AGREEMENT AND PLAN OF MERGER
among
BHAC CAPITAL IV, L.L.C.,
BHAC ACQUISITION IV, INC.
and
Extended Stay America, Inc.
Dated as of March 5, 2004
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.01 The Merger......................................................1
SECTION 1.02 Closing.........................................................1
SECTION 1.03 Effective Time..................................................2
SECTION 1.04 Effect of the Merger............................................2
SECTION 1.05 Certificate of Incorporation; Bylaws............................2
SECTION 1.06 Directors and Officers..........................................2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 Conversion of Securities........................................2
SECTION 2.02 Exchange of Certificates........................................3
SECTION 2.03 Stock Transfer Books............................................5
SECTION 2.04 Company Stock Options...........................................5
SECTION 2.05 Dissenting Shares...............................................5
SECTION 2.06 Debt Offers.....................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization and Qualification; Subsidiaries.....................8
SECTION 3.02 Certificate of Incorporation and Bylaws..........................9
SECTION 3.03 Capitalization...................................................9
SECTION 3.04 Authority Relative to This Agreement............................10
SECTION 3.05 No Conflict; Required Filings and Consents......................10
SECTION 3.06 Permits; Compliance.............................................11
SECTION 3.07 SEC Filings; Financial Statements; Undisclosed Liabilities......12
SECTION 3.08 Information Supplied............................................13
SECTION 3.09 Absence of Certain Changes or Events............................13
SECTION 3.10 Absence of Litigation...........................................14
SECTION 3.11 Employee Benefit Plans..........................................14
SECTION 3.12 Labor and Employment Matters....................................16
SECTION 3.13 Real Property; Title to Assets..................................16
SECTION 3.14 Intellectual Property...........................................17
SECTION 3.15 Taxes...........................................................18
SECTION 3.16 Environmental Matters...........................................20
SECTION 3.17 Material Contracts..............................................21
SECTION 3.18 Insurance.......................................................23
SECTION 3.19 Board Approval; Vote Required...................................23
SECTION 3.20 Interested Party Transactions...................................24
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SECTION 3.21 Opinion of Financial Advisor....................................24
SECTION 3.22 Brokers.........................................................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.01 Corporate Organization..........................................24
SECTION 4.02 Certificate of Incorporation and Bylaws.........................24
SECTION 4.03 Authority Relative to This Agreement............................24
SECTION 4.04 No Conflict; Required Filings and Consents......................25
SECTION 4.05 Information Supplied............................................25
SECTION 4.06 Absence of Litigation...........................................26
SECTION 4.07 Operations of Merger Sub........................................26
SECTION 4.08 Financing.......................................................26
SECTION 4.09 Guarantee.......................................................26
SECTION 4.10 Brokers.........................................................27
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending the Merger...........27
SECTION 5.02 Conduct of Business by Parent and Merger Sub Pending the
Merger..........................................................30
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Proxy Statement.................................................30
SECTION 6.02 Company Stockholders' Meeting...................................31
SECTION 6.03 Access to Information; Confidentiality..........................31
SECTION 6.04 No Solicitation of Transactions.................................32
SECTION 6.05 Directors' and Officers' Indemnification and Insurance..........34
SECTION 6.06 Employee Benefits Matters.......................................35
SECTION 6.07 Notification of Certain Matters.................................36
SECTION 6.08 Financing.......................................................37
SECTION 6.09 Further Action; Reasonable Best Efforts.........................39
SECTION 6.10 Obligations of Parent and Merger Sub............................39
SECTION 6.11 Public Announcements............................................40
SECTION 6.12 Transfer Taxes..................................................40
SECTION 6.13 Resignations....................................................40
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Obligations of Each Party.....................40
SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub..........40
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SECTION 7.03 Conditions to the Obligations of the Company....................42
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination.....................................................42
SECTION 8.02 Effect of Termination...........................................44
SECTION 8.03 Fees and Expenses...............................................44
SECTION 8.04 Amendment.......................................................46
SECTION 8.05 Waiver..........................................................46
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties and Agreements......46
SECTION 9.02 Notices.........................................................47
SECTION 9.03 Certain Definitions.............................................48
SECTION 9.04 Severability....................................................51
SECTION 9.05 Disclaimer of Other Representations and Warranties..............51
SECTION 9.06 Entire Agreement; Assignment....................................52
SECTION 9.07 Parties in Interest.............................................52
SECTION 9.08 Remedies; Specific Performance..................................52
SECTION 9.09 Governing Law...................................................52
SECTION 9.10 Waiver of Jury Trial............................................53
SECTION 9.11 Headings........................................................53
SECTION 9.12 Counterparts....................................................53
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AGREEMENT AND PLAN OF MERGER, dated as of March 5, 2004 (this
"Agreement"), among BHAC Capital IV, L.L.C., a Delaware limited liability
company ("Parent"), BHAC Acquisition IV, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Extended Stay America,
Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of each of the Company,
Parent and Merger Sub deem it in the best interests of their respective
stockholders or members, as the case may be, to consummate the merger (the
"Merger"), on the terms and subject to the conditions set forth in this
Agreement, of Merger Sub with and into the Company in which the Company would
become a wholly owned subsidiary of Parent, and such Boards of Directors have
approved this Agreement and declared its advisability (and, in the case of the
Board of Directors of the Company (the "Company Board"), recommended that this
Agreement be adopted by the Company's stockholders);
WHEREAS, as an inducement to Parent and Merger Sub entering into this
Agreement, Parent and certain stockholders of the Company are entering into a
voting agreement simultaneously with the execution and delivery of this
Agreement pursuant to which, among other things, such stockholders have agreed,
subject to the terms thereof, to vote their shares of the Company Common Stock
(as defined below) in favor of the adoption of this Agreement; and
WHEREAS, upon consummation of the Merger, each issued and outstanding
share of common stock, par value $.01 per share, of the Company (the "Company
Common Stock"), will be converted into the right to receive $19.625 per share in
cash, upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the conditions
set forth in Article VII, and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL"), at the Effective Time, Merger Sub shall be
merged with and into the Company. At the Effective Time, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
SECTION 1.02 Closing. Unless this Agreement shall have been terminated
in accordance with Section 8.01, and subject to the satisfaction or waiver of
the conditions set forth in Article VII, the closing of the Merger (the
"Closing") will take place at 11:00 a.m., New York time, on a date to be
specified by the parties, which shall be not later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VII
(other than those that by their terms are to be satisfied or waived at the
Closing), at the offices of Shearman & Sterling
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LLP, 599 Lexington Avenue, New York, New York 10022, unless another time, date
and/or place is agreed to in writing by Parent and the Company.
SECTION 1.03 Effective Time. Upon the terms and subject to the
conditions set forth in this Agreement, as soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall (i) file a certificate of merger (the "Certificate of Merger") in
such form as is required by, and executed and acknowledged in accordance with,
the relevant provisions of the DGCL and (ii) make all other filings or
recordings required under the DGCL to effect the Merger. The Merger shall become
effective at such date and time as the Certificate of Merger is duly filed with
the Secretary of State of the State of Delaware or at such subsequent date and
time as Parent and the Company shall agree and specify in the Certificate of
Merger. The date and time at which the Merger becomes effective is referred to
in this Agreement as the "Effective Time".
SECTION 1.04 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in Section 259 of the DGCL.
SECTION 1.05 Certificate of Incorporation; Bylaws. (a) At the
Effective Time, the Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and as provided by Law.
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by Law, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
SECTION 1.06 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified or until the earlier of their death,
resignation or removal.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of Company
Common Stock (all issued and outstanding shares of Company Common
Stock being hereinafter collectively referred to as the "Shares")
issued and outstanding immediately prior to the Effective Time (other
than any Shares to be canceled pursuant to Section 2.01(b), Shares
owned by any direct or indirect wholly owned subsidiary of the
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Company and any Dissenting Shares) shall be canceled and shall be
converted automatically into the right to receive $19.625 in cash,
without interest (the "Merger Consideration"), payable upon surrender
in the manner provided in Section 2.02, of the certificate that
formerly evidenced such Share.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. (i)
Each Share held in the treasury of the Company and each Share owned by
Merger Sub, Parent or any direct or indirect wholly owned subsidiary
of Parent immediately prior to the Effective Time shall automatically
be canceled without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(c) Capital Stock of Merger Sub. Each share of common stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become one
validly issued, fully paid and nonassessable share of common stock,
par value $.01 per share, of the Surviving Corporation.
SECTION 2.02 Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time, Parent shall (i) appoint a bank or trust company reasonably
acceptable to the Company (the "Paying Agent"), and (ii) enter into a paying
agent agreement, in form and substance reasonably acceptable to the Company,
with such Paying Agent for the payment of the Merger Consideration in accordance
with this Article II. At the Effective Time, Parent shall deposit, or cause the
Surviving Corporation to deposit, with the Paying Agent, for the benefit of the
holders of Shares, cash in an amount sufficient to pay the aggregate Merger
Consideration required to be paid pursuant to Section 2.01(a) (such cash being
hereinafter referred to as the "Exchange Fund"). The Exchange Fund shall not be
used for any other purpose. The Exchange Fund shall be invested by the Paying
Agent as directed by Parent; provided, however, that such investments shall be
in obligations of or guaranteed by the United States of America or any agency or
instrumentality thereof and backed by the full faith and credit of the United
States of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1 billion (based on the
most recent financial statements of such bank which are then publicly
available). Any net profit resulting from, or interest or income produced by,
such investments shall be payable to the Surviving Corporation.
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Parent shall cause the Paying Agent to mail to each person who
was, at the Effective Time, a holder of record of Shares entitled to receive the
Merger Consideration pursuant to Section 2.01(a): (i) a letter of transmittal
(which shall be in customary form and shall specify that delivery shall be
effected, and risk of loss and title to the certificates evidencing such Shares
(the "Certificates") shall pass, only upon proper delivery of the Certificates
to the Paying Agent) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender to the
Paying Agent of a Certificate for cancellation, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the amount of cash which such holder has the right to
receive in respect of the Shares formerly
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represented by such Certificate pursuant to Section 2.01(a), and the Certificate
so surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Shares that is not registered in the transfer records of the
Company, payment of the Merger Consideration may be made to a person other than
the person in whose name the Certificate so surrendered is registered if the
Certificate representing such Shares shall be properly endorsed or otherwise be
in proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of such Certificate
or establish to the reasonable satisfaction of Parent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
2.02, each Certificate shall be deemed at all times after the Effective Time to
represent only the right to receive upon such surrender the Merger Consideration
to which the holder of such Certificate is entitled pursuant to this Article II.
No interest shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) No Further Rights. From and after the Effective Time, holders of
Certificates shall cease to have any rights as stockholders of the Company,
except as provided herein or by Law.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of Shares for one year after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Shares who have not theretofore complied with this Article II shall thereafter
look only to Parent for, and Parent shall remain liable for, payment of their
claim for the Merger Consideration. Any portion of the Exchange Fund remaining
unclaimed by holders of Shares as of a date which is immediately prior to such
time as such amounts would otherwise escheat to or become property of any
Governmental Authority shall, to the extent permitted by applicable Law, become
the property of Parent free and clear of any claims or interest of any person
previously entitled thereto.
(e) No Liability. None of the Paying Agent, Merger Sub, Parent or the
Surviving Corporation shall be liable to any holder of Shares for any such
Shares (or dividends or distributions with respect thereto), or cash delivered
to a public official pursuant to any abandoned property, escheat or similar Law.
(f) Withholding Rights. Each of the Paying Agent, the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as it is required to deduct and withhold with respect to
such payment under all applicable Tax laws. To the extent that amounts are so
withheld by the Paying Agent, the Surviving Corporation or Parent, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Paying Agent, the Surviving
Corporation or Parent, as the case may be.
(g) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent shall
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pay in respect of such lost, stolen or destroyed Certificate the Merger
Consideration to which the holder thereof is entitled pursuant to Section
2.01(a).
SECTION 2.03 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the holders of Certificates representing
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares, except as otherwise provided in this
Agreement or by Law. On or after the Effective Time, any Certificates presented
to the Paying Agent or Parent for any reason shall be canceled against delivery
of the Merger Consideration to which the holders thereof are entitled pursuant
to Section 2.01(a).
SECTION 2.04 Company Stock Options. (a) Between the date of this
Agreement and the Effective Time, the Company shall take all necessary action
(which action shall be effective as of the Effective Time), including obtaining
the consent of the individual option holders and the adoption of Company Board
resolutions, if necessary, to (i) terminate the Studio Plus Hotels Inc. 1995
Stock Incentive Plan, the Studio Plus Hotels Inc. 1995 Non-Employee Director
Stock Incentive Plan, the Amended and Restated 1995 Employee Stock Option Plan
of the Company, the Amended and Restated 1995 Stock Option Plan for Non-Employee
Directors of the Company, the Amended and Restated 1996 Employee Stock Option
Plan of the Company, the 1997 Employee Stock Option Plan of the Company, the
1998 Employee Stock Option Plan of the Company, and the 2001 Employee Stock
Option Plan of the Company, in each case as amended through the date of this
Agreement (collectively, the "Company Stock Option Plans"), and (ii) cancel, as
of the Effective Time, each option to purchase Shares granted under the Company
Stock Option Plans (each, a "Company Stock Option") that is outstanding and
unexercised, as of the Effective Time (in each case, without the creation of
additional liability to the Company or any Subsidiaries).
(b) Each holder of a Company Stock Option that is outstanding and
unexercised as of the Effective Time and has an exercise price per Share that is
less than the per share Merger Consideration shall (subject to the provisions of
this Section 2.04) be paid by the Surviving Corporation, in exchange for the
cancellation of such Company Stock Option, an amount in cash (subject to any
applicable withholding Taxes) equal to the product of (i) the difference between
the per share Merger Consideration and the applicable exercise price of such
Company Stock Option, and (ii) the aggregate number of Shares issuable upon
exercise of such Company Stock Option (the "Option Payment"). The Surviving
Corporation shall make the Option Payments as promptly as practicable after the
Effective Time. Any such payments shall be subject to all applicable federal,
state and local Tax withholding requirements.
SECTION 2.05 Dissenting Shares. (a) Notwithstanding any provision of
this Agreement to the contrary and to the extent available under the DGCL,
Shares that are outstanding immediately prior to the Effective Time and that are
held by any stockholder who is entitled to demand and properly demands the
appraisal for such Shares (the "Dissenting Shares") pursuant to, and who
complies in all respects with, the provisions of Section 262 of the DGCL
("Section 262") shall not be converted into, or represent the right to receive,
the Merger Consideration. Any such stockholder shall instead be entitled to
receive payment of the fair value of such stockholder's Dissenting Shares in
accordance with the provisions of Section 262;
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provided, however, that all Dissenting Shares held by any stockholder who shall
have failed to perfect or who otherwise shall have withdrawn or lost such
stockholder's rights to appraisal of such Shares under Section 262 shall
thereupon be deemed to have been converted into, and to have become exchangeable
for, as of the Effective Time, the right to receive the Merger Consideration,
without any interest thereon, upon surrender in the manner provided in Section
2.02 of the Certificate or Certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands
received by the Company for appraisal of any Shares, withdrawals of such demands
and any other instruments served pursuant to the DGCL and received by the
Company and (ii) the opportunity to participate in and direct all negotiations
and proceedings with respect to demands for appraisal under the DGCL. The
Company shall not, except with the prior written consent of Parent, make any
payment or agree to make any payment with respect to any demands for appraisal
or offer to settle or settle any such demands.
