AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 1, 1997
AMONG
DOUBLETREE CORPORATION,
PROMUS HOTEL CORPORATION
AND
PARENT HOLDING CORP.
TABLE OF CONTENTS
Page
ARTICLE I. THE MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Certificate of Incorporation and Bylaws of Parent . . . . . . . . . . . 2
Section 1.2. The Doubletree Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. The Promus Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4. Effective Time of the Mergers . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6. Effect of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.7. Certificate of Incorporation and Bylaws of the Surviving Corporations . 3
Section 1.8. Directors and Officers of the Surviving Corporations . . . . . . . . . 3
ARTICLE II. CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Conversion of Doubletree Capital Stock . . . . . . . . . . . . . . . . 4
Section 2.2. Conversion of Promus Capital Stock . . . . . . . . . . . . . . . . . . 4
Section 2.3. Cancellation of Parent Stock . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DOUBLETREE . . . . . . . . . . . . . 8
Section 3.1. Organization of Doubletree . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.2. Doubletree Capital Structure . . . . . . . . . . . . . . . . . . . . . 9
Section 3.3. Authority; No Conflict; Required Filings and Consents . . . . . . . . . 10
Section 3.4. SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . 11
Section 3.5. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.6. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . 12
Section 3.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.8. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.9. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.10. Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . 14
Section 3.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.13. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.14. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.15. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.16. Registration Statement; Joint Proxy Statement/Prospectus . . . . . . . 17
Section 3.17. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.19. Doubletree Long-Range Plans . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.20. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . 18
Section 3.21. No Existing Discussions . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.22. Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . . . 19
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Section 3.23. Doubletree Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PROMUS . . . . . . . . . . . . . . . 19
Section 4.1. Organization of Promus . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.2. Promus Capital Structure . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.3. Authority; No Conflict; Required Filings and Consents . . . . . . . . . 21
Section 4.4. SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . 22
Section 4.5. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.6. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . 22
Section 4.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.8. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.9. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.10. Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . 24
Section 4.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.13. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.14. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.15. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus . . . . . . . 27
Section 4.17. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.19. Promus Long-Range Plans . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.20. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . 28
Section 4.21. No Existing Discussions . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.22. Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . . . 28
Section 4.23. Promus Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.1. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.2. Cooperation; Notice; Cure . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.3. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.4. Joint Proxy Statement/Prospectus; Registration Statement . . . . . . . 32
Section 5.5. NASDAQ Quotation and NYSE Listing . . . . . . . . . . . . . . . . . . . 32
Section 5.6. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.7. Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.8. Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.9. Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.10. Nonrecognition Exchange . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.11. Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.12. Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.13. NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.14. Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.15. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.16. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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Section 5.17. Letter of Promus's Accountants . . . . . . . . . . . . . . . . . . . . 37
Section 5.18. Letter of Doubletree's Accountants . . . . . . . . . . . . . . . . . . 38
Section 5.19. Stock Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.20. Post-Merger Corporate Governance; Employment Arrangements . . . . . . . 38
Section 5.21. Name of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.22. Parent Stockholder Rights Plan; Amendment of Promus Rights Plan . . . . 40
Section 5.23. GEPT Warrant; Doubletree Registration Rights Agreement . . . . . . . . 40
Section 5.24. Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.25. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.26. Stockholder Litigation . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.27. Employee Benefits; Severance . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VI. CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1. Conditions to Each Party's Obligation to Effect the Mergers . . . . . . 42
Section 6.2. Additional Conditions to Obligations of Doubletree . . . . . . . . . . 43
Section 6.3. Additional Conditions to Obligations of Promus . . . . . . . . . . . . 44
ARTICLE VII. TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.5. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.1. Nonsurvival of Representations, Warranties and Agreements . . . . . . . 49
Section 8.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.3. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.5. Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . 50
Section 8.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.7. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
EXHIBITS
EXHIBIT A STOCK OPTION AGREEMENT (DOUBLETREE)
EXHIBIT B STOCK OPTION AGREEMENT (PROMUS)
EXHIBIT C STOCKHOLDER SUPPORT AGREEMENT
EXHIBIT D CERTIFICATE OF INCORPORATION OF PARENT
EXHIBIT E BYLAWS OF PARENT
EXHIBIT F FORM OF DOUBLETREE AFFILIATE AGREEMENT
EXHIBIT G FORM OF PROMUS AFFILIATE AGREEMENT
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TABLES OF DEFINED TERMS
TERMS CROSS REFERENCE
- ----- IN AGREEMENT
---------------
Acquisition Proposal Section 5.3(a)
Affiliate Section 5.12
Affiliate Agreement Section 5.12
Agreement Preamble
Alternative Transaction Section 7.3(e)
Bankruptcy and Equity Exception Section 3.3(a)
Certificate of Merger Section 1.4
Certificates Section 2.4(b)
Closing Section 1.5
Closing Date Section 1.5
Code Preamble
Confidentiality Agreements Section 5.3(a)
DGCL Section 1.2
Doubletree Preamble
Doubletree Balance Sheet Section 3.4(b)
Doubletree Common Stock Section 2.1
Doubletree Director Section 5.20(a)
Doubletree Disclosure Schedule Article III
Doubletree Employee Plans Section 3.13(a)
Doubletree Employees Section 5.27(b)
Doubletree Exchange Ratio Section 2.1(c)
Doubletree Material Adverse Effect Section 3.1
Doubletree Material Contracts Section 3.10(a)
Doubletree Merger Section 1.2
Doubletree Preferred Stock Section 3.2(a)
Doubletree Rights Plan Section 3.2(b)
Doubletree SEC Reports Section 3.4(a)
Doubletree Stock Option Section 5.14(a)
Doubletree Stock Option Agreement Preamble
Doubletree Stock Plans Section 3.2(a)
Doubletree Stockholders' Meeting Section 3.16
Doubletree Sub Section 1.2
Doubletree Surviving Corporation Section 1.6
Effective Time Section 1.4
Environmental Law Section 3.12(b)
ERISA Section 3.13(a)
ERISA Affiliate Section 3.13(a)
Exchange Act Section 3.3(c)
Exchange Agent Section 2.4(a)
Exchange Fund Section 2.4(a)
GEPT Warrant Section 3.2(b)
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TERMS CROSS REFERENCE
- ----- IN AGREEMENT
---------------
Governmental Entity Section 3.3(c)
Hazardous Substance Section 3.12(c)
HSR Act Section 3.3(c)
Indemnified Parties Section 5.16(a)
IRS Section 3.7(b)
Joint Proxy Statement/Prospectus Section 3.16
Material Lease(s) Section 3.8(a)
Mergers Section 1.3
NYSE Section 2.4(e)
Order Section 5.8(b)
Outside Date Section 7.1(b)
Parent Preamble
Parent Common Stock Section 2.1(c)
Parent Rights Plan Section 5.22
Promus Preamble
Promus Balance Sheet Section 4.4(b)
Promus Common Stock Section 2.2
Promus Director Section 5.20(a)
Promus Disclosure Schedule Article IV
Promus Employee Plans Section 4.13(a)
Promus Employees Section 5.27(b)
Promus Exchange Ratio Section 2.2(c)
Promus Material Adverse Effect Section 4.1
Promus Material Contracts Section 4.10(a)
Promus Merger Section 1.3
Promus Preferred Stock Section 4.2(a)
Promus Rights Plan Section 4.2(b)
Promus SEC Reports Section 4.4(a)
Promus Special Stock Section 4.2(a)
Promus Stock Option Section 5.14(a)
Promus Stock Option Agreement Preamble
Promus Stock Plans Section 4.2(a)
Promus Stockholders' Meeting Section 3.16
Promus Sub Section 1.3
Promus Surviving Corporation Section 1.6
Registration Statement Section 3.16
Rule 145 Section 5.12
SEC Section 3.3(c)
Securities Act Section 2.4(j)
Stock Option Agreement Preamble
Stockholder Support Agreement Preamble
Subsidiary Section 3.1
Superior Proposal Section 5.3(a)
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TERMS CROSS REFERENCE
- ----- IN AGREEMENT
---------------
Surviving Corporation Section 1.6
Tax Section 3.7(a)
Taxes Section 3.7(a)
Third Party Section 5.3(a)
Transfer Taxes Section 5.25
vi
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September 1,
1997, by and among DOUBLETREE CORPORATION, a Delaware corporation
("Doubletree"), PROMUS HOTEL CORPORATION, a Delaware corporation ("Promus") and
PARENT HOLDING CORP., a newly-formed Delaware corporation with nominal
capitalization, one-half of the issued and outstanding capital stock of which is
nominally owned by each of Doubletree and Promus ("Parent").
WHEREAS, the Boards of Directors of Doubletree and Promus deem it advisable
and in the best interests of each corporation and its respective stockholders
that Doubletree and Promus combine in a "merger of equals" in order to advance
the interests of Doubletree and Promus and their respective stockholders;
WHEREAS, the combination of Doubletree and Promus shall be effected by the
terms of this Agreement through (i) a merger of a wholly-owned subsidiary of
Parent with and into Doubletree and (ii) a merger of another wholly-owned
subsidiary of Parent with and into Promus, such that Doubletree and Promus
become wholly-owned subsidiaries of Parent and the stockholders of Doubletree
and Promus become stockholders of Parent;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Doubletree's and Promus's willingness
to enter into this Agreement, Doubletree and Promus have entered into (i) a
Stock Option Agreement dated as of the date of this Agreement and attached
hereto as Exhibit A (the "Doubletree Stock Option Agreement"), pursuant to which
Promus granted Doubletree an option to purchase shares of common stock of Promus
under certain circumstances, and (ii) a Stock Option Agreement dated as of the
date of this Agreement and attached hereto as Exhibit B (the "Promus Stock
Option Agreement" and, together with the Doubletree Stock Option Agreement, the
"Stock Option Agreements"), pursuant to which Doubletree granted Promus an
option to purchase shares of common stock of Doubletree under certain
circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Promus's willingness to enter into this
Agreement, certain stockholders of Doubletree have entered into a Stockholder
Support Agreement with Promus dated as of the date of this Agreement and
attached hereto as Exhibit C (the "Stockholder Support Agreement"), pursuant to
which such stockholders have agreed, among other things, to vote all voting
securities of Doubletree beneficially owned by them in favor of approval and
adoption of the Agreement and the Doubletree Merger (as defined in Section 1.2);
WHEREAS, for Federal income tax purposes, it is intended that (i) the
Doubletree Merger shall qualify as a reorganization described in Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code") and/or, taken
together with the Promus Merger (as defined in Section 1.3), as a transfer of
property to Parent by holders of Doubletree Common Stock (as defined in Section
2.1) described in Section 351 of the Code and (ii) the Promus Merger shall
qualify as a reorganization described in Section 368(a) of the Code and/or,
taken
1
together with the Doubletree Merger, as a transfer of property to Parent
by holders of Promus Common Stock described in Section 351 of the Code;
WHEREAS, for accounting purposes, it is intended that the transactions
contemplated by this Agreement shall be accounted for as a pooling of interests;
and
WHEREAS, the Boards of Directors of Doubletree and Promus have approved
this Agreement, the Stock Option Agreements and the Stockholder Support
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGERS
Section 1.1 CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT.
Doubletree and Promus shall cause the Certificate of Incorporation and Bylaws
of Parent to be amended prior to the Effective Time (as defined in Section
1.4) to be substantially in the form of Exhibit D and Exhibit E hereto,
respectively. From the date hereof until the Effective Time, Doubletree and
Promus shall consult with each other prior to causing or permitting Parent to
take any action and neither shall cause or permit Parent to take any action
inconsistent with the provisions of this Agreement without the written
consent of the other.
Section 1.2 THE DOUBLETREE MERGER. Doubletree and Promus shall cause
Parent to form a wholly-owned subsidiary named Doubletree Acquisition Corp.
("Doubletree Sub") under the laws of the State of Delaware. Doubletree and
Promus will cause Parent to cause Doubletree Sub to execute and deliver this
Agreement. Upon the terms and subject to the provisions of this Agreement, and
in accordance with the Delaware General Corporation Code (the "DGCL"),
Doubletree Sub will merge with and into Doubletree (the "Doubletree Merger") at
the Effective Time (as defined in Section 1.4). Doubletree Sub will be formed
solely to facilitate the Doubletree Merger and will conduct no business or
activity other than in connection with the Doubletree Merger.
Section 1.3 THE PROMUS MERGER. Doubletree and Promus shall cause Parent
to form a wholly-owned subsidiary named Promus Acquisition Corp. ("Promus Sub")
under the laws of the State of Delaware. Doubletree and Promus will cause
Parent to cause Promus Sub to execute and deliver this Agreement. Upon the
terms and subject to the provisions of this Agreement, and in accordance with
the DGCL, Promus Sub will merge with and into Promus (the "Promus Merger" and
together with the Doubletree Merger, the "Mergers") at the Effective Time (as
defined in Section 1.4). Promus Sub will be formed solely to facilitate the
Promus Merger and will conduct no business or activity other than in connection
with the Promus Merger.
Section 1.4 EFFECTIVE TIME OF THE MERGERS. Subject to the provisions of
this Agreement, a certificate of merger with respect to each Merger in such
form as is required by the
2
relevant provisions of the DGCL (individually, a "Certificate of Merger" with
respect to one of the Mergers, and collectively with respect to both Mergers,
the "Certificates of Merger") shall be duly prepared, executed and
acknowledged and thereafter delivered to the Secretary of State of the State
of Delaware for filing, as provided in the DGCL, as early as practicable on
the Closing Date (as defined in Section 1.5). Each Merger shall become
effective at such time as is specified in the Certificate of Merger (the time
at which both Mergers have become fully effective being hereinafter referred
to as the "Effective Time").
Section 1.5 CLOSING. The closing of the Mergers (the "Closing") will take
place at such time and place to be agreed upon by the parties hereto, on a date
to be specified by Promus and Doubletree, which shall be no later than the
second business day after satisfaction or, if permissible, waiver of the
conditions set forth in Article VI (the "Closing Date"), unless another date is
agreed to in writing by Promus and Doubletree.
Section 1.6 EFFECT OF THE MERGERS. As a result of the Doubletree Merger,
the separate corporate existence of Doubletree Sub shall cease and Doubletree
shall continue as the surviving corporation (the "Doubletree Surviving
Corporation"). As a result of the Promus Merger, the separate corporate
existence of Promus Sub shall cease and Promus shall continue as the surviving
corporation (the "Promus Surviving Corporation" and together with the Doubletree
Surviving Corporation, the "Surviving Corporations"). Upon becoming effective,
the Mergers shall have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, (i) all
properties, rights, privileges, powers and franchises of Doubletree and
Doubletree Sub shall vest in the Doubletree Surviving Corporation, and all
debts, liabilities and duties of Doubletree and Doubletree Sub shall become the
debts, liabilities and duties of the Doubletree Surviving Corporation and (ii)
all properties, rights, privileges, powers and franchises of Promus and Promus
Sub shall vest in the Promus Surviving Corporation, and all debts, liabilities
and duties of Promus and Promus Sub shall become the debts, liabilities and
duties of the Promus Surviving Corporation.
