AGREEMENT AND PLAN OF MERGER
dated as of June 3, 1998
PMC COMMERCIAL TRUST
and
SUPERTEL HOSPITALITY, INC.
TABLE OF CONTENTS
ARTICLE 1 THE MERGER.............................................................................1
1.1 The Merger.............................................................................1
1.2 The Closing............................................................................1
1.3 Effective Time.........................................................................2
ARTICLE 2 CHARTER AND BYLAWS OF THE SURVIVING ENTITY.............................................2
2.1 Charter................................................................................2
2.2 Bylaws.................................................................................2
ARTICLE 3 DIRECTORS AND OFFICERS.................................................................2
3.1 Directors..............................................................................2
3.2 Officers...............................................................................2
ARTICLE 4 STH STOCK..............................................................................2
4.1 Conversion of the STH Stock............................................................2
4.2 Exchange of Certificates Representing STH Common Stock.................................4
4.3 Appraisal Rights.......................................................................6
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF STH ................................................7
5.1 Existence; Good Standing; Authority; Compliance with Law...............................7
5.2 Authorization, Validity and Effect of Agreements.......................................7
5.3 Capital Structure......................................................................8
5.4 Subsidiaries...........................................................................8
5.5 Other Interests........................................................................9
5.6 No Violation...........................................................................9
5.7 SEC Documents..........................................................................9
5.8 Litigation............................................................................10
5.9 Absence of Certain Changes............................................................10
5.10 Taxes.................................................................................11
5.11 Books and Records.....................................................................12
5.12 Employee Benefit Plans. .............................................................12
5.13 Labor Matters.........................................................................12
5.14 No Brokers............................................................................13
5.15 Opinion of Financial Advisor..........................................................13
5.16 PMCT Share Ownership..................................................................13
5.17 Related Party Transactions............................................................13
5.18 Contracts and Commitments.............................................................13
5.19 Development Rights....................................................................14
5.20 Certain Payments Resulting From Transactions..........................................15
5.21 Convertible Securities................................................................15
5.22 Compliance with Applicable Laws.......................................................15
5.23 Insurance.............................................................................16
5.24 Subsidiaries of STH...................................................................16
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5.25 Acquisitions by STH and its Subsidiaries..............................................16
ARTICLE 6 ADDITIONAL REPRESENTATIONS AND WARRANTIES
AND COVENANTS RELATING TO HOTELS AND REAL PROPERTY......................................................16
6.1 Representations and Warranties........................................................16
6.2 STH Deliverables......................................................................20
6.3 STH Property Reports..................................................................21
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PMCT................................................22
7.1 Existence; Good Standing; Authority; Compliance with Law..............................22
7.2 Authorization, Validity and Effect of Agreements......................................23
7.3 Capitalization........................................................................24
7.4 Subsidiaries..........................................................................24
7.5 Other Interests.......................................................................24
7.6 No Violation..........................................................................24
7.7 SEC Documents.........................................................................25
7.8 Litigation............................................................................26
7.9 Absence of Certain Changes............................................................26
7.10 Taxes.................................................................................26
7.11 Books and Records.....................................................................27
7.12 Employee Benefit Plans................................................................27
7.13 Labor Matters.........................................................................28
7.14 No Brokers............................................................................28
7.15 Opinion of Financial Advisor..........................................................29
7.16 STH Share Ownership...................................................................29
7.17 PMCT Common Shares....................................................................29
7.18 Convertible Securities................................................................29
7.19 Related Party Transactions............................................................29
7.20 Contracts and Commitments.............................................................29
ARTICLE 8 COVENANTS.............................................................................30
8.1 Acquisition Proposals.................................................................30
8.2 Earnings and Profits Dividend.........................................................31
8.3 Conduct of Businesses.................................................................31
8.4 Damage to Property....................................................................35
8.5 Meetings of Shareholders..............................................................35
8.6 Filings; Other Action.................................................................35
8.7 Inspection of Records.................................................................35
8.8 Publicity.............................................................................36
8.9 Registration Statement................................................................36
8.10 Listing Application...................................................................37
8.11 Further Action........................................................................37
8.12 Expenses..............................................................................37
8.13 Governance............................................................................37
8.14 Reorganization........................................................................37
8.15 Third Party Consents..................................................................38
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8.16 Efforts to Fulfill Conditions.........................................................38
8.17 Representations, Warranties and Conditions Prior to Closing...........................38
8.18 Cooperation of the Parties............................................................38
8.19 Tax Election..........................................................................38
8.20 Directors and Officers Insurance......................................................38
8.21 PMCT Earnings and Profits Dividend....................................................39
ARTICLE 9 CONDITIONS............................................................................39
9.1 Conditions to Each Party's Obligations to Effect the Merger...........................39
9.2 Conditions to Obligations of STH to Effect the Merger.................................40
9.3 Conditions to Obligation of PMCT to Effect the Merger.................................40
ARTICLE 10 TERMINATION...........................................................................41
10.1 Termination by Mutual Consent.........................................................41
10.2 Termination by Either PMCT or STH.....................................................42
10.3 Termination by STH....................................................................42
10.4 Termination by PMCT...................................................................43
10.5 Effect of Termination and Abandonment.................................................43
10.6 Extension; Waiver.....................................................................45
ARTICLE 11 GENERAL PROVISIONS....................................................................45
11.1 Certain Definitions...................................................................45
11.2 Nonsurvival of Representations, Warranties and Agreements.............................45
11.3 Notices...............................................................................45
11.4 Assignment; Binding Effect; Benefit...................................................47
11.5 Entire Agreement......................................................................47
11.6 Confidentiality.......................................................................47
11.7 Amendment.............................................................................49
11.8 Governing Law.........................................................................49
11.9 Counterparts..........................................................................49
11.10 Headings..............................................................................50
11.11 Interpretation........................................................................50
11.12 Waivers...............................................................................50
11.13 Incorporation.........................................................................50
11.14 Severability..........................................................................50
11.15 Enforcement of Agreement..............................................................50
11.16 Subsidiaries..........................................................................50
11.17 Non-Recourse..........................................................................50
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SCHEDULES
Schedule 5.3 - Capitalization
Schedule 5.4 - Subsidiaries
Schedule 5.7 - SEC Documents
Schedule 5.8 - Litigation
Schedule 5.9 - Absence of Certain Changes
Schedule 5.10 - Taxes
Schedule 5.12 - Employee Benefit Plans
Schedule 5.13 - Labor Matters
Schedule 5.16 - PMCT Share Ownership
Schedule 5.18 - Contracts and Commitments
Schedule 5.19 - Development Rights
Schedule 5.20 - Certain Payments Resulting From Transactions
Schedule 5.21 - Convertible Securities
Schedule 5.22 - Compliance with Applicable Regulations
Schedule 5.23 - Insurance
Schedule 6.1(a) - Title
Schedule 6.1(d) - Operating Agreements
Schedule 6.1(g) - Violations of Applicable Law
Schedule 6.1(i) - Administrative Actions
Schedule 6.1(j) - Zoning
Schedule 6.1(r) - Compliance with Architectural Barriers Legislation
Schedule 6.1(s) - Environmental
Schedule 7.3 - Capitalization
Schedule 7.4 - Subsidiaries
Schedule 7.7 - SEC Documents
Schedule 7.8 - Litigation
Schedule 7.10 - Taxes
Schedule 7.12 - Employee Benefit Plans
Schedule 7.16 - STH Share Ownership
Schedule 7.19 - Related Party Transactions
Schedule 7.20 - Contracts and Commitments
Exhibit 9.3(d) - Affiliates
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
3, 1998, is entered into by and between PMC Commercial Trust, a Texas real
estate investment trust ("PMCT") and Supertel Hospitality, Inc., a Delaware
corporation ("STH").
RECITALS
A. The Board of Trust Managers of PMCT and the Board of Directors of
STH each have determined that a business combination between PMCT and STH is in
the best interests of their respective shareholders and presents an opportunity
for their respective companies to achieve long-term strategic and financial
benefits, and accordingly have agreed to effect a merger subject to the terms
and conditions set forth herein.
B. For federal income tax purposes, it is intended that the merger
provided for herein shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and for financial accounting purposes shall be accounted for as a "purchase."
C. PMCT and STH desire to make certain representations, warranties and
agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, PMCT and STH hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
and in accordance with the Delaware General Corporation Law (the "DGCL") and the
Texas Real Estate Investment Trust Act (the "REIT Act"), at the Effective Time
(as defined in Section 1.3), STH shall be merged with and into PMCT (the
"Merger"). Following the Merger, the separate existence of STH shall cease and
PMCT shall be the surviving entity in the Merger (the "Surviving Entity"). The
Merger shall have the effects specified in Section 254 of the DGCL and Section
23.10 of the REIT Act.
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place at the offices of
Winstead Sechrest & Minick P.C., located at 1201 Elm, 5400 Renaissance Tower,
Dallas, Texas 75270, at 9:00 a.m., local time, on the second business day after
satisfaction or waiver of the conditions set forth in Article 9, or at such
other time, date or place as PMCT and STH may agree. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
1.3 Effective Time. If all the conditions to the Merger set forth in
Article 9 shall have been fulfilled or waived (and this Agreement shall not have
been terminated as provided in Article 10), PMCT and STH shall cause a
certificate of merger satisfying the requirements of the DGCL and articles of
merger satisfying the requirements of the REIT Act to be properly executed,
verified and delivered for filing in accordance with the DGCL and the REIT Act
and shall make all other filings or recordings required under the DGCL and the
REIT Act. The Merger shall become effective upon the later of (i) the filing of
the articles of merger with the County Clerk of Dallas County, Texas and (ii)
the filing of the certificate of merger with the Secretary of State of the State
of Delaware in accordance with the DGCL, or at such later time which PMCT and
STH shall have agreed upon and designated in such filings in accordance with
applicable law.
ARTICLE 2
CHARTER AND BYLAWS OF THE SURVIVING ENTITY
2.1 Charter. The Declaration of Trust of PMCT in effect immediately
prior to the Effective Time shall be the charter of the Surviving Entity, until
duly amended in accordance with applicable law.
2.2 Bylaws. The Bylaws of PMCT in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Entity, until duly amended
in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS
3.1 Directors. The Board of Trust Managers of PMCT immediately prior to
the Effective Time shall be the Board of Trust Managers of the Surviving Entity
as of the Effective Time and immediately following the Effective Time Paul J.
Schulte shall be elected as a trust manager of the Surviving Entity.
3.2 Officers. The officers of PMCT immediately prior to the Effective
Time shall be the officers of the Surviving Entity as of the Effective Time.
ARTICLE 4
STH STOCK
4.1 Conversion of the STH Stock.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of the common stock, par
value $0.01 per share (the "STH Common Stock"), of STH issued and outstanding
immediately prior to the Effective Time shall, except as provided in Section 4.3
with respect to shares of STH Common Stock as to which appraisal rights, if
available, shall have been exercised, cease to be outstanding and be converted
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into the right to receive six-tenths (0.6) of a common share of beneficial
interest, par value $0.01 per share (the "PMCT Common Shares"), of PMCT (the
"Exchange Ratio"). If the Average PMCT Trading Price (as defined below) is (i)
greater than $24.00, PMCT shall have the right to terminate this Agreement, in
the manner provided in Section 4.1(b), unless STH shall elect, in the manner
provided in Section 4.1(b), to decrease the Exchange Ratio to a fraction equal
to (A) $14.40 divided by (B) the Average PMCT Trading Price, calculated to the
nearest one-one thousandth of a share, or (ii) less than $17.50, STH shall have
the right to terminate this Agreement, in the manner provided in Section 4.1(b)
unless PMCT shall elect, in the manner provided in Section 4.1(b), to increase
the Exchange Ratio to a fraction equal to (A) $10.50 divided by (B) the Average
PMCT Trading Price.
"Average PMCT Trading Price" shall mean the average of the closing sale
prices per PMCT Common Share on the American Stock Exchange for the ten trading
days ending on the fifth trading day immediately preceding the scheduled date of
the first of the meetings contemplated by Section 8.5 (the "Determination
Date").
(b) In the event that either PMCT or STH shall elect to terminate this
Agreement in the circumstances contemplated by Section 4.1(a), then the party
initiating the termination (the "Terminating Party") shall give notice of
termination (the "Termination Notice") to the other party hereto (the "Receiving
Party") prior to 6:00 p.m. (Dallas time) on the first trading day following the
Determination Date. Such termination shall become effective automatically,
without the action of either party, at 6:00 p.m. (Dallas time) on the trading
day immediately preceding the date of the first of the meetings contemplated by
Section 8.5, unless prior to 6:00 p.m. (Dallas time) on the second trading day
following the Determination Date, the Receiving Party shall deliver notice to
the Terminating Party to the effect that it has elected to increase or decrease
the Exchange Ratio, as the case may be, in the manner contemplated by Sections
4(a)(i) and 4(a)(ii).
(c) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, except as provided in Section 4.3 with
respect to shares of STH Common Stock as to which appraisal rights, if
available, shall have been exercised, each holder of a certificate (a
"Certificate") representing any shares of STH Common Stock shall thereafter
cease to have any rights with respect to such shares of STH Common Stock, except
the right to receive, without interest, the PMCT Common Shares and cash for
fractional shares of PMCT Common Shares in accordance with Sections 4.1(a) and
4.2(d) upon the surrender of such Certificate.
(d) Each share of STH Common Stock issued and held in STH's treasury at
the Effective Time, if any, shall, by virtue of the Merger, cease to be
outstanding and shall be canceled and retired without payment of any
consideration therefor.
(e) (i) As soon as practicable following the date of this Agreement,
the Board of Directors of STH (or, if appropriate, any committee
administering STH's 1994 Stock Option Plan and 1997 Stock Plan
(together, the "STH Stock Option Plans")) shall adopt such resolutions
or take such other actions as may be required to effect the following
with respect to all options to purchase shares of STH Common Stock
granted under the
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STH Stock Option Plans or otherwise ("Options") not exercised prior to
the Closing Date:
(A) adjust the terms of all such Options to purchase
shares of STH Common Stock to provide that, at the Effective
Time, each Option outstanding and not otherwise exercised
immediately prior to the Effective Time shall expire and the
holder of such Option shall only be entitled to receive, with
respect to such Option, a number of PMCT Common Shares equal
to the quotient of (1) the product of (x) the difference
between the product of the Exchange Ratio multiplied by the
Average PMCT Trading Price minus the exercise price per share
of STH Common Stock issuable upon the exercise of such Option
multiplied by (y) the number of shares of STH Common Stock for
which such Option was exercisable divided by (2) the Average
PMCT Trading Price, calculated to the nearest one-one
thousandth of a share, subject to the provisions of Section
4.1(c) hereof; and
(B) make such other changes to the STH Stock Option
Plans as it deems appropriate to give effect to the Merger
(subject to the approval of PMCT, which approval shall not be
unreasonably withheld).
