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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 19, 1997
ITT CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 1-13960 88-0340591
(State or other (Commission File No.) (IRS Employer Identification No.)
jurisdiction of
incorporation)
1330 Avenue of the Americas
New York, NY 10019-5490
(Address of principal executive offices)
(212) 258-1000
(Registrant's telephone number, including area code)
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<PAGE>
Item 5. Other Information.
On October 19, 1997, ITT Corporation (the "Company") agreed to
merge (the "Merger") with an entity jointly owned by Starwood Lodging
Corporation ("Starwood") and Starwood Lodging Trust ("Starwood
Trust"). The terms of the Merger are set forth in an Agreement and
Plan of Merger (the "Merger Agreement") dated as of October 19, 1997,
among the Company, Starwood, Starwood Trust and Chess Acquisition
Corp. In the Merger, each share of the Company's common stock, no par
value (the "Common Stock"), will be converted into the right to
receive Paired Shares (as defined below), subject to certain collar
provisions, and $15 in cash. The shares of common stock, par value
$0.01 per share, of Starwood and the trust shares, par value $0.01 per
share, of Starwood Trust trade as "paired shares" (the "Paired
Shares") on the New York Stock Exchange. As a result of the Merger,
the Company will be wholly owned by Starwood and Starwood Trust.
The Merger is subject to the approval of the stockholders of the
Company, Starwood and Starwood Trust and other customary conditions.
The foregoing summary of the Merger Agreement is qualified in its
entirety by reference to the text of the Merger Agreement, a copy of
which is filed as Exhibit 2.1 hereto and which is incorporated herein
by reference.
On October 19, 1997, the Company entered into Amendment No. 1,
dated as of October 19, 1997 ("Amendment No. 1"), to the Rights
Agreement (the "Rights Agreement"), dated as of November 1, 1995,
between ITT Destinations, Inc. and The Bank of New York, as Rights
Agent, pursuant to which Series A Participating Cumulative Preferred
Stock purchase rights (the "Rights") were issued to holders of the
Common Stock. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in the Rights
Agreement.
Amendment No. 1 provides that none of Starwood, Starwood Trust or
any of their respective Affiliates or Associates or any of their
permitted assignees or transferees shall be deemed an Acquiring Person
and no Distribution Date shall be deemed to occur, in each such case,
by reason of the approval, execution or delivery of the Merger
Agreement, the consummation of the Merger or the consummation of the
other transactions contemplated by the Merger Agreement.
The foregoing summary of Amendment No. 1 is qualified in its
entirety by reference to the text of Amendment No. 1, a copy of which
is filed as Exhibit 4.1 hereto and which is incorporated herein by
reference.
Item 7. Financial Statements and Exhibits.
(a) - (b) Not applicable.
(c) Exhibits.
2.1 Agreement and Plan of Merger among Starwood Lodging
Corporation, Chess Acquisition Corp., Starwood Lodging
Trust and ITT Corporation dated as of October 19, 1997.
4.1 Amendment No. 1, dated as of October 19, 1997, to the
Rights Agreement dated as of November 1, 1995 between
ITT Destinations, Inc. and The Bank of New York, as
Rights Agent.
99.1 Text of Press Release of ITT Corporation and Starwood
Lodging issued October 20, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
ITT CORPORATION.
By: /s/ Patrick L. Donnelly
Date: October 20, 1997 -----------------------------
Name: Patrick L. Donnelly
Title Vice President and Assistant
General Counsel
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description Sequential Page No.
2.1 Agreement and Plan of Merger among
Starwood Lodging Corporation, Chess
Acquisition Corp., Starwood Lodging
Trust and ITT Corporation dated as of
October 19, 1997.
4.1 Amendment No. 1, dated as of October 19,
1997, to the Rights Agreement dated as
of November 1, 1995 between ITT
Destinations, Inc. and The Bank of New
York, as Rights Agent.
99.1 Text of Press Release of ITT Corporation
issued October 20, 1997.
[Exhibit 2.1]
Execution Version
AGREEMENT AND PLAN OF MERGER
AMONG
STARWOOD LODGING CORPORATION,
CHESS ACQUISITION CORP.,
STARWOOD LODGING TRUST
AND
ITT CORPORATION
Dated as of October 19, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER...................................................2
Section 1.1 The Merger......................................2
Section 1.2 Effective Time..................................2
Section 1.3 Effects of the Merger...........................2
Section 1.4 Charter and By-laws; Directors..................2
Section 1.5 Conversion of Securities........................3
Section 1.6 The Parent Companies to Make Certificates
Available...........................................4
Section 1.7 Dividends; Transfer Taxes; Withholding..........5
Section 1.8 No Fractional Securities........................6
Section 1.9 Return of Exchange Fund.........................7
Section 1.10 Adjustment of Exchange Ratio....................7
Section 1.11 No Further Ownership Rights in Company
Common Stock........................................7
Section 1.12 Closing of Company Transfer Books...............8
Section 1.13 Lost Certificates...............................8
Section 1.14 Further Assurances..............................8
Section 1.15 Closing.........................................9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES AND SUB 9
Section 2.1 Organization, Standing and Power................9
Section 2.2 Capital Structure..............................10
Section 2.3 Authority......................................12
Section 2.4 Consents and Approvals; No Violation...........13
Section 2.5 SEC Documents and Other Reports................14
Section 2.6 Registration Statement and Joint Proxy
Statement..........................................15
Section 2.7 Absence of Certain Changes or Events...........16
Section 2.8 Permits and Compliance.........................16
Section 2.9Tax Matters......................................17
Section 2.10 Actions and Proceedings........................18
Section 2.11 Compliance with Worker Safety and
Environmental Laws.................................19
Section 2.12 Liabilities....................................20
Section 2.13 Intellectual Property..........................20
Section 2.14 Opinion of Financial Advisor...................20
Section 2.15 Required Vote of Parent and Trust
Stockholders.......................................21
Section 2.16 REIT Status....................................21
Section 2.17 Brokers........................................21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............21
<PAGE>
Page
Section 3.1 Organization, Standing and Power...............21
Section 3.2 Capital Structure..............................22
Section 3.3 Authority......................................23
Section 3.4 Consents and Approvals; No Violation...........23
Section 3.5 SEC Documents and Other Reports................25
Section 3.6 Registration Statement and Joint
Proxy Statement....................................25
Section 3.7 Absence of Certain Changes or Events...........26
Section 3.8 Permits and Compliance.........................26
Section 3.9 Tax Matters....................................27
Section 3.10 Actions and Proceedings........................28
Section 3.11 Certain Agreements.............................29
Section 3.12 ERISA..........................................29
Section 3.13 Compliance with Worker Safety and
Environmental Laws.................................31
Section 3.14 Liabilities....................................32
Section 3.15 Intellectual Property..........................32
Section 3.16 Rights Agreement...............................33
Section 3.17 Parachute Payments to Disqualified
Individuals........................................33
Section 3.18 Opinion of Financial Advisor...................33
Section 3.19 State Takeover Statutes........................33
Section 3.20 Required Vote of Company Stockholders..........33
Section 3.21 Brokers........................................34
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS...................34
Section 4.1 Conduct of Business by the Company Pending
the Merger.........................................34
Section 4.2 Conduct of Business by the Parent
Companies Pending the Merger.......................37
Section 4.3 No Solicitation................................38
Section 4.4 Third Party Standstill Agreements..............40
Section 4.5 Pre-Merger Transactions........................40
Section 4.6 Post-Merger Transactions.......................42
ARTICLE V
ADDITIONAL AGREEMENTS.......................................42
Section 5.1 Stockholders Meetings..........................42
Section 5.2 Filings; Other Actions.........................42
Section 5.3 Comfort Letters................................43
Section 5.4 Access to Information..........................44
Section 5.5 Compliance with the Securities Act.............44
Section 5.6 Stock Exchange Listings........................45
Section 5.7 Fees and Expenses..............................45
<PAGE>
Page
Section 5.8 Company Stock Options..........................46
Section 5.9 Reasonable Efforts.............................47
Section 5.10 Public Announcements..........................48
Section 5.11 Transfer and Gains Tax........................48
Section 5.12 State Takeover Laws...........................49
Section 5.13 Indemnification; Directors and Officers
Insurance..........................................49
Section 5.14 Notification of Certain Matters................50
Section 5.15 Employees......................................50
Section 5.16 Rights Agreement...............................51
Section 5.17 Regulatory Matters.............................52
Section 5.18 New Jersey Trust...............................52
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER..........................53
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger..................................53
Section 6.2 Conditions to Obligation of the Company to
Effect the Merger..................................55
Section 6.3 Conditions to Obligations of Parent, Sub and
Trust to Effect the Merger.........................56
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER...........................57
Section 7.1 Termination....................................57
Section 7.2 Effect of Termination..........................59
Section 7.3 Amendment......................................59
Section 7.4 Waiver.........................................59
ARTICLE VIII
GENERAL PROVISIONS..........................................59
Section 8.1 Non-Survival of Representations and
Warranties.........................................59
Section 8.2 Notices........................................60
Section 8.3 Interpretation.................................61
Section 8.4 Counterparts...................................61
Section 8.5 Entire Agreement; No Third-Party
Beneficiaries......................................61
Section 8.6 Governing Law..................................61
Section 8.7 Assignment.....................................61
Section 8.8 Severability...................................61
Section 8.9 Enforcement of this Agreement..................62
Section 8.10 Trust..........................................62
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of October 19,
1997 (this "Agreement"), among Starwood Lodging Corporation, a
Maryland corporation ("Parent"), Chess Acquisition Corp., a
Nevada corporation and a controlled subsidiary of Parent ("Sub"),
Starwood Lodging Trust, a Maryland real estate investment trust
("Trust" and, together with Parent, the "Parent Companies") and
ITT Corporation, a Nevada corporation (the "Company") (Sub and
the Company being hereinafter collectively referred to as the
"Constituent Corporations").
W I T N E S S E T H:
WHEREAS the respective Boards of Directors of Parent,
Sub, Trust and the Company have approved the merger of Sub with
and into the Company (the "Merger"), upon the terms and subject
to the conditions set forth herein, whereby each issued and
outstanding share of Common Stock, no par value, of the Company
("Company Common Stock"), not owned by Parent, the Company or
their respective wholly owned subsidiaries will be converted into
shares of common stock, par value $.01 per share, of Parent
("Parent Common Stock"), and trust shares, par value $.01 per
share, of Trust ("Trust Shares" and, when paired with shares of
Parent Common Stock pursuant to the Pairing Agreement dated as of
June 28, 1980, as amended from time to time, between Parent and
Trust, "Paired Shares"), and cash;
WHEREAS the respective Boards of Directors or Trustees,
as the case may be, of each of the Parent Companies and the
Company have determined that the Merger is in furtherance of and
consistent with their respective long-term business strategies
and is in the best interest of their respective stockholders or
shareholders, as the case may be; and
WHEREAS the parties to this Agreement intend that the
Merger shall be treated as a taxable acquisition of all the
outstanding shares of Company Common Stock by Parent and the
Trust, respectively, in proportion to the relative percentages of
Sub capital stock they own immediately prior to the consummation
of the Merger.
<PAGE>
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to
the conditions hereof, and in accordance with the Nevada General
Corporation Law (the "NGCL"), Sub shall be merged with and into
the Company at the Effective Time (as defined in Section 1.2).
Following the Merger, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance
with the NGCL.
Section 1.2 Effective Time. The Merger shall become
effective when Articles of Merger (the "Articles of Merger"),
executed in accordance with the relevant provisions of the NGCL,
are filed with the Secretary of State of the State of Nevada;
provided, however, that, upon mutual consent of the Constituent
Corporations, the Articles of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the
date the Articles of Merger are filed. When used in this
Agreement, the term "Effective Time" shall mean the date and time
at which the Articles of Merger are accepted for record or such
later time established by the Articles of Merger. The filing of
the Articles of Merger shall be made on the date of the Closing
(as defined in Section 1.15).
Section 1.3 Effects of the Merger. The Merger shall
have the effects set forth in Section 92A.250 of the NGCL.
Section 1.4 Charter and By-laws; Directors. (a) At the
Effective Time, the Articles of Incorporation of Sub, as in
effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by
applicable law; provided, however, that the Articles of
Incorporation of Sub shall include provisions substantially
identical to ARTICLE SEVENTH and ARTICLE NINTH of the Restated
Articles of Incorporation, as amended, of the Company existing as
of the date of this Agreement; and provided further that at the
Effective Time Article I of the Articles of Incorporation of Sub
shall be amended to read in its entirety as follows: "The name of
the corporation is ITT Corporation." At the Effective Time, the
By-laws of Sub, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or in the
Articles of Incorporation; provided, however, that the By-laws of
<PAGE>
Sub shall include provisions substantially identical to Section 4
of the Amended and Restated By-laws of the Company existing on
the date of this Agreement.
(b) The directors of Sub at the Effective Time shall be
the directors of the Surviving Corporation until the earlier of
their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
(c) Parent and Trust shall use all reasonable efforts
to cause the Board of Directors of Parent and the Board of
Trustees of Trust to be increased in size, effective at the
Effective Time, by three members, in the case of the Board of
Directors of Parent, and by one member, in the case of the Board
of Trustees of Trust, with such four new members being
individuals selected by the Company (with notice of such
selection to be given to the Parent Companies within 30 days
after the date hereof) from the members of the Board of Directors
of the Company.
Section 1.5 Conversion of Securities. As of the
Effective Time, by virtue of the Merger and without any action on
the part of Sub, the Company or the holders of any securities of
the Constituent Corporations:
(a) Each issued and outstanding share of common stock,
no par value, of Sub shall be converted into one validly
issued, fully paid and nonassessable share of common stock,
no par value, of the Surviving Corporation.
(b) All shares of Company Common Stock that are held in
the treasury of the Company and shares of Company Common
Stock owned by Parent, Trust or Sub (together, in each case,
with the associated Right (as defined in Section 3.2)) shall
be canceled and no cash, capital stock of Parent or Trust or
other consideration shall be delivered in exchange therefor.
All shares of Company Common Stock that are held by any
wholly owned Subsidiary (as defined in Section 2.1) of the
Company, Parent, Sub or the Trust (together, in each case,
with the associated Right (as defined in Section 3.2)) shall
be converted into validly issued, fully paid and
nonassessable shares of common stock, no par value, of the
Surviving Corporation.
(c) (i) Subject to the provisions of Sections 1.8 and
1.10 hereof, each share of Company Common Stock (including
restricted shares of Company Common Stock issued under
Company Plans (as defined below)) issued and outstanding
immediately prior to the Effective Time (other than shares
to be canceled in accordance with Section 1.5(b)) together
with the associated Right shall as of the Effective Time be
<PAGE>
converted into the right to receive the Exchange Ratio (as
defined below) of validly issued, fully paid and
nonassessable Paired Shares and cash in an amount equal to
$15.00, without interest. All such shares of Company Common
Stock (and the associated Rights), when so converted, shall
no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist and each holder of a
certificate representing any such shares (and the associated
Rights) shall cease to have any rights with respect thereto,
except the right to receive (A) any dividends and other
distributions in accordance with Section 1.7, (B)
certificates representing the Paired Shares into which such
shares (and the associated Rights) are converted, (C) cash
into which such shares are converted pursuant to this
Section 1.5(c) and (D) any cash, without interest, in lieu
of fractional Paired Shares to be issued or paid in
consideration therefor upon the surrender of such
certificate in accordance with Sections 1.6 and 1.8.
(ii) The Exchange Ratio shall be a number equal to the
quotient, rounded to the nearest thousandth, or if there
shall not be a nearest thousandth, the next higher
thousandth, of (x) $67.00 divided by (y) the Market Price
(as defined below) of Paired Shares on the fifth New York
Stock Exchange, Inc. ("NYSE") trading day prior to the date
of the Company Stockholder Meeting (as defined in Section
5.1); provided, however, that in no event shall the Exchange
Ratio be (A) greater than an amount equal to $67.00 divided
by $53.263 or (B) less than an amount equal to $67.00
divided by $61.263. The "Market Price" of a Paired Share on
any date means the average of the daily closing prices per
Paired Share as reported on the NYSE Composite Transactions
reporting system (as published in The Wall Street Journal
or, if not published therein, in another authoritative
source mutually selected by the Company and Parent) for the
20 consecutive NYSE trading days (the "Averaging Period")
immediately preceding such date.
Section 1.6 The Parent Companies to Make Certificates
Available.
(a) Exchange of Certificates. The Parent Companies
shall authorize Bankers Trust Company (or such other person or
persons as shall be acceptable to the Parent Companies and the
Company) to act as the Exchange Agent hereunder (the "Exchange
Agent"). As soon as practicable after the Effective Time, the
Parent Companies shall deposit with the Exchange Agent, in trust
for the holders of shares of Company Common Stock converted in
the Merger, certificates representing the Paired Shares issuable
and cash payable pursuant to Section 1.5(c) in exchange for
outstanding shares of Company Common Stock, cash required to make
payments in lieu of any fractional shares pursuant to Section 1.8
<PAGE>
and cash or other property to pay or make any dividends or
distributions pursuant to Section 1.7 (such cash and Paired
Shares, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund").
The Exchange Agent shall invest any cash included in the Exchange
Fund as directed by the Parent Companies, on a daily basis. Any
interest or other income resulting from such investments shall be
paid to the Parent Companies. The Exchange Agent shall deliver
the Paired Shares contemplated to be issued and the cash payable
pursuant to Section 1.5(c) and cash or other property
distributable pursuant to Section 1.7 out of the Exchange Fund.
(b) Exchange Procedures. As soon as practicable after
the Effective Time, the Exchange Agent shall mail to each record
holder of a certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of Company
Common Stock converted in the Merger (the "Certificates"), a
letter of transmittal in form reasonably acceptable to the
Company (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon
actual delivery of the Certificates to the Exchange Agent, and
shall contain instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing Paired
Shares, cash payable pursuant to Section 1.5(c) and cash or other
property distributable pursuant to Sections 1.7 and 1.8). Upon
surrender for cancellation to the Exchange Agent of a
Certificate, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that
number of whole Paired Shares and cash into which the shares (and
the associated Rights) represented by the surrendered Certificate
shall have been converted at the Effective Time pursuant to this
Article I, cash in lieu of any fractional Paired Shares in
accordance with Section 1.8 and any dividends or other
distributions in accordance with Section 1.7, and any Certificate
so surrendered shall forthwith be canceled. All Paired Shares
shall be issued directly by the Trust and Parent and no Paired
Shares shall at any time be held by the Surviving Corporation.
