<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
RED ROOF INNS, INC.
(NAME OF SUBJECT COMPANY)
ACCOR S.A.
RRI ACQUISITION CORP.
(BIDDERS)
------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
------------------------
757005103
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
PIERRE TODOROV
ACCOR S.A.
TOUR MAINE MONTPARNASSE
33, AVENUE DU MAINE
PARIS 75015, FRANCE
(33-1) 45.38.86.00
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE BIDDER)
------------------------
COPY TO:
JEFFREY A. HORWITZ, ESQ.
PROSKAUER ROSE LLP
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 969-3000
CALCULATION OF FILING FEE
<TABLE>
<S> <C>
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TRANSACTION VALUATION AMOUNT OF FILING FEE
- ---------------------------------------------- ----------------------------------------------
$613,251,148(1) $122,643
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated by multiplying $22.75, the per share cash tender offer price, by
26,954,512, the number of shares of Common Stock being sought in the tender
offer.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
</TABLE>
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- --------------------------------------------------------------------------------
<PAGE> 2
SCHEDULE 14D-1
<TABLE>
<S> <C> <C>
- ------------------------- ----------------------
CUSIP No. 757005103 Page 2 of 6 Pages
- ------------------------- ----------------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NUMBER OF ABOVE PERSON
RRI Acquisition Corp.
- ----------------------------------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
2 (b) [ ]
- ----------------------------------------------------------------------------------------------------------
SEC USE ONLY
3
- ----------------------------------------------------------------------------------------------------------
SOURCE OF FUNDS
4
AF
- ----------------------------------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(e) or 2(f) [ ]
- ----------------------------------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ----------------------------------------------------------------------------------------------------------
SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7
18,400,000 shares of Common Stock (right to acquire)+
-----------------------------------------------------------------
SHARED VOTING POWER
8
0
-----------------------------------------------------------------
SOLE DISPOSITIVE POWER
9
18,400,000 shares of Common Stock (right to acquire)+
-----------------------------------------------------------------
SHARED DISPOSITIVE POWER
10
0
- ----------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
11 PERSON
18,400,000 shares of Common Stock
- ----------------------------------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES [ ]
- ----------------------------------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
68.3%
- ----------------------------------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
CO
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ On July 10, 1999, Accor S.A., a French corporation ("Parent"), and RRI
Acquisition Corp., a Delaware corporation ("Purchaser") and an indirect, wholly
owned subsidiary of Parent, entered into a Tender and Voting Agreement (the
"Tender and Voting Agreement") with several stockholders (collectively, the "MS
Entities") of Red Roof Inns, Inc. (the "Company"), pursuant to which the MS
Entities agreed to tender an aggregate of 18,400,000 shares of common stock,
$.01 par value per share (the "Shares") (representing approximately 68.3% of the
Company's total issued and outstanding Shares (other than treasury shares) as of
July 10, 1999) pursuant to Purchaser's offer to purchase all the outstanding
Shares. The MS Entities have present voting power with respect to such Shares
and have granted to Parent a proxy to vote those Shares. Under the Tender and
Voting Agreement, the MS Entities also granted Parent and Purchaser an option to
acquire those Shares in certain circumstances. The Tender and Voting Agreement
is more fully described in Section 10 of the Offer to Purchase, dated July 16,
1999.
<PAGE> 3
SCHEDULE 14D-1
<TABLE>
<S> <C> <C>
- ------------------------- ----------------------
CUSIP No. 757005103 Page 3 of 6 Pages
- ------------------------- ----------------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Accor S.A.
- ----------------------------------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
2 (b) [ ]
- ----------------------------------------------------------------------------------------------------------
SEC USE ONLY
3
- ----------------------------------------------------------------------------------------------------------
SOURCE OF FUNDS
4
BK
- ----------------------------------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(e) or 2(f) [ ]
- ----------------------------------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
France
- ----------------------------------------------------------------------------------------------------------
SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7
18,400,000 shares of Common Stock (right to acquire)+
-----------------------------------------------------------------
SHARED VOTING POWER
8
-0-
-----------------------------------------------------------------
SOLE DISPOSITIVE POWER
9
18,400,000 shares of Common Stock (right to acquire)+
-----------------------------------------------------------------
SHARED DISPOSITIVE POWER
10
-0-
- ----------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
11 PERSON
18,400,000 shares of Common Stock
- ----------------------------------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES [ ]
- ----------------------------------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
13
68.3%
- ----------------------------------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
CO
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
This Tender Offer Statement on Schedule 14D-1 (the "Statement") relates to
the offer by RRI Acquisition Corp., a corporation organized and existing under
the laws of the State of Delaware ("Purchaser") and an indirect, wholly owned
subsidiary of Accor S.A., a corporation organized and existing under the laws of
France ("Parent"), to purchase all of the outstanding shares of common stock,
par value $.01 per share (the "Shares"), of Red Roof Inns, Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Company"),
at a price of $22.75 per Share, net to the seller in cash (subject to applicable
withholding of taxes), without interest, upon the terms and subject to the
conditions set forth in Purchaser's Offer to Purchase, dated July 16, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer"), copies of which are filed herewith as Exhibits (a)(1) and (a)(2),
respectively.
This Statement also constitutes a Statement on Schedule 13D with respect to
the acquisition by Purchaser of beneficial ownership of the MS Entities' Shares.
The item numbers and responses thereto below are in accordance with the
requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Red Roof Inns, Inc. and its
principal executive offices are located at 4355 Davidson Road, Hilliard, Ohio
43026-2491.
(b) The class of equity securities and the exact amount of such securities
being sought in the Offer are 26,954,512 shares of common stock, par value $.01
per share, of the Company at $22.75 per share. As of July 10, 1999, there were
26,954,512 Shares issued and outstanding as represented by the Company to
Parent. The information set forth in the Introduction and Section 1 -- "Terms of
the Offer; Expiration Date" of the Offer to Purchase is incorporated herein by
reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market is set forth in Section 6 -- "Price Range of Shares; Dividends" of the
Offer to Purchase and is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is being filed by Purchaser and Parent. The
information concerning the name, state or other place of organization, principal
business and address of the principal office of each of Purchaser and Parent and
the information concerning the name, residence or business address, present
principal occupation or employment and the name, principal business and address
of any corporation or other organization in which such employment or occupation
is conducted, material occupations, positions, offices or employments during the
last five years and citizenship of each of the executive officers and directors
of Purchaser and Parent are set forth in the Introduction, Section 8 -- "Certain
Information Concerning Purchaser and Parent" and Schedule I of the Offer to
Purchase and is incorporated herein by reference.
(e) and (f) During the last five years, none of Purchaser or Parent and, to
the best knowledge of Purchaser and Parent, none of the persons listed in
Schedule I of the Offer to Purchase has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 -- "Certain Information
Concerning Purchaser and Parent" of the Offer to Purchase is incorporated herein
by reference.
(b) The information set forth in the Introduction, Section 8 -- "Certain
Information Concerning Purchaser and Parent" and Section 10 -- "Background of
the Offer; Contacts with the Company; the Merger Agreement; the Tender and
Voting Agreement" of the Offer to Purchase is incorporated herein by reference.
3
<PAGE> 5
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9 -- "Financing of the Offer
and the Merger" of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section
10 -- "Background of the Offer; Contacts with the Company; the Merger Agreement;
the Tender and Voting Agreement" and Section 11 -- "Purpose of the Offer; Plans
for the Company After the Offer and the Merger" of the Offer to Purchase is
incorporated herein by reference.
(f) and (g) The information set forth in Section 13 -- "Effect of the Offer
on the Market for the Shares, Exchange Listing and Exchange Act Registration" of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth on the cover page hereto and in the
Introduction, Section 8 -- "Certain Information Concerning Purchaser and Parent"
and Section 10 -- "Background of the Offer; Contacts with the Company; the
Merger Agreement; the Tender and Voting Agreement" of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in the Introduction, Section 8 -- "Certain
Information Concerning Purchaser and Parent" and Section 10 -- "Background of
the Offer; Contacts with the Company; the Merger Agreement; the Tender and
Voting Agreement" of the Offer to Purchase is incorporated herein by reference.
ITEM 7.CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT
COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 -- "Certain
Information Concerning Purchaser and Parent" and Section 10 -- "Background of
the Offer; Contacts with the Company; the Merger Agreement; the Tender and
Voting Agreement" of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 15 -- "Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not Applicable.
ITEM 10. ADDITIONAL INFORMATION.
(A) NOT APPLICABLE
(b)-(d) The information set forth in Section 14 -- "Certain Legal Matters
and Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(e) Not applicable
(f) The information set forth in the Offer to Purchase is incorporated
herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated July 16, 1999
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to brokers, dealers, commercial banks, trust companies and
nominees
(a)(5) Letter to clients for use by brokers, dealers, commercial banks,
trust companies and nominees
4
<PAGE> 6
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(7) Summary Advertisement as published in THE WALL STREET JOURNAL on
July 16, 1999
(a)(8) Press release issued on July 12, 1999
(b) Not applicable
(c)(1) Agreement and Plan of Merger, dated as of July 10, 1999, among
Parent, Purchaser and the Company
(c)(2) Tender and Voting Agreement, dated as of July 10, 1999, among
Parent, Purchaser and certain principal stockholders of the Company
named therein
(c)(3) Confidentiality Agreement, dated as of June 14, 1999, between Parent
and the Company
(d) Not applicable
(e) Not applicable
(f) Not applicable
5
<PAGE> 7
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
ACCOR S.A.
By: /s/ BENJAMIN COHEN
------------------------------------
Name: Benjamin Cohen
Title: Member of the Management
Board and
Chief Financial Officer
RRI ACQUISITION CORP.
By: /s/ ARMAND E. SEBBAN
------------------------------------
Name: Armand E. Sebban
Title: Executive Vice President for
Finance and
Chief Financial Officer
July 16, 1999
6
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
(a)(1) Offer to Purchase dated July 16, 1999
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to brokers, dealers, commercial banks, trust
companies and nominees
(a)(5) Letter to clients for use by brokers, dealers, commercial
banks, trust companies and nominees
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9
(a)(7) Summary Advertisement as published in THE WALL STREET
JOURNAL on July 16, 1999
(a)(8) Press release issued on July 12, 1999
(b) Not applicable
(c)(1) Agreement and Plan of Merger, dated as of July 10, 1999,
among Parent, Purchaser and the Company
(c)(2) Tender and Voting Agreement, dated as of July 10, 1999,
among Parent, Purchaser and certain principal stockholders
of the Company named therein
(c)(3) Confidentiality Agreement, dated as of June 14, 1999,
between Parent and the Company
(d) Not applicable
(e) Not applicable
(f) Not applicable
</TABLE>
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RED ROOF INNS, INC.
AT
$22.75 NET PER SHARE
BY
RRI ACQUISITION CORP.
AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF
ACCOR S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN, PRIOR TO THE EXPIRATION OF THE OFFER, AT
LEAST 18,400,000 SHARES OF COMPANY COMMON STOCK (AS DEFINED BELOW) OF RED ROOF
INNS, INC. (THE "COMPANY"), WHICH AT JULY 10, 1999 REPRESENTED APPROXIMATELY
68.3% OF THE TOTAL NUMBER OF SHARES OF OUTSTANDING COMPANY COMMON STOCK, AND
(ii) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS CONTAINED IN THIS
OFFER TO PURCHASE. SEE INTRODUCTION AND SECTION 1 -- "TERMS OF THE OFFER;
EXPIRATION DATE" AND SECTION 13 -- "CERTAIN CONDITIONS OF THE OFFER" OF THIS
OFFER TO PURCHASE.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF
MERGER, DATED AS OF JULY 10, 1999, BY AND AMONG ACCOR S.A., RRI ACQUISITION
CORP. AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND HAS DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
STOCKHOLDERS. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $0.01 per share (the "Shares" or "Company
Common Stock"), of the Company should either (1) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal and (a) mail or deliver it together with the
certificate(s) evidencing tendered Shares, and any other required documents, to
the Depositary or (b) tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3-"Procedures for Accepting the Offer
and Tendering Shares" or (2) request such stockholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such stockholder. Any stockholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedures for book-entry transfer on a timely basis, may tender such Shares
by following the procedures for guaranteed delivery set forth in Section
3 -- "Procedures for Accepting the Offer and Tendering Shares".
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent, the Dealer
Manager or from brokers, dealers, commercial banks or trust companies.
THE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN & CO.
July 16, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION................................................ 1
1. Terms of the Offer; Expiration Date................... 3
2. Acceptance for Payment and Payment for Shares......... 4
3. Procedures for Accepting the Offer and Tendering
Shares................................................. 5
4. Withdrawal Rights..................................... 7
5. Certain Federal Income Tax Consequences............... 8
6. Price Range of Shares; Dividends...................... 8
7. Certain Information Concerning the Company............ 9
8. Certain Information Concerning Purchaser and Parent... 12
9. Financing of the Offer and the Merger................. 13
10. Background of the Offer; Contacts with the Company;
The Merger Agreement; The Tender and Voting
Agreement............................................ 13
11. Purpose of the Offer; Plans for the Company After the
Offer and the Merger................................. 28
12. Effect of the Offer on the Market for the Shares,
Exchange Listing and Exchange Act Registration....... 28
13. Certain Conditions of the Offer....................... 29
14. Certain Legal Matters and Regulatory Approvals........ 31
15. Fees and Expenses..................................... 33
16. Miscellaneous......................................... 34
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND
PURCHASER.............................................. SCH-1
</TABLE>
<PAGE> 3
To the Holders of Common Stock of Red Roof Inns, Inc.:
INTRODUCTION
RRI Acquisition Corp., a corporation organized and existing under the laws
of the State of Delaware ("Purchaser") and an indirect, wholly owned subsidiary
of Accor S.A., a corporation organized and existing under the laws of France
("Parent"), hereby offers to purchase all of the outstanding shares of common
stock, par value $0.01 per share (the "Shares" or "Company Common Stock"), of
Red Roof Inns, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company"), at a price of $22.75 per Share (such amount,
or any greater amount per Share paid pursuant to the Offer, being hereinafter
referred to as the "Offer Price"), net to the seller in cash (subject to
applicable withholding of taxes), without interest, upon the terms and subject
to the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer").
Tendering stockholders who have Shares registered in their own name and who
tender directly to the Depositary will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 -- "Stock Transfer
Taxes" of the Letter of Transmittal, stock transfer or other similar taxes with
respect to the purchase of Shares by Purchaser pursuant to the Offer. Purchaser
will pay all charges and expenses of J.P. Morgan Securities Inc. ("J.P. Morgan")
which is acting as Dealer Manager for the Offer (in such capacity, the "Dealer
Manager"), Harris Trust Company of New York (the "Depositary") and D.F. King &
Co., Inc. (the "Information Agent") incurred in connection with the Offer. See
Section 15 -- "Fees and Expenses".
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN, PRIOR TO THE EXPIRATION OF THE OFFER, AT
LEAST 18,400,000 SHARES, WHICH AT JULY 10, 1999 REPRESENTED APPROXIMATELY 68.3%
OF THE TOTAL ISSUED AND OUTSTANDING SHARES (OTHER THAN TREASURY SHARES) OF
COMPANY COMMON STOCK (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO
CERTAIN OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE
SECTION 1 -- "TERMS OF THE OFFER; EXPIRATION DATE" AND SECTION 13 -- "CERTAIN
CONDITIONS OF THE OFFER", WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 10, 1999 (the "Merger Agreement"), by and among Purchaser, Parent and
the Company. The Merger Agreement provides, among other things, that as promptly
as practicable following the completion of the Offer and the satisfaction or
waiver of certain conditions set forth in the Merger Agreement and in accordance
with the relevant provisions of the General Corporation Law of the State of
Delaware ("Delaware Law") and, if required under Delaware Law, the approval and
adoption of the Merger Agreement by the stockholders of the Company, Purchaser
will be merged with and into the Company (the "Merger"). Upon consummation of
the Merger, the Company will continue as the surviving corporation (the
"Surviving Corporation") and will be an indirect, wholly owned subsidiary of
Parent. At the effective time of the Merger (the "Effective Time"), each issued
and outstanding Share (other than Shares owned by Parent, Purchaser or any
direct or indirect wholly owned subsidiary of the Company or Parent immediately
prior to the effective time of the Merger ("Ineligible Shares") and Shares which
are issued and outstanding immediately prior to the Effective Time and which are
held by stockholders who have properly exercised appraisal rights with respect
thereto ("Dissenting Shares") in accordance with Section 262 of Delaware Law)
will be converted into and represent the right to receive the Offer Price,
without interest (the "Merger Price"). See Section 10 -- "Background of the
Offer; Contacts with the Company; The Merger Agreement; The Tender and Voting
Agreement".
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER, AND HAS DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
STOCKHOLDERS. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), the financial advisor
to the Company, and CIBC World Markets Corp. ("CIBC"), have delivered separate
written opinions to the Board to the effect that, as of the date of such
opinions and based upon and subject to certain matters described therein, the
$22.75 per Share cash consideration to be received by the holders of the Shares
(other than Parent and its affiliates) in the Offer and the Merger is fair, from
a financial
1
<PAGE> 4
point of view, to such holders. Copies of such opinions are to be included with
the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") and should be read carefully in their entirety for a
description of the assumptions made, matters considered and limitations on the
review undertaken by Morgan Stanley and CIBC.
In connection with the execution of the Merger Agreement, Parent and
Purchaser entered into a Tender and Voting Agreement, dated as of July 10, 1999,
among Parent, Purchaser and The Morgan Stanley Real Estate Fund, L.P., Morgan
Stanley Real Estate Investment Management, Inc. (as nominee) and Morgan Stanley
Real Estate Co-Investment Partnership II, L.P. who are principal stockholders of
the Company (collectively, the "MS Entities") (the "Tender and Voting
Agreement"), pursuant to which each of the MS Entities has, among other things,
(i) agreed to tender pursuant to the Offer all Shares owned by it, (ii) granted
to Purchaser an irrevocable option, subject to the terms and conditions of the
Tender and Voting Agreement, to purchase such Shares for a cash purchase price
per Share equal to the Offer Price, (iii) agreed to vote such Shares in favor of
the Merger and the Merger Agreement and (iv) granted to Parent and certain
employees of Parent and/or its subsidiaries an irrevocable proxy to vote such
Shares in favor of the transactions contemplated by the Merger Agreement. As of
July 10, 1999, the 18,400,000 Shares owned by the MS Entities and subject to the
Tender and Voting Agreement constituted approximately 68.3% of the total issued
and outstanding Shares of the Company. Accordingly, the MS Entities' tender of
their Shares pursuant to the Tender and Voting Agreement will be sufficient to
satisfy the Minimum Condition. See Section 10 -- "Background of the Offer;
Contacts with the Company; The Merger Agreement; The Tender and Voting
Agreement".
The Merger Agreement provides that, promptly upon the purchase of and
payment for Shares by Parent or any of its subsidiaries which represent at least
a majority of the outstanding shares of Company Common Stock (on a fully diluted
basis), Parent will be entitled to designate such number of directors, rounded
up to the next whole number, on the Board as is equal to the product of the
total number of directors on such Board (giving effect to the directors
designated by Parent pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by Purchaser, Parent and
any of their affiliates bears to the total number of shares of Company Common
Stock then outstanding. The Company will, upon request of and as specified by
Purchaser or Parent, on the date of such request, increase the size of the Board
and/or secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be so elected to the Board, and will
take all actions necessary to cause Parent's designees to be so elected or
appointed. At such times, the Company will use its reasonable best efforts to
cause individuals designated by Parent to constitute the same percentage as such
individuals represent on the Board, each committee of the Board (other than any
committee of the Board established to take action under the Merger Agreement),
each board of directors of each subsidiary and each committee of each such
board. Notwithstanding the foregoing, until the Effective Time, the Company will
retain as members of its Board at least two directors who are directors of the
Company on the date of the Merger Agreement; provided, that subsequent to the
purchase of and payment for Shares pursuant to the Offer, Parent will always
have its designees represent at least a majority of the entire Board. See
Section 10 -- "Background of the Offer; Contacts with the Company; The Merger
Agreement; The Tender and Voting Agreement".
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
by the requisite vote of the stockholders of the Company, if required under
Delaware Law. See Section 10 -- "Background of the Offer; Contacts with the
Company; The Merger Agreement; The Tender and Voting Agreement". If so required,
a Proxy Statement (as defined in Section 10 -- "Background of the Offer;
Contacts with the Company; The Merger Agreement; The Tender and Voting
Agreement") containing detailed information concerning the Merger will be
furnished to stockholders of the Company in connection with a special meeting of
its stockholders to be called by the Company to vote on the Merger. Purchaser
will vote all Shares acquired pursuant to the Offer in favor of the Merger.
Under Delaware Law, the affirmative vote of the holders of a majority of the
outstanding Shares is required to approve and adopt the Merger Agreement and the
Merger. Consequently, the MS Entities' tender of their Shares pursuant to the
Tender and Voting Agreement will provide Purchaser with sufficient voting power
to approve and adopt the Merger Agreement and the Merger without the vote of any
other stockholder. Notwithstanding the foregoing, if Parent and Purchaser
collectively own, following consummation of the Offer, at least 90% of the
outstanding Shares, Parent, Purchaser and the Company will cause the Merger to
become effective as soon as practicable, without a meeting of the stockholders
of the Company, in accordance with the "short-form" merger provisions of Section
253 of Delaware Law.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
2
<PAGE> 5
1. TERMS OF THE OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of the Merger Agreement and
the Offer (including if the Offer is extended or amended, the terms and
conditions of such extension or amendment), Purchaser will accept for payment
and pay for all Shares validly tendered on or prior to the Expiration Date (as
defined below) and not properly withdrawn as permitted by Section
4 -- "Withdrawal Rights". The term "Expiration Date" means 12:00 Midnight, New
York City time, on August 12, 1999; provided, however, that Purchaser may,
without the consent of the Company (but subject to the terms and conditions of
the Merger Agreement, as described below), extend the period during which the
Offer is open, in which event the term "Expiration Date" will mean the latest
time and date at which the Offer, as so extended by Purchaser, will expire.
Purchaser is entitled to and shall, and Parent agrees to cause Purchaser
to, extend the Offer (and defer the Expiration Date) for a period ending October
14, 1999, in one or more periods of not more than 10 business days each, if at
the initial expiration date of the Offer, or any extension thereof, any
condition to the Offer is not satisfied or waived ("Extension A"). Purchaser
also is entitled, but shall be under no obligation, to extend the Offer (and to
defer the Expiration Date) further for an additional period ending December 14,
1999 (in one or more periods of not more than 10 business days each) following
an extension pursuant to Extension A, if at the Expiration Date, as deferred
pursuant to Extension A, the HSR Condition, the Governmental Regulation
Condition or the Trading Suspension Condition (as defined in Section
13 -- "Certain Conditions to the Offer") have not been satisfied or waived
("Extension B"). If Purchaser has not sent the Company written notice of an
extension pursuant to Extension B on or before October 8, 1999, Purchaser will
be obligated to extend the Offer as set forth in Extension B upon written demand
of the Company delivered to Purchaser on or before October 12, 1999.
Furthermore, at the Expiration Date, if all conditions to the Offer have been
satisfied or waived, and for so long as less than 90% of the outstanding shares
of Company Common Stock have been validly tendered and not properly withdrawn
pursuant to the Offer, Purchaser may, in its sole discretion and without the
consent of the Company, extend the Offer (and defer the Expiration Date) for up
to an additional 20 business days in the aggregate (in periods of no more than
five business days each). In addition, the Offer Price may be increased and the
Offer may be extended to the extent required by law in connection with such
increase without the consent of the Company. Any extension of the Offer in
accordance therewith shall defer the Expiration Date until the latest date to
which the Offer is so extended. During any such extension, all Shares previously
tendered and not withdrawn will remain tendered pursuant to the Offer, subject
to the rights of a tendering stockholder to withdraw his, her or its Shares. See
Section 4 -- "Withdrawal Rights".
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission" or "SEC"), Purchaser also expressly reserves the
right, in its sole discretion (but subject to the terms and conditions of the
Merger Agreement), at any time and from time to time, (i) to delay acceptance
for payment of, or, regardless of whether such Shares were theretofore accepted
for payment, payment for, any Shares, or to terminate the Offer and not accept
for payment, or not pay for, any Shares if, at the Expiration Date, any of the
conditions specified in Section 13 -- "Certain Conditions of the Offer" exists
and (ii) to waive any of the conditions specified in Section 13 -- "Certain
Conditions of the Offer", in whole or in part, provided that the Minimum
Condition may not be waived to less than 51% of the total issued and outstanding
shares (other than treasury shares) of Company Common Stock. The Merger
Agreement provides that, without the consent of the Company, Purchaser will not
(i) decrease the Offer Price, (ii) reduce the number of Shares sought to be
purchased in the Offer, (iii) amend the conditions to the Offer set forth in
Section 13 -- "Certain Conditions of the Offer" or impose conditions to the
Offer in addition to those set forth in Section 13 -- "Certain Conditions of the
Offer" or (iv) amend or waive the Minimum Condition to be less than 51% of the
total issued and outstanding shares (other than treasury shares) of Company
Common Stock. Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities
Exchange Act of 1934 (the "Exchange Act"), requires Purchaser to pay the
consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer and (ii) Purchaser may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the first sentence of this paragraph), any Shares upon the occurrence of any of
the conditions specified in Section 13 -- "Certain Conditions of the Offer"
without extending the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that material changes be promptly
disseminated to
3
<PAGE> 6
stockholders in a manner reasonably designed to inform them of such changes) and
without limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser will have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1(d) under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to increase the consideration being offered in the
Offer or, subject to the Company's consent, to decrease the number of Shares
being sought or the consideration being offered in the Offer, such decrease in
the number of Shares being sought or such increase or decrease in the
consideration being offered will be applicable to all stockholders whose Shares
are accepted for payment pursuant to the Offer. If at the time notice of any
such decrease in the number of Shares being sought or such increase or decrease
in the consideration being offered is first published, sent or given to holders
of such Shares, the Offer is scheduled to expire at any time earlier than the
period ending on the tenth business day from and including the date that such
notice is first so published, sent or given, the Offer will be extended at least
until the expiration of such ten business day period. For purposes of the Offer,
a "business day" means any day, other than Saturday, Sunday or a federal
holiday, and consists of the time period from 12:01 a.m. through 12:00 Midnight
New York City time.
Under no circumstances will interest on the Offer Price for the Shares be
paid, regardless of any extension of the Offer or delay in making such payment.
During any extension of the Offer, all Shares previously tendered and not
withdrawn will remain tendered pursuant to the Offer, subject to the rights of a
tendering shareholder to withdraw his Shares. See Section 4 -- "Withdrawal
Rights".
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment, and will pay for, all Shares
validly tendered on or prior to the Expiration Date and not properly withdrawn
as soon as it is legally permitted to do so under applicable law. The
obligations of Purchaser to consummate the Offer and to accept for payment and
to pay for all Shares validly tendered and not properly withdrawn will be
subject only to the satisfaction or waiver of the conditions to the Offer set
forth in Section 13 -- "Certain Conditions of the Offer". Subject to applicable
rules of the Commission and to the terms of the Merger Agreement, Purchaser
expressly reserves the right to delay acceptance for payment of, or payment for,
Shares pending receipt of any regulatory approvals specified in Section
14 -- "Certain Legal Matters and Regulatory Approvals" or in order to comply in
whole or in part with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3 -- "Procedures for Accepting the Offer and Tendering Shares", (ii) the Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or an Agent's Message (as defined below)
in connection with a book-entry transfer, and (iii) any other documents required
by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that
4
<PAGE> 7
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal and that Purchaser may enforce such agreement against such
participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering stockholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase price
for Shares be paid, regardless of any extension of the Offer or any delay in
making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3 -- "Procedures for Accepting the Offer and
Tendering Shares", such Shares will be credited to an account maintained at such
Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES
VALID TENDER. In order for a holder of Shares validly to tender Shares
pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer of
Shares, and any other documents required by the Letter of Transmittal, must be
received by the Depositary at its address set forth on the back cover of this
Offer to Purchase and either (i) the Share Certificates evidencing tendered
Shares must be received by the Depositary at such address or such Shares must be
tendered pursuant to the procedures for book-entry transfer described below and
a Book-Entry Confirmation must be received by the Depositary, in each case on or
prior to the Expiration Date, or (ii) the tendering stockholder must comply with
the guaranteed delivery procedures described below.
The method of delivery of share certificates and all other required
documents, including delivery through the book-entry transfer facility, is at
the option and risk of the tendering stockholder, and the delivery will be
deemed made only when actually received by the Depositary. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in connection with a book-entry transfer, and any other required documents,
must, in any case, be received by the Depositary at its address set forth on the
back cover of this Offer to Purchase on or prior to the Expiration Date, or the
tendering stockholder must comply with the guaranteed delivery procedures
described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Securities Transfer Agents
Medallion Program, or by any other "eligible guarantor institution," as such
term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing
being referred to as an "Eligible Institution"), except in cases where Shares
are tendered (i) by a registered holder of Shares who has not completed either
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If a Share Certificate is registered in the name of a
person other than the person who or that signs the Letter of Transmittal, or if
payment is to be made, or a Share Certificate not accepted for payment or not
tendered is to be returned, to a person other than the registered holder(s),
then the Share Certificate must
5
<PAGE> 8
be endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed by an Eligible Institution. See Instruction 1 -- "Guarantee of
Signatures" and Instruction 5 -- "Signatures on Letter of Transmittal; Stock
Powers and Endorsements" of the Letter of Transmittal.
If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) and any other documents required by the Letter of Transmittal
must accompany each such delivery.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary on or prior to
the Expiration Date, or such stockholder cannot complete the procedures for
delivery by book-entry transfer on a timely basis, such Shares may nevertheless
be tendered, provided that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received by the Depositary on or prior to the Expiration Date as provided
below; and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal, are received by the Depositary
within three New York Stock Exchange ("NYSE") trading days after the date
of execution of such Notice of Guaranteed Delivery. A "trading day" is any
day on which trading occurs on the New York Stock Exchange.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, (ii) the Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message), and (iii) any other documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination will be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition to the Offer or any defect or irregularity in the tender of any Shares
of any particular stockholder, whether or not similar defects or irregularities
are waived in the case of other stockholders. No tender of Shares will be deemed
to have been validly made until all defects and irregularities have been cured
or waived. None of Purchaser, Parent, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after the date of
this Offer to Purchase). All such proxies will be considered coupled with an
interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, Purchaser accepts such Shares for payment. Upon such
acceptance for payment, all prior proxies given by such stockholder with respect
to such Shares (and such other Shares and securities) will be revoked without
further
6
<PAGE> 9
action, and no subsequent proxies may be given nor any subsequent written
consent executed by such stockholder (and, if given or executed, will not be
deemed to be effective) with respect thereto. The designees of Purchaser will,
with respect to the Shares (and such other Shares and securities) for which the
appointment is effective, be empowered to exercise all voting and other rights
of such stockholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's stockholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for Shares to
be deemed validly tendered, immediately upon Purchaser's payment for such
Shares, Purchaser must be able to exercise full voting rights with respect to
such Shares (and such other Shares and securities).
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
BACKUP WITHHOLDING. Under the federal income tax laws, the Depositary will
be required to withhold 31% of the amount of any payments made to certain
stockholders pursuant to the Offer ("Backup Withholding") unless such
stockholder (a) is a corporation or comes within certain other exempt categories
and when required demonstrates that fact or (b) provides the Depositary with
stockholder's correct taxpayer identification number and a certification that
such stockholder is not subject to backup withholding by completing the
substitute Form W-9 in the Letter of Transmittal, or otherwise complies with
applicable requirements of the Backup Withholding rules. See Instruction
9 -- "Substitute Form W-9" of the Letter of Transmittal. In addition, with
respect to any holder that is a foreign government or international
organization, the Depositary will not deduct or withhold from the consideration
otherwise payable to any such holder of Shares pursuant to the Offer any amount
with respect to which such holder has timely delivered to the Depositary a
properly executed Form 8709 in accordance with applicable law.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time on or prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after September 14, 1999. If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to accept
Shares for payment pursuant to the Offer for any reason, then, without prejudice
to Purchaser's rights under the Offer, the Depositary may, nevertheless, on
behalf of Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as described in this Section 4. Any such delay will be by an
extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover page of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedures for
book-entry transfer as set forth in Section 3 -- "Procedures for Accepting the
Offer and Tendering Shares", any notice of withdrawal must also specify the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Shares, in which case a notice of withdrawal will be
effective if delivered to the Depositary by any method described in the first
sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of Purchaser,
Parent, the Dealer Manager, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time on or prior to the Expiration Date by following one of
the procedures described in Section 3 -- "Procedures for Accepting the Offer and
Tendering Shares".
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<PAGE> 10
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for Shares pursuant to the Offer or to the Merger will
be a taxable transaction to the stockholders of the Company for federal income
tax purposes and may also be a taxable transaction under applicable state, local
or foreign tax laws. This will be the case whether a stockholder sells Shares
pursuant to the Offer, the Merger or both.
A tendering stockholder whose Shares are accepted for sale pursuant to the
Offer generally will recognize gain or loss on the date the Offer is consummated
in an amount equal to the difference between such stockholder's tax basis in the
Shares accepted for purchase and the amount of cash received in exchange
therefor. A stockholder who receives cash in exchange for Shares pursuant to the
Merger will recognize gain or loss at the Effective Time in an amount equal to
the difference between such stockholder's tax basis in such Shares and the
amount of cash received in exchange therefor.
Gain or loss will be capital gain or loss if the Shares were capital assets
in the hands of the stockholder, and will be long-term capital gain or loss if
the Shares were held by the stockholder for more than 12 months. Under present
U.S. federal law, long-term capital gains are generally taxable at a maximum
rate of 20% for individuals and 35% for corporations.
The Merger will not be a taxable transaction to Purchaser, Parent or the
Company for federal income tax purposes.
The foregoing discussion may not be applicable to certain types of
stockholders, including stockholders who acquired shares pursuant to the
exercise of employee stock options or otherwise as compensation, individuals who
are not citizens or residents of the United States and foreign corporations.
The federal income tax discussion set forth above is included for general
information only and is based upon present law. Stockholders are urged to
consult their tax advisors with respect to the specific tax consequences of the
Offer and the Merger to them, including the application and effect of the
alternative minimum tax and state, local and foreign tax laws and changes in
such tax laws.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares have been listed and traded principally on the NYSE since
February 1996 under the symbol "RRI". The following table sets forth, for the
quarters indicated, the high and low sales prices per Share on the NYSE as
reported by the Dow Jones News Service. The Company has not paid any dividends
on the Shares during the periods set forth below.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997:
First Quarter............................................... $18 3/4 $14 1/4
Second Quarter.............................................. 17 3/4 14 7/8
Third Quarter............................................... 19 1/2 16 3/8
Fourth Quarter.............................................. 19 1/4 14 11/16
1998:
First Quarter............................................... $18 15/16 $15 13/16
Second Quarter.............................................. 18 5/8 16 1/2
Third Quarter............................................... 17 1/2 13 1/4
Fourth Quarter.............................................. 21 1/8 15
1999:
First Quarter............................................... $17 1/4 $13
Second Quarter.............................................. 18 9/16 15 1/2
Third Quarter (through July 15)............................. 22 9/16 17 9/16
</TABLE>
On July 9, 1999, the last full trading day prior to the announcement of the
execution of the Merger Agreement and of Purchaser's intention to commence the
Offer, the closing price per Share as reported on the NYSE was $18 5/16. On July
15, 1999, the last full trading day prior to the date of this Offer to Purchase,
the closing price per Share as reported on the NYSE was $22 1/2. Stockholders
are urged to obtain a current market quotation for the Shares.
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<PAGE> 11
7. CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. None of Purchaser, Parent or the Dealer Manager assumes any
responsibility for the accuracy or completeness of the information concerning
the Company, furnished by the Company or contained in such documents and records
or for any failure by the Company to disclose events which may have occurred or
may affect the significance or accuracy of any such information but which are
unknown to Purchaser, Parent or the Dealer Manager.
The Company is a corporation organized and existing under the laws of the
Sate of Delaware with its principal executive offices located at 4355 Davidson
Road, Hilliard, Ohio 43026-2491. The Company is a franchisor of and the
owner/operator of economy chain segment hotels in the United States, with 322
Inns (including 64 franchised Inns) containing more than 37,000 rooms (including
7,100 franchised rooms) in 38 states, located primarily throughout the Midwest,
East, South and Gulf Coast regions.
FINANCIAL INFORMATION. Set forth below is certain selected historical
information relating to the Company and its subsidiaries which has been
excerpted or derived from the consolidated financial statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1999
(the "Form 10-K") and the unaudited consolidated financial statements contained
in the Company's Quarterly Report on Form 10-Q for the quarter ended April 3,
1999 (the "Form 10-Q"). More comprehensive information is included in the Form
10-K, the Form 10-Q and other documents filed by the Company with the
Commission. The financial information that follows is qualified in its entirety
by reference to such reports and other documents, including the consolidated
financial statements and related notes contained therein. Such reports and other
documents may be examined and copies may be obtained from the offices of the
Commission in the manner set forth below under "Available Information".