(ii) The provisions in the STH Stock Option Plans providing
for the issuance, transfer or grant of any capital stock of STH or any
interest in respect of any capital stock of the STH shall be deleted as
of the Effective Time, and STH shall use its best efforts to ensure
that following the Effective Time no holder of an Option or any
participant in any STH Stock Option Plan shall have any right
thereunder to acquire any capital stock of STH, PMCT or the Surviving
Corporation, except as provided in Section 4.1(e)(i).
(iii) From and after the date of this Agreement, no additional
options shall be granted by STH or the STH Subsidiaries (as hereinafter
defined) under the STH Stock Option Plans or otherwise, except as may
be required by the terms of the STH Stock Option Plans with respect to
non-employee directors of STH.
4.2 Exchange of Certificates Representing STH Common Stock.
(a) As of the Effective Time, PMCT shall deposit, or shall cause to be
deposited, with an exchange agent selected by PMCT, which shall be PMCT's
Transfer Agent or such other party reasonably satisfactory to STH (the "Exchange
Agent"), for the benefit of the holders of shares of STH Common Stock, for
exchange in accordance with this Article 4, certificates representing the shares
of PMCT Common Shares and the cash in lieu of fractional shares (such cash and
certificates for shares of PMCT Common Shares together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 4.1 and paid pursuant to this
Section 4.2 in exchange for outstanding shares of STH Common Stock.
(b) Promptly after the Effective Time, PMCT shall cause the Exchange
Agent to mail to each holder of record of a Certificate or Certificates (i) a
letter of transmittal which shall
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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 PMCT may
reasonably specify and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of PMCT Common
Shares and cash in lieu of fractional shares. Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may be reasonably required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor (A) a certificate representing the number of whole shares of PMCT
Common Shares and (B) a check representing the amount of cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article 4, after giving effect to any
required withholding tax, and the Certificate so surrendered shall forthwith be
canceled.
No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders of
Certificates. In the event of a transfer of ownership of STH Common Stock which
is not registered in the transfer records of STH, a certificate representing the
proper number of shares of PMCT Common Shares, together with a check for the
cash to be paid in lieu of fractional shares, may be issued to such a transferee
if the Certificate representing shares of such STH Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions on PMCT Common Shares shall be paid with
respect to any shares of STH Common Stock represented by a Certificate until
such Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole shares of
PMCT Common Shares issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of PMCT Common Shares and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of PMCT Common Shares, less
the amount of any withholding taxes which may be required thereon.
(d) At and after the Effective Time, there shall be no transfers on the
stock transfer books of STH of the shares of STH Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to PMCT, they shall be delivered to the
Exchange Agent, canceled and exchanged for certificates for shares of PMCT
Common Shares and cash in lieu of fractional shares, if any, and unpaid
dividends and distributions deliverable in respect thereof pursuant to this
Agreement in accordance with the procedures set forth in this Article 4.
5
(e) No fractional shares of PMCT Common Shares shall be issued pursuant
hereto. Notwithstanding any other provision of this Agreement, each holder of
shares of STH Common Stock exchanged pursuant to the Merger who would otherwise
have been entitled to receive a fraction of a PMCT Common Share (after taking
into account all Certificates delivered by such holder) shall receive, from the
Exchange Agent in accordance with the provisions of this Section 4.1(e), a cash
payment in lieu of such fractional PMCT Common Shares.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and PMCT Common Shares) that remains unclaimed by the former
stockholders of STH one year after the Effective Time shall be delivered to
PMCT. Any former stockholders of STH who have not theretofore complied with this
Article 4 shall thereafter look only to PMCT for delivery of their PMCT Common
Shares, and payment of cash in lieu of fractional shares and unpaid dividends
and distributions on the PMCT Common Shares deliverable in respect of each share
of STH Common Stock such stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
(g) None of PMCT, STH, the Exchange Agent or any other person shall be
liable to any former holder of shares of STH Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by PMCT or the
Exchange Agent, the posting by such person of a bond in such reasonable amount
as PMCT may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent or PMCT will issue in
exchange for such lost, stolen or destroyed Certificate the PMCT Common Shares
and cash in lieu of fractional shares, and unpaid dividends and distributions on
PMCT Common Shares as provided in Section 4.2(c), deliverable in respect thereof
pursuant to this Agreement.
4.3 Appraisal Rights. Notwithstanding the terms of Section 4.1(a), to
the extent appraisal rights are available under Section 262 of the DGCL, shares
of STH Common Stock outstanding immediately prior to the Effective Time and held
by a holder who has properly exercised appraisal rights for such shares in
accordance with the DGCL and who, as of the Effective Time has not effectively
withdrawn or lost such appraisal rights (the "Dissenting Shares"), shall not be
converted into the right to receive PMCT Common Shares as provided in Section
4.1(a), but shall be converted into the right to receive such consideration as
may be determined to be due with respect to such Dissenting Shares pursuant to
the DGCL. If after the Effective Time such holder fails to perfect or withdraws
or loses his or her appraisal rights, such shares of STH Common Stock shall be
treated as if they had been converted as of the Effective Time into the right to
receive PMCT Common Shares as provided in Section 4.1(a). STH shall give PMCT
prompt written notice of any demands received by STH for appraisals of shares of
STH Common Stock. STH shall not, except with the prior written consent of PMCT,
make any payment with respect to, or settle or offer to settle, any such
demands.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF STH
STH represents and warrants to PMCT as set forth below and subject to those
matters set forth in the Disclosure Schedule.
5.1 Existence; Good Standing; Authority; Compliance with Law. STH is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. STH is duly licensed or qualified to do business
as a foreign corporation and is in good standing under the laws of any other
state of the United States in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, results of operations or
financial condition of STH and the STH Subsidiaries taken as a whole (an "STH
Material Adverse Effect"). STH has all requisite corporate power and authority
to own, operate, lease and encumber its properties and carry on its business as
now conducted. Each STH Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has the corporate power and authority to own its properties and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except for jurisdictions in which such failure to be so qualified or to be in
good standing would not have an STH Material Adverse Effect.
Neither STH nor any of the STH Subsidiaries is in violation of any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which STH or any STH
Subsidiary or any of their respective properties or assets are subject, where
such violation would have an STH Material Adverse Effect. STH and the STH
Subsidiaries have obtained all licenses, permits, contract rights, including,
without limitation, any necessary franchise arrangements, and other
authorizations and have taken all actions required by Applicable Law,
governmental regulations or otherwise in connection with their business as now
conducted, where the failure to obtain any such item or to take any such action
would have an STH Material Adverse Effect. Complete and correct copies of STH's
and the STH Subsidiaries' charters and bylaws, which reflect all amendments made
thereto, have been delivered or made available to PMCT and its counsel. The
minute books and other records of STH and the STH Subsidiaries contain in all
material respects accurate records of all meetings and accurately reflect in all
material respects all other corporate action of the stockholders and directors
and any committees of the boards of directors of STH and the STH Subsidiaries.
Neither STH nor the STH Subsidiaries are in default under or in violation of any
provision of their respective charters or bylaws. For the purposes of this
Agreement, the term "STH Subsidiary" shall include the entities set forth on
Schedule 5.4 hereto, which are all of STH's subsidiaries.
5.2 Authorization, Validity and Effect of Agreements. STH has the
requisite corporate power and authority to enter into the transactions
contemplated hereby and to execute and deliver this Agreement and all other
documents, agreements and instruments related to the transactions
7
contemplated by this Agreement, including, without limitation, the Agreement of
Sale (the "Agreement of Sale") to be dated as of June 3, 1998 by and between STH
and Supertel Hospitality Management Co. ("Supertel Management") and the Supertel
Omnibus Assignment and Assumption Agreement (the "Super 8 Assignment Agreement")
by and among STH, PMCT, Supertel Management and Super 8 Motels, Inc., in the
forms previously provided (collectively, the "STH Ancillary Agreements").
Subject only to the approval of this Agreement and the transactions contemplated
hereby by the holders of a majority of the outstanding shares of STH Common
Stock, the consummation by STH of this Agreement, the STH Ancillary Agreements
and the transactions contemplated hereby and thereby have been duly authorized
by all requisite corporate action on the part of STH and no other corporate
action on the part of STH is necessary to authorize this Agreement, the STH
Ancillary Agreements or the transactions contemplated hereby or thereby. This
Agreement has been duly executed and delivered by STH and constitutes, and the
STH Ancillary Agreements to which STH is a party (when executed and delivered by
STH pursuant thereto) will constitute, the valid and legally binding obligations
of STH, enforceable against STH in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity.
5.3 Capital Structure. The authorized capital stock of STH consists of
ten million (10,000,000) shares of STH Common Stock and one million (1,000,000)
shares of Class A Preferred Stock, $1.00 par value per share (the "STH Preferred
Stock"). As of March 31, 1998, (a) there were 4,840,000 shares of STH Common
Stock issued and outstanding, and no shares of STH Preferred Stock are issued
and outstanding, (b) no shares of STH Common Stock or STH Preferred Stock were
held by STH in its treasury, and (c) 139,200 shares of STH Common Stock were
issuable upon the exercise of outstanding options (the "STH Options") under the
STH Stock Option Plan. STH has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of STH on any matter. All such issued and outstanding shares of
STH Common Stock are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. Except (i) for the STH Options and (ii) as
provided on Schedule 5.3 hereto, there are not at the date of this Agreement any
existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements or commitments which obligate STH or any of the STH
Subsidiaries to issue, transfer or sell any shares of capital stock of STH or
any of the STH Subsidiaries. There are no bonds, debentures, notes or other
indebtedness of STH having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of STH may vote. There are no outstanding contractual obligations
of STH or any of the STH Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of STH or any capital stock, voting securities or
other securities or other ownership interests in any of the STH Subsidiaries or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any person (other than one of the STH Subsidiaries). Except as
provided in Section 4.1(d), after the Effective Time, PMCT will have no
obligation to issue, transfer or sell any shares of capital stock or other
equity interest of STH or PMCT pursuant to any STH Benefit Plan (as defined in
Section 5.12).
5.4 Subsidiaries. STH owns directly or indirectly all of the
outstanding shares of capital stock of the STH Subsidiaries listed on Schedule
5.4 hereto. Except as set forth on
8
Schedule 5.4 hereto, each of the outstanding shares of capital stock in each of
the STH Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by STH free and clear of
all liens, pledges, security interests, claims or other encumbrances. The
following information for each STH Subsidiary is set forth on Schedule 5.4
hereto: (a) its name and jurisdiction of incorporation; (b) its authorized
capital stock; and (c) the name of each stockholder and the number of issued and
outstanding shares of capital stock held by it.
5.5 Other Interests. Except for interests in the STH Subsidiaries,
neither STH nor any STH Subsidiary owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than investments in short-term
investment securities).
5.6 No Violation. Neither the execution and delivery by STH of this
Agreement or the STH Ancillary Agreements nor the consummation by STH of the
transactions contemplated hereby or thereby in accordance with the terms hereof
or thereof, will: (a) conflict with or result in a breach of any provisions of
the Certificate of Incorporation or Bylaws of STH or the charter or bylaws of
any of the STH Subsidiaries; (b) result in a breach or violation of, a default
under, or, except as set forth in the STH Stock Option Plans, the triggering of
any payment or other material obligations pursuant to, or accelerate vesting
under, the STH Stock Option Plans, or any grant or award made under any of the
foregoing; (c) except as contemplated by the STH Ancillary Agreements or as
forth in the schedules to this Agreement, violate, or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties of STH or
the STH Subsidiaries under, or result in being declared void, voidable or
without further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument, commitment or obligation
to which STH or any of the STH Subsidiaries is a party, or by which STH or any
of the STH Subsidiaries or any of their properties is bound or affected, except
for any of the foregoing matters which, individually or in the aggregate, would
not have an STH Material Adverse Effect; or (d) other than any filings required
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), applicable state
securities and "Blue Sky" laws or the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware (collectively, the "Regulatory
Filings"), require any consent, approval or authorization of, or declaration,
filing or registration with, any domestic governmental or regulatory authority,
except where the failure to obtain any such consent, approval or authorization
of, or declaration, filing or registration with, any governmental or regulatory
authority would not, individually or in the aggregate, have an STH Material
Adverse Effect.
5.7 SEC Documents. Schedule 5.7 hereto sets forth all reports,
schedules, forms, statements and other documents STH has filed with the U.S.
Securities and Exchange Commission (the "SEC") pursuant to the Securities Act
and the Exchange Act since March 1, 1994 (the "STH Reports") and such STH
Reports constitute all reports, schedules, forms,
9
statements and other documents required to be filed by STH under the Securities
Act, the Exchange Act and the rules and regulations promulgated thereunder (the
"Securities Laws") since such date.
As of their respective dates, the STH Reports (a) complied as to form
in all material respects with the applicable requirements of the Securities Laws
and (b) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each of the consolidated balance sheets of STH included in
or incorporated by reference into the STH Reports (including the related notes
and schedules) (i) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (ii) were prepared in all material respects in accordance with
generally accepted accounting principles ("GAAP"), and (iii) fairly presented in
all material respects the consolidated financial position of STH and the STH
Subsidiaries as of its date in conformity with GAAP. Each of the consolidated
statements of income, retained earnings and cash flows of STH included in or
incorporated by reference into the STH Reports (including any related notes and
schedules), (A) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (B) were prepared in all material respects in accordance with
GAAP, and (C) fairly presented in all material respects the results of
operations, retained earnings or cash flows, as the case may be, of STH and the
STH Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect) in conformity with GAAP.
Except as and to the extent set forth in the STH Reports and except for
liabilities incurred in connection with this Agreement and the transactions
contemplated hereby, neither STH nor any of the STH Subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of STH or in the notes thereto, prepared in
accordance with generally accepted accounting principles consistently applied,
except liabilities arising in the ordinary course of business since such date
which would not have an STH Material Adverse Effect.
5.8 Litigation. To the knowledge of STH, except as set forth on
Schedule 5.8 hereto, there are (a) no continuing orders, injunctions or decrees
of any court, arbitrator or governmental authority to which STH or any STH
Subsidiary is a party or by which any of its properties or assets are bound or,
to the knowledge of STH, to which any of its directors, officers or affiliates
is a party or by which any of their properties or assets are bound, and (b) no
actions, suits or proceedings pending against STH or any STH Subsidiary or, to
the knowledge of STH, against any of its directors, officers or affiliates or,
to the knowledge of STH, threatened against STH or any STH Subsidiary or against
any of its directors, officers or affiliates, at law or in equity, or before or
by any federal or state commission, board, bureau, agency or instrumentality.
5.9 Absence of Certain Changes. Except as disclosed in the STH Reports
filed with the SEC prior to the date hereof or on Schedule 5.9 hereto, since the
date of the most recent financial statements included in the STH Reports (the
"Financial Statement Date"), (a) STH and the STH Subsidiaries have conducted
their business in all material respects in the ordinary course
10
of such business (which for purposes of this Section 5.9 only, shall include all
acquisitions of real estate properties and financing arrangements made in
connection therewith and the operation of hotels located thereon or otherwise
set forth on Schedule 5.9 hereto); (b) no event has caused an STH Material
Adverse Effect and there has been no event, occurrence or circumstance that with
the passage of time would reasonably be expected to cause an STH Material
Adverse Effect; (c) as of the date hereof, there has not been any declaration,
setting aside or payment of any dividend or other distribution with respect to
the STH Common Stock or any split, combination or reclassification of STH's
capital stock; and (d) there has not been any material change in STH's
accounting principles, practices or methods. There are no material unsatisfied
judgments, orders (other than orders of general applicability), decrees or
stipulations affecting STH or any STH Subsidiary or to which one of them is a
party.