Section 1.7 Dividends; Transfer Taxes; Withholding. No
dividends or other distributions that are declared on or after
the Effective Time on the Paired Shares, or are payable to the
holders of record thereof on or after the Effective Time, will be
paid to any person entitled by reason of the Merger to receive a
certificate representing Paired Shares until such person
surrenders the related Certificate or Certificates, as provided
in Section 1.6, and no cash payment pursuant to Section 1.5(c) or
1.8 will be paid to any such person until such person shall so
surrender the related Certificate or Certificates. Subject to the
effect of applicable law, there shall be paid to each record
holder of a new certificate representing such Paired Shares: (i)
at the time of such surrender or as promptly as practicable
<PAGE>
thereafter, the amount, if any, of any dividends or other
distributions theretofore paid with respect to the Paired Shares
represented by such new certificate and having a record date on
or after the Effective Time and a payment date prior to such
surrender; (ii) at the appropriate payment date or as promptly as
practicable thereafter, the amount, if any, of any dividends or
other distributions payable with respect to such Paired Shares
and having a record date on or after the Effective Time but prior
to such surrender and a payment date on or subsequent to such
surrender; and (iii) at the time of such surrender or as promptly
as practicable thereafter, the amount of any cash payable
pursuant to Section 1.5(c) or 1.8 to which such holder is
entitled pursuant to Section 1.8. In no event shall the person
entitled to receive such dividends or other distributions or cash
be entitled to receive interest on such dividends or other
distributions or cash. If any certificate representing Paired
Shares or cash or other property is to be issued or delivered in
a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such
exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent
any transfer or other taxes required by reason of the issuance of
certificates for such Paired Shares in a name other than that of
the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. The Parent Companies 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 Companies 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 (the "Code"), or under
any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Parent Companies 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 Companies or the
Exchange Agent.
Section 1.8 No Fractional Securities. No certificates
or scrip representing fractional Paired Shares shall be issued
upon the surrender for exchange of Certificates pursuant to this
Article I, and no Parent or Trust dividend or other distribution
or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to
any other rights of a security holder of Parent or Trust. In lieu
of any such fractional share, each holder of Company Common Stock
who would otherwise have been entitled to a fraction of a Paired
Share upon surrender of Certificates for exchange pursuant to
this Article I will be paid an amount in cash (without
<PAGE>
interest), rounded to the nearest cent, determined by multiplying
(i) the average of the per share closing prices on the New York
Stock Exchange, Inc. (the "NYSE") of a Paired Share (as reported
in the NYSE Composite Transactions) during the five consecutive
trading days ending on the trading day immediately prior to the
date of the Effective Time by (ii) the fractional interest to
which such holder would otherwise be entitled. As promptly as
practicable after the determination of the amount of cash to be
paid to holders of fractional share interests, the Exchange Agent
shall so notify the Parent Companies, and the Parent Companies
shall deposit such amount with the Exchange Agent and shall cause
the Exchange Agent to forward payments to such holders of
fractional share interests subject to and in accordance with the
terms of Section 1.6, Section 1.7 and this Section 1.8. For
purposes of paying such cash in lieu of fractional shares, all
Certificates surrendered for exchange by a Company stockholder
shall be aggregated, and no such Company stockholder will receive
cash in lieu of fractional shares in an amount equal to or
greater than the value of one full Paired Share with respect to
such Certificates surrendered.
Section 1.9 Return of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the former
stockholders of the Company for one year after the Effective Time
shall be delivered to the Parent Companies and any such former
stockholders who have not theretofore complied with this Article
I shall thereafter look only to the Parent Companies for payment
of their claim for Paired Shares, any cash payable pursuant to
Sections 1.5(c) or 1.8 and any dividends or distributions with
respect to Paired Shares. None of Parent, Trust or Surviving
Corporation shall be liable to any former holder of Company
Common Stock for any such Paired Shares, cash and dividends and
distributions held in the Exchange Fund which is delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 1.10 Adjustment of Exchange Ratio. In the event
that, prior to the Effective Time, Parent or Trust effects any
reclassification, stock split or stock dividend with respect to
Parent Common Stock or Trust Shares, any change or conversion of
Parent Common Stock or Trust Shares into other securities or any
other dividend or distribution with respect to the Paired Shares,
other than (i) dividends contemplated by Sections 4.5(c) and (d)
and (ii) dividends in the aggregate not to exceed the greater of
(a) the current rate of the Parent Companies' dividends (together
with any increases in such rate in the ordinary course) and (b)
the Trust's "real estate investment taxable income" (as such term
is defined for purposes of the Code) without regard to any net
capital gains or the deduction for dividends paid, appropriate
and proportionate adjustments, if any, shall be made to the
Exchange Ratio, and all references to
<PAGE>
the Exchange Ratio in this Agreement shall be deemed to be to the
Exchange Ratio as so adjusted.
Section 1.11 No Further Ownership Rights in Company
Common Stock. All Paired Shares and cash issued or paid upon the
surrender for exchange of Certificates in accordance with the
terms hereof (including any cash or other property paid pursuant
to Sections 1.5(c), 1.7 and 1.8) shall be deemed to have been
issued in full satisfaction of all rights pertaining to the
shares of Company Common Stock and associated Rights represented
by such Certificates 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 of this Agreement and which
remain unpaid at the Effective Time.
Section 1.12 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock shall
thereafter be made on the records of the Company. If, after the
Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates
shall be canceled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate
shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Parent
Companies or the Exchange Agent, the posting by such person of a
bond, in such reasonable amount as the Parent Companies or the
Exchange Agent may direct (but consistent with the practices the
Parent Companies apply to their own respective stockholders) as
indemnity against any claim that may be made against them with
respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the
Paired Shares, any cash payable pursuant to Section 1.5(c) or 1.8
to which the holders thereof are entitled and any dividends or
other distributions to which the holders thereof are entitled
pursuant to Section 1.7.
Section 1.14 Further Assurances. If at any time after
the Effective Time the Surviving Corporation shall consider or be
advised that any deeds, bills of sale, assignments or assurances
or any other acts or things are necessary, desirable or proper
(a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises,
properties or assets of either of the Constituent Corporations,
or (b) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper officers and directors or
<PAGE>
their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations,
all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of either Constituent Corporation,
all such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes
of this Agreement.
Section 1.15 Closing. The closing of the Merger (the
"Closing") and all actions contemplated by this Agreement to
occur at the Closing shall take place at the offices of Sidley &
Austin, 875 Third Avenue, New York, New York, at 10:00 a.m.,
local time, on a date to be specified by the parties, which
(subject to fulfillment or waiver of the conditions set forth in
Article VI) shall be no later than the second business day
following the day on which the last of the conditions set forth
in Article VI shall have been fulfilled or waived, or at such
other time and place as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES AND SUB
Each of the Parent Companies and Sub represents and
warrants to the Company as follows:
Section 2.1 Organization, Standing and Power. Each of
the Parent Companies and Sub is a real estate investment trust or
a corporation, as the case may be, duly organized, validly
existing and in good standing under the laws of its jurisdiction
of organization and has the requisite power and authority to
carry on its business as now being conducted. Each Subsidiary of
each of the Parent Companies is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which
it is organized and has the requisite corporate (in the case of a
Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the
failure to be so organized, existing or in good standing or to
have such power or authority, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a
Material Adverse Effect (as hereinafter defined) on the Parent
Companies. The Parent Companies and each of their Subsidiaries
are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of their properties owned
or held under lease or the nature of their activities makes such
qualification necessary, except where the failure to be so
qualified, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse
Effect on the Parent Companies.
<PAGE>
For all purposes of this Agreement, any reference to
any state of facts, event, change or effect having a "Material
Adverse Effect" on or with respect to the Parent Companies or the
Company, as the case may be, means such state of facts, event,
change or effect which has had, or would reasonably be expected
to have, a material adverse effect on the business, properties,
results of operations, financial condition or prospects of the
Parent Companies and their Subsidiaries, taken as a whole, or the
Company and its Subsidiaries, taken as a whole, as the case may
be. For all purposes of this Agreement, "Subsidiary" means any
corporation, partnership, limited liability company, joint
venture or other legal entity of which the Parent Companies or
the Company, as the case may be (either alone or through or
together with any other Subsidiary), (i) owns, directly or
indirectly, more than 50% of the stock or other equity interests
the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of
such corporation, partnership, limited liability company, joint
venture or other legal entity or (ii) is a general partner,
trustee or other entity performing similar functions.
Section 2.2 Capital Structure. At the date hereof, the
authorized capital stock of Parent consists of 100,000,000 shares
of Parent Common Stock, and the authorized capital stock of Trust
consists of 100,000,000 Trust Shares, 20,000,000 excess trust
shares, par value $.01 per share ("Excess Trust Shares"), and
5,000,000 excess preferred shares, par value $.01 per share
("Excess Preferred Shares"). At the close of business on October
17, 1997, 51,302,015 shares of Parent Common Stock and 51,302,015
Trust Shares were issued and outstanding. As of October 17, 1997,
62,978,381 units of SLT Realty Limited Partnership ("SLT Units")
and 63,232,722 units of SLC Operating Limited Partnership ("SLC
Units") were outstanding. As of October 17, 1997, the Trust
beneficially owned 51,302,015 SLT Units and Parent and its
subsidiaries beneficially owned 51,302,015 SLC Units and the
remaining issued and outstanding SLT Units and SLC Units were
owned by the persons and in the quantities set forth in Section
2.2 of the Parent Letter. All the outstanding SLT Units and SLC
Units have been duly authorized and are validly issued, fully
paid and nonassessable. The capital stock of Sub consists of
100,000 shares of Common Stock, no par value, of which as of the
date of this Agreement, 1,000 shares of Common Stock were issued
and outstanding, of which, as of the date of the Agreement, 910
shares were owned directly by Parent and 90 shares were owned
directly by Trust, and 10,000 shares of Preferred Stock, no par
value, of which as of the date of this Agreement, no shares were
issued and outstanding. Immediately prior to the Effective Time,
the Trust will acquire an appropriate amount of Common Stock of
the Sub. At the close of business on October 17, 1997, none of
the Parent Companies had any shares or units reserved for
issuance, except for Trust Shares and shares of Parent Common
Stock reserved for issuance
<PAGE>
upon the exchange of the SLT Units and the SLC Units,
respectively, and except that, as of October 17, 1997, there were
5,908,313 shares of Parent Common Stock and 5,908,313 Trust
Shares reserved for issuance pursuant to the Incentive and
NonQualified Shares Option Plan (1986) of the Trust, the
Corporation Stock Non-Qualified Stock Option Plan (1986) of the
Trust, the Stock Option Plan (1986) of the Corporation, the Trust
Shares Option Plan (1986) of the Corporation, the 1995 Share
Option Plan of the Trust, and the 1995 Share Option Plan of the
Corporation (collectively, the "Parent Stock Plans"). Except as
set forth above, at the close of business on October 17, 1997, no
shares of capital stock or other voting securities of the Parent
Companies were issued, reserved for issuance or outstanding. All
the outstanding shares of Parent Common Stock and Trust Shares
are validly issued, fully paid and nonassessable and free of
preemptive rights. All shares of Parent Common Stock and Trust
Shares issuable in exchange for Company Common Stock at the
Effective Time in accordance with this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares of Parent
Common Stock and Trust Shares are paired with each other, as such
ratio may change from time to time. As of the date of this
Agreement, except as set forth in Section 2.2 of the letter dated
the date hereof and delivered on the date hereof by the Parent
Companies to the Company, which letter relates to this Agreement
and is designated therein as the Parent Letter (the "Parent
Letter"), and except for (a) this Agreement, (b) stock options
issued pursuant to the Parent Stock Plans covering not in excess
of 5,908,313 Trust Shares and 5,908,313 shares of Parent Common
Stock (collectively, the "Parent Stock Options"), (c) 11,930,707
Trust Shares and 11,930,707 shares of Parent Common Stock
issuable upon the exchange of SLT Units and SLC Units,
respectively, (d) the Transaction Agreement dated as of September
8, 1997 (the "Westin Transaction Agreement"), among the Parent
Companies, WHWE L.L.C., Woodstar Investor Partnership, Nomura
Asset Capital Corporation, Juergen Bartels, W&S Hotel L.L.C.,
Westin Hotels & Resorts Worldwide, Inc., W&S Lauderdale Corp.,
W&S Seattle Corp., Westin St. John Hotel Company, Inc., W&S
Denver Corp., W&S Atlanta Corp., SLT Realty Limited Partnership
and SLC Operating Limited Partnership, and (e) Paired Shares
issuable pursuant to the Forward Purchase Contract dated as of
October 13, 1997 (the "Forward Purchase Contract") with an
affiliate of Union Bank of Switzerland, there are no options,
warrants, calls, rights or agreements to which the Parent
Companies or any of their Subsidiaries is a party or by which any
of them is bound obligating the Parent Companies or any of their
Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the
Parent Companies or any of their Subsidiaries or obligating the
Parent Companies or any of their Subsidiaries to grant, extend or
enter into any such option, warrant, call, right or agreement.
<PAGE>
Each outstanding share of capital stock of each Subsidiary of the
Parent Companies that is a corporation is duly authorized,
validly issued, fully paid and nonassessable and, except as
disclosed in the Parent SEC Documents (as defined in Section 2.5)
filed prior to the date of this Agreement, each such share is
owned by the Parent Companies or another Subsidiary of the Parent
Companies, free and clear of all security interests, liens,
claims, pledges, mortgages, options, rights of first refusal,
agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever (each, a "Lien"). As of the
date of this Agreement, none of the Parent Companies has
outstanding any bonds, debentures, notes or other indebtedness of
Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any
matters on which stockholders or shareholders of the Parent
Companies may vote. As of the date of this Agreement, there are
no outstanding contractual obligations of the Parent Companies or
any of their Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Parent Companies or
any of their Subsidiaries. Except as set forth in Section 2.2 of
the Parent Letter, Exhibit 21 to the Annual Report on Form 10-K
of the Parent Companies for the year ended December 31, 1996 (the
"Parent Annual Report"), as filed with the Securities and
Exchange Commission (the "SEC"), is a true, accurate and correct
statement in all material respects of all the information
required to be set forth therein by the rules and regulations of
the SEC.
Section 2.3 Authority. The Boards of Directors or
Trustees, as the case may be, of the Parent Companies and Sub
have duly approved and adopted this Agreement. The Board of
Directors or Trustees, as the case may be, of each of the Parent
Companies has respectively declared advisable an amendment to
Parent's Articles of Incorporation and Trust's Declaration of
Trust to increase the number of authorized shares of Parent
Common Stock to 1,000,000,000 and the number of authorized Trust
Shares to 1,000,000,000, respectively (the "Charter Amendments").
The Board of Directors or Trustees, as the case may be, of each
of the Parent Companies has resolved to recommend the approval by
their respective stockholders or shareholders, as applicable, of
the respective Charter Amendments and the respective issuance of
Parent Common Stock and Trust Shares, in connection with the
Merger as contemplated by this Agreement (the "Share Issuances").
Each of the Parent Companies and Sub has all requisite power and
authority to enter into this Agreement and, subject to approval
by the stockholders or shareholders, as applicable, of Parent and
Trust of the respective Charter Amendments and Share Issuances,
to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Parent Companies and Sub
and the consummation by the Parent Companies and Sub of the
transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Parent Companies and Sub,
<PAGE>
subject to approval by the stockholders or shareholders, as
applicable, of Parent and Trust of the respective Charter
Amendments and Share Issuances. This Agreement has been duly
executed and delivered by each of the Parent Companies and Sub
and (assuming the valid authorization, execution and delivery of
this Agreement by the Company and the validity and binding effect
of this Agreement on the Company) constitutes the valid and
binding obligation of the Parent Companies and Sub enforceable
against each of them in accordance with its terms. The Charter
Amendments, the Share Issuances and the filing of a joint
registration statement on Form S-4 with the SEC by the Parent
Companies under the Securities Act of 1933, as amended (together
with the rules and regulations promulgated thereunder, the
"Securities Act"), for the purpose of registering the Paired
Shares to be issued in connection with the Merger as contemplated
by this Agreement (together with any amendments or supplements
thereto, whether prior to or after the effective date thereof,
the "Registration Statement") have been duly authorized by
Parent's Board of Directors and Trust's Board of Trustees.
Section 2.4 Consents and Approvals; No Violation.
Assuming that all consents, approvals, authorizations and other
actions described in this Section 2.4 have been obtained and all
filings and obligations described in this Section 2.4 have been
made, and except as set forth in Section 2.4 of the Parent
Letter, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in any
violation of, or default or loss of a material benefit (with or
without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of
any obligation under, or result in the creation of any Lien upon
any of the properties, assets or operations of the Parent
Companies or any of their Subsidiaries under, any provision of
(i) the Declaration of Trust, articles of incorporation, Trust
Regulations or by-laws, as applicable, of the Parent Companies,
(ii) any provision of the comparable charter or organization
documents of any Subsidiary of the Parent Companies, (iii) any
loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or
license applicable to the Parent Companies or any of their
Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Parent Companies
or any of their Subsidiaries or any of their respective
properties, assets or operations, other than, in the case of
clauses (ii), (iii) or (iv), any such violations, defaults,
losses, rights or Liens that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect on the Parent Companies, materially impair the ability of
the Parent Companies or Sub to perform their respective
obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration
<PAGE>
with, or authorization, consent or approval of, any domestic
(federal or state), foreign or supranational court, commission,
governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to the
Parent Companies or any of their Subsidiaries in connection with
the execution and delivery of this Agreement by the Parent
Companies or Sub or is necessary for the consummation of the
Merger and the other transactions contemplated by this Agreement,
except (i) in connection, or in compliance, with the provisions
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Securities Act and the Securities
Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act"), (ii) the
filing of the Articles of Merger with the Secretary of State of
the State of Nevada and appropriate documents with the relevant
authorities of other states in which the Parent Companies or any
of their Subsidiaries are qualified to do business, (iii) such
filings and consents as may be required under any environmental,
health or public or worker safety law or regulation specified in
Section 2.4 of the Parent Letter pertaining to any notification,
disclosure or required approval triggered by the Merger or by the
transactions contemplated by this Agreement, (iv) such filings as
may be required in connection with the taxes described in Section
5.11, (v) applicable requirements, if any, of state securities or
"blue sky" laws ("Blue Sky Laws") and the NYSE, (vi) as may be
required under foreign laws, (vii) such filings as may be
required under the rules of the NYSE in connection with the
Charter Amendments, (viii) filings with and approvals by any
regulatory authority with jurisdiction over the Company's gaming
operations required under any Federal, state, local or foreign
statute, ordinance, rule, regulation, permit, consent, approval,
license, judgment, order, decree, injunction or other
authorization governing or relating to the current or
contemplated casino and gaming activities and operations of the
Company, including the New Jersey Casino Control Act and the
rules and regulations promulgated thereunder, the Nevada Gaming
Control Act and the rules and regulations promulgated thereunder,
the Mississippi Gaming Control Act and the rules and regulations
promulgated thereunder, the Clark County governmental authorities
and the rules and regulations promulgated thereby, the Indiana
Gaming Control Act and the rules and regulations promulgated
thereunder, the Nova Scotia Gaming Control Act and the rules and
regulations promulgated thereunder, and the Ontario-Gaming
Control Act and the rules and regulations promulgated thereunder
(collectively, the "Gaming Laws"), (ix) filings with and
approvals of state educational regulatory authorities, non
governmental accrediting commissions and the U.S. Department of
Education and, if required, with the Federal Communications
Commission, (x) such other consents, approvals, orders,
authorizations, registrations, declarations and filings (a) as
may be required under the laws of any foreign country in which
the Company or any of its subsidiaries conducts any business or
<PAGE>
owns any property or assets or (b) as are set forth in Section
2.4 of the Parent Letter, and (xi) such other consents, orders,
authorizations, registrations, declarations and filings the
failure of which to be obtained or made, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on the Parent Companies, materially impair the
ability of the Parent Companies or Sub to perform their
respective obligations hereunder or prevent the consummation of
any of the transactions contemplated hereby.
