UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
PRIME HOSPITALITY CORP.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share, of Prime Hospitality Corp.
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("PHC Common Stock")
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(2) Aggregate number of securities to which transaction applies:
44,614,372 shares of PHC Common Stock
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Options to purchase 6,024,354 shares of PHC Common Stock
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$12.25 per share of PHC Common Stock
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$12.25 minus weighted average exercise price of outstanding options of
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$8.25 per share subject to an option.
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(4) Proposed maximum aggregate value of transaction:
$570,623,473.00
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(5) Total fee paid:
$72,298.00
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
PRIME HOSPITALITY CORP.
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
[ ], 2004
Dear Stockholder:
The board of directors of Prime Hospitality Corp. ("PHC" or the "Company")
has approved a merger providing for the acquisition of the Company by BREP IV
Hotels Holding L.L.C., an affiliate of The Blackstone Group. If the merger is
completed, you will receive $12.25 in cash, without interest, for each share of
the Company's common stock you own.
You will be asked, at a special meeting of the Company's stockholders, to
adopt the merger agreement. The board of directors has approved and declared the
merger, the merger agreement and the transactions contemplated by the merger
agreement advisable, and has declared that it is fair to and in the best
interests of PHC's stockholders that the Company enter into the merger agreement
and consummate the merger on the terms and conditions set forth in the merger
agreement. The board of directors recommends that PHC's stockholders vote "FOR"
the adoption of the merger agreement.
The time, date and place of the special meeting to consider and vote upon a
proposal to adopt the merger agreement are as follows:
10:00 a.m. Eastern Standard Time, [ ], 2004
[ ]
The proxy statement attached to this letter provides you with information
about the proposed merger and the special meeting of the Company's stockholders.
We encourage you to read the entire proxy statement carefully. You may also
obtain more information about the Company from documents we have filed with the
Securities and Exchange Commission.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF THE COMPANY'S
COMMON STOCK YOU OWN. BECAUSE THE ADOPTION OF THE MERGER AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMPANY'S OUTSTANDING
SHARES OF COMMON STOCK ENTITLED TO VOTE THEREON, A FAILURE TO VOTE WILL HAVE THE
SAME EFFECT AS A VOTE "AGAINST" THE MERGER. ACCORDINGLY, YOU ARE REQUESTED TO
VOTE YOUR SHARES BY PROMPTLY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY
CARD AND RETURNING IT IN THE ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING.
Voting by proxy will not prevent you from voting your shares in person if
you subsequently choose to attend the special meeting.
Thank you for your cooperation and continued support.
Very truly yours,
A.F. Petrocelli
Chairman of the Board of Directors
THIS PROXY STATEMENT IS DATED SEPTEMBER [ ], 2004
AND IS FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT SEPTEMBER [ ], 2004.
PRELIMINARY COPY
[PRIME HOSPITALITY CORP. LOGO]
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD [ ], 2004
To the stockholders of Prime Hospitality Corp.:
A special meeting of stockholders of Prime Hospitality Corp., a Delaware
corporation ("PHC" or the "Company"), will be held on [ ], 2004, at
10:00 a.m., Eastern Standard Time at [ ] for the following purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of
Merger dated as of August 18, 2004, by and among the Company, BREP IV
Hotels Holding L.L.C. (the "parent"), and BREP IV Hotels Acquisition L.L.C.
(the "merger sub"), a wholly owned subsidiary of the parent, pursuant to
which, upon the merger becoming effective, each share of common stock, par
value $0.01 per share, of PHC (other than shares held in the treasury of
the Company or owned by the merger sub, the parent or any wholly owned
subsidiary of the parent or the Company and other than shares held by a
stockholder who properly demands statutory appraisal rights) will be
converted into the right to receive $12.25 in cash, without interest; and
2. To transact such other business as may properly come before the special
meeting or any adjournment or postponement thereof.
Only stockholders of record on September [ ], 2004, are entitled to notice
of and to vote at the special meeting and at any adjournment or postponement of
the special meeting. All stockholders of record are cordially invited to attend
the special meeting in person.
The adoption of the merger agreement requires the approval of the holders
of a majority of the outstanding shares of the Company's common stock entitled
to vote thereon. Even if you plan to attend the special meeting in person, we
request that you complete, sign, date and return the enclosed proxy and thus
ensure that your shares will be represented at the special meeting if you are
unable to attend. If you sign, date and mail your proxy card without indicating
how you wish to vote, your vote will be counted as a vote in favor of the
adoption of the merger agreement. If you fail to return your proxy card, the
effect will be that your shares will not be counted for purposes of determining
whether a quorum is present at the special meeting and will have the same effect
as a vote against the adoption of the merger agreement. If you are a stockholder
of record and do attend the special meeting and wish to vote in person, you may
withdraw your proxy and vote in person.
By order of the board of directors,
Joseph B. Bernardino, Esq.
Secretary
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER 1
SUMMARY 4
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION 12
THE PARTIES TO THE MERGER 13
THE SPECIAL MEETING 14
Time, Place and Purpose of the Special Meeting 14
Record Date and Voting 14
Required Vote 14
Proxies; Revocation 15
Adjournments and Postponements 15
THE MERGER 16
Background of the Merger 16
Reasons for the Merger 18
Recommendation of the Company's Board of Directors 19
Opinion of Bear, Stearns & Co. Inc. 20
Financing 25
Guarantee; Remedies 26
Interests of the Company's Directors and Executive Officers in
the Merger 27
Change of Control Agreements and Employment Agreement 27
Indemnification and Insurance 28
Voting Agreement 29
Litigation Concerning the Merger 30
Material United States Federal Income Tax Consequences 30
Regulatory Approvals 31
THE MERGER AGREEMENT 32
Effective Time 32
Structure 32
Alternative Structure 33
Treatment of Stock and Options 33
Exchange and Payment Procedures 33
Debt Tender Offers and Consent Solicitations 35
Limited Liability Company Agreement 35
Directors and Officers 35
Representations and Warranties 35
Conduct of Our Business Pending the Merger 38
No Solicitation of Transactions 40
Employee Benefits 41
Agreement to Take Further Action and to Use Reasonable Best Efforts 43
Conditions to the Merger 44
Termination 45
Fees and Expenses 46
Amendment and Waiver 47
MARKET PRICE OF THE COMPANY'S STOCK 48
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 48
DISSENTERS' RIGHTS OF APPRAISAL 51
MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS 53
SUBMISSION OF STOCKHOLDER PROPOSALS 53
WHERE YOU CAN FIND ADDITIONAL INFORMATION 54
ANNEX A Agreement and Plan of Merger, dated as of August 18, 2004, by and among
BREP IV Hotels Holding L.L.C., BREP IV Hotels Acquisition L.L.C., and
Prime Hospitality Corp.
ANNEX B Voting Agreement, dated as of August 18, 2004, among BREP IV Hotels
Holding L.L.C., A. F. Petrocelli and United Capital Corp.
ANNEX C Opinion of Bear, Stearns & Co. Inc.
ANNEX D Section 262 of the Delaware General Corporation Law
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers address briefly some questions you may
have regarding the special meeting and the proposed merger. These questions and
answers may not address all questions that may be important to you as a
stockholder of Prime Hospitality Corp. Please refer to the more detailed
information contained elsewhere in this proxy statement, the annexes to this
proxy statement and the documents referred to in this proxy statement. In this
proxy statement, the terms "PHC," "Company," "we," "our," "ours," and "us" refer
to Prime Hospitality Corp. and its subsidiaries.
Q: WHAT IS THE PROPOSED TRANSACTION?
A: The proposed transaction is the acquisition of the Company by an affiliate
of The Blackstone Group pursuant to an Agreement and Plan of Merger (the
"merger agreement"), dated as of August 18, 2004, among the Company, BREP
IV Hotels Holding L.L.C. (the "parent"), and BREP IV Hotels Acquisition
L.L.C., a wholly owned subsidiary of the parent (the "merger sub"). Once
the merger agreement has been adopted by the Company's stockholders and the
other closing conditions under the merger agreement have been satisfied or
waived, the Company will merge with and into the merger sub (the "merger").
The merger sub will be the surviving company in the merger (the "surviving
company"). At the option of the parent, the merger may be effected through
an alternative transaction structure in which the merger sub will merge
with and into the Company, with the Company being the surviving company.
See "The Merger Agreement - Alternative Structure."
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Upon completion of the merger, you will receive $12.25 in cash, without
interest, for each share of our common stock that you own. For example, if
you own 100 shares of our common stock, you will receive $1,225.00 in cash
in exchange for your PHC shares.
Q: WHERE AND WHEN IS THE SPECIAL MEETING?
A: The special meeting will take place at [ ], on [ ], 2004,
at 10:00 a.m. Eastern Standard Time.
Q: WHAT VOTE OF OUR STOCKHOLDERS IS REQUIRED TO ADOPT THE MERGER AGREEMENT?
A: For us to complete the merger, stockholders holding at least a majority of
the shares of our common stock outstanding at the close of business on the
record date must vote "FOR" the adoption of the merger agreement.
Q: HOW DOES THE COMPANY'S BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
A: Our board of directors recommends that our stockholders vote "FOR" the
proposal to adopt the merger agreement. You should read "The
Merger--Reasons for the Merger" for a discussion of the factors that our
board of directors considered in deciding to recommend the adoption of the
merger agreement.
Q: WHAT DO I NEED TO DO NOW?
A: We urge you to read this proxy statement carefully, including its annexes,
and to consider how the merger affects you. If you are a stockholder of
record, then just mail your completed, dated and signed proxy card in the
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enclosed return envelope as soon as possible so that your shares can be
voted at the special meeting of our stockholders.
Q: WHAT HAPPENS IF I DO NOT RETURN A PROXY CARD?
A: Because the required vote of our stockholders is based upon the number of
outstanding shares of our common stock, rather than upon the shares
actually voted, the failure to return your proxy card will have the same
effect as voting against the merger.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Yes, but only if you provide instructions to your broker on how to vote.
You should follow the directions provided by your broker regarding how to
instruct your broker to vote your shares. Without those instructions, your
shares will not be voted, which will have the same effect as voting against
the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You may revoke your proxy by notifying the Secretary of
PHC in writing or by submitting a new proxy, in each case, dated after the
date of the proxy being revoked. In addition, your proxy may be revoked by
attending the special meeting and voting in person. However, simply
attending the special meeting will not revoke your proxy. If you have
instructed a broker to vote your shares, the above-described options for
changing your vote do not apply and instead you must follow the
instructions received from your broker to change your vote.
Q: ARE APPRAISAL RIGHTS AVAILABLE?
A: Yes. Under the General Corporation Law of the State of Delaware (the
"DGCL"), holders of our common stock who do not vote in favor of adopting
the merger agreement will have the right to seek appraisal of the fair
value of their shares as determined by the Delaware Court of Chancery if
the merger is completed, but only if they submit a written demand for an
appraisal prior to the vote on the adoption of the merger agreement and
they comply with the Delaware law procedures explained in this proxy
statement. This amount could be more, the same or less than the value a
stockholder would be entitled to receive under the terms of the merger
agreement.
Q: IS THE MERGER EXPECTED TO BE TAXABLE TO ME?
A: Yes. The receipt of $12.25 in cash for each share of our common stock
pursuant to the merger will be a taxable transaction for U.S. federal
income tax purposes. For U.S. federal income tax purposes, generally you
will recognize gain or loss as a result of the merger measured by the
difference, if any, between $12.25 per share and your adjusted tax basis in
that share. You should read "The Merger--Material United States Federal
Income Tax Consequences" for a more complete discussion of the U.S. federal
income tax consequences of the merger. Tax matters can be complicated and
the tax consequences of the merger to you will depend on your particular
tax situation. You should also consult your tax advisor on the tax
consequences of the merger to you.
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Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible, and we
anticipate that it will be completed in the fourth quarter of 2004. In
order to complete the merger, we must obtain stockholder approval and
satisfy the other closing conditions under the merger agreement. See "The
Merger Agreement--Conditions to the Merger."
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. Shortly after the merger is completed, you will receive a letter of
transmittal with instructions informing you how to send in your stock
certificates to the paying agent in order to receive the merger
consideration. You should use the letter of transmittal to exchange stock
certificates for the merger consideration to which you are entitled as a
result of the merger. DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY.
Q: WHO CAN HELP ANSWER MY OTHER QUESTIONS?
A: If you have more questions about the merger, you should contact our proxy
solicitation agent, Innisfree M&A Incorporated, toll free at (877)
750-9501. If your broker holds your shares, you should also call your
broker for additional information.
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SUMMARY
The following summary highlights selected information from this proxy statement
and may not contain all of the information that may be important to you.
Accordingly, we encourage you to read carefully this entire proxy statement, its
annexes and the documents referred to in this proxy statement. Each item in this
summary includes a page reference directing you to a more complete description
of that item.
THE PARTIES TO THE MERGER (PAGE 13)
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07004
We own, manage and franchise limited service and full-service hotels
throughout North America. We own and operate three proprietary hotel brands that
compete in different market segments - AmeriSuites(R), Wellesley Inns &
Suites(R) and Prime Hotels & Resorts(R). We also operate a portfolio of
full-service hotels under franchise agreements with national hotel chains.
BREP IV Hotels Holding L.L.C.
c/o Blackstone Real Estate Partners IV L.P.
345 Park Avenue
New York, New York 10154
(212) 583-5000
BREP IV Hotels Holding L.L.C., which we refer to as the parent, is a
Delaware limited liability company formed in connection with the merger by
affiliates of Blackstone Real Estate Partners IV L.P., a Delaware limited
partnership. The principal business of Blackstone Real Estate Partners IV L.P.
consists of making various real estate related investments. Blackstone Real
Estate Partners IV L.P. is an affiliate of The Blackstone Group.
The Blackstone Group, a private investment firm with offices in New York,
London and Hamburg, was founded in 1985. Blackstone's real estate group has
raised five funds, representing over $6 billion in total equity, and has a long
track record of investing in hotels and other commercial properties. In addition
to real estate, The Blackstone Group's core businesses include private equity,
corporate debt investing, marketable alternative asset management, mergers and
acquisitions advisory and restructuring and reorganization advisory.
BREP IV Hotels Acquisition L.L.C.
c/o Blackstone Real Estate Partners IV L.P.
345 Park Avenue
New York, New York 10154
(212) 583-5000
BREP IV Hotels Acquisition L.L.C., which we refer to as the merger sub, is
a Delaware limited liability company and a wholly owned subsidiary of the
parent. It was formed in connection with the merger by affiliates of Blackstone
Real Estate Partners IV L.P.
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THE SPECIAL MEETING
TIME, PLACE AND DATE (PAGE 14)
The special meeting will be held on [ ], 2004, starting at
10:00 a.m., Eastern Standard Time, at [ ].
PURPOSE (PAGE 14)
You will be asked to consider and vote upon a proposal to adopt the merger
agreement. The merger agreement provides that the Company will be merged with
and into the merger sub, and each outstanding share of the Company's common
stock (other than shares held in the treasury of the Company or owned by the
merger sub, the parent or any wholly owned subsidiary of the parent or the
Company and other than shares held by a stockholder who properly demands
statutory appraisal rights) will be converted into the right to receive $12.25
in cash, without interest.
The persons named in the accompanying proxy will also have discretionary
authority to vote upon other business, if any, that properly comes before the
special meeting and any adjournments or postponements of the special meeting,
including any adjournments or postponements for the purpose of soliciting
additional proxies to adopt the merger agreement.
RECORD DATE AND VOTING (PAGE 14)
You are entitled to vote at the special meeting if you owned shares of PHC
common stock at the close of business on September [ ], 2004, the record date
for the special meeting. You will have one vote for each share of PHC common
stock that you owned on the record date. There are 44,614,372 shares of PHC
common stock entitled to be voted.
REQUIRED VOTE (PAGE 14)
For us to complete the merger, stockholders holding at least a majority of
the shares of our common stock outstanding at the close of business on the
record date must vote "FOR" the adoption of the merger agreement.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS (PAGE 48)
As of September [ ], 2004, the directors and executive officers of PHC
beneficially owned in the aggregate (excluding options) approximately 8.2% of
the shares of PHC common stock entitled to vote at the special meeting. Each of
them has either agreed to or has advised us that he plans to vote all of his
shares in favor of the adoption of the merger agreement.
VOTING AGREEMENT (PAGE 29)
In connection with the merger agreement, A.F. Petrocelli, our Chief
Executive Officer, President and Chairman of the Board of Directors, and United
Capital Corp., an entity controlled by him, have entered into a voting agreement
with the parent. Among other things, the voting agreement provides that all the
shares of our common stock owned by Mr. Petrocelli and United Capital Corp. will
be voted in favor of the adoption of the merger agreement and against any
competing proposal or transaction or any proposal or transaction that could
reasonably be expected to prevent or impede the completion of the merger. As of
the record date, Mr. Petrocelli owned 45,000 shares of common stock of the
Company and United Capital Corp. owned 3,539,697 shares of common stock of the
Company, representing an aggregate of approximately 8.0% of the votes eligible
to be cast at the special meeting.
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VOTING AND PROXIES (PAGE 14 AND 15)
Any PHC stockholder of record entitled to vote may vote by returning the
enclosed proxy or by appearing at the special meeting. If your shares are held
in "street name" by your broker, you should instruct your broker on how to vote
your shares using the instructions provided by your broker.
REVOCABILITY OF PROXY (PAGE 15)
Any PHC stockholder of record who executes and returns a proxy may revoke
the proxy at any time before it is voted in any one of the following three ways:
o filing with the Secretary of PHC, at or before the special meeting, a
written notice of revocation that is dated a later date than the
proxy;
o sending a later-dated proxy relating to the same shares to the
Secretary of PHC, at or before the special meeting; or
o attending the special meeting and voting in person by ballot.
Simply attending the special meeting will not constitute revocation of a
proxy. If you have instructed your broker to vote your shares, the
above-described options for revoking your proxy do not apply and instead you
must follow the directions provided by your broker to change these instructions.
WHEN THE MERGER WILL BE COMPLETED (PAGE 44)
We are working to complete the merger as soon as possible. We anticipate
completing the merger in the fourth quarter of 2004, subject to receipt of
stockholder approval and satisfaction of the other closing conditions.
BOARD RECOMMENDATION (PAGE 29)
After careful consideration, our board of directors:
o has determined that the merger, the merger agreement and the
transactions contemplated by the merger agreement are advisable, fair
to and in the best interests of the Company and its stockholders;
o has approved and adopted the merger agreement, the merger and the
transactions contemplated by the merger agreement; and
o recommends that PHC's stockholders vote "FOR" the adoption of the
merger agreement.
OPINION OF BEAR, STEARNS & CO. INC. (PAGE 20 AND ANNEX C)
Bear, Stearns & Co. Inc. ("Bear Stearns") has delivered to the Company's
board of directors its opinion dated August 18, 2004 to the effect that, as of
that date and based upon and subject to the matters and assumptions stated in
that opinion, the merger consideration of $12.25 in cash per share to be
received by the Company's stockholders pursuant to the merger agreement was fair
from a financial point of view to the Company's public stockholders. The opinion
is not a recommendation as to how any of our stockholders should vote with
respect to the merger agreement. The full text of the written opinion of Bear
Stearns, which sets forth the matters considered and assumptions made in
connection with its opinion, is attached as Annex C to this proxy statement. We
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recommend that you read the entire opinion carefully.
DEBT TENDER OFFERS AND CONSENT SOLICITATIONS (PAGE 35)
We have agreed to use our reasonable best efforts to commence an offer to
purchase all of our outstanding 8 3/8% Senior Subordinated Notes due 2012 on the
terms and subject to the conditions set forth in the related documentation that
will be distributed to the holders of those notes. In connection with the offer
to purchase, we will seek the necessary consents of the note holders required to
amend the indenture governing the notes to eliminate substantially all of the
restrictive covenants, eliminate certain events of default, revise the merger
and consolidation covenant and make changes to the defeasance provisions (and
make related changes in the notes). Assuming we receive the requisite number of
consents from the note holders to amend the indenture and the notes, the
amendments will become operative immediately prior to the merger, provided that
all validly tendered notes are accepted for purchase pursuant to the offer upon
the completion of the merger.
FINANCING (PAGE 25)
In connection with the merger, the parent will cause approximately $570.6
million in cash to be paid to our stockholders and holders of stock options. In
addition, our credit agreement will be repaid and the parent anticipates that
substantially all of our senior subordinated notes will be repurchased. We
currently have approximately $20.0 million of outstanding borrowings under our
credit agreement and $178.725 million aggregate principal amount of senior
subordinated notes outstanding.
These payments are expected to be funded by a combination of equity
contributions in the parent and debt financing. The parent has received a
commitment letter from Bank of America, N.A. pursuant to which such entity has
committed to provide the parent with debt financing in the aggregate amount of
$680 million, subject to the satisfaction of the conditions contained in the
commitment letter. The parent has agreed to use its reasonable best efforts to
arrange the debt financing on the terms and conditions described in the
commitment letter.
The merger agreement does not contain a financing condition, although it
does contain a condition, which we refer to as the "market MAC" condition, which
is satisfied if certain specified market disruptions do not occur.
TREATMENT OF STOCK OPTIONS (PAGE 33)
The merger agreement provides that all outstanding PHC stock options issued
pursuant to PHC's stock option plans, whether vested or unvested, will be
"cashed out" and cancelled in connection with the completion of the merger. Each
option holder will receive an amount in cash, less applicable withholding taxes,
equal to the product of:
o the number of shares of our common stock subject to each option as of
the effective time of the merger, multiplied by
o the excess, if any, of $12.25 over the exercise price per share of
common stock subject to such option.
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INTERESTS OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (PAGE
27)
Our directors and executive officers may have interests in the merger that
are different from, or in addition to, yours, including the following:
o our directors and executive officers will have their vested and
unvested stock options "cashed out" and canceled in connection with
the merger, meaning that they will receive cash payments for each
share underlying their options equal to the excess, if any, of $12.25
per share over the exercise price per share of their options, subject
to any required withholding taxes;
o three of our executive officers will be entitled to benefits under
change of control agreements, which provide for various lump sum
payments: one such executive officer to receive such payment upon
completion of the merger and two other executive officers to receive
such payments if, during the two year period following the completion
of the merger, either of such officers is terminated without cause or
resigns for good reason;
o the change of control agreements with our three executive officers
referenced above also provide for lump sum payments to cover the costs
of any excise taxes to which those individuals may be subject by
reason of their receipt of any payment that constitutes an excess
parachute payment under Section 280G and 4999 of the Internal Revenue
Code of 1986, as amended (the "Code");
o the merger agreement provides for indemnification and insurance
arrangements for our current and former directors and officers that
will continue for six years following the effective time of the
merger.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (PAGE 30)
The merger will be a taxable transaction to you. For U.S. federal income
tax purposes, your receipt of cash in exchange for your shares of the Company's
common stock generally will cause you to recognize a gain or loss measured by
the difference, if any, between the cash you receive in the merger and your
adjusted tax basis in your shares of PHC's common stock. You should consult your
own tax advisor for a full understanding of how the merger will affect your
taxes.
PROCEDURE FOR RECEIVING MERGER CONSIDERATION (PAGE 33)
As soon as practicable after the effective time of the merger, a paying
agent appointed by the parent will mail a letter of transmittal and instructions
to you and the other PHC stockholders. The letter of transmittal and
instructions will tell you how to surrender your PHC common stock certificates
in exchange for the merger consideration. You should not return your stock
certificates with the enclosed proxy card, and you should not forward your stock
certificates to the paying agent without a letter of transmittal.
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NO SOLICITATION OF TRANSACTIONS (PAGE 40)
The merger agreement contains restrictions on our ability to solicit or
engage in discussions or negotiations with a third party regarding specified
transactions involving the Company. Notwithstanding these restrictions, under
certain circumstances, our board of directors may respond to an unsolicited
written bona fide proposal for an alternative acquisition or terminate the
merger agreement and enter into an agreement with respect to a superior
proposal.
CONDITIONS TO CLOSING (PAGE 44)
Before we can complete the merger, a number of conditions must be
satisfied. These include:
o the receipt of Company stockholder approval;
o the absence of any governmental orders that have the effect of making
the merger illegal or that otherwise prohibit the closing;
o the truth and correctness of our representations and warranties
(without regard to materiality or material adverse effect
qualifications), except where the failure of our representations and
warranties to be true and correct (without regard to materiality or
material adverse effect qualifications) would not reasonably be
expected to have a material adverse effect on us and our subsidiaries,
taken as a whole, and the truth and correctness in all material
respects of our representation and warranty regarding capitalization;
o the performance, in all material respects, by us of our covenants and
agreements in the merger agreement;
o the absence of specified market disruptions;
o the receipt of the requisite consents from the note holders under our
indentures so that we may execute supplemental indentures immediately
prior to the closing that would remove restrictive covenants;
o the receipt of a letter from our lender under our credit agreement
acknowledging the termination of our credit agreement and the release
of our liabilities thereunder upon repayment of the aggregate
principal amount outstanding under the credit agreement, together with
any other amounts payable; and
o the receipt of a title insurance affidavit with respect to debts,
liens, parties in possession and non-imputation.
TERMINATION OF THE MERGER AGREEMENT (PAGE 45)
PHC and the parent may mutually agree in writing to terminate the merger
agreement at any time without completing the merger, even after the stockholders
of PHC have adopted the merger agreement. The merger agreement may also be
terminated at any time prior to the effective time of the merger in certain
other circumstances, including:
9
o by either the parent or the Company if:
o the closing has not occurred on or before February 18, 2005, so
long as the failure to complete the merger is not the result of
the failure of the terminating party to comply with the terms of
the merger agreement;
o the Company stockholders do not vote to adopt the merger
agreement at the special meeting of the stockholders;
o there is a breach by the non-terminating party of its
representations, warranties, covenants or agreements in the
merger agreement such that the closing conditions would not be
satisfied, which breach has not been cured within 30 days;
o any governmental authority has enacted or entered any injunction
or other ruling or takes any other action which has the effect of
making the consummation of the merger illegal or otherwise
preventing or prohibiting completion of the merger;
o by the parent, if our board of directors withdraws or modifies its
recommendation that the Company's stockholders vote to adopt the
merger agreement or recommends or approves another acquisition
proposal;
o by the Company if, prior to the stockholders meeting, our board of
directors withdraws or modifies its recommendation to our stockholders
in favor of the merger in response to an unsolicited superior proposal
that it has approved and recommended in accordance with the terms of
the merger agreement, but only after we have provided the parent a
three business day period (during which time we must negotiate in good
faith with the parent) to make an offer that is at least as favorable
as the superior proposal;
o by the Company, if certain conditions to closing have been satisfied
or waived and the closing has not occurred within five business days;
or
o by the Company, if a specified market disruption event has occurred
and the parent has not waived its closing condition relating to such
event within a certain period of time following a written request for
a waiver from the Company.
TERMINATION FEES AND EXPENSE REIMBURSEMENT (PAGE 46)
Under certain circumstances, in connection with the termination of the
merger agreement, the Company will be required to pay the parent a $23 million
termination fee and up to $4 million for expense reimbursement. The parent will
be required to pay us a termination fee of $27 million if we have terminated the
merger agreement under certain circumstances.
MARKET PRICE OF PHC STOCK (PAGE 48)
Our common stock is listed on the New York Stock Exchange (the "NYSE")
under the trading symbol "PDQ." On August 17, 2004, the day before the merger
agreement was announced, the Company's common stock closed at $8.47 per share.
On September [ ], 2004, which was the last trading day before this proxy
statement was printed, the Company's common stock closed at $[ ] per share.
DISSENTERS' RIGHTS OF APPRAISAL (PAGE 51 AND ANNEX D)
Delaware law provides you with appraisal rights in the merger. This means
that you are entitled to have the value of your shares determined by the
Delaware Court of Chancery and to receive payment based on that valuation. The
10
ultimate amount you receive as a dissenting stockholder in an appraisal
proceeding may be more or less than, or the same as, the amount you would have
received under the merger agreement.
To exercise your appraisal rights, you must deliver a written objection to
the merger to the Company at or before the special meeting and you must not vote
in favor of the adoption of the merger agreement. Your failure to follow exactly
the procedures specified under Delaware law will result in the loss of your
appraisal rights. A copy of Section 262 of the DGCL is attached to this proxy
statement as Annex D.
11
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you in this proxy
statement, contain forward-looking statements based on estimates and
assumptions. Forward-looking statements include information concerning possible
or assumed future results of operations of the Company, the expected completion
and timing of the merger and other information relating to the merger. There are
forward-looking statements throughout this proxy statement, including, among
others, under the headings "Summary," "The Merger" and "The Merger--Opinion of
Bear, Stearns & Co. Inc." and in statements containing the words "believes,"
"plans," "expects," "anticipates," "intends," "estimates" or other similar
expressions. For each of these statements, the Company claims the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. You should be aware that
forward-looking statements involve known and unknown risks and uncertainties.
Although we believe that the expectations reflected in these forward-looking
statements are reasonable, we cannot assure you that the actual results or
developments we anticipate will be realized, or even if realized, that they will
have the expected effects on the business or operations of the Company. These
forward-looking statements speak only as of the date on which the statements
were made and we undertake no obligation to publicly update or revise any
forward-looking statements made in this proxy statement or elsewhere as a result
of new information, future events or otherwise. In addition to other factors and
matters contained or incorporated in this document, we believe the following
factors could cause actual results to differ materially from those discussed in
the forward-looking statements:
These factors include, among other things:
o uncertainty as to changes in U.S. general economic activity and the
impact of these changes on consumer demand within the lodging
industry;
o increasing competition in the overall lodging industry and within each
of our business segments in areas such as access, location, quality of
accommodations and room rate structures;
o uncertainty as to our future profitability and revenue;
o uncertainty as to the balance between supply of and demand for hotel
rooms and accommodations;
o uncertainty as to the impact on the lodging industry of terrorist
attacks, responses to terrorist attacks, or any epidemic or similar
health-related matters;
o our ability to continue to obtain new operating contracts and
franchise agreements;
o uncertainty as to the level of rates and occupancy that can be
achieved by our properties;
o our ability to operate within the limitations imposed by financing
arrangements;
o our ability to develop and maintain positive relations with current
and potential hotel owners and other industry participants;
o our ability and the ability of our franchisees to maintain our
properties in a first class manner;
o uncertainty as to changes in travel patterns;
o uncertainty as to the availability and terms of financing for our
properties;
12
o uncertainty as to changes in taxes and government regulation which
influence or determine wages, prices, construction procedures and
costs;
o our ability to integrate and successfully operate any properties
acquired in the future and the risks associated with these properties;
o our ability to develop and implement the operational and financial
systems needed to manage rapidly growing operations; and
o material disruptions in the U.S. commercial credit, debt capital or
commercial mortgage-backed securities markets.
THE PARTIES TO THE MERGER
PRIME HOSPITALITY CORP.
We are a Delaware corporation with our principal executive offices at 700
Route 46 East, Fairfield, New Jersey 07004. Our telephone number is (973)
882-1010. We own, manage and franchise limited service and full-service hotels
throughout North America. We own and operate three proprietary hotel brands that
compete in different market segments - AmeriSuites(R), Wellesley Inns &
Suites(R) and Prime Hotels & Resorts.(R) We also operate a portfolio of
full-service hotels under franchise agreements with national hotel chains.
BREP IV HOTELS HOLDING L.L.C.
BREP IV Hotels Holding L.L.C., which we refer to as the parent, is a
Delaware limited liability company formed in connection with the merger by
affiliates of Blackstone Real Estate Partners IV L.P., a Delaware limited
partnership. The principal business of Blackstone Real Estate Partners IV L.P.
consists of making various real estate related investments. Blackstone Real
Estate Partners IV L.P. is an affiliate of The Blackstone Group. The mailing
address of the parent's principal executive offices is c/o Blackstone Real
Estate Partners IV L.P., 345 Park Avenue, New York, New York 10154. The parent's
telephone number is (212) 583-5000.
The Blackstone Group, a private investment firm with offices in New York,
London and Hamburg, was founded in 1985. Blackstone's real estate group has
raised five funds, representing over $6 billion in total equity, and has a long
track record of investing in hotels and other commercial properties. In addition
to real estate, The Blackstone Group's core businesses include private equity,
corporate debt investing, marketable alternative asset management, mergers and
acquisitions advisory and restructuring and reorganization advisory.
BREP IV HOTELS ACQUISITION L.L.C.
BREP IV Hotels Acquisition L.L.C., which we refer to as the merger sub, is
a Delaware limited liability company and a wholly owned subsidiary of the
parent. It was formed in connection with the merger by affiliates of Blackstone
Real Estate Partners IV L.P. The mailing address of the merger sub's principal
executive offices is c/o Blackstone Real Estate Partners IV L.P., 345 Park
Avenue, New York, New York 10154. The merger sub's telephone number is (212)
583-5000.
13
THE SPECIAL MEETING
TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING
This proxy statement is being furnished to our stockholders as part of the
solicitation of proxies by our board of directors for use at the special meeting
to be held on [ ], 2004, starting at 10:00 a.m., Eastern Standard Time,
at [ ]. The purpose of the special meeting is for our stockholders to
consider and vote upon a proposal to adopt the merger agreement. Our
stockholders must approve this proposal for the merger to occur. If the
stockholders fail to approve this proposal, the merger will not occur. A copy of
the merger agreement is attached to this proxy statement as Annex A. This proxy
statement and the enclosed form of proxy are first being mailed to our
stockholders on September [ ], 2004.
RECORD DATE AND VOTING
The holders of record of PHC common stock as of the close of business on
September [ ], 2004, the record date for the special meeting, are entitled to
receive notice of, and to vote at, the special meeting. On the record date,
there were 44,614,372 shares of PHC common stock outstanding.
The holders of a majority of the outstanding shares of PHC common stock on
the record date, represented in person or by proxy, will constitute a quorum for
purposes of the special meeting. A quorum is necessary to hold the special
meeting. Any shares of PHC common stock held in treasury by PHC or by any of its
subsidiaries are not considered to be outstanding for purposes of determining a
quorum. Once a share is represented at the special meeting, it will be counted
for the purpose of determining a quorum at the special meeting and any
adjournment or postponement of the special meeting. However, if a new record
date is set for the adjourned special meeting, then a new quorum will have to be
established.
REQUIRED VOTE
Each outstanding share of PHC common stock on the record date entitles the
holder to one vote at the special meeting. Completion of the merger requires the
adoption of the merger agreement by the affirmative vote of the holders of a
majority of the shares of PHC common stock outstanding on the record date. In
order for your shares of PHC common stock to be included in the vote, if you are
a stockholder of record, you must vote your shares by returning the enclosed
proxy or by voting in person at the special meeting.
If your shares are held in "street name" by your broker, you should
instruct your broker how to vote your shares using the instructions provided by
your broker. If you have not received such voting instructions or require
further information regarding such voting instructions, contact your broker and
they can give you directions on how to vote your shares. Under the rules of the
NYSE, brokers who hold shares in "street name" for customers may not exercise
their voting discretion with respect to the approval of non-routine matters such
as the merger proposal and thus, absent specific instructions from the
beneficial owner of such shares, brokers are not empowered to vote such shares
with respect to the approval of such proposals (i.e., "broker non-votes").
Abstentions and properly executed broker non-votes will be treated as shares
that are present and entitled to vote at the special meeting for purposes of
determining whether a quorum exists. Because adoption of the merger agreement
requires the affirmative vote of a majority of the shares of PHC common stock
outstanding on the record date, a failure to vote and abstentions and broker
non-votes will have the same effect as a vote "AGAINST" adoption of the merger
agreement.
14
As of September [ ], 2004, the directors and executive officers of PHC
beneficially owned, in the aggregate, 3,688,062 (excluding options) shares of
PHC common stock, or approximately 8.2% of the outstanding shares of PHC common
stock. The directors and executive officers have informed PHC that they have
agreed to or intend to vote all of their shares of PHC common stock "FOR" the
adoption of the merger agreement. At the parent's request, A.F. Petrocelli and
United Capital Corp., who owned 45,000 shares and 3,539,637 shares of the
Company's common stock, respectively, as of the close of business on the record
date, representing an aggregate of approximately 8.0% of the outstanding shares
of PHC's common stock, have entered into a voting agreement with the parent that
provides that these shares and any shares subsequently acquired by Mr.
Petrocelli or United Capital Corp. will be voted for the adoption of the merger
agreement. See "The Merger--Voting Agreement."
PROXIES; REVOCATION
If you vote your shares of PHC common stock by signing a proxy, your shares
will be voted at the special meeting as you indicate on your proxy card. If no
instructions are indicated on your signed proxy card, your shares of PHC common
stock will be voted "FOR" the adoption of the merger agreement.
You may revoke your proxy at any time before the vote is taken at the
special meeting. To revoke your proxy, you must either advise our Secretary in
writing, deliver a proxy dated after the date of the proxy you wish to revoke or
attend the special meeting and vote your shares in person. Attendance at the
special meeting will not by itself constitute revocation of a proxy.
If you have instructed your broker to vote your shares, the above-described
options for revoking your proxy do not apply and instead you must follow the
directions provided by your broker to change these instructions.