5.10 Taxes. Except as set forth on Schedule 5.10 hereto, STH and each
of its Subsidiaries (a) have timely filed all federal, state and foreign tax
returns, including, without limitation, information returns and reports required
to be filed by any of them for tax periods ended prior to the date of this
Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired and all such returns are accurate
and complete to the knowledge of STH in all material respects, (b) has paid or
accrued in accordance with GAAP all taxes shown to be due and payable on such
returns or which have become due and payable pursuant to any assessment,
deficiency notice, 30-day letter or other notice received by it, and (c) has
properly accrued in accordance with GAAP all material taxes for such periods and
periods subsequent to the periods covered by such returns. Except as set forth
on Schedule 5.10 hereto, neither STH nor any of the STH Subsidiaries has
received written notice that the federal, state and local income and franchise
tax returns of STH or any STH Subsidiary will be examined by any taxing
authority. Except as set forth on Schedule 5.10 hereto, neither STH nor any of
the STH Subsidiaries has executed or filed with the Internal Revenue Service
(the "IRS") or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any income or other taxes.
Except as set forth on Schedule 5.10, neither STH nor any of its
Subsidiaries is a party to any pending action or proceeding by any governmental
authority for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income or franchise tax returns filed by
STH and each of the STH Subsidiaries have been delivered to PMCT or made
available to representatives of PMCT. Except as set forth on Schedule 5.10
hereto, the tax returns filed by STH and any STH Subsidiary have not been, and
are not being, to the knowledge of STH, examined by the IRS or other relevant
taxing authorities for any period nor are there any pending or, to the knowledge
of STH, threatened examinations or tax claims asserted by any such authorities.
There are no tax liens on any of the property of STH. Except as otherwise
disclosed on Schedule 5.10, STH is not a party to, or bound by, any tax
indemnity, tax sharing or tax allocation agreement. Neither STH nor any of the
STH Subsidiaries holds any asset that is subject to a consent filed pursuant to
Section 341(f) of the Code and regulations thereunder. For purposes of this
Section 5.10, "taxes" includes any interest, penalty or additional amount
payable with respect to any tax.
5.11 Books and Records. All books and records relating to operating
income and expenses of all of the Hotels furnished or made available to PMCT by
STH or STH's agent were
11
and shall be those maintained by STH in regard to the Hotels in accordance with
GAAP. The books of account and other financial records of STH and the STH
Subsidiaries are accurately reflected in all material respects in the financial
statements included in the STH Reports.
5.12 Employee Benefit Plans. All employee benefits plans and other
benefit arrangements covering employees of STH and the STH Subsidiaries (the
"STH Benefit Plans") are set forth in Schedule 5.12 hereto. True and complete
copies of the STH Benefit Plans have been made available to PMCT. To the extent
applicable, the STH Benefit Plans comply, in all material respects, with the
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code, and any STH Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined by the IRS to be so qualified. No
STH Benefit Plan is covered by Title IV of ERISA or Section 412 of the Code.
Neither STH nor any STH Benefit Plan has incurred any liability or penalty under
Section 4975 of the Code or Section 502(i) of ERISA. Each STH Benefit Plan has
been maintained and administered in all material respects in compliance with its
terms and with ERISA and the Code to the extent applicable thereto.
Except as set forth on Schedule 5.12 there are no pending or, to the
knowledge of STH, threatened claims against or otherwise involving any of the
STH Benefit Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of STH Benefit Plan activities) has
been brought against or with respect to any such STH Benefit Plan, except for
any of the foregoing which would not have an STH Material Adverse Effect. All
material contributions required to be made as of the date hereof to the STH
Benefit Plans have been made or provided for. Neither STH nor any of the STH
Subsidiaries has any liabilities or obligations with respect to any such STH
Benefit Plan, whether accrued, contingent or otherwise, nor to the knowledge of
STH are any such liabilities or obligations expected to be incurred, except for
ongoing funding obligations or contributory obligations required by the terms of
any STH Benefit Plan. Neither STH nor any entity under "common control" with STH
within the meaning of ERISA Section 4001 has contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Sections 3(37) and
4001(a)(3) of ERISA).
Except as set forth on Schedule 5.12, STH does not maintain or
contribute to any plan or arrangement which provides or has any liability to
provide life insurance, medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment and
STH has never represented, promised or contracted (whether in oral or written
form) to any employee or former employee that such benefits would be provided.
5.13 Labor Matters. Neither STH nor any of the STH Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization,
except as set forth on Schedule 5.13. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of STH, threatened against
STH or the STH Subsidiaries relating to their business, except for any such
proceeding which would not have an STH Material Adverse Effect. To the knowledge
of STH, there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of STH or any of its Subsidiaries. There have been no material work
stoppages, strikes or other concerted actions by employees
12
of STH or any of the STH Subsidiaries other than those that would not have an
STH Material Adverse Effect.
5.14 No Brokers. Except the fee to be paid to ABN AMRO Incorporated by
STH as described below, STH has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of STH
or PMCT to pay any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby. STH is not aware of any
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
5.15 Opinion of Financial Advisor. STH has retained ABN AMRO
Incorporated to review the transactions contemplated by this Agreement and to
issue an opinion to the effect that, as of the date of such opinion the
consideration is fair to holders of STH Common Stock from a financial point of
view.
5.16 PMCT Share Ownership. Except as expressly described in the
Recitals hereto or as may be set forth in Schedule 5.16, neither STH nor any of
the STH Subsidiaries owns any PMCT Common Shares or other securities convertible
shares of beneficial interest of PMCT.
5.17 Related Party Transactions. Except for employment agreements with
its executive officers and option agreements (including loan transactions in
connection therewith) issued to STH officers, directors and other key employees
pursuant to the STH Stock Option Plans, copies of which have been delivered to
PMCT, and which are true, complete and correct when delivered or made available,
there are no arrangements, agreements or contracts entered into by STH or any of
the STH Subsidiaries with (a) any consultant, (b) any person who is an officer,
director or affiliate of STH or any of the STH Subsidiaries, any relative of any
of the foregoing or any entity of which any of the foregoing is an affiliate, or
(c) any person who acquired STH Common Stock in a private placement.
5.18 Contracts and Commitments.
(a) Schedule 5.18 hereto (with paragraph references corresponding to
those set forth below) contains a true and complete list of each of the
following contracts (true and complete copies or, if none, reasonably complete
and accurate written descriptions of which, together with all amendments and
supplements thereto, have been delivered or made available to PMCT), to which
STH or any of the STH Subsidiaries is a party or by which any Hotel is bound:
(i) all contracts providing for the management of the
Hotels;
(ii) all franchise agreements (the "Franchise
Agreements");
(iii) all material contracts providing for a commitment of
employment or consultation services for a specified or unspecified
term;
13
(iv) all contracts with any person containing any provision or
covenant prohibiting or materially limiting the ability of STH or any
of the STH Subsidiaries to engage in any business activity or to
compete with any person;
(v) all partnership, joint venture, stockholders' or
other similar contracts with any person;
(vi) all notes, debentures, bonds and other evidence of
indebtedness which are secured or collateralized by mortgages, deeds of
trust or other security interests in any Hotel or any personal property
of STH or any of the STH Subsidiaries;
(vii) all contracts relating to any business combination;
(viii) all contracts between or among STH or any of the STH
Subsidiaries, on the one hand, and any of their stockholders or
affiliates, on the other hand;
(ix) all collective bargaining or similar labor contracts;
and
(x) all other contracts that involve the annual payment or
potential annual payment pursuant to the terms of such contract, by or
to STH or any of the STH Subsidiaries of more than $25,000 or aggregate
payments in excess of $300,000 that will not (A) be fully performed on
or prior to the Effective Time, (B) expire by their terms within 90
days following the Effective Time, or (C) be cancelable by the
Surviving Entity, without penalty, upon not more than 30 days notice,
including, without limitation, all leases, contracts for purchase and
sale of assets, advance booking contracts and banquet contracts.
(b) Each contract required to be disclosed on Schedule 5.18 is in full
force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms and, except as disclosed on Schedule
5.18, neither STH, any of the STH Subsidiaries nor, to the knowledge of STH, any
other party to such contract is in violation, breach or default under any such
contract (or with notice or lapse of time or both would be in violation, breach
or default under any such contract), the effect of which, individually or in the
aggregate, could reasonably be expect to result in an STH Material Adverse
Effect.
(c) The Franchise Agreements disclosed on Schedule 5.18 constitute all
of the franchise or similar agreements necessary to operate and manage the
Hotels and neither STH nor any STH Subsidiary has received any notice or has any
knowledge of an event of default or termination or proposed termination under
any such Franchise Agreement.
5.19 Development Rights. Schedule 5.19 hereto sets forth a list of all
material agreements entered into by STH or any of the STH Subsidiaries relating
to the development, rehabilitation, capital improvement or construction of
hotels or additions thereto or other real estate properties, which development
or construction has not been substantially completed as of the date of this
Agreement. Such agreements, true and correct copies of all of which have been
delivered to PMCT, have not been modified and are valid and enforceable in
accordance with their respective terms.
14
5.20 Certain Payments Resulting From Transactions. Except for the
payments described in Section 5.17 and except for option agreements (and loans
made in connection therewith) executed pursuant to the STH Stock Option Plan,
deferred compensation arrangements with certain STH executive officers and
employment agreements with certain STH officers each of which arrangements and
agreements is set forth on Schedule 5.20 hereto, the execution of, and
performance of the transactions contemplated by, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events) (a)
constitute an event under any STH Benefit Plan, policy, practice, agreement or
other arrangement or any trust or loan (the "Employee Arrangements") that will
or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, director
or consultant of STH or any of the STH Subsidiaries or (b) result in the
triggering or imposition of any restrictions or limitations on the right of STH
or PMCT to amend or terminate any Employee Arrangement and receive the full
amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. Except as set forth on Schedule 5.20,
no payment or benefit which will be required to be made pursuant to the terms of
any agreement, commitment or STH Benefit Plan, as a result of the transactions
contemplated by this Agreement, to any officer, director or employee of STH or
any of the STH Subsidiaries, will be characterized as an "parachute payment"
within the meaning of Section 280G(b)(2) of the Code.
5.21 Convertible Securities. Except as set forth on Schedule 5.21, STH
has no outstanding options, warrants or other securities exercisable for, or
convertible into, shares of STH Common Stock, the terms of which would require
any anti-dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
5.22 Compliance with Applicable Laws.
(a) Except as disclosed on Schedule 5.22 hereto, all Hotels and the
operation thereof currently are in substantial compliance with the requirements
of all Applicable Laws, except where the failure to so comply would not,
individually or in the aggregate, be reasonably likely to result in an STH
Material Adverse Effect; and to the knowledge of STH, there are no material
commitments or agreements with any of such agencies affecting any Hotel which
have not been fully disclosed to PMCT in writing.
(b) Except as disclosed on Schedule 5.22 hereto, neither STH nor any of
the STH Subsidiaries has received any written notice of uncured violations at
any of the Hotels of zoning, building, fire, health or any other applicable
statute, ordinance or regulation, relating to any of the Hotels, the
construction or any occupancy thereof, except for violations that, individually
or in the aggregate with respect to any Hotel, would not be reasonably likely to
result in an STH Material Adverse Effect, nor are there presently pending
against STH or against any of the Hotels any judgments relating to any of the
above matters, any judicial proceedings or administrative actions or any state
of facts which, to the knowledge of STH, with notice or lapse of time, could
reasonably be expected to give rise to any such proceedings or actions, in
either case that would be reasonably likely to result in an STH Material Adverse
Effect.
15
(c) Neither STH nor any of the STH Subsidiaries has received any
written notice that any material permits, licenses or consents not already
obtained are required by any governmental agencies in connection with the use
and occupancy of any of the Hotels or any material improvements thereto.
5.23 Insurance. The insurance policies listed and described on Schedule
5.23 hereto are currently in force. Neither STH nor any of the STH Subsidiaries
has received any notice from any insurer of any of the Hotels or any part
thereof requesting any improvements, alterations, additions, corrections or
other work in, on or about the improvements thereto, whether related to any of
the Hotels or to the operation of any occupant thereof, which have not been
cured or satisfied.
5.24 Subsidiaries of STH. All subsidiaries of STH which were taxed for
federal income tax purposes as "S" corporations at the time of their acquisition
by STH were taxed as "S" corporations from their respective dates of formation
and had no earnings and profits prior to their acquisition by STH.
5.25 Acquisitions by STH and its Subsidiaries. Neither STH nor any of
it subsidiaries has made an acquisition which would constitute a
"reorganization" under Section 368(a) of the Code.
ARTICLE 6
ADDITIONAL REPRESENTATIONS AND WARRANTIES
AND COVENANTS RELATING TO HOTELS AND REAL PROPERTY
6.1 Representations and Warranties. STH represents and warrants to
PMCT as set forth below:
(a) Title to Hotels. Except as set forth on Schedule 6.1(a)
hereto, STH has on the Effective Time and STH will have on the Closing
Date good and indefeasible fee simple title to the Hotels, free and
clear of all conditions, exceptions, or reservations.
(b) No Consents Required. No consent, except that of the
franchisor(s) listed on Schedule 6.1(b) hereto, those associated with
the Regulatory Filings, that of the STH shareholders and those required
by Section 8.15, waiver, approval, or authorization of, or filing,
registration, or qualification with, or notice to, any Governmental
Authority or any other entity or person (including, without limitation,
its directors is required to be made, obtained, or given by STH in
connection with the execution, delivery, and performance of this
Agreement, except such consent, waiver, approval, authorization,
filing, registration or qualification which has been made, obtained or
given.
(c) STH Not a Foreign Person. STH is not a "foreign person"
but is a "United States person" as such terms are defined in the
Foreign Investment in the Real Property Tax Act of 1980 and ss.ss. 1445
and 7701 of the Code; that is to say, STH is a
16
domestic corporation or trust which is not a foreign estate or foreign
trust within the meaning of ss. 7701(a)(30)(c) of the Code.
(d) Operating Agreements. Except as set forth on Schedule
6.1(d) hereto, no portion of any Hotel is subject to the burdens or
obligations of any Operating Agreement and all Operating Agreements are
current and not in default other than defaults that will not,
individually or in the aggregate, have an STH Material Adverse Effect.