SECTION 2.06 Debt Offers. (a) The Company shall use its reasonable
best efforts to commence, on the date 14 days prior to the estimated date of
mailing the Proxy Statement or on any other date designated by Parent on at
least five days notice to the Company, offers to purchase, and related consent
solicitations with respect to, all of the outstanding aggregate principal amount
of the Company's: (i) 9.15% Senior Subordinated Notes due 2008 (the "9.15%
Senior Subordinated Notes") on the terms and conditions set forth in Section
2.06(a) of the Company Disclosure Schedule (or as may be agreed between the
Company and Parent) and such other customary terms and conditions as are
reasonably acceptable to Parent and the Company (including the related consent
solicitation, the "9.15% Debt Offer"), and (ii) 9.875% Senior Subordinated Notes
due 2011 the "9.875% Senior Subordinated Notes" and, together with the 9.15%
Senior Subordinated Notes, the "Notes") on the terms and conditions set forth in
Section 2.06(a) of the Company Disclosure Schedule (or as may be agreed between
the Company and Parent) and such other customary terms and conditions as are
reasonably acceptable to Parent and the Company (including the related consent
solicitation, the "9.875% Debt Offer" and, together with the 9.15% Debt Offer,
the "Debt Offers"); provided that (A) this Agreement shall not have been
terminated in accordance with Section 8.01, (B) the Company shall have received
from Parent the completed Offer Documents (as defined below), which shall be in
form and substance reasonably satisfactory to the Company, and (C) at the time
of such commencement, Parent shall have otherwise performed or complied with all
of its agreements and covenants required by this Agreement to be performed on or
prior to the time that the Debt Offers are to be commenced. The Company shall
waive any of the conditions to the Debt Offers (other than that the Merger shall
have been consummated and that there shall be no order or injunction prohibiting
consummation of the Debt Offers) as may be reasonably requested by Parent and
shall not, without the consent of Parent, waive any condition to the Debt Offers
or make any changes to the terms and conditions of the Debt Offers other than as
agreed between Parent and the Company. Notwithstanding the immediately preceding
sentence, the Company need not make any change to the terms and conditions of
the Debt Offers requested by Parent that decreases the price per 9.15% Senior
Subordinated Note or 9.875% Senior Subordinated Note payable in the Debt Offers
or related consent solicitations or imposes conditions to the Debt Offers or
related consent solicitations in addition to those set forth in Section 2.06(a)
of the Company Disclosure Schedule that are materially adverse to holders of the
Notes, unless such change is approved by the Company in writing.
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(b) The Company covenants and agrees that, immediately following the
consent expiration date, assuming the requisite consents are received, it shall
execute supplemental indentures to the indentures governing the Notes, which
supplemental indentures shall implement the amendments set forth in the Offer
Documents and shall become operative immediately prior to the Effective Time,
subject to the terms and conditions of this Agreement (including the conditions
to the Debt Offers). Concurrent with the Effective Time, Parent shall cause the
Surviving Corporation to accept for payment and thereafter promptly pay for the
9.15% Senior Subordinated Notes and the 9.875% Senior Subordinated Notes.
(c) Promptly after the date of this Agreement, Parent shall prepare
all necessary and appropriate documentation in connection with the Debt Offers,
including the offers to purchase, related letters of transmittal and other
related documents (collectively, the "Offer Documents"). Parent and the Company
shall cooperate with each other in the preparation of the Offer Documents. All
mailings to the holders of the Notes in connection with the Debt Offers shall be
subject to the prior review and comment by of the Company and Parent and shall
be reasonably acceptable to each of them. If at any time prior to the completion
of the Debt Offers any information in the Offer Documents should be discovered
by the Company or Parent which should be set forth in an amendment or supplement
to the Offer Documents, so that the Offer Documents shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, the party that
discovers such information shall promptly notify the other party, and an
appropriate amendment or supplement describing such information shall be
disseminated to the holders of the applicable Notes. Notwithstanding anything to
the contrary in this Section 2.06, the Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other applicable Law
to the extent such Laws are applicable in connection with the Debt Offers. To
the extent that the provisions of any applicable Law conflict with this Section
2.06, the Company shall comply with the applicable Law and shall not be deemed
to have breached its obligations hereunder by such compliance.
(d) Parent shall pay the reasonable fees and expenses of any dealer
manager, information agent, depositary or other agent retained in connection
with the Debt Offers, and Parent further agrees to reimburse the Company for all
of its reasonable out-of-pocket costs in connection with the Debt Offers
promptly following incurrence and delivery of reasonable documentation of such
costs. Parent and Merger Sub shall, on a joint and several basis, indemnify and
hold harmless the Company, the Subsidiaries, their respective officers and
directors and each person, if any, who controls the Company within the meaning
of Section 20 of the Exchange Act for and against any and all liabilities,
losses, damages, claims, costs, expenses, interest, awards, judgments and
penalties suffered or incurred by them in connection with the Debt Offers and
the Offer Documents; provided, however, that neither Parent nor Merger Sub shall
have any obligation to indemnify and hold harmless any such party or person to
the extent that any such liabilities, losses, damages, claims, costs, expenses,
interest, awards, judgments and penalties suffered or incurred arises from
disclosure regarding the Company that is determined to have contained a material
misstatement or omission.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Parent and Merger Sub concurrently with the execution and delivery of
this Agreement (the "Company Disclosure Schedule") (provided that disclosure of
any fact or item in any section of the Company Disclosure Schedule shall, should
the existence of such fact or item be relevant to any other section, be deemed
to be disclosed with respect to that other section so long as the relevance of
such disclosure to such other section is reasonably apparent), the Company
hereby represents and warrants to Parent and Merger Sub as follows:
SECTION 3.01 Organization and Qualification; Subsidiaries. (a) Each of
the Company and each subsidiary of the Company (each, a "Subsidiary") is a
corporation or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and has the
requisite corporate power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted. Each of the Company and each Subsidiary is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not reasonably be expected to have a Company
Material Adverse Effect. The term "Company Material Adverse Effect" means any
event, circumstance, development, change or effect that, individually or in the
aggregate with all other events, circumstances, developments, changes and
effects, is materially adverse to the business, operations, assets, condition
(financial or otherwise) or results of operations of the Company and the
Subsidiaries taken as a whole or would reasonably be expected to prevent or
materially delay the consummation of any of the Transactions or prevent or
materially impair or delay the ability of the Company to perform its obligations
hereunder; provided, however, that in no event shall any of the following, alone
or in combination, be deemed to constitute, nor shall any of the following be
taken into account in determining whether there has been, or will be, a "Company
Material Adverse Effect": any event, circumstance, change or effect resulting
from or relating to (i) a change in general economic or financial market
conditions, (ii) a change in industry conditions, (iii) seasonal fluctuations in
the business of the Company and the Subsidiaries, (iv) any acts of terrorism or
war (except to the extent such event, circumstance, change or effect has had a
disproportionate effect on the Company and the Subsidiaries as compared to other
persons in the industry in which the Company and the Subsidiaries conducts their
business), (v) the announcement of the execution of this Agreement or the
pendency or consummation of the Transactions, or (vi) compliance with the terms
of, or the taking of any action required by, this Agreement; and provided,
further, that with respect to the representations and warranties set forth in
Section 3.05, the exceptions set forth in clauses (v) and (vi) will not apply.
(b) A true and complete list of all the Subsidiaries, together with
the jurisdiction of organization of each Subsidiary and the percentage of the
outstanding capital stock of each Subsidiary owned by the Company, each other
Subsidiary and any other person, is set forth in Section 3.01(b) of the Company
Disclosure Schedule.
8
(c) Section 3.01(c) of the Company Disclosure Schedule lists any and
all persons of which the Company directly or indirectly owns an equity or
similar interest, or an interest convertible into or exchangeable or exercisable
for an equity or similar interest, of less than 50% (collectively, the
"Investments"). The Company or a Subsidiary, as the case may be, owns all
Investments free and clear of all Liens, and there are no outstanding
contractual obligations of the Company or any Subsidiary permitting the
repurchase, redemption or other acquisition of any of its interest in the
Investments or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, or provide any guarantee with
respect to, any Investment.
SECTION 3.02 Certificate of Incorporation and Bylaws. The Company has
made available to Parent a complete and correct copy of the Certificate of
Incorporation and the Bylaws, each as amended to date, of the Company and each
Subsidiary. Such Certificates of Incorporation and Bylaws are in full force and
effect and no other organizational documents are applicable or binding upon the
Company or any of its Subsidiaries. Neither the Company nor any Subsidiary is,
nor has the Company been, in violation of any of the provisions of its
Certificate of Incorporation or Bylaws. No Subsidiary has been in material
violation of any of the provisions of its Certificate of Incorporation or
Bylaws. The Company has made available to Parent complete and correct copies of
the minutes of all meetings of the Company Board (and each committee thereof)
and of the stockholders of the Company, in each case since January 1, 2001.
SECTION 3.03 Capitalization. (a) The authorized capital stock of the
Company consists of (i) 500,000,000 shares of Company Common Stock and (ii)
10,000,000 shares of preferred stock, par value $.01 per share ("Company
Preferred Stock"). As of March 3, 2004, (i) 98,076,797 shares of Company Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable and were issued free of preemptive (or similar) rights, (ii)
no shares of Company Common Stock are held in the treasury of the Company, (iii)
no shares of Company Common Stock are held by the Subsidiaries, (iv) 16,198,048
shares of Company Common Stock are issuable upon exercise of outstanding Company
Stock Options granted under the Company Stock Option Plans at a weighted average
per share exercise price of $12.5143 and (v) 22,920,606 shares of Company Common
Stock are reserved for future issuance in connection with the Company Stock
Option Plans (including shares reserved pursuant to outstanding Company Stock
Options). Since March 3, 2004 through the date of this Agreement, other than in
connection with the issuance of Shares pursuant to the exercise of Company Stock
Options outstanding as of March 3, 2004, there has been no change in the number
of shares of outstanding capital stock of the Company or the number of
outstanding Company Stock Options. As of the date of this Agreement, no shares
of Company Preferred Stock are issued and outstanding. The Company does not have
a "poison pill" or similar stockholder rights plan. Except as set forth in this
Section 3.03, there are no (A) options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Subsidiary or obligating the Company or any
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any Subsidiary (B) voting securities of the Company
or securities convertible, exchangeable or exercisable for shares of capital
stock or voting securities of the Company, or (C) equity equivalents, interests
in the ownership or earnings of the Company or similar rights. All shares of
Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and
9
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable and free
of preemptive (or similar) rights. There are no outstanding contractual
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any shares of Company Common Stock or any capital stock of any
Subsidiary or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any Subsidiary or any other person. None
of the Company or any Subsidiary is a party to any stockholders' agreement,
voting trust agreement or registration rights agreement relating to any equity
securities of the Company or any Subsidiary or any other Contract relating to
disposition, voting or dividends with respect to any equity securities of the
Company or of any Subsidiary. All dividends on the Company Common Stock that
have been declared or have accrued prior to the date of this Agreement have been
paid in full to the Company's paying agent.
(b) Each outstanding share of capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and was issued free of
preemptive (or similar) rights, and each such share is owned by the Company or
another Subsidiary free and clear of all options, rights of first refusal,
agreements, limitations on the Company's or any Subsidiary's voting, dividend or
transfer rights, charges and other encumbrances or Liens of any nature
whatsoever.
(c) As of the date of this Agreement, the only outstanding
indebtedness for borrowed money of the Company and the Subsidiaries is (i)
$200,000 in aggregate principal amount of 9.15% Senior Subordinated Notes, (ii)
$300,000 in aggregate principal amount of 9.875% Senior Subordinated Notes, and
(iii) $631,565,294 in aggregate principal amount of term loans under the Credit
Agreement, dated as of July 24, 2001, among the Company, various lenders, Morgan
Stanley Senior Funding, Inc., Bear Stearns Corporate Lending Inc., Fleet
National Bank and The Industrial Bank of Japan, Limited, as amended on January
1, 2002, October 31, 2002 and July 1, 2003 (the "Credit Agreement").
SECTION 3.04 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby (collectively, the "Transactions"). The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the
adoption of this Agreement by the holders of a majority of the then-outstanding
shares of Company Common Stock and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency (including all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors' rights generally
and subject to the effect of general principles of equity.
SECTION 3.05 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this
10
Agreement by the Company and the consummation by the Company of the Transactions
will not, (i) conflict with or violate the Certificate of Incorporation or
Bylaws (or similar organizational documents) of the Company or any Subsidiary,
(ii) assuming that all consents, approvals and other authorizations described in
Section 3.05(b) have been obtained and that all filings and other actions
described in Section 3.05(b) have been made or taken, conflict with or violate
any statute, law, ordinance, regulation, rule, code, executive order, judgment,
decree or other order ("Law") applicable to the Company or any Subsidiary or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in any breach or violation of or constitute a default
(or an event which, with notice or lapse of time or both, would become a
default) under, require consent or result in a material loss of a material
benefit under, give rise to a right or obligation to purchase or sell assets or
securities under, give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
property or asset of the Company or any Subsidiary pursuant to, any note, bond,
mortgage, indenture, contract (written or oral), agreement, lease, license,
permit, franchise or other binding commitment, instrument or obligation (each, a
"Contract") to which the Company or any Subsidiary is a party or by which the
Company or a Subsidiary or any property or asset of the Company or any
Subsidiary is bound or affected, except, with respect to clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which would not reasonably be expected to have a Company Material Adverse
Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company and the consummation
by the Company of the Transactions will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
supranational, national, provincial, federal, state or local government,
regulatory or administrative authority, or any court, tribunal, or judicial or
arbitral body (a "Governmental Authority"), except for (i) applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) the filing with the Securities and Exchange Commission
(the "SEC") of a proxy statement relating to the adoption of this Agreement by
the Company's stockholders (as amended or supplemented from time to time, the
"Proxy Statement"), (iii) any filings required under the rules and regulations
of the New York Stock Exchange (the "NYSE"), (iv) the filing and recordation of
appropriate merger documents as required by the DGCL and appropriate documents
with the relevant authorities of other states in which the Company or any
Subsidiary is qualified to do business, and (v) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.06 Permits; Compliance. Each of the Company and each
Subsidiary is in possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exceptions, consents, certificates, approvals and
orders of any Governmental Authority necessary for each such entity to own,
lease and operate its properties or to carry on its business as it is now being
conducted (the "Company Permits"), except where the failure to have, or the
suspension or cancellation of, any of the Company Permits would not reasonably
be expected to have a Company Material Adverse Effect. No suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits would not reasonably be expected to
have a Company Material Adverse Effect. Each of the Company and each Subsidiary
is in compliance with, and since January 1, 2001 has been or has taken any
11
necessary steps to become in compliance with, (a) any Law applicable to such
entity or by which any property or asset of such entity is bound or affected,
and (b) any Contract or Company Permit to which such entity is a party or by
which such entity or any property or asset of such entity is bound, except, with
respect to clauses (a) and (b), for any such conflicts, defaults, breaches or
violations that would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.07 SEC Filings; Financial Statements; Undisclosed
Liabilities. (a) The Company has filed all forms, reports, statements, schedules
and other documents required to be filed by it with the SEC since January 1,
2001 (collectively, the "SEC Reports"). The SEC Reports (i) were prepared in
accordance with the applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, the Sarbanes-Oxley Act of 2002
and, in each case, the rules and regulations promulgated thereunder, and (ii)
did not, at the time they were filed, or, if amended, as of the date of such
amendment, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading (including any financial statements or other documentation
incorporated by reference therein). No Subsidiary is required to file any form,
report or other document with the SEC. The Company has made available to Parent
copies of all correspondence between the SEC, on the one hand, and the Company
and any of the Subsidiaries, on the other hand, since January 1, 2001 through
the date of this Agreement.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports, when filed, complied with
applicable accounting requirements and with published rules and regulations of
the SEC with respect thereto, was prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and each fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments). All of the
Subsidiaries are consolidated for accounting purposes.
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the consolidated Subsidiaries as at September 30, 2003
(including the notes thereto) included in the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 2003, neither the Company nor
any Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations
incurred (i) in connection with the Transactions, or (ii) in the ordinary course
of business and in a manner consistent with past practice since September 30,
2003 that would not reasonably be expected to have a Company Material Adverse
Effect.