Section 1.7 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATIONS. At the Effective Time, (i) the Certificate of Incorporation
and Bylaws of the Doubletree Surviving Corporation shall be amended to be
identical to the Certificate of Incorporation and Bylaws, respectively, of
Doubletree Sub as in effect immediately prior to the Effective Time (except that
the name of the Doubletree Surviving Corporation shall be Doubletree Inc.), in
each case until duly amended in accordance with applicable law, and (ii) the
Certificate of Incorporation and Bylaws of the Promus Surviving Corporation
shall be amended to be identical to the Certificate of Incorporation and Bylaws,
respectively, of Promus Sub as in effect immediately prior to the Effective Time
(except that the name of the Promus Surviving Corporation shall be Promus
Acquisition Corp.), in each case until duly amended in accordance with
applicable law.
Section 1.8 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATIONS
(a) DOUBLETREE SURVIVING CORPORATION. The directors of Doubletree
Sub immediately prior to the Effective Time shall be the initial directors of
the Doubletree Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Doubletree Surviving
Corporation. The officers of Doubletree immediately prior to the
3
Effective Time shall be the initial officers of the Doubletree Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Doubletree Surviving Corporation.
(b) PROMUS SURVIVING CORPORATION. The directors of Promus Sub
immediately prior to the Effective Time shall be the initial directors of the
Promus Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Promus Surviving Corporation.
The officers of Promus immediately prior to the Effective Time shall be the
initial officers of the Promus Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Promus
Surviving Corporation.
ARTICLE II.
CONVERSION OF SECURITIES
Section 2.1 CONVERSION OF DOUBLETREE CAPITAL STOCK. At the Effective
Time, by virtue of the Doubletree Merger and without any action on the part
of any of the parties hereto or the holders of any shares of Common Stock,
par value $.01 per share, of Doubletree ("Doubletree Common Stock") or common
stock of Doubletree Sub:
(a) CAPITAL STOCK OF DOUBLETREE SUB. Each issued and outstanding
share of the common stock, par value $.01 per share, of Doubletree Sub shall
be converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Doubletree Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PROMUS-OWNED STOCK. All
shares of Doubletree Common Stock that are owned by Doubletree as treasury
stock and any shares of Doubletree Common Stock owned by Promus or any
wholly-owned Subsidiary (as defined in Section 3.1) of Promus shall be
canceled and retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE RATIO FOR DOUBLETREE COMMON STOCK. Subject to
Section 2.4(e), each issued and outstanding share of Doubletree Common Stock
(other than shares to be canceled in accordance with Section 2.1(b)) shall be
converted into the right to receive one share (the "Doubletree Exchange Ratio")
of Common Stock, par value $.01 per share, of Parent ("Parent Common Stock").
All such shares of Doubletree Common Stock, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares shall
cease to have any ownership or other rights with respect thereto, except the
right to receive the shares of Parent Common Stock and an amount equal to
certain dividends and other distributions described in Section 2.4(c), without
interest, upon the surrender of such certificate in accordance with Section 2.4.
Section 2.2 CONVERSION OF PROMUS CAPITAL STOCK. At the Effective Time,
by virtue of the Promus Merger and without any action on the part of any of
the parties hereto or the holders
4
of any shares of Common Stock, par value $.10 per share, of Promus ("Promus
Common Stock") or common stock of Promus Sub:
(a) CAPITAL STOCK OF PROMUS SUB. Each issued and outstanding share
of the common stock, par value $.01 per share, of Promus Sub shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Promus Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND DOUBLETREE-OWNED STOCK. All
shares of Promus Common Stock that are owned by Promus as treasury stock and
any shares of Promus Common Stock owned by Doubletree or any wholly-owned
Subsidiary (as defined in Section 3.1) of Doubletree shall be canceled and
retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE RATIO FOR PROMUS COMMON STOCK. Subject to Section
2.4(e), each issued and outstanding share of Promus Common Stock (other than
shares to be canceled in accordance with Section 2.2(b)) shall be converted
into the right to receive 0.925 shares (the "Promus Exchange Ratio") of
Parent Common Stock. All such shares of Promus Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any ownership or other
rights with respect thereto, except the right to receive the shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock to
be issued or paid in consideration therefor and an amount equal to certain
dividends and other distributions described in Section 2.4(c), in each case
upon the surrender of such certificate in accordance with Section 2.4 and
without interest.
Section 2.3 CANCELLATION OF PARENT STOCK. At the Effective Time, by
virtue of the Mergers and without any action on the part of any holder of any
capital stock of Doubletree, Promus or Parent, each share of Parent Common
Stock issued and outstanding immediately prior to the Effective Time shall be
surrendered and canceled, and the amount paid by Doubletree and Promus for
the shares of Parent Common Stock held by them shall be returned by Parent to
them.
Section 2.4 EXCHANGE OF CERTIFICATES. The procedures for exchanging
certificates which prior to the Effective Time represented shares of
Doubletree Common Stock and Promus Common Stock for certificates representing
Parent Common Stock pursuant to the Mergers are as follows:
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit
with a bank or trust company designated by Promus and Doubletree (the
"Exchange Agent"), for the benefit of the holders of shares of Doubletree
Common Stock and shares of Promus Common Stock outstanding immediately prior
to the Effective Time, for exchange in accordance with this Section 2.4,
through the Exchange Agent, certificates representing the shares of Parent
Common Stock and, with respect to shares of Promus Common Stock, cash in lieu
of fractional shares (such shares of Parent Common Stock and cash in lieu of
fractional shares, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange
5
Fund"), issuable pursuant to Sections 2.1 and 2.2 in exchange for shares of
Doubletree Common Stock and Promus Common Stock, respectively, outstanding
immediately prior to the Effective Time.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of
a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Doubletree Common Stock or Promus Common
Stock (collectively, the "Certificates") whose shares were converted pursuant
to Section 2.1 or Section 2.2 into the right to receive shares of Parent
Common Stock (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 Doubletree and Promus may
reasonably specify) and (ii) instructions for effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Common Stock (plus cash in lieu of fractional shares, if any, of Parent
Common Stock as provided below). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Parent
Common Stock, the amount of any cash payable in lieu of fractional shares of
Parent Common Stock (with respect to shares of Promus Common Stock) and an
amount equal to certain dividends and other distributions which such holder
has the right to receive pursuant to the provisions of this Article II, and
the Certificate so surrendered shall immediately be canceled. In the event of
a transfer of ownership of Doubletree Common Stock or Promus Common Stock
prior to the Effective Time which is not registered in the transfer records
of Doubletree or Promus, respectively, a certificate representing the number
of shares of Parent Common Stock issuable and any amounts payable in
accordance with this Agreement may be issued and paid to a transferee if the
Certificate representing such Doubletree Common Stock or Promus Common Stock
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No amount in
respect of dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock the holder
thereof is entitled to receive in respect thereof and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to subsection
(e) below until the holder of record of such Certificate shall surrender such
Certificate to Parent in accordance herewith. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to subsection (e) below and an amount equal to the amount of
dividends or other distributions with a record date after the Effective Time
previously paid with respect to whole shares of Parent Common Stock, and (ii)
at the appropriate payment date, an amount equal to the amount of dividends
or other distributions with a record date after the Effective Time but prior
to surrender
6
and a payment date subsequent to surrender payable with respect to whole
shares of Parent Common Stock, in each case without interest.
(d) NO FURTHER OWNERSHIP RIGHTS IN DOUBLETREE COMMON STOCK AND PROMUS
COMMON STOCK. All shares of Parent Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms hereof (including any
cash paid pursuant to subsection (c) or (e) of this Section 2.4) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
the shares of Doubletree Common Stock or Promus Common Stock theretofore
represented by such Certificates, subject, however, to the applicable
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Doubletree on such shares of Doubletree Common Stock
or by Promus on such shares of Promus Common Stock, as the case may be, in
accordance with the terms of this Agreement (to the extent permitted under
Section 5.1) prior to the date hereof and which remain unpaid at the
Effective Time, and from and after the Effective Time there shall be no
further registration of transfers on the stock transfer books of the
Doubletree Surviving Corporation or the Promus Surviving Corporation, as the
case may be, of the shares of Doubletree Common Stock or Promus Common Stock,
respectively, which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to one of the
Surviving Corporations or Parent for any reason, such Certificates shall be
canceled and exchanged as provided in this Section 2.4.
(e) NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates representing shares of Promus Common Stock, and
such fractional share interests will not entitle the owner thereof to vote or
to any other rights of a stockholder of Parent. Notwithstanding any other
provision of this Agreement, each holder of shares of Promus Common Stock
outstanding immediately prior to the Effective Time exchanged pursuant to the
Promus Merger who would otherwise have been entitled to receive a fraction of
a share of Parent Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Parent
Common Stock multiplied by the per share sales price of Parent Common Stock
(as reported on the New York Stock Exchange Composite Tape) on the closing of
the first day of regular-way trading of Parent Common Stock on the New York
Stock Exchange (the "NYSE") after the Effective Time.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the former stockholders of Doubletree or Promus for
180 days after the Effective Time shall be delivered to Parent upon demand,
and any former stockholder of Doubletree or Promus who has not previously
complied with this Section 2.4 shall thereafter look only to Parent for
payment of such former stockholder's claim for Parent Common Stock, any cash
in lieu of fractional shares of Parent Common Stock and any amounts in
respect of dividends or distributions with respect to Parent Common Stock.
(g) NO LIABILITY. None of Doubletree, Promus, Parent or the Exchange
Agent shall be liable to any holder of shares of Doubletree Common Stock or
Promus Common Stock, as the case may be, for any shares of Parent Common
Stock (or cash in lieu of fractional shares of
7
Parent Common Stock or any dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(h) WITHHOLDING RIGHTS. Parent and each of the Surviving Corporations
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Certificates which prior
to the Effective Time represented shares of Doubletree Common Stock or Promus
Common Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld
by Parent or one of the Surviving Corporations, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Doubletree Common Stock or
Promus Common Stock, as the case may be, in respect of which such deduction
and withholding was made.
(i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or one of the Surviving Corporations, the posting by such person of a
bond in such reasonable amount as Parent or such Surviving Corporation may
direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of Parent Common Stock
and any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect thereof
pursuant to this Agreement.
(j) AFFILIATES. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in Section
5.12) of Doubletree or Promus shall not be exchanged until (i) Parent has
received an Affiliate Agreement (as defined in Section 5.12) from such
Affiliate or (ii) until the later of such date as such shares of Parent
Common Stock are freely tradable without jeopardizing the pooling of
interests accounting treatment of the Mergers and without violating the
Securities Act of 1933, as amended (the "Securities Act").
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF DOUBLETREE
Doubletree represents and warrants to Promus that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure schedule delivered by Doubletree to Promus on or before
the date of this Agreement (the "Doubletree Disclosure Schedule"). The
Doubletree Disclosure Schedule shall be arranged in paragraphs corresponding
to the numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article
III only to the extent that it is reasonably apparent from a reading of such
disclosure that it also qualifies or applies to such other paragraphs.
Section 3.1. ORGANIZATION OF DOUBLETREE. Each of Doubletree and its
Subsidiaries (as defined below) is duly organized, validly existing and in
good standing under the laws of the
8
jurisdiction of its organization, has all requisite power to own, lease and
operate its property and to carry on its business as now being conducted and
as proposed to be conducted, and is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction
in which the failure to be so qualified would have a material adverse effect
on the business, properties, financial condition or results of operations of
Doubletree and its Subsidiaries, taken as a whole (an "Doubletree Material
Adverse Effect"). A true and correct copy of the Certificate of
Incorporation and Bylaws of Doubletree has been delivered to Promus. Except
as set forth in Doubletree SEC Reports (as defined in Section 3.4) filed
prior to the date hereof, neither Doubletree nor any of its Subsidiaries
directly or indirectly owns (other than ownership interests in Doubletree or
in one or more of its Subsidiaries) any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or
entity, excluding (i) securities in any publicly traded company held for
investment by Doubletree and comprising less than five percent (5%) of the
outstanding stock of such company and (ii) any investment or series of
related investments with a book value of less than $15 million. As used in
this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority of
the economic interests in such partnership) or (ii) 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 is directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
Section 3.2. DOUBLETREE CAPITAL STRUCTURE.
(a) The authorized capital stock of Doubletree consists of 100,000,000
shares of Common Stock, $.01 par value, and 5,000,000 shares of Preferred
Stock, $.01 par value ("Doubletree Preferred Stock"). As of the date hereof,
(i) 39,688,458 shares of Doubletree Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable and (ii) no
shares of Doubletree Common Stock were held in the treasury of Doubletree or
by Subsidiaries of Doubletree. The Doubletree Disclosure Schedule shows the
number of shares of Doubletree Common Stock reserved for future issuance
pursuant to stock options granted and outstanding as of the date hereof and
the plans under which such options were granted (collectively, the
"Doubletree Stock Plans"). As of the date of this Agreement, none of the
shares of Doubletree Preferred Stock is issued and outstanding. There are no
obligations, contingent or otherwise, of Doubletree or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Doubletree Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other
than guarantees of bank obligations or indebtedness for borrowed money of
Subsidiaries entered into in the ordinary course of business and other than
any obligation the failure of which to perform or satisfy would not have a
Doubletree Material Adverse Effect. All of the outstanding shares of capital
stock or other ownership interests of each of Doubletree's Subsidiaries are
duly authorized, validly issued, fully paid and nonassessable and all such
shares (other than directors' qualifying shares in
9
the case of foreign Subsidiaries) are owned by Doubletree or another
Subsidiary of Doubletree free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Doubletree's voting rights,
charges or other encumbrances of any nature.
(b) Except as set forth in this Section 3.2 or as reserved for future
grants of options under the Doubletree Stock Plans or the Promus Stock Option
Agreement and except for the preferred stock purchase rights issued and
issuable under the Rights Agreement dated as of September 1, 1997 between
Doubletree and Harris Trust Company of California (the "Doubletree Rights
Plan"), options to purchase an aggregate of 20,000 shares of Doubletree
Common Stock, issued on June 30, 1994, to GE Investment Hotel Partners I,
Limited Partnership and the Warrants to purchase an aggregate of 262,753
shares of Doubletree Common Stock, issued on November 8, 1996, to PT
Investments Inc. (the "GEPT Warrant"), (i) there are no shares of capital
stock of any class of Doubletree, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding; (ii) there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which Doubletree or any
of its Subsidiaries is a party or by which it is bound obligating Doubletree
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other ownership
interests of Doubletree or any of its Subsidiaries or obligating Doubletree
or any of its Subsidiaries to grant, extend, accelerate the vesting of or
enter into any such option, warrant, equity security, call, right, commitment
or agreement; and (iii) to the best knowledge of Doubletree, there are no
voting trusts, proxies or other voting agreements or understandings with
respect to the shares of capital stock of Doubletree. All shares of
Doubletree Common Stock subject to issuance as specified in this Section 3.2
are duly authorized and, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, shall be validly
issued, fully paid and nonassessable.
