AGREEMENT AND PLAN OF MERGER
dated as of June 11, 1999
HUMPHREY HOSPITALITY TRUST, INC.
and
SUPERTEL HOSPITALITY, INC.
TABLE OF CONTENTS
ARTICLE 1 THE MERGER........................................................14
1.1 The Merger......................................................14
1.2 The Closing.....................................................14
1.3 Effective Time..................................................14
ARTICLE 2 CHARTER, BYLAWS AND SHARES OF THE SURVIVING ENTITY................15
2.1 Articles of Incorporation.......................................15
2.2 Bylaws..........................................................15
2.3 Outstanding Shares..............................................15
ARTICLE 3 DIRECTORS AND OFFICERS............................................15
3.1 Directors.......................................................15
3.2 Officers........................................................15
ARTICLE 4 STH STOCK.........................................................16
4.1 Conversion of the STH Stock.....................................16
4.2 Exchange of Certificates Representing STH Common Stock..........17
4.3 Withholding Rights..............................................19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF STH.............................19
5.1 Existence; Good Standing; Authority; Compliance with Law........20
5.2 Authorization, Validity and Effect of Agreements................21
5.3 Capitalization..................................................21
5.4 Subsidiaries....................................................22
5.5 Other Interests.................................................22
5.6 No Violation....................................................22
5.7 Securities Filings..............................................23
5.8 Litigation......................................................24
5.9 Absence of Certain Changes......................................24
5.10 Taxes..........................................................24
5.11 Earnings and Profits...........................................25
5.12 Books and Records..............................................26
5.13 Employee Benefit Plans.........................................26
5.14 Labor Matters..................................................27
5.15 No Brokers.....................................................27
5.16 Opinion of Financial Advisor...................................27
5.17 HHTI Share Ownership...........................................27
5.18 Related Party Transactions.....................................28
5.19 Contracts and Commitments......................................28
5.20 Development Rights.............................................29
5.21 Certain Payments Resulting From Transactions...................29
5.22 Convertible Securities.........................................30
5.23 Compliance with Applicable Laws................................30
5.24 Insurance......................................................30
5.25 Subsidiaries of STH............................................31
5.26 Acquisitions by STH and its Subsidiaries.......................31
5.27 State Takeover Statutes........................................31
5.28 Investment Company Act of 1940.................................31
5.29 Leases.........................................................31
5.30 Year 2000 Compliance...........................................31
ARTICLE 6 ADDITIONAL REPRESENTATIONS AND WARRANTIES AND COVENANTS RELATING
TO STH HOTELS AND REAL PROPERTY...................................32
6.1 Representations and Warranties..................................32
6.2 STH Deliverables................................................35
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF HHTI............................36
7.1 Existence; Good Standing; Authority; Compliance with Law........36
7.2 Authorization, Validity and Effect of Agreements................37
7.3 Capitalization..................................................37
7.4 Subsidiaries....................................................38
7.5 Other Interests.................................................38
7.6 No Violation....................................................38
7.7 Securities Filings..............................................39
7.8 Litigation......................................................40
7.9 Absence of Certain Changes......................................40
7.10 Taxes..........................................................40
7.11 Books and Records..............................................42
7.12 Employee Benefit Plans.........................................42
7.13 Labor Matters..................................................43
7.14 No Brokers.....................................................43
7.15 Opinion of Financial Advisor...................................43
7.16 STH Share Ownership............................................44
7.17 HHTI Common Stock..............................................44
7.18 Related Party Transactions.....................................44
7.19 Contracts and Commitments......................................44
7.20 Development Rights.............................................45
7.21 Certain Payments Resulting From Transactions...................46
7.22 Convertible Securities.........................................46
7.23 Compliance with Applicable Laws................................46
7.24 Insurance......................................................47
7.25 Subsidiaries of HHTI...........................................47
7.26 Acquisitions by HHTI and its Subsidiaries......................47
7.27 State Takeover Statutes........................................47
7.28 Investment Company Act of 1940.................................47
7.29 Leases.........................................................48
7.30 Year 2000 Compliance...........................................48
7.31 Representations and Warranties Regarding HHTI Properties.......48
7.32 HHTI Deliverables..............................................51
7.33 HHTI Leases....................................................52
ARTICLE 8 COVENANTS.........................................................52
8.1 Acquisition Proposals...........................................52
8.2 Earnings and Profits Dividend...................................53
8.3 Conduct of Businesses...........................................53
8.4 Damage to Property..............................................60
8.5 Meetings of Shareholders........................................60
8.6 Filings; Other Action...........................................60
8.7 Inspection of Records...........................................61
8.8 Publicity.......................................................61
8.9 Registration Statement..........................................61
8.10 Listing Application............................................62
8.11 Further Action.................................................62
8.12 Expenses.......................................................63
8.13 Governance.....................................................63
8.14 Reorganization.................................................64
8.15 REIT Qualification.............................................64
8.16 Transfer and Gains Taxes.......................................64
8.17 Third Party Consents...........................................64
8.18 Efforts to Fulfill Conditions..................................64
8.19 Representations, Warranties and Conditions Prior to Closing....65
8.20 Cooperation of the Parties.....................................65
8.21 Tax Election...................................................65
8.22 Directors and Officers Insurance...............................65
8.23 STH Subsidiary Officers........................................66
8.24 Leases.........................................................66
ARTICLE 9 CONDITIONS........................................................66
9.1 Conditions to Each Party's Obligations to Effect the Merger.....66
9.2 Conditions to Obligations of STH to Effect the Merger...........67
9.3 Conditions to Obligation of HHTI to Effect the Merger...........68
ARTICLE 10 TERMINATION......................................................69
10.1 Termination by Mutual Consent..................................69
10.2 Termination by Either HHTI or STH..............................69
10.3 Termination by STH.............................................70
10.4 Termination by HHTI............................................70
10.5 Effect of Termination and Abandonment..........................71
10.6 Extension; Waiver..............................................73
ARTICLE 11 GENERAL PROVISIONS...............................................74
11.1 Survival of Representations, Warranties and Agreements.........74
11.2 Notices........................................................74
11.3 Assignment; Binding Effect; Benefit............................75
11.4 Entire Agreement...............................................75
11.5 Confidentiality................................................76
11.6 Amendment......................................................78
11.7 Governing Law..................................................78
11.8 Choice of Venue................................................78
11.9 Counterparts...................................................78
11.10 Headings......................................................79
11.11 Interpretation................................................79
11.12 Waivers.......................................................79
11.13 Incorporation.................................................79
11.14 Severability..................................................79
11.15 Enforcement of Agreement......................................79
EXHIBITS
Exhibit A Adjustments to Earnings and Profits Amount
Exhibit B HHTI Hotels
Exhibit C [Reserved]
Exhibit D Form of HHTI Shareholders' Agreement
Exhibit E Form of Hotel Leases
Exhibit F Form of Non-Compete Agreement
Exhibit G Office Building
Exhibit H Humphrey Agreement
Exhibit I STH Hotels
Exhibit J Adjustments to the STH Indebtedness
Exhibit K Form of Sale Agreement
Exhibit L Form of Shareholders' Agreement
Exhibit M Form of Restated Articles of Incorporation
Exhibit N Form of Restated Bylaws
Exhibit O Title Affidavits
SCHEDULES
Schedule 5.1((a)) STH Foreign Qualifications
Schedule 5.1((b)) STH Subsidiary Foreign Qualifications
Schedule 5.1((c)) STH Permits
Schedule 5.3 STH Derivative Securities and Obligations to
Acquire Capital Stock
Schedule 5.4 Ownership of STH Subsidiaries
Schedule 5.6 No Violations
Schedule 5.7 STH Securities Filings
Schedule 5.7(a) STH Material Liabilities
Schedule 5.8 STH Litigation
Schedule 5.9 STH Material Changes
Schedule 5.10 STH Tax Matters
Schedule 5.13((a)) STH Benefit Plans
Schedule 5.13((b)) Amendments to STH Benefit Plans
Schedule 5.13((c)) Claims Involving STH Benefit Plans
Schedule 5.13((d)) Benefits to Former STH Employees
Schedule 5.14 STH Labor Agreements
Schedule 5.15 STH Fees or Commissions
Schedule 5.18 STH Related Party Transactions
Schedule 5.19 STH Contracts
Schedule 5.20 STH Development Rights
Schedule 5.21 STH Payments Resulting from Transactions
Schedule 5.22 STH Convertible Securities
Schedule 5.23 STH Violations of Applicable Laws
Schedule 5.24 STH Insurance Policies
Schedule 5.29 STH Leases (STH as Lessee)
Schedule 6.1((a)) STH Title to Hotels
Schedule 6.1((d)) STH Operating Agreements
Schedule 6.1((e)) STH Tenant Leases
Schedule 6.1(f) STH Condemnation Proceedings
Schedule 6.1((h)) STH Administrative Actions
Schedule 6.1((i)) STH Zoning Actions
Schedule 6.1(j) STH Parties in Possession
Schedule 6.1(k) STH Other Contracts
Schedule 6.1((p)) STH Real Estate Tax Matters
Schedule 6.1((r)) STH Environmental Matters
Schedule 6.1(s) Noncompliance with STH Franchise Agreements
Schedule 7.1((a)) HHTI Foreign Qualifications
Schedule 7.1((b)) HHTI Subsidiary Foreign Qualifications
Schedule 7.1((c)) HHTI Permits
Schedule 7.3 HHTI Derivative Securities and Obligations
to Acquire Capital Stock
Schedule 7.4 Ownership of HHTI Subsidiaries
Schedule 7.6 No Violations
Schedule 7.7 HHTI Securities Filings
Schedule 7.7(a) HHTI Material Liabilities
Schedule 7.8 HHTI Litigation
Schedule 7.9 HHTI Material Changes
Schedule 7.10 HHTI Tax Matters
Schedule 7.12((a)) HHTI Benefit Plans
Schedule 7.12((b)) Amendments to HHTI Benefit Plans
Schedule 7.12((c)) Claims Involving HHTI Benefit Plans
Schedule 7.12((d)) Benefits to Former HHTI Employees
Schedule 7.13 HHTI Labor Agreements
Schedule 7.14 HHTI Fees or Commissions
Schedule 7.18 HHTI Related Party Transactions
Schedule 7.19 HHTI Contracts
Schedule 7.20 HHTI Development Rights
Schedule 7.21 HHTI Payments Resulting from Transactions
Schedule 7.22 HHTI Convertible Securities
Schedule 7.23 HHTI Violations of Applicable Laws
Schedule 7.24 HHTI Insurance Policies
Schedule 7.29 HHTI Leases (HHTI as Lessee)
Schedule 7.31(a) HHTI Title to Hotels
Schedule 7.31(d) HHTI Operating Agreements
Schedule 7.31(e) HHTI Tenant Leases
Schedule 7.31(f) HHTI Condemnation Proceedings
Schedule 7.31(h) HHTI Administrative Actions
Schedule 7.31(i) HHTI Zoning Actions
Schedule 7.31(j) HHTI Parties in Possession
Schedule 7.31(k) HHTI Other Contracts
Schedule 7.31(l) HHTI Maintenance and Defects
Schedule 7.31(n) HHTI Real Estate Tax Matters
Schedule 7.31(o) HHTI Environmental Matters
Schedule 7.31(p) Noncompliance with HHTI Franchise Agreements
Schedule 7.33 Description of HHTI Leases and Hotel Leases
Schedule 8.3((b))((iv))(A) STH Options Exercisable Prior to
Effective Time
Schedule 8.3((b))((iv))(B) STH Permitted Option Grants
Schedule 9.2((b)) Opinion of HHTI Counsel
Schedule 9.3((b)) Opinion of STH Counsel
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June 11,
1999, is entered into by and between Humphrey Hospitality Trust, Inc., a
Virginia corporation ("HHTI") and Supertel Hospitality, Inc., a Delaware
corporation ("STH").
RECITALS
A. The Boards of Directors of HHTI and STH each have determined that a
business combination between HHTI and STH is in the best interests of their
respective shareholders and presents an opportunity for their respective
companies to achieve long-term strategic and financial benefits, and accordingly
have approved this Agreement and declared its advisability and have agreed to
effect a merger subject to the terms and conditions set forth herein.
B. For federal income tax purposes, STH and HHTI intend that the merger
provided for herein shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and for
financial accounting purposes shall be accounted for as a "purchase."
C. As an inducement to enter into this Agreement and to effectuate the
Merger and other transactions contemplated hereby, HHTI, STH and certain
affiliates of HHTI and STH have agreed to enter into certain Ancillary
Agreements.
D. HHTI and STH desire to make certain representations, warranties and
agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, HHTI and STH hereby agree as follows:
DEFINITIONS
The following capitalized terms shall have the meanings set forth herein:
"Acquisition Proposal" shall mean any proposal or offer (including, without
limitation, any proposal or offer to the target company's shareholders) with
respect to a merger, acquisition, tender offer, exchange offer, consolidation or
similar transaction involving 20% or more of the assets or equity securities (or
any debt securities convertible into equity securities) of HHTI, STH or any of
their respective subsidiaries, other than the transactions contemplated by this
Agreement.
"Agreement" shall mean this Agreement and Plan of Merger, together with the
Exhibits and Schedules attached hereto, as amended from time to time in
accordance with the terms hereof.
"Ancillary Agreements" shall mean all documents, agreements and instruments
required to be executed pursuant to the terms of this Agreement to which STH,
any STH Subsidiary, HHTI, any HHTI Subsidiary or any affiliate of STH or HHTI is
a party, including but not limited to, the Sale Agreement, the Choice Assignment
Agreement, the Cendant Assignment Agreement, the Shareholders' Agreement, the
Humphrey Agreement, the Non-Compete Agreement, the Hotel Leases and the HHTI
Shareholders' Agreement.
"Applicable Law" shall mean any federal, state, county or municipal law,
statute, ordinance, rule, regulation, order, determination or other law
(including common law) of any Governmental Authority or any board of fire
underwriters (or other body exercising similar functions), or any restrictive
covenant or deed restriction or zoning ordinance or classification affecting any
of the Hotels, Land, Personal Property, Improvements, Office Building or the
business of STH, the STH Subsidiaries, HHTI or the HHTI Subsidiaries including,
without limitation, all applicable codes, flood disaster laws, Environmental
Laws, rules and regulations.
"Cendant Assignment Agreement" shall mean the Supertel Omnibus Assignment
and Assumption Agreement by and among STH, HHMI and Cendant.
"Certificate" or "Certificates" shall mean a certificate or certificates
which immediately prior to the Effective Time represented shares of STH Common
Stock.
"Choice Assignment Agreement" shall mean the Choice Assignment and
Assumption Agreement between Choice Hotels International, Inc., HHMI and STH.
"Closing" shall mean the closing conference described in Section 1.2.
"Closing Date" shall be the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended. References
to particular sections or provisions of the Code shall include any successor
sections or provisions.
"Commitment" shall mean any contract, agreement, arrangement, understanding
or obligation, written or oral, explicit or implicit, obligating a party to take
or refrain from taking any action or to pay any sum of money.
"Confidential Material" shall have the meaning set forth in Section
11.5((a)).
"D&O Insurance" shall have the meaning set forth in Section 8.22.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"E&P Record Date" shall have the meaning set forth in Section 8.2.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Earnings and Profits Amount" shall mean the aggregate amount of STH's
current and accumulated earnings and profits, as of the end of the calendar
month preceding the month in which the Closing Date occurs, calculated on a
federal income tax basis consistent with the earnings and profits calculations
given to HHTI by STH prior to the execution of this Agreement, subject to
certain adjustments thereto, as described on Exhibit A hereto, and shall be set
forth in a certificate of the Chief Financial Officer of STH, certifying as to
the Earnings and Profits Amount and the method of its calculation.
"Earnings and Profits Dividend" shall mean a dividend equal to the Earnings
and Profits Amount, made from STH to the holders of STH Common Stock pursuant to
Section 8.2 of this Agreement.
"Effective Date" shall mean the date on which the Effective Time occurs.
"Effective Time" shall have the meaning set forth in Section 1.3.
"Environmental Condition" shall mean any condition of the environment,
including the ocean, natural resources (including flora and fauna), soil,
surface water, wetland, any actual or potential drinking or water supply,
subsurface strata, or air, including ambient air, relating to or arising out of
the use, handling, storage, treatment, recycling, generation, transportation,
release, spilling, leaking, pumping, pouring, emptying, discharging, injecting,
escaping, leaching, disposal, dumping or threatened release of Hazardous
Materials from, at, in, on, or onto any of the parcels of Land.
"Environmental Laws" shall mean any judgment, decree, statute, law
(including common law), ordinance, rule, regulation or order of any Governmental
Authority relating to human health or safety, natural resources or protection of
the environment.
"Environmental Noncompliance" shall mean, but is not limited to: (i) the
Release of any Hazardous Material into the environment, any storm drain, sewer,
septic system or publicly owned treatment works, in violation of any effluent or
emission limitations standards or other criteria or guidelines established by
any Environmental Law; (ii) any noncompliance of physical structure, equipment,
process or premises with the requirements of building or fire codes, zoning or
land use regulations or ordinances, conditional use permits and the like; (iii)
any noncompliance with federal, state or local requirements governing
occupational safety and health; (iv) any operations, procedures, designs and the
like at or on any of the parcels of Land that do not conform to the statutory or
regulatory requirements of any Environmental Law (including land use regulations
and ordinances); (v) the failure to have obtained permits, licenses, variances
or other governmental authorizations necessary for the legal use and/or
operation of any equipment, process or any activity at any parcel of Land; and
(vi) the operation and/or use of any process or equipment in violation of any
permit condition, schedule of compliance, administrative or court order or the
like, as any of the foregoing may be applicable to any parcel of Land.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall mean the HHTI Transfer Agent or such other exchange
agent selected by HHTI and reasonably satisfactory to STH.
"Exchange Fund" shall have the meaning set forth in Section 4.2((a)).
"Exchange Ratio" shall have the meaning set forth in Section 4.1((a)).
"Exchange Shares" shall mean the shares of HHTI Common Stock issuable in
exchange for shares of STH Common Stock pursuant to Section 4.1 hereof.
"Expenses" shall mean all documented out-of-pocket costs and expenses of a
party in connection with this Agreement and the transactions contemplated
hereby.
"FF&E" shall mean as to each parcel of Land, all fixtures, furniture,
furnishings, equipment, machinery, apparatus, appliances and other articles of
depreciable personal property now owned or leased by the owner of such Land and
located on such Land and used or usable in connection with the business or
Improvements located thereon, subject to such depletion and replacements as
shall occur and may be made in the normal course of business, excluding property
owned by lessees, guests, employees or other persons furnishing goods and
services to the business or Improvements located thereon.
"Financial Statement Date" shall mean the date of the most recent financial
statements included in the HHTI Reports or the STH Reports, as applicable.
"Franchise Agreements" shall mean the HHTI Franchise Agreements or the STH
Franchise Agreements, as applicable.
"GAAP" shall mean generally accepted accounting principles as in effect in
the United States of America at the time of the preparation of the subject
financial statement, consistently applied.
"Governmental Authority" shall mean any local, federal, state, county,
municipal or other governmental legislative body, department, commission, board,
bureau, agency or instrumentality, or any court, in each case whether of the
United States, any of its possessions or territories, or of any foreign nation.
"HHMI" shall mean Humphrey Hospitality Management, Inc., a Maryland
corporation and its subsidiaries.
"HHTI" shall mean Humphrey Hospitality Trust, Inc., a Virginia corporation.
"HHTI Benefit Plan" shall mean any "employee benefit plan" as defined by
Section 3(3) of ERISA, or other benefit arrangement, including, without
limitation, stock option, severance pay, vacation, bonus, fringe benefit or
deferred compensation arrangement, covering any employee of HHTI or any HHTI
Subsidiary.
"HHTI Closing Price" shall mean the closing sale price per share of HHTI
Common Stock on The Nasdaq Stock Market for the third trading day immediately
preceding the Closing Date.
"HHTI Common Stock" shall mean HHTI's common stock, par value $0.01 per
share.
"HHTI Counsel" shall mean Hunton & Williams of Richmond, Virginia.
"HHTI Directors" shall have the meaning set forth in Section 8.13(a).
"HHTI Employee Arrangements" shall have the meaning set forth in Section
7.21.
"HHTI Franchise Agreements" shall mean all franchise agreements to which
HHTI and/or any HHTI Subsidiary is a party or by which any HHTI Hotel is bound.
"HHTI Hotel" shall refer to each of those [26] hotels owned by HHTI and the
HHTI Subsidiaries, more particularly described on Exhibit B, including the HHTI
Land, HHTI Improvements and HHTI Personal Property located on, at or used in
connection with each parcel of HHTI Land.
"HHTI Improvements" shall mean all buildings, structures and other
improvements, including such fixtures as shall constitute real property, located
on each parcel of HHTI Land including, but not limited to, the hotel buildings
containing guest rooms, meeting rooms, dining and beverage facilities, office
space, parking lots, swimming pools, sheds and other hotel amenities (but
specifically excluding FF&E).
"HHTI Indebtedness" shall mean the aggregate liabilities of HHTI as of the
end of the calendar month preceding the month in which the Closing Date occurs,
as accrued or as required to be accrued on the balance sheet of HHTI as of such
date prepared in accordance with GAAP.
"HHTI Insurance Policies" shall mean all insurance policies, including
key-man policies, which are currently owned by HHTI or any HHTI Subsidiary
and/or which name HHTI or any HHTI Subsidiary as a beneficiary.
"HHTI Intangible Personal Property" shall mean all intangible personal
property owned by HHTI or any HHTI Subsidiary and used in connection with the
ownership of the HHTI Land and HHTI Hotels, including, without limitation, the
HHTI Permits, general intangibles, business records relating to the HHTI Land,
HHTI Personal Property and HHTI Hotels, plans and specifications, surveys and
title insurance policies pertaining to the HHTI Land and HHTI Improvements, all
licenses, permits and approvals with respect to the construction, ownership,
operation, leasing, occupancy or maintenance of the HHTI Land and HHTI Hotels,
and any unpaid award for taking by condemnation or any damage to the HHTI Land
by reason of a change of grade or location of or access to any street or
highway.
"HHTI Inventory" shall mean all "inventories" located on the HHTI Land and
HHTI Improvements including all inventories of merchandise and inventories of
supplies, including, without limitation, consumable supplies and any property of
the type described in Section 1221(1) of the Code, but excluding property of
tenants.
"HHTI Land" shall mean those certain [26] parcels of land owned or leased
and used by HHTI and the HHTI Subsidiaries in connection with the HHTI Hotels,
together with all easements, rights, privileges, remainders, reversions and
appurtenances thereunto belonging or in any way appertaining, and all of the
estate, right, title, interest, claim or demand whatsoever of HHTI and the HHTI
Subsidiaries therein, in the streets and ways adjacent thereto and in the beds
thereof, either at law or in equity, in possession or expectancy, now or
hereafter acquired.
