EX-10(5)
PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT
This PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT (this
"Agreement") is made as of this 30th day of June, 1995 between The Promus
Companies Incorporated, a Delaware corporation ("Promus") and Promus Hotel
Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of
Promus ("PRH").
RECITALS
WHEREAS, Promus, through subsidiaries, develops, manages and owns
a hotel business consisting of the Embassy Suites, Hampton Inn, Hampton Inn and
Suites and Homewood Suites hotel brands (the "PRH Business") and the Harrah's
casino entertainment business (the "Casino Business");
WHEREAS, the Board of Directors of Promus has determined that it
is in the best interests of Promus and the stockholders of Promus to separate
the Casino Business, on the one hand, and the PRH Business, on the other hand,
and, in order to effect such separation, to transfer (or to cause its
subsidiaries to transfer) to PRH or its Subsidiaries the stock of certain Promus
subsidiaries principally engaged in the PRH Business and certain other assets
relating principally to the PRH Business (the "Asset Transfers"), and thereafter
to cause Embassy Suites, Inc., a wholly-owned subsidiary of Promus ("Embassy"),
to distribute all of the outstanding shares of common stock, par value $0.10 per
share, of PRH to Promus (the "Embassy Distribution") and thereafter to cause
Promus to distribute such PRH common stock to the holders of Promus common stock
(the "Distribution");
WHEREAS, Promus has already effected certain preliminary
transfers and corporate restructurings, which transactions are not contingent
upon consummation of the Distribution and will not be undone if the Distribution
does not occur; and
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WHEREAS, in connection with the Distribution, Promus and PRH have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Asset Transfers and the
Distribution, and to set forth the agreements that will govern certain matters
following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. General. As used in this Agreement, the following
terms shall have the following meanings:
Action: Any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
Affiliate: Means with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have meanings correlative to
the foregoing. Notwithstanding the foregoing, (i) the Affiliates of Promus
shall not include PRH, the PRH Subsidiaries or any other Person which would be
an Affiliate of Promus by reason of Promus's ownership of the capital stock of
PRH prior to the Distribution or the fact that any officer or director of PRH or
any of the PRH Subsidiaries shall also serve as an officer or director of
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Promus or any of the Retained Subsidiaries, and (ii) the Affiliates of PRH shall
not include Promus, the Retained Subsidiaries or any other Person which would be
an Affiliate of PRH by reason of Promus's ownership of the capital stock of PRH
prior to the Distribution or the fact that any officer or director of PRH or any
of the PRH Subsidiaries shall also serve as an officer or director of Promus or
any of the Retained Subsidiaries.
Agent: The distribution agent appointed by Promus to distribute
the PRH Common Stock and cash in lieu of fractional shares pursuant to the
Distribution.
Annual Meeting: The 1995 Annual Meeting of Stockholders of
Promus held on May 26, 1995, at which the Distribution and certain other matters
relating to the Distribution were ratified and approved by the holders of a
majority of the outstanding shares of Promus Common Stock.
Code: The Internal Revenue Code of 1986, as amended.
Commission: The Securities and Exchange Commission.
Conveyancing and Assumption Instruments: Collectively, the
various agreements, instruments and other documents to be entered into to effect
the Asset Transfers and the assumption of Liabilities in the manner contemplated
by this Agreement and the Related Agreements.
Distribution Date: The date determined by the Promus Board as
the date on which the Distribution shall be effected, which Distribution Date is
contemplated by the Promus Board to occur on or about June 30, 1995.
Distribution Record Date: The date established by the Promus
Board as the date for taking a record of the Holders of Promus Common Stock
entitled to participate in the Distribution, which Distribution Record Date has
been established as June 21, 1995, subject to the fulfillment on or before June
18, 1995 of certain conditions to the Distribution as provided in Section 4.02.
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Employee Benefits Allocation Agreement: The Benefits and Other
Employment Matters Allocation Agreement between Promus and PRH, which agreement
shall be entered into on or prior to the Distribution Date in substantially the
form of Exhibit A attached hereto.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Existing Management and Lease Agreements: The existing
management or lease agreements with hotel property owners (including those
entities in which Promus or its Subsidiaries are a partner or hold an equity
interest) to which Promus and its Subsidiaries are parties, pursuant to which
Promus or its Subsidiaries lease, manage or operate lodging properties.
Existing Promus Credit Facilities: The credit facilities of
Promus set forth on Schedule 1.01(a).
Financing Obligations: All (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, notes, debentures or similar instruments,
(iii) obligations under capitalized leases and deferred purchase arrangements,
(iv) reimbursement or other obligations relating to letters of credit or similar
arrangements, and (v) obligations to guarantee, directly or indirectly, any of
the foregoing types of obligations on behalf of others.
Franchise Agreements: All license, franchise or other agreements
or commitments to which Promus or any of its Subsidiaries is a party pursuant to
which Promus (either directly or through any such Subsidiary) has granted
franchise rights with respect to the operation of hotel properties, and all
other franchise rights either granted or received by Promus or any of its
Subsidiaries relating to the PRH Business.
Harrah's: Harrah's, a Nevada corporation.
Harrah's Club: Harrah's Club, a Nevada corporation.
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Harrah's Entertainment Pro Forma Balance Sheet: The Pro Forma
Consolidated Balance Sheet for Harrah's Entertainment, Inc. as of March 31, 1995
attached hereto as Exhibit B-1.
Harrah's Entertainment Pro Forma Statement of Income: The Pro
Forma Consolidated Statement of Income for Harrah's Entertainment, Inc. as of
March 31, 1995 attached hereto as Exhibit B-2.
Holders: The holders of record of Promus Common Stock as of the
Distribution Record Date.
Information Technology Agreements: The agreements to be entered
into between Promus and PRH on or prior to the Distribution Date, providing for
certain matters related to information technology after the Distribution Date,
in substantially the forms of the following: Data Center Lease attached as
Exhibit C-1, Marketing Services Agreement attached as Exhibit C-2, Satellite
Services Agreement attached as Exhibit C-3, Software Agreement attached as
Exhibit C-4, Transitional Service Agreement attached as Exhibit
C-5, Administrative Systems Services Agreement attached as Exhibit C-6, and
Disaster Recovery Agreement attached as Exhibit C-7.
Insurance Proceeds: Those moneys (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
IRS: The Internal Revenue Service.
Liabilities: Any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto, and including, without limitation, those debts,
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liabilities and obligations arising under any law, rule, regulation, Action,
threatened Action, order or consent decree of any governmental entity or any
award of any arbitrator of any kind, and those arising under any contract,
agreement, commitment or undertaking.
Meeting Record Date: The record date established by the Promus
Board for determining stockholders of Promus entitled to vote at the Annual
Meeting.
NYSE: The New York Stock Exchange.
Person: Any individual, corporation, partnership, limited
liability company, association, trust, estate or other entity or organization,
including any governmental entity or authority.
PHI: Promus Hotels, Inc., a Delaware corporation and a wholly-
owned subsidiary of PRH.
Pre-Paid Transaction Expenses: Amounts paid by Promus prior to
the allocation of cash pursuant to Section 2.06 for legal, investment banking,
accounting, filing, printing and related expenses incurred by Promus in
connection with the Distribution.
PRH Board: The Board of Directors of PRH.
PRH Books and Records: The books and records (including
computerized records) of PRH and the PRH Subsidiaries and all books and records
owned by Promus and its Subsidiaries which relate to the PRH Business or are
necessary to operate the PRH Business including, without limitation, all such
books and records relating to PRH Employees, all files relating to any Action
being assumed by PRH as part of the PRH Liabilities, original corporate minute
books, stock ledgers and certificates and corporate seals, and all licenses,
leases, agreements and filings, relating to PRH, the PRH Subsidiaries or the PRH
Business (but not including the Promus Books and
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Records, provided that PRH shall have access to, and have the right to obtain
duplicate copies of, the Promus Books and Records in accordance with the
provisions of Article VII).
PRH Business: The businesses conducted by PRH and the PRH
Subsidiaries and the businesses conducted pursuant to or utilizing the PRH
Assets, including without limitation the management, operation and franchising
of hotels, including all hotels in the "Embassy Suites," "Hampton Inn,"
"Homewood Suites," and "Hampton Inn and Suites" hotel chains.
PRH Bylaws: The Bylaws of PRH, substantially in the form of
Exhibit D, to be in effect at the Distribution Date.
PRH Certificate: The Restated Certificate of Incorporation of
PRH, substantially in the form of Exhibit E, to be in effect at the Distribution
Date.
PRH Common Stock: The common stock, par value $0.10 per share,
of PRH (together with any PRH Rights issued pursuant to the PRH Rights Plan).
PRH Credit Agreement: The Credit Agreement between NationsBank,
N.A., Embassy, PHI, the Guarantors and the Several Lenders referred to therein,
dated as of June 7, 1995, and all documents evidencing or securing such Credit
Agreement or executed and delivered by the parties to such Credit Agreement in
connection therewith.
PRH Employees: The meaning specified in the Employee Benefits
Allocation Agreement.
PRH Group: PRH and the PRH Subsidiaries, collectively.
PRH Liabilities: (i) All of the Liabilities of the PRH Group
under, or to be retained or assumed by PRH or any of the PRH Subsidiaries
pursuant to, this Agreement or any of the Related Agreements, including those
set forth on Schedule 1.01(b), (ii) all of the Liabilities under the PRH
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Credit Agreement, (iii) all Liabilities for payment of outstanding drafts of
Promus attributable to the PRH Business existing as of the Distribution Date,
and (iv) all other Liabilities (excluding Embassy liabilities with respect to
the Excluded Assets) arising out of or in connection with any of the PRH Assets
or the PRH Business, determined on a basis consistent with the determination of
the Liabilities of PRH included on the PRH Pro Forma Balance Sheet (as reflected
in the "Distribution Pro Forma column") (including, without limitation, any
liabilities arising out of or related to the transfer to PRH or its Affiliates
of the PRH Assets or the PRH Business).
PRH Pro Forma Balance Sheet: The Pro Forma Consolidated Balance
Sheet for PRH as of March 31, 1995 attached hereto as Exhibit F-1.
PRH Pro Forma Statement of Income: The Pro Forma Combined
Statement of Income for PRH as of March 31, 1995 attached hereto as Exhibit
F-2.