Section 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Doubletree has all requisite corporate power and authority to
enter into this Agreement and the Stock Option Agreements and to consummate
the transactions contemplated by this Agreement and the Stock Option
Agreements. The execution and delivery of this Agreement and the Stock Option
Agreements and the consummation of the transactions contemplated by this
Agreement and the Stock Option Agreements by Doubletree have been duly
authorized by all necessary corporate action on the part of Doubletree,
subject only to the approval and adoption of this Agreement and the
Doubletree Merger by Doubletree's stockholders under the DGCL. This
Agreement and the Stock Option Agreements have been duly executed and
delivered by Doubletree and constitute the valid and binding obligations of
Doubletree, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles (the "Bankruptcy and Equity
Exception").
(b) The execution and delivery of this Agreement and the Stock Option
Agreements by Doubletree does not, and the consummation of the transactions
contemplated by this Agreement and the Stock Option Agreements will not, (i)
conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Doubletree
10
or any of its Subsidiaries, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Doubletree or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound (other
than pursuant to the Credit Agreement dated as of November 8, 1996 by and
among Doubletree, Morgan Stanley Senior Funding, Inc., The Bank of Nova
Scotia and the lenders identified therein) or (iii) conflict with or violate
any permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Doubletree or any of its
Subsidiaries or any of its or their properties or assets, except in the case
of (ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which (x) are not, individually or in the
aggregate, reasonably likely to have a Doubletree Material Adverse Effect or
(y) would not substantially impair or delay the consummation of the
Doubletree Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Doubletree or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and the Stock
Option Agreements or the consummation of the transactions contemplated hereby
or thereby, except for (i) the filing of the pre-merger notification report
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR Act"), (ii) the filing of a Certificate of Merger with respect to the
Doubletree Merger with the Delaware Secretary of State, (iii) the filing of
the Joint Proxy Statement/Prospectus (as defined in Section 3.16 below) with
the Securities and Exchange Commission (the "SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act, (iv) such consents, approvals, orders, authorizations,
permits, filings or registrations related to, or arising out of, compliance
with statutes, rules or regulations regulating the consumption, sale or
serving of alcoholic beverages, (v) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable state securities laws and the laws of any foreign country
and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not (x) be reasonably
likely to have a Doubletree Material Adverse Effect or (y) substantially
impair or delay the consummation of the Doubletree Merger.
Section 3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Doubletree has filed and made available to Promus all forms,
reports and documents required to be filed by Doubletree with the SEC since
January 1, 1996 (collectively, the "Doubletree SEC Reports"). The Doubletree
SEC Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Doubletree SEC Reports or
necessary in order to make the statements in such Doubletree SEC
11
Reports, in the light of the circumstances under which they were made, not
misleading. None of Doubletree's Subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) of Doubletree contained in the Doubletree SEC
Reports complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and fairly
presented the consolidated financial position of Doubletree and its
Subsidiaries as of the dates and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
audited balance sheet of Doubletree as of December 31, 1996 is referred to
herein as the "Doubletree Balance Sheet."
Section 3.5 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Doubletree SEC Reports filed prior to the date hereof, and except for normal
or recurring liabilities incurred since December 31, 1996 in the ordinary
course of business consistent with past practices, Doubletree and its
Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or
to become due, which individually or in the aggregate are reasonably likely
to have a Doubletree Material Adverse Effect.
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Doubletree SEC Reports filed prior to the date hereof, since the date of
the Doubletree Balance Sheet, Doubletree and its Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been (i) any event,
development, state of affairs or condition, or series or combination of
events, developments, states of affairs or conditions, which, individually or
in the aggregate, has had or is reasonably likely to have a Doubletree
Material Adverse Effect (other than events, developments, states of affairs
or conditions that are the effect or result of actions taken by Promus or
economic factors affecting the economy as a whole or the industry in which
Doubletree competes); (ii) any damage, destruction or loss (whether or not
covered by insurance) with respect to Doubletree or any of its Subsidiaries
which is reasonably likely to have a Doubletree Material Adverse Effect;
(iii) any material change by Doubletree in its accounting methods, principles
or practices to which Promus has not previously consented in writing; (iv)
any revaluation by Doubletree of any of its assets which is reasonably likely
to have a Doubletree Material Adverse Effect; or (v) any other action or
event that would have required the consent of Promus pursuant to Section 5.1
of this Agreement had such action or event occurred after the date of this
Agreement other than such actions or events that, individually or in the
aggregate, have not had or are not reasonably likely to have a Doubletree
Material Adverse Effect.
12
Section 3.7 TAXES.
(a) For the purposes of this Agreement, a "Tax" or, collectively,
"Taxes," means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, gains, franchise, withholding, payroll, recapture, employment,
excise, unemployment insurance, social security, business license,
occupation, business organization, stamp, environmental and property taxes,
together with all interest, penalties and additions imposed with respect to
such amounts. For purposes of this Agreement, "Taxes" also includes any
obligations under any agreements or arrangements with any other person with
respect to Taxes of such other person (including pursuant to Treas. Reg.
Sections 1.1502-6 or comparable provisions of state, local or foreign tax
law) and including any liability for Taxes of any predecessor entity.
(b) Doubletree and each of its Subsidiaries have (i) filed all
federal, state, local and foreign Tax returns and reports required to be
filed by them prior to the date of this Agreement (taking into account all
applicable extensions), (ii) paid or accrued all Taxes due and payable, and
(iii) paid or accrued all Taxes for which a notice of assessment or
collection has been received (other than amounts being contested in good
faith by appropriate proceedings), except in the case of clauses (i), (ii) or
(iii) for any such filings, payments or accruals that are not reasonably
likely, individually or in the aggregate, to have a Doubletree Material
Adverse Effect. Neither the Internal Revenue Service (the "IRS") nor any
other taxing authority has asserted any claim for Taxes, or to the actual
knowledge of the executive officers of Doubletree, is threatening to assert
any claims for Taxes, which claims, individually or in the aggregate, are
reasonably likely to have a Doubletree Material Adverse Effect. Doubletree
and each of its Subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities (or are properly holding for such
payment) all Taxes required by law to be withheld or collected, except for
amounts that are not reasonably likely, individually or in the aggregate, to
have a Doubletree Material Adverse Effect. Neither Doubletree nor any of its
Subsidiaries has made an election under Section 341(f) of the Code, except
for any such election that shall not have a Doubletree Material Adverse
Effect. There are no liens for Taxes upon the assets of Doubletree or any of
its Subsidiaries (other than liens for Taxes that are not yet due or
delinquent or that are being contested in good faith by appropriate
proceedings), except for liens that are not reasonably likely, individually
or in the aggregate, to have a Doubletree Material Adverse Effect.
(c) Neither Doubletree nor any of its Subsidiaries is or has been a
member of an affiliated group of corporations filing a consolidated federal
income tax return (or a group of corporations filing a consolidated, combined
or unitary income tax return under comparable provisions of state, local or
foreign tax law) for any taxable period beginning on or after the taxable
period ending December 31, 1993, other than a group the common parent of
which is or was Doubletree or any Subsidiary of Doubletree.
(d) Neither Doubletree nor any of its Subsidiaries has any
obligation under any agreement or arrangement with any other person with
respect to Taxes of such other person (including pursuant to Treas. Reg.
Sections 1.1502-6 or comparable provisions of state, local or foreign tax
law) and including any liability for Taxes of any predecessor entity, except
for obligations
13
that are not reasonably likely, individually or in the aggregate, to have a
Doubletree Material Adverse Effect.
Section 3.8 PROPERTIES.
(a) Neither Doubletree nor any of its Subsidiaries is in default
under any leases for real property providing for the occupancy, in each case,
of (i) a hotel or (ii) other facilities in excess of 50,000 square feet
(collectively "Material Lease(s)"), except where the existence of such
defaults, individually or in the aggregate, is not reasonably likely to have
a Doubletree Material Adverse Effect.
(b) With respect to each item of real property that Doubletree or
any of its Subsidiaries owns, except for such matters that, individually or
in the aggregate, are not reasonably likely to have a Doubletree Material
Adverse Effect: (i) Doubletree or its Subsidiary has good and clear record
and marketable title to such property, insurable by a recognized national
title insurance company at standard rates, free and clear of any security
interest, easement, covenant or other restriction, except for recorded
easements, covenants and other restrictions which do not materially impair
the current uses or occupancy of such property; and (ii) the improvements
constructed on such property are in good condition, and all mechanical and
utility systems servicing such improvements are in good condition, free in
each case of material defects.
Section 3.9 INTELLECTUAL PROPERTY. Doubletree owns, or is licensed or
otherwise possesses legally enforceable rights to use, all trademarks, trade
names, service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, know-how, computer software
programs or applications and tangible or intangible proprietary information
or material that are necessary to conduct the business of Doubletree as
currently conducted, subject to such exceptions that, individually and in the
aggregate, would not be reasonably likely to have a Doubletree Material
Adverse Effect. Doubletree has no knowledge of any assertion or claim
challenging the validity of any of such intellectual property.
Section 3.10. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Doubletree has not breached, or received in writing any claim
or notice that it has breached, any of the terms or conditions of any
material agreement, contract or commitment filed as an exhibit to the
Doubletree SEC Reports ("Doubletree Material Contracts") in such a manner as,
individually or in the aggregate, are reasonably likely to have a Doubletree
Material Adverse Effect. Each Doubletree Material Contract that has not
expired by its terms is in full force and effect.
(b) Without limiting Section 3.10(a), each of the management
contracts and franchise agreements to which Doubletree is a party and each of
Doubletree's Material Leases (i) is valid and binding in accordance with its
terms and is in full force and effect, (ii) neither Doubletree nor any of its
Subsidiaries is in default in any material respect thereof, nor does any
condition exist that with notice or lapses of time or both would constitute a
material default thereunder, and (iii) no party has given any written or (to
the knowledge of Doubletree) oral
14
notice of termination or cancellation thereof or that such party intends to
assert a breach thereof, or seek to terminate or cancel, any such agreement,
contract or lease, in each case as a result of the transactions contemplated
hereby, subject to such exceptions that, individually and in the aggregate,
would not be reasonably likely to have a Doubletree Material Adverse Effect.
Section 3.11. LITIGATION. Except as described in the Doubletree SEC
Reports filed prior to the date hereof, there is no action, suit or proceeding,
claim, arbitration or investigation against Doubletree pending or as to which
Doubletree has received any written notice of assertion, which, individually or
in the aggregate, is reasonably likely to have a Doubletree Material Adverse
Effect or a material adverse effect on the ability of Doubletree to consummate
the transactions contemplated by this Agreement.
Section 3.12. ENVIRONMENTAL MATTERS.
(a) To the knowledge of Doubletree and except as disclosed in the
Doubletree SEC Reports filed prior to the date hereof and except for such
matters that, individually or in the aggregate, are not reasonably likely to
have a Doubletree Material Adverse Effect: (i) Doubletree and its
Subsidiaries have complied with all applicable Environmental Laws (as defined
in Section 3.12(b)); (ii) the properties currently owned or operated by
Doubletree and its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances (as defined in Section 3.12(c)); (iii) the properties formerly
owned or operated by Doubletree or any of its Subsidiaries were not
contaminated with Hazardous Substances during the period of ownership or
operation by Doubletree or any of its Subsidiaries; (iv) neither Doubletree
nor its Subsidiaries are subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither Doubletree
nor any of its Subsidiaries has been associated with any release or threat of
release of any Hazardous Substance; (vi) neither Doubletree nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that Doubletree or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vii) neither Doubletree
nor any of its Subsidiaries is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law or relating to Hazardous Substances; and (viii) there
are no circumstances or conditions involving Doubletree or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any property of Doubletree or any of its Subsidiaries pursuant to
any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal,
state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A)
the protection, investigation or restoration of the environment, health and
safety, or natural resources, (B) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance or (C) noise, odor,
wetlands, pollution, contamination or any injury or threat of injury to
persons or property.
(c) As used herein, the term "Hazardous Substance" means any
substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product
15
or by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C)
any other substance which is the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
Section 3.13. EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the "Doubletree Employee Plans"
shall mean all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
and all unexpired severance agreements, written or otherwise, for the benefit
of, or relating to, any current or former employee of Doubletree or any trade
or business (whether or not incorporated) which is under common control with
Doubletree within the meaning of Section 414 of the Code (an "ERISA
Affiliate"), or any Subsidiary of Doubletree (together, the "Doubletree
Employee Plans"). Doubletree has listed in Section 3.13 of the Doubletree
Disclosure Schedule all Doubletree Employee Plans other plans that are
"employee welfare benefit plans" within the meaning of Section 3(1) of ERISA.
(b) With respect to each Doubletree Employee Plan, Doubletree has
made available to Promus, a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the IRS, (ii) such Doubletree Employee
Plan and all amendments thereto, (iii) each trust agreement and group annuity
contract, if any, and all amendments thereto relating to such Doubletree
Employee Plan and (iv) the most recent actuarial report or valuation relating
to a Doubletree Employee Plan subject to Title IV of ERISA.
(c) With respect to the Doubletree Employee Plans, individually and
in the aggregate, no event has occurred, and to the knowledge of Doubletree,
there exists no condition or set of circumstances in connection with which
Doubletree could be subject to any liability that is reasonably likely to
have a Doubletree Material Adverse Effect under ERISA, the Code or any other
applicable law.
(d) With respect to the Doubletree Employee Plans, individually and
in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves,
or otherwise properly footnoted in accordance with generally accepted
accounting principles, on the financial statements of Doubletree, except for
obligations which, individually or in the aggregate, are not reasonably
likely to have a Doubletree Material Adverse Effect.
(e) Except as disclosed in the Doubletree SEC Reports filed prior
to the date of this Agreement, and except as provided for in this Agreement,
neither Doubletree nor any of its Subsidiaries is a party to any oral or
written (i) agreement with any officer or other key employee of Doubletree or
any of its Subsidiaries, the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction
involving Doubletree of the nature contemplated by this Agreement, (ii)
agreement with any officer of Doubletree providing any term of employment or
compensation guarantee extending for a period longer than one year
16
from the date hereof and for the payment of compensation in excess of
$100,000 per annum, or (iii) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, the vesting of the
benefits of which will be accelerated or the funding of benefits of which
will be required, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
Section 3.14. COMPLIANCE WITH LAWS. Doubletree has complied with, is
not in violation of, and has not received any notices of violation with
respect to, any federal, state or local statute, law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which, individually or
in the aggregate, have not had and are not reasonably likely to have a
Doubletree Material Adverse Effect.
Section 3.15 ACCOUNTING AND TAX MATTERS.
(a) To the best knowledge of Doubletree, after consulting with its
independent auditors with respect to clause (i) below and its tax advisors
with respect to clause (ii) below, neither Doubletree nor any of its
Affiliates (as defined in Section 5.12) has taken or agreed to take any
action which would (i) prevent Parent from accounting for the business
combination to be effected by the Mergers as a pooling of interests or (ii)
prevent the Doubletree Merger from qualifying as a reorganization described
in Section 368(a) of the Code and/or, taken together with the Promus Merger,
as a transfer of property to Parent by holders of Doubletree Common Stock
described in Section 351 of the Code. Except as contemplated by the
Doubletree Option Agreement, neither Doubletree nor any of its Subsidiaries
owns any shares of Promus Common Stock or other securities convertible into
shares of Promus Common Stock (exclusive of any shares owned by Doubletree's
employee benefit plans).