(e) Tenant Leases. Except as may be specifically noted to the
contrary on Schedule 6.1(e) hereto:
(i) STH or an STH Subsidiary is the sole owner of the
lessor's interest in all of the Leases and all Leases are in
full force and effect without current material default by
either STH or the respective tenants;
(ii) none of the Leases that are material to STH has
been modified in a material way, except as reflected in
amendments to which PMCT has had access;
(iii) all obligations of the lessor under the Leases
with respect to the performance of work or the installation of
equipment or materials required to have been performed at or
prior to the Effective Time have been fully observed and
performed, except for such failures that, individually or in
the aggregate, will not have an STH Material Adverse Effect;
(iv) no tenant is or shall become entitled to any
material concession, rebate, allowance, or free rent for any
period subsequent to the Closing, without the prior written
consent of PMCT, except as set forth in the Lease with respect
to such tenant;
(v) no tenant has any purchase option or other
interest (other than its leasehold tenancy for a specified
term) in any of the Land and/or the Improvements; and
(vi) no tenant has given STH or any STH Subsidiary
notice of its intention to vacate its demised premises prior
to the end of the term of its lease.
(f) No Condemnation. There is no pending condemnation or
similar proceeding affecting any of the Land, the Improvements, or the
Personal Property or any portion thereof, and neither STH nor any STH
Subsidiary has received any written notice and each has no knowledge
that any such proceeding is contemplated.
(g) No Violations of Applicable Law. To the knowledge of STH,
except as set forth on Schedule 6.1(g) hereto, the current location,
ownership, operation, use, and occupancy of all of the Land and
Improvements thereon do not violate any Applicable Law, including,
without limitation, all Environmental Laws and the Architectural
17
Barriers Legislation. To the knowledge of STH, except as set forth on
Schedule 6.1(g) hereto, there are no violations of any Applicable Law
affecting any portion of any of the Land, the Improvements or the
Personal Property, and no written notice of any such violation has been
issued by any Governmental Authority.
(h) Changes in Applicable Laws. Neither STH nor any STH
Subsidiary has any information or knowledge of any change contemplated
in any of the Applicable Laws or any judicial or administrative action,
or any action by adjacent landowners, or any fact or condition relating
to any of the Hotels which is reasonably likely to materially adversely
affect, prevent or limit the use of any of the Hotels as hotels of the
size and nature currently being operated.
(i) No Administrative Actions. To STH's or any STH
Subsidiary's knowledge, except as set forth on Schedule 6.1(i) hereto,
no Hotel is now, to STH's or any STH Subsidiary's knowledge, the
subject of any administrative investigation, action or judicial
proceeding in regard to sex, age, or racially discriminatory practices
initiated by any Governmental Authority, or any private citizen, and no
such investigation, administrative action, or judicial proceeding is
now pending, nor is any Hotel presently operating under any court order
or administrative agreement in regard to alleged sex, age, or racially
discriminatory practices.
(j) Zoning. To STH's or any STH Subsidiary's knowledge, except
as set forth on Schedule 6.1(j) hereto, there are no pending or, to
STH's knowledge, threatened requests, applications or proceedings to
alter or restrict the zoning or other use restrictions applicable to
any Hotel; neither STH nor any STH Subsidiary has received any notice
from any Governmental Authority of zoning, building, fire, water, use,
health, environmental or other violations of Applicable Law issued in
respect of any Hotel that have not been heretofore corrected, and no
such violations exist; all of the Improvements and the present uses
thereof are permitted, conforming structures and uses under all
applicable zoning and building laws and ordinances.
(k) Parties in Possession. There are no adverse parties in
possession of any of the Hotels or of any part thereof and no parties
in possession thereof except STH and the tenants under the Leases,
except as otherwise expressly disclosed herein, and no party has been
granted any license, lease, or other right relating to the use or
possession of any of the Hotels except the tenants under the Leases, or
except as otherwise expressly disclosed herein.
(l) No Other Contracts. There are no contracts or other
obligations outstanding for the sale, exchange or transfer of any of
the Hotels or any portion thereof or the business operated thereon.
(m) Utilities. All utilities required by Applicable Laws for
the operation of all of the Improvements including, but not limited to,
water, sewer, gas and electric, enter each parcel of Land through
adjoining public streets or if they pass through adjoining private
land, do so in accordance with valid public or private easements which
inure to
18
the benefit of STH. All of said utilities are installed and operating
and all installation and connection charges have been paid in full and
no fact, condition, or proceeding exists which would result in the
termination or impairment of the furnishing of or an increase in rates
or services to any of the Hotels of the foregoing utility services.
(n) Access to Land. There are adequate means of ingress and
egress for vehicular and pedestrian traffic to and from each parcel of
Land and each adjoining street, road or highway. All routes of ingress
and egress to and from each parcel of Land, to the extent they pass
through adjoining land do so in accordance with valid public or private
easements which inure to the benefit of STH. To STH's or any STH
Subsidiary's knowledge no parcel of Land or any Improvements located
thereon violates any restriction, condition or agreement contained in
any easement, reciprocal easement, restrictive covenant, or similar
instrument or agreement affecting such Land or Improvements or any part
thereof.
(o) Maintenance and No Defects. To STH's or any STH
Subsidiary's knowledge, the roofs of the buildings comprising all of
the Improvements are free of material leaks; the foundations and all
mechanical systems including air-conditioning, plumbing, heating,
sewage drainage and electrical have been maintained in all material
respects in accordance with industry practices.
(p) Insurance. Neither STH nor any STH Subsidiary has
received, and has no other knowledge or information of, any written
notice from any insurance company or board of fire underwriters
requesting the performance of any material work or alteration with
respect to any of the Hotels, or requiring an increase in the insurance
rates applicable to any of the Hotels. To the knowledge of STH, all of
the Hotels comply with the requirements of all insurance carriers
providing insurance therefor.
(q) Property Not in Flood Area. No portion of any parcel of
Land is situated in an area designated by the Secretary of the United
States Department of Housing and Urban Development (or by any other
federal, state, municipal, or other governmental instrumentality) as
having special flood or mudslide hazards.
(r) Compliance with Architectural Barriers Legislation. To
STH's knowledge, except as set forth on Schedule 6.1(r) hereto, all of
the Improvements were built and continue to be in full compliance with
all legal requirements relative to architectural barriers or
accommodations of disabled persons, including, without limitation,
applicable Architectural Barriers Legislation.
(s) Environmental. To STH's knowledge, except as set forth on
Schedule 6.1(s) hereto, there are no Environmental Conditions and there
is no Environmental Noncompliance with respect to any Hotel. All
material Permits have been obtained, are valid and in good standing. To
STH's knowledge, all operations on or at each Hotel are and have been
conducted in material compliance with all applicable Environmental
Laws. Neither STH nor any STH Subsidiary has received any Notification
from any governmental instrumentality seeking any information or
alleging
19
any violation of any Applicable Law or Environmental Law. Neither STH
nor any STH Subsidiary has caused or permitted any Hotel to be used to
generate, manufacture, refine, transport, treat, recycle, store,
handle, dispose of, transfer, produce, or process any Hazardous
Materials or solid waste, except in small quantities utilized in
connection with routine maintenance or repair of the Hotel, all of
which have been and will be stored, used, handled, and disposed of in
full compliance with all Environmental Laws other than such
noncompliance that, individually or in the aggregate, will not have an
STH Material Adverse Effect. Neither STH nor any STH Subsidiary has
caused or permitted, and has no knowledge of, any Release of any such
Hazardous Materials on-site or off-site of any Hotel other than such
releases that, individually or in the aggregate, will not have an STH
Material Adverse Effect.
6.2 STH Deliverables. STH has, prior to the execution of this
Agreement, delivered to PMCT, or provided PMCT access to, true and correct
copies of each of the following:
(a) Leases. Each Lease covering or relating to each Hotel,
together with any amendments thereto or other documents creating
further obligations or agreements in connection therewith.
(b) Operating Statements. Operating statements covering the
Hotel for the fiscal year ended December 31, 1997, which statements are
prepared in the ordinary course of STH's business and form the basis
for STH's financial statements.
(c) Tax Statements. Copies of the most recent ad valorem and
personal property tax statements with respect to each Hotel received.
(d) Plans and Specifications. A full set of "as-built" plans,
specifications and architectural floor plans for all of the
Improvements to the extent available, and the name and address of the
project architects, if known.
(e) Operating Agreements. A list of all Operating Agreements
together with a copy of each Operating Agreement.
(f) List of Defects. A list of all defects or malfunctions
affecting any part of the Hotels and of which STH or any STH Subsidiary
has knowledge with respect to foundations, walls, roofs, heating,
electrical, plumbing or air conditioning equipment or systems, and
drainage or sewage equipment or systems other than such defects or
malfunctions that, individually or in the aggregate, will not result in
an STH Material Adverse Effect.
(g) Insurance Policies. Copies of all of STH's or an STH
Subsidiary's fire, hazard, liability and other insurance policies
currently in force with respect to the Hotels.
(h) Commission Agreements. All leasing or other commission
agreements with respect to the Hotels and a list of all unpaid
commissions which identifies the payee, amount and date or event upon
which such commission will become due and payable.
20
(i) Updated record searches relating to existing environmental
site assessments for each Hotel.
(j) A written architectural review of each Hotel previously
identified and agreed upon by STH and PMCT (each an "Architectural
Review") to determine such Hotel's compliance with Architectural
Barriers Legislation by an architect certified as to such matters and
reasonably acceptable to PMCT. Such Architectural Review shall contain
an estimate of the cost of bringing any noncomplying Hotel into
compliance with all Architectural Barriers Legislation.
6.3 STH Property Reports. STH shall, as soon as possible but in no
event later than forty-five (45) days from the date hereof (except as provided
below), cause to be furnished to PMCT:
(a) Copies of the current Title Policies held by STH as to
each Hotel;
(b) Title Updates as to each Hotel where there is existing
title insurance and, at STH's option, title reports or updates to legal
opinions where there are legal opinions, in all cases dated as of a
date following the date hereof. At such time as STH causes the Title
Updates or such reports or opinions to be furnished to PMCT, STH shall
further cause to be furnished to PMCT true, correct, and legible copies
of all instruments referred to in each Title Update, report or opinion
as conditions or exceptions to title to each Hotel, including liens,
which have not previously been provided pursuant to Section 6.3(a), and
a certificate stating that a search has been made of both the state and
county records wherein financing statements and security agreements are
filed pursuant to the Uniform Commercial Code of the state in which the
Hotel is located and that such search indicates all security interests
or liens of any kind or nature, including, but not limited to, any
equipment financing or leasing arrangements, that are claimed by any
person against the Hotel, or any part thereof; and
(c) A copy of the Survey of each parcel of Land and the
Improvements located thereon previously identified and agreed upon by
STH and PMCT, prepared by the Surveyor, dated as of a date following
the issuance of the certificate of occupancy with respect to the
applicable Hotel, to the extent not previously provided to PMCT. Such
Surveys shall include a metes and bounds legal description of each
parcel of Land, shall accurately show the location and dimensions of
all the Improvements located thereon, encroachments, uses (including
the location of all highways, streets, roads, easements, alleys and
rights-of-way upon or adjacent to the Land) and encumbrances which are
visible on the ground or listed on the applicable Title Policy and
Title Update (identifying each by volume and page reference, if
applicable), shall recite an exact area of the Land, shall show all
building set-back lines, shall contain a certificate specifically
addressed to PMCT and STH which shall substantially state "(i) this
survey is true and correct, was made on the ground as per the field
notes shown hereon, correctly shows the boundary lines and dimensions
and area of the land indicated hereon and each individual parcel
thereof indicated hereon, correctly shows the location of all
buildings, structures and other improvements and visible items on the
subject property, and correctly shows the
21
location and dimensions of all easements, alleys, streets, roads,
rights-of-way, building set-back lines and other matters of record of
which the undersigned has been advised affecting the subject property
according to the legal description in such easements and other matters
(with instrument, book and page number indicated); (ii) except as
shown, there are no improvements, easements, rights-of-way, party
walls, visible uses, conflicts, or other matters of record of which the
undersigned has been advised affecting the subject property, there are
no encroachments or protrusions onto adjoining premises, streets or
alleys by any buildings, structures or other improvements on the
subject property, there are no encroachments on the subject property by
buildings, structures or other improvements situated on adjoining
premises, and there are no encroachments on any easements located on
the subject property by any buildings, structures or other improvements
situated on the subject property; (iii) the distance from the nearest
intersecting street and road to the subject property is as shown
hereon; and (iv) no part of the subject property is within an area
designated on a Federal Flood Insurance Rate Map or Flood Hazard
Boundary Map as having special flood hazards." The Survey (i) as to
Hotels located in Texas, must conform to the current Texas Surveyors
Association Standards and Specifications for a Category IA, Condition
II Survey and (ii) as to Hotels located in all other states, must be
prepared as an "Urban" class survey according to "Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys" as adopted by the
American Land Title Association and the American Congress on Surveying
and Mapping in 1992. STH shall provide the Surveyor with a copy of this
Section 6.3(c) when the Survey is ordered.
(d) A schedule of all operating inventory at the Hotels as of
a date no more than five business days prior to the Closing Date.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PMCT
PMCT represents and warrants to STH as set forth below.
7.1 Existence; Good Standing; Authority; Compliance with Law. PMCT is a
real estate investment trust duly organized, validly existing and in good
standing under the laws of the State of Texas. PMCT is duly licensed or
qualified to do business and is in good standing under the laws of any other
state of the United States in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, results of operations or
financial condition of PMCT and its subsidiaries (each a "PMCT Subsidiary")
taken as a whole (a "PMCT Material Adverse Effect"). PMCT has all requisite
power and authority to own, operate, lease and encumber its properties and carry
on its business as now conducted. Each PMCT Subsidiary is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its properties and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
22
of its property or the conduct of its business requires such qualification,
except for jurisdictions in which such failure to be so qualified or to be in
good standing would not have a PMCT Material Adverse Effect.
Neither PMCT nor any PMCT Subsidiary is in violation of any order of
any court, governmental authority or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which PMCT or any PMCT Subsidiary
or any of their respective properties or assets is subject, where such violation
would have a PMCT Material Adverse Effect. PMCT and the PMCT Subsidiaries have
obtained all licenses, permits and other authorizations and have taken all
actions required by applicable law or governmental regulations in connection
with their business as now conducted, where the failure to obtain any such item
or to take any such action would have a PMCT Material Adverse Effect. Complete
and correct copies of PMCT's Declaration of Trust and the PMCT Subsidiaries'
charters and bylaws, which reflect all amendments made thereto, have been
delivered or made available to STH and its counsel. The minute books and other
records of PMCT and the PMCT Subsidiaries contain in all material respects
accurate records of all meetings and accurately reflect in all material respects
all other corporate action of the stockholders and directors and any committees
of the Board of Trust Managers of PMCT and the boards of directors of the PMCT
Subsidiaries. Neither PMCT nor any PMCT Subsidiary is in default under or in
violation of any provision of their respective charters or bylaws. For the
purposes of the immediately preceding sentence, the term "PMCT Subsidiary" shall
include the entities set forth on Schedule 7.4 attached hereto, which are all of
PMCT's subsidiaries.