RED ROOF INNS, INC.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEARS(1)
--------------------------------------
1996 1997 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $325,470 $360,805 $375,336
Direct room, corporate and marketing expenses............... 208,355 236,107 234,843
Depreciation and amortization............................... 36,527 36,386 38,787
-------- -------- --------
Operating income............................................ 80,588 88,312 101,706
Interest expense............................................ 41,777 46,205 46,358
Income before income taxes and extraordinary item........... 39,676 42,723 56,125
Income taxes................................................ 15,612 16,619 21,832
Income before extraordinary item............................ 24,064 26,104 34,293
Net income.................................................. 24,064 25,358 34,061
Income per share before extraordinary item:
Basic..................................................... 0.88 0.93 1.24
Diluted................................................... 0.87 0.93 1.24
Net income per share:
Basic..................................................... 0.88 0.91 1.23
Diluted................................................... 0.87 0.90 1.23
Shares used in per share calculation:
Basic..................................................... 27,362 27,982 27,566
Diluted................................................... 27,549 28,167 27,732
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
APRIL 4, APRIL 3,
1998 1999
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $85,066 $85,651
Direct room, corporate and marketing expense................ 62,664 61,932
Depreciation and amortization............................... 9,536 10,249
Operating Income............................................ 12,866 13,470
Interest Expenses........................................... (11,982) (11,265)
Income before income taxes.................................. 884 2,205
Income taxes................................................ 344 871
------- -------
Net income.................................................. 540 1,334
Net income per share:
Basic..................................................... 0.02 0.05
Diluted................................................... 0.02 0.05
Weighted average shares outstanding:
Basic..................................................... 27,632 27,046
Diluted................................................... 27,834 27,115
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS(1)
--------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Total assets.............................................. $867,627 $954,758 $969,371
Current maturities of debt................................ 12,020 11,998 15,048
Long-term debt, excluding current maturities.............. 484,158 539,207 512,890
Stockholders equity(2).................................... 319,099 338,736 369,176
</TABLE>
<TABLE>
<CAPTION>
APRIL 3, 1999
--------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA (AT PERIOD END):
Total assets.............................................. $974,513
Current maturities of debt................................ 15,085
Long-term debt, excluding current maturities.............. 521,553
Stockholders equity(2).................................... 364,064
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS(1)
----------------------------------
1996 1997 1998
--------- --------- --------
<S> <C> <C> <C>
OTHER DATA:
Cash flow from operations................................. $ 60,548 $ 79,176 $ 79,103
Net cash used by investing activities..................... (126,558) (131,265) (55,809)
Net cash provided (used) by financing activities.......... 81,242 45,584 (33,719)
EBITDA(3)................................................. 117,980 125,314 141,270
EBITDA as a percentage of revenues(3)..................... 36.2% 34.7% 37.6%
Ratio of earnings to fixed charges(4)..................... 1.8x 1.8x 2.0x
Capital expenditures:
Development, acquisitions and related improvements........ $ 101,494 $ 85,631 $ 44,243
Other..................................................... 26,076 45,604 30,445
</TABLE>
10
<PAGE> 13
- ---------------
(1) The Company operates on a 52-53 week fiscal year which ends on the Saturday
nearest to December 31. The 1996 and 1998 fiscal years each consisted of 52
weeks while the 1997 fiscal year consisted of 53 weeks. The actual year end
for each fiscal year was as follows: December 28, 1996, January 3, 1998 and
January 2, 1999.
(2) The Company has not paid any dividends on its common stock.
(3) EBITDA is operating income plus the sum of interest income, other income,
depreciation, amortization and loss on fixed asset retirements. EBITDA is
not intended to represent cash flow from operations as defined by generally
accepted accounting principles, and such information should not be
considered as an alternative to net income, cash flow from operations or any
other measure of performance prescribed by generally accepted accounting
principles. EBITDA is included herein because management believes that
certain investors find it to be a useful tool for measuring the ability to
service debt.
(4) For purposes of calculating the ratio of earnings to fixed charges, earnings
include income before income taxes plus fixed charges, excluding capitalized
interest. Fixed charges consist of interest expense, including capitalized
interest, and the portion of rental expense representative of an interest
factor.
CERTAIN COMPANY PROJECTIONS. To the knowledge of Parent and Purchaser, the
Company does not as a matter of course make public forecasts as to its future
financial performance. However, in connection with the discussions and
negotiations described in Section 10 -- "Background of the Offer; Contacts with
the Company; The Merger Agreement; The Tender and Voting Agreement", Morgan
Stanley furnished Parent with certain financial projections of the Company which
Parent and Purchaser believe are not publicly available. Neither Parent nor
Purchaser verified the accuracy of such financial projections.
According to the projections, the Company has estimated that it will have
total revenues of approximately $106.9 million, net income of approximately
$14.4 million and EBITDA of approximately $44.9 for the fiscal quarter ended
July 3, 1999.
IT IS THE UNDERSTANDING OF PARENT AND PURCHASER THAT THE PROJECTIONS WERE
NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED
GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS AND
ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT AND
PURCHASER. THESE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) ARE SUBJECT TO CERTAIN RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
PROJECTIONS. THE COMPANY HAS ADVISED PARENT AND PURCHASER THAT ITS INTERNAL
FINANCIAL FORECASTS (UPON WHICH THE PROJECTIONS PROVIDED TO PARENT AND PURCHASER
WERE BASED IN PART) ARE, IN GENERAL, PREPARED SOLELY FOR INTERNAL USE AND
CAPITAL BUDGETING AND OTHER MANAGEMENT DECISIONS, AND ARE SUBJECTIVE IN MANY
RESPECTS AND THUS SUSCEPTIBLE TO INTERPRETATIONS AND PERIODIC REVISION BASED ON
ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENTS. THE PROJECTIONS ALSO REFLECT
NUMEROUS ASSUMPTIONS (NOT ALL OF WHICH WERE PROVIDED TO PARENT AND PURCHASER),
ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE,
GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS,
INCLUDING EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY,
ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S
CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY PARENT OR PURCHASER.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING
THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY
GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE
PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF PARENT,
PURCHASER, THE COMPANY OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES
CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE
EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT,
PURCHASER, THE COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES
11
<PAGE> 14
OR REPRESENTATIVES HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON
REGARDING ULTIMATE PERFORMANCE OF THE COMPANY COMPARED TO THE INFORMATION
CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE
REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN
MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR
ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. IT
IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS,
AND ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED.
AVAILABLE INFORMATION. The Shares are registered under the Exchange Act,
and the Company is therefore subject to the reporting requirements of the
Exchange Act. In accordance with the Exchange Act, the Company is required to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: New York Regional Office, Seven World Trade
Center, 3rd Floor, New York, New York 10048; and Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained by mail, upon payment of the
Commission's customary fees, by writing to its principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a Website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission. In addition, reports, proxy statements and other information
concerning the Company can be inspected and copied at the NYSE, 20 Broad Street,
New York, New York 10005, on which the Shares are listed. Except as otherwise
stated in this Offer to Purchase, all of the information with respect to the
Company set forth in this Offer to Purchase has been derived from publicly
available information.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
Purchaser is a newly incorporated corporation organized and existing under
the laws of the State of Delaware. Purchaser was organized in connection with
the Offer and the Merger and has not carried on any activities other than in
connection with the Offer and the Merger. Until immediately prior to the time
that Purchaser will purchase Shares pursuant to the Offer, it is not anticipated
that Purchaser will have any significant assets or liabilities or engage in
activities other than those incident to its formation and capitalization and the
transactions contemplated by the Offer and the Merger. The principal offices of
Purchaser are located at 14651 Dallas Parkway, Suite 500, Dallas, Texas 75240.
Purchaser is an indirect, wholly owned subsidiary of Parent.
Parent was established as a societe anonyme under the laws of France on
April 22, 1960. Its principal offices are located at Tour Maine Montparnasse,
33, avenue du Maine, 75015 Paris, France. Parent is the parent company of the
Accor group companies ("Group"), an international group and a European leader in
the areas of travel, tourism and corporate services. The Group is principally
active in four major complementary market sectors: hotels; travel agencies; car
rental; and corporate services (service vouchers). Through its hotel brands
(mainly "Sofitel", "Novotel", "Mercure", "Ibis", "Etap'Hotel", "Formule 1" and
"Motel 6"), the Group is among the world's leading hotel groups and operates the
largest European hotel network (on the basis of the number of rooms). The Group
further operates an international business travel agency network under the
"Carlson Wagonlit Travel" brand; Europe's second largest car rental company on
the basis of market share ("Europcar") and the world's leading corporate
services business with, namely, "Ticket Restaurant" voucher, based on the volume
of issuance. The Group also has interests in restaurants in France (including
deluxe caterer "Lenotre" and grill restaurants "CourtePaille"); institutional
catering in Italy; on-board catering and sleeper train services ("Wagons-Lits");
and casinos in France.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history of each of the directors and
executive officers of Parent and Purchaser and certain other information are set
forth in Schedule I hereto.
12
<PAGE> 15
The common stock of Parent is listed and traded on the monthly settlement
market (marche a reglement mensuel) on the Paris Bourse under the symbol
"Accor".
Except as described in this Offer to Purchase and in the Tender and Voting
Agreement, (i) none of Purchaser, Parent or, to the best knowledge of Purchaser
and Parent, any of the persons listed in Schedule I to this Offer to Purchase or
any affiliate or majority owned subsidiary of Purchaser, Parent or any of the
persons so listed beneficially owns or has any right to acquire, directly or
indirectly, any Shares and (ii) none of Purchaser, Parent or, to the best
knowledge of Purchaser and Parent, any of the persons or entities referred to
above, or any director, executive officer or subsidiary of any of the foregoing,
has effected any transaction in the Shares during the past 60 days.
Except as provided in the Merger Agreement and in the Tender and Voting
Agreement and as otherwise described in this Offer to Purchase, none of
Purchaser, Parent or, to the best knowledge of Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting of
such securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies. Except as set forth in this Offer to Purchase, since January 1, 1996,
neither Purchaser, Parent nor, to the best knowledge of Purchaser and Parent,
any of the persons listed in Schedule I hereto, has had any business
relationship or transaction with the Company or any of its executive officers,
directors or affiliates that is required to be reported under the rules and
regulations of the Commission applicable to the Offer. Except as set forth in
this Offer to Purchase, since January 1, 1996, there have been no contacts,
negotiations or transactions between any of Purchaser, Parent or any of their
respective subsidiaries or, to the best knowledge of Purchaser and Parent, any
of the persons listed in Schedule I to this Offer to Purchase, on the one hand,
and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
9. FINANCING OF THE OFFER AND THE MERGER
The total amount of funds required by Purchaser to consummate the Offer and
the Merger and to pay related fees and expenses is estimated to be approximately
$694 million. Purchaser will obtain all of such funds from Parent. Parent
currently intends to provide all of such funds by borrowing amounts under
Parent's existing credit facility arranged for Parent by BNP Capital Markets
Limited, Chase Manhattan Bank, Societe Generale, Union Bank of Switzerland and
subscribed to by an international syndication of banks. This facility provides
for an aggregate commitment of up to approximately $780 million. As of the date
of this Offer to Purchase, no funds have been drawn under this facility and the
aggregate commitment is available for drawdown until December 2000. The interest
on borrowings is based on LIBOR plus an applicable spread. Parent has no current
plans or arrangements to repay such borrowings.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER AGREEMENT;
THE TENDER AND
VOTING AGREEMENT
Background of the Offer; Contacts with the Company
In the late summer of 1996, Parent and Motel 6 Operating L.P., a subsidiary
of Parent ("Motel 6"), began working with J.P. Morgan to explore the
implications of a business combination with the Company. J.P. Morgan was
formally engaged by Motel 6 on April 29, 1997 to act as financial advisor with
respect to a potential acquisition of, or merger with, the Company. In June 1997
Parent decided to defer its consideration of the potential opportunity to a
later date.
In November 1997, a representative of Parent met in New York with
representatives of the Morgan Stanley Real Estate Fund L.P. ("MSREF"), a
principal stockholder of the Company. The MSREF representatives explained that
the Company was considering various alternatives to enhance shareholder value,
and that one alternative under review would involve splitting the Company's real
estate ownership and hotel management functions into two separate entities.
MSREF representatives suggested that, if such a separation occurred, Parent
might be interested in an acquisition of, or strategic combination with, the
Company management business.
On November 18, 1997, MSREF wrote to a representative of Parent providing
more specific information on the concept of a transaction that would involve
Parent acquiring the brand and management operations of the Company.
13
<PAGE> 16
On January 13, 1998, a representative of Parent wrote to a representative
of MSREF expressing interest in the concept outlined in the November 18, 1997
letter and asking for certain clarifications and supplemental information.
On February 20, 1998, representatives of Morgan Stanley and J.P. Morgan met
at Morgan Stanley's offices in New York to discuss various issues relating to
process and the structure of a transaction between Parent and the Company. At
such meeting, Morgan Stanley informed J.P. Morgan that notwithstanding the
previous conversations between the MS Entities and Parent, the Company had a
strong preference for a transaction that involved the Company in its entirety
and, accordingly, was seeking from Parent a valuation of the Company in its
entirety.
On March 5, 1998, Parent and the Company entered into a confidentiality and
standstill agreement under which the Company agreed to provide Parent with
certain non-public information in connection with Parent's consideration of a
possible business combination involving Parent and the Company.
On March 6, 1998, the Company provided Parent with a package of non-public
financial information, designed to help Parent and its advisors better assess
the potential opportunity. Additional information was provided over the
following few weeks and several conference calls between representatives of
Parent and the Company took place to review the material.
On March 27, 1998, Parent submitted a preliminary written indication of
interest to the Company, offering to buy the brand, management operations and
related operating assets of the Company.
On April 2, 1998, Parent submitted a separate preliminary written
indication of interest, offering to acquire the Company, in its entirety, for
$20.00 per share.
On April 9, 1998, during a visit to Paris, France representatives of Morgan
Stanley met with representatives of Parent to discuss the offers that had been
made by Parent. During the meeting the Morgan Stanley representatives advised
that, in their view, alternative strategies available to the Company could
generate higher values than those offered by Parent.
On April 24, 1998, Parent submitted a revised proposal to purchase the
brand and operating business of the Company, modifying a number of key
provisions.
On May 6, 1998, a representative of Morgan Stanley wrote to a
representative of Parent to advise Parent that none of the offers made by Parent
were attractive to the Company. Morgan Stanley suggested that it would be
appropriate for the companies and their advisors to meet to review the Company's
business plan and to develop a fuller understanding of the value that could be
created by combining the Company with Parent's Motel 6 business.
On June 2 and 3, 1998, representatives of Parent, the Company, J.P. Morgan
and Morgan Stanley met at the Company's headquarters in Columbus, Ohio. Members
of the Company's senior management made presentations on key elements of the
Company's business, and led tours of a typical Red Roof inn and the headquarters
facility, reservation center, and management information systems facility.
In early July of 1998, representatives of Parent verbally advised a
representative of Morgan Stanley of their continued interest in acquiring the
Company -- at a price substantially similar to the $20.00 per share previously
offered. Morgan Stanley indicated that such an offer would not be interesting to
the Company and discussions broke off in July of 1998.
Parent and J.P. Morgan continued to monitor the performance of the Company
during the remainder of 1998.
On February 10, 1999, a J.P. Morgan representative called Morgan Stanley to
develop an understanding of the current situation at the Company. Based on that
discussion, J.P. Morgan suggested to Parent that the Company might be receptive
to a new approach.
Parent decided in mid-March 1999 to renew its consideration of a proposal
to acquire the Company. J.P. Morgan's engagement as financial advisor to Motel 6
was renewed, effective March 18, 1999, and Parent retained the law firm of
Proskauer Rose LLP, as its special legal counsel ("Proskauer").
On April 6, 1999, representatives of Parent and J.P. Morgan met with
representatives of Morgan Stanley and MSREF in New York. Parent expressed
renewed interest in acquiring the Company and indicated that it could be willing
to pay a price "within striking distance" of $20.00 per share.
14
<PAGE> 17
On April 7, 1999, Morgan Stanley provided to Parent a package of updated
information on certain aspects of the Company's current financial situation and
J.P. Morgan provided to the Company a due diligence request list which also
contained several questions for the Company. The Company responded to such list
on April 8, 1999 and provided Parent with additional operating and financial
data. Also, on April 8, 1999, J.P. Morgan delivered to Morgan Stanley a term
sheet outlining the potential structure, required internal approvals and due
diligence process being contemplated by Parent. No price was indicated in the
term sheet.
On June 1, 1999, a representative of Parent submitted a letter and term
sheet to a representative of the Company, offering to acquire the Company for
$21.00 per share.
On June 7, 1999, representatives of J.P. Morgan and Morgan Stanley met to
review the offer. Morgan Stanley reported that the offer was not attractive and
that the Company believed that it could justify a higher value. However, the
parties agreed that it would be worthwhile to develop draft agreements to
identify in detail the basis of each party's understanding of a potential
transaction and to conduct due diligence.
On June 14, 1999, in connection with Parent's continued interest in
considering a possible business combination involving Parent and the Company and
to confirm, supplement and extend the confidentiality and standstill agreement,
dated March 5, 1998, between Parent and the Company, Parent and the Company
entered into a subsequent confidentiality and standstill agreement containing
customary provisions pursuant to which, among other matters, Parent has agreed
to keep confidential all nonpublic, confidential or proprietary information
furnished to it by the Company, subject to certain exceptions, a copy of which
is filed as an exhibit to the Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") filed by Purchaser and Parent with the SEC in connection with
the Offer and which is incorporated herein by reference.
On June 17, 1999, J.P. Morgan distributed to the Company, Morgan Stanley
and the MS Entities initial drafts of the agreements for review.
Between June 22 and June 25, 1999, due diligence was carried out by
representatives of Parent and its advisors in Columbus, Ohio.
On July 1, 1999, J.P. Morgan advised Morgan Stanley that, having taken the
due diligence findings into account, Parent was able to reconfirm its offer of
$21.00 per share, subject to certain key conditions.
On July 2, 1999, Morgan Stanley representatives reported to J.P. Morgan
that the $21.00 offer was not acceptable to their client.
Commencing on July 4, 1999, a series of intermittent negotiations took
place on a daily basis between representatives of J.P. Morgan and Morgan
Stanley, and occasionally representatives of Parent and MSREF. The Supervisory
Board of Parent approved the general terms of the Merger and the Offer on July
7, 1999 and authorized the President of Parent to conclude negotiations with
respect to the final offer price and contract language. Agreement on the final
$22.75 offer price was reached on July 8, 1999. Negotiations over contract
language were completed on Saturday July 10, 1999.
The Board approved the Offer and the Merger on Saturday, July 10, 1999. The
definitive agreements were signed by representatives of Parent and the Company
later that evening.
The proposed transaction was publicly announced by a joint press release
issued by Parent and the Company in the early hours of July 12, 1999, a copy of
which is filed as an exhibit to the Schedule 14D-1 and which is incorporated
herein by reference.
The Merger Agreement
The following is a summary of the Merger Agreement, a copy of which is
filed as an exhibit to the Schedule 14D-1. Such summary is qualified in its
entirety by reference to the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable (but in no event later than five business days after
the public announcement of the execution of the Merger Agreement). Purchaser has
commenced the Offer in accordance with the terms of the Merger Agreement.
Subject to the terms of the Merger Agreement and subject to the prior
satisfaction or waiver of the conditions of the Offer (including, without
limitation, the Minimum Condition), Purchaser will accept for payment and pay
for, as soon as
15
<PAGE> 18
it is legally permitted to do so under applicable law, all Shares validly
tendered and not withdrawn. The obligation of Purchaser to accept for payment
and pay for Shares validly tendered on or prior to the expiration of the Offer
and not withdrawn is subject to the satisfaction of the Minimum Condition and
certain other conditions that are described in Section 13 -- "Certain Conditions
of the Offer" hereof. Purchaser and Parent have agreed that Purchaser will not
amend or waive the Minimum Condition to be less than 51% of the total issued and
outstanding shares (other than treasury shares) of Company Common Stock and will
not decrease the Offer Price or decrease the number of Shares sought, amend the
conditions to the Offer or impose conditions to the Offer in addition to those
set forth in Section 13 -- "Certain Conditions of the Offer" hereof without the
prior consent of the Company.
EXTENSION OF THE OFFER. Purchaser is entitled to and shall, and Parent
agrees to cause Purchaser to, extend the Offer (and defer the Expiration Date)
for a period ending October 14, 1999, in one or more periods of not more than 10
business days each, if at the initial expiration date of the Offer, or any
extension thereof, any condition to the Offer is not satisfied or waived
("Extension A"). Purchaser also is entitled, but shall be under no obligation,
to extend the Offer (and to defer the Expiration Date) further for an additional
period ending December 14, 1999 (in one or more periods of not more than 10
business days each) following an extension pursuant to Extension A, if at the
Expiration Date, as deferred pursuant to Extension A, the HSR Condition, the
Governmental Regulation Condition or the Trading Suspension Condition (as
defined in Section 13 -- "Certain Conditions to the Offer") have not been
satisfied or waived ("Extension B"). If Purchaser has not sent the Company
written notice of an extension pursuant to Extension B on or before October 8,
1999, Purchaser will be obligated to extend the Offer as set forth in Extension
B upon written demand of the Company delivered to Purchaser on or before October
12, 1999. Furthermore, at the Expiration Date, if all conditions to the Offer
have been satisfied or waived, and for so long as less than 90% of the
outstanding shares of Company Common Stock have been validly tendered and not
properly withdrawn pursuant to the Offer, Purchaser may, in its sole discretion
and without the consent of the Company, extend the Offer (and defer the
Expiration Date) for up to an additional 20 business days in the aggregate (in
periods of no more than five business days each). In addition, the Offer Price
may be increased and the Offer may be extended to the extent required by law in
connection with such increase without the consent of the Company. Any extension
of the Offer in accordance therewith shall defer the Expiration Date until the
latest date to which the Offer is so extended. During any such extension, all
Shares previously tendered and not withdrawn will remain tendered pursuant to
the Offer, subject to the rights of a tendering stockholder to withdraw his, her
or its Shares. See Section 4 -- "Withdrawal Rights".
BOARD REPRESENTATION, DIRECTORS. The Merger Agreement provides that,
promptly upon the purchase of and payment for Shares by Parent or any of its
subsidiaries which represent at least a majority of the outstanding shares of
Company Common Stock (on a fully diluted basis), Parent will be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board as is equal to the product of the total number of directors on such Board
(giving effect to the directors designated by Parent pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Purchaser, Parent and any of their affiliates bears to the total number
of shares of Company Common Stock then outstanding. The Company will, upon
request of and as specified by Purchaser or Parent, on the date of such request,
increase the size of the Board and/or secure the resignations of such number of
its incumbent directors as is necessary to enable Parent's designees to be so
elected to the Board, and will take all actions necessary to cause Parent's
designees to be so elected or appointed. At such times, the Company will use its
reasonable best efforts to cause individuals designated by parent to constitute
the same percentage as such individuals represent on the Board, each committee
of the Board (other than any committee of the Board established to take action
under the Merger Agreement), each board of directors of each Subsidiary (as
defined in the Merger Agreement) and each committee of each such board.
Notwithstanding the foregoing, until the Effective Time, the Company will retain
as members of its Board at least two directors who are directors of the Company
on the date of the Merger Agreement; provided, that subsequent to the purchase
of and payment for Shares pursuant to the Offer, Parent will always have its
designees represent at least a majority of the entire Board.
From and after the time, if any, that Parent's designees constitute a
majority of the Board, the unanimous vote of the entire Board is required for
the Company to: (i) amend or terminate the Merger Agreement, (ii) extend the
time for performance of any of the obligations of Parent or Purchaser
thereunder, (iii) waive any condition or any of the Company's rights or remedies
thereunder, or (iv) amend the Company's certificate of incorporation or by-laws.
THE MERGER. Following consummation of the Offer, upon the terms and
subject to the conditions of the Merger Agreement and in accordance with
Delaware Law, at the Effective Time Purchaser will be merged with and into the
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Company. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the successor or surviving
corporation and will be an indirect, wholly owned subsidiary of Parent (the
"Surviving Corporation"). Hereinafter, the date on which the Closing of the
Merger will take place is referred to as the "Closing Date". The Merger will
become effective at such time as a duly prepared certificate of merger or
certificate of ownership and merger is filed with the Secretary of State of the
State of Delaware in accordance with Delaware Law or such other time as is
agreed upon by the parties and specified in the certificate of merger or
certificate of ownership and merger (the "Effective Time").
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement also provides that, at the Effective Time, the Certificate of
Incorporation and the By-Laws of Purchaser will be the Certificate of
Incorporation and the By-Laws of the Surviving Corporation, provided that such
Certificate of Incorporation will be amended to change the name of the
corporation to "Red Roof Inns, Inc."
CONVERSION OF SECURITIES. Pursuant to the Merger Agreement, at the
Effective Time, each share of common stock, par value $0.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time will be
converted into and exchanged for one share of common stock, par value $0.01 per
share, of the Surviving Corporation. All Shares that are owned by the Company as
treasury stock, all Shares owned by owned by a subsidiary of the Company, and
all Shares owned by Parent, Purchaser or any wholly owned subsidiary of Parent
immediately prior to the Effective Time (all such Shares being "Ineligible
Shares") will be canceled and retired and cease to exist without payment of any
consideration therefor. In addition, each Share issued and outstanding
immediately prior to the Effective Time (other than Ineligible Shares and the
shares of Dissenting Common Stock (as defined below), will be converted into the
right to receive the Offer Price payable to the holder thereof, without interest
(the "Merger Consideration"), upon surrender of the certificate formerly
representing such Shares. All such Shares, when so converted, will no longer be
outstanding and will automatically be canceled and retired and will cease to
exist, and each certificate evidencing such Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor upon its surrender in accordance with this Offer to
Purchase, without interest.
Notwithstanding the above, any Dissenting Shares will not be converted into
the right to receive the Merger Consideration, but instead, holders of
Dissenting Shares will be entitled only to the rights granted by the provisions
of Section 262 of Delaware Law, which entitles dissenting stockholders to
receive a judicial determination of the fair value of their shares and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Such judicially determined fair value could be more or less
than the Merger Consideration. See Section 14 -- "Certain Legal Matters and
Regulatory Approvals".
STOCK OPTIONS; STOCK PURCHASE PLAN. Parent and the Company will take all
actions necessary to provide that, effective as of the date of the consummation
of the Offer, and contingent upon the consummation of the Offer, (i) each
outstanding employee stock option to purchase Shares (an "Option") granted under
the Company's Amended and Restated 1994 Management Incentive Equity Plan (the
"MEIP") and the Company's 1995 Director Stock Option Plan (collectively, the
"Option Plans"), whether or not then exercisable or vested, will be canceled and
(ii) in consideration of such cancellation, the Company (or, at Parent's option,
Purchaser) will pay to such holders of Options an amount in respect thereof
equal to the product of (A) the excess, if any, of the Offer Price over the
exercise price of each such Option and (B) the number of Shares subject thereto
(such payment, if any, to be net of applicable withholding taxes). However, such
cancellation and payment shall occur at the Effective Time with respect to any
Option that is held by an individual who is subject to Section 16 of the
Securities Exchange Act with respect to Company equity securities and who
consents, prior to the consummation of the Offer and in form reasonably
satisfactory to Parent, to the cancellation of such Option at the Effective
Time. As of the date of the consummation of the Offer, the Option Plans will
terminate and all rights and obligations of the Company and the holder of any
Option under any provision of the Option Plans, any agreement entered into
thereunder or any other plan, program or arrangement providing for the issuance
of grant of any other interest in respect of the capital stock of the Company or
any Subsidiary of the Company shall be canceled. The Company will take all
action necessary to ensure that, after the time of the consummation of the
Offer, no person shall have any right under the Option Plans or any other plan,
program or arrangement with respect to equity securities of the Company, or any
direct or indirect Subsidiary of the Company.
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Notwithstanding any other provisions of the Amended and Restated 1996
Employee Stock Purchase Plan (the "Stock Purchase Plan"), the Company will take
all actions necessary or appropriate so that all outstanding rights will be
exercised for all participants in the Stock Purchase Plan in accordance with the
terms thereof. Prior to the Effective Time, the Company will take (or cause to
be taken) all actions as are necessary or appropriate to effectuate the
termination of the Stock Purchase Plan in accordance with its terms and the
Internal Revenue Code of 1986, as amended and other applicable law. The Company
will promptly deliver to Parent prior to the Effective Time true and complete
copies of all documentation relating to or arising from the termination of the
Stock Purchase Plan.
STOCKHOLDERS' APPROVAL. Pursuant to the Merger Agreement, if required by
applicable law to consummate the Merger, the Company will (i) duly call, give
notice of, convene and hold a special meeting of its stockholders (the "Special
Meeting") as soon as practicable following the acceptance for payment and
purchase of Shares by Purchaser pursuant to the Offer for the purposes of
considering and taking action upon the Merger Agreement; (ii) prepare and file
with the SEC a preliminary proxy or information statement relating to the Merger
and the Merger Agreement and use its reasonable best efforts to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with Parent, to
respond promptly to any comments made by the SEC with respect to the preliminary
proxy or information statement and cause a definitive proxy or information
statement (the "Proxy Statement") to be mailed to its stockholders; (iii) use
its reasonable best efforts to obtain the necessary stockholder approval of the
Merger and Merger Agreement; and (iv) subject to the fiduciary obligations of
the Board under applicable law as advised by independent counsel, include in the
Proxy Statement the recommendation of the Board that stockholders of the Company
vote in favor of the approval of the Merger and the adoption of the Merger
Agreement.
Parent shall vote, or cause to be voted, all the Shares then owned by it,
Purchaser or any of its other subsidiaries and affiliates in favor of the
approval of the Merger and the approval and adoption of the Merger Agreement.
However, if Parent, Purchaser or another subsidiary of Parent acquires at
least 90% of the outstanding Shares pursuant to the Offer or otherwise, each of
the parties will take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after such acquisition, without a
meeting of stockholders of the Company, in accordance with the "short-form"
merger provisions of Section 253 of Delaware Law.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations and warranties by the Company with respect to organization;
capitalization; authorization relative to the Merger Agreement; validity of the
Merger Agreement; consents, approvals and violations; SEC reports and financial
statements; no undisclosed liabilities; absence of certain changes; employee
benefit matters; litigation; no defaults under certain contracts and compliance
with applicable laws; taxes; property; environmental matters; intellectual
property; material contracts; labor matters; restrictions on business
activities; year 2000 compliance; vote required with regard to the Merger;
brokers; opinion of financial advisor and certain other matters.
CONDUCT OF BUSINESS PENDING THE MERGER. Under the Merger Agreement, the
Company has agreed that during the period from the date of the Merger Agreement
and continuing until such time as the Purchaser's designees constitute a
majority of the members of the Board, unless as contemplated by the Merger
Agreement or as required by applicable laws and regulations of any governmental
entity, national stock exchange or over-the-counter market, Parent otherwise
agrees in writing, the business of the Company and its subsidiaries will be
conducted only in the ordinary and usual course of business consistent with past
practices subject to the following:
(a) the Company will not, directly or indirectly, (i) sell, transfer
or pledge or agree to sell, transfer or pledge any Company Common Stock or
any capital stock or any other securities of the Company or capital stock
or any other securities of any of its subsidiaries beneficially owned by
it, either directly or indirectly; (ii) amend or cause to be amended its
Certificate of Incorporation or By-laws or similar organizational documents
of any of its subsidiaries; or (iii) split, combine or reclassify the
outstanding Company Common Stock or any outstanding capital stock of any of
the subsidiaries of the Company;
(b) neither the Company nor any of its subsidiaries will: (i) declare,
set aside or pay any dividend or other distribution with respect to its
capital stock; (ii) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants or rights of any kind to acquire, any shares of
capital stock of the Company or its subsidiaries (other than shares of
Company Common Stock reserved for issuances pursuant to the exercise of
Options outstanding on the date of the Merger Agreement); (iii) transfer,
lease,
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license, sell, mortgage, pledge, dispose of or encumber any right to any
trademark, service mark or trade name owned by it or over which it has any
right whatsoever, including, without limitation, enter into any franchise
agreements (excluding transactions consummated or agreements made pursuant
to commitments existing prior to the date of the Merger Agreement and
disclosed in writing to Parent and Purchaser other than the construction
projects in Revere, Massachusetts or downtown Cleveland, Ohio); (iv)
transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any (A) real property (other than furniture, fixtures and equipment which
will be treated as set in clause (B) of this paragraph (b)(iv), including
without limitation any motel or other lodging facility or (B) any personal
property having an aggregate fair market value of $100,000 in a single
transaction or a series of related transactions (excluding for purposes of
this clause (iv) transactions consummated or agreements made pursuant to
commitments existing prior to the date thereof and disclosed in writing to
Parent and Purchaser other than the construction projects in Revere,
Massachusetts or downtown Cleveland, Ohio); (v) incur or modify any
indebtedness or other liability, except that the Company may borrow money
for use in the ordinary and usual course of business if neither the Company
nor any of its subsidiaries makes any borrowing or incurs any indebtedness
or other liability that would cause the Company's consolidated debt to
exceed $502.0 million (excluding borrowings made or indebtedness incurred
solely to finance payments required to be made by the Company for fees and
expenses in connection with the Merger Agreement and the transactions
contemplated therein; provided that the Company has the right to cure any
failure to comply with this clause (v) of this paragraph (b) by taking, no
later than the Expiration Date, any action that is not otherwise in
violation of the provisions of the Merger Agreement (which action may
include, without limitation, additional capital contributions from one or
more of its stockholders without any further issuance of equity of other
securities to any such stockholder); (vi) enter into any agreement for the
management of any motel or other lodging facility owned or leased by the
Company or any of its subsidiaries; (vii) make any capital expenditures in
excess of $2.1 million during the Company's third fiscal quarter and $1.6
million during the Company's fourth fiscal quarter of 1999; or (viii)
redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
(c) neither the Company nor any of its subsidiaries will (i) modify,
amend or terminate any of its contract, agreement or commitment, whether
oral or written, to which the Company or any of its subsidiaries is a party
or by which any of them or any of their properties, assets and rights of
any kind whatsoever (whether real, personal or mixed, and whether tangible
or intangible) owned by them is bound, as each such contract or commitment
may have been amended, modified or supplemented (A) which has a term ending
one year or more from the date of its execution and may not be terminated
by the Company in its sole and absolute discretion upon no more than 30
days' notice without penalty or payment in an amount in excess of $1,000,
(B) pursuant to which the Company or any subsidiary expects to or is
scheduled to receive (assuming full performance pursuant to the terms
thereof) revenue of, or to pay (assuming full performance pursuant to the
terms thereof), $200,000 or more during the 12-month period following the
date of the Merger Agreement, or (C) which has been or, as of the date of
the Merger Agreement, would be required to be, filed as an exhibit to the
Company's SEC filings; or (ii) waive, release or assign any rights or
claims thereunder;
(d) neither the Company nor any of its subsidiaries will permit any
material insurance policy naming it as a beneficiary or a loss payable
payee to be canceled or terminated without notice to Parent;
(e) neither the Company nor any of its subsidiaries will: (i) assume,
guarantee or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or
entity; (ii) make any loans, advances or capital contributions to, or
investments in, or acquisitions of, any other person or entity (other than
to subsidiaries of the Company); or (iii) enter into any commitment or
transaction with respect to any of the foregoing (including, but not
limited to, any borrowing, capital expenditure or purchase, sale or lease
of assets);
(f) neither the Company nor any of its subsidiaries will change any of
the accounting methods used by it unless required by United States
Generally Accepted Accounting Principles ("GAAP") or applicable law;
(g) neither the Company nor any of its subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
recapitalization or other reorganization of the Company or any of its
subsidiaries (other than the Merger);
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(h) neither the Company nor any of its subsidiaries will take, or
agree to commit to take, any action that would make any representation or
warranty of the Company contained in the Merger Agreement inaccurate in any
material respect at, or as of any time prior to, the Effective Time (except
for representations made as of a specific date);
(i) except as described under "The Merger Agreement -- Stock Options;
Stock Purchase Plan" above, the Company will not amend or change the period
(or permit any acceleration, amendment or change) of exercisability of
Options granted under any Option Plan or authorize cash payments in
exchange for any Options;
(j) neither the Company nor any subsidiary will increase the
compensation payable or to become payable to its officers, directors or key
employees;
(k) neither the Company nor any of its subsidiaries will terminate any
officer or other key employee, grant any severance or termination pay to,
or enter into any employment or severance agreement with, any director or
officer of the Company or any Subsidiary or establish, adopt, enter into or
terminate or amend any employee benefit plan;
(l) neither the Company nor any of its subsidiaries will fail to use
best efforts to preserve intact the business organizations, goodwill,
rights, licenses, permits and franchises of the Company and its
subsidiaries and maintain its existing relationships with customers,
suppliers and other persons or entities having business dealings with them;
(m) neither the Company nor any of its subsidiaries shall fail to keep
in full force and effect adequate insurance overages and maintain and keep
its properties and assets in good repair, working order and condition,
normal wear and tear excepted; and
(n) neither the Company nor any of its subsidiaries will authorize or
enter into an agreement to do any of the foregoing.
CONFIDENTIALITY AGREEMENT. Unless otherwise required by law, Parent has
agreed to hold any information furnished to it by the Company which is
non-public in confidence in accordance with the provisions of the
Confidentiality Agreement between the Company and Parent dated as of March 5,
1998, as confirmed, supplemented and extended by the letter agreement between
Parent and the Company dated June 14, 1999 (the "Confidentiality Agreement").
NO SOLICITATION. The Company has agreed that it and its subsidiaries will
not, and will use their best efforts to cause their respective officers,
directors, employees and investment bankers, attorneys or other agents retained
by or acting on behalf of the Company or any of its subsidiaries not to, (i)
initiate, solicit or encourage (including by way of furnishing non-public
information), directly or indirectly, any inquiries or the making of any
proposal that constitutes or is reasonably likely to lead to any Acquisition
Proposal (as defined below), (ii) except as described below, engage in
negotiations or discussions with, or furnish any information or data to any
third party relating to an Acquisition Proposal or (iii) enter into any
agreement with respect to any Acquisition Proposal or approve any Acquisition
Proposal. The Company is also required to promptly request each person that has
executed a confidentiality agreement in connection with its consideration of an
Acquisition Proposal to return or destroy all non-public information furnished
to such person by or on behalf of the Company or any of its subsidiaries.