"HHTI Lease" means all of HHTI's or any HHTI Subsidiary's interest in
material leases, subleases and rental agreements (written, verbal, now or
hereafter in effect) that grant a possessory interest in and to space situated
on any parcel of HHTI Land or in the HHTI Improvements thereon or that otherwise
grant rights with regard to use of all or any portion of such HHTI Land or HHTI
Improvements, and all prepaid rentals (to the extent applicable to a period
beyond the Closing Date) and security deposits under the HHTI Leases.
"HHTI Operating Agreement" shall mean any contract of employment,
management, maintenance, service, supply or rental, and other contracts
outstanding relating to the operations of the HHTI Hotels, but excluding the
HHTI Franchise Agreements and the HHTI Leases.
"HHTI Permits" shall mean all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation or use of the HHTI Land and HHTI Hotels or any part thereof
as presently being conducted by HHTI and the HHTI Subsidiaries.
"HHTI Personal Property" shall mean the HHTI Inventory, HHTI Tangible
Personal Property and the HHTI Intangible Personal Property, but shall not
include any cash.
"HHTI Preferred Stock" shall mean HHTI's preferred stock, par value $.01
per share.
"HHTI Reports" shall mean all reports, schedules, forms, statements and
other documents HHTI has filed with the SEC or any state securities commission
pursuant to the Securities Laws since August 23, 1994.
"HHTI Shareholders' Agreement" shall mean the Shareholders' Agreement dated
as of the date hereof between STH, Jeffrey Zwerdling, George R. Whittemore,
Andrew A. Mayer, Leah T. Robinson, certain other members of the Zwerdling,
Whittemore, Mayer and Robinson families, and trust and partnerships established
for the benefit members of the Zwerdling, Whittemore, Mayer and Robinson
families, which agreement shall include a voting agreement, in the form attached
as Exhibit D.
"HHTI Subsidiary" shall mean any corporation, partnership, joint venture,
business trust or other entity, of which HHTI directly or indirectly owns or
controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization.
"HHTI Tangible Personal Property" shall mean the items of tangible personal
property owned by HHTI and the HHTI Subsidiaries consisting of all FF&E situated
on, attached to, or used in the operation of the HHTI Hotels, and all other
personal property of every kind located on or used in the operation of the HHTI
Hotels, but excluding property of tenants.
"HHTI Transfer Agent" shall mean First Union National Bank or such
successor transfer agent selected by HHTI.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Hazardous Materials" shall mean any substance, product, matter, material,
waste, solid, liquid, gas or pollutant, the use, generation, storage, disposal,
handling, recycling, release (or threatened release), treatment, discharge or
emission of which is regulated, prohibited or limited under any Environmental
Law, and shall also include, without limitation, (i) gasoline, diesel fuel, fuel
oil, motor oil, waste oil and any other petroleum hydrocarbons, including any
additives or other by-products associated therewith, (ii) asbestos and
asbestos-containing materials in any form, (iii) polychlorinated biphenyls, (iv)
any substance the presence of which on any parcel of Land or any of the
Improvements (A) requires reporting or remediation under any Environmental Law;
(B) causes or threatens to cause a nuisance at any Hotel or poses or threatens
to pose a hazard to the health or safety of persons at any Hotel; or (C) which,
if it emanated or migrated from any Hotel, could constitute a trespass, nuisance
or health or safety hazard to persons on adjacent property; (v) radon, (vi) urea
formaldehyde foam insulation, and (vii) underground storage tanks, whether
empty, filled or partially filled with any substance.
"Hotel" shall refer to an HHTI Hotel or an STH Hotel, as applicable.
"Hotel Leases" shall mean the leases dated as of the Closing Date between
the Surviving Entity or its applicable affiliate, as lessor, and HHMI or its
applicable affiliate, as lessee, each relating to one of the STH Hotels,
providing for the rental structure described in Exhibit E and otherwise in the
form attached as Exhibit E.
"Humphrey Agreement" shall mean the Agreement of even date herewith among
HHTI, STH, Humphrey Hospitality Limited Partnership, L.P., James I. Humphrey,
Jr., and certain affiliates of Mr. Humphrey, which agreement shall include
restrictions on transfer and a voting agreement, in the form attached as Exhibit
H.
"IRS" shall mean the Internal Revenue Service.
"Improvements" shall mean refer to HHTI Improvements or STH Improvements,
as applicable.
"Indebtedness" shall refer to the HHTI Indebtedness or the STH
Indebtedness, as applicable.
"Land" refers to the HHTI Land or the STH Land, as applicable.
"Liquidated Damages Amount" shall mean $1,200,000.
"Material Adverse Effect" shall mean, with (a) with respect to STH, a
material adverse effect on the business, results of operations, condition
(financial or otherwise) of STH, the STH Subsidiaries or the property of STH and
the STH Subsidiaries, taken as a whole, or the ability of STH to perform the
transactions contemplated by this Agreement, (b) with respect to HHTI, a
material adverse effect on the business, results of operations, condition
(financial or otherwise) of HHTI, the HHTI Subsidiaries or the property of HHTI
and the HHTI Subsidiaries, taken as a whole, or the ability of HHTI to perform
the transactions contemplated by this Agreement, or (c) with respect to HHTI or
STH, a material adverse effect on the business, results of operations, condition
(financial or otherwise) of the Surviving Entity, its properties or
subsidiaries, taken as a whole.
"Merger" shall have the meaning set forth in Section 1.1.
"Non-Compete Agreement" shall mean a Non-Compete Agreement dated as of the
Closing Date among Paul J. Schulte, Steve Borgmann and HHTI, in the form
attached as Exhibit F.
"Notice 88-19 Election" shall mean an election pursuant to IRS Notice 88-19
to be subject to rules similar to the rules of Section 1374 of the Code.
"Office Building" shall mean that parcel of land owned and used by STH and
the STH Subsidiaries and described on Exhibit G hereto, together with all
easements, rights, privileges, remainders, reversions and appurtenances
thereunto belonging or in any way appertaining, and all of the estate, right,
title, interest, claim or demand whatsoever of STH and the STH Subsidiaries
therein, in the streets and ways adjacent thereto and in the beds thereof,
either at law or in equity, in possession or expectancy, now or hereafter
acquired together with all buildings, structures and other improvements,
including such fixtures as shall constitute real property, located thereon but
not limited to the actual office building, parking lots, sheds and other
amenities.
"Permits" refers to the HHTI Permits or STH Permits, as applicable.
"Permitted Title Exceptions" shall mean, with respect to a parcel of Land,
those exceptions to the title to the Land or Improvements thereon that: (a)
constitute a mortgage, deed of trust, lien, encumbrance or security interest
that after the Closing would secure any of the Indebtedness, or (b) constitute a
restriction, covenant, agreement or title defect disclosed (i) in
the land records applicable to the Land or Improvements as of the date
hereof, or (ii) in the Schedules and documents made available by STH to HHTI,
and by HHTI to STH, as the case may be prior to the date hereof.
"Personal Property" shall refer to the HHTI Personal Property or the STH
Personal Property, as applicable.
"Providing Party" shall have the meaning set forth in Section 11.5((a)).
"Providing Party Representatives" shall have the meaning set forth in
Section 11.5((a)).
"Proxy Statement" shall mean the preliminary proxy statement for each of
STH and HHTI, to be filed with the SEC by HHTI and STH as soon as practicable
after the date of this Agreement.
"Qualified REIT Subsidiary" shall have the meaning set forth in Section
856(i) of the Code.
"Qualifying Income" shall have the meaning set forth in
Section 10.5((a))(i).
"REIT" shall mean real estate investment trust, as defined by Section 856
of the Code and applicable Treasury Regulations.
"Receiving Party" shall have the meaning set forth in Section 11.5((a)).
"Receiving Party Representatives" shall have the meaning set forth in
Section 11.5((a)).
"Registration Statement" shall mean a registration statement on Form S-4
prepared and filed with the SEC by HHTI in connection with the Merger, in which
the Proxy Statement will be included as a prospectus.
"Regulatory Filings" shall mean (i) any filings required under Section 14
of the Exchange Act, the Securities Act, the HSR Act or applicable state
securities and "Blue Sky" laws or (ii) the filing of a certificate of merger
with the Secretary of State of the State of Delaware or articles of merger with
the VSCC.
"Release" means releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, ejecting, escaping, leaching, disposing, seeping,
infiltrating, draining or dumping of any Hazardous Material. The term shall be
interpreted to include both the present and the past tense, as appropriate.
"Rule 145" shall mean Rule 145 of the rules promulgated under the
Securities Act.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"STH" shall mean Supertel Hospitality, Inc., a Delaware corporation.
"STH Benefit Plan" shall mean any "employee benefit plan" as defined by
Section 3(3) of ERISA, or other benefit arrangement, including, without
limitation, stock option, severance pay, vacation, bonus, fringe benefit or
deferred compensation arrangement, covering any employee of STH or any STH
Subsidiary.
"STH Common Stock" shall mean STH's common stock, par value $0.01 per
share.
"STH Counsel" shall mean McGrath, North, Mullin & Kratz, P.C. of Omaha,
Nebraska.
"STH Directors" shall have the meaning set forth in Section 8.13(a).
"STH Employee Arrangements" shall have the meaning set forth in Section
5.21.
"STH Franchise Agreements" shall mean all franchise agreements to which STH
and/or any STH Subsidiary is a party or by which any STH Hotel is bound.
"STH Hotel" shall refer to each of those 63 hotels owned by STH and the STH
Subsidiaries, more particularly described on Exhibit I, including the STH Land,
STH Improvements and STH Personal Property located on, at or used in connection
with each parcel of STH Land.
"STH Improvements" shall mean all buildings, structures and other
improvements, including such fixtures as shall constitute real property, located
on each parcel of STH Land including, but not limited to, the hotel buildings
containing guest rooms, meeting rooms, dining and beverage facilities, office
space, parking lots, swimming pools, sheds and other hotel amenities (but
specifically excluding FF&E), and the Office Building.
"STH Indebtedness" shall mean the aggregate liabilities of STH as of the
end of the calendar month preceding the month in which the Closing Date occurs,
as accrued or as required to be accrued on the balance sheet of STH as of such
date prepared in accordance with GAAP, subject, however, to those adjustments
set forth on Exhibit J hereto.
"STH Insurance Policies" shall mean all insurance policies, including
key-man policies, which are currently owned by STH or any STH Subsidiary and/or
which name STH or any STH Subsidiary as a beneficiary.
"STH Intangible Personal Property" shall mean all intangible personal
property owned by STH or any STH Subsidiary, and used in connection with the
ownership of the STH Land, STH Hotels and the Office Building, including,
without limitation, the STH Permits, general intangibles, business records
relating to the STH Land, STH Personal Property, STH Hotels and the Office
Building, plans and specifications, surveys and title insurance policies
pertaining to the STH Land and STH Improvements, all licenses, permits and
approvals
with respect to the construction, ownership, operation, leasing, occupancy
or maintenance of the Office Building, STH Land and STH Hotels, and any unpaid
award for taking by condemnation or any damage to the STH Land by reason of a
change of grade or location of or access to any street or highway.
"STH Inventory" shall mean all "inventories" located on the STH Land and
STH Improvements including all inventories of merchandise and inventories of
supplies, including, without limitation, consumable supplies and any property of
the type described in Section 1221(1) of the Code, but excluding property of
tenants.
"STH Land" shall mean those certain [__] parcels of land owned and used by
STH and the STH Subsidiaries in connection with the STH Hotels, together with
all easements, rights, privileges, remainders, reversions and appurtenances
thereunto belonging or in any way appertaining, and all of the estate, right,
title, interest, claim or demand whatsoever of STH and the STH Subsidiaries
therein, in the streets and ways adjacent thereto and in the beds thereof,
either at law or in equity, in possession or expectancy, now or hereafter
acquired, as well as the Office Building.
"STH Lease" means all of STH's or any STH Subsidiary's interest in material
leases, subleases and rental agreements (written, verbal, now or hereafter in
effect) that grant a possessory interest in and to space situated on any parcel
of STH Land or in the STH Improvements thereon or that otherwise grant rights
with regard to use of all or any portion of such STH Land or STH Improvements,
and all prepaid rentals (to the extent applicable to a period beyond the Closing
Date) and security deposits under the STH Leases.
"STH Operating Agreement" shall mean any contract of employment,
management, maintenance, service, supply or rental, and other contracts
outstanding relating to the operations of the STH Hotels, but excluding the STH
Franchise Agreements and the STH Leases.
"STH Option" shall mean any option to purchase shares of STH Common Stock
granted under the STH Stock Option Plans or otherwise (collectively, "STH
Options").
"STH Permits" shall mean all licenses, permits and approvals required by
any governmental or quasi-governmental agency, body or officer for the
ownership, operation or use of the STH Land, STH Hotels and the Office Building
or any part thereof as presently being conducted by STH and the STH
Subsidiaries.
"STH Personal Property" shall mean the STH Inventory, STH Tangible Personal
Property and the STH Intangible Personal Property, but shall not include any
cash.
"STH Preferred Stock" shall mean STH's Class A Preferred Stock, par value
$1.00 per share.
"STH Reports" mean all reports, schedules, forms, statements and other
documents STH has filed with the SEC or any state securities commission pursuant
to the Securities Laws since March 1, 1994.
"STH Stock Option Plans" shall mean, collectively, STH's 1994 Stock Option
Plan and 1997 Stock Option Plan.
"STH Subsidiary" shall mean any corporation, partnership, joint venture,
business trust or other entity, of which STH directly or indirectly owns or
controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization.
"STH Tangible Personal Property" shall mean the items of tangible personal
property owned by STH and the STH Subsidiaries consisting of all FF&E situated
on, attached to, or used in the operation of the STH Hotels and the Office
Building, and all other personal property of every kind located on or used in
the operation of the STH Hotels and the Office Building, but excluding property
of tenants.
"Sale Agreement" shall mean the Agreement of Sale dated as of the date of
this Agreement between STH, Simplex, Inc., HHTI and HHMI, in the form attached
hereto as Exhibit K.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Laws" shall mean the Securities Act, the Exchange Act, any
state securities or "Blue Sky" laws, and the rules and regulations promulgated
thereunder.
"Shareholders' Agreement" shall mean the Shareholders' Agreement dated as
of the date hereof between HHTI, Paul J. Schulte, Steve Borgmann, certain other
members of the Schulte and Borgmann families, and trusts and partnerships
established for the benefit of members of the Schulte and Borgmann families,
which agreement shall include a voting agreement, a 180-day restriction on
certain sales of shares of HHTI Common Stock and the grant of certain piggyback
registration rights, in the form attached as Exhibit L.
"Superior Proposal" means a bona fide, written and unsolicited Acquisition
Proposal containing terms which the Board of Directors of the party receiving
such proposal or offer determines in good faith (with the advice of independent
financial advisors and outside legal counsel), would, if consummated, be more
favorable than the transactions contemplated hereby.
"Survey" shall mean the survey of a parcel of Land and the Improvements
located thereon.
"Surviving Entity" shall have the meaning set forth in Section 1.1.
"Takeover Statute" shall mean any "fair price," " business combination,"
"moratorium," "control share acquisition," or any other anti-takeover statute or
similar statute or regulation enacted under state or federal law.
"Title Commitments" shall mean commitments by the Title Company to provide
new ALTA Form 1970B owner's policies of title insurance issued to the owner of a
parcel of Land, pursuant to which policy the Title Company will insure ownership
in fee simple title to the Land and Improvements thereon (including the
marketability thereof) subject only to Permitted Title Exceptions. The Title
Commitments shall commit the Title Company to provide such endorsements as are
reasonably acceptable to HHTI, including, without limitation, zoning and
non-imputation endorsements.
"Title Company" shall mean Chicago Title Insurance Company, or another
title company acceptable to HHTI.
"Title Policies" shall mean ALTA Form 1970B owner's policies of title
insurance issued to the owner of a parcel of Land by the Title Company, pursuant
to which the Title Company insures ownership of fee simple title to the Land and
Improvements thereon (including the marketability thereof) subject only to
Permitted Title Exceptions. The Title Policies shall contain such endorsements
as are reasonably acceptable to HHTI, including, without limitation, zoning and
non-imputation endorsements.
"Title Update" shall mean, as to any Title Policy, the written confirmation
of the Title Company that issued such Title Policy of all matters of a public
record affecting all or any portion of the property covered by such Title Policy
that have been filed in the public record since the effective date of the
coverage of such Title Policy.
"Treasury Regulations" shall mean the current, temporary and proposed
income tax regulations under the Code, as amended from time to time.
"VSCA" shall mean the Virginia Stock Corporation Act, as amended.
"VSCC" shall mean the Virginia State Corporation Commission.
"Year 2000 Compliant" or "Year 2000 Compliance" shall mean that the
computer systems and other automated equipment used by an entity in connection
with the conduct of its business, including, without limitation, all hardware,
software and operating systems, (i) are able to accurately recognize, represent,
process, manage and manipulate date and date-sensitive data (including, but not
limited to, calculating, comparing, sorting, tagging and sequencing), in both
input and output, whether the date field uses 2 or 4 digits or any other date
coding schema, including "leap year" calculations and will not cause an abnormal
ending scenario within the application domain or generate incorrect values
involving such dates, (ii) with respect to system time for all hardware,
software and operating systems, automatically function into and beyond the year
2000 C.E. without intervention and that all applications and components will
correctly interpret system time into and beyond the year 2000 C.E., and (iii)
are able to accurately
recognize, represent, process and manage any date fields currently assigned
special values (e.g., 99/99/99 or 00/00/00), if any.
"Year 2000 Problem" shall mean the risk that computer applications may be
unable to recognize and properly perform date-sensitive functions involving
certain dates prior to and any date on or after December 31, 1999.
ARTICLE 1
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, and in accordance
with the DGCL and the VSCA, at the Effective Time STH shall be merged with and
into HHTI (the "Merger"). Upon the consummation of the Merger, the separate
existence of STH shall cease and HHTI shall be the surviving entity in the
Merger (the "Surviving Entity"). The Merger shall have the effects specified in
Section 252 of the DGCL and Section 13.1-721 of the VSCA.
1.2 The Closing.
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") shall take place at the offices of Hunton & Williams,
located at Riverfront Plaza, 951 East Byrd Street, Richmond, Virginia, 23219, at
9:00 a.m., local time, on the second business day after satisfaction or waiver
of the conditions set forth in Article 9, or at such other time, date or place
as HHTI and STH may agree.
1.3 Effective Time.
If all the conditions to the Merger set forth in Article 9 shall have been
fulfilled or waived (and this Agreement shall not have been terminated as
provided in Article 10), HHTI and STH shall cause a certificate of merger
satisfying the requirements of the DGCL and articles of merger satisfying the
requirements of the VSCA to be properly executed, verified and delivered for
filing in accordance with the DGCL and the VSCA and shall make all other filings
or recordings required under the DGCL and the VSCA. The Merger shall become
effective upon the later of (i) the filing of the articles of merger with the
VSCC and the issuance of a certificate of merger by the VSCC, all in accordance
with the VSCA and (ii) the filing of the certificate of merger with the
Secretary of State of the State of Delaware in accordance with the DGCL, or at
such later time which HHTI and STH shall have agreed upon and designated in such
filings in accordance with applicable law (the "Effective Time").
ARTICLE 2
CHARTER, BYLAWS AND SHARES OF THE SURVIVING ENTITY
2.1 Articles of Incorporation.
The Restated Articles of Incorporation of HHTI attached hereto as Exhibit M
shall be the Restated Articles of Incorporation of the Surviving Entity, until
duly amended in accordance with applicable law.
2.2 Bylaws.
The Restated Bylaws of HHTI attached hereto as Exhibit N shall be the
Bylaws of the Surviving Entity, until duly amended in accordance with applicable
law.
2.3 Outstanding Shares.
Each share of HHTI Common Stock issued and outstanding immediately before
the Effective Time shall remain issued and outstanding and shall represent one
share of Common Stock, par value $.01 per share, of the Surviving Entity,
immediately following the Effective Time.
ARTICLE 3
DIRECTORS AND OFFICERS
3.1 Directors.
Subject and pursuant to Section 8.13(a) hereof, at the Effective Time, the
Board of Directors of the Surviving Entity shall consist of the following seven
(7) individuals, who shall serve until the 2000 annual meeting of the
shareholders of the Surviving Entity: James I. Humphrey, George R. Whittemore,
Jeffrey Zwerdling, Paul J. Schulte, Steve Borgmann, Loren Steele and Joseph
Caggiano.
3.2 Officers.
Subject and pursuant to Section 8.13(b) hereof, at the Effective Time, the
Board of Directors of the Surviving Entity shall elect Mr. Schulte as Chairman
of the Board of Directors and Chief Executive Officer of the Surviving Entity,
James I. Humphrey as Vice Chairman of the Board of Directors and President and
Chief Operating Officer of the Surviving Entity, and Steve Borgmann as Executive
Vice President of the Surviving Entity.
ARTICLE 4
STH STOCK
4.1 Conversion of the STH Stock.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof, each share of STH Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into the right to receive 1.3 shares of HHTI
Common Stock (the "Exchange Ratio").
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time each holder of a Certificate shall
thereafter cease to have any rights with respect to such shares of STH Common
Stock, except the right to receive, upon the surrender of such Certificate,
without interest, the Exchange Shares and cash for fractional Exchange Shares in
accordance with this Article 4.
(c) Each share of STH Common Stock issued and held in STH's treasury at the
Effective Time, if any, shall, by virtue of the Merger, be canceled and retired
without payment of any consideration therefor.
(d) (i) Prior to the Effective Time, the Board of Directors of STH (or, if
appropriate, any committee administering the STH Stock Option Plans) shall adopt
such resolutions or take such other actions as may be required, if any, to
effect the following with respect to all STH Options:
(A) adjust the terms of all such STH Options to provide that all
outstanding STH Options which have not become fully exercisable before the E&P
Record Date shall be exercisable, in whole or in part on or before the E&P
Record Date, subject to Section Section 4.1((d))(i)((B));
(B) adjust the terms of all such STH Options to provide that, at the
Effective Time, (1) such options shall be exercisable for the number of shares
of HHTI equal to the number of shares of STH Common Stock subject to such STH
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
and (2) the per share exercise price under each such STH Option shall be
adjusted by dividing the per share exercise price under each such STH Option by
the Exchange Ratio and rounding up any fraction of a cent to the nearest cent,
subject to the provisions of Section () hereof; and
(C) within 15 days after the date of this Agreement, send a written notice
to the holders of STH Options and participants in the STH Stock Option Plan
describing the above changes, the means by which they may exercise their STH
Options prior to the Effective Date, and the
consequences of a failure to exercise the STH Options prior to the E&P
Record Date and the Effective Date, as the case may be.