(b) To the best knowledge of Doubletree, the stockholders of
Doubletree as a group have no present plan, intention or arrangement to sell
or otherwise dispose of such number of the shares of Parent Common Stock
received in the Doubletree Merger as would reduce their ownership in Parent
Common Stock to a number of shares having a value, as of the date of the
Doubletree Merger, of less than eighty percent (80%) of the value of all the
formerly outstanding stock of Doubletree as of the same date.
Section 3.16. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
The information to be supplied by Doubletree for inclusion in the
registration statement on Form S-4 pursuant to which shares of Parent Common
Stock issued in the Mergers will be registered under the Securities Act (the
"Registration Statement"), shall not at the time the Registration Statement
is declared effective by the SEC contain any untrue statement of a material
fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which they were
made, not misleading. The information supplied by Doubletree for inclusion
in the joint proxy statement/prospectus to be sent to the stockholders of
Promus and Doubletree in connection with the meeting of Doubletree's
stockholders (the "Doubletree Stockholders' Meeting") and the meeting of
Promus's stockholders (the "Promus Stockholders' Meeting") to consider this
17
Agreement and the Mergers (the "Joint Proxy Statement/Prospectus") shall not,
on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders of Doubletree or Promus, at the time of the Doubletree
Stockholders' Meeting and the Promus Stockholders' Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with
respect to any material fact, omit to state any material fact necessary in
order to make the statements made in the Joint Proxy Statement/Prospectus not
false or misleading, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation
of proxies for the Doubletree Stockholders' Meeting or the Promus
Stockholders' Meeting which has become false or misleading. If at any time
prior to the Effective Time any event relating to Doubletree or any of its
Affiliates, officers or directors should be discovered by Doubletree which
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, Doubletree shall promptly
inform Promus.
Section 3.17. LABOR MATTERS. Except as disclosed in the Doubletree SEC
Reports filed prior to the date hereof, neither Doubletree nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is Doubletree or any of its
Subsidiaries the subject of any material proceeding asserting that Doubletree
or any of its Subsidiaries has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization
nor, as of the date of this Agreement, is there pending or, to the knowledge
of the executive officers of Doubletree, threatened, any material labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving
Doubletree or any of its Subsidiaries.
Section 3.18. INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Doubletree or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Doubletree and its Subsidiaries
and their respective properties and assets, and are in character and amount
at least equivalent to that carried by persons engaged in similar businesses
and subject to the same or similar perils or hazards, except for any such
failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a Doubletree Material Adverse
Effect.
Section 3.19. DOUBLETREE LONG-RANGE PLANS. Doubletree has provided to
Promus copies of Doubletree's most recent long-range plans prepared in draft
form by Doubletree's management and Doubletree has not adopted any other
long-range plans since January 1, 1997.
Section 3.20. OPINION OF FINANCIAL ADVISOR. The financial advisor of
Doubletree, Morgan Stanley & Co. Incorporated, has delivered to Doubletree an
opinion dated the date of this Agreement to the effect that the Doubletree
Exchange Ratio is fair to the holders of Doubletree Common Stock from a
financial point of view.
Section 3.21. NO EXISTING DISCUSSIONS. As of the date hereof,
Doubletree is not engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to an Acquisition Proposal (as
defined in Section 5.3).
18
Section 3.22. SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions
contained in Section 203 of the DGCL applicable to a "business combination"
(as defined in DGCL Section 203) will not apply to the authorization,
execution, delivery and performance of this Agreement or the Stock Option
Agreements by Doubletree or the Stockholder Support Agreement by the parties
thereto or the consummation of the Doubletree Merger by Doubletree. No other
"fair price," "moratorium," "control share acquisition" or other similar
anti-takeover statute or regulation is applicable to Doubletree or (by reason
of Doubletree's participation therein) the Doubletree Merger or the other
transactions contemplated by this Agreement.
Section 3.23. DOUBLETREE RIGHTS PLAN. Under the terms of the Doubletree
Rights Plan, neither the execution of this Agreement, the Promus Stock Option
Agreement, the Stockholder Support Agreement, nor the transactions
contemplated hereby or thereby, will cause a Distribution Date to occur or
cause the rights issued pursuant to the Doubletree Rights Plan to become
exercisable, and all such rights shall become non-exercisable at the
Effective Time.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PROMUS
Promus represents and warrants to Doubletree that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule delivered by Promus to Doubletree on or before the date
of this Agreement (the "Promus Disclosure Schedule"). The Promus Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV and the disclosure in any
paragraph shall qualify other paragraphs in this Article IV only to the
extent that it is reasonably apparent from a reading of such document that it
also qualifies or applies to such other paragraphs.
Section 4.1 ORGANIZATION OF PROMUS. Each of Promus and its
Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has all requisite power to
own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the failure to be so qualified would have a
material adverse effect on the business, properties, financial condition or
results of operations of Promus and its Subsidiaries, taken as a whole (a
"Promus Material Adverse Effect"). A true and correct copy of the
Certificate of Incorporation and Bylaws of Promus has been delivered to
Doubletree. Except as set forth in the Promus SEC Reports (as defined in
Section 4.4) filed prior to the date hereof, neither Promus nor any of its
Subsidiaries directly or indirectly owns (other than ownership interests in
Promus or in one or more of its Subsidiaries) any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or
entity, excluding (i) securities in any publicly traded company held for
investment by Promus and comprising less than five percent (5%) of the
outstanding stock of such company and (ii) any investment or series of
related investments with a book value of less than $15 million.
19
Section 4.2. PROMUS CAPITAL STRUCTURE.
(a) The authorized capital stock of Promus consists of 360,000,000
shares of Common Stock, $.10 par value, 150,000 shares of Preferred Stock,
$100.00 par value ("Promus Preferred Stock") and 5,000,000 shares of Special
Stock, par value $1.12-1/2" ("Promus Special Stock"). As of the date hereof,
(i) 49,896,911 shares of Promus Common Stock were issued and outstanding, all
of which are validly issued, fully paid and nonassessable, and (ii) 1,580,101
additional shares of Promus Common Stock were held in the treasury of Promus
or by Subsidiaries of Promus. The Promus Disclosure Schedule shows the
number of shares of Promus Common Stock reserved for future issuance pursuant
to stock options granted and outstanding as of the date hereof and the plans
under which such options were granted (collectively, the "Promus Stock
Plans"). As of the date of this Agreement, none of the shares of Promus
Preferred Stock or Promus Special Stock are issued and outstanding. There
are no obligations, contingent or otherwise, of Promus or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Promus
Common Stock or the capital stock of any Subsidiary or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity other than guarantees
of bank obligations or indebtedness for borrowed money of Subsidiaries
entered into in the ordinary course of business and other than any obligation
the failure of which to perform or satisfy would not have a Promus Material
Adverse Effect. All of the outstanding shares of capital stock or other
ownership interests of each of Promus's Subsidiaries are duly authorized,
validly issued, fully paid and nonassessable and all such shares (other than
directors' qualifying shares in the case of foreign Subsidiaries) are owned
by Promus or another Subsidiary of Promus free and clear of all security
interests, liens, claims, pledges, agreements, limitations in Promus's voting
rights, charges or other encumbrances of any nature.
(b) Except as set forth in this Section 4.2 or as reserved for
future grants of options under the Promus Stock Plans or the Doubletree Stock
Option Agreement, and except for the preferred stock purchase rights issued
and issuable under the Rights Agreement dated as of June 30, 1995 between
Promus and Continental Stock Transfer & Trust Company (the "Promus Rights
Plan"), (i) there are no shares of capital stock of any class of Promus, or
any security exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding; (ii) there are no options,
warrants, equity securities, calls, rights, commitments or agreements of any
character to which Promus or any of its Subsidiaries is a party or by which
it is bound obligating Promus or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other ownership interests of Promus or any of its Subsidiaries or
obligating Promus or any of its Subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call,
right, commitment or agreement; and (iii) to the best knowledge of Promus,
there are no voting trusts, proxies or other voting agreements or
understandings with respect to the shares of capital stock of Promus. All
shares of Promus Common Stock subject to issuance as specified in this
Section 4.2 are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable.
20
Section 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Promus has all requisite corporate power and authority to enter
into this Agreement, the Stock Option Agreements and the Stockholder Support
Agreement and to consummate the transactions contemplated by this Agreement,
the Stock Option Agreements and the Stockholder Support Agreement. The
execution and delivery of this Agreement, the Stock Option Agreements and the
Stockholder Support Agreement and the consummation of the transactions
contemplated by this Agreement, the Stock Option Agreements and the
Stockholder Support Agreement by Promus have been duly authorized by all
necessary corporate action on the part of Promus, subject only to the
approval and adoption of this Agreement and the Promus Merger by Promus's
stockholders under the DGCL. This Agreement, the Stock Option Agreements and
the Stockholder Support Agreement have been duly executed and delivered by
Promus and constitute the valid and binding obligations of Promus,
enforceable in accordance with their terms, subject to the Bankruptcy and
Equity Exception.
(b) The execution and delivery of this Agreement, the Stock Option
Agreements and the Stockholder Support Agreement by Promus does not, and the
consummation of the transactions contemplated by this Agreement, the Stock
Option Agreements and the Stockholder Support Agreement will not, (i)
conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Promus or any of its Subsidiaries,
(ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which Promus
or any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound (other than pursuant to the Tranche A
Credit Agreement or the Tranche B Credit Agreement, each dated as of June 7,
1995, as amended, by and among Promus and certain of its subsidiaries and
NationsBank, N.A. (Carolinas)) or (iii) conflict with or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Promus or any of its Subsidiaries
or any of its or their properties or assets, except in the case of (ii) and
(iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which (x) are not, individually or in the
aggregate, reasonably likely to have a Promus Material Adverse Effect or (y)
would not substantially impair or delay the consummation of the Promus Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Promus or any of its Subsidiaries in connection with the execution
and delivery of this Agreement, the Stock Option Agreements and the
Stockholder Support Agreement or the consummation of the transactions
contemplated hereby or thereby, except for (i) the filing of the pre-merger
notification report under the HSR Act, (ii) the filing of a Certificate of
Merger with respect to the Promus Merger with the Delaware Secretary of
State, (iii) the filing of the Joint Proxy Statement/Prospectus with the SEC
in accordance with the Exchange Act and the Securities Act, (iv) such
consents, approvals, orders, authorizations, permits, filings, or
registrations related to, or arising out of, compliance with statutes, rules
or regulations regulating the consumption, sale or serving of alcoholic
beverages, (v) such consents, approvals, orders, authorizations,
registrations,
21
declarations and filings as may be required under applicable state securities
laws and the laws of any foreign country and (vi) such other consents,
authorizations, filings, approvals and registrations which, if not obtained
or made, would not (x) be reasonably likely to have a Promus Material Adverse
Effect or (y) substantially impair or delay the consummation of the Promus
Merger.
Section 4.4. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Promus has filed and made available to Doubletree all forms,
reports and documents required to be filed by Promus with the SEC since
January 1, 1996 (collectively, the "Promus SEC Reports"). The Promus SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Promus SEC Reports or
necessary in order to make the statements in such Promus SEC Reports, in the
light of the circumstances under which they were make, not misleading. Other
than Promus Hotels, Inc., none of Promus's Subsidiaries is required to file
any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) of Promus contained in the Promus SEC Reports
complied as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and fairly
presented the consolidated financial position of Promus and its Subsidiaries
as of the dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. The audited
balance sheet of Promus as of December 31, 1996 is referred to herein as the
"Promus Balance Sheet."
Section 4.5. NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Promus SEC Reports filed prior to the date hereof, and except for normal or
recurring liabilities incurred since December 31, 1996 in the ordinary course
of business consistent with past practices, Promus and its Subsidiaries do
not have any liabilities, either accrued, contingent or otherwise (whether or
not required to be reflected in financial statements in accordance with
generally accepted accounting principles), and whether due or to become due,
which individually or in the aggregate, are reasonably likely to have a
Promus Material Adverse Effect.
Section 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Promus SEC Reports filed prior to the date hereof, since the date of
the Promus Balance Sheet, Promus and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any event, development,
state of affairs or condition, or series or combination of events,
developments, states of affairs or
22
conditions, which, individually or in the aggregate, has had or which is
reasonably likely to have a Promus Material Adverse Effect (other than
events, developments, states of affairs or conditions that are the effect or
result of actions taken by Doubletree or economic factors affecting the
economy as a whole or the industry in which Promus competes); (ii) any
damage, destruction or loss (whether or not covered by insurance) with
respect to Promus or any of its Subsidiaries which is reasonably likely to
have a Promus Material Adverse Effect; (iii) any material change by Promus in
its accounting methods, principles or practices to which Doubletree has not
previously consented in writing; (iv) any revaluation by Promus of any of its
assets which is reasonably likely to have a Promus Material Adverse Effect;
or (v) any other action or event that would have required the consent of
Doubletree pursuant to Section 5.1 of this Agreement had such action or event
occurred after the date of this Agreement, other than such actions or events
that, individually or in the aggregate, have not had or are not reasonably
likely to have a Promus Material Adverse Effect.
Section 4.7. TAXES.
(a) Promus and each of its Subsidiaries have (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid
or accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or accruals that are not reasonably likely, individually or
in the aggregate, to have a Promus Material Adverse Effect. Neither the IRS
nor any other taxing authority has asserted any claim for Taxes, or to the
actual knowledge of the executive officers of Promus, is threatening to
assert any claims for Taxes, which claims, individually or in the aggregate,
are reasonably likely to have a Promus Material Adverse Effect. Promus and
each of its Subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities (or are properly holding for such
payment) all Taxes required by law to be withheld or collected, except for
amounts that are not reasonably likely, individually or in the aggregate, to
have a Promus Material Adverse Effect. Neither Promus nor any of its
Subsidiaries has made an election under Section 341(f) of the Code, except
for any such election that shall not have a Promus Material Adverse Effect.
There are no liens for Taxes upon the assets of Promus or any of its
Subsidiaries (other than liens for Taxes that are not yet due or delinquent
or that are being contested in good faith by appropriate proceedings), except
for liens that are not reasonably likely, individually or in the aggregate,
to have a Promus Material Adverse Effect.
(b) Neither Promus nor any of its Subsidiaries is or has been a member
of an affiliated group of corporations filing a consolidated federal income
tax return (or a group of corporations filing a consolidated, combined or
unitary income tax return under comparable provisions of state, local or
foreign tax law) for any taxable period beginning on or after February 7,
1990, other than a group the common parent of which is or was The Promus
Companies Incorporated, Promus or any Subsidiary of Promus.
(c) Neither Promus nor any of its Subsidiaries has any obligation
under any agreement or arrangement with any other person with respect to
Taxes of such other person
23
(including pursuant to Treas. Reg. SECTION 1.1502-6 or comparable provisions
of state, local or foreign tax law) and including any liability for Taxes of
any predecessor entity, except for obligations that are not reasonably
likely, individually or in the aggregate, to have an Promus Material Adverse
Effect.
Section 4.8. PROPERTIES.
(a) Neither Promus nor any of its Subsidiaries is in default under any
Material Leases, except where the existence of such defaults, individually or
in the aggregate, is not reasonably likely to have a Promus Material Adverse
Effect.