However, the Company, the Board and the Company's officers, employees,
accountants, consultants, counsel, financing sources and other representatives
(i) may participate in discussions or negotiations (including, as a part
thereof, making any counterproposal) with or furnish information to any third
party making an unsolicited Acquisition Proposal (a "Potential Acquiror") if the
Board determines in good faith, based upon advice of its outside legal counsel,
that the failure to participate in such discussions or negotiations or to
furnish such information would be inconsistent with its fiduciary duties under
applicable law, and (ii) will be permitted to take and disclose to the Company's
stockholders a position with respect to any tender or exchange offer by a third
party, or amend or withdraw such position, pursuant to Rules 14d-9 and 14e-2
under the Exchange Act.
Any non-public information furnished to a Potential Acquiror will be
limited to that non-public information that has been furnished to Parent and the
Company's officers, employees, accountants, consultants, counsel, financing
sources and other representatives and shall be furnished pursuant to a
confidentiality agreement substantially similar to the confidentiality
provisions of the Confidentiality Agreement. In the event that the Company
determines to provide any information as described above, or receives any
Acquisition Proposal, it will promptly inform Parent in writing as to the fact
that information is to be provided and will furnish to Parent the identity of
the recipient of such information or the Potential Acquiror and the terms of
such Acquisition Proposal, except to the extent that the Board determines in
good
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faith, based upon advice of its outside legal counsel, that any such action
described in this sentence would be inconsistent with its fiduciary duties under
applicable law. The Company has agreed to keep Parent reasonably informed of the
status of any such Acquisition Proposal except to the extent that the Board
determines in good faith, based upon advice of its outside legal counsel, that
any such action would be inconsistent with the Board's fiduciary duties under
applicable law.
The Board may not (i) withdraw or modify or propose to withdraw or modify,
in any manner adverse to Parent, its approval or recommendation of the Merger
Agreement, the Offer or the Merger or (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal; provided that the Board may
withdraw or modify or propose to withdraw or modify its recommendation of the
Merger Agreement, the Offer or the Merger or recommend or propose to recommend
an Acquisition Proposal if, in each case, the Board determines in good faith,
after receiving written advice from its financial advisor, that such Acquisition
Proposal is a Superior Proposal (as defined below) and determines in good faith,
based upon advice of its outside legal counsel, that it would be inconsistent
not to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law. The Company will provide reasonable notice to
Parent to the effect that it is taking such action. The Board may not authorize
the Company to enter into any agreement with respect to an Acquisition Proposal
(even if it is a Superior Proposal).
"Acquisition Proposal" means any offer or proposal, whether in writing or
otherwise, made by a third party to acquire beneficial ownership of all or a
material portion of the assets of, or any material equity interest in, the
Company or its material subsidiaries pursuant to a merger, consolidation or
other business combination, recapitalization, sales of shares of capital stock,
sale of assets, tender offer or exchange offer or similar transaction involving
the Company or its material subsidiaries (other than the transactions
contemplated by the Merger Agreement). The term "Superior Proposal" means any
proposal to acquire directly or indirectly, for consideration consisting of cash
or securities, more than a majority of the Shares then outstanding or all or
substantially all the assets of the Company, and otherwise on terms which the
Board determines in good faith to be more favorable to the Company and its
stockholders than the Offer and the Merger (based on written advice of the
Company's financial advisor that the value of the consideration provided for in
such proposal is superior to the value of the consideration provided for in the
Offer and the Merger), for which financing, to the extent required, is then
committed.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. Parent has agreed,
from and after the consummation of the Offer, to cause the Surviving Corporation
(which, for purposes of this section, will include the provision of necessary
funds to the Surviving Corporation, if necessary) to indemnify, defend and hold
harmless any person who is now, or has been at any time prior to the date of the
Merger Agreement, or who becomes prior to the Effective Time, an officer,
director, employee or agent (the "Indemnified Party") of the Company or any of
its subsidiaries against all losses, claims, damages, liabilities, costs and
expenses (including attorneys' fees and expenses), judgments, fines, losses and
amounts paid in settlement in connection with any actual or threatened action,
suit, claim, proceeding or investigation (each a "Claim") to the extent that any
such Claim is based on, or arises out of, (i) the fact that such person is or
was a director, officer, employee or agent of the Company or any of its
subsidiaries or is or was serving at the request of the Company or any of its
subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (ii) the Merger
Agreement, or any of the transactions contemplated thereby, in each case to the
extent that any such Claim pertains to any matter or fact arising or existing
prior to or at the Effective Time, regardless of whether such Claim is asserted
or claimed prior to, at or after the Effective Time, to the full extent
permitted under Delaware law or the Company's Certificate of Incorporation,
By-laws or indemnification agreements in effect at the date of the Merger
Agreement, including provisions relating to advancement of expenses incurred in
the defense of any action or suit. Without limiting the foregoing, in the event
any Indemnified Party becomes involved in any capacity in any Claim, then from
and after consummation of the Offer, Parent has agreed to cause the Company (or
the Surviving Corporation if after the Effective Time) (which, for purposes of
this section, will include the provision of necessary funds to the Surviving
Corporation, if necessary) to periodically advance to such Indemnified Party its
legal and other expenses, subject to the provision by such Indemnified Party of
an undertaking to reimburse the amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto.
Pursuant to the Merger Agreement, all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Party as provided
under Delaware law or the Company's Certificate of Incorporation, By-laws or
indemnification agreements in effect at the date of the Merger Agreement will
survive the Merger and will continue in full force and effect, without any
amendment thereto, for a period of six years from the Effective Time. However,
in the event
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any Claim or Claims are asserted or made within such six year period, all rights
to indemnification in respect of any such Claim or Claims will continue until
disposition of any and all such Claims. In addition, any determination required
to be made with respect to whether an Indemnified Party's conduct complies with
the standards set forth under Delaware law, the Company's Certificate of
Incorporation or By-laws or such agreements, as the case may be, will be made by
independent legal counsel selected by the Indemnified Party and reasonably
acceptable to Parent. Furthermore, nothing in this "Directors' and Officers'
Insurance and Indemnification" section will impair any rights or obligations of
any present or former directors or officers of the Company.
In the event Parent or Purchaser or any of their successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, in each such case, proper provision will be made so that the
successors and assigns of Parent and Purchaser assume the obligations described
above. However, in the case of any such assignment by Parent or Purchaser,
Parent and Purchaser will remain liable for all of their respective obligations
under the Merger Agreement.
In addition, for a period of six years after the Effective Time, Parent
will cause the Surviving Corporation (which, for purposes of this paragraph,
shall include the provision of necessary funds to the Surviving Corporation, if
necessary) to maintain in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that Parent
may substitute therefor policies with reputable and financially sound carriers
of at least the same coverage and amounts containing terms and conditions which
are no less advantageous to the insured parties) with respect to claims arising
from or related to facts or events that occurred at or before the Effective
Time. However, Parent shall not be obligated to cause the Surviving Corporation
to make annual premium payments for such insurance to the extent such premiums
exceed 200% of the annual premiums paid as of the date of the Merger Agreement
by the Company for such insurance (such 200% amount, the "Maximum Premium"). If
such insurance coverage cannot be obtained at all, or can only be obtained at an
annual premium in excess of the Maximum Premium, Parent will cause the Surviving
Corporation (which, for purposes of this paragraph, will include the provision
of necessary funds to the Surviving Corporation, if necessary) to maintain the
most advantageous policies of directors' and officers' insurance obtainable for
an annual premium equal to the Maximum Premium. In addition, if such insurance
coverage cannot be obtained at all, Parent shall purchase all available run-off
insurance policies with respect to pre-existing insurance in an amount that,
together with all other insurance purchased pursuant to this paragraph, does not
exceed the Maximum Premium.
FEES AND EXPENSES. All costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such expenses. The Company has agreed that all legal,
accounting, advisory, investment banking, brokerage and agency fees and expenses
that have been or will be incurred by it in connection with the Merger Agreement
and the transactions contemplated thereby will not, in the aggregate, exceed
$8,000,000 and that all such fees and expenses will be documented in reasonable
detail.
EMPLOYEE MATTERS. Prior to the Effective Time, the Company will take all
such steps as may be required to cause the transactions contemplated under "The
Merger Agreement -- Stock Option; Stock Purchase Plans" above and any other
dispositions of Company equity securities (including derivative securities) in
connection with the Merger Agreement or the transactions contemplated thereby by
each individual who is a director or officer of the Company, to be exempt under
Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
accordance with the interpretive letter dated January 12, 1999, issued by the
Securities and Exchange Commission to Skadden, Arps, Slate, Meagher & Flom LLP.
Pursuant to the Merger Agreement, Parent will cause the Surviving
Corporation to treat service with the Company and any Subsidiary prior to the
Effective Time by each employee of the Company and any Subsidiary in the same
manner as service with the Parent or its subsidiaries is treated for eligibility
and vesting purposes (and excluding benefit accrual purposes, including, without
limitation, benefit service under any defined benefit pension plan) under any
benefit plan of Parent or its subsidiaries in which any such employee is
eligible to participate following the Effective Time. However, neither Parent
nor the Surviving Corporation shall be obligated to (i) make any particular
benefit plan or benefit available to any such employee, (ii) continue any
particular benefit plan or benefit or (iii) refrain from terminating or amending
any particular benefit plan or benefit.
Also, Parent has agreed to cause the Surviving Corporation to honor, in
accordance with their terms, and to make required payments when due under, all
benefit plans maintained or contributed to by the Company or any subsidiary or
to
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which the Company or any subsidiary is a party (including but not limited to
employment, incentive and severance agreements and arrangements), that are
applicable with respect to any employee, director or stockholder of the Company
or any subsidiary (whether current, former or retired) or their beneficiaries.
However, the foregoing shall not preclude the Surviving Corporation from
amending or terminating any such benefit plan in accordance with its terms.
Parent, Purchaser and the Company each acknowledge that the consummation of the
Offer will constitute a "Change in Control" for purposes of each benefit plan in
which such concept is relevant, notwithstanding any provision of any such
benefit plan to the contrary.
With respect to any welfare plans in which employees of the Company and its
subsidiaries are eligible to participate after the Effective Time, Parent will,
and will cause the Surviving Corporation to (i) waive all limitations as to
preexisting conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to such employees and (ii)
provide each such employee with credit for any co-payments and deductibles paid
prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any such plan.
As soon as practicable following December 31, 1999, Parent will or will
cause the Surviving Corporation to pay to each person who is a participant in
the Company's 1999 Management Incentive Plan (the "MIP"), as of the date of the
Merger Agreement, a cash lump sum payment equal to the amounts set forth in the
Merger Agreement prorated as set forth in the next sentence and otherwise in
accordance with the MIP. Each such amount will be prorated by multiplying it by
a fraction, (i) the numerator of which is (A) the number of days that have
elapsed during calendar 1999 up to and including the consummation of the Offer
plus (B) thirty (but in no event shall the numerator be greater than the total
number of days during calendar 1999) and (ii) the denominator of which is the
total number of days in calendar 1999. Parent will or will cause the Surviving
Corporation to maintain in effect through December 31, 1999 each other benefit
plan (other than the MIP) that is not subject to the Employee Retirement Income
Security Act of 1974, as amended, and is an annual bonus plan as specifically
listed in the Merger Agreement, in each case as such benefit plan is in effect
on the date of the Merger Agreement.
CONDITIONS TO THE MERGER. The respective obligation of each party to
effect the Merger are subject to the satisfaction on or prior to the Closing
Date of each of the following conditions:
(a) Stockholder Approval. The Merger Agreement shall have been
approved and adopted by the requisite vote of the holders of Company Common
Stock, if required by applicable law and the Company's Certificate of
Incorporation, in order to consummate the Merger;
(b) HSR Act. Any waiting period applicable to the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall
have expired or been terminated.
(c) Statutes. No statute, rule, order, decree or regulation shall
have been enacted or promulgated by any foreign or domestic governmental
entity or authority of competent jurisdiction which prohibits the
consummation of the Merger;
(d) Consents. All foreign or domestic governmental consents, orders
and approvals required for the consummation of the Merger and the
transactions contemplated in the Merger Agreement will have been obtained
and will be in effect at the Effective Time, except for such consents the
failure of which to obtain would not have a material adverse effect on the
Company and its subsidiaries taken as a whole;
(e) Injunctions. There will be no order or injunction of a foreign or
United States federal or state court or other governmental entity of
competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and
(f) Purchase of Shares in Offer. Parent, Purchaser or their
affiliates will have accepted for payment and paid for shares of Company
Common Stock pursuant to the Offer or the Tender and Voting Agreement,
except that Parent and Purchaser will not be entitled to rely on this
condition if Purchaser has failed to purchase Shares pursuant to the Offer
in breach of its obligations under the Merger Agreement.
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TERMINATION. The Merger Agreement may be terminated and the Merger
contemplated therein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval:
(a) By the mutual consent of the Management Board of Parent and/or the
Supervisory Board of Parent, on the one hand, and the Board, on the other;
(b) By either of the Board, on the one hand, or the Management Board
and/or the Supervisory Board of Parent, on the other:
(i) if any governmental entity or court of competent jurisdiction
issues an order, decree, injunction or ruling or takes any other action
(which order, decree, injunction, ruling or other action the parties to
the Merger Agreement has used their respective reasonable best efforts
to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated in the Merger Agreement and
such order, decree, injunction, ruling or other action shall have become
final and non-appealable; provided that the party seeking to terminate
the Merger Agreement has used all reasonable efforts to challenge such
order, decree, injunction or ruling;
(ii) if Parent or Purchaser has terminated the Offer and any option
granted in the Tender and Voting Agreement has not been exercised and is
not exercisable, provided that the right to terminate the Merger
Agreement under this subsection (b) will not be available to any party
whose failure to fulfill any obligation under the Merger Agreement has
been the cause of, or resulted in, the failure of Purchaser to purchase
Shares in the Offer; or
(iii) if the Offer has not been consummated prior to the Expiration
Date as the same may be extended from time to time in accordance with
the Merger Agreement and any option granted in the Tender and Voting
Agreement has not been exercised and is not exercisable; provided that
the right to terminate the Merger Agreement under this subsection
(b)(iii) will not be available to any party that has breached in any
material respect its obligations under the Merger Agreement in any
manner that has proximately contributed to the occurrence of the failure
of the Offer to be consummated.
(c) By the Board:
(i) if Parent, Purchaser or any of their affiliates fail to
commence the Offer on or prior to five business days following the date
of the initial public announcement of the Offer; provided, however, that
the Company may not terminate the Merger Agreement pursuant to this
subsection (c)(i) if the Company is in material breach of the Merger
Agreement; or
(ii) if, prior to the purchase of shares of Company Common Stock
pursuant to the Offer, there is a material breach by either Parent or
Purchaser of any of the material covenants or agreements applicable to
it contained in the Merger Agreement that is not cured within 15
business days after Parent and Purchaser receive written notice from the
Company of the occurrence of such breach.
(d) By the Management Board and/or the Supervisory Board of Parent,
if, due to an occurrence that if occurring after the commencement of the
Offer would result in a failure to satisfy any of the conditions set forth
in Section 13 -- "Certain Conditions to the Offer", Parent, Purchaser, or
any of their affiliates have failed to commence the Offer on or prior to
five business days following the date of the initial public announcement of
the Offer; provided, however, that Parent may not terminate the Merger
Agreement pursuant to this subsection (d) if Parent or Purchaser is in
material breach of the Merger Agreement.
In the event of the termination of the Merger Agreement as provided above,
the Merger Agreement will become null and void, and there will be no liability
on the part of Parent or the Company, except (i) under the provisions of the
Merger Agreement relating to brokers' or finders' fees, the Confidentiality
Agreement and the Payment of the Non-Recommendation Fee (as defined below) and
(ii) nothing in the Merger Agreement will relieve any party of liability for
fraud or for breach of the Merger Agreement (other than a breach arising solely
out of the inaccuracy of a representation or warranty made by the Company that
was accurate when made on the date thereof and which inaccuracy was not
intentional on the part of the Company).
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Pursuant to the Merger Agreement, in the event that the Board (i) withdraws
or modifies or proposes to withdraw or modify, in any manner adverse to Parent
or Purchaser, the approval or recommendation of such Board of the Merger
Agreement, the Offer or the Merger or (ii) approves or recommends, or proposes
to approve or recommend, any Acquisition Proposal, then the Company will, on the
next succeeding business day, pay to Parent by wire transfer of immediately
available funds to an account designated by Parent an amount equal to
$30,000,000 (the "Non-Recommendation Fee"). If the Company fails to promptly pay
the Non-Recommendation Fee, the Company will also pay Parent's out-of-pocket
costs and expenses incurred in connection with litigation to obtain such
payment.
The Tender and Voting Agreement
The following is a summary of the Tender and Voting Agreement, a copy of
which is filed as an exhibit to the Schedule 14D-1. Such summary is qualified in
its entirety by reference to the Tender and Voting Agreement.
Pursuant to the Tender and Voting Agreement and in order to induce Parent
and Purchaser to enter into the Merger Agreement, the MS Entities, which
collectively hold 18,400,000 shares of Company Common Stock, representing
approximately 68.3% of the total issued and outstanding shares (other than
treasury shares) of Company Common Stock on the date of the Tender and Voting
Agreement, have agreed to tender or cause the record owner thereof to tender all
its Shares pursuant to the Offer and not to withdraw any Shares tendered in the
Offer.
Parent and Purchaser agree (a) not to decrease the price to be paid to the
Company's stockholders in the Offer or the Merger below $22.75 per Share, and
that (b) on the date that the Shares are accepted for payment and purchased by
Purchaser pursuant to the Offer, Purchaser or Parent, as the case may be, shall
make, or cause to be made by the paying agent, payment by wire transfer to each
MS Entity of the purchase price for all its Shares that are tendered by it and
accepted for payment and purchased by Purchaser to such account as is designated
by such MS Entity in a letter of transmittal which accompanies the tender of the
Shares.
Each MS Entity has further agreed to vote (or cause to be voted) all Shares
held by it (the "MS Shares") (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval and adoption of
the Merger and the terms thereof and each of the other actions contemplated by
the Merger Agreement and the Tender and Voting Agreement and any actions
required in furtherance thereof; and (ii) against any action or agreement that
would impede, interfere with or prevent the Offer or the Merger, including any
Acquisition Proposal (other than the Offer and the Merger). Each MS Entity has
agreed not to enter into any agreement, arrangement or understanding with any
person the effect of which would be inconsistent or violative of the provisions
and agreements described in this paragraph.
Each MS Entity also has granted Parent and certain employees of Parent
and/or its subsidiaries an irrevocable proxy to vote its Shares (i) in favor of
the Merger, the execution and delivery by the Company of the Merger Agreement
and the approval and adoption of the Merger and the terms thereof and each of
the other actions contemplated by the Merger Agreement and the Tender and Voting
Agreement and any actions required in furtherance thereof; and (ii) against any
action or agreement that would impede, interfere with or prevent the Offer or
the Merger, including against any Acquisition Proposal other than the Offer and
the Merger.
In addition, each MS Entity has granted to Purchaser an irrevocable option
(each an "MS Option") to purchase all its Shares at a price per Share equal to
the Offer Price. Purchaser may exercise each MS Option, in whole but not in
part, only if either of the following occur (each a "Triggering Event"): (i) the
Offer is terminated without Purchaser purchasing Shares thereunder solely
because the Minimum Condition has not been met; or (ii) the Offer is consummated
without each MS Entity having tendered all its Shares in accordance with the
Tender and Voting Agreement. However, Purchaser will not be entitled to purchase
the Shares pursuant to any MS Option if Purchaser has failed to purchase Shares
pursuant to the Offer in breach of its obligations under the Merger Agreement.
Purchaser must exercise, contemporaneously with any given MS Option, all other
MS Options that are then exercisable. Upon the purchase of the Shares of any MS
Entity pursuant to an MS Option, Purchaser will complete the Merger in
accordance with, and subject to the terms and conditions set forth in the Merger
Agreement, unless the Company has breached its obligations pursuant to the last
sentence of Section 5.4(d) of the Merger Agreement, which provides that the
Board will not authorize the Company to enter into any agreement with respect to
any Acquisition Proposal (even if it is a Superior Proposal).
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The obligation of each MS Entity to sell its Shares pursuant to an exercise
of an MS Option is subject to the following conditions:
(i) The representations and warranties of Purchaser contained in the
Tender and Voting Agreement are true and correct in all material respects
on the date thereof.
(ii) All waiting periods under the HSR Act applicable to the exercise
of the MS Option have expired or been terminated.
(iii) There is no preliminary or permanent injunction or other order,
decree or ruling issued by a governmental entity or court of competent
jurisdiction, nor any statute, rule, regulation or order promulgated or
enacted by any governmental entity, prohibiting the exercise of the
applicable MS Option.
(iv) Purchaser has purchased all the Shares held by all the MS
Entities.
The obligation of Purchaser to purchase Shares held by the MS Entities
pursuant to an exercise of an MS Option is subject to the following conditions:
(a) The representations and warranties of the MS Entities contained in
the Tender and Voting Agreement are true and correct in all material
respects on the date thereof.
(b) After giving effect to the closing of a purchase of Shares upon
the exercise of the MS Option (the "Tender Agreement Closing"), Purchaser
will have purchased at least 18,400,000 shares of Company Common Stock in
the aggregate, which 18,400,000 shares represent at least 68.3% of the
total issued and outstanding shares (other than treasury shares) of Company
Common Stock as of the date of the Tender and Voting Agreement (and no less
than 51% of such Shares on the date of the Tender Agreement Closing), from
the MS Entities.
(c) any applicable waiting period under the HSR Act has expired or
terminated.
(d) at any time on or after the occurrence of a Triggering Event and
before the Tender Agreement Closing:
(i) there is not any statute, rule, regulation, judgment, order or
injunction promulgated, entered, enforced, enacted, issued or applicable
to the MS Options or the Merger by any domestic or foreign federal or
state governmental regulatory or administrative agency or authority or
court or legislative body or commission which (1) prohibits, or imposes
any material limitations on, Parent's or Purchaser's ownership or
operation of all or a material portion of the Company's businesses or
assets, (2) prohibits, or makes illegal the acceptance for payment,
payment for or purchase of the Shares or the MS Shares or the
consummation of the MS Options or the Merger, (3) restricts the ability
of Purchaser, or renders Purchaser unable, to accept for payment, pay
for or purchase some or all the Shares or the MS Shares, or (4) imposes
material limitations on the ability of Purchaser or Parent effectively
to exercise full rights of ownership of the Shares or the MS Shares,
including, without limitation, the right to vote the Shares or the MS
Shares to be purchased by it on all matters properly presented to the
Company's stockholders, provided, however, that Parent shall have used
its reasonable best efforts to cause any such judgment, order or
injunction to be vacated or lifted;
(ii) there is not any action or proceeding pending or instituted by
any domestic or foreign national or federal governmental regulatory or
administrative agency or authority, or by any U.S. state governmental
regulatory or administrative agency or authority, which: (A)(1) seeks to
prohibit, or impose any material limitation on, Parent's or Purchaser's
ownership or operation of all or a material portion of the Company's
businesses or assets, (2) seeks to prohibit or make illegal the
acceptance for payment, payment for or purchase of Shares or the
consummation of the MS Options or the Merger, (3) seeks to restrict the
ability of Purchaser, or render Purchaser unable, to accept for payment,
pay for or purchase some or all the Shares or the MS Shares or (4) seeks
to impose material limitations on the ability of Purchaser or Parent
effectively to exercise full rights of ownership of the Shares or the MS
Shares, including, without limitation, the right to vote the Shares or
the MS Shares purchased or to be purchased by it on all matters properly
presented to the Company's stockholders; and (B) Parent shall have used
all reasonable best efforts to cause to be dismissed; and (C) the
Management Board or Supervisory Board of Parent shall have determined,
after consultation with legal counsel, would, if adversely determined,
have any of the results described in any of clauses (A)(1) through
(A)(4) of this paragraph (ii) if the relief sought were to be obtained;
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(iii) the representations and warranties of the Company set forth
in the Merger Agreement are true and correct in any respect,
disregarding for this purpose any standard of materiality contained in
any such representation or warranty, as of the date of consummation of
the MS Options as though made on or as of such date, except (A) for
changes specifically permitted by the Merger Agreement or (B)(1) those
representations and warranties that address matters only as of a
particular date which are true and correct as of such date or (2) where
the failure of such representations and warranties to be true and
correct, do not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole; or
(iv) the Company shall not have breached or failed in any material
respect to perform or comply with any material obligation, agreement or
covenant required by the Merger Agreement to be performed or complied
with by it (including, without limitation, if the Company shall have
entered into any definitive agreement or any agreement in principle with
any person or entity (other than Parent, Purchaser or any affiliate
thereof) with respect to an Acquisition Proposal or similar business
combination with the Company); or
(v) there shall not have occurred (A) any general suspension of
trading in, or limitation on prices for, securities on the New York
Stock Exchange, the Nasdaq National Market System or the Paris Stock
Exchange, which suspension or limitation shall have continued for at
least five New York Stock Exchange trading days, (B) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States or in France or any limitation (whether or not
mandatory) by Federal, state or foreign authorities on the extension of
credit by lending institutions, which moratorium, suspension, or
limitation is reasonably likely to materially affect the ability of
Parent to pay for the Shares, (C) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or France and reasonably likely
to have a material adverse effect on the Company and its subsidiaries
taken as a whole or materially and adversely affect the consummation of
the Options or the Merger, or (D) in the case of clauses (A), (B) and
(C) above existing at the time of the giving of the Exercise Notice, a
material acceleration or worsening thereof.
Except as provided above, until the termination of the Tender and Voting
Agreement, each MS Entity has agreed not to, directly or indirectly, (i)
transfer to any entity any or all of its Shares held by it; or (ii) grant any
proxies or powers of attorney, deposit any of its Shares into a voting trust or
enter into a voting agreement, understanding or arrangement with respect to such
Shares. However, no MS Entity is prohibited from transferring any or all of its
Shares to an affiliate of such MS Entity (excluding the Company and any entity
that directly, or indirectly through one or more intermediaries, are controlled
by the Company) which is or agrees to be bound by the Tender and Voting
Agreement, provided that such MS Entity continues to remain liable for all its
obligations under the Tender and Voting Agreement.
Each MS Entity has also agreed, solely in its capacity as a stockholder of
the Company, that it and its subsidiaries or affiliates will not, and such MS
Entity will cause its officers, directors, partners, shareholders, members,
employees and agents or representatives, not to, directly or indirectly,
initiate, solicit or encourage (including by way of furnishing non-public
information) any inquiries or the making of any proposal that constitutes or is
reasonably likely to lead to an Acquisition Proposal or engage in negotiations
or discussions with, or furnish any information or data to, any third party
relating to an Acquisition Proposal. In addition, the MS Entities will promptly
inform Parent of the terms of any proposal, discussion, negotiation or inquiry
(and will disclose any written materials received by them in connection with
such proposal, discussion, negotiation or inquiry) and the identity of the party
making such proposal or inquiry, which the MS Entities may receive in respect of
any Acquisition Proposal. The MS Entities will also promptly request any person
or other entity that has received any non-public information in connection with
its consideration of an Acquisition Proposal to return all such non-public
information furnished to such person or entity by or on behalf of the MS
Entities, the Company or any of the Company's subsidiaries. Any action taken by
the Company or any member of the Board or any affiliate of any MS Entity
(excluding the Company and any entity that directly, or indirectly through one
or more intermediaries, are controlled by the Company) as a financial advisor to
the Company in his or its capacity as such in accordance with the terms of the
Merger Agreement shall be deemed not to violate this paragraph.
The Tender and Voting Agreement, and all rights and obligations of the
parties thereunder, will terminate upon the earlier of (a) the date upon which
Purchaser has purchased and paid for all of the Shares of the MS Entities in
accordance with the terms of the Offer or pursuant to an exercise of the MS
Options, (b) the date on which the MS
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Options have expired in accordance with the Tender and Voting Agreement, or (c)
the date upon which the Merger Agreement is terminated in accordance with its
terms.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER
PURPOSE OF THE OFFER. The purpose of the Offer and the Merger is for
Parent to acquire control of, and the entire equity interest in, the Company.
The purpose of the Merger is for Parent to acquire all Shares not purchased
pursuant to the Offer. Upon consummation of the Merger, the Company will be an
indirect, wholly owned subsidiary of Parent. The Offer is intended to increase
the likelihood that the Merger will be completed promptly.
VOTE REQUIRED TO APPROVE MERGER. Delaware Law requires, among other
things, that the adoption of any plan of merger or consolidation of the Company
must be approved by the Board and by the holders of a majority of the
outstanding Shares. The Board has approved the Offer and the Merger; in
addition, under the Tender and Voting Agreement, the MS Entities have agreed to
tender and sell all of its Shares pursuant to the Offer. As the MS Shares
constituted approximately 68.3% of all issued and outstanding Shares as of the
date of the Merger Agreement and more than 51% of a fully diluted basis,
Purchaser will have sufficient voting power to effect the Merger without the
vote of any other stockholder of the Company. The Company would, however, be
required to provide certain notice of the Merger to stockholders, as required by
law. However, Delaware Law also provides that if a parent company owns at least
90% of each class of stock of a subsidiary, the parent company can effect a
"short form" merger with that subsidiary without the action of the other
stockholders of the subsidiary. Accordingly, if, as a result of the Offer or
otherwise, the Offeror acquires or controls at least 90% of the outstanding
Shares, Purchaser could, and intends to, effect the Merger without prior notice
to, or any action by, other stockholders of the Company.
PLANS FOR THE COMPANY. It is expected that, initially following the
Merger, the business and operations of the Company will, except as set forth in
this Offer to Purchase, be continued by the Company substantially as they are
currently being conducted. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it deems
appropriate under the circumstances then existing. Parent intends to seek
additional information about the Company during this period. Thereafter, Parent
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing exploitation of the Company's potential in conjunction with Parent's
business.
Except as indicated in this Offer to Purchase, Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries, any
material change in the Company's capitalization or dividend policy or any other
material change in the Company's corporate structure or business.
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION.
The purchase of Shares by Purchaser pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and will reduce the number
of holders of Shares, which could adversely affect the liquidity and market
value of the remaining Shares, if any, held by the public.
If the Offer and Merger are consummated, the Shares will no longer meet the
requirements of the NYSE for continued listing and will be delisted from the
NYSE. According to the NYSE's published guidelines, the NYSE considers delisting
the Shares if, among other things, the number of record holders of at least 100
Shares falls below 1,200, the number of publicly held Shares (exclusive of
holdings of officers, directors and their immediate families and other
concentrated holdings of ten percent or more ("NYSE Excluded Holdings")) falls
below 600,000 or the aggregate market value of publicly held Shares (exclusive
of NYSE Excluded Holdings) falls below $5,000,000. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NYSE for continued listing and the listing of the Shares
is discontinued, the market for the Shares could be adversely affected.
If the NYSE delists the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or other sources. The extent of
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<PAGE> 31
the public market therefor and the availability of such quotations would depend,
however, upon such factors as the number of stockholders and/or the aggregate
market value of the Shares remaining at such time, the interest in maintaining a
market in the Shares on the part of securities firms, the possible termination
of registration under the Exchange Act as described below and other factors.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause future
market prices to be greater or less than the Offer Price.
The Shares are currently "margin securities", as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of the Shares. Following the Offer, the
Shares will no longer constitute "margin securities" for purposes of the margin
regulations of the Federal Reserve Board, in which event such Shares will no
longer be used as collateral for loans made by brokers.
Purchaser currently intends to seek to cause the Company to terminate the
registration of the Shares under the Exchange Act as soon after consummation of
the Offer as the requirements for termination of registration are met.
Registration of the Shares under the Exchange Act may be terminated upon
application of the Company to the Commission if the Shares are neither listed on
a national securities exchange nor held by 300 or more holders of record. The
termination of the registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
holders of Shares and to the Commission and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the
Shares. In addition, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of their
Shares pursuant to Rule 144 promulgated under the Securities Act of 1933, as
amended. If registration of the Shares under the Exchange Act is terminated, the
Shares will no longer be "margin securities" or be eligible for NYSE or NASDAQ
reporting.
13. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer (subject to the provisions
of the Merger Agreement), Purchaser will not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for
or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer and not accept for payment any tendered shares if:
(i) there have not been validly tendered and not withdrawn prior to
the expiration of the Offer at least 18,400,000 shares of Company Common
Stock, which represent at least 68.3% of the total issued and outstanding
shares (other than treasury shares) of Company Common Stock on the date of
the Merger Agreement,
(ii) any applicable waiting period under the HSR Act has not expired
or terminated prior to the expiration of the Offer (the "HSR Act
Condition"), or
(iii) at any time on or after the date of the Merger Agreement, and
before the expiration of the Offer, any of the following events shall occur
and be continuing:
(a) there is any statute, rule, regulation, judgment, order or
injunction promulgated, entered, enforced, enacted, issued or applicable
to the Offer or the Merger by any domestic or foreign federal or state
governmental regulatory or administrative agency or authority or court
or legislative body or commission which (1) prohibits, or imposes any
material limitations on, Parent's or Purchaser's ownership or operation
of all or a material portion of the Company's businesses or assets, (2)
prohibits, or makes illegal the acceptance for payment, payment for or
purchase of Shares or the consummation of the Offer or the Merger, (3)
restricts the ability of Purchaser, or renders Purchaser unable, to
accept for payment, pay for or purchase some or all the Shares, or (4)
imposes material limitations on the ability of Purchaser or Parent
effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the Company's stockholders,
provided, however, that Parent shall have used its reasonable best
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efforts to cause any such judgment, order or injunction to be vacated or
lifted (the "Governmental Regulation Condition"); or
(b) there is any action or proceeding pending or instituted by any
domestic or foreign national or federal governmental regulatory or
administrative agency or authority, or by any U.S. state governmental
regulatory or administrative agency or authority, which: (A)(1) seeks to
prohibit, or impose any material limitation on, Parent's or Purchaser's
ownership or operation of all or a material portion of the Company's
businesses or assets, (2) seeks to prohibit or make illegal the
acceptance for payment, payment for or purchase of Shares or the
consummation of the Offer or the Merger, (3) seeks to restrict the
ability of Purchaser, or render Purchaser unable, to accept for payment,
pay for or purchase some or all the Shares or (4) seeks to impose
material limitations on the ability of Purchaser or Parent effectively
to exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's stockholders; and (B) Parent shall
have used all reasonable best efforts to cause to be dismissed; and (C)
the Management Board or Supervisory Board of Parent shall have
determined, after consultation with legal counsel, would, if adversely
determined, have any of the results described in any of clauses (A)(1)
through (A)(4) of this paragraph (b) if the relief sought were to be
obtained; or
(c) the representations and warranties of the Company set forth in
the Merger Agreement are not true and correct in any respect,
disregarding for this purpose any standard of materiality contained in
any such representation or warranty, as of the date of consummation of
the Offer as though made on or as of such date, except (i) for changes
specifically permitted by the Agreement or (ii) (A) those
representations and warranties that address matters only as of a
particular date which are true and correct as of such date or (B) where
the failure of such representations and warranties to be true and
correct, do not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole; or
(d) the Company has breached or failed in any material respect to
perform or comply with any material obligation, agreement or covenant
required by the Merger Agreement to be performed or complied with by it
(including, without limitation, if the Company has entered into any
definitive agreement or any agreement in principle with any person or
entity (other than Parent, Purchaser or any affiliate thereof) with
respect to an Acquisition Proposal or similar business combination with
the Company); or
(e) there has occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange, the
Nasdaq National Market System or the Paris Stock Exchange, which
suspension or limitation will have continued for at least five New York
Stock Exchange trading days, (ii) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
or in France or any limitation (whether or not mandatory) by Federal,
state or foreign authorities on the extension of credit by lending
institutions, which moratorium, suspension, or limitation is reasonably
likely to materially affect the ability of Parent to pay for the Shares,
(iii) a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United
States or France and reasonably likely to have a material adverse effect
on the Company and its subsidiaries taken as a whole or materially and
adversely affect the consummation of the Offer, or (iv) in the case of
clauses (i), (ii) and (iii) above existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof
(the "Trading Suspension Condition"); or
(f) the Merger Agreement has been terminated in accordance with its
terms;
which in the reasonable judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for payment or
payments.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and, subject to the Merger Agreement, may be asserted by either of them or may
be waived by Parent or Purchaser, in whole or in part at any time and from time
to time in the sole discretion of Parent or Purchaser, provided that the Minimum
Condition may not be waived to be less than 51% of the total issued and
outstanding shares (other than treasury shares) of Company Common Stock.
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14. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS
GENERAL. Based upon its examination of publicly available information with
respect to the Company, the review of certain information furnished by the
Company to Parent and discussions of representatives of Parent with
representatives of the Company during Parent's investigation of the Company (see
Section 10), neither Purchaser nor Parent is aware of any license or other
regulatory permit that appears to be material to the business of the Company and
its subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or, except as set forth
below, of any approval or other action by any domestic (federal or state) or
foreign governmental, administrative or regulatory authority or agency which
would be required prior to the acquisition of Shares by Purchaser pursuant to
the Offer. Should any such approval or other action be required, it is
Purchaser's present intention to seek such approval or action. There can be no
assurance that any such approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the business of the Company, Purchaser or Parent or that certain parts of the
businesses of the Company, Purchaser or Parent might not have to be disposed of
or held separate or other substantial conditions complied with in order to
obtain such approval or other action or in the event that such approval was not
obtained or such other action was not taken. Purchaser's obligation under the
Offer to accept for payment and pay for Shares is subject to certain conditions,
including conditions relating to the legal matters discussed in this Section 14.