(d) The Company has made available to Parent a complete and correct
copy of any amendments or modifications which have not yet been filed with the
SEC to Contracts which previously have been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
12
SECTION 3.08 Information Supplied. None of the information included or
incorporated by reference in the Proxy Statement or the Offer Documents will, in
the case of the Proxy Statement, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting or at the time
of any amendment or supplement thereof, or, in the case of the Offer Documents,
at the time the Offer Documents are first published, sent, or given to holders
of the Notes, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by the Company with
respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Sub in connection with the preparation
of the Proxy Statement or the Offer Documents for inclusion or incorporation by
reference therein. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 3.09 Absence of Certain Changes or Events. Since September 30,
2003, there has not been any event, circumstance, change, development or effect
that, individually or in the aggregate, has had or would reasonably be expected
to have, a Company Material Adverse Effect. Since September 30, 2003 and prior
to the date hereof, except as expressly contemplated by this Agreement, (a) the
Company and the Subsidiaries have conducted their businesses only in the
ordinary course of business and in a manner consistent with past practice, and
(b) neither the Company nor any Subsidiary has:
(i) amended or otherwise changed its Certificate of Incorporation
or Bylaws;
(ii) declared, set aside, made or paid any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except for dividends by any
direct or indirect wholly owned Subsidiary to the Company or any other
Subsidiary and quarterly dividends of $0.04 per Share declared and
paid or payable in cash on or around November 25, 2003 and February
24, 2004;
(iii) reclassified, combined, split, subdivided or redeemed, or
purchased or otherwise acquired, directly or indirectly, any of its
capital stock;
(iv) increased the compensation payable or to become payable or
the benefits provided to its directors, officers or employees, except
for increases in the ordinary course of business and in a manner
consistent with past practice, or granted any severance or termination
pay to, or entered into any employment, bonus, change of control or
severance agreement with, any director or officer or, except in the
ordinary course of business in a manner consistent with past practice,
any other employee of the Company or of any Subsidiary;
(v) suffered any damage, destruction or loss (whether or not
covered by insurance), other than in the ordinary course of business,
that has had a Company Material Adverse Effect;
13
(vi) made any change in financial or Tax accounting methods or
practices materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in GAAP;
(vii) made any acquisition or disposition of any real property;
(viii) made any material tax election or settled or compromised
any material United States federal, state or local income tax
liability; or
(ix) announced an intention, entered into any formal or informal
agreement or otherwise made a commitment, to do any of the foregoing.
SECTION 3.10 Absence of Litigation. There is no litigation, suit,
claim, action, proceeding, hearing, petition, grievance, complaint or
investigation (an "Action") pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, or any property or asset of
the Company or any Subsidiary, before any Governmental Authority or arbitrator
that would reasonably be expected to have a Company Material Adverse Effect. As
of the date of this Agreement, no officer or director of the Company is a
defendant in any Action in connection with his status as an officer or director
of the Company or any Subsidiary. Other than pursuant to Certificates of
Incorporation, Bylaws or other organizational documents, no Contract between the
Company or any Subsidiary and any current or former director or officer exists
that provides for indemnification. Neither the Company nor any Subsidiary nor
any property or asset of the Company or any Subsidiary is subject to any
continuing order of, consent decree, settlement agreement or other similar
written agreement with, or, to the knowledge of the Company, continuing
investigation by, any Governmental Authority, or any order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority that
would reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.11 Employee Benefit Plans. (a) Section 3.11(a) of the
Company Disclosure Schedule lists all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Company or any Subsidiary is a party, with respect to
which the Company or any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, consultant, officer or director of the Company
or any Subsidiary (collectively, the "Plans"). The Company has made available to
Parent a true and complete copy of each Plan and has made available to Parent a
true and complete copy of (where applicable) (A) each trust or funding
arrangement prepared in connection with each such Plan, (B) the two most
recently filed annual reports on Internal Revenue Service ("IRS") Form 5500, (C)
the most recently received IRS determination letter for each such Plan, (D) the
two most recently prepared actuarial reports and financial statements in
connection with each such Plan, and (E) the most recent summary plan description
and any material written communications (or a description of any material oral
communications) by the
14
Company or the Subsidiaries to any current or former employees, consultants, or
directors of the Company or any Subsidiary concerning the extent of the benefits
provided under a Plan.
(b) Neither the Company nor any Subsidiary has now or any time
contributed to, sponsored, or maintained (i) a pension plan (within the meaning
of Section 3(2) of ERISA) subject to Section 412 of the Code or Title IV of
ERISA; (ii) a multiemployer plan (within the meaning of Section 3(37) or
4001(a)(3) of ERISA) (a "Multiemployer Plan"); or (iii) a single employer
pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which the
Company or any Subsidiary could incur liability under Section 4063 or 4064 of
ERISA (a "Multiple Employer Plan"). No Plan exists that could result in the
payment to any present or former employee, director or consultant of the Company
or any Subsidiary of any money or other property or accelerate or provide any
other rights or benefits to any current or former employee of the Company or any
Subsidiary as a result of the consummation of the Transactions (whether alone or
in connection with any subsequent event). There is no contract, plan or
arrangement (written or otherwise) covering any current or former employee of
the Company or any Subsidiary that, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant to the
terms of Section 280G of the United States Internal Revenue Code of 1986, as
amended (the "Code").
(c) With respect to the Plans, no event has occurred and, to the
knowledge of the Company, there exists no condition or set of circumstances, in
connection with which the Company or any Subsidiary could reasonably be expected
to be subject to any actual or contingent liability under the terms of such Plan
or any applicable Law which would reasonably be expected to have a Company
Material Adverse Effect.
(d) Each Plan that is intended to be qualified under Section 401(a) of
the Code or Section 401(k) of the Code has received a favorable determination
letter from the IRS covering all of the provisions applicable to the Plan for
which determination letters are currently available that the Plan is so
qualified and each trust established in connection with any Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, and,
to the knowledge of the Company, no circumstance exists that could reasonably be
expected to result in the revocation of such letter.
(e) (i) Each Plan has been established and administered in accordance
with its terms, and in compliance with the applicable provisions of ERISA, the
Code and other applicable Laws, except to the extent such noncompliance,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect, and (ii) no Plan provides retiree welfare
benefits, and neither the Company nor any Subsidiary has any obligation to
provide any retiree welfare benefits other than as required by Section 4980B of
the Code.
(f) With respect to any Plan, (i) no Actions (other than routine
claims for benefits in the ordinary course) are pending or, to the knowledge of
the Company, threatened, that would reasonably be expected to have a Company
Material Adverse Effect, (ii) to the knowledge of the Company, no facts or
circumstances exist that could reasonably be expected to give rise to any such
Actions, and (iii) no administrative investigation, audit or other
administrative proceeding by the Department of Labor, the IRS or other
Governmental Authority is pending, in progress or,
15
to the knowledge of the Company, threatened that could reasonably be expected to
have a Company Material Adverse Effect.
SECTION 3.12 Labor and Employment Matters. Neither the Company nor any
Subsidiary is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any Subsidiary,
nor, to the knowledge of the Company, are there any activities or proceedings of
any labor union to organize any such employees. As of the date hereof, there are
no unfair labor practice complaints pending against the Company or any
Subsidiary before the National Labor Relations Board or any other Governmental
Authority or any current union representation questions involving employees of
the Company or any Subsidiary. As of the date hereof, there is no strike,
controversy, slowdown, work stoppage or lockout, or, to the knowledge of the
Company, threatened in writing, by or with respect to any employees of the
Company or any Subsidiary.
SECTION 3.13 Real Property; Title to Assets. (a) Section 3.13(a) of
the Company Disclosure Schedule lists each parcel of real property currently
owned by the Company or any Subsidiary and sets forth the applicable Subsidiary
owning such properties (collectively, the "Owned Real Properties"). The Company
or the applicable Subsidiary set forth on Section 3.13(a) of the Company
Disclosure Schedule owns fee simple title to the Owned Real Properties, free and
clear of all mortgages, pledges, liens, restrictions security interests,
conditional and installment sale agreements, encumbrances, charges or other
claims of third parties of any kind, including any easement, right of way or
other encumbrance to title, or any option, right of first refusal, or right of
first offer (collectively, "Liens"), other than (i) Liens for current taxes and
assessments not yet due and payable, (ii) inchoate mechanics' and materialmen's
Liens for construction in progress, and (iii) to the extent such Liens would not
reasonably be expected to have a Company Material Adverse Effect, (A) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Company or such Subsidiary consistent with past practice, (B)
all matters of record, and (C) all Liens and other imperfections of title and
encumbrances that are typical for the applicable property type and locality and
which would not reasonably be expected to materially interfere with the conduct
of the business of the Company (collectively, "Permitted Liens"). None of the
Owned Real Property is subject to any governmental decree or order to be sold
nor is being condemned, expropriated or otherwise taken by any public authority
with or without payment of compensation therefore, nor, to the knowledge of the
Company, has any such condemnation, expropriation or taking been proposed.
Neither the Company nor any Subsidiary has violated any material covenants,
conditions or restrictions affecting any Properties (as defined below) which
violations would reasonably be expected to have a Company Material Adverse
Effect.
(b) Section 3.13(b) of the Company Disclosure Schedule lists each
parcel of real property currently leased or subleased by the Company or any
Subsidiary (collectively, the "Leased Properties"; the Leased Properties,
together with the Owned Real Properties, collectively, the "Properties") and
sets forth the Company or the Subsidiary holding such leasehold interest, with
the name of the lessor and the date of the lease, sublease, assignment of the
lease, any guaranty given or leasing commissions remaining payable by the
Company or any Subsidiary in connection therewith and each material amendment to
any of the foregoing (collectively, the "Lease Documents"). True, correct and
complete copies of all Lease Documents have been delivered to Parent.
16
(c) The ground leases underlying the Leased Properties (collectively,
the "Ground Leases") are listed, by property, in Section 3.13(c) of the Company
Disclosure Schedule. Each of the Ground Leases is valid, binding and in full
force and effect as against the Company or the Subsidiaries and, to the
Company's knowledge, as against the other party thereto. Neither the Company nor
the Subsidiaries has received written notice under any of the Ground Leases of
any default, and, to the Company's knowledge, no event has occurred which, with
notice or lapse of time or both, would constitute a material default by the
Company or the applicable Subsidiaries.
(d) There are no latent defects or adverse physical conditions
affecting any Property or the improvements thereon, other than those that would
not reasonably be expected to have a Company Material Adverse Effect.
(e) Valid policies of title insurance or title commitments for which
premiums have been paid (collectively, the "Title Policies") have been issued
insuring the Company or the applicable Subsidiary's fee simple or leasehold
title to the Properties owned or ground leased by the Company or the applicable
Subsidiaries in amounts at least equal to the purchase price thereof paid by the
Company or the applicable Subsidiary, subject only to Permitted Liens. No claim
has been made against any Title Policies. The Company and the Subsidiaries have
not received any written notice and are not otherwise aware that the Title
Policies are not in full force and effect.
(f) Section 3.13(f) of the Company Disclosure Schedule lists each
Property which is under construction as of the date hereof. The Company has
obtained valid construction permits with respect to such Property.
(g) Neither the Company nor any of the Subsidiaries is a party to any
management, franchise, license or other agreement for the management of
operations conducted at any Property.
(h) The Company or the Subsidiaries own all material furniture,
fixtures, equipment, operating supplies and other personal property (the
"Personal Property") necessary for the operation of each Property, subject to no
Liens, except as would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.14 Intellectual Property. (a) Except as would not reasonably
be expected to have a Company Material Adverse Effect, (i) the conduct of the
business of the Company and the Subsidiaries as currently conducted does not
infringe upon or misappropriate the Intellectual Property rights of any third
party, and no claim has been asserted to the Company or any Subsidiary that the
conduct of the business of the Company and the Subsidiaries as currently
conducted infringes upon or may infringe upon or misappropriates the
Intellectual Property rights of any third party; (ii) with respect to each item
of Intellectual Property that is owned by the Company or a Subsidiary ("Owned
Intellectual Property"), the Company or a Subsidiary is the owner of the entire
right, title and interest in and to such Owned Intellectual Property and is
entitled to use such Owned Intellectual Property in the continued operation of
its respective business; (iii) with respect to each item of Intellectual
Property that is licensed to or otherwise held or used by the Company or a
Subsidiary ("Licensed Intellectual Property"), the Company or a Subsidiary has
the right to use such Licensed Intellectual Property in the
17
continued operation of its respective business in accordance with the terms of
the license agreement governing such Licensed Intellectual Property; (iv) none
of the Owned Intellectual Property has been adjudged invalid or unenforceable in
whole or in part and, to the knowledge of the Company, the Owned Intellectual
Property is valid and enforceable; (v) to the knowledge of the Company, no
person is engaging in any activity that infringes upon the Owned Intellectual
Property; (vi) to the knowledge of the Company, each license of the Licensed
Intellectual Property is valid and enforceable, is binding on all parties to
such license, and is in full force and effect; (vii) to the knowledge of the
Company, no party to any license of the Licensed Intellectual Property is in
breach thereof or default thereunder; (viii) the Company has taken all
reasonable actions (including executing non-disclosure and intellectual property
assignment agreements) to protect, preserve and maintain the Owned Intellectual
Property; and (ix) neither the execution of this Agreement nor the consummation
of any Transaction shall adversely affect any of the Company's rights with
respect to the Owned Intellectual Property or the Licensed Intellectual
Property.
(b) For purposes of this Agreement, "Intellectual Property" means (i)
United States patents, patent applications and statutory invention
registrations, (ii) trademarks, service marks, trade dress, logos, trade names,
corporate names, domain names and other source identifiers, and registrations
and applications for registration thereof, (iii) copyrightable works,
copyrights, and registrations and applications for registration thereof and (iv)
confidential and proprietary information, including trade secrets and know-how.
SECTION 3.15 Taxes. (a) The Company and the Subsidiaries (i) have
timely filed or caused to be filed or will timely file or cause to be filed
(taking into account any extension of time to file granted or obtained) all
material Tax Returns required to be filed by them, and all such filed Tax
Returns are true, correct and complete in all material respects; and (ii) have
timely paid or will timely pay all material amounts of Taxes due and payable
except to the extent that such Taxes are being contested in good faith and for
which the Company or the appropriate Subsidiary has set aside adequate reserves
in accordance with GAAP. All material amounts of Taxes required to have been
withheld by or with respect to the Company and its the Subsidiaries have been or
will be timely withheld and remitted to the applicable taxing authority.
(b) There are no pending or, to the knowledge of the Company,
threatened audits, examinations, investigations or other proceedings in respect
of any Tax or Tax matter of the Company or any Subsidiary. No deficiency for any
material amount of Tax has been asserted or assessed by any taxing authority in
writing against the Company or any Subsidiary, which deficiency has not been
satisfied by payment, settled or been withdrawn or contested in good faith and
for which the Company or the appropriate Subsidiary has set aside adequate
reserves in accordance with GAAP. There are no Tax liens on any assets of the
Company or any Subsidiary (other than any liens for Taxes not yet due and
payable for which adequate reserves have been made in accordance with GAAP or
for Taxes being contested in good faith). Neither the Company nor any Subsidiary
is subject to any accumulated earnings tax or personal holding company tax.
(c) Neither the Company nor any Subsidiary has made or is obligated to
make any payment that would not be deductible pursuant to Section 162(m) of the
Code.
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(d) There are no pending or, to the knowledge of the Company,
potential claims for indemnity (other than customary indemnity under credit or
any other agreements or arrangements) against the Company or any Subsidiary
(other than against each other) under any indemnification, allocation or sharing
agreement with respect to income Taxes.
(e) Neither the Company nor any Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency (other than pursuant to extensions of time to
file Tax Returns obtained in the ordinary course).