PRH Subsidiaries: The Transferred Subsidiaries and all
Subsidiaries of PRH or the Transferred Subsidiaries at the time of the
Distribution.
Privileges: All privileges regarding Information or use of
lawyers, accountants or other service providers that may be asserted under
applicable law including, without limitation, privileges or rights arising under
or relating to the attorney-client relationship (including but not limited to
the attorney-client and work product privileges and waivers of conflicts of
interest), the accountant-client privilege, and privileges relating to internal
valuative processes.
Privileged Information: All Information as to which Promus, PRH
or any of their Subsidiaries are entitled to assert the protection of a
Privilege.
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Promus Board: The Board of Directors of Promus.
Promus Books and Records: The books and records (including
computerized records) of Promus and the Retained Subsidiaries and all books and
records owned by Promus and its Subsidiaries which relate to the Retained
Business, are necessary to operate the Retained Business, or are required by law
to be retained by Promus, including, without limitation, all such books and
records relating to Retained Employees, all files relating to any Action
pertaining to the Retained Liabilities, all records required to be maintained by
Promus under the Settlement Agreement, original corporate minute books, stock
ledgers and certificates and corporate seals, and all licenses, leases,
agreements and filings, relating to Promus, the Retained Subsidiaries or the
Retained Business (but not including the PRH Books and Records, provided that
Promus shall have access to, and shall have the right to obtain duplicate copies
of, the PRH Books and Records in accordance with the provisions of Article VII).
Promus Common Stock: The common stock, par value $0.10 per
share, of Promus.
Promus Group: Promus and the Retained Subsidiaries,
collectively.
Property Tax Services Agreement: The Property Tax Services
Agreement between PRI and Embassy, which agreement shall be entered into on or
prior to the Distribution Date in substantially the form of Exhibit J attached
hereto.
Proxy Statement: The proxy statement dated April 25, 1995
provided to the holders of Promus Common Stock as of the Meeting Record Date in
connection with the Annual Meeting.
Related Agreements: All of the agreements, contracts,
instruments, understandings, assignments or other arrangements which are
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entered into in connection with the transactions contemplated hereby and which
are set forth in a writing, including, without limitation: the Conveyancing and
Assumption Instruments, the Employee Benefits Allocation Agreement, the Tax
Sharing Agreement, the Trademark Assignment Agreement, the Information
Technology Agreements, the Risk Management Allocation Agreement, and the
Property Tax Services Agreement.
Retained Assets: The assets of Promus other than the PRH Assets,
including without limitation (i) the capital stock of the Retained Subsidiaries,
(ii) the Retained Real Property, (iii) assets relating to the Retained Business,
determined on a basis consistent with the determination of assets included on
the Harrah's Entertainment Pro Forma Balance Sheet (as reflected in the
"Distribution Pro Forma" column), (iv) all of the assets expressly allocated to
Promus or any of the Retained Subsidiaries under this Agreement or the Related
Agreements, including those set forth on Schedule 1.01(c), (v) any other assets
of Promus and its Affiliates relating to the Retained Business, and (vi) the
Excluded Assets set forth on Schedule 2.01(a).
Retained Business: The businesses conducted by Promus and its
Affiliates other than the PRH Business, including without limitation, the Casino
Business.
Retained Employees: The meaning specified in the Employee
Benefits Allocation Agreement.
Retained Liabilities: (i) All of the Liabilities arising out of
or in connection with the Retained Assets or the Retained Business determined on
a basis consistent with the determination of the Liabilities of Promus included
on the Harrah's Entertainment Pro Forma Consolidated Balance Sheet (as reflected
in the "Distribution Pro Forma" column), (ii) all of the
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Liabilities of Promus under, or to be retained or assumed by Promus or any of
the Retained Subsidiaries pursuant to, this Agreement or any of the Related
Agreements, including those set forth on Schedule 1.01(d), (iii) any Financing
Obligations not constituting PRH Liabilities (including, without limitation, the
Existing Promus Credit Facilities identified on Schedule 1.01(a)), (iv) all
Liabilities for the payment of outstanding drafts of Promus attributable to the
Retained Business existing as of the Distribution Date, (v) all debts,
liabilities or other obligations, including any related claims that may be
asserted, whether prior to or after the Distribution Date, arising from the
Settlement Agreement and (vi) all other Liabilities of Promus not constituting
PRH Liabilities.
Retained Real Property: The ownership interests of Promus and
its Affiliates in real property that is not Transferred Real Property, including
the real property identified on Schedule 1.01(e).
Retained Subsidiaries: All Subsidiaries of Promus, except PRH
and the PRH Subsidiaries.
Risk Management Allocation Agreement: The Risk Management
Allocation Agreement between Promus and PRH, which agreement shall be entered
into on or prior to the Distribution Date in substantially the form of Exhibit G
hereto.
Securities Act: the Securities Act of 1933, as amended.
Senior Subordinated Notes: The 10-7/8% Senior Subordinated Notes
due 2002 and the 8-3/4% Senior Subordinated Notes due 2000 of Embassy.
Settlement Agreement: The Settlement Agreement dated March 17,
1995, whereby Plaintiff and defendant settled the litigation styled Bass Public
Limited Company, Bass International Holdings N.V., (U.S.A.) Incorporated,
Holiday Corporation and Holiday Inns, Inc. v. The Promus
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Companies Incorporated formerly pending in the United States District Court for
the Southern District of New York (92 Civ. 0969).
Subsidiary: With respect to any Person, (a) any corporation of
which at least a majority in interest of the outstanding voting stock (having by
the terms thereof voting power under ordinary circumstances to elect a majority
of the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any non-corporate entity in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has at
least majority ownership interest.
Tax Sharing Agreement: The Tax Sharing Agreement between PRH and
Promus, which agreement shall be entered into on or prior to the Distribution
Date in substantially the form of Exhibit H attached hereto.
Trademark Assignment Agreement: The Trademark Assignment
Agreement between Promus and PRH, pursuant to which Promus will convey certain
intellectual property rights to PRH, which agreement shall be entered into on or
prior to the Distribution Date in substantially the form of Exhibit I attached
hereto.
Transferred Joint Venture Interests: The partnership and joint
venture interests and minority equity interests identified on Schedule 1.01(f).
Transferred Real Property: The real property identified on
Schedule 1.01(g).
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Transferred Subsidiaries: The Subsidiaries identified on
Schedule 1.01(h).
Transferred Subsidiary Stock: All of the issued and outstanding
capital stock of the Transferred Subsidiaries.
Section 1.02. Terms Defined Elsewhere in Agreement.
Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
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Asset Transfers Recitals
Consents 4.01
Distribution Recitals
Embassy Distribution Recitals
Form 10 Registration Statement 4.02
Indemnifiable Loss 5.01
Indemnifying Party 5.03
Indemnitee 5.03
Information 7.02
Promus Recitals
Promus Indemnitees 5.02
PRH Recitals
PRH Assets 2.01
PRH Indemnitees 5.01
PRH Rights 6.06
PRH Rights Plan 6.06
Third-Party Claim 5.04
ARTICLE II
TRANSFER OF ASSETS
Section 2.01. Transfer of Assets to PRH; Harrah's Mergers.
(a) Prior to the Distribution Date, Promus shall take or cause
to be taken all actions necessary to cause the transfer, assignment, delivery
and conveyance to PRH or its Subsidiaries (as directed by PRH) of all of
Promus's and its Subsidiaries' right, title and interest in the PRH Assets. The
"PRH Assets" shall consist of the following assets:
(i) the Transferred Subsidiary Stock;
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(ii) the trademarks, service marks, goodwill and other
intangible properties and rights to be conveyed to PRH
pursuant to the Trademark Assignment Agreement;
(iii) the Existing Management and Lease Agreements;
(iv) the Franchise Agreements;
(v) the Transferred Real Property;
(vi) the Transferred Joint Venture Interests;
(vii) the PRH Books and Records;
(viii) all licenses and permits relating to the PRH
Business;
(ix) the two U.S. Dollar Swap Transactions between Embassy
and NationsBank, N.A., each with the notional amount of
$50 million, effective on March 20, 1995 and January
26, 1995, respectively;
(x) all of the other assets to be assigned to PRH under
this Agreement or the Related Agreements; and
(xi) all other assets relating to the PRH Business,
determined on a basis consistent with the determination
of the assets included on the PRH Pro Forma Combined
Balance Sheet (as reflected in the "Distribution Pro
Forma" column);
provided, that the PRH Assets shall exclude any rights of Embassy pursuant to
the agreements set forth on Schedule 2.01(a).
(b) Following the consummation of the Asset Transfers described
in Section 2.01(a) and prior to the Distribution Date, Promus shall take or
cause to be taken all actions necessary to cause Casino Holding Company to be
merged with and into Harrah's Club (with Harrah's Club as the surviving
corporation) and to cause Embassy to contribute to the capital of Harrah's
(which shall in turn contribute to the capital of Harrah's Club) all of
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Embassy's right, title and interest in its Northern Nevada and Las Vegas casino
properties.
Section 2.02. Transfers Not Effected Prior to the Distribution.
To the extent that any transfers contemplated by this Article II
shall not have been fully effected on the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer
of any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed; provided, however, that
Promus and PRH and their respective Subsidiaries and Affiliates shall cooperate
in seeking to obtain any necessary consents or approvals for the transfer of all
assets and Liabilities contemplated to be transferred pursuant to this Article
II. In the event that any such transfer of assets or Liabilities has not been
consummated effective as of the Distribution Date, the party retaining such
asset or Liability shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto) and retain such Liability for the account of the party by whom such
Liability is to be assumed pursuant hereto, and take such other actions as may
be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had such asset been
transferred or such Liability been assumed as contemplated hereby. As and when
any such asset or Liability becomes transferable, such transfer and assumption
shall be effected forthwith. The parties agree that, except as set forth in
this subsection (a), as of the Distribution Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of the
assets, together with all rights, powers and privileges incidental thereto, and
shall be deemed to have assumed in accordance with the terms of this Agreement
all of the Liabilities, - -
and all duties, obligations and responsibilities incidental thereto, which such
party is entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.03. Cooperation Re: Assets.
