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AGREEMENT AND PLAN OF MERGER
by and among
DOUBLETREE CORPORATION,
RLH ACQUISITION CORP.
and
RED LION HOTELS, INC.
Dated as of September 12, 1996
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TABLE OF CONTENTS
Section Page
ARTICLE I
THE MERGER
1.1. The Merger..................................................................................... 2
1.2. Closing........................................................................................ 2
1.3. Effective Time................................................................................. 3
1.4. Effect of the Merger........................................................................... 3
1.5. Certificate of Incorporation; By-Laws.......................................................... 3
1.6. Directors and Officers......................................................................... 3
ARTICLE II
EFFECT OF THE MERGER ON SECURITIES
OF THE CONSTITUENT CORPORATIONS
2.1. Conversion of Securities....................................................................... 4
2.2. Adjustment to Exchange Ratio................................................................... 5
2.3. Exchange of Certificates....................................................................... 6
2.4. Stock Transfer Books........................................................................... 11
2.5. Stock Options.................................................................................. 11
2.6. Dissenting Shares.............................................................................. 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Organization and Qualification................................................................. 12
3.2. Capitalization................................................................................. 13
3.3. Subsidiaries................................................................................... 14
3.4. Authorization, Validity and Enforceability..................................................... 15
3.5. No Conflict or Violation....................................................................... 16
3.6. Consents and Approvals......................................................................... 17
3.7. SEC Documents and Financial Statements......................................................... 17
3.8. No Undisclosed Liabilities..................................................................... 19
3.9. Absence of Certain Changes..................................................................... 19
3.10. Litigation..................................................................................... 20
3.11. Compliance..................................................................................... 21
3.12. Employee Benefit Plans......................................................................... 21
3.13. Labor Matters.................................................................................. 24
3.14. Tax Matters.................................................................................... 24
3.15. Properties..................................................................................... 28
3.16. Environmental Matters.......................................................................... 29
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3.17. Material Contracts and Commitments............................................................. 29
3.18. Intellectual Property.......................................................................... 31
3.19. Opinion of Financial Advisor................................................................... 31
3.20. Brokers........................................................................................ 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT
4.1. Organization and Qualification................................................................. 31
4.2. Capitalization................................................................................. 32
4.3. Subsidiaries................................................................................... 33
4.4. Authorization, Validity and Enforceability..................................................... 34
4.5. No Conflict or Violation....................................................................... 35
4.6. Consents and Approvals......................................................................... 36
4.7. SEC Documents and Financial Statements......................................................... 36
4.8. No Undisclosed Liabilities..................................................................... 37
4.9. Absence of Certain Changes..................................................................... 37
4.10. Litigation..................................................................................... 38
4.11. Compliance..................................................................................... 39
4.12. Employee Benefit Plans......................................................................... 39
4.13. Tax Matters.................................................................................... 41
4.14. Properties..................................................................................... 42
4.15. Environmental Matters.......................................................................... 42
4.16. Intellectual Property.......................................................................... 43
4.17. Labor Matters.................................................................................. 43
4.18. Material Contracts and Commitments............................................................. 43
4.19. Financing...................................................................................... 44
4.20. Opinion of Financial Advisor................................................................... 44
4.21. Brokers........................................................................................ 44
ARTICLE V
COVENANTS
5.1. Interim Operations............................................................................. 45
5.2. No Solicitation................................................................................ 48
5.3. Access to Information.......................................................................... 50
5.4. Notice of Certain Matters...................................................................... 51
5.5. Further Actions................................................................................ 51
5.6. Proxy Statement; Registration Statement........................................................ 53
5.7. Meetings of Stockholders....................................................................... 56
5.8. Nasdaq Quotation of Parent Common Stock........................................................ 57
5.9. Letters of Accountants......................................................................... 57
5.10. Affiliate Letters.............................................................................. 57
5.11. Public Announcements........................................................................... 58
5.12. Expenses....................................................................................... 58
5.13. Indemnification................................................................................ 58
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5.14. Employee Benefits Matters...................................................................... 61
5.15. Takeover Statutes.............................................................................. 62
5.16. Certification of Stockholder Vote.............................................................. 62
5.17. Conveyance Taxes............................................................................... 62
5.18. Gains Tax...................................................................................... 63
5.19. FIRPTA Certificate............................................................................. 63
ARTICLE VI
CONDITIONS
6.1. Conditions to Each Party's Obligation To Effect the Merger..................................... 64
6.2. Additional Conditions to Obligations of the Parent............................................. 65
6.3. Additional Conditions to Obligations of the Company............................................ 67
ARTICLE VII
TERMINATION
7.1. Termination.................................................................................... 68
7.2. Effect of Termination.......................................................................... 70
7.3. Extension; Waiver.............................................................................. 71
ARTICLE VIII
MISCELLANEOUS
8.1. Nonsurvival of Representations, Warranties and Agreements...................................... 72
8.2. Notices........................................................................................ 72
8.3. Certain Definitions............................................................................ 73
8.4. Assignment; Binding Effect..................................................................... 73
8.5. Entire Agreement............................................................................... 74
8.6. Amendment...................................................................................... 74
8.7. Waivers........................................................................................ 74
8.8. Severability................................................................................... 75
8.9. Governing Law.................................................................................. 75
8.10. Enforcement of Agreement....................................................................... 75
8.11. Incorporation of Exhibits...................................................................... 75
8.12. Interpretation................................................................................. 76
8.13. Headings....................................................................................... 76
8.14. Counterparts................................................................................... 76
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Exhibit A Form of Affiliate Letter
Exhibit B Form of Registration Rights Agreement
Exhibit C-1 Severance Agreements
Form for Officers
Form for Directors, Employees and Managers
C-2 Severance Policy
C-3 Headquarters Severance Plan
C-4 Senior Executive Transition Bonus Plan
C-5 SERP
C-6 Management Bonus Plan
Exhibit D Form of Partnership Services Agreement
Exhibit E Sample Exchange Ratio Calculations
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INDEX TO DEFINED TERMS
Term Section
affiliate 8.3(a)
business day 8.3(b)
Agreement Preamble
AICPA Statement 5.9(a)
Alternative Transaction 5.2
Alternative Transaction Proposal 5.2
Blue Sky Laws 3.6
Cash Consideration 2.1(a)
Certificates 2.3(b)
Certificate of Merger 1.3
Closing 1.2
Code 2.3(h)
Company Preamble
Company Assets 3.15
Company Common Stock 2.1(a)
Company Confidentiality Agreement 5.3
Company Disclosure Schedule 3.2(b)
Company Employee Plan 3.12(a)
Company Incentive Plan 3.2(a)
Company Material Adverse Effect 3.1
Company Options 3.2(a)
Company Personnel 3.12(a)
Company Preferred Stock 3.2(a)
Company SEC Documents 3.7(a)
Company Shareholder Support Agreement Recitals
Company Stockholders' Meeting 5.7(a)
Contracts 3.17
Delaware Courts 8.9
Dissenting Shares 2.6(a)
DGCL 1.1
Effective Time 1.3
Environmental Laws 3.16
ERISA 3.12(a)
ERISA Controlled Group 3.12(g)
Exchange Act 3.6
Exchange Agent 2.3(a)
Exchange Fund 2.3(a)
Exchange Ratio 2.1(a)
Final Parent Stock Price 2.2(c)
401(k) Plan 3.12(h)
GAAP 3.7(b)
Gains Tax 5.18
Governmental Entity 3.6
HSR Act 3.6
Indemnified Parties 5.13(a)
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Term Section
IRS Letter 3.12(h)
Management Bonus Plan 5.14(e)
McClaskey 5.6(e)
McClaskey Shares 5.6(e)
Merger Recitals
Merger Consideration 2.1(a)
Merger Sub Preamble
Merger Sub Common Stock 4.2(c)
MLP 3.7(c)
MLP SEC Documents 3.7(c)
Nasdaq 2.2(c)
Option Certificates 2.3(b)
Parent Preamble
Parent Assets 4.14
Parent Common Stock 2.1(a)
Parent Confidentiality Agreement 5.2
Parent Contracts 4.18(b)
Parent Disclosure Schedule 4.2(a)
Parent Employee Plan 4.12(a)
Parent Material Adverse Effect 4.1
Parent Options 4.2(a)
Parent Personnel 4.12(a)
Parent Preferred Stock 4.2(a)
Parent SEC Documents 4.7(a)
Parent Shareholder Support Agreements Recitals
Parent Stockholder Approval 4.3
Parent Stockholders' Meeting 5.7(b)
Partnership Recitals
Partnership Services Agreement 6.3(f)
Permitted Liens 3.15
person 8.3(c)
Proxy Statement 5.6(a)
Registration Rights Agreement 6.3(f)
Registration Statement 5.6(a)
Representatives 5.2
SEC 3.7(a)
SERP 5.14(d)
Securities Act 3.6
Severance Agreements 5.14(a)
Severance Policy 5.14(a)
Stay Bonus Plan 5.14(c)
Stock Certificates 2.3(b)
Stock Consideration 2.1(a)
subsidiary 8.3(d)
Surviving Corporation 1.1
Tax Return 3.14(a)
Tax Ruling 3.14(i)
Taxes 3.14(a)
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Term Section
Transfer Taxes 5.18
Transition Bonus Plan 5.14(b)
Transition Severance Plan 5.14(a)
VCR Application 3.12(h)
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of September 12, 1996
(this "Agreement"), by and among DOUBLETREE CORPORATION, a Delaware corporation
(the "Parent"), RLH ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of the Parent formed solely to effectuate the transactions
contemplated hereby ("Merger Sub"), and RED LION HOTELS, INC., a Delaware
corporation (the "Company").
RECITALS
WHEREAS, the Board of Directors of the Company has determined
that the merger of Merger Sub with and into the Company, upon the terms and
subject to the conditions set forth in this Agreement (the "Merger"), is fair
to, and in the best interests of, the Company and its stockholders; and
WHEREAS, the Boards of Directors of the Parent and Merger Sub
have determined that the Merger is in the best interests of the Parent and
Merger Sub and their respective stockholders; and
WHEREAS, the Boards of Directors of the Company, the Parent
and Merger Sub have each approved and adopted this Agreement and approved the
Merger and the other transactions contemplated hereby (including the Company
Shareholder Support Agreement and the Parent Shareholder Support Agreements),
and recommended approval and adoption of this Agreement and the Merger by their
respective stockholders; and
WHEREAS, concurrently with the execution of this Agreement,
and as an inducement to the Parent to enter into this Agreement, Red Lion, a
California Limited Partnership (the "Partnership"), which is the majority
stockholder of the Company, has entered into a Shareholder Support Agreement
(the "Company Shareholder Support Agreement") with the Parent, pursuant to which
the Partnership has agreed, among other things, to vote all voting securities of
the Company beneficially owned by it in favor of approval and adoption of this
Agreement and the Merger; and
WHEREAS, concurrently with the execution of this Agreement,
and as an inducement to the Company to enter into this Agreement, certain
stockholders of the Parent have entered into Shareholder Support Agreements (the
"Parent Shareholder Support Agreements") with the Company and the
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Parent, pursuant to which such stockholders have agreed, among other things, to
vote all voting securities of the Parent beneficially owned by them in favor of
approval and adoption of this Agreement and the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined below), Merger
Sub shall be merged with and into the Company in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"). As a result of the
Merger, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
Section 1.2. Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.1 and subject to the satisfaction or, if permissible,
waiver of the conditions set forth in Article VI, the closing of the Merger (the
"Closing") shall take place at the offices of Dewey Ballantine, 333 South Hope
Street, Los Angeles, California, as promptly as practicable (and in any event
within two business days) following the satisfaction or, if permissible, waiver
of the conditions set forth in Article VI, unless another place, date or time is
agreed to in writing by the Parent and the Company. At the Closing, the
Registration Rights Agreement, the Partnership Services Agreement and the other
documents, certificates and instruments referred to in Article VI shall be
executed and delivered, and the Merger Consideration shall be delivered (or
transmitted for delivery) to any holder of Company Common Stock or Company
Options who has delivered such holder's shares of Company Common Stock or
certificate or instrument representing Company Options, together with the letter
of transmittal duly completed as contemplated by Section 2.3(b), to the Exchange
Agent prior to the Effective Time, and all amounts contemplated by Section 5.14
to be paid at the Closing shall be paid.
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Section 1.3. Effective Time. Promptly after the Closing, the
parties hereto will cause a certificate of merger with respect to the Merger
(the "Certificate of Merger") to be executed and filed with the Secretary of
State of the State of Delaware in accordance with the DGCL. The Merger shall
become effective at such time as the Certificate of Merger is filed with the
Secretary of State of the State of Delaware in accordance with the DGCL, or at
such later time as may be agreed to by the Parent and the Company and specified
in the Certificate of Merger in accordance with applicable law. The date and
time when the Merger shall become effective is referred to herein as the
"Effective Time".
Section 1.4. Effect of the Merger. Upon becoming effective,
the Merger shall have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
properties, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
Section 1.5. Certificate of Incorporation; ByLaws. At the
Effective Time, (i) the Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation, and (ii) the ByLaws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation, in each case until duly amended in accordance with
applicable law.
Section 1.6. Directors and Officers. At the Effective Time,
the directors of Merger Sub immediately prior to the Effective Time shall become
the directors, and the officers of the Company immediately prior to the
Effective Time shall become the officers, of the Surviving Corporation, each
such director and officer to hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation and By-Laws of the Surviving
Corporation and applicable law. The Company shall use reasonable efforts to
cause each director of the Company and of its subsidiaries which are
corporations to tender his or her resignation prior to the Effective Time, each
such resignation to be effective as of the Effective Time.
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ARTICLE II
EFFECT OF THE MERGER ON SECURITIES
OF THE CONSTITUENT CORPORATIONS
Section 2.1. Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of any of the parties
hereto or the holders of any of the following securities:
(a) Each share of Common Stock, par value $.01 per share, of
the Company ("Company Common Stock") which is issued and outstanding
immediately prior to the Effective Time (other than any shares of
Company Common Stock to be cancelled pursuant to Section 2.1(b) and any
Dissenting Shares, as defined below) shall be converted into and
represent the right to receive (i) $21.30 in cash, plus, if the
Effective Time does not occur on or prior to November 18, 1996,
interest accruing at a fluctuating rate per annum equal to the prime
interest rate from time to time of Bankers Trust Company, compounded
daily, on $30.106 plus such accrued interest, for the period commencing
on November 18, 1996 and ending on the day on which the Effective Time
occurs (the "Cash Consideration"), and (ii) 0.2398 shares (as such
number may be adjusted in accordance with this Agreement, the "Exchange
Ratio") of Common Stock, par value $.01 per share, of the Parent
("Parent Common Stock"), subject to adjustment as provided in Section
2.2 (the "Stock Consideration" and, collectively together with the Cash
Consideration, the "Merger Consideration"); provided, however, that in
any event, if, between the date of this Agreement and the Effective
Time, the outstanding shares of Parent Common Stock shall have been
changed, reclassified or converted into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination, conversion or
exchange of shares, the Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination, conversion or exchange of shares.
All such shares of Company Common Stock shall no longer be outstanding
and shall automatically be cancelled, retired and extinguished and
shall cease to exist, and each certificate which immediately prior to
the Effective Time evidenced any such shares (other than any Dissenting
Shares) shall thereafter represent the right to receive, upon surrender
of such certificate in accordance with the provisions of Section 2.3,
the
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Merger Consideration into which such shares have been converted in
accordance herewith. The holders of certificates previously evidencing
shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect thereto
(including, without limitation, any rights to vote or to receive
dividends and distributions in respect of such shares), except as
otherwise provided herein or by law. No fractional share of Parent
Common Stock shall be issued and, in lieu thereof, a cash payment shall
be made pursuant to Section 2.3(e). Except as specified in clause (i)
immediately above, no interest will be paid or will accrue on any
Merger Consideration, any cash in lieu of fractional shares of Parent
Common Stock or any unpaid dividends or distributions in respect of
Parent Common Stock payable upon surrender of certificates of Company
Common Stock pursuant to this Article II.
(b) Each share of Company Common Stock owned by or held in the
treasury of the Company and each share of Company Common Stock owned by
the Parent or any direct or indirect wholly owned subsidiary of the
Company or the Parent immediately prior to the Effective Time shall be
automatically cancelled and extinguished without any conversion thereof
and shall cease to exist and no payment or consideration shall be made
or delivered with respect thereto.
(c) Each share of capital stock of Merger Sub which is issued
and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
Section 2.2. Adjustment to Exchange Ratio. (a) In the event
that the Final Parent Stock Price (as defined below) is equal to or
less than $34.89, or equal to or greater than $38.56, the Exchange
Ratio shall be subject to adjustment as follows:
(i) if the Final Parent Stock Price is equal to or less than
$31.22, then the Exchange Ratio shall be equal to the sum of 0.2398
plus the quotient obtained by dividing $0.8806 by the Final Parent
Stock Price;
(ii) if the Final Parent Stock Price is greater than $31.22
and equal to or less than $34.89, then the Exchange Ratio shall be
equal to the quotient obtained by dividing $8.3657 by the Final Parent
Stock Price;
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(iii) if the Final Parent Stock Price is equal to or greater
than $38.56 but less than $42.23, then the Exchange Ratio shall be
equal to the quotient obtained by dividing $9.2463 by the Final Parent
Stock Price;
(iv) if the Final Parent Stock Price is equal to or greater
than $42.23 but less than $44.07, then the Exchange Ratio shall be
equal to the difference of 0.2398 minus the quotient obtained by
dividing $0.8806 by the Final Parent Stock Price;
(v) if the Final Parent Stock Price is equal to or greater
than $44.07, then the Exchange Ratio shall be equal to the quotient
obtained by dividing $9.6866 by the Final Parent Stock Price.
The adjustments required by this Section 2.2(a) based upon
various Final Parent Stock Prices are set forth on Exhibit E hereto. This
Section 2.2(a) shall be interpreted in a manner consistent with Exhibit E.
(b) Notwithstanding anything herein to the contrary, except as
specified in the proviso in Section 2.1(a), the Exchange Ratio shall not be
subject to adjustment based upon the Final Parent Stock Price (whether pursuant
to this Section 2.2 or otherwise) if the Final Parent Stock Price is greater
than $34.89 and less than $38.56.