7.2 Authorization, Validity and Effect of Agreements. PMCT has the
requisite power and authority to enter into the transactions contemplated hereby
and to execute and deliver this Agreement and all other documents, agreements
and instruments related to the transactions contemplated by this Agreement to
which each of them is a party (the "PMCT Ancillary Agreements"). Subject only to
the approval of the issuance of the shares of PMCT Common Shares pursuant to the
Merger contemplated hereby by the holders of two-thirds of the outstanding
shares of PMCT Common Shares, present and voting thereon, the consummation by
PMCT of this Agreement, the PMCT Ancillary Agreements and the transactions
contemplated hereby and thereby have been duly authorized by all requisite
action on the part of PMCT and no other action on the part of PMCT is necessary
to authorize this Agreement, the PMCT Ancillary Agreements or the transactions
contemplated hereby or thereby. This Agreement constitutes, and the PMCT
Ancillary Agreements (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of PMCT
enforceable against PMCT in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and general principles of equity.
7.3 Capitalization. The authorized capital stock of PMCT consists of
100,000,000 shares of beneficial interest, which may consist of PMCT Common
Shares or such other types of classes of securities as PMCT's Board of Trust
Managers may, from time to time, create. As of June 3, 1998, (a) there were
6,509,231 shares of PMCT Common Shares issued and outstanding and (b) no shares
of PMCT Common Shares were held by PMCT in its treasury. PMCT has no outstanding
bonds, debentures, notes or other obligations the holders of which
23
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of PMCT on any
matter. All such issued and outstanding shares of PMCT Common Shares are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth on Schedule 7.3 hereto, there are not at the date of
this Agreement any existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate PMCT or
any of the PMCT Subsidiaries to issue, transfer or sell any shares of stock or
other equity interest of PMCT or any of the PMCT Subsidiaries, other than the
issuance, by PMCT of up to 95,021 PMCT Common Shares upon the exercise of stock
options issued to employees and trust managers. There are no agreements or
understandings to which PMCT is a party with respect to the voting of any shares
of PMCT Common Shares or which restrict the transfer of any such shares, except
in order to protect its REIT status. There are no bonds, debentures, notes or
other indebtedness of PMCT having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of PMCT may vote. There are no outstanding contractual obligations
of PMCT or any of the PMCT Subsidiaries to repurchase, redeem or otherwise
acquire any shares of PMCT or any capital stock, voting securities or other
securities or other ownership interests in any of the PMCT Subsidiaries or make
any material investment (in the form of a loan, capital contribution or
otherwise) in any person (other than one of the PMCT Subsidiaries).
7.4 Subsidiaries. Except as set forth in Schedule 7.4 hereto, PMCT owns
directly or indirectly all of the outstanding shares of capital stock or all of
the partnership or other equity interests of each of the PMCT Subsidiaries
listed on Schedule 7.4 free and clear of all liens, pledges, security interests,
claims or other encumbrances. Each of the outstanding shares of capital stock of
or other equity interest in each of the PMCT Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable. The following information for each
PMCT Subsidiary is set forth on Schedule 7.4, if applicable: (a) its name and
jurisdiction of incorporation or organization; (b) its authorized capital stock
or share capital or partnership or other interests; (c) the name of each
shareholder or owner of an equity interest and the number of issued and
outstanding shares of capital stock or share capital or percentage ownership for
non-corporate entities held by it; and (d) the name, ownership structure and
equity owners of the general partner(s).
7.5 Other Interests. Except for interests in the PMCT Subsidiaries,
neither PMCT nor any PMCT Subsidiary owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than investments in short-term
investment securities).
7.6 No Violation. Neither the execution and delivery by PMCT of this
Agreement or the PMCT Ancillary Agreements nor the consummation by PMCT of the
transactions contemplated hereby or thereby in accordance with the terms hereof
or thereof, will: (a) conflict with or result in a breach of any provisions of
the Declaration of Trust or Bylaws of PMCT; (b) result in a breach or violation
of, a default under, or the triggering of any payment or other material
obligations pursuant to, or accelerate vesting under, any of PMCT's Stock Option
Plans, or any grant or award made under any of the foregoing; (c) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or
24
lapse of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties of PMCT or the PMCT
Subsidiaries under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which PMCT or any of the PMCT Subsidiaries is a party, or by which PMCT or any
of the PMCT Subsidiaries or any of their properties is bound or affected, except
for any of the foregoing matters which, individually or in the aggregate, would
not have a PMCT Material Adverse Effect; or (d) other than the Regulatory
Filings require any consent, approval or authorization of, or declaration,
filing or registration with, any domestic governmental or regulatory authority,
except where the failure to obtain such consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority would not have a PMCT Material Adverse Effect.
7.7 SEC Documents. Schedule 7.7 hereto sets forth all reports,
schedules, forms, statements and other documents PMCT has filed with the SEC
pursuant to the Securities Act and the Exchange Act since June 25, 1993 (the
"PMCT Reports") and such PMCT Reports constitute all reports, schedules, forms,
statements and other documents required to be filed by PMCT under the Securities
Laws since such date.
As of their respective dates, the PMCT Reports (a) complied as to form
in all material respects with the applicable requirements of the Securities Laws
and (b) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each of the consolidated balance sheets of PMCT included
in or incorporated by reference into the PMCT Reports (including the related
notes and schedules) (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) were prepared in all material respects in
accordance with GAAP, and (iii) fairly presented in all material respects the
consolidated financial position of PMCT and the PMCT Subsidiaries as of its date
in conformity with GAAP. Each of the consolidated statements of income, retained
earnings and cash flows of PMCT included in or incorporated by reference into
the PMCT Reports (including any related notes and schedules) (A) complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (B) were
prepared in accordance with GAAP, and (C) fairly presented the results of
operations, retained earnings or cash flows, as the case may be, of PMCT and the
PMCT Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect) in conformity with GAAP.
Except as and to the extent set forth in the PMCT Reports and except
for liabilities incurred in connection with this Agreement and the transactions
contemplated hereby, neither PMCT nor any of the PMCT Subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of PMCT or in the notes thereto, prepared in
accordance with generally accepted accounting principles consistently applied,
except liabilities arising in
25
the ordinary course of business since such date which would not have a PMCT
Material Adverse Effect.
7.8 Litigation. There are (a) no continuing orders, injunctions or
decrees of any court, arbitrator or governmental authority to which PMCT or any
PMCT Subsidiary is a party or by which any of its properties or assets are bound
or, to the knowledge of PMCT, to which any of its directors, officers, or
affiliates is a party or by which any of their properties or assets are bound,
and (b) except as set forth in Schedule 7.8 hereto, no actions, suits or
proceedings pending against PMCT or any PMCT Subsidiary or, to the knowledge of
PMCT, against any of its directors, officers, or affiliates or, to the knowledge
of PMCT, threatened against PMCT or any PMCT Subsidiary or against any of its
directors, officers, or affiliates, at law or in equity, or before or by any
federal or state commission, board, bureau, agency or instrumentality, that in
the case of clause (a) or (b) above are reasonably likely, individually or in
the aggregate, to have a PMCT Material Adverse Effect.
7.9 Absence of Certain Changes. Except as disclosed in the PMCT Reports
filed with the SEC prior to the date hereof, since the date of the most recent
financial statements included in the PMCT Reports (the "Financial Statement
Date"), (a) PMCT and the PMCT Subsidiaries have conducted their business in all
material respects in the ordinary course of such business (which, for purposes
of this Section 7.9 only, shall include all financing arrangements made in
connection with the acquisition and/or development of real estate properties);
(b) no event has caused a PMCT Material Adverse Effect and there has been no
event, occurrence or circumstance that with the passage of time would reasonably
be expected to cause a PMCT Material Adverse Effect; (c) except as otherwise
permitted pursuant to the terms of this Agreement, as of the date hereof there
has not been any declaration, setting aside or payment of any dividend or other
distribution with respect to the PMCT Common Shares or any split, combination or
reclassification of the PMCT Common Shares; and (d) there has not been any
material change in PMCT's accounting principles, practices or methods. There are
no material unsatisfied judgments, orders (other than orders of general
applicability), decrees or stipulations affecting PMCT or any PMCT Subsidiary or
to which one of them is a party.
7.10 Taxes. Except as set forth on Schedule 7.10 hereto, PMCT and each
of its Subsidiaries (a) have timely filed all federal, state and foreign tax
returns, including, without limitation, information returns and reports required
to be filed by any of them for tax periods ended prior to the date of this
Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired and all such returns are absolute
and complete to the knowledge of PMCT in all material respects, (b) has paid or
accrued in accordance with GAAP all taxes shown to be due and payable on such
returns or which have become due and payable pursuant to any assessment,
deficiency notice, 30-day letter or other notice received by it, and (c) has
properly accrued in accordance with GAAP all material taxes for such periods
subsequent to the periods covered by such returns. Except as set forth on
Schedule 7.10 hereto, neither PMCT nor any of the PMCT Subsidiaries has received
written notice that the federal, state and local income and franchise tax
returns of PMCT or any PMCT Subsidiary will be examined by any taxing authority.
Except as set forth on Schedule 7.10 hereto, neither PMCT nor any of the PMCT
Subsidiaries has executed or filed with the IRS or
26
any other taxing authority any agreement now in effect extending the period for
assessment or collection of any income or other taxes.
Except as set forth on Schedule 7.10 hereto, neither PMCT nor any of
the PMCT Subsidiaries is a party to any pending action or proceeding by any
governmental authority for assessment or collection of taxes, and no claim for
assessment or collection of taxes has been asserted against it. True, correct
and complete copies of all federal, state and local income or franchise tax
returns filed by PMCT and each of the PMCT Subsidiaries have been delivered to
STH or made available to representatives of STH. Except as set forth on Schedule
7.10 hereto, the tax returns filed by PMCT and any PMCT Subsidiary have not
been, and are not being, to the knowledge of PMCT, examined by the IRS or other
relevant taxing authorities for any period nor are there any pending or, to the
knowledge of PMCT, threatened examinations or tax claims asserted by any such
authorities. There are no tax liens on any of the property of PMCT. Except as
otherwise disclosed on Schedule 7.10, PMCT is not a party to, or bound by, any
tax indemnity, tax sharing or tax allocation agreement. PMCT (i) has qualified
to be taxed as a REIT pursuant to Sections 856 through 859 of the Code for its
taxable years ended December 31, 1994 through 1997, inclusive (ii) has operated,
and intends to continue to operate, in such a manner as to qualify to be taxed
as a REIT pursuant to Sections 856 through 859 of the Code for its taxable year
ended on the effective date of the Merger, and (iii) has not taken or omitted to
take and will not take or omit to take any action which could result in, and
each of the executive officers of PMCT, each acting in his or her respective
capacity as such, has no actual knowledge of, a challenge to its status as a
REIT. Following consummation of the Merger in accordance with the provisions of
this Agreement, PMCT will continue to meet the requirements for qualification
and taxation as a REIT under the Code. PMCT represents that each of its
Subsidiaries which is a corporation for federal income tax purposes and of which
all the outstanding capital stock is owned solely by PMCT (or by PMCT and one or
more of the PMCT Subsidiaries or by one or more of the PMCT Subsidiaries) is a
Qualified REIT Subsidiary as defined in Section 856(i) of the Code. Neither PMCT
nor any of the PMCT Subsidiaries holds any asset (i) the disposition of which
could be subject to rules similar to Section 1374 of the Code as a result of an
election under IRS Notice 88-19 or (ii) that is subject to a consent filed
pursuant to Section 341(f) of the Code and regulations thereunder. For purposes
of this Section 7.10, "taxes" includes any interest, penalty or additional
amount payable with respect to any tax.
7.11 Books and Records. The books of account and other financial
records of PMCT and the PMCT Subsidiaries are accurately reflected in all
material respects in the financial statements included in the PMCT Reports.
7.12 Employee Benefit Plans. All employee benefits plans and other
benefit arrangements covering employees of PMCT and the PMCT Subsidiaries (the
"PMCT Benefit Plans") are set forth on Schedule 7.12. True and complete copies
of the PMCT Benefit Plans have been or will be made available to STH. To the
extent applicable, the PMCT Benefit Plans comply, in all material respects, with
the requirements of ERISA, and the Code, and any PMCT Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined by the IRS to
be so qualified. No PMCT Benefit Plan is covered by Title IV of ERISA or Section
412 of the Code. No PMCT Benefit Plan nor PMCT has incurred any liability or
penalty under
27
Section 4975 of the Code or Section 502(i) of ERISA. Each PMCT Benefit Plan has
been maintained and administered in all material respects in compliance with its
terms and with ERISA and the Code to the extent applicable thereto.
Except as set forth on Schedule 7.12, there are no pending or, to the
knowledge of PMCT, threatened claims against or otherwise involving any of the
PMCT Benefit Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of PMCT Benefit Plan activities) has
been brought against or with respect to any such PMCT Benefit Plan, except for
any of the foregoing which would not have a PMCT Material Adverse Effect. All
material contributions required to be made as of the date hereof to the PMCT
Benefit Plans have been made or provided for. Neither PMCT nor any PMCT
Subsidiary has any liabilities or obligations with respect to any such PMCT
Benefit Plan, whether accrued, contingent or otherwise, nor to the knowledge of
PMCT are any such liabilities or obligations expected to be incurred. Neither
PMCT nor any entity under "common control" with PMCT within the meaning of ERISA
Section 4001 has contributed to, or been required to contribute to, any
"multiemployer plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA).
Except as set forth on Schedule 7.12, PMCT does not maintain or
contribute to any plan or arrangement which provides or has any liability to
provide life insurance, medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment and
PMCT has never represented, promised or contracted (whether in oral or written
form) to any employee or former employee that such benefits would be provided.
7.13 Labor Matters. Neither PMCT nor any of the PMCT Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization. There
is no unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of PMCT, threatened against PMCT or the PMCT Subsidiaries relating to
their business, except for any such proceeding which would not have a PMCT
Material Adverse Effect. To the knowledge of PMCT, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of PMCT or any of the PMCT
Subsidiaries. There have been no material work stoppages, strikes or other
concerted actions by employees of PMCT or any of the PMCT Subsidiaries other
than those that would not have a PMCT Material Adverse Effect.
7.14 No Brokers. Except the fee to be paid to J.C. Bradford & Co. by
PMCT as described below, PMCT has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of PMCT
or STH to pay any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby. PMCT is not aware of any
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
28
7.15 Opinion of Financial Advisor. PMCT has retained J.C. Bradford &
Co. to review the transactions contemplated by this Agreement and to issue an
opinion to the effect that, as of the date of such opinion, the Exchange Ratio
is fair, from a financial point of view, to PMCT and the holders of PMCT Common
Shares.
7.16 STH Share Ownership. Except as expressly described in the Recitals
hereto or as may be set forth in Schedule 7.16, neither PMCT nor any of the PMCT
Subsidiaries owns any shares of capital stock of STH or other securities
convertible into capital stock of STH.
7.17 PMCT Common Shares. The issuance and delivery by PMCT of PMCT
Common Shares in connection with the Merger and this Agreement have been duly
and validly authorized by all necessary action on the part of PMCT except for
the approval of its shareholders contemplated by this Agreement. The PMCT Common
Shares to be issued in connection with the Merger and this Agreement, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable.
