1
EXHIBIT 10.1
ASSET SALE AGREEMENT
AND
PLANS OF MERGERS
AMONG
RFS HOTEL INVESTORS, INC., A TENNESSEE CORPORATION
("TARGET REIT"),
RHI ACQUISITION, INC., A TENNESSEE CORPORATION
("MERGER SUB"),
EQUITY INNS, INC., A TENNESSEE CORPORATION
("ACQUIROR REIT"),
RFS PARTNERSHIP, L.P., A TENNESSEE LIMITED PARTNERSHIP
("CONTRIBUTOR OP")
AND
EQUITY INNS PARTNERSHIP, L.P., A TENNESSEE LIMITED PARTNERSHIP
("ACQUIROR OP")
APRIL 21, 1998
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................... 2
1.1. [INTENTIONALLY OMITTED]..................................... 2
1.2. Acquiror CMBS OP............................................ 2
1.3. Acquiror CMBS OP Partner Approvals.......................... 2
1.4. Acquiror CMBS OP Partnership Agreement...................... 2
1.5. Acquiror OP................................................. 2
1.6. Acquiror OP General Units................................... 2
1.7. Acquiror OP Limited Units................................... 2
1.8. Acquiror OP Partner Approvals............................... 2
1.9. Acquiror OP Partnership Agreement........................... 2
1.10. Acquiror OP Units........................................... 2
1.11. Acquiror REIT............................................... 2
1.12. Acquiror REIT Charter....................................... 2
1.13. Acquiror REIT CMBS Lessee................................... 3
1.14. Acquiror REIT Common Stock.................................. 3
1.15. Acquiror REIT Employee Benefit Plans........................ 3
1.16. Acquiror REIT Employment Agreements......................... 3
1.17. Acquiror REIT Hotels........................................ 3
1.18. Acquiror REIT Leases........................................ 3
1.19. Acquiror REIT Lessee........................................ 3
1.20. Acquiror REIT Material Adverse Effect....................... 3
1.21. Acquiror REIT Options....................................... 3
1.22. Acquiror REIT Preferred Stock............................... 3
1.23. Acquiror REIT Restricted Stock Grants....................... 3
1.24. Acquiror REIT SEC Documents................................. 3
1.25. Acquiror REIT Subsidiaries.................................. 4
1.26. Acquisition Opportunity..................................... 4
1.27. Acquisition Proposal........................................ 4
1.27(a) Acquisition Proposal Notice................................. 4
1.28. Act of Bankruptcy........................................... 4
1.29. Affiliate................................................... 4
1.30. Agreement................................................... 4
1.31. Amended and Restated Acquiror OP Partnership Agreement...... 4
1.32. Articles of Merger.......................................... 4
1.33. Asset Sale.................................................. 5
1.34. Assumed Liabilities......................................... 5
1.35. Average Price............................................... 5
1.36. Bill of Sale (Inventory).................................... 5
1.37. Bill of Sale (Personal Property)............................ 5
1.38. Board....................................................... 5
1.39. Certificates................................................ 5
1.40. Certificates of Merger...................................... 5
1.41. Closing..................................................... 5
1.42. Closing Date................................................ 5
1.43. CMBS Agreement of Merger.................................... 5
1.44. CMBS Bonds.................................................. 6
1.45. CMBS OP Merger.............................................. 6
1.46. CMBS OP Merger Consideration................................ 6
1.47. OP Merger Consideration..................................... 6
1.48. CMBS OP Partner Approvals................................... 6
1.49. Code........................................................ 6
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1.49(a) Competing Transaction....................................... 6
1.50. Confidential Material....................................... 6
1.51. Contracts................................................... 6
1.52. Contributor CMBS OP......................................... 6
1.53. Contributor CMBS OP Partner Approvals....................... 6
1.54. Contributor CMBS OP Partnership Agreement................... 6
1.55. Contributor OP.............................................. 6
1.56. Contributor OP General Units................................ 7
1.57. Contributor OP Limited Units................................ 7
1.58. Contributor OP Partner Approvals............................ 7
1.59. Contributor OP Partnership Agreement........................ 7
1.60. Contributor OP Units........................................ 7
1.61. Deeds....................................................... 7
1.61(a) Definitive Competing Acquisition Agreement.................. 7
1.62. Effective Time.............................................. 7
1.63. Employee Benefit Plans...................................... 7
1.63(a) Entitled Party.............................................. 7
1.64. ERISA....................................................... 7
1.64(a) Escrow Agent................................................ 7
1.65. Exchange Act................................................ 8
1.66. Exchange Agent.............................................. 8
1.67. Exchange Ratio.............................................. 8
1.68. Expenses.................................................... 8
1.69. Final Target REIT Dividend.................................. 8
1.70. FIRPTA Certificate.......................................... 8
1.71. Form S-4.................................................... 8
1.72. Franchise Agreements........................................ 8
1.73. Franchisors................................................. 8
1.74. GAAP........................................................ 8
1.75. Hazardous Substance......................................... 8
1.76. HSR Act..................................................... 9
1.77. Improvements................................................ 9
1.78. Insurance Policies.......................................... 9
1.79. Intangible Personal Property................................ 9
1.80. Interests................................................... 9
1.81. Inventory................................................... 9
1.82. IRS......................................................... 9
1.83. Knowledge of Acquiror REIT.................................. 9
1.84. Knowledge of Target REIT.................................... 9
1.85. Land........................................................ 10
1.86. Lease Termination Agreement................................. 10
1.87. Termination Fee............................................. 10
1.88. material.................................................... 10
1.89. Material Adverse Effect..................................... 10
1.89(a) Maximum Expense Reimbursement............................... 10
1.89(b) Maximum Termination Fee..................................... 10
1.90. Mergers..................................................... 10
1.91. Merger Consideration........................................ 10
1.92. Merger Sub.................................................. 10
1.93. Mortgage Documents.......................................... 10
1.94. Mortgage Notes.............................................. 10
1.95. Mortgages................................................... 11
1.96. NYSE........................................................ 11
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1.97. OP Merger................................................... 11
1.98. OP Partner Approvals........................................ 11
1.99. Organizational Documents.................................... 11
1.90(a) Payor Party................................................. 11
1.100. Permit...................................................... 11
1.101. Permitted Title Exceptions.................................. 11
1.102. Person...................................................... 11
1.103. Personal Property........................................... 11
1.104. Plan of Merger.............................................. 11
1.105. Pricing Period.............................................. 12
1.106. Proxy Statement/Prospectus.................................. 12
1.107. Qualifying Income........................................... 12
1.108. Real Property............................................... 12
1.109. REIT........................................................ 12
1.110. REIT Merger................................................. 12
1.111. SEC......................................................... 12
1.112. SEC Documents............................................... 12
1.113. Securities Act.............................................. 12
1.114. Severance Benefits.......................................... 12
1.115. Shareholders and Shareholder................................ 12
1.116. Stock Purchase Agreement.................................... 12
1.117. Subsidiary.................................................. 13
1.118. Surviving Corporation....................................... 13
1.119. Surviving CMBS OP........................................... 13
1.120. Surviving OP................................................ 13
1.121. Takeover Statutes........................................... 13
1.122. Tangible Personal Property.................................. 13
1.123. Target C Corp............................................... 13
1.124. Target REIT................................................. 13
1.125. Target REIT Capital Stock................................... 13
1.126. Target REIT Charter......................................... 13
1.127. Target REIT CMBS Lessee..................................... 13
1.128. Target REIT Common Stock.................................... 13
1.129. Target REIT Employee Benefit Plans.......................... 14
1.130. Target REIT Employment Agreements........................... 14
1.131. Target REIT Hotels.......................................... 14
1.132. Target REIT Leases.......................................... 14
1.133. Target REIT Lessee.......................................... 14
1.134. Target REIT Material Adverse Effect......................... 14
1.135. Target REIT Options......................................... 14
1.136. Target REIT Preferred Stock................................. 14
1.137. Target REIT Restricted Stock Grants......................... 14
1.138. Target REIT SEC Documents................................... 14
1.139. Target REIT Subsidiaries.................................... 14
1.140. Tax Return.................................................. 15
1.141. Taxes....................................................... 15
1.142. Tennessee Act............................................... 15
1.143. Title Company............................................... 15
1.144. Transferred Assets.......................................... 15
1.145. TRULPA...................................................... 15
1.146. Undeveloped Land............................................ 15
1.147. Unit Certificates........................................... 15
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1.148. Utilities................................................... 15
1.149. Welfare Plans............................................... 15
ARTICLE II ASSET SALE AGREEMENT......................................... 16
2.1. Sale and Purchase........................................... 16
2.2. Effectuation of the Asset Sale.............................. 16
2.3. OP Partner Approvals........................................ 16
2.4. CMBS OP Partner Approvals................................... 16
2.5. Acquiror OP Partnership Agreement........................... 16
2.6. Contributor OP's and Contributor CMBS OP's Deliveries....... 16
2.7. Target REIT Lease Termination............................... 17
2.8. Schedules and Exhibits...................................... 17
ARTICLE III THE REIT MERGER............................................. 17
3.1. The REIT Merger............................................. 17
3.2. Closing..................................................... 18
3.3. Effective Time.............................................. 18
3.4. Effect of the REIT Merger................................... 18
3.5. Charter and Bylaws.......................................... 18
3.6. Officers and Directors...................................... 18
3.7. Employees................................................... 18
ARTICLE IV EFFECT OF REIT MERGER ON CAPITALIZATION; EXCHANGE OF
CERTIFICATES.......................................................... 19
4.1. Effect on Capitalization.................................... 19
4.2. Exchange of Certificates.................................... 20
4.3. Target REIT Options......................................... 21
ARTICLE V THE OP MERGER................................................. 22
5.1. The OP Merger............................................... 22
5.2. Effect of the OP Merger..................................... 23
5.3. Certificate of Limited Partnership and Partnership
Agreement................................................. 23
5.4. Effect on Partnership Interests............................. 23
5.5. Exchange of Certificates.................................... 23
ARTICLE VI THE CMBS OP MERGER........................................... 25
6.1. The CMBS OP Merger; CMBS Agreement of Merger................ 25
6.2. Effect of the CMBS OP Merger................................ 25
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF........................... 25
CONTRIBUTOR OP AND TARGET REIT.......................................... 25
7.1. Organization................................................ 25
7.2. Authorization; Enforceability............................... 26
7.3. Capitalization.............................................. 26
7.4. No Violation or Conflict by Contributor OP or Target REIT... 27
7.5. No Litigation............................................... 27
7.6. Absence of Certain Changes.................................. 27
7.7. Subsidiaries................................................ 27
7.8. Contracts and Commitments................................... 27
7.9. Approvals and Consents...................................... 28
7.10. Target REIT Employee Benefit Plans.......................... 28
7.11. SEC Documents; Financial Statements; Undisclosed
Liabilities............................................... 29
7.12. No Special Taxes............................................ 29
7.13. Compliance with Existing Laws............................... 29
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7.14. Insurance................................................... 30
7.15. Condemnation Proceedings.................................... 30
7.16. Personal Property........................................... 30
7.17. Bankruptcy.................................................. 30
7.18. Title to Real Property...................................... 30
7.19. Zoning...................................................... 30
7.20. Hazardous Substances........................................ 30
7.21. Room Furnishings............................................ 31
7.22. Franchisors; Franchise Agreements........................... 31
7.23. Mortgage Documents.......................................... 31
7.24. Opinion of Financial Advisor................................ 31
7.25. Financial Advisor........................................... 31
7.26. Acquiror REIT Share Ownership............................... 31
7.27. Related Party Transactions.................................. 31
7.28. Takeover Statutes........................................... 32
7.29. Hart-Scott-Rodino Antitrust Improvements Act of 1976........ 32
7.30. Development................................................. 32
7.31. Tax Matters................................................. 32
7.32. Convertible Securities...................................... 33
7.33. Updating of Representations and Warranties.................. 33
7.34. Reorganization.............................................. 33
7.35. Intellectual Property....................................... 33
7.36. Employees................................................... 33
7.37. Labor Relations............................................. 34
7.38. Termination of Certain Target REIT Leases................... 34
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF ACQUIROR REIT, ACQUIROR
OP AND MERGER SUB..................................................... 34
8.1. Organization................................................ 34
8.2. Authorization; Enforceability............................... 35
8.3. Capitalization.............................................. 35
8.4. No Violation or Conflict by Acquiror OP, Acquiror REIT or
Merger Sub................................................ 36
8.5. No Litigation............................................... 36
8.6. Absence of Certain Changes.................................. 36
8.7. Subsidiaries................................................ 36
8.8. Contracts and Commitments................................... 36
8.9. Approvals and Consents...................................... 37
8.10. Acquiror REIT Employee Benefit Plans........................ 37
8.11. SEC Documents; Financial Statement; Undisclosed
Liabilities............................................... 38
8.12. Title to Properties and Assets.............................. 38
8.13. Insurance................................................... 38
8.14. Personal Property........................................... 38
8.15. Bankruptcy.................................................. 39
8.16. Zoning...................................................... 39
8.17. Hazardous Substances........................................ 39
8.18. Leases...................................................... 39
8.19. Opinion of Financial Advisor................................ 39
8.20. Financial Advisor........................................... 39
8.21. Target REIT Share Ownership................................. 39
8.22. Related Party Transactions.................................. 40
8.23. Takeover Statutes........................................... 40
8.24. Hart-Scott-Rodino Antitrust Improvements Act of 1976........ 40
8.25. Development................................................. 40
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8.26. Tax Matters................................................. 40
8.27. Convertible Securities...................................... 41
8.28. Acquiror REIT Common Stock.................................. 41
8.29. Interim Operations of Merger Sub............................ 41
8.30. Updating of Representations and Warranties.................. 41
8.31. Reorganization.............................................. 42
8.32. Intellectual Property....................................... 42
8.33. Employees................................................... 42
8.34. Labor Relations............................................. 42
8.35. No Special Taxes............................................ 42
8.36. Compliance with Existing Laws............................... 42
8.37. Condemnation Proceedings.................................... 43
8.38. Room Furnishings............................................ 43
8.39. Franchisors; Franchise Agreements........................... 43
8.40. Mortgage Documents.......................................... 43
8.41. New Leases.................................................. 43
ARTICLE IX CONDITIONS PRECEDENT TO CLOSING.............................. 44
9.1. Conditions Precedent to Obligations of Parties.............. 44
9.2. Conditions Precedent to the Obligations of Acquiror OP,
Acquiror REIT and Merger Sub.............................. 44
9.3. Conditions Precedent to the Obligations of Contributor OP
and Target REIT........................................... 46
ARTICLE X COVENANTS..................................................... 47
10.1. Acquisition Proposals....................................... 47
10.2. Conduct of Businesses....................................... 48
10.3. Meetings of Shareholders.................................... 52
10.4. Filings; Other Action....................................... 52
10.5. Inspection of Records....................................... 53
10.6. Publicity................................................... 53
10.7. Registration Statement...................................... 53
10.8. Listing Application......................................... 54
10.9. Further Action.............................................. 54
10.10. Expenses.................................................... 54
10.11. Indemnification............................................. 54
10.12. Governance.................................................. 54
10.13. Severance Benefits.......................................... 55
10.14. Reorganization.............................................. 55
10.15. Survival of Target REIT, Contributor OP and Contributor CMBS
OP Obligations............................................ 55
10.16. Third-Party Consents........................................ 55
10.17. Efforts to Fulfill Conditions............................... 55
10.18. Representations, Warranties and Conditions Prior to
Closing................................................... 56
10.19. Cooperation of the Parties.................................. 56
10.20. Amendment to Acquiror REIT Charter.......................... 56
10.21. Records..................................................... 56
10.22. Confidentiality............................................. 56
10.23. Acknowledgments............................................. 56
10.24. Target REIT Acquisition Opportunities....................... 57
10.25. CMBS Bonds.................................................. 57
10.26. Tax Treatment............................................... 57
10.27. Transfer and Gains Taxes.................................... 58
10.28. Transfer of Target C Corp. Shares........................... 58
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10.29. Existing Restrictions....................................... 58
10.30. Lease Termination/New Leases................................ 58
ARTICLE XI TERMINATION.................................................. 58
11.1. Termination by Mutual Consent............................... 58
11.2. Termination by Either Acquiror REIT or Target REIT.......... 59
11.3. Termination by Target REIT.................................. 59
11.4. Termination by Acquiror REIT................................ 59
11.5. Effect of Termination and Abandonment....................... 60
11.6. Expenses.................................................... 62
11.7. Extension; Waiver; Miscellaneous............................ 63
ARTICLE XII MISCELLANEOUS............................................... 63
12.1. Nonsurvival of Representations, Warranties and Agreements... 63
12.2. Notices..................................................... 63
12.3. Assignment; Binding Effect; Benefit......................... 64
12.4. Entire Agreement............................................ 64
12.5. Confidentiality............................................. 64
12.6. Amendment................................................... 66
12.7. Governing Law............................................... 66
12.8. Counterparts................................................ 66
12.9. Headings.................................................... 66
12.10. Interpretation.............................................. 67
12.11. Waivers..................................................... 67
12.12. Incorporation............................................... 67
12.13. Severability................................................ 67
12.14. Enforcement of Agreement.................................... 67
12.15. Non-Recourse................................................ 67
12.16. Arbitration................................................. 68
List of Schedules....................................................... 70
List of Exhibits........................................................ 72
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ASSET SALE AGREEMENT AND
PLANS OF MERGERS
ASSET SALE AGREEMENT AND PLANS OF MERGERS, made as of this 21st day of
April, 1998, by and among RFS HOTEL INVESTORS, INC., a Tennessee corporation
("Target REIT"), EQUITY INNS, INC., a Tennessee corporation ("Acquiror REIT"),
RHI ACQUISITION, INC., a Tennessee corporation and wholly-owned subsidiary of
Acquiror REIT ("Merger Sub"), EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited
partnership ("Acquiror OP"), and RFS PARTNERSHIP, L.P., a Tennessee limited
partnership ("Contributor OP").
RECITALS
A. The Board of Directors of Acquiror REIT and the Board of Directors of
Target REIT have determined that a business combination on the terms described
herein between Acquiror REIT and Target REIT is in the best interests of their
respective Shareholders and presents an opportunity for their respective
companies to achieve long-term strategic and financial benefits, and accordingly
have agreed to effect a merger on the terms and conditions set forth herein.
B. For federal income tax purposes, it is intended that the REIT Merger (as
defined) shall qualify as tax-free reorganizations within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended, (the "Code"), and that
this Agreement (as defined herein) shall constitute a plan of reorganization
under Section 368 of the Code.
C. Acquiror REIT, as the sole shareholder of the general partners of
Acquiror OP and Acquiror CMBS OP, and Target REIT, as the general partner of
Contributor OP and as the sole shareholder of the general partner of Contributor
CMBS OP, deem it advisable and in the best interests of their respective limited
partners, subject to the conditions and other provisions contained herein, that
Contributor OP shall merge into Acquiror OP with the holders of partnership
interests in Contributor OP receiving units of limited partnership interest in
Acquiror OP and that Contributor CMBS OP shall merge into Acquiror CMBS OP with
the holders of partnership interests in Contributor CMBS OP receiving limited
partnership interests in Acquiror CMBS OP.
D. For federal income tax purposes, it is intended that the OP Merger (as
defined herein), regardless of form, be treated as a contribution by Contributor
OP of all of its assets to Acquiror OP in exchange for partnership interests in
Acquiror OP under Section 721 of the Code, and a distribution of such
partnership interests by Contributor OP to its partners under Section 731 of the
Code. For federal income tax purposes, it is intended that the CMBS OP Merger
(as defined herein), regardless of form, be treated as a contribution by
Contributor CMBS OP of all of its assets to Acquiror CMBS OP in exchange for
partnership interests in Acquiror CMBS OP under Section 721 of the Code, and a
distribution of such partnership interests by Contributor CMBS OP to its
partners under Section 731 of the Code.
E. Acquiror REIT acknowledges and agrees that it will benefit directly from
the merger of Target REIT into Merger Sub, Contributor OP into Acquiror OP and
Contributor CMBS OP into Acquiror CMBS OP as provided for herein.
F. The parties hereto desire to make certain representations, warranties
and agreements in connection with the transactions contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
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ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1. [INTENTIONALLY OMITTED].
1.2. Acquiror CMBS OP.
"Acquiror CMBS OP" shall have the meaning provided in Section 10.25.
1.3. Acquiror CMBS OP Partner Approvals.
"Acquiror CMBS OP Partner Approvals" shall have the meaning provided in
Section 2.4.
1.4. Acquiror CMBS OP Partnership Agreement.
"Acquiror CMBS OP Partnership Agreement" shall mean the Agreement of
Limited Partnership of Acquiror CMBS OP to be entered into after the date hereof
upon organization of Acquiror CMBS OP as contemplated in Section 10.25.
1.5. Acquiror OP.
"Acquiror OP" shall mean Equity Inns Partnership, L.P., a Tennessee limited
partnership.
1.6. Acquiror OP General Units.
"Acquiror OP General Units" shall mean Acquiror OP Units representing an
interest as a general partner in Acquiror OP.
1.7. Acquiror OP Limited Units.
"Acquiror OP Limited Units" shall mean Acquiror OP Units that represent an
interest as a limited partner in Acquiror OP.
1.8. Acquiror OP Partner Approvals.
"Acquiror OP Partner Approvals" shall have the meaning provided in Section
2.3.
1.9. Acquiror OP Partnership Agreement.
"Acquiror OP Partnership Agreement" shall mean the Agreement of Limited
Partnership of Acquiror OP, as amended as of the date hereof.
1.10. Acquiror OP Units.
"Acquiror OP Units" shall mean units of partnership interest of Acquiror
OP, including Acquiror OP General Units and Acquiror OP Limited Units.
1.11. Acquiror REIT.
"Acquiror REIT" shall mean Equity Inns, Inc., a Tennessee corporation.
1.12. Acquiror REIT Charter.
"Acquiror REIT Charter" shall mean the Charter of Acquiror REIT, as amended
and restated as of the date hereof.
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1.13. Acquiror REIT CMBS Lessee.
"Acquiror REIT CMBS Lessee" shall have the meaning provided in Section
10.25.
1.14. Acquiror REIT Common Stock.
"Acquiror REIT Common Stock" shall mean the common stock of Acquiror REIT,
par value $.01 per share.
1.15. Acquiror REIT Employee Benefit Plans.
"Acquiror REIT Employee Benefit Plans" shall mean the employee benefit
plans of Acquiror REIT described on Schedule 8.10.
1.16. Acquiror REIT Employment Agreements.
"Acquiror REIT Employment Agreements" shall mean the employment agreements
described on Schedule 1.16.
1.17. Acquiror REIT Hotels.
"Acquiror REIT Hotels" shall mean all of the hotel properties owned by the
Acquiror REIT Subsidiaries as of the date hereof, as set forth on Schedule 1.17.
1.18. Acquiror REIT Leases.
"Acquiror REIT Leases" shall mean the lease agreements with respect to the
operation of the Acquiror REIT Hotels leased to third parties, as described in
Schedule 1.18.
1.19. Acquiror REIT Lessee.
"Acquiror REIT Lessee" shall mean, with respect to the Acquiror REIT
Hotels, affiliates of Interstate Hotels Company.
1.20. Acquiror REIT Material Adverse Effect.
"Acquiror REIT Material Adverse Effect" shall mean a Material Adverse
Effect with respect to Acquiror REIT and the Acquiror REIT Subsidiaries taken as
a whole.
1.21. Acquiror REIT Options.
"Acquiror REIT Options" shall mean the outstanding option grants to acquire
shares of Acquiror REIT Common Stock described in Schedule 1.21.
1.22. Acquiror REIT Preferred Stock.
"Acquiror REIT Preferred Stock" shall mean the preferred stock of Acquiror
REIT, $.01 par value per share.
1.23. Acquiror REIT Restricted Stock Grants.
"Acquiror REIT Restricted Stock Grants" shall mean the grants of shares of
Acquiror REIT Common Stock which are subject to vesting as described on Schedule
1.23 .
1.24. Acquiror REIT SEC Documents.
"Acquiror REIT SEC Documents" shall mean all registration statements,
reports, proxy statements and information statements filed by Acquiror REIT with
the SEC since the effective date of Acquiror REIT's initial registration
statement on Form S-11.
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1.25. Acquiror REIT Subsidiaries.
"Acquiror REIT Subsidiaries" shall mean the Subsidiaries of Acquiror REIT
described on Schedule 8.7, including, without limitation, Merger Sub, Acquiror
OP and Acquiror CMBS OP.
1.26. Acquisition Opportunity.
"Acquisition Opportunity" shall have the meaning provided in Section 10.24.
1.27. Acquisition Proposal.
"Acquisition Proposal" shall have the meaning provided in Section 10.1.
1.27(a) Acquisition Proposal Notice.
"Acquisition Proposal Notice" shall have the meaning provided in Section
11.5(a).
1.28. Act of Bankruptcy.
"Act of Bankruptcy" shall mean if a party hereto (or any of its
Subsidiaries) or any general partner thereof shall (a) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(b) admit in writing its inability to pay its debts as they become due, (c) make
a general assignment for the benefit of its creditors, (d) file a voluntary
petition or commence a voluntary case or proceeding under the Federal Bankruptcy
Code (as now or hereafter in effect), (e) be adjudicated a bankrupt or
insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect),
or (h) take any corporate or partnership action for the purpose of effecting any
of the foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto (or any of its Subsidiaries) or any
general partner thereof, in any court of competent jurisdiction seeking (1) the
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of debts, of such party or general partner, (2) the appointment of
a receiver, custodian, trustee or liquidator of such party or general partner or
all or any substantial part of its assets, or (3) other similar relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 consecutive
days.
1.29. Affiliate.
"Affiliate" shall mean, with respect to any Person, another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
1.30. Agreement.
"Agreement" shall mean this Asset Sale Agreement and Plans of Mergers,
together with the Exhibits and Schedules attached hereto.
1.31. Amended and Restated Acquiror OP Partnership Agreement.
"Amended and Restated Acquiror OP Partnership Agreement" shall have the
meaning provided in Section 2.5.
1.32. Articles of Merger.
"Articles of Merger" shall have the meaning provided in Section 3.3.
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1.33. Asset Sale.
"Asset Sale" shall have the meaning provided in Section 2.1.
1.34. Assumed Liabilities.
"Assumed Liabilities" shall mean the liabilities of Contributor OP and
Contributor CMBS OP described on Schedule 1.34.
1.35. Average Price.
"Average Price" shall mean an amount equal to the quotient of (i) the sum
of the products of (A) the daily volume of shares of the Acquiror REIT Common
Stock traded on the NYSE on each trading day during the Pricing Period and (B)
the closing price for the Acquiror REIT Common Stock on the NYSE on each such
trading day, and (ii) the total volume of shares of Acquiror REIT Common Stock
traded on the NYSE during the Pricing Period (volumes and closing prices as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Acquiror REIT).