Section 2.5 SEC Documents and Other Reports. The Parent
Companies have filed all required documents with the SEC since
January 1, 1996 (the "Parent SEC Documents"). As of their
respective dates, the Parent SEC Documents complied in all
material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial
statements (including, in each case, any notes thereto) of the
Parent Companies included in the Parent SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto as of their respective dates of filing, were
prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented the
consolidated financial position of Trust and Parent and their
consolidated Subsidiaries as of the respective dates thereof and
the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
Except as disclosed in the Parent SEC Documents or as required by
generally accepted accounting principles, the Parent Companies
have not, since December 31, 1996, made any change in the
accounting practices or policies applied in the preparation of
their financial statements.
Section 2.6 Registration Statement and Joint Proxy
Statement. None of the information to be supplied by the Parent
Companies or Sub for inclusion or incorporation by reference in
the Registration Statement or the joint proxy
statement/prospectus included therein (together with any
amendments or supplements thereto, the "Joint Proxy Statement")
relating to the Stockholder Meetings (as defined in Section 5.1)
will (i) in the case of the Registration Statement, at the time
it becomes effective and at the Effective Time, contain any
<PAGE>
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein not misleading or (ii) in the case of the
Joint Proxy Statement, at the time of the mailing of the Joint
Proxy Statement and at the time of each of the Stockholder
Meetings, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If
at any time prior to the Effective Time any event with respect to
the Parent Companies, their respective officers and directors or
any of their Subsidiaries shall occur that is required to be
described in the Joint Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate
amendment or supplement shall be promptly filed with the SEC and,
as required by law, disseminated to the stockholders of Parent
and the Company. The Registration Statement will comply as to
form in all material respects with the provisions of the
Securities Act, and the Joint Proxy Statement will comply (with
respect to the Parent Companies) as to form in all material
respects with the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events.
Except as disclosed in the Parent SEC Documents filed prior to
the date of this Agreement, since December 31, 1996, (a) the
Parent Companies and their Subsidiaries have not sustained any
loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not
covered by insurance) that, individually or in the aggregate, has
had, or would reasonably be expected to have, a Material Adverse
Effect on the Parent Companies, (b) there have not been any
events, changes or developments that, individually or in the
aggregate, have had or would reasonably be expected to have, a
Material Adverse Effect on the Parent Companies or (c) there has
not been any split, combination or reclassification of any of the
capital stock of Parent or Trust or any issuance or the
authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of such capital
stock, except as contemplated by this Agreement. The approximate
aggregate amount of indebtedness of the Parent Companies and
their respective Subsidiaries as of September 30, 1997, is set
forth in Section 2.7 of the Parent Letter.
Section 2.8 Permits and Compliance. Each of the Parent
Companies and their respective Subsidiaries is in possession of
all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the
Parent Companies or any of their Subsidiaries to own, lease and
operate its properties or to carry on its business as it is now
being conducted (the "Parent Permits"), except where the failure
to have any of the Parent Permits,
<PAGE>
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Parent Companies, and, as of the date of this Agreement, no
suspension or cancellation of any of the Parent Permits is
pending or, to the Knowledge of the Parent Companies (as
hereinafter defined), threatened, except where the suspension or
cancellation of any of the Parent Permits, individually or in the
aggregate, has not had, and would not reasonably be expected to
have, a Material Adverse Effect on the Parent Companies. None of
the Parent Companies or any of their Subsidiaries is in violation
of (A) their respective charter, by-laws or other organizational
documents, (B) any applicable law, ordinance, administrative or
governmental rule or regulation or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over the
Parent Companies or any of their Subsidiaries, except, in the
case of clauses (A), (B) and (C), for any violations that,
individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Parent Companies. Except as disclosed in the Parent SEC Documents
filed prior to the date of this Agreement, as of the date hereof,
there is no contract or agreement that is material to the
business, properties, results of operations or financial
condition of the Parent Companies and their Subsidiaries, taken
as a whole. Except as set forth in the Parent SEC Documents or
Section 2.8 of the Parent Letter, prior to the date of this
Agreement, no event of default or event that, but for the giving
of notice or the lapse of time or both, would constitute an event
of default exists or, upon the consummation by the Parent
Companies of the transactions contemplated by this Agreement,
will exist under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, any guarantee
of any agreement or instrument for borrowed money or any lease,
license or other agreement or instrument to which the Parent
Companies or any of their Subsidiaries is a party or by which the
Parent Companies or any such Subsidiary is bound or to which any
of the properties, assets or operations of the Parent Companies
or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Parent Companies. For purposes of this Agreement, the term
"Knowledge" when used with respect to the Parent Companies means
the actual knowledge of the individuals identified in Section 2.8
of the Parent Letter.
Section 2.9 Tax Matters. Except as otherwise set forth
in Section 2.9 of the Parent Letter, (i) the Parent Companies and
each of their respective Subsidiaries have timely filed all
federal, state, local, foreign and provincial income and
Franchise Tax Returns and all other material Tax Returns required
to have been filed or appropriate extensions therefor have been
properly obtained, and such Tax Returns are, true, correct and
complete, except to the extent that any failure to so
<PAGE>
file or any failure to be true, correct and compete, individually
or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Parent
Companies; (ii) all Taxes required to have been paid by the
Parent Companies and each of their respective Subsidiaries have
been timely paid or extensions for payment have been properly
obtained, except to the extent that any failure to pay any such
Taxes or to properly obtain an extension for such payment,
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Parent Companies; (iii) the Parent Companies and each of their
respective Subsidiaries have complied in all material respects
with all rules and regulations relating to the withholding of
Taxes except to the extent that any failure to comply with such
rules and regulations, individually in the aggregate, has not
had, and would not reasonably be expected to have, a Material
Adverse Effect on the Parent Companies; (iv) none of the Parent
Companies or any of their respective Subsidiaries has waived in
writing any statute of limitations in respect of its federal,
state, local, foreign or provincial income or franchise Taxes and
no deficiency with respect to any Taxes has been proposed,
asserted or assessed against any of the Parent Companies or any
of their respective Subsidiaries, except to the extent that any
such waiver or deficiency, individually or in the aggregate, has
not had, and would not reasonably be expected to have, a Material
Adverse Effect on the Parent Companies; (v) all Federal income
Tax Returns referred to in clause (i) for all years through 1993
have been examined by and settled with the Internal Revenue
Service or the period for assessment of Taxes in respect of which
such Tax returns were required to be filed has expired; (vi) no
material issues that have been raised in writing by the relevant
taxing authority in connection with the examination of the Tax
Returns referred to in clause (i) are currently pending; (vii)
all material deficiencies asserted or material assessments made
as a result of any examination of any Tax Returns referred to in
clause (i) by any taxing authority have been paid in full; (viii)
the most recent financial statements contained in the Parent SEC
Documents reflect an adequate reserve for all Taxes payable by
the Parent Companies and their respective Subsidiaries for all
taxable periods and portions thereof through the date of such
financial statements; and (ix) there are no material liens for
Taxes (other than for current Taxes not yet due and payable) on
the assets of the Parent Companies or any of their respective
Subsidiaries. For purposes of this Agreement: (i) "Taxes" means
any federal, state, local, foreign or provincial income, gross
receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add on minimum,
ad valorem, value-added, transfer or excise tax, or other tax,
custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty
imposed by any Governmental Entity, and (ii) "Tax Return" means
any return, report or similar statement (including the attached
<PAGE>
schedules) required to be filed with respect to any Tax,
including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
Section 2.10 Actions and Proceedings. Except as set
forth in the Parent SEC Documents filed prior to the date of this
Agreement, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against
or involving the Parent Companies or any of their Subsidiaries,
or against or involving any of the directors, officers or
employees of the Parent Companies or any of their Subsidiaries,
as such, any of its or their properties, assets or business or
any employee benefit plan of the Parent Companies (a "Parent
Plan") that, individually or in the aggregate, have had, or would
reasonably be expected to have, a Material Adverse Effect on the
Parent Companies. As of the date of this Agreement, there are no
actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the Knowledge of the
Parent Companies, threatened against or involving the Parent
Companies or any of their Subsidiaries or any of their directors,
officers or employees, as such, or any of its or their
properties, assets or business or any Parent Plan that,
individually or in the aggregate, have had, or would reasonably
be expected to have, a Material Adverse Effect on the Parent
Companies. As of the date hereof, there are no actions, suits,
labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the
Knowledge of the Parent Companies, threatened against or
affecting the Parent Companies or any of their Subsidiaries or
any of their officers, directors or employees, as such, or any of
their properties, assets or business relating to the transactions
contemplated by this Agreement.
Section 2.11 Compliance with Worker Safety and
Environmental Laws. (a) Except as set forth in Section 2.11 of
the Parent Letter, the properties, assets and operations of the
Parent Companies and their respective Subsidiaries are in
compliance with all applicable federal, state, local, regional
and foreign laws, rules and regulations, orders, decrees, common
law, judgments, permits and licenses relating to public and
worker health and safety (collectively, "Worker Safety Laws") and
the protection, regulation and clean-up of the indoor and outdoor
environment and activities or conditions related thereto,
including, without limitation, those relating to the generation,
handling, disposal, transportation or release of hazardous or
toxic materials, substances, wastes, pollutants and contaminants
including, without limitation, asbestos, petroleum, radon and
polychlorinated biphenyls (collectively, "Environmental Laws"),
except for any violations that, individually or in the aggregate,
has not had, or would not reasonably be expected to have, a
Material Adverse Effect on the Parent Companies. With respect to
such properties, assets and operations, including any previously
<PAGE>
owned, leased or operated properties, assets or operations, there
are no past, present or reasonably anticipated future events,
conditions, circumstances, activities, practices, incidents,
actions or plans of the Parent Companies or any of their
respective Subsidiaries that may interfere with or prevent
compliance or continued compliance with applicable Worker Safety
Laws and Environmental Laws, other than any such interference or
prevention that, individually or in the aggregate, has not had,
or would not reasonably be expected to have, a Material Adverse
Effect on the Parent Companies.
(b) The Parent Companies and their respective
Subsidiaries have not caused or permitted any property, asset,
operation, including any previously owned property, asset or
operation, to use, generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer or process hazardous or
toxic materials, substances, wastes, pollutants or contaminants,
except in material compliance with all Environmental Laws and
Worker Safety Laws, other than any such activity that,
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Parent Companies. The Parent Companies and their respective
Subsidiaries have not reported to any Governmental Entity any
material violation of an Environmental Law or any release,
discharge or emission of any hazardous or toxic materials,
substances, wastes, pollutants or contaminants, other than any
such violation, release, discharge or emission that, individually
or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Parent
Companies. The Parent Companies have no Knowledge of any pending,
threatened or anticipated claims or liabilities under CERCLA, 42
U.S.C. ss. 9601 et seq., RCRA, 42 U.S.C. ss. 6901 et seq., or
equivalent state law provisions and no Knowledge that any current
or former property, asset or operation is identified or currently
proposed for the National Priorities List at 40 CFR ss. 300,
Appendix B, or the CERCLIS or equivalent state lists or hazardous
substances release sites.
Section 2.12 Liabilities. Except as set forth in the
Parent SEC Documents filed prior to the date hereof, the Parent
Companies and their Subsidiaries have no liabilities, absolute or
contingent, other than liabilities that, individually or in the
aggregate, have not had, and would not reasonably be expected to
have, a Material Adverse Effect on the Parent Companies.
Section 2.13 Intellectual Property. The Parent
Companies and their Subsidiaries own or have the right to use all
patents, patent rights, trademarks, trade names, service marks,
trade secrets, copyrights and other proprietary intellectual
property rights (collectively, "Intellectual Property Rights") as
are necessary in connection with the business of the Parent
Companies and their Subsidiaries, taken as a whole, except where
<PAGE>
the failure to have such Intellectual Property Rights,
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Parent Companies. Neither the Parent Companies nor any of their
respective Subsidiaries has infringed any Intellectual Property
Rights of any third party other than any infringements that,
individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Parent Companies.
Section 2.14 Opinion of Financial Advisor. The Parent
Companies have received the written opinion of Bear Stearns & Co.
Inc. dated the date hereof, to the effect that, as of the date
hereof, the consideration to be paid by the Parent Companies in
the Merger is fair to the Parent Companies from a financial point
of view, a copy of which opinion has been delivered to the
Company.
Section 2.15 Required Vote of Parent and Trust
Stockholders. The affirmative votes of the holders of a majority
of the outstanding shares of Parent Common Stock and of the
outstanding Trust Shares are required to approve the respective
Charter Amendments of Trust and Parent. The affirmative vote of a
majority of the votes cast on each Share Issuance is required to
approve such Share Issuance; provided, that the total votes cast
on each such proposal represent a majority of the outstanding
shares of Parent Common Stock or Trust Shares, as applicable. No
other vote of the stockholders or shareholders of the Parent
Companies is required by law, the organization documents of the
Parent Companies or otherwise in order for the Parent Companies
to consummate the Merger and the transactions contemplated
hereby.
Section 2.16 REIT Status. The Trust is a "real estate
investment trust" for federal income tax purposes and is not
subject to Section 269B(a)(3) of the Code by reason of Section
136(c) of the Deficit Reduction Act of 1984. The consummation of
the transactions contemplated by this Agreement will not cause
the Trust to cease to qualify as a "real estate investment trust"
for federal income tax purposes and will not cause the Trust to
become subject to Section 269B(a)(3) of the Code.
Section 2.17 Brokers. No broker, investment banker or
other person, other than Bear Stearns & Co. Inc. and Starwood
Capital Group L.L.C., the fees and expenses of which will be paid
by the Parent Companies (subject to Section 5.7), is entitled to
any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Parent
Companies.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the
Parent Companies and Sub as follows:
Section 3.1 Organization, Standing and Power. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has the
requisite corporate power and authority to carry on its business
as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has the
requisite corporate (in the case of a Subsidiary that is a
corporation) or other power and authority to carry on its
business as now being conducted, except where the failure to be
so organized, existing or in good standing or to have such power
or authority, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse
Effect on the Company. The Company and each of its Subsidiaries
are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of their properties owned
or held under lease or the nature of their activities makes such
qualification necessary, except where the failure to be so
qualified, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse
Effect on the Company.
Section 3.2 Capital Structure. At the date hereof, the
authorized capital stock of the Company consists of 200,000,000
shares of Company Common Stock and 50,000,000 shares of Preferred
Stock, no par value per share ("Company Preferred Stock"). At the
close of business on October 17, 1997, (i) 118,259,684 shares of
Company Common Stock were issued and outstanding, (ii) 1,123,526
shares of Company Common Stock were held in the treasury of the
Company or by its Subsidiaries, (iii) 133,399 shares of Company
Common Stock were reserved for issuance pursuant to the Company's
1996 Restricted Stock Plan for NonEmployee Directors, as amended,
and the Company's 1995 Incentive Stock Plan, as amended
(collectively, the "Company Stock Plans"), and (iv) no shares of
Company Common Stock were reserved in connection with the Rights
Agreement (as hereinafter defined). Except as set forth above, at
the close of business on October 17, 1997, no shares of capital
stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. All the outstanding shares
of Company Common Stock were validly issued, fully paid and
nonassessable and free of preemptive rights. As of the date of
this Agreement, except for (a) stock options issued pursuant to
the Company Stock Plans covering not in excess of 8,718,231
shares of Company Common Stock (collectively, the "Company Stock
Options"),(b) the rights to
<PAGE>
purchase shares of Series A Participating Cumulative Preferred
Stock (the "Rights"), issued pursuant to the Rights Agreement
dated as of November 1, 1995 (the "Rights Agreement"), between
the Company and The Bank of New York, as Rights Agent, and (c)
rights existing under an Investment Agreement dated as of July
15, 1997 (the "CDRV Investment Agreement"), between the Company
and CDRV Acquisition, L.L.C., there are no options, warrants,
calls, rights or agreements to which the Company or any of its
Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries
to grant, extend or enter into any such option, warrant, call,
right or agreement. Except as set forth in Section 3.2 of the
letter dated the date hereof and delivered on the date hereof by
the Company to Parent, which letter relates to this Agreement and
is designated therein as the Company Letter (the "Company
Letter"), each outstanding share of capital stock of each
Subsidiary of the Company that is a corporation is duly
authorized, validly issued, fully paid and nonassessable and,
except as disclosed in the Company SEC Documents (as defined in
Section 3.5) filed prior to the date of this Agreement, each such
share is owned by the Company or another Subsidiary of the
Company, free and clear of all Liens. As of the date of this
Agreement, the Company does not have outstanding any bonds,
debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except (x) pursuant to an
agreement dated as of July 15, 1997 between the Company and
BellSouth Corporation, (y) to the extent that Article Ninth of
the Restated Articles of Incorporation of the Company or any
comparable provision of the articles of incorporation of any
Subsidiary of the Company required under any Gaming Laws could be
construed as a contractual obligation or (z) with respect to the
withholding of exercise price or withholding taxes under any
stock option plan, as of the date of this Agreement, there are no
outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its
Subsidiaries. Exhibit 21 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996, as filed with the SEC
(the "Company Annual Report"), is a true, accurate and correct
statement in all material respects of all the information
required to be set forth therein by the rules and regulations of
the SEC.