(c) For purposes hereof, the "Final Parent Stock Price" shall
mean the "volume-weighted average quote" of the reported sales prices per share
of the Parent Common Stock quoted on The Nasdaq Stock Market's National Market
("Nasdaq"), as reported by Bloomberg L.P., for the ten (10) consecutive trading
days (on which shares of the Parent Common Stock are actually traded)
immediately preceding the second business day prior to the Effective Time.
(d) Promptly after the close of trading on Nasdaq on the tenth
day of the ten trading days referred to in the immediately preceding paragraph,
the Parent and the Company shall issue a joint press release publicly announcing
the Exchange Ratio.
Section 2.3. Exchange of Certificates. (a) Exchange Agent. As
of the Effective Time, the Parent shall deposit, or cause to be deposited, with
or for the account of a bank or trust company to be designated by the Parent,
which is reasonably acceptable to the Company (the "Exchange Agent"), for the
benefit of the holders of shares
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of Company Common Stock (other than any Dissenting Shares), for exchange through
the Exchange Agent in accordance with this Article II, (i) cash in the aggregate
amount sufficient to pay the Cash Consideration for shares of Company Common
Stock converted pursuant to Section 2.1, and (ii) certificates evidencing the
shares of Parent Common Stock issuable in exchange for shares of Company Common
Stock pursuant to Section 2.1 (the cash and shares so deposited, together with
any dividends or distributions with respect to such shares, being hereinafter
referred to collectively as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the cash and shares of Parent
Common Stock required to be delivered pursuant to Section 2.1 out of the
Exchange Fund to holders of shares of Company Common Stock. Except as
contemplated by Section 2.3(f), the Exchange Fund shall not be used for any
other purpose. The Exchange Agent shall invest cash in the Exchange Fund, on a
daily basis, as directed by the Parent. Any interest, dividends or other income
earned on the investment of cash or other property held in the Exchange Fund
shall be for the account of and payable to the Parent.
(b) Exchange Procedures. As soon as reasonably practicable
(and in any event not later than three (3) business days) after the Effective
Time, the Parent will cause the Exchange Agent to mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
evidenced outstanding shares of Company Common Stock (other than any Dissenting
Shares) (the "Stock Certificates") and to each holder of record of a certificate
or instrument which immediately prior to the Effective Time evidenced any
outstanding Company Options (the "Option Certificates" and, collectively
together with the Stock Certificates, the "Certificates"), (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 at or following the
Effective Time and upon proper delivery of the Certificates to the Exchange
Agent and which shall be in form and substance reasonably satisfactory to the
Parent and the Company) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration with respect to the
shares of Company Common Stock or Company Options formerly represented thereby.
The Proxy Statement (as defined below) shall provide that, in lieu of delivery
following the Effective Time as aforesaid, and commencing on the tenth calendar
day prior to the date of the Company Stockholders' Meeting (as defined below),
the foregoing letter of transmittal and instructions for use will be promptly
delivered to each holder of record of a Certificate from whom the Exchange Agent
receives a written request
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therefor prior to the date of the Company Stockholders' Meeting, and that each
such holder of a Certificate shall be entitled thereafter to surrender such
Certificate in accordance with the procedures described herein, and the Parent
will cause the Exchange Agent to comply with the foregoing. Upon surrender of a
Stock Certificate for cancellation to the Exchange Agent together with such
letter of transmittal, duly executed, and such other customary documents as may
be required pursuant to such instructions, the holder of such Stock Certificate
shall be entitled at or following the Effective Time to receive in exchange
therefor (A) certificates evidencing that number of whole shares of Parent
Common Stock which such holder has the right to receive in accordance with
Section 2.1 in respect of the shares of Company Common Stock formerly evidenced
by such Certificate, (B) cash which such holder is entitled to receive in
accordance with Section 2.1, (C) cash in lieu of fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.3(e) and (D)
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.3(c), in each case less the amount of any withholding taxes which
may be required thereon, and the Stock Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of shares of
Company Common Stock which is not registered in the transfer records of the
Company, certificates evidencing the proper number of shares of Parent Common
Stock and cash may be issued and paid in accordance with this Article II to a
transferee if the Certificate evidencing such shares of Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence reasonably satisfactory to the
Parent that any applicable stock transfer taxes have been paid. Certificates
surrendered for exchange by any person constituting an "affiliate" of the
Company for purposes of Rule 145(c) of the Securities Act (as defined below),
shall not be exchanged until the Parent has received a written agreement from
such person as provided in Section 5.10. Until surrendered as contemplated by
this Section 2.3, each Stock Certificate shall be deemed at any time after the
Effective Time to represent and evidence only the right to receive upon such
surrender the Merger Consideration with respect to the shares of Company Common
Stock formerly represented thereby in accordance with this Section 2.3.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provision of this Agreement, no dividends or other
distributions declared or made after the Effective Time with respect to shares
of Parent Common Stock with a record date after the Effective
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Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock which such holder is entitled to receive,
and no Cash Consideration or cash in lieu of fractional shares shall be paid to
any such holder, until the holder of such Certificate shall surrender such
Certificate for exchange as provided herein. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to the
holder of the certificates evidencing whole shares of Parent Common Stock issued
in exchange therefor, without interest, (i) as promptly as reasonably
practicable following such surrender, the amount of any cash payable in lieu of
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.3(e) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore payable (and not paid)
with respect to such whole shares of Parent Common Stock, in each case less the
amount of any withholding taxes which may be required thereon, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender payable with respect to such whole shares of Parent
Common Stock, less the amount of any withholding taxes which may be required
thereon.
(d) No Further Rights in Company Common Stock. The shares of
Parent Common Stock issued and cash paid upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been made in full satisfaction of all rights pertaining to such
shares of Company Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by the
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement or prior to the date hereof and that remain unpaid at the
Effective Time.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and such fractional share interests will not entitle
the owner thereof to vote or to any rights as a stockholder of the Parent. In
lieu of any such fractional shares, each holder of Company Common Stock upon
surrender of a Certificate for exchange pursuant to this Section 2.3 shall be
paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (i) the Final Parent Stock Price by (ii) the
fractional interest to which such holder would otherwise be entitled (after
taking into account all
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shares of Company Common Stock then held of record by such holder).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Company Common Stock as of
the date which is twelve months after the Effective Time shall be delivered to
the Parent, upon demand, and any holders of Company Common Stock who have not
theretofore complied with this Article II shall thereafter look only to the
Parent (as unsecured general creditors thereof) for payment of the Merger
Consideration, and any cash in lieu of fractional shares and any unpaid
dividends or distributions with respect to Parent Common Stock, to which they
are entitled pursuant hereto.
(g) No Liability. Neither the Parent nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any cash, stock or other property delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Withholding Rights. The Parent or the Exchange Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as the Parent or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations promulgated thereunder (the
"Code"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by the Parent or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by the Parent or the Exchange Agent.
(i) Lost Certificates. In the event that any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Parent, the posting by such person of a bond in such
reasonable amount as the Parent may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration, and any cash in lieu of fractional shares and any unpaid
dividends or distributions with respect to Stock Consideration, to which they
are entitled pursuant hereto.
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Section 2.4. Stock Transfer Books. From and after the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers of shares of Company Common
Stock on the books and records of the Company or the Surviving Corporation. If,
after the Effective Time, any Certificates are presented to the Exchange Agent
or the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in this Article II.
Section 2.5. Stock Options. At the Effective Time, each
Company Option (as defined below) outstanding immediately prior thereto shall be
converted into and represent the right to receive (a) the Merger Consideration
into which the share or shares of Company Common Stock issuable upon exercise of
such Company Option would have been converted if such Company Option had been
exercised immediately prior to the Effective Time, reduced by (b) (i) the
aggregate exercise price for the shares of Company Common Stock then issuable
upon exercise of such Company Option and (ii) the amount of any withholding
taxes which may be required thereon (such reductions to be applied on a pro rata
basis against the Cash Consideration and the Stock Consideration comprising such
Merger Consideration, in the respective proportions which such Cash
Consideration and Stock Consideration bear to such Merger Consideration). All
such Company Options shall no longer be outstanding and shall automatically be
cancelled, retired and extinguished and shall cease to exist, and each Option
Certificate shall thereafter represent the right to receive, upon surrender of
such Option Certificate in accordance with Section 2.3, the Merger Consideration
into which such Company Options have been converted in accordance herewith. The
holders of Option Certificates shall cease to have any rights with respect
thereto, except as required by law. No fractional share of Parent Common Stock
shall be issued and, in lieu thereof, a cash payment shall be made in the same
manner as provided in Section 2.3(e) with respect to exchanges of Stock
Certificates. No interest will be paid or will accrue on any Merger
Consideration (except as specified in Section 2.1(a)(i)), any cash in lieu of
fractional shares of Parent Common Stock or any unpaid dividends or
distributions in respect of Parent Common Stock payable upon surrender of Option
Certificates pursuant to this Article II. From and after the date of this
Agreement, the Company shall not permit any additional options to purchase
shares of Company Common Stock to be issued or granted under the Company's stock
option plans or otherwise.
Section 2.6. Dissenting Shares. (a) Notwithstanding any
other provision of this Agreement to the
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contrary, shares of Company Common Stock that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall have
properly delivered a written demand for appraisal of such shares in accordance
with Section 262 of the DGCL and shall not have failed to perfect or shall not
have effectively withdrawn such demand or otherwise lost their appraisal rights
(the "Dissenting Shares") shall not be converted into or represent the right to
receive Merger Consideration. Such stockholders shall be entitled to have such
shares of Company Common Stock held by them appraised in accordance with the
provisions of Section 262 of the DGCL, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or shall have effectively
withdrawn or otherwise lost their right to appraisal of such shares of Company
Common Stock under such Section 262 shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive, without any interest thereon, the Merger Consideration
therefor, upon surrender in accordance with Section 2.3 of the Certificate or
Certificates that formerly evidenced such shares of Company Common Stock.
(b) The Company shall give the Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of demands for
appraisal, and any other instruments served pursuant to the DGCL and received by
the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
will not, except with the prior written consent of the Parent, make any payment
with respect to any demands for appraisal, or offer to settle, or settle, any
such demand for appraisal rights.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and
Merger Sub as follows:
Section 3.1. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted. The Company is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the property owned, leased or
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operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
qualified, licensed or in good standing would not have a material adverse effect
on the business, operations, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole ("Company
Material Adverse Effect"). The Company has heretofore delivered to the Parent
true and complete copies of the certificate of incorporation and by-laws, each
as amended to date, of the Company.
Section 3.2. Capitalization. (a) The authorized capital stock
of the Company consists of 100,000,000 shares of Company Common Stock and
10,000,000 shares of Preferred Stock, par value $.01 per share ("Company
Preferred Stock"). As of July 1, 1996, (i) 31,312,500 shares of Company Common
Stock were issued and outstanding, (ii) the number of shares of Company Common
Stock set forth on Section 3.2 of the Company Disclosure Schedule (and
identified as "Company Option Shares") were reserved for future issuance upon
exercise of outstanding options to purchase Company Common Stock ("Company
Options"), granted to directors, officers, employees and consultants of the
Company pursuant to the Company's 1995 Equity Participation Plan (the "Company
Incentive Plan"), (iii) no shares of Company Common Stock were held in the
treasury of the Company and (iv) no shares of Company Preferred Stock were
issued or outstanding or reserved for issuance. Since such date, no additional
shares of capital stock of the Company have been issued or reserved for issuance
(except for shares of Company Common Stock issued upon exercise of Company
Options granted as aforesaid), and no options or other rights to purchase or
otherwise acquire shares of capital stock of the Company have been issued or
granted (other than the Company Options identified on Section 3.2 of the Company
Disclosure Schedule as having been granted as aforesaid). Except as set forth
above in this paragraph, no shares of capital stock or other equity or voting
securities of the Company are issued, reserved for issuance, or outstanding. All
of the outstanding shares of capital stock of the Company are, and all shares
thereof which may be issued upon exercise of Company Options will upon issuance
be, duly authorized, validly issued, fully paid and nonassessable and free of
any preemptive rights.
(b) Except as set forth in Section 3.2 of the Disclosure
Schedule delivered by the Company to the Parent concurrently with the execution
of this Agreement (the "Company Disclosure Schedule"), (i) no bonds, debentures,
notes or other indebtedness or obligations of the Company or any of its
subsidiaries entitling the holders thereof to
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have the right to vote (or which are convertible into, or exercisable or
exchangeable for, securities entitling the holders thereof to have the right to
vote) with the stockholders of the Company or any of its subsidiaries on any
matter are issued, reserved for issuance, or outstanding, (ii) there are no
options, warrants, calls, subscriptions, convertible or exchangeable securities,
or other rights, agreements or commitments of any character obligating the
Company or any of its subsidiaries to grant, issue, transfer or sell, or cause
to be granted, issued, transferred or sold, any shares of capital stock, or any
other equity or voting security or equity or voting interest, of the Company or
any of its subsidiaries or obligating the Company or any of its subsidiaries to
grant, issue, extend or enter into any right, agreement or commitment with
respect to the foregoing, (iii) there are no obligations (absolute, contingent
or otherwise) of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock, or other equity or voting
security or equity or voting interest, of the Company or any of its
subsidiaries, and (iv) other than this Agreement, there are no voting trusts,
proxies or other agreements or understandings to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound with respect to the voting of any shares of capital stock, or any other
equity or voting security or interest, of the Company or any of its
subsidiaries.
(c) The Company has heretofore delivered to the Parent a true
and complete copy of the Company Incentive Plan, as amended to date. Section 3.2
of the Company Disclosure Schedule contains a true and complete list of (i) all
Company Options outstanding on the date hereof, (ii) the identity of the holders
or optionees thereof, (iii) the number of shares of Company Common Stock covered
by each such Company Option, and the exercise price per share thereof, and (iv)
the number of shares for which each such Company Option will be exercisable at
the Effective Time. The Compensation Committee of the Board of Directors of the
Company has taken all action necessary under the Company Incentive Plan to duly
and validly authorize the conversion of all Company Options in accordance with
Section 2.5, and no other proceedings on the part of the Company are necessary
to duly and validly authorize the transactions contemplated by Section 2.5.
Section 3.3. Subsidiaries. (a) Section 3.3 of the Company
Disclosure Schedule accurately sets forth (i) the name and jurisdiction of
incorporation or organization of each subsidiary of the Company, (ii) the
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authorized and outstanding capital stock of, or other equity interest in, each
such subsidiary, (iii) the amount of capital stock of, or other equity interest
in, each such subsidiary owned directly or indirectly by the Company or any of
its subsidiaries. Except as set forth in Section 3.3 of the Company Disclosure
Schedule (including the subsidiaries of the Company disclosed therein), the
Company does not directly or indirectly own any equity interest or equity
investment in any other person.
(b) Each of the subsidiaries of the Company is duly formed,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted. Each
of the subsidiaries of the Company is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
qualified, licensed or in good standing would not have a Company Material
Adverse Effect. The Company has heretofore made available to the Parent true and
complete copies of the certificate of incorporation, by-laws, partnership
agreement and all other charter or organization documents, each as amended to
date, of each subsidiary of the Company.
(c) All of the outstanding shares of capital stock of, or
other equity interests in, each of the subsidiaries of the Company are duly
authorized and validly issued and (in the case of shares of capital stock) are
fully paid and nonassessable, and (except as set forth in Section 3.3 of the
Company Disclosure Schedule) all such shares or other equity interests owned
directly or indirectly by the Company are owned free and clear of all liens,
security interests, claims, pledges, rights of first refusal, limitations on
voting rights, charges or other encumbrances of any nature whatsoever.
Section 3.4. Authorization, Validity and Enforceability. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and (subject only, with
respect to the Merger, to the approval and adoption of this Agreement by the
holders of a majority of the outstanding shares of Company Common Stock in
accordance with the DGCL) to consummate the Merger and the other transactions
contemplated hereby to be consummated by the Company. The execution, delivery
and performance of this Agreement by the Company and the consummation by the
Company of the Merger
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and the other transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement or the
consummation of the Merger or the other transactions contemplated hereby (other
than, with respect to the Merger, the approval and adoption of this Agreement by
the holders of a majority of the outstanding shares of Company Common Stock in
accordance with the DGCL). This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equitable
remedies may be limited by the application of general principles of equity
(regardless of whether such equitable principles are applied in a proceeding at
law or in equity).
Section 3.5. No Conflict or Violation. Subject to (i) making
the filings and obtaining the approvals identified in Section 3.6 and (ii)
obtaining the material non-governmental consents identified in Section 3.5 of
the Company Disclosure Schedule and (iii) the approval and adoption of this
Agreement by the holders of a majority of the outstanding shares of Company
Common Stock in accordance with the DGCL, the execution and delivery of this
Agreement by the Company do not, and the performance by the Company of its
obligations hereunder and the consummation by the Company of the Merger and the
other transactions pursuant hereto will not, (a) conflict with or violate the
certificate of incorporation, by-laws, partnership agreement or other charter or
organization document of the Company or any of its subsidiaries, (b) conflict
with or violate any material law, statute, rule, regulation, order, judgment,
writ, injunction or decree applicable to the Company or any of its subsidiaries
or any of their respective properties or assets, or (c) result in a violation or
breach of or constitute a default under (or an event which with the giving of
notice or the lapse of time or both would constitute a default under), require
any consent, approval or authorization under, result in the loss of a material
benefit or result in any provision becoming applicable or effective under, or
give rise to any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of the Company or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract,
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agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any material property or asset of the
Company or any of its subsidiaries may be bound or affected, except in the case
of each of clauses (b) and (c) for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
be reasonably likely to result in a Company Material Adverse Effect or prevent
the Company from performing its obligations under this Agreement in any material
respect.
Section 3.6. Consents and Approvals. The execution and
delivery of this Agreement by the Company do not, and the performance by the
Company of its obligations hereunder and the consummation by the Company of the
Merger and the other transactions contemplated hereby will not, require the
Company to obtain any consent, approval, authorization or permit of, or to make
any filing with or notification to, any federal, state, local, foreign or other
governmental, judicial or regulatory authority (each a "Governmental Entity"),
except (a) for (i) applicable requirements, if any, of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), state securities or "blue sky" laws ("Blue Sky
Laws"), and state antitakeover laws, (ii) the pre-merger notification and report
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (iii) filing
and recordation of the Certificate of Merger as required by the DGCL, (iv)
consents, approvals, authorizations, orders, permits, filings or registrations
related to, or arising out of, compliance with statutes, rules or regulations
regulating the consumption, sale or serving of alcoholic beverages and (v)
filings relating to the matters set forth in Section 5.17 or 5.18, and (b) where
the failure to obtain such consents, approvals, authorizations and permits, or
to make such filings or notifications, would not, individually or in the
aggregate, prevent the Company from performing its obligations under this
Agreement in any material respect or from consummating the Merger or any other
transaction pursuant hereto.
