prorations being deemed a negative value if such
aggregate results in an amount payable by Purchaser to Sellers (the
"Prorations"). The "Supplemental Amount" shall equal the estimated
value of the Prorations, and will be determined in good faith by
Sellers and in accordance with generally accepted accounting principles
consistently applied ("GAAP") (except that no item shall fail to be
included therein or excluded therefrom on the basis of materiality,
individually or collectively). Sellers shall deliver to Purchaser not
later than five (5) days prior to the Closing Date a schedule (the
"Supplemental Amount Schedule"), certified by the treasurer or chief
financial officer of each Seller, setting forth the Prorations and
Sellers' calculation of the Supplemental Amount.
(d) Adjustment. Promptly and not later than twenty (20)
after the Closing Date, Sellers shall deliver to Purchaser a schedule
(the "Adjustment Schedule"), certified by the treasurer or chief
financial officer of each Seller, setting forth (a) the actual value of
the Prorations and (b) Sellers' calculation of the amount of the excess
of the actual value of the Prorations over the Supplemental Amount (the
"Adjustment"), which amount may be positive or negative. If within five
(5) business days after receipt of the Adjustment Schedule, Purchaser
has not given Sellers notice of objection (reasonably specifying only
the issue(s) in dispute) of Sellers' calculation of the Adjustment,
then Sellers' calculation will be final and binding on the parties. If
Purchaser gives such notice of objection, then the parties will attempt
to resolve any disagreements. If Purchaser and Sellers cannot resolve
any disagreements within twenty (20) days of the delivery of a notice
of objection, then the issue(s) in dispute shall be submitted to a
nationally recognized accounting firm mutually acceptable to the
parties and the decision of such accounting firm shall be final and
binding on the parties. Any fees of such accounting firm shall be split
evenly between Purchaser, on the one hand, and Sellers, on the other
hand.
(e) Adjustment Payment. Promptly after mutual agreement
or the final determination of the Adjustment (but in no event later
than two (2) business days after such agreement or determination), (i)
Sellers shall pay to Purchaser (pursuant to the wiring instructions set
forth on Schedule 1.2(e)) the Adjustment if the Adjustment is a
positive value, or (ii) Purchaser shall pay to Sellers (in the same
percentages and manner
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as the Closing Date Payment was paid) the absolute value of the
Adjustment if the Adjustment is a negative value.
1.3 Assumption of Certain Liabilities.
(a) Assumption by Purchaser. As of the Effective Time,
Purchaser agrees to assume only the obligations of any Seller arising
from and after the Effective Time under the following liabilities
directly related to the Business and the Assets (collectively, "Assumed
Liabilities"):
(i) the obligations of any Seller under the
Licenses for the Business, arising and accruing from and after the Effective
Time other than those based on Sellers' breaches or violations occurring prior
to the Effective Time or as a result of the assignments of the Licenses to
Purchaser pursuant hereto in violation of the terms of the Licenses;
(ii) all obligations of any Seller arising under
any Equipment Lease or Assumed Contract arising and accruing from and after the
Effective Time other than those based on Sellers' breaches or violations
occurring prior to the Effective Time or as a result of the assignments of the
Equipment Lease or Assumed Contract to Purchaser pursuant hereto;
(iii) for those employees of any Seller who are
actively employed as of the Closing Date and who are hired by Purchaser on the
Closing Date, (A) the obligation of any Seller to honor accrued medical leave of
absence as of the Effective Time, excluding all compensation, benefits, FICA and
similar costs attributable thereto and any obligation to make a payment therefor
upon termination (the "Accrued Medical Leave of Absence"), and (B) the aggregate
of the amounts of accrued vacation as reflected on the books of Sellers at the
Effective Time (the "Accrued Vacation"), each determined consistently with
Sellers' past practices and certified by the chief financial officer or
treasurer of each Seller; and
(iv) Purchase orders that pertain solely to the
Business and that are outstanding and unfulfilled at the Effective Time, but
only to the extent provided in Section 4.1 hereto.
(b) Exclusion of Other Assets and Liabilities. Except for
the Assumed Liabilities expressly assumed by Purchaser, it is expressly
understood and agreed that Purchaser will not be liable for and will
not assume any of either Seller's obligations or liabilities, including
contracts, claims, costs, expenses, agreements or understandings, of
any kind or nature whatsoever, whether or not related to any Seller's
operation of the Business or its ownership of the Assets prior to the
Effective Time (the "Excluded Liabilities"). Without limitation, the
term "Excluded Liability" includes any liability or obligation
whatsoever with respect to any past or present environmental conditions
of the Business or of any real property owned or leased by any Seller
at any time for use in the operation of the Business, or on which any
Seller conducted operations related to the Business ("Property"), any
past or present breach, default or violation by any Seller with respect
to any Equipment Lease, License, Assumed Contract or Permit, and
amounts due or obligations to employees accrued or arising prior to the
Effective Time, whether or not such employees are hired by Purchaser
after the Effective Time. Notwithstanding
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anything in this Agreement to the contrary, the Assets to be
transferred and assigned by Sellers to Purchaser hereunder shall not
include those assets (if any) set forth on Schedule 1.3(b) hereto (the
"Excluded Assets").
1.4 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement, which shall consist of the deliveries set forth
in Article VI, shall take place at the offices of Xxxxxxxx & Worcester LLP
located at Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 as soon as
practicable after the satisfaction or, if permissible, the waiver of the
conditions set forth in Article V. The effective time of the Closing (the
"Effective Time") shall be as of 11:59 p.m. on the date on which the Closing
occurs (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
In order to induce Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, except as set forth in the
Disclosure Schedule delivered by Sellers to Purchaser prior to the execution of
this Agreement (the "Disclosure Schedule") Sellers hereby jointly and severally
represent and warrant to Purchaser, as of the date hereof and again on and as of
the Closing Date, as follows:
2.1 Organization and Authority of Sellers. Candlewood is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Franchisor is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Candlewood owns all of the issued and outstanding limited liability
company interests or other equity securities of Franchisor. Except with respect
to compliance with federal or any state's franchise laws, to which Section 2.6
shall apply, each Seller is duly qualified as a foreign entity in such
jurisdictions as the conduct of its business or the ownership of its properties
requires such qualification unless such failure to so qualify could not
reasonably be anticipated to have a Material Adverse Effect. Schedule 2.1 lists
each jurisdiction in which either Seller is qualified or approved to transact
business as a franchising entity. Each Seller has all necessary power and
authority to own its properties and conduct its business as it is presently
being conducted, to execute and deliver this Agreement and such other documents
to be delivered hereunder (the "Transaction Documents") to which such Seller is
or will be a party and to consummate the transactions contemplated thereby and
hereby ("Transactions").
2.2 Due Authorization. Candlewood's directors and Franchisor's
members and managers (as required by their organizational documents) have duly
approved and authorized the execution and delivery of this Agreement and each of
the Transaction Documents and the consummation of the Transactions, and, subject
to approval by Candlewood's stockholders, no other corporate proceedings are
necessary so to approve such authorization, execution and consummation. This
Agreement and each of the Transaction Documents to which any Seller is a party
constitute, or will constitute, when executed and delivered, a valid and binding
agreement of such Seller enforceable against such Seller in accordance with its
terms subject to applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws relating to or affecting the enforcement of creditors rights and
remedies generally and to the availability of specific performance or other
equitable remedies (regardless of whether it is considered in a proceeding in
equity or at law). In approving and authorizing the execution and delivery of
this Agreement and each of the
5
Transaction Documents and the consummation of the Transactions, the board of
directors of Candlewood, based in part upon advice received from its independent
advisors, determined that the Purchase Price to be paid by Purchaser to Sellers
hereunder is fair consideration for the sale of the Assets and the Business.
2.3 No Conflict; Consents. The execution and delivery by each
Seller of the Transaction Documents to which it is a party and the consummation
by each Seller of the Transactions do not and will not: (a) violate the terms of
any instrument, document or agreement to which any Seller is a party or by which
any Seller or the Assets are bound, or be in conflict with, result in a breach
of, constitute (upon the giving of notice or lapse of time or both) a default
under or give rise to a right of termination under any such instrument, document
or agreement or result in the creation of any lien upon any of the property or
assets of any Seller relating to the Business (assuming all of the consents,
approvals and authorizations set forth in Schedule 2.3 hereto are obtained); or
(b) violate any order, writ, injunction, decree, judgment, ruling, law, rule or
regulation of any domestic or foreign governmental, administrative, judicial or
regulatory authority or court ("Governmental Entity") applicable to any Seller
or relating to the Business. Except as set forth on Schedule 2.3 and for
approval by the stockholders of Candlewood, no Seller is required to obtain any
consent from any third party in connection with the execution and delivery of
this Agreement or the consummation of the Transactions.
2.4 Compliance with Laws. Except as set forth on Schedule 2.4(a),
Sellers are in good standing as a franchisor in each state in which the nature
of their operations in connection with the Business requires them to maintain
such standing. Except as set forth on Schedule 2.4(a), no Seller is or has
within three years of the date of this Agreement been, or has received any
notice of being or having been within three years of the date of this Agreement,
in violation of, or under any investigation with respect to, any applicable law,
statute, order, rule, regulation, agency agreement, judgment, decree,
arbitration award, penalty or fine entered by any Governmental Entity relating
to the Business or to any of the Assets, including any franchise laws,
environmental laws, laws concerning occupational health and safety or applicable
zoning laws or regulations. The business licenses and each other permit
necessary for the operation of the Business as operated as of the date of this
Agreement (the "Permits") are listed on Schedule 2.4(b), all of which are in
full force and effect as of the date of this Agreement.
2.5 Title to Assets; Necessary Properties. Except as set forth on
Schedule 2.5, Sellers have, and will transfer to Purchaser at the Closing, good
and valid title to the Assets free and clear of all claims, liens, encumbrances,
covenants, conditions, easements, reservations, leases or other restriction
whether existing of record or not, security interests, mortgages, and similar
interests of any kind or nature whatsoever (collectively, the "Liens"), subject
only to the Assumed Liabilities and, at the Closing, Sellers will transfer to
Purchaser all of the Assets free and clear of all Liens. The Assets are
sufficient in all respects and include all necessary properties for Purchaser to
operate the Business as historically operated, and are individually and
collectively free from material damages by fire, accident or casualty, and free
from material defects. In the event title to one or more assets used in the
conduct of the Business is actually held by an affiliate of a Seller, Sellers
will cause such affiliate to transfer the asset in question to Purchaser at the
Closing.
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2.6 Licenses.
(a) As of the date of this Agreement, true, correct and
complete copies of all executed franchise or license agreements between
Franchisor and any Franchisee related to the Business, all amendments
or stipulations thereto, and the name of each proposed Franchisee with
a description of the status of negotiations with such party, have been
delivered by Sellers to Purchaser and are listed in Schedule 2.6
(together with all franchise or license agreements of the Business
entered into after the date hereof as provided herein, the "Licenses").
None of the Licenses has been amended or modified in any material
respect since such copies were delivered. Each License is in full force
and effect and has not been abandoned. Except as set forth on Schedule
2.6, each current Franchisee signed a Uniform Franchise Offering
Circular ("UFOC") Item 23 "receipt" at least ten business days prior to
executing its franchise agreement with Franchisor. Except as set forth
in Schedule 2.6, as of the date of this Agreement, no proceeding is
pending or, to the Knowledge of any Seller, is threatened, which
alleges a breach or default under any of the Licenses or which seeks
revocation, termination, or limitation of any of the Licenses, and no
party to any License has given written notice of default or
termination. Except for any transfer of any License between Franchisor
and Candlewood, no Seller has made an assignment or transfer of any of
its rights under any of the Licenses.
