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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
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 21, 1997
COMMISSION FILE NUMBER: 1-6828
STARWOOD LODGING
TRUST
(Exact name of registrant as specified in its charter)
MARYLAND
(State or other jurisdiction
of incorporation or organization)
52-0901263
(I.R.S. employer identification no.)
2231 EAST CAMELBACK ROAD., SUITE 410
PHOENIX, ARIZONA 85016
(Address of principal executive
offices, including zip code)
(602) 852-3900
(Registrant's telephone number, including area code)
COMMISSION FILE NUMBER: 1-7959
STARWOOD LODGING CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND
(State or other jurisdiction
of incorporation or organization)
52-1193298
(I.R.S. employer identification no.)
2231 EAST CAMELBACK ROAD, SUITE 400
PHOENIX, ARIZONA 85016
(Address of principal executive
offices, including zip code)
(602) 852-3900
(Registrant's telephone number, including area code)
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ITEM 5. OTHER INFORMATION.
On October 19, 1997, ITT Corporation ("ITT") agreed to merge (the "Merger")
with a subsidiary of Starwood Lodging Corporation (the "Corporation"). 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 Corporation, Starwood
Lodging Trust (the "Trust"), Chess Acquisition Corp. and ITT. In the Merger,
each share of ITT's common stock, no par value (the "Common Stock"), will be
converted into the right to receive shares of common stock, par value $0.01 per
share, of the Corporation and shares of beneficial interest, par value $0.01 per
share, of the Trust, subject to certain collar provisions, and $15.00 in cash.
As a result of the Merger, ITT will be wholly owned by the Corporation and the
Trust.
The Merger is subject to the approval of the shareholders of the
Corporation, the Trust and ITT 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.
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.
99.1 Text of Press Release of Starwood Lodging Corporation and
Starwood Lodging Trust issued October 19, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
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By: /s/ RONALD C. BROWN By: /s/ ALAN M. SCHNAID
- -------------------------------------------- --------------------------------------------
Ronald C. Brown Alan M. Schnaid
Senior Vice President and Vice President and Corporate Controller
Chief Financial Officer Principal Accounting Officer
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Date: October 21, 1997
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INDEX TO EXHIBITS
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EXHIBIT NO. DESCRIPTION SEQUENTIAL PAGE NO.
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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.
99.1 Text of Press Release of Starwood Lodging Corporation and
Starwood Lodging Trust issued October 19, 1997.
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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
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER................................................................. 1
Section 1.1 The Merger.................................................. 1
Section 1.2 Effective Time.............................................. 1
Section 1.3 Effects of the Merger....................................... 1
Section 1.4 Charter and By-laws; Directors.............................. 1
Section 1.5 Conversion of Securities.................................... 2
Section 1.6 The Parent Companies to Make Certificates Available......... 3
Section 1.7 Dividends; Transfer Taxes; Withholding...................... 3
Section 1.8 No Fractional Securities.................................... 4
Section 1.9 Return of Exchange Fund..................................... 4
Section 1.10 Adjustment of Exchange Ratio................................ 4
Section 1.11 No Further Ownership Rights in Company Common Stock......... 5
Section 1.12 Closing of Company Transfer Books........................... 5
Section 1.13 Lost Certificates........................................... 5
Section 1.14 Further Assurances.......................................... 5
Section 1.15 Closing..................................................... 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES AND SUB................. 6
Section 2.1 Organization, Standing and Power............................ 6
Section 2.2 Capital Structure........................................... 6
Section 2.3 Authority................................................... 7
Section 2.4 Consents and Approvals; No Violation........................ 8
Section 2.5 Sec Documents and Other Reports............................. 9
Section 2.6 Registration Statement and Joint Proxy Statement............ 9
Section 2.7 Absence of Certain Changes or Events........................ 10
Section 2.8 Permits and Compliance...................................... 10
Section 2.9 Tax Matters................................................. 10
Section 2.10 Actions and Proceedings..................................... 11
Section 2.11 Compliance with Worker Safety and Environmental Laws........ 11
Section 2.12 Liabilities................................................. 12
Section 2.13 Intellectual Property....................................... 12
Section 2.14 Opinion of Financial Advisor................................ 12
Section 2.15 Required Vote of Parent and Trust Stockholders.............. 12
Section 2.16 REIT Status................................................. 12
Section 2.17 Brokers..................................................... 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 13
Section 3.1 Organization, Standing and Power............................ 13
Section 3.2 Capital Structure........................................... 13
Section 3.3 Authority................................................... 14
Section 3.4 Consents and Approvals; No Violation........................ 14
Section 3.5 SEC Documents and Other Reports............................. 15
Section 3.6 Registration Statement and Joint Proxy Statement............ 15
Section 3.7 Absence of Certain Changes or Events........................ 16
Section 3.8 Permits and Compliance...................................... 16
Section 3.9 Tax Matters................................................. 16
Section 3.10 Actions and Proceedings..................................... 17
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Section 3.11 Certain Agreements.......................................... 17
Section 3.12 ERISA....................................................... 17
Section 3.13 Compliance with Worker Safety and Environmental Laws........ 19
Section 3.14 Liabilities................................................. 19
Section 3.15 Intellectual Property....................................... 20
Section 3.16 Rights Agreement............................................ 20
Section 3.17 Parachute Payments to Disqualified Individuals.............. 20
Section 3.18 Opinion of Financial Advisor................................ 20
Section 3.19 State Takeover Statutes..................................... 20
Section 3.20 Required Vote of Company Stockholders....................... 20
Section 3.21 Brokers..................................................... 20
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS.................................. 20
Section 4.1 Conduct of Business by the Company Pending the Merger....... 22
Section 4.2 Conduct of Business by the Parent Companies Pending the 22
Merger......................................................