Section 3.3 Authority. The Board of Directors of the
Company has duly approved and adopted this Agreement, and has
resolved to recommend the approval of this Agreement by the
Company's stockholders and directed that this Agreement be
<PAGE>
submitted to the Company's stockholders for approval. The Company
has all requisite corporate power and authority to enter into
this Agreement and, subject to approval by the stockholders of
the Company of this Agreement, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company, subject to
approval of this Agreement by the stockholders of the Company.
This Agreement has been duly executed and delivered by the
Company and (assuming the valid authorization, execution and
delivery of this Agreement by Parent, Trust and Sub and the
validity and binding effect of this Agreement on Parent, Trust
and Sub) constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms. The filing of the Joint Proxy Statement with the SEC has
been duly authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation.
Assuming that all consents, approvals, authorizations and other
actions described in this Section 3.4 have been obtained and all
filings and obligations described in this Section 3.4 have been
made, and except as set forth in Section 3.4 of the Company
Letter, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in any
violation of, or default or the loss of a material benefit (with
or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of
any obligation under, or result in the creation of any Lien, upon
any of the properties, assets or operations of the Company or any
of its Subsidiaries under any provision of (i) the Restated
Articles of Incorporation, as amended, or the Amended and
Restated By-Laws of the Company, (ii) any provision of the
comparable charter or organization documents of any Subsidiary of
the Company, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to the
Company or any of its Subsidiaries or (iv) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
the Company or any of its Subsidiaries or any of their respective
properties, assets or operations, other than, in the case of
clauses (ii), (iii) or (iv), any such violations, defaults,
losses, rights or Liens that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect on the Company, materially impair the ability of the
Company to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or
approval of, any Governmental Entity is required by or with
respect to the Company or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by the Company
<PAGE>
or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except (i) in
connection, or in compliance, with the provisions of the HSR Act,
the Securities Act and the Exchange Act, (ii) the filing of the
Articles of Merger with the Secretary of State of the State of
Nevada and appropriate documents with the relevant authorities of
other states in which the Company or any of its Subsidiaries is
qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or public or worker
safety law or regulation specified in Section 3.4 of the Company
Letter pertaining to any notification, disclosure or required
approval triggered by the Merger or by the transactions
contemplated by this Agreement, (iv) such filings as may be
required in connection with the taxes described in Section 5.11,
(v) applicable requirements, if any, of Blue Sky Laws and the
NYSE, (vi) as may be required under foreign laws, (vii) filings
with and approvals in respect of the Gaming Laws, (viii) filings
with and approvals of state educational regulatory authorities,
non-governmental accrediting commissions and the U.S. Department
of Education and, if required, with the Federal Communications
Commission, (ix) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as are
set forth in Section 3.4 of the Company Letter, and (x) such
other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or
made, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
Section 3.5 SEC Documents and Other Reports. The
Company has filed all required documents with the SEC since
January 1, 1996 (the "Company SEC Documents"). As of their
respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto)
of the Company included in the Company SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto as of their respective dates of filing, were
prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented the
<PAGE>
consolidated financial position of the Company and its
consolidated Subsidiaries as of the respective dates thereof and
the consolidated results of operations and their consolidated
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to
any other adjustments described therein). Except as disclosed in
the Company SEC Documents or as required by generally accepted
accounting principles, the Company has not, since December 31,
1996, made any change in the accounting practices or policies
applied in the preparation of its financial statements.
Section 3.6 Registration Statement and Joint Proxy
Statement. None of the information to be supplied by the Company
for inclusion or incorporation by reference in the Registration
Statement or the Joint Proxy Statement will (i) in the case of
the Registration Statement, at the time it becomes effective and
at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading or (ii) in the case of the Joint Proxy Statement, at
the time of the mailing of the Joint Proxy Statement and at the
time of each of the Stockholder Meetings, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the
Effective Time any event with respect to the Company, its
officers and directors or any of its Subsidiaries shall occur
that is required to be described in the Joint Proxy Statement or
the Registration Statement, such event shall be so described, and
an appropriate amendment or supplement shall be promptly filed
with the SEC and, as required by law, disseminated to the
stockholders of Parent and the Company. The Joint Proxy Statement
will comply (with respect to the Company) as to form in all
material respects with the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events.
Except as disclosed in the Company SEC Documents filed prior to
the date of this Agreement since December 31, 1996, (a) the
Company and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by
insurance) that, individually or in the aggregate, has had, or
would reasonably be expected to have, a Material Adverse Effect
on the Company and (b)(i) there has been no change in the capital
stock of the Company (except for the issuance of shares of the
Company Common Stock pursuant to Company Stock Plans) and no
dividend or distribution of any kind declared, paid or made by
the Company on any class of its stock and (ii) there have not
been any events, changes or developments that, individually or in
the aggregate, have had or would reasonably be expected to have a
Material Adverse Effect on the Company. The aggregate amount of
<PAGE>
indebtedness of the Company and its Subsidiaries as of September
30, 1997, is set forth in Section 3.7 of the Company Letter.
Section 3.8 Permits and Compliance. Except as set forth
in Section 3.8 of the Company Letter, each of the Company and its
Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for the Company or any of its
Subsidiaries to own, lease and operate its properties or to carry
on its business as it is now being conducted (the "Company
Permits"), except where the failure to have any of the Company
Permits, individually or in the aggregate, has not had, and would
not reasonably be expected to have, a Material Adverse Effect on
the Company, and, as of the date of this Agreement, no suspension
or cancellation of any of the Company Permits is pending or, to
the Knowledge of the Company (as hereinafter defined),
threatened, except where the suspension or cancellation of any of
the Company Permits, individually or in the aggregate, have not
had, and would not reasonably be expected to have, a Material
Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation or (C) any
order, decree or judgment of any Governmental Entity having
jurisdiction over the Company or any of its Subsidiaries, except,
in the case of clauses (A), (B) and (C), for any violations that,
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Documents filed
prior to the date of this Agreement, as of the date hereof, there
is no contract or agreement that is material to the business,
properties, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole. Except as set
forth in the Company SEC Documents or Section 3.8 of the Company
Letter, prior to the date of this Agreement, no event of default
or event that, but for the giving of notice or the lapse of time
or both, would constitute an event of default exists or, upon the
consummation by the Company of the transactions contemplated by
this Agreement, will exist under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed
money or any lease, license or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by
which the Company or any such Subsidiary is bound or to which any
of the properties, assets or operations of the Company or any
such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Company. For purposes of this Agreement, the term "Knowledge"
when used with respect to the
<PAGE>
Company means the actual knowledge of the individuals identified
in Section 3.8 of the Company Letter.
Section 3.9 Tax Matters. Except as otherwise set forth
in Section 3.9 of the Company Letter, (i) the Company and each of
its Subsidiaries have timely filed all federal, state, local,
foreign and provincial income and Franchise Tax Returns and all
other material Tax Returns required to have been filed or
appropriate extensions therefor have been properly obtained, and
such Tax Returns are true, correct and complete, except to the
extent that any failure to so file or any failure to be true,
correct and complete, individually or in the aggregate, has not
had, and would not reasonably be expected to have, a Material
Adverse Effect on the Company; (ii) all Taxes required to have
been paid by the Company and each of its Subsidiaries have been
timely paid or extensions for payment have been properly
obtained, except to the extent that any failure to pay any such
Taxes or to properly obtain an extension for such payment,
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Company; (iii) the Company and each of its Subsidiaries have
complied in all material respects with all rules and regulations
relating to the withholding of Taxes except to the extent that
any failure to comply with such rules and regulations,
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Company; (iv) neither the Company nor any of its Subsidiaries has
waived in writing any statute of limitations in respect of its
federal, state, local, foreign or provincial income or franchise
Taxes and no deficiency with respect to any Taxes has been
proposed, asserted or assessed against the Company or any of its
Subsidiaries, except the extent that any such waiver to
deficiency, individually or in the aggregate has not had, and
would not reasonably be expected to have, a Material Adverse
Effect on the Company; (v) all Federal income Tax Returns
referred to in clause (i) for all years through 1989 have been
examined by and settled with the Internal Revenue Service or the
period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired; (vi) no material
issues that have been raised in writing by the relevant taxing
authority in connection with the examination of the Tax Returns
referred to in clause (i) are currently pending; and (vii) all
material deficiencies asserted or material assessments made as a
result of any examination of any Tax Returns referred to in
clause (i) by any taxing authority have been paid in full; (viii)
the most recent financial statements contained in the Company SEC
Documents reflect an adequate reserve for all Taxes payable by
the Company and its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements;
and (ix) there are no material liens for Taxes (other than for
current Taxes not yet due and payable) on the assets of the
Company or any of its Subsidiaries.
<PAGE>
Section 3.10 Actions and Proceedings. Except as set
forth in the Company SEC Documents filed prior to the date of
this Agreement, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against
or involving the Company or any of its Subsidiaries, or against
or involving any of the directors, officers or employees of the
Company or any of its Subsidiaries, as such, any of its or their
properties, assets or business or any Company Plan (as
hereinafter defined) that, individually or in the aggregate, have
had, or would reasonably be expected to have, a Material Adverse
Effect on the Company. Except as set forth in Section 3.10 of the
Company Letter or in the Company SEC Documents filed prior to the
date hereof, as of the date of this Agreement, there are no
actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the Knowledge of the
Company, threatened against or involving the Company or any of
its Subsidiaries or any of its or their directors, officers or
employees as such, or any of its or their properties, assets or
business or any Company Plan that, individually or in the
aggregate, have had, or would reasonably be expected to have, a
Material Adverse Effect on the Company. Except as set forth in
Section 3.10 of the Company Letter or in the Company SEC
Documents filed prior to the date hereof, as of the date hereof,
there are no actions, suits, labor disputes or other litigation,
legal or administrative proceedings or governmental
investigations pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its
Subsidiaries or any of its or their officers, directors or
employees, as such, or any of its or their properties, assets or
business relating to the transactions contemplated by this
Agreement.
Section 3.11 Certain Agreements. Except as set forth in
the Company SEC Documents filed prior to the date hereof or as
listed on Section 3.11 of the Company Letter, neither the Company
nor any of its Subsidiaries is a party to any oral or written
agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated
by this Agreement. No holder of any option to purchase shares of
Company Common Stock, or shares of Company Common Stock granted
in connection with the performance of services for the Company or
its Subsidiaries, is or will be entitled to receive cash from the
Company or any Subsidiary in lieu of or in exchange for such
option or shares as a result of the transactions contemplated by
this Agreement (subject to Section 5.8).
<PAGE>
Section 3.12 ERISA. (a) Section 3.12 (a) of the Company
Letter contains a list of each Company Plan (as hereinafter
defined) maintained by the Company and each material Company Plan
maintained by a Subsidiary of the Company. To the extent
applicable, with respect to each Company Plan, the Company has
made, or will as soon as practicable after the date hereof, make
available to Parent a true and correct copy of (i) the most
recent annual report (Form 5500) filed with the IRS, (ii) such
Company Plan and all amendments thereto, (iii) each trust
agreement, insurance contract or administration agreement
relating to such Company Plan, (iv) the most recent summary plan
description for each Company Plan for which a summary plan
description is required, (v) the most recent actuarial report or
valuation relating to a Company Plan subject to Title IV of
ERISA, (vi) the most recent determination letter, if any, issued
by the IRS with respect to any Company Plan intended to be
qualified under section 401(a) of the Code, (vii) any request for
a determination currently pending before the IRS and (viii) all
correspondence with the IRS, the Department of Labor or the
Pension Benefit Guaranty Corporation relating to any outstanding
controversy. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
the Company, (i) each Company Plan complies with ERISA, the Code
and all other applicable statutes and governmental rules and
regulations, (ii) no "reportable event" (within the meaning of
Section 4043 of ERISA) has occurred within the past three years
with respect to any Company Plan which is likely to result in
liability to the Company, (iii) neither the Company nor any of
its ERISA Affiliates (as hereinafter defined) has withdrawn from
any Company Multiemployer Plan (as hereinafter defined) at any
time within the past six years or instituted, or is currently
considering taking, any action to do so, and (iv) no action has
been taken, or is currently being considered, to terminate any
Company Plan subject to Title IV of ERISA.
(b) There has been no failure to make any contribution
or pay any amount due to any Company Plan as required by Section
412 of the Code, Section 302 of ERISA, or the terms of any such
Plan, and no Company Plan, nor any trust created thereunder, has
incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived.
(c) With respect to the Company Plans, no event has
occurred and, to the Knowledge of the Company, there exists no
condition or set of circumstances in connection with which the
Company or any ERISA Affiliate would be subject to any liability
under the terms of such Company Plans, ERISA, the Code or any
other applicable law which has had, or would reasonably be
expected to have, a Material Adverse Effect on the Company.
Except as listed on Section 3.12(c) of the Company Letter, all
Company Plans that are intended to be qualified under Section
401(a) of the Code have been determined by the IRS to be so
<PAGE>
qualified, or a timely application for such determination is now
pending or will be filed on a timely basis and, except as listed
on Section 3.12(c) of the Company Letter, to the Knowledge of the
Company there is no reason why any Company Plan is not so
qualified in operation. Neither the Company nor any of its ERISA
Affiliates has been notified by any Company Multiemployer Plan
that such Company Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Company Multiemployer
Plan intends to terminate or has been terminated under Section
4041A of ERISA. Neither the Company nor any of its ERISA
Affiliates has any liability or obligation under any welfare plan
to provide life insurance or medical benefits after termination
of employment to any employee or dependent other than as required
by (i) Part 6 of Title I of ERISA or as disclosed in Section
3.12(c) of the Company Letter or (ii) the laws of a jurisdiction
outside the United States.
(d) As used herein, (i) "Company Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA (other than a Company
Multiemployer Plan)), a "welfare plan" (as defined in Section
3(1) of ERISA), or any material bonus, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, vacation, severance, death
benefit, insurance or other plan, arrangement or understanding,
in each case established or maintained or contributed to by the
Company or any of its ERISA Affiliates or as to which the Company
or any of its ERISA Affiliates or otherwise may have any
liability, (ii) "Company Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which the Company or any of its ERISA Affiliates is or has
been obligated to contribute or otherwise may have any liability,
and (iii) with respect to any person, "ERISA Affiliate" means any
trade or business (whether or not incorporated) which is under
common control or would be considered a single employer with such
person pursuant to Section 414(b), (c), (m) or (o) of the Code
and the regulations promulgated under those sections or pursuant
to Section 4001(b) of ERISA and the regulations promulgated
thereunder.
(e) Section 3.12(e) of the Company Letter contains a
list of each Company Ex-U.S. Pension Plan and the Company has
made, or as soon as practicable after the date hereof will make,
available to Parent a copy of any written plan document. Except
as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company, each
such plan has been maintained in all material respects in
compliance with all applicable laws, orders and regulations, and
the fair market value of the assets of each such plan which is
intended to be a funded Company plan or arrangement equals or
exceeds the value of the accrued benefits. "Company Ex-U.S.
Pension Plan" shall mean any arrangement (other than a Company
<PAGE>
Plan) providing retirement pension benefits that is established
or maintained by the Company or any Subsidiary exclusively for
the benefit of employees who are or were employed outside the
United States.
(f) Section 3.12(f) of the Company Letter contains a
list, as of the date of this Agreement, of all (i) severance and
employment agreements with officers of the Company and each ERISA
Affiliate, (ii) severance programs and formal policies of the
Company with or relating to its employees and (iii) plans,
programs, agreements and other arrangements of the Company with
or relating to its employees which contain change of control or
similar provisions, in each case involving a severance or
employment agreement or arrangement with an individual officer or
employee, only to the extent such agreement or arrangement
provides for minimum annual payments in excess of $150,000. The
Company has provided to the Parent a true and complete copy of
each of the foregoing or will provide such a copy as soon as
practical after the date hereof.
Section 3.13 Compliance with Worker Safety and
Environmental Laws. (a) Except as set forth in Section 3.13 of
the Company Letter, the properties, assets and operations of the
Company and its Subsidiaries are in compliance with all
applicable federal, state, local, regional and foreign laws,
rules and regulations, orders, decrees, common law, judgments,
permits and licenses relating to public and worker health and
safety (collectively, "Worker Safety Laws") and the protection,
regulation and clean-up of the indoor and outdoor environment and
activities or conditions related thereto, including, without
limitation, those relating to the generation, handling, disposal,
transportation or release of hazardous or toxic materials,
substances, wastes, pollutants and contaminants including,
without limitation, asbestos, petroleum, radon and
polychlorinated biphenyls (collectively, "Environmental Laws"),
except for any violations that, individually or in the aggregate,
have not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company. With respect to such
properties, assets and operations, including any previously
owned, leased or operated properties, assets or operations, there
are no past, present or reasonably anticipated future events,
conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or any of its Subsidiaries that
may interfere with or prevent compliance or continued compliance
with applicable Worker Safety Laws and Environmental Laws, other
than any such interference or prevention that, individually or in
the aggregate, has not had, and would not reasonably be expected
to have, a Material Adverse Effect on the Company.
(b) The Company and its Subsidiaries have not caused or
permitted any property, asset, operation, including any
previously owned property, asset or operation, to use, generate,
<PAGE>
manufacture, refine, transport, treat, store, handle, dispose,
transfer or process hazardous or toxic materials, substances,
wastes, pollutants or contaminants, except in material compliance
with all Environmental Laws and Worker Safety Laws, other than
any such activity that, individually or in the aggregate, has not
had, and would not reasonably be expected to have, a Material
Adverse Effect on the Company. The Company and its Subsidiaries
have not reported to any Governmental Entity any material
violation of an Environmental Law or any release, discharge or
emission of any hazardous or toxic materials, substances, wastes,
pollutants or contaminants, other than any such violation,
release, discharge or emission that, individually or in the
aggregate, has not had, and would not reasonably be expected to
have, a Material Adverse Effect on the Company. The Company has
no Knowledge of any pending, threatened or anticipated claims or
liabilities under CERCLA, 42 U.S.C. ss. 9601 et seq., RCRA, 42
U.S.C. ss. 6901 et seq., or equivalent state law provisions and
no Knowledge that any current or former property, asset or
operation is identified or currently proposed for the National
Priorities List at 40 CFR ss. 300, Appendix B, or the CERCLIS or
equivalent state lists or hazardous substances release sites.