Section 3.7. SEC Documents and Financial Statements. (a) The
Company has filed all forms, reports, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the "SEC") since
July 26, 1995 (such forms, reports, statements and other documents, excluding
the Proxy Statement referred to
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below, are hereinafter referred to as the "Company SEC Documents"). The Company
SEC Documents filed by the Company with the SEC prior to and after the date of
this Agreement (i) complied, or will comply, when filed, in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act, and the rules and regulations thereunder, and (ii) did not, or will not,
when filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including,
in each case, any related notes or schedules thereto) contained in or
incorporated by reference in the Company SEC Documents filed prior to and after
the date of this Agreement (i) have been or will be prepared in accordance with
the published rules and regulations of the SEC and United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited consolidated quarterly statements, as permitted by Form 10-Q
of the SEC) and (ii) fairly present or will fairly present in all material
respects the consolidated financial position of the Company and its subsidiaries
as of the respective dates thereof and the consolidated results of operations
and cash flows of the Company and its subsidiaries for the periods indicated
therein (subject, in the case of unaudited interim financial statements, to
normal recurring year-end audit adjustments which would not be material in
amount or effect).
(c) No subsidiary of the Company is required to file any
report, form or other document with the SEC. Red Lion Inns Limited Partnership,
a Delaware limited partnership (the "MLP"), has filed all forms, reports,
statements and other documents required to be filed by it with the SEC since
January 1, 1993 (such forms, reports, statements and other documents are
hereinafter referred to as the "MLP SEC Documents"). The MLP SEC Documents filed
by the MLP with the SEC prior to and after the date of this Agreement (i)
complied, or will comply, when filed, in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations thereunder, and (ii) did not, or will not, when filed, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
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misleading. Each of the consolidated financial statements (including, in each
case, any related notes or schedules thereto) contained in or incorporated by
reference in the MLP SEC Documents filed prior to and after the date of this
Agreement (A) have been or will be prepared in accordance with the published
rules and regulations of the SEC and GAAP applied on a consistent basis
throughout the periods involved (except, in the case of MLP SEC Documents filed
prior to the date of this Agreement, as may be indicated in the notes thereto
or, in the case of unaudited consolidated quarterly statements, as permitted by
Form 10-Q of the SEC) and (B) fairly present or will fairly present in all
material respects the consolidated financial position of the MLP and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows of the MLP and its subsidiaries for the periods
indicated therein (subject, in the case of unaudited interim financial
statements, to normal recurring year-end audit adjustments which would not be
material in amount or effect).
Section 3.8. No Undisclosed Liabilities. Neither the Company
nor any of its subsidiaries has any debts, liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or disclosed or reserved against in, a consolidated
balance sheet of the Company and its subsidiaries or in the notes thereto,
prepared in accordance with GAAP consistently applied, except for (a) debts,
liabilities and obligations that were so reserved on, or disclosed or reflected
in, the consolidated balance sheet of the Company and its subsidiaries as of
June 30, 1996 and the notes thereto, included in the Quarterly Report on Form
10-Q of the Company for the quarter then ended, or the consolidated balance
sheet of the Company and its subsidiaries as of December 31, 1995 and the notes
thereto, included in the Annual Report on Form 10-K of the Company for the year
then ended, and (b) debts, liabilities or obligations arising in the ordinary
course of business since June 30, 1996.
Section 3.9. Absence of Certain Changes. Since December 31,
1995, except as disclosed in the Company SEC Documents filed with the SEC prior
to the date of this Agreement or as specifically contemplated by this Agreement
or as set forth in Section 3.9 of the Company Disclosure Schedule, (a) the
Company and its subsidiaries have conducted their respective businesses only in
the ordinary course and in a manner consistent with past practice and (b) there
has not been (i) any change, event, occurrence or circumstance in the business,
operations, properties, financial condition or results of operations of the
Company
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or any of its subsidiaries which, individually or in the aggregate, has had or
is reasonably likely to have a Company Material Adverse Effect (except for
changes, events, occurrences or circumstances (A) with respect to general
economic or industry conditions and (B) arising as a result of the transactions
contemplated hereby), (ii) any material change by the Company in its accounting
methods, principles or practices, (iii) any declaration, setting aside or
payment of any dividend or distribution or capital return in respect of any
capital stock of, or other equity interest in, the Company or any of its
subsidiaries (other than dividends by such subsidiaries in accordance with their
respective charters or partnership agreements, as the case may be, (iv) any
material revaluation for financial statement purposes by the Company or any of
its subsidiaries of any asset (including, without limitation, any writing down
of the value of any property, investment or asset or writing off of notes or
accounts receivable), (v) other than payment of compensation for services
rendered to the Company or any of its subsidiaries in the ordinary course of
business or the grant of Company Options as described in Section 3.2 or any
transactions described in Section 3.12 of the Company Disclosure Schedule, any
material transactions between the Company or any of its subsidiaries, on the one
hand, and any (A) officer or director of the Company or any of its subsidiaries,
(B) record or beneficial owner of five percent (5%) or more of the voting
securities of the Company, or (C) affiliate of any such officer, director or
beneficial owner, on the other hand, or (vi) other than pursuant to the terms of
the plans, programs or arrangements specifically referred to in Section 3.12 or
Section 5.14 or in the ordinary course of business consistent with past
practice, any increase in or establishment of any bonus, insurance, welfare,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any employees, officers, directors
or consultants of the Company or any of its subsidiaries, which increase or
establishment, individually or in the aggregate, will result in a material
liability.
Section 3.10. Litigation. Except as disclosed in the Company
SEC Documents filed with the SEC prior to the date of this Agreement, there is
no action, suit, claim, proceeding or investigation pending or, to the knowledge
of the Company, threatened against the Company or any of its subsidiaries or any
properties or assets of the Company or any of its subsidiaries by or before any
court, other
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Governmental Entity or arbitrator which is material or which could reasonably be
expected to prevent or substantially delay consummation of the Merger or any of
the other transactions contemplated hereby in any material respect, or otherwise
prevent the Company from performing its obligations under this Agreement in any
material respect. Except as disclosed in the Company SEC Documents filed with
the SEC prior to the date of this Agreement, neither the Company nor any of its
subsidiaries nor any property or asset of the Company or any of its subsidiaries
is subject to any order, writ, injunction, judgment, decree or award which is
material or which could reasonably be expected to prevent or substantially delay
consummation of the Merger or any of the other transactions pursuant hereto in
any material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect.
Section 3.11. Compliance. The Company is not in conflict with,
or in default or violation of, and none of its subsidiaries is in conflict in
any material respect with, or in default or violation in any material respect
of, its respective certificate of incorporation, by-laws, partnership agreement
or other charter or organization documents. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (a) any
material law, statute, rule, regulation, order, judgment, writ, injunction or
decree applicable to the Company or any of its subsidiaries or any of their
respective properties or assets (excluding any law, statute, rule, regulation or
order relating to the consumption, sale or serving of alcoholic beverages), or
(b) any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any material property or asset of the Company or any of its
subsidiaries may be bound or affected. The Company and its subsidiaries hold all
material licenses, permits, approvals and other authorizations of Governmental
Entities, and are in substantial compliance with all applicable laws and
governmental regulations in connection with their businesses as now being
conducted.
Section 3.12. Employee Benefit Plans. (a) Section 3.12(a) of
the Company Disclosure Schedule sets forth each plan which is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and each
other material agreement, arrangement or commitment which is an employment or
consulting agreement, executive or incentive compensation plan, bonus plan,
deferred
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compensation agreement, employee pension, profit sharing, savings or retirement
plan, employee stock option or stock purchase plan, group life, health, or
accident insurance or other employee benefit plan, agreement, arrangement or
commitment, including, without limitation, any commitment arising under the laws
of any jurisdiction, severance, holiday, vacation, Christmas or other bonus
plans, maintained by the Company or any of its subsidiaries for any present or
former employees, officers or directors of the Company or any of its
subsidiaries ("Company Personnel") or with respect to which the Company or any
of its subsidiaries has liability or makes or has an obligation to make
contributions (each, a "Company Employee Plan").
(b) The Company has made available to the Parent (i) copies of
all Company Employee Plans or in the case of an unwritten plan, a written
description thereof, (ii) copies of the most recent annual, financial or
actuarial reports and Internal Revenue Service determination letters relating to
such Company Employee Plans and (iii) copies of all summary plan descriptions
(whether or not required to be furnished under ERISA) and employee
communications relating to such Company Employee Plans and distributed to
Company Personnel, in each case under this clause (iii), existing or in effect
during or within the past five years.
(c) There are no Company Personnel who are entitled to any
medical, dental or life benefit to be paid after termination of employment other
than required by Section 601 of ERISA, Section 4980B of the Code or applicable
state law.
(d) Each Company Employee Plan that is an employee welfare
benefit plan under Section 3(1) of ERISA is either (i) funded through an
insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the Code or (ii) is unfunded. There is no material
liability in the nature of a retroactive rate adjustment or loss-sharing or
similar arrangement, with respect to any Company Employee Plan which is an
employee welfare benefit plan.
(e) All contributions or payments due with respect to any
periods prior to the Effective Time under any Company Employee Plan have been
made or appropriate charges have been made on the financial statements. Except
as described in Section 3.12(h), each Company Employee Plan by its terms and
operation is in substantial compliance with all applicable laws (including, but
not limited to, ERISA,
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the Code and the Age Discrimination in Employment Act of 1967, as amended).
(f) There are no actions, suits or claims pending or
threatened (other than routine noncontested claims for benefits) and, to the
knowledge of the Company, no set of circumstances exist which may reasonably
give rise to such a claim against any Company Employee Plan or administrator or
fiduciary of any such Company Employee Plan which reasonably likely to result in
a Company Material Adverse Effect. As to each Company Employee Plan for which an
annual report is required to be filed under ERISA or the Code, all such filings,
including schedules, have been made on a timely basis.
(g) Other than the multiemployer plan identified as such in
Section 3.12(g) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries (or any entity that is or was at any time required to be
aggregated with the Company or any of its subsidiaries under Section 414(b),
(c), (m) or (o) of the Code) (the "ERISA Controlled Group") has at any time
maintained, contributed to or been required to contribute to any plan subject to
Title IV of ERISA or Section 412 of the Code. The withdrawal liability that the
Company, any of its subsidiaries or any member of their respective ERISA
Controlled Groups would incur if any such entity were to completely withdraw as
of the date hereof from the foregoing multiemployer plan to which it is required
to contribute would not exceed $1,000,000.
(h) The Employee Retirement Savings Plan maintained by the
Company (the "401(k) Plan") has received a favorable determination letter from
the Internal Revenue Service which provides that the 401(k) Plan is qualified
under Sections 401(a) and 401(k) of the Code (the "IRS Letter"). The liability
of the Company and its subsidiaries in connection with the application for a
compliance statement pursuant to Revenue Procedure 94-62 (the "VCR Application")
does not exceed $600,000. Other than items for which relief has been requested
pursuant to the VCR Application, nothing has occurred since the date of the most
recent IRS Letter to cause such letter to be no longer valid or effective.
(i) Neither the Company nor any of its subsidiaries (or, to
the knowledge of the Company, any other person, including any fiduciary) has
engaged in any "prohibited transaction" (as defined in Section 4975 of the Code
or Section 406 of ERISA), which could subject any of the Company Employee Plans
(or their trusts), the Company,
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any of its subsidiaries or any person whom, the Company or any of its
subsidiaries has an obligation to indemnify, to any material tax or penalty
imposed under Section 4975 of the Code or Section 502 of ERISA.
(j) None of the assets of the Company Employee Plans is
invested in any property constituting employer real property or an employer
security within the meaning of Section 407(d) of ERISA.
(k) Except as set forth on Section 3.12(k) of the Company
Disclosure Schedule or as required under this Agreement, the events contemplated
by this Agreement (either alone or together with any other event) will not (i)
entitle any Company Personnel to severance pay or other similar payments under
any Company Employee Plan or law, (ii) accelerate the time of payment or vesting
or increase the amount of benefits due under any Company Employee Plan or
compensation to any Company Personnel, (iii) result in any payments (including
parachute payments) under any Company Employee Plan or law becoming due to any
Company Personnel, or (iv) terminate or modify or give a third party a right to
terminate or modify the provisions or terms of any Company Employee Plan.
Section 3.13. Labor Matters. Except as set forth in Section
3.13 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is a party to any collective bargaining or other labor union
contracts applicable to any person employed by the Company or any of its
subsidiaries. There is no pending or, to the knowledge of the Company,
threatened material labor dispute, strike or work stoppage against the Company
or any of its subsidiaries. Neither the Company nor its subsidiaries, nor their
respective representatives or employees, has committed any material unfair labor
practices in connection with the operation of the respective businesses of the
Company or its subsidiaries, and there is no pending or, to the knowledge of the
Company, threatened charge or complaint against the Company or its subsidiaries
by the National Labor Relations Board or any comparable state agency which, if
adversely determined, would have a Company Material Adverse Effect.
Section 3.14. Tax Matters. (a) For purposes of this Agreement:
(i) "Taxes" means any federal, state, county, local or foreign taxes, charges,
fees, levies, or other assessments, including, without limitation, all net
income, gross income, sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipt, capital stock,
business and occupation, disability, employment, payroll, license,
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estimated, or withholding taxes or charges imposed by any governmental entity,
and includes any interest and penalties on or additions to any such taxes (and,
in the case of the Company and the Parent, Taxes for which the Company, the
Parent, and/or any of their subsidiaries, as the case may be, may be liable in
its own right, or as the transferee of the assets of, or as successor to, any
other corporation, association, partnership, joint venture, or other entity, or
under Treasury Regulation Section 1.1502-6 or any similar provision of state or
local law); and (ii) "Tax Return" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, (A) in the case of the Company, combined
or consolidated returns for any group of entities that includes the Company or
any of its subsidiaries, and (B) in the case of the Parent, combined or
consolidated returns for any group of entities that includes the Parent or any
of its subsidiaries.
(b) The Company and each of its subsidiaries, the MLP (which
for purposes of this Section 3.14 includes Red Lion Inns Operating L.P.), and
any affiliated group (within the meaning of Code Section 1504) of which the
Company or any of its subsidiaries is or was a member, have (i) filed all
federal income and material state Tax Returns required to be filed by applicable
law and all such federal income and material state Tax Returns (A) were true,
complete and correct in all respects (and as to Tax Returns not filed as of the
date hereof but filed at or prior to the Effective Time, will be true, complete
and correct in all respects) (B) reflect the liability for Taxes of the Company
and each of its subsidiaries and the MLP, and (C) were filed on a timely basis
and (ii) within the time and in the manner prescribed by law, paid (and until
the Effective Time will pay within the time and in the manner prescribed by law)
all Taxes that were or are due and payable as set forth in such Tax Returns.
(c) Each of the Company, the MLP and, where applicable, the
Company's subsidiaries has established (and until the Effective Time will
maintain) on its books and records reserves adequate to pay all Taxes of the
Company, the MLP or such respective subsidiary, as the case may be, in
accordance with GAAP, which are reflected in the most recent consolidated
financial statements of the Company and its subsidiaries and the MLP contained
in the Company SEC Documents and/or the MLP SEC Documents, as applicable, to the
extent required by GAAP.
(d) There are no, and, as of the Effective Time, there will be
no liens for Taxes, which in the aggregate
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exceed $500,000 upon the assets of the Company and/or any of its subsidiaries
and/or the MLP except liens for Taxes not yet due or payable, or not yet
delinquent.
(e) Each of the Company and its subsidiaries and the MLP has
complied (and until the Effective Time will comply) in all material respects
with the provisions of the Code relating to the payment and withholding of
Taxes, including, without limitation, the withholding and reporting requirements
under Code Sections 1441 through 1464, 3401 through 3406, and 6041 through 6049,
as well as similar provisions under any other laws, and has, within the time and
in the manner prescribed by law, withheld from employee wages and paid over to
the proper governmental authorities all amounts required.
(f) Except as disclosed in Section 3.14(f) of the Company
Disclosure Schedule, neither the Company nor any subsidiary thereof nor the MLP
has requested any extension of time within which to file any federal income Tax
Return or any state income or franchise Tax Return, which Tax Return has not
been filed as of the date hereof.
(g) Neither the Company nor any subsidiary thereof nor the MLP
has executed any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any federal income
Taxes, federal income Tax Returns, state income or franchise Taxes or state
income or franchise Tax Returns.
(h) No deficiency for any Tax which, alone or in the aggregate
with any other deficiency or deficiencies, would exceed $500,000, has been
proposed, asserted, or assessed against the Company and/or any subsidiary
thereof and/or the MLP that has not been resolved and paid in full or otherwise
settled, no audits or other administrative proceedings are presently in progress
or pending or threatened in writing with regard to any Taxes or Tax Returns of
the Company and/or any subsidiary thereof and/or the MLP, and no written claim
is currently being made by any authority in a jurisdiction where any of the
Company or any subsidiary thereof or the MLP, as the case may be, does not file
Tax Returns that it is or may be subject to Tax in that jurisdiction.
(i) Except as disclosed on Section 3.14(i) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries nor the MLP
has received a Tax Ruling (as defined below) or entered into a Closing Agreement
(as defined below) with the Internal Revenue Service that would have any
continuing effect after the Effective Time. "Tax
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Ruling" shall mean a written ruling of the Internal Revenue Service or a state
taxing authority relating to Taxes. "Closing Agreement" shall mean a written and
legally binding agreement with a Taxing authority relating to Taxes.
(j) The Company and each of its subsidiaries and the MLP have
made available (or, in the case of Tax Returns filed after the date hereof, will
make available at such time and place as the Parent may reasonably request) to
the Parent complete and accurate copies of such Tax Returns, and amendments
thereto, filed by the Company and/or its subsidiaries and/or the MLP as the
Parent may reasonably request.