1.36. Bill of Sale (Inventory).
"Bill of Sale (Inventory)" shall mean one or more bills of sale conveying
title to the Inventory owed by Target REIT Lessee or Target REIT CMBS Lessee
from Target REIT Lessee to Acquiror REIT Lessee or another designee of Acquiror
REIT, and from Target REIT CMBS Lessee to Acquiror REIT CMBS Lessee, in each
case without any additional consideration to such lessees.
1.37. Bill of Sale (Personal Property).
"Bill of Sale (Personal Property)" shall mean one or more bills of sale
conveying title to the Tangible Personal Property, Intangible Personal Property
and the Interests from Contributor OP (or its designee) to Acquiror OP (or its
designee), and from Contributor CMBS OP (or its designee) to Acquiror CMBS OP
(or its designee).
1.38. Board.
"Board" means, with respect to either Acquiror REIT or Target REIT, its
Board of Directors.
1.39. Certificates.
"Certificates" shall have the meaning provided in Section 4.2(c).
1.40. Certificates of Merger.
"Certificates of Merger" shall mean the certificates of merger referenced
in Sections 5.1(b) and 6.1(b).
1.41. Closing.
"Closing" shall mean the conference held on the Closing Date at which the
closing of the Mergers and the other transactions contemplated hereby (except as
otherwise provided herein) shall occur.
1.42. Closing Date.
"Closing Date" shall mean October 15, 1998, or such earlier date on which
the conditions set forth in Article IX shall have been satisfied or waived, or
such other date as may be mutually agreed by the parties hereto.
1.43. CMBS Agreement of Merger.
"CMBS Agreement of Merger" shall have the meaning provided in Section 6.1.
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1.44. CMBS Bonds.
"CMBS Bonds" shall have the meaning provided in Section 10.25.
1.45. CMBS OP Merger.
"CMBS OP Merger" shall mean the merger of Contributor CMBS OP with and into
Acquiror CMBS OP.
1.46. CMBS OP Merger Consideration.
"CMBS OP Merger Consideration" shall have the meaning provided in Section
6.4.
1.47. OP Merger Consideration.
"OP Merger Consideration" shall have the meaning provided in Section
5.4(b).
1.48. CMBS OP Partner Approvals.
"CMBS OP Partner Approvals" shall have the meaning provided in Section 2.4.
1.49. Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
1.49(a) Competing Transaction.
"Competing Transaction" shall have the meaning provided in Section 10.1.
1.50. Confidential Material.
"Confidential Material" shall have the meaning provided in Section 12.5(a).
1.51. Contracts.
"Contracts" shall mean contracts, agreements, leases (including ground
leases), licenses, arrangements, understandings, relationships and commitments,
whether written or oral, but shall not include any Employee Benefit Plan.
1.52. Contributor CMBS OP.
"Contributor CMBS OP" shall mean RFS Financing Partnership, L.P., a
Tennessee limited partnership.
1.53. Contributor CMBS OP Partner Approvals.
"Contributor CMBS OP Partner Approvals" shall have the meaning provided in
Section 2.4.
1.54. Contributor CMBS OP Partnership Agreement.
"Contributor CMBS OP Partnership Agreement" shall mean the Agreement of
Limited Partnership of Contributor CMBS OP, as amended as of the date hereof.
1.55. Contributor OP.
"Contributor OP" shall mean RFS Partnership, L.P., a Tennessee limited
partnership.
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1.56. Contributor OP General Units.
"Contributor OP General Units" shall mean Contributor OP Units representing
an interest as a general partner in Contributor OP.
1.57. Contributor OP Limited Units.
"Contributor OP Limited Units" shall mean Contributor OP Units representing
an interest as a limited partner in Contributor OP.
1.58. Contributor OP Partner Approvals.
"Contributor OP Partner Approvals" shall have the meaning provided in
Section 2.3.
1.59. Contributor OP Partnership Agreement.
"Contributor OP Partnership Agreement" shall mean the Agreement of Limited
Partnership of Contributor OP, as amended as of the date hereof.
1.60. Contributor OP Units.
"Contributor OP Units" shall mean units of partnership interest of
Contributor OP.
1.61. Deeds.
"Deeds" shall mean deeds as may reasonably be required to be delivered in
the sole discretion of Acquiror REIT conveying title to the Real Property from
Contributor OP or the Target REIT Subsidiaries to Acquiror OP (or its designee),
and from Contributor CMBS OP to Acquiror CMBS OP (or its designee), subject only
to Permitted Title Exceptions.
1.61(a) Definitive Competing Acquisition Agreement.
"Definitive Competing Acquisition Agreement" shall have the meaning
provided in Section 11.5.
1.62. Effective Time.
"Effective Time" shall mean the time at which the Mergers are consummated
by the filing of the Articles of Merger and the Certificates of Merger with the
Secretary of State of the State of Tennessee, or such later date as is specified
in such filings.
1.63. Employee Benefit Plans.
"Employee Benefit Plans" shall mean the Acquiror REIT Employee Benefit
Plans and the Target REIT Employee Benefit Plans, which are described on
Schedules 8.10 and 7.10, respectively.
1.63(a) Entitled Party.
"Entitled Party" shall have the meaning provided in Section 11.5(a).
1.64. ERISA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
1.64(a) Escrow Agent.
"Escrow Agent" shall have the meaning provided in Section 11.5(a).
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1.65. Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
1.66. Exchange Agent.
"Exchange Agent" shall have the meaning provided in Section 4.2(a).
1.67. Exchange Ratio.
"Exchange Ratio" shall have the meaning provided in Section 4.1(b).
1.68. Expenses.
"Expenses" shall have the meaning provided in Section 10.10.
1.69. Final Target REIT Dividend.
"Final Target REIT Dividend" shall have the meaning provided in Section
4.2(d).
1.70. FIRPTA Certificate.
"FIRTPA Certificate" shall mean the affidavit of Contributor OP and
Contributor CMBS OP under Section 1445 of the Code certifying that neither
Contributor OP nor Contributor CMBS OP is a foreign corporation, foreign
partnership, foreign trust, foreign estate or foreign person (as those terms are
defined in the Code), in form and substance reasonably satisfactory to the
Acquiror REIT.
1.71. Form S-4.
"Form S-4" shall have the meaning provided in Section 10.7.
1.72. Franchise Agreements.
"Franchise Agreements" shall mean those certain agreements and licenses to
operate the Target REIT Hotels as listed on Schedule 7.22 hereto.
1.73. Franchisors.
"Franchisors" shall mean the franchisors listed on Schedule 7.22, the
issuers of the franchise licenses under which the Target REIT Hotels are
currently operated.
1.74. GAAP.
"GAAP" shall mean generally accepted accounting principles used in the
United States, consistently applied during the periods involved.
1.75. Hazardous Substance.
"Hazardous Substance" shall mean any substance or material whose presence,
nature, quantity or intensity of existence, use, manufacture, disposal,
transportation, spill, release or effect, either by itself or in combination
with other materials is either: (1) potentially injurious to the public health,
safety or welfare, the environment or the Transferred Assets, (2) regulated,
monitored or defined as a hazardous or toxic substance or waste by any
governmental agency, or (3) a basis for liability of the owner of the
Transferred Assets to any governmental agency or third party, and Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil, or any products, by-products or components thereof, and
asbestos.
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1.76. HSR Act.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
1.77. Improvements.
"Improvements" shall mean the Target REIT Hotels, together with all other
buildings, improvements, fixtures and other items affixed to the Land.
1.78. Insurance Policies.
"Insurance Policies" shall mean all policies of insurance relating to the
Transferred Assets, or any portion thereof.
1.79. Intangible Personal Property.
"Intangible Personal Property" shall mean all intangible personal property
owned or possessed by Contributor OP or Contributor CMBS OP, as applicable, and
used in connection with the ownership of the Transferred Assets, including,
without limitation, Contracts, general intangibles, business records relating to
the Transferred Assets, plans and specifications, surveys and title insurance
policies pertaining to the Real Property and the Personal Property, all
licenses, permits and approvals with respect to the construction, ownership,
operation, leasing, occupancy or maintenance of the Transferred Assets, any
unpaid award for taking by condemnation or any damage to the Land by reason of a
change of grade or location of or access to any street or highway.
1.80. Interests.
"Interests" shall mean the partnership interests Contributor OP holds in
any Target REIT Subsidiary that is a partnership.
1.81. Inventory.
"Inventory" shall mean all "inventories" used in the operation of the
Target REIT Hotels, including all inventories of merchandise and inventories of
supplies (as such terms are used in the Uniform System of Accounts for Hotels
(9th Revised Edition, 1996) as published by the Hotel Association of New York
City, Inc., as the same may be revised from time to time as of the date hereof)
and similar consumable supplies and any property of the type described in
Section 1221(1) of the Code.
1.82. IRS.
"IRS" shall mean the Internal Revenue Service.
1.83. Knowledge of Acquiror REIT.
"Knowledge of Acquiror REIT" shall mean the actual knowledge of the
Chairman of the Board, the Chief Executive Officer, the President, any Executive
Vice President, the Secretary and the Treasurer of Acquiror REIT.
1.84. Knowledge of Target REIT.
"Knowledge of Target REIT" shall mean the actual knowledge of the Chairman
of the Board, the Chief Executive Officer, the President, any Executive
Vice-President, the Secretary and the Treasurer of Target REIT.
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1.85. Land.
"Land" shall mean those certain parcels of real estate upon which the
Target REIT Hotels are located, together with all easements, rights, privileges,
remainders, reversions and appurtenances thereunto belonging or in any way
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of Contributor OP, Contributor CMBS OP or any other Target REIT
Subsidiary, as applicable, therein, in the streets and ways adjacent thereto and
in the beds thereof, either at law or in equity, in possession or expectancy,
now or hereafter acquired.
1.86. Lease Termination Agreement.
"Lease Termination Agreement" shall have the meaning provided in Section
7.38.
1.87. Termination Fee.
"Termination Fee" shall have the meaning provided in Section 11.5(a).
1.88. Material.
"Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
1.89. Material Adverse Effect.
"Material Adverse Effect" shall mean, with respect to any entity or group
of entities, a material adverse effect on the business or assets (financial or
otherwise) as manifested by a material decline or deterioration of the financial
condition or results of operation of such entity or group of entities taken as a
whole.
1.89(a) Maximum Expense Reimbursement.
"Maximum Expense Reimbursement" shall have the meaning provided in Section
11.6(a).
1.89(b) Maximum Termination Fee.
"Maximum Termination Fee" shall have the meaning provided in Section
11.5(a).
1.90. Mergers.
"Mergers" shall mean collectively the REIT Merger, the OP Merger and the
CMBS OP Merger.
1.91. Merger Consideration.
"Merger Consideration" shall have the meaning provided in Section 4.1(d).
1.92. Merger Sub.
"Merger Sub" shall mean RHI Acquisition, Inc., a Tennessee corporation and
wholly-owned subsidiary of Acquiror REIT.
1.93. Mortgage Documents.
"Mortgage Documents" shall mean collectively the Mortgage Notes, the
Mortgages and all other documents executed or delivered in connection therewith,
including all modifications thereto.
1.94. Mortgage Notes.
"Mortgage Notes" shall have the meaning provided in Section 7.23.
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1.95. Mortgages.
"Mortgages" shall have the meaning provided in Section 7.23.
1.96. NYSE.
"NYSE" shall mean the New York Stock Exchange.
1.97. OP Merger.
"OP Merger" shall mean the merger of Contributor OP with and into Acquiror
OP.
1.98. OP Partner Approvals.
"OP Partner Approvals" shall have the meaning provided in Section 2.3.
1.99. Organizational Documents.
"Organizational Documents" shall mean with respect to a corporation, its
charter (or articles of incorporation) and bylaws, and all amendments thereto as
of the date hereof; with respect to a limited partnership, its certificate of
limited partnership and agreement of limited partnership and all amendments
thereto as of the date hereof; and with respect to a limited liability company
its articles of organization and operating agreement and all amendments thereto
as of the date hereof.
1.90(a) Payor Party.
"Payor Party" shall have the meaning provided in Section 11.5(a).
1.100. Permit.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, assets or
business.
1.101. Permitted Title Exceptions.
"Permitted Title Exceptions" shall mean those exceptions to the title to
the Real Property listed on the title insurance policies for the Target REIT
Hotels and the Undeveloped Land that do not: (a) constitute a mortgage, deed of
trust, lien, encumbrance or security interest on the Transferred Assets that
after the Closing would not secure one of the Assumed Liabilities, or (b)
materially and adversely affect the operations of the hotels on such Real
Property, create a material financial liability on the owner of the Transferred
Assets, or render title unmarketable.
1.102. Person.
"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, association,
trust, non-incorporated organization or any other entity.
1.103. Personal Property.
"Personal Property" shall mean the Tangible Personal Property and the
Intangible Personal Property.
1.104. Plan of Merger.
"Plan of Merger" shall mean the Plan of Merger in substantially the form
attached hereto as Exhibit A.
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1.105. Pricing Period.
"Pricing Period" shall mean the twenty (20) consecutive trading days
immediately preceding the fifth business day prior to the Closing Date, except
that any trading day on which trading of any newly-issued shares of Acquiror
REIT Common Stock (or securities convertible into Acquiror REIT Common Stock)
shall commence on a when-issued basis, shall be excluded from the Pricing Period
and the next earliest trading day shall be substituted therefor.
1.106. Proxy Statement/Prospectus.
"Proxy Statement/Prospectus" shall have the meaning provided in Section
10.7.
1.107. Qualifying Income.
"Qualifying Income" shall have the meaning provided in Section 11.5(a).
1.108. Real Property.
"Real Property" shall mean the Land, the Improvements and the Undeveloped
Land.
1.109. REIT.
"REIT" shall mean a real estate investment trust under Sections 856 through
859 of the Code.
1.110. REIT Merger.
"REIT Merger" shall mean the merger of Target REIT with and into Merger
Sub.
1.111. SEC.
"SEC" shall mean the Securities and Exchange Commission of the United
States.
1.112. SEC Documents.
"SEC Documents" shall mean Acquiror REIT SEC Documents or Target REIT SEC
Documents, as the context indicates.
1.113. Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
1.114. Severance Benefits.
"Severance Benefits" shall mean the payments and benefits for employees of
Target REIT and the Target REIT Subsidiaries as described in Section 10.13.
1.115. Shareholders and Shareholder.
"Shareholders" shall mean, with respect to Acquiror REIT, the holders of
Acquiror REIT Common Stock and, with respect to Target REIT, shall mean holders
of Target REIT Common Stock or Target REIT Preferred Stock, as the context
indicates. A "Shareholder" shall mean one of the Shareholders.
1.116. Stock Purchase Agreement.
"Stock Purchase Agreement" shall have the meaning provided in Section
10.28.
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1.117. Subsidiary.
"Subsidiary" of any Person shall mean any corporation, partnership, limited
liability company, limited liability partnership, joint venture or other legal
entity of which such Person (either directly or through or together with another
Subsidiary of such Person) owns 20% or more of the capital stock or other equity
interests of such corporation, partnership, limited liability company, limited
liability partnership, joint venture or other legal entity.
1.118. Surviving Corporation.
"Surviving Corporation" shall mean Merger Sub following completion of the
REIT Merger.
1.119. Surviving CMBS OP.
"Surviving CMBS OP" shall mean Acquiror CMBS OP following completion of the
CMBS OP Merger.
1.120. Surviving OP.
"Surviving OP" shall mean Acquiror OP following completion of the OP
Merger.
1.121. Takeover Statutes.
"Takeover Statutes" shall have the meaning provided in Section 7.28.
1.122. Tangible Personal Property.
"Tangible Personal Property" shall mean the items of tangible personal
property consisting of all furniture, fixtures, furnishings, machinery,
equipment and other tangible personal property situated on, attached to, or used
in the operation of Target REIT Hotels (including any capital leases of such
personal property), excluding (i) all Franchisor signage used thereon, (ii) the
Inventory owned by Target REIT Lessee or the Target REIT CMBS Lessee, and (iii)
tangible personal property leased pursuant to operating, as opposed to, capital
leases and set forth on Schedule 1.122.
1.123. Target C Corp.
"Target C Corp." shall mean Ridge Lake General Partner, Inc., a Tennessee
corporation.
1.124. Target REIT.
"Target REIT" shall mean RFS Hotels Investors, Inc., a Tennessee
corporation.
1.125. Target REIT Capital Stock.
"Target REIT Capital Stock" shall mean Target REIT Common Stock and Target
REIT Preferred Stock.
1.126. Target REIT Charter.
"Target REIT Charter" shall mean the Charter of Target REIT, as amended and
restated as of the date hereof.
1.127. Target REIT CMBS Lessee.
"Target REIT CMBS Lessee" shall mean, collectively, the parties described
in Schedule 1.133 as the lessee of the Target REIT Hotels described on Schedule
7.38 and owned by Contributor CMBS OP.
1.128. Target REIT Common Stock.
"Target REIT Common Stock" shall mean the common stock of Target REIT, par
value $.01 per share.
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1.129. Target REIT Employee Benefit Plans.
"Target REIT Employee Benefit Plans" shall mean the employee benefit plans
of Target REIT described on Schedule 7.10.
1.130. Target REIT Employment Agreements.
"Target REIT Employment Agreements" shall mean the employment agreements
described on Schedule 1.130.
1.131. Target REIT Hotels.
"Target REIT Hotels" shall mean all of the hotel properties owned by
Contributor OP, Contributor CMBS OP or the other Target REIT Subsidiaries as of
the date hereof, as set forth on Schedule 1.131.
1.132. Target REIT Leases.
"Target REIT Leases" shall mean the lease agreements with respect to the
operation of the Target REIT Hotels leased to third parties, as described in
Schedule 1.132.
1.133. Target REIT Lessee.
"Target REIT Lessee" shall mean, collectively, the parties described in
Schedule 1.133 as the lessee of the Target REIT Hotels described on Schedule
7.38 and owned by Contributor OP.
1.134. Target REIT Material Adverse Effect.
"Target REIT Material Adverse Effect" shall mean a Material Adverse Effect
with respect to Target REIT and the Target REIT Subsidiaries taken as a whole.
1.135. Target REIT Options.
"Target REIT Options" shall mean the outstanding option grants to acquire
shares of Target REIT Common Stock described in Schedule 4.3.
1.136. Target REIT Preferred Stock.
"Target REIT Preferred Stock" shall mean the Series A Preferred Stock of
Target REIT, $.01 par value per share.
1.137. Target REIT Restricted Stock Grants.
"Target REIT Restricted Stock Grants" shall mean the grants of shares of
Target REIT Common Stock which are subject to vesting as described on Schedule
1.137.
1.138. Target REIT SEC Documents.
"Target REIT SEC Documents" shall mean all registration statements,
reports, proxy statements and information statements filed by Target REIT with
the SEC since the effective date of Target REIT's initial registration statement
on Form S-11.
1.139. Target REIT Subsidiaries.
"Target REIT Subsidiaries" shall mean the Subsidiaries of Target REIT set
forth on Schedule 7.7, including, without limitation, Contributor OP and
Contributor CMBS OP.
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1.140. Tax Return.
"Tax Return" shall mean any report, return, information statement, payee
statement or other information required to be provided to any federal, state,
local or foreign governmental authority with respect to Taxes.
1.141. Taxes.
"Taxes" shall mean any and all taxes, levies, impositions, duties,
assessments, charges and withholdings imposed or required to be collected by or
paid over to any federal, state, local or foreign governmental authority or any
political subdivision thereof, including without limitation income, gross
receipts, ad valorem, value added, minimum, franchise, sales, use, excise,
license, real or personal property, unemployment, disability, stock transfer,
mortgage recording, estimated, withholding or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, and including any
interest, penalties, fines, assessments or additions to tax imposed in respect
of the foregoing, or in respect of any failure to comply with any requirement
regarding Tax Returns.
1.142. Tennessee Act.
"Tennessee Act" shall mean the Tennessee Business Corporation Act.
1.143. Title Company.
"Title Company" shall mean Lawyers Title Insurance Company.
1.144. Transferred Assets.
"Transferred Assets" shall mean collectively the Real Property, the
Tangible Personal Property, the Intangible Personal Property and the Interests.
1.145. TRULPA.
"TRULPA" shall mean the Tennessee Revised Uniform Limited Partnership Act.
1.146. Undeveloped Land.
"Undeveloped Land" shall mean those certain unimproved parcels of real
estate listed on Schedule 1.146 attached hereto, together with all easements,
rights, privileges, remainders, reversions and appurtenances thereunto belonging
or in any way appertaining, and all of the estate, right, title, interest, claim
or demand whatsoever of Contributor OP, Contributor CMBS OP or any other Target
REIT Subsidiary, as applicable, therein, in the streets and ways adjacent
thereto and in the beds thereof, either at law or in equity, in possession or
expectancy, now or hereafter acquired.
1.147. Unit Certificates.
"Unit Certificates" shall have the meaning provided in Section 5.5(a).
1.148. Utilities.
"Utilities" shall mean public sanitary and storm sewers, natural gas,
telephone, public water facilities, electrical facilities and all other utility
facilities and services necessary for the operation and occupancy of a property
as a hotel.
1.149. Welfare Plans.
"Welfare Plans" shall mean those Employee Benefit Plans that are employee
welfare benefit plans under section 3(1) of ERISA.
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ARTICLE II
ASSET SALE AGREEMENT
2.1. Sale and Purchase
Subject to the terms and conditions set forth in this Agreement, effective
as of the Closing Date, Contributor OP agrees to, and Target REIT agrees to
cause Contributor CMBS OP to, sell, and Acquiror OP agrees to, and Acquiror REIT
agrees to cause Acquiror CMBS OP to, purchase, the Transferred Assets, subject
to the Assumed Liabilities, in the manner, on the terms and subject to the
conditions and covenants set forth herein (collectively, the "Asset Sale").
2.2. Effectuation of the Asset Sale.
Subject to the terms and conditions set forth in this Agreement, the
parties hereto agree that the Asset Sale shall be effectuated by the OP Merger
provided for in Article V and the CMBS OP Merger provided for in Article VI.
2.3. OP Partner Approvals.
Target REIT shall obtain the requisite approval of the partners of
Contributor OP to the OP Merger and any other transactions contemplated by this
Agreement, to the extent required by the Contributor OP Partnership Agreement or
the TRULPA (collectively, the "Contributor OP Partner Approvals"). Acquiror REIT
shall obtain the requisite approval of the partners of Acquiror OP to the OP
Merger and any other transactions contemplated by the Agreement, to the extent
required by the Acquiror OP Partnership Agreement or the TRULPA (collectively,
the "Acquiror OP Partner Approvals," and together with the Contributor OP
Partner Approvals, the "OP Partner Approvals").
2.4. CMBS OP Partner Approvals.
Target REIT shall obtain the requisite approval of the partners of
Contributor CMBS OP to the CMBS OP Merger and the other transactions
contemplated by this Agreement, to the extent required by the Contributor CMBS
OP Partnership Agreement or the TRULPA (collectively, the "Contributor CMBS OP
Partner Approvals"). Acquiror REIT shall obtain the requisite approval of the
partners of Acquiror CMBS OP to the CMBS OP Merger and the other transactions
contemplated by this Agreement, to the extent required by the Acquiror CMBS OP
Partnership Agreement or the TRULPA (collectively, the "Acquiror CMBS Partner
Approvals," and together with the Contributor CMBS Partner Approvals, the "CMBS
OP Partner Approvals").
2.5. Acquiror OP Partnership Agreement.
Effective as of the Effective Time, Acquiror OP and Acquiror REIT shall
cause the Acquiror OP Partnership Agreement to be amended and restated in the
form of Exhibit B hereto (the "Amended and Restated Acquiror OP Partnership
Agreement"). The Acquiror OP Limited Units delivered to the limited partners of
Contributor OP as a result of the OP Merger shall have the characteristics
described in such Amended and Restated Acquiror OP Partnership Agreement.
2.6. Contributor OP's and Contributor CMBS OP's Deliveries.
At the Closing, but prior to the Effective Time, if requested by Acquiror
REIT to further evidence the Asset Sale being consummated by the OP Merger and
the CMBS OP Merger, Contributor OP shall, and Target REIT and Contributor OP
shall cause Contributor CMBS OP to, deliver, or cause to be delivered, to
Acquiror OP or Acquiror CMBS OP, as applicable, all of the following instruments
and documents, each of
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which shall have been duly executed by Contributor OP, Contributor CMBS OP, or
other appropriate party, and, where applicable, acknowledged on behalf of such
parties, and shall be dated as of the Closing Date:
(a) The Deeds.
(b) The Bill of Sale (Inventory).
(c) The Bill of Sale (Personal Property).
(d) Such agreements, affidavits or other documents as may be
reasonably required by the Title Company to issue new owner's title
insurance policies for the Target REIT Hotels, or endorsements to all such
existing owner's title policies, together with an assignment of the
existing owner's title insurance policies consented to by the Title Company
(all subject only to the Permitted Title Exceptions).
(e) The FIRPTA Certificate.
(f) True, correct and complete copies of all warranties, if any, or if
locatable, of contractors, builders, roofers, architects, manufacturers,
suppliers and installers possessed by Contributor OP or Contributor CMBS OP
and relating to the Improvements and the Personal Property, or any part
thereof.
(g) All current real estate and personal property tax bills in
Contributor OP's or Contributor CMBS OP's possession or under their
control.
2.7. Target REIT Lease Termination.
Effective as of the Closing Date, but immediately prior to the Effective
Time, upon written notice from Acquiror REIT to Target REIT not less than thirty
(30) days prior to the Closing Date, Target REIT shall cause the Target REIT
Subsidiaries to terminate the Target REIT Leases described on Schedule 7.38
effective upon payment to the Target REIT Lessee or Target REIT CMBS Lessee, as
applicable, of the amounts set forth on Schedule 7.38 at the Closing.
2.8. Schedules and Exhibits.
Each of Target REIT and Acquiror REIT shall deliver any Schedules or
Exhibits described in this Agreement for which they are responsible but which
are not attached hereto at the date hereof within ten (10) business days
following the date of this Agreement. If such Schedules are not delivered by
such date or if either Target REIT or Acquiror REIT reasonably determines that
information contained in such Schedules discloses matters which could reasonably
be expected to have an Acquiror REIT Material Adverse Effect or a Target REIT
Material Adverse Effect, respectively, Target REIT or Acquiror REIT may elect to
terminate this Agreement after such date or the receipt of such Schedules by
written notice delivered to the other within fifteen (15) business days
following the date of this Agreement in accordance with Section 11.1. Failure to
so deliver such notice within such 15 day period shall constitute an irrevocable
waiver of such termination rights.
ARTICLE III
THE REIT MERGER
3.1. The REIT Merger.
Subject to the terms and conditions of this Agreement and the Plan of
Merger, at the Effective Time, Target REIT shall be merged with and into Merger
Sub in accordance with the provisions of, and with the effects provided in,
Sections 48-21-102, 48-21-104, 48-21-107 and 48-21-108 of the Tennessee Act and
in accordance with the Plan of Merger. Merger Sub shall be the Surviving
Corporation resulting from the REIT Merger and shall continue to be governed by
the laws of the State of Tennessee. The Plan of Merger provides for the terms
and conditions of the REIT Merger, which terms and conditions are incorporated
herein and made a part of this Agreement by reference.