Section 3.14 Liabilities. Except as set forth in
Section 3.14 of the Company Letter or in the Company SEC
Documents filed prior to the date hereof, the Company and its
Subsidiaries have no liabilities, absolute or contingent, other
than liabilities that, individually or in the aggregate, have not
had, and would not reasonably be expected to have, a Material
Adverse Effect on the Company.
Section 3.15 Intellectual Property. The Company and its
Subsidiaries own or have the right to use all Intellectual
Property Rights as are necessary in connection with the business
of the Company and its Subsidiaries, taken as a whole, except
where the failure to have such Intellectual Property Rights,
individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries has
infringed any Intellectual Property Rights of any third party
other than any infringements that, individually or in the
aggregate, have not had, and would not reasonably be expected to
have, a Material Adverse Effect on the Company.
Section 3.16 Rights Agreement. The Company has taken
all necessary action to (i) render the Rights inapplicable to the
Merger and the other transactions contemplated by this Agreement
and (ii) ensure that (y) neither Parent nor any of its affiliates
is an Acquiring Person (as defined in the Rights Agreement) and
(z) a Distribution Date (as defined in the Rights Agreement) does
not occur by reason of the announcement or consummation of the
Merger or the consummation of any of the other transactions
contemplated by this Agreement.
<PAGE>
Section 3.17 Parachute Payments to Disqualified
Individuals. The estimated "excess parachute payments" (as such
term is defined in Section 280G(a) of the Code) payable to all
employees of the Company and its Subsidiaries who (i) are
"disqualified individuals" under Section 280G of the Code and
(ii) are not covered in the report prepared by Towers Perrin as
of October 18, 1997 and delivered to the Parent Companies prior
to or on the date hereof will not exceed $5,000,000, assuming for
this purpose that no such employee's employment is terminated in
connection with the transactions contemplated under this
Agreement.
Section 3.18 Opinion of Financial Advisor. The Company
has received the written opinion of Lazard Freres & Co. LLC,
dated the date hereof, to the effect that, as of the date hereof,
the consideration to be paid by the Parent Companies in the
Merger is fair to the Company's stockholders from a financial
point of view, a copy of which opinion has been delivered to the
Parent Companies.
Section 3.19 State Takeover Statutes. The Board of
Directors of the Company has, to the extent such statutes are
applicable, taken (or, with respect to Sections 78.378 to 78.3793
of the NGCL, will take prior to the Effective Time) all action
necessary to exempt the Parent Companies, their respective
Subsidiaries and affiliates, the Merger, this Agreement and the
transactions contemplated hereby from Sections 78.378 to 78.3793
and Sections 78.411 to 78.444 of the NGCL or to satisfy the
requirements thereof. To the Knowledge of the Company, no other
state takeover statutes are applicable to the Merger, this
Agreement or the transactions contemplated hereby.
Section 3.20 Required Vote of Company Stockholders. The
affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock is required to approve this
Agreement. No other vote of the stockholders of the Company is
required by law, the Restated Articles of Incorporation, as
amended, or the Amended and Restated By-laws of the Company or
otherwise in order for the Company to consummate the Merger and
the transactions contemplated hereby.
Section 3.21 Brokers. No broker, investment banker or
other person, other than Goldman, Sachs & Co. and Lazard Freres &
Co. LLC, the fees and expenses of which will be paid by the
Company (as reflected in agreements between such firms and the
Company, copies of which have been furnished to Parent), is
entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
the Company.
<PAGE>
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending
the Merger. Except as contemplated by Section 4.5 or as set forth
in Section 4.1 of the Company Letter, during the period from the
date of this Agreement to the Effective Time, the Company shall,
and shall cause each of its Subsidiaries to, carry on its
business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use all reasonable efforts to keep
available the services of its current officers and employees and
preserve its relationships with customers, suppliers, licensors,
lessors and others having business dealings with it to the end
that its goodwill and ongoing business shall be unimpaired at the
Effective Time. Except as otherwise expressly permitted by this
Agreement and as set forth in Section 4.2 of the Company Letter,
the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of Parent:
(a) except as set forth in Section 4.5 ,(i) declare,
set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make any payments to its
stockholders in their capacity as such (other than dividends
and other distributions by direct or indirect wholly owned
Subsidiaries), (ii) other than in the case of any direct or
indirect wholly owned Subsidiary, split, combine or
reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or
(iii) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or
any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(b) except as set forth in Section 4.5, issue, deliver,
sell, pledge, dispose of or otherwise encumber any shares of
its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any
rights, warrants or options to acquire any such shares,
voting securities, equity equivalent or convertible
securities, other than the issuance of shares of Company
Common Stock (and associated Rights) upon the exercise of
employee stock options pursuant to the Company Stock Plans
outstanding on the date of this Agreement in accordance with
their current terms;
(c) amend its articles or certificate of incorporation
or by-laws or other comparable organizational documents;
<PAGE>
(d) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion
of the assets of or equity in, or by any other manner, any
business or any corporation, partnership, association or
other business organization or division thereof or (ii) any
assets that are, individually or in the aggregate material
to the Company and its Subsidiaries taken as a whole, other
than transactions that are in the ordinary course of
business consistent with past practice and not material to
the Company and its Subsidiaries taken as a whole;
(e) except as set forth in Section 4.5, sell, lease,
license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of, or agree to sell, lease,
license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of, any of its assets, other than
transactions that are in the ordinary course of business
consistent with past practice and not material to the
Company and its Subsidiaries taken as a whole;
(f) except as set forth in Section 4.5, incur any
indebtedness for borrowed money, guarantee any such
indebtedness, issue or sell any debt securities or warrants
or other rights to acquire any debt securities, guarantee
any debt securities or make any loans, advances or capital
contributions to, or other investments in, any other person,
or enter into any arrangement having the economic effect of
any of the foregoing, other than (i) indebtedness incurred
in the ordinary course of business consistent with past
practice and (ii) indebtedness, loans, advances, capital
contributions and investments between the Company and any of
its wholly owned Subsidiaries or between any of such wholly
owned Subsidiaries;
(g) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate
structure or ownership of the Company or any Subsidiary;
(h) except as required under any collective bargaining
agreement or under Section 5.8, enter into or adopt any new,
or amend any existing, severance plan, agreement or
arrangement or enter into any new or amend any existing
Company Plan or employment or consulting agreement, other
than as required by law or as set forth in Section 4.1(h) of
the Company Letter, except that the Company or its
Subsidiaries may enter into (a) employment agreements if
such agreements (i) are no longer than one year in duration
and (ii) provide for an annual base salary of less than
$150,000, and (b) consulting agreements in the ordinary
course of business that are terminable on no more than 90
days' notice without penalty, and the Company or its
Subsidiaries may amend any Company Plan or other plan,
<PAGE>
program, policy or arrangement if such amendment will result
in not more than a de minimus additional cost to the Company
or its Subsidiaries;
(i) except (1) as permitted under Section 4.1(h), (2)
as permitted under Section 5.15 or (3) to the extent
required by written employment agreements existing on the
date of this Agreement, increase the compensation payable or
to become payable to its officers or employees, except for
(i) increases in the ordinary course of business consistent
with past practice in salaries or wages of employees of the
Company or any of its Subsidiaries and (ii) except to the
extent required under the terms of any applicable incentive
plan, the payment of annual incentive bonuses for 1997 which
are not in the aggregate in excess of two times the target
bonus for 1997 established for 1997 prior to the date of
this Agreement;
(j) grant or award any stock options, restricted stock,
performance shares, stock appreciation rights or other
equity-based incentive awards, other than an award which (i)
is made to a management employee or non-employee director
who would be eligible to receive such award under the terms
of the Company Stock Plans as applied consistently with past
practice and (ii) is made on terms substantially the same as
the terms of awards previously awarded under such plan;
(k) take any action, other than reasonable and usual
actions in the ordinary course of business consistent with
past practice, with respect to accounting policies or
procedures (other than actions required to be taken by
generally accepted accounting principles);
(l) except as disclosed in the Company's capital
expenditure plan which has been disclosed to Parent or for
maintenance capital expenditures in the ordinary course of
business consistent with past practice, make or agree to
make any new capital expenditure or expenditures which,
individually, is in excess of $5,000,000 or, in the
aggregate, are in excess of $50,000,000;
(m) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge
or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in
the Company SEC Documents or incurred in the ordinary course
of business consistent with past practice;
<PAGE>
(n) settle or compromise any material federal, state,
local or foreign tax liability;
(o) authorize, recommend, propose or announce an
intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of
the foregoing.
Section 4.2 Conduct of Business by the Parent Companies
Pending the Merger. Except as contemplated by Section 4.5 or as
set forth in Section 4.2 of the Parent Letter, during the period
from the date of this Agreement to the Effective Time, the Parent
Companies shall, and shall cause each of their respective
Subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent
therewith, use all reasonable efforts to keep available the
services of their respective current officers and employees and
preserve their respective relationships with customers,
suppliers, licensors, lessors and others having business dealings
with them to the end that their goodwill and ongoing business
shall be unimpaired at the Effective Time. Except as otherwise
expressly permitted by this Agreement and as set forth in Section
4.2 of the Parent Letter, the Parent Companies shall not, and
shall not permit any of their respective Subsidiaries to, without
the prior written consent of the Company:
(a) except as contemplated by Section 4.5, (i) declare,
set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make any payments to its
stockholders or shareholders, as applicable, in their
capacity as such (other than (A) dividends in the aggregate
amount not to exceed the greater of (a) the current rate of
the Parent Companies dividends and (b) the Trust's "real
estate investment taxable income" (as such term is defined
for purposes of the Code) without regard to any net capital
gains or the deduction for dividends paid (provided that
this Section 4.2(a) shall not be deemed to restrict any
increases in the dividend rate of the Parent Companies in
the ordinary course consistent with past practice) and (B)
dividends and other distributions by direct, indirect or
wholly owned Subsidiaries) or (ii) other than in the case of
any Subsidiary, split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in
substitution for Paired Shares;
(b) in the case of the Parent Companies only, except as
set forth in Section 4.5, amend its articles or certificate
of incorporation or declaration of trust, other than in
connection with the respective Charter Amendments;
<PAGE>
(c) take or omit any action that would reasonably be
expected to cause the Trust to cease to qualify as a "real
estate investment trust" for federal income tax purposes or
that would reasonably be expected to cause the Trust to
become subject to Section 269B(a)(3) of the Code; or
(d) authorize, recommend, propose or announce an
intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of
the foregoing.
Notwithstanding anything contained herein to the
contrary and except as permitted by Section 4.5(c), neither Trust
nor Parent shall declare, set aside or pay any cash dividend or
make any cash distribution or otherwise make any payments in cash
to its stockholders or shareholders, as applicable, having a
record date for the determination of the stockholders or
shareholders entitled to such dividend, distribution or other
payment occurring during the period from and including the first
day of the Averaging Period through and including the fourth
trading day after the last day of the Averaging Period.
Section 4.3 No Solicitation. (a) The Company shall not,
nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any officer, director or employee of or any
investment banker, attorney, accountant, agent or other advisor
or representative of the Company or any of its Subsidiaries to,
(i) solicit, initiate, or encourage the submission of, any
takeover proposal, (ii) except to the extent permitted by
paragraph (b), enter into any agreement with respect to any
takeover proposal or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any takeover proposal;
provided, however, that prior to the Company Stockholders'
Meeting (as defined in Section 5.1), to the extent required by
the fiduciary obligations of the Board of Directors of the
Company, as determined in good faith by a majority of the
disinterested members thereof based on the advice of outside
counsel, the Company may, in response to unsolicited requests
therefor, participate in discussions or negotiations with, or
furnish information pursuant to an appropriate confidentiality
agreement to, any person. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in
the preceding sentence by any officer, director or employee of or
any investment banker, attorney, accountant, agent or other
advisor or representative of the Company or any of its
Subsidiaries, whether or not such person is purporting to act on
behalf of the Company or otherwise, shall be deemed to be a
breach of this paragraph by the Company. For all purposes of this
Agreement, "takeover proposal" means any proposal, other
<PAGE>
than a proposal by Parent or Trust for a merger, consolidation,
share exchange, business combination or other similar transaction
involving the Company or any of its Significant Subsidiaries or
any proposal or offer (including, without limitation, any
proposal or offer to stockholders of the Company), other than a
proposal or offer by Parent or Trust to acquire in any manner,
directly or indirectly, an equity interest in, any voting
securities of, or a substantial portion of the assets of, the
Company or any of its Significant Subsidiaries. The Company
immediately shall cease and cause to be terminated all existing
discussions or negotiations with any persons conducted heretofore
with respect to, or that could reasonably be expected to lead to,
any takeover proposal. As used herein, a "Significant Subsidiary"
means any Subsidiary that would constitute a "significant
subsidiary" within the meaning of Rule 1-02 of Regulation S-X of
the SEC.
(b) Neither the Board of Directors of the Company nor
any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent, Trust or Sub,
the approval or recommendation by the Board of Directors of the
Company or any such committee of this Agreement or the Merger or
(ii) approve or recommend, or propose to approve or recommend,
any takeover proposal. Notwithstanding the foregoing, the Board
of Directors of the Company, to the extent required by the
fiduciary obligations thereof, as determined in good faith by a
majority of the disinterested members thereof based on the advice
of outside counsel, may approve or recommend (and, in connection
therewith, withdraw or modify its approval or recommendation of
this Agreement or the Merger) a superior proposal. For all
purposes of this Agreement, "superior proposal" means a bona fide
written proposal made by a third party to acquire the Company
pursuant to a tender or exchange offer, a merger, a share
exchange, a sale of all or substantially all its assets or
otherwise on terms which a majority of the disinterested members
of the Board of Directors of the Company determines in their good
faith judgment (based on the opinion, with only customary
qualifications, of independent financial advisors that the value
of the consideration provided for in such proposal exceeds the
value of the consideration provided for in the Merger) to be more
favorable to the Company and its stockholders than the Merger and
for which financing, to the extent required, is then fully
committed or which, in the good faith judgment of a majority of
such disinterested members (based on the advice of independent
financial advisors), is reasonably capable of being financed by
such third party. If, to the extent permitted by this Section
4.2(b), the Board of Directors of the Company approves or
recommends a superior proposal, the Company may take appropriate
action to render the Rights inapplicable to such superior
proposal.
<PAGE>
(c) The Company promptly shall immediately advise
Parent orally and in writing of any takeover proposal or any
inquiry with respect to or which could reasonably be expected to
lead to any takeover proposal, the material terms and conditions
of such takeover proposal or inquiry and the identity of the
person making any such takeover proposal or inquiry. The Company
will keep Parent fully informed of the status and details of any
such takeover proposal or inquiry. The Parent Companies shall
waive any applicable confidentiality provisions to the extent
necessary to allow the Company solely to explain the terms of
this transaction to persons making takeover proposals.
Section 4.4 Third Party Standstill Agreements. Except
to the extent reasonably required in connection with the
Company's obligations under Section 4.5(a), during the period
from the date of this Agreement through the Effective Time, the
Company shall not terminate, amend, modify or waive any provision
of any confidentiality or standstill or similar agreement to
which the Company or any of its Subsidiaries is a party (other
than any involving Parent or Trust) unless a majority of the
disinterested members of the Board of Directors of the Company
determines in their good faith judgment based on the advice of
outside counsel that failure to take such action would violate
the fiduciary obligations of such Board under applicable law.
Subject to the foregoing, during such period, the Company agrees
to enforce, to the fullest extent permitted under applicable law,
the provisions of any such agreements, including, but not limited
to, obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions
thereof in any court of the United States or any state thereof
having jurisdiction.
Section 4.5 Pre-Merger Transactions.
(a) The Company shall use reasonable efforts to enter
into agreements to sell assets of the Company as agreed from time
to time between the Company and Parent on terms acceptable to the
Company and shall permit the Parent Companies and their financial
and legal advisors to participate in such process; provided,
however, that such agreements may provide at the Company's
election that any such sale or disposition shall not be
consummated until after the Effective Time and may provide at the
Company's election that such agreements are terminable by the
Company if this Agreement is terminated for any reason; provided
further, however, that neither the Company nor any of its
Subsidiaries shall enter into a definitive agreement with respect
to any such sale without the prior approval of both Parent
Companies and the Board of Directors of the Company.
(b) The Company shall not implement the Comprehensive
Plan (as such term is defined in the Definitive Proxy Statement
on Schedule 14A filed with the SEC on October 9, 1997 (the "Proxy
<PAGE>
Statement")), including, without limitation, consummating the
Tender Offers (as such term is defined in the Proxy Statement).
(c) Prior to the Effective Time, Trust may declare a
dividend not to exceed $1.5 billion, payable to its shareholders
of record as of such time and payable in property other than cash
which property may be acquired by Parent in exchange for shares
of Parent's capital stock, and Parent may acquire all or any
portion of such property in such manner. In connection with the
foregoing, the Pairing Agreement dated as of June 28, 1980
between Parent and Trust may be amended to permit and facilitate
such transactions. In the event that Parent fails to exercise its
right, in whole or in part, to acquire such property prior to the
Effective Time, the Exchange Ratio shall be equitably adjusted.
The Parent Companies agree that in effecting transactions
contemplated by this Section 4.5(c), the stockholders of the
Company shall be treated on a fair and equitable basis (including
in respect of the consideration payable in the Merger).
(d) The Company acknowledges and agrees that, prior to
the Effective Time, the Parent Companies and their Subsidiaries
are obligated under the Westin Transaction Agreement to use all
reasonable efforts to consummate the transactions contemplated
thereby, including debt and equity financings and certain
restructurings and share issuances related thereto, the payment
of dividends on such share issuances, increases in stock option
and similar employee benefit plans and the increases in
authorized capital of the Parent Companies, all of which shall be
deemed to be consistent with the Parent Companies' obligations
under Section 4.2. The Company and the Parent Companies further
acknowledge and agree that, prior to the Effective Time, the
Parent Companies shall have paid a fee to certain investment
banks in connection with the transactions contemplated by the
Westin Transaction Agreement, and such fee shall have been paid
in the type and amount of consideration previously discussed by
and among the parties to this Agreement.