See Section 13 -- "Certain Conditions of the Offer".
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of Delaware Law prevents an
"interested stockholder" (generally a person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock or an affiliate
or associate thereof) from engaging in a "business combination" (defined to
include mergers and certain other transactions) with a Delaware corporation for
a period of three years following the date such person became an interested
stockholder unless, among other things, prior to such date the board of
directors of the corporation approved either the business combination or the
transaction in which the interested stockholder became an interested
stockholder.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations that are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. Mite Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987, in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders, provided
that such laws were applicable only under certain conditions. Subsequently, in
TLX Acquisition Corp. v. Telex Corp., a Federal district court in Oklahoma ruled
that the Oklahoma statutes were unconstitutional insofar as they applied to
corporations incorporated outside Oklahoma, in that they would subject such
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v.
McReynolds, a Federal district court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the United States Court of
Appeals for the Sixth Circuit. In December 1988, a federal district court in
Florida held in Grand Metropolitan PLC v. Butterworth that the provisions of the
Florida Affiliated Transactions Act and Florida Control Share Acquisition Act
were unconstitutional as applied to corporations incorporated outside of
Florida.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which may have enacted
takeover laws. Purchaser does not know whether any of these laws do, by their
terms, apply to the Offer or the Merger. Purchaser has not attempted to comply
with any such laws other than Section 1707.041 of the Ohio Revised Code with
respect to which Purchaser presently intends to make a filing. Should any person
seek to apply any state takeover law or claim that Purchaser has not properly
complied with any such law, Purchaser reserves the right to challenge the
validity or applicability of any such law allegedly applicable to the Offer or
the claim that it has not properly complied with any such law, in appropriate
court proceedings or otherwise, and nothing contained in this Offer to Purchase
nor any action taken in connection herewith is intended as a waiver of that
right. In the event it is asserted that one or more state takeover laws applies
to the Offer or the Merger or that Purchaser has not properly complied with any
such law, and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer or the Merger or that Purchaser has not properly
complied with it, as the case may be. Purchaser
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might be required to file certain information with, or receive approvals from,
the relevant state authorities. In addition, if enjoined, Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer or be
delayed in continuing or consummating the Offer and the Merger. In such case,
Purchaser may not be obligated to accept for payment, or pay for, any Shares
tendered. See Section 13 -- "Certain Conditions of the Offer".
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by Purchaser pursuant to the Offer is
subject to such requirements. See Section 2 -- "Acceptance for Payment and
Payment for Shares".
Pursuant to the HSR Act, Parent intends to file a Premerger Notification
and Report Form (the "HSR Report") with the Antitrust Division and the FTC in
connection with the purchase of Shares pursuant to the Offer. Under the
provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by Parent. Parent intends to
file the HSR Report on July 16, 1999, so as to allow the applicable HSR Act
waiting period for the Offer to expire on or prior to 11:59 p.m., New York City
time, on July 30, 1999. Pursuant to the HSR Act, Parent intends to request early
termination of the waiting period applicable to the Offer. There can be no
assurance, however, that the 15-day HSR Act waiting period will be terminated
early. If either the FTC or the Antitrust Division were to request additional
information or documentary material from Parent with respect to the Offer, the
waiting period with respect to the Offer would expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance by
Parent with such request. Thereafter, the waiting period could be extended only
by court order. If the acquisition of Shares is delayed pursuant to a request by
the FTC or the Antitrust Division for additional information or documentary
material pursuant to the HSR Act, the Offer may be extended and, in any event,
the purchase of and payment for Shares will be deferred until ten days after the
request is substantially complied with, unless the extended period expires on or
before the date when the initial 15-day period would otherwise have expired, or
unless the waiting period is sooner terminated by the FTC and the Antitrust
Division. Only one extension of such waiting period pursuant to a request for
additional information is authorized by the HSR Act and the rules promulgated
thereunder, except by court order. Any such extension of the waiting period will
not give rise to any withdrawal rights not otherwise provided for by applicable
law. See Section 4 -- "Withdrawal Rights". It is a condition to the consummation
of the Merger that the waiting period applicable under the HSR Act to the Offer
expire or be terminated. See Section 2 -- "Acceptance for Payment and Payment
for Shares" and Section 13 -- "Certain Conditions of the Offer".
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Parent, the Company or
their respective subsidiaries. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to Parent
relating to the businesses in which Parent, the Company and their respective
subsidiaries are engaged, Parent and Purchaser believe that the Offer will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, what the result would be. See Section 13 -- "Certain
Conditions of the Offer" for certain conditions to the Offer, including
conditions with respect to litigation.
DISSENTERS' RIGHTS. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
may have rights pursuant to the provisions of Section 262 of Delaware Law to
dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. If the statutory procedures were complied with, such
rights could lead to a judicial determination of the fair value required to be
paid in cash to such dissenting holders for their Dissenting Shares. Any such
judicial determination of the fair value of the Dissenting Shares could be based
upon considerations other than, or in addition to, the Offer Price, the market
value of the Dissenting Shares, including asset values, and the investment value
of the Dissenting Shares. The value so determined could be greater or lower than
the Offer Price.
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If any holder of Shares who demands appraisal under Section 262 of Delaware
Law fails to perfect, or effectively withdraws or loses his right to appraisal,
as provided in Delaware Law, the Shares of such stockholder will be converted
into the right to receive the Merger Consideration in accordance with the Merger
Agreement. A stockholder may withdraw his demand for appraisal by delivery to
Parent of a written withdrawal of his demand for appraisal and acceptance of the
terms of the Merger.
A stockholder seeking to exercise dissenters' rights under Section 262 of
Delaware Law may not tender his Shares in the Offer and will be further advised
by the Company as to the steps necessary to exercise such rights. FAILURE TO
FOLLOW THE STEPS REQUIRED BY SECTION 262 OF DELAWARE LAW FOR PERFECTING
APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS. The Commission has adopted Rule 13e-3 under
the Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger or another
business combination following the purchase of Shares pursuant to the Offer in
which Purchaser seeks to acquire any remaining Shares not held by it. However,
Rule 13e-3 will not be applicable to the Merger or any such other business
combination if (i) the Shares are deregistered under the Exchange Act prior to
the Merger or other business combination, or (ii) the Merger or other business
combination is consummated within one year after the purchase of the Shares
pursuant to the Offer and the value of the consideration paid per Share in the
Merger or other business combination (measured at the time of consummation of
the Merger) is at least equal to the amount paid per Share in the Offer. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such transaction be filed with the Commission and disclosed to
stockholders prior to consummation of the transaction.
MARGIN CREDIT REGULATIONS. Federal Reserve Board Regulations T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
15. FEES AND EXPENSES
Except as set forth below, Purchaser will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares pursuant
to the Offer.
J.P. Morgan is acting as Dealer Manager in connection with the Offer and as
financial advisor to Motel 6 in connection with Parent's proposed acquisition of
the Company, for which services J.P. Morgan will receive customary compensation.
Motel 6 has also agreed to reimburse J.P. Morgan for its out-of-pocket expenses,
including the fees and expenses of legal counsel, incurred in connection with
its engagement, and to indemnify J.P. Morgan and certain related persons against
certain liabilities and expenses in connection with its engagement, including
certain liabilities under the federal securities laws.
Purchaser and Parent have retained D.F. King & Co., as the Information
Agent, and Harris Trust Company of New York, as the Depositary, in connection
with the Offer. The Information Agent may contact holders of Shares by mail,
telephone, telex, telecopy, telegraph and personal interview and may request
banks, brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners.
The Information Agent and the Depositary will receive reasonable and
customary compensation for their services in connection with the Offer, plus
reimbursement for their reasonable out-of-pocket expenses, and will be
indemnified against certain liabilities in connection with the Offer, including
certain liabilities under the federal securities laws. Brokers, dealers,
commercial banks and trust companies will be reimbursed by Purchaser for
customary handling and mailing expenses incurred by them in forwarding material
to their customers.
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16. MISCELLANEOUS
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will
make a good faith effort to comply with any such state statute. If, after such
good faith effort, Purchaser cannot comply with any such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed to be made on behalf of Purchaser by the Dealer
Manager or by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Parent and Purchaser have filed with the Commission the Schedule
14D-1, together with exhibits, furnishing certain additional information with
respect to the Offer. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected at, and copies may be obtained from, the same places
and in the same manner as set forth in Section 7 -- "Certain Information
Concerning the Company" (except that they will not be available at the regional
offices of the Commission).
Accor S.A.
RRI Acquisition Corp.
July 16, 1999
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. EXECUTIVE OFFICERS AND DIRECTORS OF PARENT
The following table sets forth the name, current business address,
citizenship and present principal occupation or employment, and material
occupations, positions, offices or employments during the last five years, of
each director and executive officer of Parent. Unless otherwise indicated, the
current business address of each person is Tour Maine Montparnasse, 33, avenue
du Maine, Paris 75015, France. Unless otherwise indicated, each such person is a
citizen of France, or, if the person is a corporation, partnership or other
entity, the place of its organization is France. Unless otherwise indicated,
each of the following persons has held his or her present position as set forth
below for the past five years. Unless otherwise indicated, each occupation set
forth opposite an individual's name refers to employment with Parent.
Officers
JEAN-MARC ESPALIOUX
Mr. Espalioux has been Chairman of the Management Board and Chief Executive
Officer of Parent since January 1997. Prior to that, Mr. Espalioux was Deputy
Chief Executive Officer with Compagnie Generale des Eaux (now called Vivendi), a
utilities company located at 42, avenue de Friedland 54008 Paris, France.
SVEN BOINET
Mr. Boinet has been a member of the Management Board of Parent in charge of
hotel activities since January 1997. Mr. Boinet was Executive Vice-President of
Parent since 1992. Mr. Boinet also has been a director of Groupe Lucien
Barriere, a hotel and hospitality company, since 1989.
BENJAMIN COHEN
Mr. Cohen has been a member of the Management Board of Parent since January 1997
and Chief Financial Officer of Parent from 1994 to 1997. Mr. Cohen was Executive
Vice-President of Parent since 1992. Mr. Cohen also has been a director of
Tourism Asset Holdings Ltd., a company whose principal activity is investing in
hotel and tourism properties located at Level 46, MLC Centre, 19-29 Martin
Place, in Sydney, Australia 2000, since 1996.
JOHN DU MONCEAU
Mr. Du Monceau has been a member of the Management Board of Parent in charge of
Corporate Services and Car Rental since January 1997. From 1992 to 1997, Mr. Du
Monceau was Executive Vice-President of Parent.
Directors
PAUL DUBRULE AND GERARD PELISSON
Messrs. Dubrule and Pelisson have been Co-Chairmen of the Supervisory Board of
Parent since January 1997. They previously served as Chairmen and Chief
Executive Officers of Parent, which they co-founded in 1967.
ISABELLE BOUILLOT
Member of Supervisory Board of Parent. Since 1995, Mrs. Bouillot has been the
Deputy Chief Executive Officer of Caisse des Depots et Consignations, a
state-owned financial institution located at 56, rue de Lille 75007 Paris,
France. From 1991 to 1995, Mrs. Bouillot served as Budget Director in France's
Ministry of the Economy and Finance.
BANQUE NATIONALE DE PARIS (BNP)
Member of Supervisory Board of Parent. BNP is one of the leading banks in France
located at 2, rue Lafitte 75009 Paris, France. BNP is represented by Baudouin
Prot, Chief Executive Officer of BNP since 1997. Since 1992, Mr. Prot served as
Deputy Chief Executive Officer of BNP. Mr. Prot's current business address is 2,
rue Lafitte 75009 Paris, France.
CDC PARTICIPATIONS
Member of Supervisory Board of Parent. CDC Participations, a subsidiary of the
Caisse des Depots et Consignations, is located at Tour Maine-Montparnasse 33,
avenue du Maine 75755 Paris, France and is represented by Willy Stricker,
Chairman and Chief Executive Officer of CDC Participations (since 1995). From
1993 to 1995, Mr. Stricker was Chairman of Communication Development, an entity
of Caisse des Depots et Consignation.
SCH-1
<PAGE> 38
IFIL FINANZIARIA DI PARTICIPAZIONI SPA
Member of Supervisory Board of Parent. IFIL Finanziaria di Participazioni Spa is
an Italian financial and industrial corporation located at 26, corso Matteotti
10100 Torino-Italy, and represented by Gabriele Galateri di Genola, Managing
Director and Chief Executive Officier of IFIL. Mr. Galateri di Genola's current
business address is 26, corso Matteotti 10100 Torino-Italy.
SOCIETE GENERALE
Member of Supervisory Board of Parent. Societe Generale, located at Tour Societe
Generale 17, Cours Valmy, is one of the leading French banks, represented by
Patrick Duverger, Chief Executive Officer of Societe Generale, since 1997. From
1995 to 1997, Mr. Duverger was Chief Executive of International and Finance and
from 1989 until 1995, served as Senior Executive Vice-President of the Capital
Market Division. Mr. Duverger's current business address is Tour Societe
Generale 17, Cours Valmy.
ETIENNE DAVIGNON
Member of Supervisory Board of Parent. Mr. Davignon is Chairman of Societe
Generale de Belgique since 1992, a Belgian corporation, 30, rue royale B-1000
Bruxelles-Belgique.
RENAUD D'ELISSAGARAY
Member of Supervisory Board of Parent. Mr. d'Elissagaray served as a Member of
the Management Board of Banque Louis Dreyfus from 1980 until 1987 which is
located at 87 avenue Grande Armee 75116 Paris, France.
JEAN-MARIE FOURIER
Member of Supervisory Board of Parent. Ms. Fourier is a former Chief Executive
Officer of Thomson, which is located at 173 Boulevard Haussmann 75008 Paris,
France.
JEROME SEYDOUX
Member of Supervisory Board of Parent. Mr. Seydoux is Chairman and Chief
Executive Officer of Pathe, a media company, which is located at 5, Boulevard
Malesherbes 75008 Paris, France since 1991.
MAURICE SIMOND
Member of Supervisory Board of Parent. Mr. Simond is a former Group Director of
IBM Europe, which is located at 2, avenue Gambetta 92066 La Defense 5, France.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The following table sets forth the name, current business address,
citizenship and present principal occupation or employment, and material
occupations, positions, offices or employments during the last five years, of
each director and executive officer of Purchaser. Unless otherwise indicated,
the current business address of each person is 14651 Dallas Parkway, Suite 500,
Dallas, Texas 75240. Unless otherwise indicated, each such person is a citizen
of the United States, or, if the person is a corporation, partnership or other
entity, the place of its organization is the United States. Unless otherwise
indicated, each of the following persons has held his or her present position as
set forth below for the past five years. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Purchaser.
Directors
SVEN BOINET. Director since 1999. Mr. Boinet also has been a member of the
Management Board of Parent in charge of hotel activities since January 1997. Mr.
Boinet was Executive Vice-President of Parent since 1992. Mr. Boinet also has
been a director of Groupe Lucien Barriere, a hotel and hospitality company,
since 1989. Mr. Boinet is a French citizen and his current business address is
Tour Maine Montparnasse, 33, avenue du Maine, Paris 75015, France.
BENJAMIN COHEN. Director since 1999. Mr. Cohen has been a member of the
Management Board of Parent since January 1997 and Chief Financial Officer of
Parent from 1994 to 1997. Mr. Cohen was Executive Vice-President of Parent since
1992. Mr. Cohen also has been a director of Tourism Asset Holdings Ltd., a
company whose principal activity is investing in hotel and tourism properties
located at Level 46, MLC Centre 19-29 Martin Place, in Sydney, Australia 2000,
since 1996. Mr. Cohen is a French citizen and his current business address is
Tour Maine Montparnasse, 33, avenue du Maine, Paris 75015, France.
SCH-2
<PAGE> 39
ARMAND SEBBAN. Director, Executive Vice President for Finance and Chief
Financial Officer since 1999. Mr. Sebban is a French citizen. He has served as
Executive Vice President for Finance and Chief Financial Officer of Motel 6 G.P.
Inc., a subsidiary of Parent ("Motel 6 G.P. Inc."), since February, 1993.
GEORGES LE MENER. Director, Chairman, President and Chief Executive Officer
since 1999. Mr. Le Mener is a French citizen. He has served as President and
Chief Executive Officer of Motel 6 G.P. Inc. since January 1993. Mr. Le Mener
also has been a member of the board of directors and treasurer of AHMA
Educational Institute, a hotel management training company located at 800 N.
Magnolia Ave., Suite 1800, Orlando, Florida 32803.
Executive Officers
GEORGES LE MENER. Director, Chairman, President and Chief Executive Officer
since 1999. Mr. Le Mener is a French citizen. He has served as President and
Chief Executive Officer of Motel 6 G.P. Inc. since January 1993. Mr. Le Mener
also has been a member of the board of directors and treasurer of AHMA
Educational Institute, a hotel management training company located at 800 N.
Magnolia Ave., Suite 1800, Orlando, Florida 32803.
EMMETT J. GOSSEN, JR. Executive Vice President-Corporate Affairs since 1999.
Mr. Gossen also has served as Executive Vice President-Corporate Affairs and
Development of Motel 6 G.P. Inc. since July 1992.
ARMAND E. SEBBAN. Director, Executive Vice President for Finance and Chief
Financial Officer since 1999. Mr. Sebban is a French citizen. He also has served
as Executive Vice President for Finance and Chief Financial Officer of Motel 6
G.P. Inc. since February 1993.
CAROL KIRBY. Executive Vice President-Marketing since 1999. Ms. Kirby also has
served as Executive Vice President-Marketing of Motel 6 G.P. Inc. since February
1997. From December 1993 to February 1997, Ms. Kirby served as Senior Vice
President-Marketing of Motel 6 G.P. Inc.
DAVID O'SHAUGHNESSY. Executive Vice President-Quality Assurance/Franchising
since 1999. Mr. O'Shaughnessy is an Irish citizen. He has served as Executive
Vice President-Quality Assurance/Franchising of Motel 6 G.P. Inc. since February
1997. From October 1995 to February 1997, Mr. O'Shaughnessy served as Senior
Vice President-Quality Assurance of Motel 6 G.P. Inc. He has served in a variety
of management positions with Motel 6 G.P. Inc. since 1990.
WILLIAM E. TASSIN. Senior Vice President-Controller since 1999. Mr. Tassin also
has served as Senior Vice President-Controller of Motel 6 G.P. Inc. since
February 1997. From September 1995 until February 1997, he was Vice President
and Controller of Motel 6 G.P. Inc. From January 1998 until August 1995, he was
Vice President and Controller for Sofitel North America Corp., a hotel and
lodging company and a subsidiary of Parent in Scarsdale, New York.
JOSEPH A. WHEELING. Senior Vice President-External & Technical Resources since
1999. Mr. Wheeling has served as Senior Vice President-External & Technical
Resources of Motel 6 G.P. Inc. since February 1997. From April 1996 until
February 1997, he was Vice President of External and Technical Resources of
Motel 6 G.P. Inc. From September 1994 until April 1996, Mr. Wheeling was Vice
President of Operations Support for Motel 6 G.P. Inc. From November 1993 until
September 1994, he was Director of Procurement for Motel 6 G.P. Inc.
MICHAEL A. FERRARO. Senior Vice President-Real Estate and Development since
1999. Mr. Ferraro also has served as Senior Vice President-Real Estate and
Development of Motel 6 G.P. Inc. since February 1997. From September 1994 until
January 1997, he served as Vice President-Real Estate and Development of Motel 6
G.P. Inc.
ALAN J. RABINOWITZ. Senior Vice President-General Counsel and Secretary since
1999. Mr. Rabinowitz has served as Senior Vice President-General Counsel and
Secretary of Motel 6 G.P. Inc. since January 1997. Mr. Rabinowitz served as Vice
President & Assistant General Counsel of Motel 6 G.P. Inc. from September 1994
through December 1996, and Assistant General Counsel of Motel 6 G.P. Inc. from
September 1993 to September 1994.
STEPHEN MANTHEY. Vice President-Treasurer since 1999. Mr. Manthey has served as
Vice President-Treasurer of Motel 6 G.P. Inc. since December 1996. From 1993
through November 1996, he served as Director of Treasury & Finance for Richfield
Hospitality Services, Inc., a hotel company.
SCH-3
<PAGE> 40
Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at its address
set forth below.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
By Facsimile Transmission:
(212) 701-7636
Confirm Receipt of Facsimile by Telephone:
(212) 701-7624
------------------------
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of the Guaranteed Delivery may be obtained from the
Dealer Manager or the Information Agent. A stockholder may also contact brokers,
dealers, commercial banks or trust companies for assistance concerning the
Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 425-1685
All Others Call Toll Free: (800) 848-3051
The Dealer Manager for the Offer is:
J.P. MORGAN & CO.
60 Wall Street
New York, New York 10260
Call Toll Free (877) 847-4759
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER
SHARES OF COMMON STOCK
OF
RED ROOF INNS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 16, 1999
OF
RRI ACQUISITION CORP.
AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF
ACCOR S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Hand or Overnight Courier: By Facsimile Transmission:
Wall Street Station Receive Window (212) 701-7636
P.O. Box 1023 Wall Street Plaza
New York, NY 10268-1023 88 Pine Street, 19th Floor Confirm Receipt of Facsimile
New York, NY 10005 by Telephone:
(212) 701-7624
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The names and addresses of the registered holders should be printed, if not
already printed below, exactly as they appear on the certificates evidencing
Shares ("Share Certificates") tendered hereby. The Share Certificates and the
Shares (as defined below) that the undersigned wishes to tender should be
indicated in the appropriate boxes.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) SHARES CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
TOTAL SHARES
- ---------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders delivering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by Share Certificates delivered to the
Depositary are being tendered hereby. See Instruction 4.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
This Letter of Transmittal is to be completed by stockholders of Red Roof
Inns, Inc. either if Share Certificates are to be forwarded herewith or, unless
an Agent's Message (as defined in the Offer to Purchase, dated July 16, 1999
(the "Offer to Purchase")) is utilized, if delivery of Shares is to be made by
book-entry transfer to the Depositary's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the book-entry transfer
procedures described in Section 3 -- "Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase. DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary on or prior to the Expiration Date (as defined in the Offer to
Purchase) or who cannot complete the procedures for delivery by book-entry
transfer on a timely basis and who wish to tender their Shares must do so
pursuant to the guaranteed delivery procedures described in Section
3 -- "Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase. See Instruction 2.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE SYSTEM OF THE BOOK-
ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
Window Ticket Number (if any):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
- --------------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
- -------------------------------------------------------------------------
If Delivery by Book-Entry Transfer Facility, please check this box: [ ]
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF ANY OF YOUR SHARE CERTIFICATES HAS BEEN LOST, DESTROYED OR
STOLEN. SEE INSTRUCTION 10.
NUMBER OF SHARES REPRESENTED BY LOST, DESTROYED OR STOLEN CERTIFICATES:
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to RRI Acquisition Corp., a corporation
organized and existing under the laws of the State of Delaware ("Purchaser") and
an indirect, wholly owned subsidiary of Accor S.A., a corporation organized and
existing under the laws of France ("Parent"), the above-described shares of
Common Stock, par value $0.01 per share (the "Shares"), of Red Roof Inns, Inc.,
a corporation organized and existing under the laws of the State of Delaware
(the "Company"), pursuant to Purchaser's offer to purchase all outstanding
Shares at a price of $22.75 per Share, net to the seller in cash (subject to
applicable withholding of taxes), without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase, receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the Offer
to Purchase and any amendments or supplements hereto or thereto, collectively
constitute the "Offer"). The undersigned understands that Purchaser reserves the
right to transfer or assign, in whole or from time to time in part, to Parent or
any direct or indirect wholly owned subsidiary of Parent, the right to purchase
all or any portion of the Shares tendered pursuant to the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 10, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and
the Company.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon the
order of, Purchaser all right, title and interest in and to all the Shares that
are being tendered hereby and all dividends, distributions (including, without
limitation, distributions of additional Shares) and rights declared, paid or
distributed in respect of such Shares on or after July 10, 1999 (collectively,
"Distributions") and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares and
all Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Share Certificates evidencing such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by the Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Benjamin Cohen, Pierre Todorov,
Armand Sebban and Emmett J. Gossen, Jr., and each of them, as the
attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper and to otherwise act (by
written consent or otherwise) with respect to all the Shares tendered hereby
which have been accepted for payment by Purchaser prior to the time of such vote
or other action and all Shares, and other securities issued in Distributions in
respect of such Shares, which the undersigned is entitled to vote at any meeting
of stockholders of the Company (whether annual or special and whether or not an
adjourned or postponed meeting) or by written consent in lieu of any such
meeting or otherwise. This proxy and power of attorney is coupled with an
interest in the Shares tendered hereby, is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by Purchaser in accordance with the terms of the Offer. Such acceptance
for payment shall revoke, without further action, all other proxies and powers
of attorney granted by the undersigned at any time with respect to such Shares
(and all Shares and other securities issued in Distributions in respect of such
Shares), and no subsequent proxy or power of attorney shall be given or written
consent executed (and if given or executed, shall not be effective) by the
undersigned with respect thereto. The undersigned understands that, in order for
Shares to be deemed validly tendered, immediately upon Purchaser's acceptance
for payment of such Shares, Purchaser or its designees must be able to exercise
full voting and other rights with respect to such Shares and all Distributions,
including, without limitation, voting at any meeting of the Company's
stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, and that when and to the extent such
Shares are accepted for payment by Purchaser, Purchaser will acquire good,
marketable and
3
<PAGE> 4
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges, encumbrances, conditional sales agreements or
other obligations relating to the sale or transfer thereof, and that none of
such Shares and Distributions will be subject to any adverse claims. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Shares tendered hereby and all
Distributions. In addition, the undersigned shall remit and transfer promptly to
the Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and, pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby, or deduct from such purchaser price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, executors, administrators, legal representatives, successors and
assigns of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable, provided that the Shares tendered pursuant to the Offer
may be withdrawn at any time on or prior to the Expiration Date and, unless
theretofore accepted for payment as provided in the Offer to Purchase, may also
be withdrawn at any time after September 14, 1999.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 -- "Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase and in the instructions hereto and
Purchaser's acceptance for payment of such Shares will constitute a binding
agreement between the undersigned and Purchaser upon the terms and subject to
the conditions of the Offer. Without limiting the foregoing, if the price to be
paid in the Offer is amended in accordance with the terms of the Merger
Agreement, the price to be paid to the undersigned will be the amended price
notwithstanding the fact that a different price is stated in this Letter of
Transmittal. The undersigned recognizes that under certain circumstances set
forth in the Offer to Purchase, Purchaser may not be required to accept for
payment any of the Shares tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered, in the name(s) of the registered holder(s) appearing under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered." In the event that the boxes entitled "Special
Payment Instructions" and "Special Delivery Instructions" are both completed,
please issue the check for the purchase price of all Shares purchased, and
return all Share Certificates evidencing Shares not purchased or not tendered,
in the name(s) of, and mail such check and Share Certificates to, the person(s)
so indicated. Stockholders tendering Shares by book-entry transfer may request
that any Shares not accepted for payment be returned by crediting the account
maintained at the Book-Entry Transfer Facility by making an appropriate entry
under "Special Payment Instructions." The undersigned recognizes that Purchaser
has no obligation pursuant to the "Special Payment Instructions" to transfer any
Shares from the name of the registered holder(s) thereof if Purchaser does not
purchase any of such Shares.
4
<PAGE> 5
- ---------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not purchased
and/or the check for the purchase price of Shares purchased are to be issued
in the name of someone other than the undersigned, or if Shares tendered by
book-entry transfer which are not purchased are to be returned by credit to an
account maintained at the Book-Entry Transfer Facility other than that
designated on the front cover.
Issue check and/or certificates to:
Name
------------------------------------------------
(PLEASE PRINT)
Address
----------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
--------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON PAGE 11)
[ ] Credit unpurchased Shares tendered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
--------------------------------------------------------
(ACCOUNT NUMBER)
- ---------------------------------------------------------
- ---------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not purchased
and/or the check for the purchase price of Shares purchased are to be sent to
someone other than the undersigned or to the undersigned at an address other
than that shown on the front cover.
Mail check and/or certificates to:
Name
------------------------------------------------
(PLEASE PRINT)
Address
----------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
- ---------------------------------------------------------
5
<PAGE> 6
SIGN HERE
(PLEASE ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated:
---------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by Share Certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of a corporation or others acting in a
fiduciary or representative capacity, please provide the necessary information.
See Instruction 5.)
Name(s):------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------------
(SEE INSTRUCTION 5)
Address:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ( )
------------------------------------------------
Tax Identification or
Social Security No.:
----------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9 ON PAGE 11)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
----------------------------------------------------------------
Name: --------------------------------------------------------------------------
Name of Firm:
---------------------------------------------------------------------
Address:
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Title:
---------------------------------------------------------------------------
Area Code and Telephone Number: ( )
------------------------------------------------
Dated:--------------------------------------------------------------------------
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee Of Signatures. All signatures on this Letter of Transmittal
must be medallion guaranteed by a firm which is a member of the Securities
Transfer Agents Medallion Program, or by any other "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, (each of the foregoing being referred to as an
"Eligible Institution"), unless (i) this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Letter of Transmittal,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) of the Shares
tendered hereby and such holder(s) has (have) not completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on page 5 or (ii) such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. Delivery Of Letter Of Transmittal And Share Certificates. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if Shares are to be delivered by book-entry transfer pursuant to the
procedures set forth in Section 3 -- "Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or a timely confirmation of a book-entry transfer
into the Depositary's account at the Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, as well as a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile hereof), with any
required signature guarantees, or an Agent's Message in the case of a book-
entry delivery, and any other documents required by this Letter of Transmittal,
must be received by the Depositary at its address set forth herein on or prior
to the Expiration Date. If Share Certificates are forwarded to the Depositary in
multiple deliveries, a properly completed and duly executed Letter of
Transmittal must accompany each such delivery.
Stockholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary on or prior to the Expiration Date or who cannot complete the
procedure for delivery by book-entry transfer on a timely basis may tender their
Shares pursuant to the guaranteed delivery procedures described in Section
3 -- "Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase. Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all tendered Shares, in proper form for
transfer, or a timely confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer, in each case together with a Letter of Transmittal (or a
manually signed facsimile hereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry delivery, an
Agent's Message), and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery, all as described in Section 3 -- "Procedures for Accepting
the Offer and Tendering Shares" of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mailed to the Depositary and must include a
guarantee by an Eligible Institution on the form set forth in such notice.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING IN THE CASE OF A BOOK-ENTRY TRANSFER, BY A TIMELY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL, WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a manually signed facsimile hereof), all tendering stockholders waive any
right to receive any notice of the acceptance of their Shares for payment.
7
<PAGE> 8
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto and separately
signed on each page thereof in the same manner as this Letter of Transmittal.
4. Partial Tenders (Not Applicable to Stockholders Who Tender by Book-Entry
Transfer). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered, fill in the number of
Shares that is to be tendered in the box entitled "Number of Shares Tendered."
In such cases, new Share Certificate(s) evidencing the remainder of the Shares
that were evidenced by the Share Certificate(s) delivered to the Depositary
herewith will be sent to the person(s) signing this Letter of Transmittal,
unless otherwise provided in the box entitled "Special Delivery Instructions" on
this Letter of Transmittal, as soon as practicable after the Expiration Date.
All Shares evidenced by Share Certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. Signatures On Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby is registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay or cause to be paid all stock transfer taxes with respect
to the sale and transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price of any Shares is to be made to, or
Share Certificate(s) evidencing Shares not tendered or not purchased are to be
issued in the name of, a person other than the registered holder(s), or if
tendered Shares are registered in the name of any person other than the
registered holder(s), or if tendered Share Certificates are registered in the
name of any person other than the person(s) signing this Letter of Transmittal,
the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such other person will be deducted from the purchase price of such Shares
purchased, unless evidence satisfactory to Purchaser of the payment of such
taxes, or exemption therefrom, is submitted. Except as provided in this
Instruction 6, it will not be necessary for transfer tax stamps to be affixed to
the Share Certificates evidencing the Shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate(s) is to
8
<PAGE> 9
be sent to someone other than the person(s) signing this Letter of Transmittal
or to the person(s) signing this Letter of Transmittal but at an address other
than that shown in the box entitled "Description of Shares Tendered," the
appropriate boxes on this Letter of Transmittal must be completed. Stockholders
delivering Shares tendered hereby by book-entry transfer may request that Shares
not purchased be credited to such account maintained at the Book-Entry Transfer
Facility as such stockholder may designate in the box entitled "Special Payment
Instructions." If no such instructions are given, all such Shares not purchased
will be returned by crediting the account at the Book-Entry Transfer Facility as
the account from which such Shares were delivered.
8. Questions and Requests For Assistance or Additional Copies. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses and telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal
and other tender offer materials may be obtained from the Information Agent or
the Dealer Manager as set forth below, and will be furnished promptly at
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
9. Substitute Form W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below
and to certify whether such stockholder is subject to backup withholding of
federal income tax. If a tendering stockholder has been notified by the Internal
Revenue Service that such stockholder is subject to backup withholding, such
stockholder must cross out item (2) of the Certification box of the Substitute
Form W-9, unless such stockholder has since been notified by the Internal
Revenue Service that such stockholder is no longer subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering stockholder to 31% federal income tax withholding on the
payment of the purchase price of all Shares purchased from such stockholder. If
the tendering stockholder has not been issued a TIN and has applied for one or
intends to apply for one in the near future, such stockholder should write
"Applied For" in the space provided for the TIN in Part 1 of the Substitute Form
W-9 and sign and date the Substitute Form W-9. If "Applied For" is written in
Part 1 and the Depositary is not provided with a TIN within 60 days, the
Depositary will withhold 31% on all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
10. Lost, Destroyed or Stolen Certificates. If any Share Certificate has
been lost, destroyed or stolen, the stockholder should promptly call Depositary
at (212) 701-7624. The stockholder will then be instructed as to the steps that
must be taken in order to replace the Share Certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share Certificates has been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE
HEREOF), PROPERLY COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED
SIGNATURE GUARANTEES), OR AN AGENT'S MESSAGE IN THE CASE OF BOOK-ENTRY DELIVERY,
TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE AS DEFINED IN SECTION 1 -- "TERMS OF THE OFFER; EXPIRATION DATE"
OF THE OFFER TO PURCHASE.
9
<PAGE> 10
IMPORTANT TAX INFORMATION
Under the federal income tax laws, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary with such
stockholder's correct TIN on the Substitute Form W-9 below. If such stockholder
is an individual, the TIN is such stockholder's social security number. If the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future, the stockholder should so
indicate on the Substitute Form W-9. If the Depositary is not provided with the
correct TIN, the Internal Revenue Service may subject the stockholder to a $50
penalty. In addition, payments that are made to such stockholder with respect to
Shares purchased pursuant to the Offer may be subject to backup withholding.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are exempt recipients not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such individual must submit an Internal Revenue
Form W-8, signed under penalties of perjury, attesting to such individual's
exempt status. A Form W-8 may be obtained from the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, a tendering stockholder
is required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that the TIN provided on the Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN) and that (i)
such stockholder has not been notified by the Internal Revenue Service that he
is subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the Internal Revenue Service has notified such stockholder
that such stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or TIN of the record holder of the Shares tendered hereby. If the Shares
are in more than one name or are not in the name of the actual owner, consult
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance on which number to report. If the
tendering stockholder has not been issued a TIN and has applied for a number or
intends to apply for a number in the near future, the stockholder should write
"Applied For" in the space provided for the TIN in Part 1 and sign and date the
Substitute Form W-9. If "Applied For" is written in Part 1, the Depositary will
reserve 31% of all payments of the purchase price to such stockholder until a
TIN is provided to the Depositary. If the Depositary is not provided with a TIN
within 60 days, the Depositary will withhold 31% of all payments of the purchase
price to such stockholder.
10
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
- -------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT PART 3 -- Social Security Number or
FORM W-9 THE RIGHT AND CERTIFY BY SIGNING AND DATING Employer Identification Number
DEPARTMENT OF THE BELOW. --------------------------------
TREASURY INTERNAL REVENUE (If awaiting TIN write "Applied For")
SERVICE
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER ("TIN")
----------------------------------------------------------------------------------------
PART 2 -- For Payees exempt from backup withholding, see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
instructed therein.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct TIN (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the
IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out Item (2) above if you have been notified by the IRS that you are
subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS
that you were no longer subject to backup withholding, do not cross out Item (2). (Also see instructions in the
enclosed Guidelines).
- -------------------------------------------------------------------------------------------------------------------------
SIGNATURE ------------------------------------------------------------ DATE ------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate IRS
Center or Social Security Administration Office or (2) I intend to mail or
deliver an application in the near future. I understand that if I do not provide
a taxpayer identification number by the time of payment, 31% of all reportable
payments made to me will be withheld, but that such amounts will be refunded to
me if I then provide a taxpayer identification number within sixty (60) days.
Signature: ---------------------------------------- Date: ---------------
<PAGE> 12
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 425-1685
All Others Call Toll Free: (800) 848-3051
The Dealer Manager for the Offer is:
J.P. MORGAN & CO.
60 Wall Street
New York, New York 10260
Call Toll Free (877) 847-4759
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
RED ROOF INNS, INC.
TO
RRI ACQUISITION CORP.
AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF
ACCOR S.A.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined in the Offer to Purchase,
dated July 16, 1999 (the "Offer to Purchase")) (i) if certificates ("Share
Certificates") evidencing shares of Common Stock, par value $0.01 per share (the
"Shares"), of Red Roof Inns, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), are not immediately
available, (ii) if Share Certificates and all other required documents cannot be
delivered to Harris Trust Company of New York, as Depositary (the "Depositary"),
on or prior to the Expiration Date (as defined in the Offer to Purchase) or
(iii) if the procedures for delivery of Shares by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be delivered
by hand or mail or transmitted by telegram or facsimile transmission to the
Depositary and must include a guarantee by an "Eligible Institution" (as defined
in the Offer to Purchase). See Section 3 -- "Procedures for Accepting the Offer
and Tendering Shares" of the Offer to Purchase.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Hand or Overnight Courier: By Facsimile Transmission:
Wall Street Station Receive Window (212) 701-7636
P.O. Box 1023 Wall Street Plaza
New York, NY 10268-1023 88 Pine Street, 19th Floor Confirm Receipt of
New York, NY 10005 Facsimile by Telephone:
(212) 701-7624
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and Share Certificates to the Depositary within the time period
shown herein. Failure to do so could result in a financial loss to such Eligible
Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tender(s) to RRI Acquisition Corp., a corporation
organized and existing under the laws of the State of Delaware and an indirect,
wholly-owned indirect subsidiary of Accor S.A., a corporation organized and
existing under the laws of France, upon the terms and subject to the conditions
set forth in the Offer to Purchase and the related Letter of Transmittal,
receipt of each of which is hereby acknowledged, the number of Shares specified
below pursuant to the guaranteed delivery procedures described in Section
3 -- "Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase.
Number of Shares:
- ---------------------------------
Share Certificate Number(s)
(if available):
- --------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
If Share(s) will be delivered by book-entry transfer, check this box. [ ]
Account Number:
- ----------------------------------
Name(s) of Record Holder(s):
- -------------------
- ------------------------------------------------------
- ------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address(es):
- ---------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(ZIP CODE)
Area Code and Telephone
Number(s):
- ----------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SIGNATURE(S)
Dated:
- ----------------------------------------, 1999
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution which is a member of the
Securities Transfer Agents Medallion Program or an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a) represents
that the tender of Shares effected hereby complies with Rule 14e-4 under the
Exchange Act and (b) guarantees to deliver to the Depositary, at its address set
forth above, Share Certificates evidencing the Shares tendered hereby, in proper
form for transfer, or a timely confirmation of book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company, in each
case with delivery of a Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry delivery, an Agent's Message (as
defined in the Offer to Purchase), and any other required documents, all within
three New York Stock Exchange, Inc. trading days of the date of execution of
this Notice of Guaranteed Delivery.
- ------------------------------------------------------
NAME OF FIRM
- ------------------------------------------------------
ADDRESS
- ------------------------------------------------------
ZIP CODE
Area Code and
Telephone Number:
- --------------------------------
- ------------------------------------------------------
AUTHORIZED SIGNATURE
Name:
- ----------------------------------------------
(PLEASE PRINT OR TYPE)
Title:
- -----------------------------------------------
Dated:
- ----------------------------------------, 1999
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
<TABLE>
<S> <C> <C>
</TABLE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RED ROOF INNS, INC.
AT $22.75 NET PER SHARE
BY
RRI ACQUISITION CORP.
AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF
ACCOR S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
July 16, 1999
TO BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
We have been appointed by RRI Acquisition Corp., a corporation organized
and existing under the laws of the State of Delaware ("Purchaser") and an
indirect, wholly owned subsidiary of Accor S.A., a corporation organized and
existing under the laws of France ("Parent"), to act as Dealer Manager in
connection with Purchaser's offer to purchase all outstanding shares of Common
Stock, par value $0.01 per share (the "Shares"), of Red Roof Inns, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), at a price of $22.75 per Share, net to the seller in cash (subject
to applicable withholding of taxes), without interest, upon the terms and
subject to the conditions set forth in Purchaser's Offer to Purchase, dated July
16, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer") enclosed herewith. The Offer is made in connection with
the Agreement and Plan of Merger, dated July 10, 1999 (the "Merger Agreement"),
among Parent, Purchaser and the Company.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn on or prior to the Expiration Date (as
hereinafter defined) at least 18,400,000 Shares, which at July 10, 1999
represented approximately 68.3% of the total issued and outstanding Shares
(other than treasury shares) of the Company (the "Minimum Condition"). Pursuant
to the terms of the Tender and Voting Agreement, dated July 10, 1999, among
Parent, Purchaser and several stockholders of the Company (collectively, the "MS
Entities"), each MS Entity has, among other things, agreed to tender pursuant to
the Offer all Shares owned by it. The tender of the MS Entities' shares will be
sufficient to satisfy the Minimum Condition. The Offer is also conditioned upon
certain other terms and conditions contained in the Offer to Purchase. See the
Introduction and Section 1 -- "Terms of the Offer; Expiration Date" and Section
13 -- "Certain Conditions of the Offer" of the Offer to Purchase. The Board of
Directors of the Company has unanimously approved the Merger Agreement, the
Offer and the Merger (as defined in the Offer to Purchase) and has determined
that the terms of the Offer and the Merger are fair to, and in the best
interests of, the stockholders of the Company and recommends that stockholders
accept the Offer and tender their Shares pursuant to the Offer.
<PAGE> 2
Enclosed for your information and forwarding to your clients are copies of
the following documents:
1. Offer to Purchase, dated July 16, 1999;
2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares. Facsimile copies of the Letter of
Transmittal may be used to tender Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates evidencing Shares ("Share Certificates") and all other
required documents are not immediately available or cannot be delivered to
Harris Trust Company of New York (the "Depositary") by the Expiration Date
or if, in the case of book-entry delivery of Shares, the procedures for
book-entry transfer set forth in Section 3 -- "Procedures for Accepting the
Offer and Tendering Shares" of the Offer to Purchase cannot be completed by
the Expiration Date;
4. Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such client's instructions with regard to the
Offer;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, AUGUST 12, 1999 (THE
"EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) Share
Certificates (or a confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility (as defined in the
Offer to Purchase)), (ii) a Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares and (iii) any other
documents required by the Letter of Transmittal.
If holders of Shares wish to tender Shares, but cannot deliver their Share
Certificates or other required documents, or cannot comply with the procedures
for book-entry transfer, on or prior to the Expiration Date, a tender may be
effected by following the guaranteed delivery procedures described in Section
3 -- "Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, Depositary and Information Agent,
as described in the Offer to Purchase) in connection with the solicitation of
tenders of Shares pursuant to the Offer. However, Purchaser will, upon request,
reimburse you for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. Purchaser will pay or
cause to be paid any stock transfer taxes payable with respect to the transfer
of Shares to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained by
contacting, J.P. Morgan Securities Inc., the Dealer Manager, or D.F. King & Co.,
Inc., the Information Agent, at their respective addresses and telephone numbers
set forth on the back cover of the Offer to Purchase.
Very truly yours,
J.P. Morgan Securities Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU
OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF PARENT, PURCHASER,
THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF
ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RED ROOF INNS, INC.
AT
$22.75 NET PER SHARE
BY
RRI ACQUISITION CORP.
AN INDIRECT, WHOLLY OWNED SUBSIDIARY
OF
ACCOR S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
July 16, 1999
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated July 16,
1999 (the "Offer to Purchase"), and a related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") in connection with the offer by RRI Acquisition Corp., a corporation
organized and existing under the laws of the State of Delaware ("Purchaser") and
an indirect, wholly owned subsidiary of Accor S.A., a corporation organized and
existing under the laws of France ("Parent"), to purchase all outstanding shares
of Common Stock, par value $0.01 per share (the "Shares"), of Red Roof Inns,
Inc., a corporation organized and existing under the laws of the State of
Delaware (the "Company"), at a price of $22.75 per Share, net to the seller in
cash (subject to applicable withholding of taxes), without interest, upon the
terms and subject to the conditions set forth in the Offer. The Offer is made in
connection with the Agreement and Plan of Merger, dated July 10, 1999 (the
"Merger Agreement"), among Parent, Purchaser and the Company. Holders of Shares
whose certificates evidencing such Shares (the "Share Certificates") are not
immediately available or who cannot deliver their Share Certificates and all
other required documents to the Depositary (as hereinafter defined) on or prior
to the Expiration Date (as hereinafter defined), or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Shares
according to the guaranteed delivery procedures set forth in Section
3 -- "Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Shares held by us for your account upon
the terms and subject to the conditions set forth in the Offer.
Please note the following:
1. The tender price is $22.75 per Share, net to the seller in cash
(subject to applicable withholding of taxes), without interest, upon the
terms and subject to the conditions set forth in the Offer.
2. The Offer is being made for all of the outstanding Shares.
<PAGE> 2
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement, the Offer and the Merger (as defined in the Offer to
Purchase) and has determined that the Offer and the Merger are fair to and
in the best interests of the Company's stockholders. The Board of Directors
of the Company unanimously recommends that stockholders accept the Offer
and tender their Shares in the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Thursday, August 12, 1999 (the "Expiration Date"),
unless the Offer is extended.
5. The offer is conditioned upon, among other things, there having
been validly tendered and not withdrawn on or prior to the Expiration Date,
at least 18,400,000 Shares, which at July 10, 1999 represented
approximately 68.3% of the total issued and outstanding Shares (other than
treasury shares) of the Company (the "Minimum Condition"). The Offer is
also subject to certain other conditions contained in the Offer to
Purchase. See the Introduction and Section 1 -- "Terms of the Offer;
Expiration Date" and Section 13 -- "Certain Conditions of the Offer" of the
Offer to Purchase.
6. Pursuant to the terms of the Tender and Voting Agreement, dated
July 10, 1999, among Parent, Purchaser and several stockholders of the
Company (collectively, the "MS Entities"), the MS Entities have, among
other things, agreed to tender pursuant to the Offer all Shares owned by
them. The tender of the MS Entities' Shares will be sufficient to satisfy
the Minimum Condition.
7. Tendering stockholders who have Shares registered in their own name
and who tender directly to the Depositary will not be obligated to pay
brokerage fees or commissions or, except as otherwise provided in
Instruction 6 of the Letter of Transmittal, stock transfer taxes with
respect to the purchase of Shares by Purchaser pursuant to the Offer.
8. Payment for Shares purchased pursuant to the Offer will in all
cases be made only after timely receipt by Harris Trust Company of New York
(the "Depositary") of (a) Share Certificates or, in the case of book-entry
delivery of Shares, timely confirmation of the book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer Facility
(as defined in the Offer to Purchase) pursuant to the procedures set forth
in Section 3 -- "Procedures for Accepting the Offer and Tendering Shares"
of the Offer to Purchase, (b) the Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed, with any
required signature guarantees, or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry delivery and (c) any
other documents required by the Letter of Transmittal.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any jurisdiction where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to, nor will tenders be accepted from or on behalf of, the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by J.P. Morgan
Securities Inc., the Dealer Manager, or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RED ROOF INNS, INC.
BY
RRI ACQUISITION CORP.
AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF
ACCOR S.A.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated July 16, 1999 (the "Offer to Purchase"), and the
related Letter of Transmittal in connection with the offer by RRI Acquisition
Corp., a corporation organized and existing under the laws of the State of
Delaware and an indirect, wholly owned subsidiary of Accor S.A., a corporation
organized and existing under the laws of France, to purchase all outstanding
shares of Common Stock, par value $0.01 per share (the "Shares"), of Red Roof
Inns, Inc., a corporation organized and existing under the laws of the State of
Delaware, at a price of $22.75 per Share, net to the seller in cash (subject to
applicable withholding of taxes), without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated:
- --------------- 199
- ---
Number of Shares to be Tendered:
- --------------- Shares*
- ---------------
*Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
SIGN HERE
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Name(s) of Holder(s):
- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT
- --------------------------------------------------------------------------------
ADDRESS(ES)
- --------------------------------------------------------------------------------
ZIP CODE(S)
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER(S)
- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person person(3)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
9. A valid trust, estate or pension The legal entity
trust (Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state or
local government, school district
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under Section 501(a) or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A state, the District of Columbia, a possession of the United States or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government or any
agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under Section 584(a).
- An exempt charitable remainder trust or a nonexempt trust described in
Section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
PAYMENTS NOT GENERALLY SUBJECT TO BACKUP WITHHOLDING
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to nominee
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that are
not subject to information reporting are also not subject to backup withholding.
For details, see the regulations under section 6041, 6041A(a), 6045 and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers to payers who
must report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications of affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
Exhibit (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated July 16,
1999 and the related Letter of Transmittal and any amendments or supplements
thereto, and is being made to all holders of Shares. The Offer is not being made
to, nor will tenders be accepted from or on behalf of, holders of Shares in any
jurisdiction in which the making of the Offer or acceptance thereof would not be
in compliance with the laws of such jurisdiction. In those jurisdictions where
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by J.P. Morgan Securities Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK OF
RED ROOF INNS, INC.
AT
$22.75 PER SHARE
NET TO THE SELLER IN CASH
BY
RRI ACQUISITION CORP.
AN INDIRECT, WHOLLY OWNED SUBSIDIARY
OF
ACCOR S.A.
RRI Acquisition Corp., a Delaware corporation (the "Purchaser") and an indirect,
wholly owned subsidiary of Accor S.A., a corporation organized and existing
under the laws of France ("Parent"), is offering to purchase all the outstanding
shares of common stock, par value $0.01 per share (the "Shares"), of Red Roof
Inns, Inc., a Delaware corporation (the "Company"), at a purchase price of
$22.75 per Share, net to the seller in cash (subject to applicable withholding
of tax), without interest, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated July 16, 1999 (the "Offer to Purchase") and
in the related Letter of Transmittal (which, as amended or supplemented,
together constitute the "Offer"). Tendering stockholders who have Shares
registered in their own name and who tender directly to Harris Trust Company of
New York (the "Depositary") will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares pursuant to the Offer. The purpose of the Offer
is to acquire for cash as many outstanding Shares as possible as a first step in
acquiring the entire equity interest in the Company. Following the consummation
of the Offer, the Purchaser intends to effect the merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, AUGUST 12, 1999, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (1) there having been validly
tendered and not withdrawn prior to the Expiration Date (as defined below) at
least 18,400,000 Shares of the Company (the "Minimum Condition"), and (2) any
waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended, and the regulations thereunder applicable to the purchase of the Shares
pursuant to the Offer having expired or been terminated. See Section 13 of the
Offer to Purchase. Certain stockholders of the Company owning 18,400,000 Shares
have agreed to tender their Shares in the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated July
10, 1999 (the "Merger Agreement"), by and among the Purchaser, Parent and the
Company. The Merger Agreement provides, among other things, that the Purchaser
will make the Offer and that as promptly as practicable following the
consummation of the Offer and the
<PAGE> 2
satisfaction or waiver of certain conditions set forth in the Merger Agreement
and in accordance with relevant provisions of the Delaware General Corporation
Law, the Purchaser will merge with and into the Company (the "Merger"). Upon the
consummation of the Merger, the Company will continue as the surviving
corporation and will be an indirect, wholly owned subsidiary of Parent. At the
effective time of the Merger (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held by
the Company as treasury stock or by any subsidiary of the Company, Parent, the
Purchaser or any other subsidiary of Parent and other than Shares held by a
holder who has not voted in favor of the Merger or consented thereto in writing
and who has demanded appraisal for such Shares in accordance with Section 262 of
the Delaware General Corporation Law) will be converted into the right to
receive cash, without interest, in an amount equal to the price per Share paid
pursuant to the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
The Purchaser may, and may be required to, subject to the terms of the Merger
Agreement, extend the Offer. Any such extension will be followed as promptly as
practicable by public announcement thereof no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
The Offer is subject to certain conditions set forth in the Offer to Purchase.
If any such condition is not satisfied, the Purchaser may, subject to certain
terms of the Merger Agreement, (a) terminate the Offer and not accept for
payment or pay for any Shares and return all tendered Shares to tendering
stockholders or (b) waive all the unsatisfied conditions (other than the Minimum
Condition which cannot be waived below 51% of the total issued and outstanding
Shares other than treasury stock) and accept for payment and pay for all Shares
validly tendered prior to the Expiration Date or (c) extend the Offer and,
subject to the right of stockholders to withdraw Shares until the Expiration
Date as set forth below, retain the Shares that have been tendered during the
period for which the Offer is extended.
For purposes of the Offer, the Purchaser shall be deemed to have accepted for
payment (and thereby purchased) validly tendered Shares, if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to tendering stockholders. Under no
circumstances will interest on the purchase price of the Shares be paid by the
Purchaser by reason of any delay in making payment. Payment for Shares purchased
pursuant to the Offer will in all cases be made only after timely receipt by the
Depositary of (i) certificates for such Shares (or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined in the Offer to Purchase)), and (ii)
the Letter of Transmittal (or a facsimile thereof) properly completed and duly
executed with all required signature guarantees or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer of
Shares, together with any other documents required by the Letter of Transmittal.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Thursday, August 12, 1999, unless and until the Purchaser shall have extended
the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior
to the Expiration Date. Thereafter, such tenders are irrevocable, except that
they also may be withdrawn at any time after September 14, 1999 unless
theretofore accepted for payment as provided in the Offer to Purchase. To be
effective, a written or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth in the Offer
to Purchase and must specify the name of the person who tendered the Shares to
be withdrawn and the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If certificates for the Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution (as defined in the Offer to
Purchase) must be submitted prior to the release of such Shares, unless such
Shares were tendered by an Eligible Institution. In addition, such notice must
specify, in the case of Shares tendered by delivery of certificates, the serial
numbers shown on the particular certificates evidencing the Shares to be
withdrawn or, in the case of Shares tendered by a book-entry transfer, the name
and number of the account at the Book-Entry Transfer Facility (as defined in the
Offer to Purchase) to be credited with the withdrawn Shares.
<PAGE> 3
The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal and other
related materials will be mailed to record holders of Shares whose names appear
on the Company's stockholder lists, and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions or requests for assistance may be directed to the Information Agent or
to the Dealer Manager at their respective addresses and telephone numbers set
forth below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent or the Dealer Manager, and copies will be furnished promptly
at the Purchaser's expense. The Purchaser will not pay any fees or commissions
to any broker or dealer or any other person (other than the Information Agent
and the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO, INC.
77 WATER STREET
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL (212) 425-1685
ALL OTHERS CALL TOLL FREE (800) 848-3051
THE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN & CO.
60 WALL STREET
NEW YORK, NEW YORK 10260
CALL TOLL FREE (877) 847-4759
JULY 16, 1999
<PAGE> 1
Exhibit (a)(8)
PRESS RELEASE
RED ROOF INNS, INC. TO BE ACQUIRED BY
ACCOR S.A.
ACCOR EXPANDS ITS WORLDWIDE
LEADERSHIP IN THE ECONOMY LODGING SEGMENT
AND ITS PRESENCE IN THE U.S. MARKET
Paris, France and Columbus, Ohio, USA
12 July 1999
Accor S.A. and Red Roof Inns, Inc. today jointly announced that Accor plans to
launch a tender offer to acquire all outstanding shares of economy lodging
company Red Roof Inns, Inc. at a price of $22.75 per share. The total value of
the transaction, including assumption of debt, is slightly more than $1.1
billion.
Accor has received a commitment from the Morgan Stanley Real Estate Fund L.P.
and certain of its co-investors, the majority shareholders of the Company, to
tender their combined 68.3% stake at the offer price. The offer price of $22.75
represents a premium of 27.5% over the 30-day average trading price of $17.85
per share. Red Roof's revenues for 1998 amounted to $375.3 million, and EBITDA
was $146.5 million. The transaction value represents a multiple of approximately
7.6 times 1998 EBITDA. The acquisition is expected to be immediately accretive
to Accor.
With a network of 322 hotels (37,005 rooms, of which 29,907 are owned and the
remainder franchised) primarily located in the Midwest, the East and in the
South, Red Roof Inns enjoys high customer awareness and an outstanding brand
image in the economy lodging market.
Motel 6 and Red Roof Inns complement each other particularly well, as is the
case for the Formule 1 and Etap Hotel chains in Europe. The two brands
complement each other in terms of geography (West and East), product mix (Budget
and Econ omy) and clientele (leisure and business).
To supplement the renewed image and performance of Motel 6 in recent years,
Accor plans to rapidly optimize the operations of Motel 6 and Red Roof Inns
through realization of synergies and acceleration of the development and
franchising pro gram. Motel 6 and Red Roof Inns will both become part of a newly
formed group, Accor Economy Lodging.
Jean-Marc Espalioux, Chairman of the Management Board and CEO of Accor stated,
"The acquisition of Red Roof fits with one of the key elements of Accor's global
<PAGE> 2
strategy, the strengthening of Accor's worldwide leadership in the economy hotel
sector. The economy sector is promising in both developed and emerging nations,
is highly profitable, and is less sensitive to economic cycles than other hotel
sectors. With its unparalleled expertise, Accor will now operate 2,098 economy
sector properties worldwide with 207,686 rooms under the brands Formule 1, Etap
Hotel, Ibis, Motel 6, Studio 6 and Red Roof Inns, and reinforce its leading
position on all continents."
"This is a great opportunity for Red Roof Inns and offers our shareholders the
value that is representative of our company's strengths - - our people, our
service, and our brand," said Francis W. "Butch" Cash, Chairman of the Board,
President and Chief Executive Officer of Red Roof Inns. "The synergy created by
joining the Accor family will allow Red Roof Inns to expand our strong brand
positioning within a global marketplace."
Through Motel 6, Accor is already a leader in the U.S. budget and economy
lodging sector. With the addition of the Red Roof Inns portfolio to the 790
Motel 6 proper ties (85,375 rooms), Accor will operate more than 120,00 rooms in
this sector in the United States.
In the United States, the world's largest hotel market, Accor also operates
through its upscale Novotel chain and growing luxury Sofitel chain, in business
travel through its 50% interest in Carlson Wagonlit Travel and in corporate
services through Child Care.
With the Red Roof acquisition, the portion of revenues generated in the United
States will increase from 17% to 22%.
Accor, a leader worldwide in travel, tourism and business services, is active in
140 coun tries with 130,000 associates, through its four major complementary
activities: hotels (3,084 hotels, 340,782 rooms after addition of Red Roof);
travel agencies through Carlson Wagonlit Travel; car rental with Europcar and
corporate services with Accor Corporate Services.
The financial advisor for Accor was J.P. Morgan & Co. and for Red Roof Inns was
Morgan Stanley Dean Witter. The legal advisor for Accor was Proskauer Rose LLP
and for Red Roof Inns was Skadden, Arps, Slate, Meagher and Flom LLP.
<PAGE> 3
Accor Contacts
Jacques Charbit Marie-Claire Camus
Tel: 33 1 45 38 87 53 Tel: 33 1 45 38 84 85
Red Roof Inns Contacts
Gail B. Whitcomb Lisa K. Klinger
Media Inquiries Analyst Inquiries
614-876-3276 614-876-3227
<PAGE> 1
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
ACCOR S.A.,
RRI ACQUISITION CORP.
and
RED ROOF INNS, INC.
July 10, 1999
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
THE OFFER AND MERGER ...................................................... 1
Section 1.1 The Offer .................................................... 1
Section 1.2 Company Actions .............................................. 3
Section 1.3 Directors .................................................... 4
Section 1.4 The Merger ................................................... 5
Section 1.5 Effective Time ............................................... 5
Section 1.6 Closing ...................................................... 5
Section 1.7 Directors and Officers of the Surviving Corporation .......... 5
Section 1.8 Merger Without Meeting of Stockholders ....................... 5
Section 1.9 Stockholders' Meeting ........................................ 6
ARTICLE II
CONVERSION OF SECURITIES .................................................. 6
Section 2.1 Conversion of Capital Stock .................................. 6
Section 2.2 Exchange of Certificates ..................................... 7
Section 2.3 Dissenting Shares ............................................ 8
Section 2.4 Company Option Plans ......................................... 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................. 9
Section 3.1 Organization ................................................. 9
Section 3.2 Capitalization ............................................... 10
Section 3.3 Authorization; Validity of Agreement; Company Action ......... 11
Section 3.4 Consents and Approvals; No Violations ........................ 12
Section 3.5 SEC Reports and Financial Statements ......................... 12
Section 3.6 No Undisclosed Liabilities ................................... 13
Section 3.7 Absence of Certain Changes ................................... 13
Section 3.8 Employee Benefit Plans; ERISA ................................ 13
Section 3.9 Litigation ................................................... 15
Section 3.10 No Default; Compliance with Applicable Laws ................. 15
Section 3.11 Taxes ....................................................... 16
Section 3.12 Property .................................................... 17
Section 3.13 Environmental Matters ....................................... 18
Section 3.14 Intellectual Property ....................................... 19
Section 3.15 Material Contracts .......................................... 20
Section 3.16 Labor Matters ............................................... 20
Section 3.17 Restrictions on Business Activities ......................... 21
Section 3.18 Year 2000 Compliance ........................................ 21
Section 3.19 Vote Required ............................................... 21
Section 3.20 Brokers ..................................................... 21
Section 3.21 Opinion of Financial Advisor ................................ 22
Section 3.22 Information in Proxy Statement; Schedule 14D-1 .............. 22
(i)
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER .................... 22
Section 4.1 Organization ................................................. 22
Section 4.2 Authorization; Validity of Agreement; Necessary Action ....... 22
Section 4.3 Consents and Approvals; No Violations ........................ 23
Section 4.4 Information in Proxy Statement; Schedule 14D-9 ............... 23
Section 4.5 Financing .................................................... 23
Section 4.6 Share Ownership .............................................. 23
Section 4.7 Purchaser's Operations ....................................... 23
Section 4.8 Brokers or Finders ........................................... 23
ARTICLE V
COVENANTS ................................................................. 24
Section 5.1 Interim Operations of the Company ............................ 24
Section 5.2 Access to Information ........................................ 26
Section 5.3 Consents and Approvals ....................................... 26
Section 5.4 No Solicitation .............................................. 27
Section 5.5 Publicity .................................................... 28
Section 5.6 Notification of Certain Matters .............................. 28
Section 5.7 Directors' and Officers' Insurance and Indemnification ....... 29
Section 5.8 Further Assurances ........................................... 30
Section 5.9 Fees and Expenses ............................................ 30
Section 5.10 Employee Matters ............................................ 30
ARTICLE VI
CONDITIONS ................................................................ 31
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger ... 31
ARTICLE VII
TERMINATION ............................................................... 32
Section 7.1 Termination .................................................. 32
Section 7.2 Effect of Termination ........................................ 33
Section 7.3 Payment of Non-Recommendation Fee ............................ 33
ARTICLE VIII
MISCELLANEOUS ............................................................. 34
Section 8.1 Amendment and Modification ................................... 34
Section 8.2 Nonsurvival of Representations and Warranties ................ 34
Section 8.3 Notices ...................................................... 34
Section 8.4 Counterparts ................................................. 36
Section 8.5 Entire Agreement; Third-Party Beneficiaries .................. 36
Section 8.6 Severability ................................................. 36
Section 8.7 Governing Law ................................................ 37
Section 8.8 Jurisdiction ................................................. 37
Section 8.9 Assignment ................................................... 38
(ii)
<PAGE> 4
Section 8.10 Waiver ....................................................... 38
Section 8.11 Headings ..................................................... 38
Section 8.12 Specific Performance ......................................... 38
Section 8.13 Obligations of Parent and the Company of Parent and the
Company ................................................... 38
Section 8.14 Limitations on Warranties .................................... 38
Section 8.15 Schedules .................................................... 39
Section 8.16 Interpretation ............................................... 39
Section 8.17 Execution .................................................... 39
(iii)
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 10, 1999 (this
"Agreement"), by and among ACCOR S.A., a corporation organized under the laws of
France ("Parent"), RRI ACQUISITION CORP., a Delaware corporation and a wholly
owned subsidiary of Parent ("Purchaser"), and RED ROOF INNS, INC., a Delaware
corporation (the "Company").
WHEREAS, Parent and Purchaser have proposed acquiring all the
outstanding common stock, par value $.01 per share, of the Company, (the
"Shares" or "Company Common Stock") at a price of $22.75 per Share in cash;
WHEREAS, the Company, Parent and Purchaser desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger (as defined below);
WHEREAS, as a condition and inducement to Parent's and
Purchaser's entering into this Agreement and incurring the obligations set forth
herein, each of THE MORGAN STANLEY REAL ESTATE FUND, L.P., a Delaware limited
partnership, MORGAN STANLEY REAL ESTATE INVESTMENT MANAGEMENT, INC., a Delaware
corporation, MORGAN STANLEY REAL ESTATE CO-INVESTMENT PARTNERSHIP II, L.P., a
Delaware limited partnership (collectively, the "MS Entities"), concurrently
herewith is entering into a Tender and Voting Agreement (the "Tender
Agreement"), dated as of the date hereof, with Parent and Purchaser, pursuant to
which, among other things, each MS Entity is agreeing to tender its Shares in
the Offer and vote such Shares, all upon the terms and subject to the conditions
set forth in the Tender Agreement;
WHEREAS, the Boards of Directors of Parent, Purchaser and the
Company have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the acquisition of the Company by Parent
and Purchaser upon the terms and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) Provided this Agreement shall not
have been terminated in accordance with Section 7.1, as promptly as practicable
(but in no event later than five business days after the public announcement of
the execution of this Agreement), Purchaser shall, and Parent shall cause
Purchaser to, commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) an offer (the "Offer") to
purchase for cash any and all shares of the issued and outstanding Company
Common Stock at a price of $22.75 per Share, net to the seller in cash (such
price, or such higher price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price"), subject to the conditions set forth in
Annex A hereto and subject to Section 2.2(e). The Company shall not tender
Shares held by it or by any of its subsidiaries pursuant to the Offer. The
initial expiration date to be set forth in the Offer shall be August 12, 1999
(as extended in accordance herewith, the "Expiration Date"), subject to
extension as provided below. Purchaser shall, on the terms and subject to the
prior satisfaction or waiver of the conditions of the Offer (except that the
Minimum Condition (as hereinafter defined) may not be amended or waived below
51% of the total issued and outstanding shares (other than treasury shares) of
Company Common Stock), accept for payment and pay for Shares
tendered as soon as it is legally permitted to do so under applicable law. The
obligations of Purchaser to consummate the Offer and to accept for payment and
to pay for any Shares validly tendered on or prior to the expiration of the
Offer and not withdrawn shall be subject only to there being validly tendered
and not
<PAGE> 6
withdrawn prior to the expiration of the Offer, not less than 18,400,000 shares
of Company Common Stock (the "Minimum Condition"), which shares represent 68.3%
of the total issued and outstanding shares (other than treasury shares) of
Company Common Stock on the date hereof, and the other conditions set forth in
Annex A hereto.
(b) The Offer shall be made by means of an offer to purchase
(the "Offer to Purchase") containing the terms set forth in this Agreement, the
Minimum Condition and the other conditions set forth in Annex A hereto.
Purchaser shall not amend or waive the Minimum Condition to be less than 51% of
the total issued and outstanding shares (other than treasury shares) of Company
Common Stock and shall not decrease the Offer Price or decrease the number of
Shares sought, amend the conditions to the Offer set forth in Annex A or impose
conditions to the Offer in addition to those set forth in Annex A, without the
prior written consent of the Company (such consent to be authorized by the Board
of Directors of the Company or a duly authorized committee thereof).
(c) Notwithstanding Section 1.1(b): (i) Purchaser shall be
entitled to and shall, and Parent agrees to cause Purchaser to, extend the Offer
(and defer the Expiration Date) for a period ending October 14, 1999, in one or
more periods of not more than 10 business days each, if at the initial
expiration date of the Offer, or any extension thereof, any condition to the
Offer is not satisfied or waived; and (ii) (A) Purchaser shall be entitled, but
shall be under no obligation, to extend the Offer (and to defer the Expiration
Date) further for an additional period ending December 14, 1999 (in one or more
periods of not more than 10 business days each) following an extension pursuant
to clause (i) of this sentence, if at the Expiration Date, as deferred pursuant
to clause (i) of this sentence to October 14, 1999: (x) the condition to the
Offer set forth in paragraph (ii) of Annex A has not been satisfied or waived;
(y) the condition to the Offer set forth in paragraph (iii)(a) of Annex A has
not been satisfied or waived (so long as Parent or Purchaser is using its best
commercial efforts to cause any such judgment, order or injunction to be vacated
or lifted); or (z) the condition to the Offer set forth in paragraph (iii)(e) of
Annex A has not been satisfied or waived; and (B) if Purchaser shall not have
sent the Company written notice of an extension pursuant to the preceding clause
(A) of this Section 1.1(c)(ii) on or before October 8, 1999, Purchaser shall be
obligated to extend the Offer as set forth in clause (A) of this Section
1.1(c)(ii) upon written demand of the Company delivered to Purchaser on or
before October 12, 1999; and (iii) at the Expiration Date, if all conditions to
the Offer have been satisfied or waived, and for so long as less than 90% of the
outstanding shares of Company Common Stock have been validly tendered and not
properly withdrawn pursuant to the Offer, Purchaser may, in its sole discretion
and without the consent of the Company, extend the Offer (and defer the
Expiration Date) for up to an additional 20 business days in the aggregate (in
periods of no more than five business days each). In addition, the Offer Price
may be increased and the Offer may be extended to the extent required by law in
connection with such increase without the consent of the Company. Any extension
of the Offer in accordance herewith shall defer the Expiration Date until the
latest date to which the Offer is so extended.
(d) In the event that the Offer is terminated by Purchaser, it
shall deliver to the Company a written statement setting forth the applicable
provision of Annex A of this Agreement pursuant to which it has elected to
terminate the Offer.
(e) As soon as practicable on the date the Offer is commenced,
Parent and Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 shall include,
as exhibits, the Offer to Purchase and a form of letter of transmittal
(collectively, together with any amendments and supplements thereto, the "Offer
Documents"). The Offer Documents shall comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with the
SEC and on the date first published, sent or given to the Company's
stockholders, shall not 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
were made, not misleading, except that no representation is made by Parent or
Purchaser with respect to information supplied by the Company for inclusion in
the Offer Documents. Each of Parent and Purchaser shall further take all steps
necessary to cause the Offer Documents to be filed with the SEC and to be
2
<PAGE> 7
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of Parent and Purchaser, on the one
hand, and the Company, on the other hand, shall promptly correct any information
provided by it for use in the Offer Documents if and to the extent that it shall
have become false and misleading in any material respect and Purchaser further
shall take all steps necessary to cause the Offer Documents as so corrected to
be filed with the SEC and to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given an opportunity to review and comment upon the
Schedule 14D-1 (and shall provide any comments thereon as soon as practicable)
prior to the filing thereof with the SEC. In addition, Parent and Purchaser
shall provide the Company and its counsel in writing with any comments that
Parent, Purchaser or their counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after receipt of such comments and with
copies of any written responses and telephonic notification of any verbal
responses by Parent, Purchaser or their counsel.
(f) Parent shall provide or cause to be provided to Purchaser
all the funds necessary to purchase any shares of Company Common Stock that
Purchaser becomes obligated to purchase pursuant to the Offer.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer
and represents that its Board of Directors, at a meeting duly called and held,
has (i) approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (as defined in Section 1.4) (collectively,
the "Transactions"), determining that the Merger is advisable and that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders and recommending that the Company's stockholders accept
the Offer and approve and adopt the Merger and this Agreement and (ii) resolved
to recommend that the stockholders of the Company accept the Offer, tender their
Shares thereunder to Purchaser and approve and adopt this Agreement and the
Merger; provided that such recommendation may be withdrawn, modified or amended
as provided in Section 5.4(d) hereof. The Company represents that the
restrictions on "business combinations" contained in Section 203 of the Delaware
General Corporation Law, as amended (the "DGCL"), are inapplicable to the
transactions contemplated by this Agreement provided that such transactions are
consummated in accordance with the terms hereof. The Company hereby consents to
the inclusion in the Offer Documents of the recommendation of its Board of
Directors described in clause (ii) of the immediately preceding sentence, unless
and until such recommendation is withdrawn or modified, in a manner adverse to
Parent, in accordance with Section 5.4(d) hereof.
(b) Concurrently with the commencement of the Offer, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9") which shall, subject to
the fiduciary duties of the Company's directors under applicable law, as
determined by the Board of Directors after consultation with independent legal
counsel, and to the provisions of Section 5.4(d) hereof, contain the
recommendation referred to in clause (ii) of Section 1.2(a) hereof. The Schedule
14D-9 shall comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, shall not 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 were made, not
misleading, except that no representation is made by the Company with respect to
information supplied by Parent or Purchaser for inclusion in the Schedule 14D-9.
The Company further shall take all steps necessary to cause the Schedule 14D-9
to be filed with the SEC and to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws. Each
of the Company, on the one hand, and Parent and Purchaser, on the other hand,
shall promptly correct any information provided by it for use in the Schedule
14D-9 if and to the extent that it shall have become false and misleading in any
material respect and the Company further shall take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal
3
<PAGE> 8
securities laws. Parent, Purchaser and their counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 (and shall provide any
comments thereon as soon as practicable) prior to the filing thereof with the
SEC. In addition, the Company shall provide Parent, Purchaser and their counsel
in writing with any comments the Company or its counsel may receive from the SEC
or its staff with respect to the Schedule 14D-9 promptly after receipt of such
comments and with copies of any written responses and telephonic notification of
any verbal responses by the Company or its counsel.