(b) Except as set forth in Schedule 2.6, neither the
assignment of the Licenses by the applicable Seller to Purchaser
hereunder, nor the exercise of any rights under the Licenses by
Purchaser and its successors and assigns, shall violate the terms
thereof or infringe or conflict in any way with the rights of (i) any
Franchisee, or (ii) to the Knowledge of any Seller, any other person,
firm, association, corporation or other entity. Subject to the terms of
the Licenses, Franchisor is the exclusive owner of the franchisor
rights under the Licenses, free and clear of any and all liens, claims
and encumbrances, and, except as set forth in Schedule 2.6, no License
contains any restrictions on the right of Purchaser and its successors
and assigns to use and enjoy such Licenses.
(c) From the time of Sellers' or their predecessors'
first sale of a franchise in each jurisdiction in which any of them
have sold a franchise, Sellers and their predecessors have at all times
maintained all government approvals necessary for the sale by them of
franchises, and to act as a franchisor, in each such jurisdiction. At
the time of each sale by it of a franchise to each Franchisee located
in the State of Virginia, Franchisor was properly registered as a
franchisor in such State. Except as set forth on Schedule 2.6, all
franchise registrations remain in full force and effect and are not the
subject of any existing or threatened government or other action
intended, in whole or in part, to result in the termination,
revocation, modification, suspension, conditioning or dissolution of
any such franchise registration or any other circumstance which might
or would impair, impede or preclude Purchaser's ability routinely to
renew or amend (as the case may be) any such franchise registration or
enter into franchise agreements in any jurisdiction. Except as set
forth on Schedule 2.6, Sellers have not been notified by any
Governmental Entity that any of Sellers may not sell one or more
franchises in such jurisdiction. Except as set forth on Schedule 2.6,
no Governmental Entity has imposed upon any Seller or the Business any
requirement to escrow any franchise fees related to the Business.
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(d) Each hotel that uses the System or any of the
Franchise Intangibles is subject to a License with Sellers. Except as
set forth on Schedule 2.6, Franchisor and Candlewood are and have been
in compliance in all material respects with their obligations and
liabilities under each of the Licenses, and all other obligations and
liabilities that are due to the Franchisees. To the Knowledge of any
Seller, except as set forth on Schedule 2.6, all Franchisees are in
compliance in all material respects with their respective obligations
and liabilities under the Licenses and all other obligations and
liabilities due to Sellers. Except as set forth on Schedule 2.6, all of
the Licenses, and Sellers rights and obligations thereunder, are freely
assignable by Sellers with no requirement of consent or approval by any
third party or Governmental Entity. Except as described on Schedule
2.6, there have been no prepayments of any amounts due under any
License. Schedule 2.6 identifies all written contracts or other
agreements other than Licenses between any Seller and any Franchisee as
of the date of this Agreement, and Sellers are in compliance in all
material respects with each such contract or agreement.
(e) Franchisor and Candlewood are and have been in
compliance in all material respects with their obligations and
liabilities in respect of the International Association of Candlewood
Hotel Owners ("IACHQ"). Sellers have properly collected and accounted
for all Marketing Fees paid by Franchisees in respect the Marketing
Fund, including all rebates from third party vendors related to the
Marketing Fund, and Schedule 2.6 reflects the amount of the Marketing
Fund as of the date hereof. Each hotel operated under the trademark
"Candlewood"(R) or "Candlewood Suites"(R) has equal representation on
the marketing committee of IACHO, and the action of a majority of such
hotels constitutes the action of such marketing committee. The
directors and officers of IACHO are identified on Schedule 2.6.
2.7 Equipment Leases. Schedule 2.7 lists all of the material
equipment leases under which any Seller is lessee or sublessee of any FF&E or
other personal property used or held for use in the operation of the Business
(other than any that would constitute Excluded Assets) (the "Equipment Leases").
True, correct and complete copies of the Equipment Leases and all amendments
thereto have been delivered to Purchaser by Sellers. Such Equipment Leases have
not been further modified in any respect, are valid and legally binding upon the
parties thereto, and remain in full force and effect. There is not under any of
the Equipment Leases: (i) any material default by any Seller or, to the
Knowledge of any Seller, the lessors; or (ii) any event which, with notice or
lapse of time, or both, would constitute a material default by any Seller or, to
the Knowledge of any Seller, by the lessors.
2.8 Litigation; Judgments.
(a) Except as set forth on Schedule 2.8, there exists no
formal or informal complaint, inquiry, investigation, or judicial or
administrative action or proceeding, communicated or commenced (as the
case may be) by any Governmental Entity to or against Sellers regarding
the offer and sale of franchises; the administration of its franchise
network; advancing or referring to any complaint received from any
Franchisee; inquiring of or contesting any element of Sellers'
franchise program or franchise relationships (including antitrust
issues such as, without limitation, predatory pricing or
monopolization); or otherwise related to Seller's compliance with any
franchise
8
or non-franchise law, rule or regulation. Except as set forth on
Schedule 2.8 or as described in Franchisor's UFOC on the date of this
Agreement, no franchise or franchise-related litigation of any type or
nature whatsoever exists. Except as set forth on Schedule 2.8, Sellers
have no knowledge of any complaints, threats to initiate or join in
litigation or arbitration proceedings, threats to file complaints with
any Governmental Entity or threats to otherwise complain of Sellers in
any respect by any Franchisee (or group of Franchisees, including
IACHO), whether such threats have been filed either with Sellers or any
third party (including any Governmental Entity). Except as set forth on
Schedule 2.8, there exists no material litigation or other claims
asserted by any third party against any Franchisee in which any Seller
or Purchaser is or may become a party under any theory, including
negligence or "vicarious liability".
(b) Except as set forth on Schedule 2.8, there is no
action, proceeding or investigation of any kind or nature pending or,
to Sellers' Knowledge, threatened against or involving any of the
Assets or the operation of the Business or which might hinder, delay or
impose substantial restrictions on the consummation of the transactions
contemplated hereby.
2.9 Benefit Plans.
(a) No Employee Plan Liability. Neither Sellers nor any
ERISA Affiliate (as defined below) has any liability under, or is
subject to, any lien, restriction or other adverse right relating to,
any "Employee Plans" (as defined below) (i) that would affect in any
manner whatsoever Purchaser's right, title and interest in or
Purchaser's right to use or enjoy (free and clear of any lien or
restriction) any Assets, any Assumed Liabilities or any aspect of the
Business or (ii) that would result in the assumption by or imposition
on Purchaser or any of its affiliates or successors of any liability
other than liabilities expressly included as Assumed Liabilities.
Schedule 2.9 attached hereto lists any Employee Plans maintained,
contributed to or participated in by Sellers or any ERISA Affiliate.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) that together with any Seller is treated as a single
employer pursuant to Internal Revenue Code ("Code") sections 414(b),
(c), (m) or (o). "Employee Plans" means any "employee benefit plan" (as
such term is defined section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, and including all applicable laws
thereunder ("ERISA")) or any other compensation, stock option,
restricted stock, bonus, incentive, severance, fringe benefit or
retirement plan of any kind whatsoever, whether formal or informal, not
included in the foregoing or providing benefits for, or for the welfare
of, any or all of the current or former employees, agents, officers,
directors or independent contractors of Sellers or any ERISA Affiliate
or their beneficiaries or dependents. Neither Sellers nor any ERISA
Affiliate maintains or has ever maintained, contributed to or otherwise
participated in or had any liability or obligation with respect to, any
(i) defined benefit plan (as defined in ERISA section 3(35)) subject to
ERISA Title I, Subtitle B, Part 3 or ERISA Title IV, (ii) multiemployer
plan (as defined in ERISA section 3(37)), (ii) multiple employer plan
(as defined in Code section 413(c)), (iii) multiple employer welfare
arrangement (as defined in ERISA section 3(40)) or (iv) Employee Plan
covering employees whose employment is subject to a collective
bargaining agreement.
9
(b) COBRA. Schedule 2.9 lists the name of each former or
current employee and "qualified beneficiary" (as defined in COBRA) of
an Employee Plan subject to COBRA who has experienced a "qualifying
event" (as defined in COBRA) and who is eligible for "continuation
coverage" (as defined in COBRA) and whose maximum period for
continuation coverage has not expired. Such list shall include the
name, social security number and current address for each individual
listed, the date and type of each qualifying event with respect to such
individual and, for any individual who has not yet elected continuation
coverage, the date on which such individual was notified of his or her
rights to elect continuation coverage.
2.10 Financial Information.
(a) Candlewood has filed all registration statements,
forms, reports and other documents required to be filed by Candlewood
with the Securities and Exchange Commission ("SEC") since January 1,
2000 and has made available to Purchaser copies of all registration
statements, forms, reports and other documents filed by Candlewood with
the SEC since such date. All such registration statements, forms,
reports and other documents (including those that Candlewood may file
after the date hereof until the Closing) are referred to herein as the
"Candlewood SEC Reports." The Candlewood SEC Reports (i) were or will
be filed on a timely basis, (ii) at the time filed, were or will be
prepared in compliance in all material respects with the applicable
requirements of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as the case may be, and the
rules and regulations of the SEC thereunder applicable to such
Candlewood SEC Reports, and (iii) did not or will not at the time they
were or are filed contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Candlewood
SEC Reports or necessary in order to make the statements in such
Candlewood SEC Reports, in the light of the circumstances under which
they were made, not misleading.
(b) Each of the consolidated financial statements
(including, in each case, any related notes and schedules) contained or
to be contained in the Candlewood SEC Reports at the time filed (i)
complied or will comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) were or will be
prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the
notes to such financial statements or, in the case of unaudited
statements, as permitted under the Exchange Act) and (iii) fairly
presented or will fairly present, in all material respects, in
accordance with GAAP the consolidated financial position of Candlewood
and its subsidiaries as of the dates thereof and the consolidated
results of its operations and cash flows for the periods indicated,
consistent with the books and records of Candlewood and its
subsidiaries, except that the unaudited interim financial statements
were or are subject to normal year-end adjustments which were not or
are not expected to be material in amount.
(c) All financial information previously provided by
Sellers to Purchaser or its representatives regarding the Business and
the Assets is true and correct in all material respects with respect to
the periods covered thereby, and was prepared in the ordinary course of
the applicable Seller's business, consistent with the internal
accounting practices of such Seller, consistently applied. All such
financial information has been prepared in accordance with
10
GAAP and fairly and accurately presents the financial condition and
results of operations of the Business and the Assets as of the dates
and for the periods shown thereon. Since the respective dates of the
most recent of such financial statements and related information
documents provided by Sellers to Purchaser, the operation of the
Business by each Seller has been conducted in the ordinary course and
consistent with past practices and there has not been any materially
adverse change in the financial condition, assets, liabilities,
revenues, expenses or operations of the Business.
(d) All Franchise Receivables are, and on the Closing
Date will be, valid and represent or will represent true and correct
amounts owed to Sellers. The reserves for doubtful or uncollectible
Franchise Receivables reflected on Sellers' most recent quarterly
balance sheet and on its books and records as of the Closing Date
Financial Statements were and will be established in accordance with
GAAP consistently applied.