Section 4.6 Post-Merger Transactions. Promptly after
the consummation of the Merger, the Trust shall dispose of any
shares of common stock of the Surviving Corporation received by
the Trust in connection with the Merger.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholders Meetings. The Company, Parent
and Trust each shall, as soon as practicable following the date
of this Agreement, duly call, give notice of, convene and
<PAGE>
hold, a meeting of its stockholders or shareholders
(respectively, the "Company Stockholder Meeting", the "Parent
Stockholder Meeting", the "Trust Shareholder Meeting" and,
collectively, the "Stockholder Meetings") for the purpose of
considering the approval of this Agreement (in the case of the
Company) and the respective Charter Amendments and the Share
Issuances (in the case of Parent and Trust). The Company, Parent
and Trust will, through their respective Boards of Directors or
Trustees, as the case may be, recommend to their respective
stockholders or shareholders, as applicable, approval of such
matters and shall not withdraw such recommendation except to the
extent that the Board of Directors of the Company shall have
withdrawn or modified its approval or recommendation of this
Agreement of the Merger as permitted by Section 4.3(b). Without
limiting the generality of the foregoing, the Company agrees that
its obligations pursuant to the first sentence of this Section
5.1 shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any takeover
proposal. The Company, Parent and Trust shall coordinate and
cooperate with respect to the timing of such meetings and shall
use all reasonable efforts to hold such meetings on the same day.
At the Parent Stockholder Meeting and the Trust Shareholder
Meeting, the Parent Companies shall cause to be submitted to
their respective shareholders or stockholders, as applicable, a
proposal to amend Parent's Articles of Incorporation and Trust's
Declaration of Trust to include a provision substantially similar
to ARTICLE NINTH of Restated Articles of Incorporation, as
amended, of the Company.
Section 5.2 Filings; Other Actions. (a) The Company,
Parent and Trust shall promptly prepare and file with the SEC the
Joint Proxy Statement and the Parent Companies shall prepare and
file with the SEC the Registration Statement, in which the Joint
Proxy Statement will be included as a prospectus. Each of Parent,
Trust and the Company shall use all reasonable efforts to have
the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. As
promptly as practicable after the Registration Statement shall
have become effective, each of Parent, Trust and the Company
shall mail the Joint Proxy Statement to its respective
stockholders or shareholders. Parent and Trust shall also take
any action (other than qualifying to do business in any
jurisdiction in which they are currently not so qualified)
required to be taken under any applicable state securities laws
in connection with the issuance of Paired Shares in the Merger
and upon the exercise of the Substitute Options (as defined in
Section 5.8), and the Company shall furnish all information
concerning the Company and the holders of Company Common Stock as
may be reasonably requested in connection with any such action,
including information relating to the number of Paired Shares
required to be registered.
<PAGE>
(b) Each party hereto agrees, subject to applicable
laws relating to the exchange of information, promptly to furnish
the other parties hereto with copies of written communications
(and memoranda setting forth the substance of all oral
communications) received by such party, or any of its
subsidiaries, affiliates or associates (as such terms are defined
in Rule 12b-2 under the Exchange Act as in effect on the date
hereof), from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated
hereby.
(c) Each of the Company, Parent and Trust will
promptly, and in any event within fifteen business days after
execution and delivery of this Agreement, make all filings or
submissions as are required under the HSR Act. Each of the
Company, Parent and Trust will promptly furnish to the other such
necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or
submissions necessary under the HSR Act. Without limiting the
generality of the foregoing, each of the Company, Parent and
Trust will promptly notify the other of the receipt and content
of any inquiries or requests for additional information made by
any Governmental Entity in connection therewith and will promptly
(i) comply with any such inquiry or request and (ii) provide the
other with a description of the information provided to any
Governmental Entity with respect to any such inquiry or request.
In addition, each of the Company, Parent and Trust will keep the
other apprised of the status of any such inquiry or request.
Section 5.3 Comfort Letters. (a) The Company shall use
all reasonable efforts to cause to be delivered to Parent
"comfort" letters of Arthur Andersen LLP, the Company's
independent public accountants, dated the date on which the
Registration Statement shall become effective and as of the
Effective Time, and addressed to Parent, Trust and the Company,
in form and substance reasonably satisfactory to Parent and
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) Parent and Trust shall use all reasonable efforts
to cause to be delivered to the Company "comfort" letters of
Coopers & Lybrand L.L.P., Parent's and Trust's independent public
accountants, dated the date on which the Registration Statement
shall become effective and as of the Effective Time, and
addressed to the Company, Parent and Trust, in form and substance
reasonably satisfactory to the Company and reasonably customary
in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those
contemplated by this Agreement.
<PAGE>
Section 5.4 Access to Information. Subject to currently
existing contractual and legal restrictions applicable to the
Parent Companies or to the Company or any of their Subsidiaries,
each of the Parent Companies and the Company shall, and shall
cause each of its Subsidiaries to, afford to the accountants,
counsel, financial advisors and other representatives of the
other party hereto reasonable access to, and permit them to make
such inspections as they may reasonably require of, during normal
business hours during the period from the date of this Agreement
through the Effective Time, all their respective properties,
books, Tax Returns, contracts, commitments and records
(including, without limitation, the work papers of independent
accountants, if available and subject to the consent of such
independent accountants) and, during such period, each of the
Parent Companies and the Company shall, and shall cause each of
its Subsidiaries to, furnish promptly to the other (i) a copy of
each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of
federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as the other
may reasonably request. Notwithstanding the first sentence of
this Section 5.4, neither the Company nor any of its accountants,
counsel, financial advisors or other representatives shall have
access to any information relating to the matters described in
Section 5.4 of the Parent Letter. Notwithstanding the first
sentence of this Section 5.4, neither the Parent Companies nor
any of their respective accountants, counsel, financial advisors
or other representatives shall have access to any information
relating to the matters described in Section 5.4 of the Company
Letter. No investigation pursuant to this Section 5.4 shall
affect any representation or warranty in this Agreement of any
party hereto or any condition to the obligations of the parties
hereto. All information obtained by Parent or the Company
pursuant to this Section 5.4 shall be kept confidential in
accordance with the Confidentiality Agreement dated October 6,
1997 among the Parent Companies and the Company.
Section 5.5 Compliance with the Securities Act. Within
30 days following the date of this Agreement, the Company shall
cause to be prepared and delivered to Parent a list (reasonably
satisfactory to counsel for Parent) identifying all persons who,
at the time of the Company Stockholder Meeting, in the Company's
reasonable judgment may be deemed to be "affiliates" of the
Company as that term is used in paragraphs (c) and (d) of Rule
145 under the Securities Act (the "Rule 145 Affiliates"). The
Company shall use all reasonable efforts to cause each person who
is identified as a Rule 145 Affiliate in such list to deliver to
Parent on or prior to the Effective Time a written agreement in
substantially the form of Exhibit 5.5 hereto, executed by such
person.
<PAGE>
Section 5.6 Stock Exchange Listings. Parent shall use
all reasonable efforts to list on the NYSE, upon official notice
of issuance, the Paired Shares to be issued in connection with
the Merger.
Section 5.7 Fees and Expenses. (a) Except as provided
in Section 5.7(b) and (c), whether or not the Merger is
consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby including
the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and
expenses, except that expenses incurred in connection with
printing and mailing the Joint Proxy Statement and the
Registration Statement shall be borne equally by Parent and the
Company.
(b) Provided that none of Parent, Sub or Trust is in
material breach of their representations, warranties and
agreements under this Agreement, (i) if this Agreement is
terminated by the Board of Directors of the Company pursuant to
Section 7.1(g), (ii) if this Agreement is terminated by the
Parent Companies pursuant to Section 7.1(b), (iii) if this
Agreement is terminated by the Parent Companies pursuant to
Section 7.1(f) or (iv) if (A) after the date of this Agreement,
(x) any person or "group" (within the meaning of Section 13(d)(3)
of the Exchange Act) shall have made or indicated an intention to
make or amend or modify (whether or not subject to conditions) a
takeover proposal or (y) it shall have been publicly disclosed or
Parent shall have otherwise learned that any person or "group"
has beneficial ownership (determined for the purpose of this
paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of more than 15% of the outstanding shares of
Company Common Stock or (z) Parent has the right to terminate
this Agreement under Section 7.1(f) because the Board of
Directors of the Company shall or shall resolve to take an action
referred to therein and (B) the stockholders of the Company do
not approve the Merger at the Company Stockholders Meeting called
for such purpose pursuant to Section 5.1 or this Agreement is
terminated pursuant to Section 7.1(d) prior to the Company
Stockholders Meeting being held, then the Company shall pay to
Parent $225,000,000 (the "Termination Fee") in same-day funds,
plus (notwithstanding paragraph (a) of this Section 5.7) all the
Expenses (as defined below), on the date of such termination, in
the case of clause (i), (ii) or (iii), or on the date of the
Company Stockholders Meeting or such termination, as the case may
be, in the case of clause (iv); provided, however, that in the
event the date of such termination, in the case of clause (i),
(ii), (iii) or (iv), is prior to November 21, 1997, then the
amount of the Termination Fee shall be deemed to be $195,000,000.
(c) If this Agreement is terminated for any reason
(other than by the Company pursuant to Section 7.1(b)), then the
<PAGE>
Company shall (notwithstanding paragraph (a) of this Section
5.7), on the date of such termination, pay to Parent the cash
amount necessary to permit Parent fully to reimburse itself, Sub
and Trust and their affiliates for all out-of-pocket fees and
expenses incurred at any time prior to such termination by any of
them or on their behalf in connection with the Merger, the
preparation of this Agreement and the transactions contemplated
by this Agreement (including any currency or interest rate
hedging activities in connection with the transactions
contemplated hereby), including (x) all fees and expenses of
counsel, investment banking firms, financial advisors (regardless
of whether such financial advisors are affiliates of the Parent
Companies), accountants, experts and consultants to Parent, Sub
and Trust or any of their affiliates and (y) all fees and
expenses payable to banks, investment banking firms and other
financial institutions and their respective counsel, accountants
and agents in connection with arranging or providing financing )
(fees and expenses under clause (y) collectively, "Financing
Fees", and the fees and expenses contemplated by this paragraph
(c), collectively, but subject to the next succeeding proviso,
the "Expenses"); provided, however, that the aggregate amount of
Expenses, other than Financing Fees and all fees and expenses of
counsel in connection with any litigation, shall not exceed
$25,000,000.
(d) The Company acknowledges that the agreements
contained in paragraphs (b) and (c) of this Section 5.7 are an
integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent, Sub and Trust would
not enter into this Agreement; accordingly, if the Company fails
to pay promptly any amount due pursuant to this Section 5.7 and,
in order to obtain such payment, Parent, Sub or Trust commences a
suit that results in a judgment against the Company for any such
amount, the Company shall pay to Parent, Sub or Trust its cost
and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the fee at the
prime or base rate of Citibank, N.A. from the date such payment
was due under this Agreement.
Section 5.8 Company Stock Options. (a) As of the
Effective Time, each Company Stock Option (and related stock
appreciation right ("SAR")) that is outstanding immediately prior
to the Effective Time pursuant to the Company's stock option
plans (other than any "stock purchase plan" within the meaning of
Section 423 of the Code) in effect on the date hereof (the "Stock
Plans") shall be assumed by Parent and become and represent a
fully exercisable option (and related SAR) to purchase the number
of Paired Shares (a "Substitute Option") (decreased to the
nearest full share) determined by multiplying (i) the number of
shares of Company Common Stock subject to such Company Stock
Option immediately prior to the Effective Time by (ii) the
Exchange Ratio, at an exercise price per Paired Share (rounded up
<PAGE>
to the nearest tenth of a cent) equal to (x) the exercise price
per share of Company Common Stock immediately prior to the
Effective Time divided by the Exchange Ratio, reduced by (y) the
cash amount of the per share merger consideration payable
pursuant to Section 1.5(c). Parent shall pay cash to holders of
Company Stock Options in lieu of issuing fractional Paired Shares
upon the exercise of Substitute Options. As of the Effective
Time, each Substitute Option shall be subject to the same terms
and conditions as were applicable immediately prior to the
Effective Time under the related Company Stock Option and Stock
Plan under which it was granted, including those providing for
the accelerated exercisability and other special rights arising
upon an "Acceleration Event" in accordance with the terms of such
Stock Plan. The Company agrees to use all reasonable efforts to
obtain any necessary consents of holders of Company Stock Options
and take such other actions as may be necessary to effect this
Section 5.8. The accelerated lapse of restrictions and other
special rights with respect to shares of restricted Company
Common Stock issued under the Stock Plans shall also be preserved
following the Effective Time in accordance with the terms of the
Stock Plans.
(b) In respect of each Company Stock Option (and
related SAR) as converted into a Substitute Option pursuant to
Section 5.8(a) and assumed by Parent, and the shares of Parent
Common Stock underlying such option, Parent shall file and keep
current a registration statement on Form S-8 (or a post-effective
amendment to a Registration Statement on Form S-8) or other
appropriate form for as long as such options remain outstanding.
(c) The provisions of this Section 5.8 are intended to
be for the benefit of, and shall be enforceable by, each person
who is or has been an employee of the Company or any of its
subsidiaries and is a holder of Employee Stock Options or SARS,
and such employee's heirs and personal representatives and shall
be binding on all successors and assigns of the Parent Companies.
Section 5.9 Reasonable Efforts. (a) Upon the terms and
subject to the conditions set forth in this Agreement, unless, to
the extent permitted by Section 4.3, the Board of Directors of
the Company approves or recommends a superior proposal, each of
the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger
and the other transactions contemplated by this Agreement,
including, but not limited to: (i) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from all
Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental
Entities) and the taking of all
<PAGE>
reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including those in connection with the HSR
Act, state takeover statutes and Gaming Laws), (ii) the obtaining
of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental
Entity with respect to the Merger or this Agreement vacated or
reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated
by this Agreement.
(b) The Company shall use all reasonable efforts not to
take any action that, in any such case, might reasonably be
expected to (i) cause any of its representations or warranties
contained in this Agreement that is qualified as to materiality
to be untrue, (ii) cause any of its representations or warranties
contained in this Agreement that is not so qualified to be untrue
in any material respect, (iii) result in a breach of any covenant
made by it in this Agreement, (iv) result directly or indirectly
in any of the conditions to the Merger set forth in Article VI
not being satisfied or (v) impair the ability of the parties to
consummate the Merger at the earliest practicable time
(regardless of whether such action would otherwise be permitted
or not prohibited hereunder).
Section 5.10 Public Announcements. The Parent Companies
and the Company will not issue any press release with respect to
the transactions contemplated by this Agreement or otherwise
issue any written public statements with respect to such
transactions without prior consultation with each other party,
except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities
exchange.
Section 5.11 Transfer and Gains Tax. The Parent
Companies will pay any Federal, state, local, foreign or
provincial tax which is attributable to the transfer of the
beneficial ownership of the Company's or its Subsidiaries' real
property, if any (collectively, the "Gains Taxes"), any penalties
or interest with respect to the Gains Taxes, payable in
connection with the consummation of the Merger, (except as
otherwise provided in Section 1.7) any Federal, state, local,
foreign or provincial tax which is attributable to the transfer
of Company Common Stock or Paired Shares pursuant to the terms of
this Agreement (collectively, "Stock Transfer Taxes") and any
penalties or interest with respect to any such Stock Transfer
Taxes. The Company and the Parent Companies agree to cooperate
with the other in the filing of any returns with respect to the
<PAGE>
Gains Taxes, including supplying in a timely manner a complete
list of all real property interests held by the Company and its
Subsidiaries and any information with respect to such property
that is reasonably necessary to complete such returns. The
portion of the consideration allocable to the real property of
the Company and its Subsidiaries shall be agreed to between
Parent and the Company. The stockholders of the Company shall be
deemed to have agreed to be bound by the allocation established
pursuant to this Section 5.11 in the preparation of any return
with respect to the Gains Taxes.
Section 5.12 State Takeover Laws. If any "fair price",
"business combination" or "control share acquisition" statute or
other similar statute or regulation shall become applicable to
the transactions contemplated hereby, Parent, Trust and the
Company and their respective Boards of Directors or Trustees, as
the case may be, shall use all reasonable efforts to grant such
approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly
as practicable on the terms contemplated hereby and shall
otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby.
Section 5.13 Indemnification; Directors and Officers
Insurance. (a) The Parent Companies agree that all rights to
indemnification and exculpation from liabilities for acts or
omissions occurring prior to the Effective Time now existing in
favor of the current or former directors or officers of the
Company and its subsidiaries as provided in their respective
articles or certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification
agreements of the Company shall survive the Merger and shall
continue in full force and effect in accordance with their terms
for a period of not less than six years from the Effective Time
and the obligations of the Company in connection therewith shall
be assumed by the Parent Companies. Parent shall provide, or
shall cause the Surviving Corporation to provide, the Company's
current directors and officers an insurance and indemnification
policy (including any fiduciary liability policy) that provides
coverage with respect to any claims made during the six-year
period following the Effective Time for events occurring prior to
the Effective Time (the "D&O Insurance") that is substantially
similar to the Company's existing policies or, if substantially
equivalent insurance coverage is unavailable, the best available
coverage; provided, however, that the Surviving Corporation shall
not be required to pay an annual premium for the D&O Insurance in
excess of 150 percent of the last annual premium paid prior to
the date hereof (which premium the Company represents and
warrants to be approximately $1.4 million in the aggregate), but
if such annual premium would but for this proviso exceed such
amount, then Parent shall purchase as much coverage as possible
for such amount.
<PAGE>
(b) The provisions of this Section 5.13 are intended to
be for the benefit of, and shall be enforceable by, each person
who is or has been a director or officer of the Company or a
subsidiary of the Company, and such director's or officer's heirs
and personal representatives and shall be binding on all
successors and assigns of the Parent Companies.
Section 5.14 Notification of Certain Matters. The
Parent Companies shall use all reasonable efforts to give prompt
notice to the Company, and the Company shall use all reasonable
efforts to give prompt notice to the Parent Companies, of: (i)
the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which it is aware and which would be
reasonably likely to cause (x) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any
material respect or (y) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied
in all material respects, (ii) any failure of any of the Parent
Companies or the Company, as the case may be, to comply in a
timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or
(iii) any event, change or development that, individually or in
the aggregate, has had, or would reasonably be expected to have,
a Material Adverse Effect on the Parent Companies or the Company,
as the case may be; provided, however, that the delivery of any
notice pursuant to this Section 5.14 shall not limit or otherwise
affect the remedies available hereunder to the party receiving
such notice.
Section 5.15 Employees. (a) Comparable Benefits. Except
as provided in Section 5.8, for not less than one year following
the Effective Time, the Parent Companies shall maintain, or shall
cause the Company and its Subsidiaries to maintain, compensation
and employee benefits plans and arrangements for employees of the
Company and its Subsidiaries ("Affected Employees") that are, in
the aggregate, no less favorable than as provided under the
compensation arrangements and Company Plans as in effect on the
date hereof. Without limiting the generality of the foregoing,
for not less than one year following the Effective Time (or such
longer period as may be required under the applicable Company
Plan), the Parent Companies shall provide, or cause the Company
and its Subsidiaries to provide, severance pay and benefits to
each Affected Employee as of the Effective Time that are no less
favorable than under the Company Plans and current practices of
the Company as in effect as of the date of this Agreement.