In the case that at any time after the Distribution Date, PRH
reasonably determines that any of the Retained Assets (other than the assets set
forth on Schedule 2.01(a)) are essential for the conduct of the PRH Business, or
Promus reasonably determines that any of the PRH Assets are essential for the
conduct of the Retained Business, and the nature of such assets makes it
impracticable for PRH or Promus, as the case may be, to obtain substitute assets
or to make alternative arrangements on commercially reasonable terms to conduct
their respective businesses, and reasonable provisions for the use thereof are
not already included in the Related Agreements, then PRH (with respect to the
PRH Assets) and Promus (with respect to the Retained Assets) shall cooperate to
make such assets available to the other party on commercially reasonable terms,
as may be reasonably required for such party to maintain normal business
operations (provided that such assets shall be required to be made available
only until such time as the other party may reasonably obtain substitute assets
or make alternative arrangements on commercially reasonable terms to permit it
to maintain normal business operations).
Section 2.04. No Representations or Warranties; Consents. Each
of the parties hereto understands and agrees that no party hereto is, in this
Agreement or in any other agreement or document contemplated by this Agreement
or otherwise, representing or warranting in any way (i) as to the value or
freedom from encumbrance of, or any other matter concerning, any assets of such
party or (ii) as to the legal sufficiency to convey title to any asset
transferred pursuant to this Agreement or any Related Agreement, including,
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without limitation, any Conveyancing or Assumption Instruments. It is also
agreed and understood that there are no warranties whatsoever, express or
implied, given by either party to the Agreement, as to the condition, quality,
merchantability or fitness of any of the assets, businesses or other rights
either transferred to or retained by the parties, as the case may be, and all
such assets, businesses or other rights shall be "as is, where is" and "with all
faults" (provided, however, that the absence of warranties given by the parties
shall not negate the allocation of Liabilities under this Agreement and shall
have no effect on any manufacturers', sellers', or other third parties'
warranties which are intended to be transferred with such assets). Similarly,
each party hereto understands and agrees that no party hereto is, in this
Agreement or in any other agreement or document contemplated by this Agreement
or otherwise, representing or warranting in any way that the obtaining of any
consents or approvals, the execution and delivery of any amendatory agreements
and the making of any filings or applications contemplated by this Agreement
will satisfy the provisions of any or all applicable laws or judgments or other
instruments or agreements relating to such assets. Notwithstanding the
foregoing, the parties shall use their good faith efforts to obtain all consents
and approvals, to enter into all reasonable amendatory agreements and to make
all filings and applications which may be reasonably required for the
consummation of the transactions contemplated by this Agreement, and shall take
all such further actions as shall be deemed reasonably necessary to preserve for
each of the PRH Group and the Promus Group, to the greatest extent reasonably
feasible, consistent with this Agreement, the economic and operational benefits
of the allocation of assets and Liabilities provided for in this Agreement. In
case at any time after the Distribution Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of - -
each party to this Agreement shall take all such necessary or desirable action,
provided, that any financial cost shall be borne by the party receiving the
benefit of the action.
Section 2.05. Conveyancing and Assumption Instruments. In
connection with the Asset Transfers and the assumptions of Liabilities
contemplated by this Agreement, the parties shall execute or cause to be
executed by the appropriate entities the Conveyancing and Assumption Instruments
in such forms as the parties shall reasonably agree, including the transfer of
the Transferred Real Property with deeds as may be appropriate, the assignment
of trademarks and franchise rights and the assignment and assumption of the
Existing Management and Lease Agreements, Transferred Joint Venture Interests,
and the Franchise Agreements. The transfer of capital stock shall be effected
by means of delivery of stock certificates and executed stock powers and
notation on the stock record books of the corporation or other legal entities
involved and, to the extent required by applicable law, by notation on public
registries.
Section 2.06. Cash Allocation.
(a) Cash Allocation on the Distribution Date.
The allocation between Promus and PRH of all domestic and
international cash bank balances and short-term investments ("cash") of Promus
and its Subsidiaries recorded per the books of Promus and its Subsidiaries as of
the close of business on the Distribution Date (the "Pre-Distribution Cash
Balance") shall be in accordance with the following:
(i) all petty cash accounts of hotel properties on the
Distribution Date shall be transferred to PRH;
(ii) all cash received in and deposits made to the
local deposit accounts for business activities
relating to the PRH Business to and including the
Distribution
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Date which has not previously been transferred to
Promus shall be remitted to Promus no later than five
business days following the Distribution Date; and
(iii) all Liabilities for payment of outstanding drafts
drawn on accounts allocated to PRH shall be paid
by PRH (except that, with respect to outstanding
drafts relating to Existing Management and Lease
Agreements, including Transferred Joint Venture
Interests, Promus shall reimburse PRH for such
outstanding drafts net of any corresponding
receivable transferred to PRH).
(b) Cash Management After the Distribution Date. PRH shall
establish and maintain a separate cash management system and accounting records
with respect to the PRH Business effective as of 12:01 a.m. on the day following
the Distribution Date; thereafter, (i) any payments by Promus or its Retained
Subsidiaries on behalf of PRH or the PRH Subsidiaries in connection with the PRH
Business (including, without limitation, any such payments in respect of
Liabilities or other obligations of PRH or the PRH Subsidiaries under the
Employee Benefits Allocation Agreement) shall be recorded in the accounts of the
PRH Group as a payable from the PRH Group to the Promus Group; (ii) any payments
by PRH or the PRH Subsidiaries on behalf of Promus or its Retained Subsidiaries
in connection with the Retained Business (including, without limitation, any
such payments in respect to Liabilities or other obligations of Promus or its
Retained Subsidiaries under the Employee Benefits Allocation Agreement) shall be
recorded in the accounts of the Promus Group as a payable from the Promus Group
to the PRH Group; (iii) any cash payments received by Promus and the Retained
Subsidiaries relating to the PRH Business or the PRH Assets shall be recorded in
the accounts of the Promus Group as a payable from the Promus Group to the PRH
Group; (iv) any cash payments
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received by PRH or the PRH Subsidiaries relating to the Retained Business or the
Retained Assets shall be recorded in the accounts of the PRH Group as a payable
from the PRH Group to the Promus Group; (v) PRH and Promus shall make
adjustments for late deposits, checks returned for not sufficient funds and
other post-Distribution Date transactions as shall be reasonable under the
circumstances consistent with the purpose and intent of this Agreement; and (vi)
the net balance due to the Promus Group or the PRH Group, as the case may be, in
respect of the aggregate amounts of clauses (i), (ii), (iii), (iv) and (v) shall
be paid by PRH or Promus, as appropriate, as promptly as practicable. For
purposes of this Section 2.06(b), the parties contemplate that the Retained
Business and the PRH Business, including but not limited to the administration
of accounts payable and accounts receivable, will be conducted in the normal
course.
(c) All transactions contemplated in this Section 2.06 shall be
subject to audit by the parties, and any dispute thereunder shall be resolved by
Arthur Andersen LLP ("Arthur Andersen") (or, if Arthur Andersen is not
available, by such other independent firm of certified public accounts mutually
acceptable to Promus and PRH), whose decision shall be final and unappealable.
Section 2.07. Financing.
Prior to the Asset Transfers and other transactions described in
this Article II, Embassy shall enter into the PRH Credit Agreement and shall
borrow $215 million in cash under the PRH Credit Agreement. Embassy shall use
the net proceeds of the borrowings under the PRH Credit Agreement to retire a
portion of its indebtedness outstanding under the Existing Promus Credit
Facilities.
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ARTICLE III
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. Assumption and Satisfaction of Liabilities.
(a) Except as set forth in the Employee Benefits Allocation
Agreement, the Tax Sharing Agreement or other Related Agreements, effective as
of and after the Distribution Date, (i) PRH shall, and/or shall cause the PRH
Subsidiaries to, assume, pay, perform, and discharge in due course all of the
PRH Liabilities and (ii) Promus shall, and/or shall cause the Retained
Subsidiaries to, pay, perform and discharge in due course all of the Retained
Liabilities.
(b) Effective as of and after the Distribution Date, PRH shall
cause Embassy to be released and discharged from any and all Liabilities under
the PRH Credit Agreement.
ARTICLE IV
THE DISTRIBUTION
Section 4.01. Cooperation Prior to the Distribution.
(a) Promus and PRH shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit plans and other plans contemplated by the
Employee Benefits Allocation Agreement.
(b) Promus and PRH shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement and the Related Agreements.
(c) Promus and PRH shall use all reasonable efforts to obtain
any third-party consents or approvals necessary or desirable in connection with
the transactions contemplated hereby ("Consents").
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(d) Promus and PRH will use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or desirable under applicable law, to consummate the transactions
contemplated under this Agreement.
Section 4.02. Promus Board Action; Conditions Precedent to the
Distribution. The Promus Board shall, in its discretion, establish any
appropriate procedures in connection with the Distribution. In no event shall
the Distribution occur unless the following conditions shall have been
satisfied:
(i) each of the Distribution Proposals (as defined in the
Proxy Statement) having been approved by Promus's
stockholders;
(ii) the Promus Board having received an opinion from Latham
& Watkins to the effect that the Embassy Distribution
and the Distribution will qualify as a tax-free
transaction under Section 355 of the Code;
(iii) the transfers of assets and Liabilities contemplated by
this Agreement having been consummated in all material
respects;
(iv) the PRH Common Stock and associated PRH Rights having
been approved for listing on the New York Stock
Exchange subject to official notice of issuance;
(v) the PRH Board, comprised as contemplated by
Section 6.01, having been elected by Embassy, as sole
stockholder of PRH, and the PRH Certificate and the PRH
Bylaws, as each will be in effect after the
Distribution, having been adopted and being in effect;
(vi) PRH having entered into the PRH Credit Agreement;
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(vii) the Registration Statement on Form 10 with respect to
the PRH Common Stock (the "Form 10 Registration
Statement") having become effective under the Exchange
Act;
(viii) all third party consents to the transactions
contemplated by the Distribution Proposals having
been obtained (including, without limitation,
consents having been obtained from holders of the
Senior Subordinated Notes to certain amendments to
the covenants contained in such Notes), except for
those the failure of which to obtain would not
have a material adverse effect on PRH or Harrah's
Entertainment;
(ix) Embassy having obtained from its lenders under the
Existing Promus Credit Facilities consents to the
transactions contemplated by the Distribution
Proposals; and
(x) James D. Wolfensohn Incorporated having delivered an
updated opinion to the Promus Board, dated as of the
Distribution Date, in substantially the same form as
the opinion set forth in Exhibit K;
provided, however, that (i) any such condition may be waived by the Promus Board
in its sole discretion, and (ii) the satisfaction of such conditions shall not
create any obligation on the part of Promus or any other party hereto to effect
the Distribution or in any way limit Promus's power of termination set forth in
Section 9.07 or alter the consequences of any such termination from those
specified in such Section.