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3.2. Closing.
Subject to the terms and conditions of this Agreement, the Closing shall
take place at the offices of Baker, Donelson, Bearman & Caldwell, 21st Floor,
First Tennessee Building, 165 Madison, Memphis, TN 38103, or such other location
as Acquiror REIT and Target REIT may agree, commencing at 9:00 a.m. local time
on the Closing Date. Subject to the provisions of Article XI, failure to
consummate the Closing on the date provided in this Section 3.2 will not result
in a termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
3.3. Effective Time.
If all of the conditions set forth in Article IX have been fulfilled or
waived, the parties hereto shall cause, with respect to the REIT Merger,
articles of merger or other appropriate documents (the "Articles of Merger")
satisfying the requirements of the Tennessee Act, to be properly executed,
verified and delivered for filing with the Secretary of State of the State of
Tennessee in accordance with the Tennessee Act, on or before the Closing Date.
The REIT Merger shall become effective at the Effective Time. The parties hereto
shall cause the Effective Time to occur on the Closing Date.
3.4. Effect of the REIT Merger.
The REIT Merger shall have the effects specified in Section 48-21-108 of
the Tennessee Act.
3.5. Charter and Bylaws.
The Charter of Merger Sub as in effect immediately prior to the Effective
Time shall be the Charter of the Surviving Corporation, until duly amended in
accordance with applicable law. The Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation, until duly amended in accordance with applicable law.
3.6. Officers and Directors.
The directors of Merger Sub in office immediately prior to the Effective
Time shall be the directors of the Surviving Corporation until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified as provided in the Bylaws of the Surviving Corporation, as
the case may be. The officers of Merger Sub in office immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal.
3.7. Employees.
At or before the Closing, Target REIT and the Target REIT Subsidiaries will
terminate the employment of all their employees, and shall satisfy all
compensation, vacation pay, sick pay and other obligations under the Worker
Adjustment, Retraining and Notification Act, and, subject to the provisions of
Section 10.13, shall pay or make provision for the Severance Benefits. Neither
Acquiror REIT nor any Acquiror REIT Subsidiary shall have any obligation to
employ former Target REIT or Target REIT Subsidiary employees but may, in their
sole discretion, offer employment to such employees on terms and conditions
established by them. Neither Target REIT nor Contributor OP makes any
representation or warranty as to whether such employees shall accept employment
with Acquiror REIT or any Acquiror REIT Subsidiary.
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ARTICLE IV
EFFECT OF REIT MERGER ON CAPITALIZATION; EXCHANGE OF CERTIFICATES
4.1. Effect on Capitalization.
By virtue of the REIT Merger and except as otherwise provided herein or in
the Plan of Merger, without any action on the part of the holder of any shares
of Target REIT Capital Stock or the holder of any shares of Acquiror REIT Common
Stock:
(a) Cancellation of Treasury Stock. As of the Effective Time, any
shares of Target REIT Capital Stock that are owned by Target REIT or any
Target REIT Subsidiary shall automatically be canceled and retired and all
rights with respect thereto shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(b) Conversion of Target REIT Common Stock and Target REIT Preferred
Stock. As of the Effective Time, each issued and outstanding share of
Target REIT Common Stock and each issued and outstanding share of Target
REIT Preferred Stock (other than any shares canceled in accordance with
Section 4.1(a)) shall be converted into the right to receive from Acquiror
REIT a number of fully paid and nonassessable shares of Acquiror REIT
Common Stock determined as follows (the "Exchange Ratio"):
(i) if the Average Price is equal to or greater than $14.00
but less than or equal to $17.00, 1.5 shares of Acquiror REIT Common
Stock; or
(ii) if the Average Price is greater than $17.00, the number
of shares of Acquiror REIT Common Stock determined by dividing $25.50 by
the Average Price.
The Exchange Ratio and the Average Price shall be adjusted to reflect fully
the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into
Acquiror REIT Common Stock or Target REIT Capital Stock), reorganization,
recapitalization or other like change with respect to Acquiror REIT Common
Stock or Target REIT Capital Stock occurring after the date hereof and
prior to the Effective Time.
(c) Right of Termination. If the Average Price is less than $14.00,
either of Target REIT or Acquiror REIT may terminate this Agreement in
accordance with the provisions of Section 11.2.
(d) Cancellation of Target REIT Capital Stock. As of the Effective
Time, all shares of Target REIT Capital Stock shall no longer be
outstanding and shall automatically be canceled and retired and all rights
with respect thereto shall cease to exist, and each holder of a certificate
representing any such shares of Target REIT Common Stock or Target REIT
Preferred Stock shall cease to have any rights with respect thereto, except
the right to receive, upon surrender of such certificate in accordance with
Section 4.2(c), certificates representing Acquiror REIT Common Stock
required to be delivered by Acquiror REIT pursuant to this Section 4.1(d)
and any cash in lieu of fractional shares of Acquiror REIT Common Stock to
be issued or paid in consideration therefor upon surrender of such
certificate (the "Merger Consideration") as set forth in Section 4.2(g),
and any dividends or other distributions to which such holder is entitled
pursuant to Section 4.2(d), in each case without interest and less any
required withholding taxes.
(e) Acquiror REIT Common Stock. As of the Effective Time, each share
of Acquiror REIT Common Stock issued and outstanding immediately prior to
the Effective Time shall remain issued and outstanding and shall represent
one validly issued, fully paid and nonassessable share of Acquiror REIT
Common Stock.
(f) Shares of Merger Sub. As of the Effective Time, each share of
common stock, par value $.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of common stock, par value $.01
per share, of the Surviving Corporation.
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4.2. Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing, Acquiror REIT shall appoint, or
shall cause to be appointed, SunTrust Bank or another bank or trust company to
act as exchange agent (the "Exchange Agent") for the exchange of the Merger
Consideration upon surrender of certificates representing issued and outstanding
shares of Target REIT Common Stock and Target REIT Preferred Stock.
(b) Acquiror REIT to Provide Merger Consideration. Acquiror REIT shall
provide, or shall cause to be provided, to the Exchange Agent on or prior to the
Closing certificates representing the shares of Acquiror REIT Common Stock into
which the Target REIT Capital Stock shall be converted pursuant to Section
4.1(b) and the cash payable in respect of fractional shares pursuant to Section
4.2(g).
(c) Exchange Procedure. As soon as reasonably practicable after the
Closing, the Exchange Agent shall mail to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding shares of Target REIT Capital Stock (the "Certificates"), whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 4.1, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in a form and have such other provisions as Acquiror REIT reasonably specifies)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Acquiror REIT, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration into which the shares of Target REIT Capital
Stock theretofore represented by such Certificate shall have been converted
pursuant to Section 4.1(b) and all dividends or other distributions to which
such holder is entitled pursuant to Section 4.2(d), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Target REIT Capital Stock which is not registered in the transfer
records of Target REIT, payment may be made to a Person other than the Person in
whose name the Certificate so surrendered is registered only if such certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
Person requesting such payment either shall pay any transfer or other taxes
required by reason of such payment being made to a Person other than the
registered holder of such Certificate or establish to the satisfaction of
Acquiror REIT that such tax or taxes have been paid or are not applicable. Until
surrender as contemplated by this Section 4.2, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration, without interest, into which the shares
of Target REIT Capital Stock theretofore represented by such Certificate shall
have been converted pursuant to Section 4.1, and all dividends or other
distributions to which such holder is entitled pursuant to Section 4.2(d). No
interest will be paid or will accrue on the Merger Consideration upon the
surrender of any Certificate or on any cash payable pursuant to Section 4.2(d)
or Section 4.2(g).
In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by Acquiror REIT or
the Exchange Agent, the posting by such Person of a bond in such reasonable
amount as Acquiror REIT may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent or Acquiror
REIT will issue with respect to such lost, stolen or destroyed Certificate the
shares of Acquiror REIT Common Stock and cash in lieu of fractional shares and
unpaid dividends and Final Target REIT Dividend as provided in Section 4.2(d)
deliverable in respect thereof pursuant to this Agreement.
(d) Record Dates for Final Dividends; Distributions with Respect to
Unexchanged Shares. To the extent necessary to satisfy the requirements of
Section 857(a)(1) of the Code for the taxable year of Target REIT ending at the
Closing Date (and to avoid the payment of tax with respect to undistributed
income), Target REIT shall declare a dividend (the "Final Target REIT Dividend")
to each holder of shares of Target REIT Common Stock and, if necessary, Target
REIT Preferred Stock, the record date for which shall be approximately 5
business days prior to the Closing Date, in an amount equal to the minimum
dividend
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sufficient (taking into account expected revenue and expenses through the day
prior to the Closing Date) to permit Target REIT to satisfy such requirements.
If Target REIT determines it necessary to declare the Final Target REIT
Dividend, it shall notify Acquiror REIT at least 10 days prior to the date for
the Target REIT shareholders' meeting described in Section 10.3, and Acquiror
REIT shall declare a dividend per share to holders of Acquiror REIT Common
Stock, the record date for which shall be approximately 5 business days prior to
the Closing Date, in an amount per share of Acquiror REIT Common Stock equal to
the quotient obtained by dividing (x) the Final Target REIT Dividend per share
of Target REIT Common Stock paid by Target REIT by (y) the Exchange Ratio. The
dividends payable hereunder to holders of Target REIT Common Stock, Target REIT
Preferred Stock (if necessary) and Acquiror REIT Common Stock shall be paid on
the close of business on the last business day prior to the Closing Date.
(e) No Further Ownership Rights in Shares of Target REIT Capital
Stock. All Merger Consideration paid upon the surrender of Certificates in
accordance with the terms of this Section 4.2 (including any cash paid pursuant
to Section 4.2(g)) shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Target REIT Capital Stock theretofore
represented by such Certificates, and at and after the Effective Time there
shall be no further registration of transfers on the stock transfer books of
Target REIT of the shares of Target REIT Capital Stock which were outstanding
immediately prior to the Effective Time.
(f) No Liability. None of Acquiror REIT, Merger Sub, Target REIT or the
Exchange Agent shall be liable to any Person in respect of any consideration or
dividends delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. Any portion of the Merger Consideration
delivered to the Exchange Agent pursuant to this Agreement that remains
unclaimed for one year after the Closing shall be redelivered by the Exchange
Agent to Acquiror REIT, upon demand, and any holders of Certificates who have
not theretofore complied with Section 4.2(c) shall thereafter look only to
Acquiror REIT for delivery of the Merger Consideration and any unpaid dividends,
subject to applicable escheat and other similar laws.
(g) No Fractional Shares. No certificates or scrip representing fractional
shares of Acquiror REIT Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote, to receive dividends or to any other rights of a
Shareholder of Acquiror REIT. In lieu of the issuance of any fractional shares
of Acquiror REIT Common Stock, cash payments will be made by Acquiror REIT to
the Exchange Agent for payment to holders in respect of any fractional shares of
Acquiror REIT Common Stock that otherwise would be issuable in an amount equal
to such fractional part of a share of Acquiror REIT Common Stock multiplied by
the Average Price.
(h) Withholding Rights. Acquiror REIT, Target REIT or the Exchange Agent
shall be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Target REIT
Capital Stock such amounts as Acquiror REIT, Target REIT or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the
extent that such amounts are so withheld by Acquiror REIT, Target REIT or the
Exchange Agent, such withheld amount shall be treated for all purpose of this
Agreement as having been paid to the Shareholder of Target REIT in respect of
which such deduction and withholding was made by Acquiror REIT, Target REIT or
the Exchange Agent.
(i) No Appraisal Rights. The holders of Target REIT Capital Stock are not
entitled under applicable law to appraisal rights as a result of the REIT
Merger.
4.3. Target REIT Options.
At or prior to the Effective Time, holders of the currently exercisable
Target REIT Options described on Schedule 4.3 which have not been exercised as
of the Effective Time, including any unvested Target REIT Options with respect
to which vesting accelerates as a result of the transactions contemplated by
this Agreement as described in Schedule 4.3, may elect to either (i) exchange
such Target REIT Options for fully vested options to acquire a number of shares
of Acquiror REIT Common Stock equal to (x) the number of shares of Target REIT
Common Stock subject to such Target REIT Options multiplied by (y) the Exchange
Ratio with an option exercise price per share of Acquiror REIT Common Stock
equal to (A) the exercise price for the Target REIT Options divided by (B) the
Exchange Ratio (rounding to the nearest cent); or
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(ii) sell all of the Target REIT Options outstanding as of the Effective Time,
including any unvested Target REIT Options with respect to which vesting
accelerates as a result of the transactions contemplated hereby, for a cash
amount equal to (a) the number of shares of Target REIT Common Stock subject to
such Target REIT Options multiplied by (b) the difference between the exercise
price of each Target REIT Option and an amount equal to the Exchange Ratio
multiplied by the Average Price. Any options issued pursuant to clause (i) above
shall expire on the expiration date of the Target REIT Options for which they
are exchanged, disregarding any termination of employment resulting from, or
related to, Acquiror REIT's acquisition of Target REIT and its Subsidiaries
pursuant to this Agreement. Notwithstanding the provisions of clause (i) above,
Acquiror REIT shall not be obligated to issue any fraction of a share of
Acquiror REIT Common Stock upon exercise of such new options to acquire Acquiror
REIT Common Stock and any fraction of a share of Acquiror REIT Common Stock that
otherwise would be subject to such new options shall represent the right to
receive a cash payment upon exercise of such new option equal to the product of
such fraction and the difference between the market value of one share of
Acquiror REIT Common Stock at the time of exercise of such new option and the
per share exercise price of such new option. The market value of one share of
Acquiror REIT Common Stock at the time of exercise of such new option shall be
the last sale price of Acquiror REIT Common Stock on the NYSE (as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by Acquiror REIT) on the last trading day preceding the date of
exercise. In addition, notwithstanding clause (i) above, each Target REIT Option
which is an "incentive stock option" shall be adjusted as required by Section
424 of the Code, so as not to constitute a modification, extension or renewal of
the option, within the meaning of Section 424(h) of the Code. Acquiror REIT
agrees to take all necessary steps to effectuate the foregoing provisions of
this Section 4.3. As soon as practicable after the Effective Time, Acquiror REIT
shall deliver to the holders of the Target REIT Options who elect to exchange
their Target REIT Options as provided in clause (i) above an appropriate notice
setting forth such holder's rights pursuant to this Section 4.3. At or prior to
the Effective Time, Acquiror REIT shall take all corporate action necessary to
reserve for issuance sufficient number of shares of Acquiror REIT Common Stock
for delivery upon exercise of the new options provided for in this Section 4.3.
Nothing herein shall preclude any holder of Target REIT Options from exercising
any Target REIT Options which are currently vested or which vest by their terms
prior to the Effective Time, including those which vest as a result of the
transactions contemplated hereby. From and after the date of this Agreement, no
additional options shall be granted by Target REIT.
ARTICLE V
THE OP MERGER
5.1. The OP Merger.
(a) Subject to the terms and conditions of this Agreement, at the Effective
Time, and for the purpose of effecting the Asset Sale with respect to the
Transferred Assets owned by Contributor OP, Contributor OP shall be merged with
and into Acquiror OP in accordance with the provisions of, and with the effects
provided in, Section 61-2-211 of the TRULPA and in accordance with the
provisions of this Article V. Acquiror OP shall be the Surviving OP resulting
from the OP Merger and shall continue to be governed by the laws of the State of
Tennessee.
(b) If all of the conditions set forth in Article IX have been fulfilled or
waived, the parties hereto shall cause, with respect to the OP Merger, a
certificate of merger or other appropriate documents satisfying the requirements
of the TRULPA, to be properly executed, verified and delivered for filing with
the Secretary of State of the State of Tennessee in accordance with the TRULPA,
on or before the Closing Date. The OP Merger shall become effective at the
Effective Time.
(c) The sole general partner of the Surviving OP shall be Equity Inns
Trust, and the limited partners of the Surviving OP shall be all Persons who are
now or who hereafter are admitted to either Contributor OP or Acquiror OP as
limited partners.
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5.2. Effect of the OP Merger.
The OP Merger shall have the effects specified in Section 61-2-211(f) of
the TRULPA.
5.3. Certificate of Limited Partnership and Partnership Agreement.
The Certificate of Limited Partnership of Acquiror OP as in effect
immediately prior to the Effective Time shall be the Certificate of Limited
Partnership of the Surviving OP, until duly amended in accordance with
applicable law. The Acquiror OP Partnership Agreement of Acquiror OP as in
effect immediately prior to the Effective Time shall be the partnership
agreement of the Surviving OP, until duly amended in accordance with applicable
law.
5.4. Effect on Partnership Interests.
By virtue of the OP Merger and except as otherwise provided herein, without
any action on the part of the holder of any units of partnership interest of
Contributor OP or the holder of any units of partnership interest of Acquiror
OP:
(a) Conversion of Contributor OP Units. As of the Effective Time, (i)
each issued and outstanding Contributor OP Unit held by Target REIT,
including preferred units of partnership interest, shall be converted into
the right to receive from Acquiror OP a number of validly issued, fully
paid and nonassessable Acquiror OP General Units equal to the Exchange
Ratio, and (ii) each issued and outstanding Contributor OP Unit held by
limited partners of Contributor OP shall be converted into the right to
receive from Acquiror OP a number of fully paid and nonassessable Acquiror
OP Limited Units equal to the Exchange Ratio. Neither Acquiror OP nor
Contributor OP shall effect any reorganization, recapitalization or other
like change with respect to Acquiror OP Units or Contributor OP Units after
the date hereof and prior to the Effective Time.
(b) Cancellation of Contributor OP Units. As of the Effective Time,
all Contributor OP Units shall no longer be outstanding and shall
automatically be canceled and retired and all rights with respect thereto
shall cease to exist, and each holder of any certificate representing any
such units of Contributor OP shall cease to have any rights with respect
thereto, except the right to receive, upon surrender of such certificate in
accordance with Section 5.5(a) and delivery of such documents as may be
reasonably required by Acquiror OP, certificates representing Acquiror OP
Units required to be issued by Acquiror OP pursuant to Section 5.4(a) and
any cash in lieu of fractional Acquiror OP Units paid by Acquiror OP
pursuant to Section 5.5(f) (the "OP Merger Consideration"), without
interest and less any required withholding taxes.
(c) Acquiror OP Units. As of the Effective Time, each Acquiror OP
Limited Unit and Acquiror OP General Unit, respectively, issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one validly issued, fully paid and
nonassessable Acquiror OP Limited Unit and Acquiror OP General Unit,
respectively.
5.5. Exchange of Certificates.
(a) Exchange Procedure. As soon as reasonably practicable after the
Closing, Acquiror OP shall mail to each limited partner of record of Contributor
OP, whose Contributor OP Units were converted into the right to receive the OP
Merger Consideration pursuant to Section 5.4, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to any
certificates representing Contributor OP Units ("Unit Certificates") shall pass,
only upon delivery of the Unit Certificates to Acquiror OP and shall be in a
form and have such other provisions as Acquiror OP reasonably specifies) and
(ii) instructions for use in effecting the surrender of any Unit Certificates in
exchange for the OP Merger Consideration. Upon surrender of a Unit Certificate
for cancellation to Acquiror OP or to such other agent or agents as may be
appointed by Acquiror OP, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by Acquiror OP,
the holder of such Unit Certificate shall be entitled to receive in exchange
therefor the OP Merger Consideration into which the Contributor OP Units
theretofore represented
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by such Unit Certificate shall have been converted pursuant to Section 5.4 (a)
and all distributions to which such holder is entitled and the Unit Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Contributor OP Units which is not registered in the transfer
records of Contributor OP, payment may be made to a Person other than the Person
in whose name the Unit Certificate so surrendered is registered only if such
certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment either shall pay any transfer or
other taxes required by reason of such payment being made to a Person other than
the registered holder of such Unit Certificate or establish to the satisfaction
of Acquiror OP that such tax or taxes have been paid or are not applicable.
Until surrender as contemplated by this Section 5.5(a), each Unit Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the OP Merger Consideration, without interest,
into which the Contributor OP Units theretofore represented by such Unit
Certificate shall have been converted pursuant to Section 5.4, and all
distributions to which such holder is entitled. No interest will be paid or will
accrue on the OP Merger Consideration upon the surrender of any Unit
Certificate. In the event any Unit Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Unit Certificate to be lost, stolen or destroyed and, if required by
Acquiror OP, the posting by such Person of a bond in such reasonable amount as
Acquiror OP may direct as indemnity against any claim that may be made against
it with respect to such Unit Certificate, Acquiror OP will issue with respect to
such lost, stolen or destroyed Unit Certificate the Acquiror OP Units and cash
in lieu of fractional units deliverable in respect thereof pursuant to this
Agreement. The certificates evidencing the Acquiror OP Units will bear
appropriate legends indicating (A) that the Acquiror OP Units have not been
registered under the Securities Act, and (B) that the Acquiror OP Partnership
Agreement restricts the transfer of the Acquiror OP Units.
(b) No Further Ownership Rights in Contributor OP Units. All OP Merger
Consideration paid upon the surrender of Unit Certificates in accordance with
the terms of this Section 5.5 shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Contributor OP Units theretofore
represented by such Unit Certificates, and at and after the Effective Time there
shall be no further registration of transfers on the unit transfer books of
Contributor OP of Contributor OP Units which were outstanding immediately prior
to the Effective Time.
(c) No Liability. Neither Contributor OP nor Acquiror OP shall be liable
to any Person in respect of any consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(d) Withholding Rights. Acquiror OP or Contributor OP shall be entitled to
deduct and withhold from the OP Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Contributor OP Units such amounts as Acquiror
OP or Target OP is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that such amounts are so withheld by Acquiror OP or Target
OP, such withheld amount shall be treated for all purpose of this Agreement as
having been paid to the partner of Acquiror OP in respect of which such
deduction and withholding was made by Acquiror OP or Target OP.
(e) No Appraisal Rights. The holders of Contributor OP Units are not
entitled under applicable law to appraisal rights as a result of the OP Merger.
(f) No Fractional Units. No fractional Acquiror OP Units shall be issued
in connection with the OP Merger, and such fractional unit interests will not
entitle the owner thereof to vote, to receive distributions or any other rights
of a partner of Acquiror OP. In lieu of the issuance of any fractional Acquiror
OP Units, upon surrender for exchange of Unit Certificates, cash payments will
be made by Acquiror OP to such owners in respect of any fractional Acquiror OP
Units that otherwise would be issuable in an amount equal to such fractional
part of an Acquiror OP Unit multiplied by the Average Price.
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ARTICLE VI
THE CMBS OP MERGER
6.1. The CMBS OP Merger; CMBS Agreement of Merger.
(a) Subject to the terms and conditions of this Agreement, at the Effective
Time, and for the purpose of effecting the Asset Sale with respect to the
Transferred Assets owned by Contributor CMBS OP, Contributor CMBS OP shall be
merged with and into Acquiror CMBS OP in accordance with the provisions of, and
with the effects provided in, Section 61-2-211 of the TRULPA and in accordance
with the provisions of this Article VI and an agreement of merger between
Contributor CMBS OP and Acquisition CMBS OP that Target REIT and Acquiror REIT
shall cause to be entered into prior to the Closing Date, and which will contain
terms and conditions consistent with this Article VI (the "CMBS Agreement of
Merger"). Acquiror CMBS OP shall be the Surviving CMBS OP resulting from the
CMBS OP Merger and shall continue to be governed by the laws of the State of
Tennessee.
(b) If all of the conditions set forth in Article IX have been fulfilled or
waived, the parties hereto shall cause, with respect to the CMBS OP Merger, a
certificate of merger or other appropriate documents satisfying the requirements
of the TRULPA, to be properly executed, verified and delivered for filing with
the Secretary of State of the State of Tennessee in accordance with the TRULPA,
on or before the Closing Date. The CMBS OP Merger shall become effective at the
Effective Time.
6.2. Effect of the CMBS OP Merger.
The CMBS OP Merger shall have the effects specified in Section 61-2-211(f)
of the TRULPA.
6.3. Certificate of Limited Partnership and Partnership Agreement.
The Certificate of Limited Partnership of Acquiror CMBS OP as in effect
immediately prior to the Effective Time shall be the Certificate of Limited
Partnership of the Surviving CMBS OP, until duly amended in accordance with
applicable law. The Acquiror CMBS OP Partnership Agreement of Acquiror CMBS OP
as in effect immediately prior to the Effective Time shall be the partnership
agreement of the Surviving CMBS OP, until duly amended in accordance with
applicable law.
6.4. Effect on Partnership Interests.
By virtue of the CMBS OP Merger and except as otherwise provided herein,
without any action on the part of the holder of any units of partnership
interest of Contributor CMBS OP or the holder of any units of partnership
interest of Acquiror CMBS OP, as of the Effective Time, each issued and
outstanding unit of partnership interest in Contributor CMBS OP shall be
converted into the right to receive from Acquiror CMBS OP a number of validly
issued, fully paid and nonassessable units of partnership interest in Acquiror
CMBS OP, as set forth in the CMBS Agreement of Merger (the "CMBS OP Merger
Consideration").
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF
CONTRIBUTOR OP AND TARGET REIT
Contributor OP and Target REIT hereby represent and warrant, jointly and
severally, to Acquiror OP, Acquiror REIT and Merger Sub that:
7.1. Organization.
(a) Target REIT is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee and is duly qualified as
a foreign corporation to do business in, and is in good standing under the laws
of, each jurisdiction in which the failure to qualify would have a Target REIT
Material
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Adverse Effect. Target REIT has the power and authority to carry on its business
as it is now being conducted and to own or lease its assets.
(b) Each of the Target REIT Subsidiaries is a corporation or limited
partnership, as indicated on Schedule 7.7, duly organized, validly existing and
in good standing under the laws of the state of its formation and is duly
qualified as a foreign entity to do business in, and is in good standing under
the laws of, each jurisdiction in which the failure to qualify would have a
Target REIT Material Adverse Effect. Each of the Target REIT Subsidiaries has
the power and authority to carry on its business as it is now being conducted
and to own or lease its assets.
(c) The copies of the Organizational Documents of Contributor OP and Target
REIT, which have heretofore been made available to Acquiror REIT, are true,
complete and correct copies of the Organizational Documents of Contributor OP
and Target REIT, as amended and in effect on the date hereof.
(d) The copies of the Organizational Documents of the Target REIT
Subsidiaries, which have heretofore been made available to Acquiror REIT, are
true, complete and correct copies of such Organizational Documents of the Target
REIT Subsidiaries, as amended and in effect on the date hereof.
(e) The copies of the minute books and records of the material proceedings
of Target REIT and the Target REIT Subsidiaries, which have heretofore been made
available to Acquiror REIT, are copies of the original minute books and records
of Target REIT and the Target REIT Subsidiaries, contain all proceedings of the
Shareholders, partners, boards of directors and any committees thereof with
respect to Target REIT and the Target REIT Subsidiaries prior to the date
hereof, and are true, correct and complete in all material respects.