Notwithstanding the foregoing, the Parent Companies shall have
the right (i) following the Effective Time to transfer to one or
more employee benefit plans maintained by the Parent Companies
any employee of the Company or any Subsidiary who becomes an
employee of the Parent Companies or any of their respective
Subsidiaries and (ii) in the good faith exercise of it managerial
<PAGE>
discretion, to terminate the employment of any employee. Nothing
in this Agreement shall be construed as granting to any employee
any rights of continuing employment.
(b) Honoring Company Plans and Accrued Vacation. Parent
Companies shall, or shall cause the Company to, honor all Company
Plans and other contractual commitments in effect immediately
prior to the Effective Time between the Company or its
Subsidiaries and Affected Employees or former employees of the
Company or its Subsidiaries. Without limiting the generality or
the foregoing, Parent Companies shall honor all vacation,
holiday, sickness and personal days accrued by Affected Employees
and, to the extent applicable, former employees of the Company
and its Subsidiaries ("Former Employees") as of the Effective
Time.
(c) Participation in Benefit Plans. Employees and, to
the extent applicable, Former Employees shall be given credit for
all service with the Company and its Subsidiaries (or service
credited by the Company or such Subsidiaries) under all employee
benefit plans and arrangements currently maintained by the Parent
Companies or any of their respective Subsidiaries in which they
are or become participants for purposes of eligibility, vesting,
level of participant contributions and benefit accruals (but
subject to an offset, if necessary, to avoid duplication of
benefits) to the same extent as if rendered to the Parent
Companies or any of their respective Subsidiaries. The Parent
Companies shall cause to be waived any pre-existing condition
limitation under their welfare plans that might otherwise apply
to an Affected Employee or, to the extent applicable, a Former
Employee. The Parent Companies agree to recognize (or cause to be
recognized) the dollar amount of all expenses incurred by
Affected Employees or, to the extent applicable, Former
Employees, during the calendar year in which the Effective Time
occurs for purposes of satisfying the calendar year deductions
and co-payment limitations for such year under the relevant
benefit plans of the Parent Companies and their respective
Subsidiaries.
Section 5.16 Rights Agreement. (a) The Board of
Directors of the Company shall take all further action (in
addition to that referred to in Section 3.16) requested in
writing by Parent (including redeeming the Rights immediately
prior to the Effective Time of the Merger or amending the Rights
Agreement) in order to render the Rights inapplicable to the
Merger and the other transactions contemplated by this Agreement.
Except as requested in writing by Parent or as permitted by
Section 5.16(b), prior to the Company Stockholders Meeting, the
Board of Directors of the Company shall not (i) amend the Rights
Agreement or (ii) take any action with respect to, or, except as
specifically permitted by Section 5.16(b), make any determination
<PAGE>
under, the Rights Agreement (including a redemption of the
Rights).
(b) If, to the extent permitted by Section 4.3(b), the
Board of Directors of the Company approves or recommends a
superior proposal, the Company may take appropriate action under
the Rights Agreement solely in order to render the Rights
inapplicable to such superior proposal; provided, however, that
the foregoing shall not permit the Company to make any
determination under, or take any action with respect to, the
Rights Agreement in order to render the Rights applicable to the
Merger or any of the other transaction contemplated by this
Agreement or to redeem the Rights.
Section 5.17. Regulatory Matters. In connection with
subsection (i) of the first sentence of Section 5.9(a) and
without limiting the generality of Section 5.9, the Parent
Companies shall, and shall cause their respective subsidiaries to
(and shall use all reasonable efforts to cause their respective
affiliates other than subsidiaries to), if it is necessary to
obtain any regulatory approval for this Agreement or the
transactions contemplated hereby, disassociate themselves from
any person or persons deemed, or reasonably likely to be deemed,
unacceptable by a Governmental Entity with authority to
administer Gaming Laws and, in the case of any such person who is
a nominee to serve as a director or trustee of a Parent Company
or any subsidiary of a Parent Company, the Parent Companies
shall, and shall cause the relevant subsidiary or subsidiaries
to, replace any such director nominee with a suitable substitute
nominee. In connection with subsection (i) of the first sentence
of Section 5.9(a), the Parent Companies agree that they shall use
all reasonable efforts to cause the trust arrangements described
in either clause (x) or (y) of Section 6.1(c)(iii) to be in full
force and effect and further agree that, if the requisite
approvals are obtained from the New Jersey Casino Control
Commission, they will place shares of Company Common Stock or
shares of common stock of the Surviving Corporation, as
applicable, in trust as contemplated by such clauses.
Section 5.18. New Jersey Trust. In connection with the
application for qualification and licensing by the Parent
Companies with the New Jersey Casino Control Commission pursuant
to the New Jersey Casino Control Act and the rules and
regulations promulgated thereunder, if requested by the Parent
Companies (for the purpose of permitting the Parent Companies to
hold directly (and not in trust) the shares of Company Common
Stock to be acquired pursuant to the Merger while the Parent
Companies' application for qualification and licensing is pending
with the New Jersey Casino Control Commission), the Company shall
execute and deliver a trust agreement prepared by the Parent
Companies and reasonably acceptable to the Company and the New
Jersey Casino Control Commission and complying with the
<PAGE>
requirements of the New Jersey Casino Control Act and the rules
and regulations promulgated thereunder.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of the parties to
effect the Merger shall be subject to the fulfillment (or waiver
by such party) at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have
been duly approved by the requisite vote of share holders of the
Company in accordance with applicable law and the Restated
Articles of Incorporation, as amended, and Amended and Restated
By-laws of the Company, and the respective Charter Amendments and
Share Issuances shall have been duly approved by the requisite
vote of the stockholders or shareholders, as applicable, of each
of Parent and Trust in accordance with applicable rules of the
NYSE, applicable law and the Articles of Incorporation and
By-laws of Parent and Declaration of Trust and Trust Regulations
of the Trust.
(b) Stock Exchange Listings. The Paired Shares issuable
in the Merger and pursuant to the Substitute Options shall have
been authorized for listing on the NYSE, subject to official
notice of issuance.
(c) HSR and Other Approvals. (i) The waiting period
(and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(ii) All consents, approvals, orders or authorizations
of or registrations, declarations or filings with any
Governmental Entity, which the failure to obtain, make or occur
would reasonably be expected to have a Material Adverse Effect on
the Company (assuming the Merger had taken place), shall have
been obtained, shall have been made or shall have occurred, and
shall be in full force and effect.
(iii) All consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, (B) any
Governmental Entity with jurisdiction in respect of Gaming Laws
(other than New Jersey), (C) the Federal Communications
Commission and (D) state educational authorities,
non-governmental educational accrediting commissions and the U.S.
Department of Education (in the case of this clause (C) required
to be made or obtained prior to consummation of the Merger), in
each case, required or necessary in connection with the Merger
<PAGE>
and this Agreement and the transactions contemplated by this
Agreement (including the changes in the composition of the Board
of Directors of the Company) shall have been obtained and shall
be in full force and effect, and in the case of the New Jersey
Casino Control Act and the rules and regulations promulgated
thereunder, either, at the option of the Parent Companies, (x) as
contemplated by Section 5.17, all shares of the common stock of
Sub shall have been deposited in trust with a trustee qualified
and otherwise acceptable to the New Jersey Casino Control
Commission and the transactions and arrangements contemplated by
Section 5.17 shall be in full force and effect or (y) (1) the New
Jersey Casino Control Commission shall have approved a form of
trust agreement in form and substance reasonably satisfactory to
the Parent Companies (including in respect of control by the
Parent Companies of the Company and its subsidiaries) in respect
of a trust arrangement for the shares of Company Common Stock to
be acquired pursuant to the Merger or shares of the common stock
of the Surviving Corporation pending final qualification of the
Parent Companies to hold a casino license under the New Jersey
Casino Control Act and the rules and regulations thereunder, (2)
a trustee qualified and otherwise acceptable to the New Jersey
Casino Control Commission and the Parent Companies in respect of
such trust arrangement for the shares of Company Common Stock to
be acquired pursuant to the Merger or shares of the common stock
of the Surviving Corporation shall have been appointed or
designated and (3) the directors of Sub shall have been qualified
on a permanent or temporary basis to serve as directors of a
company (including the Company) that either directly, or through
its subsidiaries, holds a casino license under the New Jersey
Casino Control Act and the rules and regulations thereunder.
(d) Registration Statement. The Registration Statement
shall have become effective in accordance with the provisions of
the Securities Act. 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 Companies or the Company, threatened
by the SEC. All necessary state securities or blue sky
authorizations shall have been received.
(e) No Order. No court or other Governmental Entity
having jurisdiction over the Company, Parent or Trust, or any of
their respective Subsidiaries, shall (after the date of this
Agreement) have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which
is then in effect and has the effect of making the Merger or any
of the transactions contemplated hereby illegal; provided,
however, that each of the parties shall have used all reasonable
efforts to prevent and to appeal as promptly as possible any such
law, rule, regulation, executive order, decree, injunction or
other order
<PAGE>
(f) Change in Tax Laws. There shall not have been any
Federal legislative or regulatory change that would cause the
Trust to cease to qualify as a "real estate investment trust" for
federal income tax purposes or that would cause the Trust to
become subject to Section 269B(a)(3) of the Code.
Section 6.2 Conditions to Obligation of the Company to
Effect the Merger. The obligation of the Company to effect the
Merger shall be subject to the fulfillment (or waiver by the
Company) at or prior to the Effective Time of the following
additional condition:
(a) Performance of Obligations; Representations and
Warranties. Each of Parent, Sub and Trust shall have performed in
all material respects each of its agreements contained in this
Agreement required to be performed at or prior to the Effective
Time, each of the representations and warranties of Parent, Sub
and Trust contained in this Agreement that is qualified as to
materiality shall be true and correct at and as of the Effective
Time as if made at and as of such time (other than
representations and warranties which address matters only as of a
certain date, which shall be true and correct as of such certain
date) and each of the representations and warranties that is not
so qualified shall be true and correct in all material respects
at and as of the Effective Time as if made on and as of such date
(other than representations and warranties which address matters
only as of a certain date, which shall be true and correct in all
material respects as of such certain date), in each case except
as contemplated or permitted by this Agreement, and the Company
shall have received certificates signed on behalf of each of
Parent, Sub and Trust by its Chief Executive Officer and its
Chief Financial Officer to such effect.
(b) No Litigation. There shall not be pending or
threatened any suit, action or proceeding by any Governmental
Entity or any other person, or before any court or governmental
authority, agency or tribunal, domestic or foreign, in each case
that has a significant likelihood of success challenging the
acquisition by any of the Parent Companies of any shares of
Company Common Stock, seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from Parent,
Trust or Sub any damages that are material in relation to the
Company, the Parent Companies and their Subsidiaries taken as a
whole.
(c) Tax Opinion. On the Closing Date, the opinion of
Sidley & Austin, counsel to the Parent Companies, shall have been
delivered to the Company in form and substance reasonably
satisfactory to the Company stating that (i) the Trust is a "real
estate investment trust" for federal income tax purposes and the
Trust is not subject to Section 269B(a)(3) of the Code by reason
<PAGE>
of Section 136(c) of the Deficit Reduction Act of 1984 and (ii)
consummation of the transactions contemplated by this Agreement
will not cause the Trust to cease to qualify as a "real estate
investment trust" for federal income tax purposes and will not
cause the Trust to become subject to Section 269B(a)(3) of the
Code. In rendering such opinion, such counsel shall be entitled
to rely upon customary representations reasonably requested by
such counsel and made by the Parent Companies.
Section 6.3 Conditions to Obligations of Parent, Sub
and Trust to Effect the Merger. The obligations of Parent, Sub
and Trust to effect the Merger shall be subject to the
fulfillment (or waiver by the Parent Companies) at or prior to
the Effective Time of the following additional conditions:
(a) Performance of Obligations; Representations and
Warranties. The Company shall have performed in all material
respects each of its agreements contained in this Agreement
required to be performed at or prior to the Effective Time, each
of the representations and warranties of the Company contained in
this Agreement that is qualified as to materiality shall be true
and correct at and as of the Effective Time as if made at and as
of such time (other than representations and warranties which
address matters only as of a certain date, which shall be true
and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be
true and correct in all material respects at and as of the
Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a
certain date, which shall be true and correct in all material
respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and the Parent
Companies shall have received a certificate signed on behalf of
the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) Consents Under Agreements. Except for the consents
listed in Section 6.3(b) of the Company Letter, the Company shall
have obtained the consent or approval of each person that is not
a Governmental Entity whose consent or approval shall be required
in connection with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture, lease, hotel
management agreement or other agreement or instrument, except as
to which the failure to obtain such consents and approvals,
individually or in the aggregate, would not be expected, in the
reasonable opinion of the Parent Companies, to have a Material
Adverse Effect on the Company or upon the consummation of the
transactions contemplated in this Agreement.
(c) Letters from Company Affiliates. Parent shall have
received from each person named in the letter referred to in
<PAGE>
Section 5.5 an executed copy of an agreement substantially in the
form of Exhibit 5.5 hereto.
(d) No Litigation. There shall not be pending or
threatened any suit, action or proceeding by any Governmental
Entity or any other person, or before any court or governmental
authority, agency or tribunal, domestic or foreign, in each case
that has a significant likelihood of success (i) challenging the
acquisition by any of the Parent Companies of any shares of
Company Common Stock, seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from the
Company any damages that are material in relation to the Company,
the Parent Companies and their Subsidiaries taken as a whole,
(ii) seeking to prohibit or limit the ownership or operation by
the Company, Parent or any of their respective Subsidiaries of
any material portion of the combined business or assets of the
Company, Parent, Trust and their respective Subsidiaries, or to
compel the Company, Parent, Trust and their respective
subsidiaries to dispose of or hold separate any material portion
of the combined business or assets of the Company, Parent, the
Trust and their respective Subsidiaries, as a result of the
Merger or any of the other transactions contemplated by this
Agreement, (iii) seeking to impose limitations on the ability of
Parent, the Trust or Sub to acquire or hold, or exercise full
rights of ownership of, any shares of Company Common Stock,
including, without limitation, the right to vote any Company
Common Stock purchased by it on all matters properly presented to
the shareholders of the Company, (iv) seeking to prohibit Parent,
the Trust or any of their respective Subsidiaries from
effectively controlling in any material respect the business or
operations of the Company or its Subsidiaries or (v) which
otherwise would reasonably be expected to have a Material Adverse
Effect on the Company.
(e) Rights Agreement. The Rights shall not have become
nonredeemable, exercisable, distributed or triggered pursuant to
the terms of the Rights Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after approval of any matters presented in connection
with the Merger by the stockholders or shareholders, as
applicable, of the Company or of the Parent Companies:
<PAGE>
(a) by mutual written consent of the Parent Companies
and the Company;
(b) by either the Parent Companies or the Company if
there has been a material breach of the representations,
warranties, covenants and agreements on the part of the other set
forth in this Agreement, which breach has not been cured within
ten business days following receipt by the breaching party of
notice of such breach from the nonbreaching party;
(c) by either the Parent Companies or the Company if
any permanent order, decree, ruling or other action of a court or
other competent authority restraining, enjoining or otherwise
preventing the consummation of the Merger shall have become final
and non-appealable;
(d) by either the Parent Companies or the Company if
the Merger shall not have been consummated before December 31,
1998, unless the failure to consummate the Merger is the result
of a material breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that the passage of
such period shall be tolled for any part thereof during which any
party shall be subject to a nonfinal order, decree, ruling or
other action restraining, enjoining or otherwise preventing the
consummation of Merger;
(e) by either the Parent Companies or (if the Company
has paid to Parent an amount in cash equal to the sum of the
Termination Fee plus all Expenses if required by Section 5.7 (b)
and (c)) the Board of Directors of the Company if any required
approval of the Merger by the stockholders of the Company shall
not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of such
stockholders or at any adjournment thereof;
(f) by the Parent Companies if the Board of Directors
of the Company shall or shall resolve to (i) not recommend, or
withdraw its approval or recommendation of, the Merger, this
Agreement or any of the transactions contemplated hereby (other
than transactions contemplated by Section 4.5(a)), (ii) modify
such approval or recommendation in a manner adverse to Parent,
Sub or Trust or (iii) approve or recommend a superior proposal
pursuant to Section 4.3(b);
(g) by the Board of Directors of the Company if (i) (x)
to the extent permitted by Section 4.3(b), the Board of Directors
of the Company approves or recommends a superior proposal or (y)
nominees of Hilton Hotels Corporation are elected as a majority
of the members of the Board of Directors of the Company at the
Company's 1997 annual meeting of stockholders and (ii) the
Company has paid to Parent an amount in cash equal to
<PAGE>
the sum of the Termination Fee plus all Expenses as provided by
Section 5.7(b); or
(h) by either the Parent Companies or the Board of
Directors of the Company if the approval of the Charter
Amendments and the Share Issuances by the shareholders of Trust
or the stockholders of Parent shall not have been obtained by
reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of such shareholders or stockholders,
as the case may be, or at any adjournment thereof.
Section 7.2 Effect of Termination. In the event of
termination of this Agreement by either the Parent Companies or
the Company, as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Trust, Sub or their
respective officers or directors (except for the last sentence of
Section 5.4 and the entirety of Sections 2.14, 3.21, 5.7 and
5.16, this Section 7.2 and Article VIII, which shall survive the
termination); provided, however, that nothing contained in this
Section 7.2 shall relieve any party hereto from any liability for
any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this
Agreement.
Section 7.3 Amendment. This Agreement may be amended by
the parties hereto, by or pursuant to action taken by their
respective Boards of Directors or Trustees, as the case may be,
at any time before or after approval of the matters presented in
connection with the Merger by the respective stockholders or
shareholders of Parent, Trust and the Company, but, after any
such approval, no amendment shall be made which by law requires
further approval by such stockholders or shareholders without
such further approval. This Agreement may not be amended except
by an instrument in writing duly executed by each of the parties
hereto.
Section 7.4 Waiver. At any time prior to the Effective
Time, the parties hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein which
may legally be waived. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing duly executed by such party.
The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and
Warranties. The representations and warranties in this Agreement
or in any instrument delivered pursuant to this Agreement shall
terminate at the Effective Time.