Section 4.3 No Solicitation............................................. 23
Section 4.4 Third Party Standstill Agreements........................... 24
Section 4.5 Pre-Merger Transactions..................................... 24
Section 4.6 Post-Merger Transactions.................................... 25
ARTICLE V
ADDITIONAL AGREEMENTS...................................................... 25
Section 5.1 Stockholders Meetings....................................... 25
Section 5.2 Filings; Other Actions...................................... 25
Section 5.3 Comfort Letters............................................. 26
Section 5.4 Access to Information....................................... 26
Section 5.5 Compliance with the Securities Act.......................... 27
Section 5.6 Stock Exchange Listings..................................... 27
Section 5.7 Fees and Expenses........................................... 27
Section 5.8 Company Stock Options....................................... 28
Section 5.9 Reasonable Efforts.......................................... 28
Section 5.10 Public Announcements........................................ 29
Section 5.11 Transfer and Gains Tax...................................... 29
Section 5.12 State Takeover Laws......................................... 29
Section 5.13 Indemnification; Directors and Officers Insurance........... 29
Section 5.14 Notification of Certain Matters............................. 30
Section 5.15 Employees................................................... 30
Section 5.16 Rights Agreement............................................ 31
Section 5.17 Regulatory Matters.......................................... 31
Section 5.18 New Jersey Trust............................................ 31
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER......................................... 32
Section 6.1 Conditions to Each Party's Obligation to Effect the 32
Merger......................................................
Section 6.2 Conditions to Obligation of the Company to Effect the 33
Merger......................................................
Section 6.3 Conditions to Obligations of Parent, Sub and Trust to Effect 33
the Merger..................................................
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER.......................................... 34
Section 7.1 Termination................................................. 34
Section 7.2 Effect of Termination....................................... 35
Section 7.3 Amendment................................................... 35
Section 7.4 Waiver...................................................... 35
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ARTICLE VIII
GENERAL PROVISIONS......................................................... 36
Section 8.1 Non-Survival of Representations and Warranties.............. 36
Section 8.2 Notices..................................................... 36
Section 8.3 Interpretation.............................................. 36
Section 8.4 Counterparts................................................ 37
Section 8.5 Entire Agreement; No Third-Party Beneficiaries.............. 37
Section 8.6 Governing Law............................................... 37
Section 8.7 Assignment.................................................. 37
Section 8.8 Severability................................................ 37
Section 8.9 Enforcement of this Agreement............................... 37
Section 8.10 Trust....................................................... 37
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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").
WITNESSETH:
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.
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
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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 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 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
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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 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 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
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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 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
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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 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
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.
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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.
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
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
Non-Qualified Shares Option Plan (1986) of
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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. 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
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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, 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 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,
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(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, nongovernmental
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 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 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
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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,
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
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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 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 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
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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
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. sec.
9601 et seq., RCRA, 42 U.S.C. sec. 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 sec. 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 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
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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.
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 Non-Employee
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 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,
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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 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
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<PAGE> 19
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
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 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,
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<PAGE> 20
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
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 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
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<PAGE> 21
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.
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 orbusiness 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).
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
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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 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 otherwisemay 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.
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(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 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, 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. sec.
9601 et seq., RCRA, 42 U.S.C. sec. 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 sec. 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
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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.
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.
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
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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;
(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
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(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, 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;
(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
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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;
(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 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
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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.
(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 Statement")), including, without limitation,
consummating the Tender Offers (as such term is defined in the Proxy Statement).
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(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 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
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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.
(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.
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
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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.
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 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
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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 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
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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 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 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
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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.
(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
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.
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(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 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 requirements of the New Jersey Casino Control
Act and the rules and regulations promulgated thereunder.
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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 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.
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(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.
(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 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
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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 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:
(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;
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<PAGE> 39
(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 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.
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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
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
36
<PAGE> 41
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 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.
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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
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<PAGE> 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> 2
2
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> 3
3
"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> 4
4
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 Hotel, 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.