(k) Except as disclosed on Section 3.14(k) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries nor the MLP
is a party to any agreement relating to allocating or sharing of the payment of,
or liability for, Taxes.
(l) Neither the Company nor any of its subsidiaries nor the
MLP is required to include in income any adjustment pursuant to Code Section
481.
(m) Neither the Company nor any of its subsidiaries nor the
MLP has made or entered into, or holds any assets subject to, a consent filed
pursuant to Section 341(f) of the Code and the regulations thereunder.
(n) Except as set forth in Section 3.14(n) of the Company
Disclosure Schedule, the disallowance of a deduction under Section 162(m) of the
Code for the employee remuneration will not apply to any amount paid or payable
by the Company or any of its subsidiaries or the MLP under any contract, plan,
program, arrangements or understanding currently in effect.
(o) Assuming that the Effective Time occurs in 1996, the total
aggregate amounts that may be characterized as excess parachute payments (within
the meaning of Code Section 280(G)(b)(1)), and the related Excise Tax Gross Up
Payments (within the meaning of the Severance Agreements and the SERP), with
respect to the Company and/or any subsidiary thereof and/or the MLP will not
exceed $12,400,000 and $7,200,000, respectively, provided that any amount under
the Management Bonus Plan (or any similar plan maintained by Parent and/or any
subsidiary thereof) shall not be considered a parachute payment.
(p) Except as disclosed on Section 3.14(p) of the Company
Disclosure Schedule, there is no unresolved issue of
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law or fact arising out of a notice of deficiency, proposed deficiency or
assessment from the Internal Revenue Service or any other taxing authority with
respect to Taxes of the Company or any of its subsidiaries or the MLP.
(q) To the best of the knowledge of the Company, there are no
deferred intercompany gains, intercompany gains that have not yet been taken
into account, or excess loss accounts (within the meaning of the Treasury
Regulations under Code Section 1502) with respect to the Company or any of its
subsidiaries.
(r) To the best of the knowledge of the Company, no foreign
person directly or indirectly holds (within the meaning of Code section
897(c)(3)) more than 5 percent of the stock of the Company.
Section 3.15. Properties. Section 3.15 of the Company
Disclosure Schedule contains a true and complete list (identifying the relevant
owners, lessors and lessees) of all real properties owned or leased by the
Company or any of its subsidiaries. Each of the Company and its subsidiaries has
good and marketable title to all properties, assets and rights of any kind
whatsoever (whether real, personal or mixed, and whether tangible or intangible)
owned by it (collectively, the "Company Assets"), in each case free and clear of
any mortgage, security interest, deed of trust, claim, charge, title defect or
other lien or encumbrance, except (a) as shown on the consolidated balance sheet
of the Company and its subsidiaries dated June 30, 1996 and the notes thereto,
and the consolidated balance sheet of the Company and its subsidiaries dated as
of December 31, 1995 and the notes thereto, each as contained in the Company SEC
Documents, (b) for any mortgage, security interest, deed of trust, claim,
charge, title defect or other lien or encumbrance arising by reason of (i)
taxes, assessments or governmental charges not yet delinquent or which are being
contested in good faith, (ii) deposits to secure public or statutory obligations
in lieu of surety or appeal bonds entered into in the ordinary course of
business, and (iii) operation of law in favor of carriers, warehousemen,
landlords, mechanics, materialmen, laborers, employees or suppliers, incurred in
the ordinary course of business for sums which are not yet delinquent or are
being contested in good faith by negotiations or by appropriate proceedings
which suspend the collection thereof ("Permitted Liens"), or (c) as set forth on
Section 3.15 of the Company Disclosure Schedule. Except as set forth in Section
3.15 of the Company Disclosure Schedule, there are no pending or, to the
knowledge of the Company, threatened condemnation proceedings against or
affecting any material
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Company Assets, and none of the material Company Assets is subject to any
commitment or other arrangement for its sale to a third party outside the
ordinary course of business.
Section 3.16. Environmental Matters. Neither the Company nor
any of its subsidiaries is the subject of any federal, state, local or foreign
investigation, and neither the Company nor any of its subsidiaries has received
any notice or claim, nor entered into any negotiations or agreements with any
third party, relating to any material liability or remedial action or potential
material liability or remedial action under any Environmental Laws (as defined
below). There are no pending or, to the knowledge of the Company, threatened
actions, suits, claims or proceedings against or affecting the Company or any of
its subsidiaries or any of their properties, assets or operations in connection
with any such Environmental Laws. The properties, assets and operations of the
Company and its subsidiaries are in compliance in all material respects with all
applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and worker
health and safety and to the protection and clean-up of natural environment and
activities or conditions relating thereto, including, without limitation, those
relating to the generation, handling, disposal, transportation or release of
hazardous materials (collectively, "Environmental Laws"), except as disclosed in
the "Phase I" and other reports identified in Section 3.16 of the Company
Disclosure Schedule (true and complete copies of which have been made available
to the Parent).
Section 3.17. Material Contracts and Commitments. (a) Section
3.17 of the Company Disclosure Schedule contains a true and complete list of all
of the following contracts, agreements and commitments, whether oral or written
("Contracts"), to which the Company or any of its subsidiaries is a party or by
which any of them or any of their material Company Assets is bound, as each such
contract or commitment may have been amended, modified or supplemented:
(i) all Contracts pursuant to which the Company or its
subsidiaries holds a leasehold interest in one or more hotel
facilities;
(ii) all Contracts providing for management of any hotel by
the Company or any of its subsidiaries or management by any other
person of a hotel owned or leased by the Company or any of its
subsidiaries;
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(iii) all Contracts granting a franchise or license to utilize
a brand name or other rights of a hotel chain or system;
(iv) all partnership, joint venture or limited liability
company Contracts with any person;
(v) all loan agreements, notes, bonds, debentures, debt
instruments, evidences of indebtedness, debt securities, or other
Contracts relating to any indebtedness of the Company or any of its
subsidiaries in an amount in excess of $1,000,000, or involving the
direct or indirect guaranty or suretyship by the Company or any of its
subsidiaries of any indebtedness in an amount in excess of $1,000,000;
(vi) all Contracts (entered into since the formation of the
Company) relating to any merger, consolidation, business combination,
share exchange, business acquisition, or for the purchase, acquisition,
sale or disposition of any Company Assets outside the ordinary course
of business; and
(vii) all stockholder Contracts to which the Company or any of
its subsidiaries is a party; and all other Contracts entered into by
the Company or any of its subsidiaries with stockholders of the Company
who are beneficial owners of five percent or more of the voting
securities of the Company.
(b) The Company has heretofore made available to the Parent
true and complete copies of all of the Contracts required to be set forth in
Section 3.17 of the Company Disclosure Schedule. Each such Contract is valid and
binding in accordance with its terms, and is in full force and effect (except as
set forth in Section 3.17 of the Company Disclosure Schedule). Neither the
Company nor any of its subsidiaries is in default in any material respect with
respect to any such Contract, nor (to the knowledge of the Company) does any
condition exist that with notice or lapse of time or both would constitute such
a material default thereunder. To the knowledge of the Company, no other party
to any such Contract is in default in any material respect with respect to any
such Contract. Except as set forth in Section 3.17 of the Company Disclosure
Schedule, no party has given any written or (to the knowledge of the Company)
oral notice of termination or cancellation of any such Contract or that it
intends to assert a breach of, or seek to terminate or cancel, any such Contract
as a result of the transactions contemplated hereby.
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Section 3.18. Intellectual Property. The Company and its
subsidiaries own or possess adequate licenses or other valid rights to use all
material trademarks, trademark rights, trade names, trade name rights,
copyrights, patents, patent rights, service marks, trade secrets, applications
for trademarks and for service marks, and other proprietary rights and
information used or held for use in connection with the business of the Company
and its subsidiaries as currently conducted, and the Company has no knowledge of
any assertion or claim challenging the validity of any of the foregoing.
Section 3.19. Opinion of Financial Advisor. The Company has
received the opinion of Smith Barney Inc. to the effect that the Merger
Consideration to be received by the stockholders of the Company (other than the
Parent and its affiliates) is fair to such stockholders from a financial point
of view.
Section 3.20. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of its affiliates, other than Smith
Barney Inc. (the fees and expenses of which shall be paid in full by the
Company). The Company has heretofore furnished to the Parent a true and complete
copy of all agreements between the Company and such firm pursuant to which such
firm would be entitled to any payment relating to the Merger or the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent hereby represents and warrants to the Company as
follows:
Section 4.1. Organization and Qualification. Each of the
Parent and Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. The Parent is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the
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failure to be so qualified, licensed or in good standing would not have a
material adverse effect on the business, operations, properties, financial
condition or results of operations of the Parent and its subsidiaries, taken as
a whole (a "Parent Material Adverse Effect"). The Parent has heretofore
delivered to the Company true and complete copies of the certificate of
incorporation, by-laws and all other charter or similar organization documents,
each as amended to date, of the Parent and Merger Sub.
Section 4.2. Capitalization. (a) The authorized capital stock
of the Parent consists of 100,000,000 shares of Parent Common Stock and
5,000,000 shares of Preferred Stock, par value $.01 per share ("Parent Preferred
Stock"). As of July 15, 1996, (i) 23,077,461 shares of Parent Common Stock were
issued and outstanding, (ii) 1,760,275 shares of Parent Common Stock were
reserved for future issuance upon exercise of outstanding options to purchase
Parent Common Stock ("Parent Options"), granted to directors, officers,
employees and consultants of the Parent pursuant to the Parent's 1994 Equity
Participation Plan, (iii) no shares of Parent Common Stock were held in the
treasury of the Parent and (iv) no shares of Parent Preferred Stock were issued
or outstanding or reserved for issuance. Since such date, no additional shares
of capital stock of the Parent have been issued or reserved for issuance, and no
options or other rights to purchase or otherwise acquire shares of capital stock
of the Parent have been issued or granted, other than (A) shares of Parent
Common Stock issued upon exercise of Parent Options granted as aforesaid, (B) as
contemplated hereby and (C) as described in Section 4.2 of the Disclosure
Schedule delivered by the Parent to the Company concurrently with the execution
of this Agreement (the "Parent Disclosure Schedule"). Except as set forth above
in this paragraph, no shares of capital stock or other equity or voting
securities of the Parent are issued, reserved for issuance, or outstanding. All
of the outstanding shares of capital stock of the Parent are, and all shares
thereof which may be issued upon exercise of Parent Options will upon issuance
be, duly authorized, validly issued, fully paid and nonassessable and free of
any preemptive rights. The shares of Parent Common Stock to be issued to holders
of Company Common Stock in connection with the Merger have been duly authorized
and, when issued and delivered to such holders in accordance with this
Agreement, will be validly issued, fully paid and nonassessable and free of any
preemptive rights.
(b) Except as contemplated hereby or as set forth in Section
4.2 of the Parent Disclosure Schedule, (i) no
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bonds, debentures, notes or other indebtedness or obligations of the Parent or
any of its subsidiaries entitling the holders thereof to have the right to vote
(or which are convertible into, or exercisable or exchangeable for, securities
entitling the holders thereof to have the right to vote) with the stockholders
of the Parent or any of its subsidiaries on any matter are issued, reserved for
issuance, or outstanding, (ii) there are no options, warrants, calls,
subscriptions, convertible or exchangeable securities, or other rights,
agreements or commitments of any character obligating the Parent or any of its
subsidiaries to grant, issue, transfer or sell, or cause to be granted, issued,
transferred or sold, any shares of capital stock, or any other equity or voting
security or equity or voting interest, of the Parent or any of its subsidiaries
or obligating the Parent or any of its subsidiaries to grant, issue, extend or
enter into any right, agreement or commitment with respect to the foregoing,
(iii) there are no obligations (absolute, contingent or otherwise) of the Parent
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock, or other equity or voting security or equity or voting
interest, of the Parent or any of its subsidiaries, and (iv) there are no voting
trusts, proxies or other agreements or understandings to which the Parent or any
of its subsidiaries is a party or by which the Parent or any of its subsidiaries
is bound with respect to the voting of any shares of capital stock, or any other
equity or voting security or interest, of the Parent or any of its subsidiaries.
(c) The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, par value $.01 per share ("Merger Sub Common
Stock"), of which 100 shares are issued and outstanding. The Parent owns
directly all the outstanding shares of Merger Sub Common Stock. The outstanding
shares of Merger Sub Common Stock are duly authorized, validly issued, fully
paid and nonassessable and free of any preemptive rights.
Section 4.3. Subsidiaries. (a) Section 4.3 of the Parent
Disclosure Schedule accurately sets forth the name and jurisdiction of
incorporation or organization of each subsidiary of the Parent. Each of the
subsidiaries of the Parent is duly formed, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Each of the subsidiaries of the Parent is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in
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which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so qualified, licensed or in good standing would not have a
Parent Material Adverse Effect. The Parent has heretofore made available to the
Company true and complete copies of the certificate of incorporation, by-laws,
partnership agreement and all other charter or organization documents, each as
amended to date, of each subsidiary of the Parent.
(b) All of the outstanding shares of capital stock of, or
other equity interests in, each of the subsidiaries of the Parent are duly
authorized and validly issued and (in the case of shares of capital stock) are
fully paid and nonassessable, and (except as set forth in Section 4.3 of the
Parent Disclosure Schedule) all such shares or other equity interests owned
directly or indirectly by the Parent are owned free and clear of all liens,
security interests, claims, pledges, rights of first refusal, limitations on
voting rights, charges or other encumbrances of any nature whatsoever.
Section 4.4. Authorization, Validity and Enforceability. Each
of the Parent and Merger Sub has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and
(subject only to the approval, by the holders of a majority of the total votes
cast in person or by proxy at a duly called and held meeting of holders of
Parent Common Stock, of the issuance of Parent Common Stock pursuant to this
Agreement, as required under the rules and requirements of Nasdaq (the "Parent
Stockholder Approval")) to consummate the Merger and the other transactions
contemplated hereby to be consummated by the Parent. The execution, delivery and
performance of this Agreement by the Parent and Merger Sub and the consummation
by the Parent and the Merger Sub of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Parent and Merger Sub and no other corporate
proceedings on the part of the Parent or Merger Sub are necessary to authorize
the execution, delivery and performance of this Agreement or the consummation of
the Merger or the other transactions contemplated hereby (other than the Parent
Stockholder Approval). This Agreement has been duly executed and delivered by
each of the Parent and Merger Sub and constitutes the legal, valid and binding
obligation of each of the Parent and Merger Sub, enforceable against each of the
Parent and Merger Sub in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization,
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moratorium or other similar laws affecting the enforcement of creditors' rights
generally, and except as the availability of equitable remedies may be limited
by the application of general principles of equity (regardless of whether such
equitable principles are applied in a proceeding at law or in equity).
Section 4.5. No Conflict or Violation. Subject to (i) making
the filings and obtaining the approvals identified in Section 4.6 and (ii)
obtaining the material non-governmental consents identified in Section 4.5 of
the Parent Disclosure Schedule and (iii) the Parent Stockholder Approval, the
execution and delivery of this Agreement by the Parent and Merger Sub do not,
and the performance by each of the Parent and Merger Sub of its obligations
hereunder and the consummation by the Parent and Merger Sub of the Merger and
the other transactions pursuant hereto will not, (a) conflict with or violate
the certificate of incorporation, by-laws or other charter or organization
document of the Parent, Merger Sub or any other subsidiary of the Parent, (b)
conflict with or violate any material law, statute, rule, regulation, order,
judgment, writ, injunction or decree applicable to the Parent, Merger Sub or any
other subsidiary of the Parent or any of their respective properties or assets,
or (c) result in a violation or breach of or constitute a default under (or an
event which with the giving of notice or the lapse of time or both would
constitute a default under), require any consent, approval or authorization
under, result in the loss of a material benefit or result in any provision
becoming applicable or effective under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Parent,
Merger Sub or any other subsidiary of the Parent pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Parent, Merger Sub or
any other subsidiary of the Parent is a party or by which the Parent, Merger Sub
or any other subsidiary of the Parent or any material property or asset of the
Parent, Merger Sub or any other subsidiary of the Parent may be bound or
affected, except in the case of each of clauses (b) and (c) for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, be reasonably likely to result in a Parent
Material Adverse Effect or prevent the Parent or Merger Sub from performing its
obligations under this Agreement in any material respect.
Section 4.6. Consents and Approvals. The execution and
delivery of this Agreement by the Parent and
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Merger Sub do not, and the performance by each of the Parent and Merger Sub of
its obligations hereunder and the consummation by the Parent and Merger Sub of
the transactions contemplated hereby will not, require the Parent or Merger Sub
to obtain any consent, approval, authorization or permit of, or to make any
filing with or notification to, any Governmental Entity, except (a) for (i)
applicable requirements, if any, of the Securities Act, the Exchange Act, Blue
Sky Laws, and state antitakeover laws, (ii) the pre-merger notification and
report requirements of the HSR Act, (iii) filing and recordation of the
Certificate of Merger as required by the DGCL, (iv) consents, approvals,
authorizations, orders, permits, filings or registrations related to, or arising
out of, compliance with statutes, rules or regulations regulating the
consumption, sale or serving of alcoholic beverages and (v) filings relating to
the matters set forth in Section 5.17 or 5.18, and (b) where the failure to
obtain such consents, approvals, authorizations and permits, or to make such
filings or notifications, would not, individually or in the aggregate, prevent
the Parent or Merger Sub from performing its obligations under this Agreement in
any material respect or from consummating the Merger or any other transaction
pursuant hereto.
Section 4.7. SEC Documents and Financial Statements. (a) The
Parent has filed all forms, reports, statements and other documents required to
be filed by it with the SEC since December 13, 1994 (such forms, reports,
statements and other documents, excluding the Registration Statement referred to
below, are hereinafter referred to as the "Parent SEC Documents"). The Parent
SEC Documents filed by the Parent with the SEC prior to and after the date of
this Agreement (i) complied, or will comply, when filed, in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act, and the rules and regulations thereunder, and (ii) did not, or will not,
when filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including,
in each case, any related notes or schedules thereto) contained in or
incorporated by reference in the Parent SEC Documents filed prior to and after
the date of this Agreement (i) have been or will be prepared in accordance with
the published rules and regulations of the SEC and GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
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thereto or, in the case of unaudited consolidated quarterly statements, as
permitted by Form 10-Q of the SEC) and (ii) fairly present or will fairly
present in all material respects the consolidated financial position of the
Parent and its subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows of the Parent and its
subsidiaries for the periods indicated therein (subject, in the case of
unaudited interim financial statements, to normal recurring year-end audit
adjustments which would not be material in amount or effect).