7.18 Convertible Securities. PMCT has no outstanding options, warrants
or other securities exercisable for, or convertible into, shares of PMCT Common
Shares, the terms of which would require any anti-dilution adjustments by reason
of the consummation of the transactions contemplated hereby.
7.19 Related Party Transactions. Schedule 7.19 hereto sets forth a list
of all arrangements, agreements and contracts entered into by PMCT or any of the
PMCT Subsidiaries with (a) any consultant, or (b) any person who is an officer,
director or affiliate of PMCT or any of the PMCT Subsidiaries, any relative of
any of the foregoing or any entity of which any of the foregoing is an
affiliate. Copies of such documents, all of which have been or will be delivered
or made available to STH prior to May 8, 1998, are or will be true, complete and
correct when delivered or made available.
7.20 Contracts and Commitments. Except for loan commitments made by
PMCT in the ordinary course of its business, Schedule 7.20 sets forth (a) all
unsecured notes or other obligations of PMCT and the PMCT Subsidiaries which
individually may result in total payments in excess of $750,000, (b) notes,
debentures, bonds and other evidence of indebtedness which are secured or
collateralized by mortgages, deeds of trust or other security interests in the
PMCT properties or personal property of PMCT and the PMCT Subsidiaries, and (c)
each Commitment entered into by PMCT or any of the PMCT Subsidiaries which
individually may result in total payments or liability in excess of $750,000.
True and correct copies of the foregoing have been delivered or made available
to STH. None of PMCT or any of the PMCT Subsidiaries has received any notice of
a default that has not been cured under any of the documents described in clause
(a) or (b) above or is in default respecting any payment obligations thereunder
beyond any applicable grace periods. All joint venture agreements to which PMCT
or any of the PMCT Subsidiaries is a party are set forth on Schedule 7.20 and
PMCT or the PMCT Subsidiaries are not in default with respect to any
obligations, which individually or in the aggregate are material, thereunder.
29
ARTICLE 8
COVENANTS
8.1 Acquisition Proposals. Prior to the Effective Time, STH and PMCT
each agree (a) that neither of them nor any of their Subsidiaries shall, and
each of them shall direct and use its best efforts to cause its respective
officers, trust managers, directors, employees, agents, affiliates and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders) with respect to a merger, acquisition,
tender offer, exchange offer, consolidation or similar transaction involving, or
any purchase 20% or more of the assets or equity securities (or any debt
securities convertible into equity securities) of, such party or any of its
Subsidiaries, other than the transactions contemplated by this Agreement (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; (b) that it will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing and each will
take the necessary steps to inform the individuals or entities referred to above
of the obligations undertaken in this Section 8.1; and (c) that it will notify
the other party immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, it; provided, however, that
nothing contained in this Section 8.1 shall prohibit the Board of Trust Managers
or the Board of Directors of such party from (i) furnishing information to or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited bona fide Acquisition Proposal, if, and only to the extent that,
(A) the Board of Trust Managers or Board of Directors of such party determines
in good faith that such action is required for such body to comply with its
fiduciary duties to shareholders imposed by law as advised by counsel, (B) prior
to furnishing such information to, or entering into discussions or negotiations
with, such person or entity, such party provides written notice to the other
party to this Agreement to the effect that it is furnishing information to, or
entering into discussions with, such person or entity, and (C) subject to any
confidentiality agreement with such person or entity (which such party
determined in good faith was required to be executed in order for such body to
comply with its fiduciary duties to shareholders imposed by law as advised by
counsel), such party keeps the other party to this Agreement informed of the
status (but not the terms) of any such discussions or negotiations; and (ii) to
the extent applicable, complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
Nothing in this Section 8.1 shall (x) permit any party to terminate
this Agreement (except as specifically provided in Article 10 hereof), (y)
permit any party to enter into any agreement with respect to an Acquisition
Proposal during the term of this Agreement (it being agreed that during the term
of this Agreement, no party shall enter into any agreement with any person that
provides for, or in any way facilitates, an Acquisition Proposal (other than a
confidentiality
30
agreement in customary form)), or (z) affect any other obligation of any party
under this Agreement.
8.2 Earnings and Profits Dividend. The Earnings and Profits Dividend
shall be paid to STH shareholders of record as of a date not more than five (5)
trading days nor fewer than three (3) trading days before the Closing Date. STH
shall declare such dividend not less than 10 days nor more than 15 days prior to
the record date for such dividend. STH and PMCT shall cause the Earnings and
Profits Dividend to be distributed immediately following the Closing.
8.3 Conduct of Businesses.
(a) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement or as contemplated by this Agreement, unless the
other party has consented in writing thereto, PMCT and STH:
(i) Shall use their reasonable efforts, and shall cause each
of their respective Subsidiaries to use their reasonable efforts, to
preserve intact their business organizations and goodwill and keep
available the services of their respective officers and employees;
(ii) Shall confer on a regular basis with one or more
representatives of the other to report operational matters of
materiality and, subject to Section 8.1, any proposals to engage in
material transactions;
(iii) Shall promptly notify the other of any material
emergency or other material change in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects or the
normal course of their businesses or in the operation of their
properties, any material governmental complaints, investigations or
hearings (or communications indicating that the same may be
contemplated), or the breach in any material respect of any
representation, warranty, covenant or agreement contained herein; and
(iv) Shall promptly deliver to the other true and correct
copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement.
(b) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement, unless PMCT has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, STH:
(i) Shall, and shall cause each of the STH Subsidiaries to,
conduct its operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(ii) Shall not amend its Certificate of Incorporation or
Bylaws;
(iii) Shall not merge or consolidate with any other person;
31
(iv) Shall not (A) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on
the date hereof and disclosed pursuant to this Agreement, issue any
shares of its capital stock, effect any stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction,
(B) grant, confer or award any option, warrant, conversion right or
other right (other than so-called "reload options" which have
heretofore been authorized for issuance in connection with the
application of existing STH Common Stock to the exercise price of
existing options) not existing on the date hereof to acquire any shares
of its capital stock, (C) increase any compensation or enter into or
amend any employment agreement with any of its present or future
officers or directors, or (D) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or
amend any existing employee benefit plan in any material respect,
except for changes which are less favorable to participants in such
plans;
(v) Except for the payment of the Earnings and Profits
Dividend in accordance with Section 8.2, shall not declare, set aside
or pay any dividend or make any other distribution or payment with
respect to any shares of its capital stock;
(vi) Other than in the ordinary course of its business, shall
not, and shall not permit any of the STH Subsidiaries to, sell or
otherwise dispose of (A) any Land, Hotel Improvements, Personal
Property or any of its capital stock of or other interests in the STH
Subsidiaries, in each case which are material, individually or in the
aggregate, or (B) except as otherwise contemplated by the Agreement of
Sale, any of its other assets which are material, individually or in
the aggregate;
(vii) Other than in the ordinary course of its business, shall
not, and shall not permit any of the STH Subsidiaries to, make any
loans, advances or capital contributions to, or investments in, any
other person;
(viii) Shall not, and shall not permit any of the STH
Subsidiaries to, pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of STH included in the STH
Reports or incurred in the ordinary course of business consistent with
past practice;
(ix) Shall not, and shall not permit any of the STH
Subsidiaries to, enter into any commitment which individually may
result in total payments or liability by or to it in excess of $50,000
in the case of any one commitment or in excess of $125,000 for all
commitments;
(x) Shall not, and shall not permit any of the STH
Subsidiaries to, enter into any commitment with any officer, director
or affiliate of STH or any of the STH
32
Subsidiaries except to the extent the same occur in the ordinary course
of business consistent with past practice and would not have an STH
Material Adverse Effect;
(xi) Shall manage and operate each Hotel in all material
respects in accordance with the practices and in the manner it was
managed and operated on the date hereof;
(xii) Shall maintain in all material respects the Improvements
and FF&E in a manner consistent with past practices;
(xiii) Shall enter into no material agreement with respect to
the operation or maintenance of any portion of any Hotel without the
prior written consent of PMCT;
(xiv) Other than in the ordinary course of business, shall
not, without the prior written consent of PMCT, permit any material
structural modifications or additions to any Hotel, or sell or permit
to be sold or otherwise dispose of any item or group of items
constituting a portion of any Hotel;
(xv) Shall maintain STH's existing or comparable insurance
coverage with respect to each Hotel from the date of execution of this
Agreement through the Effective Time or earlier termination of this
Agreement;
(xvi) Shall not further encumber or permit encumbrance of any
Hotel in any manner;
(xvii) Shall promptly notify PMCT in writing of the receipt by
STH of any material written levy (or threatened levy) against any Hotel
of any special governmental assessment or similar occurrence;
(xviii) Shall promptly notify PMCT in writing of any
violation, alleged violation or anticipated violation, of any
Applicable Law or Environmental Law, of which it gains knowledge or is
notified which is likely to have a STH Material Adverse Effect;
(xix) Shall not execute an assignment of any Lease, an
assignment of any rent accruing under any Lease or the assignment of
any room rent or booking; and
(xx) To the extent a notice of assumed name or similar
document relating to any name, trademark, trade style or trade name
assigned or passed to PMCT hereunder has been filed with any federal,
state, county or local governmental agency, shall, at PMCT's request,
withdraw such filing and assist PMCT in any reasonable manner to
protect PMCT's interest in any such name, trademark, trade style, trade
name or Servicemark assigned or passed to PMCT hereunder.
(c) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement, unless STH has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, PMCT:
33
(i) Shall, and shall cause each of the PMCT Subsidiaries to,
conduct its operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(ii) Shall not amend its Declaration of Trust or Bylaws;
(iii) Shall not merge or consolidate with any other person;
(iv) Shall not (A) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on
the date hereof and disclosed pursuant to this Agreement, issue any of
its shares of beneficial interest, effect any share split, reverse
share split, share dividend, recapitalization or other similar
transaction, (B) grant, confer or award any option, warrant, conversion
right or other right not existing on the date hereof to acquire any of
its shares of beneficial interest, (C) amend any employment agreement
with any of its present or future officers or trust managers, or (D)
adopt any new employee benefit plan (including any share option, share
benefit or share purchase plan);
(v) Shall not declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its
capital stock, except (A) its regular quarterly dividends not to exceed
per quarter $0.50 per share of PMCT Common Shares, (B) a special
dividend payable to PMCT shareholders contemporaneously with the
Closing in an amount not to exceed $0.50 per share, and (C) any other
dividend or distribution necessary for PMCT to maintain its ability to
qualify to be taxed as a REIT under the Code;
(vi) Except as will be set forth in the schedules to this
Agreement, shall not, and shall not permit any of the PMCT Subsidiaries
to, sell or otherwise dispose of, except in the ordinary course of
business, any of its assets which are material, individually or in the
aggregate;
(vii) Shall not, and shall not permit any of the PMCT
Subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of PMCT included in the PMCT Reports
or incurred in the ordinary course of business consistent with past
practice;
(viii) Shall not, and shall not permit any of the PMCT
Subsidiaries to, enter into any Commitment which individually may
result in total payments or liability by or to it in excess of $750,000
other than in the ordinary course of business; and
(ix) Shall not, and shall not permit any of the PMCT
Subsidiaries to, enter into any Commitment with any officer, director
or affiliate of PMCT or any of the PMCT
34
Subsidiaries, except as provided herein or in the Schedules to this
Agreement and except in the ordinary course of business.
8.4 Damage to Property. STH agrees to give PMCT prompt notice of any
material fire or other material casualty affecting any of the Hotels between the
date hereof and the Closing Date or of any actual or threatened taking or
condemnation of all or any portion of any of the Land or the Improvements.
8.5 Meetings of Shareholders. Each of PMCT and STH will take all action
necessary in accordance with applicable law and its organizational documents to
convene a meeting of its shareholders as promptly as practicable to consider and
vote upon or otherwise to obtain the consent of its shareholders to (a) in the
case of PMCT, the approval of the issuance of the shares of PMCT Common Shares
pursuant to the Merger and (b) in the case of STH, the approval of this
Agreement and the transactions contemplated hereby. The Board of Trust Managers
of PMCT and the Board of Directors of STH shall each recommend such approval and
PMCT and STH shall each take all lawful action to solicit such approval,
including, without limitation, timely mailing the Proxy Statement (as defined in
Section 8.9); provided, however, that such recommendation or solicitation is
subject to any action taken by, or upon authority of, the Board of Trust
Managers of PMCT or the Board of Directors of STH, as the case may be, in the
exercise of its good faith judgment as to its fiduciary duties to its
shareholders imposed by law as advised by counsel. PMCT and STH shall coordinate
and cooperate with respect to the timing of such meetings and shall use their
best efforts to hold such meetings on the same day.
8.6 Filings; Other Action. Subject to the terms and conditions herein
provided, STH and PMCT shall: (a) use all reasonable efforts to cooperate with
one another in (i) determining which filings are required to be made prior to
the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from
governmental or regulatory authorities of the United States, the several states,
third party secured and unsecured lenders and rating agencies in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations; (b) use
all reasonable efforts to obtain in writing any consents required from third
parties in form reasonably satisfactory to STH and PMCT necessary to effectuate
the Merger; and (c) use all reasonable efforts to take, or cause to be taken,
all other action and do, or cause to be done, all other things necessary, proper
or appropriate to consummate and make effective the transactions contemplated by
this Agreement. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purpose of this Agreement, the proper
officers and directors or trust managers of PMCT and STH shall take all such
necessary action.
8.7 Inspection of Records. From the date hereof to the Effective Time,
each of STH and PMCT shall allow all designated officers, attorneys, accountants
and other representatives of the other access at all reasonable times to the
records and files, correspondence, audits and properties, as well as to all
information relating to commitments, contracts, titles and financial position,
or otherwise pertaining to the business and affairs of STH and PMCT and their
respective Subsidiaries.
35
8.8 Publicity. The initial press release relating to this Agreement
shall be a joint release and thereafter STH and PMCT shall, subject to their
respective legal obligations (including requirements of stock exchanges and
other similar regulatory bodies), consult with each other, and use reasonable
efforts to agree upon the text of any press release, before issuing any such
press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national securities exchange
with respect thereto.