7.2. Authorization; Enforceability.
Target REIT has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated by this Agreement, subject to approval of this Agreement and the
Plan of Merger by the Shareholders of Target REIT as required by the Tennessee
Act. Contributor OP has the partnership power and authority to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated by this Agreement, subject to approval of this
Agreement and the OP Merger by the limited partners of Contributor OP as
required by the TRULPA. Subject to such Shareholder and limited partner
approvals, this Agreement is, and the other documents and instruments required
hereby will be, when executed and delivered by Contributor OP and Target REIT
and the other parties hereto and thereto, the valid and binding obligations of
Contributor OP and Target REIT, enforceable against Contributor OP and Target
REIT in accordance with their respective terms, except as may be limited by
bankruptcy or insolvency laws or similar laws or equitable principles affecting
rights of creditors generally. All necessary action on the part of the board of
directors of Target REIT and the general partner of Contributor OP has been
taken to authorize the execution and delivery of this Agreement and each
agreement or instrument executed in connection herewith, the performance of
their obligations hereunder and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Target REIT and Contributor OP.
7.3. Capitalization.
The authorized capital stock of Target REIT consists of 100,000,000 shares
of Target REIT Common Stock and 5,000,000 shares of Target REIT Preferred Stock.
As of the date hereof, (i) 24,876,946 shares of Target REIT Common Stock are
issued and outstanding, (ii) Target REIT has issued 41,000 shares of Target REIT
Common Stock pursuant to unvested Target REIT Restricted Stock Grants, the
vesting of which accelerates as a result of the transactions contemplated by
this Agreement, and (iii) 973,684 shares of Target REIT Preferred Stock are
issued and outstanding. All such issued and outstanding shares of Target REIT
Capital Stock are validly issued, fully paid, nonassessable and were not issued
in violation of any preemptive rights. An aggregate of 2,567,609 shares of
Target REIT Common Stock are reserved for issuance upon redemption of 2,567,609
outstanding Contributor OP Units. Neither Target REIT nor any Target REIT
Subsidiary has any outstanding bonds, debentures, notes or other obligations the
holders of which have the
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right to vote with the Shareholders of Target REIT on any matter. There are not
any existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements or commitments which obligate Target REIT or any of the
Target REIT Subsidiaries to issue, transfer or sell any shares of capital stock,
partnership interests or other equity interests of Target REIT or any of the
Target REIT Subsidiaries, other than with respect to the Target REIT Options,
the Target REIT Restricted Stock Grants described on Schedule 1.137, and the
Contributor OP Units described on Schedule 7.7 and except as set forth in the
Target REIT Charter with respect to Target REIT Preferred Stock. There are no
agreements or understandings to which Target REIT is a party with respect to the
voting of any shares of Target REIT Capital Stock or which restrict the transfer
of any such shares, except as set forth in Target REIT's Organizational
Documents. Except as with respect to options issued pursuant to Section 4.3,
after the Closing, Acquiror REIT will have no obligation to issue, transfer or
sell any shares of capital stock or other equity interest of Acquiror REIT
pursuant to any Target REIT Benefit Plan.
7.4. No Violation or Conflict by Contributor OP or Target REIT.
Except as set forth on Schedule 7.4, the execution, delivery and
performance of this Agreement by Contributor OP and Target REIT do not and will
not conflict with or violate or constitute a breach or default under, (i) any
law, judgment, order or decree binding on Target REIT or any of the Target REIT
Subsidiaries, (ii) the Organizational Documents of Target REIT, Contributor OP,
or Contributor CMBS OP, or (iii) any Contract to which Target REIT or any of the
Target REIT Subsidiaries is a party or by which it is bound, the breach or
default of which would have a Target REIT Material Adverse Effect.
7.5. No Litigation.
Except as set forth on Schedule 7.5, there is no litigation or governmental
investigation pending or, to the Knowledge of Target REIT, proposed or
threatened against Target REIT or any of the Target REIT Subsidiaries, that (a)
is expected to have a Target REIT Material Adverse Effect, or (b) seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
7.6. Absence of Certain Changes.
Except as set forth on Schedule 7.6, in the Target REIT SEC Documents, or
as contemplated by this Agreement, since December 31, 1997, there has not been
any sale, transfer or other disposition of material assets of Target REIT or the
Target REIT Subsidiaries, except in the ordinary course of business consistent
with past practice.
7.7. Subsidiaries.
All of the Target REIT Subsidiaries are disclosed on Schedule 7.7 hereto.
Schedule 7.7 also sets forth Target REIT's and Contributor OP's ownership of
equity interests in the Target REIT Subsidiaries, and to the Knowledge of Target
REIT, other Persons' ownership of equity interests in the Target REIT
Subsidiaries. Except as set forth on Schedule 7.7, Target REIT and Contributor
OP (directly or indirectly) have good and marketable title to all of the equity
interests in each of the Target REIT Subsidiaries as indicated on Schedule 7.7
free and clear of all liens, claims and encumbrances. Except for the Target REIT
Subsidiaries, Target REIT owns no ownership interest in any other corporation,
partnership, joint venture or other business organization or entity.
7.8. Contracts and Commitments.
Except as set forth on Schedule 7.8, Target REIT and the Target REIT
Subsidiaries are not a party to any Contract (a) involving remaining payment or
guarantee of obligations by Target REIT or any Target REIT Subsidiary in excess
of $25,000, or (b) with a remaining term in excess of one year and which cannot
be canceled by Target REIT or a Target REIT Subsidiary without penalty on prior
notice of 90 days or less. Schedule 7.8 sets forth the indebtedness (other than
trade payables arising in the ordinary course of business
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and obligations under the Employee Benefit Plans) of Target REIT and the Target
REIT Subsidiaries including the unpaid principal balance at March 31, 1998. With
respect to each Contract listed on Schedule 7.8 hereto: (i) the Contract is in
full force and effect, valid and enforceable in accordance with its terms, as
limited by applicable bankruptcy, reorganization, moratorium, or similar laws
and equitable principles affecting creditors' rights generally; (ii) neither
Target REIT nor any Target REIT Subsidiary is in material default thereunder;
(iii) neither Target REIT nor any Target REIT Subsidiary has repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the Knowledge of Target REIT, in default in any
respect, or has repudiated or waived any material provision thereunder. Except
as disclosed on Schedule 7.8 hereto, all of the indebtedness set forth on
Schedule 7.8 hereto may be prepaid at borrower's sole option at any time without
penalty or premium. Except as set forth in Schedule 7.8, neither Target REIT nor
any Target REIT Subsidiary has entered into or is subject, directly or
indirectly, to any Tax Protection Agreements. As used herein, a "Tax Protection
Agreement" is an agreement, oral or written, (i) that has as one of its purposes
to permit a Person to take the position that such Person could defer federal
taxable income that otherwise might have been recognized upon a transfer of
property to the Contributor OP, Contributor CMBS OP or any other Target REIT
Subsidiary that is treated as a partnership for federal income tax purposes, and
(ii) that (A) prohibits or restricts in any manner the disposition of any assets
of Target REIT or any Target REIT Subsidiary, (B) requires that Target REIT or
any Target REIT Subsidiary maintain, or put in place, or replace, indebtedness,
whether or not secured by one or more of the Target REIT Hotels, or (C) requires
that Target REIT or any Target REIT Subsidiary offer to any Person at any time
the opportunity to guarantee or otherwise assume, directly or indirectly, the
risk of loss for federal income tax purposes for indebtedness or other
liabilities of Target REIT or any Target REIT Subsidiary.
7.9. Approvals and Consents.
Except as set forth on Schedule 7.9, no consent, approval or authorization
of, notice to, or filing with any governmental authority or any Person or entity
not a party to this Agreement is required to be obtained by Target REIT or any
Target REIT Subsidiary as a condition to the execution, delivery or performance
of this Agreement by Contributor OP or Target REIT, except where the failure to
obtain such consent, approval or authorization does not have a Target REIT
Material Adverse Effect.
7.10. Target REIT Employee Benefit Plans.
(a) Disclosure. Schedule 7.10 hereto sets forth a summary description of
all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently or previously adopted, maintained by, sponsored in whole or in
part by, contributed to, or required to be contributed to, by Target REIT or any
Target REIT Subsidiary or any entity which is considered a member of the same
controlled group as Target REIT under Section 4001 of ERISA or Section 414 of
the Code or Section 302 of ERISA (whether or not waived) for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate.
(b) Compliance with Law. The provisions of each Target REIT Employee
Benefit Plan and, to the Knowledge of Target REIT, the administration of each
Target REIT Employee Benefit Plan are and have been in all material respects in
compliance with all applicable laws, and neither Target REIT nor any Target REIT
Subsidiary has received any claim or notice alleging to the contrary with
respect to any Target REIT Employee Benefit Plan.
(c) Tax or Civil Liability. With respect to the Target REIT Employee
Benefit Plans, neither Target REIT nor any of the Target REIT Subsidiaries has
engaged in any "prohibited transaction" (as such term is defined in ERISA or the
Code), for which there is not an exception, that could subject Target REIT or
any
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Target REIT Subsidiary to an excise tax under Code Section 4975 or civil
liability under Section 502(i) of ERISA, except for a tax or liability that
would not have a Target REIT Material Adverse Effect.
(d) Claims and Liability. There is no action, claim or demand of any kind
(other than routine claims for benefits) that has been brought or, to the
Knowledge of Target REIT, threatened, against any Target REIT Employee Benefit
Plan or the assets thereof, or against any fiduciary of any such Target REIT
Employee Benefit Plan.
(e) Multiemployer Plans. Target REIT and the Target REIT Subsidiaries
neither maintain, participate in nor contribute to, and, except as set forth on
Schedule 7.10 hereto, have never maintained, participated in or contributed to,
any "multiemployer plans" as defined in Section 3(37) of ERISA. Target REIT and
the Target REIT Subsidiaries have no present liability under any multiemployer
plan.
(f) Reporting and Disclosure. Target REIT and the Target REIT Subsidiaries
have complied in all material respects with the reporting and disclosure
requirements of ERISA.
7.11. SEC Documents; Financial Statements; Undisclosed Liabilities.
The Target REIT SEC Documents constitute all forms, reports and documents
required to be filed by Target REIT with the SEC under applicable law. All of
the Target REIT SEC Documents (other than preliminary material) have been timely
filed, and, as of their respective filing dates or effective dates, as
applicable, complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act. None of the Target REIT SEC
Documents at the time of filing contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been modified or superseded by later Target REIT SEC Documents filed and
publicly available prior to the date of this Agreement. The consolidated
financial statements of Target REIT and the Target REIT Subsidiaries included in
Target REIT SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, in accordance with the applicable requirements of GAAP and the
applicable rules and regulations of the SEC, the consolidated financial position
of Target REIT and the Target REIT Subsidiaries, taken as a whole, as of the
dates thereof and the consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as disclosed in the consolidated financial
statements of Target REIT and the Target REIT Subsidiaries included in the
Target REIT SEC Documents or on Schedule 7.11, neither Target REIT nor any
Target REIT Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of Target REIT or in the notes thereto and which,
individually or in the aggregate, would have a Target REIT Material Adverse
Effect.
7.12. No Special Taxes.
Except as set forth in Schedule 7.12, neither Target REIT, Contributor OP,
nor Contributor CMBS OP has knowledge of, nor has received any notice of, any
special taxes or assessments relating to any of the Transferred Assets or any
part thereof or any planned public improvements that may result in a special tax
or assessment against a Target REIT Hotel which would have a Target REIT
Material Adverse Effect.
7.13. Compliance with Existing Laws.
Except as set forth on Schedule 7.13, neither Target REIT nor any Target
REIT Subsidiary has received any notice within the past twelve (12) months (or
since commencement of development or the date of acquisition of any Target REIT
Hotel if such development commenced or acquisition occurred within the past
twelve (12) months) of any existing or threatened violation of any provision of
any applicable building, zoning, subdivision, environmental or other
governmental ordinance, resolution, statute, rule, order or
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regulation, including but not limited to those of environmental agencies or
insurance boards of underwriters, with respect to the ownership, operation, use,
maintenance or condition of any Target REIT Hotel or any part thereof, or
requiring any repairs or alterations other than those that have been made prior
to the date hereof, except such violations as have been cured to the
satisfaction of the relevant authority or would have no Target REIT Material
Adverse Effect. Target REIT and each Target REIT Subsidiary have in effect all
Permits necessary for them to own, lease, or operate the Target REIT Hotels and
to carry on their businesses as now conducted, except for those Permits the
absence of which would have no Material Adverse Effect on any Target REIT Hotel,
and there has occurred no default under any such Permit other than defaults
which, singly or in the aggregate, would have no Material Adverse Effect on any
Target REIT Hotel. Except as disclosed on Schedule 7.13 hereto, neither Target
REIT nor any Target REIT Subsidiary is in violation of any laws, orders, or
Permits applicable to its business or employees conducting its business, except
for violations which would not have a Target REIT Material Adverse Effect.
7.14. Insurance.
All of the Insurance Policies are listed on Schedule 7.14, and all such
policies are valid and in full force and effect, all premiums for such policies
were paid when due and all future premiums for such policies (and any
replacements thereof) through the Closing Date shall be paid by Contributor OP,
Contributor CMBS OP or their lessees on or before the due date therefor.
7.15. Condemnation Proceedings.
Except as set forth on Schedule 7.15, neither Target REIT nor Contributor
OP has received any notice of any condemnation or eminent domain proceeding
pending or, to the Knowledge of Target REIT, threatened against the Transferred
Assets or any material part thereof.
7.16. Personal Property.
Subject only to the Permitted Title Exceptions and the Assumed Liabilities,
all of the Personal Property will be free and clear of all liens, encumbrances
and charges on the Closing Date and the Target REIT Subsidiaries have good and
marketable title thereto and the right to convey same in accordance with the
terms of this Agreement (except for capital leases of personal property entered
into in the ordinary cause of business). All of the Tangible Personal Property
is in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business of the Target REIT Hotels consistent with past
practices.
7.17. Bankruptcy.
No Act of Bankruptcy has occurred with respect to Target REIT or any Target
REIT Subsidiary.
7.18. Title to Real Property.
Except for Permitted Title Exceptions and as set forth on Schedule 7.18,
the Target REIT Subsidiaries are the sole owners of good and marketable title to
the Real Property, free and clear of all liens, mortgages, security interests,
leases (except ground and other leases noticed on Schedule 7.18), encumbrances,
restrictions, conditions, and agreements. The Target REIT Subsidiaries have
title insurance polices insuring their fee simple titles or leasehold interests,
as the case may be, to the Target REIT Hotels.
7.19. Zoning.
Except as set forth on Schedule 7.19, to the Knowledge of Target REIT, the
current use and occupancy of the Target REIT Hotels for hotel purposes are
permitted under all laws applicable thereto.
7.20. Hazardous Substances.
To the Knowledge of Target REIT: except as set forth on Schedule 7.20,
there are no (a) Hazardous Substances on, under or in the Target REIT Hotels, or
any portion thereof, in violation of applicable law,
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(b) spills, releases, discharges, or disposal of Hazardous Substances in
violation of applicable law that have occurred or are presently occurring on or
onto the Target REIT Hotels, or any portion thereof, or (c) PCB (polychlorinated
biphenyls) transformers serving, or stored on, the Target REIT Hotels, or any
portion thereof. To the Knowledge of Target REIT, Target REIT and the Target
REIT Subsidiaries have complied with any applicable local, state and federal
environmental laws, regulations, ordinances and administrative and judicial
orders relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Substances, except for violations that
would not have a Target REIT Material Adverse Effect.
7.21. Room Furnishings.
All public spaces, lobbies, meeting rooms, and each room in each of the
Target REIT Hotels available for guest rental is generally furnished in
accordance with the applicable Franchisor's standards for the hotel and room
type.
7.22. Franchisors; Franchise Agreements.
The Target REIT Hotels are currently operated pursuant to Franchise
Agreements with the Franchisors as listed next to their name on Schedule 7.22.
7.23. Mortgage Documents.
All promissory notes, bonds and other evidences on indebtedness given by
Target REIT or any Target REIT Subsidiary that are secured by mortgages or
negative pledges encumbering the Real Property are listed on Schedule 7.23 (the
"Mortgage Notes"), together with a description of the corresponding mortgage
documents (the "Mortgages"). The Mortgage Documents are complete, are in full
force and effect and have not been modified or supplemented, except as otherwise
disclosed on Schedule 7.23, and no fact or circumstance has occurred that, by
itself or with the giving of notice or the passage of time or both, would
constitute a default under any of the Mortgage Documents. Neither Target REIT,
Contributor OP, nor Contributor CMBS OP has been advised nor have any of them
received any notice asserting that a default exists under any of the Mortgage
Documents.
7.24. Opinion of Financial Advisor.
Target REIT has retained Salomon Smith Barney Inc. to review the
transactions contemplated by this Agreement and to issue an opinion to the
effect that, as of the date of such opinion, the Exchange Ratio is fair, from a
financial point of view, to the holders of Target REIT Capital Stock and the
partners of Contributor OP, and Target REIT has received the opinion of Salomon
Smith Barney Inc. to such effect and such opinion has not been withdrawn or
materially modified.
7.25. Financial Advisor.
Except for fees payable to Salomon Smith Barney Inc., neither Target REIT
nor any Target REIT Subsidiary is committed to pay any financial advisory,
broker or finder fees or any similar fees in connection with the Mergers, the
Asset Sale or the transactions contemplated by this Agreement.
7.26. Acquiror REIT Share Ownership.
Neither Target REIT nor any of the Target REIT Subsidiaries owns any shares
of capital stock of Acquiror REIT or other securities convertible into any
capital stock of Acquiror REIT.
7.27. Related Party Transactions.
Except for the Target REIT Employment Agreements, the Target REIT Options,
Contributor OP Units, and the Target REIT Restricted Stock Grants, there are no
arrangements, agreements or contracts entered into by Target REIT or any of the
Target REIT Subsidiaries with any person who is an officer, director,
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employee or affiliate of Target REIT or any of the Target REIT Subsidiaries, any
relative of any of the foregoing persons or any entity of which any of the
foregoing persons is an Affiliate.
7.28. Takeover Statutes.
Target REIT has taken all actions required of Target REIT to exempt the
transactions contemplated hereby from the operation of any "fair price,"
"moratorium," "control share acquisition" or any other anti-takeover statute or
similar statute enacted under the state or federal laws of the United States or
similar statute or regulation ("Takeover Statutes").
7.29. Hart-Scott-Rodino Antitrust Improvements Act of 1976.
For purposes of determining compliance with the HSR Act, Target REIT
confirms that the conduct of its business, through the Target REIT Subsidiaries,
consists solely of investing in, owning and operating, real estate assets and
related personal property for the benefit of its Shareholders.
7.30. Development.
Set forth on Schedule 7.30 is a list of all material agreements entered
into by Target REIT or any of the Target REIT Subsidiaries relating to the
development, rehabilitation, capital improvement or construction of hotel
properties or additions thereto or other real estate properties which
development or construction has not been substantially completed as of the date
of this Agreement. Schedule 7.30 provides a description of each of Target REIT's
or its Subsidiaries' material development, rehabilitation, capital improvement
and construction projects, including budgeted amounts and costs incurred to date
for each such project.
7.31. Tax Matters.
Except as set forth in Schedule 7.31: (i) Target REIT and each of the
Target REIT Subsidiaries (a) has timely filed all material Tax Returns required
to be filed by any of them for tax periods ended prior to the date of this
Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired, and all such tax returns are
accurate and complete in all material respects, (b) has paid or accrued all
Taxes shown to be due and payable on such returns or which have become due and
payable pursuant to any assessment or deficiency notice received by any of them,
and (c) has properly accrued in accordance with and to the extent required by
GAAP all Taxes for such periods and periods subsequent to the periods covered by
such Tax Returns; (ii) neither Target REIT nor any of the Target REIT
Subsidiaries has received any notice that any federal, state and local income,
excise and franchise Tax Return of Target REIT or any such Target REIT
Subsidiary has been or will be examined by any taxing authority; (iii) neither
Target REIT nor any of its the Target REIT Subsidiaries has executed or filed
with the IRS or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any income or other Taxes; (iv)
Target REIT (a) has qualified to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable years ended December 31, 1993, 1994,
1995, 1996 and 1997, and (b) has operated, and intends to continue to operate,
in such a manner as to qualify to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable year ending on the date of the Effective
Time; (v) each Target REIT Subsidiary that is a partnership, joint venture or
limited liability company (A) has been since its formation and continues to be
treated for federal income tax purposes as a partnership and not as a
corporation or an association taxable as a corporation and (B) has not since the
later of its formation or the acquisition by Target REIT of a direct or indirect
interest therein, owned any assets (including, without limitation, securities)
that would cause Target REIT to violate Section 856(c)(5) of the Code; and (vi)
neither Target REIT nor any of the Target REIT Subsidiaries holds any asset (a)
the disposition of which could be subject to rules similar to Section 1374 of
the Code as a result of an election under IRS Notice 88-19, or (b) that is
subject to a consent filed pursuant to Section 341(f) of the Code and
regulations thereunder. No Target REIT Subsidiary (other than Target C. Corp.)
is a corporation (or an entity that would, under applicable federal income tax
principles, be classified as an association taxable as a corporation). Neither
Contributor OP nor Contributor CMBS OP is a publicly traded partnership within
the meaning of Section 7704 of the Code. True, correct and complete copies of
all federal, state and local income or franchise Tax Returns filed by Target
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REIT and each of the Target REIT Subsidiaries and all communications with taxing
authorities relating thereto have been made available to Acquiror REIT or its
representatives.
7.32. Convertible Securities.
Except as set forth herein or in Schedule 7.32 hereto, Target REIT has no
outstanding options, warrants, or other securities exercisable for, or
convertible into, Target REIT Capital Stock, the terms of which would require
any anti-dilution adjustments by reason of the consummation of the transaction
contemplated hereby.
7.33. Updating of Representations and Warranties.
Between the date hereof and the Closing Date, Contributor OP and Target
REIT will promptly disclose to Acquiror REIT any information which, to the
Knowledge of Target REIT, (a) would render any representation or warranty of
either of them under this Article VII untrue, (b) renders any information set
forth in this Agreement no longer correct in all material respects, or (c)
arises after the date hereof and which would have been required to be included
in this Agreement if such information had existed on the date hereof.
Each of the representations, warranties and covenants contained in this
Article VII and its various subparagraphs are intended for the benefit of
Acquiror REIT, Acquiror OP and Merger Sub and may be waived in whole or in part,
by Acquiror REIT, but only by an instrument in writing signed by Acquiror REIT.
No investigation, audit, inspection, review or the like conducted by or on
behalf of Acquiror REIT, Merger Sub or Acquiror OP shall be deemed to terminate
the effect of any such representations, warranties and covenants, it being
understood that Acquiror REIT, Merger Sub and Acquiror OP have the right to rely
thereon and that each such representation, warranty and covenant constitutes a
material inducement to Acquiror REIT, Merger Sub and Acquiror OP to execute this
Agreement, agree to the Merger and to consummate the transactions contemplated
by this Agreement.
7.34. Reorganization.
Neither Target REIT nor any Target REIT Subsidiary has taken any action, or
agreed to take any action, or has any knowledge of any fact or circumstance that
is reasonably likely to prevent the REIT Merger, from qualifying for treatment
as a "reorganization" within the meaning of Section 368(a) of the Code.
7.35. Intellectual Property.
Schedule 7.35 contains a true, correct and complete listing of all
trademarks, service marks, trade names, service names, patents, copyrights and
computer software owned or licensed by or registered in the name of Target REIT
or any Target REIT Subsidiary. Either Target REIT or any Target REIT Subsidiary,
as shown therein, is the sole owner of all right, title and interest in all
intellectual property described in Schedule 7.35 hereto, except and excluding
proprietary rights that either Target REIT or any Target REIT Subsidiary are
entitled to exercise and sublicense, by reason of license or otherwise, which
are identified in Schedule 7.35 hereof. Except as provided on Schedule 7.35
hereof, neither Target REIT nor Contributing OP has any knowledge nor have they
received any written notice to the effect that any service rendered by either
Target REIT or any Target REIT Subsidiary with respect to their businesses
infringes on any intellectual property right or other legally-protectable right
of another Person.
7.36. Employees.
Except as set forth on Schedule 7.36 hereof, neither Target REIT nor any
Target REIT Subsidiary has any written employment contract with any person
currently engaged, or previously engaged, in the businesses of Target REIT nor
any Target REIT Subsidiary. Schedule 7.36 lists all current employees of Target
REIT and the Target REIT Subsidiaries, showing each such person's name and
position.
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7.37. Labor Relations.
Neither Target REIT nor any Target REIT Subsidiary is the subject of any
litigation or governmental investigation asserting that Target REIT or any
Target REIT Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or seeking
to compel Target REIT or any Target REIT Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is Target REIT or any
Target REIT Subsidiary a party to or bound by any collective bargaining
agreement, contract, or other agreement or understanding with a labor union or
labor organization, nor is there any strike or other labor dispute involving
Target REIT or any Target REIT Subsidiary, pending or, to the Knowledge of
Target REIT, threatened, or, to the Knowledge of Target REIT, is there any
activity involving Target REIT's or any Target REIT Subsidiary's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
7.38. Termination of Certain Target REIT Leases.
Target REIT, Contributor OP and Contributor CMBS OP have entered into a
letter agreement with the Target REIT Lessee dated October 17, 1997, a copy of
which is attached as Exhibit G hereto (the "Lease Termination Agreement"),
providing for the determination of certain amounts payable to the Target REIT
Lessee or the Target REIT CMBS Lessee, as applicable, in connection with the
termination by certain Target REIT Subsidiaries of the Target REIT Leases
described on Schedule 7.38 on or before December 31, 1998. Schedule 7.38 sets
forth the amounts determined pursuant to the Lease Termination Agreement for
termination of each of such Target REIT Leases. Target REIT or the Target REIT
Subsidiaries have the right to terminate such Target REIT Leases upon payment of
the amounts set forth in Schedule 7.38 and in accordance with the notice and
other provisions set forth in such Target REIT Leases.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF ACQUIROR REIT,
ACQUIROR OP AND MERGER SUB
Acquiror REIT, Acquiror OP and Merger Sub hereby represent and warrant,
jointly and severally, to Target REIT and Contributor OP that:
8.1. Organization.
(a) Acquiror REIT is a corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee and is duly
qualified as a foreign corporation to do business in, and is in good
standing under the laws of, each jurisdiction in which the failure to
qualify would have an Acquiror REIT Material Adverse Effect. Acquiror REIT
has the power and authority to carry on its business as it is now being
conducted and to own and lease its assets.
(b) Each of the Acquiror REIT Subsidiaries is a corporation, limited
liability company or limited partnership, as indicated on Schedule 8.7,
duly organized, validly existing and in good standing under the laws of the
state of its formation and is duly qualified as a foreign entity to do
business in, and is in good standing under the laws of, each jurisdiction
in which the failure to qualify would have an Acquiror REIT Material
Adverse Effect. Each of the Acquiror REIT Subsidiaries has the power and
authority to carry on its business as it is now being conducted and to own
or lease its assets.