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Section 4.03. The Distribution. On the Distribution Date,
subject to the conditions and rights of termination set forth in this Agreement,
PRH shall issue and deliver to Embassy, and Embassy shall assign
and deliver to Promus, and Promus shall endorse in blank and deliver to the
Agent, a share certificate for PRH Common Stock representing a number of such
shares which, when taken together with the shares of PRH Common Stock already
owned by Embassy, will result in Embassy owning one share of PRH Common Stock
for each two shares of Promus Common Stock issued and outstanding on the
Distribution Record Date. Promus shall instruct the Agent to distribute, on or
as soon as practicable following the Distribution Date, to the Holders one share
of the PRH Common Stock for each two shares of Promus Common Stock held by such
Holders and cash in lieu of fractional shares of PRH Common Stock as provided in
Section 4.04. PRH agrees to provide all share certificates that the Agent shall
require in order to effect the Distribution.
Section 4.04. Cash in Lieu of Fractional Shares.
No certificate or scrip representing fractional shares of PRH
Common Stock shall be issued as part of the Distribution and in lieu thereof,
each holder of PRH Common Stock who would otherwise be entitled to receive a
fractional share of the PRH Common Stock will receive cash for such fractional
share. Promus shall instruct the Agent to determine the number of whole shares
and fractional shares of PRH Common Stock allocable to each holder of record of
the Promus Common Stock as of the Distribution Record Date. Promus shall
instruct the Agent to aggregate all such fractional shares into whole shares and
sell the whole shares obtained thereby in the open market as soon as practicable
following the Distribution Date at then prevailing prices on behalf of Holders
who otherwise would be entitled to receive fractional share interests and to
distribute to each such Holder such Holder's ratable share of
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the proceeds of such sale as soon as practicable after the Distribution Date.
Promus shall bear the costs of commissions incurred in connection with such
sales.
ARTICLE V
INDEMNIFICATION
Section 5.01. Indemnification by Promus. Except as otherwise
expressly set forth in a Related Agreement, Promus shall indemnify, defend and
hold harmless PRH and each of the PRH Subsidiaries, and each of their respective
directors, officers, employees, agents and Affiliates and each of the heirs,
executors, successors and assigns of any of the foregoing (the "PRH
Indemnitees") from and against the Retained Liabilities and any and all losses,
Liabilities and damages, including, without limitation, the costs and expenses
of any and all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any such Actions or threatened Actions (collectively, "PRH Indemnifiable
Losses" and, individually, a "PRH Indemnifiable Loss") of the PRH Indemnitees
arising out of or due to the failure or alleged failure of Promus or any of its
Affiliates (i) to pay, perform or otherwise discharge in due course any of the
Retained Liabilities, or (ii) comply with the provisions of Section 6.04.
Section 5.02. Indemnification by PRH. Except as otherwise
expressly set forth in a Related Agreement (other than a deed giving effect to a
transfer of the Transferred Real Property), PRH shall indemnify, defend and hold
harmless Promus and each of the Retained Subsidiaries, and each of their
directors, officers, employees, agents and Affiliates and each of the heirs,
executors, successors and assigns of any of the foregoing (the "Promus
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Indemnitees") from and against the PRH Liabilities and any and all losses,
Liabilities, damages, including, without limitation, the costs and expenses of
any and all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any such Actions or threatened Actions (collectively, "Promus
Indemnifiable Losses" and, individually, a "Promus Indemnifiable Loss") of the
Promus Indemnitees arising out of or due to the failure or alleged failure of
PRH or any of its Affiliates to (i) pay, perform or otherwise discharge in due
course any of the PRH Liabilities or (ii) comply with the provisions of Section
6.04. The "PRH Indemnifiable Losses" and the "Promus Indemnifiable Losses" are
collectively referred to as the "Indemnifiable Losses."
Section 5.03. Insurance Proceeds. The amount which any party
(an "Indemnifying Party") is or may be required to pay to any other Person (an
"Indemnitee") pursuant to Section 5.01 or Section 5.02 shall be reduced
(including, without limitation, retroactively) by any Insurance Proceeds or
other amounts actually recovered by or on behalf of such Indemnitee in reduction
of the related Indemnifiable Loss. If an Indemnitee shall have received the
payment required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such Insurance Proceeds or other amounts actually received.
Section 5.04. Procedure for Indemnification.
(a) Except as may be set forth in a Related Agreement, if an
Indemnitee shall receive notice or otherwise learn of the assertion by a
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Person (including, without limitation, any governmental entity) who is not a
party to this Agreement or to any of the Related Agreements of any claim or of
the commencement by any such Person of any Action (a "Third-Party Claim") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim; provided, that the failure of any Indemnitee to give notice
as required by this Section 5.04 shall not relieve the Indemnifying Party of its
obligations under this Article V, except to the extent that such Indemnifying
Party is prejudiced by such failure to give notice. Such notice shall describe
the Third-Party Claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the Indemnifiable Loss that has been or may be
sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to
settle or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third-Party Claim, provided that the
Indemnifying Party must confirm in writing that it agrees that the Indemnitee is
entitled to indemnification hereunder in respect of such Third-Party Claim.
Within 30 days of the receipt of notice from an Indemnitee in accordance with
Section 5.04(a) (or sooner, if the nature of such Third-Party Claim so
requires), the Indemnifying Party shall notify the Indemnitee of its election
whether to assume responsibility for such Third-Party Claim (provided that if
the Indemnifying Party does not so notify the Indemnitee of its election within
30 days after receipt of such notice from the Indemnitee, the Indemnifying Party
shall be deemed to have elected not to assume responsibility for such Third-
Party Claim), and such Indemnitee shall cooperate in the defense or settlement
or compromise of such Third-Party Claim. After notice from an Indemnifying
Party to an Indemnitee of its
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election to assume responsibility for a Third-Party Claim, such Indemnifying
Party shall not be liable to such Indemnitee under this Article V for any legal
or other expenses (except expenses approved in advance by the Indemnifying
Party) subsequently incurred by such Indemnitee in connection with the defense
thereof; provided, that if the defendants or parties against which relief is
sought in any such claim include both the Indemnifying Party and one or more
Indemnitees and in such Indemnitees' reasonable judgment a conflict of interest
between such Indemnitees and such Indemnifying Party exists in respect of such
claim, such Indemnitees shall have the right to employ separate counsel and in
that event the reasonable fees and expenses of such separate counsel (but not
more than one separate counsel reasonably satisfactory to the Indemnifying
Party) shall be paid by such Indemnifying Party. If an Indemnifying Party
elects not to assume responsibility for a Third-Party Claim (which election may
be made only in the event of a good faith dispute that a claim was
inappropriately tendered under Section 5.01 or 5.02, as the case may be) such
Indemnitee may defend or (subject to the following sentence) seek to compromise
or settle such Third-Party Claim. Notwithstanding the foregoing, an Indemnitee
may not settle or compromise any claim without prior written notice to the
Indemnifying Party, which shall have the option within ten days following the
receipt of such notice (i) to disapprove the settlement and assume all past and
future responsibility for the claim, including reimbursing the Indemnitee for
prior expenditures in connection with the claim, or (ii) to disapprove the
settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnifying Party shall have no further right to
contest the amount or reasonableness of the settlement if the Indemnitee elects
to proceed therewith, or (iii) to approve the amount of the settlement,
reserving the Indemnifying Party's right to contest the Indemnitee's right to
indemnity, or
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(iv) to approve and agree to pay the settlement. In the event the Indemnifying
Party makes no response to such written notice from the Indemnitee, the
Indemnifying Party shall be deemed to have elected option (ii).
(c) If an Indemnifying Party chooses to defend or to seek to
compromise any Third-Party Claim, the Indemnitee shall make available to such
Indemnifying Party any personnel and any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense or compromise.
(d) Notwithstanding anything else in this Section 5.04 to the
contrary, an Indemnifying Party shall not settle or compromise any Third-Party
Claim unless such settlement or compromise contemplates as an unconditional term
thereof the giving by such claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such Third-Party Claim (and provided
further that such settlement may not provide for any non-monetary relief by
Indemnitee without the written consent of Indemnitee) and unless such settlement
or compromise does not involve any new or additional contractual or other
burdens on the Indemnitee. In the event the Indemnitee shall notify the
Indemnifying Party in writing that such Indemnitee declines to accept any such
settlement or compromise, such Indemnitee may continue to contest such Third-
Party Claim, free of any participation by such Indemnifying Party, at such
Indemnitee's sole expense. In such event, the obligation of such Indemnifying
Party to such Indemnitee with respect to such Third-Party Claim shall be equal
to (i) the costs and expenses of such Indemnitee prior to the date such
Indemnifying Party notifies such Indemnitee of the offer to settle or compromise
(to the extent such costs and expenses are otherwise indemnifiable hereunder)
plus (ii) the lesser of (A) the amount of any offer of settlement or compromise
which such Indemnitee declined to accept and (B)
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the actual out-of-pocket amount such Indemnitee is obligated to pay subsequent
to such date as a result of such Indemnitee's continuing to pursue such Third-
Party Claim.
(e) Any claim on account of an Indemnifiable Loss which does not
result from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement.
(f) In addition to any adjustments required pursuant to Section
5.03, if the amount of any Indemnifiable Loss shall, at any time subsequent to
the payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
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Section 5.05. Remedies Cumulative. The remedies provided in
this Article V shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party.
Section 5.06. Survival of Indemnities. The obligations of each
of PRH and Promus under this Article V shall survive the sale or other transfer
by it of any assets or businesses or the assignment by it of any Liabilities,
with respect to any Indemnifiable Loss of the other related to such assets,
businesses or Liabilities.
Section 5.07. After-Tax Indemnification Payments. Except as
otherwise expressly provided herein or in a Related Agreement, any
indemnification payment made by either party under this Article V shall give
effect to, and be reduced by the value of, any and all applicable deductions,
losses, credits, offsets or other items for Federal, state or other tax purposes
attributable to the payment of the indemnified liability by the Indemnitee in a
manner consistent with the treatment of tax indemnity payments under the Tax
Sharing Agreement.