(f) No claim is pending by a taxing authority in a jurisdiction where
the Company or any Subsidiary does not file a Tax Return that the Company or
such Subsidiary is or may be subject to Tax by such jurisdiction.
(g) Neither the Company nor any Subsidiary is a party to any
understanding or arrangement described in Section 6111(d) or Section
6662(d)(2)(C)(iii) of the Code.
(h) There are no proposed reassessments of any property owned by the
Company and the Subsidiaries that could result in a material increase in the
amount of any Tax to which the Company or any such Subsidiary would be subject.
(i) Neither the Company nor any Subsidiary will be required to include
any item of income in, or exclude any item of deduction from, taxable income as
a result of any (1) adjustment pursuant to Section 481 of the Code, the
regulations thereunder or any similar provision under state or local Law, (2)
"closing agreement" as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax Law)
executed on or prior to the Closing, (3) intercompany transaction or excess loss
account described in the Treasury Regulations under Section 1502 of the Code (or
any corresponding or similar provision of state, local or foreign income Tax
law), (4) installment sale or open transaction disposition made on or prior to
the Closing, or (5) prepaid amount received on or prior to the Closing.
(j) Neither the Company nor any Subsidiary has made an election under
Section 341(f) of the Code.
(k) For purposes of this Agreement:
(i) "Tax" or "Taxes" shall mean any and all federal, state, local
and foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other taxes of any kind
(together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any
governmental or Tax authority.
(ii) "Tax Returns" means any and all returns, declarations,
claims for refund, or information returns or statements, reports and
forms relating to Taxes filed with any
19
Tax authority (including any schedule or attachment thereto) with
respect to the Company or the Subsidiaries, including any amendment
thereof.
SECTION 3.16 Environmental Matters. (a) Except as would not reasonably
be expected to have a Company Material Adverse Effect, (i) none of the Company
or any of the Subsidiaries has violated, or is in violation of, any
Environmental Law; (ii) to the knowledge of the Company, there is and has been
no presence, release or threat of release of Hazardous Substances at, on, under
or affecting: (A) any of the properties currently owned, leased or operated by
the Company or any of the Subsidiaries or, during the period of the Company's or
the Subsidiaries' ownership, lease or operation thereof, formerly owned, leased
or operated by the Company or any of the Subsidiaries, or (B) any location at
which Hazardous Substances are present for which the Company or any of the
Subsidiaries is or is allegedly liable, under conditions in the case of either
(A) or (B) that would reasonably be expected to result in a liability or
obligation to the Company or any of the Subsidiaries, or, as the Company and the
Subsidiaries are currently operated, adversely affect the revenues of the
Company or any of the Subsidiaries; (iii) the Company and the Subsidiaries have
obtained and are and have been in compliance with all, and have not violated
any, required Environmental Permits; (iv) there are no written claims pending
or, to the knowledge of the Company, threatened against the Company or any of
the Subsidiaries alleging violations of or liability or obligations under any
Environmental Law or otherwise concerning the presence or release of Hazardous
Substances; and none of the Company or any of the Subsidiaries has received any
written notice of, is a party to, or, to the knowledge of the Company, is
reasonably likely to be affected by any proceedings, any investigations or any
agreements concerning such matters. The Company has provided to Parent a copy of
all material studies, audits, assessments or investigations concerning
compliance with, or liability or obligations under, Environmental Law affecting
the Company or any Subsidiary that is in the possession or, to the knowledge of
the Company, control of the Company or any Subsidiary.
(b) For purposes of this Agreement:
(i) "Environmental Laws" means any Laws (including common law) of
the United States federal, state, local, non-United States, or any
other Governmental Authority, relating to (A) releases or threatened
releases of Hazardous Substances or materials containing Hazardous
Substances; (B) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or materials containing
Hazardous Substances; or (C) pollution or protection of the
environment or human health and safety as affected by Hazardous
Substances or materials containing Hazardous Substances.
(ii) "Environmental Permits" means any permit, license
registration, approval, notification or any other authorization
pursuant to Environmental Law.
(iii) "Hazardous Substances" means (A) those substances,
materials or wastes defined as toxic, hazardous, acutely hazardous,
pollutants, contaminants, or words of similar import, in or regulated
under the following United States federal statutes and any analogous
state statutes, and all regulations thereunder: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive
20
Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air
Act; (B) petroleum and petroleum products, including crude oil and any
fractions thereof; (C) natural gas, synthetic gas, and any mixtures
thereof; (D) polychlorinated biphenyls, asbestos, molds that could
reasonably be expected to adversely affect human health, urea
formaldehyde foam insulation and radon; and (E) any substance,
material or waste regulated by any Governmental Authority pursuant to
or that would reasonably be expected to result in liability under, any
Law in addition to those identified in (A) above the primary purpose
of which is the protection of the environment or human health and
safety as affected by environmental media.
SECTION 3.17 Material Contracts. (a) Section 3.17(a) of the Company
Disclosure Schedule contains a list of the following Contracts to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any of their respective properties or assets are bound or affected as of the
date hereof:
(i) any lease of real or personal property providing for annual
rentals of $200,000 or more;
(ii) any Contract for the purchase of materials, supplies, goods,
services, equipment or other assets that is not terminable without
material penalty on 90 days notice by the Company or the Subsidiaries
and that provides for or is reasonably likely to require either (A)
annual payments to or from the Company and the Subsidiaries of
$250,000 or more, or (B) aggregate payments to or from the Company and
the Subsidiaries of $500,000 or more;
(iii) any partnership, limited liability company agreement, joint
venture or other similar agreement or arrangement relating to the
formation, creation, operation, management or control of any
partnership or joint venture;
(iv) any Contract (other than among consolidated Subsidiaries)
under which Indebtedness is outstanding or may be incurred or pursuant
to which any property or asset is mortgaged, pledged or otherwise
subject to a Lien, or any Contract restricting the incurrence of
Indebtedness or the incurrence of Liens or restricting the payment of
dividends or the transfer of any Property (except, with respect to the
transfer of Leased Properties, restrictions contained in the Lease
Documents). "Indebtedness" means (A) indebtedness for borrowed money
(excluding any interest thereon), secured or unsecured, (B)
obligations under conditional sale or other title retention Contracts
relating to purchased property, (C) capitalized lease obligations, (D)
obligations under interest rate cap, swap, collar or similar
transactions or currency hedging transactions (valued at the
termination value thereof), and (E) guarantees of any of the foregoing
of any other person;
(v) any Contract required to be filed as an exhibit to the
Company's Annual Report on Form 10-K pursuant to Item 601(b)(10) of
Regulation S-K under the Securities Act;
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(vi) any Contract that purports to limit in any material respect
the right of the Company or the Subsidiaries (A) to engage in any line
of business, or (B) to compete with any person or operate in any
location;
(vii) any Contract to which the Company or any of its
Subsidiaries has continuing indemnification obligations or potential
liability under any purchase price adjustment;
(viii) any Contract providing for the sale or exchange of, or
option to sell or exchange, any Property, or for the purchase or
exchange of, or option to purchase or exchange, any real estate;
(ix) any Contract for the acquisition or disposition, directly or
indirectly (by merger or otherwise), of assets (other than Contracts
referenced in clause (viii) of this Section 3.17(a)) or capital stock
or other equity interests of another person for aggregate
consideration in excess of $500,000, in each case other than in the
ordinary course of business and in a manner consistent with past
practice;
(x) any Contract pursuant to which the Company or any of the
Subsidiaries manages any real property;
(xi) other than Contracts for ordinary repair and maintenance,
any Contract relating to the development or construction of, or
additions or expansions to, the Properties, under which the Company or
any of the Subsidiaries has, or expects to incur, an obligation in
excess of $100,000 per site or $250,000 in the aggregate;
(xii) any advertising or other promotional Contract providing for
payment by the Company or any Subsidiary of $100,000 or more;
(xiii) any license, royalty or other Contract concerning
Intellectual Property which is material to the Company and the
Subsidiaries; and
(xiv) any Contract which by its terms calls for payments by the
Company and the Subsidiaries in excess of $5,000,000.
(the Contracts described in clauses (i) through (xiv) and those required to be
identified in Sections 3.11(a), 3.13(b), 3.13(c) and 3.17(c) of the Company
Disclosure Schedule, in each case together with all exhibits and schedules
thereto being, the "Material Contracts").
(b) Except as would not reasonably be expected to have a Company
Material Adverse Effect, (i) neither the Company nor any of its Subsidiaries is
and, to the Company's knowledge, no other party is in breach or violation of, or
default under, any Material Contract, (ii) none of the Company or any of the
Subsidiaries have received any claim of default under any such agreement, and
(iii) to the Company's knowledge, no event has occurred which would result in a
breach or violation of, or a default under, any Material Contract (in each case,
with or without notice or lapse of time or both). Except as would not reasonably
be expected to have a Company Material Adverse Effect, each Material Contract is
valid, binding and enforceable in
22
accordance with its terms and is in full force and effect. The Company has made
available to Parent true and complete copies of all Material Contracts,
including any amendments thereto.
(c) Except as disclosed in the Company's proxy statement relating to
the election of directors dated April 4, 2003, there are no Contracts or
transactions between the Company or any Subsidiary, on the one hand, and any (i)
officer or director of the Company or any Subsidiary, (ii) record or beneficial
owner of five percent or more of the voting securities of the Company, or (iii)
associate (as defined in Rule 12b-2 under the Exchange Act) or affiliate of any
such officer, director or record or beneficial owner, on the other hand, except
those of a type available to employees generally.
SECTION 3.18 Insurance. Section 3.18 of the Company Disclosure
Schedule sets forth a complete and correct list of all material insurance
policies owned or held by the Company and each Subsidiary, true and complete
copies of which have been made available to Parent. With respect to each such
insurance policy, except as would not reasonably be expected to have a Company
Material Adverse Effect: (i) the policy is legal, valid, binding and enforceable
in accordance with its terms and, except for policies that have expired under
their terms in the ordinary course, is in full force and effect; (ii) neither
the Company nor any Subsidiary is in breach or default (including any such
breach or default with respect to the payment of premiums or the giving of
notice), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination or
modification, under the policy; (iii) to the knowledge of the Company, no
insurer on the policy has been declared insolvent or placed in receivership,
conservatorship or liquidation; (iv) no notice of cancellation or termination
has been received; and (v) the policy is sufficient for compliance with all
requirements of Law and of all Contracts to which the Company or the
Subsidiaries are parties or otherwise bound.
SECTION 3.19 Board Approval; Vote Required. (a) The Company Board, by
resolutions duly adopted at a meeting duly called and held, has duly (i)
determined that this Agreement, the Merger and the other Transactions are fair
to and in the best interests of the Company and its stockholders, (ii) approved
this Agreement, the Merger and the other Transactions and declared their
advisability, and (iii) recommended that the stockholders of the Company adopt
this Agreement and directed that this Agreement be submitted for consideration
by the Company's stockholders at the Company Stockholders' Meeting
(collectively, the "Company Board Recommendation"). The approval of this
Agreement, the Merger and the other Transactions by the Company Board
constitutes approval of this Agreement, the Merger and the other Transactions
for purposes of Section 203 of the DGCL and represents the only action necessary
to ensure that Section 203 of the DGCL does not and will not apply to the
execution and delivery of this Agreement or the consummation of the
Transactions.
(b) Except as contemplated by Section 2.06, the only vote of the
holders of any class or series of capital stock or other securities of the
Company necessary to approve this Agreement, the Merger and the other
Transactions is the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock in favor of the adoption of this
Agreement (the "Stockholder Approval").
23
SECTION 3.20 Interested Party Transactions. Between the date of the
Company's last annual meeting proxy statement filed with the SEC and the date of
this Agreement, no event has occurred that would be required to be reported by
the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 3.21 Opinion of Financial Advisor. The Company has received
the opinion of Morgan Stanley & Co. Incorporated to the effect that, as of the
date of this Agreement, the Merger Consideration is fair, from a financial point
of view, to the Company's stockholders. An executed copy of such opinion has
been delivered to Parent.
SECTION 3.22 Brokers. No broker, finder or investment banker (other
than Morgan Stanley & Co. Incorporated) is entitled to any brokerage, finder's
or other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of the Company. The Company has furnished to
Parent a complete and correct copy of any Contract between the Company and
Morgan Stanley & Co. Incorporated pursuant to which Morgan Stanley & Co.
Incorporated could be entitled to any payment from the Company relating to the
Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.01 Corporate Organization. Parent is a limited liability
company and Merger Sub is a corporation, in each case, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has the requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay Parent or Merger Sub from performing their obligations under
this Agreement.
SECTION 4.02 Certificate of Incorporation and Bylaws. Parent has
heretofore furnished to the Company a complete and correct copy of the
Certificate of Incorporation and Bylaws (or similar organizational documents) of
Parent and Merger Sub, each as amended to date. Such Certificates of
Incorporation and Bylaws (or similar organizational documents) are in full force
and effect. Neither Parent nor Merger Sub is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws (or similar
organizational documents).
SECTION 4.03 Authority Relative to This Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution, delivery and performance of this Agreement by
Parent and Merger Sub and the consummation by Parent and Merger Sub of the
Transactions have been duly and validly
24
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the Transactions. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable against each of Parent
and Merger Sub in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency (including all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity.
SECTION 4.04 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub and the consummation
by Parent and Merger Sub of the Transactions will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws (or similar organizational
documents) of Parent or Merger Sub, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.04(b) have been obtained
and all filings and obligations described in Section 4.04(b) have been made,
conflict with or violate any Law applicable to Parent or Merger Sub or by which
any property or asset of either of them is bound or affected, or (iii) result in
any breach or violation of, or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any property or asset of Parent or Merger
Sub pursuant to, any Contract to which Parent or Merger Sub is a party or by
which Parent or Merger Sub or any property or asset of either of them is bound
or affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, prevent or materially delay consummation of
any of the Transactions or otherwise prevent or materially delay Parent and
Merger Sub from performing their obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub and
the consummation by Parent and Merger Sub of the Transactions will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for (i) applicable
requirements, if any, of the Exchange Act, (ii) the filing and recordation of
appropriate merger documents as required by the DGCL and appropriate documents
with the relevant authorities of other states in which the Company or any of the
Subsidiaries is qualified to do business, and (iii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or
materially delay consummation of any of the Transactions or otherwise prevent
Parent or Merger Sub from performing their material obligations under this
Agreement.
SECTION 4.05 Information Supplied. None of the information supplied by
Parent or Merger Sub for inclusion in the Proxy Statement or the Offer Documents
will, in the case of the Proxy Statement at the date it is first mailed to the
Company's stockholders or at the time of the Company Stockholders' Meeting or at
the time of any amendment or supplement thereof, or in the case of the Offer
Documents, at the time the Offer Documents are first published, sent or given to
holders of the Notes, contain any untrue statement of a material fact
25
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. No representation is made by Parent or Merger Sub
with respect to statements made or incorporated by reference therein based on
information supplied by the Company in connection with the preparation of the
Proxy Statement or the Offer Documents for inclusion or incorporation by
reference therein.
SECTION 4.06 Absence of Litigation. As of the date of this Agreement,
there is no Action pending or, to the knowledge of the officers of Parent,
threatened, against Parent or any of its affiliates before any Governmental
Authority that would or seeks to materially delay or prevent the consummation of
any of the Transactions. As of the date of this Agreement, neither Parent nor
any of its affiliates is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of the officers of Parent, continuing investigation by, any
Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority that would or seeks to
materially delay or prevent the consummation of any of the Transactions.