(c) The copies of the Organizational Documents of Acquiror OP,
Acquiror REIT and Merger Sub, which have heretofore been made available to
Target REIT, are true, complete and correct copies of the Organizational
Documents of Acquiror OP, Acquiror REIT and Merger Sub, as amended and in
effect on the date hereof.
(d) The copies of the Organizational Documents of the Acquiror REIT
Subsidiaries, which have heretofore been made available to Target REIT, are
true, complete and correct copies of such
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Organizational Documents of the Acquiror REIT Subsidiaries, as amended and
in effect on the date hereof.
(e) The copies of the minute books and records of the material
proceedings of Acquiror REIT and the Acquiror REIT Subsidiaries, which have
heretofore been made available to Target REIT, are copies of the original
minute books and records of Acquiror REIT and the Acquiror REIT
Subsidiaries, contain all proceedings of the Shareholders, members,
partners, boards of directors and any committees thereof with respect to
Acquiror REIT and the Acquiror REIT Subsidiaries prior to the date hereof,
and are true, correct and complete in all material respects.
8.2. Authorization; Enforceability.
Each of Acquiror REIT and Merger Sub has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated by this Agreement, subject to the
approval of the issuance of Acquiror REIT Common Stock contemplated herein by
the Shareholders of Acquiror REIT pursuant to applicable law and the rules of
the NYSE. Acquiror OP has the partnership power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement, subject to approval of this Agreement and the OP Merger by the
limited partners of Acquiror OP as required by the TRULPA. Subject to such
Shareholder and limited partner approvals, this Agreement is, and the other
documents and instruments required hereby will be, when executed and delivered
by Acquiror OP, Acquiror REIT, Merger Sub and the other parties hereto and
thereto, the valid and binding obligations of Acquiror OP, Acquiror REIT and
Merger Sub, enforceable against Acquiror OP, Acquiror REIT and Merger Sub in
accordance with their respective terms, except as may be limited by bankruptcy
or insolvency laws or similar laws or equitable principles affecting rights of
creditors generally. All necessary action on the part of the board of directors
of Acquiror REIT and the board of directors and Shareholders of Merger Sub and
the general partner of Acquiror OP has been taken to authorize the execution and
delivery of this Agreement and each agreement or instrument executed in
connection herewith, the performance of their respective obligations hereunder
and the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Acquiror REIT, Acquiror OP and
Merger Sub.
8.3. Capitalization.
The authorized capital stock of Acquiror REIT consists of 50,000,000 shares
of Acquiror REIT Common Stock and 10,000,000 shares of Acquiror REIT Preferred
Stock. As of the date hereof, 36,234,030 shares of Acquiror REIT Common Stock
are issued and outstanding and no shares of Acquiror REIT Preferred Stock are
issued and outstanding. As of the date hereof, the authorized capital stock of
Merger Sub consists of 1,000 shares of common stock of Merger Sub, $.01 par
value per share, 1,000 shares of which common stock are issued and outstanding.
All such issued and outstanding shares of Acquiror REIT Common Stock and common
stock of Merger Sub are validly issued, fully paid, nonassessable and were not
issued in violation of any preemptive rights. An aggregate of 1,953,581 shares
of Acquiror REIT Common Stock are reserved for issuance upon redemption of
1,953,581 outstanding Acquiror OP Units. Neither Acquiror REIT nor any of the
Acquiror REIT Subsidiaries has any outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote with the Shareholders of
Acquiror REIT on any matter. There are not any existing options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate Acquiror REIT or any of the Acquiror REIT
Subsidiaries to issue, transfer or sell any shares of capital stock or other
equity interest of Acquiror REIT or any of the Acquiror Subsidiaries, other than
with respect to the Acquiror REIT Options, the Acquiror REIT Restricted Stock
Grants described on Schedule 1.23 and the Acquiror OP Units described on
Schedule 8.7. Except as set forth on Schedule 8.3, there are no agreements or
understandings to which Acquiror REIT is a party with respect to the voting of
any shares of Acquiror REIT Common Stock or which restrict the transfer of any
such shares, except as set forth in Acquiror REIT's Organizational Documents.
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8.4. No Violation or Conflict by Acquiror OP, Acquiror REIT or Merger Sub.
Except as set forth on Schedule 8.4, the execution, delivery and
performance of this Agreement by Acquiror OP, Acquiror REIT and Merger Sub do
not and will not conflict with or violate or constitute a breach or default
under, (i) any law, judgment, order or decree binding on Acquiror REIT or any of
the Acquiror REIT Subsidiaries, (ii) the Organizational Documents of Acquiror
REIT, Acquiror OP or Merger Sub, or (iii) any Contract to which Acquiror REIT or
any of the Acquiror REIT Subsidiaries is a party or by which it is bound, the
breach or default of which would have an Acquiror REIT Material Adverse Effect.
8.5. No Litigation.
Except as set forth on Schedule 8.5, there is no litigation or governmental
investigation pending or, to the Knowledge of Acquiror REIT, proposed or
threatened against Acquiror REIT or any of the Acquiror REIT Subsidiaries, that
(a) is expected to have an Acquiror REIT Material Adverse Effect, or (b) seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
8.6. Absence of Certain Changes.
Except as set forth on Schedule 8.6, in the Acquiror REIT SEC Documents, or
as contemplated by this Agreement, since December 31, 1997, there has not been
any sale, transfer or other disposition of material assets of Acquiror REIT or
the Acquiror REIT Subsidiaries, except in the ordinary course of business
consistent with past practice.
8.7. Subsidiaries.
All of the Acquiror REIT Subsidiaries are disclosed on Schedule 8.7.
Schedule 8.7 also sets forth Acquiror REIT's and Acquiror OP's ownership of
equity interests in the Acquiror REIT Subsidiaries, and, to the Knowledge of
Acquiror REIT, other Persons' ownership of equity interests in the Acquiror REIT
Subsidiaries. Except as set forth on Schedule 8.7, Acquiror REIT and Acquiror OP
(directly or indirectly) have good and marketable title to all of the equity
interests in each of the Acquiror REIT Subsidiaries as indicated on Schedule 8.7
free and clear of all liens, claims and encumbrances. Except for the Acquiror
REIT Subsidiaries, Acquiror REIT owns no ownership interest in any other
corporation, partnership, joint venture or other business organization or
entity.
8.8. Contracts and Commitments.
Except as set forth on Schedule 8.8, Acquiror REIT and the Acquiror REIT
Subsidiaries are not a party to any Contract (a) involving remaining payment or
guarantee of obligations by Acquiror REIT or any Acquiror REIT Subsidiary in
excess of $25,000, or (b) with a remaining term in excess of one year and which
cannot be canceled by Acquiror REIT or an Acquiror REIT Subsidiary without
penalty on prior notice of 90 days or less. Schedule 8.8 sets forth the
indebtedness (other than trade payables arising in the ordinary course of
business and obligations under the Employee Benefit Plans) of Acquiror REIT and
the Acquiror REIT Subsidiaries, including the unpaid principal balance at March
31, 1998. With respect to each Contract listed on Schedule 8.8 hereto: (i) the
Contract is in full force and effect, valid and enforceable in accordance with
its terms, as limited by applicable bankruptcy, reorganization, moratorium, or
similar laws and equitable principles affecting creditors' rights generally;
(ii) neither Acquiror REIT nor any Acquiror REIT Subsidiary is in material
default thereunder; (iii) neither Acquiror REIT nor any Acquiror REIT Subsidiary
has repudiated or waived any material provision of any such Contract; and (iv)
no other party to any such Contract is, to the Knowledge of Acquiror REIT, in
default in any respect, or has repudiated or waived any material provision
thereunder. Except as set forth in Schedule 8.8, neither Acquiror REIT nor any
Acquiror REIT Subsidiary has entered into or is subject, directly or indirectly,
to any Tax Protection Agreements. As used herein, a "Tax Protection Agreement"
is an agreement, oral or written, (i) that has as one of its purposes to permit
a Person to take the position that such Person could defer federal taxable
income that otherwise might have been recognized upon a transfer of property to
the Acquiror OP or any other Acquiror REIT
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Subsidiary that is treated as a partnership for federal income tax purposes, and
(ii) that (A) prohibits or restricts in any manner the disposition of any assets
of Acquiror REIT or any Acquiror REIT Subsidiary, (B) requires that Acquiror
REIT or any Acquiror REIT Subsidiary maintain, or put in place, or replace,
indebtedness, whether or not secured by one or more of the Acquiror REIT Hotels,
or (C) requires that Acquiror REIT or any Acquiror REIT Subsidiary offer to any
Person at any time the opportunity to guarantee or otherwise assume, directly or
indirectly, the risk of loss for federal income tax purposes for indebtedness or
other liabilities of Acquiror REIT or any Acquiror REIT Subsidiary.
8.9. Approvals and Consents.
Except as set forth on Schedule 8.9, no consent, approval, or authorization
of, notice to, filing with any governmental authority or any Person or entity
not a party to this Agreement is required to be obtained by Acquiror REIT or any
Acquiror REIT Subsidiary as a condition to the execution, delivery or
performance of this Agreement by Acquiror OP, Acquiror REIT or Merger Sub,
except where the failure to obtain such consent, approval or authorization does
not have an Acquiror REIT Material Adverse Effect.
8.10. Acquiror REIT Employee Benefit Plans.
(a) Disclosure. Schedule 8.10 hereto sets forth a summary description of
all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently or previously maintained by, sponsored in whole or in part by,
or contributed to, or required to be contributed to, by Acquiror REIT or any
Acquiror REIT Subsidiary or any entity which is considered a member of the same
controlled group as Acquiror REIT under Section 4001 of ERISA or Section 414 of
the Code or Section 302 of ERISA (whether or not waived) for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate.
(b) Compliance with Law. The provisions of each Acquiror REIT Employee
Benefit Plan and, to the Knowledge of Acquiror REIT, the administration of each
Acquiror REIT Employee Benefit Plan are and have been in all material respects
in compliance with all applicable laws, and neither Acquiror REIT nor any
Acquiror REIT Subsidiary has received any claim or notice alleging to the
contrary with respect to any Acquiror REIT Employee Benefit Plan.
(c) Tax or Civil Liability. With respect to the Acquiror REIT Employee
Benefit Plans, neither Acquiror REIT nor any of the Acquiror REIT Subsidiaries
has engaged in any "prohibited transaction" (as such term is defined in ERISA or
the Code), for which there is not an exception, that could subject Acquiror REIT
or any Acquiror REIT Subsidiary to an excise tax under Code Section 4975 or
civil liability under Section 502(i) of ERISA, except for a tax or liability
that would not have an Acquiror REIT Material Adverse Effect.
(d) Claims and Liability. There is no action, claim or demand of any kind
(other than routine claims for benefits) that has been brought or, to the
Knowledge of Acquiror REIT, threatened, against any Acquiror REIT Employee
Benefit Plan or the assets thereof, or against any fiduciary of any such
Acquiror REIT Employee Benefit Plan.
(e) Multiemployer Plans. Acquiror REIT and the Acquiror REIT Subsidiaries
neither maintain nor participate in, and, except as set forth on Schedule 8.10
hereto, have never maintained or participated in, any "multiemployer plans" as
defined in Section 3(37) of ERISA. Acquiror REIT and the Acquiror REIT
Subsidiaries have no present liability under any multiemployer plan.
(f) Reporting and Disclosure. Acquiror REIT and the Acquiror REIT
Subsidiaries have complied in all material respects with the reporting and
disclosure requirements of ERISA.
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8.11. SEC Documents; Financial Statement; Undisclosed Liabilities.
The Acquiror REIT SEC Documents constitute all forms, reports and documents
required to be filed by Acquiror REIT with the SEC under applicable law. All of
the Acquiror REIT SEC Documents (other than preliminary material) have been
timely filed, and, as of their respective filing dates or effective dates, as
applicable, complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act. None of the Acquiror REIT SEC
Documents at the time of filing contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been modified or superseded by later Acquiror REIT SEC Documents filed and
publicly available prior to the date of this Agreement. The consolidated
financial statements of Acquiror REIT and the Acquiror REIT Subsidiaries
included in Acquiror REIT SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by the
applicable rules and regulations of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto),
and fairly presented, in accordance with the applicable requirements of GAAP and
the applicable rules and regulations of the SEC, the consolidated financial
position of Acquiror REIT and the Acquiror REIT Subsidiaries, taken as a whole,
as of the dates thereof and the consolidated results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as disclosed in the consolidated
financial statements of Acquiror REIT and the Acquiror REIT Subsidiaries
included in the Acquiror REIT SEC Documents or on Schedule 8.11, neither
Acquiror REIT nor any Acquiror REIT Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Acquiror
REIT or in the notes thereto and which, individually or in the aggregate, would
have an Acquiror REIT Material Adverse Effect.
8.12. Title to Properties and Assets.
Except as set forth on Schedule 8.12, the Acquiror REIT Subsidiaries are
the sole owners of good and marketable title to the Acquiror REIT Hotels and
other assets of Acquiror OP, free and clear of all liens, mortgages, security
interests, leases (except ground and other leases noticed on Schedule 8.12),
encumbrances, restrictions, conditions and agreements. Acquiror OP has title
insurance policies insuring its fee simple titles or leasehold interests, as the
case may be, to the Acquiror REIT Hotels.
8.13. Insurance.
All of the insurance policies with respect to the Acquiror REIT Hotels are
listed on Schedule 8.13, and all such policies are valid and in full force and
effect, all premiums for such policies were paid when due and all future
premiums for such policies (and any replacements thereof) shall be paid by
Acquiror OP or its lessee on or before the due date therefor.
8.14. Personal Property.
Except as disclosed in the consolidated financial statements of Acquiror
REIT and the Acquiror REIT Subsidiaries included in the Acquiror REIT SEC
Documents or on Schedule 8.14, each of Acquiror OP and the Acquiror Subsidiaries
has good and marketable title to all of the machinery, equipment, materials,
supplies and other personal property of every kind, tangible or intangible,
shown as assets in its records and books of account, free and clear of all
liens, encumbrances and charges (except for capital leases of personal property
entered into in the ordinary cause of business). All of such tangible personal
property is in good condition, reasonable wear and tear excepted, and are usable
in the ordinary course of business of the Acquiror REIT Hotels consistent with
past practices.
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8.15. Bankruptcy.
No Act of Bankruptcy has occurred with respect to Acquiror REIT or any
Acquiror REIT Subsidiary.
8.16. Zoning.
Except as set forth on Schedule 8.16, to the Knowledge of Acquiror REIT,
the current use and occupancy of the Acquiror REIT Hotels for hotel purposes are
permitted under all laws applicable thereto.
8.17. Hazardous Substances.
To the Knowledge of Acquiror REIT: except as set forth on Schedule 8.17,
there are no (a) Hazardous Substances on, under or in the Acquiror REIT Hotels,
or any portion thereof, in violation of applicable law, (b) spills, releases,
discharges, or disposal of Hazardous Substances in violation of applicable law
that have occurred or are presently occurring on or onto any of the Acquiror
REIT Hotels, or any portion thereof, or (c) PCB (polychlorinated biphenyls)
transformers serving, or stored on, any Acquiror REIT Hotels, or any portion
thereof. To the Knowledge of Acquiror REIT, Acquiror REIT and the Acquiror REIT
Subsidiaries have complied with any applicable local, state and federal
environmental laws, regulations, ordinances and administrative and judicial
orders relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Substances, except for violations which
would not have an Acquiror REIT Material Adverse Effect.
8.18. Leases.
Each Acquiror REIT Lease is in full force and effect, valid and enforceable
in accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws and equitable
principles affecting creditors' rights generally and (b) as may be limited in
the jurisdiction where the relevant Acquiror REIT Hotel is located if such
limitation would not deprive the Acquiror REIT Subsidiaries, in total, of the
principal benefits contemplated by the Acquiror REIT Leases; and no Acquiror
REIT Subsidiary is in material default under any Acquiror REIT Lease, no
Acquiror Subsidiary has repudiated or waived any material provision of any such
Acquiror REIT Lease, and no other party to any such Acquiror REIT Lease is, to
the Knowledge of Acquiror REIT, in default in any respect, or has repudiated or
waived any material provision thereunder. No event or occurrence exists which
with notice or the passage of time, or both, would constitute an event of
default under any Acquiror REIT Lease. The Acquiror REIT Leases will not
adversely affect the tax qualification of Acquiror REIT as a REIT for federal
income tax purposes.
8.19. Opinion of Financial Advisor.
Acquiror REIT has retained Morgan Keegan & Company, Inc. to review the
transactions contemplated by this Agreement and to issue an opinion to the
effect that, as of the date of such opinion, the Exchange Ratio is fair, from a
financial point of view, to the holders of Acquiror REIT Common Stock and the
partners of Acquiror OP, and Acquiror REIT has received the opinion of Morgan
Keegan & Company, Inc. to such effect and such opinion has not been withdrawn or
materially modified.
8.20. Financial Advisor.
Except for fees payable to Bear, Stearns & Co., Inc. and Morgan Keegan &
Company, Inc., Acquiror REIT is not committed to pay any financial advisory,
broker or finder fees or any similar fees in connection with the Mergers, the
Asset Sale or the transactions contemplated by this Agreement.
8.21. Target REIT Share Ownership.
Neither Acquiror REIT nor any of the Acquiror REIT Subsidiaries owns any
shares of capital stock of Target REIT or other securities convertible into
capital stock of Target REIT.
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8.22. Related Party Transactions.
Except for the Acquiror REIT Employment Agreements, the Acquiror REIT
Options, Acquiror OP Units and the Acquiror REIT Restricted Stock Grants, there
are no arrangements, agreements, or contracts entered into by Acquiror REIT or
any of the Acquiror REIT Subsidiaries with any person who is an officer,
director, employee or affiliate of Acquiror REIT or any of the Acquiror REIT
Subsidiaries, any relative of any of the foregoing persons or any entity of
which any of the foregoing persons is an Affiliate.
8.23. Takeover Statutes.
Acquiror REIT and Merger Sub have taken all actions required of Acquiror
REIT and Merger Sub to exempt the transactions contemplated hereby from the
operation of any Takeover Statutes.
8.24. Hart-Scott-Rodino Antitrust Improvements Act of 1976.
For purposes of determining compliance with the HSR Act, Acquiror REIT and
Merger Sub confirm that the conduct of their business, through the Acquiror REIT
Subsidiaries, consists solely of investing in, owning and operating, real
estate, assets and related personal property for the benefit of the Shareholders
of Acquiror REIT.
8.25. Development.
Set forth on Schedule 8.25 is a list of all material agreements entered
into by Acquiror REIT or any of the Acquiror REIT Subsidiaries relating to the
development, rehabilitation, capital improvement or construction of hotel
properties or additions thereto or other real estate properties which
development or construction has not been substantially completed as of the date
of this Agreement. Schedule 8.25 provides a description of each of Acquiror
REIT's or its Subsidiaries' material development, rehabilitation, capital
improvement and construction projects, including budgeted amounts and costs
incurred to date for each such project.
8.26. Tax Matters.
Except as set forth in Schedule 8.26, (i) Acquiror REIT and each of the
Acquiror REIT Subsidiaries (a) has timely filed all material Tax Returns
required to be filed by any of them for tax periods ended prior to the date of
this Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired, and all such tax returns are
accurate and complete in all material respects, (b) has paid or accrued all
Taxes shown to be due and payable on such returns or which have become due and
payable pursuant to any assessment or deficiency notice received by any of them,
and (c) has properly accrued in accordance with and to the extent required by
GAAP all Taxes for such periods and periods subsequent to the periods covered by
such Tax Returns; (ii) neither Acquiror REIT nor any of the Acquiror REIT
Subsidiaries has received any notice that any federal, state and local income,
excise and franchise Tax Return of Acquiror REIT or any such Acquiror REIT
Subsidiary has been or will be examined by any taxing authority; (iii) neither
Acquiror REIT nor any of the Acquiror REIT Subsidiaries has executed or filed
with the IRS or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any income or other Taxes; (iv)
Acquiror REIT (a) has qualified to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable years ended December 31, 1994, 1995,
1996 and 1997, and (b) has operated, and intends to continue to operate, in such
a manner as to qualify to be taxed as a REIT pursuant to Sections 856 through
859 of the Code for its taxable year ending after the Closing Date; (v) each
Acquiror REIT Subsidiary that is a partnership, joint venture or limited
liability company (A) has been since its formation and continues to be treated
for federal income tax purposes as a partnership and not as a corporation or an
association taxable as a corporation and (B) has not since the later of its
formation or the acquisition by Acquiror REIT of a direct or indirect interest
therein, owned any assets (including, without limitation, securities) that would
cause Acquiror REIT to violate Section 856(c)(5) of the Code; (vi) Acquiror REIT
represents that each of the Acquiror REIT Subsidiaries which is a corporation
for federal income tax purposes and of which all the outstanding capital stock
is owned solely by Acquiror REIT (or by Acquiror REIT and one or more of the
Acquiror REIT Subsidiaries or by one or more of the Acquiror REIT
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Subsidiaries) is a "Qualified REIT Subsidiary" as defined in Section 856 of the
Code; and (vi) neither Acquiror REIT nor any of the Acquiror REIT Subsidiaries
holds any asset, (a) the disposition of which could be subject to rules similar
to Section 1374 of the Code as a result of an election under IRS Notice 88-19,
or (b) that is subject to a consent filed pursuant to Section 341(f) of the Code
and regulations thereunder. No Acquiror REIT Subsidiary (other than Acquiror C.
Corp.) is a corporation (or an entity that would, under applicable federal
income tax principles, be classified as an association taxable as a
corporation). Acquiror OP is not a publicly traded partnership within the
meaning of Section 7704 of the Code. True, correct and complete copies of all
federal, state and local income or franchise Tax Returns filed by Acquiror REIT
and each of the Acquiror REIT Subsidiaries and all communications with taxing
authorities relating thereto have been made available to Target REIT or its
representatives.
8.27. Convertible Securities.
Except as set forth herein or in Schedule 8.27 hereto, Acquiror REIT has no
outstanding options, warrants or other securities exercisable for, or
convertible into, Acquiror REIT Common Stock, the terms of which would require
any anti-dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
8.28. Acquiror REIT Common Stock.
Acquiror REIT has reserved for issuance a sufficient number of shares of
Acquiror REIT Common Stock to perform its obligations hereunder. The issuance
and delivery by Acquiror REIT of shares of Acquiror REIT Common Stock in
connection with the REIT Merger and this Agreement have been duly and validly
authorized by all necessary corporate action on the part of Acquiror REIT,
except for the approval of such issuance and delivery by Acquiror REIT's
Shareholders as contemplated by this Agreement. The shares of Acquiror REIT
Common Stock to be issued in connection with the REIT Merger, when issued in
accordance with the terms of this Agreement and the Plan of Merger, will be
validly issued, fully paid and nonassessable and not issued in violation of any
preemptive rights.
8.29. Interim Operations of Merger Sub.
Merger Sub was formed solely for the purpose of engaging in the REIT Merger
and has not engaged in any business activities or conducted any operations other
than as contemplated by this Agreement.
8.30. Updating of Representations and Warranties.
Between the date hereof and the Closing Date, Acquiror OP, Acquiror REIT
and Merger Sub will promptly disclose to Target REIT any information which, to
the Knowledge of Acquiror REIT, (a) would render any representation or warranty
of any of them under this Article VIII untrue, (b) renders any information set
forth in this Agreement no longer correct in all material respects, or (c)
arises after the date hereof and which would have been required to be included
in this Agreement if such information had existed on the date hereof.
Each of the representations, warranties and covenants contained in this
Article VIII and its various subparagraphs are intended for the benefit of
Target REIT and Contributor OP and may be waived in whole or in part, by Target
REIT, but only by an instrument in writing signed by Target REIT. No
investigation, audit, inspection, review or the like conducted by or on behalf
of Target REIT or Contributor OP shall be deemed to terminate the effect of any
such representations, warranties and covenants, it being understood that Target
REIT and Contributor OP have the right to rely thereon and that each such
representation, warranty and covenant constitutes a material inducement to
Target REIT and Contributor OP to execute this Agreement, agree to the Mergers
and to consummate the transactions contemplated by this Agreement.
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8.31. Reorganization.
Neither Acquiror REIT nor any Acquiror REIT Subsidiary has taken any
action, or agreed to take any action, or has any knowledge of any fact or
circumstance that is reasonably likely to prevent the REIT Merger, from
qualifying for treatment as a "reorganization" within the meaning of Section
368(a) of the Code.
8.32. Intellectual Property.
Schedule 8.32 contains a true, correct and complete listing of all
trademarks, service marks, trade names, service names, patents, copyrights and
computer software owned or licensed by or registered in the name of Acquiror
REIT or any Acquiror REIT Subsidiary. Either Acquiror REIT or any Acquiror REIT
Subsidiary, as shown therein, is the sole owner of all right, title and interest
in all intellectual property described in Schedule 8.32 hereto, except and
excluding proprietary rights that either Acquiror REIT or any Acquiror REIT
Subsidiary are entitled to exercise and sublicense, by reason of license or
otherwise, which are identified in Schedule 8.32 hereof. Except as provided on
Schedule 8.32 hereof, neither Acquiror REIT nor Acquiror OP has any knowledge
nor have they received any written notice to the effect that any service
rendered by either Acquiror REIT or any Acquiror REIT Subsidiary with respect to
their businesses infringes on any intellectual property right or other
legally-protectable right of another Person.
8.33. Employees.
Except as set forth on Schedule 8.33 hereof, neither Acquiror REIT nor any
Acquiror REIT Subsidiary has any written employment contract with any person
currently engaged, or previously engaged, in the businesses of Acquiror REIT nor
any Acquiror REIT Subsidiary.
8.34. Labor Relations.
Neither Acquiror REIT nor any Acquiror REIT Subsidiary is the subject of
any litigation or governmental investigation asserting that Acquiror REIT or any
Acquiror REIT Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or seeking
to compel Acquiror REIT or any Acquiror REIT Subsidiary to bargain with any
labor organization as to wages or conditions of employment, nor is Acquiror REIT
or any Acquiror REIT Subsidiary a party to or bound by any collective bargaining
agreement, contract, or other agreement or understanding with a labor union or
labor organization, nor is there any strike or other labor dispute involving
Acquiror REIT or any Acquiror REIT Subsidiary, pending or, to the Knowledge of
Acquiror REIT, threatened, or, to the Knowledge of Acquiror REIT, is there any
activity involving Acquiror REIT's or any Acquiror REIT Subsidiary's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
8.35. No Special Taxes.
Except as set forth in Schedule 8.35, neither Acquiror REIT nor Acquiror OP
has knowledge of, nor has received any notice of, any special taxes or
assessments relating to any of the Acquiror REIT Hotels or any part thereof or
any planned public improvements that may result in a special tax or assessment
against an Acquiror REIT Hotel which would have an Acquiror REIT Material
Adverse Effect.