Section 8.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given when delivered personally, one day after being delivered to
a nationally recognized overnight courier or when telecopied
(with a confirmatory copy sent by such overnight courier) to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent, Sub or Trust, to
Starwood Lodging Corporation
Starwood Lodging Trust
c/o Starwood Capital Group
3 Pickwick Plaza
Greenwich, Connecticut 06830
Attention: Barry Sternlicht
Chief Executive Officer
Facsimile No.: (203) 861-2101
with copies to:
Sherwin L. Samuels
Sidley & Austin
555 W. Fifth Street
Los Angeles, California 90013
Facsimile No.: (213) 896-6600
Scott M. Freeman
Sidley & Austin
875 Third Avenue
New York, New York 10022
Facsimile No.: (212) 906-2021
(b) if to the Company, to
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019
Attention: Rand V. Araskog
Chairman and Chief
Executive
Facsimile No.: (212) 258-1027
<PAGE>
with a copy to:
Philip A. Gelston
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile No.: (212) 474-3700
Section 8.3 Interpretation. When a reference is made in
this Agreement to a Section or Article, such reference shall be
to a Section or Article of this Agreement unless otherwise
indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation".
Section 8.4 Counterparts. This Agreement may be
executed in counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and
delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party
Beneficiaries. This Agreement, except as provided in the last
sentence of Section 5.4, constitutes the entire agreement and
supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter
hereof. This Agreement, except for the provisions of Section 5.8
and Section 5.13, is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. Except to the extent that
the laws of the State of Nevada are mandatorily applicable to the
Merger, this Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
Section 8.7 Assignment. 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, except that Sub may assign, in its sole discretion, any
of or all its rights, interests and obligations under this
Agreement to Parent, Trust or to any direct or indirect wholly
owned Subsidiary of Parent or Trust, but no such assignment shall
relieve Sub of any of its obligations under this Agreement.
Subject to the preceding sentence, this Agreement will be binding
<PAGE>
upon, inure to the benefit of, and be enforceable by, the parties
and their respective successors and assigns.
Section 8.8 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated
hereby are not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
Section 8.9 Enforcement of this 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 their specific wording or were otherwise
breached. It is accordingly agreed that the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
having jurisdiction, such remedy being in addition to any other
remedy to which any party is entitled at law or in equity.
Section 8.10 Trust. The name "Starwood Trust" is the
designation of Trust and its Trustees (as Trustees but not
personally) under a Declaration of Trust dated August 25, 1969 as
amended and restated, and all persons dealing with Trust must
look solely to Trust's property for the enforcement of any claims
against Trust, as the Trustees, officers, agents and security
holders of Trust assume no personal obligations of Trust, and
their respective properties shall not be subject to claims of any
person relating to such obligation.
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have
caused this Agreement to be signed by their respective officers
thereunto duly authorized all as of the date first written above.
STARWOOD LODGING CORPORATION
By: /s/ Barry S. Sternlicht
---------------------------
Name: Barry S. Sternlicht
Title: Authorized Signatory
CHESS ACQUISITION CORP.
By: /s/ Barry S. Sternlicht
----------------------------
Name: Barry S. Sternlicht
Title: Authorized Signatory
STARWOOD LODGING TRUST
By: /s/ Barry S. Sternlicht
-----------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief
Executive Officer
ITT CORPORATION
By: /s/ Rand V. Araskog
-----------------------------
Name: Rand V. Araskog
Title: Chairman and Chief
Executive
<PAGE>
Exhibit 5.5
FORM OF AFFILIATE LETTER FOR AFFILIATES OF THE COMPANY
[Date]
Starwood Lodging Corporation
Starwood Lodging Trust
c/o Starwood Capital Group
3 Pickwick Plaza
Greenwich, Connecticut 06830
Attention: Barry Sternlicht
Chief Executive Officer
Ladies and Gentlemen:
I have been advised that as of the date of this letter
I may be deemed to be an "affiliate" of ITT Corporation, a Nevada
corporation (the "Company"), as the term "affiliate" is defined
for purposes of paragraphs (c) and (d) of Rule 145 of the rules
and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of October 19, 1997 (the
"Merger Agreement"), among Starwood Lodging Corporation, a
Maryland corporation ("Parent"), Chess Acquisition Corp., a
Nevada corporation ("Sub"), Starwood Lodging Trust, a Maryland
real estate investment trust ("Trust" and, together with Parent,
the "Parent Companies"), and the Company, Sub will be merged with
and into the Company (the "Merger"). Capitalized terms used in
this letter without definition shall have the meanings assigned
to them in the Merger Agreement.
As a result of the Merger, I may receive shares of
common stock, par value $.01 per share, of Parent (the "Parent
Shares") and trust shares, par value $.01 per share, of Trust
("Trust Shares" and, when paired with Parent Shares, "Paired
Shares"), in exchange for shares of common stock, no par value of
the Company (the "Company Shares"), owned by me or purchasable
upon exercise of stock options.
1. I represent, warrant and covenant to each of the
Parent Companies that in the event I am an affiliate and I
receive any Paired Shares as a result of the Merger:
<PAGE>
A. I shall not make any sale, transfer or other
disposition of any Paired Shares in violation of the Act or the
Rules and Regulations.
B. I have carefully read this letter and the Merger
Agreement and discussed the requirements of such documents and
other applicable limitations upon my ability to sell, transfer or
otherwise dispose of the Paired Shares, to the extent I felt
necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of the Paired
Shares to me pursuant to the Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4.
However, I have also been advised that, because at the time the
Merger is submitted for a vote of the stockholders of the
Company, (a) I may be deemed to be an affiliate of the Company
and (b) the sale, transfer or other distribution by me of the
Paired Shares has not been registered under the Act, I may not
sell, transfer or otherwise dispose of the Paired Shares issued
to me in the Merger unless (i) such sale, transfer or other
disposition is made in conformity with the volume limitations and
other conditions of Rule 145 promulgated by the Commission under
the Act (provided that I deliver to the Parent Companies
customary letters of representation from myself and my broker),
(ii) such sale, transfer or other disposition has been registered
under the Act or (iii) in the opinion of counsel reasonably
acceptable to the Parent Companies, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that the Parent Companies are under no
obligation to register the sale, transfer or other disposition of
any Paired Shares by me or on my behalf under the Act or, except
as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that there will be placed on the
certificates for the Paired Shares issued to me, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
OCTOBER 19, 1997 AMONG THE REGISTERED HOLDER HEREOF,
STARWOOD LODGING CORPORATION AND STARWOOD LODGING TRUST
A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF EACH OF STARWOOD LODGING TRUST AND STARWOOD
LODGING CORPORATION."
<PAGE>
F. I also understand that unless a sale, transfer or
other disposition is made in conformity with the provisions of
Rule 145, or pursuant to a registration statement, each of the
Parent Companies reserves the right to put the following legend
on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 OR IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
G. Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as
described in the first paragraph of this letter, nor as a waiver
of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter.
2. By the Parent Companies' acceptance of this letter,
the Parent Companies hereby agree with me as follows:
A. For so long as and to the extent necessary to permit
me to sell the Paired Shares pursuant to Rule 145 and, to the
extent applicable, Rule 144 under the Act, the Parent Companies
shall (a) use their reasonable best efforts to (i) file, on a
timely basis, all reports and data required to be filed with the
Commission by them pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and (ii)
furnish to me upon request a written statement as to whether the
Parent Companies have each complied with such reporting
requirements during the 12 months preceding any proposed sale of
Paired Shares by me under Rule 145, and (b) otherwise use all
reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144. The Parent Companies have filed all reports required to
be filed with the Commission under Section 13 of the 1934 Act
during the preceding 12 months.
B. It is understood and agreed that certificates with
the legends set forth in paragraphs E and F above will be
substituted by delivery of certificates without such legend if
(i)one year shall have elapsed from the date the undersigned
acquired the Paired Shares received in the Merger and the
provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
<PAGE>
undersigned acquired the Paired Shares received in the Merger and
the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) the Parent Companies have received either
an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to the Parent Companies, or a "no action"
letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule
145 under the Act no longer apply to the undersigned. The
reasonable fees of such counsel shall be paid by the Parent
Companies.
Very truly yours,
------------------------------
Name:
Agreed and accepted this ___
day of __________, 199_, by
STARWOOD LODGING CORPORATION
By:_________________________
Name:
Title:
Agreed and accepted this ___
day of __________, 199_, by
STARWOOD LODGING TRUST
By:________________________
Name:
Title:
[Exhibit 4.1]
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT No. 1 (this "Amendment")
dated as of October 19, 1997, to the
Rights Agreement (the "Rights
Agreement"), dated as of November 1,
1995, between ITT Corporation (formerly
ITT Destinations, Inc.), a Nevada
corporation (the "Company"), and The
Bank of New York, a New York banking
corporation, as Rights Agent (the
"Rights Agent"). All capitalized terms
not otherwise defined herein shall have
the meaning ascribed to such terms in
the Rights Agreement.
WHEREAS the Company, Starwood Lodging Corporation, a
Maryland corporation ("Starwood"), Chess Acquisition Corp., a
Nevada corporation ("Sub"), and Starwood Lodging Trust, a
Maryland real estate investment trust ("Starwood Trust") have
proposed to enter into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which, among other things, Sub
will merge into the Company (the "Merger") and each outstanding
share of common stock of the Company will be converted into the
right to receive Paired Shares (as defined below), subject to
certain collar provisions, and $15 in cash subject to the terms
and conditions of the Merger Agreement; the shares of common
stock, par value $0.01 per share, of Starwood and the trust
shares, par value $0.01 per share, of Starwood Trust trade as
"paired shares" (the "Paired Shares") on the New York Stock
Exchange. As a result of the Merger, the Company will become a
wholly owned subsidiary of Starwood;
WHEREAS the Company and the Rights Agent desire to
amend the Rights Agreement to render the Rights inapplicable to
the Merger and the other transactions contemplated by the Merger
Agreement;
WHEREAS the Company deems the following amendment to
the Rights Agreement to be necessary and desirable and in the
best interests of the holders of Rights Certificates;
WHEREAS Section 26 of the Rights Agreement permits the
Company from time to time to supplement and amend the Rights
Agreement; and
WHEREAS Section 26 of the Rights Agreement provides
that any supplement or amendment duly approved by the Company
that does not amend Sections 19, 20, 21 or 22 in a manner adverse
to the Rights Agent shall become effective immediately upon
execution by the Company, whether or not also executed by the
Rights Agent.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and
the agreements, provisions and covenants herein contained, the
parties agree as follows:
1. Section 1 of the Rights Agreement is hereby amended
by adding the following new paragraph at the end of Section 1:
"Notwithstanding anything in this Agreement that might
otherwise be deemed to the contrary, none of Starwood,
Starwood Trust, any of their respective Affiliates or
Associates or any of their respective permitted assignees or
transferees shall be deemed an Acquiring Person and no
Distribution Date shall be deemed to occur by reason of the
approval, execution or delivery of the Agreement and Plan of
Merger, dated as of October 19, 1997, among the Company,
Starwood Lodging Corporation, a Maryland corporation, Chess
Acquisition Corp., a Nevada corporation, and Starwood
Lodging Trust, a Maryland real estate investment trust,
including any amendment or supplement thereto (the "Merger
Agreement"), the consummation of the Merger (as defined in
the Merger Agreement) or the consummation of the other
transactions contemplated by the Merger Agreement."
2. The Rights Agreement shall not otherwise be
supplemented or amended by virtue of this Amendment, but shall
remain in full force and effect. This Amendment may be executed
in one or more counterparts, all of which shall be considered one
and the same amendment and each of which shall be deemed an
original.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the day and year first above written.
ITT CORPORATION
(formerly ITT DESTINATIONS, INC.),
by /s/ PATRICK L. DONNELLY
----------------------------
Name: Patrick L. Donnelly
Title: Vice President and
Assistant General
Counsel
<PAGE>
Acknowledged as of the
Date First Above Written:
THE BANK OF NEW YORK,
by /s/ JOHN I. SIVERTSEN
- -------------------------
Name: John I. Sivertsen
Title: Vice President
[Exhibit 99.1]
FOR IMMEDIATE RELEASE
Contacts:
Starwood Lodging ITT Corporation
Media: Media:
Michael Claes 212-614-5236 Jim Gallagher 212-258-1261
or 212-258-1281 George Sard/David Reno 212-687-8080
Analysts: Analysts:
Stuart Carlisle 212-614-5287 Anne Tarbell 212-258-1622
STARWOOD LODGING TO ACQUIRE ITT FOR $82 PER SHARE
$13.3 BILLION TRANSACTION WILL CREATE
WORLD'S LARGEST HOTEL COMPANY
Starwood Lodging Expects 20% Accretion To Pro Forma FFO
Phoenix, AZ and New York, October 20, 1997 -- Starwood
Lodging (NYSE: HOT) and ITT Corporation (NYSE: ITT) announced
today that they have signed a definitive merger agreement
providing for Starwood Lodging to acquire ITT for $15.00 in cash
and $67.00 in newly issued paired shares in Starwood Lodging for
a total value to ITT shareholders of $82.00 per share.
The combination of Starwood Lodging and ITT will create the
preeminent global hotel company, with some 650 hotels in 70
countries, with combined revenues over $10 billion. It will
control six powerful international brands: Sheraton, Westin,
CIGA, Four Points, The Luxury Collection and Caesars. Including
its pending acquisition of Westin Hotels, Starwood Lodging will
become the largest hotel company and the largest real estate
investment trust in the world, with a total market capitalization
of approximately $20 billion. Starwood Lodging's strategy will
focus on expanding its global hotel and gaming businesses and
continuing to evaluate the divestiture of non-core assets.
Starwood Lodging will also assume $3.5 billion in
outstanding ITT debt, for a total transaction value of
approximately $13.3 billion.
<PAGE>
The transaction will be accounted for as a purchase, and is
expected to be approximately 20 percent accretive to Starwood
Lodging's pro forma Funds From Operations (FFO) during the first
12 months of combined operations. Contributing to this accretion
will be an estimated $100 million in synergies from greater
workforce economies including those recently announced by ITT;
shared technology, reservation, and purchasing services;
cross-marketing activities; a combined hotel preference program
(Westin Premier and Sheraton Club International) and other
efficiencies arising from the merger.
The taxable transaction is anticipated to close in the first
quarter of 1998, subject to shareholder, gaming, and antitrust
approvals. Under the merger agreement, Starwood Lodging may
receive a termination fee and reimbursement of expenses under
certain circumstances.
Shares of Starwood Lodging Trust, which is the nation's
largest hotel real estate investment trust, are paired with and
trade together with shares of Starwood Lodging Corporation, a
premier hotel operating company.
Barry S. Sternlicht, who will continue as Chairman and CEO
of the combined companies, said, "The lodging industry has become
a global business that benefits from scale and product
distribution. This transaction gives the combined companies a
sound balance sheet, which will enable us to continue to be a
growth company and to take advantage of our current acquisition
pipeline and a rapidly consolidating industry."
"This acquisition complements our current holdings in every
part of the world by strengthening our presence in key markets,
including Europe, Latin America and Africa. The combination of
Starwood, Westin and Sheraton will create the number one upscale
hotel company in the world, and will dramatically strengthen our
overall growth platform. We will have the financial clout,
operating infrastructure, proprietary pipeline and management
capabilities to pursue acquisitions globally," he said.
<PAGE>
"Rand Araskog has spent 31 years at ITT and 18 years as
Chairman and CEO. He has built one of the greatest collections of
brands, assets and people. We intend to retain a significant
number of ITT senior executives, and look forward to working with
them in the transition to build off the world-class platform they
have created," said Sternlicht.
Mr. Araskog said, "This is a superb transaction for ITT
shareholders, combining the benefits of Starwood's paired share
REIT structure, the extraordinary fit between Sheraton and
Westin, Starwood Lodging's substantial quarterly cash dividends,
and enormous growth potential under Starwood's leadership. This
is the right structure for our assets, the right transaction for
our shareholders, and the right opportunity for our employees.
ITT's directors have worked diligently to see to it that our
stockholders get the best possible deal."
"We look forward to working closely with Barry Sternlicht
and the proven Starwood management team, which has created more
shareholder value over the past three years than any other REIT,
to ensure the future success and growth of this new enterprise,"
he added.
ITT will have minority representation on the Starwood
Lodging boards. ITT will designate four directors, one of whom
will be Mr. Araskog.
The offer includes a collar of $4.00 per share around
$57.263, the five-day trailing average price of Starwood Lodging
stock. The exchange ratio will be fixed at 1.094 Starwood Lodging
shares per ITT share if Starwood Lodging's share price exceeds
$61.263 per share, and 1.258 Starwood Lodging shares per ITT
share if Starwood Lodging's shares trade below $53.263, based on
Starwood Lodging's average share price during a 20-day period
prior to the date of the ITT stockholders meeting.
Starwood Lodging has received "highly confident" letters
from BT Alex.Brown Incorporated and Bear Stearns & Co., Inc. to
finance the transaction.
<PAGE>
ITT Corporation consists of Sheraton, a premier hotel
company which owns, manages and franchises 424 hotels in 62
countries; Caesars, the leading brand name in the gaming
industry; and ITT World Directories. ITT also has ownership
positions in ITT Educational Services (83.3%) and Madison Square
Garden (10.2%). ITT has a definitive agreement to sell its 50%
interest in New York City television station WBIS+ to Paxson
Communications Corp. (ASE:PXN).
Starwood Lodging Trust is the largest hotel REIT in the
United States, which, including the pending acquisition of Westin
Hotels, owns or manages 162 hotels with over 60,000 rooms in 24
countries. Starwood Lodging Trust conducts all of its business as
general partner of SLT Realty Limited Partnership. Starwood
Lodging Corporation, which conducts substantially all of its
business as managing general partner of SLC Operating Limited
Partnership, leases properties from the Trust and operates them
directly or through third-party management companies.
# # #
Statements in this press release that are not strictly
historical are "forward-looking" statements under the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Although Starwood Lodging believes the expectations
reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that its
expectations will be attained. Forward-looking statements involve
known and unknown risks which may cause Starwood Lodging's actual
results to differ materially from expected results. Factors that
could cause results to differ materially from Starwood Lodging's
expectations include, without limitation, completion of the
acquisition described in this press release and future
acquisitions, the availability of capital for acquisitions and
for renovations, the ability to maintain existing franchise,
management and representation agreements and to obtain new ones
on current terms. Competition within the lodging industry, the
cyclicality of the real estate business and the hotel business,
real estate and economic conditions and other risks detailed from
time to time in Starwood Lodging's SEC reports including
quarterly reports on form 10Q, reports on 8K and annual reports
on form 10K.