(b) With respect to each item of real property that Promus or any of
its Subsidiaries owns, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Promus Material Adverse
Effect: (i) Promus or its Subsidiary has good and clear record and marketable
title to such property, insurable by a recognized national title insurance
company at standard rates, free and clear of any security interest, easement,
covenant or other restriction, except for recorded easements, covenants and
other restrictions which do not materially impair the current uses or
occupancy of such property; and (ii) the improvements constructed on such
property are in good condition, and all mechanical and utility systems
servicing such improvements are in good condition, free in each case of
material defects.
Section 4.9. INTELLECTUAL PROPERTY. Promus owns, or is licensed or
otherwise possesses legally enforceable rights to use, all trademarks, trade
names, service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, know-how, computer software
programs or applications, and tangible or intangible proprietary information
or material that are necessary to conduct the business of Promus as currently
conducted, subject to such exceptions that, individually and in the
aggregate, would not be reasonably likely to have a Promus Material Adverse
Effect. Promus has no knowledge of any assertion or claim challenging the
validity of any of such intellectual property.
Section 4.10. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Promus has not breached, or received in writing any claim or
notice that it has breached, any of the terms or conditions of any material
agreement, contract or commitment filed as an exhibit to the Promus SEC
Reports ("Promus Material Contracts") in such a manner as, individually or in
the aggregate, are reasonably likely to have a Promus Material Adverse
Effect. Each Promus Material Contract that has not expired by its terms is
in full force and effect.
(b) Without limiting Section 4.10(a), each of the management contracts
and franchise agreements to which Promus is a party and each of Promus's
Material Leases (i) is valid and binding in accordance with its terms and is
in full force and effect, (ii) neither Promus nor any of its Subsidiaries is
in default in any material respect thereof, nor does any condition exist that
with notice or lapses of time or both would constitute a material default
thereunder, and (iii) no party has given any written or (to the knowledge of
Promus) oral notice of termination or cancellation thereof or that such party
intends to assert a breach thereof, or seek to terminate or cancel, any such
agreement, contract or lease, in each case as a result of the transactions
24
contemplated hereby, subject to such exceptions that, individually and in the
aggregate, would not be reasonably likely to have a Promus Material Adverse
Effect.
Section 4.11. LITIGATION. Except as described in the Promus SEC Reports
filed prior to the date hereof, there is no action, suit or proceeding,
claim, arbitration or investigation against Promus pending or as to which
Promus has received any written notice of assertion, which, individually or
in the aggregate, is reasonably likely to have a Promus Material Adverse
Effect or a material adverse effect on the ability of Promus to consummate
the transactions contemplated by this Agreement.
Section 4.12. ENVIRONMENTAL MATTERS. To the knowledge of Promus and
except as disclosed in the Promus SEC Reports filed prior to the date hereof
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Promus Material Adverse Effect: (i) Promus and
its Subsidiaries have complied with all applicable Environmental Laws; (ii)
the properties currently owned or operated by Promus and its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures)
are not contaminated with any Hazardous Substances; (iii) the properties
formerly owned or operated by Promus or any of its Subsidiaries were not
contaminated with Hazardous Substances during the period of ownership or
operation by Promus or any of its Subsidiaries; (iv) neither Promus nor its
Subsidiaries are subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (v) neither Promus nor any of its
Subsidiaries has been associated with any release or threat of release of any
Hazardous Substance; (vi) neither Promus nor any of its Subsidiaries has
received any notice, demand, letter, claim or request for information
alleging that Promus or any of its Subsidiaries may be in violation of or
liable under any Environmental Law; (vii) neither Promus nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are
no circumstances or conditions involving Promus or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use or transfer of
any property of Promus or any of its Subsidiaries pursuant to any
Environmental Law.
Section 4.13. EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the "Promus Employee Plans" shall
mean all employee benefit plans (as defined in Section 3(3) of ERISA) and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
and all unexpired severance agreements, written or otherwise, for the benefit
of, or relating to, any current or former employee of Promus or any ERISA
Affiliate of Promus, or any Subsidiary of Promus (together, the "Promus
Employee Plans"). Promus has listed in Section 4.13 of the Promus Disclosure
Schedule all Promus Employee Plans other than plans that are "employee
welfare benefit plans" within the meaning of Section 3(1) of ERISA.
(b) With respect to each Promus Employee Plan, Promus has made
available to Doubletree, a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the IRS, (ii) such Promus Employee Plan
and all amendments thereto, (iii) each trust agreement
25
and group annuity contract, if any, and all amendments thereto relating to
such Promus Employee Plan and (iv) the most recent actuarial report or
valuation relating to a Promus Employee Plan subject to Title IV of ERISA.
(c) With respect to the Promus Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Promus, there
exists no condition or set of circumstances in connection with which Promus
could be subject to any liability that is reasonably likely to have a Promus
Material Adverse Effect under ERISA, the Code or any other applicable law.
(d) With respect to the Promus Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting
principles, on the financial statements of Promus, except for obligations
which, individually or in the aggregate, are not reasonably likely to have a
Promus Material Adverse Effect.
(e) Except as disclosed in the Promus SEC Reports filed prior to the
date of this Agreement, and except as provided for in this Agreement, neither
Promus nor any of its Subsidiaries is a party to any oral or written (i)
agreement with any officer or other key employee of Promus or any of its
Subsidiaries, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Promus of
the nature contemplated by this Agreement, (ii) agreement with any officer of
Promus providing any term of employment or compensation guarantee extending
for a period longer than one year from the date hereof or for the payment of
compensation in excess of $100,000 per annum, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, the vesting of the benefits of which will be accelerated or the
funding of benefits of which will be required, by the occurrence of any of
the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
Section 4.14. COMPLIANCE WITH LAWS. Promus has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business,
except for failures to comply or violations which, individually or in the
aggregate, have not had and are not reasonably likely to have a Promus
Material Adverse Effect.
Section 4.15. ACCOUNTING AND TAX MATTERS.
(a) To the best knowledge of Promus, after consulting with its
independent auditors with respect to clause (i) below and its tax advisors
with respect to clause (ii) below, neither Promus nor any of its Affiliates
(as defined in Section 5.12) has taken or agreed to take any action which
would (i) prevent Parent from accounting for the business combination to be
effected by the Mergers as a pooling of interests, or (ii) prevent the Promus
Merger from qualifying as a reorganization described in Section 368(a) of the
Code and/or, taken together
26
with the Doubletree Merger, as a transfer of property to Parent by holders of
Promus Common Stock described in Section 351 of the Code. Except as
contemplated by the Promus Option Agreement, neither Promus nor any of its
Subsidiaries owns any shares of Doubletree Common Stock or other securities
convertible into shares of Doubletree Common Stock (exclusive of any shares
owned by Promus's employee benefit plans).
(b) To the best knowledge of Promus, the stockholders of Promus as a
group have no present plan, intention or arrangement to sell or otherwise
dispose of such number of the shares of Parent Common Stock received in the
Promus Merger as would reduce their ownership in Parent Common Stock to a
number of shares having a value, as of the date of the Promus Merger, of less
than eighty percent (80%) of the value of all the formerly outstanding stock
of Promus as of the same date.
Section 4.16. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
The information to be supplied by Promus for inclusion in the Registration
Statement shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or omit
to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information to be supplied by Promus for inclusion in the
Joint Proxy Statement/Prospectus shall not, on the date the Joint Proxy
Statement/Prospectus is first mailed to stockholders of Promus or Doubletree,
at the time of the Promus Stockholders' Meeting and the Doubletree
Stockholder's Meeting and at the Effective Time, contain any statement which,
at such time and in light of the circumstances under which it shall be made,
is false or misleading with respect to any material fact, omit to state any
material fact necessary in order to make the statements made in the Joint
Proxy Statement/Prospectus not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Promus Stockholders'
Meeting or the Doubletree Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Promus or any of its Affiliates, officers or directors should be discovered
by Promus which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/Prospectus, Promus
shall promptly inform Doubletree.
Section 4.17. LABOR MATTERS. Except as disclosed in the Promus SEC
Reports filed prior to the date hereof, neither Promus nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is Promus or any of its
Subsidiaries the subject of any material proceeding asserting that Promus or
any of its Subsidiaries has committed an unfair labor practice or is seeking
to compel it to bargain with any labor union or labor organization nor, as of
the date of this Agreement, is there pending or, to the knowledge of the
executive officers of Promus, threatened, any material labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving Promus or any of its
Subsidiaries.
Section 4.18. INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Promus or any of its Subsidiaries are
with reputable insurance carriers, provide full and adequate
27
coverage for all normal risks incident to the business of Promus and its
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for
any such failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a Promus Material Adverse
Effect.
Section 4.19. PROMUS LONG-RANGE PLANS. Promus has provided to
Doubletree copies of Promus's long-range plans that are substantially
identical to the long-range plans presented by Promus's management to, and
adopted by, the Board of Directors of Promus on July 23, 1997, and Promus has
not adopted any other long-range plans since such date.
Section 4.20. OPINION OF FINANCIAL ADVISOR. The financial advisor of
Promus, BT Wolfensohn, has delivered to Promus an opinion dated the date of
this Agreement to the effect that the Promus Exchange Ratio is fair to
holders of Promus Common Stock from a financial point of view.
Section 4.21. NO EXISTING DISCUSSIONS. As of the date hereof, Promus is
not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to an Acquisition Proposal.
Section 4.22. SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions
contained in Section 203 of the DGCL applicable to a "business combination"
(as defined in Section DGCL 203) will not apply to the authorization,
execution, delivery or performance of this Agreement or the Stock Option
Agreements by Promus or the consummation of the Promus Merger by Promus. No
other "fair price," "moratorium," "control share acquisition" or other
similar anti-takeover statute or regulation is applicable to Promus or (by
reason of Promus's participation therein) the Promus Merger or the other
transactions contemplated by this Agreement.
Section 4.23. PROMUS RIGHTS PLAN. Under the terms of the Promus Rights
Plan, neither the execution of this Agreement or the Doubletree Stock Option
Agreement, nor the transactions contemplated hereby or thereby will cause a
Distribution Date to occur or cause the rights issued pursuant to the Promus
Rights Plan to become exercisable, and all such rights shall become
non-exercisable at the Effective Time.
ARTICLE V
COVENANTS
Section 5.1. CONDUCT OF BUSINESS. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Doubletree and Promus each agrees as to
itself and its respective Subsidiaries (except to the extent that the other
party shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and taxes when due subject to good
faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use
all reasonable efforts consistent with past practices and policies to
preserve intact its present
28
business organization, keep available the services of its present officers
and key employees and preserve its relationships with customers, suppliers,
distributors, and others having business dealings with it. Except as
expressly contemplated by this Agreement or the Stock Option Agreements or as
set forth in Section 5.1 of the Doubletree Disclosure Schedule, during the
period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Doubletree and
Promus each shall not (and shall not permit any of its respective
Subsidiaries to), without the written consent of the other party:
(a) Accelerate, amend or change the period of exercisability of
options or restricted stock granted under any employee stock plan of such
party or authorize cash payments in exchange for any options granted under
any of such plans except as required by the terms of such plans or any
related agreements (including severance agreements) in effect as of the date
of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock,
or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service to such party;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than (i) the grant of options consistent with past
practices to employees or directors, which options represent in the aggregate
the right to acquire no more than 25,000 shares (net of cancellations) of
Doubletree Common Stock or Promus Common Stock, as the case may be, (ii) the
issuance of shares of Doubletree Common Stock or Promus Common Stock, as the
case may be, pursuant to the exercise of options or warrants outstanding on
the date of this Agreement, and (iii) the issuance of capital stock under the
Doubletree Rights Plan or the Promus Rights Plan if required by the
respective terms thereof;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire
or agree to acquire any assets (other than hotel properties, inventory and
other immaterial assets, in each case in the ordinary course of business);
(e) Sell, lease, license or otherwise dispose of any of its material
properties or assets, except for transactions (including sales, leases,
licenses or dispositions of hotel properties, inventory and other immaterial
assets) in the ordinary course of business;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary
or wages of employees (other
29
than officers) in accordance with past practices, (ii) grant any additional
severance or termination pay to, or enter into any employment or severance
agreements with, any employees or officers, (iii) enter into any collective
bargaining agreement (other than as required by law or extensions to existing
agreements in the ordinary course of business), (iv) establish, adopt, enter
into or amend any bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees;
(g) Amend or propose to amend its Certificate of Incorporation or
Bylaws except as contemplated by this Agreement;
(h) Incur any indebtedness for borrowed money other than in the
ordinary course of business;
(i) Take any action that would or is reasonably likely to result in a
material breach of any provision of this Agreement or the Stock Option
Agreements or in any of its representations and warranties set forth in this
Agreement or the Stock Option Agreements being untrue on and as of the
Closing Date;
(j) Make or rescind any material express or deemed election relating
to Taxes, settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes, or make any material change to 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 ending
December 31, 1996, except as may be required by applicable law;
(k) Settle any litigation relating to the transactions contemplated
hereby other than any settlement which would not (i) have a Doubletree
Material Adverse Effect (if settled by Doubletree), a Promus Material Adverse
Effect (if settled by Promus) or a material adverse effect on the business,
properties, financial condition or results of operations of Parent (if
settled by either Doubletree or Promus) or (ii) adversely effect the
consummation of the transactions contemplated hereby; or
(l) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (k) above.
Section 5.2. COOPERATION; NOTICE; CURE. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of
Doubletree and Promus shall confer on a regular and frequent basis with one
or more representatives of the other party to report on the general status of
ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Mergers and the transactions contemplated
hereby and thereby. Each of Doubletree and Promus shall promptly notify the
other in writing of, and will use all commercially reasonable efforts to cure
before the Closing Date, any event, transaction or circumstance, as soon as
practical after it becomes known to such party, that causes or will cause any
covenant or agreement of Doubletree or Promus under this Agreement to be
breached or that
30
renders or will render untrue any representation or warranty of Doubletree or
Promus contained in this Agreement. No notice given pursuant to this
paragraph shall have any effect on the representations, warranties, covenants
or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
Section 5.3. NO SOLICITATION.
(a) Doubletree and Promus each shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent of such party (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transaction involving such
party or any of its Subsidiaries, other than the transactions contemplated by
this Agreement (any of the foregoing inquiries or proposals being referred to
in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations
or discussions with any person (or group of persons) other than Doubletree or
Promus or their respective affiliates (a "Third Party") concerning, or
provide any non-public information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to or recommend any Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent Doubletree or Promus, or their respective Board of Directors, from
(A) furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited
bona fide written Acquisition Proposal by such person or entity or modifying
or withdrawing its recommendation with respect to the transactions
contemplated hereby or recommending an unsolicited bona fide written
Acquisition Proposal to the stockholders of such party, if and only to the
extent that (1) the Board of Directors of such party believes in good faith
(after consultation with its financial advisor) that such Acquisition
Proposal is reasonably capable of being completed on the terms proposed and,
after taking into account the strategic benefits anticipated to be derived
from the Mergers and the prospects of Doubletree and Promus as a combined
company, would, if consummated, result in a transaction more favorable to the
stockholders of such party over the long term than the transaction
contemplated by this Agreement (a "Superior Proposal") and the Board of
Directors of such party determines in good faith after consultation with
outside legal counsel that such action is required for such Board of
Directors to comply with its fiduciary duties to stockholders under
applicable law and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality and standstill agreement with terms no less favorable to such
party than those contained in the Confidentiality Agreements, each dated
August 16, 1997 between Promus and Doubletree (the "Confidentiality
Agreements"); or (B) complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal. Each of Doubletree and Promus
agrees not to release any third party from, or waive any provision of, any
standstill agreement to which it is a party or any confidentiality agreement
between it and another person who has made, or who may reasonably be
considered likely to make, an Acquisition Proposal, unless its Board of
Directors determines in good faith after consultation with outside legal
counsel that such action is required for such Board of Directors to comply
with its fiduciary duties to stockholders under applicable law.