8.36. Compliance with Existing Laws.
Except as set forth on Schedule 8.36, neither Acquiror REIT nor any
Acquiror REIT Subsidiary has received notice within the past twelve (12) months
(or since commencement of development or the date of acquisition of any Acquiror
REIT Hotel if such development commenced or acquisition occurred within the past
twelve (12) months) of any existing or threatened violation of any provision of
any applicable building, zoning, subdivision, environmental or other
governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of an Acquiror REIT Hotel or any part thereof, or requiring any
repairs or alterations other than those that have been made prior to the date
hereof, except such violations as have been cured to the satisfaction of the
relevant authority or would have no
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Acquiror REIT Material Adverse Effect. Acquiror REIT and each Acquiror REIT
Subsidiary have in effect all Permits necessary for them to own, lease, or
operate the Acquiror REIT Hotels and to carry on their businesses as now
conducted, except for those Permits the absence of which would have no Material
Adverse Effect on any Acquiror REIT Hotel, and there has occurred no default
under any such Permit other than defaults which, singly or in the aggregate,
would have no Material Adverse Effect on any Acquiror REIT Hotel. Except as
disclosed on Schedule 8.36 hereto, neither Acquiror REIT nor any Acquiror REIT
Subsidiary is in violation of any laws, orders, or Permits applicable to its
business or employees conducting its business, except for violations which would
not have an Acquiror REIT Material Adverse Effect.
8.37. Condemnation Proceedings.
Except as set forth on Schedule 8.37, neither Acquiror REIT nor Acquiror OP
has received notice of any condemnation or eminent domain proceeding pending or,
to the Knowledge of Acquiror REIT, threatened against the Acquiror REIT Hotels
or any material part thereof.
8.38. Room Furnishings.
All public spaces, lobbies, meeting rooms, and each room in each of the
Acquiror REIT Hotels available for guest rental is generally furnished in
accordance with the applicable franchisor's standards for the hotel and room
type.
8.39. Franchisors; Franchise Agreements.
The Acquiror REIT Hotels are currently operated pursuant to franchise
agreements with the franchisors as listed next to their name on Schedule 8.39.
8.40. Mortgage Documents.
All promissory notes, bonds and other evidences of indebtedness given by
Acquiror REIT or any Acquiror REIT Subsidiary that are secured by mortgages or
negative pledges encumbering the Acquiror REIT Hotels are listed on Schedule
8.40, together with a description of the corresponding mortgage documents. Such
mortgage documents are complete, are in full force and effect and have not been
modified or supplemented, except as otherwise disclosed on Schedule 8.40, and no
fact or circumstance has occurred that, by itself or with the giving of notice
or the passage of time or both, would constitute a default under any of such
mortgage documents. Neither Acquiror REIT nor Acquiror OP has been advised nor
received any notice asserting that a default exists under any of such mortgage
documents.
8.41. New Leases.
Acquiror REIT and Acquiror OP will use their good faith best efforts, and
will cause Acquiror CMBS OP to use its good faith best efforts, to enter into
new leases with respect to the Target REIT Hotels described on Schedule 7.38 (as
soon as practical after the date hereof concerning those hotels owned by
Contributor CMBS OP) on terms reasonably acceptable to Acquiror REIT effective
as of the Closing Date and will keep Target REIT and Contributor OP advised as
to the status of negotiations as to such new leases.
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ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING
9.1. Conditions Precedent to Obligations of Parties.
The respective obligations of each party hereto to consummate the Mergers,
the Asset Sale and the other transactions contemplated hereby are subject to the
satisfaction at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by the Shareholders of Target REIT and the Shareholders of
Acquiror REIT in the manner required by the Acquiror REIT Charter, the
Target REIT Charter and by applicable law and applicable regulations of the
NYSE.
(b) Each party hereto shall have obtained reasonable evidence of the
OP Partner Approvals.
(c) No order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any United States court of competent
jurisdiction or any United States governmental authority which prohibits
the consummation of the Mergers, the Asset Sale and the other transactions
contemplated hereby; provided, however, that in case of the existence of
such order, decree or injunction, the parties hereto shall use their
reasonable best efforts to have any such order, decree or injunction
vacated or reversed.
(d) All applicable requirements under state securities or Takeover
Statutes, if any, relating to the issuance and trading of the shares of
Acquiror REIT Common Stock issuable hereunder, shall have been satisfied.
(e) Any waiting period applicable to the Mergers under the HSR Act, as
applicable, shall have terminated or expired.
(f) The Form S-4 shall have become effective under the Securities Act
and no stop order with respect thereto shall be in effect.
(g) Acquiror REIT shall have obtained the approval for the listing of
the shares Acquiror REIT Common Stock issuable hereunder on the NYSE,
subject to official notice of issuance.
(h) The Average Price shall be equal to or greater than $14.00.
(i) Acquiror OP and Acquiror CMBS OP shall have entered into new
leases with respect to the Target REIT Hotels described on Schedule 7.38
effective as of the Closing Date on terms reasonably acceptable to Acquiror
REIT.
(j) Each party hereto shall have obtained any and all consents,
approvals, authorizations, clearances, exemptions or waivers by any Person
pursuant to any Contract, law, order or Permit required for consummation of
the Mergers, the Asset Sale or any of the other transactions contemplated
herein, or for the prevention of a default under any Contract or Permit of
such party which, if not obtained or made, is reasonably likely to have a
Material Adverse Effect on such party.
(k) The Closing shall have occurred on or before October 15, 1998.
9.2. Conditions Precedent to the Obligations of Acquiror OP, Acquiror REIT
and Merger Sub.
Each and every obligation hereunder of Acquiror OP, Acquiror REIT and
Merger Sub to be performed on the Closing Date shall be subject to the
satisfaction prior to or at the Closing of the express conditions precedent set
forth below:
(a) Target REIT and Contributor OP shall have performed and complied
in all material respects with all of their obligations under this Agreement
that are to be performed or complied with by them prior to or on the
Closing Date.
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(b) All proceedings, corporate, partnership or other, to be taken by
or at the direction of Target REIT and Contributor OP in connection with
the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to Acquiror
REIT, Acquiror OP and Merger Sub, and Target REIT and Contributor OP shall
have made available to Acquiror REIT, Merger Sub and Acquiror OP for
examination the originals or complete, true and correct copies of all
documents that Acquiror REIT, Acquiror OP and Merger Sub may reasonably
request in connection with the transactions contemplated by this Agreement.
(c) No investigation, suit, action or other proceeding shall be
threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
(d) The representations and warranties made by Contributor OP and
Target REIT in this Agreement shall be true and correct in all material
respects as of the Effective Time with the same force and effect as though
such representations and warranties had been made on the and as of the
Effective Time (with such exceptions, if any, necessary to give effect to
events or transactions contemplated hereby and provided that representation
and warranties which are confined to a specific date shall speak only as of
such date), except where the failure to be true and correct does not have a
Target REIT Material Adverse Effect.
(e) Acquiror REIT shall have received the opinion of Baker, Donelson,
Bearman & Caldwell, counsel to Acquiror REIT, Acquiror OP and Merger Sub,
dated the Closing Date, to the effect that (i) the REIT Merger will be
treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, (ii) Acquiror REIT and Target REIT
will each be a party to that reorganization within the meaning of Section
368(b) of the Code, and (iii) no gain or loss will be recognized for
federal income tax purposes by Acquiror REIT, Merger Sub, or Target REIT,
on consummation of the REIT Merger. In rendering its opinion, said counsel
shall be entitled to rely as to any factual matter upon certificates given
by executive officers of Acquiror REIT and Target REIT and shall be
entitled to assume that the covenants of Section 10.14 shall be fully
complied with.
(f) Acquiror REIT shall have received (i) an opinion of Hunton &
Williams, dated as of the Closing Date, to the effect that, commencing with
its taxable year ended December 31, 1993, Target REIT was organized and has
operated in conformity with the requirements for qualification as a REIT
under the Code (with customary exceptions, assumptions and qualifications
and based upon customary representations) and (ii) an opinion of Baker,
Donelson, Bearman & Caldwell, dated as of the Closing Date, to the effect
that, commencing with its taxable year ending December 31, 1994, Acquiror
REIT was organized and has operated in conformity with the requirements for
qualification as a REIT under the Code and that, after giving effect to the
REIT Merger, Acquiror REIT's proposed method of operation will enable it to
continue to meet the requirements for qualification and taxation as a REIT
under the Code (with customary exceptions, assumptions and qualifications
and based upon customary representations and based upon and subject to the
opinion of counsel to Target REIT described in clause (i) above).
(g) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of Target REIT and the Target REIT Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have a Target REIT
Material Adverse Effect, other than any such change that affects both
Target REIT and Acquiror REIT in a substantially similar manner.
(h) Acquiror REIT shall have received the opinion of Hunton &
Williams, counsel to Target REIT and Contributor OP, dated the Closing
Date, as to the matters set forth in Exhibit C.
(i) Target REIT and Contributor OP shall have delivered to Acquiror
REIT an officer's certificate, given as of the Effective Time, in
substantially the form attached hereto as Exhibit D.
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(j) Contributor OP shall have delivered to Acquiror OP, on or before
the Effective Time, all of the documents and other information required of
Contributor OP and Contributor CMBS OP pursuant to Section 2.6.
(k) Good and marketable fee simple title to the Real Property shall be
insurable as such by the Title Company subject only to Permitted Title
Exceptions.
(l) Acquiror REIT shall have received from Target REIT the executed
Articles of Merger.
(m) Acquiror REIT shall have received copies of resignations by each
director and officer of Target REIT and the Target REIT Subsidiaries.
(n) All of the shares of capital stock of the Target C Corp. owned by
Mr. Solmson shall have been transferred to Acquiror REIT, or its designees
or assigns, in accordance with the Stock Purchase Agreement.
(o) Acquiror REIT shall have received from Contributor CMBS OP the
executed CMBS Agreement of Merger.
9.3. Conditions Precedent to the Obligations of Contributor OP and Target
REIT.
Each and every obligation hereunder of Contributor OP and Target REIT to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of the express conditions precedent set forth below:
(a) Acquiror OP, Acquiror REIT and Merger Sub shall have performed and
complied in all material respects with all of their obligations under this
Agreement that are to be performed or complied with by them prior to or on
the Closing Date.
(b) All proceedings, corporate, partnership or other, to be taken by
or at the direction of Acquiror OP, Acquiror REIT and Merger Sub in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Target REIT and Contributor OP, and Acquiror REIT, Acquiror OP
and Merger Sub shall have made available to Target REIT and Contributor OP
for examination the originals or complete, true and correct copies of all
documents that Target REIT and Contributor OP may reasonably request in
connection with the transactions contemplated by this Agreement.
(c) No investigation, suit, action or other proceeding shall be
threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
(d) The representations and warranties made by Acquiror OP, Acquiror
REIT and Merger Sub in this Agreement shall be true and correct in all
material respects as of the Effective Time with the same force and effect
as though such representations and warranties had been made on and as of
the Effective Time (with such exceptions, if any, necessary to give effect
to events or transactions contemplated hereby and provided that
representations and warranties which are confined to a specific date shall
speak only as of such date), except where the failure to be true and
correct does not have an Acquiror REIT Material Adverse Effect.
(e) Target REIT shall have received the opinion of Hunton & Williams,
counsel to Target REIT and Contributor OP, dated the Closing Date, to the
effect that (i) the REIT Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, (ii) Acquiror REIT and Target REIT will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, (iii) the
exchange in the REIT Merger of Acquiror REIT Common Stock for Target REIT
Capital Stock will not give rise to gain or loss to the Shareholders of
Target REIT with respect to such exchange (except with respect to the
receipt of cash in lieu of fractional shares), (iv) the transfer by
Contributor OP of all of its assets to Acquiror OP in exchange for limited
partnership interests in Acquiror OP will not cause Contributor OP to
recognize gain or loss for federal income tax purposes
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(except to the extent that Contributor OP receives cash in the exchange),
and (v) the distribution by Contributor OP of limited partnership interests
in Acquiror OP will not cause the partners of Contributor OP to recognize
gain or loss for federal income tax purposes (except to the extent that the
partners of Contributor OP receive cash in the distribution). In rendering
its opinion, said counsel shall be entitled to rely as to any factual
matter upon certificates given by executive officers of Acquiror REIT and
Target REIT and shall be entitled to assume that the covenants of Section
10.14 shall be fully complied with.
(f) Target REIT shall have received an opinion of Baker, Donelson,
Bearman & Caldwell, dated as of the Closing Date, that, commencing with its
taxable year ended December 31, 1994, Acquiror REIT was organized and has
operated in conformity with the requirements for qualification as a REIT
under the Code (with customary exceptions, assumptions and qualifications
and based upon customary representations).
(g) From the date of the Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of Acquiror REIT and the Acquiror REIT Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have an Acquiror
REIT Material Adverse Effect, other than any such change that affects both
Acquiror REIT and Target REIT in a substantially similar manner.
(h) Target REIT shall have received the opinion of Baker, Donelson,
Bearman & Caldwell, counsel to Acquiror REIT, Merger Sub and Acquiror OP,
dated the Closing Date, as to the matters set forth in Exhibit E.
(i) Acquiror REIT, Acquiror OP and Merger Sub shall have delivered to
Target REIT an officer's certificate, given as of the Effective Time, in
substantially the form attached hereto as Exhibit F.
(j) Target REIT shall have received from Merger Sub the executed
Articles of Merger and from Acquiror OP and Acquiror CMBS OP the
Certificates of Merger.
(k) Target REIT shall have received from Acquiror CMBS OP the executed
CMBS Agreement of Merger.
ARTICLE X
COVENANTS
10.1. Acquisition Proposals.
Prior to the Effective Time, Acquiror REIT and Target REIT each agree (a)
that neither of them nor any of their Subsidiaries' shall, and each of them
shall direct and use its reasonable best efforts to cause its or any of its
Subsidiaries' respective officers, directors, trustees, partners, employees,
agents, affiliates and representatives (including, without limitation, any
investment banker, financial adviser, attorney or accountant retained by it or
any of its Subsidiaries) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its Shareholders)
by any Person with respect to a merger, acquisition, tender offer, exchange
offer, consolidation or similar transaction involving, or any purchase by any
Person of all or any significant portion of the assets or any equity securities
(or any debt securities convertible into equity securities) of, such party or
any of its Subsidiaries, other than the transactions contemplated by this
Agreement (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal" and any such proposed transaction being hereinafter
referred to as a "Competing Transaction"), or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any Person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
(b) that it or any of its Subsidiaries will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Persons
conducted heretofore with respect to any of the foregoing and each will take, or
cause its Subsidiaries to take, the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken in this Section 10.1;
and (c) that it will notify the other party, in writing in accordance with
Section 12.2, immediately if any such inquiries or proposals are received by,
any
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such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it or any of its Subsidiaries;
provided, however, that nothing contained in this Section 10.1 shall prohibit
the Board of Directors of such party from (i) furnishing information to or
entering into discussions or negotiations with, any Person that makes an
unsolicited bona fide Acquisition Proposal, if, and only to the extent that, (A)
the Board of Directors of such party determines in good faith based on the
written advice of counsel that such action is required for the Board of
Directors to comply with its fiduciary duties to Shareholders, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such Person, such party provides written notice to the other parties to
this Agreement to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such Person, and (C) subject to any
confidentiality agreement with such Person (which such party determined in good
faith was required to be executed in order for the Board of Directors to comply
with its fiduciary duties to Shareholders imposed by law as advised by counsel
in writing), such party keeps the other parties to this Agreement informed of
the status (but not the terms) of any such discussions or negotiations; and (ii)
to the extent applicable, complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal.
Nothing in this Section 10.1 shall (x) permit any party hereto to terminate
this Agreement (except as specifically provided in Article XI hereof), (y)
permit any party hereto to enter into any agreement with respect to an
Acquisition Proposal or with respect to any Competing Transaction during the
term of this Agreement (it being agreed that during the term of this Agreement,
no party hereto shall enter into any agreement with any Person that provides
for, or in any way facilitates, an Acquisition Proposal or with respect to any
Competing Transaction (other than a confidentiality agreement in customary
form)), or (z) affect any other obligation under this Agreement of any party
hereto.
10.2. Conduct of Businesses.
(a) Prior to the Effective Time, except as otherwise contemplated by
this Agreement, unless the other party has consented in writing thereto,
Acquiror REIT and Target REIT:
(i) Shall use their reasonable efforts, and shall cause each of
their respective Subsidiaries to use their reasonable efforts, to
preserve intact their business organizations and goodwill and keep
available the services of their respective officers and employees;
(ii) Shall confer on a regular basis with one or more
representatives of the other party to report operational matters of
materiality and, subject to Sections 10.2(b)(v) and 10.2(c)(v), any
proposals to engage in material transactions;
(iii) Shall promptly notify the other party of any material
emergency or other material adverse change in the condition (financial
or otherwise), business, properties, assets, liabilities, prospects or
the normal course of their businesses or in the operation of their
properties, any material governmental complaints, investigations or
hearings (or communications indicating that the same may be
contemplated), or the breach in any material respect of any
representation, warranty, covenant or agreement contained herein;
(iv) Shall set the record date for the quarterly dividend payable
with respect to Acquiror REIT Common Stock, Acquiror REIT Preferred
Stock and Target REIT Capital Stock, respectively, for the second
calendar quarter of 1998 to a date no later than June 30, 1998, and
shall mutually agree upon the payment date for each dividend (and
neither Acquiror REIT nor Target REIT shall make the election permitted
by Section 858(a) of the Code with respect to such dividend); provided,
however, that such record date for either party shall be modified to
prevent the elimination of a dividend for the Shareholders of either
party or to prevent the receipt by the Shareholders of either party of
dividends from both Acquiror REIT and Target REIT; and
(v) Shall promptly deliver to the other complete, true and correct
copies of any SEC Documents filed with the SEC subsequent to the date of
this Agreement.
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(b) Prior to the Effective Time, except as otherwise set forth herein,
unless Acquiror REIT, Merger Sub and Acquiror OP have consented (such
consent not to be unreasonably withheld or delayed) in writing thereto,
Contributor OP and Target REIT:
(i) Shall, and shall cause each of the Target REIT Subsidiaries
to, conduct their operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(ii) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, amend their Organizational Documents;
(iii) Shall not (A) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights (including any
existing dividend reinvestment plan) existing on the date hereof and
disclosed pursuant to this Agreement, issue any shares of Target REIT's
capital stock or any units of partnership interests of Contributor OP
other than with respect to redemption of Contributor OP Units, or effect
any stock split, reverse stock split, stock dividend, recapitalization
or other similar transaction, (B) grant, confer or award any option,
warrant, conversion right or other right not existing on the date hereof
to acquire any shares of Target REIT's capital stock or any units of
partnership interests of Contributor OP, (C) increase materially any
compensation or enter into or amend any employment agreement with any of
their present or future officers, directors, partners or employees, or
(D) adopt any new employee benefit plan (including any stock option,
stock benefit or stock purchase plan) or amend any existing Target REIT
Employee Benefit Plan in any material respect;
(iv) Shall not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of Target
REIT's capital stock, except (a) a dividend not to exceed $.375 per
share of Target REIT's Common Stock and $.3625 per share of Target REIT
Preferred Stock for the second calendar quarter of 1998 and (b) any
Final Target REIT Dividend pursuant to Section 4.2(d), or (B) except in
connection with the use of shares of Target REIT's capital stock to pay
the exercise price or tax withholding in connection with stock-based
employee benefit plans of Target REIT, directly or indirectly redeem,
purchase or otherwise acquire any shares of Target REIT's capital stock
or capital stock of any of the Target REIT Subsidiaries, or make any
commitment for any such action, provided, however, that Target REIT may
issue shares of Target REIT Common Stock in redemption of Contributor OP
Units as contemplated by the Contributor OP Partnership Agreement;
(v) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, sell or otherwise dispose of (A) any Target REIT Hotels
or any of their capital stock of or other interests in the Target REIT
Subsidiaries or (B) except in the ordinary course of business consistent
with past practice for reasonable and adequate consideration, any of
their other assets which are material, individually or in the aggregate;
provided, however, that Target REIT and the Target REIT Subsidiaries may
sell the Target REIT Hotels set forth on Schedule 10.2(b)(v) hereto for
prices which equal or exceed the prices set forth opposite the name of
such Target REIT Hotels on Schedule 10.2(b)(v) hereto or which, in the
aggregate, equal or exceed the prices for all Target REIT Hotels set
forth on Schedule 10.2(b)(v);
(vi) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, make any loans, advances or capital contributions to,
investments in, or guarantees on behalf of, any Person other than the
Target REIT Subsidiaries, or impose, or suffer the imposition, on any
Target REIT Hotel or on any other assets of Target REIT or any Target
REIT Subsidiary of any lien or encumbrance or permit such lien or
encumbrance to exist, other than liens and encumbrances (A) in effect on
the date hereof that are disclosed on the consolidated financial
statements of Target REIT and the Target REIT Subsidiaries included in
the Target REIT SEC Documents or (B) arising hereafter in the ordinary
course of business consistent with past practice;
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(vii) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice (including,
without limitation, payments of outstanding principal amounts under
credit lines) or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of Target REIT
and the Target REIT Subsidiaries included in the Target REIT SEC
Documents or incurred in the ordinary course of business consistent with
past practice;
(viii) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, enter into any Contract which individually may result
in total payments or liability by or to them in excess of $100,000 in
the case of any one Contract or in excess of $500,000 for all such
Contracts, or modify, amend or terminate any Contract or waive, release,
compromise or assign any material rights or claims thereunder, other
than in the ordinary course of business consistent with past practice;
provided, however, that Target REIT and the Target REIT Subsidiaries may
complete the acquisitions of the hotel properties described in Schedule
10.2(b)(viii), the purchase of which will be funded through borrowings
under Contributor OP's line of credit;
(ix) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, enter into any Contract with any officer, director,
partner, employee or affiliate of Target REIT or any of the Target REIT
Subsidiaries, except to the extent the same occur in the ordinary course
of business consistent with past practice and would not have an Target
REIT Material Adverse Effect;
(x) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, take any action that would adversely effect the status
of title to the real property;
(xi) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, release or modify any warranties or guarantees, if any,
of contractors, builders, architects, manufacturers, suppliers and
installers relating to the Improvements and the Personal Property or any
part thereof;
(xii) Shall, and shall cause each of the Target REIT Subsidiaries
to, pay all premiums then-due on, and shall not cancel or voluntarily
allow to expire, any of the Insurance Policies unless such policy is
replaced, without any lapse of coverage, by another policy or policies
providing coverage at least as extensive as the policy or policies being
replaced; and
(xiii) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, amend or supplement the Mortgage Documents in whole or
in part, and shall, and shall cause each of the Target REIT Subsidiaries
to, pay or make, as and when due and payable, all payments of principal,
interest and other amounts required to be paid or made under the
Mortgage Documents.
(c) Prior to the Effective Time, except as otherwise set forth herein,
unless Target REIT and Contributor OP have consented (such consent not to
be unreasonably withheld or delayed) in writing thereto, Acquiror OP,
Acquiror REIT and Merger Sub:
(i) Shall, and shall cause each of the Acquiror REIT Subsidiaries
to, conduct their operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(ii) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, amend their Organizational Documents, except as
provided in the proxy statement with respect to Acquiror REIT's 1998
annual meeting of shareholders;
(iii) Shall not (A) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights (including any
existing dividend reinvestment plan) existing on the date hereof and
disclosed pursuant to this Agreement or pursuant to this Agreement with
respect to the Merger Consideration, the OP Merger Consideration and the
CMBS OP Merger Consideration, issue any shares of Acquiror REIT's or
Merger Sub's capital stock or any units of partnership interest of
Acquiror OP other than with respect to redemption of Acquiror OP Units,
or effect any
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stock split, reverse stock split, stock dividend, recapitalization or
other similar transaction, (B) grant, confer or award any option,
warrant, conversion right or other right not existing on the date hereof
to acquire any shares of Acquiror REIT's or Merger Sub's capital stock
or any units of partnership interest of Acquiror OP, (C) increase
materially any compensation or enter into or amend any employment
agreement with any of their present or future officers, directors,
partners or employees, or (D) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or
amend any existing Acquiror REIT Employee Benefit Plan in any material
respect; provided, however, that Acquiror REIT may sell, from time to
time, shares of Acquiror REIT Common Stock or shares of Acquiror REIT
Preferred Stock at fair market values then prevailing in the market
place for such securities;
(iv) Shall not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of Acquiror
REIT's or Merger Sub's capital stock, except (subject to Section
10.2(a)(iv) a dividend not to exceed $.31 per share of Acquiror REIT
Common Share for the second calendar quarter of 1998 and any other
dividend pursuant to Section 4.2(d) or other distribution necessary for
Acquiror REIT to maintain its ability to qualify to be taxed as a REIT
under the Code, or (B) except in connection with the use of shares of
Acquiror REIT capital stock to pay the exercise price or tax withholding
in connection with stock-based employee benefit plans of Acquiror REIT,
directly or indirectly redeem, purchase or otherwise acquire any shares
of Acquiror REIT's or Merger Sub's capital stock or capital stock of any
of the Acquiror REIT Subsidiaries, or make any commitment for any such
action, provided, however, that Acquiror REIT may issue shares of
Acquiror REIT Common Stock in redemption of Acquiror OP Units as
contemplated by the Acquiror OP Partnership Agreement;
(v) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, sell or otherwise dispose of (A) any Acquiror REIT
Hotels or any of their capital stock of or other interests in the
Acquiror REIT Subsidiaries other than Acquiror OP Units issued in
connection with the acquisition of hotel properties as described in
Section 10.2(c)(viii) or (B) except in the ordinary course of business
consistent with past practices for reasonable and adequate
consideration, any of their other assets which are material,
individually or in the aggregate; provided however, that Acquiror REIT
and the Acquiror REIT Subsidiaries may sell the Acquiror REIT Hotels set
forth on Schedule 10.2(c)(v) for prices which equal or exceed the prices
set forth opposite the name of such Acquiror REIT Hotels set forth on
Schedule 10.2(c)(v) hereto or which, in the aggregate, equal or exceed
the prices for all Acquiror REIT Hotels set forth on Schedule
10.2(c)(v);
(vi) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, make any loans, advances or capital contributions to,
investments in, or guarantees on behalf of, any Person other than the
Acquiror REIT Subsidiaries, or impose, or suffer the imposition, on any
Acquiror REIT Hotel or any other assets of Acquiror REIT or any Acquiror
REIT Subsidiary of any lien or encumbrance or permit such lien or
encumbrance to exist, other than liens and encumbrances (A) in effect on
the date hereof that are disclosed on the consolidated financial
statements of Acquiror REIT and the Acquiror REIT Subsidiaries included
in the Acquiror REIT SEC Document or (B) arising hereafter in the
ordinary course of business consistent with past practice;
(vii) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice (including,
without limitation, payment of outstanding principal amounts under
credit lines) or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of Acquiror
REIT and the Acquiror REIT Subsidiaries included in the Acquiror REIT
SEC Documents or incurred in the ordinary course of business consistent
with past practice;
(viii) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, enter into any Contract which individually may result
in total payments or liability by or to them in excess of
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$100,000 in the case of any one such Contract or in excess of $500,000
for all such Contracts, or modify, amend or terminate any Contract, or
waive, release, compromise or assign any material rights in claims
thereunder, other than in the ordinary course of business consistent
with past practice, provided, however, that Acquiror REIT and the
Acquiror REIT Subsidiaries may complete the acquisitions of the hotel
properties described in Schedule 10.2(c)(viii);
(ix) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, enter into any Contract with any officer, director,
partner, employee or affiliate of Acquiror REIT or any of the Acquiror
REIT Subsidiaries, except as herein provided and except in the ordinary
course of business consistent with past practice and would not have an
Acquiror REIT Material Adverse Effect; and
(x) Shall, and shall cause each of the Acquiror REIT Subsidiaries
to, pay all premiums then-due on, and shall not cancel or voluntarily
allow to expire, any of the insurance policies with respect to the
Acquiror REIT Hotels unless such policy is replaced, without any lapse
of coverage, by another policy or policies providing coverage at least
as extensive as the policy or policies being replaced.