2.11 Taxes; Other Undisclosed Liabilities. Each Seller has filed or
will file when due all federal, state and local income, franchise, sales, use,
payroll, excise, business and license tax returns required by law to be filed by
such Seller with respect to the Business or the ownership of the Assets for all
periods prior to the Effective Time. Each Seller has paid or will pay all
federal, state, local or foreign taxes or other governmental charges (including
interest or penalties) imposed with respect to the Business or the ownership of
the Assets for all periods prior to and including the Closing Date. There are no
liens for any such taxes on any of the Assets other than any liens for taxes not
yet due and payable. There are no outstanding assessments or any such taxes
otherwise due that if not paid on a timely basis would result in any liens for
such assessments or taxes on any of the Assets.
(b) Except as set forth in Schedule 2.11, neither Seller
has any liabilities of any nature (whether absolute, accrued,
contingent, liquidated, unliquidated, known, unknown or otherwise)
related to the Assets or the Business, and no act, omission, fact or
circumstance has occurred which could result in such a liability,
except for
(i) liabilities reflected or reserved against in
and the most recent annual and quarterly financial statements of
Sellers contained in the Candlewood SEC Reports (which reserves are
adequate, appropriate and reasonable),
(ii) additional indebtedness resulting from
borrowings by Sellers under any existing loan or credit agreement,
provided that such borrowings were made in the ordinary course of
business; and
(iii) trade payables and similar ordinary and
necessary liabilities incurred in the ordinary course of the Business
(which, among other things, do not include liabilities or obligations
arising from the borrowing of money or secured indebtedness or
negligent or unlawful actions any Seller or any of their respective
officers, directors, agents or employees).
2.12 No Unions. There are no collective bargaining agreements with
any unions affecting any of the Business or Assets. To each Seller's knowledge,
within the 12-month period
11
preceding the date of this Agreement, there have been no material actions
relating to or attempts at organizing any unions for any of the Business.
2.13 Environmental.
(a) For purposes of this Section 2.13, the following
definitions shall apply:
(i) "Environmental Law(s)" shall mean any and
all applicable international, federal, state, or local laws, statutes,
ordinances, regulations, policies, guidance, rules, judgments, orders,
court decisions or rule of common law, permits, restrictions and
licenses, which (i) regulate or relate to the protection or clean up of
the environment; the use, treatment, storage, transportation, handling,
disposal or release of Hazardous Substances, the preservation or
protection of waterways, groundwater, drinking water, air, wildlife,
plants or other natural resources; or the health and safety of persons
or property, including without limitation protection of the health and
safety of employees; or (ii) impose liability or responsibility with
respect to any of the foregoing, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. ss. 9601 et seq.), or any other law of similar effect..
(ii) "Environmental Permits" shall mean any
material permit, license, authorization or approval required under
applicable Environmental Laws.
(iii) "Hazardous Substances" shall mean any
pollutant, chemical, substance and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical, or chemical
compound, or hazardous substance, material or waste, whether solid,
liquid or gas, that is subject to regulation, control or remediation
under any Environmental Laws, including without limitation, any
quantity of asbestos in any form, urea formaldehyde, PCBs, radon gas,
crude oil or any fraction thereof, all forms of natural gas, petroleum
products or byproducts or derivatives.
(b) To the Knowledge of any Seller, and except as set
forth on Schedule 2.13, attached hereto:
(i) The operations of the Properties, was in
full compliance in all material respects with all Environmental Laws at
all times during the periods of any Seller's ownership, lease,
management or conduct of operations with respect to such Properties.
(ii) Each Seller has all the Environmental
Permits necessary for the conduct and operation of the business as now
being conducted, all of which are in full force and effect.
(iii) There is not now and has not been any
Hazardous Substance used, generated, treated, stored, transported,
disposed of, released, handled or otherwise existing on, under, about,
or emanating from or to, any Seller owned, leased or operated property
associated with the Business except in compliance with all applicable
Environmental Laws.
(iv) No Seller has received any notice of
alleged, actual or potential responsibility for, or any inquiry or
investigation regarding, any release or threatened release of
12
Hazardous Substances or alleged violation of, or non-compliance with,
any Environmental Law, nor is the Company aware of any information
which might form the basis of any such notice or any claim.
(v) There is no site to which any Seller has
transported or arranged for the transport of Hazardous Substances which
to the Knowledge of the Seller is or may become the subject of any
environmental action.
(c) True, complete and correct copies of the written
reports, and all parts thereof, of all environmental audits or
assessments which have been conducted at any Seller owned, leased or
operated property, have been provided to Purchaser.
2.14 Assumed Contracts. True, correct and complete copies of all
contracts to which any Seller is a party as of the date of this Agreement (other
than the Permits and the Licenses but including any confidentiality agreement
between any Seller and any Franchisee) that are material to the operation of the
Business and all amendments thereto (the "Assumed Contracts") have been
delivered to Purchaser by Sellers and are listed on Schedule 2.14 as of the date
of this Agreement, and, except as specifically identified on Schedule 2.14
hereto, all of such Assumed Contracts are able to be terminated by the
applicable Seller without cause on not more than sixty (60) days' notice. None
of the Assumed Contracts has been materially modified since such copies were
delivered. Each Assumed Contract is in full force and effect in all material
respects. No party to any of the Assumed Contracts has given notice of default
or termination. Except as set forth on Schedule 2.14, Franchisor and Candlewood
are and have been in compliance in all material respects with their obligations
and liabilities under each of the Assumed Contracts. To the Knowledge of any
Seller, except as set forth on Schedule 2.14, all other parties to the Assumed
Contracts are in compliance in all material respects with their respective
obligations and liabilities under the Assumed Contracts. Except for any transfer
of any Assumed Contract between Candlewood and Franchisor, no Seller has made an
assignment or transfer of any of its rights under any of the Assumed Contracts.
Neither the assignment of the Assumed Contracts by the applicable Seller to
Purchaser hereunder, nor the exercise of any rights under the Assumed Contracts
by Purchaser and its successors and assigns, shall violate the terms thereof or
infringe or conflict in any way with the rights of (i) any Franchisee, or (ii)
to the Knowledge of any Seller, any person, firm, association, corporation or
other entity that could reasonably be anticipated to have a Material Adverse
Effect. Except as otherwise provided on Schedule 2.14, each Assumed Contract is
freely assignable by Sellers with no requirement of consent or approval by any
third party or Governmental Entity.
2.15 Employees. Schedule 2.15 attached hereto contains a true and
complete list of all Hotel-based operational employees and strategic sales
directors of Sellers employed in connection with the operations of the Business
as of the date of this Agreement, including thereon the name, date of hire,
Hotel location, and the current hourly or annualized aggregate compensation of
each employee (including any accrued bonuses or other forms of incentive
compensation), all Accrued Vacation and Accrued Medical Leave of Absence for
each employee. Except as otherwise set forth on Schedule 2.15, each of the
employees listed on Schedule 2.15, as of the date of this Agreement, has been
actively employed by the applicable Seller through the date of this Agreement.
13
2.16 Franchising Intangibles.
(a) Schedule 2.16 lists all of the registered trademarks
(including the names "Candlewood"(R), "Candlewood Suites"(R), "Where
Value Stays"(R)), material unregistered trademarks, service marks,
trade names, Trade Secrets (as defined below, provided that such
listing of Trade Secrets contains only a general description of
material Trade Secrets that have been reduced to writing), registered
and material unregistered copyrights, domain name registrations and
patents owned by any Seller and used in the Business (including where
applicable, the date of registration, serial or registration number or
patent number), as of the date of this Agreement, which Schedule will
be revised, as necessary, to add any such items used in the Business as
of the Closing Date. "Franchising Intangibles" shall mean all of the
trademarks, service marks, trade names, Trade Secrets, copyrights and
copyrighted material, domain name registrations, or patents, and the
custom interfaces for the HIS Lodging Touch system, used by either
Seller or their affiliates in connection with the operation of the
Business, whether or not listed on Schedule 2.16, and shall also
include the xxxx "Cambridge Suites by Candlewood"(R). "Trade Secrets"
shall mean confidential information of Sellers, including (i) the
design for System hotels, (ii) methods of service and operations at
System hotels, (iii) knowledge of sales and profit performance at any
one or more System hotels, (iv) knowledge of test programs, concepts or
results relating to new advertising and promotional programs, (v)
sources of suppliers of equipment, (vi) advertising, promotion, and
marketing techniques, (vii) methods and information regarding the
selection and training of managers and other employees for System
hotels; and (viii) Sellers' System standards manual setting out the
standards, methods, procedures, techniques and specifications of the
System.
(b) Candlewood owns all right, title and interest in and
to all trademarks, service marks, trade names, Trade Secrets,
copyrights and copyrighted material, domain name registrations, patents
and the Interface included within the Franchising Intangibles, the use
of which has been licensed to Franchisor and sublicensed to the
Franchisees pursuant to the Licenses. Candlewood licenses all such
items to Franchisor for use in the Business. Except to the extent set
forth in Schedule 2.16 and as licensed to Franchisees pursuant to the
Licenses, each Seller owns, has the sole and exclusive right to use or
the right without restrictions to use royalty-free all Franchising
Intangibles in connection with the Business as presently conducted, and
the consummation of the transactions contemplated hereby will not alter
or impair any such right. No person other than Sellers and the
Franchisees has any right to use any of the Franchising Intangibles in
connection with the hotel business. Except as set forth on Schedule
2.16, no claims have been asserted within the past three years, and no
claims are pending, by any person regarding the use of any Franchising
Intangibles or challenging or questioning the validity or effectiveness
of any Franchising Intangibles. The use by any Franchisee or each
Seller of the Franchising Intangibles has not and does not infringe on
the rights of any person under applicable law.
(c) Except to the extent set forth in Schedule 2.16, each
Seller:
(i) has procedures in place sufficient to
maintain the confidentiality of the Trade Secrets; and
14
(ii) has obtained from each of its employees
and/or consultants valid and enforceable assignments of their
rights in any Trade Secrets or other Franchising Intangibles
which such employees and/or consultants developed during the
course of their employment or other relationship with such
Seller.
To the extent Trade Secrets are not in documentary form,
Sellers will, on or within a reasonable time after the Closing
Date, make such Trade Secrets available to Purchaser by other
appropriate means, such as interviews, technical assistance or
training, at no additional cost to Purchaser, sufficient to
transfer such Trade Secrets.
(d) Except to the extent set forth in Schedule 2.16,
Sellers control the quality of the services rendered by Franchisees
under the Franchising Intangibles by performing regular inspections at
each Franchisee location, and to the extent any material defects have
been revealed by such inspections, Sellers have taken appropriate steps
to ensure that the Franchisee has corrected such material defects.
2.17 Insurance. The Assets and the Business are currently insured
under various policies of general liability and other forms of insurance, which
are set forth on Schedule 2.17, as of the date of this Agreement, and based on
the past claims experience of Candlewood and Franchisor, such policies are in
amounts adequate in the reasonable judgment of Sellers to protect the business
from significant loss. All such policies are in force and effect with premiums
thereon timely paid and, to the Knowledge of any Seller, no act or failure to
act has occurred which caused or may cause any such policy to be canceled or
terminated. Seller has not been refused any material insurance with respect to
the Business, by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the past five (5) years. Except as
set forth on Schedule 2.17, there are no outstanding requirements or
recommendations by any current insurer or underwriter with respect to the
Business or the Assets that require or recommend material changes in the conduct
of the Business. Schedule 2.17 denotes which of the liability policies are
"occurrences" policies and which are "claims made" policies.