PHC does not expect that any matter other than the proposal to adopt the
merger agreement will be brought before the special meeting. If, however, such a
matter is properly presented at the special meeting or any adjournment or
postponement of the special meeting, the persons appointed as proxies will have
discretionary authority to vote the shares represented by duly executed proxies
in accordance with their discretion and judgment.
PHC will pay the cost of this proxy solicitation. In addition to soliciting
proxies by mail, directors, officers and employees of PHC may solicit proxies
personally and by telephone, facsimile or other electronic means of
communication. These persons will not receive additional or special compensation
for such solicitation services. PHC will, upon request, reimburse brokers, banks
and other nominees for their expenses in sending proxy materials to their
customers who are beneficial owners and obtaining their voting instructions. PHC
has retained Innisfree M&A Incorporated to assist it in the solicitation of
proxies for the special meeting and will pay Innisfree M&A Incorporated a fee of
approximately $5,000.00 plus reimbursement of out-of-pocket expenses.
ADJOURNMENTS AND POSTPONEMENTS
Although it is not expected, the special meeting may be adjourned or
postponed for the purpose of soliciting additional proxies. Any adjournment or
postponement may be made without notice, other than by an announcement made at
the special meeting, by approval of the holders of a majority of the outstanding
shares of PHC common stock present in person or represented by proxy at the
special meeting, whether or not a quorum exists. Any signed proxies received by
PHC will be voted in favor of an adjournment or postponement in these
circumstances. Any adjournment or postponement of the special meeting for the
15
purpose of soliciting additional proxies will allow PHC stockholders who have
already sent in their proxies to revoke them at any time prior to their use.
THE MERGER
BACKGROUND OF THE MERGER
In July of 2003, Jonathan D. Gray, Senior Managing Director of The
Blackstone Group ("Blackstone"), contacted Bear Stearns, the Company's financial
advisor, to inquire about the Company's interest in considering a possible
acquisition of the Company by Blackstone in partnership with a strategic hotel
company. On September 2, 2003, following discussions between Bear Stearns and
A.F. Petrocelli, Chief Executive Officer, President and Chairman of the Board of
Directors of the Company, the Company entered into customary confidentiality
agreements with Blackstone and its strategic hotel partner pursuant to which
Blackstone and its partner were provided with confidential due diligence
information from the Company for the purposes of evaluating a potential
acquisition of the Company. This process did not lead to a proposal to acquire
the Company or any of its assets or operations.
In February of 2004, the Company entered into a confidentiality agreement
and provided confidential due diligence information to another hotel company
that had expressed an interest in acquiring the Company. Following the
completion of the preliminary due diligence, such hotel company expressed an
interest in an acquisition price that was below the price subsequently agreed to
by Blackstone with respect to the merger, and the parties declined to pursue
further discussions regarding a potential transaction.
In early May 2004, the Company authorized Bear Stearns to contact a limited
number of potential financial and strategic buyers for the Company owned
Wellesley Inns & Suites hotels. Following such authorization, Bear Stearns
contacted Mr. Gray to inquire about Blackstone's interest in considering a
possible acquisition of these hotels. In response, Blackstone requested due
diligence information regarding these hotels. Following a limited due diligence
review, on June 21, 2004, Blackstone made a preliminary proposal to acquire the
Company owned Wellesley Inns & Suites hotels. In late June 2004, based upon
the terms and conditions of the preliminary proposal, the Company determined not
to pursue the sale of the Company owned Wellesley Inns & Suites hotels at
that time.
In early July 2004, Mr. Gray contacted Bear Stearns to express Blackstone's
renewed interest in acquiring the Company as a whole. That same day, Bear
Stearns contacted Mr. Petrocelli and informed him of Blackstone's expressed
interest in acquiring the Company. On July 8, 2004, Bear Stearns informed Mr.
Gray that the Company was willing to consider exploring a transaction with
Blackstone. The Company and Blackstone entered into a customary confidentiality
agreement, dated July 12, 2004, pursuant to which Blackstone was provided with
confidential due diligence information. On July 26, 2004, Blackstone informed
Mr. Petrocelli and Bear Stearns that, based on Blackstone's due diligence review
to date, Blackstone was prepared to proceed at a proposed price of $12.00 per
share in cash.
On July 26, 2004, the Company communicated to Blackstone through Bear
Stearns that the proposed per share price of $12.00 was not acceptable to the
Company. Later that same day, after a series of discussions between Mr. Gray and
Bear Stearns, the parties agreed to continue to pursue a transaction, subject to
approval by the Company's Board of Directors, on the basis of a proposed
purchase price of $12.25 per share in cash.
On July 27, 2004, a special meeting of the Company's Board was held at the
Company's offices in Fairfield, New Jersey. Mr. Petrocelli summarized for the
Board the conversations that he and other members of senior management had had
with Blackstone and Bear Stearns concerning Blackstone's proposal to acquire the
Company. After discussing the general terms of the proposal, the Board
16
authorized management to continue discussions and negotiations with Blackstone
in order to develop more detailed terms of the proposal and to ascertain whether
the proposal might form the basis for a transaction to be considered further by
the Board. Among other things, the Board authorized management to allow
Blackstone to continue its due diligence investigation of the Company. The Board
then directed management to continue to keep the Board members informed
concerning the status of discussions or negotiations with Blackstone.
During the period from July 27, 2004 through August 5, 2004, Blackstone
conducted due diligence to confirm its cash offer of $12.25 per share. On August
5, 2004, Blackstone informed the Company that it was comfortable proceeding with
the transaction on the basis of $12.25 per share in cash. Based on this
confirmation, the Company made additional due diligence information available to
Blackstone.
On August 2, 2004, Blackstone's legal advisor, Simpson Thacher & Bartlett
LLP ("Simpson Thacher"), delivered to Olshan Grundman Frome Rosenzweig & Wolosky
LLP ("OGFR&W"), the Company's legal advisor, and Bear Stearns an initial draft
of a merger agreement that contemplated the merger of the Company with and into
an affiliate of Blackstone.
During the period August 6, 2004 through August 18, 2004, Blackstone
conducted additional due diligence in connection with the merger transaction. On
August 9, 2004, OGFR&W delivered comments on the draft merger agreement to
Simpson Thacher. Subsequently the Company and its counsel, OGFR&W, and
Blackstone and its counsel, Simpson Thacher, negotiated the terms of the merger
agreement and related documents.
On August 9, 2004, Simpson Thacher delivered to OGFR&W a draft of a
proposed voting agreement among the parent, Mr. Petrocelli and United Capital
Corp., an entity controlled by Mr. Petrocelli that owns approximately 7.9% of
the Company's outstanding common stock and is its largest stockholder, that
would require Mr. Petrocelli and United Capital Corp. to vote any shares
beneficially owned by them in favor of the adoption of the merger agreement and
against any other proposals. Blackstone had previously conveyed its request to
the Company for such a voting agreement.
At a special meeting of the Board on August 12, 2004, the Board reviewed
the discussions and contacts with Blackstone to date, including the financial
and other terms of the proposed merger agreement and voting agreement.
Representatives of Bear Stearns and OGFR&W participated in the meeting.
At a special meeting of the Company's Board held on August 18, 2004, the
Board reviewed the discussion and contacts with Blackstone occurring after the
Board's meeting held on August 12, 2004. Representatives of OGFR&W and Bear
Stearns participated in the meeting. Bear Stearns delivered its detailed
financial analysis in connection with the proposed transaction. OGFR&W delivered
a presentation on the Board's fiduciary duties with respect to the proposed
merger agreement and described the terms of the merger agreement. The Board then
reviewed the final terms of the merger agreement and discussed various factors
to be considered in connection with its decision to approve and adopt the merger
and the merger agreement, and noted that the $12.25 per share price represented
a premium of approximately 44.7% over the previous day's closing price of $8.47
per share. Following the Board's discussion and review of the merger agreement,
Bear Stearns delivered its oral opinion, later confirmed in writing, as to the
fairness, from a financial point of view, of the $12.25 per share merger
consideration to be received by the Company's stockholders pursuant to the
merger agreement. Following these discussions and questions by the Board members
to the Company's senior management and financial and legal advisors, the
Company's Board approved and declared advisable the merger agreement and the
merger and resolved to recommend that the Company's stockholders adopt the
merger agreement. The Board's actions were unanimous, except that Mr. Petrocelli
decided to abstain from voting on the merger transaction in his capacity as a
17
director of the Company in light of his control of the Company's largest
stockholder, United Capital Corp., and certain payments he is entitled to
receive in connection with the consummation of the merger, which are described
in "The Merger--Interests of the Company's Directors and Executive Officers in
the Merger." Mr. Petrocelli informed the board, however, that he fully supported
the decision to approve the merger agreement and the merger, as evidenced by his
intention to enter into the voting agreement.
Following the meeting of the Board and the close of trading of the
Company's common stock on August 18, 2004, the Company and Blackstone executed
the merger agreement and issued a press release announcing the merger.
REASONS FOR THE MERGER
After careful consideration, our board of directors approved and determined
the merger, the merger agreement and the transactions contemplated by the merger
agreement advisable and has declared that it is fair to and in the best
interests of the Company and our stockholders. In the course of reaching its
decision to approve and adopt the merger agreement, the merger and the
transactions contemplated by the merger agreement, our board of directors
consulted with senior management and our financial and legal advisors and
considered a number of factors, including the following:
o the current and historical market prices of our common stock,
including the market price of our common stock relative to those of
other industry participants and general market indices, and the fact
that the cash merger price of $12.25 per share represents a 44.7%
premium to the closing price on August 17, 2004, the day before the
merger was announced;
o our business, operations, financial condition, strategy and prospects,
as well as the risks involved in achieving those prospects, the nature
of the lodging industry, and general industry, economic and market
conditions, both on a historical and on a prospective basis;
o the potential value that might result from other alternatives
available to us, including the alternative of remaining a stand-alone,
independent company, as well as the risks and uncertainties associated
with those alternatives;
o the efforts made by us and our advisors to negotiate and execute a
merger agreement favorable to us;
o the financial and other terms and conditions of the merger agreement
as reviewed by our board of directors with our financial and legal
advisors (see "The Merger Agreement") and the fact that they were the
product of arm's-length negotiations between the parties;
o the existence of the voting agreement among A. F. Petrocelli, United
Capital Corp. and the parent;
o the financial presentation of Bear Stearns, including its opinion as
to the fairness, from a financial point of view, of the $12.25 per
share merger consideration to be received by the Company's
stockholders pursuant to the merger agreement (see "The
Merger--Opinion of Bear, Stearns & Co. Inc.");
o the fact that the merger consideration is all cash, so that the
transaction allows our stockholders to immediately realize a fair
value, in cash, for their investment;
18
o the fact that an all cash transaction would be taxable to our
stockholders for U.S. federal income tax purposes;
o the fact that we could in certain circumstances terminate the merger
agreement, prior to the stockholder vote, in order to approve a
transaction proposal by a third party on terms more favorable to our
stockholders than the merger with the merger sub, after having given
the parent the opportunity to match the third party proposal, upon the
payment to the parent of a $23 million termination fee and up to $4
million for expense reimbursement (see "The Merger
Agreement--Termination" and "The Merger Agreement--Fees and
Expenses");
o the commitment made by the parent to treat our employees in a fair and
equitable manner, including to provide, for a two-year period
following the completion of the merger, each of our employees with at
least the same level of base salary, cash incentive compensation and
other cash variable compensation that was provided to the employee
immediately prior to the merger;
o the risks and costs to us if the merger does not close, including the
diversion of management and employee attention, potential employee
attrition and the potential effect on business and customer
relationships;
o the possibility that the $23 million termination fee and up to $4
million for expense reimbursement payable by us to the parent under
certain circumstances will discourage third parties from making
competing proposals to acquire us;
o the interests of our officers and directors in the merger (see "The
Merger--Interests of the Company's Directors and Executive Officers in
the Merger"); and
o the restrictions on the conduct of our business prior to the
completion of the merger, requiring us to conduct our business in the
ordinary course, subject to specific limitations, which may delay or
prevent us from undertaking business opportunities that may arise
pending completion of the merger.
The foregoing discussion summarizes the material factors considered by our
board of directors in its consideration of the merger, including factors that
support the merger as well as those that may weigh against it. In view of the
wide variety of factors considered by our board of directors, our board of
directors did not find it practicable to quantify or otherwise assign relative
weights to the foregoing factors. Our board of directors approved and recommends
the merger based upon the totality of the information presented to and
considered by it.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
After careful consideration, our board of directors:
o has determined that the merger, the merger agreement and the
transactions contemplated by the merger agreement are advisable, fair
to and in the best interests of the Company and its stockholders;
o has approved and adopted the merger, the merger agreement and the
transactions contemplated by the merger agreement; and
o recommends that PHC's stockholders vote "FOR" the adoption of the
merger agreement.
19
OPINION OF BEAR STEARNS & Co. Inc.
The Board retained Bear Stearns to act as its exclusive financial advisor
with respect to exploring strategic alternatives including a possible sale of
the Company. In selecting Bear Stearns, the Board considered the fact that Bear
Stearns is an internationally recognized investment banking firm with
substantial experience advising companies in the Company's industry and has
substantial experience providing strategic advisory services. Bear Stearns, as
part of its investment banking business, is continuously engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
At the August 18, 2004 meeting of the Board, Bear Stearns delivered its
oral opinion, which was subsequently confirmed in writing, that, as of August
18, 2004, and based upon and subject to the assumptions, qualifications and
limitations set forth in the written opinion, the merger consideration of $12.25
per share is fair, from a financial point of view, to the public shareholders of
the Company.
The full text of Bear Stearns' written opinion is attached as Annex C to
this document, and you should read the opinion carefully and in its entirety.
The opinion sets forth the assumptions made, some of the matters considered and
qualifications and limitations of the review undertaken by Bear Stearns. The
Bear Stearns opinion is subject to the assumptions and conditions contained
therein and is necessarily based on economic, market and other conditions and
the information made available to Bear Stearns as of the date of the Bear
Stearns opinion. In reading the discussion of the fairness opinion set forth
below, the shareholders of the Company should be aware that Bear Stearns'
opinion:
o was provided to the Board for its benefit and use;
o did not constitute a recommendation to the Board in connection with
the merger;
o does not constitute a recommendation to any shareholder of the Company
as to how to vote in connection with the merger; and
o did not address the Company's underlying business decision to pursue
the merger, the relative merits of the transaction as compared to any
alternative business strategies that might exist for the Company or
the effects of any other transaction in which the Company might
engage.
Although Bear Stearns evaluated the fairness of the merger consideration,
from a financial point of view, to the public shareholders of the Company, the
consideration itself was determined by the Company and Blackstone through
arm's-length negotiations. The Company did not provide specific instructions to,
or place any limitations on, Bear Stearns with respect to the procedures to be
followed or factors to be considered by it in performing its analyses or
providing its opinion.
In connection with rendering its opinion, Bear Stearns, among other things:
o reviewed a draft of the merger agreement dated August 17, 2004;
o reviewed the Company's publicly available Annual Reports to
Shareholders and Annual Reports on Form 10-K for the years ended
December 31, 2001 through 2003, its publicly available Quarterly
Reports on Form 10-Q for the periods ended March 31 and June 30, 2004,
and its publicly available Reports on Form 8-K for the three years
ended the date hereof;
20
o reviewed certain operating and financial information relating to the
Company's business and prospects, including a budget dated August 12,
2004 for the year ended December 31, 2004 (the "Budget"), all as
prepared and provided to Bear Stearns by the Company's management;
o met with certain members of the Company's senior management to discuss
the Company's business, operations, historical financial results and
future prospects;
o reviewed the reported historical prices, trading multiples and trading
volumes of the common stock of the Company;
o reviewed publicly available financial data, stock market performance
data and trading multiples of companies which Bear Stearns deemed
generally comparable to the Company;
o reviewed the terms of recent transactions (to the extent publicly
available) involving companies which Bear Stearns deemed generally
comparable to the Company and the transaction; and
o conducted such other studies, analyses, inquiries and investigations
as Bear Stearns deemed appropriate.
In arriving at its opinion, Bear Stearns did not perform or obtain any
independent appraisal of the assets or liabilities (contingent or otherwise) of
the Company, nor was Bear Stearns furnished with any such appraisals. Bear
Stearns assumed that the final executed merger agreement did not materially
differ from the draft merger agreement reviewed by them. In addition, Bear
Stearns assumed that the transaction will be consummated in a timely manner and
in accordance with the terms of the merger agreement without any limitations,
restrictions, conditions, amendments or modifications, regulatory or otherwise,
that collectively would have a material effect on the Company.
Bear Stearns relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information reviewed by
them for the purposes of their opinion, including, without limitation, the
financial and other information provided to them by the Company. With respect to
the Company's Budget, Bear Stearns relied on representations that it was
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the senior management of the Company as to the expected future
performance of the Company. Bear Stearns did not assume any responsibility for
the independent verification of any such information or of the Budget provided
to them, and Bear Stearns further relied upon the assurances of the senior
management of the Company that they are unaware of any facts that would make the
information and Budget provided to them incomplete or misleading. Subsequent
developments may affect the Bear Stearns opinion and Bear Stearns assumes no
responsibility for updating or revising its opinion based on circumstances or
events occurring after the date of the Bear Stearns opinion.
SUMMARY OF ANALYSES
-------------------
The following is a brief summary of the material financial analyses
performed by Bear Stearns and presented to the Board in connection with
rendering its fairness opinion.
Some of the financial analyses summarized below include summary data and
information presented in tabular format. In order to understand fully the
financial analyses, the summary data and tables must be read together with the
21
full text of the analyses. Considering the summary data and tables alone could
create a misleading or incomplete view of Bear Stearns' financial analyses.
COMPARISON OF MERGER CONSIDERATION TO HISTORICAL STOCK PRICES. Bear Stearns
compared the merger consideration to be received by the Company stockholders of
$12.25 per share to the Company's closing stock price on August 17, 2004 (the
last full trading day prior to the meeting of the Board on August 18, 2004 at
which Bear Stearns delivered its opinion) and average closing stock prices for
the periods one month, six months, one year and three years preceding August 17,
2004 and since the appointment of A.F. Petrocelli, the Company's President,
Chief Executive Officer and Chairman of the Board of Directors, on September 15,
1998. The merger consideration of $12.25 per share represents a 44.7% premium to
the Company's closing stock price of $8.47 on August 17, 2004.
Average Closing Merger Consideration
Period Prior to August 17, 2004: Stock Price ($) Premium (%)
------------------------------- --------------- --------------------
One Month 9.37 30.8
Six Months 10.28 19.2
One Year 9.98 22.8
Three Years 9.54 28.5
Since September 15, 1998 9.73 25.9
CALCULATION OF THE COMPANY'S ENTERPRISE VALUE AT THE MERGER. For purposes
of analyzing the merger consideration to be received by the Company's
stockholders, Bear Stearns calculated the enterprise value, referred to in this
summary as "Enterprise Value" of the Company by adding the equity value of the
Company's common stock (including calculating the value of in-the-money stock
options with a deduction for the exercise prices of such options) and the
Company's total debt outstanding as of June 30, 2004 and subtracting the
Company's cash and cash equivalents outstanding as of June 30, 2004.
Bear Stearns calculated multiples of the Company's Enterprise Value to the
Company's earnings before interest, taxes, depreciation and amortization,
referred to in this summary as "EBITDA," for the estimated fiscal year ending
December 2004.
COMPARABLE COMPANY ANALYSIS. Bear Stearns analyzed selected historical and
2004 budgeted operating information provided by management of the Company, stock
price performance data and valuation multiples for the Company and compared this
data to that of four publicly traded lodging C-Corps and three publicly traded
lodging real estate investment trusts ("REITS") deemed by Bear Stearns to be
generally comparable to the Company. No company or transaction used in the
analyses described below is directly comparable to the Company or the
contemplated transaction. The analyses performed by Bear Stearns are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by these analyses. Bear
Stearns used the earnings forecasts for these companies from publicly available
data, First Call and selected Wall Street equity research reports. In conducting
its analysis, Bear Stearns analyzed the multiples of the following comparable
companies:
22
C-Corps:
La Quinta Corporation
Fairmont Hotels & Resorts Inc.
Hilton Hotels Corporation; and
Starwood Hotels and Resorts Worldwide, Inc.
REITS:
Equity Inns, Inc.
Innkeepers USA Trust; and
Winston Hotels, Inc.
Bear Stearns reviewed, among other things, the comparable companies'
multiples of Enterprise Value to fiscal year 2004 estimated (2004E) EBITDA. The
multiples are based on closing stock prices of the companies on August 17, 2004.
The following table summarizes the analysis:
Enterprise Value/2004E EBITDA
-----------------------------
C-Corps:
La Quinta 12.5x
Fairmont Hotels and Resorts 14.0
Hilton Hotels 10.1
Starwood Hotels and Resorts 11.8
REITS:
Equity Inns 12.2x
Innkeepers USA Trust 10.7
Winston Hotels 12.8
Bear Stearns compared the multiples above to the implied multiple in the
merger of 11.9x Enterprise Value to 2004E EBITDA. Bear Stearns also noted that
the comparable companies have historically traded at a premium Enterprise Value
/ Last Twelve Months ("LTM") EBITDA multiple to that of the Company.
COMPARABLE PRECEDENT TRANSACTIONS ANALYSIS. Bear Stearns analyzed publicly
available financial information relating to nine merger and acquisition
transactions involving companies in the lodging industry which Bear Stearns
deemed generally comparable to the Company and the merger. No company or
transaction used in the analyses described below is directly comparable to the
Company or the contemplated transaction. The analyses performed by Bear Stearns
are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by these analyses.
Bear Stearns reviewed, among other things, the ratio of the comparable
companies' Enterprise Value implied in the respective transactions to their last
twelve months (pre-acquisition) EBITDA, referred to in this summary as "LTM
EBITDA."
23
The precedent transactions in the Bear Stearns analysis were
(Target/Acquiror):
Baymont Inns & Suites/La Quinta Corporation
Extended Stay America, Inc./The Blackstone Group
RFS Hotel Investors, Inc./CNL Hospitality Properties, Inc.
Suburban Lodges of America Inc./InTown Suites
Homestead Village Incorporated/Blackstone Real Estate Advisors
Promus Hotel Corp./Hilton Hotels Corporation
Red Roof Inns, Inc./Accor SA
La Quinta Inns, Inc./Meditrust Companies; and
Homegate Hospitality, Inc./Prime Hospitality Corp.
The following table summarizes the analysis:
Enterprise Value/LTM EBITDA
---------------------------
High 13.7x
Mean 10.4
Median 10.1
Low 7.1
Bear Stearns compared the multiples implied in the merger of 12.8x
Enterprise Value to LTM EBITDA with the mean and median of the precedent
transactions. Further, Bear Stearns considered how the multiples have varied
over time and some of the factors involved in some of the transactions.
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of those methods to the
particular circumstances involved. Such an opinion is therefore not readily
susceptible to partial analysis or summary description, and taking portions of
the analyses set out above, without considering the analysis as a whole, would
in the view of Bear Stearns, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering the Bear Stearns
opinion. Bear Stearns did not form an opinion as to whether any individual
analysis or factor, whether positive or negative, considered in isolation,
supported or failed to support the Bear Stearns opinion. In arriving at its
opinion, Bear Stearns considered the results of all its analyses and did not
attribute any particular weight to any one analysis or factor. Bear Stearns
arrived at its ultimate opinion based on the results of all analyses undertaken
by it and assessed as a whole and believes that the totality of the factors
considered and analyses performed by Bear Stearns in connection with its opinion
operated collectively to support its determination as to the fairness of the
merger consideration to the public shareholders to the Company. The analyses
performed by Bear Stearns, particularly those based on estimates and
projections, are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. With respect to the analysis of comparable companies and the
analysis of precedent transactions summarized above, no public company utilized
as a comparison is identical to the Company. Accordingly, an analysis of
publicly traded comparable companies and comparable precedent transactions is
not mathematical; rather it involves complex considerations and judgments
concerning the differences in financial and operating characteristics of the
companies and precedent transactions and other factors that could affect the
public trading values of the Company and the companies and precedent
transactions to which they were compared. The analyses do not purport to be
appraisals or to reflect the prices at which any securities may trade at the
present time or at any time in the future. In addition, the Bear Stearns opinion
was just one of the many factors taken into consideration by the Board.
Consequently, Bear Stearns' analysis should not be viewed as determinative of
the decision of the Board with respect to the fairness of the merger
consideration, from a financial point of view, to the public shareholders of the
Company.
24
In August 2004, the Board formally engaged Bear Stearns to act as its
exclusive financial advisor with respect to exploring strategic alternatives
including a possible sale of the Company. Pursuant to the terms of Bear Stearns'
engagement letter, the Company has agreed to pay Bear Stearns a transaction fee
of 0.80% of the aggregate consideration involved in the transaction (including
the amount of any debt assumed or acquired), provided, however, that in no event
shall the transaction fee be less than $6.4 million, the principal portion of
which is payable upon consummation of the transaction contemplated by the merger
agreement. In addition, the Company has agreed to reimburse Bear Stearns for all
reasonable out-of-pocket expenses (up to a maximum of $50,000) incurred by Bear
Stearns in connection with its engagement and the merger, including reasonable
fees and disbursements of its legal counsel. Also, the Company has agreed to
indemnify Bear Stearns against certain liabilities relating to or arising out of
Bear Stearns' engagement.
Bear Stearns has acted as financial advisor to the Board in connection
with, and has participated in certain of the negotiations leading to, the
transaction contemplated by the merger agreement. Bear Stearns has also
previously provided certain investment banking services to the Company, having
received aggregate compensation from the Company of approximately $4.0 million.
In the ordinary course of business, Bear Stearns and its affiliates may
actively trade the equity and debt securities and/or bank debt of the Company
and affiliates of BREP IV Hotels Holding L.L.C. for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities or bank debt. Bear Stearns and/or its affiliates own
limited partnership interests in certain investment funds affiliated with BREP
IV Hotels Holding L.L.C., including Blackstone Communications Partners I, LP,
Blackstone Mezzanine Fund, LP, Blackstone Capital Partners IV, LP and Blackstone
Real Estate Partners IV, LP, in each case representing, in the aggregate, less
than 2% of such interests. In addition, Bear Stearns and/or its affiliates have
provided investment banking services to BREP IV Hotels Holding L.L.C. and its
affiliates, including Blackstone Real Estate Partners IV LP. Such services have
included various advisory services, including Blackstone Real Estate Partners IV
LP's acquisition of Extended Stay America, Inc. and Homestead Village
Incorporated and various equity, debt and mortgage related financings, including
financing for Extended Stay America, Inc. and Homestead Village Incorporated, in
each case for which Bear Stearns has received customary fees.
FINANCING
In connection with the merger, the parent will cause approximately $570.6
million in cash to be paid to our stockholders and holders of stock options. In
addition, our credit agreement will be repaid and the parent anticipates that
substantially all our senior subordinated notes will be repurchased. We
currently have approximately $20.0 million of outstanding borrowings under our
credit agreement and $178.725 million aggregate principal amount of senior
subordinated notes outstanding. See "The Merger Agreement--Debt Tender Offers
and Consent Solicitations" and "The Merger Agreement--Conditions to the Merger."
We have also agreed to use our reasonable best efforts to repay, prior to
the effective time of the merger, $915,000 in aggregate principal amount of
mortgage notes issued by us and secured by our Prime Hotel and Suites property
in Fairfield, New Jersey. See "The Merger Agreement--Agreement to Take Further
Action and to Use Reasonable Best Efforts." Following the closing of the merger,
approximately $13.0 million in aggregate principal amount of other mortgage
notes issued by one of our subsidiaries, $24.3 million in aggregate principal
amount of mortgage notes issued by one of our joint ventures (up to $4.0 million
of which is guaranteed by us) and CN$7.8 million in aggregate principal amount
of mortgage notes issued by another of our joint ventures will remain
outstanding.
25
The payments to our stockholders, the holders of stock options, and the
holders of our debt which is being repaid or repurchased are all expected to be
funded by a combination of equity contributions to the parent by affiliates of
The Blackstone Group and debt financing. It is expected that affiliates of The
Blackstone Group will contribute approximately $172.5 million of equity to the
parent and that the remaining funds necessary to finance the acquisition and
related debt refinancings will be obtained through the parent's debt financing.
In connection with the execution and delivery of the merger agreement, the
parent obtained a commitment letter from Bank of America, N.A. providing for
$680 million in debt financing. The funds to be borrowed pursuant to the
commitment letter are to be secured by, among other things, first priority
mortgage liens on substantially all of the owned hotel properties of the Company
and its subsidiaries, a first priority assignment of all leases and rents
attributable to such properties, and a first priority assignment of all security
accounts and other reserves and escrows for such properties. The financing will
be non-recourse, subject to customary exceptions.
The commitment is conditioned on the merger being consummated by February
18, 2005 and other customary conditions. The lenders have the right to terminate
the commitment under certain circumstances, including:
o the occurrence of events which are substantially similar to the events
constituting a "market MAC" that are described in "The Merger
Agreement--Conditions to the Merger," and
o if the parent is entitled to terminate the merger agreement as a
result of a breach of certain representations and warranties made by
the Company. See "The Merger Agreement--Termination."
The merger agreement does not contain a financing condition, although it
does contain a condition, which we refer to as the "market MAC" condition, which
is satisfied if certain specified market disruptions do not occur. See "The
Merger Agreement--Conditions to the Merger."
Under the terms of the merger agreement, the parent has agreed to use its
reasonable best efforts to arrange its debt financing on the terms and
conditions described in the debt commitment letter. In the event any portion of
the parent's debt financing becomes unavailable on the terms and conditions
contemplated in the debt commitment letter, the parent is obligated to use its
reasonable best efforts to arrange to obtain that portion from alternative
sources on comparable or more favorable terms. The parent is obligated to keep
us informed of the status of its efforts to arrange its equity and debt
financing and to give us prompt notice of any material breach by any party of
the debt commitment letter or of any termination of the debt commitment letter.
The parent must consult with us before it permits any material amendment or
modification to be made to, or any waiver of any material provision or remedy
under, the debt commitment letter. With certain exceptions, we have agreed to
provide, and to cause our subsidiaries and their representatives to provide, all
reasonable cooperation in connection with the arrangement of the debt financing
as may be reasonably requested by the parent.
GUARANTEE; REMEDIES
In connection with the merger agreement, Blackstone Real Estate Partners IV
L.P. has agreed to guarantee the due and punctual observance, performance and
discharge of all of the payment obligations and liabilities of the parent and
the merger sub under the merger agreement, up to a maximum amount of $27
million. The guarantee will remain in full force and effect until the effective
time of the merger or, if the merger agreement is terminated, until the second
anniversary of the termination date.
26
We cannot seek specific performance to require the parent or the
merger sub to complete the merger, and our exclusive remedy for the failure of
the parent or the merger sub to complete the merger is a termination fee of $27
million payable to us in the circumstances described under "The Merger
Agreement--Fees and Expenses." In no event can we seek to recover in excess of
$27 million for a breach of the merger agreement by the parent or the merger
sub.
INTERESTS OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
STOCK OPTIONS
As of the record date, there were approximately 6,024,354 shares of our
common stock subject to stock options granted to our executive officers and
directors under our equity incentive plans. Under the terms of the merger
agreement, all such stock options will become immediately vested and exercisable
effective as of the completion of the merger. Any outstanding stock options that
remain unexercised as of the completion of the merger will be canceled, and the
holder of each stock option that has an exercise price of less than $12.25 will
receive a cash payment, subject to any required withholding taxes, equal to the
product of:
o the number of shares of our common stock subject to each option as of
the effective time of the merger, multiplied by
o the excess of $12.25 over the exercise price per share of common stock
subject to such option.
The following table summarizes the vested and unvested options under our
equity incentive plans and other stock option grants with exercise prices of
less than $12.25 per share held by our executive officers and directors as of
September [ ], 2004 and the consideration that each of them will receive
pursuant to the merger agreement in connection with the cancellation of their
options:
No. of Shares Weighted Average
Underlying Vested and Exercise Price of Resulting
Unvested Options and Unvested Options($) Consideration($)
---------------- ----------------------- ----------------
A. F. Petrocelli 4,825,000 7.965 20,675,625
Richard T. Szymanksi 150,000 9.671 386,920
Lawrence N. Friedland 70,000 9.753 149,850
Allen S. Kaplan 40,000 9.298 88,550
Howard M. Lorber 105,000 9.495 261,725
Richard Reitman 20,000 7.945 86,100
Stephen Seltzer 10,000 9.540 27,100
Stephen M. Kronick 138,000 9.482 381,970
John Capone 21,300 8.847 72,447
Arthur Manso 24,000 8.768 83,580
Vito Stellato 12,000 9.090 37,920
Bryan Hayes 11,300 9.308 33,242
CHANGE OF CONTROL AGREEMENTS AND EMPLOYMENT AGREEMENT
We have entered into change in control agreements with three of our
executive officers, A.F. Petrocelli, Richard Szymanski and Stephen Kronick. The
change in control agreement with Mr. Petrocelli provides that if a change of
control of the Company occurs, the Company will pay him, within ten days of such
27
event and in one lump sum, two and one-half times the aggregate cash
compensation earned by him during the fiscal year immediately preceding the
change in control. The change in control agreements with Mr. Szymanski and Mr.
Kronick each provide that, if within two years of a change in control of the
Company, the officer's employment with the Company is terminated by the Company
without cause or if the officer resigns for good reason (as defined in the
agreement), the Company will pay the officer two and one-half times the
aggregate cash compensation earned by the officer during the fiscal year
immediately preceding the termination of employment. Each of the change in
control agreements with Messrs. Petrocelli, Szymanski and Kronick contains a tax
gross-up provision whereby if the officer incurs any excise tax by reason of his
receipt of any payment (under his change in control agreement or employment
agreement) that constitutes an excess parachute payment as defined in Section
280G and 4999 of the Internal Revenue Code, the officer will receive a gross-up
payment in an amount that would place the officer in the same after-tax position
that he would have been in if no excess tax had applied.
In accordance with the Employment Agreement, dated September 14, 1998,
between A.F. Petrocelli and us, Mr. Petrocelli will receive severance
compensation of a lump sum payment of approximately $1.3 million on the
effective date of the merger since he will not be employed by the surviving
company after the effective date of the merger.
The aggregate amount of cash severance benefits payable under the change of
control agreement and the employment agreement with Mr. Petrocelli is
approximately $7.8 million (which includes a tax gross-up payment of
approximately $3.0 million and the severance payment of approximately $1.3
million referred to in the preceding paragraph). The aggregate amount of cash
severance benefits under the change of control agreements with Mr. Szymanski and
Mr. Kronick is approximately $1.4 million if they are terminated within the
two-year period commencing on the date that the change of control occurs. It is
not currently anticipated that any tax gross-up payments would be required to be
paid to Messrs. Szymanski and Kronick if they are terminated and are entitled to
a change of control payment.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that the limited liability company agreement
(or similar organizational document) of the surviving company will contain
provisions no less favorable with respect to indemnification of our directors,
officers, employees, fiduciaries or agents than those set forth in the Company's
certificate of incorporation. The indemnification provisions in the surviving
company's limited liability company agreement will not be amended or repealed in
any manner adverse to persons entitled to rights under those provisions on or
prior to the effective time for a period of six years following the effective
time of the merger.
The parent and the surviving company have agreed to indemnify, to the same
extent as provided in our certificate of incorporation or any other applicable
contract in effect on August 18, 2004 each of our present and former directors
and officers against all expenses, losses and liabilities incurred in connection
with any claim, proceeding or investigation arising out of any act or omission
in their capacity as an officer or director occurring on or before the effective
time of the merger.
The merger agreement requires that the surviving company either:
o obtain "tail" directors' and officers' insurance policies in an amount
and scope at least as favorable as the Company's existing policies and
with a claims period of at least six years from the effective time of
the merger for claims arising from facts or events that occurred on or
prior to the effective time; or
28
o maintain in effect, for a period of six years after the effective time
of the merger, our current directors' and officers' liability
insurance policies with respect to matters occurring prior to the
effective time or obtain policies of at least the same coverage,
subject to a maximum annual premium of 250% of our current premium. If
the annual premiums of insurance coverage exceed 250% of our current
annual premium, the surviving company must obtain a policy with the
greatest coverage available for a cost not exceeding 250% of the
current annual premium paid by us.
The obligations described above regarding directors' and officers'
indemnification and insurance must be assumed by any successor entity to the
parent or the surviving company as a result of any consolidation, merger or
transfer of all or substantially all properties and assets.
VOTING AGREEMENT
As a condition to its entering into the merger agreement, the parent
required Mr. A. F. Petrocelli, our Chairman and Chief Executive Officer, and
United Capital Corp., an entity controlled by him, to enter into a voting
agreement with respect to all 45,000 shares of common stock owned by Mr.
Petrocelli and all 3,539,697 shares of common stock owned by United Capital
Corp. as of the record date and any additional shares acquired by them. As of
the record date, these shares represent in the aggregate approximately 8.0% of
the votes eligible to be cast at the special meeting.