(ii) From and after the date of this Agreement, except for STH Options to
be granted as described in Schedule 8.3(b)(iv), no additional STH Options or
other compensatory awards under which STH Common Stock may be issued shall be
granted or awarded by STH or the STH Subsidiaries under the STH Stock Option
Plans or otherwise, and other than the adjustments set forth in Section 4.1(i)
above, neither the Board of Directors of STH nor any committee administering the
STH Stock Option Plans shall adjust or modify the terms of the STH Stock Option
Plans.
(iii) At the Effective Time, HHTI shall (A) assume each STH Option
outstanding and not exercised prior to the Effective Time and each stock option
agreement evidencing such STH Options and (B) adopt a stock option plan to
administer such STH Options. The stock option plan adopted by HHTI shall have
terms and conditions substantially similar to those of the STH Stock Option
Plans, except that from and after the Effective Time, (i) HHTI and the HHTI
Board of Directors (or a committee thereof) shall be substituted for STH and the
STH Board of Directors or any committee thereof administering such STH Stock
Option Plans, (ii) each STH Option assumed by HHTI may be exercised solely for
shares of HHTI Common Stock (or cash, if so provided under the terms of such STH
Option), and (iii) the number of shares of HHTI Common Stock subject to such STH
Option shall be adjusted as set forth in Section 4.1(i)((B)).
(iv) Notwithstanding any other provisions of Section 4.1((d)), each STH
Option which is an "incentive stock option" shall be adjusted as required by
Section 424 of the Internal Revenue Code, so as not to constitute a
modification, extension or renewal of the option, within the meaning of Section
424(h) of the Internal Revenue Code.
(v) Each of STH and HHTI agrees to take all necessary steps to effectuate
the foregoing provisions of this Section 4.1((d)), including using its
reasonable efforts to obtain from each holder of an STH Option any consent or
contract that may be deemed necessary or advisable in order to effect the
transactions contemplated by this Section 4.1((d)).
4.2 Exchange of Certificates Representing STH Common Stock.
(a) As of the Effective Time, HHTI shall deposit, or shall cause to be
deposited, with the Exchange Agent, for the benefit of the holders of shares of
STH Common Stock, for exchange in accordance with this Article 4, certificates
representing the Exchange Shares and the cash in lieu of fractional Exchange
Shares (such cash and certificates for Exchange Shares, being hereinafter
referred to as the "Exchange Fund") to be issued pursuant to Section 4.1 and
paid pursuant to this Section 4.2, in exchange for outstanding shares of STH
Common Stock.
(b) Promptly after the Effective Time, HHTI shall cause the Exchange Agent
to mail to each holder of record of a Certificate or Certificates (i) a letter
of transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as HHTI may reasonably specify and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing the Exchange Shares and cash in lieu of fractional Exchange Shares
pursuant to the terms hereof. Upon surrender of a Certificate for cancellation
to the Exchange Agent, together with such letter of transmittal, duly executed
and completed in accordance with the instructions thereto, and such other
documents as may be reasonably required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor (A) a
certificate representing the number of whole Exchange Shares and (B) a check
representing the amount of cash in lieu of fractional Exchange Shares, if any,
which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Article 4, after giving effect to
any required withholding tax, and the Certificate so surrendered shall forthwith
be canceled.
No interest will be paid or accrued on the cash in lieu of fractional
Exchange Shares, if any, payable to holders of Certificates. In the event of a
transfer of ownership of STH Common Stock which is not registered in the
transfer records of STH, a certificate representing the proper number of
Exchange Shares, together with a check for the cash to be paid in lieu of
fractional shares, may be issued to such a transferee if the Certificate
representing shares of such STH Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions on Exchange Shares shall be paid with respect to any shares
of STH Common Stock represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole Exchange Shares issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date and payment date after the
Effective Time but prior to surrender, payable with respect to such whole
Exchange Shares less the amount of any withholding taxes which may be required
thereon, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Exchange Shares, less the amount of any withholding taxes which may
be required thereon.
(d) At and after the Effective Time, there shall be no transfers on the
stock transfer books of STH of the shares of STH Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to HHTI, they shall be delivered to the
Exchange Agent, canceled and exchanged for certificates for Exchange Shares and
cash in lieu of fractional shares, if any, and unpaid dividends and
distributions deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Article 4.
(e) No fractional shares of HHTI Common Stock shall be issued pursuant
hereto. Notwithstanding any other provision of this Agreement, each holder of
shares of STH Common Stock exchanged pursuant to the Merger who would otherwise
have been entitled to receive a fraction of a share of HHTI Common Stock (after
taking into account all Certificates delivered by such holder) shall receive,
from the Exchange Agent in accordance with the provisions of this Section
4.2((e))), a cash payment in lieu of such fractional share of HHTI Common
Stock, determined by multiplying the fraction by the HHTI Closing Price.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any Exchange Shares) that remains unclaimed by the
former stockholders of STH one year after the Effective Time shall be delivered
to HHTI. Any former stockholders of STH who have not theretofore complied with
this Article 4 shall thereafter look only to HHTI for delivery of their Exchange
Shares and payment of cash in lieu of fractional shares and unpaid dividends and
distributions on the Exchange Shares deliverable in respect of each share of STH
Common Stock such stockholder holds as determined pursuant to this Agreement, in
each case, without any interest thereon.
(g) None of HHTI, STH, the Exchange Agent or any other person shall be
liable to any former holder of shares of STH Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(h) In the event 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 HHTI or the
Exchange Agent, the posting by such person of a bond in such reasonable amount
as HHTI may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent or HHTI will issue in
exchange for such lost, stolen or destroyed Certificate the Exchange Shares and
cash in lieu of fractional shares, and unpaid dividends and distributions on the
Exchange Shares as provided in Section (), deliverable in respect thereof
pursuant to this Agreement.
4.3 Withholding Rights.
HHTI shall be entitled to deduct from any consideration otherwise payable
pursuant to this Agreement to any holder of STH Common Stock such amounts as
HHTI is required to deduct and withhold with respect to the making of such
payment under the Code, Treasury Regulations or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by HHTI, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of STH Common Stock in respect of which such deduction
and withholding was made by HHTI.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF STH
STH represents and warrants to HHTI as set forth below:
5.1 Existence; Good Standing; Authority; Compliance with Law.
(a) STH is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. STH is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of any other state of the United States in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified and in good standing would not have a Material Adverse Effect.
Schedule 5.1((a)) attached hereto is a true and correct list of each
jurisdiction in which STH is qualified or licensed as a foreign corporation. STH
has all requisite corporate power and authority to own, operate, lease and
encumber its properties and carry on its business as now conducted.
(b) Each STH Subsidiary is a corporation, limited liability company or
partnership duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good standing
would not have a Material Adverse Effect. Schedule 5.1((b))attached hereto is a
true and correct list of each jurisdiction in which each STH Subsidiary is
qualified or licensed as a foreign entity.
(c) Neither STH nor any of the STH Subsidiaries is in violation of any
order of any court, Governmental Authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which STH or any STH
Subsidiary or any of their respective properties or assets are subject, where
such violation would have a Material Adverse Effect. STH and the STH
Subsidiaries have obtained all licenses, permits, contract rights, including,
without limitation, any necessary franchise arrangements, and other
authorizations and have taken all actions required by Applicable Law,
governmental regulations or otherwise in connection with their business as now
conducted, where the failure to obtain any such item or to take any such action
would have a Material Adverse Effect. Schedule 5.1((c)) attached hereto is a
true and complete list of all necessary STH Permits held or required to be held
by STH or any STH Subsidiary, other than any STH Permit of which the failure to
obtain would not have a Material Adverse Effect.
(d) Complete and correct copies of STH's Certificate of Incorporation and
the STH Subsidiaries' charters and bylaws or other organizational documents, as
the case may be, which reflect all amendments made thereto, have been delivered
or made available to HHTI and its counsel. The minute books and other records of
STH and the STH Subsidiaries are complete and contain in all material respects
accurate records of all meetings and accurately reflect in all material respects
all other corporate action of the stockholders and directors and any committees
of the Board of Directors of STH and the boards of directors, partners or
managers of the STH Subsidiaries. Neither STH nor any STH Subsidiary is in
default under or in violation of any provision of their respective charters or
bylaws.
5.2 Authorization, Validity and Effect of Agreements.
STH and the STH Subsidiaries have the requisite corporate power and
authority to enter into the transactions contemplated hereby and to execute and
deliver this Agreement and all other documents, agreements and instruments
related to the transactions contemplated by this Agreement, including, without
limitation, the Ancillary Agreements. Subject only to the adoption of this
Agreement by the holders of a majority of the outstanding shares of STH Common
Stock, the consummation by STH of this Agreement, the Ancillary Agreements and
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of STH and the STH Subsidiaries and
no other corporate action on the part of STH or the STH Subsidiaries is
necessary to authorize this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by STH and constitutes, and the Ancillary Agreements to
which STH is a party (when executed and delivered by STH pursuant thereto) will
constitute, the valid and legally binding obligations of STH, enforceable
against STH in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity.
5.3 Capitalization.
The authorized capital stock of STH consists of 10,000,000 shares of STH
Common Stock and 1,000,000 shares of STH Preferred Stock. As of June 7, 1999 (a)
4,843,400 shares of STH Common Stock were issued and outstanding, and no shares
of STH Preferred Stock are issued and outstanding, (b) no shares of STH Common
Stock or STH Preferred Stock were held by STH in its treasury, and (c) 190,300
shares of STH Common Stock were issuable upon the exercise of the STH Options,
as described on Schedule 5.3. STH has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of STH on any matter. All such issued and outstanding shares of
STH Common Stock are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. Except (i) for the STH Options issued pursuant to
the STH Stock Option Plans and (ii) except as provided on Schedule 5.3 hereto,
there are not at the date of this Agreement any existing options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate STH or any of the STH Subsidiaries to issue, transfer
or sell any shares of capital stock or other equity interest of STH or any of
the STH Subsidiaries. There are no agreements or understandings to which STH is
a party with respect to the voting of any shares of STH Common Stock or which
restrict the transfer of any such shares. Except as set forth in Schedule 5.3
hereto, there are no outstanding contractual obligations of STH or any of the
STH Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of STH or any capital stock, voting securities or other securities
or other ownership interests in any of the STH Subsidiaries or make any material
investment (in the form of a loan, capital contribution or otherwise) in any
person (other than one of the STH Subsidiaries). After the Effective Time, HHTI
will have no obligation to issue, transfer or sell any shares of capital stock
or other equity interest of STH or HHTI pursuant to any STH Benefit Plan.
5.4 Subsidiaries.
The outstanding shares of capital stock or other form of ownership
interests of the STH Subsidiaries are owned as set forth on Schedule hereto.
Except as set forth on Schedule 5.4 hereto, each of the outstanding shares of
capital stock or other form of ownership interest in each of the STH
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned as set forth on Schedule 5.4, free and clear of all liens, pledges,
security interests, voting agreements, claims or other encumbrances. The
following information for each STH Subsidiary is set forth on Schedule 5.4, if
applicable: (a) its name and jurisdiction of incorporation or organization; (b)
its authorized capital stock or other form of ownership interest; (c) the name
of each stockholder or owner of an equity interest and the number of issued and
outstanding shares of capital stock or other form of ownership interest held by
it; and (d) the name, ownership structure and equity owners of the general
partner(s), if any. In the case of each STH Subsidiary that is a corporation (or
that is classified as a corporation for federal income tax purposes), all of the
outstanding capital stock or other form of equity interest of that entity is
owned by STH, one or more other STH Subsidiaries that are corporations (or that
are classified as corporations for federal income tax purposes), or a
combination of the foregoing.
5.5 Other Interests.
Except for interests in the STH Subsidiaries, neither STH nor any STH
Subsidiary owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust
or entity (other than investments in short-term investment securities).
5.6 No Violation.
Except as contemplated by Section 4.1(d)(i) hereof and as set forth on
Schedule 5.6, neither the execution and delivery by STH of this Agreement or the
Ancillary Agreements nor the consummation by STH and the STH Subsidiaries of the
transactions contemplated hereby or thereby in accordance with the terms hereof
or thereof, will: (a) conflict with or result in a breach of any provisions of
the Certificate of Incorporation or Bylaws of STH or the charter, bylaws or
other organizational documents of any of the STH Subsidiaries; (b) result in a
breach or violation of, a default under, or the triggering of any payment or
other material obligations pursuant to, or accelerate vesting under, the STH
Stock Option Plans, or any grant or award made under any of the foregoing; (c)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of STH or the STH Subsidiaries under, or result in
being declared void, voidable or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any license, franchise, permit, lease, contract, agreement or other
instrument, Commitment or obligation to which STH or any of the STH Subsidiaries
is a party, or by which STH or any of the STH Subsidiaries or any of their
properties is bound or affected, except for any of the
foregoing matters which, individually or in the aggregate, would not have a
Material Adverse Effect; or (d) other than any Regulatory Filings and the
approval of the STH and HHTI shareholders, require STH to make, obtain or give
any consent, waiver, approval or authorization of, or declaration, filing,
qualification or registration with, any domestic governmental or regulatory
authority, or any other entity or person (including, without limitation, its
directors) except where the failure to make, obtain or give any such consent,
waiver, approval or authorization of, or declaration, filing, qualification or
registration with, any governmental or regulatory authority or other entity or
person would not, individually or in the aggregate, have a Material Adverse
Effect. For purposes of determining compliance with the HSR Act, STH confirms
that the conduct of its business consists solely of investing in, owning,
developing and operating real estate for the benefit of its shareholders.
5.7 Securities Filings.
Schedule 5.7 hereto sets forth all STH Reports, and such STH Reports
constitute all reports, schedules, forms, statements and other documents
required to be filed by STH under the Securities Laws since March 1, 1994.
As of their respective dates, the STH Reports (a) complied as to form in
all material respects with the applicable requirements of the Securities Laws
and (b) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each of the consolidated balance sheets of STH included in
or incorporated by reference into the STH Reports (including the related notes
and schedules) (i) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (ii) were prepared in all material respects in accordance with
GAAP, and (iii) fairly presented in all material respects the consolidated
financial position of STH and the STH Subsidiaries as of its date in conformity
with GAAP. Each of the consolidated statements of income, retained earnings and
cash flows of STH included in or incorporated by reference into the STH Reports
(including any related notes and schedules) (A) complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (B) were prepared in all
material respects in accordance with GAAP, and (C) fairly presented in all
material respects the results of operations, retained earnings or cash flows, as
the case may be, of STH and the STH Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect) in conformity with
GAAP.
Except as and to the extent set forth in the STH Reports and as set forth
on Schedule 5.7(a), neither STH nor any of the STH Subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on, or reserved against in,
a balance sheet of STH or in the notes thereto, prepared in accordance with
GAAP, except liabilities arising in the ordinary course of business since such
date which would not have a Material Adverse Effect.
5.8 Litigation.
Except as set forth on Schedule 5.8 hereto, there are (a) no continuing
orders, injunctions or decrees of any court, arbitrator or Governmental
Authority to which STH or any STH Subsidiary is a party or by which any of its
properties or assets are bound or, to the knowledge of STH, to which any of its
directors, officers or affiliates is a party or by which any of their properties
or assets are bound, and (b) no actions, suits or proceedings (whether insured
or uninsured) pending against STH or any STH Subsidiary or, to the knowledge of
STH, against any of its directors, officers or affiliates or, to the knowledge
of STH, threatened against STH or any STH Subsidiary or against any of its
directors, officers or affiliates, at law or in equity, or before or by any
federal or state commission, board, bureau, agency or instrumentality, that in
the case of clause (a) or (b) above are reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect.
5.9 Absence of Certain Changes.
Except as disclosed in the STH Reports filed with the SEC prior to the date
hereof or as set forth on Schedule 5.9 hereto, since the Financial Statement
Date, (a) STH and the STH Subsidiaries have conducted their business in all
material respects in the ordinary course of such business (which, for purposes
of this Section 5.9 only, shall include all acquisitions and/or development of
real estate properties and financing arrangements made in connection therewith
and the operation of the hotels located thereon as set forth on Schedule 5.9
hereto); (b) no event has caused a Material Adverse Effect and there has been no
event, occurrence or circumstance that with the passage of time would reasonably
be expected to cause a Material Adverse Effect; (c) except as otherwise
permitted pursuant to the terms of this Agreement, as of the date hereof there
has not been any declaration, setting aside or payment of any dividend or other
distribution with respect to STH's capital stock or any split, combination or
reclassification of STH's capital stock; and (d) there has not been any material
change in STH's accounting principles, practices or methods. There are no
material unsatisfied judgments, orders (other than orders of general
applicability), decrees or stipulations affecting STH or any STH Subsidiary or
to which any of them is a party.
5.10 Taxes.
(a) Except as set forth on Schedule 5.10 hereto, as of the date hereof, STH
and each of its Subsidiaries (i) have timely filed all federal, state and
foreign tax returns, including, without limitation, information returns and
reports required to be filed by any of them for tax periods ended prior to the
date of this Agreement, or requests for extensions have been timely filed and
any such request has been granted and has not expired and all such returns are
accurate and complete to the knowledge of STH in all material respects, (ii)
have paid or accrued in accordance with GAAP all taxes shown to be due and
payable on such returns or which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by it, and
(iii) have properly accrued in accordance with GAAP all taxes for such periods
and periods subsequent to the periods covered by such returns, other than, as to
clauses (i), (ii) and (iii), any failure or failures that are not reasonably
likely, individually or in the
aggregate, to have a Material Adverse Effect. Except as set forth on
Schedule 5.10 hereto, as of the date hereof, neither STH nor any of the STH
Subsidiaries has received written notice that the federal, state or local income
or franchise tax returns of STH or any STH Subsidiary will be examined by any
taxing authority, or that any such examination is ongoing. Except as set forth
on Schedule 5.10 hereto, neither STH nor any of the STH Subsidiaries has
executed or filed with the IRS or any other taxing authority any agreement now
in effect extending the period for assessment or collection of any income or
other taxes.
(b) Except as set forth on Schedule 5.10, neither STH nor any of the STH
Subsidiaries is a party to any pending action or proceeding by any Governmental
Authority for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income and franchise tax returns filed by
STH and each of the STH Subsidiaries have been delivered to HHTI or made
available to representatives of HHTI. Except as set forth on Schedule 5.10
hereto, the tax returns filed by STH and any STH Subsidiary have not been, and,
to the knowledge of STH, are not being examined by the IRS or other relevant
taxing authorities for any period nor are there any pending or, to the knowledge
of STH, threatened examinations, tax claims or deficiencies asserted by any such
authorities. There are no tax liens on any of the property of STH. Except as
otherwise disclosed on Schedule 5.10, STH is not a party to, or bound by, any
tax indemnity, tax sharing or tax allocation agreement.
(c) Neither STH nor any of the STH Subsidiaries (i) has made or entered
into, or holds any asset that is subject to, a consent filed pursuant to Section
341(f) of the Code and the Treasury Regulations or a "safe harbor lease" subject
to Section 168(f)(8) of the Internal Revenue Code of 1954, as amended before the
Tax Reform Act of 1984 or (ii) is required to include in income any amount for
an adjustment pursuant to Section 481 of the Code.
(d) Neither STH nor any STH Subsidiary has taken any action, or has any
reason to believe that any conditions exist, that could reasonably be expected
to prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
For purposes of this Section 5.10, "taxes" includes any federal, state,
local or foreign income, gross receipts, license, payroll, employment,
withholding, property, sales, excise or other tax or governmental charges of any
nature whatsoever, together with any interest, penalty or additional amount
payable with respect to any tax.
5.11 Earnings and Profits.
The current and accumulated earnings and profits of STH as computed for
federal income tax purposes as of April 30, 1999, was approximately $20,839,518.
After consultation with its tax and accounting advisors, STH estimates that its
current and accumulated earnings and profits for federal income tax purposes as
of August 31, 1999, will, to the knowledge of STH, be approximately $22,651,650
- - $24,111,423.
5.12 Books and Records.
All books and records relating to operating income and expenses of all of
the STH Hotels and the Office Building furnished or made available to HHTI by
STH or STH's agent were complete and were and shall be those maintained by STH
in regard to the STH Hotels and the Office Building in accordance with GAAP. The
books of account and other financial records of STH and the STH Subsidiaries are
accurately reflected in all material respects in the financial statements
included in the STH Reports.
5.13 Employee Benefit Plans.
(a) All STH Benefit Plans are set forth in Schedule 5.13((a)) hereto. True
and complete copies of the STH Benefit Plans have been made available to HHTI.
To the extent applicable, the STH Benefit Plans comply, in all material
respects, with the requirements of ERISA and the Code, and any STH Benefit Plan
intended to be qualified under Section 401(a) of the Code has been determined by
the IRS to be so qualified. No STH Benefit Plan is covered by, nor has STH or
any entity under "common control" with STH within the meaning of ERISA Section
4001 ever maintained or been required to contribute to, any plan covered by
Title IV of ERISA or Section 412 of the Code. Neither STH nor any STH Subsidiary
has incurred, or engaged in any conduct that could cause it to incur, any
liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA.
Each STH Benefit Plan has been maintained and administered in all material
respects in compliance with its terms and with ERISA and the Code to the extent
applicable thereto, including, without limitation, reporting, disclosure and
group health plan continuation coverage requirements.
(b) Except as disclosed on Schedule 5.13((b)), since the date of the most
recent audited financial statements of STH, neither STH nor any STH Subsidiary
has adopted or amended in any material respect any STH Benefit Plan.
(c) Except as set forth on Schedule 5.13(c), there are no pending or, to
the knowledge of STH, threatened claims against or otherwise involving any of
the STH Benefit Plans and no suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of STH Benefit Plan activities) has
been brought against or with respect to any such STH Benefit Plan, except for
any of the foregoing which would not have a Material Adverse Effect. All
material contributions required to be made as of the date hereof to the STH
Benefit Plans have been made or provided for. Neither STH nor any of the STH
Subsidiaries has any liabilities or obligations with respect to any such STH
Benefit Plan, whether accrued, contingent or otherwise, nor to the knowledge of
STH are any such liabilities or obligations expected to be incurred, except for
ongoing funding obligations or contributory obligations required by the terms of
any STH Benefit Plan. Neither STH nor any entity under " common control" with
STH within the meaning of ERISA Section 4001 has contributed to, or been
required to contribute to, any "multiemployer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA).