2.18 Solvency of Sellers. As of the Closing Date, the assets of
each of Candlewood and Franchisor will exceed each such entity's liabilities and
each of Candlewood and Franchisor will have at and after the Effective Time
funds sufficient to enable it to pay its debts, obligations and other
liabilities, including the Excluded Liabilities as and when they become due.
Each of Candlewood and Franchisor have not been and will not after the Effective
Time be engaged or about to engage in a business or a transaction for which its
remaining assets were unreasonably small in relation to the business or
transaction.
2.19 FF&E. Schedule 2.19 lists all furniture, trade fixtures,
machinery, computers, cash registers and equipment owned or leased by any Seller
and used in connection with the operation of the Business (the "FF&E"). Sellers
have good and valid title to the FF&E and such FF&E is to be sold and conveyed
to Purchaser hereunder in good condition, normal wear and tear excepted.
2.20 Certain Relations. Seller's relations with its Franchisees are
generally good, and to each Seller's Knowledge, there has not been any
materially adverse change in relations with
15
the Franchisees as a result of the disclosure of the Transactions or otherwise
since the date hereof. Schedule 2.20 lists all pending applications for Licenses
and all material prospective franchisees. All franchise applications are being
processed in the ordinary course of business consistent with past practice.
2.21 Brokers. Except as set forth in Schedule 2.21, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Transactions based upon arrangements made
by or on behalf of Sellers.
2.22 Full Disclosure. This Agreement and the exhibits and schedules
attached hereto disclose all facts material to the Assets and operation of the
Business. No statement contained herein or in any certificate, schedule, list,
exhibit, document, agreement or other instrument furnished by any Seller to
Purchaser in connection with this Agreement contains or will contain any untrue
statement of any material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
In order to induce Sellers to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser represents and
warrants to Sellers, as of the date hereof and as of the Closing Date, as
follows:
3.1 Organization and Authority of Purchaser. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Purchaser is duly qualified as a foreign entity in
such jurisdictions as the conduct of its business or the ownership of its
properties requires such qualification unless such failure to so qualify
reasonably could not be anticipated to have a Material Adverse Effect. Purchaser
has all necessary power and authority to execute and deliver the Transaction
Documents to which Purchaser is or will be a party and to consummate the
Transactions.
3.2 Due Authorization. Purchaser's directors (as required by its
organizational documents) have duly approved and authorized the execution and
delivery of this Agreement and each of the Transaction Documents and the
consummation of the Transactions, and no other corporate proceedings are
necessary to authorize the Transaction Documents and to consummate the
Transactions. This Agreement and each of the Transaction Documents to which
Purchaser is a party constitute, or will constitute, when executed and
delivered, a valid and binding agreement of Purchaser enforceable in accordance
with its terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws relating to or affecting the enforcement of creditors
rights and remedies generally and to the availability of specific performance or
other equitable remedies.
3.3 No Conflict; Consents. The execution and delivery by Purchaser
of the Transaction Documents to which it is a party and the consummation by
Purchaser of the Transactions do not and will not: (a) violate the terms of,
result in any breach of or any loss of benefit under any material instrument,
document or agreement to which Purchaser is a party or by which Purchaser is
bound; or (b) violate any material order, writ, injunction, decree, judgment,
ruling, law, rule or
16
regulation of any Governmental Entity applicable to Purchaser. Except as set
forth on Schedule 3.3, Purchaser is not required to obtain any consent from any
Governmental Entity or other third party in connection with the execution and
delivery of this Agreement or the consummation of the Transactions that could
reasonably be anticipated to cause a Material Adverse Effect if such consent
were not obtained.
3.4 Litigation. As of the date hereof, (A) there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of
Purchaser, threatened against Purchaser and (B) the Purchaser is not subject to
any outstanding order, writ, judgment, injunction or decree of any or
Governmental Entity which, in the case of (A) or (B), would, individually or in
the aggregate, reasonably be expected to prevent or materially delay Purchaser's
ability to consummate the Transactions.
3.5 Disclosure Documents. The information with respect to the
Purchaser that the Purchaser furnishes to the Company in writing and
specifically designated for use in a proxy statement (the "Proxy Statement") or
in any other filing required to be made by Sellers with the SEC other than the
Proxy Statement (the "Other Filings") will not at the time provided contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
3.6 Financing. Purchaser has possession of, or has available to it
under existing lines of credit, sufficient funds to consummate the Transactions,
and will have sufficient funds available to consummate the Transactions.
3.7 Purchaser's Assets. Purchaser's principal assets are
trademarks, franchise contracts, owned and leased hotels, management contracts,
joint venture agreements, and ancillary support businesses. Purchaser's business
comprises the ownership, leasing, management and franchising of hotels and
resorts primarily under the following brands: Holiday Inn, Crowne Plaza, Holiday
Inn Express and Staybridge Suites.
3.8 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Purchaser.
ARTICLE IV
OTHER COVENANTS
4.1 Payment by Sellers of Sellers' Vendors and Other Indebtedness.
Seller will make payment in full to all vendors, suppliers, merchants,
wholesalers, distributors, service companies or similar suppliers of products
and services to the Business (collectively, "Vendors") for all amounts payable
to such Vendors in respect of products and services provided to the Business
prior to the Effective Time. Purchaser shall have no liability whatsoever for
any invoices from Vendors relating to the Business or to the ownership and/or
operation of any of the Assets prior to the Effective Time. Purchaser will have
responsibility for purchase orders of the Business outstanding at the Effective
Time, provided that purchase orders that individually exceed $5,000 must be
approved by Purchaser in writing prior to the Closing and Sellers will retain
all liability
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and obligation pursuant to purchase orders that have not been approved by
Purchaser in writing prior to the Closing to the extent the aggregate of the
amounts payable pursuant to such purchase orders exceeds $10,000. Sellers will
pay all of their debts and discharge all of their obligations as and when they
become due consistent with past practices. Each Seller covenants that before the
Effective Time all assessments levied against the Assets, if any, that are
payable by each Seller shall be paid in full by each Seller even if the
assessments are due in installments after the Effective Time. Each Seller
covenants that it shall pay any income, sales, use, business, franchise,
occupation, withholding, employment, security or similar tax, and all other
taxes of any kind whatsoever with respect to the Assets and/or the operation of
the Business relating to any period prior to the Effective Time and Purchaser
shall pay all such taxes relating to periods after the Effective Time.
4.2 Sales and Transfer Taxes. Each Seller and Purchaser will use
reasonable efforts to take all necessary action to cause the consummation of the
Transactions to qualify for an exemption from any obligation to pay sales, use,
transfer, recording and similar taxes (federal, state, city or otherwise) in
connection therewith. To the extent any such taxes are payable, however, each of
Sellers, on the one hand, and Purchaser, on the other hand, shall be responsible
for the payment of one-half of such taxes.
4.3 Employees.
(a) Purchaser will offer employment at the Effective Time
to all hotel-based operational employees, including to hotel general managers of
Sellers in good standing but not currently assigned to a specific hotel,
employed in connection with the operations of the Business, and to certain
strategic sales directors designated on Schedule 2.15, and Purchaser may (but
shall not be obligated to) offer employment to other employees of the Business.
Individuals who are offered and who accept employment with Purchaser shall
commence employment with Purchaser effective as of the Effective Time and are
referred to herein as "Hired Employees". Sellers shall in all events comply with
the requirements of COBRA.
(b) Purchaser acknowledges that Purchaser shall be
responsible for the employment-related obligations with respect to the Hired
Employees that arise with respect to their employment by Purchaser as of the
Effective Time. For purposes of this section, "employment related obligations"
shall include compensation for services performed for Purchaser after the
Effective Time (and related employment and withholding taxes), benefits accrued
under any Purchaser-sponsored plan or arrangement of Purchaser covering the
employees after the Effective Time, worker's compensation benefits with respect
to injuries after the Effective Time and Accrued Vacation and Accrued Medical
Leave of Absence.
(c) Seller shall have responsibility for and shall pay
when due all compensation and benefits owed (i) to Hired Employees, for all
service and employment prior to the Effective Time, except to the extent
specifically included in the Assumed Liabilities, and (ii) to all other
employees of Sellers. Seller shall comply with the requirements of the Worker
Adjustment and Retraining Notification Act of 1988 ("WARN") with respect to any
"plant closing" or "mass layoff", as those terms are defined in WARN, which may
result from any Seller's termination of the employment of any of its employees
in connection with the
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transactions contemplated by this Agreement, and Purchaser shall have no
obligation or responsibility therefor.
(d) Subject to the terms and conditions of any applicable
collective bargaining agreement which may be in effect at any time in the
future, for a period of one (1) year immediately following the Effective Time,
Purchaser shall provide the Hired Employees with a compensation package which
is, when combined with the Employee Plans described in clause (e) of this
Section 4.3, substantially comparable in the aggregate the compensation package
and Employee Plans which the Hired Employees are provided by Sellers as
reflected on Schedule 2.15.
(e) Subject to the terms and conditions of any applicable
collective bargaining agreement which may be in effect at any time in the
future, for a period of one (1) year immediately following the Effective Time,
Purchaser shall provide the Hired Employees certain Employee Plans that are,
when combined with the compensation package described in clause (d) of this
Section 4.3, substantially comparable in the aggregate the compensation package
and Employee Plans which the Hired Employees are provided as reflected on
Schedule 2.9. Purchaser shall ensure that its Employee Plans credit employment
with any of Sellers prior to the Effective Time the same as employment with any
of Purchaser, its parent and its subsidiaries from and after the Effective Time
for purposes of eligibility, vesting, and benefit accrual (except with respect
to any defined benefit or cash balance plan) under Sellers' Employee Plans.
(f) Immediately after the Effective Time, Purchaser shall
cause the Hired Employees to be covered by one or more medical benefit plans
("Purchaser's Medical Plans") which shall provide benefits to the Hired
Employees and their dependents which in the aggregate are no less favorable then
the medical benefits which were provided to the Hired Employees and their
dependents by Sellers' medical plans. Purchaser's Medical Plans shall waive any
"pre-existing conditions" exclusions or limitations which would cause any of the
Hired Employees or their dependents to be excluded from Purchaser's Medical
Plans immediately after the Effective Time. Purchaser shall give effect, in
determining any deductible and maximum out-of-pocket limitations, to claims
incurred and amounts paid by, and amounts reimbursed to, the Hired Employees in
the plan year in which the Closing Date occurs with respect to medical plans
maintained by Sellers for their benefit immediately prior to the Effective Time.
(g) Subject to the terms and conditions of any applicable
collective bargaining agreement which is currently in effect or which may be in
effect at any time in the future, each Hired Employee who satisfies the
eligibility requirements of Purchaser's 401(k) plan shall become eligible to
participate in Purchaser's 401(k) plan as of the Effective Time. Purchaser's
401(k) plan shall accept rollovers from any Seller's 401(k) plan with respect
to Hired Employees who participate in Purchaser's 401(k) plan.
(h) Purchaser shall not assume any of the Employee Plans,
and any liabilities arising from Sellers' employment of the employees prior to
the Effective Time shall remain the sole obligation of Sellers.