Under the voting agreement, Mr. Petrocelli and United Capital Corp. have
agreed to do the following:
o when the special meeting is held, to appear at the meeting or
otherwise cause all the shares of common stock of the Company
beneficially owned by them to be counted as present at the meeting for
the purpose of establishing a quorum;
o vote, or cause to be voted, in person or by proxy all the shares of
common stock of the Company beneficially owned by them in favor of the
merger and any other matters necessary for consummation of the
transactions contemplated by the merger agreement; and
o vote, or cause to be voted, all the shares of common stock of the
Company beneficially owned by them against:
o any proposal for any recapitalization, reorganization,
liquidation, merger, sale of assets or other business combination
between the Company and any other person, other than the merger,
and
o any other action that could reasonably be expected to impede,
interfere with, delay, postpone or adversely affect the merger or
any of the transactions contemplated by the merger agreement, any
transactions contemplated by the voting agreement or result in a
breach in any material respect of any covenant, representation or
warranty or other obligation or agreement of the Company under
the merger agreement.
Mr. Petrocelli and United Capital Corp. have irrevocably granted, until the
termination of the merger agreement, and appointed the parent, each Senior
Managing Director of the parent and the Secretary of the parent, in their
respective capacities as officers of the parent, and any other designee of the
parent, proxy to vote as described above all shares subject to the voting
agreement.
29
Mr. Petrocelli and United Capital Corp. have agreed not to sell, transfer
or otherwise dispose of any shares of common stock of the Company other than, in
case of Mr. Petrocelli, to specified related persons who agree to be bound by
the voting agreement, or enter into any voting agreement with respect to those
shares.
Mr. Petrocelli and United Capital Corp. have agreed not to, and not to
permit any representative to, directly or indirectly, solicit, including by way
of furnishing information, any inquiries or the making of any proposal by any
person or entity, other than the parent or any affiliate of the parent, which
constitutes, or could reasonably be expected to lead to, another acquisition
proposal, except that this obligation shall not restrict Mr. Petrocelli from
acting in his capacity as a director of the Company and in compliance with the
merger agreement.
The voting agreement terminates upon the earliest of:
o the effective time of the merger;
o the termination of the merger agreement in accordance with its terms;
and
o written notice of termination of the voting agreement by the parent to
Mr. Petrocelli and United Capital Corp..
The foregoing summary of the voting agreement is qualified in its entirety
by reference to the voting agreement, a copy of which is attached to this proxy
statement as Annex B and which we incorporate by reference into this document.
This summary may not contain all of the information about the voting agreement
that is important to you. We encourage you to read carefully the voting
agreement in its entirety.
LITIGATION CONCERNING THE MERGER
On August 19, 2004 and August 20, 2004, two purported class actions were
filed against us, our directors and The Blackstone Group in the Court of
Chancery of the State of Delaware, and styled as Garco Investments LLP v. Prime
Hospitality Corp., et. al. (Filing ID 4077874) and Elliot Ames v. Prime
Hospitality Corp., et. al. (Filing ID 4079278). The complaints in the actions,
which are substantially similar, allege, among other things, that our directors
breached their fiduciary duties to our stockholders in connection with the
merger. Among other relief, the complaints seek class action status, injunctive
relief from completing the merger (which, if granted, could under certain
circumstances delay or terminate the merger), unspecified monetary damages, and
the payment of attorney's fees. We believe the lawsuits are without merit and
intend to vigorously defend against them.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain material U.S. federal
income tax consequences of the merger to U.S. holders of our common stock. We
base this summary on the provisions of the Code, applicable current and proposed
U.S. Treasury Regulations, judicial authority, and administrative rulings and
practice, all of which are subject to change, possibly on a retroactive basis.
For purposes of this discussion, we use the term "U.S. holder" to mean:
o a citizen or individual resident of the U.S. for U.S. federal income
tax purposes;
o a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized in or under the laws
of the U.S. or any State or the District of Columbia;
30
o a trust if it (1) is subject to the primary supervision of a court
within the U.S. and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (2) has a valid
election in effect under applicable U.S. Treasury Regulations to be
treated as a U.S. person; or
o an estate the income of which is subject to U.S. federal income tax
regardless of its source.
This discussion assumes that you hold the shares our of common stock as a
capital asset within the meaning of Section 1221 of the Code (generally,
property held for investment). This discussion does not address all aspects of
U.S. federal income tax that may be relevant to you in light of your particular
circumstances, or that may apply to you if you are subject to special treatment
under the U.S. federal income tax laws (including, for example, insurance
companies, dealers in securities or foreign currencies, tax-exempt
organizations, financial institutions, mutual funds, partnerships or other pass
through entities for U.S. federal income tax purposes, non-U.S. persons,
stockholders who hold shares of our common stock as part of a hedge, straddle,
constructive sale or conversion transaction, or stockholders who acquired their
shares of our common stock through the exercise of employee stock options or
other compensation arrangements). In addition, the discussion does not address
any tax considerations under state, local or foreign laws or U.S. federal laws
other than those pertaining to the U.S. federal income tax that may apply to
you. We urge you to consult your own tax advisor to determine the particular tax
consequences to you, including the application and effect of any state, local or
foreign income and other tax laws, of the receipt of cash in exchange for our
common stock pursuant to the merger.
The receipt of cash in the merger by U.S. holders of our common stock will
be a taxable transaction for U.S. federal income tax purposes (and may also be a
taxable transaction under applicable state, local and foreign tax laws). In
general, for U.S. federal income tax purposes, a U.S. holder of our common stock
will recognize gain or loss equal to the difference between:
o the amount of cash received in exchange for such common stock and
o the U.S. holder's adjusted tax basis in such common stock.
If the holding period in our common stock surrendered in the merger is
greater than one year as of the date of the merger, the gain or loss will be
long-term capital gain or loss. The deductibility of a capital loss recognized
on the exchange is subject to limitations under the Code. If you acquired
different blocks of our common stock at different times and different prices,
you must determine your adjusted tax basis and holding period separately with
respect to each block of our common stock.
Under the Code, as a U.S. holder of our common stock, you may be subject,
under certain circumstances, to information reporting on the cash received in
the merger unless you are a corporation or other exempt recipient. Backup
withholding will also apply (currently at a rate of 28%) with respect to the
amount of cash received in the merger, unless you provide proof of an applicable
exemption or a correct taxpayer identification number, and otherwise comply with
the applicable requirements of the backup withholding rules. Backup withholding
is not an additional tax and any amounts withheld under the backup withholding
rules may be refunded or credited against your U.S. federal income tax
liability, if any, provided that you furnish the required information to the
Internal Revenue Service in a timely manner.
REGULATORY APPROVALS
The Company is not aware of any material regulatory approvals required in
order to complete the merger.
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THE MERGER AGREEMENT
The summary of the material terms of the merger agreement below and
elsewhere in this proxy statement is qualified in its entirety by reference to
the merger agreement, a copy of which is attached to this proxy statement as
Annex A and which we incorporate by reference into this document. This summary
may not contain all of the information about the merger agreement that is
important to you. We encourage you to read carefully the merger agreement in its
entirety.
EFFECTIVE TIME
The effective time of the merger will occur at the time that we file a
certificate of merger with the Secretary of State of the State of Delaware on
the closing date of the merger. The closing date will occur no later than the
second business day after all of the conditions set forth in the merger
agreement have been satisfied or waived, or such other date as the parties may
agree in writing.
STRUCTURE
At the effective time of the merger, we will merge with and into the merger
sub. The merger sub will survive the merger and continue to exist after the
merger as a wholly owned subsidiary of the parent. All of the Company's and the
merger sub's properties, assets, rights, privileges, immunities, powers and
purposes, and all of their liabilities, obligations and penalties, will become
those of the surviving company. Following the completion of the merger, our
common stock will be delisted from the NYSE, deregistered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and no longer publicly
traded.
ALTERNATIVE STRUCTURE
While it is currently contemplated that the merger will be effected through
the merger of the Company with and into the merger sub, the parent has the
option, in its sole discretion and without requiring our consent or the consent
of our board of directors or stockholders, after providing us with reasonable
notice, to cause the merger to be effected through an alternative transaction
structure in which the merger sub will merge with and into the Company, with the
Company being the surviving company. If the parent elects the alternative merger
structure, the merger consideration to be paid to our stockholders will not
change and:
o each limited liability company interest of the merger sub issued and
outstanding immediately prior to the effective time of the merger will
be converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the
surviving company;
o the certificate of incorporation and bylaws of the Company, as in
effect immediately prior to the effective time of the merger, will be
the certificate of incorporation and bylaws of the surviving company;
and
o the directors of the merger sub immediately prior to the effective
time of the merger will be the initial directors and officers of the
surviving company.
For purposes of the merger agreement, all references to the term "merger"
include the alternative merger structure and all references to the "surviving
company" include the Company in its capacity as the surviving entity in the
alternative merger structure.
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In addition, the parent has the option, in its sole discretion and without
requiring our consent or the consent of our board of directors or stockholders,
after providing us with reasonable notice, to convert one or more of our
subsidiaries that are organized as corporations into limited liability companies
or limited partnerships immediately prior to the effective time of the merger.
The completion of any such conversions would be contingent upon consummation of
the closing of the merger.
TREATMENT OF STOCK AND OPTIONS
COMPANY COMMON STOCK
At the effective time of the merger, each share of our common stock issued
and outstanding immediately prior to the effective time of the merger will
automatically be canceled and will cease to exist and will be converted into the
right to receive $12.25 in cash, without interest, other than Company common
stock:
o held in the Company's treasury immediately prior to the effective time
of the merger;
o held by the merger sub, the parent or any direct or indirect wholly
owned subsidiary of the parent or the Company immediately prior to the
effective time of the merger; and
o as to which the Company's stockholders demand appraisal rights in
compliance with Delaware law.
COMPANY STOCK OPTIONS
Immediately prior to the effective time of the merger, each outstanding
option to acquire our common stock will be canceled, and the holder of each
stock option that has an exercise price of less than $12.25 will be entitled to
receive from the surviving company as promptly as practicable thereafter an
amount in cash equal to the product of:
o the number of shares of our common stock subject to each option as of
the effective time of the merger, multiplied by
o the excess of $12.25 over the exercise price per share of common stock
subject to such option.
The amount of cash payable with respect to options will be reduced by the amount
of any applicable taxes required to be withheld. We have agreed to take all
actions necessary prior to the effective time of the merger to terminate all of
the Company's stock option plans and to cancel the stock options.
NO FURTHER OWNERSHIP RIGHTS
After the effective time of the merger, each of our outstanding stock
certificates will represent only the right to receive the merger consideration.
The merger consideration paid upon surrender of each certificate will be paid in
full satisfaction of all rights pertaining to the shares of our common stock
represented by that certificate.
EXCHANGE AND PAYMENT PROCEDURES
At the effective time of the merger, the parent will deposit an amount of
cash sufficient to pay the merger consideration to each holder of shares of
Company common stock with a bank or trust company (the "paying agent")
reasonably acceptable to us. As soon as practicable after the effective time of
the merger, the paying agent will mail a letter of transmittal and instructions
33
to you and the other Company stockholders. The letter of transmittal and
instructions will tell you how to surrender your Company common stock
certificates in exchange for the merger consideration.
YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD,
AND YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A
LETTER OF TRANSMITTAL.
You will not be entitled to receive the merger consideration until you
surrender your Company common stock certificate or certificates to the paying
agent, together with a duly completed and executed letter of transmittal and any
other documents as the paying agent may reasonably require. The merger
consideration may be paid to a person other than the person in whose name the
corresponding certificate is registered if the certificate is properly endorsed
or is otherwise in the proper form for transfer. In addition, the person
requesting payment must either pay any applicable stock transfer taxes or
establish to the reasonable satisfaction of the parent that such stock transfer
taxes have been paid or are not applicable.
No interest will be paid or will accrue on the cash payable upon surrender
of the certificates. Each of the paying agent, the surviving company and the
parent will be entitled to deduct and withhold any applicable taxes from the
merger consideration.
At the effective time of the merger, our share transfer books will be
closed, and there will be no further registration of transfers of outstanding
shares of our common stock. If, after the effective time of the merger,
certificates are presented to the surviving company or the paying agent for
transfer or any other reason, they will be canceled and exchanged for the merger
consideration.
None of the paying agent, the merger sub, the parent or the surviving
company will be liable to any person for any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. Any
portion of the merger consideration deposited with the paying agent that remains
undistributed to the holders of certificates evidencing shares of our common
stock for one year after the effective time of the merger, will be delivered,
upon demand, to the surviving company. Holders of certificates who have not
surrendered their certificates within one year after the effective time of the
merger may only look to the parent for the payment of the merger consideration.
Any portion of the merger consideration that remains unclaimed as of a date that
is immediately prior to such time as such amounts would otherwise escheat to or
become property of any governmental authority will become the property of the
parent free and clear of any claims or interest of any person previously
entitled to the merger consideration.
If you have lost a certificate, or if it has been stolen or destroyed, then
before you will be entitled to receive the merger consideration, you will have
to make an affidavit that your certificate was lost, stolen or destroyed and, if
the surviving company requires, you will have to post a bond in a reasonable
amount determined by the surviving company indemnifying the surviving company
against any claims made against it with respect to that certificate.
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DEBT TENDER OFFERS AND CONSENT SOLICITATIONS
We have agreed to use our reasonable best efforts to commence an offer to
purchase any and all of our outstanding 8 3/8% Senior Subordinated Notes due
2012. The terms and conditions of the offer to purchase will be set forth in the
related documentation that will be distributed to the holders of those notes.
In connection with the offer to purchase, we will seek the necessary
consents of the note holders required to amend the indenture governing the notes
and the notes. The amendments will, among other things, eliminate substantially
all of the restrictive covenants, eliminate certain events of default, revise
the merger and consolidation covenant and make changes to the defeasance
provisions contained in the indenture and make related changes in the notes.
Assuming we receive the requisite number of consents from the note holders to
amend the indenture and the notes, the amendments will become operative
immediately prior to the merger, provided that all validly tendered notes are
accepted for purchase pursuant to the offer upon the completion of the merger.
The proposed terms of the amended indenture and the notes will also be described
in the documentation to be distributed to the note holders in connection with
the offer to purchase and consent solicitation. Subject to the terms and
conditions of the offer, concurrently with the effective time of the merger, the
parent will cause the surviving company to accept for payment and pay for all
validly tendered notes.
LIMITED LIABILITY COMPANY AGREEMENT
The limited liability company agreement of the merger sub as in effect
immediately prior to the effective time of the merger will be the limited
liability company agreement of the surviving company. If the parent elects the
alternative merger structure, the certificate of incorporation and bylaws of the
Company, as in effect immediately prior to the effective time of the merger,
will be the certificate of incorporation and bylaws of the surviving company.
DIRECTORS AND OFFICERS
The directors and officers of the merger sub immediately prior to the
effective time of the merger will be the directors and officers of the surviving
company.
REPRESENTATIONS AND WARRANTIES
We make customary representations and warranties in the merger agreement
that are subject, in some cases, to specified exceptions and qualifications. Our
representations and warranties relate to, among other things:
o our and our subsidiaries' proper organization, good standing and
corporate power to operate our businesses;
o our certificate of incorporation and bylaws and that of our
subsidiaries;
o our capitalization, including in particular the number of shares of
our common stock and stock options outstanding and the amount of our
debt outstanding;
o our corporate power and authority to enter into the merger agreement
and to consummate the transactions contemplated by the merger
agreement;
35
o the absence of any violation of or conflict with our organizational
documents, applicable law or certain agreements as a result of
entering into the merger agreement and consummating the merger;
o required consents and approvals of governmental entities as a result
of the merger;
o our possession of all licenses and permits necessary to operate our
properties and carry on our business;
o our SEC filings since January 1, 2001 and the financial statements
contained therein;
o the absence of liabilities, other than as set forth on our June 30,
2004 balance sheet, ordinary course liabilities and liabilities
incurred in connection with the merger
o the filing of our Uniform Franchise Offering Circulars;
o the absence of certain changes and events since June 30, 2004;
o the accuracy and completeness of information supplied by us in this
proxy statement and in the offer documents to be distributed to the
holders of the notes;
o the absence of litigation or outstanding court orders against us;
o employment and labor matters affecting us, including matters relating
to our employee benefit plans;
o real property owned and leased by us and title to assets;
o our franchise agreements and management agreements;
o loans and indebtedness payable to us or any of our subsidiaries;
o our intellectual property;
o taxes, environmental matters and material contracts;
o our insurance policies;
o the approval and recommendation by our board of directors of the
merger agreement, the merger and the other transactions contemplated
by the merger agreement;
o the required vote of our stockholders in connection with the adoption
of the merger agreement;
o the absence of interested party transactions between the date of our
last annual meeting proxy statement and the date of the merger
agreement;
o receipt by us of a fairness opinion of Bear Stearns;
o the absence of undisclosed broker's fees; and
36
o the absence, since June 30, 2004, of any event, circumstance, change,
development or effect that, individually or in the aggregate, has had
or would reasonably be expected to have a material adverse effect on
the Company.
For the purposes of the merger agreement, "material adverse effect" means
any event, circumstance, development, change or effect that, individually or in
the aggregate with all other events, circumstances, developments, changes and
effects:
o is materially adverse to the business, operations, assets, condition
(financial or otherwise) or results of operations of the Company and
any of our subsidiaries taken as a whole; or
o would reasonably be expected to prevent or materially delay the
consummation of any of the transactions contemplated by the merger
agreement or prevent or materially impair or delay our ability to
perform our obligations under the merger agreement.
A "material adverse effect" will not have occurred, however, as a result of any
event, circumstance, change or effect resulting from or relating to:
o a change in general economic or financial market conditions;
o a change in industry conditions;
o seasonal fluctuations in our business;
o any acts of terrorism or war, except to the extent such event,
circumstance, change or effect has had a disproportionate effect on us
as compared to other persons in the industry in which we conduct
business;
o the announcement of the execution of the merger agreement or the
pendency or consummation of the transactions contemplated by the
merger agreement; or
o compliance with the terms of, or the taking of any action required by,
the merger agreement.
The merger agreement also contains customary representations and warranties
made by the parent and the merger sub that are subject, in some cases, to
specified exceptions and qualifications. The representations and warranties
relate to, among other things:
o their proper organization, good standing and limited liability company
power to operate their businesses;
o their certificate of formation and limited liability company
agreement;
o their limited liability company power and authority to enter into the
merger agreement and to consummate the transactions contemplated by
the merger agreement;
o the absence of any violation of or conflict with their organizational
documents, applicable law or certain agreements as a result of
entering into the merger agreement and consummating the merger;
o required consents and approvals of governmental entities as a result
of the merger;
37
o the accuracy and completeness of information they have supplied for
inclusion in this proxy statement and in the offer documents to be
distributed to the holders of the notes;
o the absence of litigation or outstanding court orders against them;
o the operations of the merger sub;
o the parent's receipt at closing of the financing proceeds required to
complete the merger and the other transactions contemplated by the
merger agreement;
o the delivery by the parent of the guarantee by an affiliate of the
parent of the obligations of the parent and the merger sub under the
merger agreement; and
o the absence of undisclosed broker's fees.
The representations and warranties of each of the parties to the merger
agreement will expire upon completion of the merger.
CONDUCT OF OUR BUSINESS PENDING THE MERGER
Under the merger agreement, we have agreed that, subject to certain
exceptions, between August 18, 2004 and the completion of the merger, we and our
subsidiaries will:
o conduct our business only in the ordinary course of business, in a
manner consistent with past practice and in compliance with applicable
laws; and
o use reasonable best efforts to preserve substantially intact our
business organization, to preserve our assets and properties in good
repair and condition and to preserve our current relationships with
customers, suppliers and other persons with which we have material
business relations, in each case in the ordinary course of business
and in a manner consistent with past practice.
We have also agreed that during the same time period, and again subject to
certain exceptions or unless the parent gives its prior written consent, we and
our subsidiaries will not:
o amend or otherwise change our certificate of incorporation or by-laws;
o issue, sell, license or encumber any of our or our subsidiaries'
securities, real property or tangible or intangible assets;
o declare, set aside, make or pay dividends;
o reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of our or our subsidiaries'
securities;
o acquire any businesses, properties or assets, other than non-real
property assets either in the ordinary course of business or that do
not exceed $1.5 million in the aggregate;
o acquire, enter into or extend any option to acquire or exercise an
option to acquire real property;
o incur any indebtedness, make loans or grant security interests in any
assets;
38
o make any capital expenditures other than expenditures related to
maintenance expenditures at existing properties in the ordinary course
of business and consistent with past practice;
o commence construction of, or enter into any contract to develop or
construct, other real estate projects;
o enter into any new line of business;
o expend or utilize any portion of the reserve established under our
management agreement with HPT TRS SPES II, Inc.;
o make investments in persons other than wholly owned subsidiaries;
o increase, adopt, terminate or amend compensation, retention, severance
or benefit plan arrangements;
o loan or advance any money or property to any current or former
director, officer or employee;
o grant any equity or equity-based awards;
o make or file for any change in any method of tax accounting;
o make, change or rescind any material tax election, file any amended
tax return, enter into any closing agreement relating to taxes, waive
or extend the statute of limitations in respect of taxes, or settle or
compromise any material U.S. federal, state or local income tax
liability, audit, claim or assessment, or surrender any right to claim
for a tax refund;
o pay, discharge, waive, settle or satisfy liabilities or obligations,
except for repayments of indebtedness under our credit agreement,
other than in the ordinary course of business consistent with past
practice;
o waive, release, assign, settle or compromise any pending or threatened
litigation requiring payment by the Company or any Subsidiary in
excess of $100,000 individually or $500,000 in the aggregate;
o amend, modify, or consent to the termination of any material
contracts, other than the terms and provisions of our stock option
plans required in connection with the merger, except for certain types
of material contracts in the ordinary course of business consistent
with past practice;
o make any advertising or marketing expenditures;
o adopt, renew, terminate, change or increase our liability or other
obligations under any operating standards, loyalty programs or amenity
packages relating to the Prime Hotels and Resorts, AmeriSuites or
Wellesley Inns & Suites brands;
o fail to maintain in full force and effect existing insurance policies;
o fail to preserve or protect our rights in all material intellectual
property;
o enter into or amend any material contracts or enter into or amend any
related party transactions;
39
o effectuate a plant closing or mass layoff; or
o announce an intention, enter into any formal or informal agreement or
otherwise make a commitment to do any of the foregoing.
NO SOLICITATION OF TRANSACTIONS
We have agreed that neither we nor any of our subsidiaries or
representatives will, directly or indirectly:
o solicit or initiate or knowingly encourage or otherwise knowingly
facilitate any inquiries or the implementation or submission of any
acquisition proposal; or
o participate in discussions or negotiations regarding, or furnish to
any person any non-public information in connection with, any
acquisition proposal.
For purposes of the merger agreement, "acquisition proposal" means any proposal
or offer, including any proposal to our stockholders, from any person other than
the parent or the merger sub relating to:
o any direct or indirect acquisition of more than 15% of our assets and
the assets of our consolidated subsidiaries, taken as a whole;
o any direct or indirect acquisition of more than 15% of any class of
our equity securities;
o any tender offer or exchange offer that, if consummated, would result
in any person beneficially owning 15% or more of any class of our
equity securities; or
o any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or other similar transaction involving us.
Prior to the special meeting, however, we or our board of directors are
permitted to engage in discussions or negotiations with, or furnish any
information to, a third party in connection with an unsolicited bona fide
written acquisition proposal, if and only to the extent that:
o our board of directors believes in good faith, after consultation with
its advisors, that the acquisition proposal is, or could reasonably be
expected to result in, a superior proposal and that the board of
directors is required to engage in discussions or provide information
to the third party to comply with its fiduciary duties to our
stockholders; and
o our board of directors receives from the third party an executed
confidentiality agreement containing terms that are substantially
similar to and no less favorable to us than those contained in the
confidentiality agreement signed with an affiliate of the parent.
For purposes of the merger agreement, "superior proposal" means any bona fide
written acquisition proposal that:
o is not solicited or initiated in violation of our obligations under
the merger agreement;
o relates to more than 50% of our outstanding common stock or all or
substantially all of our and our subsidiaries' assets, taken as a
whole;
40
o our board of directors determines in its good faith judgment is more
favorable to our stockholders, from a financial point of view, than
the merger agreement; and
o our board of directors determines is reasonably capable of being
completed.
We have agreed to notify the parent within 48 hours of our receipt of any
bona fide inquiries, proposals or offers, requests for information or requests
for discussions or negotiations regarding any acquisition proposal. In our
notice to the parent, we have agreed to specify the material terms and
conditions of the acquisition proposal and the identity of the third party
making the proposal. We have also agreed to keep the parent reasonably informed
of the status of any discussions or negotiations with third parties and of any
modifications to the third party inquiries, proposals or offers. Under the
merger agreement, we may not terminate, waive, amend or modify any standstill or
confidentiality agreement to which we are a party. We also agreed to terminate
or cause to be terminated any discussions or negotiations with any parties that
may have been ongoing with respect to any acquisition proposal as of August 18,
2004.
We have also agreed that our board of directors will not and will not
publicly propose to:
o withdraw or modify its approval or recommendation of the merger
agreement, the merger or the other transactions contemplated by the
merger agreement;
o approve or recommend any acquisition proposal; or
o approve any letter of intent, acquisition agreement or similar
agreement with respect to any acquisition proposal.
Notwithstanding our obligations under the merger agreement, prior to the
adoption of the merger agreement by our stockholders at the special meeting, our
board of directors may withdraw or modify its approval or recommendation of the
merger agreement, the merger or the other transactions contemplated by the
merger agreement if:
o in response to the receipt of an unsolicited third party acquisition
proposal, the board of directors determines in good faith, after
consultation with its advisors, that the acquisition proposal is a
superior proposal; and
o that the board of directors is required, after consultation with its
outside legal counsel, to withdraw or modify its approval or
recommendation in order to comply with its fiduciary duties to our
stockholders; or
o other than in connection with an acquisition proposal, the board of
directors determines in good faith, after consultation with its
outside legal counsel, that it is required to withdraw or modify its
approval or recommendation in order to comply with its fiduciary
duties to our stockholders.
We have also agreed not take any action to exempt any person from the
restrictions on "business combinations" set forth in the DGCL or our Certificate
of Incorporation or otherwise cause such restrictions not to apply.
EMPLOYEE BENEFITS
For a period of two years following the effective time of the merger, the
parent has agreed that it will, or will cause the surviving company to, provide
our employees as of the effective time of the merger with at least the same
level of base salary, cash incentive compensation and other cash variable
41
compensation that was provided to our employees immediately before the merger.
For that two-year period, the parent also will provide our employees as of the
effective time with employee benefits, other than equity-based compensation,
that are no less favorable in the aggregate than those provided to such
employees immediately before the effective time of the merger.
In addition, the parent has agreed:
o to provide our employees with credit for service with the Company or
any of our subsidiaries with respect to any of the parent's benefit
plans under which our employees may be eligible to participate after
the effective time of the merger;
o to provide severance benefits, subject to execution of a general
release, to any employee who is employed at the Company's executive
offices (excluding any employee with an employment agreement, change
in control agreement or any other severance agreement and certain
other employees) as of the effective time and is terminated without
cause during the one-year period immediately following the effective
time of the merger in varying amounts depending upon their position
and years of employment;
o with respect to our bonus plan (the "Bonus Plan"), provided we achieve
our earnings per share target for the applicable years:
o each eligible employee, who is employed by us at the effective
time of the merger and remains employed by the surviving company
through the end of calendar year 2004 will be entitled to receive
a bonus in accordance with the Bonus Plan in accordance with past
practices;
o each employee who is employed by us at the effective time of the
merger but is terminated for any reason other than for cause will
be entitled to receive a pro-rata bonus payment under the Bonus
Plan;
o each employee who is terminated by the Company for any reason
prior to the effective time of the merger and before the end of
calendar year 2004 will not be entitled to receive any payment
under the Bonus Plan;
o A.F. Petrocelli, our President and Chief Executive Officer, will
be entitled to receive his pro-rata bonus payment prior to the
effective time of the merger. Mr. Petrocelli will not be employed
by the surviving company after the effective time of the merger;
and
o At any time after the effective time of the merger the surviving
company, in its discretion, shall be entitled to terminate the
Bonus Plan for any and all fiscal years after December 31, 2004.
o with respect to the welfare benefit plans maintained or sponsored by
the parent or the surviving company and in which our employees may be
eligible to participate on or after the effective time of the merger;
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o waive all limitations as to preexisting and at-work conditions, if
any, with respect to participation and coverage requirements
applicable to each employee under any of those welfare benefit plans
to the same extent waived under our comparable plans; and
o provide credit to each employee for any co-payments, deductibles and
out-of-pocket expenses paid by such employee under our plans during
the relevant plan year, up to and including the effective time of the
merger.
AGREEMENT TO TAKE FURTHER ACTION AND TO USE REASONABLE BEST EFFORTS
Subject to the terms and conditions of the merger agreement, each party has
agreed to use its reasonable best efforts to take all appropriate action and to
do all things necessary, proper or advisable to complete and to make effective
the transactions contemplated under the merger agreement. Among other things,
each party has committed to use such efforts to cooperate with each other to
obtain all necessary consents, approvals and authorizations from governmental
authorities and third parties.
Furthermore, the parties have agreed to use their respective reasonable
best efforts to obtain any third party consents:
o necessary or advisable to complete the transactions contemplated under
the merger agreement;
o specified in the merger agreement; or
o required to prevent a material adverse effect from occurring.
In addition, we have agreed that, in the event that we fail to obtain any
of the third party consents mentioned above, we will use our reasonable best
efforts and take all such actions reasonably requested by the parent in order to
minimize any adverse effect on the Company and the parent and their respective
businesses as a result of the failure to obtain such consents.
We have agreed that, in connection with obtaining any approval or consent
from any governmental authority with respect to the merger or any other
transaction contemplated under the merger agreement, neither we nor the parent
or its affiliates will be required to make any divestiture or undertaking
relating to the conduct of business, unless acceptable to the parent. We have
also agreed that neither we nor the parent or its affiliates will be required to
pay or commit to pay any consideration, make any commitment or incur any
liability in connection with obtaining any approval or consent from any
non-governmental third party unless the parent has provided its prior written
consent, which the parent cannot unreasonably withhold if the payment,
commitment or incurrence is to be made by the Company.
In addition, we have agreed at or immediately prior to the effective time
of the merger, to use our reasonable best efforts to (A) exercise the purchase
options granted to us as tenant under that certain Lease, dated as of March 31,
1996, by and between us and N.J. Route 46, Limited Partnership and that certain
Lease, dated as of September 22, 1988, by and between us and N.J. Route 46,
Limited Partnership, as successor in interest to Prime Motor Inns, Inc., and
acquire fee simple title to the property commonly known as 700 Route 46 East,
Fairfield, New Jersey prior to the effective time of the merger and (B) to
exercise our purchase option granted to us as tenant under that certain
Agreements of Lease, dated as of September 22, 2000 and August 8, 2000, by and
between us and Brown Trout Investments, Ltd. and acquire in our name, or if
requested by parent, in the name of a subsidiary of the Surviving Company, fee
simple title to the properties commonly known as (i) 5895 Caravan Court,
Orlando, Florida and (ii) 4730 Painters Mill Road, Owings Mills, Maryland, such
acquisitions to be consummated prior to, but to become effective
43
immediately after, the effective time of the merger. We have also agreed to
obtain a payoff letter from our lender with respect to our mortgage for our
Prime Hotel and Suites property in Fairfield, New Jersey.
CONDITIONS TO THE MERGER
The obligations of the parties to complete the merger are subject to the
following mutual conditions:
o receipt of Company stockholder approval; and
o the absence of any governmental orders that have the effect of making
the merger illegal or that otherwise prohibit the closing.
The obligations of the parent and the merger sub to complete the merger are
subject to the following additional conditions:
o the truth and correctness of our representations and warranties,
without giving effect to any materiality or material adverse effect
qualifiers, except where the failure of our representations and
warranties to be true and correct, without giving effect to any
materiality or material adverse effect qualifiers, would not
reasonably be expected to have a material adverse effect on us and our
subsidiaries, taken as a whole, and the truth and correctness in all
material respects of our representation and warranty regarding
capitalization;
o the performance, in all material respects, by us of our covenants and
agreements in the merger agreement;
o our delivery to the parent at closing of a certificate with respect to
our representations, warranties, covenants and agreements;
o the absence of a "market MAC" market disruption or the absence of an
occurrence of any "market MAC" event which with the passage of time
could become a "market MAC"; a "market MAC" is defined as any one of
the following market disruption events:
o any general suspension of trading in securities on the NYSE for
three or more consecutive business days;
o the declaration of a banking moratorium or any suspension of
payments in respect of banks for three or more consecutive
business days;
o the commencement or material escalation of war or other crisis,
including terrorist acts, that results in a material disruption
or material adverse change in the U.S. commercial credit, debt
capital or commercial mortgage-backed securities markets for a
period of three or more consecutive business days; or
o any limitation by any governmental authority that prohibits the
extension of credit by banks in the U.S. or New York for a period
of three or more consecutive business days in a manner that
prevents Blackstone's lenders from providing its debt financing;
44
o the receipt of the requisite consents from the note holders under each
of our indentures so that we and the indenture trustees may execute
supplemental indentures immediately prior to the closing that would
remove restrictive covenants;
o receipt of a letter from our lender under our credit agreement
acknowledging that our credit agreement will be terminated and we and
our subsidiaries will be released from liability thereunder upon the
repayment of the aggregate principal amount outstanding under our
credit agreement; and
o receipt of a title insurance affidavit with respect to debts, liens,
parties in possession and non-imputation.
Our obligation to complete the merger is subject to the following additional
conditions:
o the truth and correctness in all material respects of the parent's and
the merger sub's representations and warranties;
o the performance, in all material respects, by the parent and the
merger sub of their covenants and agreements in the merger agreement;
and
o the delivery at closing by the parent of a certificate with respect to
the parent's and the merger sub's representations, warranties,
covenants and agreements.
TERMINATION
We and the parent may agree in writing to terminate the merger agreement at
any time without completing the merger, even after our stockholders have adopted
the merger agreement. The merger agreement may also be terminated at any time
prior to the effective time of the merger in certain other circumstances,
including:
o by either the parent or the Company if:
o the closing has not occurred on or before February 18, 2005, so
long as the failure to complete the merger is not the result of
the failure of the terminating party to comply with the terms of
the merger agreement;
o the Company stockholders do not vote to adopt the merger
agreement at the special meeting of the stockholders;
o there is a breach by the non-terminating party of its
representations, warranties, covenants or agreements in the
merger agreement such that the closing conditions would not be
satisfied, which breach has not been cured within 30 days;
o any governmental authority has enacted or entered any injunction
or other ruling or takes any other action which has the effect of
making the consummation of the merger illegal or otherwise
preventing or prohibiting completion of the merger;
o by the parent, if our board of directors withdraws or modifies its
recommendation or approval of the merger agreement, the merger or the
other transactions contemplated by the merger agreement or that the
Company's stockholders vote to adopt the merger agreement or
recommends or approves another acquisition proposal;
45
o by the Company if, prior to the stockholders meeting, our board of
directors withdraws or modifies its recommendation to our stockholders
in favor of the merger in response to an unsolicited superior proposal
that it has approved and recommended in accordance with the terms of
the merger agreement, but only after we have provided the parent a
three business day period (during which time we must negotiate in good
faith with the parent) to make an offer that is at least as favorable
as the superior proposal;
o by the Company, if certain conditions to closing have been satisfied
or waived and the closing has not occurred within five business days;
or
o by the Company, if a specified market disruption event has occurred
and the parent has not waived its closing condition relating to such
event within a certain period of time following a written request for
a waiver from the Company.
FEES AND EXPENSES
We have agreed to reimburse the parent's transaction expenses, up to a
limit of $4 million, if:
o the parent terminates the merger agreement due to a breach by us of
our representations, warranties, covenants or agreements such that the
closing conditions would not be satisfied, which breach has not been
cured within 30 days; or
o either the Company or the parent terminates the merger agreement
because of the failure to receive Company stockholder approval at the
special meeting of the stockholders.
If, concurrently with either of the foregoing events or within 12 months
after such event, we submit to our stockholders, enter into or complete an
acquisition proposal, we have agreed to also pay to the parent a termination fee
of $23 million.
In addition, we have agreed to pay the parent a termination fee of $23
million, and to reimburse the parent's transaction expenses up to a limit of $4
million, if:
o the parent has terminated the merger agreement because our board of
directors has withdrawn or modified its recommendation of the merger,
the merger agreement or the other transactions contemplated by the
merger agreement or recommended or approved an acquisition proposal,
so long as neither the parent nor the merger sub was in material
breach of the merger agreement as of the termination date; or
o the Company has terminated the merger agreement if, prior to the
stockholders meeting, our board of directors has withdrawn or modified
its recommendation to our stockholders in favor of the merger in
response to an unsolicited superior proposal that it has approved and
recommended in accordance with the terms of the merger agreement, but
only after we have provided the parent a three business day period
(during which time we must negotiate in good faith with the parent) to
make an offer that is at least as favorable as the superior proposal.