10.3. Meetings of Shareholders.
Each of Acquiror REIT and Target REIT will take all action necessary in
accordance with applicable law and its Organizational Documents to convene a
meeting of its Shareholders as promptly as practicable, but in any event,
subject to effectiveness of the Form S-4 and related requirements as to the
timing of distribution of proxy materials to Shareholders, no later than October
15, 1998, to consider and vote upon or otherwise to obtain the consent of its
Shareholders to (i) in the case of Acquiror REIT, the approval of this
Agreement, the issuance of the Acquiror REIT Common Stock pursuant to the REIT
Merger and the amendment of its Charter as provided in Section 10.20 hereof, and
(ii) in the case of Target REIT, the approval of this Agreement and the
transactions contemplated hereby. The Board of Directors of Acquiror REIT and
the Board of Directors of Target REIT shall each recommend such approval, and
Acquiror REIT and Target REIT shall each take all lawful action to solicit such
approval, including, without limitation, timely mailing of the Proxy
Statement/Prospectus to its respective Shareholders; provided, however, that
such recommendation or solicitation is subject to any action taken by, or upon
authority of, the Board of Directors of Acquiror REIT or the Board of Directors
of Target REIT, as the case may be, in the exercise of its good faith judgment
as to its fiduciary duties to its Shareholders imposed by law as advised by
counsel in writing. Acquiror REIT and Target REIT shall coordinate and cooperate
with respect to the timing of such meetings and shall use their best efforts to
hold such meetings on the same day.
10.4. Filings; Other Action.
Subject to the terms and conditions herein provided, the parties hereto
shall: (a) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits or authorizations are required to
be obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states, third party secured and
unsecured lenders, franchisors and rating agencies in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, and (ii) timely making all such filings
and timely seeking all such consents, approvals, permits or authorizations; (b)
use all reasonable efforts to obtain in writing any consents required from third
parties in form reasonably satisfactory to Target REIT and Acquiror REIT
necessary to effectuate the Mergers, the Asset Sale and the other transactions
contemplated herein; and (c) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of Acquiror REIT and Target REIT
shall take, or cause the Subsidiaries of Acquiror REIT and Target REIT to take,
any necessary action.
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10.5. Inspection of Records.
From the date hereof to the Effective Time, each of Target REIT and
Acquiror REIT shall allow all designated officers, attorneys, accountants,
investment bankers, financial advisers and other representatives of the other
access at all reasonable times to the records and files, correspondence, audits
and properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs of Target REIT and Acquiror REIT and their respective
Subsidiaries.
10.6. Publicity.
The initial press release relating to this Agreement and the transactions
contemplated hereby shall be a joint release and thereafter, prior to the
Effective Time, Target REIT and Acquiror REIT shall, subject to their respective
legal obligations (including requirements of stock exchanges and other similar
regulatory bodies), provide each other with copies of any proposed press release
a sufficient amount of time prior to the proposed release to allow for review
and discussion thereof, consult with each other, and use reasonable efforts to
agree upon the text of any press release, before issuing any such press release
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
10.7. Registration Statement.
Acquiror REIT and Target REIT shall cooperate and promptly prepare and
Acquiror REIT shall file with the SEC as soon as practicable a Registration
Statement on Form S-4 (together with any pre-effective or post-effective
amendments, the "Form S-4") under the Securities Act, with respect to the
Acquiror REIT Common Stock issuable in the REIT Merger, a portion of which
Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the Shareholders of Target REIT and of Acquiror REIT
in connection with the REIT Merger (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4 to
comply as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act. Acquiror REIT shall use all reasonable
efforts and Target REIT will cooperate with Acquiror REIT to have the Form S-4
declared effective by the SEC as promptly as practicable. Acquiror REIT shall
use its best efforts to obtain, prior to the effective date of the Form S-4, all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this Agreement and will pay all
expenses incident thereto. Acquiror REIT agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of Shareholders of
Acquiror REIT and Target REIT, or, in the case of the Form S-4 and each
amendment or supplement thereto, at the time it is filed or becomes effective,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by Acquiror REIT in reliance upon and in conformity with
written information concerning Target REIT or the Target REIT Subsidiaries
furnished to Acquiror REIT by Target REIT specifically for use in the Proxy
Statement/Prospectus or the Form S-4. Target REIT agrees that the written
information provided by it specifically for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of Shareholders of
Acquiror REIT and Target REIT, or, in the case of written information provided
by Target REIT specifically for inclusion in the Form S-4 or any amendments or
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Acquiror
REIT will advise Target REIT, promptly after it receives notice thereof, of the
time when the Form S-4 has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the shares of Acquiror REIT Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment
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of the Proxy Statement/Prospectus or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information.
10.8. Listing Application.
Acquiror REIT shall promptly prepare and submit to the NYSE a listing
application covering the shares of Acquiror REIT Common Stock issuable in the
REIT Merger, and shall use its best efforts to obtain, prior to the Effective
Time, approval for the listing of such shares of Acquiror REIT Common Stock,
subject to official notice of issuance.
10.9. Further Action.
Each party hereto shall, subject to the fulfillment at or before the
Effective Time of each of the conditions of performances set forth herein or the
waiver thereof, perform such further acts and execute such documents as may
reasonably be required to effect the Mergers and the Asset Sale.
10.10. Expenses.
Except as otherwise specifically set forth herein, all out-of-pocket costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby ("Expenses") shall be paid by the party hereto incurring
such Expenses, except that each of Acquiror REIT and Target REIT shall bear and
pay one-half of (i) the SEC and Blue Sky filing fees incurred in connection with
the Form S-4 and the Proxy Statement/Prospectus, and (ii) the printing and
distribution costs incurred in connection with the printing and distribution to
the Shareholders of the Form S-4 and the Proxy Statement/Prospectus. However,
notwithstanding any other terms or conditions of this Agreement, Acquiror REIT
acknowledges that all unpaid Expenses incurred by Target REIT and the Target
REIT Subsidiaries in connection with the execution of this Agreement and the
performance of the transactions contemplated hereby will be obligations of
Merger Sub upon consummation of the REIT Merger and Merger Sub agrees to pay,
and Acquiror REIT agrees to cause Merger Sub to timely perform and pay, such
obligations in full.
10.11. Indemnification.
For a period of six years from and after the Effective Time, Acquiror REIT
shall indemnify the directors, officers, employees and agents of Target REIT and
the Target REIT Subsidiaries who at any time prior to the Effective Time were
entitled to indemnification under the Organizational Documents of Target REIT,
Organizational Documents of the Target REIT Subsidiaries or employment or other
agreements between Target REIT and such persons, or between any Target REIT
Subsidiary and such persons, existing on the date hereof to the same extent as
such directors, officers, employees and agents are entitled to indemnification
under such Organizational Documents or employment or other agreements in respect
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement). If
Acquiror REIT, the Surviving Corporation or any of its successors or assigns
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consideration or merger or shall transfer
all or substantially all of its assets to any Person, then and in each case,
proper provision shall be made so that the successors and assigns of Acquiror
REIT or the Surviving Corporation, as the case may be, shall assume the
obligations set forth in this Section 10.11.
10.12. Governance.
On or before the Closing Date, Acquiror REIT's Board shall take all action
necessary to expand the number of directorships on Acquiror REIT's Board from
the current four directorships to six directorships, and cause Robert M. Solmson
and Bruce E. Campbell, Jr. to be appointed as directors of Acquiror REIT to fill
such two new directorships effective as of the Effective Time for terms expiring
at the 1999 annual meeting of Shareholders of Acquiror REIT; provided that,
notwithstanding the foregoing, Acquiror REIT's Board shall recommend in Acquiror
REIT's proxy statement with respect to the 1999 annual meeting of Shareholders
of Acquiror REIT that Messr. Campbell and Solmson shall be nominated by the
Board of Acquiror REIT for
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election as Class I and Class II directors, respectively, with terms expiring at
Acquiror REIT's annual meetings of shareholders in 2001 and 2002, respectively.
If, prior to the Effective Time, either of such persons shall decline or be
unable to serve as a director of Acquiror REIT, Target REIT shall designate
another person to serve in such person's stead, which person shall be reasonably
acceptable to Acquiror REIT's Board.
On or before the Closing Date, Acquiror REIT's Board shall take all action
necessary to form a three (3) member executive committee of such Board, and
cause Robert M. Solmson, Phillip H. McNeill, Sr. and William W. Deupree to be
appointed to serve as members of such executive committee.
10.13. Severance Benefits.
Acquiror REIT agrees that Target REIT may pay to employees of Target REIT
or the Target REIT Subsidiaries, at or prior to the Effective Time, the
severance benefits described in Schedule 10.13 (the "Severance Benefits"),
provided that, if Target REIT does not pay the Severance Benefits prior to or at
the Effective Time, Acquiror OP, Merger Sub or Acquiror REIT will pay the
Severance Benefits to such employees within three (3) business days at the
Closing.
10.14. Reorganization.
From and after the date hereof and until the Effective Time, neither
Acquiror REIT nor Target REIT nor any of their respective Subsidiaries or other
affiliates shall (i) knowingly take any action that, or knowingly fail to take
any action the failure of which, would jeopardize qualification of the REIT
Merger as a reorganization within the meaning of Section 368(a) of the Code; or
(ii) enter into any contract, agreement, commitment or arrangement with respect
to the foregoing. Each of Acquiror REIT and Target REIT shall use its reasonable
best efforts before the Effective Time to obtain the opinions of counsel
referred to in Sections 9.2(e) and 9.3(e). Following the Effective Time, each of
Acquiror REIT, Acquiror OP and Merger Sub shall use its best efforts to conduct
its business in a manner that would not jeopardize the characterization of the
REIT Merger as a reorganization within the meaning of Section 368(a) of the
Code.
10.15. Survival of Target REIT, Contributor OP and Contributor CMBS OP
Obligations.
All of the obligations of Target REIT, Contributor OP and Contributor CMBS
OP that are outstanding at the Closing shall survive the Closing and shall not
be merged therein. Upon the consummation of the Mergers, such obligations shall
be assumed, automatically, by the Surviving Corporation, the Surviving OP and
the Surviving CMBS OP, respectively; provided, however, that such assumption
shall not impose upon or expose the Surviving Corporation, the Surviving OP and
the Surviving CMBS OP, respectively, to any liability for which Target REIT,
Contributor OP and Contributor CMBS OP was not liable, and provided, further,
that the Surviving Corporation, the Surviving OP and the Surviving CMBS OP,
respectively, shall be entitled to the same defenses, offsets and counterclaims
to which Target REIT, Contributor OP and Contributor CMBS OP would have been
entitled but for the Mergers.
10.16. Third-Party Consents.
Acquiror REIT, Acquiror OP, Merger Sub, Contributor OP and Target REIT each
shall take, and shall cause their respective Subsidiaries to take, all necessary
corporate and other action and will use its commercially reasonable efforts to
obtain, or cause its Subsidiaries to obtain, the consents and applicable
approvals from third parties that may be required by any agreement, lease,
instrument, arrangement, judgment, decree, order or license to enable it to
carry out the transactions contemplated by this Agreement.
10.17. Efforts to Fulfill Conditions.
Acquiror REIT, Acquiror OP, Merger Sub, Contributor OP and Target REIT each
shall use commercially reasonable efforts to ensure that all conditions
precedent to its obligations hereunder are fulfilled at or prior to the Closing.
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10.18. Representations, Warranties and Conditions Prior to Closing.
Each party hereto shall use its best efforts to cause its representations
and warranties contained in this Agreement to be true and correct on and as of
the Effective Time in all material respects. Prior to Closing, Acquiror OP,
Acquiror REIT and Merger Sub, on the one hand, and Contributor OP and Target
REIT, on the other hand, each shall promptly notify the other in writing (i) if
any representation or warranty contained in this Agreement is discovered to be
or becomes untrue or (ii) if any party hereto fails to perform or comply with
any of its covenants or agreements contained in this Agreement or it is
reasonably expected that it will be unable to perform or comply with any of its
covenants or agreements contained in this Agreement.
10.19. Cooperation of the Parties.
Each party hereto will cooperate with the other parties hereto in supplying
such information as may be reasonably requested by the others in connection with
obtaining consents or approvals to the transactions contemplated by this
Agreement. The parties hereto will execute and deliver to counsel for Acquiror
REIT and Target REIT certificates of executive officers with respect to matters
reasonably requested by such counsel in connection with the opinions of such
counsel pursuant to Sections 9.2(e) and (f) and 9.3(e) and (f) hereof.
10.20. Amendment to Acquiror REIT Charter.
If required to consummate the transactions contemplated herein, Acquiror
REIT's Board shall recommend to its Shareholders in the Proxy
Statement/Prospectus an amendment to the Acquiror REIT Charter and, if all the
conditions to the Mergers set forth in Article IX shall have been fulfilled or
waived (and this Agreement shall not have been terminated as provided in Article
XI below), Acquiror REIT shall promptly after the Effective Time cause articles
of amendment effectuating such amendment and satisfying the requirements of the
Tennessee Act to be filed in accordance with the Tennessee Act.
10.21. Records.
Acquiror REIT, Acquiror OP and Merger Sub shall preserve and keep, free of
charge, all books, papers and records of Target REIT and the Target REIT
Subsidiaries relating to periods prior to the Closing Date for a period of no
less than seven years following the Closing Date. Acquiror REIT, Acquiror OP and
Merger Sub agree to permit any officer of Target REIT and the attorneys,
accountants and advisors of Target REIT, access to the records of Target REIT
from and after the Closing Date for all reasonable purposes. Any such
examination shall be performed at the place where the records of Acquiror REIT
are regularly maintained and shall not unreasonably interfere with Acquiror
REIT's normal business activities.
10.22. Confidentiality.
The parties hereto shall, and shall cause their respective representatives
and agents to, keep the existence and terms of this Agreement strictly
confidential, except (a) to the extent disclosure must be made to enable such
parties to perform acts necessary to consummate Closing or take actions
permitted under this Agreement, (b) disclosure to attorneys, accountants and
other professionals who are similarly bound to confidentiality, and (c) such
confidentiality no longer shall apply from and after consummation of Closing.
10.23. Acknowledgments.
Acquiror OP, Acquiror REIT and Merger Sub have conducted an independent
investigation of the financial condition, results of operations, assets,
liabilities, properties and operations of Target REIT and the Target REIT
Subsidiaries. Contributor OP and Target REIT have conducted an independent
investigation of the financial condition, results of operations, assets,
liabilities, properties and operations of Acquiror REIT and the Acquiror REIT
Subsidiaries. The representations and warranties made by the parties hereto in
this Agreement and in any certificate delivered hereunder constitute the sole
and exclusive representations and warranties of such parties in connection with
the transactions contemplated under this Agreement, and the parties hereto
understand, acknowledge and agree that all other representations and warranties
of any kind or
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nature (including, but not limited to, any relating to the future or historical
financial condition, results or operations, assets or liabilities of any entity)
are specifically disclaimed by such parties.
10.24. Target REIT Acquisition Opportunities.
From the date hereof to the Effective Time, Target REIT or its Subsidiaries
may propose potential acquisitions of one or more hotel properties to Acquiror
REIT or its Subsidiaries, of which acquisition opportunity Acquiror REIT is not
otherwise aware (each, "Acquisition Opportunity"). Acquiror REIT and its
Subsidiaries shall have no obligation to pursue, or otherwise take advantage of,
any of Acquisition Opportunity. The parties hereto agree that in the event of a
termination of this Agreement pursuant to Article XI hereof, Acquiror REIT shall
not permit its Subsidiaries to take any action to pursue, or otherwise take
advantage of, any Acquisition Opportunity which Target REIT or its subsidiaries
presented to Acquiror REIT, and shall cause its Subsidiaries to, promptly upon
such termination and reimbursement by Target REIT for all out-of-pocket costs
and expenses incurred by Acquiror REIT or its Subsidiaries related thereto,
assign and transfer any and all of their rights, title or interests in any
Acquisition Opportunity to Target REIT (or its designee), including, without
limitation, any and all Contracts and Permits (as permitted by law) related to
such Acquisition Opportunity. In connection with any such assignment and
transfer, Target REIT shall assume all of the obligations under such Contracts
and shall indemnify and hold harmless Acquiror REIT and its Subsidiaries against
any claims by third parties thereunder.
10.25. CMBS Bonds.
The parties hereto shall to cooperate to use their best efforts to cause
Contributor CMBS OP's Series 1996-1 Commercial Mortgage Bonds, Class A and Class
B, in the aggregate original principal amount of $75,000,000 (collectively, the
"CMBS Bonds"), to remain outstanding after the Mergers, with Acquiror CMBS OP as
the issuer thereof rather than Contributor CMBS OP. Accordingly, Acquiror REIT
agrees to use its best efforts to promptly (a) create and establish a Tennessee
limited partnership ("Acquiror CMBS OP") with characteristics and ownership
structure substantially similar to the characteristics and ownership structure
of Contributor CMBS OP; (b) cause the creation and establishment of a legal
entity ("Acquiror REIT CMBS Lessee") with characteristics and ownership
structure substantially similar to the characteristics and ownership structure
of Target REIT CMBS Lessee; (c) prepare and cause Acquiror CMBS OP and Acquiror
REIT CMBS Lessee to enter into leases for each of the Target REIT Hotels owned
by Contributor CMBS OP that are substantially similar to the Target REIT Leases
currently in effect with respect to such hotels, provided such new leases shall
provide for rent terms no less favorable to Acquiror CMBS OP than the rent terms
contained in the corresponding Target REIT Leases and shall be effective upon
the Effective Time; and (d) take such further action as may be reasonably
required by rating agencies, trustees or other third parties in connection with
the transactions contemplated by this Section 10.25. Target REIT and Acquiror
REIT agree to use their best efforts to obtain all necessary consents required
to cause the CMBS Bonds to remain outstanding after the Mergers, with Acquiror
CMBS OP as the issuer thereof rather than Contributor CMBS OP, including,
without limitation, consents of the rating agency and trustee for the CMBS
Bonds.
10.26. Tax Treatment.
If, based upon the advice of counsel in writing, Acquiror REIT and Target
REIT determine that the transactions between the Acquiror OP and the Contributor
OP hereunder could reasonably be expected to create a risk that the REIT Merger
would not qualify as a reorganization under the provisions of Section 368(a) of
the Code, Acquiror REIT and Target REIT undertake to use reasonable best efforts
to negotiate and structure an alternative means to effect the REIT Merger, for
Acquiror REIT to acquire the interest in Contributor OP owned by Target REIT,
and for the holders of Contributor OP Units to receive Acquiror OP Units (or the
economic and tax equivalent thereof) in exchange for their Contributor OP Units.
Acquiror OP will use the "traditional method" under Treasury Regulations Section
1.704-3(b) for purposes of making allocations under Section 704(c) of the Code
with respect to the properties of or interests in the Contributor OP as of the
Effective Time (with no curative allocations of gross income with respect to
depreciation to offset the effects of the "ceiling rule" but with a curative
allocation of gain upon disposition of
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such properties to offset the effect of the "ceiling rule"). Acquiror OP and
Contributor OP shall negotiate in good faith to agree upon the "Section 704(c)
values" of the properties of Contributor OP, effective as of the Closing Date.
For purposes of allocating "excess nonrecourse liabilities" of the Acquiror OP
pursuant to Treasury Regulations Section 1.752-3(a)(3) following the Closing
Date, Acquiror OP shall use a methodology to be agreed upon between Acquiror OP
and Contributor OP.
10.27. Transfer and Gains Taxes.
Each party hereto shall cooperate in the preparation, execution and filing
of all returns, questionnaires, applications or other documents regarding any
real property transfer or gains, sales, use, transfer, value added stock
transfer and stamp taxes, any transfer, recording, registration and other fees
and any similar taxes which become payable in connection with the transactions
contemplated by this Agreement (together with any related interests, penalties
or additions to tax, "Transfer and Gains Taxes"). From and after the Effective
Time, Acquiror REIT shall pay or cause Acquiror OP, as appropriate, to pay or
cause to be paid, without deduction or withholding from any amounts payable to
the holders of Acquiror REIT Common Stock, or Acquiror OP Units, as applicable,
all Transfer and Gains Taxes (which term shall not in any event be construed to
include for these purposes any tax imposed under the Code).
10.28. Transfer of Target C Corp. Shares.
At the Closing and pursuant to the Stock Purchase Agreement, Target REIT
shall cause Robert M. Solmson to transfer to Acquiror REIT or such Person as
Acquiror REIT shall designate by written notice delivered to him prior to the
Closing, all of the shares of capital stock of the Target C Corp. owned by him
for an aggregate consideration of $95,000 paid to him in cash and in accordance
with a Stock Purchase Agreement (the "Stock Purchase Agreement") to be executed
between Mr. Solmson and Acquiror REIT.
10.29. Existing Restrictions.
Acquiror REIT, Acquiror OP and Acquiror CMBS OP shall assume the
obligations of Target REIT, Contributor OP, Contributor CMBS OP or the
applicable Target REIT Subsidiary, as the case may be, under the Tax Protection
Agreements described in Schedule 7.8.
10.30. Lease Termination/New Leases.
Acquiror REIT and Acquiror OP shall use their good faith best efforts, and
will cause Acquiror CMBS OP to use its good faith best efforts, to enter into
new leases with respect to the Target REIT Hotels described on Schedule 7.38 (as
soon as practical after the date hereof concerning those hotels owned by
Contributor CMBS OP) on terms reasonably acceptable to Acquiror REIT effective
as of the Closing Date and will keep Target REIT and Contributor OP advised as
to the status of negotiations as to such new Leases.
ARTICLE XI
TERMINATION
11.1. Termination by Mutual Consent.
This Agreement may be terminated and the transactions contemplated herein
may be abandoned at any time prior to the Effective Time, before or after the
approval of this Agreement by the Shareholders of Target REIT or Acquiror REIT,
by the mutual written consent of Acquiror REIT and Target REIT. This Agreement
may also be terminated and the transactions contemplated herein may be abandoned
at any time on or after the date hereof (a) by action of the Board of Target
REIT in the event that Acquiror REIT shall have failed to deliver to Target REIT
the Schedules and Exhibits for which it is responsible as described in Section
2.8 in form and substance reasonably satisfactory to Target REIT, or (b) by
action of the Board of Acquiror REIT in the event that Target REIT shall have
failed to deliver to Acquiror REIT the Schedules and Exhibits for
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which it is responsible as described in Section 2.8 in form and substance
reasonably satisfactory to Acquiror REIT.
11.2. Termination by Either Acquiror REIT or Target REIT.
This Agreement may be terminated and the transactions contemplated herein
may be abandoned at any time prior to the Effective Time, before or after the
approval of this Agreement by the Shareholders of Target REIT or Acquiror REIT,
by action of the Board of Target REIT or the Board of Acquiror REIT if (a) the
Mergers shall not have been consummated by October 15, 1998, or (b) a meeting of
Target REIT's Shareholders or a meeting of Acquiror REIT's Shareholders shall
have been duly convened and held and the approval of Target REIT's Shareholders
or the approval of Acquiror REIT's Shareholders required by Section 9.1(a) shall
not have been obtained at such meeting or at any adjournment thereof, or (c) a
United States federal or state court of competent jurisdiction or United States
federal or state governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable, provided, that the party seeking to
terminate this Agreement pursuant to this clause (c) shall have used its
reasonable best efforts to remove such order, decree, ruling or injunction, or
(d) any of the conditions set forth in Article IX shall not have been satisfied
or waived by the Effective Time, or (e) the Average Price is less then $14.00;
and provided, in the case of a termination pursuant to clause (a) or (d) above,
that the terminating party shall not have proximately contributed (including,
without limitation, failure to use all reasonable efforts to satisfy the
conditions set forth in Article IX) to the occurrence of the failure referred to
in said clauses.
11.3. Termination by Target REIT.
This Agreement may be terminated and the transactions contemplated herein
may be abandoned at any time prior to the Effective Time, before or after the
adoption and approval by the Shareholders of Target REIT referred to in Section
9.1(a), by action of the Board of Target REIT if (a) the Board of Acquiror REIT
withdraws, materially modifies or changes in a manner adverse to Target REIT its
recommendation to Acquiror REIT's Shareholders of this Agreement or the REIT
Merger, other than as a result of the occurrence of an event that, in the good
faith judgment of the Board of Acquiror REIT, has or is reasonably likely to
have a Target REIT Material Adverse Effect, (b) the Board of Acquiror REIT
postpones the date scheduled for the meeting of Shareholders of Acquiror REIT to
approve this Agreement and the transactions contemplated hereby beyond the date
set forth in Section 11.2(a), or fails to set a date for such meeting by such
date, except with the written consent of Target REIT, (c) there has been a
breach by Acquiror REIT, Acquiror OP or Merger Sub of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an Acquiror REIT Material Adverse Effect, which breach is not
curable or, if curable, either (i) is not cured by the earlier of (A) the date
set forth in Section 11.2(a) or (B) the Closing Date, or (ii) is waived by
Target REIT, (d) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Acquiror REIT, Acquiror OP
or Merger Sub, which breach is not curable or, if curable, either (i) is not
cured by the earlier of (A) 30 days after written notice of such breach is given
by Target REIT to Acquiror REIT, or (B) the Closing Date, or (ii) is waived by
Target REIT, or (e) the Target REIT Board determines that, in the exercise of
its good faith judgment, termination of this Agreement is required in the
exercise of its fiduciary duties to the Target REIT Shareholders by reason of an
Acquisition Proposal being made.