(i) No provision of this Agreement shall create any
third-party beneficiary rights in any Hired Employee, any beneficiary or
dependent thereof, or any collective bargaining
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representative thereof, with respect to the compensation, terms and conditions
of employment and/or benefits that may be provided to any Hired Employee by
Purchaser or under any benefit plan which Purchaser may maintain.
4.4 Conduct of the Business. Except as expressly contemplated in
this Agreement or as otherwise consented to in writing by Purchaser, from and
after the date of this Agreement until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time,
(a) Candlewood shall, and shall cause its subsidiaries to
(i) carry on the Businesses in the usual,
regular and ordinary course in substantially the same manner as previously
conducted and, to the extent consistent therewith, will use commercially
reasonable efforts to preserve intact its current organization, maintain the
Assets, the Business and the System in good condition in a manner consistent
with past practice, keep available the services of its current officers and
employees, preserve its relationships with persons having business dealings with
it, solicit and process applications for Licenses in the ordinary course of
business, consistent with past practice, and promptly deliver to Purchaser true
and correct copies of any Licenses Sellers may enter into in accordance with the
terms of this Agreement;
(ii) Sellers will, for no additional
consideration due from Purchaser, pay to Purchaser at the Effective Time the
full amount paid by any Franchisee to any Seller as liquidated damages to effect
the early termination of any License;
(iii) use its commercially reasonable efforts to
maintain insurance coverage of the types and in the amounts carried by it prior
to the execution of this Agreement and promptly report all known claims within
the applicable claims period; and
(iv) take all action that is necessary and
appropriate to terminate any license of rights related to the Franchising
Intangibles other than any license of such rights between any Seller and any
Franchisee entered into pursuant to any License, including any license of such
rights by Candlewood to Franchisor that will be assumed by Purchaser in
connection with the Transactions; and
(b) Candlewood shall not, and shall not permit any of its
subsidiaries to, directly or indirectly, do any of the following
without the prior written consent of Purchaser (which consent will not
be withheld unreasonably):
(i) purchase, sell, lease or dispose of any
material property related to the Business or Assets and not incur any material
liability or make any material commitment or enter into any other material
transaction related to the Business, except in the ordinary and usual course of
business or pursuant to contracts existing on the date hereof;
(ii) agree to amend, modify or terminate any
existing License or materially amend or modify any existing Assumed Contract,
whether or not in the ordinary and usual course of business;
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(iii) enter into any License or take any action
which would influence a prospective Franchisee of the Business whose profile is
more suited for the Business to enter into a franchise or license agreement in
respect of Sellers Cambridge Suites business;
(iv) except as expressly provided by this
Agreement, by that certain voting agreement entered into between HPT and certain
of Candlewood's stockholders in connection with the HPT Agreements, or by any
plan of dissolution approved by Candlewood's stockholders, amend or propose to
amend Candlewood's or any of its subsidiaries' articles of incorporation or
organization, bylaws, operating agreement, partnership agreement or other
comparable charter or organizational documents, or modify or agree to modify in
any material respect the operative documents or procedures of IACHO;
(v) acquire (A) by merging or consolidating
with, or by purchasing all or a substantial portion of the assets or any stock
of, or by any other manner, any business or any corporation, partnership, joint
venture, limited liability company, association or other business organization
or division thereof or (B) any assets that are material, in the aggregate, to
Candlewood and its subsidiaries, taken as a whole, except purchases of assets in
the ordinary course of business;
(vi) pledge or encumber, sell, lease, license,
dispose of or otherwise transfer any assets material to the Business, taken as a
whole (including any accounts, leases, contracts or intellectual property or any
assets or the stock of any of its subsidiaries) other than (A) in the case of
pledges, encumbrances and leases, in connection with the purchase of equipment
subject to capital lease or other similar financing arrangements in the ordinary
course of business consistent with Candlewood's past practice, and (B)
dispositions in the ordinary course of business of equipment no longer used in
the businesses of Candlewood and its subsidiaries;
(vii) except as contemplated by the HPT
Agreements, enter into an agreement with respect to any merger, consolidation,
liquidation or business combination, or any acquisition or disposition of all or
substantially all of the assets or securities of Candlewood or any of its
subsidiaries;
(viii) make any changes in accounting methods,
principles or practices or any assumption underlying, or method of calculating,
any bad debt, contingency or other reserve, except as may have been required by
a change in GAAP or applicable Law;
(ix) (A) pay, discharge, settle or satisfy any
material claims, liabilities or obligations (whether absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the in ordinary course of
business or in accordance with their terms as in effect on the date of this
Agreement, unless such payment, discharge, settlement or satisfaction would not
reasonably be expected to impose upon Candlewood or any of its subsidiaries any
material burden that would remain in effect and apply to the Assets after the
Closing, or (B) waive any benefits of, modify in any respect, or fail to enforce
any confidentiality, standstill or similar agreements to which Candlewood or any
of its subsidiaries is a party which results in a Material Adverse Effect;
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(x) knowingly waive, release or assign any
material rights or claims thereunder in a manner adverse to the Business or the
Assets (including any write-off or other compromise of any material accounts
receivable of Candlewood or any of its subsidiaries related to the Business or
the Assets);
(xi) except on a non-exclusive basis in the
ordinary course of business, license any material intellectual property rights
related to the Business or the Assets to any other person;
(xii) compromise or settle any material litigation
or arbitration proceeding related to the Business or the Assets;
(xiii) permit the prepayment of or compromise or
discount any of Franchised Receivables;
(xiv) except for individual annual merit increases
in salary or wages of less than 2.5% offered in the ordinary course of business
consistent with past practice, amend or modify compensation or benefits payable
to or for the benefit of any person being considered as a Hired Employee,
including any raises in salary or wages, any modification of any Benefit Plan,
or Seller's vacation or medical leave of absence policy; or
(xv) authorize any of, or commit or agree, in
writing or otherwise, to take any of, the foregoing actions or any action which
would materially impair or prevent the satisfaction of any conditions in Article
VI.
4.5 Proxy Statement. As promptly as practicable after the
execution of this Agreement, Candlewood will prepare and file with the SEC a
Proxy Statement and any Other Filings which shall comply in all material
respects with the provisions of the Exchange Act. Purchaser will provide
Candlewood with any information which is specifically requested by Candlewood in
writing and which may be required in order to effectuate the preparation and
filing of the Proxy Statement. Candlewood will use its commercially reasonable
efforts to respond to any comments from the SEC. Candlewood will notify
Purchaser promptly upon the receipt of any comments from the SEC or its staff in
connection with the filing of, or amendments or supplements to, the Proxy
Statement. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement, Candlewood will promptly inform
Purchaser of such occurrence and file with the SEC or its staff, and/or mail to
stockholders of Candlewood such amendment or supplement. Candlewood shall
provide Purchaser (and its counsel) with a reasonable opportunity to review and
comment on the Proxy Statement and any amendment or supplement to the Proxy
Statement prior to filing such with the SEC, and will provide Purchaser with a
copy of all such filings made with the SEC.
4.6 Special Meeting. Candlewood (i) shall call a special meeting
of its stockholders ("Special Meeting") to be held as promptly as practicable
after the filing of the Proxy Statement with the SEC for the purpose of voting
upon the Transactions, (ii) will cause the Proxy Statement to be mailed to its
stockholders and (iii) subject to the fiduciary duties of the board of directors
of Candlewood under Delaware law, shall use all reasonable efforts to obtain
stockholder approval of the Transactions.
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4.7 No Solicitation.
(a) If, prior to receipt of the Stockholder Approval,
Candlewood shall receive a Purchase Proposal from any person, and Candlewood's
board of directors shall determine in good faith, after consultation with
independent counsel and Candlewood's financial advisor, that failing to take
such action would be inconsistent with its fiduciary obligations under Delaware
law, Candlewood's board of directors may, in response to a Purchase Proposal,
terminate this Agreement and accept such Purchase Proposal, and then Candlewood
shall give Purchasers notice thereof and, subject to the continuing obligations
of Sellers hereunder, including under Section 4.8, this Agreement shall
terminate without recourse. For purposes of this Agreement, a "Purchase
Proposal" shall mean any offer or proposal concerning any (A) merger,
consolidation, business combination, or similar transaction involving Candlewood
or any of its subsidiaries, (B) sale, lease or other disposition directly or
indirectly by merger, consolidation, business combination, share exchange, joint
venture, or otherwise of assets of Candlewood or any of its subsidiaries
representing 25% or more of the consolidated assets of Candlewood and its
subsidiaries, (C) issuance, sale, or other disposition of (including by way of
merger, consolidation, business combination, share exchange, joint venture, or
any similar transaction) securities (or options, rights or warrants to purchase,
or securities convertible into or exchangeable for such securities) representing
25% or more of the voting power of Candlewood or (D) transaction in which any
person shall acquire beneficial ownership, or the right to acquire beneficial
ownership or any group shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of 25% or more of the outstanding voting
capital stock of Candlewood or (E) any combination of the foregoing.
(b) Candlewood shall not, and shall not permit any of its
subsidiaries, officers or directors, or any of its representatives, directly or
indirectly, to knowingly solicit or initiate (including by way of furnishing any
non-public information concerning Candlewood's business, properties, assets or
prospects) discussions, inquiries or proposals or participate in any negotiation
leading to any proposal concerning any Purchase Proposal or for the sale of all
or substantially all of Candlewood's Assets or for the purchase of all or
substantially all of Candlewood's equity securities, except for the transactions
contemplated by this Agreement and the HPT Agreements; provided, however, that
if, at any time prior to the obtaining of the Stockholder Approval, Candlewood's
board of directors determines in good faith, after consultation with independent
counsel, that failing to take such action would be inconsistent with its
fiduciary duties to Candlewood's stockholders, Candlewood may, in response to a
Purchase Proposal, (i) furnish information with respect to Candlewood and its
subsidiaries to the person making such Purchase Proposal pursuant to a customary
confidentiality agreement and (ii) participate in discussions and negotiations
with respect to such Purchase Proposal. If Candlewood shall receive any offer or
request for non-public information, it shall (i) inform Purchaser that an offer
or request has been received, and (ii) furnish to Purchaser the identity of the
offerer or person making the request, and, in the case of an offer, a copy of
such offer or, if oral, a description of the material terms thereof.
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4.8 Termination Fee. If Candlewood accepts a Purchase Proposal and
terminates this Agreement pursuant to Section 4.7, Candlewood shall promptly,
but in no event later than two business days after the consummation of the
transactions contemplated by such Purchase Proposal, pay Purchaser an aggregate
termination fee of $428,571.43.