SECTION 4.07 Operations of Merger Sub. Merger Sub is a direct, wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
SECTION 4.08 Financing. Parent has delivered to the Company true and
complete copies of (a) an executed commitment letter from Blackstone Capital
Partners IV L.P. and Blackstone Real Estate Partners IV L.P. to provide equity
financing in an aggregate amount of $680,000,000 (the "Equity Funding Letter"),
and (b) an executed commitment letter (the "Commitment Letter") from Bank of
America, N.A. and Bear Stearns Commercial Mortgage, Inc. pursuant to which Bank
of America, N.A. and Bear Stearns Commercial Mortgage, Inc. have committed to
provide Parent and certain existing or future subsidiaries of Merger Sub with
financing in an aggregate amount of $2,662,000,000 (the "Debt Financing" and
together with the financing referred to in clause (a) being collectively
referred to as the "Financing"). Each of the Equity Funding Letter and the
Commitment Letter, in the form so delivered, is valid and in full force and
effect as of the date hereof. No event has occurred which, with or without
notice, lapse of time or both, would constitute a default on the part of Parent
under either the Equity Funding Letter or the Commitment Letter. Parent has
fully paid any and all commitment fees or other fees required by the Commitment
Letter to be paid as of the date hereof. Parent shall have at the Closing and at
the Effective Time proceeds in connection with the Financing in an amount equal
to $3,342,000,000.
SECTION 4.09 Guarantee. Concurrently with the execution of this
Agreement, Parent has delivered to the Company the duly executed guarantee of
Blackstone Real Estate Partners IV L.P. (the "Guarantor") in the form attached
as Annex I to this Agreement (the "Guarantee"). The Guarantee is valid and in
full force and effect, and no event has occurred which, with or without notice,
lapse of time or both, would constitute a default on the part of Guarantor under
the Guarantee.
26
SECTION 4.10 Brokers. The Company will not be responsible for any
brokerage, finder's or other fee or commission to any broker, finder or
investment banker in connection with the Transactions based upon arrangements
made by or on behalf of Parent or Merger Sub.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending the Merger.
The Company agrees that, between the date of this Agreement and the Effective
Time, except as expressly contemplated by this Agreement or as set forth in
Section 5.01 of the Company Disclosure Schedule, the businesses of the Company
and the Subsidiaries shall be conducted only in, and the Company and the
Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice and in compliance with
applicable Law, and the Company shall, and shall cause each of the Subsidiaries
to, use its reasonable best efforts to preserve substantially intact the
business organization of the Company and the Subsidiaries, to preserve the
assets and properties of the Company and the Subsidiaries in good repair and
condition and to preserve the current relationships of the Company and the
Subsidiaries with customers, suppliers and other persons with which the Company
or any Subsidiary has material business relations, in each case in the ordinary
course of business and in a manner consistent with past practice. By way of
amplification and not limitation, except as expressly contemplated by any other
provision of this Agreement or as set forth in Section 5.01 of the Company
Disclosure Schedule, the Company agrees that neither the Company nor any
Subsidiary shall, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or propose to do, any of the following without the
prior written consent of Parent:
(a) amend or otherwise change its Certificate of Incorporation or
Bylaws;
(b) issue, sell, pledge, dispose of, grant, encumber or otherwise
subject to any Lien, or authorize such issuance, sale, pledge,
disposition, grant or encumbrance of or subjection to such Lien, (i)
any shares of any class of capital stock of the Company or any
Subsidiary, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including any phantom interest), of the
Company or any Subsidiary (except for the issuance of Shares issuable
pursuant to employee stock options outstanding on the date hereof and
granted under Company Stock Option Plans as in effect on the date
hereof in the ordinary course of business and in a manner consistent
with past practice), or (ii) any Properties or other assets of the
Company or any Subsidiary, except assets (other than Properties) that
are not material in the ordinary course of business and in a manner
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except for dividends by any
direct or indirect wholly owned Subsidiary to the Company or any other
Subsidiary and quarterly dividends on Shares declared and paid in cash
in an aggregate
27
quarterly amount not in excess of $0.04 per Share in accordance with
Section 5.01 of the Company Disclosure Schedule;
(d) reclassify, combine, split, subdivide or redeem, or purchase
or otherwise acquire, directly or indirectly, any capital stock of the
Company or any Subsidiary;
(e) (i) acquire (including by merger, consolidation, or
acquisition of stock or assets or any other business combination) any
corporation, partnership, other business organization (or any division
thereof) or any property or asset, except assets (other than real
property) in the ordinary course of business and in a manner
consistent with past practice, and other assets (other than real
property) that do not exceed $3,000,000 in the aggregate; (ii)
repurchase, repay or incur any Indebtedness (other than in connection
with letters of credit in the ordinary course of business), or issue
any debt securities or assume or endorse, or otherwise become
responsible for, the obligations of any person, or make any loans or
advances, or grant any security interest in any of its assets except
under the Credit Agreement, or in the ordinary course of business and
consistent with past practice; (iii) authorize, or make any commitment
with respect to, any capital expenditure, other than (A) expenditures
related to planned refurbishment projects set forth in Section 5.01 of
the Company Disclosure Schedule, (B) maintenance expenditures at
existing Properties in the ordinary course of business and consistent
with past practice and (C) any expenditures in connection with the
completion or development of sites set forth on Section 5.01 of the
Company Disclosure Schedule and with respect to each site, up to the
amount set forth on such Schedule for the applicable period except for
any increase in such amount resulting from change orders in the
ordinary course of business and consistent with past practice or as
may be necessary as a result of unforeseen circumstances or
developments; (iv) acquire, enter into or extend any option to
acquire, or exercise an option to acquire, real property or commence
construction of, or enter into any Contract to develop or construct,
other real estate projects, other than in connection with the
continued development of the sites set forth on Section 5.01 of the
Company Disclosure Schedule; (v) enter into any new line of business;
or (vi) make investments in persons other than wholly owned
subsidiaries;
(f) (i) increase the compensation payable or to become payable or
the benefits provided to its current or former directors, officers or
employees, except for increases in compensation in the ordinary course
of business and in a manner consistent with past practice; (ii) grant
any retention, severance or termination pay to, or enter into any
employment, bonus, change of control or severance agreement with, any
current or former director, officer or other employee of the Company
or of any Subsidiary; (iii) establish, adopt, enter into, terminate or
amend any Plan or establish, adopt or enter into any plan, agreement,
program, policy, trust, fund or other arrangement that would be a Plan
if it were in existence as of the date of this Agreement for the
benefit of any director, officer or employee except as required by
Law; (iv) loan or advance any money or other property to any current
or former director, officer or employee of the Company or the
Subsidiaries; or (v) grant any equity or equity based awards (provided
that equity awards may be transferred in accordance with the terms of
the applicable plan document or agreement);
28
(g) make any change (or file for such change) in any method of
Tax accounting;
(h) make, change or rescind any material Tax election, file any
amended Tax Return, except as required by applicable Law, enter into
any closing agreement relating to Taxes, waive or extend the statute
of limitations in respect of Taxes (other than pursuant to extensions
of time to file Tax Returns obtained in the ordinary course of
business) or settle or compromise any material United States federal,
state or local income Tax liability, audit, claim or assessment, or
surrender any right to claim for a Tax Refund;
(i) pay, discharge, waive, settle or satisfy any claim, liability
or obligation that is not an Action, other than the payment,
discharge, waiver, settlement or satisfaction, in the ordinary course
of business and consistent with past practice;
(j) waive, release, assign, settle or compromise any pending or
threatened Action (i) in respect of any matter set forth in Section
5.01(j)(i) of the Company Disclosure Schedule or requiring payment by
the Company or any Subsidiary in excess of $150,000 individually or
$1,000,000 in the aggregate, (ii) set forth in Section 5.01(j)(ii) of
the Company Disclosure Schedule, unless the Company shall first have
consulted with Parent, or (iii) that is brought by any current, former
or purported holder of any securities of the Company in its capacity
as such and that (A) requires any payment to such security holders by
the Company or any Subsidiary or (B) adversely affects in any material
respect the ability of the Company and the Subsidiaries to conduct
their business in a manner consistent with past practice;
(k) other than (I) in connection with the completion or
development of sites set forth on Section 5.01 of the Company
Disclosure Schedule, (II) in the ordinary course of business and in a
manner consistent with past practice or (III) as may be necessary as a
result of unforeseen circumstances or developments and which does not
result in an increase in expenditures from those set forth in Section
5.01 of the Company Disclosure Schedule, except for any increase in
expenditures that may result from change orders in the ordinary course
of business and consistent with past practice or as may be necessary
as a result of unforeseen circumstances or developments (and then
following consultation with Parent to the extent commercially
practicable), (i) enter into, amend, modify or consent to the
termination of any Material Contract or (ii) amend, waive, modify or
consent to the termination of the Company's or any Subsidiary's rights
thereunder; provided that without Parent's prior written consent
(such consent not to be unreasonably withheld, conditioned or delayed)
the Company shall not (x) enter into, amend, modify or waive in any
material respect or consent to the termination of any Material
Contract set forth on Section 5.01(k)(ii)(x) of the Company Disclosure
Schedule or (y) amend, waive or modify in any material respect or
consent to the termination of the Company's or any Subsidiary's rights
thereunder, unless in the case of each of clause (x) or (y) the board
of directors determines in good faith that in order to comply with its
fiduciary duties it is required to authorize the Company or any
Subsidiary, as the case may be, to take such action;
29
(l) spend in excess of $1,000,000 in the aggregate in connection
with any advertising or marketing, other than pursuant to any Contract
set forth in Section 5.01(l) of the Company Disclosure Schedule;
(m) fail to maintain in full force and effect the existing
insurance policies covering the Company and the Subsidiaries and their
respective properties, assets and businesses;
(n) enter into, amend, modify or consent to the termination of
any Contract that would be a Material Contract or transaction that
would be required to be set forth in Section 3.17(c) of the Company
Disclosure Schedule if in effect on the date of this Agreement;
(o) effectuate a "plant closing" or "mass layoff," as those terms
are defined in the Worker Adjustment and Retraining Notification Act
of 1988; or
(p) announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing.
SECTION 5.02 Conduct of Business by Parent and Merger Sub Pending the
Merger. Each of Parent and Merger Sub agrees that, between the date of this
Agreement and the Effective Time, it shall not, directly or indirectly, (a) take
any action to cause its representations and warranties set forth in Article IV
to be untrue in any material respect; or (b) take any action that would
reasonably be likely to materially delay the consummation of the Transactions.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Proxy Statement. As promptly as practicable following the
date of this Agreement (but in any event within 10 business days unless the
parties shall otherwise agree), the Company shall prepare and file with the SEC
the preliminary Proxy Statement. Each of the Company and Parent shall furnish
all information concerning itself and its affiliates that is required to be
included in the Proxy Statement or that is customarily included in proxy
statements prepared in connection with transactions of the type contemplated by
this Agreement. Each of the Company and Parent shall use its reasonable best
efforts to respond as promptly as practicable to any comments of the SEC with
respect to the Proxy Statement, and the Company shall use its reasonable best
efforts to cause the definitive Proxy Statement to be mailed to the Company's
stockholders as promptly as reasonably practicable after the date of this
Agreement. The Company shall promptly notify Parent upon the receipt of any
comments from the SEC or its staff or any request from the SEC or its staff for
amendments or supplements to the Proxy Statement and shall provide Parent with
copies of all correspondence between the Company and its Representatives, on the
one hand, and the SEC and its staff, on the other hand relating to the Proxy
Statement. If at any time prior to the Company Stockholders' Meeting, any
information relating to the Company, Parent or any of their respective
affiliates, officers or directors, should be discovered by the Company or Parent
which should be set forth in an amendment or supplement to the Proxy Statement,
so that the Proxy Statement shall not contain
30
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, the party which discovers such information shall promptly notify the
other parties, and an appropriate amendment or supplement describing such
information shall be filed with the SEC and, to the extent required by
applicable Law, disseminated to the stockholders of the Company. Notwithstanding
anything to the contrary stated above, prior to filing or mailing the Proxy
Statement (or any amendment or supplement thereto) or responding to any comments
of the SEC with respect thereto, the Company shall provide Parent an opportunity
to review and comment on such document or response and shall include in such
document or response comments reasonably proposed by Parent; provided, however,
that in the event of a Change in Board Recommendation, the Company shall
consider in good faith including in such document or response comments
reasonably proposed by Parent.
SECTION 6.02 Company Stockholders' Meeting. The Company shall duly
call, give notice of, convene and hold a meeting of its stockholders (the
"Company Stockholders' Meeting"), as promptly as practicable after the date of
this Agreement, for the purpose of obtaining the Stockholder Approval. Unless
this Agreement shall have been terminated in accordance with Section 8.01, the
Company shall hold the Company Stockholders' Meeting regardless of whether the
Company Board has effected a Change in Board Recommendation. Subject to Section
6.04(c), the Company Board shall (a) recommend to holders of the Shares that
they adopt this Agreement, (b) include such recommendation in the Proxy
Statement and (c) use its reasonable best efforts to solicit and obtain the
Stockholder Approval.
SECTION 6.03 Access to Information; Confidentiality. (a) Except as
otherwise prohibited by applicable Law or the terms of any Contract entered into
prior to the date hereof or would be reasonably expected to violate any
attorney-client privilege, from the date of this Agreement until the Effective
Time, the Company shall (and shall cause the Subsidiaries to), at Parent's
expense: (i) provide to Parent and to the officers, directors, employees,
accountants, consultants, legal counsel, financing sources, agents and other
representatives (collectively, "Representatives") of Parent reasonable access,
during normal business hours and upon reasonable prior notice by Parent, to the
officers, employees, agents, properties, offices and other facilities of the
Company and the Subsidiaries and to the books and records thereof, and (ii)
furnish promptly to Parent such information concerning the business, properties,
Contracts, assets, liabilities, personnel and other aspects of the Company and
the Subsidiaries as Parent or its Representatives may reasonably request.
Without limiting the foregoing, Parent and its Representatives (including its
financing sources) shall have the right to conduct appraisal and environmental
and engineering inspections of each of the Properties, provided, however, (A)
that unless reasonably required by the financing sources in connection with the
Debt Financing, neither Parent nor its Representatives shall have the right to
take and analyze any samples of any environmental media (including soil,
groundwater, surface water, air or sediment) or any building material or to
perform any invasive testing procedure on any building; and that any such taking
and analyzing of samples or any such performance of invasive testing conducted
pursuant to this Section 6.03 shall be reasonably acceptable to the Company,
implemented in a manner that does not disrupt the operations of the Company or
any of the Subsidiaries, and paid for by Parent at Parent's sole cost and
expense; and that Parent, at Parent's sole cost and expense, shall return any
site at which or from which, or that has otherwise been affected by, any taking
and analyzing of samples or performance of invasive testing conducted pursuant
to this Section 6.03,
31
in all material respects, to the condition existing at such site prior to the
taking and analyzing of samples or performance of invasive testing, and (B)
Parent and Merger Sub shall, on a joint and several basis, indemnify and hold
harmless the Company, the Subsidiaries and their respective Representatives for
and against any and all liabilities, losses, damages, claims, costs, expenses,
interest, awards, judgments and penalties suffered or incurred by them arising
out of any personal injury or physical damage resulting from any appraisal or
inspection conducted pursuant to this Section 6.03, except that, Parent and
Merger Sub shall have no obligation to so indemnify or hold harmless to the
extent any such liabilities, losses, damages, claims, costs, expenses, interest,
awards, judgments or penalties result from the negligence of the Company, the
Subsidiaries, or one of their Representatives.
(b) All information obtained by Parent or its Representatives pursuant
to this Section 6.03 shall be kept confidential in accordance with the
confidentiality agreement, dated January 31, 2004 (the "Confidentiality
Agreement"), between Blackstone Real Estate Acquisitions IV L.L.C. and the
Company.