(c) In connection with the Offer, the Company shall promptly
furnish or cause to be furnished to Purchaser mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date, and shall
furnish Purchaser with such information and assistance as Purchaser or its
agents may reasonably request in communicating the Offer to the stockholders of
the Company. Except for such steps as are necessary to disseminate the Offer
Documents and subject to the requirements of applicable law, each of Parent and
Purchaser shall hold in confidence the information contained in any of such
labels and lists and the additional information referred to in the preceding
sentence, shall use such information only in connection with the Offer and
Merger, and, if this Agreement is terminated, shall upon request of the Company
deliver or cause to be delivered to the Company all copies of such information
then in its possession or the possession of its agents or representatives.
Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for Shares by
Parent or any of its subsidiaries which represent at least a majority of the
outstanding shares of Company Common Stock (on a fully diluted basis), Parent
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company as is equal to the
product of the total number of directors on such Board (giving effect to the
directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by Purchaser,
Parent and any of their affiliates bears to the total number of shares of
Company Common Stock then outstanding. The Company shall, upon request of and as
specified by Purchaser or Parent, on the date of such request, increase the size
of its Board of Directors and/or secure the resignations of such number of its
incumbent directors as is necessary, consistent with the request of Purchaser or
Parent, to enable Parent's designees to be so elected to the Company's Board of
Directors, and shall take all actions necessary to cause Parent's designees to
be so elected or appointed. At such times, the Company will use its reasonable
best efforts to cause individuals designated by Parent to constitute the same
percentage as such individuals represent on the Company's Board of Directors,
each committee of the Board (other than any committee of the Board established
to take action under this Agreement), each board of directors of each Subsidiary
(as defined in Section 3.1) and each committee of each such board.
Notwithstanding the foregoing, until the Effective Time (as defined in Section
1.5 hereof), the Company shall retain as members of its Board of Directors at
least two directors who are directors of the Company on the date hereof (the
"Continuing Directors"); provided, however, that subsequent to the purchase of
and payment for Shares pursuant to the Offer, Parent shall always have its
designees represent at least a majority of the entire Board of Directors. The
Company's obligations under this Section 1.3(a) shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Parent or
Purchaser shall supply the Company any information with respect to either of
them and their nominees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1. Upon receipt of such information from Parent or Purchaser,
the Company shall include in the Schedule 14D-9 (as an annex or otherwise) the
information required by Section 14(f) and Rule 14f-1 as is necessary to enable
Parent's designees to be elected to the Company's Board of Directors.
(b) From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors (the "Appointment
Date"), the unanimous vote of the entire Board of Directors of the Company is
required for the Company to: (i) amend or terminate this Agreement, (ii) extend
the time for performance of any of the obligations of Parent or Purchaser
hereunder, (iii) waive any condition or any of the Company's rights or remedies
hereunder, or (iv) amend the Company's certificate of incorporation or by-laws.
4
<PAGE> 9
Section 1.4 The Merger. Subject to the terms and conditions of this
Agreement and the provisions of the DGCL, at the Effective Time (as defined in
Section 1.5 hereof), the Company and Purchaser shall consummate a merger (the
"Merger") pursuant to which (a) Purchaser shall be merged with and into the
Company and the separate corporate existence of Purchaser shall thereupon cease,
(b) the Company shall be the successor or surviving corporation in the Merger
(the "Surviving Corporation") under the name "Red Roof Inns, Inc." and shall
continue to be governed by the laws of the State of Delaware, and (c) the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger.
Pursuant to the Merger, (x) the Certificate of Incorporation of Purchaser, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, and (y) the By-laws of Purchaser,
as in effect immediately prior to the Effective Time, shall be the By-laws of
the Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation and such By-laws; provided, that Section 1 of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read in its entirety as follows: "The name of the Corporation is Red Roof Inns,
Inc." The Merger shall have the effects set forth in the DGCL.
Section 1.5 Effective Time. Parent, Purchaser and the Company shall
cause an appropriate Certificate of Merger or Certificate of Ownership and
Merger (the "Certificate of Merger") to be executed and filed on the date of the
Closing (as defined in Section 1.6) (or on such other date as Parent and the
Company may agree) with the Secretary of State of the State of Delaware (the
"Secretary of State") as provided in the DGCL. The Merger shall become effective
on the date on which the Certificate of Merger has been duly filed with the
Secretary of State or such other time as is agreed upon by the parties and
specified in the Certificate of Merger, and such time is hereinafter referred to
as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m., New York City time, on a date to be specified by the
parties, which shall be as soon as practicable, but in no event later than the
third business day after satisfaction or waiver of all the conditions set forth
in Article VI hereof (the "Closing Date"), at the New York offices of Proskauer
Rose LLP, unless another date or place is agreed to in writing by the parties
hereto.
Section 1.7 Directors and Officers of the Surviving Corporation. The
directors of Purchaser and the officers of the Company immediately prior to the
Effective Time shall, from and after the Effective Time, be the directors and
officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed or qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws.
Section 1.8 Merger Without Meeting of Stockholders. In the event that
Parent, Purchaser or any other Subsidiary of Parent, shall acquire at least 90
percent of the outstanding shares of Company Common Stock pursuant to the Offer
or otherwise, each of the parties hereto shall take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of stockholders of the
Company, in accordance with Section 253 of the DGCL.
Section 1.9 Stockholders' Meeting. Notwithstanding Section 1.8 hereof:
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as soon as
practicable following the acceptance for payment and purchase of Shares
by Purchaser pursuant to the Offer for the purpose of considering and
taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement and use its reasonable best efforts (x) to obtain and furnish
the information required to be included by the SEC in the Proxy
Statement (as
5
<PAGE> 10
hereinafter defined) and, after consultation with Parent, to respond
promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy
or information statement (the "Proxy Statement") to be mailed to its
stockholders and (y) to obtain the necessary approvals of the Merger
and this Agreement by its stockholders; and
(iii) subject to the fiduciary obligations of the
Board under applicable law as advised by independent counsel, include
in the Proxy Statement the recommendation of the Board that
stockholders of the Company vote in favor of the approval of the Merger
and the adoption of this Agreement.
(b) Parent shall provide the Company with the information
concerning Parent and Purchaser required to be included in the Proxy Statement.
Parent shall vote, or cause to be voted, all the Shares then owned by it,
Purchaser or any of its other subsidiaries and affiliates in favor of the
approval of the Merger and the approval and adoption of this Agreement.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of Company Common Stock or common stock, par value $.01 per share, of
Purchaser (the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding share
of the Purchaser Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, $.01 par value per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
shares of Company Common Stock that are owned by the Company as treasury stock,
all shares of Company Common Stock owned by any Subsidiary (as defined in
Section 3.1) of the Company and any shares of Company Common Stock owned by
Parent, Purchaser or any other wholly owned Subsidiary of Parent immediately
prior to the Effective Time shall be cancelled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Shares to be cancelled in accordance with Section 2.1(b) hereof and any shares
of Dissenting Common Stock (as defined in Section 2.3 hereof)), shall be
converted into the right to receive the Offer Price payable to the holder
thereof, without interest (the "Merger Consideration"), upon surrender of the
certificate formerly representing such share of Company Common Stock in the
manner provided in Section 2.2 hereof. All such shares of Company Common Stock,
when so converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2 hereof, without
interest.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company (the "Paying Agent") reasonably acceptable to
the Company to make the payments of the funds to which holders of shares of
Company Common Stock shall become entitled to pursuant to this Agreement upon
surrender of their Certificates (as hereinafter defined) pursuant to Section
2.2(b) hereof, and such amounts shall hereinafter be referred to as the
"Exchange Fund." The expenses of the Paying Agent shall not be paid from the
Exchange Fund but shall be paid directly by the Surviving Corporation.
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<PAGE> 11
Prior to the Effective Time, Parent shall take all steps necessary to deposit or
cause to be deposited with the Paying Agent, in trust for the benefit of the
Company's stockholders, the aggregate Merger Consideration, in immediately
available funds, for timely payment thereunder. If the amount of the cash in the
Exchange Fund is insufficient to pay all of the amounts required to be paid
pursuant to this Agreement, Parent, from time to time after the Effective Time,
shall deposit in trust additional cash with the Paying Agent sufficient to make
all such payment. The Exchange Fund shall not be used for any purpose that is
not provided herein. The Paying Agent may invest, if so directed by Parent or
the Surviving Corporation, the Exchange Fund in obligations of the United States
government or any agency or instrumentality thereof, or in obligations that are
guaranteed or insured by the United States government or an agency or
instrumentality thereof. Any net profit resulting from, or interest or income
produced by, such investments shall be payable to Parent on demand.
(b) Exchange Procedures. As soon as practicable after the
Effective Time but in no event more than three business days thereafter, Parent
shall cause the Paying Agent to mail to each holder of record of a certificate
or certificates, which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"), whose shares
were converted pursuant to Section 2.1 hereto into the right to receive the
Merger Consideration, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Parent and the Surviving Corporation
may reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent, together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration (subject to
subsection (e) below) for each share of Company Common Stock formerly
represented by such Certificate and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be made to
a Person other than the Person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. For
purposes of this Agreement, the term "Person" shall mean an individual,
corporation, partnership, limited liability company, joint venture, association,
trust, estate, unincorporated organization or other entity. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive the Merger
Consideration in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in Company
Common Stock. At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares, except as
otherwise provided for herein or by applicable law. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following
one year after the Effective Time, the Surviving Corporation shall be entitled
to require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) as general
creditors thereof with respect to the payment of any Merger Consideration that
may be payable upon surrender of any Certificates such stockholder holds, as
determined pursuant to this Agreement, without any interest thereon.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
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<PAGE> 12
(e) Withholding Taxes. Parent, Purchaser, the Surviving
Corporation and the Paying Agent shall be entitled to deduct and withhold from
the consideration otherwise payable to a holder of Shares pursuant to the Offer
or Merger such amounts as Parent, Purchaser, the Surviving Corporation or the
Paying 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 any provision of state, local or foreign tax law, it being acknowledged that
Parent, Purchaser, the Surviving Corporation or the Paying Agent shall not
deduct or withhold from the consideration otherwise payable to any such holder
of Shares pursuant to the Offer or the Merger any amount with respect to which
such holder has timely delivered to Parent, Purchaser, the Surviving Corporation
or the Paying Agent, as the case may be, a properly executed Form 8709 in
accordance with applicable law. Any amounts so withheld shall be delivered to
the applicable taxing authority for the account of such holder of shares of
Company Common Stock from whom the amount was withheld. To the extent amounts
are so withheld by Parent, Purchaser, the Surviving Corporation or the Paying
Agent, the withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares in respect of which the
deduction and withholding was made.
Section 2.3 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, if and to the extent required by the DGCL, shares of
Company Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by holders of such shares of Company Common
Stock who have properly exercised appraisal rights with respect thereto (the
"Dissenting Common Stock") in accordance with Section 262 of the DGCL, shall not
be exchangeable for the right to receive the Merger Consideration, and holders
of such shares of Dissenting Common Stock shall be entitled to receive payment
of the appraised value of such shares of Dissenting Common Stock in accordance
with the provisions of Section 262 of the DGCL unless and until such holders
fail to perfect or effectively withdraw or otherwise lose their rights to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses such right, such
shares of Dissenting Common Stock shall thereupon be treated as if they had been
converted into and to have become exchangeable for, at the Effective Time, the
right to receive the Merger Consideration, without any interest thereon.
Notwithstanding anything to the contrary contained in this Section 2.3, if (i)
the Merger is rescinded or abandoned or (ii) the stockholders of the Company
revoke the authority to effect the Merger, then the right of any stockholder to
be paid the fair value of such stockholder's Dissenting Common Stock pursuant to
Section 262 of the DGCL shall cease. The Company shall give Parent prompt notice
of any demands received by the Company for appraisals of shares of Dissenting
Common Stock. The Company shall not, except as required by applicable law or
with the prior written consent of Parent, make any payment with respect to any
demands for appraisals or offer to settle or settle any such demands.
Section 2.4 Company Option Plans.
(a) Stock Options Plans. The Company shall take all actions
necessary to provide that, effective as of the date of the consummation of the
Offer, and contingent upon the consummation of the Offer, (i) each outstanding
employee stock option to purchase Shares ("Option") granted under the Company's
Amended and Restated 1994 Management Incentive Equity Plan (the "MEIP") and the
Company's 1995 Director Stock Option Plan (collectively, the "Option Plans"),
whether or not then exercisable or vested, shall be cancelled and (ii) in
consideration of such cancellation, the Company (or, at Parent's option, the
Purchaser) shall pay to such holders of Options an amount in respect thereof
equal to the product of (A) the excess, if any, of the Offer Price over the
exercise price of each such Option and (B) the number of Shares subject thereto
(such payment, if any, to be net of applicable withholding taxes); provided,
however, that such cancellation and payment shall occur at the Effective Time
with respect to any Option that is held by an individual who is subject to
Section 16 of the Exchange Act with respect to Company equity securities and who
consents, prior to the consummation of the Offer and in form reasonably
satisfactory to Parent, to the cancellation of such Option at the Effective
Time. As of the date of the consummation of the Offer, the Option Plans shall
terminate and all rights and obligations of the Company and the holder of any
Option under any provision of the Option Plans, any agreement entered into
thereunder or any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any Subsidiary of the
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Company shall be cancelled. The Company shall take all action necessary to
ensure that, after the time of the consummation of the Offer, no person shall
have any right under the Option Plans or any other plan, program or arrangement
with respect to equity securities of the Company, or any direct or indirect
Subsidiary of the Company.
(b) Stock Purchase Plan. Notwithstanding any other provision
of the Amended and Restated 1996 Employee Stock Purchase Plan (the "Stock
Purchase Plan"), the Company shall take all actions as are necessary or
appropriate so that all outstanding rights shall be exercised for all
participants in the Stock Purchase Plan in accordance with the terms of Section
8 thereof. Prior to the Effective Time, the Company shall take (or cause to be
taken) all actions as are necessary or appropriate to effectuate the termination
of the Stock Purchase Plan prior to the Effective Time in accordance with its
terms and the Code and other applicable law. The Company shall promptly deliver
to Parent prior to the Effective Time true and complete copies of all
documentation relating to or arising from the termination of the Stock Purchase
Plan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
Section 3.1 Organization.
(a) Each of the Company and its Subsidiaries (as defined in
this Section 3.1) is a corporation or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate or other power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power or authority would not have
a material adverse effect on the Company and its Subsidiaries taken as a whole.
As used in this Agreement, the word "Subsidiary" means, with respect to any
Person any other Person of which (i) the first Person or any of its other
Subsidiaries is a general partner (excluding partnerships in which the first
Person or any of its other Subsidiaries do not have at least 50% of the voting
interest) or (ii) at least 50% of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such other Person is
directly or indirectly owned or controlled by the first Person and/or by any one
or more of its Subsidiaries. As used in this Agreement, any reference to any
event, change or effect having a material adverse effect on or with respect to
any entity (or group of entities taken as a whole) means such event, change or
effect is materially adverse to the consolidated financial condition, businesses
or results of operations of such entity (or, if used with respect to a group of
entities, of such group of entities taken as a whole); provided, however, that
the effects of changes that are generally applicable to (i) the hotel, motel or
travel industries, (ii) the United States or French economy or (iii) the United
States or French securities markets shall be excluded from such determination;
and provided, further, that the following shall also be excluded from such
determination: any adverse effect resulting, directly or indirectly, in whole or
in part, from (x) the execution of this Agreement and the announcement of this
Agreement and the transactions contemplated hereby, including, but not limited
to, any stockholder litigation brought or threatened against the Company or any
member of the Board of Directors of the Company in respect of this Agreement,
the Offer or the Merger, and (y) any change in the market price of the Company
Common Stock, in and of itself. Notwithstanding anything to the contrary in this
Agreement: (A) clause (x) of the preceding sentence shall have no effect on and
is not intended to limit the conditions set forth on Annex A or Section 6.1, and
(B) clauses (i), (ii) and (iii) of the preceding sentence shall have no effect
on and are not intended to limit the conditions set forth on Annex A or Section
6.1 other than clause (iii)(c) set forth on Annex A. The Company and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not in the aggregate have a material adverse effect on
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the Company and its Subsidiaries taken as a whole. Schedule 3.1(a) of the
Company's Disclosure Schedule dated the date hereof and delivered to Parent and
Purchaser herewith (the "Company Disclosure Schedule") sets forth a complete and
correct list of all the Company's Subsidiaries and their respective
jurisdictions of incorporation or organization. Except as set forth in Schedule
3.1(a), neither the Company nor any Subsidiary of the Company holds any interest
in a partnership or joint venture of any kind.
(b) Except as set forth in Schedule 3.1(b), the Company has
heretofore delivered to Parent a complete and correct copy of each of its
Certificate of Incorporation and By-laws, as currently in effect, and has
heretofore made available to Parent a complete and correct copy of the charter
and by-laws of each of its Subsidiaries, as currently in effect. In all material
respects, the minute books of the Company and the Subsidiaries of the Company
contain accurate records of all meetings and accurately reflect all other
actions taken by the stockholders, the boards of directors and all committees of
the boards of directors of the Company and the Subsidiaries of the Company.
Except as set forth on Schedule 3.1(b), complete and accurate copies of all such
minute books and of the stock register of the Company and each Subsidiary of the
Company have been made available by the Company to the Parent.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of (i) 100,000,000 shares of Company Common Stock, and (ii)
10,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock"). As of the date hereof, (v) 26,951,712 shares of Company Common Stock
are issued and outstanding, (w) 4,060,000 shares of Company Common Stock are
reserved for issuance upon exercise of outstanding Options (whether or not
exercisable and granted under the Option Plans), (x) 300,000 shares of Company
Common Stock are reserved for issuance under the Stock Purchase Plan, (y) no
shares of Preferred Stock are issued and outstanding and (z) 1,637,160 shares of
Company Common Stock are held in the Company's treasury. All the outstanding
shares of the Company Common Stock are, and all shares which may be issued
pursuant to the exercise of outstanding Options when issued in accordance with
the respective terms thereof shall be, duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights. There are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except (a) as set forth
above,(b) for the transactions contemplated by this Agreement, as of the date
hereof, and (c) as set forth in Schedule 3.2(a), (i) there are no shares of
capital stock of the Company authorized, issued or outstanding, (ii) there are
no existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character, relating to
the issued or unissued capital stock of the Company or any of its Subsidiaries,
obligating the Company or any of its Subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interest in, the Company or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity interests,
or obligating the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment, and (iii) there are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Shares, or capital stock of the Company or any Subsidiary
or affiliate of the Company. The Company has provided Parent and Purchaser with
a true and complete list, as of the date hereof, of (i) all Options to purchase
Company Common Stock that have been granted by the Company, (ii) the holder of
each of the Options, (iii) the Option Plan under which each Option was issued,
(iv) the number of Options held by each such holder, (v) the exercise prices of
each such Option, (vi) the date of grant of such Option, (vii) the expiration
date of such Option, (viii) whether such Option has vested as of the date
hereof, and (ix) whether such Option is a non-qualified stock option or an
"incentive stock option" within the meaning of Section 422(b) of the Code. No
shares of restricted stock or other equity-based awards have been granted under
the Option Plans or otherwise.
(b) Except as set forth on Schedule 3.2(b) all the outstanding
shares of capital stock, partnership interests, membership interests or other
equity interests of or in each of the Subsidiaries are owned beneficially and of
record by the Company, directly or indirectly, free and clear of any security
interest, lien, claim, pledge, agreement, limitation on voting rights or other
encumbrance of
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any nature whatsoever, and all such shares or interests have been validly issued
and are fully paid, free of preemptive rights and, in the case of capital stock,
nonassessable.
(c) There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock or equity interests of or in the
Company or any of the Subsidiaries. None of the Company or its Subsidiaries is
required to redeem, repurchase or otherwise acquire shares of capital stock or
other equity interests of or in the Company, or any of its Subsidiaries,
respectively, as a result of the transactions contemplated by this Agreement.
Section 3.3 Authorization; Validity of Agreement; Company Action. (a)
The Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, subject to
obtaining the approval of holders of a majority of the Shares prior to the
consummation of the Merger in accordance with section 251 of the DGCL, if so
required. The execution, delivery and performance by the Company of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly authorized by its Board of Directors and, except for obtaining
the approval of its stockholders as contemplated by Section 1.9 hereof, no other
corporate action on the part of the Company is necessary to authorize the
execution and delivery by the Company of this Agreement and the consummation by
it of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, assuming due and valid authorization,
execution and delivery hereof by the other parties hereto, is a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) The Board of Directors of the Company has approved and
taken all corporate action required to be taken by the Board of Directors for
the consummation of the transactions contemplated by this Agreement.
Section 3.4 Consents and Approvals; No Violations. Except as set forth
on Schedule 3.4 and except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of, the
Exchange Act, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") state or foreign laws relating to takeovers, state securities or blue sky
laws, foreign antitrust laws and the DGCL, neither the execution, delivery or
performance of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby nor compliance by the Company with any
of the provisions hereof shall (i) conflict with or result in any breach of any
provision of the certificate of incorporation or by-laws or similar
organizational documents of the Company or of any of its Subsidiaries, (ii)
require on the part of the Company any filing with, or permit, authorization,
consent or approval of, any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency (a
"Governmental Entity"), (iii) result in a material violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party or by which any of them or any
of their properties or assets may be bound, (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its Subsidiaries or any of their properties or assets, (v) result in the
creation or imposition of any lien, claim, security interest or other
encumbrance on any of the assets of the Company or any of its Subsidiaries, or
(vi) result in the creation or imposition of any lien, claim, security interest
or other encumbrance on any Company Common Stock or any equity interest in any
Subsidiary, excluding from the foregoing clauses (ii), (iii), (iv) or (v) where
the failure to obtain such permits, authorizations, consents or approvals or to
make such filings, or the existence of such violations, breaches or defaults,
would not, individually or in the aggregate, have a material adverse effect on
the Company and its Subsidiaries taken as a whole, and which shall not
materially impair the ability of the Company to consummate the transactions
contemplated hereby.
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Section 3.5 SEC Reports and Financial Statements. Except as set forth
on Schedule 3.5, the Company has filed with the SEC all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 1994 under the Exchange Act (as such documents have been amended
since the time of their filing, collectively, the "Company SEC Documents"). As
of their respective dates and, if amended, as of the date of the last such
amendment, the Company SEC Documents, including, without limitation, any
financial statements or schedules included therein; did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any forms, reports or other documents with the
SEC pursuant to Section 12 or 15 of the Exchange Act. The financial statements
of the Company (the "1998 Financial Statements") included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 2, 1999 (including
the related notes thereto) (the "1998 Form 10-K") and in the quarterly report on
Form 10-Q for the first fiscal quarter occurring since the 1998 Form 10-K, have
been prepared from, and are in accordance with, the books and records of the
Company and its consolidated subsidiaries, comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto and subject, in the case of unaudited interim financial statements, to
normal year-end adjustments and to the absence of complete notes) and fairly
present the consolidated financial position and the consolidated results of
operations and cash flows of the Company and its consolidated subsidiaries as at
the dates thereof or for the periods presented therein. Except as disclosed in
the Company SEC Documents or on Schedule 3.5, the books and records of the
Company and its Subsidiaries have been, and are being, maintained, in all
material respects, in accordance with GAAP and any other applicable legal and
accounting requirements (subject to normal year-end audit adjustments and the
absence of notes).
Section 3.6 No Undisclosed Liabilities. Except (a) as disclosed in the
Company SEC Documents or on Schedule 3.6, (b) for liabilities and obligations
incurred in the ordinary course of business consistent with past practices since
January 2, 1999, and (c) for liabilities and obligations incurred in connection
with the consummation of the transactions contemplated hereby, neither the
Company nor any of its Subsidiaries has incurred any liabilities which would be
reasonably expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
Section 3.7 Absence of Certain Changes. Except as disclosed in the
Company SEC Documents or on Schedule 3.7, since January 2, 1999, the Company and
its Subsidiaries have conducted their respective businesses in the ordinary
course of business consistent with past practice and there has not been (i) as
of the date hereof, any change in the consolidated financial condition, business
or results of operations of the Company or the amount, character or ownership
interests of the Company's assets that resulted in or would be reasonably
expected to result in a material adverse effect on the Company and its
Subsidiaries, taken as a whole; (ii) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of the Company or of any of its Subsidiaries
(other than dividends and distributions by the Company's Subsidiaries to the
Company); (iii) any change by the Company or any of its Subsidiaries in
accounting principles or methods, except insofar as may be required by a change
in GAAP or applicable law; (iv) any split, combination or reclassification of
shares of the Company's capital stock; (v) any entry into any written employment
agreement with, or any increase in the rate or terms of compensation payable or
to become payable by the Company or any of its Subsidiaries to, any of their
respective directors, officers or key employees; or (vi) any increase in the
rate or terms (including, without limitation, any acceleration of the right to
receive payment) of any bonus, insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with any such directors, officers
or key employees, except for increases occurring in the ordinary course of
business or as required by law.
Section 3.8 Employee Benefit Plans; ERISA.
(a) Schedule 3.8(a) contains a true and complete list of each
material deferred compensation, bonus, profit sharing, stock option, pension,
incentive compensation, and equity
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compensation plan; "welfare" plan, fund or program (within the meaning of
section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")); "pension" plan, fund or program (within the meaning of section 3(2)
of ERISA); each employment, consulting, change in control, termination or
severance agreement; and each fringe benefit, insurance, welfare,
post-retirement, health, life, tuition refund, scholarship, relocation,
disability, accident, sick, vacation, commission, payroll practices, retention,
noncompetition, or any other material employee benefit plan, fund, program,
agreement or arrangement (whether written or unwritten, insured or
self-insured), in each case, that is or was sponsored, maintained or contributed
to or required to be contributed to by the Company, by any Subsidiary or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), that
together with the Company would be deemed a "single employer" within the meaning
of section 4001(b) of ERISA or Section 414(b), (c), (m) or (o) of the Code, or
to which the Company, any Subsidiary or an ERISA Affiliate is a party, for the
benefit of any employee, director or stockholder of the Company or any
Subsidiary (whether current, former or retired) or their beneficiaries or to
which the Company or any Subsidiary or any ERISA Affiliate has or could
reasonably be expected to have any liability (the "Benefit Plans").
(b) With respect to each Benefit Plan, the Company has made
available to Purchaser and Parent true and complete copies of the Benefit Plan
and any amendments thereto (or if the Benefit Plan is not a written Benefit
Plan, a description thereof), any related trust or other funding vehicle, any
reports, financial statements or summaries required under ERISA or the Code, the
most recent determination letter received from the Internal Revenue Service (the
"IRS") with respect to each Benefit Plan intended to qualify under section 401
of the Code and any material communication received by or furnished to the
Company, any Subsidiary or any ERISA Affiliate from the IRS or any other
governmental entity.
(c) No liability under Title IV or section 302 of ERISA has
been incurred by the Company, any Subsidiary or any ERISA Affiliate that has not
been satisfied in full, and no condition exists that presents a material risk to
the Company, any Subsidiary or any ERISA Affiliate of incurring any such
liability, other than liability for premiums due the Pension Benefit Guaranty
Corporation (the "PBGC") (which premiums have been paid when due). With regard
to the single employer plan (within the meaning of Section 4001(a)(15) of ERISA)
disclosed on Schedule 3.8(a) (the "Terminated Pension Plan"), the Company has
(i) taken all corporate actions necessary to terminate the Terminated Pension
Plan; (ii) received a favorable determination letter from the IRS approving the
qualified status of the Terminated Pension Plan upon its termination; (iii)
timely filed PBGC Forms 500 and Form 501, including all schedules and
attachments; (iv) timely filed the final Form 5500 with the IRS; and (v) taken
all other actions as are necessary or appropriate to effectuate the termination
of the Terminated Pension Plan in accordance with its terms and the Code, ERISA
and other applicable law. Neither the Company, any ERISA Affiliate, nor any of
their respective predecessors is liable for or will be liable for any liability
with respect to the Terminated Pension Plan.
(d) No Benefit Plan is a "multiemployer pension plan," as
defined in section 3(37) or 4001(a)(3) of ERISA, or Section 414(f) of the Code
(a "Multiemployer Plan") nor is any Benefit Plan a plan described in section
4063(a) of ERISA.
(e) Except as disclosed on Schedule 3.8, each Benefit Plan
intended to be "qualified" within the meaning of section 401(a) of the Code has
received a determination letter from the Internal Revenue Service to the effect
that it is so qualified and, to the knowledge of the Company, nothing has
occurred or is reasonably expected to occur through the Effective Time that
caused or could cause the loss of such qualification or exemption or the
imposition of any material penalty or material tax liability.
(f) Except as disclosed on Schedule 3.8(f), no Benefit Plan
provides medical, surgical, hospitalization, death or similar benefits (whether
or not insured) for employees or former employees of the Company or any
Subsidiary for periods extending beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable law, or (ii) death
benefits under any "pension plan".
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(g) There are no pending or, to the knowledge of the Company,
threatened or anticipated claims by or on behalf of any Benefit Plan, by any
employee or beneficiary covered under any such Benefit Plan, or otherwise
involving any such Benefit Plan (other than routine claims for benefits).
(h) With respect to each of the Benefit Plans on Schedule
3.8(a): (i) all material payments required by any Benefit Plan, any collective
bargaining agreement or other agreement, or by law (including, without
limitation, all contributions, insurance premiums, or intercompany charges) with
respect to all periods through the date of the Effective Time shall have been
made prior to the Effective Time or provided for by the Company as applicable,
by full accruals (as if all targets required by such Benefit Plan had been or
will be met at maximum levels) on its financial statements; (ii) no "accumulated
funding deficiency" (within the meaning of section 302 of ERISA and section 412
of the Code) has been or could be reasonably expected to be incurred, whether or
not waived, and no excise or other taxes have been or could be reasonably
expected to be incurred or are due and owing with respect to the Benefit Plan
because of any failure to comply with the minimum funding standards of ERISA and
the Code; (iii) the Benefit Plan complies and has been maintained and operated
in all material respects in accordance with its terms and applicable law,
including, without limitation, ERISA and the Code; (iv) no "prohibited
transaction", within the meaning of section 4975 of the Code and section 406 of
ERISA that has resulted or could reasonably be expected to result in material
liability to the Company or any of its Subsidiaries, has occurred or is
reasonably expected to occur with respect to the Benefit Plan; (v) except as set
forth on Schedule 3.8(h)(v), no Benefit Plan is or is reasonably expected to be
under audit or, to the knowledge of the Company, investigation by the IRS, U.S.
Department of Labor, or any other government authority and no such completed
audit, if any, has resulted in the imposition of any Tax or penalty that has not
been paid; and (vi) with respect to each Benefit Plan that is funded mostly or
partially through an insurance policy, except as set forth on Schedule
3.8(h)(vi), neither the Company nor any Subsidiary has any liability in the
nature of retroactive rate adjustment, loss sharing arrangement or other actual
or contingent liability arising wholly or partially out of events occurring on
or before the Effective Time.
(i) Except as disclosed on Schedule 3.8(i)(i), the
consummation of the transactions contemplated by this Agreement will not give
rise to any liability for severance pay, unemployment compensation, termination
pay, or withdrawal liability, or accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any employee or director
of the Company or any Subsidiary (whether current, former, or retired) or their
beneficiaries solely by reason of such transactions by reason of a termination
of employment following such transactions. Except as previously disclosed in
writing by the Company to Parent, no amounts payable under any Benefit Plan will
fail to be deductible for federal income tax purposes by virtue of section 280G
or 162(m) of the Code. To the knowledge of the Company, none of the Company, any
Subsidiary or any officer or employee thereof, has made any promise or
commitment, whether legally binding or not, to create any additional plan,
agreement, or arrangement, or to modify or change any existing Benefit Plan. No
event, condition or circumstance exists that could reasonably be expected to
result in a material increase of the benefits provided under any Benefit Plan or
the expense of maintaining any Benefit Plan from the level of benefits or
expense incurred for the most recent fiscal year ended before the Effective
Time. No event, condition, or circumstance exists that would prevent the
amendment or termination of any Benefit Plan in accordance with its terms and
applicable law. Except as set forth on Schedule 3.8(i)(ii) or as reflected on
the 1998 Financial Statements, none of the Company, any Subsidiary or any ERISA
Affiliate has any unfunded liabilities pursuant to any Benefit Plan that is
intended to be an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA and that is not intended to be qualified under Section 401(a) of
the Code.
Section 3.9 Litigation. Except as disclosed in the Company SEC
Documents or on Schedule 3.9, there is no suit, action or proceeding pending or,
to the knowledge of the Company, threatened against the Company, any of its
Subsidiaries or any of their respective assets which individually or in the
aggregate with all other such suits, actions or proceedings is reasonably likely
to have a material adverse effect on the Company and its Subsidiaries, taken as
a whole, or which, as of the date hereof, has had or is reasonably likely to
have individually or in the aggregate with all other such suits, actions or
proceedings a material adverse effect on the ability of the Company to
consummate the transactions contemplated by this Agreement.
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Section 3.10 No Default; Compliance with Applicable Laws. Except as set
forth on Schedule 3.10 hereto, the business of the Company and each of its
Subsidiaries is not in default or violation of any term, condition or provision
of (i) its respective certificates of incorporation or by-laws or similar
organizational documents, (ii) any contract, agreement or commitment, whether
oral or written, to which the Company or any of its Subsidiaries is a party or
by which any of them or any of their Company Assets is bound, as each such
contract or commitment may have been amended, modified or supplemented (x) which
has a term ending one year or more from the date of its execution and may not be
terminated by the Company in its sole and absolute discretion upon no more than
30 days' notice without penalty or payment in an amount in excess of $1,000, (y)
pursuant to which the Company or any Subsidiary expects to or is scheduled to
receive (assuming full performance pursuant to the terms thereof) revenue of, or
to pay (assuming full performance pursuant to the terms thereof), $200,000 or
more during the 12-month period following the date of this Agreement, or (z)
which has been or, as of the date of this Agreement, would be required to be,
filed as an exhibit to the Company SEC Documents (as defined in Section 3.5)
(which contracts, agreements and commitments are collectively referred to herein
as the "Significant Contracts") or (iii) any federal, state, local or foreign
statute, law, ordinance, rule, regulation, judgment, decree, order, concession,
grant, franchise, permit or license or other governmental authorization or
approval applicable to the Company or any of its Subsidiaries, excluding from
clauses (ii) or (iii) any defaults or violations which would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole, or which
become applicable solely as a result of the business or activities in which
Parent or Purchaser is or proposes to be engaged or as a result of any acts or
omissions by, or the status of any facts pertaining to, Parent or Purchaser.
Section 3.11 Taxes.
(a) The Company and its Tax Subsidiaries (as defined in
Section 3.11(h) have (i) duly filed (or there has been filed on their behalf)
with the appropriate governmental authorities (x) all federal income Tax Returns
(as defined in Section 3.11(h)) required to be filed by them on or prior to the
date hereof and (y) all other Tax Returns required to be filed by them on or
prior to the date hereof, other than such other Tax Returns the failure of which
to file would not have a material adverse effect on the Company and its Tax
Subsidiaries, taken as a whole, and such Tax Returns are true, correct and
complete in all material respects, and (ii) duly paid in full or made provision
in accordance with generally accepted accounting principles (or there has been
paid or provision has been made on their behalf) for the payment of all Taxes
(as defined in Section 3.11(h)) shown to be due on such Tax Returns.
(b) Except as set forth on Schedule 3.11(b), no federal, state
or local audits, actions, suits, proceedings, investigations, claims or
assessments are presently pending or proposed in writing with regard to any
Taxes or Tax Return of the Company or its Tax Subsidiaries.
(c) Except as set forth on Schedule 3.11(c), there are no
outstanding written consents to extend the statutory period of limitations
applicable to the assessment of any federal income Taxes or other material Taxes
or deficiencies against the Company or any of its Tax Subsidiaries, and no power
of attorney granted by either the Company or any of its Tax Subsidiaries with
respect to any Taxes is currently in force.
(d) Except as set forth on Schedule 3.11(d), neither the
Company nor any of its Tax Subsidiaries (i) is a party to any written agreement
or, to the knowledge of senior executives of the Company, any oral agreement
with any third party providing for the allocation or sharing of Taxes or (ii)
can have any liability or entitlement under any such agreement to which it
previously was a party.
(e) Except as set forth in Schedule 3.11(e), complete copies
of (i) consolidated federal income Tax Returns for the Company and its Tax
Subsidiaries and (ii) state and local income Tax and other Tax Returns of the
Company and its Tax Subsidiaries for each of the years ended 1996, 1997 and 1998
have heretofore been made available to Parent and Purchaser.
(f) Except as set forth in Schedule 3.11(f), (i) all material
amounts required to be collected or withheld by the Company and each of its Tax
Subsidiaries with respect to Taxes have been
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duly collected or withheld and any such amounts that are required to be remitted
to any taxing authority have been duly remitted, (ii) there are no Tax rulings,
requests for rulings, refund claims, closing agreements or changes of accounting
method relating to the Company or any of its Tax Subsidiaries that could
materially affect their liability for Taxes of the Company or its Tax
Subsidiaries due for any period after the Effective Time, (iii) there are no
excess loss accounts (as referred to in Treasury Regulations Section 1.1502-19)
exists with respect to any Tax Subsidiary of the Company, (iv) neither the
Company nor any of its Tax Subsidiaries has any deferred gain or loss arising
from deferred intercompany transactions (as referred to in Treasury Regulations
Section 1.1502-13), (v) neither the Company nor any Tax Subsidiary has filed a
consent under Section 341(f) of the Code or any comparable provisions of state
revenue statues, and (vi) none of the Company or its Tax Subsidiaries will be
required to include in a taxable period ending after the Effective Time taxable
income attributable to a prior taxable period that was not recognized in that
taxable period as a result of the installment method of accounting, the
completed contract method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or
comparable provisions of state or local or foreign tax law;
(g) Neither the Company nor the Tax Subsidiaries were treated
as a member of a consolidated group for income Tax reporting purposes other than
the consolidated group of which the Company was the parent; and
(h) "Taxes" shall mean any and all taxes, charges, fees,
levies, customs, duties, imposts or other assessments, including, without
limitation, income, gross receipts, excise, real or personal property, sales,
withholding, social security, occupation, use, service, service use, license,
net worth, payroll, franchise, transfer and recording taxes, fees and charges,
ad valorem, value added, asset, license, transaction, capital, estimated,
employment, workers compensation, utility, severance, production, unemployment
compensation, premium, windfall profits and gains taxes imposed by the United
States Internal Revenue Service or any taxing authority (domestic or foreign),
including, without limitation, any state, county, local or foreign government or
any subdivision or taxing agency thereof (including a United States
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "Tax Return" shall mean
any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (domestic or
foreign) with respect to Taxes. The term "Tax Subsidiaries" shall include all
Subsidiaries.