4.9 Noncompetition.
(a) Seller acknowledges that (1) Sellers are the
exclusive franchisors of the System and provide the Services to
extended-stay mid-priced hotels (the "Restricted Activity") pursuant to
its Business throughout the United States (the "Territory") (2)
Purchaser would not purchase the Business and the Assets or enter into
the transactions contemplated by this Agreement without assurances that
Sellers will not engage in the activities prohibited by this Agreement
for the specified periods, (3) in order to induce Purchaser to enter
into this Agreement, Sellers will restrict their actions as provided in
this Agreement, and (4) such restrictions are reasonable in light of
the Business and the benefits of this and other transactions
contemplated by this Agreement to Sellers. Sellers and Purchaser agree
that:
(i) until the third anniversary of the Closing
Date or until such time as neither Purchaser nor any of its subsidiaries is
engaged in the Restricted Activity in the Territory, whichever is earlier (the
"Expiration Date"), Sellers will not directly or indirectly, in the Territory
either engage in, have any interest in, act as agent, broker, or distributor for
or adviser or consultant to, or in any way assist (whether by solicitation of
customers or employees or otherwise) any person, firm, corporation or business
entity other than Purchaser and its affiliates which is engaged, or which any
Seller knows is undertaking to become engaged, in the Territory in the
Restricted Activity; provided that this Section 4.9(a)(i) shall not prohibit
Sellers from owning any publicly traded shares or other securities of any
company that is engaged in any such business so long as the aggregate amount of
all such shares and other securities owned by any such Seller does not exceed 5%
of the outstanding shares or securities of such company;
(ii) until the Expiration Date, Sellers will not
directly or indirectly induce a Franchisee or a prospective franchisee of the
Business to become a franchisee of any business entity operating in the
Territory (other than Purchaser or its affiliates) with respect to extended-stay
hotels; and
(iii) until the Expiration Date, no Seller will
directly or indirectly through a business entity in which he or any of his
affiliates has an ownership interest, request or induce any employee of
Purchaser to terminate his employment with Purchaser or its affiliates and
accept employment with another business entity engaged in the Restricted
Activity in the Territory.
(iv) For purposes of this Section 4.9, a
"mid-priced, extended-stay" hotel is a hotel with an average daily rate between
$55 and $75 and that more than 50% of the guests of which occupy rooms for more
than seven nights, and does not include any of Sellers' Cambridge Suites hotels
open and operating on the date of this Agreement so long as such hotels are
operated in the same manner as they are operated on the date of this Agreement.
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4.10 Franchising Receivables. Purchaser and Sellers will negotiate
in good faith to determine a value of all accounts receivable of the Business
arising solely pursuant to the terms of the Licenses (the "Franchising
Receivables"). If the parties agree on a value of the Franchising Receivables,
Purchaser may purchase from Sellers all of the Franchising Receivables by paying
to Sellers such agreed value at the Closing.
4.11 Maintenance of Books and Records. After the Effective Time,
where there is a legitimate purpose, each of Sellers and Purchaser shall provide
the others and their representatives with access, upon prior reasonable written
request specifying the need therefor, during regular business hours, to (i) the
officers and employees of such Party and (ii) the books of account and records
of such Party, but, in each case, only to the extent relating to the assets,
liabilities or operations of the Business prior to the Effective Time or the
performance of the Assumed Liabilities, and the other Parties and their
representatives shall have the right to make copies of such books and records;
provided, however, that the foregoing right of access shall not be exercisable
in such a manner as to interfere unreasonably with the normal operations and
business of such Party; and further, provided, that, as to so much of such
information as constitutes Trade Secrets or confidential business information of
such Party, the requesting Party, its affiliates, officers, directors and
representatives will use due care to not disclose such information except (i) as
required by law, (ii) with the prior written consent of such Party, which
consent shall not be unreasonably withheld, or (iii) where such information
becomes available to the public generally, or becomes generally known to
competitors of such Party, through sources other than the requesting Party, its
affiliates or its officers, directors or representatives. All books and records
possessed or to be possessed by such Party relating to any of the Assets,
liabilities or business of the Business prior to the Effective Time shall be
preserved for a reasonable period of time, but in any event for not less than
two years. Before destroying any such records, a Party send to the other parties
written notice of its intent to destroy records, specifying with particularity
the contents of the records to be destroyed. Such records may then be destroyed
after the 60th day after such notice is given unless another Party objects to
the destruction in which case the Party seeking to destroy the records shall
deliver such records to the objecting Party.
4.12 Liability Insurance. Sellers shall maintain their current
liability insurance in full force and effect until the Closing Date, cause
Purchaser to be named as an additional insured thereon as of the Effective Time,
deliver to the Purchaser certificates of insurance to that effect, and maintain
Purchaser as a named insured thereon.
4.13 Further Action; Future Cooperation. Sellers and Purchaser
shall take such actions, do all things necessary, and execute such documents,
certificates, instruments and other papers as may be reasonably required or
desirable to carry out the provisions of this Agreement and the Transactions,
and shall each deliver or cause to be delivered to the other following the
Closing such additional instruments as the other may reasonably request for the
purpose of fully carrying out this Agreement. Sellers will cooperate and use
their commercially reasonable efforts to have the present officers, directors
and employees cooperate with Purchaser at and following the Closing in
furnishing documents, information, evidence, testimony and other assistance,
whether in connection with any actions, proceedings, arrangements or disputes of
any nature with respect to matters pertaining to all periods prior to the
Closing or otherwise. Sellers will further so cooperate prior to the Closing
Date in the transfer of the operations of all hotels
25
owned or leased by Sellers and operating under the name "Candlewood Suites",
which hotels are the subject of an effective License, to Purchaser, which
cooperation will include, in addition to the foregoing, the granting to
Purchaser and its agents of reasonable access to Sellers' offices and facilities
and to such hotels during normal business hours, prorations of all utility
deposits, and prompt and complete transfer of all employee and other files and
records after the Effective Time. The Party requesting cooperation, information
or actions under this Section 4.12 shall reimburse the other Party for all
reasonable out-of-pocket costs and expenses paid or incurred in connection
therewith, which costs and expenses shall not, however, include per diem charges
for employees or allocations of overhead charges.
4.14 Appropriate Action; Consents; Filings. The Purchaser and
Sellers shall use their commercially reasonable efforts to (A) take, or cause to
be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable law or otherwise to consummate
and make effective the transactions contemplated by this Agreement as promptly
as practicable, (B) obtain from any Governmental Entity any consents, licenses,
permits, waivers, approvals, authorizations or orders respectively required to
be obtained or made by Purchaser and Sellers or any of their respective
subsidiaries, or to avoid any action or proceeding by any Governmental Entity in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Transactions, and (C) make or assist the other parties
hereto in making all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Transactions required under
the Exchange Act, and any other applicable law; provided, however, that
Purchaser and Sellers shall cooperate with each other in connection with the
making of all such filings, including providing copies, if requested, of all
such documents to the non-filing party and its advisors prior to filing and, if
requested, to accept all reasonable additions, deletions or changes suggested in
connection therewith, and to assist Purchaser in preparing a UFOC sufficient for
the Purchaser's operation of the Business after the Effective Time. The
Purchaser and Sellers shall furnish, upon written request, to each other all
information required for any application or other filing under the rules and
regulations of any applicable law in connection with the transactions
contemplated by this Agreement.
4.15 Public Announcements. Purchaser and Sellers shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Transactions and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law. Notwithstanding anything to the contrary set
forth herein or in any other written or oral understanding or agreement to which
the parties hereto are parties or by which they are bound, the parties
acknowledge and agree that (i) any obligations of confidentiality contained
herein and therein do not apply and have not applied from the commencement of
discussions between the parties to the tax treatment and tax structure of the
Transaction (and any related transactions or arrangements), and (ii) each party
(and each of its employees, representatives, or other agents) may disclose to
any and all persons, without limitation of any kind, the tax treatment and tax
structure of the Transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to such party relating to such tax
treatment and tax structure, all within the meaning of Treasury Regulation
Section 1.6011-4; provided, however, that each party recognizes that the
privilege each has to maintain, in its sole discretion, the confidentiality of a
communication relating to the Transaction, including a confidential
communication with its attorney or a confidential
26
communication with a federally authorized tax practitioner under Section 7525 of
the Internal Revenue Code, is not intended to be affected by the foregoing.
ARTICLE V
CLOSING
5.1 Closing Deliveries of Sellers. At the Closing, Sellers shall
make the following deliveries to Purchaser and shall execute and deliver to
Purchaser or otherwise cause to be delivered to Purchaser, as the case may be,
each of the following documents dated as of the Closing Date:
(a) Manager's and Officer's Certificates.
(i) A certificate dated the Closing Date from
Candlewood and duly executed by the appropriate officer of Candlewood: (i)
setting forth the names, titles and signatures of the officers of Candlewood
executing the Transaction Documents to be executed by Candlewood, (ii) attaching
certified copies of all resolutions of the directors and the stockholders
authorizing the execution and delivery of this Agreement, the Transaction
Documents and consummation of the Transactions, which certificate shall state
that such resolutions have not been modified, amended or rescinded, and (iii)
attaching a complete copy of the Certificate of Incorporation of Candlewood
certified by the Delaware Secretary of State and a complete copy of the current
Bylaws of Candlewood certified by the appropriate officer of Candlewood.
(ii) A certificate dated the Closing Date from
Franchisor and duly executed by the appropriate manager or officer of
Franchisor: (i) setting forth the names and titles of the managers or officers
of Franchisor executing the Transaction Documents to be executed by Franchisor
and the signatures of such managers or officers, (ii) attaching certified copies
of all resolutions of the members and/or managers authorizing or otherwise
addressing the execution and delivery of this Agreement, the Transaction
Documents and consummation of the Transactions, which certificate shall state
that such resolutions have not been modified, amended or rescinded, and (iii)
attaching a complete copy of the Certificate of Formation of Franchisor
certified by the Delaware Secretary of State and a complete copy of the current
limited liability company agreement of Franchisor certified by the appropriate
manager or officer of Franchisor.
(iii) The other certificates required by Section
1.2.
(b) Closing Certificate. A certificate, dated the Closing
Date, from the chief executive officer or other senior officer of each Seller to
the effect that:
(i) each of the representations and warranties
of Sellers set forth in this Agreement is true and correct in all material
respects as though made on and as of the Closing Date except for any
representations and warranties that speak as of a specific date,
(ii) Each Seller has performed and complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing, and
27
(iii) all conditions precedent to the obligations
of Sellers under this Agreement have been satisfied or waived.
(c) General Conveyance, Xxxx of Sale and Assignment and
Assumption Agreement. A combined general warranty xxxx of sale (with respect to
all Assets) and assignment and assumption instruments relating to the Equipment
Leases, the Licenses and the Assumed Contracts, in substantially the form
attached hereto as Exhibit C (the "General Conveyance, Xxxx of Sale and
Assignment and Assumption Agreement").
(d) Assignment and Assumption of Certain Franchising
Intangibles. The Franchise Assignments, which shall be in substantially the form
attached hereto as Exhibit D, as to the assumption by Purchaser of each Seller's
right, title and interest in and to certain of the Franchising Intangibles (the
"Franchise Assignments").
(e) Certificate of Existence and Good Standing. A
Certificate of Existence with respect to each Seller issued by the Secretary of
State of such Seller's state of incorporation or organization, and a certificate
of good standing for each Seller as to each other state in which any of the
Business is located.
(f) Consents. Executed copies of each of the consents
necessary to consummate the Transactions (including the consents listed on
Schedule 2.3 hereto as of the date of this Agreement), each of which shall be in
form and substance reasonably acceptable to Sellers and Purchaser.
(g) Certificates of Insurance. Certificates of insurance
in respect of Sellers' liability insurance policies naming Purchaser as a named
insured thereon effective as of the Effective Time.
(h) License and Sublicenses. The trademark license
described in Section 5.2(h) and duly executed franchise agreements or
sublicenses authorizing all third parties which use the xxxx "Cambridge Suites
by Candlewood"(R) to use such xxxx, in form reasonably acceptable to Purchaser.