(c) No investigation pursuant to this Section 6.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.04 No Solicitation of Transactions. (a) The Company agrees
that neither it nor any Subsidiary shall, nor shall it authorize or permit the
Representatives of the Company or the Subsidiaries to, directly or indirectly,
(i) solicit or initiate or knowingly encourage or otherwise knowingly facilitate
(including by way of furnishing information) any inquiries or the implementation
or submission of any Acquisition Proposal, or (ii) participate in discussions or
negotiations regarding, or furnish to any person any non-public information in
connection with, any Acquisition Proposal; provided, however, that, prior to the
adoption of this Agreement by the Company's stockholders at the Company
Stockholders' Meeting, nothing contained in this Agreement shall prevent the
Company or the Company Board from furnishing information to, or engaging in
negotiations or discussions with, any person in connection with an unsolicited
bona fide written Acquisition Proposal by such person, if and only to the extent
that prior to taking such action (A) the Company Board believes in good faith
(after consultation with its advisors) that such Acquisition Proposal is, or
could reasonably be expected to result in, a Superior Proposal, and the Company
Board determines in good faith (after consultation with its outside legal
counsel) that it is required to do so in order to comply with its fiduciary
duties to the stockholders of the Company under applicable Law, and (B) the
Company Board receives from such person an executed confidentiality agreement,
the terms of which are substantially similar to and no less favorable to the
Company than those contained in the Confidentiality Agreement. Neither the
Company nor any Subsidiary shall enter into any letter of intent, acquisition
agreement or similar agreement with respect to an Acquisition Proposal (other
than a confidentiality agreement referred to in this Section 6.04(a)).
(b) The Company shall notify Parent as promptly as practicable (and in
any event within 48 hours) of the receipt by the Company or any of the
Subsidiaries, or any of its or their respective Representatives, of any bona
fide inquiries, proposals or offers, requests for information or requests for
discussions or negotiations regarding any Acquisition Proposal, specifying the
material terms and conditions thereof and the identity of the party making such
32
proposal. The Company shall keep Parent reasonably informed of the status of any
such discussions or negotiations and of any modifications to such inquiries,
proposals or offers (the Company agreeing that it shall not, and shall cause the
Subsidiaries not to, enter into any confidentiality agreement with any person
subsequent to the date of this Agreement which prohibits the Company from
providing such information to Parent). The Company agrees that neither it nor
any of the Subsidiaries shall terminate, waive, amend or modify any provision of
any existing standstill or confidentiality agreement to which it or any of the
Subsidiaries is a party and that it and the Subsidiaries shall enforce the
provisions of any such agreement. The Company shall, and shall cause the
Subsidiaries and its and their Representatives to, immediately cease and cause
to be terminated any discussions or negotiations with any parties that may be
ongoing with respect to any Acquisition Proposal as of the date hereof, shall
take reasonable steps to inform its and the Subsidiaries' Representatives of the
obligations undertaken in this Section 6.04 and shall request that all
confidential information previously furnished to any such third parties be
returned promptly.
(c) Except as set forth in this Section 6.04, the Company Board (or
any committee thereof) shall not, and shall not publicly propose to, (i)
withdraw or modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation of this Agreement, the Merger or the other Transactions by the
Company Board (or any committee thereof); (ii) approve or recommend any
Acquisition Proposal; or (iii) approve any letter of intent, acquisition
agreement or similar agreement with respect to any Acquisition Proposal (other
than a confidentiality agreement referred to in this Section 6.04).
Notwithstanding the foregoing, prior to the adoption of this Agreement by the
Company's stockholders at the Company Stockholders Meeting, (x) in response to
the receipt of an unsolicited bona fide written Acquisition Proposal, if the
Company Board (A) determines in good faith (after consultation with its
advisors) that such Acquisition Proposal is a Superior Proposal and (B)
determines in good faith (after consultation with its outside legal counsel)
that it is required to do so in order to comply with its fiduciary duties to the
stockholders of the Company under applicable Law, then the Company Board may
approve and recommend such Superior Proposal and, in connection with such
Superior Proposal, withdraw or modify the Company Board Recommendation or (y)
other than in connection with an Acquisition Proposal, if the Company Board
determines in good faith (after consultation with its outside legal counsel)
that it is required to do so in order to comply with its fiduciary duties to the
stockholders of the Company under applicable Law, then the Company Board may
withdraw or modify the Company Board Recommendation (either event described in
the foregoing clauses (x) and (y), a "Change in Board Recommendation").
(d) Nothing contained in this Agreement shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if the Company Board (or any committee
thereof) determines in good faith (after consultation with its outside legal
counsel) that it is required to do so under applicable Law; provided, however,
that neither the Company nor the Company Board (nor any committee thereof) shall
(i) recommend that the stockholders of the Company tender their Shares in
connection with any such tender or exchange offer (or otherwise approve or
recommend any Acquisition Proposal or (ii) withdraw or modify the Company Board
Recommendation, unless in each case the requirements of Section 6.04(c) shall
have been satisfied.
33
(e) The Company shall not take any action to exempt any person from
the restrictions on "business combinations" contained in Section 203 of the DGCL
(or any similar provision) or otherwise cause such restrictions not to apply.
(f) Except as set forth in Section 8.03(d) with respect to an
Acquisition Proposal, for purposes of this Agreement:
(i) "Acquisition Proposal" means any proposal or offer (including
any proposal from or to the Company's stockholders) from any person
other than Parent or Merger Sub relating to (1) any direct or indirect
acquisition of (A) more than 15% of the assets of the Company and its
consolidated Subsidiaries, taken as a whole or (B) over 15% of any
class of equity securities of the Company; (2) any tender offer or
exchange offer, as defined pursuant to the Exchange Act, that if
consummated, would result in any person beneficially owning 15% or
more of any class of equity securities of the Company; or (3) any
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or other similar transaction involving the
Company.
(ii) "Superior Proposal" means any bona fide written Acquisition
Proposal not solicited or initiated in violation of Section 6.04(a)
that (i) relates to more than 50% of the outstanding Shares or all or
substantially all of the assets of the Company and the Subsidiaries
taken as a whole, (ii) is on terms that the Company Board determines
in its good faith judgment (after receiving the advice of its
financial advisor and after taking into account all the terms and
conditions of the Acquisition Proposal) are more favorable to the
Company's stockholders (in their capacities as stockholders) from a
financial point of view than this Agreement (including any alterations
to this Agreement agreed to in writing by Parent in response thereto)
and (iii) which the Company Board determines is reasonably capable of
being consummated.
SECTION 6.05 Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in Article NINTH of the Certificate of Incorporation of the Company, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who, at or prior to the Effective Time, were
directors, officers, employees, fiduciaries or agents of the Company or any of
the Subsidiaries.
(b) After the Effective Time, Parent and the Surviving Corporation
shall, jointly and severally, to the fullest extent permitted under applicable
Law, indemnify and hold harmless, each present and former director and officer
of the Company and each Subsidiary (collectively, the "Indemnified Parties")
against all costs and expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and settlement amounts paid in connection
with any claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee, fiduciary or agent, occurring on or
before the Effective Time, to the same extent as provided in the Certificate of
Incorporation of the Company or any other applicable contract or agreement in
effect on the date hereof. In the event of any such claim, action, suit,
proceeding or investigation, (i) Parent or the
34
Surviving Corporation shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Surviving Corporation, promptly after statements therefor
are received (provided the applicable Indemnified Party provides an undertaking
to repay all advanced expenses if it is finally judicially determined that such
Indemnified Party is not entitled to indemnification) and (ii) the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither Parent nor the Surviving Corporation shall be liable for
any settlement effected without the Surviving Corporation's written consent
(which consent shall not be unreasonably withheld or delayed); and provided,
further, that neither Parent nor the Surviving Corporation shall be obligated
pursuant to this Section 6.05(b) to pay the fees and expenses of more than one
counsel (selected by a plurality of the applicable Indemnified Parties) for all
Indemnified Parties in any jurisdiction with respect to any single action except
to the extent that two or more of such Indemnified Parties shall have
conflicting interests in the outcome of such action; and provided, further,
that, in the event that any claim for indemnification is asserted or made within
such six year period, all rights to indemnification in respect of such claim
shall continue until the disposition of such claim.
(c) The Surviving Corporation shall either (i) cause to be obtained at
the Effective Time "tail" insurance policies with a claims period of at least
six years from the Effective Time with respect to directors' and officers'
liability insurance in amount and scope at least as favorable as the Company's
existing policies for claims arising from facts or events that occurred on or
prior to the Effective Time; or (ii) maintain in effect for six years from the
Effective Time, if available, the current directors' and officers' liability
insurance policies maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions that are not less favorable) with respect to
matters occurring prior to the Effective Time; provided, however, that in no
event shall the Surviving Corporation be required to expend pursuant to this
Section 6.05(c) more than an amount per year equal to 250% of current annual
premiums paid by the Company for such insurance; provided, however, that in the
event of an expiration, termination or cancellation of such current policies,
Purchaser or the Surviving Corporation shall be required to obtain as much
coverage as is possible under substantially similar policies for such maximum
annual amount in aggregate annual premiums. The Company represents that such
current annual premium amount is set forth in Section 6.05(c) of the Company
Disclosure Schedule.
(d) In the event Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall succeed to the obligations set
forth in this Section 6.05.
(e) Parent shall cause the Surviving Corporation to perform all of the
obligations of the Surviving Corporation under this Section 6.05.
SECTION 6.06 Employee Benefits Matters. (a) Parent hereby agrees that,
for a period of two years immediately following the Effective Time, it shall, or
it shall cause the Surviving Corporation and its subsidiaries to, (i) provide
each employee of the Company as of
35
the Effective Time (each, an "Employee") with at least the same level of base
salary, cash incentive compensation and other cash variable compensation that
was provided to each such Employee immediately prior to the Effective Time, and
(ii) provide the Employees with employee benefits (other than equity-based
compensation) that are no less favorable in the aggregate than those provided to
such Employees immediately prior to the Effective Time. From and after the
Effective Time, Parent shall cause the Surviving Corporation and its
subsidiaries to honor in accordance with their terms, all contracts, agreements,
arrangements, policies, plans and commitments of the Company and the
Subsidiaries as in effect immediately prior to the Effective Time that are
applicable to any current or former employees or directors of the Company or any
Subsidiary.
(b) Employees shall receive credit for all purposes (including, for
purposes of eligibility to participate, vesting, benefit accrual and eligibility
to receive benefits, but excluding benefit accruals under any defined benefit
pension plan) under any employee benefit plan, program or arrangement
established or maintained by Parent, the Surviving Corporation or any of their
respective subsidiaries under which each Employee may be eligible to participate
on or after the Effective Time to the same extent recognized by the Company or
any of the Subsidiaries under comparable Plans immediately prior to the
Effective Time. Such plan, program or arrangement shall credit each such
Employee for service accrued or deemed accrued on or prior to the Effective Time
with the Company or any Subsidiary; provided, however, that such crediting of
service shall not operate to duplicate any benefit or the funding of any such
benefit.
(c) Without limiting any of the foregoing, Parent agrees that it
shall, or shall cause the Surviving Corporation to, provide severance benefits
to each Employee who is terminated during the two-year period immediately
following the Effective Time in an amount that is at least equal to the
severance benefits that would have been paid to such Employee pursuant to the
terms of the Company Broad-Based Severance Plan as in effect immediately prior
to the Effective Time, to be calculated based on each Employee's compensation
and service at the time of such termination of employment.
(d) With respect to the welfare benefit plans, programs and
arrangements maintained, sponsored or contributed to by Parent or the Surviving
Corporation ("Purchaser Welfare Benefit Plans") in which an Employee may be
eligible to participate on or after the Effective Time, Parent shall (a) waive,
or cause its insurance carrier to waive, all limitations as to preexisting and
at-work conditions, if any, with respect to participation and coverage
requirements applicable to each Employee under any Purchaser Welfare Benefit
Plan to the same extent waived under a comparable Plan, and (b) provide credit
to each Employee for any co-payments, deductibles and out-of-pocket expenses
paid by such Employee under the Plans during the relevant plan year, up to and
including the Effective Time.
SECTION 6.07 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which could reasonably be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, in the case of representations or warranties
not qualified by any "material" or "Company Material Adverse Effect" qualifier,
or in any respect, in
36
the case of representations or warranties qualified by the "material" or
"Company Material Adverse Effect" qualifier, and (b) any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or satisfy any covenant
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 6.07 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice. In addition, the Company shall give prompt written notice
to Parent, and Parent shall give prompt written notice to the Company, of any
notice or other communication (i) from any person and the response thereto of
the Company or the Subsidiaries or Parent, as the case may be, or its or their
Representatives alleging that the consent of such person is or may be required
in connection with this Agreement or the Transactions, (ii) from any
Governmental Authority and the response thereto of the Company or the
Subsidiaries or Parent, as the case may be, or its or their Representatives in
connection with this Agreement or the Transactions, and (iii) except in the
event the Company Board shall have effected a Change of Board Recommendation,
from or to the SEC.
SECTION 6.08 Financing. (a) Parent shall use its reasonable best
efforts to arrange the Debt Financing on the terms and conditions described in
the Debt Commitment Letter, including using reasonable best efforts to (i)
negotiate definitive agreements with respect thereto on terms and conditions
contained therein and (ii) to satisfy all conditions applicable to Parent and
Merger Sub in such definitive agreements that are within its control. In the
event any portion of the Debt Financing becomes unavailable on the terms and
conditions contemplated in the Debt Commitment Letter, Parent shall use its
reasonable best efforts to arrange to obtain any such portion from alternative
sources on comparable or more favorable terms to Parent (as determined in the
reasonable judgment of Parent). Parent shall give the Company prompt notice of
any material breach by any party of the Debt Commitment Letter or any
termination of the Debt Commitment Letter. Parent shall keep the Company
informed on a reasonably current basis in reasonable detail of the status of its
efforts to arrange the Financing and shall not permit any material amendment or
modification to be made to, or any waiver of any material provision or remedy
under, the Commitment Letters without first consulting with the Company.
(b) The Company agrees to provide, and shall cause the Subsidiaries
and its and their Representatives to provide, all reasonable cooperation in
connection with the arrangement of the Debt Financing as may be reasonably
requested by Parent (provided that such requested cooperation does not
unreasonably interfere with the ongoing operations of the Company and the
Subsidiaries), including (i) participation in meetings, drafting sessions and
due diligence sessions, (ii) furnishing Parent and its financing sources with
financial and other pertinent information regarding the Company as may be
reasonably requested by Parent, (iii) assisting Parent and its financing sources
in the preparation of (A) an offering document for any debt raised to complete
the Merger and (B) materials for rating agency presentations, (iv) reasonably
cooperating with the marketing efforts of Parent and its financing sources for
any debt raised by Parent to complete the Merger and (v) providing and executing
documents as may be reasonably requested by Parent; provided that none of the
Company or any Subsidiary shall be required to pay any commitment or other
similar fee or incur any other liability in connection with the Debt Financing
prior to the Effective Time. Parent shall, promptly upon request by the Company,
reimburse the Company for all reasonable out-of-pocket costs incurred by the
Company or the Subsidiaries in connection with such cooperation. Parent and
Merger Sub shall, on a joint and several basis, indemnify and hold harmless the
Company, the Subsidiaries and their respective
37
Representatives for and against any and all liabilities, losses, damages,
claims, costs, expenses, interest, awards, judgments and penalties suffered or
incurred by them in connection with the arrangement of the Debt Financing and
any information utilized in connection therewith (other than historical
information relating to the Company or the Subsidiaries).
(c) All non-public or otherwise confidential information regarding the
Company obtained by Parent or its Representatives pursuant to Section 6.08(b)
shall be kept confidential in accordance with the Confidentiality Agreement.