11.4. Termination by Acquiror REIT.
This Agreement may be terminated and the transactions contemplated herein
may be abandoned at any time prior to the Effective Time, before or after the
approval by the Shareholders of Acquiror REIT referred to in Section 9.1(a), by
action of the Board of Acquiror REIT if (a) the Board of Target REIT withdraws,
materially modifies or changes in a manner adverse to Acquiror REIT its
recommendation to Target REIT's Shareholders of this Agreement or the REIT
Merger, other than as a result of the occurrence of an event that,
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in the good faith judgment of the Board of Target REIT, has or is reasonably
likely to have an Acquiror REIT Material Adverse Effect, (b) the Board of Target
REIT postpones the date scheduled for the meeting of Shareholders of Target REIT
to approve this Agreement and the transactions contemplated hereby beyond the
date set forth in Section 11.2(a), or fails to set a date for such meeting by
such date, except with the written consent of Acquiror REIT, (c) there has been
a breach by Target REIT or Contributor OP of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a Target REIT Material Adverse Effect, which breach is not curable or, if
curable, either (i) is not cured by the earlier of (A) the date set forth in
Section 11.2(a) or (B) the Closing Date, or (ii) is waived by Acquiror REIT, (d)
there has been a material breach of any of the covenants or agreements set forth
in this Agreement on the part of Target REIT or Contributor OP, which breach is
not curable or, if curable, either (i) is not cured the earlier of (A) thirty
(30) days after written notice of such breach is given by Acquiror REIT to
Target REIT, or (B) the Closing Date, or (ii) is waived by Acquiror REIT, or (e)
the Acquiror REIT Board determines that, in the exercise of its good faith
judgment, termination of this Agreement is required in the exercise of its
fiduciary duties to the Acquiror REIT Shareholders by reason of an Acquisition
Proposal being made.
11.5. Effect of Termination and Abandonment.
(a) If (i) Target REIT elects to terminate this Agreement pursuant to
Section 11.2(a), 11.2(b) (provided, in the case of termination pursuant to
either of these sections, that neither Target REIT nor Contributor OP shall be
the party who proximately contributed to a failure to consummate the
transactions hereunder or be the breaching party), or 11.3(e), or (ii) Acquiror
REIT elects to terminate this Agreement pursuant to Section 11.2(a), 11.2(b)
(provided, in the case of termination pursuant to either of these sections, that
none of Acquiror REIT, Acquiror OP or Merger Sub shall be the party proximately
contributing to a failure to consummate the transactions hereunder or be the
breaching party), or 11.4(e), and, in any event, an Acquisition Proposal
relating to Target REIT in the case of a termination pursuant to clause (i)
above or relating to Acquiror REIT in the case of a termination pursuant to
clause (ii) above (such party being sometimes hereinafter referred to as the
"Payor Party"), shall have been made and notice of same shall have been required
pursuant to Section 10.1 prior to such termination (an "Acquisition Proposal
Notice"), provided that the other party (the "Entitled Party") was not in
material breach of its obligations hereunder at the time of such termination,
the Payor Party shall at the time of such termination deposit by wire transfer
of same-day funds into an interest bearing escrow account with an escrow agent
selected by the Entitled Party (the "Escrow Agent") and on such terms as the
Entitled Party and the Escrow Agent shall agree, consistent with the terms of
this Article XI, for the benefit of the Entitled Party as reasonable
compensation to the Entitled Party for enhanced competitive risks resulting from
the Payor Party consummating a Competing Transaction, market risks in announcing
the REIT Merger, management time expended in pursuit of the Mergers and related
transactions, lost opportunities to consummate other merger or acquisition
transactions, transaction costs and expenses, and other incidental costs and
losses, and not as a penalty or forfeiture, an amount equal to $20,000,000 (the
"Termination Fee"). If a Competing Transaction shall be consummated within one
(1) year following the date of such termination or a definitive agreement for a
Competing Transaction (a "Definitive Competing Acquisition Agreement") shall be
executed and delivered by the Payor Party within one (1) year following the date
of such termination with the party named in the Acquisition Proposal Notice and
a Competing Transaction with such party is consummated within nine (9) months
following the date of execution of the Definitive Competing Acquisition
Agreement, the Escrow Agent shall, at the time any such Competing Transaction is
consummated, distribute to the Entitled Party out of the escrowed funds an
amount equal to the lesser of (A) $20,000,000, plus any accrued interest thereon
or on any part thereof through the date of payment (the "Maximum Termination
Fee") and (B) the sum of (1) the maximum amount that can be paid to the Entitled
Party without causing it to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of
the Code ("Qualifying Income"), as determined by the Entitled Party's certified
public accountants, plus (2) in the event an Entitled Party receives a letter
from such Entitled Party's counsel indicating that the Entitled Party has
received a ruling from the IRS described in Section 11.5(c)(ii) or (iii), an
amount equal to the Maximum Termination
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Fee less the amount payable under clause (1) above. In the event no Competing
Transaction is consummated or no Definitive Competing Acquisition Agreement is
executed, delivered and consummated by Payor Party within the time periods
described above in this Section 11.5(a) following the termination of this
Agreement, with the party named in the Acquisition Notice, the Escrow Agent
shall return the Termination Fee to the Payor Party, together with interest
thereon from the date of deposit through the date of return.
(b) Moreover, if an Acquisition Proposal shall have been received by a
Payor Party so as to require an Acquisition Proposal Notice prior to that
party's Shareholders voting on approval of this Agreement, and this Agreement is
not terminated pursuant to Sections 11.1 through 11.4 above, and the
Shareholders of the Payor Party vote against approval of this Agreement, and if
a Competing Transaction with the party named in such Acquisition Proposal Notice
shall be consummated within one (1) year following the date of such shareholder
vote or a Definitive Competing Acquisition Agreement shall be executed and
delivered by the Payor Party within one (1) year following the date of such
shareholder vote with a party named in such Acquisition Proposal Notice and a
Competing Transaction with such party is consummated within nine (9) months
following the date of execution of such Definitive Competing Acquisition
Agreement, then, immediately upon consummating such Competing Transaction or
executing such Definitive Competing Acquisition Agreement, the Payor Party shall
deliver to the Escrow Agent in same-day funds for the benefit of the Entitled
Party an amount equal to the Termination Fee. Upon consummation of any such
Competing Transaction, the Escrow Agent shall immediately disburse to the
Entitled Party an amount equal to the lesser of (A) the Maximum Termination Fee
and (B) the sum of (i) the maximum amount that can be paid to the Entitled Party
without causing it to fail to meet the requirements of Sections 856(c)(2) and
(3) of the Code determined as if the payment of such amount did not constitute
Qualifying Income, as determined by the Entitled Party's certified public
accountants, plus (ii) in the event an Entitled Party receives a letter from
such Entitled Party's counsel indicating that the Entitled Party has received a
ruling from the IRS described in Section 11.5(c)(ii) or (iii), an amount equal
to the Maximum Termination Fee less the amount payable under clause (1) above.
In the event no Competing Transaction is consummated or no Definitive Competing
Acquisition Agreement is executed, delivered and consummated by Payor Party
within the time periods described above in this Section 11.5(b), with the party
named in the Acquisition Proposal Notice, the Escrow Agent shall return the
Termination Fee to the Payor Party, together with interest thereon from the date
of deposit through the date of return.
(c) In the event that the Entitled Party is not able to receive the Maximum
Termination Fee, the Escrow Agent shall hold the unpaid amount in escrow and
shall not release any portion thereof to the Entitled Party unless and until the
Payor Party receives, at any time or from time to time, any one or combination
of the following: (i) a letter from the Entitled Party's certified public
accountants indicating the maximum amount that can be paid at that time to the
Entitled Party without causing the Entitled Party to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code, determined as if the
payment of such amount did not constitute Qualifying Income or a subsequent such
letter revising or (in the case of later tax years) adding to that amount, in
which case and at each such time the Escrow Agent shall release such revised or
additional amount to the Entitled Party, or (ii) a letter from the Entitled
Party's counsel indicating that the Entitled Party received a ruling from the
IRS holding that the receipt by the Entitled Party of the Maximum Termination
Fee would either constitute Qualifying Income or would be excluded from gross
income within the meaning of Sections 856(c)(2) and (3) of the Code, in which
case the Escrow Agent shall release the remainder of the Maximum Termination
Fee, plus any interest accrued thereon, to the Entitled Party, or (iii) a letter
from the Entitled Party's counsel indicating that the Entitled Party received a
ruling from the IRS holding that the receipt by the Entitled Party of the
remaining balance of the Maximum Termination Fee following the receipt of and
pursuant to such ruling would not be deemed constructively received prior
thereto, in which case the Escrow Agent shall release the remainder of the
Maximum Termination Fee to the Entitled Party. If the Maximum Termination Fee
has not been distributed to the Entitled Party pursuant to this Section 11.5(c)
by the fifth anniversary of the date of termination, in the case of an escrow
established pursuant to Section 11(a), or the date of the Shareholder vote, in
the case of an escrow established pursuant to Section 11(b), any remaining funds
then in escrow, including any interest accrued thereon, shall be delivered by
the Escrow Agent to the Payor Party or its successor in interest.
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(d) In the event of termination of this Agreement and the abandonment of
the Mergers pursuant to this Article XI, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
11.5 or Section 11.6 and except for the provisions of Sections 12.4, 12.5, 12.6,
12.7, 12.15 and 12.16. In the event an Entitled Party has received the Maximum
Termination Fee pursuant to this Section 11.5, the Entitled Party shall not (i)
assert or pursue in any manner, directly or indirectly, any claim or cause of
action based in whole or in part upon alleged tortious or other interference
with rights under this Agreement against any entity or person submitting an
Acquisition Proposal, or (ii) assert or pursue in any manner, directly or
indirectly, any claim or cause of action against the Payor Party or any of its
officers or directors based in whole or part upon its or their receipt,
consideration, recommendation or approval of an Acquisition Proposal or the
Payor Party's exercise of its right of termination under Section 11.3(e) or
11.4(e), as applicable. Notwithstanding the foregoing, in the event an Entitled
Party is required to file suit or an arbitration proceeding to seek all or a
portion of such Maximum Termination Fee, and it ultimately succeeds, the
Entitled Party shall be entitled to receive from the Payor Party all expenses,
including attorneys' fees and expenses, which it has incurred in enforcing its
rights hereunder.
11.6. Expenses.
(a) If (i) Target REIT elects to terminate this Agreement pursuant to
Section 11.3(a), 11.3(b), 11.3(c) or 11.3(d) or (ii) Acquiror REIT elects to
terminate this Agreement pursuant to Section 11.4(a), 11.4(b), 11.4(c) or
11.4(d), and, in any event, no Acquisition Proposal shall have been made prior
to such termination, Acquiror REIT, in the case of termination in the events set
forth in clause (i) above, or Target REIT, in the case of termination in the
events set forth in clause (ii) above, provided that the Entitled Party was not
in material breach of its obligations hereunder at the time of such termination,
as liquidated damages and not as a penalty or forfeiture, shall pay to the
Entitled Party by wire transfer of same day funds on the business day after
receipt of notice of termination of this Agreement an amount equal to the lesser
of (A) all documented Expenses incurred by the Entitled Party in connection with
its pursuit of the transactions contemplated herein, (B) $5,000,000 (the
"Maximum Expense Reimbursement") and (C) the sum of (1) the maximum amount that
can be paid to the Entitled Party without causing it to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code determined as if the
payment of such amount did not constitute Qualifying Income, as determined by
the Entitled Party's certified public accountants, plus (2) in the event an
Entitled Party receives a letter from such Entitled Party's counsel indicating
that the Entitled Party has received a ruling from the IRS described in Section
11.5(c)(ii) or (iii), an amount equal to the Maximum Expense Reimbursement less
the amount payable under clause (1) above.
(b) In the event that the Entitled Party is not able to receive the Maximum
Expense Reimbursement in any tax year without causing it to fail to meet the
requirements of Section 856(c)(2) and (3) of the Code, determined as if the
payment of the Maximum Expense Reimbursement did not constitute Qualifying
Income, the Payor Party shall pay the unpaid amount of the Maximum Expense
Reimbursement at such time as the Payor Party receives, at any time or from time
to time, any one or combination of the following: (i) a letter from the Entitled
Party's certified public accountants indicating the maximum amount that can be
paid at that time to the Entitled Party without causing the Entitled Party to
fail to meet the requirements of Sections 856(c)(2) and (3) of the Code,
determined as if the payment of such amount did not constitute Qualifying Income
or a subsequent such letter revising or (in the case of later tax years) adding
to that amount, in which case and at each such time the Payor Party shall pay
such revised or additional amount to the Entitled Party subject to a total
maximum payment under this Section 11.6 of an amount equal to the Maximum
Expense Reimbursement, or (ii) a letter from the Entitled Party's counsel
indicating that the Entitled Party received a ruling from the IRS holding that
the receipt by the Entitled Party of the Maximum Expense Reimbursement would
either constitute Qualifying Income or would be excluded from gross income
within the meaning of Sections 856(c)(2) and (3) of the Code, in which case the
Payor Party shall pay the remainder of the Maximum Expense Reimbursement to the
Entitled Party, or (iii) a letter from the Entitled Party's counsel indicating
that the Entitled Party received a ruling from the IRS holding that the receipt
by the Entitled Party of the remaining balance of the Maximum Expense
Reimbursement following the receipt of and pursuant to such ruling would not be
deemed constructively received prior thereto, in which case the
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Payor Party shall release the remainder of the Maximum Expense Reimbursement to
the Entitled Party. The Payor Party's obligations under this Section 11.6(b)
shall terminate five (5) years from the date hereof.
(c) If this Agreement is terminated for any reason or under any
circumstances not addressed in subsection (a) or (b) of this Section 11.6, no
party hereto shall be liable to the other parties hereto for Expenses, except as
provided in Section 10.10.
(d) Except for payments as provided in Section 11.5, in no event shall any
party be liable hereunder for any amount in excess of the Maximum Expense
Reimbursement.
11.7. Extension; Waiver; Miscellaneous.
At any time prior to the Effective Time, any party hereto, by action taken
by its Board, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in instrument in
writing signed on behalf of such party.
Acquiror REIT and Target REIT agree to amend Sections 11.5 and 11.6 above
at the request of the other party in order to (i) permit receipt of the Maximum
Termination Fee or the Maximum Expense Reimbursement by such other party
hereunder without causing such other party to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code or (ii) improve such other party's
chances of securing a favorable ruling from the IRS described in Section 11.5 or
11.6, provided that no such amendment may result in any additional cost or
expense to such other party.
ARTICLE XII
MISCELLANEOUS
12.1. Nonsurvival of Representations, Warranties and Agreements.
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Articles II, III, IV and XI,
the last sentence of Section 10.4 and Sections 10.8, 10.10, 10.11, 10.12, 10.13,
10.15, 10.20, 10.21, 10.24, 10.25, 10.27, 10.28, 10.29 and 10.30 and this
Article XII shall survive the Mergers. No third party (other than counsel for
Acquiror REIT and Target REIT with respect to delivery of their opinions
hereunder) is entitled to rely on any of the representations, warranties and
agreements contained in this Agreement and the parties hereto assume no
liability to any third party because of any reliance on the representations,
warranties and agreements contained in this Agreement.
12.2. Notices.
Any notice required to be given hereunder shall be in writing and shall be
sent by facsimile transmission (confirmed by any of the methods that follow),
courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage) and addressed
as follows:
If to Acquiror OP, Acquiror REIT or Merger Sub:
Equity Inns, Inc.
4735 Spottswood, Suite 102
Memphis, TN 38117
Facsimile No. 901/761-3945
Attention: Phillip H. McNeill, Sr.
Chairman of the Board and
Chief Executive Officer
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with a copy to:
Baker, Donelson, Bearman & Caldwell
20th Floor, First Tennessee Building
165 Madison
Memphis, TN 38103
Facsimile No. 901/577-2303
Attention: John A. Good, Esq.
If to Contributor OP or Target REIT:
RFS Hotel Investors, Inc. 850 Ridge Lake Boulevard, Suite 220
Memphis, TN 38120
Facsimile No. 901/818-5260
Attention: Robert M. Solmson
Chairman of the Board and
Chief Executive Officer
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, VA 23219
Facsimile No. 804/788-8218
Attention: David C. Wright, Esq.
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
12.3. Assignment; Binding Effect; Benefit.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties
hereto. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the parties hereto or their respective heirs,
successors, executors, administrators or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
12.4. Entire Agreement.
This Agreement (including the Exhibits and the Schedules attached hereto)
and any documents and instruments delivered by the parties hereto in connection
herewith constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect hereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
12.5. Confidentiality.
(a) As used in Section 12.5, "Confidential Material" means, with respect to
any party hereto (the "Providing Party"), all information (written or oral)
furnished (whether before or after the date hereof) by the Providing Party and
its directors, trustees, officers, employees, affiliates or representatives of
advisors, including counsel, lenders and financial advisors (collectively, the
"Providing Party Representatives") to any other party hereto (the "Receiving
Party") or such Receiving Party's directors, officers, employees, affiliates or
representatives of advisors, including counsel, lenders and financial advisors
or the Receiving Party's potential sources of financing for the transactions
contemplated by this Agreement (collectively "the
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Receiving Party Representatives") and all analyses, compilations, forecasts and
other studies or other documents prepared by the Providing Party or the
Providing Party Representatives in connection with its or their review of the
transactions contemplated by this Agreement which contain or reflect such
information. The term "Confidential Material" does not include, however,
information which (i) at the time of disclosure or thereafter is generally
available to and known by the public other than as a result of a disclosure
directly or indirectly by the Receiving Party or the Receiving Party
Representatives in violation of this Section 12.5, (ii) at the time of
disclosure was available on a nonconfidential basis from a source other than the
Providing Party or the Providing Party Representatives, providing that such
source is not and was not bound by a confidentiality agreement with the
Providing Party, (iii) was known by the Receiving Party prior to receiving the
Confidential Material from the Providing Party or has been independently
acquired or developed by the Receiving Party without violating any of its
obligations under this Section 12.5, or (iv) is contained in any Target REIT SEC
Documents or Acquiror REIT SEC Documents, the Form S-4 or the Proxy
Statement/Prospectus.
(b) Subject to paragraph (c) below or except as required by law, the
Confidential Material will be kept confidential and will not, without the prior
written consent of the Providing Party, be disclosed by the Receiving Party or
the Receiving Party Representatives, in whole or in part and will not be used by
the Receiving Party or the Receiving Party Representatives, directly or
indirectly, for any purpose other than in connection with this Agreement, the
Mergers, the Asset Sale or the evaluating, negotiating or advising with respect
to a transaction contemplated herein. Moreover, each Receiving Party agrees to
transmit Confidential Material to the Receiving Party Representatives only if
and to the extent that such representatives need to know the Confidential
Material for purposes of such transaction and are informed by the Receiving
Party of the confidential nature of the Confidential Material and of the terms
of this Section 12.5.
(c) In the event that either the Receiving Party, the Receiving Party
Representatives or anyone to whom such Receiving Party or such representatives
supply the Confidential Material, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any government or
governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Receiving Party agrees
(i) to immediately notify the Providing Party of the existence, terms and
circumstances surrounding such a request, (ii) to consult with the Providing
Party on the advisability of taking legally available steps to resist or narrow
such request, and (iii) if disclosure of such information is required, to
furnish only that portion of the Confidential Material which, in the opinion of
the Receiving Party's counsel, such Receiving Party is legally compelled to
disclose and to cooperate with any action by the Providing Party to obtain an
appropriate protective order or otherwise reliable assurances that confidential
treatment will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable out-
of-pocket expenses incurred by the Receiving Party in connection with such
cooperation).
(d) In the event of termination of this Agreement in accordance with its
terms, promptly upon request from the Providing Party, the Receiving Party
shall, except to the extent prevented by law, redeliver to the Providing Party
or destroy all tangible Confidential Material and will not retain any copies,
extracts or other reproductions thereof in whole or in part. Any such
destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, the Receiving Party and one of the Receiving Party
Representatives designated by the Receiving Party shall be permitted to retain
one permanent file copy of each document constituting the Confidential Material.
(e) Each party hereto further agrees that if this Agreement is terminated
in accordance with its terms, until two (2) years after such termination, (1) it
will not offer to hire or hire any person currently or formerly employed by any
other party with whom such party has had contact prior hereto other than persons
whose employment shall have been terminated by such other party prior to the
date of such offer to hire or hiring and (2) neither it nor its Affiliates shall
directly or indirectly, (a) (A) solicit, seek or offer to effect or effect, (B)
negotiate with or provide any information to the Board of Directors of the other
party, any director or officer of such other party or any stockholder of such
other party with respect to, (C) make any statement or proposal, whether written
or oral, either alone or in concert with others, to the Board of Directors of
such other party, any director or officer of such other party or any shareholder
of the other party or any other person with respect
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to, or (D) make any public announcement (except as required by law in respect of
actions permitted hereto) or proposal or offer whatsoever (including, but not
limited to, any "solicitation" of "proxies" as such terms are defined or used in
Regulation 14a of the Exchange Act) with respect to, (i) any form of business
combination or similar or other extraordinary transaction involving such other
party or any Affiliate thereof, including, without limitation, a merger, tender
offer or exchange offer or liquidation of such other party's assets, (ii) any
form of restructuring, recapitalization or similar transaction with respect to
such other party or any Affiliate thereto, (iii) any purchase of any securities
or assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of such other party or any
Affiliate thereof, (iv) any proposal to seek representation on the Board of
Directors of such other party or otherwise to seek to control or influence the
management, Board of Directors or policies of such other party or any Affiliate
thereof, (v) any request or proposal to waive, terminate or amend the provisions
of this Section 12.5 or (vi) any proposal or other statement inconsistent with
the terms of this Section 12.5, or (b) instigate, encourage, join, act in
concert with or assist (including, but not limited to, providing or assisting in
any way in the obtaining of financing for, or acting as a joint or co-bidder for
such other party with) any third party to do any of the foregoing, unless and
until such party has received the prior written invitation or approval of a
majority of the Board of Directors of such other party to do any of the
foregoing; provided that without such invitation or approval, any party hereto
may at any time, on a confidential non-public basis, submit to the Chief
Executive Officer or, if none, the President of any other party, a proposal to
(a) amend any of the provisions of this Section 12.5(e), or (b) effect a
business combination or other extraordinary transaction with such other party
providing for the acquisition or all or substantially all of the assets or the
securities of such other party, including without limitation, a merger, tender
offer or exchange offer. Each party hereto agrees that it will not agree with
any third party to waive its rights under this Section 12.5.
12.6. Amendment.
This Agreement may be amended by the parties hereto at any time before or
after approval of this Agreement or any other matter presented in connection
with the REIT Merger by the Shareholders of Acquiror REIT or Target REIT, but
after any such Shareholder approval, no amendment shall be made which by law
requires the further approval of Shareholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
12.7. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Tennessee without regard to its rules of conflict of laws.
Each of the parties hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Tennessee and of the
United States District Court, Western District of Tennessee (collectively, the
"Tennessee Courts") for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any litigation relating thereto except in such courts), waives any objection to
the laying of venue of any such litigation in the Tennessee Courts and agrees
not to plead or claim in any Tennessee Court that such litigation brought
therein has been brought in an inconvenient forum.
12.8. Counterparts.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
12.9. Headings.
Heading of the Articles and Sections of this Agreement are for the
convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
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12.10. Interpretation.
In this Agreement, unless the context otherwise requires, words describing
the singular number shall include the plural and vice versa, and words denoting
any gender shall include all genders and words denoting natural persons shall
include corporations and partnerships and vice versa. Neither this Agreement nor
any uncertainty or ambiguity herein shall be construed or resolved against any
party hereto, whether under any rule of construction or otherwise.
12.11. Waivers.
Except as provided in this Agreement, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party hereto, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
12.12. Incorporation.
The Schedules and all Exhibits attached hereto and thereto and referred to
herein and therein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
12.13. Severability.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
12.14. Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any Tennessee Court, this being in addition to any other remedy to
which they are entitled to at law or in equity.
12.15. Non-Recourse.
None of the officers, directors, limited partners or Shareholders of
Acquiror REIT, Acquiror OP or Merger Sub shall be personally bound or have any
personal liability hereunder. Target REIT and Contributor OP shall look solely
to the assets of Acquiror REIT, Acquiror OP and Merger Sub for satisfaction of
any liability of Acquiror REIT, Acquiror OP or Merger Sub with respect to this
Agreement. Neither Target REIT nor Contributor OP will seek recourse or commence
any action against any of the Shareholders of Acquiror REIT or any of their
personal assets, and will not commence any action for money judgments against
any of the directors, officers or limited partners of Acquiror REIT, Acquiror OP
or Merger Sub or seek recourse against their personal assets, for the
performance or payment of any obligation of Acquiror REIT, Acquiror OP or Merger
Sub hereunder or thereunder. None of the directors, officers, limited partners
or Shareholders of Target REIT and Contributor OP shall be personally bound or
have any personal liability hereunder. Acquiror REIT, Acquiror OP and Merger Sub
shall look solely to the assets of Target REIT and Contributor OP for
satisfaction of any liability of Target REIT or Contributor OP with respect to
this Agreement. Neither Acquiror REIT, Acquiror OP nor Merger Sub will seek
recourse or commence any action against any of the Shareholders of the Target
REIT or any of their personal assets, and will not commence any action for money
judgments against any of the directors, officers or limited partners of Target
REIT or Contributor OP or seek
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recourse against any of their personal assets, for the performance or payment of
any obligation of Target REIT or Contributor OP hereunder or thereunder.
12.16. Arbitration.
If any disputes between Contributor OP or Target REIT, on the one hand, and
Acquiror REIT, Acquiror OP or Merger Sub, on the other hand, are not resolved by
the parties hereto within 60 days, either Acquiror REIT or Target REIT may
submit the dispute to binding arbitration in accordance with the rules of the
American Arbitration Association (the "AAA").
Acquiror REIT and Target REIT each shall select one arbitrator from a list
of arbitrators maintained by the AAA, and the two arbitrators so selected shall
select a third arbitrator. Should either Acquiror REIT or Target REIT fail to
select an arbitrator within ten days after arbitration is sought by the other
party, or if the two arbitrators shall fail to select a third arbitrator within
15 days after arbitration is sought, the AAA shall select the arbitrator.
Expenses of arbitration shall be submitted to the arbitrators for determination
as to which parties shall bear such expenses.
[SIGNATURES ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.
TARGET REIT:
RFS HOTEL INVESTORS, INC.
By: /s/ ROBERT M. SOLMSON
------------------------------------
Name: Robert M. Solmson
--------------------------------------
Title: Chairman
--------------------------------------
CONTRIBUTOR OP:
RFS PARTNERSHIP, L.P.
By: RFS Hotel Investors, Inc., General
Partner
By: /s/ ROBERT M. SOLMSON
------------------------------------
Name: Robert M. Solmson
--------------------------------------
Title: Chairman
--------------------------------------
ACQUIROR REIT:
EQUITY INNS, INC.
By: /s/ PHILLIP H. MCNEILL, SR.
------------------------------------
Name: Phillip H. McNeill, Sr.
--------------------------------------
Title: Chairman of the Board
--------------------------------------
MERGER SUB:
RHI ACQUISITIONS, INC.
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By: /s/ PHILLIP H. MCNEILL, SR.
----------------------------------
Name: Phillip H. McNeill, Sr.
--------------------------------------
Title: Chairman of the Board
--------------------------------------
ACQUIROR OP:
EQUITY INNS PARTNERSHIP, L.P.
By: Equity Inns Trust, General Partner
By: /s/ PHILLIP H. MCNEILL, SR.
------------------------------------
Name: Phillip H. McNeill, Sr.
--------------------------------------
Title: Chairman of the Board
--------------------------------------
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