In no event will we be obligated to pay to the parent aggregate fees and
expenses in excess of $27 million (a termination fee of $23 million and up to $4
million for reimbursement of expenses). For purposes of determining whether a
termination fee is payable by us, an "acquisition proposal" is one that involves
over 40% of our stock or assets or a merger or other business combination in
which our stockholders would cease to own at least 60% of the stock of the
Company immediately following the transaction.
46
The parent has agreed to pay us a termination fee of $27 million if we have
terminated the merger agreement:
o due to a breach by the parent or the merger sub of its
representations, warranties, covenants or agreements such that the
closing conditions would not be satisfied, which breach has not been
cured within 30 days;
o because the closing has not occurred by February 18, 2005 so long as
the failure to complete the merger is not the result of the failure of
the Company to comply with the terms of the merger agreement and, at
the time of the termination, the mutual closing conditions relating to
our stockholder approval and the absence of governmental orders and
the parent's conditions relating to our representations, warranties,
covenants and agreements, the absence of a market MAC and the receipt
of the requisite consents from the note holders have been satisfied or
waived; or
o because the mutual closing conditions relating to our stockholder
approval and the absence of governmental orders and the parent's
conditions relating to our representations, warranties, covenants and
agreements, the absence of a market MAC and the receipt of the
requisite consents from the note holders have been satisfied or waived
and the closing has not occurred within five business days.
Our right to receive a termination fee from the parent is our exclusive
remedy for losses suffered by us as a result of the failure of the merger to
close.
AMENDMENT AND WAIVER
The merger agreement may be amended prior to the effective time of the
merger by mutual agreement of the parties. After the merger agreement has been
adopted by our stockholders, no amendment will be made to the merger agreement
except as allowed under applicable law. The merger agreement also provides that,
at any time prior to the effective time of the merger, any party may extend the
time for the performance of any obligations or other acts of the other parties,
waive any inaccuracies in the representations and warranties of the other
parties or waive compliance with any agreement of another party or any condition
to its own obligations contained in the merger agreement.
47
MARKET PRICE OF THE COMPANY'S STOCK
Our common stock is traded on the NYSE under the symbol "PDQ." The
following table sets forth the high and low closing sales prices per share of
our common stock on the NYSE for the periods indicated.
Market Information
Common Stock
---------------------------------
High Low
Year Ended December 31, 2002: ------ ------
1st Quarter $13.72 $10.52
2nd Quarter $13.66 $11.90
3rd Quarter $12.30 $8.20
4th Quarter $9.40 $7.55
Year Ended December 31, 2003:
1st Quarter $8.76 $4.68
2nd Quarter $7.15 $5.10
3rd Quarter $9.10 $6.76
4th Quarter $11.02 $8.69
Year Ended December 31, 2004:
1st Quarter $11.79 $9.98
2nd Quarter $11.50 $9.34
3rd Quarter (through September [ ], 2004) $[ ] $[ ]
The closing sale price of our common stock on the NYSE on August 17, 2004,
the day before the merger agreement was announced, was $8.47. On September [ ],
2004, the last trading day before this proxy statement was printed, the closing
price for the Company's common stock on the NYSE was $[ ]. You are encouraged to
obtain current market quotations for PDQ common stock in connection with voting
your shares.
We have not declared any cash dividends on our common stock during the two
prior fiscal years and we are currently prohibited by the terms of the merger
agreement and certain debt agreements from paying cash dividends. In the event
that the merger is not consummated, we currently anticipate that we will retain
any future earnings for use in our business and that we will not pay any
dividends on our common stock in the foreseeable future.
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September [ ], 2004 (unless otherwise
noted), certain information regarding the beneficial ownership of our common
stock by:
o each person known by us to be the beneficial owner of 5% or more of
the outstanding common stock;
o each of our directors and executive officers; and
o all of our directors and executive officers as a group.
48
There were approximately [ ] record holders of common stock and [ ]
shares of common stock outstanding on that date.
- --------------------------------------------------------------------------------------------
Shares Beneficially Owned
-----------------------------
Name (1) Number (2) Percent
- ----------------------------------------------- ------------- -----------
A.F. Petrocelli (3) 7,659,697 15.7
United Capital Corp. (3) 3,539,697 7.9
AXA Financial Services, Inc. (4) 3,208,638 7.2
Dimensional Fund Advisors Inc. (5) 3,136,700 7.0
Massachusetts Financial Services Company (6) 2,303,330 5.2
Richard Szymanski (7) 141,279 *
Lawrence N. Friedland (8) 71,000 *
Allen S. Kaplan (9) 30,000 *
Howard M. Lorber (10) 185,000 *
Richard Reitman (11) 10,000 *
Stephen Seltzer 0 0
Stephen M. Kronick (12) 123,748 *
John Capone (13) 12,700 *
Arthur Manso (14) 12,000 *
Vito Stellato (15) 4,000 *
Bryan Hayes (16) 8,703 *
All directors and officers as a group (14 persons) 8,258,127 16.8
- ---------------------------------
* Less than 1.0%.
(1) Unless otherwise indicated, the address of such person is c/o Prime
Hospitality Corp., 700 Route 46 East, Fairfield, New Jersey 07004.
(2) The numbers and percentages of shares owned by the directors, the named
executive officers, and by all officers and directors as a group assume in each
case that currently outstanding stock options covering shares of common stock
which were exercisable within 60 days of September [ ], 2004 had been exercised
by that person or group as follows: (i) A. F. Petrocelli - 4,075,000; (ii)
Richard Szymanski - 138,999; (iii) Lawrence Friedland - 60,000; (iv) Allen S.
Kaplan - 30,000; (v) Howard Lorber - 95,000; (vi) Richard Reitman - 10,000;
(vii) Stephen M. Kronick - 123,666; (viii) John Capone - 12,700; (ix) Arthur
Manso - 12,000; (x) Vito Stellato - 4,000; (xi) Bryan Hayes - 8,700 and (ix) all
directors and executive officers as a group - 4,570,065.
(3) Includes 45,000 shares owned by Mr. Petrocelli and 3,539,697 shares
owned by United Capital Corp. of which A.F. Petrocelli is a majority
shareholder, Chairman of the Board of Directors, President and Chief Executive
Officer. Mr. Petrocelli expressly disclaims beneficial ownership of the shares
directly held by United Capital Corp. Also includes options held by Mr.
Petrocelli to purchase 4,075,000 shares at an exercise price of $9.31 per share
as to 10,000 shares, $10.00 per share as to 65,000 shares, $5.91 per share as to
1,000,000 shares and $9.12 per share as to 3,000,000 shares.
(4) AXA Financial, Inc., AXA Assurances I.A.R.D. Mutuelle, AXA Assurances
Vie Mutuelle and AXA Courtage Assurance Mutuelle together filed a joint Schedule
13G dated February 10, 2004 with the SEC reporting beneficial ownership of these
shares of Common Stock. According to this Schedule 13G, (i) AXA Financial
reported beneficial ownership of an aggregate of 2,283,638 of such shares,
2,002,871 of which it reported sole voting power, 24,650 of which it reported
shared voting power, and 2,283,638 of which it reported sole dispositive power,
49
and (ii) each of AXA Assurances I.A.R.D., AXA Assurances Vie and AXA Courtage
reported beneficial ownership of all of such shares, 2,741,771 of which it
reported sole voting power, 24,650 of which it reported shared voting power,
2,283,638 of which it reported sole dispositive power and 925,000 of which it
reported shared dispositive power. AXA Financial Services, Inc. is located at
Avenue of the Americas, New York, New York 10104.
(5) Dimensional Fund Advisors Inc. filed a Schedule 13G dated February 6,
2004 with the SEC reporting ownership of 3,136,700 shares of Common Stock, with
sole voting and dispositive power with respect to all such shares. Dimensional
Fund Advisors Inc. is located at 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401.
(6) Massachusetts Financial Services Company filed a Schedule 13G dated
February 11, 2004 with the SEC reporting ownership of 2,303,330 shares of Common
Stock, with sole voting power with respect to 2,270,530 shares and sole
dispositive power with respect to 2,303,330 shares. Massachusetts Financial
Services Company is located at Boylston Street, Boston, Massachusetts 01216.
(7) Includes 2,280 shares owned by Mr. Szymanski. Also includes options to
purchase 138,999 shares with an exercise price $9.63 per share as to 12,000
shares, $10.00 per share as to 27,000 shares, $11.25 per share as to 35,000
shares, $9.16 per share as to 31,000 shares, $8.60 per share as to 19,000
shares, $8.445 per share as to 12,666 shares, and $9.09 per share as to 2,333
shares.
(8) Includes 2,000 shares owned by Mr. Friedland, 7,000 shares owned by
trust under which Mr. Friedland is the trustee and beneficiary and 2,000 shares
owned by trusts for the benefit of Mr. Friedland's grandchildren. Mr. Friedland
disclaims beneficial ownership of the shares owned by the trust for the benefit
of his grandchildren. Also includes options held by Mr. Friedland to purchase
60,000 shares at an exercise price of $10.00 per share as to 10,000 shares,
$12.00 per share as to 10,000 shares, $8.63 per share as to 10,000 shares,
$12.01 per share as to 10,000 shares, $12.49 per share as to 10,000 shares and
$6.35 per share as to 10,000 shares.
(9) Consists of options held by Mr. Kaplan to purchase 30,000 shares at an
exercise price of $12.01 per share as to 10,000 shares, $12.49 per share as to
10,000 shares, and $6.35 per share as to 10,000 shares.
(10) Includes 90,000 shares owned by Mr. Lorber. Also includes options to
purchase 95,000 shares with an exercise price of $9.31 per share as to 10,000
shares, $10.00 per share as to 65,000 shares, $12.49 as to 10,000 shares, and
$6.35 as to 10,000 shares.
(11) Consists of options held by Mr. Reitman to purchase 10,000 shares at
an exercise price of $6.35 per share.
(12) Includes 82 shares owned by Mr. Kronick. Also includes options to
purchase 123,666 shares with an exercise price of $9.63 per share as to 12,000
shares, $10.00 per share as to 24,000 shares, $11.25 per share as to 21,000
shares, $9.16 per share as to 31,000 shares, $8.60 per share as to 19,000
shares, $8.445 per share as to 12,666 shares, and $9.09 per share as to 4,000
shares.
(13) Consists of options to purchase 12,700 shares with an exercise price
of $4.72 per share as to 1,500 shares, $11.25 per share as to 1,500 shares,
$9.16 per share as to 2,700, $8.60 per share as to 1,800 shares, $8.445 per
share as to 1,200 shares, and $9.09 per share as to 4,000 shares.
(14) Consists of options to purchase 12,000 shares with an exercise price
of $8.445 per share as to 8,000 shares, and $9.09 per share as to 4,000 shares.
50
(15) Consists of options to purchase 4,000 shares with an exercise price of
$9.09 per share.
(16) Includes 3 shares owned by Mr. Hayes. Also includes options to
purchase 8,700 shares with an exercise price of $11.25 per share as to 2,000
shares, $9.12 per share as to 2,700 shares, $8.60 per share as to 1,800 shares,
$8.445 per share as to 1,200 shares and $9.09 per share as to 1,000 shares.
DISSENTERS' RIGHTS OF APPRAISAL
Under the DGCL, you have the right to dissent from the merger and to
receive payment in cash for the fair value of your common stock of the Company.
The Company's stockholders electing to exercise appraisal rights must comply
with the provisions of Section 262 of the DGCL in order to perfect their rights.
The Company will require strict compliance with the statutory procedures.
The following is intended as a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a stockholder in
order to dissent from the merger and perfect appraisal rights. This summary,
however, is not a complete statement of all applicable requirements and is
qualified in its entirety by reference to Section 262 of the DGCL, the full text
of which appears in Annex D to this proxy statement.
Section 262 requires that stockholders be notified that appraisal rights
will be available not less than 20 days before the special meeting to vote on
the merger. A copy of Section 262 must be included with such notice. This proxy
statement constitutes the Company's notice to its stockholders of the
availability of appraisal rights in connection with the merger in compliance
with the requirements of Section 262. If you wish to consider exercising your
appraisal rights, you should carefully review the text of Section 262 contained
in Annex D since failure to timely and properly comply with the requirements of
Section 262 will result in the loss of your appraisal rights under Delaware law.
If you elect to demand appraisal of your shares, you must satisfy each of
the following conditions:
o You must deliver to the Company a written demand for appraisal of your
shares before the vote with respect to the merger is taken. This
written demand for appraisal must be in addition to and separate from
any proxy or vote abstaining from or voting against the adoption of
the merger agreement. Voting against or failing to vote for the
adoption of the merger agreement by itself does not constitute a
demand for appraisal within the meaning of Section 262.
o You must not vote in favor of the adoption of the merger agreement. A
vote in favor of the adoption of the merger agreement, by proxy or in
person, will constitute a waiver of your appraisal rights in respect
of the shares so voted and will nullify any previously filed written
demands for appraisal. If you fail to comply with either of these
conditions and the merger is completed, you will be entitled to
receive the cash payment for your shares of the Company's common stock
as provided for in the merger agreement, but you will have no
appraisal rights with respect to your shares of the Company's common
stock.
All demands for appraisal should be addressed to Prime Hospitality Corp.,
700 Route 46 East, Fairfield, New Jersey 07004, Attention: Joseph B. Bernardino,
Esq., Secretary and General Counsel, before the vote on the merger agreement is
taken at the special meeting, and should be executed by, or on behalf of, the
record holder of the shares of the Company's common stock. The demand must
reasonably inform the Company of the identity of the stockholder and the
intention of the stockholder to demand appraisal of his, her or its shares.
51
To be effective, a demand for appraisal by a holder of the Company's common
stock must be made by, or in the name of, such registered stockholder, fully and
correctly, as the stockholder's name appears on his or her stock certificate(s).
Beneficial owners who do not also hold the shares of record may not directly
make appraisal demands to the Company. The beneficial holder must, in such
cases, have the registered owner submit the required demand in respect of those
shares. If shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of a demand for appraisal should be
made in that capacity; and if the shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand should be
executed by or for all joint owners. An authorized agent, including an
authorized agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he or she is acting as agent for the record owner. A record owner, such
as a broker, who holds shares as a nominee for others, may exercise his or her
right of appraisal with respect to the shares held for one or more beneficial
owners, while not exercising this right for other beneficial owners. In that
case, the written demand should state the number of shares as to which appraisal
is sought. Where no number of shares is expressly mentioned, the demand will be
presumed to cover all shares held in the name of the record owner.
If you hold your shares of the Company's common stock in a brokerage
account or in other nominee form and you wish to exercise appraisal rights, you
should consult with your broker or the other nominee to determine the
appropriate procedures for the making of a demand for appraisal by the nominee.
Within 10 days after the effective time of the merger, the surviving
company must give written notice that the merger has become effective to each
Company stockholder who has properly filed a written demand for appraisal and
who did not vote in favor of the merger agreement. At any time within 60 days
after the effective time, any stockholder who has demanded an appraisal has the
right to withdraw the demand and to accept the cash payment specified by the
merger agreement for his or her shares of the Company's common stock. Within 120
days after the effective time, either the surviving company or any stockholder
who has complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
shares held by all stockholders entitled to appraisal. The surviving company has
no obligation to file such a petition in the event there are dissenting
stockholders. Accordingly, the failure of a stockholder to file such a petition
within the period specified could nullify the stockholder's previously written
demand for appraisal.
If a petition for appraisal is duly filed by a stockholder and a copy of
the petition is delivered to the surviving company, the surviving company will
then be obligated, within 20 days after receiving service of a copy of the
petition, to provide the Chancery Court with a duly verified list containing the
names and addresses of all stockholders who have demanded an appraisal of their
shares. After notice to dissenting stockholders, the Chancery Court is empowered
to conduct a hearing upon the petition, and to determine those stockholders who
have complied with Section 262 and who have become entitled to the appraisal
rights provided thereby. The Chancery Court may require the stockholders who
have demanded payment for their shares to submit their stock certificates to the
Register in Chancery for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with that direction, the
Chancery Court may dismiss the proceedings as to that stockholder.
After determination of the stockholders entitled to appraisal of their
shares of the Company's common stock, the Chancery Court will appraise the
shares, determining their fair value exclusive of any element of value arising
from the accomplishment or expectation of the merger, together with a fair rate
of interest. When the value is determined, the Chancery Court will direct the
payment of such value, with interest thereon accrued during the pendency of the
proceeding, if the Chancery Court so determines, to the stockholders entitled to
52
receive the same, upon surrender by such holders of the certificates
representing those shares.
In determining fair value, the Chancery Court is required to take into
account all relevant factors. YOU SHOULD BE AWARE THAT THE FAIR VALUE OF YOUR
SHARES AS DETERMINED UNDER SECTION 262 COULD BE MORE, THE SAME, OR LESS THAN THE
VALUE THAT YOU ARE ENTITLED TO RECEIVE UNDER THE TERMS OF THE MERGER AGREEMENT.
Costs of the appraisal proceeding may be imposed upon the surviving company
and the stockholders participating in the appraisal proceeding by the Chancery
Court as the Chancery Court deems equitable in the circumstances. Upon the
application of a stockholder, the Chancery Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares entitled to appraisal. Any stockholder who had demanded appraisal rights
will not, after the effective time, be entitled to vote shares subject to that
demand for any purpose or to receive payments of dividends or any other
distribution with respect to those shares, other than with respect to payment as
of a record date prior to the effective time; however, if no petition for
appraisal is filed within 120 days after the effective time of the merger, or if
the stockholder delivers a written withdrawal of his or her demand for appraisal
and an acceptance of the terms of the merger within 60 days after the effective
time of the merger, then the right of that stockholder to appraisal will cease
and that stockholder will be entitled to receive the cash payment for shares of
his, her or its Company common stock pursuant to the merger agreement. Any
withdrawal of a demand for appraisal made more than 60 days after the effective
time of the merger may only be made with the written approval of the surviving
company and must, to be effective, be made within 120 days after the effective
time.
In view of the complexity of Section 262, the Company's stockholders who
may wish to dissent from the merger and pursue appraisal rights should consult
their legal advisors.
MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS
In accordance with Rule 14a-3(e)(1) under the Exchange Act, one proxy
statement will be delivered to two or more stockholders who share an address,
unless PHC has received contrary instructions from one or more of the
stockholders. PHC will deliver promptly upon written or oral request a separate
copy of the proxy statement to a stockholder at a shared address to which a
single copy of the proxy statement was delivered. Requests for additional copies
of the proxy statement, and requests that in the future separate proxy
statements be sent to stockholders who share an address, should be directed to
Prime Hospitality Corp., 700 Route 46 East, Fairfield, New Jersey 07004,
Attention: Investor Relations, telephone: (973) 882-1010, with a copy to the
attention of the Company's Secretary and General Counsel, Joseph B. Bernardino,
Esq. In addition, stockholders who share a single address but receive multiple
copies of the proxy statement may request that in the future they receive a
single copy by contacting PHC at the address and phone number set forth in the
prior sentence.
SUBMISSION OF STOCKHOLDER PROPOSALS
If the merger is completed, we will no longer be a publicly held company
and there will be no public participation in any future meetings of our
stockholders. However, if the merger is not completed, our stockholders will
continue to be entitled to attend and participate in our stockholders' meetings.
If the merger is not completed, we must receive stockholder proposals not later
than December 22, 2004 for inclusion in the proxy materials relating to our 2005
annual meeting, which proposals must comply with the rules and regulations of
the Securities and Exchange Commission then in effect.
53
In addition, our amended by-laws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at our headquarters, not less than 50 days
nor more than 75 days prior to the meeting; provided, that in the event that
less than 65 days' notice or prior public disclosure of the date of the meeting
is given to stockholders, notice by the stockholder to be timely must be
received by the close of business on the 15th day following the date on which
notice of the meeting was mailed or public disclosure was made, whichever first
occurs. We reserve the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not comply with these
and other applicable requirements.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The Company files annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports, proxy
statements or other information that we file with the SEC at the following
location of the SEC:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. You may also obtain copies of this information by mail from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. The Company's public filings are
also available to the public from document retrieval services and the Internet
website maintained by the SEC at www.sec.gov.
Reports, proxy statements or other information concerning us may also be
inspected at the offices of the New York Stock Exchange at:
20 Broad Street
New York, NY 10005
Any person, including any beneficial owner, to whom this proxy statement is
delivered may request copies of reports, proxy statements or other information
concerning us, without charge, by written or telephonic request directed to us
at Prime Hospitality Corp., 700 Route 46 East, Fairfield, New Jersey 07004,
Attention: Investor Relations, with a copy to the attention of the Company's
Secretary and General Counsel, Joseph B. Bernardino, Esq. If you would like to
request documents, please do so by [ ], 2004, in order to receive them before
the special meeting.
No persons have been authorized to give any information or to make any
representations other than those contained in this proxy statement and, if given
or made, such information or representations must not be relied upon as having
been authorized by us or any other person. This proxy statement is dated
September [ ], 2004 should not assume that the information contained in
this proxy statement is accurate as of any date other than that date, and the
mailing of this proxy statement to stockholders shall not create any implication
to the contrary.
54
ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER
among
BREP IV HOTELS HOLDING L.L.C.,
BREP IV HOTELS ACQUISITION L.L.C.
and
PRIME HOSPITALITY CORP.
Dated as of August 18, 2004
================================================================================
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER...........................................................................1
SECTION 1.01. The Merger............................................................1
SECTION 1.02. Closing...............................................................1
SECTION 1.03. Effective Time........................................................1
SECTION 1.04. Effect of the Merger..................................................2
SECTION 1.05. Limited Liability Company Agreement...................................2
SECTION 1.06. Directors and Officers................................................2
SECTION 1.07. Alternative Structure of Merger.......................................2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES..................................3
SECTION 2.01. Conversion of Securities..............................................3
SECTION 2.02. Exchange of Certificates..............................................3
SECTION 2.03. Stock Transfer Books..................................................5
SECTION 2.04. Company Stock Options.................................................5
SECTION 2.05. Dissenting Shares.....................................................5
SECTION 2.06. Debt Offer............................................................6
SECTION 2.07. Non-Foreign Status....................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................7
SECTION 3.01. Organization and Qualification; Subsidiaries..........................7
SECTION 3.02. Certificate of Incorporation and Bylaws...............................8
SECTION 3.03. Capitalization........................................................8
SECTION 3.04. Authority Relative to This Agreement..................................9
SECTION 3.05. No Conflict; Required Filings and Consents...........................10
SECTION 3.06. Permits; Compliance..................................................10
SECTION 3.07. SEC Filings; Financial Statements; Undisclosed Liabilities...........11
SECTION 3.08. Information Supplied.................................................12
SECTION 3.09. Absence of Certain Changes or Events.................................12
SECTION 3.10. Absence of Litigation................................................13
SECTION 3.11. Employee Benefit Plans...............................................13
SECTION 3.12. Labor and Employment Matters.........................................14
SECTION 3.13. Real Property; Title to Assets.......................................15
SECTION 3.14. Intellectual Property................................................17
SECTION 3.15. Taxes................................................................18
SECTION 3.16. Environmental Matters................................................19
SECTION 3.17. Material Contracts...................................................20
SECTION 3.18. Insurance............................................................22
SECTION 3.19. Board Approval; Vote Required........................................22
SECTION 3.20. Interested Party Transactions........................................22
SECTION 3.21. Opinion of Financial Advisor.........................................23
SECTION 3.22. Brokers..............................................................23
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Page
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............................23
SECTION 4.01. Corporate Organization...............................................23
SECTION 4.02. Certificate of Formation and Limited Liability Company Agreement.....23
SECTION 4.03. Authority Relative to This Agreement.................................23
SECTION 4.04. No Conflict; Required Filings and Consents...........................23
SECTION 4.05. Information Supplied.................................................24
SECTION 4.06. Absence of Litigation................................................24
SECTION 4.07. Operations of Merger Sub.............................................25
SECTION 4.08. Financing............................................................25
SECTION 4.09. Guarantee............................................................25
SECTION 4.10. Brokers..............................................................25
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER..............................................25
SECTION 5.01. Conduct of Business by the Company Pending the Merger................25
SECTION 5.02. Conduct of Business by Parent and Merger Sub Pending the Merger......27
ARTICLE VI ADDITIONAL AGREEMENTS..............................................................28
SECTION 6.01. Proxy Statement......................................................28
SECTION 6.02. Company Stockholders' Meeting........................................28
SECTION 6.03. Access to Information; Confidentiality...............................28
SECTION 6.04. No Solicitation of Transactions......................................29
SECTION 6.05. Directors' and Officers' Indemnification and Insurance...............31
SECTION 6.06. Employee Benefits Matters............................................32
SECTION 6.07. Notification of Certain Matters......................................33
SECTION 6.08. Financing............................................................33
SECTION 6.09. Further Action; Reasonable Best Efforts..............................35
SECTION 6.10. Obligations of Parent and Merger Sub.................................36
SECTION 6.11. Public Announcements.................................................36
SECTION 6.12. Taxes................................................................36
SECTION 6.13. Resignations.........................................................36
ARTICLE VII CONDITIONS TO THE MERGER..........................................................37
SECTION 7.01. Conditions to the Obligations of Each Party..........................37
SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub...............37
SECTION 7.03. Conditions to the Obligations of the Company.........................38
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER................................................38
SECTION 8.01. Termination..........................................................38
SECTION 8.02. Effect of Termination................................................40
SECTION 8.03. Fees and Expenses....................................................40
SECTION 8.04. Amendment............................................................42
SECTION 8.05. Waiver...............................................................42
ARTICLE IX GENERAL PROVISIONS.................................................................42
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements...........42
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Page
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SECTION 9.02. Notices..............................................................42
SECTION 9.03. Certain Definitions..................................................43
SECTION 9.04. Severability.........................................................46
SECTION 9.05. Disclaimer of Other Representations and Warranties...................46
SECTION 9.06. Entire Agreement; Assignment.........................................46
SECTION 9.07. Parties in Interest..................................................47
SECTION 9.08. Remedies; Specific Performance.......................................47
SECTION 9.09. Governing Law........................................................47
SECTION 9.10. Waiver of Jury Trial.................................................47
SECTION 9.11. Headings.............................................................47
SECTION 9.12. Counterparts.........................................................48
Exhibit A Certificate of Non-Foreign Status
Exhibit B Form of Guarantee
Exhibit C Form of Title Insurance Affidavit
iii
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AGREEMENT AND PLAN OF MERGER, dated as of August 18, 2004 (this
"AGREEMENT"), among BREP IV Hotels Holding L.L.C., a Delaware limited liability
company ("PARENT"), BREP IV Hotels Acquisition L.L.C., a Delaware limited
liability company and a wholly owned subsidiary of Parent ("MERGER SUB"), and
Prime Hospitality Corp., a Delaware corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors or Board of Managers of each
of the Company, Parent and Merger Sub deem it in the best interests of their
respective stockholders or members, as the case may be, to consummate the merger
(the "MERGER"), on the terms and subject to the conditions set forth in this
Agreement, of the Company with and into Merger Sub in which Merger Sub would be
the surviving entity, and such Boards of Directors or Board of Managers, as the
case may be, have approved this Agreement and declared its advisability (and, in
the case of the Board of Directors or Board of Managers of the Company, as the
case may be (the "COMPANY BOARD"), recommended that this Agreement be adopted by
the Company's stockholders);
WHEREAS, as an inducement to Parent and Merger Sub entering into this
Agreement, Parent and certain stockholders of the Company are entering into a
voting agreement simultaneously with the execution and delivery of this
Agreement pursuant to which, among other things, such stockholders have agreed,
subject to the terms thereof, to vote their shares of the Company Common Stock
(as defined below) in favor of the adoption of this Agreement; and
WHEREAS, upon consummation of the Merger, each issued and outstanding
share of common stock, par value $.01 per share, of the Company (the "COMPANY
COMMON STOCK"), will be converted into the right to receive $12.25 per share in
cash, upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in Article VII, and in accordance with the General Corporation Law of the
State of Delaware (the "DGCL"), at the Effective Time, the Company shall be
merged with and into Merger Sub. At the Effective Time, the separate corporate
existence of the Company shall cease and Merger Sub shall continue as the
surviving entity of the Merger (the "SURVIVING COMPANY").
SECTION 1.02. CLOSING. Unless this Agreement shall have been terminated in
accordance with Section 8.01, and subject to the satisfaction or waiver of the
conditions set forth in Article VII, the closing of the Merger (the "CLOSING")
will take place at 11:00 a.m., New York time, on a date to be specified by the
parties, which shall be not later than the second business day after the
satisfaction or waiver of the conditions set forth in Article VII (other than
those that by their terms are to be satisfied or waived at the Closing), at the
offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65
East 55th Street, New York, New York 10022, unless another time, date and/or
place is agreed to in writing by Parent and the Company.
SECTION 1.03. EFFECTIVE TIME. Upon the terms and subject to the conditions
set forth in this Agreement, as soon as practicable after the satisfaction or
waiver of the conditions set forth in Article VII, the parties hereto shall (i)
file a certificate of merger (the "CERTIFICATE OF MERGER") in such form as is
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required by, and executed and acknowledged in accordance with, the relevant
provisions of the DGCL and (ii) make all other filings or recordings required
under the DGCL to effect the Merger. The Merger shall become effective at such
date and time as the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware or at such subsequent date and time as Parent and
the Company shall agree and specify in the Certificate of Merger. The date and
time at which the Merger becomes effective is referred to in this Agreement as
the "EFFECTIVE TIME".
SECTION 1.04. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in Sections 259 and 264 of the DGCL and Section
18-209 of the Delaware Limited Liability Company Act.
SECTION 1.05. LIMITED LIABILITY COMPANY AGREEMENT. Subject to Section
1.07, at the Effective Time, the Limited Liability Company Agreement of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Limited
Liability Company Agreement of the Surviving Company until thereafter amended in
accordance with the provisions thereof and as provided by Law.
SECTION 1.06. DIRECTORS AND OFFICERS. Subject to Section 1.07, the
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Company, each to hold office in accordance
with the Limited Liability Company Agreement of the Surviving Company, and the
officers of the Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Company, in each case until their respective
successors are duly elected or appointed and qualified or until the earlier of
their death, resignation or removal.
SECTION 1.07. ALTERNATIVE STRUCTURE OF MERGER. While it is currently
contemplated that the Merger shall be effected through the merger of the Company
with and into Merger Sub, Parent shall have the option, in its sole discretion
and without requiring the further consent of the Company or the Company's Board
of Directors or stockholders, upon reasonable notice to the Company, to cause
the Merger to be effected through an alternative transaction structure of Merger
Sub merging with and into the Company, with the Company being the Surviving
Company (the "ALTERNATIVE MERGER"), in which case (i) each limited liability
company interest of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Company, (ii) the Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Company until thereafter amended as provided by
Law, (iii) the Bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Company until thereafter
amended as provided by Law, the Certificate of Incorporation of the Surviving
Company and such Bylaws, and (iv) the directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving Company,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Company, and the officers of Merger Sub immediately
prior to the Effective Time shall be the initial officers of the Surviving
Company, in each case until their respective successors are duly elected or
appointed and qualified or until the earlier of their death, resignation or
removal. Parent shall make such election by delivering to the Company a notice
(the "ELECTION NOTICE") electing to effect the Alternative Merger. For purposes
of this Agreement, (i) all references to the term "Merger" shall be deemed to
include the Alternative Merger, except for such references contained in this
Section 1.07, and (ii) all references to the term "Surviving Company" shall be
deemed to include the Company in its capacity as the surviving entity in the
Alternative Merger. In addition, Parent shall have the option, in its sole
discretion and without requiring the further consent of the Company or the
Company's Board of Directors or stockholders, upon reasonable notice (but not
less than 15 days' notice) to the Company, to request the Company, immediately
prior to the Effective Time, to use commercially reasonable efforts to the
extent possible within such time frame to convert one or more Subsidiaries that
are organized as corporations into limited liability companies or limited
2
A-6
partnerships; PROVIDED (i) that completion of any such actions or transactions
shall be contingent upon consummation of the Closing and (ii) such actions (or
the inability to complete such actions) shall not affect or modify the
obligations of Parent or Merger Sub to fulfill their obligations under this
Agreement. As part of the Proxy Statement and the Offer Documents and in the
manner required by applicable Law, the Company shall describe the provisions of
this Section 1.07.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of the following securities:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Company Common Stock
(all issued and outstanding shares of Company Common Stock being hereinafter
collectively referred to as the "SHARES") issued and outstanding immediately
prior to the Effective Time (other than any Shares to be canceled pursuant to
Section 2.01(b), Shares owned by any direct or indirect wholly owned subsidiary
of the Company and any Dissenting Shares) shall be canceled and shall be
converted automatically into the right to receive $12.25 in cash, without
interest (the "MERGER CONSIDERATION"), payable upon surrender in the manner
provided in Section 2.02, of the certificate that formerly evidenced such Share.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. (i) Each Share
held in the treasury of the Company and each Share owned by Merger Sub, Parent
or any direct or indirect wholly owned subsidiary of Parent immediately prior to
the Effective Time shall automatically be canceled without any conversion
thereof and no payment or distribution shall be made with respect thereto.
(c) CAPITAL STOCK OF MERGER SUB. Subject to Section 1.07, each limited
liability company interest of Merger Sub issued and outstanding immediately
prior to the Effective Time shall continue to remain outstanding and shall
constitute the only issued and outstanding limited liability company interests
of the Surviving Company.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior to the
Effective Time, Parent shall (i) appoint a bank or trust company reasonably
acceptable to the Company (the "PAYING AGENT"), and (ii) enter into a paying
agent agreement, in form and substance reasonably acceptable to the Company,
with such Paying Agent for the payment of the Merger Consideration in accordance
with this Article II. At the Effective Time, Parent shall deposit, or cause the
Surviving Company to deposit, with the Paying Agent, for the benefit of the
holders of Shares, cash in an amount sufficient to pay the aggregate Merger
Consideration required to be paid pursuant to Section 2.01(a) (such cash being
hereinafter referred to as the "EXCHANGE FUND"). The Exchange Fund shall not be
used for any other purpose. The Exchange Fund shall be invested by the Paying
Agent as directed by Parent; PROVIDED, HOWEVER, that such investments shall be
in obligations of or guaranteed by the United States of America or any agency or
instrumentality thereof and backed by the full faith and credit of the United
States of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1 billion (based on the
most recent financial statements of such bank which are then publicly
available). Any net profit resulting from, or interest or income produced by,
such investments shall be payable to the Surviving Company.
(b) EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Time, Parent shall cause the Paying Agent to mail to each person who was, at the
Effective Time, a holder of record of Shares entitled to receive the Merger
3
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Consideration pursuant to Section 2.01(a): (i) a letter of transmittal (which
shall be in customary form and shall specify that delivery shall be effected,
and risk of loss and title to the certificates evidencing such Shares (the
"CERTIFICATES") shall pass, only upon proper delivery of the Certificates to the
Paying Agent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender to the
Paying Agent of a Certificate for cancellation, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the amount of cash which such holder has the right to
receive in respect of the Shares formerly represented by such Certificate
pursuant to Section 2.01(a), and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, payment of the Merger
Consideration may be made to a person other than the person in whose name the
Certificate so surrendered is registered if the Certificate representing such
Shares shall be properly endorsed or otherwise be in proper form for transfer
and the person requesting such payment shall pay any transfer or other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration to which the holder of such
Certificate is entitled pursuant to this Article II. No interest shall be paid
or will accrue on any cash payable to holders of Certificates pursuant to the
provisions of this Article II.
(c) NO FURTHER RIGHTS. From and after the Effective Time, holders of
Certificates shall cease to have any rights as stockholders of the Company,
except as provided herein or by Law.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of Shares for one year after the Effective
Time shall be delivered to Parent, upon demand, and any holders of Shares who
have not theretofore complied with this Article II shall thereafter look only to
Parent for, and Parent shall remain liable for, payment of their claim for the
Merger Consideration. Any portion of the Exchange Fund remaining unclaimed by
holders of Shares as of a date which is immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Authority shall, to the extent permitted by applicable Law, become the property
of Parent free and clear of any claims or interest of any person previously
entitled thereto.
(e) NO LIABILITY. None of the Paying Agent, Merger Sub, Parent or the
Surviving Company shall be liable to any holder of Shares for any such Shares
(or dividends or distributions with respect thereto), or cash delivered to a
public official pursuant to any abandoned property, escheat or similar Law.
(f) WITHHOLDING RIGHTS. Each of the Paying Agent, the Surviving Company
and Parent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as it is required to deduct and withhold with respect to such payment
under all applicable Tax Laws. To the extent that amounts are so withheld by the
Paying Agent, the Surviving Company or Parent, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction and withholding
was made by the Paying Agent, the Surviving Company or Parent, as the case may
be.