Section 4.8. No Undisclosed Liabilities. Neither the Parent
nor any of its subsidiaries has any debts, liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or disclosed or reserved against in, a consolidated
balance sheet of the Parent and its subsidiaries or in the notes thereto,
prepared in accordance with GAAP consistently applied, except for (a) debts,
liabilities and obligations that were so reserved on, or disclosed or reflected
in, the consolidated balance sheet of the Parent and its subsidiaries as of June
30, 1996 and the notes thereto, included in the Quarterly Report on Form 10-Q of
the Parent for the quarter then ended, or the consolidated balance sheet of the
Parent and its subsidiaries as of December 31, 1995 and the notes thereto,
included in the Annual Report on Form 10-K of the Parent for the year then
ended, (b) debts, liabilities or obligations arising in the ordinary course of
business since June 30, 1996 and (c) debts, liabilities and obligations
contemplated hereby or as set forth on Section 4.8 of the Parent Disclosure
Schedule.
Section 4.9. Absence of Certain Changes. Since December 31,
1995, except as disclosed in the Parent SEC Documents filed with the SEC prior
to the date of this Agreement or as specifically contemplated by this Agreement
or as set forth in Section 4.2 or Section 4.9 of the Parent Disclosure Schedule,
(a) the Parent and its subsidiaries have conducted their respective businesses
only in the ordinary course and in a manner consistent with past practice and
(b) there has not been (i) any change, event, occurrence or circumstance in the
business, operations, properties, financial condition or results of operations
of the Parent or any of its subsidiaries which, individually or in the
aggregate, has had or is reasonably likely to have a Parent Material Adverse
Effect (except for changes, events, occurrences or circumstances (A) with
respect to general economic or industry conditions or (B) arising as a result of
the transactions contemplated hereby), (ii) any material change by the Parent in
its accounting methods, principles
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or practices, (iii) any declaration, setting aside or payment of any dividend or
distribution or capital return in respect of any capital stock of, or other
equity interest in, the Parent or any of its subsidiaries (other than dividends
by such subsidiaries in accordance with their respective charters or partnership
agreements, as the case may be, (iv) any material revaluation for financial
statement purposes by the Parent or any of its subsidiaries of any asset
(including, without limitation, any writing down of the value of any property,
investment or asset or writing off of notes or accounts receivable), (v) other
than payment of compensation for services rendered to the Parent or any of its
subsidiaries in the ordinary course of business or the grant of Parent Options
as described in Section 4.2 or any transactions described in Section 4.12 of the
Parent Disclosure Schedule, any material transactions between the Parent or any
of its subsidiaries, on the one hand, and any (A) officer or director of the
Parent or any of its subsidiaries, (B) record or beneficial owner of five
percent (5%) or more of the voting securities of the Parent, or (C) affiliate of
any such officer, director or beneficial owner, on the other hand, or (vi) other
than pursuant to the terms of the plans, programs or arrangements specifically
referred to in Section 4.12 or in the ordinary course of business consistent
with past practice, any material increase in or establishment of any bonus,
insurance, welfare, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other material
increase in the compensation payable or to become payable to any employees,
officers, directors or consultants of the Parent or any of its subsidiaries.
Section 4.10. Litigation. Except as disclosed in the Parent
SEC Documents filed with the SEC prior to the date of this Agreement, there is
no action, suit, claim, proceeding or investigation pending or, to the knowledge
of the Parent, threatened against the Parent or any of its subsidiaries or any
properties or assets of the Parent or any of its subsidiaries by or before any
court, other Governmental Entity or arbitrator which could reasonably be
expected to prevent or substantially delay consummation of the Merger or any of
the other transactions contemplated hereby in any material respect, or otherwise
prevent the Parent or Merger Sub from performing its obligations under this
Agreement in any material respect. Except as disclosed in the Parent SEC
Documents filed with the SEC prior to the date of this Agreement, neither the
Parent nor any of its subsidiaries nor any property or asset of the Parent or
any
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of its subsidiaries is subject to any order, writ, injunction, judgment, decree
or award which could reasonably be expected to prevent or substantially delay
consummation of the Merger or any of the other transactions pursuant hereto in
any material respect, or otherwise prevent the Parent or Merger Sub from
performing its obligations under this Agreement in any material respect.
Section 4.11. Compliance. The Parent is not in conflict with,
or in default or violation of, and none of its subsidiaries is in conflict in
any material respect with, or in default or violation in any material respect
of, its respective certificate of incorporation, by-laws or other charter or
organization documents. Neither the Parent nor any of its subsidiaries is in
conflict with, or in default or violation of, (a) any material law, statute,
rule, regulation, order, judgment, writ, injunction or decree applicable to the
Parent or any of its subsidiaries or any of their respective properties or
assets (excluding any law, statute, rule, regulation or order relating to the
consumption, sale or serving of alcoholic beverages), or (b) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Parent or any of its
subsidiaries is a party or by which the Parent or any of its subsidiaries or any
material property or asset of the Parent or any of its subsidiaries may be bound
or affected. The Parent and its subsidiaries hold all licenses, permits,
approvals and other authorizations of Governmental Entities, and are in
substantial compliance with all applicable laws and governmental regulations in
connection with their businesses as now being conducted.
Section 4.12. Employee Benefit Plans. (a) The Parent has made
available to the Company copies of all summary plan descriptions (whether or not
required to be furnished under ERISA) existing or in effect during or within the
past five years, which have been distributed to any present or former employees,
officers or directors of the Parent or any of its subsidiaries ("Parent
Personnel"), with respect to each plan which is subject to ERISA and each other
material agreement, arrangement or commitment which is an employment or
consulting agreement, executive or incentive compensation plan, bonus plan,
deferred compensation agreement, employee pension, profit sharing, savings or
retirement plan, employee stock option or stock purchase plan, group life,
health, or accident insurance or other employee benefit plan, agreement,
arrangement or commitment, including, without limitation, any commitment arising
under the laws of any jurisdiction, severance, holiday, vacation, Christmas or
other bonus plans,
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maintained by the Parent or any of its subsidiaries or with respect to which the
Parent or any of its subsidiaries has liability or makes or has an obligation to
make contributions (each, a "Parent Employee Plan").
(b) Except as disclosed in Section 4.12 of the Parent
Disclosure Schedule, there are no Parent Personnel who are entitled to any
medical, dental or life benefit to be paid after termination of employment other
than required by Section 601 of ERISA, Section 4980B of the Code or applicable
state law.
(c) There is no material liability in the nature of a
retroactive rate adjustment or loss-sharing or similar arrangement, with respect
to any Parent Employee Plan which is an employee welfare benefit plan.
(d) All contributions or payments due with respect to any
periods prior to the Effective Time under any Parent Employee Plan have been
made or appropriate charges have been made on the financial statements. Each
Parent Employee Plan by its terms and operation is in substantial compliance
with all applicable laws (including, but not limited to, ERISA, the Code and the
Age Discrimination in Employment Act of 1967, as amended).
(e) There are no actions, suits or claims pending or
threatened (other than routine noncontested claims for benefits) and, to the
knowledge of the Parent, no set of circumstances exist which may reasonably give
rise to such a claim against any Parent Employee Plan or administrator or
fiduciary of any such Parent Employee Plan which is reasonably likely to result
in a Parent Material Adverse Effect. As to each Parent Employee Plan for which
an annual report is required to be filed under ERISA or the Code, all such
filings, including schedules, have been made on a timely basis.
(f) Except as disclosed in Section 4.12 of the Parent
Disclosure Schedule, neither the Parent nor any of its subsidiaries (or any
entity that is or was at any time required to be aggregated with the Parent or
any of its subsidiaries under Section 414(b), (c), (m) or (o) of the Code) has
at any time maintained, contributed to or been required to contribute to any
plan subject to Title IV of ERISA or Section 412 of the Code.
(g) The Parent has applied for a determination letter from the
Internal Revenue Service to the effect that the Employee Retirement Savings Plan
maintained by the
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Parent is qualified under Sections 401(a) and 401(k) of the Code.
(h) Neither the Parent nor any of its subsidiaries (or, to the
knowledge of the Parent, any other person, including any fiduciary) has engaged
in any "prohibited transaction" (as defined in Section 4975 of the Code or
Section 406 of ERISA), which could subject any of the Parent Employee Plans (or
their trusts), the Parent, any of its subsidiaries or any person whom the Parent
or any of its subsidiaries has an obligation to indemnify, to any material tax
or penalty imposed under Section 4975 of the Code or Section 502 of ERISA.
(i) None of the assets of the Parent Employee Plans is
invested in any property constituting employer real property or an employer
security within the meaning of Section 407(d) of ERISA.
(j) Except as required under this Agreement, the events
contemplated by this Agreement (either alone or together with any other event)
will not (i) entitle any Parent Personnel to severance pay or other similar
payments under any Parent Employee Plan or law, (ii) accelerate the time of
payment or vesting or increase the amount of benefits due under any Parent
Employee Plan or compensation to any Parent Personnel, (iii) result in any
payments (including parachute payments) under any Parent Employee Plan or law
becoming due to any Parent Personnel, or (iv) terminate or modify or give a
third party a right to terminate or modify the provisions or terms of any Parent
Employee Plan.
Section 4.13. Tax Matters. (a) The Parent and each of its
subsidiaries, and any affiliated group (within the meaning of Code Section 1504)
of which the Parent or any of its subsidiaries is or was a member, have (i)
filed all federal income and material state Tax Returns required to be filed by
applicable law and all such federal income and material state Tax Returns (A)
were true, complete and correct in all respects (and as to Tax Returns not filed
as of the date hereof but filed at or prior to the Effective Time, will be true,
complete and correct in all respects) (B) reflect the liability for Taxes of the
Parent and each of its subsidiaries, and (C) were filed on a timely basis and
(ii) within the time and in the manner prescribed by law, paid (and until the
Effective Time will pay within the time and in the manner prescribed by law) all
Taxes that were or are due and payable as set forth in such Tax Returns.
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(b) Each of the Parent and, where applicable, its subsidiaries
has established (and until the Effective Time will maintain) on its books and
records reserves adequate to pay all Taxes of the Parent or any such subsidiary,
as the case may be, in accordance with GAAP, which are reflected in the most
recent consolidated financial statements of the Parent and its subsidiaries
contained in the Parent SEC Documents, to the extent required by GAAP.
(c) No deficiency for any Tax which, alone or in the aggregate
with any other deficiency or deficiencies, would exceed $500,000, has been
proposed, asserted, or assessed against the Parent and/or any subsidiary thereof
that has not been resolved and paid in full or otherwise settled.
Section 4.14. Properties. Each of the Parent and its
subsidiaries has good and marketable title to all properties, assets and rights
of any kind whatsoever (whether real, personal or mixed, and whether tangible or
intangible) owned by it (collectively, the "Parent Assets"), in each case free
and clear of any mortgage, security interest, deed of trust, claim, charge,
title defect or other lien or encumbrance, except (a) as shown on the
consolidated balance sheet of the Parent and its subsidiaries dated June 30,
1996 and the notes thereto, and the consolidated balance sheet of the Parent and
its subsidiaries dated as of December 31, 1995 and the notes thereto, each as
contained in the Parent SEC Documents, (b) for Permitted Liens or (c) as set
forth in Section 4.14 of the Parent Disclosure Schedule. Except as set forth in
Section 4.14 of the Parent Disclosure Schedule, there are no pending or, to the
knowledge of the Parent, threatened condemnation proceedings against or
affecting any material Parent Assets, and none of the material Parent Assets is
subject to any commitment or other arrangement for its sale to a third party
outside the ordinary course of business.
Section 4.15. Environmental Matters. Neither the Parent nor
any of its subsidiaries is the subject of any federal, state, local or foreign
investigation, and neither the Parent nor any of its subsidiaries has received
any notice or claim, nor entered into any negotiations or agreements with any
third party, relating to any material liability or remedial action or potential
material liability or remedial action under any Environmental Laws. There are no
pending or, to the knowledge of the Parent, threatened actions, suits, claims or
proceedings against or affecting the Parent or any of its subsidiaries or any of
their properties, assets or operations in connection with any such Environmental
Laws. The properties, assets and operations
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of the Parent and its subsidiaries are in compliance in all material respects
with all applicable Environmental Laws, except as disclosed in the "Phase I" and
other reports identified in Section 4.15 of the Parent Disclosure Schedule (true
and complete copies of which have been made available to the Company).
Section 4.16. Intellectual Property. The Parent and its
subsidiaries own or possess adequate licenses or other valid rights to use all
material trademarks, trademark rights, trade names, trade name rights,
copyrights, patents, patent rights, service marks, trade secrets, applications
for trademarks and for service marks, and other proprietary rights and
information used or held for use in connection with the business of the Parent
and its subsidiaries as currently conducted, and the Parent has no knowledge of
any assertion or claim challenging the validity of any of the foregoing, except
as set forth in Section 4.16 of the Parent Disclosure Schedule.
Section 4.17. Labor Matters. There is no pending or, to the
knowledge of the Parent, threatened material labor dispute, strike or work
stoppage against the Parent or any of its subsidiaries. Neither the Parent nor
its subsidiaries, nor their respective representatives or employees, has
committed any material unfair labor practices in connection with the operation
of the respective businesses of the Parent or its subsidiaries, and there is no
pending or, to the knowledge of the Parent, threatened charge or complaint
against the Parent or its subsidiaries by the National Labor Relations Board or
any comparable state agency which, if adversely determined, would have a Parent
Material Adverse Effect.
Section 4.18. Material Contracts and Commitments. (a) Section
4.18 of the Parent Disclosure Schedule contains a true and complete list of all
of the following contracts, agreements and commitments, whether oral or written,
to which the Parent is a party, as each such contract, agreement or commitment
may have been amended, modified or supplemented:
(i) contracts, agreements or commitments granting any person
the right to require that the Parent register any securities of the
Parent under the Securities Act; and
(ii) contracts, agreements or commitments granting any
shareholder of the Parent the (i) right to have any designees nominated
as directors, (ii) pre-emptive rights, rights of first refusal, rights
of first offer
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or similar rights with respect to the Parent's capital stock, or (iii)
any other rights or privileges not possessed by all common stockholders
of the Company.
(b) Except as set forth in Section 4.18 of the Parent
Disclosure Schedule, each of the Parent's management contracts, franchise
agreements and leases of real property (the "Parent Contracts") is valid and
binding in accordance with its terms, and is in full force and effect. Except as
set forth in Section 4.18 of the Parent Disclosure Schedule, neither the Parent
or any of its subsidiaries is in default in any material respect with respect to
any such Parent Contracts, nor (to the knowledge of the Parent) does any
condition exist that with notice or lapse of time or both would constitute such
a material default thereunder. Except as set forth in Section 4.18 of the Parent
Disclosure Schedule, no party has given any written or (to the knowledge of the
Company) oral notice of termination or cancellation of any such Parent Contract
or that it intends to assert a breach of, or seek to terminate or cancel, any
such Parent Contract, in each case as a result of the transactions contemplated
hereby. The Parent has no knowledge of any existing facts or circumstances that
have given rise to any right of RFS Partnership, L.P. to terminate any of the
leases between the Parent or its subsidiaries and RFS Partnership, L.P.
Section 4.19. Financing. The Parent has heretofore furnished
to the Company true and complete copies of all written commitments (including a
commitment from GE Investment Management Incorporated, or an affiliate thereof,
to purchase $100,000,000 of Parent Common Stock) to obtain financing in
contemplation of the Merger.
Section 4.20. Opinion of Financial Advisor. The Parent has
received the opinion of Morgan Stanley & Co. Incorporated, to the effect that
the Merger Consideration to be paid to the stockholders of the Company is fair
to the Parent from a financial point of view.
Section 4.21. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of its affiliates, other than Morgan
Stanley & Co. Incorporated (the fees and expenses of which shall be paid in full
by the Parent).