(i) Additional Documents. Any and all other documents
reasonably requested by Purchaser or its counsel, including any additional
documents listed in the draft closing agenda set forth as Exhibit E.
5.2 Closing Deliveries of Purchaser. At the Closing (except as to
Section 5.2(b), after the Closing), Purchaser shall make the following
deliveries to Sellers and shall execute and deliver to Sellers or otherwise
cause to be delivered to Sellers, as the case may be, each of the following
documents dated as of the Closing Date:
(a) Officer's Certificate. A certificate dated the
Closing Date and duly executed by the officers of Purchaser: (i) setting forth
the names and titles of the officers of Purchaser executing the Transaction
Documents to be executed by Purchaser and the signatures of such officers, (ii)
attaching certified copies of all resolutions of the Board of Directors of
Purchaser authorizing or otherwise addressing the execution and delivery of this
Agreement, the Transaction Documents and consummation of the Transactions, which
certificate shall state that
28
such resolutions have not been modified, amended or rescinded, and (iii)
attaching a complete copy of the Certificate of Incorporation of Purchaser
certified by the Delaware Secretary of State and a complete copy of the current
Bylaws of Purchaser certified by the officers of Purchaser.
(b) Closing Certificate. A certificate, dated the Closing
Date, from the chief executive officer or other senior officer of Purchaser to
the effect that
(i) each of the representations and warranties
of Purchaser set forth in this Agreement is true and correct in all material
respects as though made on and as of the Closing Date except for any
representations and warranties that speak as of a specific date,
(ii) Purchaser has performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it prior to or at the Closing, and
(iii) all conditions precedent to the obligations
of Purchaser under this Agreement have been satisfied or waived.
(c) General Conveyance, Xxxx of Sale and Assignment and
Assumption Agreement. The General Conveyance, Xxxx of Sale and Assignment and
Assumption Agreement.
(d) Assignment and Assumption of Franchising Intangibles.
The Franchise Assignments.
(e) Good Standing Certificate. A good standing
certificate with respect to Purchaser issued by the Delaware Secretary of State.
(f) Consents. Executed copies of each of the consents
necessary to consummate the Transactions (including the consents listed on
Schedule 3.3 hereto as of the date of this Agreement), each of which shall be in
form and substance reasonably acceptable to Sellers and Purchaser.
(g) Purchase Price. At the Closing, the Purchase Price to
be paid at Closing shall be paid by Purchaser in accordance with Section 1.2.
(h) Trademark License. A world-wide, six-month,
royalty-free, non-exclusive license to use or authorize the use of the trademark
"Cambridge Suites by Candlewood"(R) exclusively in connection with Sellers' four
existing Cambridge Suites franchise or license agreements for the purpose of
changing signage and consuming or disposing of stationery, documents and all
other items bearing such trademark to terminate the use of such trademark in
connection with such hotels, which license shall also provide Sellers' agreement
to terminate all use of such xxxx by any other person claiming rights under
Sellers.
(i) Additional Documents. Any and all other documents
reasonably requested by Sellers or their counsel, including any additional
documents listed in the draft closing agenda set forth as Exhibit E.
29
5.3 Conditions to Each Party's Obligations to Close. The
respective obligations of Purchaser to take the actions required to be taken by
Purchaser at the Closing and Sellers to take the actions required to be taken by
Sellers at the Closing are subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) the receipt of all necessary regulatory approvals
required by applicable law for the consummation of the Transactions and the
expiration or termination of any applicable waiting period with respect thereto;
(b) there shall not have been instituted, pending or
threatened any action or proceeding by any Governmental Entity or before any
Governmental Entity or court of competent jurisdiction, nor shall there be in
effect any judgment, decree order, or injunction of any Governmental Entity or
court of competent jurisdiction, or any other legal restraint preventing or
seeking to prevent consummation of the transactions contemplated by this
Agreement;
(c) the stockholders of Candlewood shall have approved at
a special meeting of the stockholders duly convened the execution and delivery
of this Agreement and the consummation of the Transactions;
(d) Candlewood, certain of Candlewood's affiliates, HPT,
and certain of HPT's affiliates shall have effected the transactions
contemplated by that certain Termination Agreement; and
(e) Candlewood, certain of Candlewood's affiliates and
HPT shall have consummated the transactions contemplated by the HPT Agreements.
5.4 Conditions to Purchaser's Obligation to Close. The obligation
of Purchaser to take the actions required to be taken by Purchaser at the
Closing are subject to the satisfaction of the following conditions on or before
the Closing Date, the compliance with or occurrence of which may be waived, in
whole or in part, by Purchaser:
(a) Accuracy of Representations. The representations and
warranties of Sellers contained in this Agreement shall be true on and as of the
Closing Date with the same effect as if made on and as of such date except for
any representations and warranties that speak as of a specific date (which shall
be true as of such date) except for such failures of such representations and
warranties to be true that would not, individually or in the aggregate, result
in a Material Adverse Effect, taking into account all events and circumstances
under Section 5.4(a), (b) and (d) which could be included in determining whether
there has been a Material Adverse Effect;
(b) Performance of Obligations. Sellers shall have
performed, complied with and satisfied all agreements, covenants and conditions
required by this Agreement to be performed, complied with and satisfied by them
prior to the Closing Date, in accordance with the terms of this Agreement,
except for such failures so to perform, comply with or satisfy that would not,
individually or in the aggregate, result in a Material Adverse Effect, taking
into account all events and circumstances under Section 5.4(a), (b) and (d)
which could be included in determining whether there has been a Material Adverse
Effect;
30
(c) Delivery of Documents. Sellers shall have delivered
each of the documents required to be delivered by Sellers pursuant to Section
5.1;
(d) Material Adverse Effect. Since the date of this
Agreement, there shall not have occurred any Material Adverse Effect, or any
litigation, claim, event or development that individually or in the aggregate
has resulted in a Material Adverse Effect, with respect to Sellers, the Business
or the Assets, taken as a whole, taking into account all events and
circumstances under Section 5.4(a), (b) and (d) which could be included in
determining whether there has been a Material Adverse Effect;
(e) Fairness Opinion. An internationally recognized
investment banker shall have delivered to Candlewood's Board of Directors its
opinion to the effect that the consideration payable hereunder and under the HPT
Agreements is fair to Candlewood and its stockholders, which opinion shall not
have been withdrawn;
(f) Change of Names. Candlewood shall have taken, or
caused to be taken, all actions that are necessary and appropriate to amend the
certificates of incorporation, certificates of formation, or other similar
organizational documents of Candlewood and all of its subsidiaries, and such
documents shall have been amended, to remove from the corporate or legal name of
each such entity reference to the name "Candlewood" or any other Franchise
Intangible; and
(g) Dissolution of Sellers. Candlewood's Board of
Directors and stockholders shall have duly adopted a plan of dissolution that
provides for the satisfaction of all outstanding indebtedness and other
liabilities of Candlewood prior to Candlewood's complete liquidation in
accordance with Delaware law, and Candlewood shall not have withdrawn or
rendered ineffective such plan of dissolution as of the Effective Time.
5.5 Conditions to Sellers' Obligations to Close. The obligation of
Sellers to take the actions required to be taken by Sellers at the Closing are
subject to the satisfaction of the following conditions on or before the Closing
Date, the compliance with or occurrence of which may be waived, in whole or in
part, by Candlewood:
(a) Accuracy of Representations. The representations and
warranties of Purchaser contained in this Agreement shall be true in all
material respects on and as of the Closing Date with the same effect as if made
on and as of such date except for any representations and warranties that speak
as of a specific date (which shall be true in all material respects as of such
date) except for such failures of such representations and warranties to be true
that would not, individually or in the aggregate, result in a Material Adverse
Effect;
(b) Performance of Obligations. Purchaser shall have
performed, complied with and satisfied all material agreements, covenants and
conditions required by this Agreement to be performed, complied with and
satisfied by it prior to the Effective Time, in accordance with the terms of
this Agreement, except for such failures so to perform, comply with or satisfy
that would not, individually or in the aggregate, result in a Material Adverse
Effect; and
(c) Delivery of Documents. Purchaser shall have delivered
each of the documents required to be delivered by Purchaser pursuant to Section
5.2.
31
ARTICLE VI
6.1 Termination. This Agreement may be terminated, and the
Transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, by action taken or authorized by the board of directors of the
terminating party or parties, whether before or after receipt of Stockholder
Approval:
(a) By mutual written consent of Purchaser and Sellers;
(b) By either the Purchaser or Sellers if the Transaction
shall not have been consummated prior to February 28, 2004 ("Outside
Date"); provided however that the right to terminate this Agreement
under this Section 7.l(b) shall not be available to any party whose
failure to fulfill any obligation of this Agreement has been the
primary cause of the failure of the Transactions to occur on or before
the Outside Date;
(c) By either Purchaser or Sellers if the Stockholder
Approval is not obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or at any
adjournment thereof;
(d) By either Purchaser or Sellers if either the HPT
Purchase Agreement or the Termination Agreement has been terminated;
(e) By Candlewood pursuant to Section 4.7;
(f) By Purchaser, if since the date of this Agreement,
there shall have been any event, development or change of circumstance
that constitutes, has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and such
Material Adverse Effect is not cured within 20 days after written
notice thereof;
(g) By Purchaser, if (i)(A) there shall be breached any
covenant or agreement on the part of a party other than Purchaser set
forth in this Agreement, or (B) any representation or warranty of a
party other than Purchaser set forth in this Agreement shall have
become untrue, (ii) such breach or misrepresentation is not cured
within 20 days after written notice thereof, and (iii) such breach or
misrepresentation would cause any of the conditions set forth in
Section 5.4 not to be satisfied; and
(h) By Sellers, if (i)(A) Purchaser has breached any
covenant or agreement on the part of Purchaser set forth in this
Agreement, or (B) any representation or warranty of Purchaser set forth
in this Agreement shall have become untrue, (ii) such breach or
misrepresentation is not cured within 20 days after written notice
thereof and (iii) such breach or misrepresentation would cause any of
the conditions set forth in Section 5.5 not to be satisfied.
6.2 Effect of Termination.
(a) In the event of termination of this Agreement by
either Purchaser or Sellers as provided in Section 6.1, this Agreement
shall terminate and there shall be no
32
liability or obligation on the part of Purchaser or Sellers or their
respective Subsidiaries, officers or directors except (x) with respect
to this Section 6.2, Section 4.7 and Article VI and the obligations
incorporated by reference and (y) with respect to any liabilities or
damages incurred or suffered by a party as a result of the breach by
the other party of any of its representations, warranties, covenants or
other agreements set forth in this Agreement.
(b) Purchaser and Sellers agree that if this Agreement is
terminated pursuant to Section 6.1(e), then Sellers shall pay Purchaser
the amount specified in Section 4.8 plus an additional amount equal to
the sum of Purchaser's Expenses up to an amount equal to $500,000.
(c) Purchaser and Sellers agree that if this Agreement is
terminated pursuant to Section 6.1(g), then Sellers shall pay to
Purchaser an amount equal to the sum of Purchaser's Expenses up to an
amount equal to $500,000.
(d) Purchaser and Sellers agree that if this Agreement is
terminated pursuant to Section 6.1(h), then Purchaser shall pay to
Sellers an amount equal to the sum of Sellers' Expenses up to an amount
equal to $500,000.