8.9 Registration Statement. As soon as practicable following the date
of this Agreement, PMCT and STH shall prepare and file with the SEC a
preliminary proxy statement (the "Proxy Statement") in form and substance
satisfactory to each of PMCT and STH, and PMCT shall prepare and file with the
SEC a Registration Statement on Form S-4 (the "Registration Statement"), in
which the Proxy Statement will be included as a prospectus. Each of PMCT and STH
shall use its best efforts to (a) respond to any comments of the SEC and (b)
have the Registration Statement declared effective under the Securities Act and
the rules and regulations promulgated thereunder as promptly as practicable
after such filing and to keep the Registration Statement effective as long as is
reasonably necessary to consummate the Merger. Each party will notify the other
promptly of the receipt of any comments from the SEC and of any request by the
SEC for amendments or supplements to the Registration Statement or the Proxy
Statement or for additional information and will supply the other with copies of
all correspondence between such party or any of its representatives and the SEC,
with respect to the Registration Statement or the Proxy Statement. Whenever any
event occurs which is required to be set forth in an amendment or supplement to
the Registration Statement or the Proxy Statement, PMCT or STH, as the case may
be, shall promptly inform the other of such occurrence and cooperate in filing
with the SEC and/or mailing to the shareholders of PMCT and the stockholders of
STH such amendment or supplement. PMCT shall use its best efforts to obtain,
prior to the effective date of the Registration Statement, all necessary state
securities law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement and will pay all expenses incident
thereto. PMCT agrees the Proxy Statement and each amendment or supplement
thereto, at the time of mailing thereof and at the time of the respective
meetings of shareholders of PMCT and STH, or, in the case of the Registration
Statement and each amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by PMCT in reliance upon and in conformity with written
information concerning STH furnished to PMCT by STH specifically for use in the
Proxy Statement. STH agrees the written information provided by it specifically
for inclusion in the Proxy Statement and each amendment or supplement thereto,
at the time of mailing thereof and at the time of the respective meetings of
shareholders of PMCT and STH, or, in the case of written information provided by
STH specifically for inclusion in the Registration Statement or any amendments
or supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. PMCT will
advise STH, promptly after it receives notice thereof, of the
36
time when the Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the PMCT Common Shares issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
8.10 Listing Application. PMCT shall promptly prepare and submit to the
American Stock Exchange ("AMEX") a listing application covering the PMCT Common
Shares issuable in the Merger, and shall use its reasonable efforts to obtain,
prior to the Effective Time, approval for the listing of such PMCT Common
Shares, subject to official notice of issuance.
8.11 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performances set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Merger.
8.12 Expenses. Subject to Section 10.5, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby,
other than those associated with the filing, printing and distribution of the
Proxy Statement and the Registration Statement which shall be borne by PMCT,
shall be paid by the party incurring such expenses.
8.13 Governance. PMCT's Board of Trust Managers shall take all action
necessary to cause the full Board of Trust Managers of PMCT at the Effective
Time to take all such action necessary to cause Paul J. Schulte to be selected
and elected as a trust manager of PMCT for a term expiring at the 1999 annual
meeting of shareholders, following the Effective Time, to fill one new position
to be created in connection with the transaction contemplated hereby; provided
that, notwithstanding the foregoing, the shareholders of PMCT at the 1999 annual
meeting of shareholders shall vote on the election of Mr. Schulte for a one year
term. If, prior to the Effective Time, such person shall decline or be unable to
serve as a trust manager, STH shall designate another person to serve in such
person's stead, which person shall be reasonably acceptable to PMCT.
8.14 Reorganization. From and after the date hereof and until the
Effective Time, neither PMCT nor STH nor any of their respective Subsidiaries or
other affiliates shall (a) knowingly take any action, or knowingly fail to take
any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code; or (b) enter
into any contract, agreement, commitment or arrangement with respect to the
foregoing. Following the Effective Time, PMCT shall not take any action that
would not jeopardize the characterization of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
8.15 Third Party Consents. PMCT and STH each shall take all necessary
corporate and other action and will use its commercially reasonable efforts to
obtain the consents and applicable approvals from third parties that may be
required to enable it to carry out the transactions contemplated by this
Agreement.
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8.16 Efforts to Fulfill Conditions. PMCT and STH each shall use
commercially reasonable efforts to insure that all conditions precedent to its
obligations hereunder are fulfilled at or prior to the Closing.
8.17 Representations, Warranties and Conditions Prior to Closing.
Neither PMCT nor STH shall voluntarily take any action that would reasonably be
expected to cause its representations and warranties contained in this Agreement
not to be true and correct on and as of the Closing Date in all material
respects. Prior to Closing, PMCT and STH each shall promptly notify the other in
writing (a) if any representation or warranty contained in this Agreement is
discovered to or becomes untrue in any material respect or (b) if PMCT or STH
fails to perform or comply in any material respect with any of its covenants or
agreements contained in this Agreement or it is reasonably expected that it will
be unable to perform or comply in any material respect with any of its covenants
or agreements contained in this Agreement.
8.18 Cooperation of the Parties. PMCT and STH each will cooperate with
the other in supplying such information as may be reasonably requested by the
other in connection with obtaining consents or approvals to the transactions
contemplated by this Agreement.
8.19 Tax Election. PMCT agrees to timely file a Notice 88-19 Election
with respect to built-in gain assets acquired by PMCT as a result of the Merger,
which election will provide that PMCT will be taxed upon built-in gain with
respect to the sale of any such property within ten years after the Closing Date
to the extent the fair market value of such property at Closing exceeds the
adjusted tax basis of such property at Closing.
8.20 Directors and Officers Insurance.
(a) PMCT shall provide, or shall cause the Surviving Entity to provide,
STH's current covered insureds continuation coverage under STH's existing
Directors and Officers Liability and Employment Practice Liability insurance and
indemnification policy (including any fiduciary liability policy) to provide
coverage with respect to any claims made during the six-year period following
the Effective Time for events occurring prior to the Effective Time (the "D&O
Insurance") or, if substantially equivalent insurance coverage is unavailable,
the best available coverage and PMCT shall pay the deductible amounts associated
with claims made under such D&O Insurance; provided, however, that the Surviving
Entity shall not be required to pay one-time premium for the D&O Insurance in
excess of $125,000, but if such annual premium would but for this proviso exceed
such amount, the PMCT shall purchase as much coverage as possible for such
amount.
(b) The provisions of this Section 8.20 are intended to be for the
benefit of, and shall be enforceable by, each such covered insured, and such
covered insured's heirs and personal representatives and shall be binding on all
successors and assigns of PMCT.
8.21 PMCT Earnings and Profits Dividend. To the extent the Earnings and
Profits Amount has been reduced as provided in the definition thereof, PMCT
hereby agrees to pay to
38
its shareholders of record as of a date after Closing, on a pro rata basis, the
amount by which the Earnings and Profits Amount was so reduced on or prior to
December 31, 1998. Such dividend payment shall be in addition to PMCT's regular
quarterly dividend for such period.
ARTICLE 9
CONDITIONS
9.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby
shall have been approved in the manner required by the Declaration of
Trust of PMCT and the Certificate of Incorporation and Bylaws of STH,
and by applicable law or by applicable regulations of any stock
exchange or other regulatory body and by the holders of the issued and
outstanding shares of capital stock of STH and PMCT entitled to vote
thereon.
(b) Neither of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which
prohibits the consummation of the transactions contemplated by this
Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any
such injunction lifted.
(c) The Registration Statement shall have become effective and
all necessary state securities law or "Blue Sky" permits or approvals
required to carry out the transactions contemplated by this Agreement
shall have been obtained and no stop order with respect to any of the
foregoing shall be in effect.
(d) PMCT shall have obtained the approval for the listing of
the PMCT Common Shares issuable in the Merger on the AMEX, subject to
official notice of issuance.
(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board,
other regulatory body or third parties required in connection with the
execution, delivery and performance of this Agreement shall have been
obtained or made, except for filings in connection with the Merger and
any other documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a
material adverse effect on the business, results of operations or
financial condition of PMCT and STH (and their respective
Subsidiaries), taken as a whole, following the Effective Time.
39
9.2 Conditions to Obligations of STH to Effect the Merger. The
obligation of STH to effect the Merger shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions, unless waived by STH:
(a) PMCT shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and
the representations and warranties of PMCT contained in this Agreement
shall be true and correct in all material respects as of the Closing
Date as if made on the Closing Date, except representations and
warranties made as of a specific date (which shall be true and correct
in all material respects as of such date), and STH shall have received
a certificate of the President or an Executive Vice President of PMCT,
dated the Closing Date, certifying to such effect.
(b) STH shall have received the opinion of Winstead Sechrest &
Minick P.C. of Dallas, Texas ("PMCT's Counsel"), dated the Closing
Date, to the effect that commencing with its taxable year ended
December 31, 1994, PMCT was organized and has operated in conformity
with the requirements for qualification as a REIT under the Code and
that, after giving effect to the Merger, PMCT's proposed method of
operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code (with customary
exceptions, assumptions and qualifications and based upon customary
representations) and to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, that STH and PMCT will each be a party to
that reorganization within the meaning of Section 368(a) of the Code
and as to such other customary matters as STH may reasonably request,
such opinion to be reasonably satisfactory to STH. In rendering its
opinion, PMCT's Counsel shall be entitled to rely as to any factual
matter upon certificates given by executive officers of STH and PMCT.
(c) From the date of the Agreement through the Effective Time,
there shall not have occurred any change in the financial condition,
business or operations of PMCT and the PMCT Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have a PMCT
Material Adverse Effect.
(d) The opinion of ABN AMRO Incorporated addressed to the
Board of Directors of STH that the consideration to be received by the
stockholders of STH is fair, from a financial point of view, shall not
have been withdrawn or materially modified.
(e) PMCT shall have entered into the Super 8 Assignment
Agreement.
9.3 Conditions to Obligation of PMCT to Effect the Merger. The
obligations of PMCT to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by PMCT:
(a) STH shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and
the representations and warranties of STH contained in this Agreement
shall be true and correct in all material respects as of the Closing
Date as if made on the Closing Date and PMCT shall have
40
received a certificate of the Chief Executive Officer, President or an
Executive Vice President of STH dated the Closing Date, certifying to
such effect.
(b) PMCT shall have received the opinion of PMCT's Counsel,
dated the Closing Date, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, that PMCT and STH will each be a party
to that reorganization within the meaning of Section 368(a) of the
Code. PMCT shall also have received an opinion from McGrath, North,
Mullin & Kratz, P.C. ("STH's Counsel") as to such customary matters as
PMCT may reasonably request, such opinion to be reasonably satisfactory
to PMCT. In rendering its opinion, STH's Counsel shall be entitled to
rely as to any factual matter upon certificates given by executive
officers of PMCT and STH.
(c) From the date of this Agreement through the Effective
Time, there shall not have occurred any change in the financial
condition, business or operations of STH and the STH Subsidiaries,
taken as a whole, that would have or would be reasonably likely to have
an STH Material Adverse Effect.
(d) Each "affiliate" of STH (within the meaning of the
Securities Laws) listed on Exhibit 9.3(d) hereto shall have delivered
to PMCT a written agreement to the effect that such person will not
offer to sell, sell or otherwise dispose of any of the PMCT Common
Shares issued in the Merger, except, in each case, pursuant to an
effective registration statement or in compliance with Rule 145, as
amended from time to time, or in a transaction which, in the opinion of
legal counsel reasonably satisfactory to PMCT, is exempt from the
registration requirements of the Securities Act and that the
certificates representing the PMCT shares issued to him or her in the
Merger may bear a legend to such effect.
(e) STH and Supertel Management shall have entered into the
STH Ancillary Documents.
(f) The opinion of J.C. Bradford & Co. addressed to the Board
of Trust Managers of PMCT that the Exchange Ratio is fair, from a
financial point of view, to PMCT and the holders of PMCT Common Shares,
shall not have been withdrawn or materially modified.
ARTICLE 10
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval of this Agreement by the shareholders of STH or PMCT or by
the mutual written consent of PMCT and STH, with the prior approval of their
Boards of Trust Managers or Directors, respectively.
41
10.2 Termination by Either PMCT or STH. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of STH or the Board of Trust Managers of PMCT if (a) the Merger shall not have
been consummated by November 30, 1998, (b) a meeting of STH's stockholders shall
have been duly convened and held and the approval of STH's stockholders required
by Section 9.1(a) shall not have been obtained at such meeting or at any
adjournment thereof, (c) a meeting of PMCT's shareholders shall have been duly
convened and held and the approval of PMCT's shareholders required by Section
9.1(a) shall not have been obtained at such meeting or at any adjournment
thereof, (d) PMCT or STH elects to terminate this Agreement pursuant to Section
4.1(a), or (e) a United States federal or state court of competent jurisdiction
or United States federal or state governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable, provided that the party
seeking to terminate this Agreement pursuant to this clause (e) shall have used
commercially reasonable efforts to remove such order, decree, ruling or
injunction, and provided, in the case of a termination pursuant to clause (a)
above, that the terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the occurrence of the failure referred to in said
clause. The notice of termination shall include the reasons, if any, for such
termination and shall be considered Confidential Material under Section 11.6.
10.3 Termination by STH. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the stockholders of STH referred to in Section
9.1(a), by action of the Board of Directors of STH, if (a) in the exercise of
its good faith judgment as to its fiduciary duties to its stockholders imposed
by law, as advised by counsel, the Board of Directors of STH determines that
such termination is required by reason of an STH Acquisition Proposal being
made, (b) the Board of Trust Managers of PMCT withdraws, materially modifies or
changes in a manner materially adverse to STH its recommendations to PMCT's
shareholders of this Agreement or the Merger, (c) the Board of Trust Managers of
PMCT postpones the date scheduled for the meeting of shareholders of PMCT to
approve this Agreement and the transactions contemplated hereby beyond October
31, 1998 or fails to set a date for such meeting by such date, except with the
written consent of STH, (d) there has been a breach by PMCT of any
representation or warranty contained in this Agreement which would have or would
be reasonably likely to have a PMCT Material Adverse Effect, which breach is not
curable by October 31, 1998, (e) there has been material breach of any of the
covenants or agreements set forth in this Agreement on the part of PMCT, which
breach is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by STH to PMCT, or (f) the per share Earnings and
Profits Dividend payable to each holder of STH Common Stock at Closing would be
less than $3.00 per share.
10.4 Termination by PMCT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the shareholders of PMCT referred to in Section 9.1(a), by
action of the Board of Trust Managers of PMCT, if (a) the Board of Directors of
STH withdraws, materially modifies or changes in a manner materially adverse to
PMCT its recommendation to STH's stockholders of this
42
Agreement or the Merger, (b) the Board of Directors of STH postpones the date
scheduled for the meeting of stockholders of STH to approve this Agreement and
the transactions contemplated hereby beyond October 31, 1998 or fails to set a
date for such meeting by such date, except with the written consent of PMCT, (c)
there has been a breach by STH of any representation or warranty contained in
this Agreement which would have or would be reasonably likely to have an STH
Material Adverse Effect, which breach is not curable by October 31, 1998, (d)
there has been a material breach of any of the covenants or agreements set forth
in this Agreement on the part of STH, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by PMCT to STH, or (e) the aggregate amount of Indebtedness is greater
than $73 million, unless such excess is the result of general market conditions.