Section 3.12 Property. The Company has provided to Parent and Purchaser
a true and complete list (identifying the relevant owners, lessors and lessees)
of (i) all real property consisting of hotels, motels or other lodging
facilities, including, without limitation, any reservation centers and any
warehouse space, and company headquarters and (ii) any other real property that
is material to the Company and its Subsidiaries taken as a whole, in each case
that is owned or leased by the Company or any of its Subsidiaries. Each of the
Company and its Subsidiaries has good and marketable title to all properties,
assets and rights of any kind whatsoever (whether real, personal or mixed, and
whether tangible or intangible) owned by it (collectively, the "Company
Assets"), in each case free and clear of any mortgage, security interest, deed
of trust, claim, charge, title defect, lease, adverse interest or other lien,
encumbrance or interest (collectively, "Liens"), except (a) as shown on the
consolidated balance sheet of the Company and its Subsidiaries dated April 3,
1999 and the notes thereto, and the consolidated balance sheet of the Company
and its Subsidiaries dated as of January 2, 1999 and the notes thereto, each as
contained in the Company SEC Documents, (b) for any Liens incurred in connection
with the purchase of real property after January 2, 1999 and previously
disclosed to Purchaser (such Liens being limited to the real property so
acquired), (c) for any Lien arising by reason of (i) taxes, assessments or
governmental charges not yet delinquent or which are being contested in good
faith, (ii) deposits to secure public or statutory obligations in lieu of surety
or appeal bonds entered into in the ordinary course of business, and (iii)
operation of law in favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the ordinary course
of business for sums which are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which suspend the collection
thereof, (d) for exceptions to a property's title discoverable from the public
record or a survey of such property, (e) for leases and subleases entered into
by the Company or any of its Subsidiaries in the
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ordinary course of business and previously disclosed to Purchaser, (f) for
zoning laws and other land use restrictions that do not materially impair the
present use of the property, or (g) as set forth on Schedule 3.12 hereto. The
exceptions contained in the foregoing clauses (a) through (g) are hereinafter
referred to as the "Permitted Liens." Except as otherwise disclosed by the
Company to Parent and Purchaser in writing on or prior to the date hereof, there
are no pending or, to the knowledge of the Company, threatened condemnation
proceedings against or affecting any Company Assets consisting of motel or
lodging facilities, and none of such Company Assets is subject to any commitment
or other arrangement for its sale to a third party outside the ordinary course
of business.
Section 3.13 Environmental Matters.
(a) Except (i) as set forth in Schedule 3.13 or (ii) as set
forth in the Company SEC Documents:
(i) neither the Company nor any Subsidiary has
received any written communication from any Person (including any
Governmental Entity) stating or alleging that the Company or any
Subsidiary is a potentially responsible party or is otherwise liable
under Environmental Law (as defined in Section 3.13(b)) with respect to
any actual or alleged environmental contamination which remains
unresolved or outstanding, other than any liabilities that,
individually or in the aggregate, would not be reasonably expected to
have a material adverse effect on the Company and its Subsidiaries
taken as a whole; and neither the Company nor any Subsidiary has
received any request for information from any Governmental Entity or
any other Person with respect to any actual or alleged environmental
contamination or non-compliance other than with respect to matters
that, individually or in the aggregate, would not be reasonably
expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole;
(ii) to the knowledge of the Company, all current and
past operations of the Company and its Subsidiaries, including any
operations at or from any property that is currently owned, leased or
operated by the Company or any of its Subsidiaries ("Real Property")
comply with and have at all times complied with all applicable
Environmental Laws in effect as of the date hereof, except where the
failure to be in compliance would not, individually or in the
aggregate, be reasonably expected to have a material adverse effect on
the Company or any of its Subsidiaries taken as a whole;
(iii) to the knowledge of the Company, excluding
asbestos, radon and lead-based Hazardous Substances, the Real Property
contains no Hazardous Substances in, on, over, at or under it, in
concentrations which would presently violate any applicable
Environmental Law in effect as of the date hereof or would be
reasonably likely to result in the imposition of Environmental
Liabilities on the Company, any of its Subsidiaries or the Real
Property under any applicable Environmental Law in effect as of the
date hereof, including any liability or obligation for the
investigation, corrective action, remediation or monitoring of
Hazardous Substances in, on, over, under, at or from the Real Property,
except with respect to violations or Environmental Liabilities that,
individually or in the aggregate, would not be reasonably expected to
have a material adverse effect on the Company and its Subsidiaries
taken as a whole; and
(iv) the Company and its Subsidiaries have been and
are in full compliance with the terms and conditions of all
Environmental Permits which are required under applicable Environmental
Laws, except where the failure to be in compliance would not,
individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
(b) (i) For purposes of this Section 3.13, "Environmental
Laws" means all applicable foreign, state, federal and local laws and the
applicable common law, regulations and rules, ordinances, codes, judgments,
decrees and orders relating to health, safety, or the
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pollution, preservation or protection of the environment, including the release
of Hazardous Substances into the environment.
(ii) for the purposes of this Section 3.13,
"Environmental Permits" means the permits, licenses, authorizations and
approvals required or issued under any Environmental Law which are
necessary for the conduct of the Company's and its Subsidiaries'
businesses and for the operations on, in or at, the assets of the
Company and of its Subsidiaries and the Real Property;
(iii) for the purposes of this Section 3.13,
"Environmental Liabilities" means any claims, judgments, damages
(including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including
attorneys' and consultants' fees) of investigation, remediation,
monitoring or defense of any matter, which (A) are incurred as a result
of (1) the existence of Hazardous Substances in, on, over, under, at or
emanating from any Real Property, (2) the offsite transportation,
treatment, storage or disposal of Hazardous Substances generated by the
Company or any of its Subsidiaries, (3) the violation of or
non-compliance with any Environmental Laws or (B) arise under the
Environmental Laws; and
(iv) for the purposes of this Section 3.13,
"Hazardous Substances" means any petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead-based paint, radon, urea formaldehyde,
asbestos or any materials containing asbestos, pesticides, and any
chemicals, materials or substances regulated under any Environmental
Law, or defined as or included in the definition of "hazardous
substances", "extremely hazardous substances", "hazardous materials",
"hazardous constituents", "toxic substances", "pollutants",
"contaminants", or any similar denomination intended to classify or
regulate such chemicals, materials or substances by reason of their
toxicity, carcinogenicity, ignitability, corrosivity or reactivity or
other characteristics under the Environmental Laws.
(c) The representations set forth in this Section 3.13 are the
sole and exclusive representations and warranties being made by the Company in
this Agreement with respect to environmental matters.
Section 3.14 Intellectual Property. The Company and its
Subsidiaries own all rights in, or possess adequate licenses or other valid
rights to use, all Intellectual Property (as hereinafter defined) used in the
conduct of their businesses in the manner in which they are presently being
conducted, except for such lack of or defects in ownership or possession as is
not, individually or in the aggregate, reasonably likely to have a material
adverse effect on the Company and its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries has received any written notice that its
rights in its Intellectual Property have been declared unenforceable or
otherwise invalid by any court or Governmental Entity other than notices
relating to Intellectual Property whose loss would not, individually or in the
aggregate, be reasonably likely to have a material adverse effect on the Company
and its Subsidiaries taken as a whole. There is no existing infringement,
misuse, or misappropriation of any Intellectual Property by others that is,
individually or in the aggregate, reasonably likely to have a material adverse
effect on the Company and its Subsidiaries taken as a whole. Neither the Company
nor any of its Subsidiaries has received any written notice alleging that the
operation of its business or that of any of its Subsidiaries infringes in any
material respect upon the rights of others in any Intellectual Property other
than allegations that are not, individually or in the aggregate, reasonably
likely to have a material adverse effect on the Company and its Subsidiaries
taken as a whole. For purposes of this Agreement, "Intellectual Property" shall
mean: trademarks, service marks, brand names, certification marks, trade dress,
assumed names, trade names and other indications of origin, good will associated
with the foregoing and registrations in any extension, modification or renewal
of any such registration or application; inventions, discoveries and ideas,
whether patentable or not in any jurisdiction; patents, applications for patents
(including but not limited to divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or
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disclosure thereof by any Person; writings and other works, whether
copyrightable or not in any jurisdiction, and any renewals or extensions
thereof; and any similar intellectual property or proprietary rights.
Section 3.15 Material Contracts. The Company has filed as an exhibit to
its Annual Report on Form 10-K or another Company SEC Document all contracts to
which the Company or any of its Subsidiaries is a party or by which any of their
respective properties or assets may be bound that are or would be required to be
filed in an exhibit to an Annual Report on Form 10-K filed by it with the SEC as
of the date of this Agreement (collectively, the "Material Contracts"). Each of
the Material Contracts is valid and enforceable against the Company or its
Subsidiaries and/or their respective assets, as applicable, in accordance with
its terms, except that such enforcement may be subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws of general applicability, now or hereafter in effect, affecting creditors'
rights, and the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. Neither the
Company nor any of its Subsidiaries, as the case may be, nor, to the knowledge
of the Company's executive officers, any other party, is in breach of or in
default under any Material Contract, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a default
thereunder by the Company or any of its Subsidiaries or, to the knowledge of the
Company's executive officers, any other Party, except for any such
unenforceability, default or event which, individually or in the aggregate, is
not reasonably likely to have a material adverse effect on the Company and its
Subsidiaries taken as a whole. No party to any Material Contract has given
notice to the Company of or made a claim against the Company with respect to any
breach or default thereunder, in any such case in which such breach or default,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the Company and its Subsidiaries taken as a whole.
Section 3.16 Labor Matters. Except as set forth on Schedule 3.16, there
are no controversies pending or, to the knowledge of the Company, threatened
between the Company or any of its Subsidiaries and any of their respective
employees, which controversies are reasonably likely to have a material adverse
effect on the Company and its Subsidiaries taken as a whole. Neither the Company
nor any of its Subsidiaries is involved in or threatened with any material labor
dispute, grievance or litigation or investigation by a governmental agency
relating to wages, labor, safety or discrimination matters involving any person
employed by the Company or any of its Subsidiaries, including, without
limitation, charges of unfair labor practices or discrimination complaints
except for any such dispute, grievance, litigation or investigation that would
not be reasonably likely to have a material adverse effect on the Company and
its Subsidiaries taken as a whole. Neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act or similar such legislation of foreign
jurisdictions in a manner that would be reasonably likely to have a material
adverse effect on the Company and its Subsidiaries taken as a whole. Except as
set forth in Schedule 3.16, neither the Company nor any of its Subsidiaries is
presently a party to, or bound by, any collective bargaining agreement or union
contract with respect to any persons employed by the Company or any of its
Subsidiaries, and no collective bargaining agreement is being negotiated by the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has any knowledge of any current or pending strikes, slowdowns,
work stoppages or lockouts, or threats thereof, by or with respect to any
employees of the Company or any of its Subsidiaries, and there have been no such
strikes, slowdowns, work stoppages or lockouts within the past three years. The
Company and each of its Subsidiaries is in compliance in all material respects
with all laws, regulations and orders relating to wages, the Occupational Safety
and Health Act, workers' compensation and the Worker Adjustment and Retraining
Notification Act or similar such legislation of foreign jurisdictions, except
where the failure to be in compliance would not have a material adverse effect
on the Company and its Subsidiaries taken as a whole.
Section 3.17 Restrictions on Business Activities. Except as set forth
on Schedule 3.17, there is no material agreement, judgment, injunction, order or
decree binding upon the Company or any of its Subsidiaries which has the effect
of prohibiting or impairing any material business operations of the Company or
any of its Subsidiaries.
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Section 3.18 Year 2000 Compliance. Except as set forth in the Company
SEC Documents, to the knowledge of the Company, the computer systems of the
Company and its Subsidiaries are Year 2000 Compliant or will be Year 2000
Compliant by December 31, 1999, except where the failure to be Year 2000
Compliant would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole. The computer systems of the Company and its
Subsidiaries have the ability to interface properly and will continue to
interface properly with internal and external applications and systems of third
parties with which the Company and its Subsidiaries exchange data electronically
whether or not they are Year 2000 Compliant, except where the failure to so
interface would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole. The Company has provided Parent and Purchaser
with access to true, complete and accurate descriptions in reasonable detail of
remedial or other work performed to date in order to ensure Year 2000 Compliance
by the Company and its Subsidiaries and a description in reasonable detail of
the balance of the work to be performed to ensure Year 2000 Compliance by the
Company and its Subsidiaries. In addition, the Company has provided Parent and
Purchaser with access to true, complete and accurate copies of materials
provided to it by third-party vendors with respect to remedial or other work
performed to date in order to ensure Year 2000 Compliance by the Company and its
Subsidiaries.
The term "Year 2000 Compliant" as used herein means that the computer
systems (i) are capable of recognizing, processing, managing, representing,
interpreting and manipulating correctly date related data for dates earlier and
later than January 1, 2000, including calculating, comparing, sorting, storing,
tagging and sequencing, without resulting in or causing logical or mathematical
errors or inconsistencies in any user-interface functionalities or otherwise,
including data input and retrieval, data storage, data fields, calculations,
reports, processing or any other input or output; (ii) have the ability to
provide date recognition for any data element without limitation (including
date-related data represented without a century designation, date-related data
whose year is represented by only two digits and date fields assigned special
values); (iii) have the ability to function automatically into and beyond the
year 2000 without human intervention and without any change in operations
associated with the advent of the year 2000; (iv) have the ability to interpret
data, dates and time correctly into and beyond the year 2000; (v) have the
ability not to produce noncompliance in existing information, nor otherwise
corrupt such data into and beyond the year 2000; (vi) have the ability to
process correctly after January 1, 2000 data containing dates before that date;
and (vii) have the ability to recognize all "leap years," including February 29,
2000.
Section 3.19 Vote Required. The affirmative vote of the holders of the
number of Shares of Company Common Stock entitled to be cast, consisting of a
majority of the total voting power of all Shares of Company Common Stock
outstanding, approving this Agreement, is the only vote of the holders of any
series or class of common stock required to approve and adopt the plan of merger
in this Agreement and to approve the Merger.
Section 3.20 Brokers. No agent, broker, finder, investment banker or
financial advisor or other firm or Person is or shall be entitled to any
brokerage or finder's fee or any other commission or similar fee in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of its Subsidiaries or affiliates,
except that the Company has retained Morgan Stanley Dean Witter & Co. and CIBC
World Markets Corp. as its financial advisors in connection with the
transactions contemplated by this Agreement, and whose fees shall, subject to
Section 5.9, be paid by the Company in accordance with the Company's agreement,
as in effect on the date hereof, with such firms.
Section 3.21 Opinion of Financial Advisor. Each of Morgan Stanley Dean
Witter & Co. and CIBC World Markets Corp., financial advisors to the Company,
has advised the Company's Board of Directors that, in its opinion, as of the
date of such opinion, the consideration to be received by the holders of the
Company Common Stock (other than Parent and its affiliates) in the Offer and the
Merger, taken together, is fair, from a financial point of view, to such
stockholders.
Section 3.22 Information in Proxy Statement; Schedule 14D-1. None of
the information supplied by the Company for inclusion or incorporation by
reference in the Proxy Statement (if any) or the
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Schedule 14D-1 shall, at the date mailed to stockholders and at the time of the
meeting of stockholders (if any) to be held in connection with the Merger,
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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and warrant to the
Company as follows:
Section 4.1 Organization. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate or other power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power or authority would not have
a material adverse effect on Parent and its Subsidiaries taken as a whole.
Parent and each of its Subsidiaries is duly qualified or licensed to do business
and in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not, in the aggregate, have a
material adverse effect on Parent and its Subsidiaries, taken as a whole.
Section 4.2 Authorization; Validity of Agreement; Necessary Action.
Each of Parent and Purchaser has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Parent and Purchaser of this
Agreement, and the consummation by them of the transactions contemplated hereby,
have been duly authorized by the Management Board and/or Supervisory Board of
Parent and the Board of Directors of Purchaser and no other corporate action on
the part of Parent and Purchaser is necessary to authorize the execution and
delivery by Parent and Purchaser of this Agreement and the consummation by them
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Parent and Purchaser, as the case may be, and, assuming due and
valid authorization, execution and delivery hereof by the Company, is a valid
and binding obligation of each of Parent and Purchaser, as the case may be,
enforceable against them in accordance with its respective terms, except that
(i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the HSR Act, state or
foreign laws relating to takeovers, state securities or blue sky laws, the DGCL,
foreign antitrust laws or the laws of other states in which Parent or Purchaser
is qualified to do or is doing business, neither the execution, delivery or
performance of this Agreement by Parent and Purchaser nor the consummation by
Parent and Purchaser of the transactions contemplated hereby nor compliance by
Parent and Purchaser with any of the provisions hereof shall (i) conflict with
or result in any breach of any provision of the respective certificate of
incorporation or by-laws or similar organizational documents of Parent or
Purchaser, (ii) require on the part of Parent or Purchaser any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent or Purchaser is a party or by
which any of them or any of their properties or assets may be bound, except for
such violations, breaches and defaults (or rights of termination, cancellation
or acceleration) as
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to which requisite waivers or consents have been obtained, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Parent or Purchaser or any of their properties or assets, excluding from the
foregoing clauses (ii), (iii) or (iv) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings, or the existence
of such violations, breaches or defaults, would not, individually or in the
aggregate, have a material adverse effect on Parent and Purchaser taken as a
whole and shall not materially impair the ability of Parent or Purchaser to
consummate the transactions contemplated hereby.
Section 4.4 Information in Proxy Statement; Schedule 14D-9. None of the
information supplied by Parent or Purchaser for inclusion or incorporation by
reference in the Proxy Statement or the Schedule 14D-9 shall, at the date mailed
to stockholders and at the time of the meeting of stockholders (if any) to be
held in connection with the Merger, 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.
Section 4.5 Financing. Parent and Purchaser have sufficient funds
available (through cash on hand and existing credit arrangements or otherwise)
to purchase all the Shares outstanding on a fully diluted basis and to repay all
outstanding indebtedness of the Company and its Subsidiaries that may become due
in connection with the transactions contemplated hereby and to pay all fees and
expenses related to the transactions contemplated by this Agreement that are
required to be paid by it hereunder.
Section 4.6 Share Ownership. None of Parent, Purchaser or any of their
respective "affiliates" or "associates" (as those terms are defined under Rule
12b-2 under the Exchange Act) beneficially own any Shares.
Section 4.7 Purchaser's Operations. Purchaser was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations other than in connection
with the transactions contemplated hereby.
Section 4.8 Brokers or Finders. Parent represents, as to itself, its
Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or Person is or shall be entitled to any
brokers' or finders' fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except J.P. Morgan
& Co. Incorporated, whose fees and expenses shall be paid or caused to be paid
by Parent.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company.
(a) The Company covenants and agrees that, except (w) as
contemplated by this Agreement, (x) as disclosed in Schedule 5.1, (y) as agreed
in writing by Parent or Purchaser, after the date hereof, and prior to the
Appointment Date, or (z) as required by applicable laws or regulations of any
Governmental Entity, national stock exchange or over-the-counter market, the
business of the Company and its Subsidiaries shall be conducted only in the
ordinary and usual course of business consistent with past practices, subject to
the following:
(i) the Company shall not, directly or indirectly,
(1) sell, transfer or pledge or agree to sell, transfer or pledge any
Company Common Stock or any capital stock or other securities of the
Company or capital stock or any other securities of any of its
Subsidiaries beneficially owned by it, either directly or indirectly;
(2) amend or cause to be amended its Certificate of Incorporation or
By-laws or similar organizational documents of any of its Subsidiaries;
or (3) split, combine or reclassify the
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outstanding Company Common Stock or any outstanding capital stock of
any of the Subsidiaries of the Company;
(ii) neither the Company nor any of its Subsidiaries
shall: (1) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock;
(2) issue, sell, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or its
Subsidiaries, other than shares of Company Common Stock reserved for
issuances pursuant to the exercise of Options outstanding on the date
hereof; (3) transfer, lease, license, sell, mortgage, pledge, dispose
of or encumber any right to any trademark, service mark or trade name
owned by it or over which it has any right whatsoever, including,
without limitation, enter into any franchise agreements (excluding
transactions consummated or agreements made pursuant to commitments
existing prior to the date hereof and disclosed in writing to Parent
and Purchaser other than the construction projects in Revere,
Massachusetts or downtown Cleveland, Ohio); (4) transfer, lease,
license, sell, mortgage, pledge, dispose of, purchase, acquire or
encumber any (A) real property (other than furniture, fixtures and
equipment which shall be treated as set in clause (B) of this Section
5.1(a)(ii)(4)), including, without limitation any motel or other
lodging facility or (B) any personal property having an aggregate fair
market value of $100,000 in a single transaction or a series of related
transactions (excluding for purposes of this clause (4) transactions
consummated or agreements made pursuant to commitments existing prior
to the date hereof and disclosed in writing to Parent and Purchaser
other than the construction projects in Revere, Massachusetts or
downtown Cleveland, Ohio); (5) incur or modify any indebtedness or
other liability, provided however, that the Company may borrow money
for use in the ordinary and usual course of business, provided further,
however, that, neither the Company nor any of its Subsidiaries shall
make any borrowing or incur any indebtedness or other liability that
would cause the Company's consolidated debt to exceed $502.0 million
(excluding borrowings made or indebtedness incurred solely to finance
payments required to be made by the Company pursuant to Section 5.9);
provided, however, that the Company shall have the right to cure any
failure to comply with this Section 5.1(a)(ii)(5) by taking, no later
than the Expiration Date, any action that is not otherwise in violation
of the provisions of this Agreement (which action may include, without
limitation, additional capital contributions from one or more of its
stockholders without any further issuance of equity or other securities
to any such stockholder); (6) enter into any agreement for the
management of any motel or other lodging facility by the Company or any
of its Subsidiaries or management by any other Person of a motel or
other lodging facility owned or leased by the Company or any of its
Subsidiaries; (7) make any capital expenditures in excess of $2.1
million during the Company's third fiscal quarter and $1.6
million during the Company's fourth fiscal quarter of 1999; or (8)
redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
(iii) neither the Company nor any of its Subsidiaries
shall modify, amend or terminate any of its Significant Contracts or
waive, release or assign any rights or claims thereunder;
(iv) neither the Company nor any of its Subsidiaries
shall permit any material insurance policy naming it as a beneficiary
or a loss payable payee to be cancelled or terminated without notice to
Parent;
(v) neither the Company nor any of its Subsidiaries
shall: (1) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other Person; (2) make any loans, advances or
capital contributions to, or investments in, or acquisitions of, any
other Person (other than to Subsidiaries of the Company); or (3) enter
into any commitment or transaction with respect to any of the foregoing
(including, but not limited to, any borrowing, capital expenditure or
purchase, sale or lease of assets);
(vi) neither the Company nor any of its Subsidiaries
shall change any of the accounting methods used by it unless required
by GAAP or applicable law;
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(vii) neither the Company nor any of its Subsidiaries
shall adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than
the Merger);
(viii) neither the Company nor any of its
Subsidiaries shall take, or agree to commit to take, any action that
would make any representation or warranty of the Company contained
herein inaccurate in any material respect at, or as of any time prior
to, the Effective Time (except for representations made as of a
specific date);
(ix) except as required under Section 2.4, the
Company shall not amend or change the period (or permit any
acceleration, amendment or change) of exercisability of Options granted
under any Option Plan or authorize cash payments in exchange for any
Options;
(x) neither the Company nor any Subsidiary shall
increase the compensation payable or to become payable to its officers,
directors or key employees;
(xi) neither the Company nor any of its Subsidiaries
shall terminate any officer or other key employee, grant any severance
or termination pay to, or enter into any employment or severance
agreement with, any director or officer of the Company or any
Subsidiary or establish, adopt, enter into or terminate or amend any
Benefit Plan;
(xii) neither the Company nor any of its Subsidiaries
shall fail to use best efforts to preserve intact the business
organizations, goodwill, rights, licenses, permits and franchises of
the Company and its Subsidiaries and maintain its existing
relationships with customers, suppliers and other Persons having
business dealings with them;
(xiii) neither the Company nor any of its
Subsidiaries shall fail to keep in full force and effect adequate
insurance overages and maintain and keep its properties and assets in
good repair, working order and condition, normal wear and tear
excepted; and
(xiv) neither the Company nor any of its Subsidiaries
shall authorize or enter into an agreement to do any of the foregoing.
(b) In the event that Purchaser shall extend the Offer in
accordance with clause (ii)(A) of Section 1.1(c) and not in the event that
Purchaser shall extend the Offer at the written demand of the Company in
accordance with clause (ii)(B) of Section 1.1(c):
(i) Notwithstanding the provisions of Section
5.1(a)(ii)(3), the Company and its Subsidiaries shall, during the
period of such extension, be permitted to transfer, lease, license,
sell, mortgage, pledge, dispose of or encumber any right to any
trademark, service mark or trade name owned by it or over which it has
any right whatsoever, including, without limitation, to enter into any
franchise agreements in the ordinary and usual course of business
consistent with past practices;
(ii) Notwithstanding the provisions of Section
5.1(a)(ii)(4), the Company and its Subsidiaries shall, during the
period of such extension, be permitted to transfer, lease, license,
sell, mortgage, pledge, dispose of, purchase, acquire or encumber any
other assets, including, without limitation any motel or other lodging
facility in the ordinary and usual course of business consistent with
past practices;
(iii) Notwithstanding the provisions of Section
5.1(a)(ii)(6), the Company and its Subsidiaries shall, during the
period of such extension, be permitted to enter into any agreement for
the management of any motel or other lodging facility by the Company or
any of its Subsidiaries or management by any other Person of a motel or
other lodging facility owned or leased by the Company or any of its
Subsidiaries in the ordinary and usual course of business consistent
with past practices;
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(iv) Notwithstanding the provisions of Section
5.1(a)(iii), the Company and its Subsidiaries shall, during the period
of such extension, be permitted to modify, amend or terminate any of
its Significant Contracts or waive, release or assign any rights or
claims thereunder in the ordinary and usual course of business
consistent with past practices; and
(v) Prior to taking any of the actions permitted
pursuant to Sections 5.1(b)(i) through 5.1(b)(iv), the Company shall,
in each instance, consult with Parent or Purchaser and, from time to
time thereafter at the request of Purchaser or Parent, shall keep them
fully informed with respect to that action.
Section 5.2 Access to Information.
(a) Upon reasonable notice and during normal business hours,
the Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, consultants, counsel, financing sources and
other representatives (collectively, "Representatives") of Parent, access to all
its properties, employees, books, contracts, commitments and records (including
tax returns), and the Company shall (and shall cause each of its Subsidiaries
to) furnish promptly to Parent, at the sole expense of Parent (i) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal securities laws
and (ii) all other information concerning its business, properties and personnel
as Parent may reasonably request; provided, however, that nothing herein shall
require either the Company or any of its Subsidiaries to disclose any
information to Parent or its Representatives if such disclosure would be in
violation of applicable laws or regulations of any Governmental Entity.
(b) Parent shall hold any such information which is nonpublic
in confidence in accordance with the provisions of the Confidentiality Agreement
between the Company and Parent, dated March 5, 1998, as confirmed, supplemented
and extended by the letter agreement between Parent and the Company dated June
14, 1999 (the "Confidentiality Agreement").
Section 5.3 Consents and Approvals. Each of the Company, Parent and
Purchaser shall take all actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
transactions contemplated hereby (which actions shall include, without
limitation, promptly furnishing all information required under the HSR Act and
in connection with approvals of or filings with any other Governmental Entity)
and shall promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or any of their
Subsidiaries in connection with this Agreement and the transactions contemplated
hereby. Each of the Company, Parent and Purchaser shall, and shall cause its
Subsidiaries to, take all actions necessary to obtain (and shall cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity or other public or private third party
required to be obtained or made by Parent, Purchaser, the Company or any of
their Subsidiaries in connection with the Merger or the taking of any action
contemplated or by this Agreement. Without limiting the foregoing, the Company,
Parent and Purchaser shall file as soon as practicable notifications under the
HSR Act and respond as promptly as practicable to any inquiries received from
the Federal Trade Commission and the Antitrust Division of the Department of
Justice for additional information or documentation and respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
Concurrently with the filing of notifications under the HSR Act or as soon
thereafter as practicable, the Company and Parent shall each request early
termination of the HSR Act waiting period. In addition, no party hereto shall
take any action after the date hereof that would reasonably be expected to
materially delay the obtaining of, or result in not obtaining, any permission,
approval or consent from any Governmental Entity necessary to be obtained prior
to Closing.
Section 5.4 No Solicitation.
(a) The Company and its Subsidiaries shall not, and shall use
their best efforts to cause their respective officers, directors, employees and
investment bankers, attorneys or other agents
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retained by or acting on behalf of the Company or any of its Subsidiaries not
to, (i) initiate, solicit or encourage (including by way of furnishing
non-public information), directly or indirectly, any inquiries or the making of
any proposal that constitutes or is reasonably likely to lead to any Acquisition
Proposal (as defined in Section 5.4(e) hereof), (ii) except as permitted below,
engage in negotiations or discussions with, or furnish any information or data
to any third party relating to an Acquisition Proposal, or (iii) enter into any
agreement with respect to any Acquisition Proposal or approve any Acquisition
Proposal. The Company will also promptly request each Person that has heretofore
executed a confidentiality agreement in connection with its consideration of an
Acquisition Proposal to return or destroy all non-public information furnished
to such Person by or on behalf of the Company or any of its Subsidiaries.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Company and its Board of Directors and its Representatives (i)
may participate in discussions or negotiations (including, as a part thereof,
making any counterproposal) with or furnish information to any third party
making an unsolicited Acquisition Proposal (a "Potential Acquiror") if the Board
determines in good faith, based upon advice of its outside legal counsel, that
the failure to participate in such discussions or negotiations or to furnish
such information would be inconsistent with the Board's fiduciary duties under
applicable law, and (ii) shall be permitted to take and disclose to the
Company's stockholders a position with respect to any tender or exchange offer
by a third party, or amend or withdraw such position, pursuant to Rules 14d-9
and 14e-2 of the Exchange Act.
(c) Any non-public information furnished to a Potential
Acquiror shall be limited to that non-public information that has been furnished
to Parent and its Representatives and shall be furnished pursuant to a
confidentiality agreement substantially similar to the confidentiality
provisions of the Confidentiality Agreement. In the event that the Company shall
determine to provide any information as described above, or shall receive any
Acquisition Proposal, it shall promptly inform Parent in writing as to the fact
that information is to be provided and shall furnish to Parent the identity of
the recipient of such information and the Potential Acquiror and the terms of
such Acquisition Proposal, except to the extent that the Board determines in
good faith, based upon advice of its outside legal counsel, that any such action
described in this sentence would be inconsistent with the Board's fiduciary
duties under applicable law. The Company shall keep Parent reasonably informed
of the status of any such Acquisition Proposal except to the extent that the
Board determines in good faith, based upon advice of its outside legal counsel,
that any such action would be inconsistent with the Board's fiduciary duties
under applicable law.
(d) The Board of Directors of the Company shall not (i)
withdraw or modify or propose to withdraw or modify, in any manner adverse to
Parent, the approval or recommendation of such Board of Directors of this
Agreement, the Offer or the Merger or (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal; provided that, the Company's
Board of Directors may withdraw or modify or propose to withdraw or modify its
recommendation of this Agreement, the Offer or the Merger or recommend or
propose to recommend an Acquisition Proposal if, in each case, the Board
determines in good faith, after receiving written advice from its financial
advisor, that such Acquisition Proposal is a Superior Proposal and determines in
good faith, based upon advice of its outside legal counsel, that it would be
inconsistent not to do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law. The Company shall provide
reasonable notice to Parent to the effect that it is taking such action. The
Board of Directors of the Company shall not authorize the Company to enter into
any agreement with respect to an Acquisition Proposal (even if it is a Superior
Proposal).
(e) For purposes of this Agreement, "Acquisition Proposal"
shall mean any offer or proposal, whether in writing or otherwise, made by a
third party to acquire beneficial ownership (as defined under Rule 13(d) of the
Exchange Act) of all or a material portion of the assets of, or any material
equity interest in, the Company or its material Subsidiaries pursuant to a
merger, consolidation or other business combination, recapitalization, sale of
shares of capital stock, sale of assets, tender offer or exchange offer or
similar transaction involving the Company or its material Subsidiaries (other
than the transactions contemplated by this Agreement).
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(f) The term "Superior Proposal" means any proposal to
acquire, directly or indirectly, for consideration consisting of cash or
securities, more than a majority of the Shares then outstanding or all or
substantially all the assets of the Company, and otherwise on terms which the
Board of Directors of the Company determines in good faith to be more favorable
to the Company and its stockholders than the Offer and the Merger (based on
written advice of the Company's financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Offer and the Merger), for which financing, to
the extent required, is then committed.
Section 5.5 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release reasonably acceptable
to Parent and the Company. Thereafter, until the earlier of the Appointment Date
or the date on which this Agreement is terminated in accordance with its terms,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release with respect to the Merger, this
Agreement or the other transactions contemplated hereby without notifying the
other party, except as may be required by law or by any listing agreement with a
national securities exchange.
Section 5.6 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence of any event the occurrence, or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any respect at or prior to the
Appointment Date, (ii) any material failure of the Company or Parent, as the
case may be, to comply with or satisfy any covenant or agreement to be complied
with or satisfied by it hereunder, and (iii) the occurrence or failure to occur
of an event or condition that would cause any condition to the consummation of
the Offer or the Merger not to be satisfied; provided, however, that the
delivery of any notice pursuant to this Section 5.6 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 5.7 Directors' and Officers' Insurance and Indemnification. (a)
From and after the consummation of the Offer, Parent shall cause the Surviving
Corporation (which, for purposes of this Section 5.7, shall include the
provision of necessary funds to the Surviving Corporation, if necessary) to
indemnify, defend and hold harmless any person who is now, or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, an
officer, director, employee or agent (the "Indemnified Party") of the Company or
any of its Subsidiaries against all losses, claims, damages, liabilities, costs
and expenses (including attorneys' fees and expenses), judgments, fines, losses,
and amounts paid in settlement in connection with any actual or threatened
action, suit, claim, proceeding or investigation (each a "Claim") to the extent
that any such Claim is based on, or arises out of, (i) the fact that such person
is or was a director, officer, employee or agent of the Company or any of its
Subsidiaries or is or was serving at the request of the Company or any of its
Subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (ii) this Agreement,
or any of the transactions contemplated hereby, in each case to the extent that
any such Claim pertains to any matter or fact arising, existing, or occurring
prior to or at the Effective Time, regardless of whether such Claim is asserted
or claimed prior to, at or after the Effective Time, to the full extent
permitted under Delaware law or the Company's Certificate of Incorporation,
By-laws or indemnification agreements in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the defense of any
action or suit. Without limiting the foregoing, in the event any Indemnified
Party becomes involved in any capacity in any Claim of the type described above,
then from and after consummation of the Offer, Parent shall cause the Company
(or the Surviving Corporation if after the Effective Time) (which, for purposes
of this Section 5.7, shall include the provision of necessary funds to the
Surviving Corporation, if necessary) to periodically advance to such Indemnified
Party its legal and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the provision by such
Indemnified Party of an undertaking to reimburse the amounts so advanced in the
event of a final non-appealable determination by a court of competent
jurisdiction that such Indemnified Party is not entitled thereto.
(b) All rights to indemnification and all limitations of
liability existing in favor of the Indemnified Party as provided under Delaware
law or the Company's Certificate of Incorporation, By-laws
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or indemnification agreements in effect at the date hereof shall survive the
Merger and shall continue in full force and effect, without any amendment
thereto, for a period of six years from the Effective Time; provided, however,
that in the event any Claim or Claims are asserted or made within such six year
period, all rights to indemnification in respect of any such Claim or Claims
shall continue until disposition of any and all such Claims; provided further,
however, that any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under Delaware
law, the Company's Certificate of Incorporation or By-laws or such agreements,
as the case may be, shall be made by independent legal counsel selected by the
Indemnified Party and reasonably acceptable to Parent; and provided further,
however, that nothing in this Section 5.7 shall impair any rights or obligations
of any present or former directors or officers of the Company.
(c) In the event Parent or Purchaser or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
its properties and assets to any person, then, and in each such case, to the
extent necessary to effectuate the purposes of this Section 5.7, proper
provision shall be made so that the successors and assigns of Parent and
Purchaser assume the obligations set forth in this Section 5.7; provided that,
in the case of any such assignment by Parent or Purchaser, Parent and Purchaser
shall remain liable for all of their respective obligations under this
Agreement.