Section 5.08. Characterization of Payments. Any payment (other
than interest thereon) made by either party under this Article V shall be
treated by all parties for tax purposes to the extent permitted by law, and for
accounting purposes to the extent permitted by generally accepted accounting
principles, as non-taxable dividend distributions or capital contributions made
prior to the close of business on the Closing Date.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
Section 6.01. PRH Board. PRH and Promus shall take all actions
which may be required to constitute, effective as of the Distribution Date, the
following persons as the directors of PRH: Michael D. Rose, Ronald Terry,
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Ben C. Peternell, Raymond E. Schultz, David Sullivan, U. Bertram Ellis, Jr.,
Debra J. Fields, Christopher W. Hart, C. Warren Neel, Michael I. Roth, and Jay
Stein.
Section 6.02. Resignations; Promus Board. PRH shall cause all
of its directors and PRH Employees to resign, effective as of the Distribution
Date, from all boards of directors or similar governing bodies of Promus or any
of its Retained Subsidiaries on which they serve, and from all positions as
officers or employees of Promus or any of its Retained Subsidiaries in which
they serve, except that (i) Michael D. Rose shall serve as a director and
Chairman of Promus and as a director and Chairman of PRH, and (ii) Ben C.
Peternell shall serve as an executive officer of Promus (as well an officer of
Embassy) and as a director of PRH. Promus shall cause all of its directors and
the Retained Employees to resign from all boards of directors or similar
governing bodies of PRH or any of its subsidiaries on which they serve, and from
all positions as officers or employees of PRH or any of its subsidiaries in
which they serve, except to the extent specified in the preceding sentence.
Section 6.03. Certificate and Bylaws. On or prior to the
Distribution Date, PRH shall adopt the PRH Certificate and the PRH Bylaws, and
shall file the PRH Certificate with the Secretary of State of the State of
Delaware.
Section 6.04. Certain Post-Distribution Transactions.
(a) PRH. (i) PRH shall, and shall cause each of the PRH
Subsidiaries to, comply with each representation and statement made, or to be
made, to Latham & Watkins in connection with its tax opinion or any other
opinion obtained, or to be obtained, by Promus and PRH acting together, from any
tax counsel with respect to any transaction contemplated by this Agreement and
(ii) until the second anniversary of the Distribution Date, neither PRH nor any
of its subsidiaries shall (A) liquidate, merge with any other
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corporation or sell or otherwise dispose of a material portion of its assets,
except in the ordinary course of business and except for contributions of hotel
real estate to ventures or entities in which PHC will continue to own an equity
interest and with respect to which hotel real estate PHC retains a contractual
right to serve as manager or franchisor, (B) repurchase or issue any PRH capital
stock (other than stock issued pursuant to employee plans), or (C) cease the
active conduct of a material portion of its business independently, with its own
employees and without material change, unless, in each of cases (A), (B) and
(C), in the opinion of counsel to PRH, which opinion shall be reasonably
satisfactory to Promus, or pursuant to a favorable IRS ruling letter reasonably
satisfactory to Promus, such act or omission would not adversely affect the tax
consequences of the Distribution to Promus or the stockholders of Promus, as set
forth in any tax opinion issued by Latham & Watkins; and PRH has no present
intention to take any such actions.
(b) Promus. (i) Promus shall, and shall cause each of its
subsidiaries to, comply with each representation and statement made, or to be
made, to Latham & Watkins in connection with its tax opinion or any other
opinion obtained, by Promus and PRH acting together, from any tax counsel with
respect to any transaction contemplated by this Agreement; and (ii) until the
second anniversary of the Distribution Date, neither Promus nor any of its
subsidiaries shall (A) liquidate, merge with any other corporation or sell or
otherwise dispose of a material portion of its assets (other than the PRH
Assets), except in the ordinary course of business, (B) repurchase or issue any
capital stock of Promus (other than stock issued pursuant to employee plans), or
(C) cease the active conduct of a material portion of its business
independently, with its own employees and without material change, unless, in
each of cases (A), (B) and (C), in the opinion of counsel to Promus, which
opinion shall be reasonably satisfactory to PRH, or pursuant to a favorable
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IRS ruling letter reasonably satisfactory to PRH, such act or omission would not
adversely affect the tax consequences of the Distribution to PRH or the
stockholders of PRH, as set forth in any opinion issued by Latham & Watkins; and
Promus has no present intention to take any such actions.
Section 6.05. Corporate Name. Effective as of the Distribution
Date, Promus shall change its corporate name to "Harrah's Entertainment, Inc."
and Embassy shall change its corporate name to "Harrah's Operating Company,
Inc." All references to Promus and Embassy herein shall be references to each
such corporation both before and after such corporate name change.
Section 6.06. PRH Rights Plan. Prior to the Distribution Date,
the PRH Board may elect, in its sole discretion, to recommend that PRH adopt a
stockholder rights plan (the "PRH Rights Plan"). The PRH Rights Plan will
provide for the distribution of preferred share purchase rights ("PRH Rights")
with respect to each share of PRH Common Stock. The PRH Rights will be attached
to the PRH Common Stock and will not be exercisable, or transferable apart from
the PRH Common Stock, unless and until certain events occur. If certain events
occur relating to the acquisition by an acquiring person of PRH Common Stock, or
a merger or other combination of PRH with an acquiring person, the PRH Rights
will entitle holders (other than the acquiring person) to purchase either PRH
Common Stock or common stock of the acquiring person at a discount. The
specific terms of the PRH Rights will be determined by the Board of Directors of
PRH consistent with the description thereof in the Proxy Statement.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.01. Provision of Corporate Records.
(a) Except as may otherwise be provided in a Related Agreement,
Promus shall arrange as soon as practicable following the Distribution Date,
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to the extent not previously delivered in connection with the transactions
contemplated in Article II, for the transportation (at PRH's cost) to PRH of the
PRH Books and Records in its possession, except to the extent such items are
already in the possession of PRH or a PRH Subsidiary. Such PRH Books and
Records shall be the property of PRH, but shall be available to Promus for
review and duplication until Promus shall notify PRH in writing that such
records are no longer of use to Promus or until the 10th anniversary of this
Agreement.
(b) Except as otherwise provided in a Related Agreement, PRH
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Promus's cost) to Promus of the Promus
Books and Records in its possession, except to the extent such items are already
in the possession of Promus. The Promus Books and Records shall be the property
of Promus, but shall be available to PRH for review and duplication until PRH
shall notify Promus in writing that such records are no longer of use to PRH or
until the 10th anniversary of this Agreement.
Section 7.02. Access to Information. Except as otherwise
provided in a Related Agreement, from and after the Distribution Date, Promus
shall afford to PRH and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information relating to pre-Distribution operations
(collectively, "Information") within Promus's possession insofar as such access
is reasonably required by PRH for the conduct of its business, subject to
appropriate restrictions for confidential
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or Privileged Information. Similarly, except as otherwise provided in a Related
Agreement, PRH shall afford to Promus and its authorized accountants, counsel
and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to Information within PRH's
possession, insofar as such access is reasonably required by Promus for the
conduct of its business, subject to appropriate restrictions for confidential or
Privileged Information. Information may be requested under this Article VII for
the legitimate business purposes of either party, including without limitation,
audit, accounting, claims (including claims for indemnification hereunder),
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the transactions
contemplated hereby.
Section 7.03. Production of Witnesses. At all times from and
after the Distribution Date, each of PRH and Promus shall use reasonable efforts
to make available to the other, upon written request, its and its subsidiaries'
officers, directors, employees and agents as witnesses to the extent that such
persons may reasonably be required in connection with any Action.
Section 7.04. Reimbursement. Except to the extent otherwise
contemplated in any Related Agreement, a party providing Information or witness
services to the other party under this Article VII shall be entitled to receive
from the recipient, upon the presentation of invoices therefor, payments of such
amounts, relating to supplies, disbursements and other out-of-pocket expenses
(at cost) and direct and indirect expenses of employees who are witnesses or
otherwise furnish assistance (at cost), as may be reasonably incurred in
providing such Information or witness services.
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Section 7.05. Retention of Records. Except as otherwise
required by law or agreed to in a Related Agreement or otherwise in writing,
each of Promus and PRH may destroy or otherwise dispose of any of the
Information, which is material Information and is not contained in other
Information retained by Promus or PRH, as the case may be, at any time after the
10th anniversary of this Agreement, provided that, prior to such destruction or
disposal, (a) it shall provide no less than 90 or more than 120 days prior
written notice to the other, specifying in reasonable detail the Information
proposed to be destroyed or disposed of and (b) if a recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested at the expense of the party requesting such Information.
Section 7.06. Confidentiality. Each of Promus and its
Subsidiaries on the one hand, and PRH and its Subsidiaries on the other hand,
shall hold, and shall cause its consultants and advisors to hold, in strict
confidence, all Information concerning the other in its possession or furnished
by the other or the other's representatives pursuant to this Agreement (except
to the extent that such Information has been (i) in the public domain through no
fault of such party or (ii) later lawfully acquired from other sources by such
party), and each party shall not release or disclose such Information to any
other person, except its auditors, attorneys, financial advisors, rating
agencies, bankers and other consultants and advisors, unless compelled to
disclose by judicial or administrative process or by other requirements of law
or regulation, or unless such Information is reasonably required to be disclosed
in connection with (x) any litigation with any third parties or litigation
between the Promus Group and the PRH Group,
- -
(y) any contractual agreement to which the Promus Group or the PRH Group are
currently parties, or (z) in exercise of either party's rights hereunder.
Section 7.07. Privileged Matters. Promus and PRH recognize that
legal and other professional services that have been and will be provided prior
to the Distribution Date have been and will be rendered for the benefit of both
the Promus Group and the PRH Group and that both the Promus Group and the PRH
Group should be deemed to be the client for the purposes of asserting all
Privileges. To allocate the interests of each party in the Privileged
Information, the parties agree as follows:
(a) Promus shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the Retained Business, whether or not the Privileged
Information is in the possession of or under the control of Promus or PRH.