(d) Within 60 days of there having occurred after the date of this
Agreement (i) any general suspension of trading in, or limitation on prices for,
securities on the NYSE for three or more consecutive business days, including
but not limited to any changes in trading conditions resulting from actual or
threatened terrorist attacks, responses by the United States or its allies
thereto, or the effects thereof; (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States or New York
for three or more consecutive business days; (iii) the commencement or material
escalation of a war, armed hostilities or other international or national crisis
or security event directly or indirectly involving the United States or any of
its territories after the date of this Agreement, including without limitation,
any acts of terrorism, domestic or foreign or responses of the United States or
its allies, or a national or international economic or financial crisis, the
result of which there has occurred any material disruption or material adverse
change in the United State commercial credit, debt capital or commercial
mortgage-backed securities markets for a period of three or more consecutive
business days; or (iv) any limitation by any governmental, regulatory or
administrative agency or authority which prohibits the extension of credit by
banks or other lending institutions in the United States or New York in a manner
that prevents Lender from providing the Debt Financing for a period of three or
more consecutive business days, Parent shall deliver to the Company a
certificate (the "Market MAC Notice") to that effect signed by an officer of
Parent, describing in reasonable detail the nature of the Market MAC (any of the
events specified in clauses (i) through (iv) described in such Market MAC Notice
being hereinafter referred to as a "Market MAC"). At any time following its
receipt of the Market MAC Notice, the Company may request (by delivery of a
written notice to Parent to such effect (a "Company Waiver Request")) that
Parent fully and irrevocably waive its right to invoke the condition set forth
in Section 7.02(d) with respect to such Market MAC. In the event that Parent
delivers to the Company a written notice that Parent waives its right to invoke
the condition set forth in Section 7.02(d) with respect to such Market MAC (a
"Parent Waiver Notice"), then such Market MAC shall cease to be a basis for
Parent or Merger Sub not consummating the Merger. In the event that Parent fails
to deliver a Parent Waiver Notice with respect to a Market MAC within the longer
of (i) seven days after Parent's receipt of the corresponding Company Waiver
Request and (ii) the number of days between the date on which Parent delivered
to the Company the corresponding Market MAC Notice and the date on which the
Company delivered to Parent the Company Waiver Request (the longer of such
periods being hereinafter referred to as the "Requisite Response Period"), then
the Company shall be entitled to terminate the Agreement pursuant to Section
8.01(j). Notwithstanding anything to the contrary in this Section 6.08(d),
nothing shall release Parent from continuing to be obligated to use its
reasonable best efforts to obtain (i) the Debt Financing or (ii) an alternative
financing in accordance with Section 6.08(a) in the event Parent declines to
timely waive its right to invoke the condition set forth in Section 7.02(d) with
respect to a Market MAC.
38
SECTION 6.09 Further Action; Reasonable Best Efforts. (a) Upon the
terms and subject to the conditions of this Agreement, each of the parties
hereto agrees to use its reasonable best efforts to (i) take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Transactions and (ii) obtain from Governmental
Authorities and third parties any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained by Parent or the
Company or any of their respective subsidiaries in connection with the
authorization, execution and delivery of this Agreement. Subject to appropriate
confidentiality protections, each of Parent and the Company shall have the right
to review and approve in advance drafts of all applications, notices, petitions,
filings and other documents made or prepared in connection with the items
described in clauses (i) and (ii) above, which approval shall not be
unreasonably withheld or delayed, shall cooperate with each other in connection
with the making of all such filings, shall furnish to the other party such
necessary information and assistance as such other party may reasonably request
with respect to the foregoing and shall provide the other party with copies of
all filings made by such party with any applicable Government Authority, and,
upon request, any other information supplied by such party to a Governmental
Authority in connection with this Agreement and the Transactions.
(b) Merger Sub, the Company, and Parent shall use their respective
reasonable best efforts to obtain any third party consents (i) necessary, proper
or advisable to consummate the Transactions, (ii) disclosed in the Company
Disclosure Schedule or (iii) required to prevent a Company Material Adverse
Effect from occurring prior to the Effective Time. In the event that the Company
shall fail to obtain any third party consent described above, the Company shall
use its reasonable best efforts, and shall take such actions as are reasonably
requested by Parent, to minimize any adverse effect upon the Company and Parent
and their respective businesses resulting, or which could reasonably be expected
to result, after the Effective Time, from the failure to obtain such consent.
(c) Notwithstanding anything to the contrary in this Agreement, except
as contemplated under Sections 2.06 and 6.08 or in connection with the
satisfaction of the conditions set forth in Section 7.02(f), in connection with
obtaining any approval or consent from any person (other than a Governmental
Authority) with respect to the Merger or any other Transaction, (i) without the
prior written consent of Parent which shall not be unreasonably withheld, none
of the Company or any of its Subsidiaries shall pay or commit to pay to such
person whose approval or consent is being solicited any cash or other
consideration, make any commitment or incur any liability or other obligation
due to such person and (ii) none of Parent, Merger Sub or their respective
affiliates shall be required to pay or commit to pay to such person whose
approval or consent is being solicited any cash or other consideration, make any
commitment or to incur any liability or other obligation. In connection with
obtaining any approval or consent from any Governmental Authority with respect
to the Merger or any other Transaction, no divestiture of assets or undertaking
relating to the conduct of business shall be made by the Company, Parent or
Merger Sub or their respective affiliates unless acceptable to Parent.
SECTION 6.10 Obligations of Parent and Merger Sub. Parent shall take
all action necessary to cause Merger Sub to perform its obligations under this
Agreement and to
39
consummate the Transactions on the terms and subject to the conditions set forth
in this Agreement.
SECTION 6.11 Public Announcements. The initial press release relating
to this Agreement shall be a joint press release the text of which has been
agreed to by each of Parent and the Company. Thereafter, each of Parent and the
Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or any of
the Transactions, except to the extent public disclosure is required by
applicable Law or the requirements of the NYSE, in which case the issuing party
shall use its reasonable best efforts to consult with the other party before
issuing any such release or making any such public statement.
SECTION 6.12 Transfer Taxes. The Company and Parent shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any sales, transfer, stamp, stock
transfer, value added, use, real property transfer or gains and any similar
Taxes which become payable in connection with the transactions contemplated by
this Agreement. Each of Parent and the Surviving Corporation agrees to assume
liability for and pay any sales, transfer, stamp, stock transfer, value added,
use, real property transfer or gains and any similar Taxes, as well as any
transfer, recording, registration and other fees that may be imposed upon,
payable or incurred in connection with this Agreement and the Transactions.
SECTION 6.13 Resignations. The Company shall use its reasonable best
efforts to obtain and deliver to Parent at the Closing evidence reasonably
satisfactory to Parent of the resignation effective as of the Effective Time, of
those directors of the Company or any Subsidiary designated by Parent to the
Company in writing at least 10 business days prior to the Closing.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver (where permissible) of the following
conditions:
(a) Company Stockholder Approval. This Agreement shall have been
adopted by the requisite affirmative vote of the stockholders of the
Company in accordance with the DGCL and the Company's Certificate of
Incorporation.
(b) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation,
judgment, decree, executive order or award which is then in effect and
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver (where permissible) of the following additional
conditions:
40
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true
and correct (without giving effect to any limitation as to materiality
or Company Material Adverse Effect set forth therein except for the
limitation set forth in the first sentence of Section 3.09) as of the
Effective Time, as though made on and as of the Effective Time (except
to the extent expressly made as of an earlier date, in which case as
of such earlier date), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any limitation as to materiality or Company Material
Adverse Effect set forth therein except for the limitation set forth
in the first sentence of Section 3.09) would not, individually or in
the aggregate, reasonably be expected to have a Company Material
Adverse Effect. In addition, the representations and warranties set
forth in Section 3.03 shall be true and correct in all material
respects as of the Effective Time, as though made on and as of the
Effective Time (except to the extent expressly made as of an earlier
date, in which case as of such earlier date).
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on
or prior to the Effective Time.
(c) Officer's Certificate. The Company shall have delivered to
Parent a certificate, dated the date of the Closing, signed by an
officer of the Company and certifying as to the satisfaction of the
conditions specified in Sections 7.02(a) and 7.02(b).
(d) No Market MAC. No Market MAC (other than any Market MAC in
respect of which Parent has previously waived its right to invoke this
Section 7.02(d)) shall have occurred after the date of this Agreement.
If any of the events specified in clauses (i) through (iv) described
in the first sentence of Section 6.08(d) has occurred for less than
three consecutive business days (without giving effect to the three
consecutive business day period already referenced with respect to the
applicable event in Section 6.08(d)), then Parent and Merger Sub shall
not be obligated to consummate the Merger for so long as such event is
continuing, and thereafter Parent and Merger Sub shall not be
obligated to consummate the Merger to the extent such event
constitutes a Market MAC in accordance with Section 6.08(d).
(e) Debt Offers. At or prior to the Effective Time, the requisite
consents specified in Section 2.06(a) of the Company Disclosure
Schedule, respectively, shall have been received under the 9.15% Debt
Offer and the 9.875% Debt Offer and the Company and the respective
trustees shall have executed and delivered the supplemental indentures
described in Section 2.06(b) to the indentures governing the 9.15%
Senior Subordinated Notes and the 9.875% Senior Subordinated Notes.
(f) Credit Agreement. At or prior to the Effective Time, The
Industrial Bank of Japan, Limited, as administrative agent under the
Credit Agreement ("IBJ"), shall have provided the Company with a
"payoff" letter acknowledging that (i) the Credit Agreement shall be
terminated, (ii) any and all Liens held by IBJ related thereto shall
be released and (iii) the Company and the Subsidiaries shall be
released from any and all liabilities under the Credit Agreement and
any related guaranties (other than any
41
obligations under any indemnification or similar provision that
survive such termination), in each case subject to repayment of the
aggregate principal amount outstanding under the Credit Agreement,
together with all interest accrued thereon and any other fees or
expenses payable thereunder in connection with such prepayment.
SECTION 7.03 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub that are qualified by materiality
shall be true and correct in all respects, and the representations and
warranties of Parent and Merger Sub contained in this Agreement that
are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the
Effective Time, as though made on and as of the Effective Time, except
to the extent expressly made as of an earlier date, in which case as
of such earlier date.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by it on or prior to the Effective Time.
(c) Officer's Certificate. Parent shall have delivered to the
Company a certificate, dated the date of the Closing, signed by an
officer of Parent, certifying as to the satisfaction of the conditions
specified in Sections 7.03(a) and 7.03(b).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time by action taken or authorized by the Board of Directors of the
terminating party or parties, notwithstanding any requisite adoption of this
Agreement and the Transactions by the stockholders of the Company, and whether
before or after the stockholders of the Company have approved this Agreement at
the Company Stockholders' Meeting, as follows (the date of any such termination,
the "Termination Date"):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall
not have occurred on or before August 31, 2004; provided, however,
that the right to terminate this Agreement under this Section 8.01(b)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date;
(c) by either Parent or the Company if any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling (whether temporary, preliminary or
permanent) or taken any other action (including the
42
failure to have taken an action) which has become final and
non-appealable and has the effect of making consummation of the Merger
illegal or otherwise preventing or prohibiting consummation of the
Merger;
(d) by Parent, if neither Parent nor Merger Sub is in material
breach of its obligations under this Agreement, and if (i) any of the
representations and warranties of the Company herein become untrue or
inaccurate such that Section 7.02(a) would not be satisfied, or (ii)
there has been a breach on the part of the Company of any of its
covenants or agreements herein such that Section 7.02(b) would not be
satisfied, and, in either such case, such breach (if curable) has not
been cured within 30 days after notice to the Company;
(e) by the Company if the Company is not in material breach of
its obligations under this Agreement, and if (i) any of the
representations and warranties of Parent or Merger Sub herein become
untrue or inaccurate such that Section 7.03(a) would not be satisfied,
or (ii) there has been a breach on the part of Parent or Merger Sub of
any of its covenants or agreements herein such that Section 7.03(b)
would not be satisfied, and, in either such case, such breach (if
curable) has not been cured within 30 days after notice to Parent;
(f) by either Parent or the Company if this Agreement shall fail
to receive the Stockholder Approval at the Company Stockholders'
Meeting;
(g) by Parent if the Company Board shall have (i) effected a
Change of Board Recommendation; or (ii) recommended or approved any
Acquisition Proposal;
(h) by the Company if, prior to the adoption of this Agreement by
the Company's stockholders at the Company Stockholders' Meeting, the
Company Board determines in good faith (after consultation with its
advisors), in the exercise of its fiduciary duties, that an
unsolicited bona fide Acquisition Proposal is a Superior Proposal, but
only (i) after providing written notice to Parent (a "Notice of
Superior Proposal") advising Parent that the Company Board has
received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making
such Superior Proposal, and (ii) if Parent does not, within three (3)
business days of Parent's receipt of the Notice of Superior Proposal,
make an offer that the Company Board determines, in its good faith
judgment (after consultation with its advisors) to be at least as
favorable to the Company's stockholders as such Superior Proposal;
provided that during such three business day period, the Company shall
negotiate in good faith with Parent (to the extent Parent wishes to
negotiate) to enable Parent to make such an offer; provided, however,
that any such purported termination pursuant to this Section
8.01(h)shall be void and of no force or effect unless the Company
concurrently with such termination pays to Parent the Company
Termination Fee in accordance with Section 8.03; and provided further
that Parent and Merger Sub acknowledge and agree that concurrently
with such termination the Company may enter into a definitive
agreement providing for implementation of such Superior Proposal;
43
(i) by the Company if, after the conditions set forth in Section
7.01, Sections 7.02(a), (b) and (d) and (in the event Parent has fully
and timely complied with its obligations under Section 2.06) Section
7.02(e) have been satisfied and within five business days after the
Company has delivered written notice to Parent of the satisfaction of
such conditions, the Merger shall not have been consummated; or
(j) by the Company if Parent fails to deliver a Parent Waiver
Notice prior to the expiration of the Requisite Response Period with
respect to any Market MAC.
SECTION 8.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, and there shall be no liability under this Agreement on the part of any
party hereto (except that the indemnification and reimbursement obligations of
Parent and Merger Sub contained in Sections 2.06(d), 6.03(a) and 6.08(b), the
Guarantee referred to in Section 4.09, and the provisions of Sections 6.03(b)
and 6.08(c), this Section 8.02, Section 8.03 and Article IX shall survive any
such termination); provided, however, that nothing herein shall relieve the
Company from liability for any willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement prior to such
termination.
SECTION 8.03 Fees and Expenses. (a) Except as otherwise set forth in
this Section 8.03, all Expenses incurred in connection with this Agreement and
the Transactions shall be paid by the party incurring such expenses, whether or
not the Merger or any other Transaction is consummated. "Expenses", as used in
this Agreement, shall include all reasonable out-of-pocket expenses (including
all fees and expenses of counsel, accountants, investment bankers, financing
sources, hedging counterparties, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Proxy Statement, the solicitation of stockholder approvals and all other
matters related to the closing of the Merger and the other Transactions.
(b) The Company agrees that if this Agreement shall be terminated:
(i) by Parent pursuant to Section 8.01(d), then the Company shall
pay Parent the Termination Expenses and, further, if (A) at or prior
to the Termination Date, an Acquisition Proposal shall have been
publicly announced and (B) if concurrently with such termination or
within 12 months of the Termination Date, the Company enters into, or
submits to the stockholders of the Company for adoption, an agreement
with respect to an Acquisition Proposal (which need not be the same
Acquisition Proposal as the Acquisition Proposal described above that
shall have been publicly announced at or prior to the Termination
Date), or an Acquisition Proposal (which need not be the same
Acquisition Proposal as the Acquisition Proposal described above that
shall have been publicly announced at or prior to the Termination
Date) is consummated, then the Company will also pay Parent the
Company Termination Fee;
(ii) by Parent or the Company pursuant to Section 8.01(f), and,
at or prior to the Termination Date, an Acquisition Proposal shall
have been publicly announced, then (A) the Company shall pay to Parent
the Termination Expenses and (B) if, concurrently
44
with such termination or within 12 months of the Termination Date, the
Company enters into, or submits to the stockholders of the Company for
adoption, an agreement with respect to an Acquisition Proposal (which
need not be the same Acquisition Proposal as the Acquisition Proposal
described above that shall have been publicly announced at or prior to
the Termination Date), or an Acquisition Proposal (which need not be
the same Acquisition Proposal as the Acquisition Proposal described
above that shall have been publicly announced at or prior to the
Termination Date) is consummated, then the Company shall pay Parent
the Company Termination Fee;
(iii) by Parent pursuant to Section 8.01(g), then (so long as
neither Parent nor Merger Sub was in material breach of any of its
representations, warranties or covenants in this Agreement as of the
Termination Date) the Company shall pay Parent the Company Termination
Fee; or
(iv) by the Company pursuant to Section 8.01(h), then the Company
shall pay to Parent the Company Termination Fee (which Company
Termination Fee shall be paid concurrently with such termination).