(g) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Company, the posting by such person of a bond, in such reasonable
amount as the Surviving Company may direct, as indemnity against any claim that
4
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may be made against it with respect to such Certificate, the Paying Agent shall
pay in respect of such lost, stolen or destroyed Certificate the Merger
Consideration to which the holder thereof is entitled pursuant to Section
2.01(a).
SECTION 2.03. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the holders of Certificates representing
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares, except as otherwise provided in this
Agreement or by Law. On or after the Effective Time, any Certificates presented
to the Paying Agent or Parent for any reason shall be canceled against delivery
of the Merger Consideration to which the holders thereof are entitled pursuant
to Section 2.01(a).
SECTION 2.04. COMPANY STOCK OPTIONS. (a) Between the date of this
Agreement and the Effective Time, the Company shall take all necessary action
(which action shall be effective as of the Effective Time), including obtaining
the consent of the individual option holders and the adoption of Company Board
resolutions, if necessary, to (i) terminate the 1995 Employee Stock Option Plan,
the 1995 Non-Employee Director Stock Option Plan, the Nonqualified Stock Option
Agreement dated October 14, 1998 between A.F. Petrocelli and the Company, and
the Nonqualified Stock Option Agreement dated October 23, 2001 between A.F.
Petrocelli and the Company, in each case as amended through the date of this
Agreement (collectively, the "COMPANY STOCK OPTION PLANS"), and (ii) cancel, as
of the Effective Time, each option to purchase Shares granted under the Company
Stock Option Plans (each, a "COMPANY STOCK OPTION") that is outstanding and
unexercised, as of the Effective Time (in each case, without the creation of
additional liability to the Company or any Subsidiaries).
(b) Each holder of a Company Stock Option that is outstanding and
unexercised as of the Effective Time and has an exercise price per Share that is
less than the per share Merger Consideration shall (subject to the provisions of
this Section 2.04) be paid by the Surviving Company, in exchange for the
cancellation of such Company Stock Option, an amount in cash (subject to any
applicable withholding Taxes) equal to the product of (i) the difference between
the per share Merger Consideration and the applicable exercise price of such
Company Stock Option, and (ii) the aggregate number of Shares issuable upon
exercise of such Company Stock Option (the "OPTION PAYMENT"). The Surviving
Company shall make the Option Payments as promptly as practicable after the
Effective Time. Any such payments shall be subject to all applicable federal,
state and local Tax withholding requirements.
SECTION 2.05. DISSENTING SHARES. (a) Notwithstanding any provision of this
Agreement to the contrary and to the extent available under the DGCL, Shares
that are outstanding immediately prior to the Effective Time and that are held
by any stockholder who is entitled to demand and properly demands the appraisal
for such Shares (the "DISSENTING SHARES") pursuant to, and who complies in all
respects with, the provisions of Section 262 of the DGCL ("SECTION 262") shall
not be converted into, or represent the right to receive, the Merger
Consideration. Any such stockholder shall instead be entitled to receive payment
of the fair value of such stockholder's Dissenting Shares in accordance with the
provisions of Section 262; PROVIDED, HOWEVER, that all Dissenting Shares held by
any stockholder who shall have failed to perfect or who otherwise shall have
withdrawn or lost such stockholder's rights to appraisal of such Shares under
Section 262 shall thereupon be deemed to have been converted into, and to have
become exchangeable for, as of the Effective Time, the right to receive the
Merger Consideration, without any interest thereon, upon surrender in the manner
provided in Section 2.02 of the Certificate or Certificates that formerly
evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands
received by the Company for appraisal of any Shares, withdrawals of such demands
and any other instruments served pursuant to the DGCL and received by the
Company and (ii) the opportunity to participate in and direct all negotiations
and proceedings with respect to demands for appraisal under the DGCL. The
5
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Company shall not, except with the prior written consent of Parent, make any
payment or agree to make any payment with respect to any demands for appraisal
or offer to settle or settle any such demands.
SECTION 2.06. DEBT OFFER. (a) The Company shall use its reasonable best
efforts to commence, on the date 14 days prior to the estimated date of mailing
the Proxy Statement or on any other date designated by Parent on at least five
days notice to the Company, an offer to purchase, and related consent
solicitation with respect to, all of the outstanding aggregate principal amount
of the Company's 8 3/8 % Senior Subordinated Notes due 2012 (the "NOTES") on the
terms and conditions set forth in Section 2.06(a) of the Company Disclosure
Schedule (or as may be agreed between the Company and Parent) and such other
customary terms and conditions as are reasonably acceptable to Parent and the
Company (including the related consent solicitation, the "DEBT OFFER"); provided
that (A) this Agreement shall not have been terminated in accordance with
Section 8.01, (B) the Company shall have received from Parent the completed
Offer Documents (as defined below), which shall be in form and substance
reasonably satisfactory to the Company, and (C) at the time of such
commencement, Parent shall have otherwise performed or complied with all of its
agreements and covenants required by this Agreement to be performed on or prior
to the time that the Debt Offer is to be commenced. The Company shall waive any
of the conditions to the Debt Offer (other than that the Merger shall have been
consummated and that there shall be no order or injunction prohibiting
consummation of the Debt Offer) as may be reasonably requested by Parent and
shall not, without the consent of Parent, waive any condition to the Debt Offer
or make any changes to the terms and conditions of the Debt Offer other than as
agreed between Parent and the Company. Notwithstanding the immediately preceding
sentence, the Company need not make any change to the terms and conditions of
the Debt Offer requested by Parent that decreases the price per Note payable in
the Debt Offer or related consent solicitation or imposes conditions to the Debt
Offer or related consent solicitation in addition to those set forth in Section
2.06(a) of the Company Disclosure Schedule that are materially adverse to
holders of the Notes, unless such change is approved by the Company in writing.
(b) The Company covenants and agrees that, immediately following the
consent expiration date, assuming the requisite consents are received, it shall
execute a supplemental indenture to the indenture governing the Notes, which
supplemental indenture shall implement the amendments set forth in the Offer
Documents and shall become operative immediately prior to the Effective Time,
subject to the terms and conditions of this Agreement (including the conditions
to the Debt Offer). Concurrent with the Effective Time, Parent shall cause the
Surviving Company to accept for payment and thereafter promptly pay for the
Notes that have been properly tendered and not withdrawn pursuant to the Debt
Offer and in accordance with the Debt Offer.
(c) Promptly after the date of this Agreement, Parent shall prepare all
necessary and appropriate documentation in connection with the Debt Offer,
including the offer to purchase, related letter of transmittal and other related
documents (collectively, the "OFFER DOCUMENTS"). Parent and the Company shall
cooperate with each other in the preparation of the Offer Documents. All
mailings to the holders of the Notes in connection with the Debt Offer shall be
subject to the prior review and comment by of the Company and Parent and shall
be reasonably acceptable to each of them. If at any time prior to the completion
of the Debt Offer any information in the Offer Documents should be discovered by
the Company or Parent which should be set forth in an amendment or supplement to
the Offer Documents, so that the Offer Documents shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, the party that
discovers such information shall promptly notify the other party, and an
appropriate amendment or supplement describing such information shall be
disseminated to the holders of the Notes. Notwithstanding anything to the
contrary in this Section 2.06, the Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other applicable Law to the extent
such Laws are applicable in connection with the Debt Offer. To the extent that
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the provisions of any applicable Law conflict with this Section 2.06, the
Company shall comply with the applicable Law and shall not be deemed to have
breached its obligations hereunder by such compliance.
(d) Parent shall pay the reasonable fees and expenses of any dealer
manager, information agent, depositary or other agent retained in connection
with the Debt Offer, and Parent further agrees to reimburse the Company for all
of its reasonable out-of-pocket costs in connection with the Debt Offer promptly
following incurrence and delivery of reasonable documentation of such costs.
Parent and Merger Sub shall, on a joint and several basis, indemnify and hold
harmless the Company, the Subsidiaries, their respective officers and directors
and each person, if any, who controls the Company within the meaning of Section
20 of the Exchange Act for and against any and all liabilities, losses, damages,
claims, costs, expenses, interest, awards, judgments and penalties suffered or
incurred by them in connection with the Debt Offer and the Offer Documents;
PROVIDED, HOWEVER, that neither Parent nor Merger Sub shall have any obligation
to indemnify and hold harmless any such party or person to the extent that any
such liabilities, losses, damages, claims, costs, expenses, interest, awards,
judgments and penalties suffered or incurred arises from disclosure regarding
the Company that is determined to have contained a material misstatement or
omission.
SECTION 2.07. NON-FOREIGN STATUS. At or prior to the Effective Time, the
Company shall furnish to Parent and Merger Sub a duly executed certification of
the Company's non-foreign status in the form set forth in EXHIBIT A to this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to
Parent and Merger Sub concurrently with the execution and delivery of this
Agreement (the "COMPANY DISCLOSURE SCHEDULE") (PROVIDED that disclosure of any
fact or item in any section of the Company Disclosure Schedule shall, should the
existence of such fact or item be relevant to any other section, be deemed to be
disclosed with respect to that other section so long as the relevance of such
disclosure to such other section is reasonably apparent), the Company hereby
represents and warrants to Parent and Merger Sub as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each of
the Company and each subsidiary of the Company (each, a "SUBSIDIARY") is a
corporation, limited partnership or limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has the requisite corporate, limited liability company or
limited partnership power and authority, as the case may be, and all necessary
governmental approvals to own, lease, franchise, manage and operate its
properties and to carry on its business as it is now being conducted. Each of
the Company and each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased, franchised, managed or operated
by it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not reasonably be expected to have a Company Material
Adverse Effect. The term "COMPANY MATERIAL ADVERSE EFFECT" means any event,
circumstance, development, change or effect that, individually or in the
aggregate with all other events, circumstances, developments, changes and
effects, is materially adverse to the business, operations, assets, condition
(financial or otherwise) or results of operations of the Company and the
Subsidiaries taken as a whole or would reasonably be expected to prevent or
materially delay the consummation of any of the Transactions or prevent or
materially impair or delay the ability of the Company to perform its obligations
hereunder; PROVIDED, HOWEVER, that in no event shall any of the following, alone
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or in combination, be deemed to constitute, nor shall any of the following be
taken into account in determining whether there has been, or will be, a "COMPANY
MATERIAL ADVERSE EFFECT": any event, circumstance, change or effect resulting
from or relating to (i) a change in general economic or financial market
conditions, (ii) a change in industry conditions, (iii) seasonal fluctuations in
the business of the Company and the Subsidiaries, (iv) any acts of terrorism or
war (except to the extent such event, circumstance, change or effect has had a
disproportionate effect on the Company and the Subsidiaries as compared to other
persons in the industry in which the Company and the Subsidiaries conducts their
business), (v) the announcement of the execution of this Agreement or the
pendency or consummation of the Transactions, or (vi) compliance with the terms
of, or the taking of any action required by, this Agreement; and PROVIDED,
FURTHER, that with respect to the representations and warranties set forth in
Section 3.05, the exceptions set forth in clauses (v) and (vi) will not apply.
(b) A true and complete list of all the Subsidiaries, together with the
jurisdiction of organization of each Subsidiary and the percentage of the
outstanding capital stock of each Subsidiary owned by the Company, each other
Subsidiary and any other person, is set forth in Section 3.01(b) of the Company
Disclosure Schedule.
(c) Section 3.01(c) of the Company Disclosure Schedule lists any and all
persons of which the Company directly or indirectly owns an equity or similar
interest, or an interest convertible into or exchangeable or exercisable for an
equity or similar interest, of less than 50% (collectively, the "INVESTMENTS").
The Company or a Subsidiary, as the case may be, owns all Investments free and
clear of all Liens, and there are no outstanding contractual obligations of the
Company or any Subsidiary permitting the repurchase, redemption or other
acquisition of any of its interest in the Investments or to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, or provide any guarantee with respect to, any Investment.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has
made available to Parent a complete and correct copy of the Certificate of
Incorporation and the Bylaws or similar organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Certificates of
Incorporation and Bylaws are in full force and effect and no other
organizational documents are applicable or binding upon the Company or any of
its Subsidiaries. Neither the Company nor any Subsidiary is, nor has the Company
been, in violation of any of the provisions of its Certificate of Incorporation
or Bylaws. No Subsidiary has been in material violation of any of the provisions
of its Certificate of Incorporation or Bylaws. The Company has made available to
Parent complete and correct copies of the minutes of all meetings of the Company
Board (and each committee thereof) and of the stockholders of the Company, in
each case since January 1, 2001.
SECTION 3.03. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of (i) 75,000,000 shares of Company Common Stock and (ii)
20,000,000 shares of preferred stock, par value $.10 per share ("COMPANY
PREFERRED STOCK"). As of August 17, 2004, (i) 44,614,372 shares of Company
Common Stock are issued and outstanding (excluding shares of Common Stock held
in the treasury of the Company), all of which are validly issued, fully paid and
nonassessable and were issued free of preemptive (or similar) rights, (ii)
12,244,778 shares of Company Common Stock are held in the treasury of the
Company, (iii) no shares of Company Common Stock are held by the Subsidiaries,
(iv) 6,054,354 shares of Company Common Stock are issuable upon exercise of
outstanding Company Stock Options granted under the Company Stock Option Plans
at a weighted average per share exercise price of $8.27 and (v) 2,905,696 shares
of Company Common Stock are reserved for future issuance in connection with the
Company Stock Option Plans (including shares reserved pursuant to outstanding
Company Stock Options). Since August 17, 2004 through the date of this
Agreement, other than in connection with the issuance of Shares pursuant to the
exercise of Company Stock Options outstanding as of August 17, 2004 there has
been no change in the number of shares of outstanding capital stock of the
Company or the number of outstanding Company Stock Options. As of the date of
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this Agreement, no shares of Company Preferred Stock are issued and outstanding.
The Company does not have a "poison pill" or similar stockholder rights plan.
Except as set forth in this Section 3.03, there are no (A) options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any Subsidiary or
obligating the Company or any Subsidiary to issue or sell any shares of capital
stock of, or other equity interests in, the Company or any Subsidiary (B) voting
securities of the Company or securities convertible, exchangeable or exercisable
for shares of capital stock or voting securities of the Company, or (C) equity
equivalents, interests in the ownership or earnings of the Company or similar
rights. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive (or similar) rights. There are no
outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of any Subsidiary or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other person. None of the Company or any Subsidiary is a party
to any stockholders' agreement, voting trust agreement or registration rights
agreement relating to any equity securities of the Company or any Subsidiary or
any other Contract relating to disposition, voting or dividends with respect to
any equity securities of the Company or of any Subsidiary. All dividends on the
Company Common Stock that have been declared or have accrued prior to the date
of this Agreement have been paid in full to the Company's paying agent.
(b) Each outstanding share of capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and was issued free of
preemptive (or similar) rights, and each such share is owned by the Company or
another Subsidiary free and clear of all options, rights of first refusal,
agreements, limitations on the Company's or any Subsidiary's voting, dividend or
transfer rights, charges and other encumbrances or Liens of any nature
whatsoever.
(c) As of the date of this Agreement, the only outstanding indebtedness
for borrowed money of the Company and the Subsidiaries is (i) $178,725,000 in
aggregate principal amount of Notes issued by the Company, (ii) $20,000,000 in
aggregate principal amount of loans of the Company under the Credit Agreement,
dated as of July 22, 2002, among the Company and the Canadian Imperial Bank of
Commerce as administrative agent (the "CREDIT AGREEMENT"), (iii) $915,000 in
aggregate principal amount pursuant to the 6.7% Mortgage Note due January 1,
2005 issued by the Company and secured by the Prime Hotel & Suites, Fairfield,
New Jersey (the "FAIRFIELD MORTGAGE") and (iv) $12,965,899 in aggregate
principal amount pursuant to the 8.63% Mortgage Note due October 1, 2009 issued
by Haledon Holding Corp. and secured by the Prime Suites, Secaucus, New Jersey
(the mortgages referred to in clauses (iii) and (iv), collectively, the
"MORTGAGES"). In addition, the only outstanding indebtedness for borrowed money
of East Rutherford Group, L.L.C. or 3072929 Nova Scotia Company is (i)
$24,264,481 in aggregate principal amount pursuant to the LIBOR+2.75% Mortgage
Note due May 1, 2006 issued by East Rutherford Group, L.L.C. and secured by the
Sheraton Meadowlands Hotel and Conference Center, Meadowlands, New Jersey, up to
$4,000,000 of which is guaranteed by the Company, and (ii) CN $7,788,705 in
aggregate principal amount pursuant to the 6.26% Mortgage Note due August 1,
2008 issued by 3072929 Nova Scotia Company and secured by the Holiday Inn
Select, Quebec City.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the
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adoption of this Agreement by the holders of a majority of the then-outstanding
shares of Company Common Stock and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency (including all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors' rights generally
and subject to the effect of general principles of equity.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company and the consummation by the Company
of the Transactions will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws (or similar organizational documents) of the Company or
any Subsidiary, (ii) assuming that all consents, approvals and other
authorizations described in Section 3.05(b) have been obtained and that all
filings and other actions described in Section 3.05(b) have been made or taken,
conflict with or violate any statute, law, ordinance, regulation, rule, code,
executive order, judgment, decree or other order ("LAW") applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) result in any breach or violation
of or constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, require consent or result in a material
loss of a material benefit under, give rise to a right or obligation to purchase
or sell assets or securities under, give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any property or asset of the Company or any Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract (written or oral), agreement, lease,
license, permit, franchise or other binding commitment, instrument or obligation
(each, a "CONTRACT") to which the Company or any Subsidiary is a party or by
which the Company or a Subsidiary or any property or asset of the Company or any
Subsidiary is bound or affected, except, with respect to clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which would not reasonably be expected to have a Company Material Adverse
Effect.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company and the consummation by the
Company of the Transactions will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
supranational, national, provincial, federal, state or local government,
regulatory or administrative authority, or any court, tribunal, or judicial or
arbitral body (a "GOVERNMENTAL AUTHORITY"), except for (i) applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), (ii) the filing with the Securities and Exchange Commission
(the "SEC") of a proxy statement relating to the adoption of this Agreement by
the Company's stockholders (as amended or supplemented from time to time, the
"PROXY STATEMENT"), (iii) any filings required under the rules and regulations
of the New York Stock Exchange (the "NYSE"), (iv) the filing and recordation of
appropriate merger documents as required by the DGCL and appropriate documents
with the relevant authorities of other states in which the Company or any
Subsidiary is qualified to do business, (v) any state or federal Laws governing
the sale of liquor that may be applicable, and (vi) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE. Each of the Company and each Subsidiary
is in possession of all franchises, grants, authorizations, licenses, including
liquor licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for
each such entity to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "COMPANY PERMITS"), except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not reasonably be expected to have a Company Material Adverse
Effect. No suspension or cancellation of any of the Company Permits is pending
or, to the knowledge of the Company, threatened, except where the failure to
have, or the suspension or cancellation of, any of the Company Permits would not
reasonably be expected to have a Company Material Adverse Effect. Each of the
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Company and each Subsidiary is in compliance with, and since January 1, 2001 has
been or has taken any necessary steps to become in compliance with, (a) any Law
applicable to such entity or by which any property or asset of such entity is
bound or affected, and (b) any Contract or Company Permit to which such entity
is a party or by which such entity or any property or asset of such entity is
bound, except, with respect to clauses (a) and (b), for any such conflicts,
defaults, breaches or violations that would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has filed all forms, reports, statements, schedules and other
documents required to be filed by it with the SEC since January 1, 2001
(collectively, the "SEC REPORTS"). The SEC Reports (i) were prepared in
accordance with the applicable requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Exchange Act, the Sarbanes-Oxley Act of 2002
and, in each case, the rules and regulations promulgated thereunder, and (ii)
did not, at the time they were filed, or, if amended, as of the date of such
amendment, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading (including any financial statements or other documentation
incorporated by reference therein). No Subsidiary is required to file any form,
report or other document with the SEC. The Company has made available to Parent
copies of all correspondence between the SEC, on the one hand, and the Company
and any of the Subsidiaries, on the other hand, since January 1, 2001 through
the date of this Agreement.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports, when filed, complied with
applicable accounting requirements and with published rules and regulations of
the SEC with respect thereto, was prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and each fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments). All of the
Subsidiaries are consolidated for accounting purposes.
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the consolidated Subsidiaries as at June 30, 2004
(including the notes thereto) included in the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2004, neither the Company nor any
Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations
incurred (i) in connection with the Transactions, or (ii) in the ordinary course
of business and in a manner consistent with past practice since June 30, 2004
that would not reasonably be expected to have a Company Material Adverse Effect.
(d) Except as and to the extent set forth on the balance sheet of East
Rutherford Group, L.L.C. as at July 31, 2004 and the balance sheet of 3072929
Nova Scotia Company as at July 31, 2004 set forth in Section 3.07(d) of the
Company Disclosure Schedule, to the Company's knowledge, neither East Rutherford
Group, L.L.C. nor 3072929 Nova Scotia Company has any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise), except, with
respect to each entity, for liabilities and obligations incurred in the ordinary
course of business and in a manner consistent with past practice since July 31,
2004 that would not, individually or in the aggregate, reasonably be expected to
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be material to such entity or to interfere in any material respect with the
conduct of such entity's business as conducted on the date of this Agreement.
(e) The Company has made available to Parent a complete and correct copy
of any amendments or modifications which have not yet been filed with the SEC to
Contracts which previously have been filed by the Company with the SEC pursuant
to the Securities Act or the Exchange Act.
(f) The Company and its Subsidiaries have prepared and maintained each of
its Uniform Franchise Offering Circulars ("UFOCS") in accordance with applicable
Law, have filed its UFOCs in all states in which the Company and its
Subsidiaries offered or sold franchises which required registration and approval
prior to offers or sales of franchises in such states and have not failed to
file any required amendments or renewals on a timely and accurate basis, except
where the failure to do any of the foregoing would not reasonably be expected to
have a Company Material Adverse Effect. The Company has provided Parent copies
of all material correspondence it or any of the Subsidiaries have received or
sent since January 1, 2001 affecting the registration and renewals of the UFOCs
in the applicable states. The Company and its Subsidiaries do not and have not
authorized their officers, directors or representatives to furnish any materials
or information which is inconsistent in any material respect with the "earnings
claim" information set forth in Item 19 of the UFOCs, as that term is defined by
federal and state franchising laws.
SECTION 3.08. INFORMATION SUPPLIED. None of the information included or
incorporated by reference in the Proxy Statement or the Offer Documents will, in
the case of the Proxy Statement, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting or at the time
of any amendment or supplement thereof, or, in the case of the Offer Documents,
at the time the Offer Documents are first published, sent, or given to holders
of the Notes, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by the Company with
respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Sub in connection with the preparation
of the Proxy Statement or the Offer Documents for inclusion or incorporation by
reference therein. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 2004,
there has not been any event, circumstance, change, development or effect that,
individually or in the aggregate, has had or would reasonably be expected to
have, a Company Material Adverse Effect. Since June 30, 2004 and prior to the
date hereof, except as expressly contemplated by this Agreement, (a) the Company
and the Subsidiaries have conducted their businesses only in the ordinary course
of business and in a manner consistent with past practice, and (b) neither the
Company nor any Subsidiary has:
(i) amended or otherwise changed its Certificate of Incorporation or
Bylaws;
(ii) declared, set aside, made or paid any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except for dividends by any direct or indirect wholly owned
Subsidiary to the Company or any other Subsidiary;
(iii) reclassified, combined, split, subdivided or redeemed, or purchased
or otherwise acquired, directly or indirectly, any of its capital stock;
(iv) increased the compensation payable or to become payable or the
benefits provided to its directors, officers or employees, except for increases
in the ordinary course of business and in a manner consistent with past
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practice, or granted any severance or termination pay to, or entered into any
employment, bonus, change of control or severance agreement with, any director
or officer or, except in the ordinary course of business in a manner consistent
with past practice, any other employee of the Company or of any Subsidiary;
(v) suffered any damage, destruction or loss (whether or not covered by
insurance), other than in the ordinary course of business, that has had a
Company Material Adverse Effect;
(vi) made any change in financial or Tax accounting methods or practices
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in GAAP;
(vii) made any acquisition or disposition of any real property;
(viii) made any material tax election or settled or compromised any
material United States federal, state or local income tax liability; or
(ix) announced an intention, entered into any formal or informal agreement
or otherwise made a commitment, to do any of the foregoing.
SECTION 3.10. ABSENCE OF LITIGATION. There is no litigation, suit, claim,
action, proceeding, hearing, petition, grievance, complaint or investigation (an
"ACTION") pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary, or any property or asset of the Company or any
Subsidiary, before any Governmental Authority or arbitrator that would
reasonably be expected to have a Company Material Adverse Effect. As of the date
of this Agreement, no officer or director of the Company is a defendant in any
Action in connection with his status as an officer or director of the Company or
any Subsidiary. Other than pursuant to Certificates of Incorporation, Bylaws or
other organizational documents, no Contract between the Company or any
Subsidiary and any current or former director or officer exists that provides
for indemnification. Neither the Company nor any Subsidiary nor any property or
asset of the Company or any Subsidiary is subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, to the knowledge of the Company, continuing investigation by, any
Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority that would reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.11. EMPLOYEE BENEFIT PLANS. (a) Section 3.11(a) of the Company
Disclosure Schedule lists all employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
and all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements, and all
employment, termination, severance or other contracts or agreements to which the
Company or any Subsidiary is a party, with respect to which the Company or any
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or
former employee, consultant, officer or director of the Company or any
Subsidiary (collectively, the "PLANS"). The Company has made available to Parent
a true and complete copy of each Plan and has made available to Parent a true
and complete copy of (where applicable) (A) each trust or funding arrangement
prepared in connection with each such Plan, (B) the two most recently filed
annual reports on Internal Revenue Service ("IRS") Form 5500, (C) the most
recently received IRS determination letter for each such Plan, (D) the two most
recently prepared actuarial reports and financial statements in connection with
each such Plan, and (E) the most recent summary plan description and any
material written communications (or a description of any material oral
communications) by the Company or the Subsidiaries to any current or former
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employees, consultants, or directors of the Company or any Subsidiary concerning
the extent of the benefits provided under a Plan.
(b) Neither the Company nor any Subsidiary has now or any time contributed
to, sponsored, or maintained (i) a pension plan (within the meaning of Section
3(2) of ERISA) subject to Section 412 of the Code or Title IV of ERISA; (ii) a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "MULTIEMPLOYER PLAN"); or (iii) a single employer pension plan (within the
meaning of Section 4001(a)(15) of ERISA) for which the Company or any Subsidiary
could incur liability under Section 4063 or 4064 of ERISA (a "MULTIPLE EMPLOYER
PLAN"). No Plan exists that could result in the payment to any present or former
employee, director or consultant of the Company or any Subsidiary of any money
or other property or accelerate or provide any other rights or benefits to any
current or former employee of the Company or any Subsidiary as a result of the
consummation of the Transactions (whether alone or in connection with any
subsequent event). There are no contracts, plans or arrangements (written or
otherwise) covering any current or former employee of the Company or any
Subsidiary that, individually or collectively, could give rise to payments in
excess of the amounts set forth in Section 3.11(b) of the Company Disclosure
Schedule that would not be deductible pursuant to the terms of Section 280G of
the United States Internal Revenue Code of 1986, as amended (the "CODE").
(c) With respect to the Plans, no event has occurred and, to the knowledge
of the Company, there exists no condition or set of circumstances, in connection
with which the Company or any Subsidiary could reasonably be expected to be
subject to any actual or contingent liability under the terms of such Plan or
any applicable Law which would reasonably be expected to have a Company Material
Adverse Effect.
(d) Each Plan that is intended to be qualified under Section 401(a) of the
Code or Section 401(k) of the Code has received a favorable determination letter
from the IRS covering all of the provisions applicable to the Plan for which
determination letters are currently available that the Plan is so qualified and
each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and, to the
knowledge of the Company, no circumstance exists that could reasonably be
expected to result in the revocation of such letter.
(e) (i) Each Plan has been established and administered in accordance with
its terms, and in compliance with the applicable provisions of ERISA, the Code
and other applicable Laws, except to the extent such noncompliance, individually
or in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect, and (ii) no Plan provides retiree welfare benefits, and neither
the Company nor any Subsidiary has any obligation to provide any retiree welfare
benefits other than as required by Section 4980B of the Code.
(f) With respect to any Plan, (i) no Actions (other than routine claims
for benefits in the ordinary course) are pending or, to the knowledge of the
Company, threatened, that would reasonably be expected to have a Company
Material Adverse Effect, (ii) to the knowledge of the Company, no facts or
circumstances exist that could reasonably be expected to give rise to any such
Actions, and (iii) no administrative investigation, audit or other
administrative proceeding by the Department of Labor, the IRS or other
Governmental Authority is pending, in progress or, to the knowledge of the
Company, threatened that could reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.12. LABOR AND EMPLOYMENT MATTERS(a) . Section 3.12 of the
Company Disclosure Schedule lists each collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or any
Subsidiary to which the Company or any Subsidiary is a party. Except as set
forth in Section 3.12 of the Company Disclosure Schedule, to the knowledge of
the Company there are no activities or proceedings of any labor union to
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organize any employees of the Company or any Subsidiary. As of the date hereof,
there are no unfair labor practice complaints pending against the Company or any
Subsidiary before the National Labor Relations Board or any other Governmental
Authority or any current union representation questions involving employees of
the Company or any Subsidiary. As of the date hereof, there is no strike,
controversy, slowdown, work stoppage or lockout, or, to the knowledge of the
Company, threatened in writing, by or with respect to any employees of the
Company or any Subsidiary.
SECTION 3.13. REAL PROPERTY; TITLE TO ASSETS. (a) Section 3.13(a)(i) of
the Company Disclosure Schedule lists each parcel of real property currently
owned by the Company or any Subsidiary and sets forth the Company or the
applicable Subsidiary owning such properties (collectively, the "OWNED REAL
PROPERTIES"). Section 3.13(a)(ii) of the Company Disclosure Schedule lists each
parcel of real property currently ground leased by the Company or any Subsidiary
(collectively, the "GROUND LEASED PROPERTIES"; the Ground Leased Properties
together with the Owned Properties, collectively, the "PROPERTIES") and sets
forth the Company or the Subsidiary holding such leasehold interest, with the
name of the lessor and the date of the lease, any subleases and assignments, any
guarantees given and each amendment to any of the foregoing (collectively, the
"GROUND LEASES"). The Company or the applicable Subsidiary set forth on Section
3.13(a)(i) of the Company Disclosure Schedule owns fee simple title to the Owned
Real Properties and the Company or the applicable Subsidiary set forth on
Section 3.13(a)(ii) of the Company Disclosure Schedule owns leasehold title to
the Ground Leased Properties, in each case, free and clear of all mortgages,
pledges, liens, restrictions security interests, conditional and installment
sale agreements, encumbrances, charges or other claims of third parties of any
kind, including any easement, right of way or other encumbrance to title, or any
option, right of first refusal, or right of first offer (collectively, "LIENS"),
other than (i) Liens for current taxes and assessments not yet due and payable,
(ii) inchoate mechanics' and materialmen's Liens for construction in progress,
(iii) the Mortgages (iv) all matters of record and other Liens which are
disclosed in the Title Policies (as defined below) that the Company has made
available to Parent, and (v) to the extent such Liens would not reasonably be
expected to have a Company Material Adverse Effect, (A) workmen's, repairmen's,
warehousemen's and carriers' Liens arising in the ordinary course of business of
the Company or such Subsidiary consistent with past practice, (B) all matters of
record, and (C) all Liens and other imperfections of title and encumbrances that
are typical for the applicable property type and locality and which would not
reasonably be expected to materially interfere with the conduct of the business
of the Company (collectively, "PERMITTED LIENS"). None of the Properties is
subject to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefore, nor, to the knowledge of the Company, has any such
condemnation, expropriation or taking been proposed. Neither the Company nor any
Subsidiary has violated any material covenants, conditions or restrictions
affecting any Properties which violations would reasonably be expected to have a
Company Material Adverse Effect.
(b) Section 3.13(b) of the Company Disclosure Schedule lists each real
property lease or sublease (other than the Ground Leases) the Company or any
Subsidiary is currently a party, or subject, to, as either a tenant, landlord,
lessee, lessor, sublandlord or subtenant and sets forth the Company or the
Subsidiary holding such interest, with the name of the other party or parties
thereto and the date of the lease, any sublease or assignment, any guaranty
given or leasing commissions remaining payable by the Company or any Subsidiary
in connection therewith and each amendment to any of the foregoing
(collectively, the "SPACE LEASES").
(c) Each of the Ground Leases and the Space Leases is valid, binding and
in full force and effect as against the Company or the Subsidiaries and, to the
Company's knowledge, as against the other party thereto. Neither the Company nor
the Subsidiaries has received written notice under any of the Ground Leases or
the Space Leases of any default, and, to the Company's knowledge, no event has
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occurred which, with notice or lapse of time or both, would constitute a
material default by the Company or the applicable Subsidiaries.
(d) To the knowledge of the Company, there are no latent defects or
adverse physical conditions affecting any Property or the improvements thereon,
other than those that would not reasonably be expected to have a Company
Material Adverse Effect.
(e) The Company and the Subsidiaries have not received any written notice
and are not otherwise aware that valid policies of title insurance or title
commitments for which premiums have been paid (collectively, the "TITLE
POLICIES") insuring the Company or the applicable Subsidiary's fee simple or
leasehold title to the Properties owned or ground leased by the Company or the
applicable Subsidiary are not in full force and effect. To the Company's
knowledge, no claim has been made by the Company or the Subsidiaries against any
Title Policies within the last 10 years.
(f) There are no Properties under construction as of the date hereof.
(g) Except as set forth on Schedule 3.13(g) of the Company Disclosure
Schedule, neither the Company nor any of the Subsidiaries is a party to any
third party management, franchise, license or other agreement for the management
of operations conducted at any Property (the "THIRD PARTY FLAG AGREEMENTS").
(h) Section 3.13(h) of the Company Disclosure Schedule lists each parcel
of real property in respect of which any person (other than the Company or any
Subsidiary) has the right, pursuant to a franchise, license, satellite
agreement, franchise development agreement, area development agreement,
development incentive agreement or other Contract (together with any amendments,
guarantees and any ancillary documents and agreements related thereto, the
"FRANCHISE AGREEMENTS") to utilize a brand name or other rights of a hotel chain
or system from the Company or any Subsidiary. Such schedule also identifies the
applicable brand of such property and the Franchise Agreement related thereto.
Each Franchise Agreement is valid, binding and in full force and effect as
against the Company or the Subsidiaries and, to the Company's knowledge, as
against the other party thereto. Neither the Company nor any Subsidiary has
received or delivered written notice under any of the Franchise Agreements of
any default, and, to the Company's knowledge, no event has occurred which, with
notice or lapse of time or both, would constitute a material default by the
Company or the applicable Subsidiary or the other party thereto.
(i) Section 3.13(i) of the Company Disclosure Schedule lists each parcel
of real property that is managed by the Company or a Subsidiary pursuant to a
management agreement or other Contract (together with any amendments, guarantees
and any ancillary documents and agreements related thereto, the "MANAGEMENT
AGREEMENTS"). Such schedule also identifies the applicable brand of such
property and the Management Agreement related thereto. Each Management Agreement
is valid, binding and in full force and effect as against the Company or the
Subsidiaries and, in the case of the HPT Documents (as defined below) and those
certain management agreements between the applicable Subsidiary and affiliates
of Equity Inns, Inc. (together with any amendments, guarantees and any ancillary
documents and agreements related thereto, the "EQUITY INN DOCUMENTS"), as
against the other party thereto. Neither the Company nor any Subsidiary has
received or delivered written notice under any of the Management Agreements of
any default, and, to the Company's knowledge, no event has occurred which, with
notice or lapse of time or both, would constitute a material default by the
Company or the applicable Subsidiary or, in the case of the HPT Documents and
the Equity Inn Documents, the other party thereto. As of the date hereof, (i)
the Company has utilized $3,364,911 of the $25,000,000 that is to be provided by
HPT TRS SPES II, Inc. or an affiliate thereof ("HPT") pursuant to the terms of
that certain Management Agreement between the applicable Subsidiary and HPT (the
"HPT MANAGEMENT AGREEMENT", together with any amendments, guarantees and any
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ancillary documents and agreements related thereto, the "HPT DOCUMENTS"), (ii)
in accordance with Section 5.3 of the HPT Management Agreement, the applicable
Subsidiary has delivered the requisite budgets and schedules to HPT, which
budgets and schedules cover the balance of the $25,000,000 to be provided by HPT
less the amounts previously utilized by the Company as disclosed above (the "HPT
RESERVE BALANCE"), (iii) the HPT Reserve Balance has not been utilized or
expended by the applicable Subsidiary and remains available for use by such
Subsidiary in accordance with the HPT Management Agreement, (iv) to the
Company's knowledge, the HPT Reserve Balance has been deposited by HPT in the
Reserve Account (as defined in the HPT Management Agreement) and remains an
obligation of HPT to be funded in accordance with the HPT Management Agreement
and (vi) to the Company's knowledge, no amounts are due or payable by the
Company or the applicable Subsidiary in connection with any Retained Liabilities
(as defined in the HPT Documents).