Promus shall also be entitled, in perpetuity, to control the assertion or waiver
of all Privileges in connection with Privileged Information that relates solely
to the subject matter of any claims constituting Retained Liabilities, now
pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated against or by Promus, whether or not the Privileged
Information is in the possession of or under the control of Promus or PRH.
(b) PRH shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the PRH Business, whether or not the Privileged
Information is in the possession of or under the control of Promus or PRH. PRH
shall also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information which relates solely to the
subject matter of any claims constituting PRH Liabilities, now pending or which
may be asserted in the future, in any
- -
lawsuits or other proceedings initiated against or by PRH, whether or not the
Privileged Information is in the possession of PRH or under the control of
Promus or PRH.
(c) Promus and PRH agree that they shall have a shared
Privilege, with equal right to assert or waive, subject to the restrictions in
this Section 7.07, with respect to all Privileges not allocated pursuant to the
terms of Sections 7.07(a) and (b). All Privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both Promus
and PRH in respect of which Promus and PRH retain any responsibility or
liability under this Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted
under any applicable law, and in which the other party has a shared Privilege,
without the consent of the other party, except to the extent reasonably required
in connection with any litigation with third parties or as provided in
subsection (e) below. Consent shall be in writing, or shall be deemed to be
granted unless written objection is made within 20 days after notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between a member
of the Promus Group and a member of the PRH Group, either party may waive a
Privilege in which the other party has a shared Privilege, without obtaining the
consent of the other party, provided that such waiver of a shared Privilege
shall be effective only as to the use of Information or counsel with respect to
the litigation or dispute between the Promus Group and the PRH Group, and shall
not operate as a waiver of the shared Privilege with respect to third parties.
(f) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of either party,
each party agrees that it shall negotiate in good faith, shall endeavor to
- -
minimize any prejudice to the rights of the other party, and shall not
unreasonably withhold consent to any request for waiver by the other party.
Each party specifically agrees that it will not withhold consent to waiver for
any purpose except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or
other request which arguably calls for the production or disclosure of
Information subject to a shared Privilege or as to which the other party has the
sole right hereunder to assert a Privilege, or if any party obtains knowledge
that any of its current or former directors, officers, agents or employees have
received any subpoena, discovery or other requests which arguably calls for the
production or disclosure of such Privileged Information, such party shall
promptly notify the other party of the existence of the request and shall
provide the other party a reasonable opportunity to review the Information and
to assert any rights it may have under this Section 7.07 or otherwise to prevent
the production or disclosure of such Privileged Information.
(h) The transfer of the PRH Books and Records and the Promus
Books and Records and other Information between Promus and its Subsidiaries and
PRH and its Subsidiaries, is made in reliance on the agreement of Promus and
PRH, as set forth in Sections 7.06 and 7.07, to maintain the confidentiality of
Privileged Information and to assert and maintain all applicable Privileges with
respect to third parties. The access to information being granted pursuant to
Sections 7.01 and 7.02 hereof, the agreement to provide witnesses and
individuals pursuant to Section 7.03 hereof and the transfer of Privileged
Information between Promus and its Subsidiaries and PRH and its Subsidiaries
pursuant to this Agreement shall not be deemed a waiver of any Privilege that
has been or may be asserted under this Agreement or otherwise.
- -
ARTICLE VIII
ADDITIONAL COVENANTS
Section 8.01. Non-Competition Agreement.
(a) PRH. Until 5 years after the Distribution Date, PRH and its
Affiliates shall not, without the express written consent of Harrah's
Entertainment, compete with the Casino Business of Harrah's Entertainment,
provided (i) that two years after the Distribution Date and for the remaining
term of this covenant, such restrictions shall not prevent PRH or any of its
Affiliates from competing with the Casino Business in geographic areas where
Harrah's Entertainment is prohibited, by law or by contract, from operating
casino facilities (or any additional casino facilities) and (ii) that such
restrictions shall not prevent PRH or any of its Affiliates from operating the
Hotel Business in competition with Harrah's Entertainment's casino facilities or
from operating a limited scale casino (no more than 10,000 square feet or 300
gaming positions) in a predominantly hotel facility. In the event that PRH or
any of its Affiliates determines to operate a limited scale casino as described
above, PRH shall offer to Harrah's Entertainment the right to provide management
or consulting services to PRH in connection therewith. In the event that PRH
determines not to accept such services on the terms specified by Harrah's
Entertainment, then PRH and its Affiliates shall not enter into any management
or consulting agreement with any other person on terms and conditions that are
less favorable to PRH than the terms offered by Harrah's Entertainment, without
first offering such terms to Harrah's Entertainment.
(b) Harrah's Entertainment. Until 5 years after the
Distribution Date, Harrah's Entertainment and its Affiliates shall not, without
the express written consent of PRH, compete with the Hotel Business of PRH,
provided that such restrictions shall not prevent or impair the operation
- -
or ownership by Harrah's Entertainment or any of its Affiliates of any hotel
facility related to or supporting a casino facility as such hotel facility may
be operated presently or in the future.
(c) As used in this Section 8.01, the term "Affiliates" includes
any entity in which PRH or Harrah's Entertainment owns a 20% or greater
interest, but excludes any entity owning a controlling or other interest in
either company (now or in the future). PRH and Harrah's Entertainment will not
be permitted to unreasonably withhold their consent to transactions involving
Affiliates that are not controlled by the other Company.
Section 8.02. Hiring of Employees. Neither PRH nor Promus nor
their respective Affiliates shall, for a period of two years after the
Distribution Date, hire any employee of the other company or its subsidiaries
(it being understood that PRH or its Affiliates may employ any PRH Employee and
Promus or its Affiliates may employ any Retained Employee), except that, in
order to provide opportunities for increased line-level responsibility and
career growth to field operations employees of Promus and PRH at the manager,
director and vice president officer levels, Promus and PRH and their respective
Affiliates may employ any employee of the other company in the following
categories:
(1) General manager or assistant general manager of any Embassy
Suites, Hampton Inn, Hampton Inn and Suites or Homewood Suites
hotel.
(2) Manager, director or vice president of any Harrah's casino
operation.
Section 8.03. Settlement Agreement. PRH and Promus shall
cooperate with each other in respect of the Settlement Agreement by making
available to each other such documents or other information and facilities
which, in the reasonable opinion of the party requesting such documents or
- -
other information and facilities, may be necessary. PRH shall promptly advise
Promus upon receipt of any notices or other communications related to the
Settlement Agreement. Promus agrees to pay all of the out-of-pocket expenses
(including any reasonable fees of legal counsel) of PRH related to such
cooperation. PRH agrees that the defense or prosecution of the claims pursuant
to the Settlement Agreement shall be solely under the direction and control of
Promus; provided that, without PRH's consent, Promus may not settle any claims
or enter into any agreements in connection therewith if doing so would prejudice
PRH in a manner not adequately compensated by the indemnification provided in
Section 5.01.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Complete Agreement; Construction. This Agreement,
including the Schedules and Exhibits and the Related Agreements and other
agreements and documents referred to herein or delivered pursuant hereto, shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of the Related Agreements, then the Related Agreements shall
control; provided, however, that this Agreement shall control in the event of
any conflict between the provisions of this Agreement and the deeds which effect
the transfer of the Transferred Real Property.
Section 9.02. Expenses. Except as otherwise set forth in this
Agreement or any Related Agreement, all costs and expenses incurred through the
Distribution Date in connection with the preparation, execution, delivery and
implementation of this Agreement, the Distribution and with the
- -
consummation of the transactions contemplated by this Agreement shall be charged
to Promus (other than the costs and expenses of the PRH Credit Agreement, which
shall be charged to PRH). Except as otherwise set forth in this Agreement or
any Related Agreement, all costs and expenses incurred following the
Distribution Date in connection with implementation of the transactions
contemplated in this Agreement shall be charged to the party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the parties.
Section 9.03. Accounting Adjustments. Except as otherwise set
forth in this Agreement or any Related Agreement, Promus and PRH agree (i) after
the Distribution Date, to cooperate in finalizing any adjustments required to
finalize accounting allocations and entries made to account for the transactions
contemplated by this Agreement and the Related Agreements, and (ii) that any
such adjustments shall be finalized by December 31, 1995. Subsequent to
December 31, 1995, any accounting required to adjust either PRH's or Promus's
books and records shall be the responsibility of the respective companies and no
adjustments will be made to account for the transactions contemplated by this
Agreement and the Related Agreements. This Section 9.03 is not intended to
impact any other sections of this Agreement or any of the Related Agreements.
Section 9.04. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Tennessee, without
regard to the principles of conflicts of laws thereof.
Section 9.05. Notices. All notices and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses for a party as shall be
- -
specified by like notice) and shall be deemed given on the date on which such
notice is received:
To PRH:
Promus Hotel Corporation
6800 Poplar Avenue, Suite 200
Memphis, TN 38138
Attention: Ralph B. Lake
General Counsel
To Promus:
The Promus Companies Incorporated
1023 Cherry Road
Memphis, Tennessee 38117
Attention: Corporate Secretary
Section 9.06. Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 9.07. Successors and Assigns. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.
Section 9.08. Termination. This Agreement may be terminated and
the Distribution abandoned at any time prior to the Distribution Date by and in
the sole discretion of the Promus Board without the approval of PRH or of
Promus's stockholders. In the event of such termination, no party shall have
any liability to any other party pursuant to this Agreement.
Section 9.09. Subsidiaries. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party which is contemplated to be a Subsidiary of such party on and after
the Distribution Date.
Section 9.10. No Third-Party Beneficiaries. This Agreement is
solely for the benefit of the parties hereto and their respective Subsidiaries
and Affiliates and should not be deemed to confer upon third parties any
- -
remedy, claim, Liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.
Section 9.11. Titles and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 9.12. Exhibits and Schedules. The Exhibits and
Schedules shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
Section 9.13. Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
Section 9.14. Arbitration of Disputes. (a) Any controversy or
claim arising out of this Agreement, or any breach of this Agreement, including
any controversy relating to a determination of whether specific assets
constitute PRH Assets or Retained Assets or whether specific Liabilities
constitute PRH Liabilities or Retained Liabilities, but excluding any
controversy relating to the matters set forth in Section 2.06, shall be settled
by arbitration in accordance with the Rules of the American Arbitration
Association then in effect, as modified by this Section 9.13 or by the further
agreement of the parties.