(c) The Company Termination Fee shall be paid to Parent or its
designee by the Company in immediately available funds (i) concurrently with and
as a condition to the effectiveness of a termination of this Agreement by the
Company pursuant to Section 8.01(h) and (ii) within two business days after the
date of the event giving rise to the obligation to make such payment in all
other circumstances. The Termination Expenses shall be paid to Parent or its
designee by the Company in immediately available funds within two business days
after receipt by the Company of reasonable documentation with respect to such
Expenses. In no event shall the Company be required to pay under Section 8.03(b)
an amount in excess of $50,000,000.
(d) (i) For purposes of this Section 8.03, Acquisition Proposal shall
have the meaning assigned to such term in Section 6.04(f), except that
references to 15% in clauses (1) and (2) of the definition thereof shall be
deemed to be references to 40% and clause (3) of the definition thereof shall be
deemed amended and replaced in its entirety by the following language "(3) any
merger, consolidation, business combination, recapitalization or other similar
transaction involving the Company pursuant to which stockholders of the Company
immediately prior to the consummation of such transaction would cease to own
directly or indirectly at least 40% of the voting power of the outstanding
securities of the Company (or of another person that directly or indirectly
would own all or substantially all the assets of the Company) immediately
following such transaction in the same proportion as they owned prior to the
consummation of such transaction".
(ii) For purposes of this Agreement, "Company Termination Fee" means
an amount equal to $50,000,000, less the Termination Expenses, if any,
previously paid to Parent pursuant to this Section 8.03(b).
(iii) For purposes of this Agreement, "Termination Expenses" means an
amount, not to exceed $10,000,000, equal to the reasonably documented Expenses
of Parent and Merger Sub.
45
(e) Parent agrees that, if the Company shall terminate this Agreement
(i) pursuant to Section 8.01(e), (ii) pursuant to Section 8.01(b) and, at the
time of such termination, the conditions set forth in Section 7.01, Sections
7.02(a), (b) and (d) and (in the event Parent has fully and timely complied with
its obligations under Section 2.06) Section 7.02(e) have been satisfied, or
(iii) pursuant to Section 8.01(i), then Parent shall pay to the Company a fee of
$50,000,000 (the "Parent Termination Fee") in immediately available funds no
later than two business days after such termination by the Company.
(f) Each of the Company and Parent acknowledges that the agreements
contained in this Section 8.03 are an integral part of the transactions
contemplated by this Agreement. In the event that the Company shall fail to pay
the Company Termination Fee or any Termination Expenses when due or Parent shall
fail to pay the Parent Termination Fee when due, the Company or the Parent, as
the case may be, shall reimburse the other party for all reasonable costs and
expenses actually incurred or accrued by such other party (including reasonable
fees and expenses of counsel) in connection with the collection under and
enforcement of this Section 8.03. Notwithstanding anything to the contrary in
this Agreement, the Company's right to receive payment of the Parent Termination
Fee pursuant to this Section 8.03 shall be the exclusive remedy of the Company
and the Subsidiaries for the loss suffered as a result of the failure of the
Merger and the other Transactions to be consummated, and upon payment of the
Parent Termination Fee in accordance with this Section 8.03, none of Parent,
Merger Sub or Guarantor shall have any further liability or obligation relating
to or arising out of this Agreement or the Transactions (except with respect to
the second sentence of this Section 8.03(f), indemnification and reimbursement
obligations of Parent and Merger Sub contained in Sections 2.06(d), 6.03(a) and
6.08(b) and the provisions of Section 6.03(b) and 6.08(c)).
SECTION 8.04 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after the
adoption of this Agreement and the Transactions by the stockholders of the
Company, no amendment shall be made except as allowed under applicable Law. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
SECTION 8.05 Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any obligation or
other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties of any other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any agreement
of any other party or any condition to its own obligations contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby. The failure of any party to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties and
Agreements. The representations and warranties in this Agreement and in any
certificate delivered pursuant
46
hereto shall terminate at the Effective Time. This Section 9.01 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
SECTION 9.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing in the English language and shall
be given (a) on the date of delivery if delivered personally, (b) on the first
business day following the date of dispatch if delivered by a nationally
recognized next-day courier service, (c) on the fifth business day following the
date of mailing if delivered by registered or certified mail (postage prepaid,
return receipt requested) or (d) if sent by facsimile transmission, when
transmitted and receipt is confirmed. All notices hereunder shall be delivered
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 9.02):
if to Parent or Merger Sub:
c/o Blackstone Real Estate Partners IV L.P.
345 Park Avenue
New York, NY 10154
Facsimile No: (212) 583-5573
Attention: Jonathan D. Gray
and
c/o Blackstone Capital Partners IV L.P.
345 Park Avenue
New York, NY 10154
Facsimile No: (212) 583-5717
Attention: Michael S. Chae
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Facsimile No: (212) 455-2502
Attention: Brian M. Stadler
if to the Company:
Extended Stay America, Inc.
100 Dunbar Street
Spartanburg, SC 29306
Facsimile No: (864) 573-1740
Attention: Corry Oakes
47
with a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Facsimile No: (212) 848-7179
Attention: John J. Madden
SECTION 9.03 Certain Definitions. (a) For purposes of this Agreement:
"affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, such specified person.
"beneficial owner", with respect to any Shares, has the meaning
ascribed to such term under Rule 13d-3(a) of the Exchange Act.
"business day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which
banks are not required or authorized to close in The City of New York.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership
of voting securities, as trustee or executor, by contract or credit
arrangement or otherwise.
"knowledge of the Company" or "Company's knowledge" means the
actual knowledge (after reasonable inquiry) of any executive officer
of the Company.
"person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including a
"person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government.
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means an affiliate controlled
by such person, directly or indirectly, through one or more
intermediaries, and, without limiting the foregoing, includes any
entity in respect of which such person, directly or indirectly,
beneficially owns 50% or more of the voting securities or equity.
(b) The following terms have the meaning set forth in the Sections set
forth below:
Defined Term Location of Definition
------------ ----------------------
Acquisition Proposal................................ ss. 6.04(f)(i)
48
Defined Term Location of Definition
------------ ----------------------
Action.............................................. ss. 3.10
Agreement........................................... Preamble
Certificate of Merger............................... ss. 1.03
Certificates........................................ ss. 2.02(b)
Change in Board Recommendation...................... ss. 6.04(c)
Closing............................................. ss. 1.02
Code................................................ ss. 3.11(b)
Commitment Letter................................... ss. 4.08
Company............................................. Preamble
Company Board....................................... Recitals
Company Board Recommendation........................ ss. 3.19(a)
Company Common Stock................................ Recitals
Company Disclosure Schedule......................... Article III
Company Material Adverse Effect..................... ss. 3.01(a)
Company Permits..................................... ss. 3.06
Company Preferred Stock............................. ss. 3.03(a)
Company Stock Option................................ ss. 2.04(a)
Company Stock Option Plans.......................... ss. 2.04(a)
Company Stockholders' Meeting....................... ss. 6.02
Company Termination Fee............................. ss. 8.03(d)(iii)
Company Waiver Request.............................. ss. 6.08(d)
Confidentiality Agreement........................... ss. 6.03(b)
Contract............................................ ss. 3.05(a)
Credit Agreement.................................... ss. 3.03(c)
Debt Financing...................................... ss. 4.08
Debt Offers ........................................ ss. 2.06(a)
DGCL................................................ ss. 1.01
Dissenting Shares................................... ss. 2.05(a)
Effective Time...................................... ss. 1.03
Employee............................................ ss. 6.06(a)
Environmental Laws.................................. ss. 3.16(b)(i)
Environmental Permits............................... ss. 3.16(b)(ii)
Equity Funding Letter............................... ss. 4.08
ERISA............................................... ss. 3.11(a)
Exchange Act........................................ ss. 3.05(b)
Exchange Fund....................................... ss. 2.02(a)
Expenses............................................ ss. 8.03(a)
Financing........................................... ss. 4.08
GAAP................................................ ss. 3.07(b)
Governmental Authority.............................. ss. 3.05(b)
Ground Leases ...................................... ss. 3.13(c)
Guarantee........................................... ss. 4.09
Guarantor........................................... ss. 4.09
Hazardous Substances................................ ss. 3.16(b)(iii)
IBJ................................................. ss. 7.02(f)
49
Defined Term Location of Definition
------------ ----------------------
Indebtedness........................................ ss. 3.17(a)(iv)
Indemnified Parties................................. ss. 6.05(b)
Intellectual Property............................... ss. 3.14(b)
Investments......................................... ss. 3.01(c)
IRS................................................. ss. 3.11(a)
Law................................................. ss. 3.05(a)
Lease Documents..................................... ss. 3.13(b)
Leased Properties................................... ss. 3.13(b)
Licensed Intellectual Property...................... ss. 3.14(a)
Liens............................................... ss. 3.13(a)
Market MAC ......................................... ss. 6.08(d)
Market MAC Notice................................... ss. 6.08(d)
Material Contracts.................................. ss. 3.17(a)
Merger.............................................. Recitals
Merger Consideration................................ ss. 2.01(a)
Merger Sub.......................................... Preamble
Multiemployer Plan.................................. ss. 3.11(b)
Multiple Employer Plan.............................. ss. 3.11(b)
Notes............................................... ss. 2.06(a)
9.15% Senior Subordinated Notes..................... ss. 2.06(a)
9.15% Debt Offer.................................... ss. 2.06(a)
9.875% Senior Subordinated Notes.................... ss. 2.06(a)
9.875% Debt Offer................................... ss. 2.06(a)
Notice of Superior Proposal......................... ss. 8.01(h)
NYSE................................................ ss. 3.05(b)
Offer Documents..................................... ss. 2.06(c)
Option Payment...................................... ss. 2.04(b)
Owned Intellectual Property......................... ss. 3.14(a)
Owned Real Properties............................... ss. 3.13(a)
Parent.............................................. Preamble
Parent Termination Fee.............................. ss. 8.03(e)
Parent Waiver Notice................................ ss. 6.08(d)
Paying Agent........................................ ss. 2.02(a)
Permitted Liens..................................... ss. 3.13(a)
Personal Property................................... ss. 3.13(h)
Plans............................................... ss. 3.11(a)
Properties.......................................... ss. 3.13(b)
Proxy Statement..................................... ss. 3.05(b)
Purchaser Welfare Benefit Plans..................... ss. 6.06(d)
Representatives..................................... ss. 6.03(a)
Requisite Response Period........................... ss. 6.08(d)
SEC................................................. ss. 3.05(b)
SEC Reports......................................... ss. 3.07(a)
Section 262......................................... ss. 2.05(a)
50
Defined Term Location of Definition
------------ ----------------------
Securities Act...................................... ss. 3.07(a)
Shares.............................................. ss. 2.01(a)
Stockholder Approval................................ ss. 3.19(b)
Subsidiary.......................................... ss. 3.01(a)
Superior Proposal................................... ss. 6.04(f)(ii)
Surviving Corporation............................... ss. 1.01
Tax or Taxes........................................ ss. 3.15(k)(i)
Tax Returns......................................... ss. 3.15(k)(ii)
Termination Expenses ............................... ss. 8.03(d)(iii)
Termination Date.................................... ss. 8.01
Title Policies...................................... ss. 3.13(e)
Transactions........................................ ss. 3.04
(c) When a reference is made in this Agreement to Sections, Schedules
or Exhibits, such reference shall be to a Section, Schedule or Exhibit of this
Agreement, respectively, unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not any particular provision of
this Agreement. The term "or" is not exclusive. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms. References to a person are also to its permitted successors and
assigns. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.
SECTION 9.04 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05 Disclaimer of Other Representations and Warranties.
Parent, Merger Sub and the Company each acknowledges and agrees that, except for
the representations and warranties expressly set forth in this Agreement (a) no
party makes, and has not made, any representations or warranties relating to
itself or its businesses or otherwise in connection with the Transactions, (b)
no person has been authorized by any party to make any representation or
warranty relating itself or its businesses or otherwise in connection with the
Transactions and, if made, such representation or warranty must not be relied
upon as having been authorized by such party, and (c) any estimates,
projections, predictions, data, financial information, memoranda, presentations
or any other materials or information provided or addressed to any party or any
of its Representatives are not and shall not be deemed to be or to include
representations or
51
warranties unless any such materials or information is the subject of any
representation or warranty set forth in this Agreement.
SECTION 9.06 Entire Agreement; Assignment. This Agreement, the
Confidentiality Agreement and the Guarantee constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof
and supersede all prior agreements and undertakings, both written and oral,
among the parties hereto, or any of them, with respect to the subject matter
hereof and thereof. This Agreement shall not be assigned (whether pursuant to a
merger, by operation of law or otherwise), except that Parent and Merger Sub may
assign all or any of their rights and obligations hereunder to any direct or
indirect wholly owned subsidiary of Parent, provided, however, that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
SECTION 9.07 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.05 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.08 Remedies; Specific Performance. (a) Without limiting the
right to receive any payment it may be entitled to receive under Section 8.03(e)
(including under Sections 2.06(d), 6.03(a) and 6.08(b)), the Company agrees that
to the extent it has incurred losses or damages in connection with this
Agreement the maximum aggregate liability of Parent, Merger Sub and Guarantor
for such losses or damages shall be limited to $50,000,000, and in no event
shall the Company seek to recover any money damages in excess of such amount
from Parent, Merger Sub or Guarantor or their respective Representatives and
affiliates in connection therewith.
(b) The parties hereto agree that irreparable damage would occur in
the event any provision of this Agreement were not performed by the Company in
accordance with the terms hereof and that, prior to the termination of this
Agreement pursuant to Section 8.01, Parent and Merger Sub shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity. The parties acknowledge that the Company shall not be entitled to an
injunction or injunctions to prevent breaches of this Agreement by Parent or
Merger Sub or to enforce specifically the terms and provisions of this Agreement
and that the Company's sole and exclusive remedy with respect to any such breach
shall be the remedy set forth in Section 9.08(a) and 8.03(f); provided, however,
the Company shall be entitled to seek specific performance to prevent any breach
by Parent or Merger Sub of Sections 6.03(b) and 6.08(c).
SECTION 9.09 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All Actions arising out
of or relating to this Agreement shall be heard and determined exclusively in
the Delaware Court of Chancery. The parties hereto hereby (a) submit to the
exclusive jurisdiction of the Delaware Court of Chancery for the purpose of any
Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in
52
any such Action, any claim that it is not subject personally to the jurisdiction
of the above-named court, that its property is exempt or immune from attachment
or execution, that the Action is brought in an inconvenient forum, that the
venue of the Action is improper, or that this Agreement or the Transactions may
not be enforced in or by the above-named court.
SECTION 9.10 Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable Law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Transactions. Each of
the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to enter
into this Agreement and the Transactions, as applicable, by, among other things,
the mutual waivers and certifications in this Section 9.10.
SECTION 9.11 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.12 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
53
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
Extended Stay America, Inc.
By /s/ George D. Johnson, Jr.
--------------------------------------
Name: George D. Johnson, Jr.
Title: Chief Executive Officer
BHAC CAPITAL IV, L.L.C.
By /s/ Jonathan D. Gray
-------------------------------------
Name: Jonathan D. Gray
Title: Chairman
BHAC ACQUISITION IV, INC.
By /s/ Jonathan D. Gray
-------------------------------------
Name: Jonathan D. Gray
Title: President