(d) Except as set forth on Schedule 5.13((d)), STH does not maintain or
contribute to any plan or arrangement which provides or has any liability to
provide life insurance, medical or other employee welfare benefits to any
employee or former employee upon
his retirement or termination of employment and STH has never represented,
promised or contracted (whether in oral or written form) to any employee or
former employee that such benefits would be provided.
5.14 Labor Matters.
Except as set forth on Schedule 5.14, neither STH nor any of the STH
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor union
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of STH, threatened against STH or the STH
Subsidiaries relating to their business, except for any such proceeding which
would not have a Material Adverse Effect. To the knowledge of STH, as of the
date hereof, there are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or threatened involving
employees of STH or any of the STH Subsidiaries. Except as set forth on Schedule
5.14, there have been no work stoppages, strikes or other concerted actions by
employees of STH or any of the STH Subsidiaries other than those that would not
have a Material Adverse Effect.
5.15 No Brokers.
Except the fee to be paid to ABN AMRO Incorporated by STH as described on
Schedule 5.15, neither STH nor any STH Subsidiary has entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of STH, any STH Subsidiary, HHTI, any HHTI Subsidiary or HHMI to pay
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement, the Ancillary
Agreements or the consummation of the transactions contemplated hereby. Neither
STH nor any STH Subsidiary is aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement, the Ancillary Agreements or the
consummation of the transactions contemplated hereby.
5.16 Opinion of Financial Advisor.
STH has retained ABN AMRO Incorporated to review the transactions
contemplated by this Agreement and the Ancillary Agreements and has received an
opinion from ABN AMRO Incorporated on or before the date of this Agreement to
the effect that, as of the date of this Agreement, the consideration to be
received by STH and the holders of STH Common Stock pursuant to this Agreement
is fair from a financial point of view.
5.17 HHTI Share Ownership.
Neither STH nor any of the STH Subsidiaries owns any shares of capital
stock of HHTI or other securities convertible into shares of capital stock of
HHTI.
5.18 Related Party Transactions.
Except as set forth on Schedule 5.18, there are no arrangements, agreements
or contracts entered into by STH or any of the STH Subsidiaries with (a) any
consultant, (b) any person who is an officer, director or affiliate of STH or
any of the STH Subsidiaries, any relative of any of the foregoing or any entity
of which any of the foregoing is an affiliate, or (c) any person who acquired
STH Common Stock in a private placement. Copies of such documents, all of which
have been delivered to HHTI prior to the date hereof, were true, complete and
correct when delivered.
5.19 Contracts and Commitments.
(a) Schedule 5.19 hereto (with paragraph references corresponding to those
set forth below) contains a true and complete list of each of the following
contracts (true and complete copies or, if none, reasonably complete and
accurate written descriptions of which, together with all amendments and
supplements thereto, have been delivered or made available to HHTI), to which
STH or any of the STH Subsidiaries is a party or by which any STH Hotel or the
Office Building is bound:
(i) all contracts providing for the leasing or management
of one or more of the STH Hotels or the Office
Building or any portion of one or more of the STH
Hotels;
(ii) all STH Franchise Agreements;
(iii) all material contracts providing for a commitment of
employment or consultation services for a specified
or unspecified term;
(iv) all contracts with any person containing any
provision or covenant prohibiting or materially
limiting the ability of STH or any of the STH
Subsidiaries to engage in any business activity, hire
employees, solicit customers or otherwise compete
with any person;
(v) all partnership, joint venture, stockholders' or
other similar contracts with any person;
(vi) all notes, debentures, bonds and other evidence of
Indebtedness;
(vii) all contracts relating to any business combination;
(viii) all contracts between or among STH or any of the STH
Subsidiaries, on the one hand, and any of their
stockholders or affiliates, on the other hand;
(ix) all collective bargaining or similar labor contracts;
and
(x) all other contracts that involve the annual payment
or potential annual payment pursuant to the terms of
such contract, by or to STH or any of the STH
Subsidiaries of more than $25,000 or aggregate
payments in excess of $100,000 that will not (A) be
fully performed on or prior to the Effective Time,
(B) expire by their terms prior to the Effective
Time, or (C) be cancelable by the Surviving Entity,
without penalty, upon not more than 30 days notice,
including, without limitation, all leases, contracts
for purchase and sale of assets, advance booking
contracts and banquet contracts.
(b) Each contract required to be disclosed on Schedule 5.19 is in full
force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms and, except as disclosed on Schedule
5.19, neither STH, any of the STH Subsidiaries nor, to the knowledge of STH, any
other party to such contract is in violation, breach or default under any such
contract (or with notice or lapse of time or both would be in violation, breach
or default under any such contract), the effect of which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
(c) The STH Franchise Agreements disclosed on Schedule 5.19 constitute all
of the franchise or similar agreements necessary to operate and manage the STH
Hotels and neither STH nor any STH Subsidiary has received any notice or has any
knowledge of an event of default or termination or proposed termination under
any such STH Franchise Agreement.
5.20 Development Rights.
Schedule 5.20 hereto sets forth a list of all material agreements entered
into by STH or any of the STH Subsidiaries relating to the acquisition,
development, rehabilitation, capital improvement or construction of hotels or
additions thereto or other real estate properties, which acquisition,
development or construction has not been substantially completed as of the date
of this Agreement. Such agreements, true and correct copies of all of which have
been delivered to HHTI, have not been modified and are valid and enforceable in
accordance with their respective terms.
5.21 Certain Payments Resulting From Transactions.
Except for the payments described in Section 5.13 and except for option
agreements executed pursuant to the STH Stock Option Plans, deferred
compensation arrangements with certain STH executive officers and employment
agreements with certain STH officers, each of which arrangements and agreements
is set forth on Schedule 5.21 hereto, the execution of, and performance of the
transactions contemplated by, this Agreement and the Ancillary Agreements will
not (either alone or upon the occurrence of any additional or subsequent events)
(a) constitute an event under any STH Benefit Plan, policy, practice, agreement
or other arrangement or any trust or loan (the "STH Employee Arrangements") that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, director
or consultant of STH or any of the STH Subsidiaries or (b) result in the
triggering or imposition of any restrictions or limitations on the right of STH
or HHTI to amend or terminate any STH Employee Arrangement and receive the full
amount of any excess assets remaining or resulting from such amendment or
termination,
subject to applicable taxes. Except as set forth on Schedule 5.21, no
payment or benefit which will be required to be made pursuant to the terms of
any agreement, Commitment or STH Benefit Plan, as a result of the transactions
contemplated by this Agreement or the Ancillary Agreements, to any officer,
director or employee of STH or any of the STH Subsidiaries, will be
characterized as a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code.
5.22 Convertible Securities.
Except as set forth on Schedule 5.22, STH has no outstanding options,
warrants or other securities exercisable for, or convertible into, shares of STH
Common Stock, the terms of which would require any anti-dilution adjustments by
reason of the consummation of the transactions contemplated hereby.
5.23 Compliance with Applicable Laws.
(a) Except as disclosed on Schedule 5.23 hereto, STH, all STH Subsidiaries,
all STH Hotels and the Office Building and the operation thereof currently are
in substantial compliance with the requirements of all Applicable Laws, except
where the failure to so comply would not, individually or in the aggregate, be
reasonably likely to result in a Material Adverse Effect.
(b) Except as disclosed on Schedule 5.23 hereto, neither STH nor any of the
STH Subsidiaries has received any written notice of uncured violations at any of
the STH Hotels or the Office Building of zoning, building, fire, health or any
other applicable statute, ordinance or regulation, relating to any of the STH
Hotels or the Office Building, the construction or any occupancy thereof, except
for violations that, individually or in the aggregate with respect to any STH
Hotel or the Office Building, would not be reasonably likely to result in a
Material Adverse Effect, nor are there presently pending against STH or against
any of the STH Hotels or the Office Building any judgments relating to any of
the above matters, any judicial proceedings or administrative actions or any
state of facts which, to the knowledge of STH, with notice or lapse of time,
could reasonably be expected to give rise to any such proceedings or actions, in
either case that would be reasonably likely to result in a Material Adverse
Effect.
(c) Neither STH nor any of the STH Subsidiaries has received any written
notice that any material STH Permits, licenses or consents not already obtained
are required by any Governmental Authorities in connection with the use and
occupancy of any of the STH Hotels or the Office Building or any material
improvements thereto; and there are no material Commitments or agreements with
any of such Governmental Authorities affecting any STH Hotel or the Office
Building which have not been fully disclosed to HHTI in writing.
5.24 Insurance.
Schedule 5.24 sets forth a list of the STH Insurance Policies. STH shall
provide HHTI a copy of any STH Insurance Policy within five (5) days of a
request from HHTI. The STH Insurance Policies are currently in force, all
premiums for such policies were paid when due and all premiums to provide
coverage under such policies through the Effective Date will be paid
\
by STH or the STH Subsidiaries on or before the Effective Date except for
such failure that will not have a Material Adverse Effect. Neither STH nor any
of the STH Subsidiaries has received any notice from any insurer of any of the
STH Hotels or the Office Building or any part thereof requesting any material
improvements, alterations, additions, corrections or other work in, on or about
the improvements thereto, whether related to any of the STH Hotels or the Office
Building or to the operation of any occupant thereof, which have not been cured
or satisfied. The STH Insurance Policies are adequate to cover the amount of all
losses that can reasonably be anticipated and have coverage amounts equal to or
greater than the coverage amounts required by STH's lenders.
5.25 Subsidiaries of STH.
All STH Subsidiaries which were taxed for federal income tax purposes as
"S" corporations at the time of their acquisition by STH were taxed as "S"
corporations from their respective dates of formation and had no current or
accumulated earnings and profits for federal income tax purposes prior to their
acquisition by STH.
5.26 Acquisitions by STH and its Subsidiaries.
Neither STH nor any STH Subsidiary has made an acquisition which would
constitute a "reorganization" under Section 368(a) of the Code.
5.27 State Takeover Statutes.
STH and the STH Subsidiaries have taken all action necessary to exempt the
transactions contemplated by this Agreement and the Ancillary Agreements from
the operation of any Takeover Statute.
5.28 Investment Company Act of 1940.
Neither STH nor any STH Subsidiary is, or at the Effective Time will be,
required to be registered under the Investment Company Act of 1940, as amended.
5.29 Leases.
Except as set forth on Schedule 5.29, neither STH nor any STH Subsidiary is
a lessee or tenant under any lease for real property.
5.30 Year 2000 Compliance.
STH and the STH Subsidiaries have reviewed the areas within their business
and operations which could be adversely affected by the Year 2000 Problem and
have developed a program to achieve Year 2000 Compliance on or before September
30, 1999. To date, STH and the STH Subsidiaries have implemented such Year 2000
program in accordance with the timetable set forth therein. Based on such review
and program, STH and the STH Subsidiaries believe that the Year 2000 Problem,
including costs of remediation, will not have a Material Adverse Effect.
ARTICLE 6
ADDITIONAL REPRESENTATIONS AND WARRANTIES
AND COVENANTS RELATING TO STH HOTELS AND REAL PROPERTY
6.1 Representations and Warranties.
STH represents and warrants to HHTI that, except as set forth on Schedules
6.1(a) through (s):
(a) Title to STH Hotels and Office Building. STH or an STH Subsidiary has
on the date of this Agreement and will have on the Closing Date good and
indefeasible fee simple title to each of the STH Land and STH Improvements, free
and clear of all liens except those securing STH Indebtedness as disclosed in
the Title Policies, Title Commitments and Title Updates covering the STH Land
and STH Improvements, and free and clear of all other conditions, exceptions or
reservations, except such as do not have a Material Adverse Effect.
(b) [Reserved]
(c) STH Not a Foreign Person. STH is not a "foreign person" but is a
"United States person" as such terms are defined in the Foreign Investment in
Real Property Tax Act of 1980 and Sections 1445 and 7701 of the Code.
(d) Operating Agreements. No portion of any STH Hotel or the Office
Building is subject to the burdens or obligations of any STH Operating Agreement
and all STH Operating Agreements are current and not in default other than
defaults that will not, individually or in the aggregate, have a Material
Adverse Effect.
(e) Tenant Leases.
(i) STH or an STH Subsidiary is the sole owner of the lessor's interest in
all of the STH Leases, and all STH Leases are in full force and effect without
current material default by either STH or the respective tenants, and no tenant
has made any material claim against STH or any STH Subsidiary for damages
related to any STH Lease other than any such default, claim or claims that are
not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect;
(ii) none of the STH Leases that are material to STH has been modified in a
material way, except as reflected in amendments to which HHTI has had access;
(iii) all obligations of the lessor under the STH Leases with respect to
the performance of work or the installation of equipment or materials required
to have been performed at or prior to the Effective Time have been fully
observed and performed, except for such failures that, individually or in the
aggregate, will not have a Material Adverse Effect;
(iv) as of the date hereof, no tenant is or shall become entitled to any
material concession, rebate, allowance, or free rent for any period subsequent
to the Closing, without the prior written consent of HHTI, except as set forth
in the STH Lease with respect to such tenant;
(v) no tenant has any purchase option or other interest (other than its
leasehold tenancy for a specified term) in any of the STH Land and/or the STH
Improvements;
(vi) no tenant has given STH or any STH Subsidiary notice of its intention
to vacate its demised premises prior to the end of the term of its lease; and
(vii) none of the STH Leases provides for the payment of rent or other
amounts that are determined in whole or in part with reference to the income or
profits derived by any person (excluding amounts received as rents from the STH
Leases that are based solely on a percentage or percentages of receipts or sales
where the percentage or percentages were fixed at the time the STH Leases were
entered into, have not been renegotiated during the term of the STH Leases in a
manner that had the effect of basing rent on income or profits, and conform with
normal business practices).
(f) No Condemnation. To the knowledge of STH and the STH Subsidiaries, as
of the date hereof, there is no pending condemnation or similar proceeding
affecting any of the STH Land, the STH Improvements, or the STH Personal
Property or any portion thereof, and neither STH nor any STH Subsidiary has
received any written notice and each has no knowledge that any such proceeding
is contemplated.
(g) [Reserved]
(h) No Administrative Actions. Except for any investigation, action or
judicial proceeding that would not have a Material Adverse Effect, to the
knowledge of STH and the STH Subsidiaries, no STH Hotel is now the subject of
any administrative investigation, action or judicial proceeding in regard to
sex, age, or racially discriminatory practices initiated by any Governmental
Authority, or any private citizen, and, to the knowledge of STH and the STH
Subsidiaries, no such investigation, administrative action, or judicial
proceeding is now pending, nor is any STH Hotel presently operating under any
court order or administrative agreement in regard to alleged sex, age, or
racially discriminatory practices.
(i) Zoning. To the knowledge of STH and the STH Subsidiaries all of the STH
Improvements and the present uses thereof are permitted, conforming structures
and uses under all applicable zoning and building laws and ordinances, other
than any unpermitted or nonconforming structures that do not materially affect
the use or value of the STH Hotel.
(j) Parties in Possession. There are no adverse parties in possession of
any of the STH Hotels or the Office Building or of any part thereof and no
parties in possession thereof except STH and the tenants under the STH Leases,
except as otherwise expressly disclosed
herein, and no party has been granted any license, lease, or other right
relating to the use or possession of any of the STH Hotels or the Office
Building except the tenants under the STH Leases, or except as otherwise
expressly disclosed herein.
(k) No Other Contracts. There are no contracts or other obligations
outstanding for the sale, exchange or transfer of any of the STH Hotels or the
Office Building or any portion thereof or the business operated thereon.
(l) [Reserved]
(m) [Reserved]
(n) Maintenance and No Defects. To STH's or any STH Subsidiary's knowledge,
the STH Hotels have been maintained in all material respects in accordance with
industry practices.
(o) [Reserved]
(p) Real Estate Tax Matters. As of the date hereof, neither STH nor any of
the STH Subsidiaries is a party to any pending action or proceeding by any
Governmental Authority for assessment or collection of real estate taxes.
(q) [Reserved]
(r) Environmental. To STH's or any STH Subsidiary's knowledge, there are no
Environmental Conditions and there is no Environmental Noncompliance with
respect to any STH Hotel or the Office Building or any properties or assets now
or previously owned or operated by STH or any STH Subsidiary, where such
condition or noncompliance is reasonably likely to have a Material Adverse
Effect. All material STH Permits have been obtained, are valid and in good
standing. To STH's or any STH Subsidiary's knowledge, all operations on or at
each STH Hotel and the Office Building are and have been conducted in material
compliance with all applicable Environmental Laws, where noncompliance with such
laws is reasonably likely to have a Material Adverse Effect. As of the date
hereof, neither STH nor any STH Subsidiary has received any notification from
any governmental instrumentality seeking any information or alleging any
violation of any Applicable Law or Environmental Law. Neither STH nor any STH
Subsidiary has caused or permitted any STH Hotel or the Office Building to be
used to generate, manufacture, refine, transport, treat, recycle, store, handle,
dispose of, transfer, produce, or process any Hazardous Materials or solid
waste, except in small quantities utilized in connection with routine
maintenance, repair or operation of the STH Hotels or the Office Building, all
of which have been and will be stored, used, handled, and disposed of in full
compliance with all Environmental Laws other than such noncompliance that,
individually or in the aggregate, will not have a Material Adverse Effect.
Neither STH nor any STH Subsidiary has caused or permitted, and has no knowledge
of, any Release of any such Hazardous Materials on-site or off-site of any STH
Hotel or the Office Building (or any properties or assets now or previously
owned or operated by STH or any STH Subsidiary) other than such releases that,
individually or in the aggregate, do not violate any applicable Environmental
Laws and will not have a Material Adverse Effect.
(s) Compliance with STH Franchise Agreements. The STH Hotels are operated
pursuant to the STH Franchise Agreements described in Schedule 5.19, and all
public spaces, lobbies, meeting rooms and each guest room of the STH Hotels is
furnished in accordance with the franchisor's standards except for such
noncompliance that is not reasonably likely to have a Material Adverse Effect.
6.2 STH Deliverables.
STH has, prior to the execution of this Agreement, delivered to HHTI, or
provided HHTI access to, true, correct and complete copies of each of the
following:
(a) Leases. Each STH Lease covering or relating to each STH
Hotel and the Office Building, together with any amendments thereto or other
documents creating further obligations or agreements in connection therewith.
(b) Operating Statements. Operating statements covering the
STH Hotels for the fiscal year ended December 31, 1998, which statements are
prepared in the ordinary course of STH's business and form the basis for STH's
financial statements.
(c) Tax Statements. Copies of the most recent real estate, ad
valorem and personal property tax statements with respect to each parcel of STH
Land and/or STH Hotel.
(d) [Reserved]
(e) Operating Agreements. A list of all STH Operating
Agreements together with a copy of each STH Operating Agreement.
(f) List of Defects. A list of all defects or malfunctions
affecting any part of the STH Hotels or the Office Building and of which STH or
any STH Subsidiary has knowledge with respect to foundations, walls, roofs,
heating, electrical, plumbing or air conditioning equipment or systems, and
drainage or sewage equipment or systems other than such defects or malfunctions
that, individually or in the aggregate, will not result in a Material Adverse
Effect.
(g) Insurance Policies. Copies of all of the STH Insurance
Policies.
(h) Commission Agreements. All leasing or other commission
agreements with respect to the STH Hotels and the Office Building and a list of
all unpaid commissions which identifies the payee, amount and date or event upon
which such commission will become due and payable.
(i) Environmental Matters. All existing environmental reports
for any STH Hotel and the Office Building and existing updated record searches
relating to existing environmental site assessments for each STH Hotel.
(j) Title Requirements/Owner Affidavits. Any affidavits in the
form attached as Exhibit O and any indemnification agreements or other
representations required by the Title Company to issue Title Commitments and
Title Policies for the STH Hotels;
(k) A copy of the existing Survey of each parcel of STH Land
and the STH Improvements located thereon; and
(l) A schedule of all Inventory and FF&E at the STH Hotels and
the Office Building as of a date no more than five business days prior to the
Closing Date.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF HHTI
HHTI represents and warrants to STH as set forth below.
7.1 Existence; Good Standing; Authority; Compliance with Law.
(a) HHTI is a corporation duly incorporated, validly existing and in good
standing under the laws of the Commonwealth of Virginia. HHTI is duly licensed
or qualified to do business and is in good standing under the laws of any other
state of the United States in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not have a Material Adverse Effect. Schedule 7.1((a)) attached
hereto is a true and correct list of each jurisdiction in which HHTI is
qualified or licensed as a foreign corporation. HHTI has all requisite corporate
power and authority to own, operate, lease and encumber its properties and carry
on its business as now conducted.
(b) Each HHTI Subsidiary is a corporation, limited liability company,
business trust or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its properties and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except for jurisdictions in which such failure to be so qualified or to be in
good standing would not have a Material Adverse Effect. Schedule 7.1((b))
attached hereto is a true and correct list of each jurisdiction in which each
HHTI Subsidiary is qualified or licensed as a foreign entity.
(c) Neither HHTI nor any of the HHTI Subsidiaries is in violation of any
order of any court, Governmental Authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which HHTI or any HHTI
Subsidiary or any of their respective properties or assets are subject, where
such violation would have a Material Adverse Effect. HHTI and the HHTI
Subsidiaries have obtained all licenses, permits, contract rights, including,
without limitation, any necessary franchise arrangements, and other
authorizations and have taken all actions required by Applicable Law,
governmental regulations or otherwise in connection with their business as now
conducted, where the failure to obtain any
such item or to take any such action would have a Material Adverse Effect.
Schedule 7.1((c)) attached hereto is a true and complete list of all necessary
HHTI Permits held or required to be held by HHTI or any HHTI Subsidiary, other
than any HHTI Permit of which the failure to obtain would not have a Material
Adverse Effect.
(d) Complete and correct copies of HHTI's Articles of Incorporation and the
HHTI Subsidiaries' charters and bylaws or other organizational documents, as the
case may be, which reflect all amendments made thereto, have been delivered or
made available to STH and its counsel. The minute books and other records of
HHTI and the HHTI Subsidiaries are complete and contain in all material respects
accurate records of all meetings and accurately reflect in all material respects
all other corporate action of the stockholders and directors and any committees
of the Board of Directors of HHTI and the boards of directors, partners or
managers of the HHTI Subsidiaries. Neither HHTI nor any HHTI Subsidiary is in
default under or in violation of any provision of their respective charters or
bylaws.