- -
(b) Such arbitration shall be conducted in Memphis, Tennessee.
(c) Any judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof. The arbitrators shall not,
under any circumstances, have any authority to award punitive, exemplary or
similar damages, and may not, in any event, make any ruling, finding or award
that does not conform to the terms and conditions of this Agreement.
(d) Nothing contained in this Section 9.13 shall limit or
restrict in any way the right or power of a party at any time to seek injunctive
relief in any court and to litigate the issues relevant to such request for
injunctive relief before such court (i) to restrain the other party from
breaching this Agreement or (ii) for specific enforcement of this Section 9.13.
The parties agree that any legal remedy available to a party with respect to a
breach of this Section 9.13 will not be adequate and that, in addition to all
other legal remedies, each party is entitled to an order specifically enforcing
this Section 9.13.
(e) The Parties hereby consent to the jurisdiction of the
federal courts located in Memphis, Tennessee for all purposes.
(f) Neither party nor the arbitrators may disclose the existence
or results of any arbitration under this Agreement or any evidence presented
during the course of the arbitration without the prior written consent of both
parties, except as required to fulfill applicable disclosure and reporting
obligations, or as otherwise required by law.
(g) Each party shall bear its own costs incurred in the
arbitration. If either party refuses to submit to arbitration any dispute
required to be submitted to arbitration pursuant to this Section 9.13, and
instead commences any other proceeding, including, without limitation,
litigation, then the party who seeks enforcement of the obligation to
- -
arbitrate shall be entitled to its attorneys' fees and costs incurred in any
such proceeding.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
THE PROMUS COMPANIES INCORPORATED,
a Delaware corporation
By: CHARLES A. LEDSINGER, JR.
------------------------------
Name: Charles A. Ledsinger, Jr.
Title: Senior Vice President
PROMUS HOTEL CORPORATION,
a Delaware corporation
By: DONALD H. DEMPSEY
------------------------------
Name: Donald H. Dempsey
Title: SVP-CFO
- -
EXHIBITS
Exhibit A: Employee Benefits Allocation Agreement
Exhibit B-1: Harrah's Entertainment Pro Forma Balance Sheet
Exhibit B-2: Harrah's Entertainment Pro Forma Statement of Income
Exhibit C: Information Technology Agreements
Exhibit C-1: Data Center Lease
Exhibit C-2: Marketing Services Agreement
Exhibit C-3: Satellite Services Agreement
Exhibit C-4: Software Agreement
Exhibit C-5: Transitional Service Agreement
Exhibit C-6: Administrative Systems Services Agreement
Exhibit C-7: Disaster Recovery Agreement
Exhibit D: PRH Bylaws
Exhibit E: PRH Certificate
Exhibit F-1: PRH Pro Forma Balance Sheet
Exhibit F-2: PRH Pro Forma Statement of Income
Exhibit G: Risk Management Allocation Agreement
Exhibit H: Tax Sharing Agreement
Exhibit I: Trademark Assignment Agreement
Exhibit J: Property Tax Services Agreement
Exhibit K: Opinion of James D. Wolfensohn Incorporated
- -
SCHEDULES
1.01(a) Existing Promus Credit Facilities
1.01(b) PRH Liabilities
1.01(c) Retained Assets
1.01(d) Retained Liabilities
1.01(e) Retained Real Property
1.01(f) Transferred Joint Venture Interest
1.01(g) Transferred Real Property
1.01(h) Transferred Subsidiaries
2.01(a) Excluded Assets
- -
TABLE OF CONTENTS
----------------
Page
----
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01. General . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Terms Defined Elsewhere in Agreement . . . . . . . . . 13
ARTICLE II - TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.01. Transfer of Assets to PRH; Harrah's Mergers . . . . . . 14
Section 2.02. Transfers Not Effected Prior to the Distribution . . . 16
Section 2.03. Cooperation Re: Assets . . . . . . . . . . . . . . . . 17
Section 2.04. No Representations or Warranties; Consents . . . . . . 17
Section 2.05. Conveyancing and Assumption Instruments . . . . . . . . 19
Section 2.06. Cash Allocation . . . . . . . . . . . . . . . . . . . . 20
Section 2.07. Financing . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE III - ASSUMPTION AND SATISFACTION OF LIABILITIES . . . . . . . . . 22
Section 3.01. Assumption and Satisfaction of Liabilities . . . . . . 22
ARTICLE IV - THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.01. Cooperation Prior to the Distribution . . . . . . . . . 23
Section 4.02. Promus Board Action; Conditions Precedent to the
Distribution . . . . . . . . . . . . . . . . . . . . 24
Section 4.03. The Distribution . . . . . . . . . . . . . . . . . . . 26
Section 4.04. Cash in Lieu of Fractional Shares . . . . . . . . . . . 26
ARTICLE V - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.01. Indemnification by Promus . . . . . . . . . . . . . . . 27
Section 5.02. Indemnification by PRH . . . . . . . . . . . . . . . . 27
Section 5.03. Insurance Proceeds . . . . . . . . . . . . . . . . . . 28
Section 5.04. Procedure for Indemnification . . . . . . . . . . . . . 29
Section 5.05. Remedies Cumulative . . . . . . . . . . . . . . . . . . 33
Section 5.06. Survival of Indemnities . . . . . . . . . . . . . . . . 33
ARTICLE VI - CERTAIN ADDITIONAL MATTERS . . . . . . . . . . . . . . . . . . 33
Section 6.01. PRH Board . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.02. Resignations; Promus Board . . . . . . . . . . . . . . 34
Section 6.03. Certificate and Bylaws . . . . . . . . . . . . . . . . 34
Section 6.04. Certain Post-Distribution Transactions . . . . . . . . 34
Section 6.05. Corporate Name . . . . . . . . . . . . . . . . . . . . 36
Section 6.06. PRH Rights Plan . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII - ACCESS TO INFORMATION AND SERVICES . . . . . . . . . . . . . 37
Section 7.01. Provision of Corporate Records . . . . . . . . . . . . 37
Section 7.02. Access to Information . . . . . . . . . . . . . . . . . 37
Section 7.03. Production of Witnesses . . . . . . . . . . . . . . . . 38
Section 7.04. Reimbursement . . . . . . . . . . . . . . . . . . . . . 39
Section 7.05. Retention of Records . . . . . . . . . . . . . . . . . 39
Section 7.06. Confidentiality . . . . . . . . . . . . . . . . . . . . 39
Section 7.07. Privileged Matters . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII - ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . 43
Section 8.01. Non-Competition Agreement . . . . . . . . . . . . . . 43
Section 8.02. Hiring of Employees . . . . . . . . . . . . . . . . . 45
Section 8.03. Settlement Agreement . . . . . . . . . . . . . . . . 45
ARTICLE IX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.01. Complete Agreement; Construction . . . . . . . . . . . 45
Section 9.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.03. Accounting Adjustments . . . . . . . . . . . . . . . . 46
Section 9.04. Governing Law . . . . . . . . . . . . . . . . . . . . . 47
Section 9.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.06. Amendments . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.07. Successors and Assigns . . . . . . . . . . . . . . . . 48
Section 9.08. Termination . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.09. Subsidiaries . . . . . . . . . . . . . . . . . . . . . 48
Section 9.10. No Third-Party Beneficiaries . . . . . . . . . . . . . 48
Section 9.11. Titles and Headings . . . . . . . . . . . . . . . . . . 49
Section 9.12. Exhibits and Schedules . . . . . . . . . . . . . . . . 49
Section 9.13. Legal Enforceability . . . . . . . . . . . . . . . . . 49
Section 9.14. Arbitration of Disputes . . . . . . . . . . . . . . . . 49
EXHIBITS
SCHEDULES
Schedule 1.01(a)
Existing Promus Credit Facilities
---------------------------------
1. Credit Agreement dated as of July 22, 1993 among The Promus Companies
Incorporated, Embassy Suites, Inc., Certain Subsidiaries of Embassy Suites,
Inc., Various Banks, Bankers Trust Company, The Bank of New York, Credit
Lyonnais, Atlanta Agency and The Sumitomo Bank, Limited, New York Branch,
as Agents, and Bankers Trust Company, as Administrative Agent.
As amended and restated pursuant to: Amended and Restated Credit Agreement
dated as of June 9, 1995 among The Promus Companies Incorporated, Embassy
Suites, Inc., Certain Subsidiaries of Embassy Suites, Inc., Various Banks,
Bankers Trust Company. The Bank of New York, CIBC, Inc., Credit Lyonnais,
Atlanta Agency, First Interstate Bank of California, The Long-Term Credit
Bank of Japan, New York Branch, NationsBank of Georgia, N.A., Societe
Generale and The Sumitomo Bank, Limited, New York Branch, as Agents, and
Bankers Trust Company, as Administrative Agent (to be effective upon the
satisfaction of certain conditions set forth therein on or before the
Distribution Date).
2. Credit Agreement dated as of June 9, 1995 among The Promus Companies
Incorporated, Embassy Suites, Inc., Certain Subsidiaries of Embassy Suites,
Inc., Various Banks, Bankers Trust Company, The Bank of New York, CIBC,
Inc., Credit Lyonnais, Atlanta Agency, First Interstate Bank of California,
The Long-Term Credit Bank of Japan, New York Branch, NationsBank of
Georgia, N.A., Societe Generale and The Sumitomo Bank, Limited, New York
Branch, as Agents, and Bankers Trust Company, as Administrative Agent (to
be effective upon the satisfaction of certain conditions set forth therein
on or before the Distribution Date).
3. Credit Agreement dated as of June 1, 1994 among The Promus Companies
Incorporated, Embassy Suites, Inc., Various Banks and Bankers Trust
Company, as Administrative Agent.
- -
Schedule 1.01(b)
PRH Liabilities
---------------
1. Capital Leases
Embassy - Tucson $ 44,350
Embassy - Orlando $ 31,362
Embassy - Thomas Road $ 35,072
Embassy - Philadelphia Airport $ 41,031
Information Technology $ 1,773,302
Marketing Services Center $ 68,061
2. Notes
Embassy - DeBanks Henwood $ 917,641
Hampton - San Francisco land $ 296,724
3. Guarantees
Meadowlands Land Lease $29,356,749
Chicago Lombard $ 500,000
Embassy Pacific Partner LP,
Embassy Atlanta Buckhead Partners LP
and Embassy LaJolla Partners LP $ 4,000,000
Executive Life Guarantee [Not to exceed $8,100,000]
4. Executive Deferred Compensation Plans and Deferred Compensation Plan
5. Commitment to purchase $25,000,000 of shares in Felcor Suites Hotels, Inc.
or units in Felcor Suites Hotels Limited Partnership
6. Indemnity for hotel-related letters of credit issued under Bankers Trust
facility
- -
Schedule 1.01
Retained Assets
---------------
- Aircraft
- Hangar and related facilities at Memphis airport
- Cherry Road office (including all furniture, fixtures and
equipment located thereat or associated therewith) [Art?]