(e) Payment of Expenses pursuant to Section 6.2(b),
Section 6.2(c) or Section 6.2(d) shall be made not later than two
business days after delivery to the other party of notice of demand for
payment and a documented itemization setting forth in reasonable detail
all Expenses of the party entitled to receive payment (which
itemization may be supplemented and updated from time to time by such
party until the 90th day after such party delivers such notice of
demand for payment).
(f) All payments under Section 6.2 shall be made by wire
transfer of immediately available funds to an account designated by the
party entitled to receive payment.
(g) For the purposes of this Section 6.2, the term
"Expenses" shall mean all reasonable and customary out-of-pocket
expenses incurred by a Party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby.
ARTICLE VII MISCELLANEOUS PROVISIONS
7.1 Effect of Representations and Warranties. Notwithstanding
anything to the contrary set forth herein, in the case of any breach by any of
Sellers of any of such Sellers' representations and warranties contained in
Article II or any breach by Purchaser of any of Purchaser's representations and
warranties contained in Article III, the non-breaching Party's sole right shall
be the exercise (if it is entitled to do so) of its rights not to close under
Article V hereof and its rights of termination pursuant to Article VI hereof
(and the non-breaching Party's sole remedies in connection therewith shall be
those expressly set forth or referenced in Article VI hereof) and none of the
Parties who committed such breach of its representations and warranties shall,
subject to making any required payments provided for or referenced in Article
33
VI, at any time (whether before, on or after the Effective Date) have any
further liability whatsoever with respect to any such breach. For purposes of
clarity, the limitations contained in this Section 7.1 do not apply in respect
of (a) any breach of any covenant or other agreement of Purchaser or Sellers
contained in this Agreement, or (b) any willful or intentional breach of any
representation or warranty of Purchaser or Sellers contained in this Agreement.
7.2 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
7.3 Headings. The subject headings of the articles, sections and
subsections of this Agreement and the table of contents are included for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
7.4 Entire Agreement; Amendment; Waiver. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior agreements, representations and
understandings, both written and oral, of the parties and the rights and
remedies of the parties hereto with respect to the subject matter of this
Agreement shall be governed by the express terms hereof. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both parties. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the Party making the waiver.
7.5 Counterparts; Copies. This Agreement and any amendments hereto
may be executed by the parties hereto in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all parties shall not have signed the same counterpart.
This Agreement and any amendments thereto may be executed by the parties hereto
in several copies each of which shall be deemed an original and it shall not be
necessary, when making proof of this Agreement, to account for or produce more
than one original of such copies. Any signature delivered by a Party by
facsimile transmission shall be deemed to be an original signature thereto.
7.6 Binding Effect. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto and their respective legal
representatives, heirs, successors and assigns and shall inure to the benefit of
their respective permitted legal representatives, heirs, successors and assigns.
7.7 Expenses. Except as otherwise specifically provided herein,
Purchaser and Sellers shall each respectively be responsible for their own fees
and expenses regarding the Transactions, including all of the fees and expenses
incurred by the parties hereto in connection with the preparation, execution and
delivery of this Agreement, including, but not limited to, all legal, accounting
and other professional fees.
7.8 Nature of Representations, Warranties, Covenants and
Agreements. No representations or warranties whatsoever are made by any Party,
except as specifically set forth
34
in this Agreement, or as specifically set forth in any schedule, instrument,
certificate, exhibit or other writing provided for or referred to in this
Agreement or in the Transaction Documents. All statements contained in any such
instrument or other writing shall be deemed to be representations and warranties
under this Agreement to the extent specified in this Agreement.
7.9 Notices. All notices, offers, acceptances and other
communications required or permitted under this Agreement shall be in writing
signed by the Party making the same, shall specify the Section of this Agreement
pursuant to which it is given, and shall be deemed properly addressed as
follows:
To Purchaser: Six Continents Hotels, Inc.
Suite 000
Xxxxx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx Xxxxxx
with copies to: Six Continents Hotels, Inc
Suite 000
Xxxxx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx Xxxxxxx
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx Xxxxxx, Esq.
To any Seller: Candlewood Hotel Company, Inc.
0000 X. 00xx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
Attn: Xx. Xxxxxx X. Fix
35
with a copy to: Candlewood Hotel Company, Inc.
0000 X. 00xx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
Attn: Xx. Xxx X. Xxxxxxx
Candlewood Hotel Company, Inc.
0000 X. 00xx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
Attn: Xx. Xxxx X. XxXxxx
Xxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxx
and such notice shall be deemed to have been received (i) on the date of
delivery if delivered in person or if sent by telecopier or other facsimile
transmission (with hard copy of same being mailed to recipient) or (ii) on the
first (1st) business day after the date of delivery if sent by same day or
overnight courier service, or (iii) upon receipt, if sent by certified or
registered United States Mail, return receipt requested, postage and charges
prepaid. The time period in which a response to any such notice must be given,
or any action taken with respect thereto, however, shall commence to run from
the date of receipt by the addressee. Rejection, failure or refusal to accept
delivery or the inability to deliver because of changed address of which no
notice was given, shall be deemed to constitute receipt of the notice sent by
the addressee. Any Party may change its address for notice, election, and other
communication from time to time by notifying the other Party of the new address
in the manner provided for giving notice herein. If notice is given pursuant to
this Section of a permitted successor or assign, then notice shall be given in
accordance with the foregoing to such permitted successor or assign.
7.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to laws that may be applicable under conflicts of laws principles.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Delaware State court, or Federal court of the United States
of America, sitting in Delaware, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby or for recognition or enforcement of any judgment relating
thereto, and each of the parties hereby irrevocably and unconditionally (A)
agrees not to commence any such action or proceeding except in such courts, (B)
agrees that any claim in respect of any such action or proceeding may be heard
and determined in such Delaware State court or, to the extent permitted by law,
in such Federal court, (C) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in any such Delaware State or
Federal court, and (D) waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any
36
such Delaware State or Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.7. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
7.11 Exhibits. All exhibits, schedules and attachments to this
Agreement and all exhibits, schedules and attachments thereto are hereby
incorporated by reference into this Agreement and hereby made a part hereof
(whether or not physically attached hereto or thereto).
7.12 No Third-Party Beneficiary. The parties do not intend to
confer any benefit under this Agreement on anyone other than the parties, and
nothing contained in this Agreement shall be deemed to confer any such benefit
on any such other person.
7.13 Assignment. Neither Sellers, on the one hand, or Purchaser, on
the other hand may assign its or their rights or delegate its or their duties
under this Agreement without the prior written consent of the other Party.
7.14 Construction. As used herein:
(a) "Material Adverse Effect" means
(i) any change, event, development or effect
that has had, or is reasonably likely to have, a materially
adverse effect on (A) the liabilities, prospects, condition
(financial or other), or results of operations of the Business
and the Assets, taken as a whole, or of Purchaser, or (B) the
ability of Sellers or Purchaser to consummate the transactions
contemplated by this Agreement, or
(ii) any changes, events, developments or effects
that have had, or are reasonably likely to have, in the
aggregate, an adverse effect on the liabilities, prospects,
condition (financial or other) or results of operations of the
Business or the Assets (including any loss, cost, damage,
expense or diminution of value) with an aggregate value of
$1,500,000 or more,
except in each case other than the termination of Licenses
described in the last sentence of this Section 7.13(a), for
any such change or condition resulting from (A) changes or
developments primarily resulting from the announcement or
pendency of this Agreement or the HPT Agreements, (B) changes
or developments in the industry in which Sellers operate or
(C) changes or developments in financial or securities markets
or the economy in general. For purposes of determining whether
any Material Adverse Effect exists pursuant to clause (ii) of
this Section 7.13(a),
(x) the termination of any License related to
(1) any open and operating Hotel except the Rockford, Illinois
Hotel, or to any of the Hotels under construction in Anaheim,
California, Syracuse, New York, or Sterling, Virginia, shall
have a deemed loss value per Hotel equal to the excess of
$300,000 over any
37
amount paid to Purchaser pursuant to clause (ii) of Section
4.4(a) in respect of the termination of such License, and (2)
the Rockford, Illinois Hotel shall have a deemed loss value
equal to the excess of $150,000 over any amount paid to
Purchaser pursuant to clause (ii) of Section 4.4(a) in respect
of the termination of such License, and
(y) Sellers may cure the termination or other
loss of any License by paying to the Purchaser the deemed
value of any such deemed loss value at or prior to the
Effective Time;
(b) "Knowledge" means (a) with respect to an individual,
"knowledge" of a particular fact or other matter if such individual is
aware of such fact or other matter; and (b) with respect to a person
(other than an individual), "knowledge" of a particular fact or other
matter if any individual who is serving as a director, manager or
executive officer of such person is aware of such fact or other matter;
(c) whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation"; and
(d) whenever the context so requires, the singular
includes the plural and the plural includes the singular, and the
gender of any pronoun includes the other genders.
7.15 Disclosure. Any matter disclosed in any section of a Party's
Disclosure Schedule shall be considered disclosed for other sections of such
Disclosure Schedule, but only to the extent such matter on its face would
reasonably be expected to be pertinent to a particular section of a Party's
Disclosure Schedule in light of the disclosure made in such section.
7.16 Non-Recourse. Notwithstanding anything contained in this
Agreement to the contrary, each and every warranty, representation, covenant and
agreement made in this Agreement by any of Sellers or the Purchaser was not made
or intended to be made as a personal or individual warranty, representation,
covenant or agreement on the part of the incorporator or any stockholder
(including any holder of preferred stock of any Seller or the Purchaser),
director, officer, agent or partner, past present or future, of any of Sellers
or the Purchaser, or any of them, and no personal or individual liability or
responsibility is assumed by and no recourse at any time shall be asserted or
enforced against, any such incorporator, stockholder (including any holder of
preferred stock of any Seller or the Purchaser), director, officer, agent or
partner, past, present or future, in respect of any breach or violation by any
of Sellers or Purchaser of any representation, warranty, covenant or agreement
made in this Agreement, all of which recourse (whether in common law, in equity,
by statute or otherwise) is hereby forever waived and released. For purposes of
clarity, this Section 7.16 shall not limit or impair in any way the rights and
obligations of the parties to the Voting Agreement of near or even date herewith
among Candlewood, Purchaser and certain stockholders of Candlewood, or any other
separate agreement or instrument.
7.17 Specific Performance. The Parties hereto 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
38
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
[SIGNATURES BEGIN ON NEXT PAGE.]
39
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, under seal, by their respective duly authorized officers, effective on
the date and year first above written.
PURCHASER:
SIX CONTINENTS HOTELS, INC.
By: /s/ XXXXXX X. XXXXXX
--------------------------------------
Name: XXXXXX X. XXXXXX
------------------------------------
Its: CHAIRMAN AND PRESIDENT
-------------------------------------
[CORPORATE SEAL]
SELLERS:
CANDELWOOD HOTEL COMPANY, INC.
By: /s/ XXXX X. XX XXXX
-----------------------------------
Name: XXXX X. XX XXXX
------------------------------------
Its: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
-------------------------------------
[CORPORATE SEAL]
CANDELWOOD HOTEL COMPANY, L.L.C.
By:/s/ XXXX X. XX XXXX
--------------------------------------
Name: XXXX X. XX XXXX
------------------------------------
Its: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
-------------------------------------
[COMPANY SEAL]