7.2 Authorization, Validity and Effect of Agreements.
HHTI and the HHTI Subsidiaries have the requisite corporate power and
authority to enter into the transactions contemplated hereby and to execute and
deliver this Agreement and all other documents, agreements and instruments
related to the transactions contemplated by this Agreement, including, without
limitation, the Ancillary Agreements. Subject only to the adoption of this
Agreement by the holders of two-thirds of the outstanding shares of HHTI Common
Stock, the consummation by HHTI of this Agreement, the Ancillary Agreements and
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of HHTI and the HHTI Subsidiaries and
no other corporate action on the part of HHTI or the HHTI Subsidiaries is
necessary to authorize this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by HHTI and constitutes, and the Ancillary Agreements to
which HHTI is a party (when executed and delivered by HHTI pursuant thereto)
will constitute, the valid and legally binding obligations of HHTI enforceable
against HHTI in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity.
7.3 Capitalization.
The authorized capital stock of HHTI consists of (a) 25,000,000 shares of
HHTI Common Stock and (b) 10,000,000 shares of HHTI Preferred Stock. As of June
1, 1999, (a) 4,631,700 shares of HHTI Common Stock were issued and outstanding,
(b) 868,304 shares of HHTI Common Stock were reserved for issuance upon
redemption of units of limited partnership interest in Humphrey Hospitality
Limited Partnership, and (c) no shares of HHTI Preferred Stock were issued and
outstanding. HHTI has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of HHTI on any matter. All such issued and outstanding shares
of HHTI Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as provided on
Schedule 7.3 hereto, there are not at the date of this Agreement any
existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements or commitments which obligate HHTI or any of the HHTI
Subsidiaries to issue, transfer or sell any shares of capital stock or other
equity interest of HHTI or any of the HHTI Subsidiaries. There are no agreements
or understandings to which HHTI is a party with respect to the voting of any
shares of HHTI Common Stock or which restrict the transfer of any such shares,
except in order to protect its REIT status. Except as set forth in Schedule ,
there are no outstanding contractual obligations of HHTI or any of the HHTI
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of HHTI or any capital stock, voting securities or other securities or
other ownership interests in any of the HHTI Subsidiaries or make any material
investment (in the form of a loan, capital contribution or otherwise) in any
person (other than one of the HHTI Subsidiaries).
7.4 Subsidiaries.
The outstanding shares of capital stock or other form of ownership
interests of the HHTI Subsidiaries are owned as set forth on Schedule 7.4
hereto. Except as set forth on Schedule 7.4 hereto, each of the outstanding
shares of capital stock or other form of ownership interest in each of the HHTI
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned as set forth on Schedule 7.4, free and clear of all liens, pledges,
security interests, voting agreements, claims or other encumbrances. The
following information for each HHTI Subsidiary is set forth on Schedule 7.4, if
applicable: (a) its name and jurisdiction of incorporation or organization; (b)
its authorized capital stock or other form of ownership interest; (c) the name
of each stockholder or owner of an equity interest and the number of issued and
outstanding shares of capital stock or other form of ownership interest held by
it; and (d) the name, ownership structure and equity owners of the general
partner(s), if any. In the case of each HHTI Subsidiary that is a corporation
(or that is classified as a corporation for federal income tax purposes), all of
the outstanding capital stock or other form of equity interest of that entity is
owned by HHTI, one or more other HHTI Subsidiaries that are corporations (or
that are classified as corporations for federal income tax purposes), or a
combination of the foregoing.
7.5 Other Interests.
Except for interests in the HHTI Subsidiaries, neither HHTI nor any HHTI
Subsidiary owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust
or entity (other than investments in short-term investment securities).
7.6 No Violation.
Except as set forth on Schedule 7.6, neither the execution and delivery by
HHTI of this Agreement or the Ancillary Agreements nor the consummation by HHTI
and the HHTI Subsidiaries of the transactions contemplated hereby or thereby in
accordance with the terms hereof or thereof, will: (a) conflict with or result
in a breach of any provisions of the Articles of Incorporation or Bylaws of HHTI
or the charter, bylaws or other organizational documents of any of the HHTI
Subsidiaries; (b) violate, or conflict with, or result in a breach of any
provision
of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination or
in a right of termination or cancellation of, or accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties of HHTI or the HHTI Subsidiaries under,
or result in being declared void, voidable or without further binding effect,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, contract,
agreement or other instrument, Commitment or obligation to which HHTI or any of
the HHTI Subsidiaries is a party, or by which HHTI or any of the HHTI
Subsidiaries or any of their properties is bound or affected, except for any of
the foregoing matters which, individually or in the aggregate, would not have a
Material Adverse Effect; or (c) other than any Regulatory Filings and the
approval of the STH and HHTI shareholders, require HHTI to make, obtain or give
any consent, waiver, approval or authorization of, or declaration, filing,
qualification or registration with, any domestic governmental or regulatory
authority, or any other entity or person (including, without limitation, its
directors) except where the failure to make, obtain or give any such consent,
waiver, approval or authorization of, or declaration, filing, qualification or
registration with, any governmental or regulatory authority or other entity or
person would not, individually or in the aggregate, have a Material Adverse
Effect. For purposes of determining compliance with the HSR Act, HHTI confirms
that the conduct of its business consists solely of investing in, owning,
developing and operating real estate for the benefit of its shareholders.
7.7 Securities Filings.
Schedule 7.7 hereto sets forth all HHTI Reports and such HHTI Reports
constitute all reports, schedules, forms, statements and other documents
required to be filed by HHTI under the Securities Laws since August 23, 1994.
As of their respective dates, the HHTI Reports (a) complied as to form in
all material respects with the applicable requirements of the Securities Laws
and (b) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each of the consolidated balance sheets of HHTI included
in or incorporated by reference into the HHTI Reports (including the related
notes and schedules) (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) were prepared in all material respects in
accordance with GAAP, and (iii) fairly presented in all material respects the
consolidated financial position of HHTI and the HHTI Subsidiaries as of its date
in conformity with GAAP. Each of the consolidated statements of income, retained
earnings and cash flows of HHTI included in or incorporated by reference into
the HHTI Reports (including any related notes and schedules) (A) complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (B) were
prepared in all material respects in accordance with GAAP, and (C) fairly
presented in all material respects the results of operations, retained earnings
or cash flows, as the case may be, of HHTI and the HHTI Subsidiaries for the
periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not
be material in amount or effect) in conformity with GAAP.
Except as and to the extent set forth in the HHTI Reports and as set forth
on Schedule 7.7(a), neither HHTI nor any of the HHTI Subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of HHTI or in the notes thereto, prepared in
accordance with GAAP, except liabilities arising in the ordinary course of
business since such date which would not have a Material Adverse Effect.
7.8 Litigation.
Except as set forth on Schedule 7.8 hereto, there are (a) no continuing
orders, injunctions or decrees of any court, arbitrator or Governmental
Authority to which HHTI or any HHTI Subsidiary is a party or by which any of its
properties or assets are bound or, to the knowledge of HHTI, to which any of its
directors, officers or affiliates is a party or by which any of their properties
or assets are bound, and (b) no actions, suits or proceedings (whether insured
or uninsured) pending against HHTI or any HHTI Subsidiary or, to the knowledge
of HHTI, against any of its directors, officers or affiliates or, to the
knowledge of HHTI, threatened against HHTI or any HHTI Subsidiary or against any
of its directors, officers or affiliates, at law or in equity, or before or by
any federal or state commission, board, bureau, agency or instrumentality, that
in the case of clause (a) or (b) above are reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect.
7.9 Absence of Certain Changes.
Except as disclosed in the HHTI Reports filed with the SEC prior to the
date hereof or as set forth on Schedule 7.9 hereto, since the Financial
Statement Date, (a) HHTI and the HHTI Subsidiaries have conducted their business
in all material respects in the ordinary course of such business (which, for
purposes of this Section 7.9nonly, shall include all acquisitions and/or
development of real estate properties and financing arrangements made in
connection therewith and the operation of hotels located thereon as set forth on
Schedule 7.9 hereto); (b) no event has caused a Material Adverse Effect and
there has been no event, occurrence or circumstance that with the passage of
time would reasonably be expected to cause a Material Adverse Effect; (c) except
as otherwise permitted pursuant to the terms of this Agreement, as of the date
hereof there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to HHTI's capital stock or any
split, combination or reclassification of HHTI's capital stock; and (d) there
has not been any material change in HHTI's accounting principles, practices or
methods. There are no material unsatisfied judgments, orders (other than orders
of general applicability), decrees or stipulations affecting HHTI or any HHTI
Subsidiary or to which any of them is a party.
7.10 Taxes.
(a) Except as set forth on Schedule 7.10 hereto, as of the date hereof,
HHTI and each of its Subsidiaries (i) have timely filed all federal, state and
foreign tax returns,
including, without limitation, information returns and reports required to
be filed by any of them for tax periods ended prior to the date of this
Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired and all such returns are accurate
and complete to the knowledge of HHTI in all material respects, (ii) have paid
or accrued in accordance with GAAP all taxes shown to be due and payable on such
returns or which have become due and payable pursuant to any assessment,
deficiency notice, 30-day letter or other notice received by it, and (iii) have
properly accrued in accordance with GAAP all taxes for such periods and periods
subsequent to the periods covered by such returns, other than as to clauses (i),
(ii) and (iii), any failure or failures that are not reasonably likely,
individually or in aggregate, to have a Material Adverse Effect. Except as set
forth on Schedule 7.10 hereto, as of the date hereof, neither HHTI nor any of
the HHTI Subsidiaries has received written notice that the federal, state or
local income or franchise tax returns of HHTI or any HHTI Subsidiary will be
examined by any taxing authority, or that any such examination is ongoing.
Except as set forth on Schedule hereto, neither HHTI nor any of the HHTI
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement now in effect extending the period for assessment or collection of
any income or other taxes.
(b) Except as set forth on Schedule 7.10, neither HHTI nor any of the HHTI
Subsidiaries is a party to any pending action or proceeding by any Governmental
Authority for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income and franchise tax returns filed by
HHTI and each of the HHTI Subsidiaries have been delivered to STH or made
available to representatives of STH. Except as set forth on Schedule 7.10
hereto, the tax returns filed by HHTI and any HHTI Subsidiary have not been,
and, to the knowledge of HHTI, are not being examined by the IRS or other
relevant taxing authorities for any period nor are there any pending or, to the
knowledge of HHTI, threatened examinations, tax claims or deficiencies asserted
by any such authorities. There are no tax liens on any of the property of HHTI.
Except as otherwise disclosed on Schedule 7.10, HHTI is not a party to, or bound
by, any tax indemnity, tax sharing or tax allocation agreement. HHTI (i)
qualified to be taxed as a REIT pursuant to Sections 856 through 859 of the Code
for its taxable years ended December 31, 1994 through December 31, 1998,
inclusive, (ii) has operated, and intends to continue to operate, in such a
manner as to qualify to be taxed as a REIT pursuant to Sections 856 through 859
of the Code for its taxable year ending December 31, 1998, and (iii) has not
taken or omitted to take, and will not take or omit to take, any action which
could result in, and each of the executive officers of HHTI, each acting in his
or her respective capacity as such, has no actual knowledge of, a challenge to
its status as a REIT. HHTI represents that each of its Subsidiaries which is a
corporation for federal income tax purposes and all the outstanding capital
stock of which is owned directly or through one or more of such wholly-owned
corporate HHTI Subsidiaries is a Qualified REIT Subsidiary as defined in Section
856(i) of the Code.
(c) Neither HHTI nor any HHTI Subsidiary has taken any action, or has any
reason to believe that any conditions exist, that could reasonably be expected
to prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
For purposes of this Section 7.10, "taxes" includes any federal, state,
local or foreign income, gross receipts, license, payroll, employment,
withholding, property, sales, excise or other tax or governmental charges of any
nature whatsoever, together with any interest, penalty or additional amount
payable with respect to any tax.
7.11 Books and Records.
All books and records relating to operating income and expenses of all of
the HHTI Hotels furnished or made available to STH by HHTI or HHTI's agent were
complete and were and shall be those maintained by HHTI in regard to the HHTI
Hotels in accordance with GAAP. The books of account and other financial records
of HHTI and the HHTI Subsidiaries are accurately reflected in all material
respects in the financial statements included in the HHTI Reports.
7.12 Employee Benefit Plans.
(a) All HHTI Benefit Plans are set forth in Schedule 7.12((a)) hereto. True
and complete copies of the HHTI Benefit Plans have been made available to STH.
To the extent applicable, the HHTI Benefit Plans comply, in all material
respects, with the requirements of ERISA and the Code, and any HHTI Benefit Plan
intended to be qualified under Section 401(a) of the Code has been determined by
the IRS to be so qualified. No HHTI Benefit Plan is covered by, nor has HHTI or
any entity under " common control" with HHTI within the meaning of ERISA Section
4001 ever maintained or been required to contribute to, any plan covered by
Title IV of ERISA or Section 412 of the Code. Neither HHTI nor any HHTI
Subsidiary has incurred, or engaged in any conduct that could cause it to incur,
any liability or penalty under Section 4975 of the Code or Section 502(i) of
ERISA. Each HHTI Benefit Plan has been maintained and administered in all
material respects in compliance with its terms and with ERISA and the Code to
the extent applicable thereto, including, without limitation, reporting,
disclosure and group health plan continuation coverage requirements.
(b) Except as disclosed on Schedule 7.12((b)), since the date of the most
recent audited financial statements of HHTI, neither HHTI nor any HHTI
Subsidiary has adopted or amended in any material respect any HHTI Benefit Plan.
(c) Except as set forth on Schedule (), there are no pending or, to the
knowledge of HHTI, threatened claims against or otherwise involving any of the
HHTI Benefit Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of HHTI Benefit Plan activities) has
been brought against or with respect to any such HHTI Benefit Plan, except for
any of the foregoing which would not have a Material Adverse Effect. All
material contributions required to be made as of the date hereof to the HHTI
Benefit Plans have been made or provided for. Neither HHTI nor any of the HHTI
Subsidiaries has any liabilities or obligations with respect to any such HHTI
Benefit Plan, whether accrued, contingent or otherwise, nor to the knowledge of
HHTI are any such liabilities or obligations expected to be incurred, except for
ongoing funding obligations or contributory obligations required by the terms of
any HHTI Benefit Plan. Neither HHTI nor any entity under "common control" with
HHTI within the meaning of ERISA Section 4001 has contributed to, or been
required to contribute to, any "multiemployer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA).
(d) Except as set forth on Schedule 7.12((d)), HHTI does not maintain or
contribute to any plan or arrangement which provides or has any liability to
provide life insurance, medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment and
HHTI has never represented, promised or contracted (whether in oral or written
form) to any employee or former employee that such benefits would be provided.
7.13 Labor Matters.
Except as set forth on Schedule 7.13, neither HHTI nor any of the HHTI
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor union
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of HHTI, threatened against HHTI or the HHTI
Subsidiaries relating to their business, except for any such proceeding which
would not have a Material Adverse Effect. To the knowledge of HHTI, as of the
date hereof, there are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or threatened involving
employees of HHTI or any of the HHTI Subsidiaries. Except as set forth on
Schedule 7.13, there have been no work stoppages, strikes or other concerted
actions by employees of HHTI or any of the HHTI Subsidiaries other than those
that would not have a Material Adverse Effect.
7.14 No Brokers.
Except for fees to be paid by HHTI as described on Schedule 7.14, neither
HHTI nor any HHTI Subsidiary has entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
HHTI, any HHTI Subsidiary or HHMI, or STH or any STH Subsidiary to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement, the Ancillary
Agreements or the consummation of the transactions contemplated hereby. Neither
HHTI nor any HHTI Subsidiary is aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement, the Ancillary Agreements or the
consummation of the transactions contemplated hereby.
7.15 Opinion of Financial Advisor.
HHTI has retained Tucker Anthony Cleary Gull to review the transactions
contemplated by this Agreement and the Ancillary Agreements and has received an
opinion from Tucker Anthony Cleary Gull on or before the date of this Agreement
to the effect that, as of the date of this Agreement, the Merger consideration
as provided in this Agreement is fair, from a financial point of view, to HHTI
and the holders of HHTI Common Stock.
7.16 STH Share Ownership.
Neither HHTI nor any of the HHTI Subsidiaries owns any shares of capital
stock of STH or other securities convertible into shares of capital stock of
STH.
7.17 HHTI Common Stock.
The issuance and delivery by HHTI of shares of HHTI Common Stock in
connection with the Merger and this Agreement have been duly and validly
authorized by all necessary corporate action on the part of HHTI except for the
approval of its shareholders as contemplated by this Agreement. The shares of
HHTI Common Stock to be issued in connection with the Merger and this Agreement,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
7.18 Related Party Transactions.
Except as set forth on Schedule 7.18, there are no arrangements, agreements
or contracts entered into by HHTI or any of the HHTI Subsidiaries with (a) any
consultant, (b) any person who is an officer, director or affiliate of HHTI or
any of the HHTI Subsidiaries, any relative of any of the foregoing or any entity
of which any of the foregoing is an affiliate, or (c) any person who acquired
HHTI Common Stock in a private placement. Copies of such documents, all of which
have been delivered to STH prior to the date hereof, were true, complete and
correct when delivered.
7.19 Contracts and Commitments.
(a) Schedule 7.19 hereto (with paragraph references corresponding to those
set forth below) contains a true and complete list of each of the following
contracts (true and complete copies or, if none, reasonably complete and
accurate written descriptions of which, together with all amendments and
supplements thereto, have been delivered or made available to STH), to which
HHTI or any of the HHTI Subsidiaries is a party or by which any HHTI Hotel is
bound:
(i) all contracts providing for the leasing or management of
one or more of the HHTI Hotels or any portion of one or more
of the HHTI Hotels;
(ii) all HHTI Franchise Agreements;
(iii) all material contracts providing for a commitment of
employment or consultation services for a specified or
unspecified term;
(iv) all contracts with any person containing any provision or
covenant prohibiting or materially limiting the ability of
HHTI or any of the HHTI Subsidiaries to engage in any business
activity, hire employees, solicit customers or otherwise
compete with any person;
(v) all partnership, joint venture, stockholders' or other
similar contracts with any person;
(vi) all notes, debentures, bonds and other evidence of HHTI
Indebtedness;
(vii) all contracts relating to any business combination;
(viii) all contracts between or among HHTI or any of the HHTI
Subsidiaries, on the one hand, and any of their stockholders
or affiliates, on the other hand;
(ix) all collective bargaining or similar labor contracts; and
(x) all other contracts that involve the annual payment or
potential annual payment pursuant to the terms of such
contract, by or to HHTI or any of the HHTI Subsidiaries of
more than $25,000 or aggregate payments in excess of $100,000
that will not (A) be fully performed on or prior to the
Effective Time, (B) expire by their terms prior to the
Effective Time, or (C) be cancelable by the Surviving Entity,
without penalty, upon not more than 30 days notice, including,
without limitation, all leases, contracts for purchase and
sale of assets, advance booking contracts and banquet
contracts.
(b) Each contract required to be disclosed on Schedule 7.19 is in full
force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms and, except as disclosed on Schedule
7.19 , neither HHTI, any of the HHTI Subsidiaries nor, to the knowledge of HHTI,
any other party to such contract is in violation, breach or default under any
such contract (or with notice or lapse of time or both would be in violation,
breach or default under any such contract), the effect of which, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect.
(c) The HHTI Franchise Agreements disclosed on Schedule 7.19 constitute all
of the franchise or similar agreements necessary to operate and manage the HHTI
Hotels and neither HHTI nor any HHTI Subsidiary has received any notice or has
any knowledge of an event of default or termination or proposed termination
under any such HHTI Franchise Agreement.
7.20 Development Rights.
Schedule 7.20 hereto sets forth a list of all material agreements entered
into by HHTI or any of the HHTI Subsidiaries relating to the acquisition,
development, rehabilitation, capital improvement or construction of hotels or
additions thereto or other real estate properties, which acquisition,
development or construction has not been substantially completed as of the date
of this Agreement. Such agreements, true and correct copies of all of which have
been delivered to STH, have not been modified and are valid and enforceable in
accordance with their respective terms.
7.21 Certain Payments Resulting From Transactions.
Except for the payments described in Schedule 7.21 and except for deferred
compensation arrangements with certain HHTI executive officers and employment
agreements with certain HHTI officers, each of which arrangements and agreements
is set forth on Schedule 7.19 hereto, the execution of, and performance of the
transactions contemplated by, this Agreement and the Ancillary Agreements will
not (either alone or upon the occurrence of any additional or subsequent events)
(a) constitute an event under any HHTI Benefit Plan, policy, practice, agreement
or other arrangement or any trust or loan (the "HHTI Employee Arrangements")
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, director
or consultant of HHTI or any of the HHTI Subsidiaries or (b) result in the
triggering or imposition of any restrictions or limitations on the right of HHTI
to amend or terminate any HHTI Employee Arrangement and receive the full amount
of any excess assets remaining or resulting from such amendment or termination,
subject to applicable taxes. Except as set forth on Schedule 7.21, no payment or
benefit which will be required to be made pursuant to the terms of any
agreement, Commitment or HHTI Benefit Plan, as a result of the transactions
contemplated by this Agreement or the Ancillary Agreements, to any officer,
director or employee of HHTI or any of the HHTI Subsidiaries, will be
characterized as a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code.
7.22 Convertible Securities.
Except as set forth on Schedule 7.22, HHTI has no outstanding options,
warrants or other securities exercisable for, or convertible into, shares of
HHTI Common Stock, the terms of which would require any anti-dilution
adjustments by reason of the consummation of the transactions contemplated
hereby.
7.23 Compliance with Applicable Laws.
(a) Except as disclosed on Schedule 7.23 hereto, HHTI, all HHTI
Subsidiaries and all HHTI Hotels and the operation thereof currently are in
substantial compliance with the requirements of all Applicable Laws, except
where the failure to so comply would not, individually or in the aggregate, be
reasonably likely to result in a Material Adverse Effect.
(b) Except as disclosed on Schedule 7.23 hereto, neither HHTI nor any of
the HHTI Subsidiaries has received any written notice of uncured violations at
any of the HHTI Hotels of zoning, building, fire, health or any other applicable
statute, ordinance or regulation, relating to any of the HHTI Hotels, the
construction or any occupancy thereof, except for violations that, individually
or in the aggregate with respect to any HHTI Hotel, would not be reasonably
likely to result in a Material Adverse Effect, nor are there presently pending
against HHTI or against any of the HHTI Hotels any judgments relating to any of
the above matters, any judicial proceedings or administrative actions or any
state of facts which, to the knowledge of HHTI, with notice or lapse of time,
could reasonably be expected to give rise to any such proceedings or actions, in
either case that would be reasonably likely to result in a Material Adverse
Effect.
(c) Neither HHTI nor any of the HHTI Subsidiaries has received any written
notice that any material HHTI Permits, licenses or consents not already obtained
are required by any Governmental Authorities in connection with the use and
occupancy of any of the HHTI Hotels or any material improvements thereto; and
there are no material Commitments or agreements with any of such Governmental
Authorities affecting any HHTI Hotel which have not been fully disclosed to STH
in writing.