10.5 Effect of Termination and Abandonment.
(a)(i) If an election to terminate this Agreement is made by PMCT
pursuant to Section 10.2(b) or by STH pursuant to Section 10.3(a), and
an Acquisition Proposal relating to STH shall have been made and,
within one year from the date of such termination, STH consummates that
STH Acquisition Proposal or enters into an agreement to consummate an
STH Acquisition Proposal which is subsequently consummated within 18
months from the date of such termination, STH shall pay to PMCT,
provided PMCT was not in material breach of its obligations hereunder
at the time of such termination, as liquidated damages and not as a
penalty or forfeiture, an amount equal to the lesser of (A) $1,200,000
(the "Liquidated Damages Amount") and (B) the maximum amount permitted
as liquidated damages pursuant to applicable Delaware law, provided
that the Liquidated Damages Amount shall not exceed the sum of (1) the
maximum amount that can be paid to PMCT without causing PMCT to fail to
meet the requirements of Sections 856(c)(2) and (3) of the Code
determined as if the payment of such amount did not constitute income
described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code
("Qualifying Income"), as determined by PMCT's certified public
accountants, plus (2) an amount equal to the Liquidated Damages Amount
less the amount payable under clause (1) above in the event PMCT
receives a letter from PMCT's Counsel indicating that PMCT has received
a ruling from the IRS to the effect that Liquidated Damages Amount
payments constitute Qualifying Income. In addition to the Liquidated
Damages Amount, PMCT shall be entitled to receive from STH (or its
successor in interest) up to $700,000, the first $400,000 of which will
consist of an unaccountable reimbursement of PMCT's costs and expenses
and the remaining $300,000 will be for reimbursement of documented
out-of-pocket costs and expenses in connection with this Agreement and
the transactions contemplated hereby incurred by PMCT.
(ii) If an election to terminate this Agreement is made by STH
pursuant to Section 10.2(c) or by PMCT pursuant to Section 10.4(a), and
an Acquisition Proposal relating to PMCT shall have been made and,
within one year from the date of such termination, PMCT consummates
that PMCT Acquisition Proposal or enters into an agreement or
consummate a PMCT Acquisition Proposal which is subsequently
consummated within 18 months from the date of such termination, PMCT
shall pay to STH, provided STH was not in material breach of its
obligations hereunder at the time
43
of such termination, as liquidated damages and not as a penalty or
forfeiture, the Liquidated Damages Amount. In addition to the
Liquidated Damages Amount, STH shall be entitled to receive from PMCT
(or its successor in interest) up to $700,000, the first $400,000 of
which will constitute of an unaccountable reimbursement of STH's costs
and expenses and the remaining $300,000 will be for reimbursement of
documented out-of-pocket costs and expenses in connection with this
Agreement and the transactions contemplated hereby incurred by STH.
(iii) The payments to which PMCT and STH are entitled under
this Section 10.5(a) shall be their sole remedy with respect to the
termination of this Agreement under the circumstances contemplated by
this Section 10.5(a).
(b) (i) If an election to terminate this Agreement is made by PMCT
pursuant to (A) Section 10.2(b) (except as a result of a default or breach
hereunder by PMCT) and no Acquisition Proposal with respect to STH is in
existence at such time or (B) Section 10.4(e), PMCT shall be entitled to receive
from STH all documented out-of-pocket costs and expenses in connection with this
Agreement and the transactions contemplated hereby (the "Expenses") incurred by
PMCT, up to a maximum of $700,000. If an election to terminate this Agreement is
made by STH pursuant to Section 10.3(f), PMCT shall be entitled to receive from
STH all Expenses incurred by PMCT, up to a maximum of $300,000. The payments to
which PMCT is entitled under this paragraph shall be its sole remedy with
respect to the termination of the Agreement under the circumstances contemplated
in this paragraph.
(ii) If an election to terminate this Agreement is made by STH
pursuant to Section 10.2(c) (except as a result of a default or breach hereunder
by STH) and no Acquisition Proposal with respect to PMCT is in existence at such
time, STH shall be entitled to recover from PMCT all Expenses incurred by STH,
up to a maximum of $700,000. The payment to which STH is entitled under this
paragraph shall be its sole remedy for termination of the Agreement in such
circumstances.
(c) If this Agreement is terminated pursuant to Section 10.3(d),
Section 10.3(e), Section 10.4(c) or Section 10.4(d), the non-terminating party
shall, provided that the terminating party was not in material breach of its
obligations hereunder at the time of such termination, pay the terminating party
all Expenses, up to a maximum of $700,000, incurred by it and the
non-terminating party shall remain liable to the terminating party for its
breach.
(d) The payment of the Liquidated Damages Amount or any of the Expenses
pursuant to this Article 10 shall be by wire transfer or bank check, within 10
days of the date of the event that triggers the payment requirements set forth
in this Article 10.
(e) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article 10, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
10.5 and Sections 8.8 and 8.12 and except for the provisions of Sections 11.4,
11.5, 11.6, 11.7, 11.8, 11.9, 11.11, 11.14, 11.15 and 11.17. In the event PMCT
is required to file suit to seek all or a portion of such Liquidated Damages
44
Amount, and it ultimately succeeds, it shall be entitled to all expenses,
including attorney's fees and expenses, which it has incurred in enforcing its
right hereunder.
10.6 Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors or Trust Managers, as
the case may be, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 11
GENERAL PROVISIONS
11.1 Certain Definitions. Except as may otherwise be set forth in this
Agreement, capitalized terms used but not defined herein shall have the meanings
set forth in the glossary attached hereto as "Appendix A".
11.2 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Article 4, Sections 8.2,
8.6, 8.13, 8.14, 8.19, 8.20 and 8.21, and this Article 11 shall survive the
Merger.
11.3 Notices. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to PMCT:
PMC Commercial Trust
Department 101
17290 Preston Road, 3rd Floor
Dallas, Texas 75252
Facsimile: (972) 349-3265
with a copy to:
Mr. Lance B. Rosemore
President
PMC Commercial Trust
17290 Preston Road, 3rd Floor
Dallas, Texas 75252
45
and with a copy (which shall not constitute notice) to:
Winstead Sechrest & Minick P.C.
1201 Elm Street
5400 Renaissance Tower
Dallas, Texas 75270
Attention: Kenneth L. Betts, Esq.
Facsimile: (214) 745-5390
If to STH:
Mr. Paul J. Schulte
Chief Executive Officer
Supertel Hospitality, Inc.
309 North 5th Street
Norfolk, Nebraska 68701
Facsimile: (402) 371-4229
with a copy (which shall not constitute notice) to:
McGrath, North, Mullin & Kratz, P.C.
One Central Park Plaza, Suite 1400
222 South Fifteenth Street
Omaha, Nebraska 68102
Attention: David L. Hefflinger, Esq.
Facsimile: (402) 341-0216
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
11.4 Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except as provided in the
following sentence, nothing in this Agreement, expressed or implied, is intended
to confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The provisions
of Article 4 and Sections 7.12, 7.13 and 7.14 (collectively, the "Third Party
Provisions") shall benefit the persons identified therein.
11.5 Entire Agreement. This Agreement, the Exhibits, the Schedules, the
STH Ancillary Agreements, the PMCT Ancillary Agreements and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the
46
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
11.6 Confidentiality. (a) As used herein, "Confidential Material"
means, with respect to either party hereto (the "Providing Party"), all
information (written or oral) furnished (whether before or after the date
hereof) by the Providing Party and its trust managers, directors, officers,
employees, affiliates or representatives of advisors, including counsel, lenders
and financial advisors (collectively, the "Providing Party Representatives") to
the other party hereto (the "Receiving Party") or such Receiving Party's
directors, officers, employees, affiliates or representatives of advisors,
including counsel, lenders and financial advisors or the Receiving Party's
potential sources of financing for the transactions contemplated by this
Agreement (collectively "the Receiving Party Representatives") and all analyses,
compilations, forecasts and other studies or other documents prepared by the
Providing Party or the Providing Party Representatives in connection with its or
their review of the transactions contemplated by this Agreement which contain or
reflect such information. The term "Confidential Material" does not include,
however, information which (i) at the time of disclosure or thereafter is
generally available to and known by the public other than as a result of a
disclosure directly or indirectly by the Receiving Party or the Receiving Party
Representatives in violation of this Agreement, (ii) at the time of disclosure
was available on a nonconfidential basis from a source other than the Providing
Party or the Providing Party Representatives, providing that such source is not
and was not bound by a confidentiality agreement with the Providing Party, (iii)
was known by the Receiving Party prior to receiving the Confidential Material
from the Providing Party or has been independently acquired or developed by the
Receiving Party without violating any of its obligations under this Agreement,
or (iv) is contained in any STH Reports or PMCT Reports or the Proxy
Statement/Prospectus.
(b) Subject to paragraph (c) below or except as required by law, the
Confidential Material will be kept confidential and will not, without the prior
written consent of the Providing Party, be disclosed by the Receiving Party or
its Representatives, in whole or in part and will not be used by the Receiving
Party or its Representatives, directly or indirectly, for any purpose other than
in connection with this Agreement, the Merger or the evaluating, negotiating or
advising with respect to a transaction contemplated herein. Moreover, each
Receiving Party agrees to transmit Confidential Material to its Representatives
only if and to the extent that such Representatives need to know the
Confidential Material for purposes of such transaction and are informed by such
Receiving Party of the confidential nature of the Confidential Material and of
the terms of this Section.
(c) In the event either Receiving Party, its Representatives or anyone
to whom such Receiving Party or its Representatives supply the Confidential
Material, are requested or required (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand, any
informal or formal investigation by any government or governmental agency or
authority or otherwise in connection with legal processes) to disclose any
Confidential Material, such Receiving Party agrees (i) to immediately notify the
Providing Party of the existence, terms and circumstances surrounding such a
request, (ii) to consult with the Providing Party on the advisability of taking
legally available steps to resist or narrow such request and (iii) if disclosure
of such information is required, to furnish only that portion of the
47
Confidential Material which, in the opinion of such Receiving Party's counsel,
such Receiving Party is legally compelled to disclose and to cooperate with any
action by the Providing Party to obtain an appropriate protective order or
otherwise reliable assurances that confidential treatment will be accorded the
Confidential Material (it being agreed that the Providing Party shall reimburse
the Receiving Party for all reasonable out-of-pocket expenses incurred by the
Receiving Party in connection with such cooperation).
(d) In the event of the termination of this Agreement in accordance
with its terms, promptly upon request from either Providing Party, the Receiving
Party shall, except to the extent prevented by law, redeliver to the Providing
Party or destroy all tangible Confidential Material and will not retain any
copies, extracts or other reproductions thereof in whole or in part. Any such
destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, each Receiving Party and one Representative designated by each
Receiving Party shall be permitted to retain one permanent file copy of each
document constituting Confidential Material.
(e) Each party hereto further agrees that if this Agreement is
terminated in accordance with its terms, for a period of one year from the date
of termination (i) it will not offer to hire or hire any person currently or
formerly employed by the other party with whom such party has had contact prior
hereto other than persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and (ii) neither
it nor its Affiliates shall directly or indirectly, (A) (1) solicit, seek or
offer to effect or effect, (2) negotiate with or provide any information to the
Board of Directors or Trust Managers of the other party, any director or officer
of the other party or any stockholder of the other party with respect to, (3)
make any statement or proposal, whether written or oral, either alone or in
concert with others, to the Board of Directors or Trust Managers of the other
party, any trust manager, director or officer of the other party or any
stockholder of the other party or any other person with respect to, or (4) make
any public announcement (except as required by law in respect of actions
permitted hereby) or proposal or offer whatsoever (including, but not limited
to, any "solicitation" of "proxies" as such terms are defined or used in
Regulation 14A of the Exchange Act) with respect to, (u) any form of business
combination or similar or other extraordinary transaction involving the other
party or any Affiliate thereof, including, without limitation, a merger, tender
or exchange offer or liquidation of the other party's assets, (v) any form of
restructuring, recapitalization or similar transaction with respect to the other
party or any Affiliate thereto, (w) any purchase of any securities or assets, or
rights or options to acquire any securities or assets (through purchase,
exchange, conversion or otherwise), of the other party or any Affiliate thereof,
(x) any proposal to seek representation on the Board of Directors or Trust
Managers of the other party or otherwise to seek to control or influence the
management, Board of Directors or Trust Managers or policies of the other party
or any Affiliate thereof, (y) any request or proposal to waive, terminate or
amend the provisions of this Section 11.6 or (z) any proposal or other statement
inconsistent with the terms of this Section 11.6 or (B) instigate, encourage,
join, act in concert with or assist (including, but not limited to, providing or
assisting in any way in the obtaining of financing for, or acting as a joint or
co-bidder for the other party with) any third party to do any of the foregoing,
unless and until such party has received the prior written invitation or
approval of a majority of the Board of Directors or Trust Managers of the other
party to do any of the foregoing; provided that without such invitation or
approval,
48
either party may at any time, on a confidential non-public basis, submit to the
Chief Executive Officer or, if none, the President of the other party a proposal
to (a) amend any of the provisions of this Section 11.6(e) or (b) effect a
business combination or other extraordinary transaction with the other party
providing for the acquisition of all or substantially all of the assets or the
securities of the other party, including, without limitation, a merger, tender
offer or exchange offer. Each party hereto agrees that it will not agree with
any third party to waive its rights under this Section 11.6.
11.7 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors or Trust Managers, at any
time before or after approval of this Agreement or any other matter presented in
connection with the Merger by the shareholders of STH and PMCT, but after any
such shareholder approval, no amendment shall be made which by law requires the
further approval of shareholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
11.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without regard to its rules of
conflict of laws.
11.9 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
11.10 Headings. Heading of the Articles and Sections of this Agreement
are for the convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
11.11 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
11.12 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
11.13 Incorporation. The Schedules and all Exhibits attached hereto and
thereto and referred to herein and therein are hereby incorporated herein and
made a part hereof for all purposes as if fully set forth herein.
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11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
11.15 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any Texas Court, this being in
addition to any other remedy to which they are entitled at law or in equity.
11.16 Subsidiaries. As used in this Agreement, the word "Subsidiary"
when used with respect to any party means any corporation, partnership, joint
venture, business trust or other entity, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization.
11.17 Non-Recourse. Neither the officers, trust managers nor
shareholders of PMCT shall be personally bound or have any personal liability
hereunder. STH shall look solely to the assets of PMCT for satisfaction of any
liability of PMCT with respect to this Agreement and the Ancillary Agreements to
which it is a party. STH will not seek recourse or commence any action against
any of the shareholders of PMCT or any of their personal assets, and will not
commence any action for money judgments against any of the directors or officers
of PMCT or seek recourse against any of their personal assets, for the
performance or payment of any obligation of PMCT hereunder or thereunder.
Neither the directors, officers nor shareholders of STH shall be personally
bound or have any personal liability hereunder. PMCT shall look solely to the
assets of STH for satisfaction of any liability of STH with respect to this
Agreement and the Ancillary Agreements to which it is a party. PMCT will not
seek recourse or commence any action against any of the stockholders of STH or
any of their personal assets, and will not commence any action for money
judgments against any of the directors or officers of STH or seek recourse
against any of their personal assets, for the performance or payment of any
obligation of STH hereunder or thereunder.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
ATTEST: PMC COMMERCIAL TRUST
By: /s/ Andrew S. Rosemore By: /s/ Lance B. Rosemore
Andrew S. Rosemore Lance B. Rosemore
Executive Vice President and President and Chief Executive
Chief Operating Officer Officer
ATTEST: SUPERTEL HOSPITALITY, INC.
By: /s/ Steve H. Borgmann By: /s/ Paul J. Schulte
Steve H. Borgmann Paul J. Schulte
Executive Vice President and President and Chief Executive
Chief Operating Officer Officer
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