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ARTICLE V
COVENANTS
Section 5.1. Interim Operations. (a) From the date of this
Agreement until the Effective Time, except as set forth in Section 5.1 of the
Company Disclosure Schedule or as expressly contemplated by any other provision
of this Agreement, unless the Parent has consented in writing thereto, the
Company shall, and shall cause each of its subsidiaries to:
(i) conduct its business and operations only in the ordinary
course of business consistent with past practice;
(ii) use its reasonable efforts to preserve intact the
business organizations, goodwill, rights, licenses, permits and
franchises of the Company and its subsidiaries, and maintain their
existing relationships with customers, suppliers and other persons
having business dealings with them;
(iii) use its commercially reasonable efforts to keep in full
force and effect adequate insurance coverages and maintain and keep its
properties and assets in good repair, working order and condition,
normal wear and tear excepted;
(iv) not amend or modify its respective certificate of
incorporation, by-laws, partnership agreement or other charter or
organization documents;
(v) not authorize for issuance, issue, sell, grant, deliver,
pledge or encumber or agree or commit to issue, sell, grant, deliver,
pledge or encumber any shares of any class or series of capital stock
of the Company or any of its subsidiaries or any other equity or voting
security or equity or voting interest in the Company or any of its
subsidiaries, any securities convertible into or exercisable or
exchangeable for any such shares, securities or interests, or any
options, warrants, calls, commitments, subscriptions or rights to
purchase or acquire any such shares, securities or interests (other
than issuances of Company Common Stock upon exercise of Company Options
granted prior to the date of this Agreement to directors, officers,
employees and consultants of the Company in accordance with the Company
Incentive Plan as currently in effect);
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(vi) not (A) split, combine or reclassify any shares of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of, or in substitution for,
shares of its capital stock, (B) in solely the case of the Company,
declare, set aside or pay any dividends on, or make other distributions
in respect of, any of the Company's capital stock, or (C) repurchase,
redeem or otherwise acquire, or agree or commit to repurchase, redeem
or otherwise acquire, any shares of capital stock or other equity or
debt securities or equity interests of the Company or any of its
subsidiaries;
(vii) not amend or otherwise modify the terms of any Company
Options or the Company Incentive Plan the effect of which shall be to
make such terms more favorable to the holders thereof or persons
eligible for participation therein;
(viii) other than in the ordinary course of business
consistent with past practice, not increase the compensation payable or
to become payable to any directors, officers or employees of the
Company or any of its subsidiaries, or grant any severance or
termination pay to, or enter into any employment or severance agreement
with any director or officer of the Company or any of its subsidiaries,
or establish, adopt, enter into or amend in any material respect or
take action to accelerate any material rights or benefits under any
collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer of employee of the Company of any of its
subsidiaries;
(ix) not acquire or agree to acquire (including, without
limitation, by merger, consolidation, or acquisition of stock, equity
securities or interests, or assets) any corporation, partnership, joint
venture, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets of any other person
outside the ordinary course of business consistent with past practice
or any interest in any real properties (whether or not in the ordinary
course of business);
(x) not incur, assume or guarantee any indebtedness for
borrowed money (including draw-downs
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on letters or lines of credit) or issue or sell any notes, bonds,
debentures, debt instruments, evidences of indebtedness or other debt
securities of the Company or any of its subsidiaries or any options,
warrants or rights to purchase or acquire any of the same, except for
(A) renewals of existing bonds and letters of credit in the ordinary
course of business not to exceed $10,000,000 and (B) advances, loans or
other indebtedness in the ordinary course of business consistent with
past practice in an aggregate amount not to exceed $5,000,000;
(xi) not sell, lease, license, encumber or otherwise dispose
of, or agree to sell, lease, license, encumber or otherwise dispose of,
any properties or assets of the Company or any of its subsidiaries
(other than in the ordinary course of business consistent with past
practice);
(xii) not authorize or make any capital expenditures
(including by lease) in excess of $10,000,000 in the aggregate through
December 31, 1996 (and not in excess of $2,500,000 during January 1997)
for the Company and all of its subsidiaries;
(xiii) not make any material change in any of its accounting
or financial reporting (including Tax accounting and reporting)
methods, principles or practices, except as may be required by GAAP;
(xiv) not make any tax election or settle or compromise any
federal, state, local or foreign income tax liability either not in
accordance with prior practice or which could reasonably be expected to
have a Company Material Adverse Effect;
(xv) except in the ordinary course of business consistent with
past practice, not amend, modify or terminate any Contract required to
be listed in Section 3.17 of the Company Disclosure Schedule or waive,
release or assign any material rights or claims thereunder;
(xvi) not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries;
(xvii) not take any action that would, or would be reasonably
likely to, result in any of the representations and warranties set
forth in this
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Agreement not being true and correct in any material respect or any of
the conditions set forth in Article VI not being satisfied; and
(xviii) not agree or commit in writing or otherwise to do (or,
in the case of clauses (i) through (iii), to do anything inconsistent
with) any of the foregoing.
(b) From the date of this Agreement until the Effective Time,
except as set forth in Section 5.1 of the Parent Disclosure Schedule or as
expressly contemplated by any other provision of this Agreement, unless the
Company has consented in writing thereto, the Parent shall, and shall cause each
of its subsidiaries to:
(i) not amend or modify its certificate of incorporation,
by-laws, or other charter or organization documents in any manner which
adversely affects the rights, powers or privileges of holders of the
Parent Common Stock;
(ii) not (A) split, combine or reclassify any shares of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of, or in substitution for,
shares of its capital stock, (B) declare, set aside or pay any
dividends on, or make other distributions in respect of, any of the
Parent's capital stock (other than regular quarterly cash dividends
consistent with past practice);
(iii) not take any action that would, or would be reasonably
likely to, result in any of the representations and warranties set
forth in this Agreement not being true and correct in any material
respect or any of the conditions set forth in Article VI not being
satisfied; and
(iv) not agree or commit in writing or otherwise to do any of
the foregoing.
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(c) The parties hereto shall perform the provisions set forth
in Section 5.1 of the Parent Disclosure Schedule relating to the Red Lion La
Posada and Village Motor Inn joint ventures.
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Section 5.2. No Solicitation. Prior to the Effective Time, the
Company agrees (a) that neither it nor any of its subsidiaries shall, nor shall
it or any of its subsidiaries authorize or permit their respective officers,
directors, employees, agents and representatives (including, without limitation,
any investment banker, financial advisor, attorney, accountant, consultant or
other expert retained by or acting on behalf of it or any of its subsidiaries)
(collectively, "Representatives") to, directly or indirectly, initiate or
solicit any inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to any of its stockholders) concerning, or
that may reasonably be expected to lead to, an Alternative Transaction (any such
proposal or offer being hereinafter referred to as an "Alternative Transaction
Proposal"), and (b) that it will notify the Parent as soon as practicable (and
in any event within 48 hours) if any such inquiries or proposals are received
by, any information or documents is requested from, or any negotiations or
discussions are sought to be initiated or continued with, the Company or any of
its subsidiaries; provided, however, that nothing contained in this Section 5.2
shall prohibit the Board of Directors of the Company from, to the extent
applicable, complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Alternative Transaction Proposal. The Company agrees that prior to
furnishing any such information to, or entering into any discussions or
negotiations with, any person or entity concerning an Alternative Transaction
Proposal, the Company shall (i) receive from such person or entity an executed
confidentiality agreement in customary form on terms not less favorable to the
Company than the terms of the confidentiality agreement dated June 25, 1996
between the Parent and the Company, providing for confidentiality of information
furnished by the Company to the Parent and its Representatives in connection
with the transactions contemplated hereby (the "Parent Confidentiality
Agreement"), and (ii) provide written notice to the Parent to the effect that it
is furnishing information to, or entering into discussions or negotiations with,
such person or entity. Notwithstanding anything herein to the contrary, nothing
in this Section 5.2 shall (x) permit the Company to terminate this Agreement
(except as specifically provided in Article VII hereof), or (y) permit the
Company to enter into any binding agreement (other than a confidentiality
agreement as aforesaid) with respect to an Alternative Transaction Proposal for
as long as this Agreement remains in effect, or (z) affect any other obligation
of the Company under this Agreement. For purposes of this Agreement,
"Alternative Transaction" shall mean any of the following involving the Company
or any of its subsidiaries: (i) any
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merger, consolidation, share exchange, business combination or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 15% or more of the assets of the Company and its subsidiaries,
determined on a consolidated basis in accordance with GAAP; (iii) any tender
offer or exchange offer for 15% of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act
in connection therewith; (iv) the acquisition by any person or entity of
beneficial ownership or the right to acquire beneficial ownership of, or the
formation or existence of any "group" (as such term is defined under Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
which beneficially owns, or has the right to acquire beneficial ownership of,
15% or more of the then outstanding shares of capital stock of the Company
(other than through the vesting of Company Options granted to directors,
officers, employees and consultants of the Company in accordance with the
Company Incentive Plan as currently in effect); or (v) any public announcement
of a proposal, plan or intention to do any of the foregoing or any agreement or
commitment to engage in any of the foregoing.
Section 5.3. Access to Information. (a) From the date of this
Agreement until the Effective Time, upon reasonable prior notice to the other,
each of the Company and the Parent shall (and shall cause each of its
subsidiaries to) give the other such party and its Representatives reasonable
access at reasonable hours to the officers, employees, agents, books, records,
properties, offices, hotels and other facilities of it and its subsidiaries, and
shall furnish promptly to the other such party and its Representatives such
financial and operating data and other information concerning the business,
operations, properties, contracts, records and personnel of it and its
subsidiaries as the other such party may from time to time reasonably request.
All information obtained by the Company or the Parent pursuant to this Section
5.3(a) shall be kept confidential in accordance with the Parent Confidentiality
Agreement and the confidentiality agreement dated August 12, 1996 between the
Company and the Parent, providing for confidentiality of information furnished
by the Parent to the Company and its Representatives in connection with the
transactions contemplated hereby (the "Company Confidentiality Agreement"). No
representations and warranties or conditions to the consummation of the Merger
contained herein or in any certificate or instrument delivered in connection
herewith shall be deemed waived or otherwise affected by any such investigation
made by the parties or their respective Representatives.
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(b) From the date of this Agreement until the Effective Time,
upon reasonable prior notice to the Company, the Company shall (and shall cause
each of its subsidiaries to) give the investment banks, commercial banks,
financial institutions and other persons providing debt or equity financing to
the Parent in connection with the transactions contemplated hereby or retained
by the Parent in connection with any securities offerings contemplated by the
Parent, and their respective Representatives, reasonable access at reasonable
hours to the officers, employees, agents, books, records, properties, offices,
hotels and other facilities of the Company and its subsidiaries, and shall
furnish promptly to such persons and their respective Representatives such
financial and operating data and other information concerning the business,
operations, properties, contracts, records and personnel of the Company and its
subsidiaries as such persons may from time to time reasonably request for such
purposes (provided that such investment banks, commercial banks, financial
institutions and other persons shall enter into confidentiality agreements upon
terms similar to the Parent Confidentiality Agreement or otherwise in customary
form).
Section 5.4. Notice of Certain Matters. The Company shall give
prompt notice to the Parent, and the Parent and Merger Sub shall give prompt
notice to the Company, of (a) the occurrence or non-occurrence of any event
which would be likely to cause (i) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect or (ii) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied in all material respects and (b) any failure of the Company or
of the Parent or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; provided that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
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Section 5.5. Further Actions. (a) Each of the parties hereto
shall use all commercially reasonable good faith efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations, and consult and fully
cooperate with and provide reasonable assistance to each other party hereto and
their respective Representatives in order, to consummate and make effective the
Merger and the other transactions contemplated by this Agreement as promptly as
practicable hereafter, including, without limitation, (i) using all commercially
reasonable good faith efforts to make all filings, applications, notifications,
reports, submissions and registrations with, and to obtain all consents,
approvals, authorizations or permits of, Governmental Entities or other persons
or entities as are necessary for the consummation of the Merger and the other
transactions contemplated hereby (including, without limitation, pursuant to the
HSR Act, the Securities Act, the Exchange Act, Blue Sky Laws and other
applicable laws and regulations), and (ii) taking such actions and doing such
things as any other party hereto may reasonably request in order to cause any of
the conditions to such other party's obligation to consummate the Merger as
specified in Article VI of this Agreement to be fully satisfied. Prior to making
any application to or filing with any Governmental Entity or other person or
entity in connection with this Agreement, the Company, on the one hand, and the
Parent and Merger Sub, on the other hand, shall provide the other with drafts
thereof and afford the other a reasonable opportunity to comment on such drafts.
At the Closing, each of the parties hereto shall execute each agreement or
instrument to which it is a party.
(b) Without limiting the generality of the foregoing, each of
the Parent and the Company agree to cooperate and use all commercially
reasonable efforts to vigorously contest and resist any action, suit, proceeding
or claim, and to have vacated, lifted, reversed or overturned any injunction,
order, judgment or decree (whether temporary, preliminary or permanent), that
delays, prevents or otherwise restricts the consummation of the Merger or any
other transaction contemplated by this Agreement, and to take any and all
actions (including, without limitation, the disposition of assets, divestiture
of businesses, or the withdrawal from doing business in particular
jurisdictions) as may be required by Governmental Entities as a condition to the
granting of any such necessary approvals or as may be required to avoid, vacate,
lift, reverse or overturn any injunction, order, judgment, decree or regulatory
action (provided, however, that in no
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event shall any party hereto take, or be required to take, any action that would
have a Company Material Adverse Effect or that, individually or in the
aggregate, would have a Parent Material Adverse Effect).
(c) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement or
to vest the Surviving Corporation with full title to all properties, assets,
rights, privileges, immunities and franchises of either the Company or Merger
Sub, the proper officers and directors of each party to this Agreement shall
take all such necessary action.
Section 5.6. Proxy Statement; Registration Statement. (a) As
promptly as practicable after the execution of this Agreement, (i) the Company
shall prepare and file with the SEC (with appropriate requests for confidential
treatment) under the Exchange Act a proxy statement/prospectus and a form of
proxy (or, to the extent a Parent Stockholders' Meeting, as defined below, is
required to be held, the Company and the Parent shall prepare and file with the
SEC under the Exchange Act a joint proxy statement/prospectus and forms of
proxies) (such proxy statement/prospectus or joint proxy statement/prospectus,
as the case may be, together with any amendments thereof or supplements thereto,
in each case in the form or forms delivered to the stockholders of the Company
and, if applicable, the stockholders of the Parent, the "Proxy Statement")
relating to the Company Stockholders' Meeting and the vote of the stockholders
of the Company with respect to the Merger (and, if applicable, the Parent
Stockholders' Meeting and the vote of the stockholders of the Parent with
respect to the issuance of Parent Common Stock in connection with the Merger)
and (ii) following clearance by the SEC of the Proxy Statement, the Parent shall
prepare and file with the SEC under the Securities Act a registration statement
on Form S-4 (such registration statement, together with any amendments thereof
or supplements thereto, the "Registration Statement"), in which the Proxy
Statement will be included as a prospectus, in connection with the registration
under the Securities Act of the shares of Parent Common Stock to be distributed
to holders of shares of Company Common Stock and Company Options pursuant to the
Merger. The Parent and the Company will cause the Registration Statement and the
Proxy Statement to comply in all material respects with the Securities Act, the
Exchange Act and the rules and regulations thereunder. Each of the Parent and
the Company shall use all commercially reasonable efforts to have or cause the
Registration Statement to become effective (including clearing the Proxy
Statement with the SEC) as
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promptly as practicable thereafter, and shall take any and all actions required
under any applicable federal or state securities or Blue Sky Laws in connection
with the issuance of shares of Parent Common Stock pursuant to the Merger.
Without limiting the generality of the foregoing, each of the Parent and the
Company agrees to use all commercially reasonable efforts, after consultation
with the other such party, to respond promptly to any comments made by the SEC
with respect to the Proxy Statement (including each preliminary version thereof)
and the Registration Statement (including each amendment thereof and supplement
thereto). Each of the Parent and the Company shall, and shall cause its
respective representatives to, fully cooperate with the other such party and its
respective representatives in the preparation of the Proxy Statement and the
Registration Statement, and shall, upon request, furnish the other such party
with all information concerning it and its affiliates, directors, officers and
stockholders as the other may reasonably request in connection with the
preparation of the Proxy Statement and the Registration Statement. The Proxy
Statement shall include the determination and recommendation of the Board of
Directors of the Company that the stockholders of the Company vote in favor of
the approval and adoption of this Agreement and the Merger and, if applicable,
the determination and recommendation of the Board of Directors of the Parent
that the stockholders of the Parent vote in favor of the approval of the
issuance of Parent Common Stock pursuant to this Agreement; provided, however,
that the Board of Directors of the Company or the Parent may withdraw, modify or
change such respective recommendation if either such Board of Directors
determines in good faith, based upon the advice of outside counsel, that making
such recommendation, or the failure to so withdraw, modify or change its
recommendation, or the failure to recommend any other offer or proposal, could
reasonably be deemed to cause the members of such Board of Directors to breach
their fiduciary duties under applicable law. As promptly as practicable after
the Registration Statement shall have become effective, the Company shall (and,
to the extent a Parent Stockholders' Meeting is required to be held, the Parent
shall) cause the Proxy Statement to be mailed to its stockholders.
(b) Without limiting the generality of the foregoing, (i) the
Company and the Parent shall each notify the other as promptly as practicable
upon becoming aware of any event or circumstance which should be described in an
amendment of, or a supplement to, the Proxy Statement or the Registration
Statement, and (ii) the Company and the Parent shall each notify the other as
promptly as practicable after the receipt by it of any written or oral comments
of the SEC
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on, or of any written or oral request by the SEC for amendments or supplements
to, the Proxy Statement or the Registration Statement, and shall promptly supply
the other with copies of all correspondence between it or any of its
representatives and the SEC with respect to any of the foregoing filings.
(c) The information supplied by the Company for inclusion or
incorporation by reference in the Proxy Statement and the Registration Statement
shall not (i) at the time the Registration Statement is declared effective, (ii)
at the time the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to holders of Company Common Stock (or, if applicable, holders
of Parent Common Stock), (iii) at the time of the Company Stockholders' Meeting
or, if applicable, the Parent Stockholder's Meeting and (iv) at the Effective
Time, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to the Company or any of its affiliates or its or their respective
officers or directors should be discovered by the Company which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement, the Company shall promptly inform the Parent of such event or
circumstance.
(d) The information supplied by the Parent for inclusion or
incorporation by reference in the Proxy Statement and the Registration Statement
shall not (i) at the time the Registration Statement is declared effective, (ii)
at the time the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to holders of Company Common Stock (or, if applicable, holders
of Parent Common Stock), (iii) at the time of the Company Stockholders' Meeting
or, if applicable, the Parent Stockholder's Meeting and (iv) at the Effective
Time, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to the Parent or any of its affiliates or its or their respective
officers or directors should be discovered by the Parent which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement, the Parent shall promptly inform the Company of such event or
circumstance.
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(e) The Parent agrees to file a post-effective amendment to
the Registration Statement as soon as practicable after the Effective Time to
register the offer and sale or other distribution by Mr. Tod McClaskey or his
successors, assigns, heirs or legal representatives ("McClaskey") of all the
shares (the "McClaskey Shares") of Parent Common Stock that McClaskey may
receive as a distribution from the Partnership following its receipt of the
Stock Consideration. The Parent agrees to use its best efforts to cause such
post-effective amendment to thereafter become effective and to remain effective
and usable for a period of at least six months in the aggregate (excluding any
"blackout" periods provided in the next sentence). The Parent may, upon written
notice to McClaskey at his address as it appears on the records of the Company,
suspend the offering and sale of securities owned by McClaskey pursuant to such
post-effective amendment, for a period not to exceed 90 days if there exists at
the time material non-public information relating to the Company (including,
without limitation, the planned release of any earnings statements or other
financial information) that, in the reasonable opinion of the Parent, should not
be disclosed. The Parent shall pay all expenses incident to the registration of
the McClaskey Shares under this Section 5.6(e).
Section 5.7. Meetings of Stockholders. (a) As promptly as
practicable after the date of this Agreement, the Company and its Board of
Directors will (i) duly call and hold a special meeting of stockholders of the
Company (the "Company Stockholders' Meeting") for the purpose of considering and
voting upon the approval and adoption of this Agreement and the approval of the
Merger (which Company Stockholders' Meeting shall, to the extent feasible, be
held on the same day or as soon as practicable after the date on which the
Registration Statement becomes effective and on the same day or as soon as
practicable after the date on which the Parent Stockholders' Meeting is held, if
one is held) and (ii) use all commercially reasonable efforts to solicit from
the stockholders of the Company proxies in favor of such approvals and to secure
the vote or consent of stockholders required by the DGCL to effect the Merger.