(j) Section 3.13(j) of the Company Disclosure Schedule lists each parcel
of real property or leasehold interest in any ground lease conveyed,
transferred, assigned or otherwise disposed of by the Company or any Subsidiary
since January 1, 1991.
(k) The Company or the Subsidiaries own all material furniture, fixtures,
equipment, operating supplies and other personal property (the "PERSONAL
PROPERTY") necessary for the operation of each Property, subject to no Liens,
except as would not reasonably be expected to have a Company Material Adverse
Effect.
(l) Section 3.13(l) of the Company Disclosure Schedule lists each loan
document (together with any amendments, guarantees and any ancillary documents
and agreements related thereto, the "LOAN DOCUMENTS") with respect to any loans
made by the Company or any Subsidiary to any person (other than the Company or
any Subsidiary) which as of the date of this Agreement has an outstanding
balance that is payable by such party to the Company or any Subsidiary or
pursuant to which Indebtedness to the Company or any Subsidiary may be incurred
by such party (collectively, the "LOANS"). As of the date of this Agreement, the
outstanding principal amount of each Loan or the amount of Indebtedness that may
be borrowed under each Loan Document is not less than the amount set forth on
Section 3.13(l) of the Company Disclosure Schedule. Neither the Company nor any
Subsidiary (i) has delivered any written notice of default under the Loan
Documents or (ii) executed any written waiver of any rights of the Company or
the Subsidiaries under the Loan Documents.
SECTION 3.14. INTELLECTUAL PROPERTY. (a) Except as would not reasonably be
expected to have a Company Material Adverse Effect, (i) the conduct of the
business of the Company and the Subsidiaries as currently conducted does not
infringe upon or misappropriate the Intellectual Property rights of any third
party, and no claim has been asserted to the Company or any Subsidiary that the
conduct of the business of the Company and the Subsidiaries as currently
conducted infringes upon or may infringe upon or misappropriates the
Intellectual Property rights of any third party; (ii) with respect to each item
of Intellectual Property that is owned by the Company or a Subsidiary ("OWNED
INTELLECTUAL PROPERTY"), the Company or a Subsidiary is the owner of the entire
right, title and interest in and to such Owned Intellectual Property and is
entitled to use such Owned Intellectual Property in the continued operation of
its respective business; (iii) with respect to each item of Intellectual
Property that is licensed to or otherwise held or used by the Company or a
Subsidiary ("LICENSED INTELLECTUAL PROPERTY"), the Company or a Subsidiary has
the right to use such Licensed Intellectual Property in the continued operation
of its respective business in accordance with the terms of the license agreement
governing such Licensed Intellectual Property; (iv) none of the Owned
Intellectual Property has been adjudged invalid or unenforceable in whole or in
part and, to the knowledge of the Company, the Owned Intellectual Property is
valid and enforceable; (v) to the knowledge of the Company, no person is
engaging in any activity that infringes upon the Owned Intellectual Property;
(vi) to the knowledge of the Company, each license of the Licensed Intellectual
Property is valid and enforceable, is binding on all parties to such license,
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and is in full force and effect; (vii) to the knowledge of the Company, no party
to any license of the Licensed Intellectual Property is in breach thereof or
default thereunder; (viii) the Company has taken all reasonable actions
(including executing non-disclosure and intellectual property assignment
agreements) to protect, preserve and maintain the Owned Intellectual Property;
and (ix) neither the execution of this Agreement nor the consummation of any
Transaction shall adversely affect any of the Company's rights with respect to
the Owned Intellectual Property or the Licensed Intellectual Property.
(b) For purposes of this Agreement, "INTELLECTUAL PROPERTY" means all
U.S., state and foreign intellectual property, including all (i) patents, patent
applications and statutory invention registrations, (ii) trademarks, service
marks, trade dress, logos, trade names, corporate names, domain names and other
source identifiers, and registrations and applications for registration thereof,
(iii) copyrightable works, copyrights, and registrations and applications for
registration thereof and (iv) confidential and proprietary information,
including trade secrets and know-how.
SECTION 3.15. TAXES. (a) The Company and the Subsidiaries (i) have timely
filed or caused to be filed or will timely file or cause to be filed (taking
into account any extension of time to file granted or obtained) all material Tax
Returns required to be filed by them, and all such filed Tax Returns are true,
correct and complete in all material respects; and (ii) have timely paid or will
timely pay all material amounts of Taxes due and payable except to the extent
that such Taxes are being contested in good faith and for which the Company or
the appropriate Subsidiary has set aside adequate reserves in accordance with
GAAP. All material amounts of Taxes required to have been withheld by or with
respect to the Company and its the Subsidiaries have been or will be timely
withheld and remitted to the applicable taxing authority.
(b) There are no pending audits, examinations, investigations or other
proceedings or, to the knowledge of the Company, proposed audits, examinations,
investigations or other proceedings in respect of any Tax or Tax matter of the
Company or any Subsidiary. No deficiency for any material amount of Tax has been
asserted or assessed by any taxing authority in writing against the Company or
any Subsidiary, which deficiency has not been satisfied by payment, settled or
been withdrawn or contested in good faith and for which the Company or the
appropriate Subsidiary has set aside adequate reserves in accordance with GAAP.
There are no Tax liens on any assets of the Company or any Subsidiary (other
than any liens for Taxes not yet due and payable for which adequate reserves
have been made in accordance with GAAP or for Taxes being contested in good
faith). Neither the Company nor any Subsidiary is subject to any accumulated
earnings tax or personal holding company tax.
(c) Neither the Company nor any Subsidiary has made or is obligated to
make any payment that would not be deductible pursuant to Section 162(m) of the
Code.
(d) There are no pending or, to the knowledge of the Company, potential
claims for indemnity (other than customary indemnity under credit or any other
agreements or arrangements) against the Company or any Subsidiary (other than
against each other) under any indemnification, allocation or sharing agreement
with respect to income Taxes.
(e) Neither the Company nor any Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency (other than pursuant to extensions of time to
file Tax Returns obtained in the ordinary course).
(f) No claim is pending by a taxing authority in a jurisdiction where the
Company or any Subsidiary does not file a Tax Return that the Company or such
Subsidiary is or may be subject to Tax by such jurisdiction.
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(g) Neither the Company nor any Subsidiary is a party to any understanding
or arrangement described in Section 6111(d) or Section 6662(d)(2)(C)(iii) of the
Code.
(h) There are no proposed reassessments of any property owned by the
Company and the Subsidiaries that could result in a material increase in the
amount of any Tax to which the Company or any such Subsidiary would be subject.
(i) Neither the Company nor any Subsidiary will be required to include any
item of income in, or exclude any item of deduction from, taxable income as a
result of any (1) adjustment pursuant to Section 481 of the Code, the
regulations thereunder or any similar provision under state or local Law, (2)
"CLOSING AGREEMENT" as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax Law)
executed on or prior to the Closing, (3) intercompany transaction or excess loss
account described in the Treasury Regulations under Section 1502 of the Code (or
any corresponding or similar provision of state, local or foreign income Tax
Law), (4) installment sale or open transaction disposition made on or prior to
the Closing, or (5) prepaid amount received on or prior to the Closing.
(j) Neither the Company nor any Subsidiary has made an election under
Section 341(f) of the Code.
(k) For purposes of this Agreement:
(i) "TAX" or "TAXES" shall mean any and all federal, state, local and
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
taxes of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any
governmental or Tax authority.
(ii) "TAX RETURNS" means any and all returns, declarations, claims for
refund, or information returns or statements, reports and forms relating to
Taxes filed with any Tax authority (including any schedule or attachment
thereto) with respect to the Company or the Subsidiaries, including any
amendment thereof.
SECTION 3.16. ENVIRONMENTAL MATTERS. (a) Except as would not reasonably be
expected to have a Company Material Adverse Effect, (i) none of the Company or
any of the Subsidiaries has violated, or is in violation of, any Environmental
Law; (ii) to the knowledge of the Company, there is and has been no presence,
release or threat of release of Hazardous Substances at, on, under or affecting:
(A) any of the properties currently owned, leased or operated by the Company or
any of the Subsidiaries or, during the period of the Company's or the
Subsidiaries' ownership, lease or operation thereof, formerly owned, leased or
operated by the Company or any of the Subsidiaries, or (B) any location at which
Hazardous Substances are present for which the Company or any of the
Subsidiaries is or is allegedly liable, under conditions in the case of either
(A) or (B) that would reasonably be expected to result in a liability or
obligation to the Company or any of the Subsidiaries, or, as the Company and the
Subsidiaries are currently operated, adversely affect the revenues of the
Company or any of the Subsidiaries; (iii) the Company and the Subsidiaries have
obtained and are and have been in compliance with all, and have not violated
any, required Environmental Permits; (iv) there are no written claims pending
or, to the knowledge of the Company, threatened against the Company or any of
the Subsidiaries alleging violations of or liability or obligations under any
Environmental Law or otherwise concerning the presence or release of Hazardous
Substances; and none of the Company or any of the Subsidiaries has received any
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written notice of, is a party to, or, to the knowledge of the Company, is
reasonably likely to be affected by any proceedings, any investigations or any
agreements concerning such matters. The Company has provided to Parent a copy of
all material studies, audits, assessments or investigations concerning
compliance with, or liability or obligations under, Environmental Law affecting
the Company or any Subsidiary that is in the possession or, to the knowledge of
the Company, control of the Company or any Subsidiary.
(b) For purposes of this Agreement:
(i) "ENVIRONMENTAL LAWS" means any Laws (including common law) of the
United States federal, state, local, non-United States, or any other
Governmental Authority, relating to (A) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances; (B) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (C)
pollution or protection of the environment or human health and safety as
affected by Hazardous Substances or materials containing Hazardous Substances.
(ii) "ENVIRONMENTAL PERMITS" means any permit, license registration,
approval, notification or any other authorization pursuant to Environmental Law.
(iii) "HAZARDOUS SUBSTANCES" means (A) those substances, materials or
wastes defined as toxic, hazardous, acutely hazardous, pollutants, contaminants,
or words of similar import, in or regulated under the following United States
federal statutes and any analogous state statutes, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act; (B) petroleum and petroleum products, including crude
oil and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures
thereof; (D) polychlorinated biphenyls, asbestos, molds that could reasonably be
expected to adversely affect human health, urea formaldehyde foam insulation and
radon; and (E) any substance, material or waste regulated by any Governmental
Authority pursuant to or that would reasonably be expected to result in
liability under, any Law in addition to those identified in (A) above the
primary purpose of which is the protection of the environment or human health
and safety as affected by environmental media.
SECTION 3.17. MATERIAL CONTRACTS. (a) Section 3.17(a) of the Company
Disclosure Schedule contains a list of the following Contracts to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any of their respective properties or assets are bound or affected as of the
date hereof:
(i) any lease of personal property providing for annual rentals of
$200,000 or more;
(ii) any Contract for the purchase of materials, supplies, goods,
services, equipment or other assets that is not terminable without material
penalty on 90 days notice by the Company or the Subsidiaries and that provides
for or is reasonably likely to require either (A) annual payments to or from the
Company and the Subsidiaries of $250,000 or more, or (B) aggregate payments to
or from the Company and the Subsidiaries of $500,000 or more;
(iii) any partnership, limited liability company agreement, joint venture
or other similar agreement or arrangement relating to the formation, creation,
operation, management or control of any partnership or joint venture;
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(iv) any Contract (other than among consolidated Subsidiaries) under which
Indebtedness is outstanding or may be incurred or pursuant to which any property
or asset is mortgaged, pledged or otherwise subject to a Lien, or any Contract
restricting the incurrence of Indebtedness or the incurrence of Liens or
restricting the payment of dividends or the transfer of any Property (except,
with respect to the transfer of Leased Properties, restrictions contained in the
Lease Documents). "INDEBTEDNESS" means (A) indebtedness for borrowed money
(excluding any interest thereon), secured or unsecured, (B) obligations under
conditional sale or other title retention Contracts relating to purchased
property, (C) capitalized lease obligations, (D) obligations under interest rate
cap, swap, collar or similar transactions or currency hedging transactions
(valued at the termination value thereof), and (E) guarantees of any of the
foregoing of any other person;
(v) any Contract required to be filed as an exhibit to the Company's
Annual Report on Form 10-K pursuant to Item 601(b)(10) of Regulation S-K under
the Securities Act;
(vi) any Contract that purports to limit in any material respect the right
of the Company or the Subsidiaries (A) to engage in any line of business, or (B)
to compete with any person or operate in any location;
(vii) any Contract to which the Company or any of its Subsidiaries has
continuing indemnification obligations or potential liability under any purchase
price adjustment;
(viii) any Contract providing for the sale or exchange of, or option to
sell or exchange, any Property, or for the purchase or exchange of, or option to
purchase or exchange, any real estate;
(ix) any Contract for the acquisition or disposition, directly or
indirectly (by merger or otherwise), of assets (other than Contracts referenced
in clause (viii) of this Section 3.17(a)) or capital stock or other equity
interests of another person for aggregate consideration in excess of $250,000,
in each case other than in the ordinary course of business and in a manner
consistent with past practice;
(x) other than Contracts for ordinary repair and maintenance, any Contract
relating to the development or construction of, or additions or expansions to,
the Properties, under which the Company or any of the Subsidiaries has, or
expects to incur, an obligation in excess of $50,000 per site or $125,000 in the
aggregate;
(xi) any advertising or other promotional Contract providing for payment
by the Company or any Subsidiary of $100,000 or more;
(xii) any license, royalty or other Contract concerning Intellectual
Property which is material to the Company and the Subsidiaries; and
(xiii) any Contract which by its terms calls for payments by the Company
and the Subsidiaries in excess of $2,500,000.
(the Contracts described in clauses (i) through (xiii) and those required to be
identified in Sections 3.11(a), 3.13(a), 3.13(b), 3.13(g), 3.13(h), 3.13(i),
3.13(l) and 3.17(c) of the Company Disclosure Schedule, in each case together
with all exhibits and schedules thereto being, the "MATERIAL CONTRACTS").
(b) Except as would not reasonably be expected to have a Company Material
Adverse Effect, (i) neither the Company nor any of its Subsidiaries is and, to
the Company's knowledge, no other party is in breach or violation of, or default
under, any Material Contract, (ii) none of the Company or any of the
Subsidiaries have received any claim of default under any such agreement, and
(iii) to the Company's knowledge, no event has occurred which would result in a
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breach or violation of, or a default under, any Material Contract (in each case,
with or without notice or lapse of time or both). Except as would not reasonably
be expected to have a Company Material Adverse Effect, each Material Contract is
valid, binding and enforceable in accordance with its terms and is in full force
and effect. The Company has made available to Parent true and complete copies of
all Material Contracts, including any amendments thereto.
(c) Except as disclosed in the Company's proxy statement relating to the
election of directors dated April 20, 2004, there are no Contracts or
transactions between the Company or any Subsidiary, on the one hand, and any (i)
officer or director of the Company or any Subsidiary, (ii) record or beneficial
owner of five percent or more of the voting securities of the Company, or (iii)
associate (as defined in Rule 12b-2 under the Exchange Act) or affiliate of any
such officer, director or record or beneficial owner, on the other hand, except
those of a type available to employees generally.
SECTION 3.18. INSURANCE. Section 3.18 of the Company Disclosure Schedule
sets forth a complete and correct list of all material insurance policies owned
or held by the Company and each Subsidiary, true and complete copies of which
have been made available to Parent. With respect to each such insurance policy,
except as would not reasonably be expected to have a Company Material Adverse
Effect: (i) the policy is legal, valid, binding and enforceable in accordance
with its terms and, except for policies that have expired under their terms in
the ordinary course, is in full force and effect; (ii) neither the Company nor
any Subsidiary is in breach or default (including any such breach or default
with respect to the payment of premiums or the giving of notice), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination or modification, under the policy;
(iii) to the knowledge of the Company, no insurer on the policy has been
declared insolvent or placed in receivership, conservatorship or liquidation;
(iv) no notice of cancellation or termination has been received; and (v) the
policy is sufficient for compliance with all requirements of Law and of all
Contracts to which the Company or the Subsidiaries are parties or otherwise
bound.
SECTION 3.19. BOARD APPROVAL; VOTE REQUIRED. (a) The Company Board, by
resolutions duly adopted at a meeting duly called and held, has duly (i)
determined that this Agreement, the Merger and the other Transactions are fair
to and in the best interests of the Company and its stockholders, (ii) approved
this Agreement, the Merger and the other Transactions and declared their
advisability, and (iii) recommended that the stockholders of the Company adopt
this Agreement and directed that this Agreement be submitted for consideration
by the Company's stockholders at the Company Stockholders' Meeting
(collectively, the "COMPANY BOARD RECOMMENDATION"). The approval of this
Agreement, the Merger and the other Transactions by the Company Board
constitutes approval of this Agreement, the Merger and the other Transactions
for purposes of each of Section 203 of the DGCL and Article Tenth of the
Certificate of Incorporation of the Company and represents the only action
necessary to ensure that Section 203 of the DGCL and Article Tenth of the
Certificate of Incorporation of the Company do not and will not apply to the
execution and delivery of this Agreement or the consummation of the
Transactions.
(b) Except as contemplated by Section 2.06, the only vote of the holders
of any class or series of capital stock or other securities of the Company
necessary to approve this Agreement, the Merger and the other Transactions is
the affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock in favor of the adoption of this Agreement (the
"STOCKHOLDER APPROVAL").
SECTION 3.20. INTERESTED PARTY TRANSACTIONS. Between the date of the
Company's last annual meeting proxy statement filed with the SEC and the date of
this Agreement, no event has occurred that would be required to be reported by
the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
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SECTION 3.21. OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Bear, Stearns & Co. Inc. to the effect that, as of the date of this
Agreement, the Merger Consideration is fair, from a financial point of view, to
the Company's stockholders. An executed copy of such opinion has been delivered
to Parent.
SECTION 3.22. BROKERS. No broker, finder or investment banker (other than
Bear, Stearns & Co. Inc.) 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 the Company. The Company has furnished to Parent a complete and
correct copy of any Contract between the Company and Bear, Stearns & Co. Inc.
pursuant to which Bear, Stearns & Co. Inc. could be entitled to any payment from
the Company relating to the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that:
SECTION 4.01. CORPORATE ORGANIZATION. Each of Parent and Merger Sub is a
limited liability company duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the requisite
limited liability company power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, prevent or materially
delay consummation of any of the Transactions or otherwise prevent or materially
delay Parent or Merger Sub from performing their obligations under this
Agreement.
SECTION 4.02. CERTIFICATE OF FORMATION AND LIMITED LIABILITY COMPANY
AGREEMENT. Parent has heretofore furnished to the Company a complete and correct
copy of the Certificate of Formation and Limited Liability Company Agreement (or
similar organizational documents) of Parent and Merger Sub, each as amended to
date. Such Certificate of Formation and Limited Liability Company Agreement (or
similar organizational documents) are in full force and effect. Neither Parent
nor Merger Sub is in violation of any of the provisions of its Certificate of
Formation or Limited Liability Company Agreement (or similar organizational
documents).
SECTION 4.03. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary limited liability company power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution, delivery and performance of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the Transactions have been duly and validly authorized by all necessary
limited liability company action, and no other limited liability company
proceedings on the part of Parent or Merger Sub are necessary to authorize this
Agreement or to consummate the Transactions. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Merger Sub, enforceable against
each of Parent and Merger Sub in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency (including all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to the effect of general principles of
equity.
SECTION 4.04. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub and the consummation
by Parent and Merger Sub of the Transactions will not, (i) conflict with or
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violate the Certificate of Formation or Limited Liability Company Agreement (or
similar organizational documents) of Parent or Merger Sub, (ii) assuming that
all consents, approvals, authorizations and other actions described in Section
4.04(b) have been obtained and all filings and obligations described in Section
4.04(b) have been made, conflict with or violate any Law applicable to Parent or
Merger Sub or by which any property or asset of either of them is bound or
affected, or (iii) result in any breach or violation of, or constitute a default
(or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
property or asset of Parent or Merger Sub pursuant to, any Contract to which
Parent or Merger Sub is a party or by which Parent or Merger Sub or any property
or asset of either of them is bound or affected, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, prevent or
materially delay consummation of any of the Transactions or otherwise prevent or
materially delay Parent and Merger Sub from performing their obligations under
this Agreement.
(b) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the Transactions will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except for (i) applicable requirements, if any,
of the Exchange Act, (ii) the filing and recordation of appropriate merger
documents as required by the DGCL and appropriate documents with the relevant
authorities of other states in which the Company or any of the Subsidiaries is
qualified to do business, (iii) any state or federal Laws governing the sale of
liquor that may be applicable, and (iv) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or
materially delay consummation of any of the Transactions or otherwise prevent
Parent or Merger Sub from performing their material obligations under this
Agreement.
SECTION 4.05. INFORMATION SUPPLIED. None of the information supplied by
Parent or Merger Sub for inclusion in the Proxy Statement or the Offer Documents
will, in the case of the Proxy Statement at the date it is first mailed to the
Company's stockholders or at the time of the Company Stockholders' Meeting or at
the time of any amendment or supplement thereof, or in the case of the Offer
Documents, at the time the Offer Documents are first published, sent or given to
holders of the Notes, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. No representation is made by Parent or Merger Sub with
respect to statements made or incorporated by reference therein based on
information supplied by the Company in connection with the preparation of the
Proxy Statement or the Offer Documents for inclusion or incorporation by
reference therein.
SECTION 4.06. ABSENCE OF LITIGATION. As of the date of this Agreement,
there is no Action pending or, to the knowledge of the officers of Parent,
threatened, against Parent or any of its affiliates before any Governmental
Authority that would or seeks to materially delay or prevent the consummation of
any of the Transactions. As of the date of this Agreement, neither Parent nor
any of its affiliates is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of the officers of Parent, continuing investigation by, any
Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority that would or seeks to
materially delay or prevent the consummation of any of the Transactions.
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SECTION 4.07. OPERATIONS OF MERGER SUB. Merger Sub is a direct, wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
SECTION 4.08. FINANCING. Parent has delivered to the Company true and
complete copies of (a) an executed commitment letter from Blackstone Real Estate
Partners IV L.P. to provide equity financing in an aggregate amount of
$172,500,000 (the "EQUITY FUNDING LETTER"), and (b) an executed commitment
letter (the "COMMITMENT LETTER") from Bank of America, N.A. pursuant to which
Bank of America, N.A. has committed to provide Merger Sub and certain existing
or future affiliates of Merger Sub with financing in an aggregate amount of
$680,000,000 (the "DEBT FINANCING" and together with the financing referred to
in clause (a) being collectively referred to as the "FINANCING"). Each of the
Equity Funding Letter and the Commitment Letter, in the form so delivered, is
valid and in full force and effect as of the date hereof. No event has occurred
which, with or without notice, lapse of time or both, would constitute a default
on the part of Parent under either the Equity Funding Letter or the Commitment
Letter. Parent has fully paid any and all commitment fees or other fees required
by the Commitment Letter to be paid as of the date hereof. Parent shall have at
the Closing and at the Effective Time proceeds in connection with the Financing
in an amount equal to $852,500,000.
SECTION 4.09. GUARANTEE. Concurrently with the execution of this
Agreement, Parent has delivered to the Company the duly executed guarantee of
Blackstone Real Estate Partners IV L.P. (the "GUARANTOR") in the form attached
as EXHIBIT B to this Agreement (the "GUARANTEE"). The Guarantee is valid and in
full force and effect, and no event has occurred which, with or without notice,
lapse of time or both, would constitute a default on the part of Guarantor under
the Guarantee.
SECTION 4.10. BROKERS. The Company will not be responsible for any
brokerage, finder's or other fee or commission to any broker, finder or
investment banker in connection with the Transactions based upon arrangements
made by or on behalf of Parent or Merger Sub.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as expressly contemplated by this Agreement or as set forth in Section
5.01 of the Company Disclosure Schedule, the businesses of the Company and the
Subsidiaries shall be conducted only in, and the Company and the Subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice and in compliance with applicable Law, and
the Company shall, and shall cause each of the Subsidiaries to, use its
reasonable best efforts to preserve substantially intact the business
organization of the Company and the Subsidiaries, to preserve the assets and
properties of the Company and the Subsidiaries in good repair and condition and
to preserve the current relationships of the Company and the Subsidiaries with
customers, suppliers and other persons with which the Company or any Subsidiary
has material business relations, in each case in the ordinary course of business
and in a manner consistent with past practice. By way of amplification and not
limitation, except as expressly contemplated by any other provision of this
Agreement or as set forth in Section 5.01 of the Company Disclosure Schedule,
the Company agrees that neither the Company nor any Subsidiary shall, between
the date of this Agreement and the Effective Time, directly or indirectly, do,
or propose to do, any of the following without the prior written consent of
Parent:
(a) amend or otherwise change its Certificate of Incorporation or Bylaws;
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(b) issue, sell, pledge, dispose of, grant, encumber, license or otherwise
subject to any Lien, or authorize such issuance, sale, pledge, disposition,
grant or encumbrance of or subjection to such Lien, (i) any shares of any class
of capital stock of the Company or any Subsidiary, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including any phantom interest),
of the Company or any Subsidiary (except for the issuance of Shares issuable
pursuant to employee stock options outstanding on the date hereof and granted
under Company Stock Option Plans as in effect on the date hereof in the ordinary
course of business and in a manner consistent with past practice), or (ii) any
Properties or other assets of the Company or any Subsidiary, except assets
(other than Properties) that are not material in the ordinary course of business
and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except for dividends by any direct or indirect wholly owned
Subsidiary to the Company or any other Subsidiary;
(d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any capital stock of the Company or
any Subsidiary;
(e) (i) acquire (including by merger, consolidation, or acquisition of
stock or assets or any other business combination) any corporation, partnership,
other business organization (or any division thereof) or any property or asset,
except assets (other than real property) in the ordinary course of business and
in a manner consistent with past practice, and other assets (other than real
property) that do not exceed $1,500,000 in the aggregate; (ii) repurchase, repay
or incur any Indebtedness, or issue any debt securities or assume or endorse, or
otherwise become responsible for, the obligations of any person, or make any
loans or advances, or grant any security interest in any of its assets; (iii)
authorize, or make any commitment with respect to, any capital expenditure,
other than maintenance expenditures at existing Properties in the ordinary
course of business and consistent with past practice; (iv) acquire, enter into
or extend any option to acquire, or exercise an option to acquire, real property
or commence construction of, or enter into any Contract to develop or construct,
other real estate projects; (v) enter into any new line of business; (vi) expend
or utilize any portion of the Initial Reserve Amount or the Secondary Reserve
Amount, or (vii) make investments in persons other than wholly owned
subsidiaries;
(f) (i) increase the compensation payable or to become payable or the
benefits provided to its current or former directors, officers or employees,
except for increases in compensation in the ordinary course of business and in a
manner consistent with past practice; (ii) grant any retention, severance or
termination pay to, or enter into any employment, bonus, change of control or
severance agreement with, any current or former director, officer or other
employee of the Company or of any Subsidiary; (iii) establish, adopt, enter
into, terminate or amend any Plan or establish, adopt or enter into any plan,
agreement, program, policy, trust, fund or other arrangement that would be a
Plan if it were in existence as of the date of this Agreement for the benefit of
any director, officer or employee except as required by Law; (iv) loan or
advance any money or other property to any current or former director, officer
or employee of the Company or the Subsidiaries; or (v) grant any equity or
equity based awards (PROVIDED that equity awards may be transferred in
accordance with the terms of the applicable plan document or agreement);
(g) make any change (or file for such change) in any method of Tax
accounting;
(h) make, change or rescind any material Tax election, file any amended
Tax Return, except as required by applicable Law, enter into any closing
agreement relating to Taxes, waive or extend the statute of limitations in
respect of Taxes (other than pursuant to extensions of time to file Tax Returns
obtained in the ordinary course of business) or settle or compromise any
material United States federal, state or local income Tax liability, audit,
claim or assessment, or surrender any right to claim for a Tax Refund;
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(i) pay, discharge, waive, settle or satisfy any claim, liability or
obligation that is not an Action, other than repayments of Indebtedness under
the Credit Agreement and the payment, discharge, waiver, settlement or
satisfaction, in the ordinary course of business and consistent with past
practice;
(j) waive, release, assign, settle or compromise any pending or threatened
Action (i) requiring payment by the Company or any Subsidiary in excess of
$100,000 individually or $500,000 in the aggregate or (ii) that is brought by
any current, former or purported holder of any securities of the Company in its
capacity as such and that (A) requires any payment to such security holders by
the Company or any Subsidiary or (B) adversely affects in any material respect
the ability of the Company and the Subsidiaries to conduct their business in a
manner consistent with past practice;
(k) other than in the ordinary course of business and in a manner
consistent with past practice, (i) amend, modify or consent to the termination
of any Material Contract other than the terms and conditions of the Stock Option
Plans required to effectuate the provisions set forth in Section 2.04 or (ii)
amend, waive, modify or consent to the termination of the Company's or any
Subsidiary's rights thereunder; PROVIDED that the exception set forth above
shall not be applicable to any Third Party Flag Agreement, Franchise Agreement
or Management Agreement;
(l) make any expenditure in connection with any advertising or marketing,
or adopt, renew, terminate, change, or increase the liability or other
obligations of the Company or any Subsidiary under, any operating standards,
loyalty programs or amenity packages relating to the Prime Hotels and Resorts,
AmeriSuites or Wellesley Inns & Suites brands;
(m) fail to maintain in full force and effect the existing insurance
policies covering the Company and the Subsidiaries and their respective
properties, assets and businesses or fail to preserve or protect their rights in
all material Intellectual Property used in the business of the Company or its
Subsidiaries;
(n) enter into, amend, modify or consent to the termination of any
Contract that would be a Material Contract or transaction that would be required
to be set forth in Section 3.17(c) of the Company Disclosure Schedule if in
effect on the date of this Agreement;
(o) effectuate a "plant closing" or "mass layoff," as those terms are
defined in the Worker Adjustment and Retraining Notification Act of 1988; or
(p) announce an intention, enter into any formal or informal agreement or
otherwise make a commitment, to do any of the foregoing.
SECTION 5.02. CONDUCT OF BUSINESS BY PARENT AND MERGER SUB PENDING THE
MERGER. Each of Parent and Merger Sub agrees that, between the date of this
Agreement and the Effective Time, it shall not, directly or indirectly, (a) take
any action to cause its representations and warranties set forth in Article IV
to be untrue in any material respect; or (b) take any action that would
reasonably be likely to materially delay the consummation of the Transactions.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PROXY STATEMENT. As promptly as practicable following the
date of this Agreement (but in any event within 10 business days unless the
parties shall otherwise agree), the Company shall prepare and file with the SEC
the preliminary Proxy Statement. Each of the Company and Parent shall furnish
all information concerning itself and its affiliates that is required to be
included in the Proxy Statement or that is customarily included in proxy
statements prepared in connection with transactions of the type contemplated by
this Agreement. Each of the Company and Parent shall use its reasonable best
efforts to respond as promptly as practicable to any comments of the SEC with
respect to the Proxy Statement, and the Company shall use its reasonable best
efforts to cause the definitive Proxy Statement to be mailed to the Company's
stockholders as promptly as reasonably practicable after the date of this
Agreement. The Company shall promptly notify Parent upon the receipt of any
comments from the SEC or its staff or any request from the SEC or its staff for
amendments or supplements to the Proxy Statement and shall provide Parent with
copies of all correspondence between the Company and its Representatives, on the
one hand, and the SEC and its staff, on the other hand relating to the Proxy
Statement. If at any time prior to the Company Stockholders' Meeting, any
information relating to the Company, Parent or any of their respective
affiliates, officers or directors, should be discovered by the Company or Parent
which should be set forth in an amendment or supplement to the Proxy Statement,
so that the Proxy Statement shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, the party which discovers such
information shall promptly notify the other parties, and an appropriate
amendment or supplement describing such information shall be filed with the SEC
and, to the extent required by applicable Law, disseminated to the stockholders
of the Company. Notwithstanding anything to the contrary stated above, prior to
filing or mailing the Proxy Statement (or any amendment or supplement thereto)
or responding to any comments of the SEC with respect thereto, the Company shall
provide Parent an opportunity to review and comment on such document or response
and shall include in such document or response comments reasonably proposed by
Parent; PROVIDED, HOWEVER, that in the event of a Change in Board
Recommendation, the Company shall consider in good faith including in such
document or response comments reasonably proposed by Parent.
SECTION 6.02. COMPANY STOCKHOLDERS' MEETING. The Company shall duly call,
give notice of, convene and hold a meeting of its stockholders (the "COMPANY
STOCKHOLDERS' MEETING"), as promptly as practicable after the date of this
Agreement, for the purpose of obtaining the Stockholder Approval. Unless this
Agreement shall have been terminated in accordance with Section 8.01, the
Company shall hold the Company Stockholders' Meeting regardless of whether the
Company Board has effected a Change in Board Recommendation. Subject to Section
6.04(c), the Company Board shall (a) recommend to holders of the Shares that
they adopt this Agreement, (b) include such recommendation in the Proxy
Statement and (c) use its reasonable best efforts to solicit and obtain the
Stockholder Approval.
SECTION 6.03. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Except as
otherwise prohibited by applicable Law or the terms of any Contract entered into
prior to the date hereof or would be reasonably expected to violate any
attorney-client privilege, from the date of this Agreement until the Effective
Time, the Company shall (and shall cause the Subsidiaries to), at Parent's
expense: (i) provide to Parent and to the officers, directors, employees,
accountants, consultants, legal counsel, financing sources, agents and other
representatives (collectively, "REPRESENTATIVES") of Parent reasonable access,
during normal business hours and upon reasonable prior notice by Parent, to the
officers, employees, agents, properties, offices and other facilities of the
Company and the Subsidiaries and to the books and records thereof, and (ii)
furnish promptly to Parent such information concerning the business, properties,
Contracts, assets, liabilities, personnel and other aspects of the Company and
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the Subsidiaries as Parent or its Representatives may reasonably request.
Without limiting the foregoing, Parent and its Representatives (including its
financing sources) shall have the right to conduct appraisal and environmental
and engineering inspections of each of the Properties, PROVIDED, HOWEVER, (A)
that unless reasonably required by the financing sources in connection with the
Debt Financing, neither Parent nor its Representatives shall have the right to
take and analyze any samples of any environmental media (including soil,
groundwater, surface water, air or sediment) or any building material or to
perform any invasive testing procedure on any building; and that any such taking
and analyzing of samples or any such performance of invasive testing conducted
pursuant to this Section 6.03 shall be reasonably acceptable to the Company,
implemented in a manner that does not disrupt the operations of the Company or
any of the Subsidiaries, and paid for by Parent at Parent's sole cost and
expense; and that Parent, at Parent's sole cost and expense, shall return any
site at which or from which, or that has otherwise been affected by, any taking
and analyzing of samples or performance of invasive testing conducted pursuant
to this Section 6.03, in all material respects, to the condition existing at
such site prior to the taking and analyzing of samples or performance of
invasive testing, and (B) Parent and Merger Sub shall, on a joint and several
basis, indemnify and hold harmless the Company, the Subsidiaries and their
respective Representatives for and against any and all liabilities, losses,
damages, claims, costs, expenses, interest, awards, judgments and penalties
suffered or incurred by them arising out of any personal injury or physical
damage resulting from any appraisal or inspection conducted pursuant to this
Section 6.03, except that, Parent and Merger Sub shall have no obligation to so
indemnify or hold harmless to the extent any such liabilities, losses, damages,
claims, costs, expenses, interest, awards, judgments or penalties result from
the negligence of the Company, the Subsidiaries, or one of their
Representatives.
(b) All information obtained by Parent or its Representatives pursuant to
this Section 6.03 shall be kept confidential in accordance with the
confidentiality agreement, dated July 12, 2004 (the "CONFIDENTIALITY
AGREEMENT"), between Blackstone Real Estate Acquisitions IV L.L.C. and the
Company.
(c) No investigation pursuant to this Section 6.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.04. NO SOLICITATION OF TRANSACTIONS. (a) The Company agrees that
neither it nor any Subsidiary shall, nor shall it authorize or permit the
Representatives of the Company or the Subsidiaries to, directly or indirectly,
(i) solicit or initiate or knowingly encourage or otherwise knowingly facilitate
(including by way of furnishing information) any inquiries or the implementation
or submission of any Acquisition Proposal, or (ii) participate in discussions or
negotiations regarding, or furnish to any person any non-public information in
connection with, any Acquisition Proposal; PROVIDED, HOWEVER, that, prior to the
adoption of this Agreement by the Company's stockholders at the Company
Stockholders' Meeting, nothing contained in this Agreement shall prevent the
Company or the Company Board from furnishing information to, or engaging in
negotiations or discussions with, any person in connection with an unsolicited
bona fide written Acquisition Proposal by such person, if and only to the extent
that prior to taking such action (A) the Company Board believes in good faith
(after consultation with its advisors) that such Acquisition Proposal is, or
could reasonably be expected to result in, a Superior Proposal, and the Company
Board determines in good faith (after consultation with its outside legal
counsel) that it is required to do so in order to comply with its fiduciary
duties to the stockholders of the Company under applicable Law, and (B) the
Company Board receives from such person an executed confidentiality agreement,
the terms of which are substantially similar to and no less favorable to the
Company than those contained in the Confidentiality Agreement. Neither the
Company nor any Subsidiary shall enter into any letter of intent, acquisition
agreement or similar agreement with respect to an Acquisition Proposal (other
than a confidentiality agreement referred to in this Section 6.04(a)).