31
(b) Doubletree and Promus shall each notify the other party immediately
after receipt by Doubletree or Promus (or any of their advisors) of any
Acquisition Proposal or any request for nonpublic information in connection
with an Acquisition Proposal or for access to the properties, books or
records of such party by any person or entity that informs such party that it
is considering making, or has made, an Acquisition Proposal. Such notice
shall be made orally and in writing and shall indicate in reasonable detail
the identity of the offeror and the terms and conditions of such proposal,
inquiry or contact. Such party shall continue to keep the other party hereto
informed, on a current basis, of the status of any such discussions or
negotiations and the terms being discussed or negotiated.
Section 5.4 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practical after the execution of this Agreement,
Doubletree and Promus shall prepare and file with the SEC the Joint Proxy
Statement/Prospectus and the Registration Statement in which the Joint Proxy
Statement/Prospectus will be included as a prospectus, provided that
Doubletree and Promus may delay the filing of the Registration Statement
until approval of the Joint Proxy Statement/Prospectus by the SEC.
Doubletree and Promus shall use all reasonable efforts to cause the
Registration Statement to become effective as soon after such filing as
practical. The Joint Proxy Statement/Prospectus shall include the
recommendation of the Board of Directors of Doubletree in favor of adoption
of this Agreement and the Doubletree Merger and the recommendation of the
Board of Directors of Promus in favor of adoption of this Agreement and the
Promus Merger; provided that the Board of Directors of either party may
modify or withdraw such recommendation if such Board of Directors believes in
good faith after consultation with outside legal counsel that the
modification or withdrawal of such recommendation is required for such Board
of Directors to comply with its fiduciary duties under applicable law.
(b) Doubletree and Promus shall make all necessary filings with respect to
the Merger under the Securities Act, the Exchange Act, applicable state blue sky
laws and the rules and regulations thereunder.
Section 5.5 NASDAQ QUOTATION AND NYSE LISTING. Each of Doubletree and
Promus agrees to continue the quotation and listing of Doubletree Common
Stock and Promus Common Stock, respectively, on NASDAQ National Market and
the NYSE, respectively, during the term of this Agreement.
Section 5.6 ACCESS TO INFORMATION. Upon reasonable notice, Doubletree
and Promus shall each (and shall cause each of their respective Subsidiaries
to) afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its personnel, properties, books,
contracts, commitments and records and, during such period, each of
Doubletree and Promus shall, and shall cause each of their respective
Subsidiaries to, furnish promptly to the other (a) copies of monthly
financial reports and development reports, (b) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws
and (c) all other information concerning its business, properties and
personnel as such other party may reasonably request. The parties
32
will hold any such information which is nonpublic in confidence in accordance
with the Confidentiality Agreements. No information or knowledge obtained in
any investigation pursuant to this Section 5.6 shall affect or be deemed to
modify any representation or warranty contained in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
Section 5.7 STOCKHOLDERS' MEETINGS. Doubletree and Promus each shall
call a meeting of its respective stockholders to be held as promptly as
practicable for the purpose of voting, in the case of Doubletree, upon this
Agreement and the Doubletree Merger and, in the case of Promus, upon this
Agreement and the Promus Merger. Subject to Sections 5.3 and 5.4, Doubletree
and Promus shall, through their respective Boards of Directors, recommend to
their respective stockholders adoption of this Agreement and approval of such
matters and 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 and as soon as practicable after the date hereof. Unless otherwise
required to comply with the applicable fiduciary duties of the respective
directors of Doubletree and Promus, as determined by such directors in good
faith after consultation with outside legal counsel, each party shall use all
reasonable efforts to solicit from stockholders of such party proxies in
favor of such matters. Doubletree and Promus intend to submit additional
proposals to their respective stockholders at the Doubletree Stockholders'
Meeting and the Promus Stockholders' Meeting, respectively, separate from the
proposals referred to in the first sentence of this Section 5.7. The
approval by Doubletree's stockholders or Promus's stockholders, as the case
may be, of such additional proposals shall not be a condition to the closing
of the Mergers under this Agreement.
Section 5.8 LEGAL CONDITIONS TO MERGER.
(a) Doubletree and Promus shall each use all reasonable efforts to (i)
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary and proper under applicable law to consummate and
make effective the transactions contemplated hereby as promptly as
practicable, (ii) obtain from any Governmental Entity or any other third
party any consents, licenses, permits, waivers, approvals, authorizations, or
orders required to be obtained or made by Doubletree or Promus or any of
their Subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby including, without limitation, the Mergers, and (iii) as
promptly as practicable, make all necessary filings, and thereafter make any
other required submissions, with respect to this Agreement and the Mergers
required under (A) the Securities Act and the Exchange Act, and any other
applicable federal or state securities laws, (B) the HSR Act and any related
governmental request thereunder, and (C) any other applicable law.
Doubletree and Promus shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such documents
to the non-filing party and its advisors prior to filing and, if requested,
to accept all reasonable additions, deletions or changes suggested in
connection therewith. Doubletree and Promus shall use their reasonable
efforts to furnish to each other all information required for any application
or other filing to be made pursuant to the rules and regulations of any
applicable law (including all information required to be included in the
Joint Proxy Statement/Prospectus and the Registration Statement) in
connection with the transactions contemplated by this Agreement.
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(b) Doubletree and Promus agree, and shall cause each of their
respective Subsidiaries, to cooperate and to use their respective reasonable
efforts to obtain any government clearances required for Closing (including
through compliance with the HSR Act and any applicable foreign government
reporting requirements), to respond to any government requests for
information, and to contest and resist any action, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an "Order") that restricts, prevents or
prohibits the consummation of the Mergers or any other transactions
contemplated by this Agreement. The parties hereto will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any
party hereto in connection with proceedings under or relating to the HSR Act
or any other federal, state or foreign antitrust or fair trade law.
Doubletree and Promus shall cooperate and work together in any proceedings or
negotiations with any Governmental Entity relating to any of the foregoing.
Notwithstanding anything to the contrary in this Section 5.8, neither
Doubletree nor Promus, nor any of their respective Subsidiaries, shall be
required to take any action that would reasonably be expected to
substantially impair the overall benefits expected, as of the date hereof, to
be realized from the consummation of the Mergers.
(c) Each of Doubletree and Promus shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, all reasonable efforts to obtain
any third party consents related to or required in connection with the
Mergers.
Section 5.9 PUBLIC DISCLOSURE. Doubletree and Promus shall agree on
the form and content of the initial press release regarding the transactions
contemplated hereby and thereafter shall consult with each other before
issuing, and use all reasonable efforts to agree upon, any press release or
other public statement with respect to any of the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law.
Section 5.10 NONRECOGNITION EXCHANGE. From and after the date hereof
and until the Effective Time, neither Doubletree nor Promus, nor any of their
respective Subsidiaries or other Affiliates shall knowingly take any action,
or knowingly fail to take any action, that is reasonably likely to jeopardize
the treatment of either of the Mergers as a reorganization described in
Section 368(a) of the Code and/or, taken together with the other of the
Mergers, as a transfer of property to Parent by holders of Doubletree Common
Stock or Promus Common Stock, as applicable, described in Section 351 of the
Code.
Section 5.11 POOLING ACCOUNTING. From and after the date hereof and
until the Effective Time, neither Doubletree nor Promus, nor any of their
respective Subsidiaries or other Affiliates shall knowingly take any action,
or knowingly fail to take any action, that is reasonably likely to jeopardize
the treatment of the Mergers as a pooling of interests for accounting
purposes.
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Section 5.12 AFFILIATE AGREEMENTS. Upon the execution of this
Agreement, Doubletree and Promus will provide each other with a list of those
persons who are, in Doubletree's or Promus's respective reasonable judgment,
"affiliates" of Doubletree or Promus, respectively, within the meaning of
Rule 145 (each such person who is an "affiliate" of Doubletree or Promus
within the meaning of Rule 145 is referred to as an "Affiliate") promulgated
under the Securities Act ("Rule 145"). Doubletree and Promus shall provide
each other such information and documents as the other party shall reasonably
request for purposes of reviewing such list and shall notify the other party
in writing regarding any change in the identity of its Affiliates prior to
the Closing Date. Doubletree and Promus shall each use all reasonable
efforts to deliver or cause to be delivered to each other by October 15, 1997
(and in any case prior to the Effective Time) from each of its Affiliates, an
executed Affiliate Agreement, in substantially the form of Exhibit F (with
respect to affiliates of Doubletree) or Exhibit G (with respect to affiliates
of Promus) attached hereto (each, an "Affiliate Agreement," and together, the
"Affiliate Agreements").
Section 5.13 NYSE LISTING. Doubletree and Promus shall cause Parent to
promptly prepare and submit to the NYSE a listing application covering the
shares of Parent Common Stock to be issued in the Mergers and upon exercise
of Doubletree Stock Options, the GEPT Warrant and Promus Stock Options, and
shall use all reasonable efforts to cause such shares to be approved for
listing on the NYSE, prior to the Effective Time, subject to official notice
of issuance.
Section 5.14 STOCK PLANS.
(a) At the Effective Time, each outstanding option to purchase shares
of Doubletree Common Stock (an "Doubletree Stock Option") under the
Doubletree Stock Plans and each outstanding option to purchase shares of
Promus Common Stock (a "Promus Stock Option") under the Promus Stock Plans,
in each case whether vested or unvested, shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Doubletree Stock Option or Promus Stock Option, as the case may be, the
same number of shares of Parent Common Stock as the holder of such Doubletree
Stock Option or Promus Stock Option, as the case may be, would have been
entitled to receive pursuant to the Doubletree Merger or the Promus Merger,
respectively, had such holder exercised such option in full immediately prior
to the Effective Time (rounded downward to the nearest whole number), at a
price per share (rounded downward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of Doubletree Common Stock or Promus
Common Stock, as the case may be, purchasable pursuant to such Doubletree
Stock Option or such Promus Stock Option immediately prior to the Effective
Time divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Doubletree Stock Option or Promus Stock Option,
as the case may be, in accordance with the foregoing.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the participants in the Doubletree Stock Plans and the Promus
Stock Plans appropriate notice setting forth such participants' rights
pursuant thereto and the grants pursuant to Doubletree Stock Plans or Promus
Stock Plans, as the case may be, shall continue in effect on the same terms
and
35
conditions (subject to the adjustments required by this Section 5.14 after
giving effect to the Mergers).
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
under Doubletree Stock Plans and Promus Stock Plans assumed in accordance
with this Section 5.14. As soon as practicable after the Effective Time,
Parent shall file a registration statement on Form S-8 (or any successor or
other appropriate forms), or another appropriate form with respect to the
shares of Parent Common Stock subject to such options and shall use its
reasonable efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
(d) The Board of Directors of each of Doubletree and Promus shall,
prior to or as of the Effective Time, take all necessary actions, pursuant to
and in accordance with the terms of the Doubletree Stock Plans and the
instruments evidencing the Doubletree Stock Options, or the Promus Stock
Plans and the instruments evidencing the Promus Stock Options, as the case
may be, to provide for the conversion of the Doubletree Stock Options and the
Promus Stock Options into options to acquire Parent Common Stock in
accordance with this Section 5.14 without obtaining consent of the holders of
the Doubletree Stock Options or Promus Stock Options in connection with such
conversion; provided, however, that Promus shall use all reasonable efforts
to obtain from each holder of Promus Stock Options a waiver of any right of
such holder to receive any cash payment which may become due with respect to
any Promus Stock Options that are exercisable immediately prior to the
Effective Time as a result of the consummation of the transactions
contemplated hereby.
(e) The Board of Directors of each of Doubletree and Promus shall,
prior to or as of the Effective Time, take appropriate action to approve the
deemed cancellation of the Doubletree Stock Options or Promus Stock Options,
as the case may be, for purposes of Section 16(b) of the Exchange Act. The
Board of Directors of Parent shall, prior to or as of the Effective Time,
take appropriate action to approve the deemed grant of options to purchase
Parent Common Stock under the Doubletree Stock Options and the Promus Stock
Options (as converted pursuant to this Section 5.14) for purposes of Section
16(b) of the Exchange Act.
Section 5.15 BROKERS OR FINDERS. Each of Doubletree and Promus
represents, as to itself, its Subsidiaries and its Affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement except Morgan Stanley & Co. Incorporated, whose fees and expenses
will be paid by Doubletree in accordance with Doubletree's agreement with
such firm (a copy of which has been delivered by Doubletree to Promus prior
to the date of this Agreement), and BT Wolfensohn, whose fees and expenses
will be paid by Promus in accordance with Promus's agreement with such firm
(a copy of which has been delivered by Promus prior to the date of this
Agreement). Each of Promus and Doubletree agrees to indemnify and hold the
other harmless from and against any and all claims, liabilities or
obligations with respect to any such fees, commissions or
36
expenses asserted by any person on the basis of any act or statement alleged
to have been made by such party or any of its Affiliates.
Section 5.16 INDEMNIFICATION.
(a) From and after the Effective Time, Parent agrees that it will, and
will cause the Surviving Corporations to, indemnify and hold harmless each
present and former director and officer of Doubletree and Promus (the
"Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid
in settlement incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that Doubletree or Promus, as the case
may be, would have been permitted under Delaware law and its certificate of
incorporation or bylaws in effect on the date hereof to indemnify such
Indemnified Party (and Parent and the Surviving Corporation shall also
advance expenses as incurred to the fullest extent permitted under applicable
law, provided the Indemnified Party to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification).
(b) For a period of six years after the Effective Time, Parent shall
maintain or shall cause the Surviving Corporations to maintain (to the extent
available in the market) in effect a directors' and officers' liability
insurance policy covering those persons who are currently covered by
Doubletree's or Promus's directors' and officers' liability insurance policy
(copies of which have been heretofore delivered by Doubletree and Promus to
each other) with coverage in amount and scope at least as favorable as
Doubletree's or Promus's existing coverage; provided that in no event shall
Parent or the Surviving Corporations be required to expend in the aggregate
in excess of 200% of the annual premium currently paid by Doubletree and
Promus for such coverage; and if such premium would at any time exceed 200%
of the such amount, then the Parent or the Surviving Corporations shall
maintain insurance policies which provide the maximum and best coverage
available at an annual premium equal to 200% of such amount.