(b) As promptly as practicable after the date of this
Agreement, the Parent will use all commercially reasonable efforts to solicit
letters from holders of a majority of the outstanding shares of Parent Common
Stock containing such holders' support for the issuance of Parent Common Stock
pursuant to this Agreement, and, if the Parent is able to secure such letters,
to apply for, and obtain an exemption from, any and all requirements of the
Nasdaq for the Parent to obtain the Parent Stockholder Approval. In
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the event that the Parent is unable to obtain such exemption on or before
fifteen (15) business days after the date hereof, it and its Board of Directors
will, as promptly as practicable thereafter, (i) duly call and hold a meeting of
its stockholders (the "Parent Stockholders' Meeting") for the purpose of
considering and voting upon the approval of such issuance (which Parent
Stockholders' Meeting shall, to the extent feasible, be held on the same day or
as soon as practicable after the date on which the Registration Statement
becomes effective and on the same day or as soon as practicable after the date
on which the Company Stockholders' Meeting is held) and (ii) use all
commercially reasonable efforts to solicit from the stockholders of the Parent
proxies in favor of such approval and to secure the vote or consent of
stockholders required by the rules of Nasdaq to obtain the Parent Stockholder
Approval.
Section 5.8. Nasdaq Quotation of Parent Common Stock. The
Parent shall use all commercially reasonable efforts to cause the Parent Common
Stock to be issued in the Merger to be approved for quotation on Nasdaq (subject
to official notice of issuance) prior to the Effective Time.
Section 5.9. Letters of Accountants. (a) The Company shall use
all commercially reasonable efforts to cause to be delivered to the Parent
"comfort" letters of Deloitte & Touche, LLP, the Company's independent public
accountants, of the kind contemplated by the Statement of Auditing Standards
with respect to Letters to Underwriters promulgated by the American Institute of
Certified Public Accountants (the "AICPA Statement"), dated the date on which
the Registration Statement shall become effective and as of the Effective Time,
each addressed to the Parent, in form and substance reasonably satisfactory to
the Parent, concerning the procedures undertaken by them with respect to the
financial statements and information of the Company and its subsidiaries
contained in the Registration Statement and the other matters contemplated by
the AICPA Statement and otherwise reasonably customary in scope and substance
for letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
(b) The Parent shall use all commercially reasonable efforts
to cause to be delivered to the Company "comfort" letters of KPMG Peat Marwick
LLP, the Parent's independent public accountants, of the kind contemplated by
the AICPA Statement, dated the date on which the Registration Statement shall
become effective and as of the Effective Time, each addressed to the Company, in
form and substance reasonably satisfactory to the Company, concerning
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the procedures undertaken by them with respect to the financial statements and
information of the Parent and its subsidiaries contained in the Registration
Statement and the other matters contemplated by the AICPA Statement and
otherwise reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
Section 5.10. Affiliate Letters. At least thirty (30) days
prior to the Effective Time, as well as at the Closing, the Company shall
deliver to the Parent a list of names and addresses of all persons who may be
deemed "affiliates" of the Company within the meaning of Rule 145 promulgated
under the Securities Act, including without limitation all directors and
executive officers of the Company. The Company shall use all commercially
reasonable efforts to deliver or cause to be delivered to the Parent, at or
prior to the Closing, an affiliate letter agreement, in the form attached hereto
as Exhibit A, from each of the affiliates of the Company identified in the
foregoing lists and each person who may be deemed to have become an "affiliate"
of the Company within the meaning of such Rule 145 after delivery of the first
such list delivered hereunder and prior to the Effective Time. The Surviving
Company shall be entitled to place legends as specified in such affiliate letter
agreements on the certificates evidencing any Parent Common Stock to be received
by such affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
Common Stock, consistent with the terms of such affiliate letter agreements.
Section 5.11. Public Announcements. Unless otherwise required
by applicable law or stock exchange requirements or requirements of Nasdaq, at
all times prior to the earlier of the Effective Time or the termination of this
Agreement, no party hereto shall or shall permit any of its subsidiaries to (and
each party shall use its reasonable best efforts to cause its affiliates and
Representatives not to) issue any press release concerning this Agreement, the
Merger or any other transaction contemplated hereby, without prior consultation
with the other parties hereto.
Section 5.12. Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby (including, without limitation, fees
and disbursements of Representatives) shall be borne by the party which incurs
such cost or expense; provided, however, that (a) the filing fee in connection
with the filings under
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the HSR Act required in connection herewith, and (b) all out-of-pocket costs and
expenses related to the printing, filing and mailing (as applicable) of the
Proxy Statement and the Registration Statement and all SEC and other regulatory
filing fees incurred in connection with the Proxy Statement and the Registration
Statement shall be borne equally by the Company, on the one hand, and the Parent
and Merger Sub, on the other hand.
Section 5.13. Indemnification. (a) From and after the
Effective Time, the Parent shall, and shall cause the Surviving Corporation to,
indemnify and hold harmless each person who is now, or has been at any time
prior to the date hereof, an officer or director of the Company or any of its
subsidiaries (the "Indemnified Parties") against any losses, claims, damages,
judgments, settlements, liabilities, costs or expenses (including without
limitation reasonable attorneys' fees and out-of-pocket expenses) incurred in
connection with any claim, action, suit, proceeding or investigation arising out
of or pertaining to acts or omissions, or alleged acts or omissions, by them in
their capacities as such occurring at or prior to the Effective Time (including,
without limitation, in connection with the Merger and the other transactions
contemplated by this Agreement), to the fullest extent that the Company or such
subsidiaries would have been permitted, under applicable law and the Certificate
of Incorporation or By-laws of the Company or the organizational documents of
such subsidiaries each as in effect on the date of this Agreement, to indemnify
such person (and the Parent or the Surviving Corporation shall also advance
expenses as incurred to the fullest extent permitted under applicable law upon
receipt from the Indemnified Party to whom expenses are advanced of a written
undertaking to repay such advances as contemplated by Section 145(e) of the
DGCL). The Parent and Surviving Corporation shall pay all reasonable expenses,
including reasonable attorneys' fees, that may be incurred by any Indemnified
Party in enforcing this Section 5.13. If the indemnity provided by this Section
5.13(a) is not available with respect to any Indemnified Party, then the Parent
and Surviving Corporation, on the one hand, and the Indemnified Party, on the
other hand, shall contribute to the amount payable in such proportion as is
appropriate to reflect relative faults and benefits.
(b) In the event of any such claim, action, suit, proceeding
or investigation, (i) any Indemnified Party wishing to claim indemnification
under this Section 5.13 shall, upon becoming aware of any such claim, action,
suit, proceeding or investigation, promptly notify the Surviving Corporation
thereof (provided that the failure to provide
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such notice shall not relieve the Parent or the Surviving Corporation of any
liability or obligation it may have to such Indemnified Party under this Section
unless such failure materially prejudices the Parent or the Surviving
Corporation), and shall deliver to the Parent and the Surviving Corporation the
undertaking contemplated by Section 145(e) of the DGCL, (ii) the Parent or the
Surviving Corporation shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
acceptable to the Parent and the Surviving Corporation, (iii) the Parent and the
Surviving Corporation shall cooperate in the defense of any such matter;
provided, however, that neither the Parent nor the Surviving Corporation shall
be liable for any settlement effected without its prior written consent (not to
be unreasonably withheld); and provided, further, that neither the Parent nor
the Surviving Corporation shall be liable under this Section 5.13 for the fees
and expenses of more than one counsel for all Indemnified Parties in any single
claim, action, suit, proceeding or investigation, except to the extent that, in
the opinion of counsel for the Indemnified Parties, two or more of such
Indemnified Parties have conflicting interests in the outcome of such claim,
action, suit, proceeding or investigation such that additional counsel is
required to be retained by such Indemnified Parties under applicable standards
of professional conduct.
(c) Unless otherwise required by law, (i) at the Effective
Time, the Certificate of Incorporation and By-Laws of the Surviving Corporation
shall contain provisions providing for exculpation of director and officer
liability and indemnification by the Surviving Corporation of the Indemnified
Parties not less favorable to the Indemnified Parties than those provisions
providing for exculpation of director and officer liability and indemnification
by the Company of the Indemnified Parties contained in the Certificate of
Incorporation and By-Laws of the Company as in effect on the date of this
Agreement, and (ii) the Surviving Corporation and the Company's subsidiaries
shall not amend, repeal or modify any such provisions contained in their
respective certificates of incorporation and by-laws, or other organizational
documents of such subsidiaries, to reduce or adversely affect the rights of
Indemnified Parties thereunder in respect of actions or omissions by them
occurring at or prior to the Effective Time.
(d) From and after the Effective Time until the sixth
anniversary thereof, the Parent shall cause the Surviving Corporation to
maintain, without any gaps or lapses in coverage, directors' and officers'
liability
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insurance covering the Indemnified Parties who are covered, in their capacities
as directors and officers of the Company, by the existing directors' and
officers' liability insurance of the Company in force on the date of this
Agreement, with respect to losses or claims arising out of acts or omissions, or
alleged acts or omissions, by them in their capacities as such occurring at or
prior to the Effective Time, and upon terms no less favorable to the Indemnified
Parties than such existing directors' and officers' liability insurance;
provided, however, that the Surviving Corporation shall not be required in order
to maintain or procure such coverage to pay an annual premium in excess of 150%
of the current annual premium paid by the Company for its existing coverage
(which current annual premium the Company represents and warrants to be
$474,000), and that if equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of such limit, the Surviving
Corporation shall only be required to obtain as much coverage as can be obtained
by paying an annual premium equal to such limit. The Company hereby represents
and warrants to the Parent that it has heretofore furnished to the Parent a true
and complete copy of the existing directors' and officers' liability insurance
policy in force on the date of this Agreement (including a list of the named
insureds and beneficiaries thereunder).
(e) This covenant is intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and their respective
heirs and legal representatives.
Section 5.14. Employee Benefits Matters. (a) The Parent shall
require the Surviving Corporation to (i) honor the terms of the Severance
Agreements in the forms attached hereto as Exhibit C-1 for the officers, general
managers and director-level employees who will be party thereto (the "Severance
Agreements"), (ii) maintain the Company severance policy, the terms of which are
attached hereto as Exhibit C-2 (the "Severance Policy"), and (iii) maintain the
Headquarters Severance Plan, the terms of which are attached as Exhibit C-3.
Such Headquarters Severance Plan shall terminate in accordance with its terms,
and the Severance Policy shall terminate on the first anniversary of the
Effective Time (except that such plans and policies shall be effective with
respect to any layoff or terminations resulting from a reorganization or
consolidation on or after the first anniversary and before the second
anniversary). Upon termination of the Severance Policy, the Parent shall require
the Surviving Corporation to provide severance benefits no less favorable than
those
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provided from time to time to similarly situated employees of Parent.
(b) A copy of the Company's Senior Executive Transition Bonus
Plan is attached hereto as Exhibit C-4 (the "Transition Bonus Plan"). The Parent
acknowledges that the Company shall make payments under such Transition Bonus
Plan to the persons, and in the respective amounts, specified in Exhibit C-4 at
the Effective Time; provided, however, that in no event shall such amounts, in
the aggregate, exceed $2,000,000.
(c) The Company shall have the right to pay bonuses in order
to retain the services of certain employees in an amount not to exceed $100,000
in the aggregate at or prior to the Effective Time. Such bonuses shall be
awarded in the sole discretion of the Company's Chief Executive Officer, after
consultation with the Parent.
(d) A copy of the Supplemental Retirement Income Agreement
with David Johnson, as amended, is attached hereto as Exhibit C-5 (the "SERP").
The Parent acknowledges that the Company shall make the payments to Mr. Johnson
under the SERP at the Effective Time.
(e) The Parent shall require the Company to maintain the Red
Lion Hotel, Inc. Management Bonus Plan as attached hereto as Exhibit C-6 (the
"Management Bonus Plan"), to calculate the amounts payable under such Management
Bonus Plan on a basis consistent with the terms and past practice of the
Company, including terms relating to proration of bonuses upon employee layoffs,
and to make payments under such Management Bonus Plan with respect to the
Company's fiscal year ending December 31, 1996.
(f) For purposes of determining eligibility to participate,
vesting, entitlement to benefits and in all other respects where length of
service is relevant under any employee benefit plan or arrangement of the
Company or its subsidiaries (including for severance but not for pension benefit
accruals to the extent not permitted by law), employees of the Company and its
subsidiaries as of the Effective Time shall receive service credit for service
with the Company and any of its subsidiaries to the same extent such service was
credited under the Company's employee benefit plans immediately prior to the
Effective Time.
Section 5.15. Takeover Statutes. The Company and the Parent
will cooperate and take all actions reasonably necessary to (a) exempt the
Merger from the requirements of any applicable "fair price", "moratorium",
"control share acquisition" or other form of antitakeover law or regulation
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and (b) render inapplicable the prohibitions on business combinations contained
in Section 203 of the DGCL and eliminate or minimize the validity or
applicability to the Merger of any state takeover law.
Section 5.16. Certification of Stockholder Vote. At or prior
to the Closing, the Company shall deliver to the Parent a certificate executed
by the Secretary of the Company setting forth (a) the number of shares of
Company Common Stock voted in favor of approval and adoption of this Agreement
and the Merger and the number of shares of Company Common Stock voted against
approval and adoption of this Agreement and the Merger and (b) the number of
Dissenting Shares.
Section 5.17. Conveyance Taxes. The Company and the Parent
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 that are required or permitted to be filed at or before the
Effective Time.
Section 5.18. Gains Tax. The Company shall pay, without
deduction or withholding from any amount payable to the holders of Company
Common Stock, any New York State Tax on Gains Derived from Certain Real Property
Transfers (the "Gains Tax"), New York State Real Estate Transfer Tax, New York
City Real Property Transfer Tax and New York State Stock Transfer Tax (the
"Transfer Taxes") and any similar Taxes imposed upon stockholders by any other
State of the United States, including pursuant to Revised Code of Washington
Section 82.45.060 (and any penalties and interest with respect to such taxes),
which become payable in connection with the transactions contemplated by this
Agreement, on behalf of the stockholders of the Company. The Company and the
Parent shall cooperate in the preparation, execution and filing of any required
returns with respect to such taxes (including returns on behalf of the
stockholders of the Company) and in the determination of the portion of the
consideration allocable to the real property of the Company and its subsidiaries
in New York State and City (or in any other jurisdiction, if applicable). The
terms of the Proxy Statement shall provide that the stockholders of the Company
shall be deemed to have agreed to be bound by the allocation established
pursuant to this Section 0 in the preparation of any return with respect
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to the Gains Tax and the Transfer Taxes and any similar taxes, if applicable.
Section 5.19. FIRPTA Certificate. At the Closing, the Company
shall cause the Partnership to provide to the Parent a valid certification of
non-foreign status of the Partnership pursuant to Section 1445(b)(2) of the Code
and Treasury Regulation Section 1.1445-2(b)(2). Such certification shall conform
to the model certification provided in Treasury Regulation Section 1.1445-
2(b)(2)(iii)(B), or shall be in a form otherwise acceptable to the Parent.
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ARTICLE VI
CONDITIONS
Section 6.1. Conditions to Each Party's Obligation To Effect
the Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions, any or all of which may be waived, in whole or in part, to
the extent permitted by applicable law:
(a) Effective Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or, to the
knowledge of the Parent or the Company, threatened by the SEC, and all
necessary approvals under Blue Sky Laws relating to the issuance or
trading of the Parent Common Stock to be issued to the stockholders of
the Company in connection with the Merger shall have been received.
(b) Stockholder Approvals. This Agreement shall have been
approved and adopted by the requisite vote of the stockholders of the
Company, and the Parent Stockholder Approval shall have been obtained
or the Parent shall have received an exemption from the requirements of
Nasdaq to obtain the Parent Stockholder Approval in form and substance
reasonably satisfactory to the Parent and the Company.
(c) HSR Act. The waiting period (and any extension thereof)
under the HSR Act applicable to the Merger shall have expired or been
terminated.
(d) Governmental and Regulatory Consents. All consents,
approvals, authorizations, orders or permits required to be obtained by
the Company, the Parent, Merger Sub or their respective subsidiaries
prior to the Effective Time from, or filings or registrations required
to be made by any of the same prior to the Effective Time with, any
Governmental Entity in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except
(i) where the failure to have obtained or made any such consent,
approval, authorization, order, permit, filing or registration would
not have a Company Material Adverse Effect or a Parent Material Adverse
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Effect following the Effective Time and (ii) for any such consent,
approval, authorization, order, permit, filing or registration related
to, or arising out of, compliance with statutes, rules or regulations
regulating the consumption, sale or serving of alcoholic beverages.
(e) Nasdaq Quotation of Parent Common Stock. The Parent Common
Stock to be issued to the stockholders of the Company in connection
with the Merger shall have been approved for quotation on Nasdaq
subject only to official notice of issuance.
(f) No Order. No Governmental Entity or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which prohibits the consummation of
the Merger or any other material transaction pursuant to this
Agreement; provided, however, that the parties shall use their best
efforts to cause any such decree, judgment or other order to be vacated
or lifted.
Section 6.2. Additional Conditions to Obligations of the
Parent. The obligation of the Parent to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this
Agreement (without giving effect to any qualification contained therein
as to materiality, including without limitation the phrases "material",
"in all material respects", "substantial" or "substantially", and
"Company Material Adverse Effect") shall be true and correct as of the
Effective Time as though made on and as of the Effective Time, except
(i) for changes specifically permitted or required by this Agreement,
(ii) that those representations and warranties which address matters
only as of a particular date (other than the date of this Agreement)
shall remain true and correct as of such particular date, and (iii)
where the failure to be so true and correct would not, individually or
in the aggregate, have or be reasonably likely to have a Company
Material Adverse Effect.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects
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with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Effective Time.
(c) No Material Adverse Change. From the date of this
Agreement until the Effective Time, there shall not have occurred any
change, event, occurrence or circumstance in the business, operations,
properties, financial condition or results of operations of the Company
or any of its subsidiaries which, individually or in the aggregate, has
had or is reasonably likely to have a Company Material Adverse Effect
(except for changes, events, occurrences or circumstances (i) with
respect to general economic or industry conditions or (ii) arising as a
result of the transactions contemplated hereby).