7.24 Insurance.
Schedule 7.24 sets forth a list of the HHTI Insurance Policies. HHTI shall
provide STH a copy of any HHTI Insurance Policy within five (5) days of a
request from STH. The HHTI Insurance Policies are currently in force, all
premiums for such policies were paid when due and all premiums to provide
coverage under such policies through the Effective Date will be paid by HHTI or
the HHTI Subsidiaries on or before the Effective Date except for such failure
that will not have a Material Adverse Effect. Neither HHTI nor any of the HHTI
Subsidiaries has received any notice from any insurer of any of the HHTI Hotels
or any part thereof requesting any material improvements, alterations,
additions, corrections or other work in, on or about the improvements thereto,
whether related to any of the HHTI Hotels or to the operation of any occupant
thereof, which have not been cured or satisfied. The HHTI Insurance Policies are
adequate to cover the amount of all losses that can reasonably be anticipated
and have coverage amounts equal to or greater than the coverage amounts required
by HHTI's lenders.
7.25 Subsidiaries of HHTI.
All HHTI Subsidiaries which were taxed for federal income tax purposes as
"S" corporations at the time of their acquisition by HHTI were taxed as "S"
corporations from their respective dates of formation and had no current or
accumulated earnings and profits for federal income tax purposes prior to their
acquisition by HHTI.
7.26 Acquisitions by HHTI and its Subsidiaries.
Neither HHTI nor any HHTI Subsidiary has made an acquisition which would
constitute a "reorganization" under Section 368(a) of the Code.
7.27 State Takeover Statutes.
HHTI and the HHTI Subsidiaries have taken all action necessary to exempt
the transactions contemplated by this Agreement and the Ancillary Agreements
from the operation of any Takeover Statute.
7.28 Investment Company Act of 1940.
Neither HHTI nor any HHTI Subsidiary is, or at the Effective Time will be,
required to be registered under the Investment Company Act of 1940, as amended.
7.29 Leases.
Except as set forth on Schedule 7.29, neither HHTI nor any HHTI Subsidiary
is a lessee or tenant under any lease for real property.
7.30 Year 2000 Compliance.
HHTI and the HHTI Subsidiaries have reviewed the areas within their
business and operations which could be adversely affected by the Year 2000
Problem and have developed a program to achieve Year 2000 Compliance on or
before September 30, 1999. To date, HHTI and the HHTI Subsidiaries have
implemented such Year 2000 program in accordance with the timetable set forth
therein. Based on such review and program, HHTI and the HHTI Subsidiaries
believe that the Year 2000 Problem, including costs of remediation, will not
have a Material Adverse Effect.
7.31 Representations and Warranties Regarding HHTI Properties.
HHTI represents and warrants to STH that, except as set forth on Schedules
7.31(a) through (p):
(a) Title to HHTI Hotels. HHTI or an HHTI Subsidiary has on the date of
this Agreement and will have on the Closing Date good and indefeasible fee
simple title to each of the HHTI Land (other than properties held pursuant to a
ground lease) and HHTI Improvements, free and clear of all liens except those
securing HHTI Indebtedness as disclosed in the Title Policies, Title Commitments
and Title Updates covering the HHTI Land and HHTI Improvements, and free and
clear of all other conditions, exceptions or reservations, except such as do not
have a Material Adverse Effect.
(b) [Reserved]
(c) HHTI Not a Foreign Person. HHTI is not a "foreign person" but is a
"United States person" as such terms are defined in the Foreign Investment in
Real Property Tax Act of 1980 and Sections 1445 and 7701 of the Code.
(d) Operating Agreements. No portion of any HHTI Hotel is subject to the
burdens or obligations of any HHTI Operating Agreement and all HHTI Operating
Agreements are current and not in default other than defaults that will not,
individually or in the aggregate, have a Material Adverse Effect.
(e) Tenant Leases.:
(i) HHTI or an HHTI Subsidiary is the sole owner of the lessor's interest
in all of the HHTI Leases and all such Leases are in full force and effect
without current material default by either HHTI or the respective tenants, and
no tenant has made any material claim against HHTI or any HHTI Subsidiary for
damages related to any HHTI Lease other than any such default, claim or claims
that are
not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect;
(ii) none of the HHTI Leases that are material to HHTI has been modified in
a material way, except as reflected in amendments to which STH has had access;
(iii) all obligations of the lessor under the HHTI Leases with respect to
the performance of work or the installation of equipment or materials required
to have been performed at or prior to the Effective Time have been fully
observed and performed, except for such failures that, individually or in the
aggregate, will not have a Material Adverse Effect;
(iv) as of the date hereof, no tenant is or shall become entitled to any
material concession, rebate, allowance, or free rent for any period subsequent
to the Closing, without the prior written consent of STH, except as set forth in
the HHTI Lease with respect to such tenant;
(v) no tenant has any purchase option or other interest (other than its
leasehold tenancy for a specified term) in any of the HHTI Land and/or the HHTI
Improvements;
(vi) no tenant has given HHTI or any HHTI Subsidiary notice of its
intention to vacate its demised premises prior to the end of the term of its
lease; and
(vii) none of the HHTI Leases provides for the payment of rent or other
amounts that are determined in whole or in part with reference to the income or
profits derived by any person (excluding amounts received as rents from the HHTI
Leases that are based solely on a percentage or percentages of receipts or sales
where the percentage or percentages were fixed at the time the HHTI Leases were
entered into, have not been renegotiated during the term of the HHTI Leases in a
manner that had the effect of basing rent on income or profits, and conform with
normal business practices).
(f) No Condemnation. To the knowledge of HHTI and the HHTI Subsidiaries, as
of the date hereof, there is no pending condemnation or similar proceeding
affecting any of the HHTI Land, the HHTI Improvements, or the HHTI Personal
Property or any portion thereof, and neither HHTI nor any HHTI Subsidiary has
received any written notice and each has no knowledge that any such proceeding
is contemplated.
(g) [Reserved]
(h) No Administrative Actions. Except for any investigation, action or
judicial proceeding that would not have a Material Adverse Effect, to the
knowledge of HHTI and the HHTI Subsidiaries, no HHTI Hotel is now the subject of
any administrative investigation, action or judicial proceeding in regard to
sex, age, or racially discriminatory practices initiated by any Governmental
Authority, or any private citizen, and, to the knowledge
of HHTI and the HHTI Subsidiaries, no such investigation, administrative
action, or judicial proceeding is now pending, nor is any HHTI Hotel presently
operating under any court order or administrative agreement in regard to alleged
sex, age, or racially discriminatory practices.
(i) Zoning. To the knowledge of HHTI and the HHTI Subsidiaries all of the
HHTI Improvements and the present uses thereof are permitted, conforming
structures and uses under all applicable zoning and building laws and
ordinances, other than any unpermitted or nonconforming structures that do not
materially affect the use or value of the HHTI Hotel.
(j) Parties in Possession. There are no adverse parties in possession of
any of the HHTI Hotels or of any part thereof and no parties in possession
thereof except HHTI and the tenants under the HHTI Leases, except as otherwise
expressly disclosed herein, and no party has been granted any license, lease, or
other right relating to the use or possession of any of the HHTI Hotels except
the tenants under the HHTI Leases, or except as otherwise expressly disclosed
herein.
(k) No Other Contracts. There are no contracts or other obligations
outstanding for the sale, exchange or transfer of any of the HHTI Hotels or any
portion thereof or the business operated thereon.
(l) Maintenance and No Defects. To HHTI's or any HHTI Subsidiary's
knowledge, the HHTI Hotels have been maintained in all material respects in
accordance with industry practices.
(m) [Reserved]
(n) Real Estate Tax Matters. As of the date hereof, neither HHTI nor any of
the HHTI Subsidiaries is a party to any pending action or proceeding by any
Governmental Authority for assessment or collection of real estate taxes.
(o) Environmental. To HHTI's or any HHTI Subsidiary's knowledge, there are
no Environmental Conditions and there is no Environmental Noncompliance with
respect to any HHTI Hotel or any properties or assets now or previously owned or
operated by HHTI or any HHTI Subsidiary, where such condition or noncompliance
is reasonably likely to have a Material Adverse Effect. All material HHTI
Permits have been obtained, are valid and in good standing. To HHTI's or any
HHTI Subsidiary's knowledge, all operations on or at each HHTI Hotel are and
have been conducted in material compliance with all applicable Environmental
Laws, where noncompliance with such laws is reasonably likely to have a Material
Adverse Effect. As of the date hereof, neither HHTI nor any HHTI Subsidiary has
received any notification from any governmental instrumentality seeking any
information or alleging any violation of any Applicable Law or Environmental
Law. Neither HHTI nor any HHTI Subsidiary has caused or permitted any HHTI Hotel
to be used to generate, manufacture, refine, transport, treat, recycle, store,
handle, dispose of, transfer, produce, or process any Hazardous Materials or
solid waste, except in small quantities utilized in connection with routine
maintenance, repair or operation of the HHTI Hotels, all of which have been and
will be stored, used, handled, and disposed of in full compliance with all
Environmental Laws other than such
noncompliance that, individually or in the aggregate, will not have a
Material Adverse Effect. Neither HHTI nor any HHTI Subsidiary has caused or
permitted, and has no knowledge of, any Release of any such Hazardous Materials
on-site or off-site of any HHTI Hotel (or any properties or assets now or
previously owned or operated by HHTI or any HHTI Subsidiary) other than such
releases that, individually or in the aggregate, do not violate any applicable
Environmental Laws and will not have a Material Adverse Effect.
(p) Compliance with HHTI Franchise Agreements. The HHTI Hotels are operated
pursuant to the HHTI Franchise Agreements described in Schedule 7.19, and all
public spaces, lobbies, meeting rooms and each guest room of the HHTI Hotels is
furnished in accordance with the franchisor's standards except for such
noncompliance that is not reasonably likely to have a Material Adverse Effect.
7.32 HHTI Deliverables.
HHTI has, prior to the execution of this Agreement, delivered to STH, or
provided STH access to, true, correct and complete copies of each of the
following:
(a) Leases. Each HHTI Lease covering or relating to each HHTI Hotel,
together with any amendments thereto or other documents creating further
obligations or agreements in connection therewith.
(b) Operating Statements. Operating statements covering the HHTI Hotels for
the fiscal year ended December 31, 1998, which statements are prepared in the
ordinary course of HHTI's business and form the basis for HHTI's financial
statements.
(c) Tax Statements. Copies of the most recent real estate, ad valorem and
personal property tax statements with respect to each parcel of HHTI Land and/or
HHTI Hotel.
(d) [Reserved]
(e) Operating Agreements. A list of all HHTI Operating Agreements together
with a copy of each HHTI Operating Agreement.
(f) List of Defects. A list of all defects or malfunctions affecting any
part of the HHTI Hotels and of which HHTI or any HHTI Subsidiary has knowledge
with respect to foundations, walls, roofs, heating, electrical, plumbing or air
conditioning equipment or systems, and drainage or sewage equipment or systems
other than such defects or malfunctions that, individually or in the aggregate,
will not result in a Material Adverse Effect.
(g) Insurance Policies. Copies of all of the HHTI Insurance Policies.
(h) Commission Agreements. All leasing or other commission agreements with
respect to the HHTI Hotels and a list of all unpaid commissions which identifies
the payee, amount and date or event upon which such commission will become due
and payable.
(i) Environmental Matters. All existing environmental reports for any HHTI
Hotel and existing updated record searches relating to existing environmental
site assessments for each HHTI Hotel.
(j) [Reserved]
(k) A copy of the existing Survey of each parcel of HHTI Land and the HHTI
Improvements located thereon; and
(l) A schedule of all Inventory and FF&E at the HHTI Hotels as of a date no
more than five business days prior to the Closing Date.
7.33 HHTI Leases.
Schedule sets forth a brief summary of the HHTI Leases. True and correct
copies of each HHTI Lease have been provided by HHTI to STH. Schedule 7.33 sets
forth a brief description of the proposed Hotel Leases.
ARTICLE 8
COVENANTS
8.1 Acquisition Proposals.
Prior to the Effective Time, STH and HHTI each agree (a) that neither of
them nor any of their Subsidiaries shall, and each of them shall direct and use
its best efforts to cause its respective officers, directors, employees, agents,
affiliates and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any Acquisition Proposal or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (b) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and each will take the necessary
steps to inform the individuals or entities referred to above of the obligations
undertaken in this Section 8.1; and (c) that it will notify the other party
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 8.1 shall prohibit the Board of Directors of such
party from (i) prior to the adoption of this Agreement by the stockholders of
such party, furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited bona fide
Acquisition Proposal, if, and only to the extent that, (A) the Board of
Directors of such party determines in good faith that such action is appropriate
for such body to determine whether the Acquisition Proposal constitutes or could
lead to a Superior Proposal, or the Board of Directors of such party determines
in good faith that such action is appropriate because the Acquisition Proposal
constitutes a Superior Proposal, (B)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, such party provides written notice to
the other party to this Agreement to the effect that it is furnishing
information to, or entering into discussions with, such person or entity, and
(C) subject to any confidentiality agreement with such person or entity, such
party keeps the other party to this Agreement informed of the status (but not
the terms) of any such discussions or negotiations; and (ii) to the extent
applicable, complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal.
Nothing in this Section 8.1 shall (x) permit any party to terminate this
Agreement (except as specifically provided in Article 10 hereof), (y) permit any
party to enter into any agreement with respect to an Acquisition Proposal during
the term of this Agreement (it being agreed that during the term of this
Agreement, no party shall enter into any agreement with any person that provides
for, or in any way facilitates, an Acquisition Proposal (other than a
confidentiality agreement in customary form)), or (z) affect any other
obligation of any party under this Agreement.
8.2 Earnings and Profits Dividend.
Prior to the Effective Time, the Earnings and Profits Dividend shall be
paid to STH stockholders of record as of a record date on or prior to the
Closing Date (the "E&P Record Date"). STH shall declare such dividend not less
than 10 days nor more than 15 days prior to the E&P Record Date, provided,
however, that the payment of such dividend shall be contingent as provided in
the last sentence of this Section 8.2. If STH incurs debt to pay the Earnings
and Profits Dividend, STH and HHTI agree that any such indebtedness (i) if
secured, shall after the Effective Time be secured exclusively by certain of the
STH Hotels and shall be non-recourse as to any other properties owned by the
Surviving Entity, except for reasonable and customary exceptions relating to
fraud, waste, failure to pay taxes, misapplication of proceeds, and breach of
hazardous materials provisions, and (ii) together with the STH Indebtedness,
shall be included for purposes of the debt limitation set forth in Section
9.3((g)) and Section 10.4. STH shall pay the Earnings and Profits Dividend to
the STH stockholders only if this Agreement is adopted by the holders of a
majority of the outstanding shares of STH Common Stock and by the holders of
two-thirds of the outstanding shares of HHTI Common Stock and if all other
conditions set forth in Article 9 have been satisifed or waived.
8.3 Conduct of Businesses.
(a) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement or as contemplated by this Agreement, unless the
other party has consented in writing thereto, STH and HHTI:
(i) Shall use their reasonable efforts, and shall cause each of their
respective Subsidiaries to use their reasonable efforts, to preserve intact
their business organizations and goodwill and keep available the services of
their respective officers and employees;
(ii) Shall confer on a regular basis with one or more representatives of
the other to report operational matters of materiality and, subject to Section
8.1, any proposals to engage in material transactions;
(iii) Shall promptly notify the other of any material emergency or other
material change in the condition (financial or otherwise), business, properties,
assets, liabilities, prospects or the normal course of their businesses or in
the operation of their properties, any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the breach in any material respect of any representation,
warranty, covenant or agreement contained herein; and
(iv) Shall promptly deliver to the other true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of this
Agreement.
(b) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement or as otherwise contemplated by this Agreement,
unless HHTI has consented (such consent not to be unreasonably withheld or
delayed) in writing thereto, STH:
(i) Shall, and shall cause each of the STH Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(ii) Shall not, and shall not permit any of the STH Subsidiaries to, amend
its Certificate of Incorporation, Bylaws or other organizational documents;
(iii) Shall not, and shall not permit any STH Subsidiary to, merge or
consolidate with any other person;
(iv) Shall not, and shall not permit any of the STH Subsidiaries to, (A)
except pursuant to the exercise of options described in Schedule
8.3((b))((iv))(A), warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this Agreement, issue any
of its shares of beneficial interest, effect any share split, reverse share
split, share dividend, recapitalization or other similar transaction, (B) grant,
confer or award any option, warrant, conversion right or other right not
existing on the date hereof or described on Schedule 8.3((b))((iv))(B) to
acquire any shares of its beneficial interest, (C) increase any compensation or
enter into or amend any employment agreement with any of its present or future
officers or directors, or (D) adopt any new employee benefit plan (including any
stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any material respect, except for changes which are less
favorable to participants in such plans;
(v) Except for the payment of the Earnings and Profits Dividend in
accordance with Section 8.2, shall not declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of its capital
stock;
(vi) Other than in the ordinary course of its business and except as
contemplated by the Sale Agreement, shall not, and shall not permit any of the
STH Subsidiaries to, sell or otherwise dispose of (A) any STH Land, STH Hotel,
STH Improvements, STH Personal Property or any of its capital stock of or other
interests in the STH Subsidiaries, in each case which are material, individually
or in the aggregate, or (B) any of its other assets which are material,
individually or in the aggregate;
(vii) Other than in the ordinary course of its business, shall not, and
shall not permit any of the STH Subsidiaries to, make any loans, advances or
capital contributions to, or investments in, any other person;
(viii) Shall not, and shall not permit any of the STH Subsidiaries to, pay,
discharge or satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business consistent
with past practice or in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of STH included in the STH Reports
or incurred in the ordinary course of business consistent with past practice;
(ix) Except for any indebtedness STH incurs in order to pay the Earnings
and Profits Dividend, STH shall not, and shall not permit any of the STH
Subsidiaries to, enter into any Commitment which individually may result in
total payments or liability by or to it in excess of $50,000 in the case of any
one Commitment or in excess of $125,000 for all such Commitments;
(x) Shall not, and shall not permit any of the STH Subsidiaries to, enter
into any Commitment with any officer, director or affiliate of STH or any of the
STH Subsidiaries except to the extent the same occur in the ordinary course of
business consistent with past practice and would not have a Material Adverse
Effect;
(xi) Shall manage and operate each STH Hotel and the Office Building in all
material respects in accordance with the practices and in the manner it was
managed and operated on the date hereof, including, without limitation,
maintaining customary levels of Inventory;
(xii) Shall maintain in all material respects the STH Improvements and FF&E
in a manner consistent with past practices;
(xiii) Shall enter into no material agreement with respect to the
operation, management or maintenance of any portion of any STH Hotel or the
Office Building without the prior written consent of HHTI;
(xiv) Other than in the ordinary course of business, shall not, without the
prior written consent of HHTI, permit any material structural modifications or
additions to any STH Hotel or the Office Building, or sell or permit to be sold
or otherwise dispose of any item or group of items constituting a portion of any
STH Hotel or the Office Building;
(xv) Shall not, and shall not permit any STH Subsidiary to, consent to a
change in the zoning of any STH Hotel or the Office Building;
(xvi) Shall not, and shall not permit any STH Subsidiary to, enter into a
contract to acquire any real property;
(xvii) Shall maintain STH's existing or comparable insurance coverage with
respect to each STH Hotel or the Office Building from the date of execution of
this Agreement through the Effective Time or earlier termination of this
Agreement;
(xviii) Shall not further encumber or permit encumbrance of any STH Hotel
or the Office Building in any manner or permit the modification or amendment of
any debt instruments or agreements relating to the STH Indebtedness;
(xix) Shall, and shall cause each STH Subsidiary to, (i) collect and/or pay
to the appropriate governmental authorities, as required, except to the extent
reasonably disputed in good faith, all sales taxes, rental taxes or the
equivalent, and all interest and penalties thereon, required to be paid or
collected in connection with the operation of the STH Hotels or the Office
Building as of the Closing Date and (ii) file all necessary returns and
petitions required to be filed through the Closing Date;
(xx) Shall promptly notify HHTI in writing of the receipt by STH of any
material written levy (or threatened levy) against any STH Hotel or the Office
Building of any special governmental assessment or similar occurrence;
(xxi) Shall promptly notify HHTI in writing of any violation, alleged
violation or anticipated violation, of any Applicable Law or Environmental Law,
of which it gains knowledge or is notified which is likely to have a Material
Adverse Effect or the commencement of any legal action, suit or proceeding
affecting STH, any STH Subsidiary or any of their assets, properties or
employees;
(xxii) Shall not execute an assignment of any STH Lease, an assignment of
any rent accruing under any STH Lease or the assignment of any room rent or
booking;
(xxiii) To the extent a notice of assumed name or similar document relating
to any name, trademark, trade style or trade name assigned or passed to HHTI
hereunder has been filed with any federal, state, county or local governmental
agency, shall, at HHTI's request, withdraw such filing and assist HHTI in any
reasonable manner to protect HHTI's interest in any such name, trademark, trade
style, trade name or servicemark assigned or passed to HHTI hereunder; and
(xxiv) Shall not (i) change in any material manner any of its methods,
principles or practices of accounting in effect as of the date of its most
recent audited financial statements, except as may be required by applicable law
or GAAP and with notice thereof to HHTI, or (ii) make or rescind any express or
deemed election relating to taxes, settle or compromise any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ended December
31, 1998.