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(b) The Company shall notify Parent as promptly as practicable (and in any
event within 48 hours) of the receipt by the Company or any of the Subsidiaries,
or any of its or their respective Representatives, of any bona fide inquiries,
proposals or offers, requests for information or requests for discussions or
negotiations regarding any Acquisition Proposal, specifying the material terms
and conditions thereof and the identity of the party making such proposal. The
Company shall keep Parent reasonably informed of the status of any such
discussions or negotiations and of any modifications to such inquiries,
proposals or offers (the Company agreeing that it shall not, and shall cause the
Subsidiaries not to, enter into any confidentiality agreement with any person
subsequent to the date of this Agreement which prohibits the Company from
providing such information to Parent). The Company agrees that neither it nor
any of the Subsidiaries shall terminate, waive, amend or modify any provision of
any existing standstill or confidentiality agreement to which it or any of the
Subsidiaries is a party and that it and the Subsidiaries shall enforce the
provisions of any such agreement. The Company shall, and shall cause the
Subsidiaries and its and their Representatives to, immediately cease and cause
to be terminated any discussions or negotiations with any parties that may be
ongoing with respect to any Acquisition Proposal as of the date hereof, shall
take reasonable steps to inform its and the Subsidiaries' Representatives of the
obligations undertaken in this Section 6.04 and shall request that all
confidential information previously furnished to any such third parties be
returned promptly.
(c) Except as set forth in this Section 6.04, the Company Board (or any
committee thereof) shall not, and shall not publicly propose to, (i) withdraw or
modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation of this Agreement, the Merger or the other Transactions by the
Company Board (or any committee thereof); (ii) approve or recommend any
Acquisition Proposal; or (iii) approve any letter of intent, acquisition
agreement or similar agreement with respect to any Acquisition Proposal (other
than a confidentiality agreement referred to in this Section 6.04).
Notwithstanding the foregoing, prior to the adoption of this Agreement by the
Company's stockholders at the Company Stockholders Meeting, (x) in response to
the receipt of an unsolicited bona fide written Acquisition Proposal, if the
Company Board (A) determines in good faith (after consultation with its
advisors) that such Acquisition Proposal is a Superior Proposal and (B)
determines in good faith (after consultation with its outside legal counsel)
that it is required to do so in order to comply with its fiduciary duties to the
stockholders of the Company under applicable Law, then the Company Board may
approve and recommend such Superior Proposal and, in connection with such
Superior Proposal, withdraw or modify the Company Board Recommendation or (y)
other than in connection with an Acquisition Proposal, if the Company Board
determines in good faith (after consultation with its outside legal counsel)
that it is required to do so in order to comply with its fiduciary duties to the
stockholders of the Company under applicable Law, then the Company Board may
withdraw or modify the Company Board Recommendation (either event described in
the foregoing clauses (x) and (y), a "CHANGE IN BOARD RECOMMENDATION").
(d) Nothing contained in this Agreement shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act or from making any disclosure to
the Company's stockholders if the Company Board (or any committee thereof)
determines in good faith (after consultation with its outside legal counsel)
that it is required to do so under applicable Law; PROVIDED, HOWEVER, that
neither the Company nor the Company Board (nor any committee thereof) shall (i)
recommend that the stockholders of the Company tender their Shares in connection
with any such tender or exchange offer (or otherwise approve or recommend any
Acquisition Proposal) or (ii) withdraw or modify the Company Board
Recommendation, unless in each case the requirements of Section 6.04(c) shall
have been satisfied.
(e) The Company shall not take any action to exempt any person from the
restrictions on "business combinations" contained in Section 203 of the DGCL (or
any similar provision) or in Article Tenth of the Certificate of Incorporation
of the Company or otherwise cause such restrictions not to apply.
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(f) Except as set forth in Section 8.03(d) with respect to an Acquisition
Proposal, for purposes of this Agreement:
(i) "ACQUISITION PROPOSAL" means any proposal or offer (including any
proposal from or to the Company's stockholders) from any person other than
Parent or Merger Sub relating to (1) any direct or indirect acquisition of (A)
more than 15% of the assets of the Company and its consolidated Subsidiaries,
taken as a whole or (B) over 15% of any class of equity securities of the
Company; (2) any tender offer or exchange offer, as defined pursuant to the
Exchange Act, that if consummated, would result in any person beneficially
owning 15% or more of any class of equity securities of the Company; or (3) any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or other similar transaction involving the Company.
(ii) "SUPERIOR PROPOSAL" means any bona fide written Acquisition
Proposal not solicited or initiated in violation of Section 6.04(a) that (i)
relates to more than 50% of the outstanding Shares or all or substantially all
of the assets of the Company and the Subsidiaries taken as a whole, (ii) is on
terms that the Company Board determines in its good faith judgment (after
receiving the advice of its financial advisor and after taking into account all
the terms and conditions of the Acquisition Proposal) are more favorable to the
Company's stockholders (in their capacities as stockholders) from a financial
point of view than this Agreement (including any alterations to this Agreement
agreed to in writing by Parent in response thereto) and (iii) which the Company
Board determines is reasonably capable of being consummated.
SECTION 6.05. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a)
The Limited Liability Company Agreement (or similar organizational document) of
the Surviving Company shall contain provisions no less favorable with respect to
indemnification than are set forth in Article Eighth of the Certificate of
Incorporation of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who, at
or prior to the Effective Time, were directors, officers, employees, fiduciaries
or agents of the Company or any of the Subsidiaries.
(b) After the Effective Time, Parent and the Surviving Company shall,
jointly and severally, to the fullest extent permitted under applicable Law,
indemnify and hold harmless, each present and former director and officer of the
Company and each Subsidiary (collectively, the "INDEMNIFIED PARTIES") against
all costs and expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee, fiduciary or agent, occurring on or
before the Effective Time, to the same extent as provided in the Certificate of
Incorporation of the Company or any other applicable contract or agreement in
effect on the date hereof. In the event of any such claim, action, suit,
proceeding or investigation, (i) Parent or the Surviving Company shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving Company,
promptly after statements therefor are received (provided the applicable
Indemnified Party provides an undertaking to repay all advanced expenses if it
is finally judicially determined that such Indemnified Party is not entitled to
indemnification) and (ii) the Surviving Company shall cooperate in the defense
of any such matter; PROVIDED, HOWEVER, that neither Parent nor the Surviving
Company shall be liable for any settlement effected without the Surviving
Company's written consent (which consent shall not be unreasonably withheld or
delayed); and PROVIDED, FURTHER, that neither Parent nor the Surviving Company
shall be obligated pursuant to this Section 6.05(b) to pay the fees and expenses
of more than one counsel (selected by a plurality of the applicable Indemnified
Parties) for all Indemnified Parties in any jurisdiction with respect to any
single action except to the extent that two or more of such Indemnified Parties
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shall have conflicting interests in the outcome of such action; and PROVIDED,
FURTHER, that, in the event that any claim for indemnification is asserted or
made within such six year period, all rights to indemnification in respect of
such claim shall continue until the disposition of such claim.
(c) The Surviving Company shall either (i) cause to be obtained at the
Effective Time "tail" insurance policies with a claims period of at least six
years from the Effective Time with respect to directors' and officers' liability
insurance in amount and scope at least as favorable as the Company's existing
policies for claims arising from facts or events that occurred on or prior to
the Effective Time; or (ii) maintain in effect for six years from the Effective
Time, if available, the current directors' and officers' liability insurance
policies maintained by the Company (PROVIDED that the Surviving Company may
substitute therefor policies of at least the same coverage containing terms and
conditions that are not less favorable) with respect to matters occurring prior
to the Effective Time; PROVIDED, HOWEVER, that in no event shall the Surviving
Company be required to expend pursuant to this Section 6.05(c) more than an
amount per year equal to 250% of current annual premiums paid by the Company for
such insurance; PROVIDED, HOWEVER, that in the event of an expiration,
termination or cancellation of such current policies, Purchaser or the Surviving
Company shall be required to obtain as much coverage as is possible under
substantially similar policies for such maximum annual amount in aggregate
annual premiums. The Company represents that such current annual premium amount
is set forth in Section 6.05(c) of the Company Disclosure Schedule.
(d) In the event Parent or the Surviving Company or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Company, as the case may be, shall succeed to the obligations set
forth in this Section 6.05.
(e) Parent shall cause the Surviving Company to perform all of the
obligations of the Surviving Company under this Section 6.05.
SECTION 6.06. EMPLOYEE BENEFITS MATTERS. (a) Parent hereby agrees that,
for a period of two years immediately following the Effective Time, it shall, or
it shall cause the Surviving Company and its subsidiaries to, (i) provide each
employee of the Company as of the Effective Time (each, an "EMPLOYEE") with at
least the same level of base salary, cash incentive compensation and other cash
variable compensation that was provided to each such Employee immediately prior
to the Effective Time, and (ii) provide the Employees with employee benefits
(other than equity-based compensation) that are no less favorable in the
aggregate than those provided to such Employees immediately prior to the
Effective Time. Parent hereby agrees that, except as set forth in Section
6.06(a) of the Company Disclosure Schedule, it shall, or shall cause the
Surviving Company to, maintain the bonus plan set forth in Section 6.06(a) of
the Company Disclosure Schedule in respect of calendar year 2004 in accordance
with the terms of such plan as in effect on the date of this Agreement
(including with respect to the timing of payment of bonuses) and, prior to the
Effective Time, the Company agrees that such plan will be maintained in
accordance with its terms (including with respect to the timing of payment of
bonuses). From and after the Effective Time, Parent shall cause the Surviving
Company and its subsidiaries to honor in accordance with their terms, all
contracts, agreements, arrangements, policies, plans and commitments of the
Company and the Subsidiaries as in effect immediately prior to the Effective
Time that are applicable to any current or former employees or directors of the
Company or any Subsidiary.
(b) Employees shall receive credit for all purposes (including, for
purposes of eligibility to participate, vesting, benefit accrual and eligibility
to receive benefits, but excluding benefit accruals under any defined benefit
pension plan) under any employee benefit plan, program or arrangement (including
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vacation plans, programs and arrangements) established or maintained by Parent,
the Surviving Company or any of their respective subsidiaries under which each
Employee may be eligible to participate on or after the Effective Time for
service with the Company and its Subsidiaries through the Effective Time to the
same extent recognized by the Company or any of the Subsidiaries under
comparable Plans immediately prior to the Effective Time. Such plan, program or
arrangement shall credit each such Employee for service accrued or deemed
accrued on or prior to the Effective Time with the Company or any Subsidiary;
PROVIDED, HOWEVER, that such crediting of service shall not operate to duplicate
any benefit or the funding of any such benefit.
(c) Notwithstanding anything to the contrary in this Agreement, Parent
agrees that it shall, or shall cause the Surviving Company to, provide severance
benefits to each Employee employed at the Company's executive offices who is
terminated during the one year period immediately following the Effective Time
in an amount calculated as set forth in Section 6.06(c) of the Company
Disclosure Schedule.
(d) With respect to the welfare benefit plans, programs and arrangements
maintained, sponsored or contributed to by Parent or the Surviving Company
("PURCHASER WELFARE BENEFIT PLANS") in which an Employee may be eligible to
participate on or after the Effective Time, Parent shall (a) waive, or cause its
insurance carrier to waive, all limitations as to preexisting and at-work
conditions, if any, with respect to participation and coverage requirements
applicable to each Employee under any Purchaser Welfare Benefit Plan to the same
extent waived under a comparable Plan, and (b) provide credit to each Employee
for any co-payments, deductibles and out-of-pocket expenses paid by such
Employee under the Plans during the relevant plan year, up to and including the
Effective Time.
SECTION 6.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which could reasonably be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, in the case of representations or warranties
not qualified by any "material" or "Company Material Adverse Effect" qualifier,
or in any respect, in the case of representations or warranties qualified by the
"material" or "Company Material Adverse Effect" qualifier, and (b) any failure
of the Company, Parent or Merger Sub, as the case may be, to comply with or
satisfy any covenant or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 6.07 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice. In addition, the Company shall
give prompt written notice to Parent, and Parent shall give prompt written
notice to the Company, of any notice or other communication (i) from any person
and the response thereto of the Company or the Subsidiaries or Parent, as the
case may be, or its or their Representatives alleging that the consent of such
person is or may be required in connection with this Agreement or the
Transactions, (ii) from any Governmental Authority and the response thereto of
the Company or the Subsidiaries or Parent, as the case may be, or its or their
Representatives in connection with this Agreement or the Transactions, and (iii)
except in the event the Company Board shall have effected a Change of Board
Recommendation, from or to the SEC.
SECTION 6.08. FINANCING. (a) Parent shall use its reasonable best efforts
to arrange the Debt Financing on the terms and conditions described in the Debt
Commitment Letter, including using reasonable best efforts to (i) negotiate
definitive agreements with respect thereto on terms and conditions contained
therein and (ii) to satisfy all conditions applicable to Parent and Merger Sub
in such definitive agreements that are within its control. In the event any
portion of the Debt Financing becomes unavailable on the terms and conditions
contemplated in the Debt Commitment Letter, Parent shall use its reasonable best
efforts to arrange to obtain any such portion from alternative sources on
comparable or more favorable terms to Parent (as determined in the reasonable
judgment of Parent). Parent shall give the Company prompt notice of any material
breach by any party of the Debt Commitment Letter or any termination of the Debt
Commitment Letter. Parent shall keep the Company informed on a reasonably
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current basis in reasonable detail of the status of its efforts to arrange the
Financing and shall not permit any material amendment or modification to be made
to, or any waiver of any material provision or remedy under, the Commitment
Letters without consulting with the Company.
(b) The Company agrees to provide, and shall cause the Subsidiaries and
its and their Representatives to provide, all reasonable cooperation in
connection with the arrangement of the Debt Financing as may be reasonably
requested by Parent (provided that such requested cooperation does not
unreasonably interfere with the ongoing operations of the Company and the
Subsidiaries), including (i) participation in meetings, drafting sessions and
due diligence sessions, (ii) furnishing Parent and its financing sources with
financial and other pertinent information regarding the Company as may be
reasonably requested by Parent, (iii) assisting Parent and its financing sources
in the preparation of (A) an offering document for any debt raised to complete
the Merger and (B) materials for rating agency presentations, (iv) reasonably
cooperating with the marketing efforts of Parent and its financing sources for
any debt raised by Parent to complete the Merger and (v) providing and executing
documents as may be reasonably requested by Parent; PROVIDED that none of the
Company or any Subsidiary shall be required to pay any commitment or other
similar fee or incur any other liability in connection with the Debt Financing
prior to the Effective Time. Parent shall, promptly upon request by the Company,
reimburse the Company for all reasonable out-of-pocket costs incurred by the
Company or the Subsidiaries in connection with such cooperation. Parent and
Merger Sub shall, on a joint and several basis, indemnify and hold harmless the
Company, the Subsidiaries and their respective Representatives for and against
any and all liabilities, losses, damages, claims, costs, expenses, interest,
awards, judgments and penalties suffered or incurred by them in connection with
the arrangement of the Debt Financing and any information utilized in connection
therewith (other than historical information relating to the Company or the
Subsidiaries).
(c) All non-public or otherwise confidential information regarding the
Company obtained by Parent or its Representatives pursuant to Section 6.08(b)
shall be kept confidential in accordance with the Confidentiality Agreement.
(d) Within 60 days of there having occurred after the date of this
Agreement (i) any general suspension of trading in, or limitation on prices for,
securities on the NYSE for three or more consecutive business days, including
but not limited to any changes in trading conditions resulting from actual or
threatened terrorist attacks, responses by the United States or its allies
thereto, or the effects thereof; (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States or New York
for three or more consecutive business days; (iii) the commencement or material
escalation of a war, armed hostilities or other international or national crisis
or security event directly or indirectly involving the United States or any of
its territories after the date of this Agreement, including without limitation,
any acts of terrorism, domestic or foreign or responses of the United States or
its allies, or a national or international economic or financial crisis, the
result of which there has occurred any material disruption or material adverse
change in the United State commercial credit, debt capital or commercial
mortgage-backed securities markets for a period of three or more consecutive
business days; or (iv) any limitation by any governmental, regulatory or
administrative agency or authority which prohibits the extension of credit by
banks or other lending institutions in the United States or New York in a manner
that prevents Lender from providing the Debt Financing for a period of three or
more consecutive business days, Parent shall deliver to the Company a
certificate (the "MARKET MAC NOTICE") to that effect signed by an officer of
Parent, describing in reasonable detail the nature of the Market MAC (any of the
events specified in clauses (i) through (iv) described in such Market MAC Notice
being hereinafter referred to as a "MARKET MAC"). At any time following its
receipt of the Market MAC Notice, the Company may request (by delivery of a
written notice to Parent to such effect (a "COMPANY WAIVER REQUEST")) that
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Parent fully and irrevocably waive its right to invoke the condition set forth
in Section 7.02(d) with respect to such Market MAC. In the event that Parent
delivers to the Company a written notice that Parent waives its right to invoke
the condition set forth in Section 7.02(d) with respect to such Market MAC (a
"PARENT WAIVER NOTICE"), then such Market MAC shall cease to be a basis for
Parent or Merger Sub not consummating the Merger. In the event that Parent fails
to deliver a Parent Waiver Notice with respect to a Market MAC within the longer
of (i) seven days after Parent's receipt of the corresponding Company Waiver
Request and (ii) the number of days between the date on which Parent delivered
to the Company the corresponding Market MAC Notice and the date on which the
Company delivered to Parent the Company Waiver Request (the longer of such
periods being hereinafter referred to as the "REQUISITE RESPONSE PERIOD"), then
the Company shall be entitled to terminate the Agreement pursuant to Section
8.01(j). Notwithstanding anything to the contrary in this Section 6.08(d),
nothing shall release Parent from continuing to be obligated to use its
reasonable best efforts to obtain (i) the Debt Financing or (ii) an alternative
financing in accordance with Section 6.08(a) in the event Parent declines to
timely waive its right to invoke the condition set forth in Section 7.02(d) with
respect to a Market MAC.
SECTION 6.09. FURTHER ACTION; REASONABLE BEST EFFORTS. (a) Upon the terms
and subject to the conditions of this Agreement, each of the parties hereto
agrees to use its reasonable best efforts to (i) take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Law or otherwise to consummate and make effective
the Transactions and (ii) obtain from Governmental Authorities and third parties
any consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained by Parent or the Company or any of their respective
subsidiaries in connection with the authorization, execution and delivery of
this Agreement. Subject to appropriate confidentiality protections, each of
Parent and the Company shall have the right to review and approve in advance
drafts of all applications, notices, petitions, filings and other documents made
or prepared in connection with the items described in clauses (i) and (ii)
above, which approval shall not be unreasonably withheld or delayed, shall
cooperate with each other in connection with the making of all such filings,
shall furnish to the other party such necessary information and assistance as
such other party may reasonably request with respect to the foregoing and shall
provide the other party with copies of all filings made by such party with any
applicable Government Authority, and, upon request, any other information
supplied by such party to a Governmental Authority in connection with this
Agreement and the Transactions.
(b) Merger Sub, the Company, and Parent shall use their respective
reasonable best efforts to obtain any third party consents (i) necessary, proper
or advisable to consummate the Transactions, (ii) disclosed in the Company
Disclosure Schedule or (iii) required to prevent a Company Material Adverse
Effect from occurring prior to the Effective Time. In the event that the Company
shall fail to obtain any third party consent described above, the Company shall
use its reasonable best efforts, and shall take such actions as are reasonably
requested by Parent, to minimize any adverse effect upon the Company and Parent
and their respective businesses resulting, or which could reasonably be expected
to result, after the Effective Time, from the failure to obtain such consent.
(c) Notwithstanding anything to the contrary in this Agreement, except as
contemplated under Sections 2.06 and 6.08 or in connection with the satisfaction
of the conditions set forth in Section 7.02(f), in connection with obtaining any
approval or consent from any person (other than a Governmental Authority) with
respect to the Merger or any other Transaction, (i) without the prior written
consent of Parent which shall not be unreasonably withheld, none of the Company
or any of its Subsidiaries shall pay or commit to pay to such person whose
approval or consent is being solicited any cash or other consideration, make any
commitment or incur any liability or other obligation due to such person and
(ii) none of Parent, Merger Sub or their respective affiliates shall be required
to pay or commit to pay to such person whose approval or consent is being
solicited any cash or other consideration, make any commitment or to incur any
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liability or other obligation. In connection with obtaining any approval or
consent from any Governmental Authority with respect to the Merger or any other
Transaction, no divestiture of assets or undertaking relating to the conduct of
business shall be made by the Company, Parent or Merger Sub or their respective
affiliates unless acceptable to Parent.
(d) The Company shall use its reasonable best efforts to (i) exercise the
purchase options granted to the Company as tenant under that certain Lease dated
as of March 31, 1996 by and between N.J. Route 46, Limited Partnership and the
Company and that certain Lease dated as of September 22, 1988 by and between
N.J. Route 46, Limited Partnership and the Company, as successor in interest to
Prime Motor Inns, Inc., and acquire fee simple title to the property commonly
known as 700 Route 46 East, Fairfield, New Jersey prior to the Effective Time,
(ii) exercise the purchase option granted to the Company as tenant under that
certain Agreement of Lease dated as of September 22, 2000 by and between Brown
Trout Investments, Ltd. ("BROWN TROUT") and the Company and acquire in the name
of the Company, or if requested by Parent, in the name of a subsidiary of Merger
Sub, fee simple title to the property commonly known as 5895 Caravan Court,
Orlando, Florida, such acquisition to be consummated prior to, but to become
effective immediately after, the Effective Time, (iii) exercise the purchase
option granted to the Company as tenant under that certain Agreement of Lease
dated as of August 8, 2000 by and between Brown Trout and the Company and
acquire in the name of the Company, or if requested by Parent, in the name of a
subsidiary of Merger Sub, fee simple title to the property commonly known as
4730 Painters Mill Road, Owings Mills, Maryland, such acquisition to be
consummated prior to, but to become effective immediately after, the Effective
Time, and (iv) prior to the Effective Time, obtain a "payoff letter" from New
Jersey Economic Development Authority, as lender (the "FAIRFIELD LENDER") under
the Fairfield Mortgage acknowledging that (A) any loan agreements underlying the
Fairfield Mortgage shall be terminated and (B) any and all Liens held by the
Mortgage Lender related thereto shall be released in due course subsequent to
payment.
SECTION 6.10. OBLIGATIONS OF PARENT AND MERGER SUB. Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Transactions on the terms and subject to the
conditions set forth in this Agreement.
SECTION 6.11. PUBLIC ANNOUNCEMENTS. The initial press release relating to
this Agreement shall be a joint press release the text of which has been agreed
to by each of Parent and the Company. Thereafter, each of Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or any of the
Transactions, except to the extent public disclosure is required by applicable
Law or the requirements of the NYSE, in which case the issuing party shall use
its reasonable best efforts to consult with the other party before issuing any
such release or making any such public statement.
SECTION 6.12. TAXES. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding (i) any income or franchise Taxes imposed on or
assumed by the Surviving Company, and (ii) any sales, transfer, stamp, stock
transfer, value added, use, real property transfer or gains and any similar
Taxes, in each case which become payable in connection with the transactions
contemplated by this Agreement. Each of Parent and the Surviving Company agrees
to assume liability for and pay any such income or franchise Taxes and any such
sales, transfer, stamp, stock transfer, value added, use, real property transfer
or gains and any similar Taxes, as well as any transfer, recording, registration
and other fees that may be imposed upon, payable or incurred in connection with
this Agreement and the Transactions.
SECTION 6.13. RESIGNATIONS. The Company shall use its reasonable best
efforts to obtain and deliver to Parent at the Closing evidence reasonably
satisfactory to Parent of the resignation effective as of the Effective Time, of
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those directors of the Company or any Subsidiary designated by Parent to the
Company in writing at least 10 business days prior to the Closing.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver (where permissible) of the following conditions:
(a) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have been
adopted by the requisite affirmative vote of the stockholders of the
Company in accordance with the DGCL and the Company's Certificate of
Incorporation.
(b) NO ORDER. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment,
decree, executive order or award which is then in effect and has the
effect of making the Merger illegal or otherwise prohibiting consummation
of the Merger.
SECTION 7.02. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and
correct (without giving effect to any limitation as to materiality or
Company Material Adverse Effect set forth therein except for the
limitation set forth in the first sentence of Section 3.09) as of the
Effective Time, as though made on and as of the Effective Time (except to
the extent expressly made as of an earlier date, in which case as of such
earlier date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to materiality or Company Material Adverse Effect set forth
therein except for the limitation set forth in the first sentence of
Section 3.09) would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. In addition, the
representations and warranties set forth in Section 3.03 shall be true and
correct in all material respects as of the Effective Time, as though made
on and as of the Effective Time (except to the extent expressly made as of
an earlier date, in which case as of such earlier date).
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time.
(c) OFFICER'S CERTIFICATE. The Company shall have delivered to
Parent a certificate, dated the date of the Closing, signed by an officer
of the Company and certifying as to the satisfaction of the conditions
specified in Sections 7.02(a) and 7.02(b).
(d) NO MARKET MAC. No Market MAC (other than any Market MAC in
respect of which Parent has previously waived its right to invoke this
Section 7.02(d)) shall have occurred after the date of this Agreement. If
any of the events specified in clauses (i) through (iv) described in the
first sentence of Section 6.08(d) has occurred for less than three
consecutive business days (without giving effect to the three consecutive
business day period already referenced with respect to the applicable
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event in Section 6.08(d)), then Parent and Merger Sub shall not be
obligated to consummate the Merger for so long as such event is
continuing, and thereafter Parent and Merger Sub shall not be obligated to
consummate the Merger to the extent such event constitutes a Market MAC in
accordance with Section 6.08(d).
(e) DEBT OFFER. At or prior to the Effective Time, the requisite
consents specified in Section 2.06(a) of the Company Disclosure Schedule,
respectively, shall have been received under the Debt Offer and the
Company and the respective trustees shall have executed and delivered the
supplemental indenture described in Section 2.06(b) to the indenture
governing the Notes.
(f) CREDIT AGREEMENT. At or prior to the Effective Time, Canadian
Imperial Bank of Commerce, as administrative agent under the Credit
Agreement ("CIBC"), shall have provided the Company with a "payoff" letter
acknowledging that (i) the Credit Agreement shall be terminated, (ii) any
and all Liens held by CIBC related thereto shall be released and (iii) the
Company and the Subsidiaries shall be released from any and all
liabilities under the Credit Agreement and any related guaranties (other
than any obligations under any indemnification or similar provision that
survive such termination), in each case subject to repayment of the
aggregate principal amount outstanding under the Credit Agreement,
together with all interest accrued thereon and any other fees or expenses
payable thereunder in connection with such prepayment.
(g) TITLE AFFIDAVIT. The Company shall have delivered a title
insurance affidavit, dated the date of the Closing, signed by an officer
of the Company with respect to debts, Liens, parties in possession and
non-imputation in the form attached as EXHIBIT C.
SECTION 7.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub that are qualified by materiality
shall be true and correct in all respects, and the representations and
warranties of Parent and Merger Sub contained in this Agreement that are
not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Effective Time,
as though made on and as of the Effective Time, except to the extent
expressly made as of an earlier date, in which case as of such earlier
date.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
it on or prior to the Effective Time.
(c) OFFICER'S CERTIFICATE. Parent shall have delivered to the
Company a certificate, dated the date of the Closing, signed by an officer
of Parent, certifying as to the satisfaction of the conditions specified
in Sections 7.03(a) and 7.03(b).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time by action taken or authorized by the Board of Directors of the terminating
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party or parties, notwithstanding any requisite adoption of this Agreement and
the Transactions by the stockholders of the Company, and whether before or after
the stockholders of the Company have approved this Agreement at the Company
Stockholders' Meeting, as follows (the date of any such termination, the
"TERMINATION DATE"):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall not
have occurred on or before February 18, 2005; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
(c) by either Parent or the Company if any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling (whether temporary, preliminary or
permanent) or taken any other action (including the failure to have taken
an action) which has become final and non-appealable and has the effect of
making consummation of the Merger illegal or otherwise preventing or
prohibiting consummation of the Merger;
(d) by Parent, if neither Parent nor Merger Sub is in material
breach of its obligations under this Agreement, and if (i) any of the
representations and warranties of the Company herein become untrue or
inaccurate such that Section 7.02(a) would not be satisfied, or (ii) there
has been a breach on the part of the Company of any of its covenants or
agreements herein such that Section 7.02(b) would not be satisfied, and,
in either such case, such breach (if curable) has not been cured within 30
days after notice to the Company;
(e) by the Company if the Company is not in material breach of its
obligations under this Agreement, and if (i) any of the representations
and warranties of Parent or Merger Sub herein become untrue or inaccurate
such that Section 7.03(a) would not be satisfied, or (ii) there has been a
breach on the part of Parent or Merger Sub of any of its covenants or
agreements herein such that Section 7.03(b) would not be satisfied, and,
in either such case, such breach (if curable) has not been cured within 30
days after notice to Parent;
(f) by either Parent or the Company if this Agreement shall fail to
receive the Stockholder Approval at the Company Stockholders' Meeting;
(g) by Parent if the Company Board shall have (i) effected a Change
of Board Recommendation; or (ii) recommended or approved any Acquisition
Proposal;
(h) by the Company if, prior to the adoption of this Agreement by
the Company's stockholders at the Company Stockholders' Meeting, the
Company Board shall have effected a Change in Board Recommendation in
accordance with clause (x) of the second sentence of Section 6.04(c) of
this Agreement, but only (i) after providing written notice to Parent (a
"NOTICE OF SUPERIOR PROPOSAL") advising Parent that the Company Board has
received a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the person making such Superior
Proposal, and (ii) if Parent does not, within three (3) business days of
Parent's receipt of the Notice of Superior Proposal, make an offer that
the Company Board determines, in its good faith judgment (after
consultation with its advisors) to be at least as favorable to the
Company's stockholders as such Superior Proposal; PROVIDED that during
such three business day period, the Company shall negotiate in good faith
with Parent (to the extent Parent wishes to negotiate) to enable Parent to
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make such an offer; PROVIDED, HOWEVER, that any such purported termination
pursuant to this Section 8.01(h) shall be void and of no force or effect
unless the Company concurrently with such termination pays to Parent the
Company Termination Fee and the Termination Expenses in accordance with
Section 8.03; and PROVIDED FURTHER that Parent and Merger Sub acknowledge
and agree that concurrently with such termination the Company may enter
into a definitive agreement providing for implementation of such Superior
Proposal;
(i) by the Company if, after the conditions set forth in Section
7.01, Sections 7.02(a), (b) and (d) and (in the event Parent has fully and
timely complied with its obligations under Section 2.06) Section 7.02(e)
have been satisfied and within five business days after the Company has
delivered written notice to Parent of the satisfaction of such conditions,
the Merger shall not have been consummated; or
(j) by the Company if Parent fails to deliver a Parent Waiver Notice
prior to the expiration of the Requisite Response Period with respect to
any Market MAC.
SECTION 8.02. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, and there shall be no liability under this Agreement on the part of any
party hereto (except that the indemnification and reimbursement obligations of
Parent and Merger Sub contained in Sections 2.06(d), 6.03(a) and 6.08(b), the
Guarantee referred to in Section 4.09, and the provisions of Sections 6.03(b)
and 6.08(c), this Section 8.02, Section 8.03 and Article IX shall survive any
such termination); PROVIDED, HOWEVER, that nothing herein shall relieve the
Company from liability for any willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement prior to such
termination.
SECTION 8.03. FEES AND EXPENSES. (a) Except as otherwise set forth in this
Section 8.03, all Expenses incurred in connection with this Agreement and the
Transactions shall be paid by the party incurring such expenses, whether or not
the Merger or any other Transaction is consummated. "EXPENSES", as used in this
Agreement, shall include all reasonable out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, financing
sources, hedging counterparties, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Proxy Statement, the solicitation of stockholder approvals and all other
matters related to the closing of the Merger and the other Transactions.
(b) The Company agrees that if this Agreement shall be terminated:
(i) by Parent pursuant to Section 8.01(d), then (A) the Company
shall pay Parent the Termination Expenses and (B) if, concurrently with
such termination or within 12 months of the Termination Date, the Company
enters into, or submits to the stockholders of the Company for adoption,
an agreement with respect to an Acquisition Proposal, or an Acquisition
Proposal is consummated, then the Company shall also pay Parent the
Company Termination Fee;
(ii) by Parent or the Company pursuant to Section 8.01(f), then (A)
the Company shall pay Parent the Termination Expenses and (B) if,
concurrently with such termination or within 12 months of the Termination
Date, the Company enters into, or submits to the stockholders of the
Company for adoption, an agreement with respect to an Acquisition
Proposal, or an Acquisition Proposal is consummated, then the Company
shall also pay Parent the Company Termination Fee;
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(iii) by Parent pursuant to Section 8.01(g), then (so long as
neither Parent nor Merger Sub was in material breach of any of its
representations, warranties or covenants in this Agreement as of the
Termination Date) the Company shall pay Parent the Company Termination Fee
and the Termination Expenses; or
(iv) by the Company pursuant to Section 8.01(h), then the Company
shall pay Parent the Company Termination Fee and the Termination Expenses
(which Company Termination Fee and Termination Expenses shall be paid
concurrently with such termination).
(c) The Company Termination Fee shall be paid to Parent or its designee by
the Company in immediately available funds (i) concurrently with and as a
condition to the effectiveness of a termination of this Agreement by the Company
pursuant to Section 8.01(h) and (ii) within two business days after the date of
the event giving rise to the obligation to make such payment in all other
circumstances. The Termination Expenses shall be paid to Parent or its designee
by the Company in immediately available funds (i) concurrently with and as a
condition to the effectiveness of a termination of this Agreement by the Company
pursuant to Section 8.01(h) and (ii) otherwise, within two business days after
receipt by the Company of reasonable documentation with respect to such
Expenses. In no event shall the Company be required to pay under Section 8.03(b)
an amount in excess of $27,000,000.
(d) (i) For purposes of this Section 8.03, Acquisition Proposal shall have
the meaning assigned to such term in Section 6.04(f), except that references to
15% in clauses (1) and (2) of the definition thereof shall be deemed to be
references to 40% and clause (3) of the definition thereof shall be deemed
amended and replaced in its entirety by the following language "(3) any merger,
consolidation, business combination, recapitalization or other similar
transaction involving the Company pursuant to which stockholders of the Company
immediately prior to the consummation of such transaction would cease to own
directly or indirectly at least 60% of the voting power of the outstanding
securities of the Company (or of another person that directly or indirectly
would own all or substantially all the assets of the Company) immediately
following such transaction in the same proportion as they owned prior to the
consummation of such transaction".
(ii) For purposes of this Agreement, "COMPANY TERMINATION FEE" means
an amount equal to $23,000,000.
(iii) For purposes of this Agreement, "TERMINATION EXPENSES" means
an amount, not to exceed $4,000,000, equal to the reasonably documented Expenses
of Parent and Merger Sub.
(e) Parent agrees that, if the Company shall terminate this Agreement (i)
pursuant to Section 8.01(e), (ii) pursuant to Section 8.01(b) and, at the time
of such termination, the conditions set forth in Section 7.01, Sections 7.02(a),
(b) and (d) and (in the event Parent has fully and timely complied with its
obligations under Section 2.06) Section 7.02(e) have been satisfied, or (iii)
pursuant to Section 8.01(i), then Parent shall pay to the Company a fee of
$27,000,000 (the "PARENT TERMINATION FEE") in immediately available funds no
later than two business days after such termination by the Company.
(f) Each of the Company and Parent acknowledges that the agreements
contained in this Section 8.03 are an integral part of the transactions
contemplated by this Agreement. In the event that the Company shall fail to pay
the Company Termination Fee or any Termination Expenses when due or Parent shall
fail to pay the Parent Termination Fee when due, the Company or the Parent, as
the case may be, shall reimburse the other party for all reasonable costs and
expenses actually incurred or accrued by such other party (including reasonable
fees and expenses of counsel) in connection with the collection under and
enforcement of this Section 8.03. Notwithstanding anything to the contrary in
this Agreement, the Company's right to receive payment of the Parent Termination
Fee pursuant to this Section 8.03 shall be the exclusive remedy of the Company
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and the Subsidiaries for the loss suffered as a result of the failure of the
Merger and the other Transactions to be consummated, and upon payment of the
Parent Termination Fee in accordance with this Section 8.03, none of Parent,
Merger Sub or Guarantor shall have any further liability or obligation relating
to or arising out of this Agreement or the Transactions (except with respect to
the second sentence of this Section 8.03(f), indemnification and reimbursement
obligations of Parent and Merger Sub contained in Sections 2.06(d), 6.03(a) and
6.08(b) and the provisions of Section 6.03(b) and 6.08(c)).