(d) Third Party Consents. The Company shall have obtained, and
hereby agrees to exercise diligent efforts to obtain, the written
consent, in form and substance reasonably satisfactory to the Parent,
of the Partnership and/or RLH Partnership, L.P. to the change in the
name under which the hotel properties, which are subject to the Master
Lease dated as of August 1, 1995 between the Company, as tenant, and
RLH Partnership, L.P., as landlord, are operated to "Doubletree" or a
variation thereof designated by the Parent.
(e) Certificate. The Parent shall have received a certificate
executed on behalf of the Company by the Chief Executive Officer or
Chief Financial Officer of the Company to the effect set forth in
clauses (a) through (d) of this Section 6.2.
(f) Comfort Letter. The Parent shall have received the
"comfort" letter from the Company's independent public accountant,
dated as of the Effective Time, as described in Section 5.9(a).
(g) Company Shareholder Support Agreement. The Company
Shareholder Support Agreement shall be in full force and effect in
accordance with its terms. The Partnership shall have performed and
complied with all covenants and agreements required to be performed or
complied with by the Partnership.
(h) Dissenting Stockholders. Holders of not more than 10% of
the outstanding shares of Company Common Stock shall have demanded
appraisal rights for their shares of Company Common Stock in accordance
with the DGCL.
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Section 6.3. Additional Conditions to Obligations of the
Company. The obligation of the Company to effect the Merger is also subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Parent contained in this
Agreement (without giving effect to any qualification contained therein
as to materiality, including without limitation the phrases "material",
"in all material respects", "substantial" or "substantially", and
"Parent Material Adverse Effect") shall be true and correct in all
material respects, as of the Effective Time as though made on and as of
the Effective Time, except (i) for changes specifically permitted or
required by this Agreement, and (ii) that those representations and
warranties which address matters only as of a particular date (other
than the date of this Agreement) shall remain true and correct as of
such particular date, and (iii) where the failure to be so true and
correct would not, individually or in the aggregate, have or be
reasonably likely to have a Parent Material Adverse Effect.
(b) Agreements and Covenants. The Parent shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Effective Time.
(c) No Material Adverse Change. From the date of this
Agreement until the Effective Time, there shall not have occurred any
change, event, occurrence or circumstance in the business, operations,
properties, financial condition or results of operations of the Parent
or any of its subsidiaries which, individually or in the aggregate, has
had or is reasonably likely to have a Parent Material Adverse Effect
(except for changes, events, occurrences or circumstances (i) with
respect to general economic or industry conditions or (ii) arising as a
result of the transactions contemplated hereby).
(d) Certificate. The Company shall have received a certificate
executed on behalf of the Parent by the Chief Executive Officer or
Chief Financial Officer of the Parent to the effect set forth in
clauses (a) through (c) of this Section 6.3.
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(e) Comfort Letter. The Company shall have received the
"comfort" letter from the Parent's independent public accountant, dated
as of the Effective Time, as described in Section 5.9(b).
(f) Registration Rights Agreement; Partnership Services
Agreement. The Parent shall have entered into (i) a registration rights
agreement, substantially in the form attached hereto as Exhibit B (the
"Registration Rights Agreement"), with each affiliate of the Company
identified therein and (ii) a Partnership Services Agreement,
substantially in the form attached hereto as Exhibit D (the
"Partnership Services Agreement"), with the Partnership.
(g) Parent Shareholder Support Agreements. Each of the Parent
Shareholder Support Agreements shall be in full force and effect in
accordance with its terms. Each stockholder of the Parent that is a
party to a Parent Shareholder Support Agreement shall have performed
and complied with all covenants and agreements required to be performed
or complied with by such party thereunder.
(h) Dissenting Stockholders. Holders (other than the
Partnership and all other directors, officers and affiliates of the
Company) of not more than 10% of the outstanding shares of Company
Common Stock shall have demanded appraisal rights for their shares of
Company Common Stock in accordance with the DGCL.
ARTICLE VII
TERMINATION
Section 7.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval and adoption of this Agreement by the stockholders
of the Company or any Parent Stockholder Approval (or exemption therefrom as
contemplated hereunder):
(a) by mutual consent of the Parent and the
Company; or
(b) by action of the Board of Directors of either the Parent
or the Company if:
(i) the Merger shall not have been consummated by January 31,
1997 (provided that the right to terminate
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this Agreement under this clause (i) shall not be available to any
party whose breach of any representation or warranty or failure to
fulfill any covenant or agreement under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date); or
(ii) the Parent shall not have received an exemption from the
requirements of Nasdaq to obtain the Parent Stockholder Approval, and
the Parent Stockholder Approval shall not have been obtained upon a
vote at a Parent Stockholders' Meeting duly convened therefor or at any
adjournment thereof; or
(iii) 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 (iii) shall have
used all reasonable efforts to remove such injunction, order or
decree); or
(c) by action of the Board of Directors of the Company (i) if,
by reason of an Alternative Transaction Proposal being made, the Board
of Directors of the Company determines that it will not recommend
approval of the Merger by the stockholders of the Company, or withdraws
such recommendation, whether before or after approval and adoption of
this Agreement by the stockholders of the Company, or (ii) if the Final
Parent Stock Price is equal to or less than $29.38; or
(d) by action of the Board of Directors of the Parent, if (i)
the Board of Directors of the Company shall have withdrawn or modified
in a manner materially adverse to the Parent its approval or
recommendation of this Agreement or the Merger or shall have
recommended an Alternative Transaction Proposal to the stockholders of
the Company, or (ii) all of the conditions to the Merger set forth in
Section 6.1 and 6.2 have been satisfied, and the Parent is unable to
consummate the Merger or to pay the Merger Consideration as a result of
its failure to obtain financing in an amount necessary to consummate
the Merger or to pay the Merger Consideration due to the nonfulfillment
of (A) either of the conditions precedent set forth in paragraphs
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(vi) and (xv) of the section entitled "Conditions Precedent: A. To the
Initial Loans" contained in the senior debt commitment letter dated
September 12, 1996 by and among Morgan Stanley Senior Funding, Inc.,
The Bank of Nova Scotia and the Parent or (B) either of the conditions
precedent set forth in paragraphs 8 or 9 of the section entitled
"Conditions to Funding" contained in the bridge loan commitment letter
dated September 12, 1996 by and among Morgan Stanley Group, Inc., The
Bank of Nova Scotia, First Union Corporation, Societe Generale
Investment Corporation and the Parent; or (iii) the Final Parent Stock
Price is equal to or less than $25.71.
Notwithstanding the foregoing, if any fee would be due under Section 7.2 as a
result of any such termination, the ability of the Company to terminate this
Agreement pursuant to Section 7.1(c)(i) and the ability of the Parent to
terminate this Agreement pursuant to Section 7.1(b)(ii) or 7.1(d)(ii) is
conditioned upon the payment by the Company or the Parent, as the case may be,
of any amounts owed by it in accordance with Section 7.2(a).
Section 7.2. Effect of Termination. (a) In the event that this
Agreement is terminated pursuant to Section 7.1(c)(i) or 7.1(d)(i), then the
Company shall pay the Parent a cash fee of $25,000,000, which amount shall be
payable by wire transfer of immediately available funds simultaneously with any
such termination pursuant to Section 7.1(c)(i) and no later than two (2)
business days after such termination pursuant to Section 7.1(d)(i). The Company
acknowledges that the agreements contained in this Section 7.2(a) are an
integral part of the transactions contemplated in this Agreement, and that,
without these agreements, the Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 7.2(a), and, in order to obtain such payment, the
Parent or Merger Sub commences a suit which results in a judgment against the
Company for the fee set forth in this Section 7.2(a), the Company shall pay to
the Parent its costs and expenses (including attorneys' fees) in connection with
such suit.
(b) In the event that this Agreement is terminated pursuant to
Section 7.1(b)(ii) (other than primarily as a result of the breach of this
Agreement by the Company), then the Parent shall pay the Company a cash fee of
$25,000,000, which amount shall be payable by wire transfer of immediately
available funds simultaneously with any such termination, if the terminating
party is the Parent, and in
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no event later than two business (2) days after any such termination, if the
terminating party is the Company. In the event that this Agreement is terminated
pursuant to Section 7.1(d)(ii) (other than primarily as a result of the breach
of this Agreement by the Company), then the Parent shall pay the Company a cash
fee of $12,000,000, which fee shall be the sole and exclusive remedy of the
Company for the failure of the parties to consummate the Merger, and which fee
shall be payable by wire transfer of immediately available funds simultaneously
with any such termination. The Parent acknowledges that the agreements contained
in this Section 7.2(b) are an integral part of the transactions contemplated in
this Agreement, and that, without these agreements, the Company would not enter
into this Agreement; accordingly, if the Parent fails to promptly pay any
amounts due pursuant to this Section 7.2(b), and, in order to obtain such
payment, the Company commences a suit which results in a judgment against the
Parent for the fee set forth in this Section 7.2(b), the Parent shall pay to the
Company its costs and expenses (including attorneys' fees) in connection with
such suit.
(c) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VII, all obligations and
liabilities of the parties hereto shall terminate, except the obligations of the
parties pursuant to this Section 7.2 and Section 5.12 and except for the
provisions of Article VIII, the Company Confidentiality Agreement and the Parent
Confidentiality Agreement. Nothing herein shall prejudice the ability of the
non-breaching party to seek damages from any other party for any willful breach
of this Agreement, including without limitation, attorneys' fees and the right
to pursue any remedy at law or in equity.
Section 7.3. Extension; Waiver. At any time prior to the
Effective Time, any party hereto, by action taken by its Board of Directors,
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 such extension or waiver shall be valid only if set forth in an
instrument in writing signed by or on behalf of the party or parties to be bound
thereby.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations, Warranties and
Agreements. All representations, warranties and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall be deemed to the
extent expressly provided herein to be conditions to the Merger and shall not
survive the Merger and thereafter neither the Parent, Merger Sub or the Company,
nor any affiliate, officer, director, employee or shareholder shall have any
liability with respect thereto; provided, however, that the agreements contained
in Articles I and II, Sections 5.13 and 5.14, this Article VIII, the
Registration Rights Agreement, the Affiliate Letters, the Partnership Services
Agreement, the Company Shareholder Support Agreement, the Parent Shareholder
Support Agreements and any other covenant or agreement which contemplates
performance after the Effective Time shall survive the Merger.
Section 8.2. Notices. Any notice required to be given
hereunder shall be sufficient if in writing, and sent by facsimile transmission
and by courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
(a) if to the Parent or Merger Sub, to
Doubletree Corporation
410 North 44th Street
Suite 700
Phoenix, Arizona 85008
Attention: Chief Financial Officer
Telecopier: (602) 220-6602
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: William J. Phillips, Esq.
Telecopier: (212) 295-6333
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(b) if to the Company, to
Red Lion Hotels, Inc.
4001 Main Street
Vancouver, Washington 98663
Attention: Chief Executive Officer
Telecopier: (360) 693-1739
with a copy to:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111-2586
Attention: Peter F. Kerman, Esq.
Telecopier: (415) 395-8095
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
telecommunicated or personally delivered or on the fifth business day after
being deposited in the United States mail, if mailed.
Section 8.3. Certain Definitions. The following terms shall,
when used in this Agreement, have the following respective meanings:
(a) "affiliate" shall have the meaning assigned to such term
in Section 12(b)-2 of the Exchange Act.
(b) "business day" shall have the meaning set forth in Rule
14d-1(c)(6) under the Exchange Act.
(c) "person" means any natural person, corporation, limited
liability company, partnership, unincorporated organization, government
or department or agency thereof, or other legal entity.
(d) "subsidiary" of any person means any corporation,
partnership, joint venture or other organization, whether incorporated
or unincorporated, of which such person directly or indirectly owns or
controls at least 50% of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization, or any partnership or other
organization of which such person directly or indirectly owns a 50% or
greater equity interest.
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Section 8.4. Assignment; Binding Effect. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 2.3(f), 5.13 and 8.6 nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
Section 8.5. Entire Agreement. This Agreement (including the
Exhibits hereto), the Company Disclosure Schedule, the Parent Disclosure
Schedule, the Parent Confidentiality Agreement, the Parent Shareholder Support
Agreements, the Company Confidentiality Agreement, the Company Shareholder
Support Agreement, the Registration Rights Agreement, the Partnership Services
Agreement and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
Section 8.6. Amendment. This Agreement may be amended by the
parties hereto, by action taken by their respective Boards of Directors, at any
time before or after approval and adoption of this Agreement by the stockholders
of the Company or the Parent Stockholder Approval is obtained, but, after any
such approval or any Parent Stockholder Approval, no amendment shall be made
which by law requires further approval by the stockholders of the Company or the
Parent 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. After the Effective Time, none of the Sections or Articles
specified in Section 8.1 may be amended.
Section 8.7. Waivers. Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
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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.
Section 8.8. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section 8.9. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to its rules of conflict of laws. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America
located in the State of Delaware (the "Delaware 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 the
Delaware Courts), waives any objection to the laying of venue of any such
litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in an
inconvenient forum.
Section 8.10. Enforcement of Agreement. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with its specific
terms or was otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
Delaware Court, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section 8.11. Incorporation of Exhibits. The Company
Disclosure Schedule, the Parent Disclosure Schedule and the Exhibits attached
hereto and referred to herein are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein. Inclusion of information
in the Company Disclosure Schedule or the Parent
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Disclosure Schedule does not constitute an admission or acknowledgement of the
materiality of such information.
Section 8.12. 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.
Section 8.13. Headings. The headings 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.
Section 8.14. Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all which 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.
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IN WITNESS WHEREOF, the Parent, Merger Sub and the Company
have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
DOUBLETREE CORPORATION
By: /s/ Richard Ferris
------------------------------------
Name: Richard Ferris
Title: Co-Chairman
RLH ACQUISITION CORP.
By: /s/ David Heuck
------------------------------------
Name: David Heuck
Title: Vice President
RED LION HOTELS, INC.
By: /s/ David J. Johnson
------------------------------------
Name: David J. Johnson
Title: President, CEO and Chairman
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EXHIBIT E
TO MERGER
AGREEMENT
SAMPLE EXCHANGE RATIO ADJUSTMENTS
Base Parent Stock Price: $36.7253
Base Value of Stock Consideration: $8.8060
FINAL PARENT PERCENT OF BASE EXCHANGE VALUE OF STOCK PERCENT OF
STOCK PRICE PARENT STOCK PRICE RATIO CONSIDERATION BASE VALUE
- ------------ ------------------ -------- -------------- ----------
$25.7077 70.0% 0.2740 $ 7.0448 80.0%
26.0750 71.0% 0.2736 7.1329 81.0%
26.4422 72.0% 0.2731 7.2209 82.0%
26.8095 73.0% 0.2726 7.3090 83.0%
27.1767 74.0% 0.2722 7.3970 84.0%
27.5440 75.0% 0.2718 7.4851 85.0%
27.9112 76.0% 0.2713 7.5732 86.0%
28.2785 77.0% 0.2709 7.6612 87.0%
28.6457 78.0% 0.2705 7.7493 88.0%
29.0130 79.0% 0.2701 7.8373 89.0%
29.3802 80.0% 0.2698 7.9254 90.0%
29.7475 81.0% 0.2694 8.0135 91.0%
30.1147 82.0% 0.2690 8.1015 92.0%
30.4820 83.0% 0.2687 8.1896 93.0%
30.8493 84.0% 0.2683 8.2776 94.0%
31.2165 85.0% 0.2680 8.3657 95.0%
31.5838 86.0% 0.2649 8.3657 95.0%
31.9510 87.0% 0.2618 8.3657 95.0%
32.3183 88.0% 0.2589 8.3657 95.0%
32.6855 89.0% 0.2559 8.3657 95.0%
33.0528 90.0% 0.2531 8.3657 95.0%
33.4200 91.0% 0.2503 8.3657 95.0%
33.7873 92.0% 0.2476 8.3657 95.0%
34.1545 93.0% 0.2449 8.3657 95.0%
34.5218 94.0% 0.2423 8.3657 95.0%
34.8890 95.0% 0.2398 8.3657 95.0%
35.2563 96.0% 0.2398 8.4538 96.0%
35.6235 97.0% 0.2398 8.5418 97.0%
35.9908 98.0% 0.2398 8.6299 98.0%
36.3580 99.0% 0.2398 8.7179 99.0%
36.7253 100.0% 0.2398 8.8060 100.0%
37.0926 101.0% 0.2398 8.8941 101.0%
37.4598 102.0% 0.2398 8.9821 102.0%
37.8271 103.0% 0.2398 9.0702 103.0%
38.1943 104.0% 0.2398 9.1582 104.0%
38.5616 105.0% 0.2398 9.2463 105.0%
38.9288 106.0% 0.2375 9.2463 105.0%
39.2961 107.0% 0.2353 9.2463 105.0%
39.6633 108.0% 0.2331 9.2463 105.0%
40.0306 109.0% 0.2310 9.2463 105.0%
40.3978 110.0% 0.2289 9.2463 105.0%
40.7651 111.0% 0.2268 9.2463 105.0%
41.1323 112.0% 0.2248 9.2463 105.0%
41.4996 113.0% 0.2228 9.2463 105.0%
41.8668 114.0% 0.2209 9.2463 105.0%
42.2341 115.0% 0.2189 9.2463 105.0%
42.6013 116.0% 0.2191 9.3344 106.0%
42.9686 117.0% 0.2193 9.4224 107.0%
43.3359 118.0% 0.2195 9.5105 108.0%
43.7031 119.0% 0.2196 9.5985 109.0%
44.0704 120.0% 0.2198 9.6866 110.0%
44.4376 121.0% 0.2180 9.6866 110.0%
44.8049 122.0% 0.2162 9.6866 110.0%
45.1721 123.0% 0.2144 9.6866 110.0%
45.5394 124.0% 0.2127 9.6866 110.0%
45.9066 125.0% 0.2110 9.6866 110.0%
46.2739 126.0% 0.2093 9.6866 110.0%
46.6411 127.0% 0.2077 9.6866 110.0%
47.0084 128.0% 0.2061 9.6866 110.0%
47.3756 129.0% 0.2045 9.6866 110.0%
47.7429 130.0% 0.2029 9.6866 110.0%
E-1