- Racquet Club Membership and suite
- Memphis State Basketball tickets
- Pyramid Arena Suite
- Equitable portion of other purchased tickets, memberships,
subscriptions and the like
- Vehicles related principally to the Cherry road offices
- Antique automobiles
- Proceeds of Joe Francis life insurance in escrow
- -
Schedule 1.01(d)
Retained Liabilities
--------------------
1. Hotel-related letters of credit issued under the Bankers Trust facility and
covered by an indemnity agreement from PRH
2. Other hotel-related liabilities covered by an indemnity agreement from PRH
- -
Schedule 1.01(e)
Retained Real Property
----------------------
1. Casino in Reno, Nevada
2. Casino in Las Vegas, Nevada
3. Casino in Lake Tahoe, Nevada
4. Bill's Casino in Lake Tahoe, Nevada
5. Cherry Road campus in Memphis, Tennessee
6. Chalfonte property in Atlantic City, New Jersey
7. Camelot property in Atlantic City, New Jersey
- -
Schedule 1.01(f)
Transferred Joint Venture Interests
-----------------------------------
1. Barshop-HII Joint Venture, a Texas general partnership formed pursuant to
that certain Joint Venture Agreement dated January 17, 1984 and amended by
that certain Amendment to Joint Venture Agreement dated February 1, 1995
between Embassy Suites, Inc. and PMB Associates, Ltd.
2. Embassy AKERS Venture, a Georgia general partnership formed pursuant to
that certain Joint Venture Agreement dated March 2, 1984 among Embassy
Suites, Inc., George H. Johnson, and Charles C. Barton.
3. SES/D.C. Venture, a District of Columbia general partnership formed
pursuant to that certain Amended and Restated Joint Venture Agreement dated
April 8, 1988 between Embassy Suites, Inc., CHS/D.C. One Associates and
Shuwa Hotel Joint Venture.
4. Embassy/GACL Lombard Venture, an Illinois general partnership formed
pursuant to that certain Joint Venture Agreement dated July 28, 1987 as
amended by that certain First Amendment to Joint Venture Agreement of
Embassy/GACL Lombard Venture dated June 30, 1992 between Embassy Suites,
Inc., Embassy Development Corporation and GACL Lombard, Inc.
5. Embassy Shaw/Parsippany Venture, a New Jersey general partnership formed
pursuant to that certain Joint Venture Agreement dated January 4, 1986
between Embassy Suites, Inc. and CHS Parsippany Associates, L.P.
6. Embassy Shaw/Rochester Venture, a New York general partnership formed
pursuant to that certain Joint Venture Agreement dated April 7, 1989
between Embassy Suites, Inc. and CHS Investment Company, Inc.
7. EPT Atlanta-Perimeter Center Limited Partnership, a Delaware limited
partnership, formed pursuant to that certain Limited Partnership Agreement
dated December 3, 1987 among Suite Life, Inc. and APCGEPT Realty
Corporation as general partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
8. EPT Austin Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986 among Suite Life, Inc. and ATEPT Realty Corporation
as general partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as
limited partners.
9. EPT Bloomington Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986 among Suite Life, Inc. and BMEPT Realty Corporation
as general partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as
limited partners.
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10. EPT Covina Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986 among Suite Life, Inc. and CCEPT Realty Corporation
as general partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as
limited partners.
11. EPT Crystal City Land Limited Partnership, a Delaware limited
partnership formed pursuant to that certain Limited Partnership
Agreement dated June 27, 1989 among Suite Life, Inc. and CCVEPT Realty
Corporation as general partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
12. EPT Kansas City Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986 among Suite Life, Inc. and KCMEPT Realty
Corporation as general partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
13. EPT Meadowlands Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated December 3,
1987 among Suite Life, Inc. and MNJEPT Realty Corporation as general
partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as limited
partners.
14. EPT Omaha Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986, among Suite Life, Inc. and ONEPT Realty
Corporation as general partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
15. EPT Overland Park Limited Partnership, a Delaware limited partnership
formed pursuant to that certain Limited Partnership Agreement dated
December 3, 1987 among Suite Life, Inc. and OPKEPT Realty Corporation as
general partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as
limited partners.
16. EPT Raleigh Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated December 3,
1987 among Suite Life, Inc. and RNCEPT Realty Corporation as general
partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as limited
partners.
17. EPT San Antonio Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
and amended by that certain First Amendment to Limited Partnership
Agreement December 12, 1986 among Suite Life, Inc. and SATEPT Realty
Corporation as genera; partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
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18. E.S. Philadelphia Airport Joint Venture, a Pennsylvania general partnership
formed pursuant to that certain Joint Venture Agreement dated February 2,
1989 between Embassy Suites, Inc. and ES/PA, L.P.
19. Granada Royale Hometel-Tucson, an Arizona limited partnership formed
pursuant to that certain Certificate and Agreement of Limited Partnership
dated March 3, 1975, amended by that certain Amendment to Certificate and
Agreement of Limited Partnership dated August 18, 1975, and amended by that
certain Second Amendment to Certificate and Agreement of Limited
Partnership on December 10, 1975, among Embassy Suites, Inc. as general
partner and certain limited partners.
20. Granada Royale Hometel-West, an Arizona limited partnership, formed
pursuant to that certain Certificate and Agreement of Limited Partnership
dated January 1, 1976, amended by that certain Amended, Restated and
Refiled Certificate and Agreement of Limited Partnership dated March 30,
1984, and amended by that certain Amendment to Certificate and Agreement of
Limited Partnership dated March 28, 1985, among Embassy Suites, Inc. as
general partner and certain limited partners.
21. King Street Station Hotel Associates, L.P., a Virginia limited partnership
formed pursuant to that certain Limited Partnership Agreement dated April
28, 1989 among The Oliver Carr Company and Duke Street Partnership L.P. as
general partners and Embassy Suites, Inc. as limited partner.
22. MHV Joint Venture, a Texas general partnership formed pursuant to that
certain Joint Venture Agreement dated January 6, 1989 between Embassy
Suites, Inc. and Submarin, L.P.
23. Pacific Market Investment Company, a California general partnership formed
pursuant to that certain Joint Venture Agreement dated December 19, 1986
between Harbor Drive Company and Embassy Suites, Inc.
24. Riverview/Embassy Joint Venture, an inactive joint venture in which Embassy
Suites has a 50% interest.
25. Embassy Suites Club No. Two, Inc., a Texas corporation in which Embassy
Suites, Inc. has a 49% ownership interest.
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Schedule 1.01(g)
Transferred Real Property
-------------------------
1. Orlando - Lake Buena Vista (fee interest)
2. Phoenix - 24th & Thomas Road (ground lease interest)
3. Dallas - Market Center (leasehold interest)
4. Data Center Building (fee interest)
5. Ridgeway Center Offices - 850 Ridge Lake Boulevard, Memphis, Tennessee
(multiple leasehold interests)
6. Ridgeway Center Offices - 860 Ridge Lake Boulevard, Memphis, Tennessee
(multiple leasehold interests)
7. Ridgeway Center Offices - 959 Ridgeway Loop, Memphis, Tennessee (multiple
leasehold interests)
8. Southwind - 8245 Tournament Drive, Memphis, Tennessee (multiple leasehold
interests)
9. Southwind - 3239 Players Club Parkway, Memphis, Tennessee (leasehold
interest)
10. 6800 Poplar, Memphis, Tennessee (leasehold interest)
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Schedule 1.01(h)
Transferred Subsidiaries
------------------------
1. Buckleigh, Inc. (100% owned by ESI)
2. ATM Hotels (50% owned by ESI; 50% owned by Pacific Hotels, Inc.)
3. Compass, Inc. (100% owned by ESI)
4. EJP Corporation (100% owned by ESI)
5. Embassy Development Corporation (100% owned by ESI)
6. Embassy Equity Development Corporation (100% owned by ESI)
7. Embassy Memphis Corporation (100% owned by ESI)
8. Embassy Pacific Equity Corporation (100% owned by ESI)
9. Embassy Suites Club No. 1, Inc. (100% owned by ESI)
10. Embassy Suites Club No. Three, Inc. (100% owned by ESI)
11. Embassy Suites De Mexico, S.A., De C.V. (96% owned by ESI)
12. Embassy Suites (Isla Verde), Inc. (100% owned by ESI)
13. Embassy Suites (Puerto Rico), Inc. (100% owned by ESI)
14. Embassy Vacation Resorts, Inc. (100% owned by ESI)
15. EPAM Corporation (100% owned by ESI)
16. ESI Development, Inc. (100% owned by ESI)
17. ESI Mortgage Development Corporation (100% owned by ESI)
18. ESI Mortgage Development Corporation II (100% owned by ESI)
19. E.S. Philadelphia Airport Venture (ESI owns a 90% interest)
20. GOL (Heathrow), Inc. (100% owned by ESI)
21. Granada Royale Hometel-West, a limited partnership (ESI owns a 50.003%
interest)
22. Granada Royale Hometel-Tucson, a limited partnership (ESI owns a 65%
interest)
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23. Hampton Inns, Inc. (100% owned by ESI)
24. Old Town Hotel Corporation (100% owned by ESI)
25. Pacific Hotels, Inc. (100% owned by ESI)
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Schedule 2.01(a)
Excluded Assets
---------------
Interests in those partnerships necessary to avoid Internal Revenue Code Section
708 tax terminations and, after the Distribution has been consummated, those
certain hotel-related assets of Promus and its Subsidiaries that will be
retained by Promus and its Subsidiaries but which shall be managed by Promus
Hotels, Inc. pursuant to that certain Asset Management Agreement by and between
Embassy Suites, Inc. and Promus Hotels, Inc. to be executed as of June 30, 1995.
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