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after the
adoption of this Agreement and the Transactions by the stockholders of the
Company, no amendment shall be made except as allowed under applicable Law. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any agreement of any other party
or any condition to its own obligations contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby. The failure of any party to assert any of
its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations and warranties in this Agreement and in any certificate
delivered pursuant hereto shall terminate at the Effective Time. This Section
9.01 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing in the English language and shall
be given (a) on the date of delivery if delivered personally, (b) on the first
business day following the date of dispatch if delivered by a nationally
recognized next-day courier service, (c) on the fifth business day following the
date of mailing if delivered by registered or certified mail (postage prepaid,
return receipt requested) or (d) if sent by facsimile transmission, when
transmitted and receipt is confirmed. All notices hereunder shall be delivered
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 9.02):
if to Parent or Merger Sub:
c/o Blackstone Real Estate Partners IV L.P.
345 Park Avenue
New York, New York 10154
Facsimile No: (212) 583-5573
Attention: Jonathan D. Gray
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with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Facsimile No: (212) 455-2502
Attention: Brian M. Stadler
if to the Company:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07004
Facsimile No: (973) 882-7689
Attention: Rich Szymanski
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Facsimile No: 212-451-2222
Attention: Steven Wolosky, Esq.
SECTION 9.03. CERTAIN DEFINITIONS. (a) For purposes of this Agreement:
"AFFILIATE" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified person.
"BENEFICIAL OWNER", with respect to any Shares, has the meaning ascribed
to such term under Rule 13d-3(a) of the Exchange Act.
"BUSINESS DAY" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in The City of New York.
"CONTROL" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
"knowledge of the Company" or "Company's knowledge" means the actual
knowledge (after reasonable inquiry) of any executive officer of the Company.
"PERSON" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.
"SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving Company,
Parent or any other person means an affiliate controlled by such person,
directly or indirectly, through one or more intermediaries, and, without
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limiting the foregoing, includes any entity in respect of which such person,
directly or indirectly, beneficially owns 50% or more of the voting securities
or equity.
(b) The following terms have the meaning set forth in the Sections set
forth below:
Defined Term Location of Definition
- ------------ ----------------------
Acquisition Proposal..................................... ss. 6.04(f)(i)
Alternative Merger....................................... ss. 1.07
Brown Trout.............................................. ss. 6.09(d)
Certificate of Merger.................................... ss. 1.03
Company Board............................................ Recitals
Company Board Recommendation............................. ss. 3.19(a)
Company Common Stock..................................... Recitals
Company Disclosure Schedule.............................. Article III
Company Material Adverse Effect.......................... ss. 3.01(a)
Company Permits.......................................... ss. 3.06
Company Preferred Stock.................................. ss. 3.03(a)
Company Stock Option..................................... ss. 2.04(a)
Company Stock Option Plans............................... ss. 2.04(a)
Company Stockholders' Meeting............................ ss. 6.02
Company Termination Fee.................................. ss. 8.03(d)(iii)
Company Waiver Request................................... ss. 6.08(d)
Confidentiality Agreement................................ ss. 6.03(b)
Contract................................................. ss. 3.05(a)
Credit Agreement......................................... ss. 3.03(c)
Debt Financing........................................... ss. 4.08
Debt Offer............................................... ss. 2.06(a)
DGCL..................................................... ss. 1.01
Dissenting Shares........................................ ss. 2.05(a)
Effective Time........................................... ss. 1.03
Election Notice.......................................... ss. 1.07
Employee................................................. ss. 6.06(a)
Environmental Laws....................................... ss. 3.16(b)(i)
Environmental Permits.................................... ss. 3.16(b)(ii)
Equity Funding Letter.................................... ss. 4.08
Equity Inns Documents.................................... ss. 3.13(i)
ERISA.................................................... ss. 3.11(a)
Exchange Act............................................. ss. 3.05(b)
Exchange Fund............................................ ss. 2.02(a)
Expenses................................................. ss. 8.03(a)
Fairfield Lender......................................... ss. 6.09(d)
Fairfield Mortgage....................................... ss. 3.03(c)
Financing................................................ ss. 4.08
Franchise Agreements..................................... ss. 3.13(h)
GAAP..................................................... ss. 3.07(b)
Governmental Authority................................... ss. 3.05(b)
Ground Leased Properties................................. ss. 3.13(a)
Ground Leases............................................ ss. 3.13(a)
Guarantee................................................ ss. 4.09
Guarantor................................................ ss. 4.09
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Hazardous Substances..................................... ss. 3.16(b)(iii)
HPT...................................................... ss. 3.13(i)
HPT Documents............................................ ss. 3.13(i)
HPT Management Agreement................................. ss. 3.13(i)
Indebtedness............................................. ss. 3.17(a)(iv)
Indemnified Parties...................................... ss. 6.05(b)
Initial Reserve Amount................................... ss. 3.13(i)
Intellectual Property.................................... ss. 3.14(b)
Investments.............................................. ss. 3.01(c)
IRS...................................................... ss. 3.11(a)
Law...................................................... ss. 3.05(a)
Leased Properties........................................ ss. 3.13(b)
Licensed Intellectual Property........................... ss. 3.14(a)
Liens ss. 3.13(a)
Loans.................................................... ss. 3.13(l)
Loan Documents........................................... ss. 3.13(l)
Management Agreements.................................... ss. 3.13(i)
Market MAC............................................... ss. 6.08(d)
Market MAC Notice........................................ ss. 6.08(d)
Material Contracts....................................... ss. 3.17(a)
Merger................................................... Recitals
Merger Consideration..................................... ss. 2.01(a)
Merger Sub............................................... Preamble
Mortgages................................................ ss. 3.03(c)
Multiemployer Plan....................................... ss. 3.11(b)
Multiple Employer Plan................................... ss. 3.11(b)
Notes.................................................... ss. 2.06(a)
Notice of Superior Proposal.............................. ss. 8.01(h)
NYSE..................................................... ss. 3.05(b)
Offer Documents.......................................... ss. 2.06(c)
Option Payment........................................... ss. 2.04(b)
Owned Intellectual Property.............................. ss. 3.14(a)
Owned Real Properties.................................... ss. 3.13(a)
Parent................................................... Preamble
Parent Termination Fee................................... ss. 8.03(e)
Parent Waiver Notice..................................... ss. 6.08(d)
Paying Agent............................................. ss. 2.02(a)
Permitted Liens.......................................... ss. 3.13(a)
Personal Property........................................ ss. 3.13(k)
Plans.................................................... ss. 3.11(a)
Properties............................................... ss. 3.13(b)
Proxy Statement.......................................... ss. 3.05(b)
Purchaser Welfare Benefit Plans.......................... ss. 6.06(d)
Representatives.......................................... ss. 6.03(a)
Requisite Response Period................................ ss. 6.08(d)
SEC...................................................... ss. 3.05(b)
Secondary Reserve Amount................................. ss. 3.13(i)
SEC Reports.............................................. ss. 3.07(a)
Section 262.............................................. ss. 2.05(a)
Securities Act........................................... ss. 3.07(a)
Shares................................................... ss. 2.01(a)
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Space Leases............................................. ss. 3.13(b)
Stockholder Approval..................................... ss. 3.19(b)
Subsidiary............................................... ss. 3.01(a)
Superior Proposal........................................ ss. 6.04(f)(ii)
Surviving Company........................................ ss. 1.01
Tax or Taxes............................................. ss. 3.15(k)(i)
Tax Returns.............................................. ss. 3.15(k)(ii)
Termination Expenses..................................... ss. 8.03(d)(iii)
Termination Date......................................... ss. 8.01
Third Party Flag Agreements.............................. ss. 3.13(g)
Title Policies........................................... ss. 3.13(e)
Transactions............................................. ss. 3.04
UFOCs.................................................... ss. 3.07(f)
(c) When a reference is made in this Agreement to Sections, Schedules or
Exhibits, such reference shall be to a Section, Schedule or Exhibit of this
Agreement, respectively, unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not any particular provision of
this Agreement. The term "or" is not exclusive. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms. References to a person are also to its permitted successors and
assigns. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.
SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Parent,
Merger Sub and the Company each acknowledges and agrees that, except for the
representations and warranties expressly set forth in this Agreement (a) no
party makes, and has not made, any representations or warranties relating to
itself or its businesses or otherwise in connection with the Transactions, (b)
no person has been authorized by any party to make any representation or
warranty relating itself or its businesses or otherwise in connection with the
Transactions and, if made, such representation or warranty must not be relied
upon as having been authorized by such party, and (c) any estimates,
projections, predictions, data, financial information, memoranda, presentations
or any other materials or information provided or addressed to any party or any
of its Representatives are not and shall not be deemed to be or to include
representations or warranties unless any such materials or information is the
subject of any representation or warranty set forth in this Agreement.
SECTION 9.06. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the
Confidentiality Agreement and the Guarantee constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof
and supersede all prior agreements and undertakings, both written and oral,
among the parties hereto, or any of them, with respect to the subject matter
hereof and thereof. This Agreement shall not be assigned (whether pursuant to a
merger, by operation of law or otherwise), except that Parent and Merger Sub may
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assign all or any of their rights and obligations hereunder to any direct or
indirect wholly owned subsidiary of Parent, PROVIDED, HOWEVER, that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
SECTION 9.07. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.05 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.08. REMEDIES; SPECIFIC PERFORMANCE. (a) Without limiting the
right to receive any payment it may be entitled to receive under Section 8.03(e)
(including under Sections 2.06(d), 6.03(a) and 6.08(b)), the Company agrees that
to the extent it has incurred losses or damages in connection with this
Agreement the maximum aggregate liability of Parent, Merger Sub and Guarantor
for such losses or damages shall be limited to $27,000,000, and in no event
shall the Company seek to recover any money damages in excess of such amount
from Parent, Merger Sub or Guarantor or their respective Representatives and
affiliates in connection therewith.
(b) The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement were not performed by the Company in
accordance with the terms hereof and that, prior to the termination of this
Agreement pursuant to Section 8.01, Parent and Merger Sub shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity. The parties acknowledge that the Company shall not be entitled to an
injunction or injunctions to prevent breaches of this Agreement by Parent or
Merger Sub or to enforce specifically the terms and provisions of this Agreement
and that the Company's sole and exclusive remedy with respect to any such breach
shall be the remedy set forth in Section 9.08(a) and 8.03(f); PROVIDED, HOWEVER,
the Company shall be entitled to seek specific performance to prevent any breach
by Parent or Merger Sub of Sections 6.03(b) and 6.08(c).
SECTION 9.09. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All Actions arising out
of or relating to this Agreement shall be heard and determined exclusively in
the Delaware Court of Chancery. The parties hereto hereby (a) submit to the
exclusive jurisdiction of the Delaware Court of Chancery for the purpose of any
Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named court, that its property is exempt or immune
from attachment or execution, that the Action is brought in an inconvenient
forum, that the venue of the Action is improper, or that this Agreement or the
Transactions may not be enforced in or by the above-named court.
SECTION 9.10. WAIVER OF JURY TRIAL. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable Law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Transactions. Each of
the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to enter
into this Agreement and the Transactions, as applicable, by, among other things,
the mutual waivers and certifications in this Section 9.10.
SECTION 9.11. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
47
A-51
SECTION 9.12. COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
48
A-52
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
PRIME HOSPITALITY CORP.
By: /s/ A.F. Petrocelli
-------------------------------------
Name: A.F. Petrocelli
Title: President and Chief
Executive Officer
BREP IV HOTELS HOLDING L.L.C.
By: /s/ Jonathan D. Gray
-------------------------------------
Name: Jonathan D. Gray
Title: Senior Managing Director and
Vice President
BREP IV HOTELS ACQUISITION L.L.C.
By: /s/ Jonathan D. Gray
-------------------------------------
Name: Jonathan D. Gray
Title: Senior Managing Director and
Vice President
A-53
ANNEX B
VOTING AGREEMENT
VOTING AGREEMENT, dated as of August 18, 2004 (this "AGREEMENT"),
among BREP IV Hotels Holding L.L.C., a Delaware limited liability company
("PARENT"), A.F. Petrocelli ("PETROCELLI") and United Capital Corp., a Delaware
corporation ("UCC," and together with Petrocelli, the "STOCKHOLDERS").
WHEREAS, concurrently herewith, Parent, BREP IV Hotels Acquisition
L.L.C., a Delaware limited liability company and a wholly owned subsidiary of
Parent ("MERGER SUB"), and Prime Hospitality Corp., a Delaware corporation (the
"COMPANY"), are entering into an Agreement and Plan of Merger (the "MERGER
AGREEMENT"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), pursuant to which (and subject to
the terms and conditions set forth therein) the Company will merge with and into
Merger Sub (the "MERGER") and each outstanding share of common stock, par value
$0.01 per share, of the Company (the "COMMON STOCK") will be converted into the
right to receive the Merger Consideration;
WHEREAS, Petrocelli beneficially owns 45,000 Shares, excluding the UCC
Shares (as hereinafter defined) and Shares issuable upon conversion of employee
stock options (the "PETROCELLI SHARES"), and UCC beneficially owns 3,539,697
Shares (the "UCC SHARES," and together with the Petrocelli Shares, the "OWNED
SHARES"), the Owned Shares, including any Shares acquired by either of the
Stockholders after the date hereof and prior to the termination hereof, whether
upon exercise of options, warrants, conversion of other convertible securities
or otherwise, are collectively referred to herein as the "COVERED SHARES";
WHEREAS, in order to induce Parent to enter into the Merger Agreement
and proceed with the Merger, Parent and the Stockholders are entering into this
Agreement; and
WHEREAS, each of the Stockholders acknowledges that Parent is entering
into the Merger Agreement in reliance on the representations, warranties,
covenants and other agreements of the Stockholders set forth in this Agreement
and would not enter into the Merger Agreement if the Stockholders did not enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent and each of the Stockholders hereby agree as follows:
1. AGREEMENT TO VOTE.
(a) Prior to any termination of this Agreement, subject to Section 7
hereof (in the case of Petrocelli), each of the Stockholders hereby agrees that
it shall, and shall cause any other holder of record of any Covered Shares to,
at any meeting of the stockholders of the Company (whether annual or special and
whether or not an adjourned or postponed meeting), however called, (i) when a
meeting is held, appear at such meeting or otherwise cause the Covered Shares to
be counted as present thereat for the purpose of establishing a quorum, (ii)
vote (or caused to be voted) in person or by proxy all Covered Shares in favor
of the Merger and any other matters necessary for consummation of the
Transactions and (iii) vote (or cause to be voted) all Covered Shares against
B-1
(A) any proposal for any recapitalization, reorganization, liquidation, merger,
sale of assets or other business combination between the Company and any other
person (other than the Merger) and (B) any other action that could reasonably be
expected to impede, interfere with, delay, postpone or adversely affect the
Merger or any of the Transactions, any transactions contemplated by this
Agreement or result in a breach in any material respect of any covenant,
representation or warranty or other obligation or agreement of the Company under
the Merger Agreement.
(b) EACH OF THE STOCKHOLDERS HEREBY GRANTS TO, AND APPOINTS, PARENT,
EACH SENIOR MANAGING DIRECTOR OF PARENT AND THE SECRETARY OF PARENT, IN THEIR
RESPECTIVE CAPACITIES AS OFFICERS OF PARENT, AND ANY OTHER DESIGNEE OF PARENT,
EACH OF THEM INDIVIDUALLY, SUCH STOCKHOLDER'S IRREVOCABLE (UNTIL THE TERMINATION
DATE) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE THE
COVERED SHARES AS INDICATED IN CLAUSE (a) OF THIS SECTION 1. EACH OF THE
STOCKHOLDERS INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION DATE)
AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH
OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND
HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY EACH STOCKHOLDER WITH RESPECT TO
THE COVERED SHARES.
(c) Except as set forth in clause (a) of this Section 1, the
Stockholders shall not be restricted from voting in favor of, against or
abstaining with respect to any matter presented to the stockholders of the
Company. In addition, nothing in this Agreement shall give Parent the right to
vote any Covered Shares in connection with the election of directors.
2. NO INCONSISTENT AGREEMENTS. Each of the Stockholders hereby
covenants and agrees that, except as contemplated by this Agreement, it (a) has
not entered into, and shall not enter at any time while this Agreement remains
in effect, any voting agreement or voting trust with respect to the Covered
Shares and (b) has not granted, and shall not grant at any time while this
Agreement remains in effect, a proxy or power of attorney with respect to the
Covered Shares, in either case, which is inconsistent with its obligations
pursuant to this Agreement.
3. TERMINATION. This Agreement shall terminate upon the earliest of
(a) the Effective Time, (b) the termination of the Merger Agreement in
accordance with its terms and (c) written notice of termination of this
Agreement by Parent to the Stockholders, such date shall be referred to herein
as the "TERMINATION DATE".
4. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby represents
and warrants to the Stockholders as follows:
(i) VALID EXISTENCE. Parent is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the requisite limited liability
company power and authority and all necessary governmental approvals to
2
B-2
own, lease and operate its properties and to carry on its business as it is
now being conducted.
(ii) AUTHORITY RELATIVE TO THIS AGREEMENT. Parent has all necessary
limited liability company power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby have been duly and validly authorized by
all necessary limited liability company action, and no other limited
liability company proceedings on the part of Parent are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly authorized, executed and
delivered by Parent and, assuming due authorization, execution and delivery
by each of the Stockholders, constitutes a legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its
terms.
(iii) NO CONFLICTS. Except for the applicable requirements of the
Exchange Act (A) no filing with, and no permit, authorization, consent or
approval of, any state, federal or foreign governmental authority is
necessary on the part of Parent for the execution and delivery of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby and (B) neither the execution and delivery of this
Agreement by Parent nor the consummation by Parent of the transactions
contemplated hereby nor compliance by Parent with any of the provisions
hereof shall (1) conflict with or violate the Certificate of Formation or
Limited Liability Company Agreement (or similar organizational document) of
Parent, (2) result in any breach or violation of, or constitute a default
(or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
property or asset of Parent pursuant to, any Contract to which Parent is a
party or by which Parent or any property or asset of Parent is bound or
affected or (3) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent or any of its properties or assets,
except in the case of (2) or (3) for violations, breaches or defaults that
would not in the aggregate materially impair the ability of Parent to
perform its obligations hereunder.
(b) REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The
Stockholders hereby severally (and not jointly) represent and warrant to Parent
as follows:
(i) OWNERSHIP OF SECURITIES. The Stockholders are the only beneficial
owners and record holders of the Covered Shares, free and clear of Liens
and the Stockholders have sole voting power and sole power of disposition
with respect to all Covered Shares, with no restrictions, subject to
applicable federal securities laws on their rights of disposition
pertaining thereto (other than as created by this Agreement). As of the
date hereof, Petrocelli does not own beneficially or of record any equity
securities of the Company other than the Petrocelli Shares, the UCC Shares
and 4,825,000 Shares issuable upon the exercise of stock options, including
3,075,000 Shares issuable upon the exercise of currently exercisable stock
options (collectively, the "Options") and UCC does not own beneficially or
of record any equity securities of the Company other than the UCC Shares.
Neither Stockholder has appointed or granted any proxy which is still in
effect with respect to the Covered Shares.
3
B-3
(ii) EXISTENCE, POWER; BINDING AGREEMENT. UCC is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
Petrocelli has full power and authority to execute and deliver this
Agreement, to perform his obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of the Stockholders and, assuming due
authorization, execution and delivery by Parent, constitutes a legal, valid
and binding obligation of each of the Stockholders, enforceable against
each of Stockholders in accordance with its terms. If Petrocelli is
married, and any of the Covered Shares constitute community property or
otherwise need spousal or other approval for this Agreement to be legal,
valid and binding, this Agreement has been duly authorized, executed and
delivered by, and constitutes the legal, valid and binding obligation of,
Petrocelli's spouse, enforceable in accordance with its terms.
(iii) NO CONFLICTS. Except for the applicable requirements of the
Exchange Act (A) no filing with, and no permit, authorization, consent or
approval of, any state, federal or foreign governmental authority is
necessary on the part of either of the Stockholders for the execution and
delivery of this Agreement by either of the Stockholders and the
consummation by either of the Stockholders of the transactions contemplated
hereby and (B) the execution and delivery of this Agreement by the
Stockholders or the consummation by the Stockholders of the transactions
contemplated hereby or compliance by the Stockholders with any of the
provisions hereof shall not (1) in case of UCC, violate any provision of
its certificate of incorporation, bylaws or similar organizational
documents, (2) result in any breach or violation of, or constitute a
default (or an event which, with notice or lapse of time or both, would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a
Lien on any property or asset of either of the Stockholders pursuant to any
Contract to which either of the Stockholders is a party or by which either
of the Stockholders or any property or asset of either of the Stockholders
is bound or affected or (3) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to either of the Stockholders or any
of its properties or assets, except in the case of (2) or (3) for
violations, breaches or defaults that would not in the aggregate materially
impair the ability of either of the Stockholders to perform its obligations
hereunder.
(iv) ACCREDITED INVESTOR. Each of the Stockholders is an "accredited
investor" (as defined under the Securities Act) and a sophisticated
investor, is capable of evaluating the merits and risks of its investments
and has the capacity to protect its own interests.
5. CERTAIN COVENANTS OF THE STOCKHOLDERS. Except in accordance with
the terms of this Agreement, each of the Stockholders hereby severally (and not
jointly) covenants and agrees as follows:
4
B-4
(a) NO SOLICITATION. Prior to any termination of this Agreement,
subject to Section 7 hereof (with respect to Petrocelli), each of the
Stockholders agrees that neither it nor any of its Representatives shall,
directly or indirectly, solicit (including by way of furnishing information) any
inquiries or the making of any proposal by any person or entity (other than
Parent or any affiliate of Parent) which constitutes, or could reasonably be
expected to lead to, an Acquisition Proposal. If either of the Stockholders
receives a bona fide inquiry or proposal with respect to the sale of Shares,
then such Stockholder shall promptly inform Parent of the terms and conditions,
if any, of such inquiry or proposal and the identity of the person making it.
Each of the Stockholders will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
prior to the date of this Agreement with respect to any of the foregoing.
(b) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Except as
set forth in Section 8 hereof (in the case of Petrocelli), each of the
Stockholders hereby agrees, while this Agreement is in effect, and except as
contemplated hereby, not to (i) sell, transfer, pledge, encumber, assign or
otherwise dispose of, or enter into any Contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, any of the Covered Shares or Options, (ii)
grant any proxies or powers of attorney, deposit any Covered Shares into a
voting trust or enter into a voting agreement with respect to any Covered Shares
or (iii) knowingly take any action that would make any representation or
warranty of either of the Stockholders contained herein untrue or incorrect or
have the effect of preventing or disabling either of the Stockholders from
performing its obligations under this Agreement.
(c) Each of the Stockholders agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any new Shares acquired by
such Stockholder, if any, after the date hereof (including, upon exercise of
Options).
6. FURTHER ASSURANCES. From time to time, at the other party's request
and without further consideration, each party hereto shall take such reasonable
further action as may reasonably be necessary or desirable to consummate and
make effective the transactions contemplated by this Agreement.
7. FIDUCIARY DUTIES. Notwithstanding anything in this Agreement to the
contrary: (a) Petrocelli makes no agreement or understanding herein in any
capacity other than in Petrocelli's capacity as a record holder and beneficial
owner of Covered Shares, (b) nothing herein shall be construed to limit or
affect any action or inaction by Petrocelli acting in his capacity as a director
of the Company and in compliance with Section 6.04 of the Merger Agreement and
(c) Petrocelli shall have no liability to Parent or any of its affiliates under
this Agreement or otherwise as a result of any action or inaction by Petrocelli
in his capacity as a director of the Company and in compliance with Section 6.04
of the Merger Agreement.
8. PERMITTED TRANSFERS. Notwithstanding anything in this Agreement to
the contrary, Petrocelli may transfer any or all of the Petrocelli Shares, in
accordance with provisions of applicable Law, to Petrocelli's spouse, ancestors,
descendants or any trust (controlled by Petrocelli) for any of their benefit or
to a charitable trust (controlled by Petrocelli); PROVIDED, HOWEVER, that, prior
to and as a condition to the effectiveness of such transfer, each person to
5
B-5
which any of such Petrocelli Shares or any interest in any of such Petrocelli
Shares is or may be transferred shall have executed and delivered to Parent a
counterpart of this Agreement pursuant to which such person shall be bound by
all of the terms and provisions of this Agreement, and shall have agreed in
writing with Parent to hold such Petrocelli Shares or interest in such
Petrocelli Shares subject to all of the terms and provisions of this Agreement.
9. NO CONTROL. Nothing contained in this Agreement shall give Parent
the right to control or direct the Company or the Company's operations.
10. AMENDMENT. This Agreement may be amended by the parties hereto;
PROVIDED, HOWEVER, that after the adoption of this Agreement and the
Transactions by the stockholders of the Company no amendment shall be made
except as allowed under applicable Law. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto.
11. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the Stockholders and Parent contained herein
shall not survive the closing of the transactions contemplated hereby and by the
Merger Agreement.
12. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing in the English language and shall
be deemed duly given (a) on the date of delivery if delivered personally, (b) on
the first business day following the date of dispatch if delivered by a
nationally recognized next-day courier service, (c) on the fifth business day
following the date of mailing if delivered by registered or certified mail
(postage prepaid, return receipt requested) or (d) if sent by facsimile
transmission, when transmitted and receipt is confirmed. All notices hereunder
shall be delivered to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 12):
if to Parent:
c/o Blackstone Real Estate Partners IV L.P.
345 Park Avenue
New York, NY 10154
Facsimile No.: (212) 583-5573
Attention: Jonathan D. Gray
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 455-2502
Attention: Brian M. Stadler
6
B-6
if to Petrocelli:
c/o United Capital Corp.
9 Park Place
Great Neck, New York 11021
Facsimile No.: (516) 829-4301
Attention: A.F. Petrocelli
if to UCC:
United Capital Corp.
9 Park Place
Great Neck, New York 11021
Facsimile No: (516) 829-4301
Attention: Anthony J. Miceli
13. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.
14. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, both written and
oral, among the parties hereto with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise, except that Parent may
assign all or any of its rights and obligations hereunder to any direct or
indirect wholly owned subsidiary of Parent; PROVIDED, HOWEVER, that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
15. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties hereto shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
16. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed in that State. All Actions arising out of or
relating to this Agreement shall be heard and determined exclusively in the
Delaware Court of Chancery. The parties hereto hereby (a) submit to the
exclusive jurisdiction of the Delaware Court of Chancery for the purpose of any
Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named court, that its property is exempt or
7
B-7
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the transactions contemplated hereby may not be enforced in or by
the above-named court. This Agreement does not involve less than $100,000, and
the parties intend that 6 Del.C. ss.2708 shall apply to this Agreement.
17. HEADINGS. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
18. COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterpart, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
B-8
IN WITNESS WHEREOF, Parent and each Stockholder have caused to be
executed or executed this Agreement as of the date first written above.
BREP IV Hotels Holding L.L.C.
/s/ Jonathan D. Gray
-----------------------------------------
Name: Jonathan D. Gray
Title: Senior Managing Director
and Vice President
A.F. Petrocelli
/s/ A.F. Petrocelli
-----------------------------------------
A.F. Petrocelli
UNITED CAPITAL CORP.
/s/ Anthony J. Miceli
-----------------------------------------
Name: Anthony J. Miceli
Title: Vice President
B-9
ANNEX C
BEAR Bear, Steams & Co. Inc.
STEARNS 383 Madison Avenue
New York, New York 10179
Tel 212-272-2000
www.bearstearns.com
August 18, 2004
The Board of
Directors Prime
Hospitality Corp. 700
Route 46 East
Fairfield, NJ 07004
Ladies and Gentlemen:
We understand that Prime Hospitality Corp. ("Prime"), BREP N Hotels Holding
L.L.C. ("Parent") and BREP N Hotels Acquisition L.L.C. ("Merger Sub"), a wholly
owned subsidiary of Parent, have entered into an Agreement and Plan of Merger
dated as of August 18, 2004 (the "Agreement"), pursuant to which Prime will be
merged with and into Merger Sub (the "Transaction"). Pursuant to the Agreement,
all of the issued and outstanding shares of the common stock, par value $0.01
per share (the "Common Stock"), of Prime will be converted, subject to certain
exceptions, into the right to receive $12.25 per share in cash (the
"Consideration to be Received"). The terms and conditions of the Transaction are
more fully set out in the Agreement.
You have asked us to render our opinion as to whether the Consideration to be
Received is fair, from a financial point of view, to the public shareholders of
Prime.
In the course of performing our review and analyses for rendering this opinion,
we have;
o reviewed a draft of the Agreement dated August 17, 2004;
o reviewed Prime's publicly available Annual Reports to Shareholders and
Annual Reports on Form 10-K for the years ended December 31, 2001 through
2003, its publicly available Quarterly Reports on Form 10-Q for the
periods ended March 31 and June 30, 2004, and its publicly available
Reports on Form 8-K for the three years ended the date hereof;
o reviewed certain operating and financial information relating to Prime's
business and prospects, including a budget dated August 12, 2004 for the
year ended December 31, 2004 (the "Budget"), all as prepared and provided
to us by Prime's management;
o met with certain members of Prime's senior management to discuss Prime's
business, operations, historical financial results and future prospects;
o reviewed the reported historical prices, trading multiples and trading
volumes of the Common Stock;
o reviewed publicly available financial data, stock market performance data
and trading multiples of companies which we deemed generally comparable to
Prime;
o reviewed the terms of recent transactions (to the extent publicly
available) involving companies which we deemed generally comparable to
Prime and the Transaction;
o conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate.
C-1
We have relied upon and assumed, without independent verification, the accuracy
and completeness of the financial and other information reviewed by us for the
purposes of this opinion, including, without limitation, the financial and other
information provided to us by Prime. With respect to Prime's Budget, we have
relied on representations that it has been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the senior
management of Prime as to the expected future performance of Prime. We have not
assumed any responsibility for the independent verification of any such
information or of the Budget provided to us, and we have further relied upon the
assurances of the senior management of Prime that they are unaware of any facts
that would make the information and Budget provided to us incomplete or
misleading.
In arriving at our opinion, we have not performed or obtained any independent
appraisal of the assets or liabilities (contingent or otherwise) of Prime, nor
have we been furnished with any such appraisals. We have assumed that the final
executed Agreement will not materially differ from the draft Agreement reviewed
by us. In addition, we have assumed that the Transaction will be consummated in
a timely manner and in accordance with the terms of the Agreement without any
limitations, restrictions, conditions, amendments or modifications, regulatory
or otherwise, that collectively would have a material effect on Prime.
We have acted as a financial advisor to Prime in connection with the Transaction
and will receive a customary fee for such services, a substantial portion of
which is contingent on successful consummation of the Transaction. Bear Stearns
has been previously engaged (and may in the future be engaged) by Prime to
provide certain investment banking and financial advisory services for which we
received (and may in the future receive) customary fees. In the ordinary course
of business, Bear Steams and its affiliates may actively trade the equity and
debt securities and/or bank debt of Prime and affiliates of Parent for our own
account and for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities or bank debt. Bear Steams
and/or its affiliates own limited partnership interests in certain investment
funds affiliated with Parent, including Blackstone Communications Partners I,
LP, Blackstone Mezzanine Fund, LP, Blackstone Capital Partners IV, LP and
Blackstone Real Estate Partners IV, LP, (collectively, "Blackstone") in each
case representing, in the aggregate, less than 2% of such interests. In
addition, Bear Stearns and/or its affiliates have provided investment banking
services to Parent and its affiliates, including Blackstone Real Estate Partners
IV LP. Such services have included various advisory services, including
Blackstone's acquisition of Extended Stay America, Inc. and Homestead Village
Incorporated and various equity, debt and mortgage related financings, including
financing for Extended Stay America, Inc. and Homestead Village Incorporated, in
each case for which we have received customary fees.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of Prime and it is not intended to confer rights or remedies
upon any other entity or person. It is also understood that this letter does not
constitute a recommendation to the Board of Directors of Prime or any holders of
Common Stock as to how to vote in connection with the Transaction. This opinion
does not address Prime's underlying business decision to pursue the Transaction,
the relative merits of the Transaction as compared to any alternative business
strategies that might exist for Prime or the effects of any other transaction in
which Prime might engage. This letter is not to be used for any other purpose,
or be reproduced, disseminated, quoted from or referred to at any time, in whole
or in part, without our prior written consent; provided, however, that this
letter may be included in its entirety in any proxy statement to be distributed
to the holders of Common Stock in connection with the Transaction. Our opinion
is subject to the assumptions and conditions contained herein and is necessarily
based on economic, market and other conditions, and the information made
available to us, as of the date hereof. Subsequent developments may affect this
opinion and we assume no responsibility for updating or revising our opinion
based on circumstances or events occurring after the date hereof.
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Based on and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be Received is fair, from a financial point of
view, to the public shareholders of Prime.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ Charles Edelman
--------------------------------------
Senior Managing Director
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ANNEX D
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE
SS. 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares
of stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in favor
of the merger or consolidation nor consented thereto in writing pursuant to ss.
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to ss. 251 (other than a merger effected pursuant to ss.
251(g) of this title), ss. 252, ss. 254, ss. 257, ss.258, ss. 263 or ss. 264 of
this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to ss.ss. 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
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d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss. 253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to ss. 228
or ss. 253 of this title, then either a constituent corporation before the
effective date of the merger or consolidation, or the surviving or resulting
corporation within 10 days thereafter, shall notify each of the holders of any
class or series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
D-2
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
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interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
D-4
PRIME HOSPITALITY CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
for the Special Meeting of Stockholders on _________, 2004, at 10 a.m.
P The undersigned hereby appoints A.F. Petrocelli or Richard Szymanski,
R or either of them, each with full power of substitution, to act as
O proxies for the undersigned, and to vote all shares of Common Stock of
X Prime Hospitality Corp. (the "Company") that the undersigned would be
Y entitled to vote if personally present at the Special Meeting of
Stockholders of the Company to be held on __________, 2004, at 10
a.m., Eastern Standard Time, at _______________________, ________, and
at any and all postponements or adjournments thereof as follows:
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL
TO ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED AS OF AUGUST 18,
2004, BY AND AMONG THE COMPANY, BREP IV HOTELS HOLDING L.L.C. AND BREP
IV HOTELS ACQUISITION L.L.C. IF ANY OTHER BUSINESS IS PROPERLY
PRESENTED AT THE SPECIAL MEETING, INCLUDING A MOTION TO ADJOURN OR
POSTPONE THE SPECIAL MEETING FOR THE PURPOSE OF SOLICITING ADDITIONAL
PROXIES, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY AT
THEIR DISCRETION. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF
NO OTHER BUSINESS TO BE PRESENTED AT THE SPECIAL MEETING.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE, AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)
SEE REVERSE SIDE
================================================================================
TO VOTE BY MAIL, PLEASE DETACH HERE
================================================================================
X VOTES MUST BE THE BOARD RECOMMENDS A VOTE "FOR" ITEM 1.
INDICATED (X) IN
BLACK OR BLUE INK
THE BOARD OF DIRECTORS I PLAN TO ATTEND THE SPECIAL MEETING. |_|
RECOMMENDS A VOTE FOR THE
PROPOSAL TO ADOPT THE
AGREEMENT AND PLAN OF MERGER, TO CHANGE YOUR ADDRESS, PLEASE MARK
DATED AS OF AUGUST 18, 2004, THIS BOX. |_|
BY AND AMONG THE COMPANY, BREP
IV HOTELS HOLDING L.L.C. AND
BREP IV HOTELS ACQUISITION
L.L.C.
1. To adopt the Agreement and Plan FOR AGAINST ABSTAIN WHERE NO VOTING
of Merger, dated as of August 18, |_| |_| |_| INSTRUCTIONS ARE
2004, by and among the Company, GIVEN, THE SHARES
BREP IV Hotels Holding L.L.C. and REPRESENTED BY THIS
BREP IV Hotels Acquisition L.L.C. PROXY WILL BE VOTED
FOR ITEM 1.
2. If any other matter is
properly presented at the
Special Meeting, this proxy
when properly executed will
be voted by those named in
this proxy in their
discretion.
Each signatory to this Date: 2004
proxy acknowledges receipt -----------
from the Company prior to
execution of this proxy of
a Notice of Special Meeting
of Stockholders and a proxy
statement dated September
___, 2004.
======================
Share Owner sign here
======================
Co-owner sign here
IMPORTANT: Please sign exactly as
your name or names appear on this
proxy. Where shares are held
jointly, both holders must sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
holder is a corporation, execute in
full corporate name by authorized
officer, giving full title. If
holder is a partnership, please
sign in full partnership name by
authorized person, giving full
title.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
================================================================================
TO VOTE BY MAIL, PLEASE DETACH HERE
================================================================================