(c) The provisions of this Section 5.16 are intended to be an addition
to the rights otherwise available to the current officers and directors of
Doubletree and Promus by law, charter, statute, bylaw or agreement, and shall
operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
Section 5.17 LETTER OF PROMUS'S ACCOUNTANTS. Promus shall use all
reasonable efforts to cause to be delivered to Doubletree and Promus a letter
of Arthur Andersen LLP, Promus's independent auditors, dated a date within
two business days before the date on which the Registration Statement shall
become effective and addressed to Doubletree, in form reasonably satisfactory
to Doubletree and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
37
Section 5.18 LETTER OF DOUBLETREE'S ACCOUNTANTS. Doubletree shall use
all reasonable efforts to cause to be delivered to Promus and Doubletree a
letter of KPMG Peat Marwick LLP, Doubletree's independent auditors, dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to Promus, in form reasonably
satisfactory to Promus and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
Section 5.19 STOCK OPTION AGREEMENTS. Promus and Doubletree each agree
to fully perform their respective obligations under the Stock Option
Agreements.
Section 5.20 POST-MERGER CORPORATE GOVERNANCE; EMPLOYMENT ARRANGEMENTS.
(a) At the Effective Time, the total number of persons serving on the
Board of Directors of Parent shall be fourteen (unless otherwise agreed in
writing by Doubletree and Promus prior to the Effective Time), half of whom
shall be Doubletree Directors and half of whom shall be Promus Directors (as
such terms are defined below), all of which Doubletree Directors and Promus
Directors shall be spread as evenly as possible among Parent's three classes
of Directors. The persons to serve initially on the Board of Directors of
Parent at the Effective Time who are Doubletree Directors shall be selected
solely by and at the absolute discretion of the Board of Directors of
Doubletree prior to the Effective Time; and the persons to serve initially on
the Board of Directors of Parent at the Effective Time who are Promus
Directors shall be selected solely by and at the absolute discretion of the
Board of Directors of Promus prior to the Effective Time. In the event that,
prior to the Effective Time, any person so selected to serve on the Board of
Directors of Parent after the Effective Time is unable or unwilling to serve
in such position, the Board of Directors which selected such person shall
designate another of its members to serve in such person's stead in
accordance with the provisions of the immediately preceding sentence. From
and after the Effective Time and until December 31, 2002, (a) the Board of
Directors of Parent and each Committee of the Board of Directors of Parent as
constituted following each election of Directors shall consist of an equal
number of Doubletree Directors and Promus Directors, and (b) the size of the
Board of Directors of Parent and each Committee of the Board of Directors of
Parent shall not be increased unless such increase is approved by 75% of the
members thereof. It is the intention of the parties hereto that Mr. Dale
Frey shall be designated as the initial Chairman of the Human Resources
Committee of Parent immediately following the Effective Time. If, at any
time during the period referenced in the second preceding sentence, the
number of Doubletree Directors and Promus Directors serving, or that would be
serving following the next stockholders' meeting at which Directors are to be
elected, as Directors of Parent or as members of any Committee of the Board
of Directors of Parent, would not be equal, then, subject to the fiduciary
duties of the Directors of Parent, the Board of Directors and the Nominating
Committee thereof shall nominate for election at the next stockholders'
meeting at which Directors are to be elected, such person or persons as may
be requested by the remaining Doubletree Directors (if the number of
Doubletree Directors is, or would otherwise become, less than the number of
Promus Directors) or by the remaining Promus Directors (if the number of
Promus Directors is, or would otherwise become, less than the number of
Doubletree Directors) to ensure that there shall be an equal number of
Doubletree Directors and Promus Directors. The provisions of the preceding
sentence shall not apply in
38
respect of any stockholders' meeting which takes place after December 31,
2002. The term "Doubletree Director" means (i) any person serving as a
Director of Doubletree or any of its Subsidiaries on the date hereof who
becomes a Director of Parent at the Effective Time and (ii) any person who
becomes a Director of Parent pursuant to the second preceding sentence and
who is designated by the Doubletree Directors; and the term "Promus Director"
means (i) any person serving as a Director of Promus or any of its
Subsidiaries on the date hereof who becomes a Director of Parent at the
Effective Time and (ii) any person who becomes a Director of Parent pursuant
to the second preceding sentence and who is designated by the Promus
Directors.
(b) At the Effective Time, pursuant to the terms of the employment
contracts referred to in Section 5.20(c) hereof, (i) Raymond E. Schultz, the
current Chief Executive Officer of Promus, shall hold the position of Chief
Executive Officer and Chairman of the Board of Parent, (ii) Richard M.
Kelleher, the current President and Chief Executive Officer of Doubletree,
shall hold the position of President and Chief Operating Officer of Parent,
(iii) William L. Perocchi, the current Executive Vice President and Chief
Financial Officer of Doubletree, shall hold the position of Executive Vice
President and Chief Financial Officer of Parent and (iv) Thomas L. Keltner,
the current Executive Vice President, Development of Promus, shall hold the
position of Executive Vice President, Development of Parent. Mr. Schultz
will continue as Chairman of the Board and Chief Executive Officer of Parent
until his retirement no later than December 31, 1999, and, pursuant to the
terms of the employment contracts referred to in Section 5.20(c) hereof and
subject to the Bylaws of Parent, Mr. Kelleher will succeed Mr. Schultz as
Chairman of the Board and Chief Executive Officer of Parent. If any of the
persons identified above in this Section 5.20(b) is unable or unwilling to
hold such offices as set forth above, his successor shall be selected by the
Board of Directors of Parent in accordance with the Bylaws of Parent. The
authority, duties and responsibilities of the Chairman and Chief Executive
Officer, the President and Chief Operating Officer, the Executive Vice
President and Chief Financial Officer and the Executive Vice President,
Development shall be set forth in the employment contracts entered into
pursuant to Section 5.20(c) hereof, which employment contracts shall also set
forth in their entirety the rights and remedies of Messrs. Schultz, Kelleher,
Perocchi and Keltner with respect to employment by Parent , and none of them
shall have any right, remedy or cause of action under this Section 5.20, nor
shall they be third party beneficiaries of this Section 5.20.
(c) Prior to the Closing, Parent shall offer to enter into employment
agreements with Raymond E. Schultz, Richard M. Kelleher, William L. Perocchi
and Thomas L. Keltner on substantially the terms previously agreed to by
Doubletree and Promus.
(d) At the Effective Time, Parent shall have an Executive Committee
which initially will be comprised of the following four members of the Board
of Directors of Parent: Richard J. Ferris, Michael D. Rose, Raymond E.
Schultz and Peter V. Ueberroth. In addition, Richard M. Kelleher shall be an
ex-officio member of the Executive Committee with the right to attend but not
vote at all meetings of the Executive Committee. The Executive Committee
shall have responsibility for developing Parent's long-term strategic plans,
making significant capital allocation decisions and such other duties and
responsibilities as specified by the Board of Directors of Parent at or after
the Effective Time. The Executive Committee also shall be required to
oversee the implementation of Promus's existing 100% guest satisfaction
guarantee
39
program at all of Promus's and Doubletree's hotel properties following the
Effective Time. Each member of the Executive Committee that is not an
employee of Parent will be entitled to receive $300,000 per year as
compensation for serving on the Executive Committee.
(e) Each of Doubletree and Promus shall cause Parent to incorporate the
provisions contained in this Section 5.20 into the Bylaws of Parent in effect
at the Effective Time, which provisions shall thereafter be amended only with
the approval of 75% of the members of the Board of Directors of Parent.
Section 5.21 NAME OF PARENT. At the Effective Time, Parent shall
change its corporate name to Promus Hotel Corporation.
Section 5.22 PARENT STOCKHOLDER RIGHTS PLAN. Prior to the Effective
Time, Doubletree and Promus shall cause Parent to adopt a Stockholder Rights
Plan (the "Parent Rights Plan") that is substantially similar to the Promus
Rights Plan, with such modifications as are acceptable to both Doubletree and
Promus.
Section 5.23 GEPT WARRANT; DOUBLETREE REGISTRATION RIGHTS AGREEMENT.
(a) At the Effective Time, Parent shall assume all obligations under
the GEPT Warrant, and the holder of the GEPT Warrant thereafter shall have
the right to acquire, on the same pricing and payment terms and conditions as
are currently applicable under the GEPT Warrant, the same number of shares of
Parent Common Stock as the holder of the GEPT Warrant would have been
entitled to receive pursuant to the Doubletree Merger had such holder
exercised the GEPT Warrant in full immediately prior to the Effective Time
(rounded downward to the nearest whole number), at the price per share
(rounded downward to the nearest whole cent) equal to (y) the aggregate
exercise price for the shares of Doubletree Common Stock purchasable pursuant
to the GEPT Warrant immediately prior to the Effective Time divided by (z)
the number of full shares of Parent Common Stock deemed purchasable pursuant
to the GEPT Warrant in accordance with the foregoing.
(b) At the Effective Time, Doubletree and Promus shall cause Parent to
enter into a Registration Rights Agreement (the "Parent Registration Rights
Agreement") substantially similar to the Incorporation and Registration
Rights Agreement dated as of December 16, 1993, as amended on June 30, 1994,
February 27, 1996 and November 8, 1996 by and among Doubletree and certain
stockholders of Doubletree (the "Doubletree Registration Rights Agreement")
pursuant to which Parent will provide registration rights to parties to the
Doubletree Registration Rights Agreement (other than Doubletree) with respect
to all shares of Parent Common Stock issued in the Doubletree Merger on
account of the shares of Doubletree Common Stock covered by the Doubletree
Registration Rights Agreement.
Section 5.24 CONVEYANCE TAXES. Doubletree and Promus 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 or any similar taxes which
40
become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the
Effective Time.
Section 5.25 TRANSFER TAXES. Doubletree shall pay, and Promus shall
pay, on behalf of the stockholders of Doubletree and Promus, respectively,
any New York State Real Estate Transfer Tax, New York City Real Property
Transfer Tax, New York State Stock Transfer Tax and any similar taxes imposed
on the stockholders of Doubletree and Promus, respectively, by any other
State of the United States (and any interest with respect to such taxes) (the
"Transfer Taxes"), which become payable in connection with the transactions
contemplated by this Agreement. Doubletree and Promus shall cooperate in the
preparation, execution and filing of any required returns with respect to
such Transfer Taxes (including returns on behalf of the stockholders of
Doubletree and Promus) and in the determination of the portion of the
consideration allocable to the real property of Doubletree and the Doubletree
Subsidiaries and Promus and the Promus Subsidiaries in New York State and
City (or in any other jurisdiction, if applicable). The Joint Proxy
Statement/Prospectus shall provide that the stockholders of Doubletree and
Promus shall be deemed to have (i) authorized Doubletree and Promus,
respectively, to prepare, execute and file any tax returns relating to
Transfer Taxes and pay any Transfer Taxes arising in connection with the
Mergers, in each case, on behalf of such holders and (ii) agreed to be bound
by the values and allocations established by Doubletree and Promus in the
preparation of any return with respect to the Transfer Taxes, if applicable.
Section 5.26 STOCKHOLDER LITIGATION. Each of Doubletree and Promus
shall give the other the reasonable opportunity to participate in the defense
of any stockholder litigation against Doubletree or Promus, as applicable,
and its directors relating to the transactions contemplated hereby.
Section 5.27 EMPLOYEE BENEFITS; SEVERANCE.
(a) Parent shall cause to continue to be maintained the Doubletree and
Promus annual bonus plans for management employees for the 1997 fiscal year
and shall calculate the amounts payable to participants thereunder on a basis
consistent with the terms of each such plan and the past practice of
Doubletree or Promus, as applicable.
(b) For purposes of determining eligibility to participate, vesting,
entitlement to benefits and in all other respects where length of service is
relevant (except for pension benefit accruals) under any employee benefit
plan or arrangement covering employees of Doubletree and its Subsidiaries
("Doubletree Employees") employees of Promus and its Subsidiaries ("Promus
Employees") following the Effective Time, Parent shall cause such plans or
arrangements to recognize service credit for service with Doubletree or
Promus (as applicable) and any of their respective Subsidiaries to the same
extent such service was recognized under the applicable employee benefit
plans immediately prior to the Effective Time.
(c) At the Effective Time, Parent shall assume and honor in accordance
with their terms the severance agreements and severance pay policies
identified in Section 5.27 of the Doubletree Disclosure Schedule and Section
5.27 of the Promus Disclosure Schedule.
41
(d) Promus and Doubletree agree that each may enter into retention and
transition bonus arrangements with its employees prior to the Effective Time,
with the terms and amounts of such payments to be determined jointly by the
Chief Executive Officers of Promus and Doubletree; provided, however, that in
no event shall the aggregate of all such payments exceed approximately $2.5
million.
(e) Promus agrees to use all reasonable efforts, including obtaining
any necessary employee consents, to prevent the automatic funding of any
escrow, trust or similar arrangement pursuant to any employment agreement,
arrangement or benefit plan that arises in connection with the execution of
this Agreement or the consummation of any of the transactions contemplated
hereby.
ARTICLE VI.
CONDITIONS TO MERGER
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS. The respective obligations of each party to this Agreement to effect
the Mergers shall be subject to the satisfaction or waiver by each party
prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement, the Doubletree Merger and
the Promus Merger shall have been approved in the manner required under the
DGCL by the respective holders of the issued and outstanding shares of
capital stock of Doubletree and Promus.
(b) HSR ACT. The waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated.
(c) APPROVALS. Other than the filing provided for by Section 1.4, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity
the failure of which to file, obtain or occur is reasonably likely to have a
Doubletree Material Adverse Effect or a Promus Material Adverse Effect shall
have been filed, been obtained or occurred.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(e) NO INJUNCTIONS. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any order, executive order, stay,
decree, judgment or injunction or statute, rule, regulation which is in
effect and which has the effect of making the Mergers illegal or otherwise
prohibiting consummation of the Mergers.
(f) POOLING LETTERS. Doubletree and Promus shall have received
letters from KPMG Peat Marwick LLP and Arthur Andersen LLP, respectively,
addressed to Doubletree and Promus, respectively, regarding their concurrence
with the respective conclusions of
42
management of Doubletree and Promus, as to the appropriateness of the pooling
of interests accounting, under Accounting Principles Board Opinion No. 16 for
the transactions contemplated hereby, it being agreed that Doubletree and
Promus shall each provide reasonable cooperation to KPMG Peat Marwick LLP and
Arthur Andersen LLP to enable them to issue such letters.
(g) NYSE LISTING. The shares of Parent Common Stock to be issued in
the Merger and upon exercise of Doubletree Options, the GEPT Warrant and
Promus Options shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(h) CORPORATE GOVERNANCE. Doubletree and Promus shall have taken all
actions necessary so that (i) not later than the Effective Time, the
Certificate of Incorporation and Bylaws of Parent shall have been amended to
be substantially in the form of Exhibit D and Exhibit E hereto; (ii) at the
Effective Time, the composition of the Board of Directors of Parent and of
each Committee of the Board of Directors of Parent shall comply with Section
5.20 hereof (assuming Doubletree has designated the Doubletree Directors and
Promus has designated the Promus Directors, in each case as contemplated by
Section 5.20(a) hereof); and (iii) not later than the Effective Time, Parent
shall have adopted the Parent Rights Plan.
Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF DOUBLETREE.