(c) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement (including, without limitation, Schedule 9.3((c)) or
as otherwise contemplated by this Agreement, unless STH has consented (such
consent not to be unreasonably withheld or delayed) in writing thereto, HHTI:
(i) Shall, and shall cause each of the HHTI Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(ii) Shall not, and shall not permit any of the HHTI Subsidiaries to, amend
its Articles of Incorporation, Bylaws or other organizational documents;
(iii) Shall not, and shall not permit any HHTI Subsidiary to, merge or
consolidate with any other person;
(iv) Shall not, and shall not permit any of the HHTI Subsidiaries to, (A)
except pursuant to the exercise of options, warrants, conversion rights and
other contractual rights existing on the date hereof and disclosed pursuant to
this Agreement, issue any of its shares of beneficial interest, effect any share
split, reverse share split, share dividend, recapitalization or other similar
transaction, (B) grant, confer or award any option, warrant, conversion right or
other right not existing on the date hereof to acquire any of its shares of
beneficial interest, (C) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers or directors, or
(D) adopt any new employee benefit plan (including any stock option, stock
benefit or stock purchase plan) or amend any existing employee benefit plan in
any material respect, except for changes which are less favorable to
participants in such plans;
(v) Shall not declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock, except
(A) its regular monthly dividends, and (B) any other dividend or distribution to
the
extent necessary for HHTI to maintain its ability to qualify to be taxed as
a REIT under the Code;
(vi) Other than in the ordinary course of its business, shall not, and
shall not permit any of the HHTI Subsidiaries to, sell or otherwise dispose of
(A) any HHTI Land, HHTI Hotel, HHTI Improvements, HHTI Personal Property or any
of its capital stock of or other interests in the HHTI Subsidiaries, in each
case which are material, individually or in the aggregate, or (B) any of its
other assets which are material, individually or in the aggregate;
(vii) Other than in the ordinary course of its business, shall not, and
shall not permit any of the HHTI Subsidiaries to, make any loans, advances or
capital contributions to, or investments in, any other person;
(viii) Shall not, and shall not permit any of the HHTI Subsidiaries to,
pay, discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of HHTI included in the
HHTI Reports or incurred in the ordinary course of business consistent with past
practice;
(ix) Shall not, and shall not permit any of the HHTI Subsidiaries to, enter
into any Commitment which individually may result in total payments or liability
by or to it in excess of $50,000 in the case of any one Commitment or in excess
of $125,000 for all such Commitments;
(x) Shall not, and shall not permit any of the HHTI Subsidiaries to, enter
into any Commitment with any officer, director or affiliate of HHTI or any of
the HHTI Subsidiaries except to the extent the same occur in the ordinary course
of business consistent with past practice and would not have a Material Adverse
Effect;
(xi) Shall manage and operate each HHTI Hotel in all material respects in
accordance with the practices and in the manner it was managed and operated on
the date hereof, including, without limitation, maintaining customary levels of
Inventory;
(xii) Shall maintain in all material respects the HHTI Improvements and
FF&E in a manner consistent with past practices;
(xiii) Shall enter into no material agreement with respect to the
operation, management or maintenance of any portion of any HHTI Hotel without
the prior written consent of STH;
(xiv) Other than in the ordinary course of business, shall not, without the
prior written consent of STH, permit any material structural modifications or
additions to any HHTI Hotel, or sell or permit to be sold or otherwise dispose
of any item or group of items constituting a portion of any HHTI Hotel;
(xv) Shall not, and shall not permit any HHTI Subsidiary to, consent to a
change in the zoning of any HHTI Hotel;
(xvi) Shall not, and shall not permit any HHTI Subsidiary to, enter into a
contract to acquire any real property;
(xvii) Shall maintain HHTI's existing or comparable insurance coverage with
respect to each HHTI Hotel from the date of execution of this Agreement through
the Effective Time or earlier termination of this Agreement;
(xviii) Shall not further encumber or permit encumbrance of any HHTI Hotel
in any manner or permit the modification or amendment of any debt instruments or
agreements relating to the HHTI Indebtedness;
(xix) Shall, and shall cause each HHTI Subsidiary to, (i) collect and/or
pay to the appropriate governmental authorities, as required, except to the
extent reasonably disputed in good faith, all sales taxes, rental taxes or the
equivalent, and all interest and penalties thereon, required to be paid or
collected in connection with the operation of the HHTI Hotels as of the Closing
Date and (ii) file all necessary returns and petitions required to be filed
through the Closing Date;
(xx) Shall promptly notify STH in writing of the receipt by HHTI of any
material written levy (or threatened levy) against any HHTI Hotel of any special
governmental assessment or similar occurrence;
(xxi) Shall promptly notify STH in writing of any violation, alleged
violation or anticipated violation, of any Applicable Law or Environmental Law,
of which it gains knowledge or is notified which is likely to have a Material
Adverse Effect or the commencement of any legal action, suit or proceeding
affecting HHTI, any HHTI Subsidiary or any of their assets, properties or
employees;
(xxii) Shall not execute an assignment of any HHTI Lease, an assignment of
any rent accruing under any HHTI Lease or the assignment of any room rent or
booking; and
(xxiii) Shall not (i) change in any material manner any of its methods,
principles or practices of accounting in effect as of the date of its most
recent audited financial statements, except as may be required by applicable law
or GAAP and with notice thereof to STH, or (ii) make or rescind any express or
deemed election relating to taxes, settle or compromise any claim, action, suit,
litigation,
proceeding, arbitration, investigation, audit or controversy
relating to taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ended December
31, 1998.
8.4 Damage to Property.
STH agrees to give HHTI prompt notice of any material fire or other
material casualty affecting any of the STH Hotels or the Office Building between
the date hereof and the Closing Date or of any actual or threatened taking or
condemnation of all or any portion of any of the STH Land or the STH
Improvements. HHTI agrees to give STH prompt notice of any material fire or
other material casualty affecting any of the HHTI Hotels between the date hereof
and the Closing Date or of any actual or threatened taking or condemnation of
all or any portion of the HHTI Land or the HHTI Improvements.
8.5 Meetings of Shareholders.
Each of HHTI and STH will take all action necessary in accordance with
applicable law and its organizational documents to convene a meeting of its
shareholders as promptly as practicable, but in no event later than October 15,
1999, to consider and vote upon or otherwise to obtain the consent of its
shareholders to adopt or approve this Agreement, the Ancillary Agreements and
the transactions contemplated hereby and thereby, as applicable, including the
Restated Articles of Incorporation of HHTI, in the form attached hereto as
Exhibit M. The Boards of Directors of HHTI and STH shall each recommend to its
shareholders such adoption or approval, and HHTI and STH shall each take all
lawful action to solicit such adoption or approval, including, without
limitation, timely mailing the Proxy Statement; provided, however, that such
convening of a meeting of shareholders, recommendation and solicitation are
subject to any action taken by, or upon authority of, the Board of Directors of
HHTI or STH, as the case may be, in the exercise of its good faith judgment as
to its fiduciary duties to its shareholders imposed by law as advised by
counsel. HHTI and STH shall coordinate and cooperate with respect to the timing
of such meetings and shall use their best efforts to hold such meetings on the
same day.
8.6 Filings; Other Action.
(a) Subject to the terms and conditions herein provided, STH and HHTI
shall: (a) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits or authorizations are required to
be obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states, third party secured and
unsecured lenders, franchisors and rating agencies in connection with the
execution and delivery of this Agreement, the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby and (ii) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; (b) use all reasonable efforts to obtain in writing any
consents required from third parties in form reasonably satisfactory to STH and
HHTI necessary to effectuate the Merger; and (c) use all reasonable efforts to
take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements.
(b) STH, HHTI and their respective Boards of Directors shall (i) take all
action necessary so that no Takeover Statute is or becomes applicable to the
Merger, this Agreement, the Ancillary Agreements or any of the other
transactions contemplated hereby or thereby, and (ii) if any Takeover Statute
becomes applicable to the Merger, this Agreement, the Ancillary Agreements or
any of the other transactions contemplated hereby, take all action necessary to
minimize the effect of such Takeover Statute on the Merger or the consummation
of any other transaction contemplated hereby.
(c) If at any time after the Effective Time, any further action is
necessary or desirable to carry out the purpose and intent of this Agreement,
the proper officers and directors of HHTI and STH shall take all such necessary
action.
8.7 Inspection of Records.
From the date hereof to the Effective Time, each of STH and HHTI shall
allow all designated officers, attorneys, accountants and other representatives
of the other access at all reasonable times to the records and files,
correspondence, audits and properties, as well as to all information relating to
commitments, contracts, titles and financial position, or otherwise pertaining
to the business and affairs of STH and HHTI and their respective Subsidiaries.
8.8 Publicity.
The initial press release relating to this Agreement shall be a joint
release and thereafter STH and HHTI shall, subject to their respective legal
obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable efforts to agree
upon the text of any press release, before issuing any such press release or
otherwise making public statements with respect to the transactions contemplated
hereby and in making any filings with any federal or state governmental or
regulatory agency or with any national securities exchange with respect thereto.
8.9 Registration Statement.
As soon as practicable following the date of this Agreement, HHTI and STH
shall prepare and file with the SEC the Proxy Statement in form and substance
satisfactory to each of HHTI and STH, and HHTI shall prepare and file with the
SEC the Registration Statement. Each of HHTI and STH shall use its best efforts
to (a) respond to any comments of the SEC and (b) have the Registration
Statement declared effective under the Securities Act and the rules and
regulations promulgated thereunder as promptly as practicable after such filing
and to keep the Registration Statement effective as long as is reasonably
necessary to consummate the Merger. Each party will notify the other promptly of
the receipt of any comments from the SEC and of any request by the SEC for
amendments or supplements to the Registration Statement or the Proxy Statement
or for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives and the SEC,
with respect to the Registration Statement or the Proxy Statement. Whenever any
event occurs which is required to be set forth in an amendment or supplement to
the Registration Statement or the Proxy Statement, HHTI or STH, as the case may
be, shall promptly inform the other of such occurrence and cooperate in filing
with the SEC and/or mailing to the shareholders of HHTI and the stockholders of
STH such amendment or supplement. HHTI shall use its best efforts to obtain,
prior to the effective date of the Registration Statement, all necessary state
securities law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement and will pay all expenses incident
thereto. HHTI agrees that the Proxy Statement and each amendment or supplement
thereto, at the time of mailing thereof and at the time of the respective
meetings of shareholders of HHTI and STH, or, in the case of the Registration
Statement and each amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by HHTI in reliance upon and in conformity with
information concerning STH furnished to HHTI by STH specifically for use in the
Proxy Statement. STH agrees the information provided by it specifically for
inclusion in the Proxy Statement and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the respective meetings of
shareholders of HHTI and STH, or, in the case of information provided by STH
specifically for inclusion in the Registration Statement or any amendments or
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. HHTI will
advise STH, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the HHTI Common Stock issuable in connection with the Merger for offering or
sale in any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information.
8.10 Listing Application.
HHTI shall promptly prepare and submit to The Nasdaq Stock Market a
notification form for listing of additional shares covering the HHTI Common
Stock issuable in the Merger, and shall use its reasonable efforts to satisfy,
prior to the Effective Time, all requirements for the listing of such shares of
HHTI Common Stock.
8.11 Further Action.
Each party hereto shall, subject to the fulfillment at or before the
Effective Time of each of the conditions of performances set forth herein or the
waiver thereof, perform such further acts and execute such documents as may
reasonably be required to effect the Merger.
8.12 Expenses.
Subject to Section 10.5, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, other than those
associated with the filing, printing and distribution of the Proxy Statement and
the Registration Statement which shall be borne by HHTI, shall be paid by the
party incurring such expenses.
8.13 Governance.
(a) On or prior to the Effective Time, HHTI's Board of Directors shall take
all action necessary to cause the full Board of Directors of HHTI at the
Effective Time to take all such action necessary so that, at the Effective Time,
the Board of Directors of the Surviving Entity shall consist of the following
seven (7) individuals, who shall serve until the 2000 annual meeting of the
shareholders of HHTI: James I. Humphrey, George R. Whittemore, Jeffrey
Zwerdling, Paul J. Schulte, Steve Borgmann, Loren Steele and Joseph Caggiano;
provided that, notwithstanding the foregoing, at the 2000 through 2005 annual
meetings of the HHTI shareholders, Mr. Schulte, Mr. Borgmann, Mr. Steele and Mr.
Caggiano (collectively, the "STH Directors"), or in the event any one of them
shall decline or be unable to serve as a director, such individual designated by
the remaining STH Directors (which person shall be reasonably acceptable to
HHTI), shall be nominated by the HHTI Board of Directors for election to the
HHTI Board of Directors; provided, further, that, notwithstanding the foregoing,
at the 2000 through 2005 annual meetings of the HHTI shareholders, Mr. Humphrey,
Mr. Whittemore and Mr. Zwerdling (collectively, the "HHTI Directors"), or in the
event any one of them shall decline or be unable to serve as a director, such
individual designated by the remaining HHTI Directors (which person shall be
reasonably acceptable to the STH Directors), shall be nominated by the HHTI
Board of Directors for election to the HHTI Board of Directors. If, prior to the
Effective Time, any of Mr. Schulte, Mr. Borgmann, Mr. Steele or Mr. Caggiano
shall decline or be unable to serve as a director, STH shall designate another
person to serve in such person's stead, which person shall be reasonably
acceptable to HHTI. If, prior to the Effective Time, any of Mr. Humphrey, Mr.
Whittemore or Mr. Zwerdling shall decline or be unable to serve as a director,
HHTI shall designate another person to serve in such person' stead, which person
shall be reasonably acceptable to STH. The Board of Directors of the Surviving
Entity shall use its best efforts to cause each individual nominated for
election to the Board of Directors pursuant to this Section 8.13(a) to be so
elected at each such annual meeting of the shareholders of the Surviving Entity.
(b) At the Effective Time, the Board of Directors of HHTI shall take all
action necessary to elect Mr. Schulte as Chairman of the Board of Directors and
Chief Executive Officer of HHTI, to elect Mr. Humphrey as the Vice Chairman of
the Board of Directors and President and Chief Operating Officer of HHTI, and to
elect Mr. Borgmann as the Executive Vice President of HHTI.
(c) At and after the Effective Time, the Surviving Entity shall continue to
be headquartered in Silver Spring, Maryland. The Surviving Entity shall provide
each of Messrs.
Schulte and Borgmann with office space in the Office Building for the
lesser of five years or until he no longer serves as a director of the Surviving
Entity.
8.14 Reorganization
From and after the date hereof and until the Effective Time, neither HHTI
nor STH nor any of their respective Subsidiaries or other affiliates shall (a)
knowingly take any action or knowingly fail to take any action, if the taking,
or the failing to take, such action would jeopardize qualification of the Merger
as a reorganization within the meaning of Section 368(a) of the Code; or (b)
enter into any contract, agreement, commitment or arrangement with respect to
the foregoing. Following the Effective Time, HHTI shall not take any action that
would jeopardize the characterization of the Merger as a reorganization within
the meaning of Section 368(a) of the Code.
8.15 REIT Qualification.
Neither HHTI nor any of the HHTI Subsidiaries shall take or omit to take
any action if the taking, or omitting to take, such action would cause HHTI to
be disqualified as a REIT.
8.16 Transfer and Gains Taxes.
STH and HHTI shall cooperate in the preparation, execution and filing of
all returns, questionnaires, applications or other documents regarding any real
property transfer or gains, sales, use, transfer, value added, stock transfer
and stamp taxes, any transfer, recording, registration and other fees and any
similar taxes which become payable in connection with the Merger. STH agrees
that HHTI shall, in its sole discretion, determine the relative value of each
Hotel for purposes of such taxes and fees.
8.17 Third Party Consents.
HHTI and STH each shall take all necessary corporate and other action and
will use its commercially reasonable efforts to obtain the consents and
applicable approvals from third parties that may be required to enable it to
carry out the transactions contemplated by this Agreement, including, without
limitation, the consents set forth on Schedule 5.6 and any consents required to
be included in the Registration Statement.
8.18 Efforts to Fulfill Conditions.
HHTI and STH each shall use commercially reasonable efforts to insure that
all conditions precedent to its obligations hereunder are fulfilled at or prior
to the Closing. Notwithstanding the foregoing, STH agrees that it will act
diligently and take all reasonable steps necessary or appropriate to ensure that
the condition set forth in subsection 9.1((g)) is satisfied prior to the Closing
Date, and, to the extent necessary, HHTI will reasonably cooperate with STH in
that regard.
8.19 Representations, Warranties and Conditions Prior to Closing.
Neither HHTI nor STH shall voluntarily take any action that would
reasonably be expected to cause its representations and warranties contained in
this Agreement not to be true and correct on and as of the Closing Date in all
material respects. Prior to Closing, HHTI and STH each shall promptly notify the
other in writing (a) if any representation or warranty contained in this
Agreement is discovered to or becomes untrue in any material respect or (b) if
HHTI or STH fails to perform or comply in any material respect with any of its
covenants or agreements contained in this Agreement or it is reasonably expected
that it will be unable to perform or comply in any material respect with any of
its covenants or agreements contained in this Agreement.
8.20 Cooperation of the Parties.
HHTI and STH each will cooperate with the other in supplying such
information as may be reasonably requested by the other in connection with
obtaining consents or approvals to the transactions contemplated by this
Agreement.
8.21 Tax Election.
To the extent the fair market value of the assets acquired by HHTI from STH
at the Closing Date exceeds the adjusted tax basis of such assets at the
Effective Time, HHTI agrees to timely file a Notice 88-19 Election with respect
to such assets, which election will cause HHTI to be taxed upon the built-in
gain associated with such assets upon the sale of any such asset within ten
years after the Closing Date.
8.22 Directors and Officers Insurance.
(a) The Surviving Entity shall provide, or cause to be provided, at its
sole expense, STH's currently covered insureds with continuation coverage under
STH's existing Directors and Officers Liability and Employment Practice
Liability insurance and indemnification policy (including any fiduciary
liability policy) to provide coverage with respect to any claims made during the
six-year period following the Effective Time for events occurring prior to the
Effective Time (the "D&O Insurance") or, if substantially equivalent insurance
coverage is unavailable, the best available coverage and the Surviving Entity
shall pay the deductible amounts associated with claims made under such D&O
Insurance; provided, however, that the one-time premium paid for the D&O
Insurance shall not exceed, after the application against such premium of the
amount of any prepaid premium under such policy, $113,000 (which amount shall be
increased by $7,100 on the first of each month beginning on September 1, 1999
until the Closing Date, if the Closing Date occurs after August 31, 1999), but
if such premium would, but for this proviso, exceed such amount, the Surviving
Entity shall purchase as much coverage as possible for such amount.
(b) From and after the Effective Time and pursuant to the terms of Article
VII of the Second Restated Articles of Incorporation of Surviving Entity, the
Surviving Entity shall indemnify each person who is now, or has been at any time
prior to the date hereof, a director or
officer of STH or any STH Subsidiary against any liability incurred by him
in connection with any proceeding arising out of acts or omissions by him in his
capacity as such, whether such proceeding was commenced before or after the
Effective Time.
(c) The provisions of this Section 8.22 are intended to be for the benefit
of, and shall be enforceable by, each such covered insured, and such covered
insured's heirs and personal representatives and shall be binding on all
successors and assigns of the Surviving Entity.
8.23 STH Subsidiary Officers.
On the Closing Date, STH shall cause the directors and officers of STH and
each STH Subsidiary to submit their resignations from such positions, effective
as of the Effective Time.
8.24 Leases.
HHTI shall not amend, terminate or otherwise modify any of the HHTI Leases
and shall prepare Hotel Leases, in form and substance reasonably satisfactory to
STH and reflecting the terms set forth on Schedule . The Hotel Leases shall be
executed at Closing.
ARTICLE 9
CONDITIONS
9.1 Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
adopted and approved by the shareholders of STH in accordance with the
Certificate of Incorporation and Bylaws of STH, and this Agreement, the
amendments to the HHTI Articles of Incorporation and Bylaws, and the other
transactions contemplated hereby shall have been approved by the shareholders of
HHTI in the manner required by the Articles of Incorporation and Bylaws of HHTI,
and in each case, in accordance with applicable law and applicable regulations
of any stock exchange or other regulatory body.
(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by this Agreement. In the event any such order
or injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(c) The Registration Statement shall have become effective and all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the transactions
contemplated by this Agreement shall have been obtained and no stop order
with respect to any of the foregoing shall be in effect.
(d) HHTI shall have filed with The Nasdaq Stock Market a notification of
listing of additional shares covering the HHTI Common Stock issuable in the
Merger and shall have no knowledge that the listing of such shares has been or
will be denied.
(e) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board, other regulatory body or
third parties required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or registration
would not have a Material Adverse Effect on the business, results of operations
or financial condition of HHTI or any of its subsidiaries, taken as a whole,
following the Effective Time.
(f) From the date of this Agreement through the Effective Time, there shall
not have been any enacted, promulgated or proposed legislative, administrative
or judicial action, interpretation or decision that causes or, if effected,
could be reasonably expected to cause HHTI to cease to qualify as a REIT for
federal income tax purposes.
(g) All lenders of borrowed money to STH shall have consented to the Merger
without change or modification to the terms of the STH Indebtedness, or STH
shall have entered into an agreement or agreements to refinance (on terms and
conditions reasonably satisfactory to HHTI) the STH Indebtedness.
9.2 Conditions to Obligations of STH to Effect the Merger.
The obligation of STH to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions, unless
waived by STH:
(a) HHTI shall have performed its agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the representations
and warranties of HHTI contained in this Agreement shall be true and correct in
all respects as of the Closing Date as if made on the Closing Date (except
representations and warranties made as of a specific date, which shall be true
and correct in all respects as of such date), except for any breach of such
representations or warranties that does not have a Material Adverse Effect, and
STH shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer, President or an Executive Vice President of HHTI, dated the
Closing Date, certifying to such effect.
(b) STH shall have received the opinion of HHTI Counsel, dated the Closing
Date, to the effect that commencing with its taxable year ended December 31,
1994, HHTI was organized and has operated in conformity with the requirements
for qualification as a REIT under the Code and that the Merger will not prevent
HHTI from continuing to meet the requirements for qualification and taxation as
a REIT under the Code (with customary exceptions, assumptions and qualifications
and based upon customary representations) and as to
such matters set forth in Schedule 9.2((b)). STH shall have received the
opinion of STH Counsel, dated the Closing Date, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that STH and HHTI will each be a party
to that reorganization within the meaning of Section 368(a) of the Code. In
rendering its opinion, such counsel shall be entitled to rely as to any factual
matter upon certificates given by executive officers of STH and HHTI.
(c) From the date of the Agreement through the Effective Time, there shall
not have occurred any change in the financial condition, business or operations
of HHTI and the HHTI Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a Material Adverse Effect.
(d) The opinion of ABN AMRO Incorporated addressed to the Board of
Directors of STH that the consideration to be received the stockholders of STH
pursuant to this Agreement is fair, from a financial point of view, shall not
have been withdrawn or materially modified.
(e) The Ancillary Agreements shall have been fully executed and delivered.
9.3 Conditions to Obligation of HHTI to Effect the Merger.
The obligations of HHTI to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions, unless
waived by HHTI:
(a) STH shall have performed its agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the representations
and warranties of STH contained in this Agreement shall be true and correct in
all respects as of the Closing Date as if made on the Closing Date (except
representations and warranties made as of a specific date, which shall be true
and correct in all respects as of such date), except for any breach of such
representations or warranties that does not have a Material Adverse Effect, and
HHTI shall have received a certificate of the Chief Executive Officer and the
Chief Financial Officer, President or an Executive Vice President of STH dated
the Closing Date, certifying to such effect.