The obligation of Doubletree to effect the Doubletree Merger is subject to
the satisfaction of each of the following conditions prior to the Effective
Time, any of which may be waived in writing exclusively by Doubletree:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Promus set forth in this Agreement shall be true and correct as
of the date of this Agreement and (except to the extent such representations
speak as of an earlier date) as of the Closing Date as though made on and as
of the Closing Date, except for, (i) changes contemplated by this Agreement
and (ii) inaccuracies which, individually or in the aggregate, have not had
and are not reasonably likely to have a Promus Material Adverse Effect or a
material adverse effect upon the consummation of the transactions
contemplated hereby; and Doubletree shall have received a certificate signed
on behalf of Promus by the chief executive officer and the chief financial
officer of Promus to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PROMUS. Promus shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Doubletree shall have
received a certificate signed on behalf of Promus by the chief executive
officer and the chief financial officer of Promus to such effect.
(c) TAX OPINION. Doubletree shall have received the opinion of Dewey
Ballantine, counsel to Doubletree, based upon reasonably requested
representation letters and dated the Closing Date, to the effect that the
Doubletree Merger will be treated as a reorganization described in Section
368(a) of the Code and/or, taken together with the Promus Merger, as a
transfer of property to Parent by holders of Doubletree Common Stock
described in Section 351 of the Code.
43
(d) NO TRIGGER OF PROMUS RIGHTS PLAN. No event shall have occurred
that has or would result in the triggering of any right or entitlement of
stockholders of Promus under the Promus Rights Plan, or will occur as a
result of the consummation of the Mergers.
Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PROMUS. The
obligations of Promus to effect the Promus Merger are subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by Promus:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Doubletree set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except for, (i) changes
contemplated by this Agreement and (ii) inaccuracies which, individually or
in the aggregate, have not had and are not reasonably likely to have a
Doubletree Material Adverse Effect, or a material adverse effect upon the
consummation of the transactions contemplated hereby; and Promus shall have
received a certificate signed on behalf of Doubletree by the chief executive
officer and the chief financial officer of Doubletree to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF DOUBLETREE. Doubletree shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date; and Promus shall
have received a certificate signed on behalf of Doubletree by the chief
executive officer and the chief financial officer of Doubletree to such
effect.
(c) TAX OPINION. Promus shall have received the opinion of Latham &
Watkins, counsel to Promus, based upon reasonably requested representation
letters and dated the Closing Date, to the effect that the Promus Merger will
be treated as a reorganization described in Section 368(a) of the Code
and/or, taken together with the Doubletree Merger, as a transfer of property
to Parent by holders of Promus Common Stock described in Section 351 of the
Code.
(d) NO TRIGGER OF DOUBLETREE RIGHTS PLAN. No event shall have
occurred that has or would result in the triggering of any right or
entitlement of stockholders of Doubletree under the Doubletree Rights Plan,
or will occur as a result of the consummation of the Mergers.
ARTICLE VII.
TERMINATION AND AMENDMENT
Section 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(h),
by written notice by the terminating party to the other party), whether
before or after approval of the matters presented in connection with the
Mergers by the stockholders of Doubletree or Promus:
(a) by mutual written consent of Doubletree and Promus; or
44
(b) by either Doubletree or Promus if the Mergers shall not have been
consummated by January 31, 1998 (provided that (i) either Doubletree or
Promus may extend such date to March 31, 1998 by providing written notice
thereof to the other party on or prior to January 31, 1998 (January 31, 1998,
as it may be so extended, shall be referred to herein as the "Outside Date")
and (ii) the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the
Mergers to occur on or before such date); or
(c) by either Doubletree or Promus if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Mergers; or
(d) (i) by Doubletree or Promus, if, at the Promus Stockholders'
Meeting (including any adjournment or postponement), the requisite vote of
the stockholders of Promus in favor of the approval and adoption of this
Agreement and the Promus Merger shall not have been obtained; or (ii) by
Promus or Doubletree if, at the Doubletree Stockholders' Meeting (including
any adjournment or postponement), the requisite vote of the stockholders of
Doubletree in favor of the approval and adoption of this Agreement and the
Doubletree Merger shall not have been obtained; or
(e) by Doubletree, if (i) the Board of Directors of Promus shall have
withdrawn or modified its recommendation of this Agreement or the Promus
Merger (provided that Doubletree's right to terminate this Agreement under
such clause (i) shall not be available if at such time Promus would be
entitled to terminate this Agreement under Section 7.1(h) without giving
effect to the cure period); (ii) after the receipt by Promus of an
Acquisition Proposal, Doubletree requests in writing that the Board of
Directors of Promus reconfirm its recommendation of this Agreement and the
Promus Merger to the stockholders of Promus and the Board of Directors of
Promus fails to do so within 10 business days after its receipt of
Doubletree's request; (iii) the Board of Directors of Promus shall have
recommended to the stockholders of Promus an Alternative Transaction (as
defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or
more of the outstanding shares of Promus Common Stock is commenced (other
than by Doubletree or an Affiliate of Doubletree) and the Board of Directors
of Promus recommends that the stockholders of Promus tender their shares in
such tender or exchange offer; or (v) for any reason Promus fails to call and
hold the Promus Stockholders' Meeting by the Outside Date (provided that
Doubletree's right to terminate this Agreement under such clause (v) shall
not be available if at such time Promus would be entitled to terminate this
Agreement under Section 7.1(h) without giving effect to the cure period); or
(f) by Promus, if (i) the Board of Directors of Doubletree shall have
withdrawn or modified its recommendation of this Agreement or the Doubletree
Merger (provided that Promus's right to terminate this Agreement under such
clause (i) shall not be available if at such time Doubletree would be
entitled to terminate this Agreement under Section 7.1(h) without giving
effect to the cure period); (ii) after the receipt by Doubletree of an
Acquisition Proposal, Promus requests in writing that the Board of Directors
of Doubletree reconfirm its recommendation of this Agreement and the
Doubletree Merger to the stockholders of Promus
45
and the Board of Directors of Doubletree fails to do so within 10 business
days after its receipt of Promus's request; (iii) the Board of Directors of
Doubletree shall have recommended to the stockholders of Doubletree an
Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender offer
or exchange offer for 20% or more of the outstanding shares of Doubletree
Common Stock is commenced (other than by Promus or an Affiliate of Promus)
and the Board of Directors of Doubletree recommends that the stockholders of
Doubletree tender their shares in such tender or exchange offer; or (v) for
any reason Doubletree fails to call and hold the Doubletree Stockholders'
Meeting by the Outside Date (provided that Promus's right to terminate this
Agreement under such clause (v) shall not be available if at such time
Doubletree would be entitled to terminate this Agreement under Section 7.1(h)
without giving effect to the cure period); or
(g) by Doubletree or Promus, prior to the approval of this Agreement
by the stockholders of such party, if, as a result of a Superior Proposal
received by such party from a Third Party, the Board of Directors of such
party determines in good faith after consultation with outside legal counsel
that accepting such Superior Proposal is required for such Board of Directors
to comply with its fiduciary duties to stockholders under applicable law;
provided, however, that no termination shall be effective pursuant to this
Section 7.1(g) under circumstances in which a termination fee is payable by
the terminating party pursuant to Section 7.3(b)(iii) or (c)(iii), unless
concurrently with such termination, such termination fee is paid in full by
the terminating party in accordance with Section 7.3(b)(iii) or (c)(iii), as
applicable; or
(h) by Doubletree or Promus, if (A) there has been a breach of any
representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) will cause the conditions
set forth in Section 6.2(a) or (b) (in the case of termination by Doubletree)
or 6.3(a) or (b) (in the case of termination by Promus) not to be satisfied,
and (ii) shall not have been cured within 20 business days following receipt
by the breaching party of written notice of such breach from the other party;
or (B) any event shall have occurred which makes it impossible for the
conditions set forth in Article VI hereof (other than Section 6.1(a), 6.1(e),
6.2(d) and 6.3(d)) to be satisfied, provided that any termination pursuant to
this clause (B) shall not be effective until 20 business days after notice
thereof is delivered by the party seeking to terminate to the other party,
and shall be automatically rescinded if (1) such condition is solely for the
benefit of the party receiving such notice and (2) such party, prior to such
20th business day, irrevocably waives satisfaction of such condition based on
such event.
Section 7.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Doubletree,
Promus, Parent or their respective officers, directors, stockholders or
Affiliates, except as set forth in Sections 5.15 and 7.3 and except that such
termination shall not limit liability for a willful breach of this Agreement;
provided that, the provisions of Sections 5.15 and 7.3 of this Agreement, the
Stock Option Agreements and the Confidentiality Agreements shall remain in
full force and effect and survive any termination of this Agreement.
46
Section 7.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Mergers are consummated.
(b) Doubletree shall pay Promus a termination fee of $45 million upon
the earliest to occur of the following events:
(i) the termination of this Agreement by either Promus or
Doubletree pursuant to Section 7.1(d)(ii), if a proposal for an Alternative
Transaction (as defined below) involving Doubletree shall have been publicly
announced prior to the Doubletree Stockholders' Meeting and either a definitive
agreement for an Alternative Transaction is entered into, or an Alternative
Transaction is consummated, within eighteen months of such termination;
(ii) the termination of this Agreement by Promus pursuant to
Section 7.1(f); or
(iii) the termination of this Agreement by Doubletree
pursuant to Section 7.1(g).
Doubletree's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of Promus against Doubletree and any of
its Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment; provided that this limitation shall not apply in the event of a
willful breach of this Agreement by Doubletree. Notwithstanding the foregoing,
if and to the extent that Promus has purchased shares of Doubletree Common Stock
pursuant to the Promus Stock Option Agreement prior to the payment of the $45
million fee provided for herein (the "Fee Payment Date"), the amount payable to
Promus under this Section 7.3(b), together with (i)(x) the net cash amount
received by Promus prior to the Fee Payment Date pursuant to Doubletree's
repurchase of Shares (as defined in the Promus Stock Option Agreement) pursuant
to Section 7 of the Promus Stock Option Agreement, less (y) Promus's purchase
price for such Shares, and (ii)(x) the amounts received by Promus prior to the
Fee Payment Date pursuant to the sale of Shares (or any other securities into
which such Shares are converted or exchanged), less (y) Promus's purchase price
for such Shares, shall not exceed $65 million.
(c) Promus shall pay Doubletree a termination fee of $45 million upon
the earliest to occur of the following events:
(i) the termination of this Agreement by either Doubletree
or Promus pursuant to Section 7.1(d)(i), if a proposal for an Alternative
Transaction (as defined below) involving Promus shall have been publicly
announced prior to the Promus Stockholders' Meeting and either an Alternative
Transaction is entered into, or an Alternative Transaction is consummated,
within eighteen months of such termination;
(ii) the termination of this Agreement by Doubletree
pursuant to Section 7.1(e); or
47
(iii) the termination of this Agreement by Promus pursuant to
Section 7.1 (g).
Promus's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of Doubletree against Promus and any of
its Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment; provided that this limitation shall not apply in the event of a
willful breach of this Agreement by Promus. Notwithstanding the foregoing, if
and to the extent that Doubletree has purchased shares of Promus Common Stock
pursuant to the Doubletree Stock Option Agreement prior to the Fee Payment Date,
the amount payable to Doubletree under this Section 7.3(c), together with (i)(x)
the net cash amount received by Doubletree prior to the Fee Payment Date
pursuant to Promus's repurchase of Shares (as defined in the Doubletree Stock
Option Agreement) pursuant to Section 7 of the Doubletree Stock Option
Agreement, less (y) Doubletree's purchase price for such Shares, and (ii)(x) the
amounts received by Doubletree prior to the Fee Payment Date pursuant to the
sale of Shares (or any other securities into which such Shares are converted or
exchanged), less (y) Doubletree's purchase price for such Shares, shall not
exceed $65 million.
(d) The fees payable pursuant to Section 7.3(b) or 7.3(c) shall be paid
concurrently with the first to occur of the events described in Section
7.3(b)(i), (ii) or (iii) or 7.3(c)(i), (ii) or (iii), respectively.
(e) As used in this Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any Third Party acquires more than 20% of
the outstanding shares of Doubletree Common Stock or Promus Common Stock, as the
case may be, pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger or other business combination involving Doubletree or Promus pursuant to
which any Third Party (or the stockholders of a Third Party) acquires more than
20% of the outstanding shares of Doubletree Common Stock or Promus Common Stock,
as the case may be, or the entity surviving such merger or business combination,
(iii) any other transaction pursuant to which any Third Party acquires control
of assets (including for this purpose the outstanding equity securities of
Subsidiaries of Doubletree or Promus, and the entity surviving any merger or
business combination including any of them) of Doubletree or Promus having a
fair market value (as determined by the Board of Directors of Doubletree or
Promus, as the case may be, in good faith) equal to more than 20% of the fair
market value of all the assets of Doubletree or Promus, as the case may be, and
their respective Subsidiaries, taken as a whole, immediately prior to such
transaction, or (iv) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
Section 7.4 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Mergers by the stockholders of Doubletree or Promus, but,
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto; provided, however, that this Agreement
may be amended in writing without obtaining the
48
signatures of Doubletree, Promus or Parent solely for the purpose of adding
Doubletree Sub and Merger Sub as parties to this Agreement.
Section 7.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained here. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Sections 1.6, 2.1, 2.2, 2.4, 5.16,
5.19, 5.20 and 5.27 and Article VIII, and the agreements of the Affiliates
delivered pursuant to Section 5.12. The Confidentiality Agreements shall
survive the execution and delivery of this Agreement.
Section 8.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Doubletree, to
Doubletree Corporation
410 North 44th Street, Suite 700
Phoenix, AZ 85008
Attn: Richard M. Kelleher
Telecopy: (602) 220-6753
with a copy to
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019-6092
Attn: William J. Phillips, Esq.
Telecopy: (212) 295-6333
49
(b) if to Promus, to
Promus Hotel Corporation
755 Crossover Lane
Memphis, TN 38117
Attn: Raymond E. Schultz
Telecopy: (901) 374-5636
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Attn: John M. Newell, Esq.
Telecopy: (213) 891-8763
Section 8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
September 1, 1997.
Section 8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and all documents and instruments referred to herein (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.16 are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality Agreements shall remain in full force and
effect until the Effective Time. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, neither Doubletree
nor Promus makes any other representations or warranties, and each hereby
disclaims any other representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement or
the transactions contemplated hereby, notwithstanding the delivery or disclosure
to the other or the other's representatives of any documentation or other
information with respect to any one or more of the foregoing.
50
Section 8.6 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
Section 8.7 ASSIGNMENT. 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
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
51
Signature Page for Agreement and Plan of Merger
IN WITNESS WHEREOF, Doubletree, Promus and Parent have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
DOUBLETREE CORPORATION
/s/ Richard M. Kelleher
-----------------------------------
By: Richard M. Kelleher
Its: President and Chief Executive
officer
PROMUS HOTEL CORPORATION
/s/ Raymond E. Schultz
-----------------------------------
By: Raymond E. Schultz
Its: President and Chief Executive Officer
PARENT HOLDING CORP.
/s/ Raymond E. Schultz
-----------------------------------
By: Raymond E. Schultz
Its: Chief Executive Officer and
Chairman of the Board
S-1