(b) HHTI shall have received the opinion of HHTI Counsel, dated the Closing
Date, to the effect that (i) the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
(ii) HHTI and STH will each be a party to that reorganization within the meaning
of Section 368(a) of the Code, and (iii) the Merger will not prevent HHTI from
continuing to meet the requirements for qualification and taxation as a REIT
under the Code. HHTI shall also have received an opinion from STH Counsel, dated
the Closing Date, as to such matters set forth on Schedule 9.3((b)). In
rendering its opinion, such counsel shall be entitled to rely as to any factual
matter upon certificates given by executive officers of HHTI and STH.
(c) HHTI shall have received a report as to the Earnings and Profits Amount
of STH as of the end of the month prior to the Closing and estimated Earnings
and Profits Amount as of the Closing Date, from KPMG Peat Marwick, in form and
substance consistent
with the earnings and profit calculations given to HHTI by STH prior to the
execution of this Agreement.
(d) From the date of this Agreement through the Effective Time, there shall
not have occurred any change in the financial condition, business or operations
of STH and the STH Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a Material Adverse Effect.
(e) The Ancillary Agreements shall have been fully executed and delivered.
(f) The opinion of Tucker Anthony Cleary Gull, addressed to the Board of
Directors of HHTI, that the Merger consideration as provided in this Agreement
is fair, from a financial point of view, to HHTI shall not have been withdrawn
or materially modified.
(g) At the Effective Time, the total STH Indebtedness shall be no more than
$77 million.
(h) The franchisors of the STH Hotels shall have approved the transactions
contemplated by this Agreement and the Ancillary Agreements, and STH shall have
paid any and all costs, fees, penalties or other charges associated with
obtaining such approvals.
(i) Paul J. Schulte and Steve Borgmann shall have purchased from STH any
and all "key man" insurance policies owned by STH.
(j) Paul J. Schulte, Steve Borgmann and Karen Schulte shall have terminated
their employment with STH, effective as of the Closing Date, with no further
liability to STH, HHTI or HHMI.
ARTICLE 10
TERMINATION
10.1 Termination by Mutual Consent.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, before or after the approval of this Agreement
by the shareholders of STH or HHTI, by the mutual written consent of HHTI and
STH, with the prior approval of their respective Boards of Directors.
10.2 Termination by Either HHTI or STH.
This Agreement may be terminated and the Merger may be abandoned by action
of the Board of Directors of STH or HHTI if (a) the Merger is not consummated on
or before October 31, 1999; (b) a meeting of STH's stockholders shall have been
duly convened and held and the approval of STH's stockholders required by
Section 9.1((a)) shall not have been obtained at such meeting or at any
adjournment thereof, (c) a meeting of HHTI's shareholders shall have been duly
convened and held and the approval of HHTI's shareholders required by
Section 9.1((a)) shall not have been obtained at such meeting or at any
adjournment thereof, or (d) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable,
provided that the party seeking to terminate this Agreement pursuant to this
clause (d) shall have used commercially reasonable efforts to remove such order,
decree, ruling or injunction. The notice of termination shall include the
reasons, if any, for such termination and shall be considered Confidential
Material under Section 11.5.
10.3 Termination by STH.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, before or after the adoption and approval by
the stockholders of STH referred to in Section 9.1((a)), by action of the Board
of Directors of STH, if (a) prior to the adoption of this Agreement by the
stockholders of STH, the Board of Directors of STH shall reasonably determine
that an Acquisition Proposal constitutes a Superior Proposal; provided, however,
that STH may not terminate this Agreement pursuant to this subsection unless (i)
three business days shall have elapsed after delivery to HHTI of a written
notice advising HHTI that the Board of Directors of STH has received a Superior
Proposal, and (ii) at the end of such three-day period, the Board of Directors
of STH believes that such Superior Proposal is superior to the transaction
contemplated by this Agreement (as the same maybe proposed by HHTI to be amended
in response to such Superior Proposal), (b) the Board of Directors of HHTI
withdraws, materially modifies or changes in a manner materially adverse to STH
its recommendations to HHTI's shareholders with respect to this Agreement or the
Merger, (c) the Board of Directors of HHTI postpones the date scheduled for the
meeting of shareholders of HHTI to approve this Agreement and the transactions
contemplated hereby beyond October 15, 1999, or fails to schedule such meeting
for a date on or preceding such date, except with the written consent of STH,
(d) there has been a breach by HHTI of any representation or warranty contained
in this Agreement which would have or would be reasonably likely to have a
Material Adverse Effect, which breach is not curable by October 15, 1999, (e)
there has been material breach of any of the covenants or agreements set forth
in this Agreement on the part of HHTI, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by STH to HHTI (f) HHTI has failed to satisfy, and STH has not waived, any
of the conditions set forth in Section 9.1 or Section 9.2 prior to the Effective
Time or (g) the Earnings and Profit Amount is not sufficient to pay an Earnings
and Profit Dividend of at least $4.00.
10.4 Termination by HHTI.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, before or after the approval by the
shareholders of HHTI referred to in Section (), by action of the Board of
Directors of HHTI, if (a) [reserved], (b) prior to the adoption of this
Agreement by the shareholders of HHTI, the Board of Directors of HHTI shall
reasonably determine that an Acquisition Proposal constitutes a Superior
Proposal;
provided, however, that HHTI may not terminate this Agreement pursuant to
this subsection unless (i) three business days shall have elapsed after delivery
to STH of a written notice advising STH that the Board of Directors of HHTI has
received Superior Proposal, and (ii) at the end of such three-day period, the
Board of Directors of HHTI believes that such Superior Proposal is superior to
the transaction contemplated by this Agreement (as the same maybe proposed by
STH to be amended in response to such Superior Proposal), (c) the Board of
Directors of STH withdraws, materially modifies or changes in a manner
materially adverse to HHTI its recommendation to STH's stockholders with respect
to this Agreement or the Merger, (d) the Board of Directors of STH postpones the
date scheduled for the meeting of stockholders of STH to approve this Agreement
and the transactions contemplated hereby beyond October 15, 1999, or fails to
schedule such meeting for a date on or preceding such date, except with the
written consent of HHTI, (e) there has been a breach by STH of any
representation or warranty contained in this Agreement which would have or would
be reasonably likely to have a Material Adverse Effect, which breach is not
curable by October 15, 1999, (f) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of STH, which
breach is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by HHTI to STH, (g) the aggregate amount of the
STH Indebtedness is greater than $77 million, or (h) STH has failed to satisfy,
and HHTI has not waived, any of the conditions set forth in Section 9.1 or
Section 9.3 prior to the Effective Time.
10.5 Effect of Termination and Abandonment.
(a) If (A) an election to terminate this Agreement is made by (1) HHTI or
STH pursuant to Section 10.2(b), (2) by HHTI pursuant to Section 10.4(c) or
Section 10.4(d), or (3) by STH pursuant to Section 10.3(a), and (B) an
Acquisition Proposal relating to STH shall have been made prior to such
termination and, within 18 months from the date of such termination, STH
consummates that STH Acquisition Proposal or enters into an agreement with
respect to that STH Acquisition Proposal which is thereafter consummated, STH
shall pay to HHTI, provided HHTI was not in material breach of its obligations
hereunder at the time of such termination:
(i) as liquidated damages and not as a penalty or forfeiture,
an amount equal to the lesser of (A) the Liquidated Damages
Amount and (B) the maximum amount permitted as liquidated
damages pursuant to applicable Delaware law, provided that the
Liquidated Damages Amount shall not exceed the sum of (1) the
maximum amount that can be paid to HHTI without causing HHTI
to fail to meet the requirements of Sections 856(c)(2) and (3)
of the Code determined as if the payment of such amount did
not constitute income described in Sections 856(c)(2)(A)-(H)
and 856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as
determined by HHTI's certified public accountants, plus (2) an
amount equal to the Liquidated Damages Amount less the amount
payable under clause (1) above in the event HHTI receives a
letter from HHTI Counsel indicating that HHTI has received a
ruling from the IRS to the effect that Liquidated Damages
Amount payments constitute Qualifying Income; and
(ii) all Expenses incurred by HHTI, up to a maximum of
$700,000.
The payments to which HHTI is entitled under this Section 10.5((a)) shall
be its sole remedy with respect to the termination of this Agreement under the
circumstances contemplated by this Section 10.5((a)).
(b) If (A) an election to terminate this Agreement is made by (1) STH or
HHTI pursuant to Section 10.2(c), (2) by STH pursuant to Section 10.3(b) or
Section 10.3(c) or (3) by HHTI pursuant to Section 10.4(b), and (B) an
Acquisition Proposal relating to HHTI shall have been made prior to such
termination and, within 18 months from the date of such termination, HHTI
consummates that HHTI Acquisition Proposal or enters into an agreement with
respect to that HHTI Acquisition Proposal which is thereafter consummated, HHTI
shall pay to STH, provided STH was not in material breach of its obligations
hereunder at the time of such termination:
(i) the Liquidated Damages Amount, and
(ii) all Expenses incurred by STH, up to a maximum of $700,000.
The payments to which STH is entitled under this Section 10.5((b)) shall be
its sole remedy with respect to the termination of this Agreement under the
circumstances contemplated by this Section 109.5((b)).
(c) If (A) STH or HHTI elects to terminate this Agreement pursuant to
Section 10.2(b) and no STH Acquisition Proposal has been made prior to such
termination, or if an STH Acquisition Proposal has been made prior to such
termination and STH does not within 18 months from the date of such termination
consummate such STH Acquisition Proposal or enter into an agreement with respect
to such STH Acquisition Proposal which is thereafter consummated, (B) STH elects
to terminate this Agreement pursuant to Section 10.3(a) but STH does not within
18 months from the date of such termination consummate the STH Acquisition
Proposal or enter into an agreement with respect to the STH Acquisition Proposal
which is thereafter consummated, (C) HHTI elects to terminate this Agreement
pursuant to Section 10.4(g), or (D) HHTI elects to terminate this Agreement
because STH has failed to satisfy the condition set forth in Section 9.3(g),
then STH shall pay to HHTI, provided HHTI was not in material breach of its
obligations hereunder at the time of such termination, all Expenses incurred by
HHTI, up to a maximum of $700,000. The payment to which HHTI is entitled under
this paragraph shall be its sole remedy for termination of the Agreement in such
circumstances.
(d) If (A) STH or HHTI elects to terminate this Agreement pursuant to
Section 10.21(c) and no HHTI Acquisition Proposal has been made prior to such
termination, or if an HHTI Acquisition Proposal has been made prior to the date
of such termination and HHTI does not within 18 months from the date of such
termination consummate such HHTI Acquisition Proposal or enter into an agreement
with respect to such HHTI Acquisition Proposal which is thereafter consummated,
or (B) HHTI elects to terminate this Agreement pursuant to Section 10.4(b) and
HHTI does not within 18 months from the date of such termination
consummate the HHTI Acquisition Proposal or enter into an agreement with
respect to that HHTI Acquisition Proposal which is thereafter consummated, then
HHTI shall pay to STH, provided STH was not in material breach of its
obligations hereunder at such time, all Expenses incurred by STH, up to a
maximum of $700,000. The payment to which STH is entitled under this paragraph
shall be its sole remedy for termination of the Agreement in such circumstances.
(e) If (A) this Agreement is terminated pursuant to Sections 10.3(b),
10.3(c) 10.4(c) or 10.4(d) and no Acquisition Proposal respecting the
non-terminating party has been made prior to such termination, or if an
Acquisition Proposal respecting the non-terminating party has been made prior to
termination but the non-terminating party does not within 18 months from the
date of such termination consummate such Acquisition Proposal or enter into an
agreement with respect to such Acquisition Proposal which is thereafter
consummated, or (B) this Agreement is terminated pursuant to Sections 10.3(d),
10.3(e), 10.3(f), 10.3(e), 10.4(f), or 10.4(h) (other than for STH's failure to
satisfy the condition set forth in Section ()), the non-terminating party shall,
provided that the terminating party was not in material breach of its
obligations hereunder at the time of such termination, (X) pay the terminating
party all Expenses incurred by it, up to a maximum of $700,000, and (Y) remain
liable to the terminating party for any breach of this Agreement.
(f) If this Agreement is terminated pursuant to Section 10.2(a) or Section
10.2(d), neither party shall pay stipulated damages to the other, but each party
shall be liable to the other for any breach of this Agreement.
(g) The payment of damages or Expenses pursuant to this Article 10 shall be
by wire transfer or bank check, within 10 days of the date of the event that
triggers the payment requirements set forth in this Article 10.
(h) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 10, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
10.5 and Sections 8.8 and 8.12 and except for the provisions of Sections 11.3,
11.4, 11.5, 11.6, 11.7, 11.8, 11.10, 11.13, 11.14 and 11.15. In the event HHTI
or STH is required to file suit to seek all or a portion of such damages or
Expenses due hereunder and ultimately succeeds, it shall be entitled to all
expenses, including attorney's fees and expenses, which it has incurred in
enforcing its right hereunder.
10.6 Extension; Waiver.
At any time prior to the Effective Time, any party hereto, by action taken
by its Board of Directors may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE 11
GENERAL PROVISIONS
11.1 Survival of Representations, Warranties and Agreements.
All representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall not survive the Merger.
11.2 Notices.
Any notice required to be given hereunder shall be in writing and shall be
sent by facsimile transmission (confirmed by any of the methods that follow),
courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid) and
addressed as follows:
If to HHTI:
Mr. James I. Humphrey, Jr., Chairman
Humphrey Hospitality Trust, Inc.
12301 Old Columbia Pike
Silver Spring, Maryland 20904
Facsimile: (301) 680-4342
and with a copy (which shall not constitute notice) to:
Hunton & Williams
Riverfront Plaza
951 East Byrd Street
Richmond, Virginia 23219
Attention: Kenneth J. Alcott, Esquire
Facsimile: (804) 788-8218
and
Gallagher, Evelius and Jones
218 North Charles Street, Suite 400
Baltimore, Maryland 21201
Attention: David E. Raderman, Esquire
Facsimile: (410) 837-3079
If to STH:
Mr. Paul J. Schulte
Chief Executive Officer
Supertel Hospitality, Inc.
309 North 5th Street
Norfolk, Nebraska 68701
Facsimile: (402) 371-4229
with a copy (which shall not constitute notice) to:
McGrath, North, Mullin & Kratz, P.C.
One Central Park Plaza, Suite 1400
222 South Fifteenth Street
Omaha, Nebraska 68102
Attention: David L. Hefflinger, Esq.
Facsimile: (402) 341-0216
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
11.3 Assignment; Binding Effect; Benefit.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, except as provided in Section 8.22, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
11.4 Entire Agreement.
This Agreement, the Exhibits, the Schedules, the Ancillary Agreements, and
any documents delivered by the parties in connection herewith constitute the
entire agreement among
the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
11.5 Confidentiality.
(a) As used herein, "Confidential Material" means, with respect to either
party hereto (the "Providing Party"), all information (written or oral)
furnished (whether before or after the date hereof) by the Providing Party and
its directors, officers, employees, affiliates or representatives of advisors,
including counsel, lenders and financial advisors (collectively, the "Providing
Party Representatives") to the other party hereto (the "Receiving Party") or
such Receiving Party's directors, officers, employees, affiliates or
representatives of advisors, including counsel, lenders and financial advisors
or the Receiving Party's potential sources of financing for the transactions
contemplated by this Agreement (collectively "the Receiving Party
Representatives") and all analyses, compilations, forecasts and other studies or
other documents prepared by the Providing Party or the Providing Party
Representatives in connection with its or their review of the transactions
contemplated by this Agreement which contain or reflect such information. The
term "Confidential Material" does not include, however, information which (i) at
the time of disclosure or thereafter is generally available to and known by the
public other than as a result of a disclosure directly or indirectly by the
Receiving Party or the Receiving Party Representatives in violation of this
Agreement, (ii) at the time of disclosure was available on a nonconfidential
basis from a source other than the Providing Party or the Providing Party
Representatives, providing that such source is not and was not bound by a
confidentiality agreement with the Providing Party, (iii) was known by the
Receiving Party prior to receiving the Confidential Material from the Providing
Party or has been independently acquired or developed by the Receiving Party
without violating any of its obligations under this Agreement, or (iv) is
contained in any STH Reports or HHTI Reports or the Proxy Statement/Prospectus.
(b) Subject to paragraph (c) below or except as required by law, the
Confidential Material will be kept confidential and will not, without the prior
written consent of the Providing Party, be disclosed by the Receiving Party or
its Representatives, in whole or in part and will not be used by the Receiving
Party or its Representatives, directly or indirectly, for any purpose other than
in connection with this Agreement, the Merger or the evaluating, negotiating or
advising with respect to a transaction contemplated herein. Moreover, each
Receiving Party agrees to transmit Confidential Material to its Representatives
only if and to the extent that such Representatives need to know the
Confidential Material for purposes of such transaction and are informed by such
Receiving Party of the confidential nature of the Confidential Material and of
the terms of this Section.
(c) In the event either Receiving Party, its Representatives or anyone to
whom such Receiving Party or its Representatives supply the Confidential
Material, are requested or required (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand, any
informal or formal investigation by any government or governmental agency or
authority or otherwise in connection with legal processes) to disclose
any Confidential Material, such Receiving Party agrees (i) to immediately
notify the Providing Party of the existence, terms and circumstances surrounding
such a request, (ii) to consult with the Providing Party on the advisability of
taking legally available steps to resist or narrow such request and (iii) if
disclosure of such information is required, to furnish only that portion of the
Confidential Material which, in the opinion of such Receiving Party's counsel,
such Receiving Party is legally compelled to disclose and to cooperate with any
action by the Providing Party to obtain an appropriate protective order or
otherwise reliable assurances that confidential treatment will be accorded the
Confidential Material (it being agreed that the Providing Party shall reimburse
the Receiving Party for all reasonable out-of-pocket expenses incurred by the
Receiving Party in connection with such cooperation).
(d) In the event of the termination of this Agreement in accordance with
its terms, promptly upon request from either Providing Party, the Receiving
Party shall, except to the extent prevented by law, redeliver to the Providing
Party or destroy all tangible Confidential Material and will not retain any
copies, extracts or other reproductions thereof in whole or in part. Any such
destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, each Receiving Party and one Representative designated by each
Receiving Party shall be permitted to retain one permanent file copy of each
document constituting Confidential Material.
(e) Each party hereto further agrees that if this Agreement is terminated
in accordance with its terms, for a period of one year from the date of
termination (i) it will not offer to hire or hire any person currently or
formerly employed by the other party with whom such party has had contact prior
hereto other than persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and (ii) neither
it nor its Affiliates shall directly or indirectly, (A) (1) solicit, seek or
offer to effect or effect, (2) negotiate with or provide any information to the
Board of Directors of the other party, any director or officer of the other
party or any stockholder of the other party with respect to, (3) make any
statement or proposal, whether written or oral, either alone or in concert with
others, to the Board of Directors of the other party, any director or officer of
the other party or any stockholder of the other party or any other person with
respect to, or (4) make any public announcement (except as required by law in
respect of actions permitted hereby) or proposal or offer whatsoever (including,
but not limited to, any "solicitation" of "proxies" as such terms are defined or
used in Regulation 14A of the Exchange Act) with respect to, (u) any form of
business combination or similar or other extraordinary transaction involving the
other party or any Affiliate thereof, including, without limitation, a merger,
tender or exchange offer or liquidation of the other party's assets, (v) any
form of restructuring, recapitalization or similar transaction with respect to
the other party or any Affiliate thereto, (w) any purchase of any securities or
assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of the other party or any
Affiliate thereof, (x) any proposal to seek representation on the Board of
Directors of the other party or otherwise to seek to control or influence the
management, Board of Directors or policies of the other party or any Affiliate
thereof, (y) any request or proposal to waive, terminate or amend the provisions
of this Section 11.5 or (z) any proposal or other statement inconsistent with
the terms of this Section 11.5 or (B) instigate, encourage, join, act in concert
with or assist (including, but not
limited to, providing or assisting in any way in the obtaining of financing
for, or acting as a joint or co-bidder for the other party with) any third party
to do any of the foregoing, unless and until such party has received the prior
written invitation or approval of a majority of the Board of Directors of the
other party to do any of the foregoing; provided that without such invitation or
approval, either party may at any time, on a confidential non-public basis,
submit to the Chief Executive Officer or, if none, the President of the other
party a proposal to (a) amend any of the provisions of this Section 11.5((e)) or
(b) effect a business combination or other extraordinary transaction with the
other party providing for the acquisition of all or substantially all of the
assets or the securities of the other party, including, without limitation, a
merger, tender offer or exchange offer. Each party hereto agrees that it will
not agree with any third party to waive its rights under this Section 11.5.
11.6 Amendment.
This Agreement may be amended by the parties hereto, by action taken by
their respective Boards of Directors, at any time before or after approval of
this Agreement or any other matter presented in connection with the Merger by
the shareholders of STH and HHTI, but after any such shareholder approval, no
amendment shall be made which by law requires the further approval of
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
11.7 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia without regard to its rules of conflict of
laws.
11.8 Choice of Venue.
The parties hereto hereby irrevocably consent to the exclusive jurisdiction
of the state or federal courts in the Commonwealth of Virginia, and all state or
federal courts competent to hear appeals therefrom, over any actions which may
be commenced against any of them under or in connection with this Agreement.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any objection which any of them may now or hereafter have to the
laying of venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute in the Commonwealth of
Virginia. Each party hereto hereby agrees that a judgment in any such dispute
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each party hereto hereby consents to process being
served by any party to this Agreement in any actions by the transmittal of a
copy thereof in accordance with the provisions of this Section 11.8.
11.9 Counterparts.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a number of copies hereof each signed by less
than all, but together signed by all of the parties hereto.
11.10 Headings.
Heading of the Articles and Sections of this Agreement are for the
convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
11.11 Interpretation.
In this Agreement, unless the context otherwise requires, words describing
the singular number shall include the plural and vice versa, and words denoting
any gender shall include all genders and words denoting natural persons shall
include corporations and partnerships and vice versa. Nothing in this Agreement,
nor any uncertainty or ambiguity herein, shall be construed or resolved against
any party hereto, whether under any rule of construction or otherwise.
11.12 Waivers.
Except as provided in this Agreement, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
11.13 Incorporation.
The Schedules and all Exhibits attached hereto and thereto and referred to
herein and therein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
11.14 Severability.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
11.15 Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur in the event
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any Virginia court, this being in addition to any other remedy to which they are
entitled at law or in equity.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
HUMPHREY HOSPITALITY TRUST, INC.
By: /s/ James I. Humphrey, Jr.
-----------------------------------
James I. Humphrey, Jr.
President and Chief Executive Officer
SUPERTEL HOSPITALITY, INC.
By: /s/ Paul J. Schulte
_________________________________
Paul J. Schulte
President and Chief Executive Officer