(d) For a period of six years after the Effective Time, Parent
shall cause the Surviving Corporation (which, for purposes of this Section
5.7(d), shall include the provision of necessary funds to the Surviving
Corporation, if necessary) to maintain in effect the current policies of
directors' and officers' liability insurance maintained by the Company (provided
that Parent may substitute therefor policies with reputable and financially
sound carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous to the insured parties) with respect
to claims arising from or related to facts or events that occurred at or before
the Effective Time; provided, however, that Parent shall not be obligated to
cause the Surviving Corporation to make annual premium payments for such
insurance to the extent such premiums exceed 200% of the annual premiums paid as
of the date hereof by the Company for such insurance (such 200% amount, the
"Maximum Premium"). If such insurance coverage cannot be obtained at all, or can
only be obtained at an annual premium in excess of the Maximum Premium, Parent
shall cause the Surviving Corporation (which, for purposes of this Section
5.7(d), shall include the provision of necessary funds to the Surviving
Corporation, if necessary) to maintain the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to the
Maximum Premium; provided further, if such insurance coverage cannot be obtained
at all, Parent shall purchase all available run-off insurance policies with
respect to pre-existing insurance in an amount that, together with all other
insurance purchased pursuant to this Section 5.7(d), does not exceed the Maximum
Premium. The Company represents to Parent that the current annualized premium on
current policies of directors' and officers' liability insurance maintained by
the Company is no more than $200,000.
Section 5.8 Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use their respective
reasonable best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. If at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the parties hereto shall use their respective reasonable efforts to
take or cause to be taken all such necessary action, including, without
limitation, the execution and delivery of such further instruments and documents
as may be reasonably requested by the other party for such purposes or otherwise
to consummate and make effective the transactions contemplated hereby.
Section 5.9 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses. The Company agrees that all legal,
accounting, advisory, investment banking, brokerage and agency fees and expenses
that have been or will be incurred by it in connection with this Agreement and
the transactions contemplated hereby shall not, in the aggregate, exceed
$8,000,000, and that all such fees
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and expenses shall be documented in reasonable detail. The Company has provided
Parent and Purchaser with a reasonable estimate of all such fees and expenses as
of the date hereof.
Section 5.10 Employee Matters.
(a) Prior to the Effective Time, the Company shall take all
such steps as may be required to cause the transactions contemplated by Section
2.4 and any other dispositions of Company equity securities (including
derivative securities) in connection with this Agreement or the transactions
contemplated hereby by each individual who is a director or officer of the
Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act, such
steps to be taken in accordance with the interpretive letter dated January 12,
1999, issued by the Securities and Exchange Commission to Skadden, Arps, Slate,
Meagher & Flom LLP.
(b) Parent shall cause the Surviving Corporation to treat
service with the Company and any Subsidiary prior to the Effective Time by each
employee of the Company and any Subsidiary in the same manner as service with
the Parent or its Subsidiaries is treated for eligibility and vesting purposes
(and excluding benefit accrual purposes, including, without limitation, benefit
service under any defined benefit pension plan) under any benefit plan of Parent
or its Subsidiaries in which any such employee is eligible to participate
following the Effective Time; provided, however that nothing in this Section
5.10(b) shall obligate Parent or the Surviving Corporation to (i) make any
particular benefit plan or benefit available to any such employee, (ii) continue
any particular benefit plan or benefit or (iii) refrain from terminating or
amending any particular benefit plan or benefit.
(c) Parent agrees to cause the Surviving Corporation to honor,
in accordance with their terms, and to make required payments when due under,
all Benefit Plans maintained or contributed to by the Company or any Subsidiary
or to which the Company or any Subsidiary is a party (including but not limited
to employment, incentive and severance agreements and arrangements), that are
applicable with respect to any employee, director or stockholder of the Company
or any Subsidiary (whether current, former or retired) or their beneficiaries;
provided, however, that the foregoing shall not preclude the Surviving
Corporation from amending or terminating any such Benefit Plan in accordance
with its terms. Parent, Purchaser and the Company each acknowledge that
consummation of the Offer shall constitute a "Change in Control" for purposes of
each Benefit Plan in which such concept is relevant, notwithstanding any
provision of any such Benefit Plan to the contrary.
(d) With respect to any welfare plans in which employees of
the Company and its Subsidiaries are eligible to participate after the Effective
Time, Parent shall, and shall cause the Surviving Corporation to (i) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to such employees
and (ii) provide each such employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any such plan.
(e) As soon as practicable following December 31, 1999 Parent
shall or shall cause the Surviving Corporation to pay to each person who is a
participant in the Company's 1999 Management Incentive Plan (the "MIP") as of
the date hereof a cash lump sum payment equal to the amounts set forth opposite
their respective names on Schedule 5.10(e) prorated as set forth in the next
sentence and otherwise in accordance with the MIP. Each such amount shall be
prorated by multiplying it by a fraction, (i) the numerator of which is (A) the
number of days that have elapsed during calendar 1999 up to and including the
consummation of the Offer plus (B) thirty (but in no event shall the numerator
be greater than the total number of days during calendar 1999) and (ii) the
denominator of which is the total number of days in calendar 1999. Parent shall
or shall cause the Surviving Corporation to maintain in effect through December
31, 1999 each other Benefit Plan (other than the MIP) that is not subject to
ERISA and is an annual bonus plan listed on Schedule 5.10(e), in each case as
such Benefit Plan is in effect on the date hereof.
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ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the holders of Company Common
Stock, if required by applicable law and the Certificate of Incorporation, in
order to consummate the Merger;
(b) HSR Act. Any waiting period applicable to the Merger under
the HSR Act shall have expired or been terminated;
(c) Statutes. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any foreign or domestic Governmental
Entity of competent jurisdiction which prohibits the consummation of the Merger;
(d) Consents. All foreign or domestic governmental consents,
orders and approvals required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and shall be in effect
at the Effective Time, except for such consents the failure of which to obtain
would not have a material adverse effect on the Company and its Subsidiaries
taken as a whole;
(e) Injunctions. There shall be no order or injunction of a
foreign or United States federal or state court or other Governmental Entity of
competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and
(f) Purchase of Shares in Offer. Parent, Purchaser or their
affiliates shall have accepted for payment and paid for shares of Company Common
Stock pursuant to the Offer or the Tender Agreement, except that Parent and
Purchaser shall not be entitled to rely on this condition if Purchaser shall
have failed to purchase Shares pursuant to the Offer in breach of its
obligations under this Agreement.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after stockholder approval thereof:
(a) By the mutual consent of the Management Board of Parent
and/or the Supervisory Board of Parent, on the one hand, and the Board of
Directors of the Company, on the other.
(b) By either of the Board of Directors of the Company, on the
one hand, or the Management Board and/or the Supervisory Board of Parent, on the
other:
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<PAGE> 35
(i) if any Governmental Entity or court of competent
jurisdiction shall have issued an order, decree, injunction or ruling
or taken any other action (which order, decree, injunction, ruling or
other action the parties hereto shall use their respective reasonable
best efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, injunction, ruling or other action
shall have become final and non-appealable; provided, however, that the
party seeking to terminate this Agreement shall have used all
reasonable best efforts to challenge such order, decree, injunction or
ruling;
(ii) if Parent or Purchaser shall have terminated the
Offer and any option granted in the Tender Agreement has not been
exercised and is not exercisable, provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
Purchaser to purchase Shares in the Offer; or
(iii) if the Offer shall not have been consummated
prior to the Expiration Date as the same may be extended from time to
time in accordance with Section 1.1(c) and any option granted in the
Tender Agreement has not been exercised and is not exercisable;
provided that the right to terminate this Agreement under this Section
7.1(b)(iii) shall not be available to any party that has breached in
any material respect its obligations under this Agreement in any manner
that has proximately contributed to the occurrence of the failure of
the Offer to be consummated.
(c) By the Board of Directors of the Company,
(i) if Parent, Purchaser or any of their affiliates
shall have failed to commence the Offer on or prior to five business
days following the date of the initial public announcement of the
Offer; provided, however, that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(i) if the Company is in
material breach of this Agreement; or
(ii) if, prior to the purchase of shares of Company
Common Stock pursuant to the Offer, there shall be a material breach by
either Parent or Purchaser of any of the material covenants or
agreements applicable to it contained in this Agreement that is not
cured within 15 business days after Parent and Purchaser receive
written notice from the Company of the occurrence of such breach.
(d) By the Management Board and/or the Supervisory Board of
Parent, if, due to an occurrence that if occurring after the commencement of the
Offer would result in a failure to satisfy any of the conditions set forth in
Annex A hereto, Parent, Purchaser, or any of their affiliates shall have failed
to commence the Offer on or prior to five business days following the date of
the initial public announcement of the Offer; provided, however, that Parent may
not terminate this Agreement pursuant to this Section 7.1(d)(i) if Parent or
Purchaser is in material breach of this Agreement.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.1, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement (other than this
Section 7.2 and Sections 3.20, 4.8, 5.2(b) and 7.3) shall forthwith become null
and void, and there shall be no liability on the part of the Parent or the
Company or any of their respective Representatives, except nothing in this
Section 7.2 shall relieve any party of liability for fraud or for breach of this
Agreement (other than a breach of this Agreement arising solely out of the
inaccuracy of a representation or warranty made by the Company that was accurate
when made on the date hereof and which inaccuracy was not caused by the
intentional actions or omissions by the Company).
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Section 7.3 Payment of Non-Recommendation Fee.
(a) In the event that the Board of Directors of the Company
shall, in accordance with Section 5.4(d), (i) withdraw or modify or propose to
withdraw or modify, in any manner adverse to Parent or Purchaser, the approval
or recommendation of such Board of Directors of this Agreement, the Offer or the
Merger or (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal, then the Company shall, on the next succeeding business
day, pay to Parent by wire transfer of immediately available funds to an account
designated by Parent an amount equal to $30,000,000 (the "Non-Recommendation
Fee").
(b) The Company acknowledges that the agreements contained in
this Section 7.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails to promptly pay any amount due
pursuant to and in accordance with this Section 7.3, and, in order to obtain
such payment, the other party commences a suit which results in a judgment
against the Company for the Non-Recommendation Fee set forth in this Section
7.3, the Company shall also pay to Parent its out-of-pocket costs and expenses
incurred in connection with such litigation.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company contemplated
hereby, by written agreement of the parties hereto (which in the case of the
Company shall require approval of its Board of Directors and include approvals
as contemplated in Section 1.3(b)), at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after the
approval of this Agreement by the stockholders of the Company, no such
amendment, modification or supplement shall reduce or change the Merger
Consideration.
Section 8.2 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time or, in the case of the Company, shall survive the acceptance for
payment of, and payment for, the shares of Company Common Stock pursuant to the
Offer. This Section 8.2 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
Section 8.3 Notices. All notices (which term shall include any other
communications) required or permitted to be given under this Agreement or in
connection with the matters contemplated by this Agreement shall be in writing
and shall be deemed to have been duly given to the intended party (i) when
personally delivered, (ii) upon receipt if sent by reputable overnight courier
service or (iii) when successfully transmitted by telecopier without
interruption (with a confirming copy of such transmission sent within one
business day by reputable overnight courier service) to the party for whom
intended, provided that any notice received by telecopy or otherwise at the
addressee's location on any business day after 5:00 p.m. (addressee's local
time) shall be deemed to have been received at 9:00 a.m. (addressee's local
time) on the next business day. Any party to this Agreement may notify any other
party of any changes to the address or any of the other details specified in
this paragraph, provided that such notification shall only be effective on the
date specified in such notice or five (5) business days after the
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<PAGE> 37
notice is given, whichever is later. All notices required to be given under this
Agreement shall be sent to the party using the addresses or telecopy numbers
specified below:
(a) if to Parent or Purchaser, to:
Accor S.A.
Tour Maine Montparnasse
33, avenue du Maine
Paris 75015
France
Attention: Secretaire General
Telephone No.: 33-1-45-38-87-32
Telecopy No.: 33-1-45-38-87-30
- and -
Motel 6
14651 Dallas Parkway
Suite 500
Dallas, Texas 75240
Attention: Chief Financial Officer
Telephone No.: 1-972-702-6843
Telecopy No.: 1-972-702-6909
- and -
Attention: General Counsel
Telephone No.: 1-972-702-6961
Telecopy No.: 1-972-702-5995
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036-8299
Attention: Jeffrey A. Horwitz, Esq.
Telephone No.: 1-212-969-3229
Telecopy No.: 1-212-969-2900
(b) if to the Company, to:
Red Roof Inns, Inc.
4355 Davidson Road
Hilliard, Ohio 43026-2491
Attention: David L. Rea, Executive Vice President,
Chief Financial Officer and Treasurer
Telephone No.: 1-614-876-3210
Telecopy No.: 1-614-876-0544
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- and -
Attention: Office of the General Counsel
Telephone No.: 1-614-876-3200
Telecopy No.: 1-614-876-0544
with copies to:
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Telephone No.: 1-212-735-3000
Telecopy No.: 1-212-735-2000
Attention: Jeffrey W. Tindell, Esq.
- and -
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Thomas Patrick Dore, Jr., Esq.
Telephone No.: 1-212-450-4136
Telecopy No.: 1-212-450-4800
Section 8.4 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 8.5 Entire Agreement; Third-Party Beneficiaries. This
Agreement, the Company Disclosure Schedule, the Tender Agreement and the
Confidentiality Agreement (including the documents and the instruments referred
to herein and therein): (a) constitutes the entire agreement and supersedes all
prior agreements; understandings, representations and warranties, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
except as provided in Sections 1.3, 2.1, 2.2, 2.4 and 5.7, are not intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder. References herein to this Agreement shall for all purposes be deemed
to include references to the Company Disclosure Schedule.
Section 8.6 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
authority to be invalid, void, unenforceable or against its regulatory policy,
the application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction, and the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated,
provided that the commercial objective of this Agreement is not frustrated
thereby.
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Section 8.7 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof or of any other
jurisdiction.
Section 8.8 Jurisdiction.
(a) Any legal action or proceeding with respect to
this Agreement or any matters arising out of or in connection with this
Agreement or otherwise, and any action for enforcement of any judgment in
respect thereof shall be brought exclusively in the courts of the State of New
York or of the United States of America for the Southern District of New York,
the Court of Chancery of Delaware or the courts of the United States of America
for the District of Delaware and, by execution and delivery of this Agreement,
the Company, Parent and Purchaser each hereby accepts for itself and in respect
of its property, generally and unconditionally, the exclusive jurisdiction of
the aforesaid courts and appellate courts thereof. The Company, Parent and
Purchaser irrevocably consent to service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, or by recognized
international express carrier or delivery service, to the Company, Parent or
Purchaser at their respective addresses referred to in Section 8.3 hereof.
(b) Each of Parent and Purchaser hereby designates CT
Corporation as its respective agent for service of process in the State of New
York and RL&F Service Corp. as its agent for the service of process in the State
of Delaware, in each case solely with respect to any dispute or controversy
arising out of this Agreement only, and service upon Parent or Purchaser for
such purposes shall be deemed to be effective upon service of either CT
Corporation or RL&F Service Corp., as applicable, as aforesaid or of its
successor designated in accordance with the following sentence in the
appropriate State. Parent or Purchaser may designate another corporate agent or
law firm reasonably acceptable to the Company and located in the Borough of
Manhattan, in the City of New York, or in the County of Newcastle in the State
of Delaware, as applicable, as successor agent for service of process upon 30
days' prior written notice to the Company. Parent further covenants and agrees
to execute, upon the Company's request, such documents and agreements as are
reasonably necessary to confirm such designations.
(c) The Company, Parent and Purchaser each hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement or otherwise brought in the courts referred to
above and hereby further irrevocably waives and agrees, to the extent permitted
by applicable law, not to plead or claim in any such court , by way of motion,
as a defense, counterclaim or otherwise, in any action or proceeding with
respect to this Agreement, (a) any claim that it is not personally subject to
the jurisdiction of the above-named courts, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment before
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), (c) that the proceeding in any such court is brought in an
inconvenient forum, (d) that the venue of such proceeding is improper or (e)
that this Agreement, or the subject matter hereof, may not be enforced in or by
such court. Nothing herein shall affect the right of any party hereto to serve
process in any other manner permitted by law.
Section 8.9 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 Purchaser may assign, in its
sole discretion, any or all its rights, interests and obligations hereunder to
Parent or to any direct or indirect
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<PAGE> 40
wholly owned Subsidiary of Parent; provided that, in the case of any such
assignment by Purchaser, Purchaser shall remain liable for all of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
Section 8.10 Waiver. Any waiver of compliance with any
obligation, covenant, agreement, provision or condition of this Agreement or
consent pursuant to this Agreement shall not be effective unless evidenced by an
instrument in writing executed by the party to be charged. Any waiver of
compliance with any such obligation, covenant, agreement, provision or condition
of this Agreement shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other non-compliance.
Section 8.11 Headings. The table of contents and the
descriptive headings used herein are inserted for convenience of reference only
and are not intended to be part of or to affect the meaning or interpretation of
this Agreement. "Include," "includes," and "including" shall be deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import.
Section 8.12 Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached, each non-breaching party would be irreparably and
immediately harmed and could not be made whole by monetary damages. Accordingly,
it is agreed that the parties hereto (a) shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to compel specific
performance of this Agreement in any proceeding instituted in the courts of the
State of New York or the United States of America for the Southern District of
New York or in the Court of Chancery in and for New Castle County in the State
of Delaware or the courts of the United States of America for the District of
Delaware (or, if any such court lacks subject matter jurisdiction, any
appropriate state or federal court in the State of New York or the State of
Delaware), this being in addition to any other remedy to which they are entitled
at law or in equity, and (b) will waive, in any proceeding for specific
performance, the defense of adequacy of a remedy at law. Each of the parties
further agrees to waive any requirement for the securing or posting of any bond
or other security in connection with any proceeding for specific performance.
Section 8.13 Obligations of Parent and the Company of Parent
and the Company. Whenever this Agreement requires a Subsidiary of Parent to take
any action, such requirement shall be deemed to include an undertaking on the
part of Parent to cause such Subsidiary to take such action. Whenever this
Agreement requires a Subsidiary of the Company to take any action, such
requirement shall be deemed to include an undertaking on the part of the Company
to cause such Subsidiary to take such action.
Section 8.14 Limitations on Warranties.
(a) Except for the representations and warranties
contained in Article III of this Agreement, the Company makes no other express
or implied representation or warranty to Parent or Purchaser. Parent and
Purchaser acknowledge that, in entering into this Agreement, it has not relied
on any representations or warranties of the Company other than the
representations and warranties of the Company set forth in Article III of this
Agreement.
(b) Except for the representations and warranties
contained in Article IV of this Agreement, Parent and Purchaser make no other
express or implied representation or warranty to the Company. The Company
acknowledges that, in entering into this Agreement, it has not relied on any
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<PAGE> 41
representations or warranties of Parent and Purchaser other than the
representations and warranties of Parent and Purchaser set forth in Article IV
of this Agreement.
Section 8.15 Schedules. The Company Disclosure Schedule shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein. Any matter disclosed pursuant
to the Company Disclosure Schedule shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed.
Section 8.16 Interpretation. The words "hereof," "herein" and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. All terms defined in
this Agreement shall have the defined meanings contained herein when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the gender and neuter genders of such term. Any agreement, instrument
or statute defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of agreements
and instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns. All references to "$" and "dollars" herein
shall be deemed to refer to the U.S. dollar. The term "business day" shall mean
any day other than Saturday, Sunday or any other day on which banks in New York
City, New York or Paris, France are required to or permitted to be closed.
Section 8.17 Execution. This Agreement may be executed by
facsimile signatures and such signature shall be deemed binding for all purposes
hereof, without delivery of an original signature being thereafter required.
[END OF TEXT]
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[EXECUTION PAGE]
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
ACCOR S.A.
By: /s/ ANDRE MARTINEZ
-----------------------------
Name: Andre Martinez
Title: Authorized Signatory
By: /s/ PIERRE TODOROV
-----------------------------
Name: Pierre Todorov
Title: Authorized Signatory
RRI ACQUISITION CORP.
By: /s/ ARMAND SEBBAN
-----------------------------
Name: Armand Sebban
Title: Executive Vice President
and Chief Financial Officer
RED ROOF INNS, INC.
By: /s/ FRANCIS W. CASH
-----------------------------
Name: Francis Cash
Title: Chairman, President and
Chief Executive Officer
<PAGE> 43
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer (subject to
the provisions of the Agreement), Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any tendered
Shares, and may terminate the Offer and not accept for payment any tendered
shares if:
(i) there shall not have been validly tendered and not
withdrawn prior to the expiration of the Offer at least 18,400,000 shares of
Company Common Stock (the "Minimum Condition"), which represent at least 68.3%
of the total issued and outstanding shares (other than treasury shares) of
Company Common Stock on the date hereof,
(ii) any applicable waiting period under the HSR Act has not
expired or terminated prior to the expiration of the Offer, or
(iii) at any time on or after the date of the Agreement, and
before the expiration of the Offer, any of the following events shall occur and
be continuing:
(a) there shall be any statute, rule, regulation,
judgment, order or injunction promulgated, entered, enforced, enacted,
issued or applicable to the Offer or the Merger by any domestic or
foreign federal or state governmental regulatory or administrative
agency or authority or court or legislative body or commission which
(1) prohibits, or imposes any material limitations on, Parent's or
Purchaser's ownership or operation of all or a material portion of the
Company's businesses or assets, (2) prohibits, or makes illegal the
acceptance for payment, payment for or purchase of Shares or the
consummation of the Offer or the Merger, (3) restricts the ability of
Purchaser, or renders Purchaser unable, to accept for payment, pay for
or purchase some or all the Shares, or (4) imposes material limitations
on the ability of Purchaser or Parent effectively to exercise full
rights of ownership of the Shares, including, without limitation, the
right to vote the Shares purchased by it on all matters properly
presented to the Company's stockholders, provided, however, that Parent
shall have used its reasonable best efforts to cause any such judgment,
order or injunction to be vacated or lifted;
(b) there shall be any action or proceeding pending
or instituted by any domestic or foreign national or federal
governmental regulatory or administrative agency or authority, or by
any U.S. state governmental regulatory or administrative agency or
authority, which: (A) (1) seeks to prohibit, or impose any material
limitation on, Parent's or Purchaser's ownership or operation of all or
a material portion of the Company's businesses or assets, (2) seeks to
prohibit or make illegal the acceptance for payment, payment for or
purchase of Shares or the consummation of the Offer or the Merger, (3)
seeks to restrict the ability of Purchaser, or render Purchaser unable,
to accept for payment, pay for or purchase some or all the Shares or
(4) seeks to impose material limitations on the ability of Purchaser or
Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased
by it on all matters properly presented to the Company's stockholders;
and (B) Parent shall have used all reasonable best efforts to cause to
be dismissed; and (C) the Management Board or Supervisory Board of
Parent shall have determined, after consultation with legal counsel,
would, if adversely
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<PAGE> 44
determined, have any of the results described in any of clauses (A)(1)
through (A)(4) of this paragraph (b) if the relief sought were to be
obtained;
(c) the representations and warranties of the Company
set forth in the Agreement shall not be true and correct in any
respect, disregarding for this purpose any standard of materiality
contained in any such representation or warranty, as of the date of
consummation of the Offer as though made on or as of such date, except
(i) for changes specifically permitted by the Agreement or (ii) (A)
those representations and warranties that address matters only as of a
particular date which are true and correct as of such date or (B) where
the failure of such representations and warranties to be true and
correct, do not, individually or in the aggregate, have a material
adverse effect on the Company and its Subsidiaries, taken as a whole;
or
(d) the Company shall have breached or failed in any
material respect to perform or comply with any material obligation,
agreement or covenant required by the Agreement to be performed or
complied with by it (including, without limitation, if the Company
shall have entered into any definitive agreement or any agreement in
principle with any Person (other than Parent, Purchaser or any
affiliate thereof) with respect to an Acquisition Proposal or similar
business combination with the Company);
(e) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on
the New York Stock Exchange, the Nasdaq National Market System or the
Paris Stock Exchange, which suspension or limitation shall have
continued for at least five New York Stock Exchange trading days, (ii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or in France or any limitation
(whether or not mandatory) by Federal, state or foreign authorities on
the extension of credit by lending institutions, which moratorium,
suspension, or limitation is reasonably likely to materially affect the
ability of Parent to pay for the Shares, (iii) a commencement of a war
or armed hostilities or other national or international calamity
directly or indirectly involving the United States or France and
reasonably likely to have a material adverse effect on the Company and
its Subsidiaries taken as a whole or materially and adversely affect
the consummation of the Offer, or (iv) in the case of clauses (i), (ii)
and (iii) above existing at the time of the commencement of the Offer,
a material acceleration or worsening thereof;
(f) the Agreement shall have been terminated in
accordance with its terms which in the reasonable judgment of Parent or
Purchaser, in any such case, and regardless of the circumstances giving
rise to such condition, makes it inadvisable to proceed with the Offer
or with such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Purchaser
and Parent and, subject to the Agreement, may be asserted by either of them or
may be waived by Parent or Purchaser, in whole or in part at any time and from
time to time in the sole discretion of Parent or Purchaser, provided that the
Minimum Condition may not be waived to be less than 51% of the total issued and
outstanding shares (other than treasury shares) of Company Common Stock.
A-2
<PAGE> 1
Exhibit (c)(2)
TENDER AND VOTING AGREEMENT
THIS TENDER AND VOTING AGREEMENT dated as of July 10, 1999
(this "AGREEMENT") is by and among ACCOR SA, a corporation organized under the
laws of France ("PARENT"), RRI ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Parent ("PURCHASER"), and the persons listed on Annex
A hereto (collectively, the "MS ENTITIES").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement,
Parent, Purchaser and Red Roof Inns, Inc., a Delaware corporation (the
"COMPANY"), have entered into an Agreement and Plan of Merger (as amended from
time to time, the "MERGER AGREEMENT"), pursuant to which Purchaser has agreed,
among other things, to commence a cash tender offer (as such tender offer may
hereafter be amended from time to time, the "OFFER") to purchase any and all
shares of common stock, par value $0.01 per share, of the Company (the "COMPANY
COMMON STOCK");
WHEREAS, as an inducement and a condition to its entering into
the Merger Agreement and incurring the obligations set forth therein, including
the Offer and the Merger, Parent has required that the MS Entities enter into
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises, representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement. In addition, for
purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person, any Person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified. For
purposes of this Agreement, with respect to any MS Entity, "AFFILIATE" shall not
include the Company and the Persons that directly, or indirectly through one or
more intermediaries, are controlled by the Company.
"ENCUMBRANCES" shall mean any and all liens, charges, security
interests, options, claims, mortgages, pledges, proxies, voting trusts or
agreements, obligations, understandings or arrangements or other restrictions of
any nature whatsoever.
"OWNED SHARES" means, with respect to each MS Entity, the shares of
Company Common Stock set forth opposite such MS Entity's name on Annex A to this
Agreement, together with any other shares of Company Common Stock acquired by
that MS Entity after the date hereof.
"PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, estate, unincorporated
organization or other entity.
"REPRESENTATIVE" means, with respect to any Person, such Person's
officers, directors, partners, shareholders, members, employees, and other
agents and representatives (including any investment banker, financial advisor,
agent, representative or expert retained by or acting on behalf of such Person
or its subsidiaries).
"TRANSFER" means, with respect to a security, the sale, transfer,
pledge, hypothecation, encumbrance, assignment or disposition of such security
or the Beneficial Ownership thereof, the offer to make such a sale, transfer or
other disposition, and each option, agreement, arrangement or understanding,
whether or not in writing, to effect any of the foregoing. As a verb, "TRANSFER"
shall have a correlative meaning.
<PAGE> 2
2. Representations and Warranties of the MS Entities. Each MS Entity hereby
represents and warrants, but as to itself only, to Parent and Purchaser as
follows:
(a) Upon the consummation of the Offer or exercise of the Option (as
defined in Section 6 hereof), Purchaser will acquire good and marketable title
to such MS Entity's Owned Shares, free and clear of all Encumbrances, except for
any Encumbrance arising (i) under the Securities Act of 1933, as amended, or any
applicable state securities laws or (ii) solely as a result of the conduct of
Purchaser. Annex A accurately sets forth the number of shares of Company Common
Stock owned by such MS Entity as of the date of this Agreement.
(b) Such MS Entity is a corporation, limited liability company or
partnership (as specified on Annex A hereto) duly organized and validly existing
under the laws of its jurisdiction of organization, is in good standing under
the laws of its jurisdiction of organization, and has the corporate, company or
partnership (as the case may be) power and authority to execute and deliver this
Agreement and perform its obligations hereunder. The execution, delivery and
performance by such MS Entity of this Agreement and the consummation by it of
the transactions contemplated hereby have, to the extent required, been duly and
validly authorized by its Board of Directors, Manager(s) and General Partner(s)
(as the case may be) of such MS Entity and no other corporate, company or
partnership (as the case may be) proceedings on its part are necessary to
authorize the execution, delivery or performance by it of this Agreement or the
consummation by it of the transactions contemplated hereby.
(c) This Agreement has been duly and validly executed and delivered by
such MS Entity and constitutes a valid and binding agreement of it and any
person for whom it is acting as a nominee, enforceable against them in
accordance with its terms except (i) to the extent limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(d) None of the execution and delivery of this Agreement by such MS
Entity, the consummation by it of the transactions contemplated hereby or
compliance by it with any of the provisions hereof shall (i) conflict with or
result in a breach of any provision of its certificate of incorporation,
by-laws, limited liability company agreement, partnership agreement or similar
organizational documents, (ii) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which it is a party or by which any of its properties or assets
(including the Owned Shares) may be bound, (iii) require on its part any filing
with, or permit, authorization, consent or approval of, any Governmental Entity,
other than any filing required to be made under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), or (iv) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable to it
or any of its properties or assets, excluding from clauses (ii) through (iv)
such violations, breaches, defaults or failure to make any filing or to obtain
any permit, authorization, consent or approval which would not, individually or
in the aggregate, have a material adverse effect on it, and which will not
materially impair the its ability to consummate the transactions contemplated
hereby.
(e) Except as set forth on Schedule 2(e) to this Agreement, such MS
Entity is the record and beneficial owner, has sole voting power, sole power of
disposition and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to its Owned Shares, subject to applicable
securities laws and the terms of this Agreement.
3. Representations and Warranties of Parent and Purchaser. Parent and Purchaser
hereby represent and warrant, jointly and severally, to the MS Entities as
follows:
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<PAGE> 3
(a) Each of Parent and Purchaser is a corporation duly organized and
validly existing under the laws of its jurisdiction of incorporation, and each
of them is in good standing under the laws of its jurisdiction of incorporation.
Parent and Purchaser have the corporate power and authority to execute and
deliver this Agreement and perform their respective obligations hereunder. The
execution and delivery by Parent and Purchaser of this Agreement and the
performance by Parent and Purchaser of their respective obligations hereunder
have been duly and validly authorized by the Management Board and/or the
Supervisory Board of Parent and the Board of Directors and Purchaser and no
other corporate proceedings on the part of Parent or Purchaser are necessary to
authorize the execution, delivery or performance of this Agreement by Parent and
Purchaser or the consummation of the transactions contemplated hereby by Parent
and Purchaser.
(b) This Agreement has been duly and validly executed and delivered by
Parent and Purchaser and constitutes a valid and binding agreement of each of
Parent and Purchaser, enforceable against each of them in accordance with its
terms except (i) to the extent limited by applicable bankruptcy, insolvency or
similar laws affecting creditors rights and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) None of the execution and delivery of this Agreement by Parent or
Purchaser, the consummation by Parent or Purchaser of the transactions
contemplated hereby or compliance by Parent or Purchaser with any of the
provisions hereof shall (i) conflict with or result in any breach of the
certificate of incorporation or by-laws of Parent or Purchaser, or (ii) result
in a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which Parent or Purchaser is a party or
by which Parent or Purchaser or any of their respective properties or assets may
be bound, (iii) require on the part of Parent or the Purchaser any filing with,
or permit, authorization, consent or approval of, any Governmental Entity, other
than any filing required to be made under the HSR Act, or (iv) violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to Parent or Purchaser or any of their respective properties or
assets, excluding from clauses (ii) through (iv) such violations, breaches,
defaults or failure to make any filing or to obtain any permit, authorization,
consent or approval which would not, individually or in the aggregate, have a
material adverse effect on Parent or Purchaser, and which will not materially
impair the ability of Parent or Purchaser to consummate the transactions
contemplated hereby.
4. Tender of Shares. Each MS Entity shall tender or cause the record owner
thereof to tender, pursuant to and in accordance with the terms of the Offer,
and shall not withdraw, any and all of its Owned Shares. The parties agree that
each MS Entity will, for all Owned Shares tendered by it in the Offer and
accepted for payment and purchased by Purchaser, receive a price for each of its
Owned Shares equal to $22.75, or such higher per share consideration paid to
other stockholders who have tendered shares of Company Common Stock into the
Offer which have been accepted for payment and purchased by Purchaser in the
Offer (the "OFFER PRICE"), but not any additional amounts paid or payable to
holders of Company Common Stock that do not participate in the Offer by reason
of rights of appraisal, rights of dissent or otherwise. Parent and Purchaser
agree (a) not to decrease the price to be paid to the Company's stockholders in
the Offer or the Merger below $22.75 per Share, and that (b) on the date that
the Owned Shares are accepted for payment and purchased by Purchaser pursuant to
the Offer, Purchaser or Parent, as the case may be, shall make, or cause to be
made by the Paying Agent, payment by wire transfer to each MS Entity of the
purchase price for all its Owned Shares that are tendered by it and accepted for
payment and purchased by Purchaser to such account as is designated by such MS
Entity in the letter of transmittal which accompanies the tender of the Owned
Shares.
5. Voting of Owned Shares; Proxy. (a) During the period commencing on the date
hereof and continuing until the earlier of (x) the consummation of the Offer and
(y) the termination of this Agreement (such period being referred to as the
"VOTING PERIOD"), at any meeting (whether annual or special, and
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<PAGE> 4
whether or not an adjourned or postponed meeting) of the Company's stockholders,
however called, or in connection with any written consent of the Company's
stockholders, subject to the absence of a preliminary or permanent injunction or
other requirement under applicable law by any United States federal, state or
foreign court barring such action, each MS Entity shall vote (or cause to be
voted) all of its Owned Shares: (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval and adoption of
the Merger and the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof; and (ii) against any action or agreement that would impede,
interfere with, or prevent the Offer or the Merger, including any Acquisition
Proposal (other than the Offer and the Merger). No MS Entity shall enter into
any agreement, arrangement or understanding with any Person the effect of which
would be inconsistent or violative of the provisions and agreements contained in
this Section 5.
(b) By its execution hereof and in order to secure its obligations
under this Agreement, during the period commencing on the date hereof, each MS
Entity irrevocably grants to, and appoints, Parent and Benjamin Cohen, Pierre
Todorov, Armand Sebban and Emmett J.Gossen, Jr., or any of them, in their
respective capacities as employees of Parent and/or its Subsidiaries, and any
individual who shall hereafter succeed to either of their respective positions
at Parent and/or such Subsidiary, and each of them individually, as its true and
lawful proxy and attorney-in-fact (with full power of substitution), for and in
the name, place and stead of it, to vote the Owned Shares or grant a consent or
approval in respect of the Owned Shares (i) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the approval
and adoption of the Merger and the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement and any actions required
in furtherance thereof and hereof; and (ii) against any action or agreement that
would impede, interfere with, or prevent the Offer or the Merger, including
against any Acquisition Proposal other than the Offer and the Merger (the
irrevocable proxy granted by each MS Entity under this Section 5(b) being its
"IRREVOCABLE PROXY").
(c) Each MS Entity understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon its execution and delivery of its
Irrevocable Proxy. Each MS Entity hereby affirms that its Irrevocable Proxy is
given in connection with the execution of this Agreement and the Merger
Agreement, and further affirms that its Irrevocable Proxy is coupled with an
interest in this Agreement and may under no circumstances be revoked until the
termination of this Agreement in accordance with Section 15 at which point its
Irrevocable Proxy shall be automatically revoked. Each MS Entity hereby ratifies
and confirms all that its Irrevocable Proxy may lawfully do or cause to be done
by virtue hereof. The Irrevocable Proxy of each MS Entity is executed and
intended to be irrevocable in accordance with the provisions of Section 212(e)
of the Delaware General Corporation Law.
6. Option. (a) Each MS Entity hereby grants Purchaser an irrevocable option (the
irrevocable option granted by each MS Entity under this Section 6(a) being its
"OPTION") to purchase all its Owned Shares at a price per share equal to the
Offer Price (the "OPTION PRICE"). The Option granted by each MS Entity shall
become exercisable, in whole but not in part, only if either of the following
occur (each a "TRIGGERING EVENT"):
(i) the Offer is terminated without the Purchaser purchasing
Shares thereunder solely because the Minimum Condition has not been met; or
(ii) the Offer is consummated without that MS Entity having
tendered all its Owned Shares in accordance with Section 4.
(b) Notwithstanding any provision of this Agreement to the contrary, it
is understood that Purchaser shall not be entitled to purchase the Shares
pursuant to any Option if Purchaser shall have failed to purchase Shares
pursuant to the Offer in breach of its obligations under the Merger Agreement.
Upon the purchase of the Owned Shares of any MS Entity pursuant to the
applicable Option, Purchaser shall, unless the Company shall have breached its
obligations pursuant to the last sentence of Section
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<PAGE> 5
5.4(d) of the Merger Agreement, complete the Merger in accordance with, and
subject to the terms and conditions set forth in, the Merger Agreement.
7. Exercise of Options.
(a) Subject to the conditions set forth in Section 9 hereof, the
Options may be exercised by Purchaser in accordance with the terms in this
Section 7 and the other provisions of this Agreement. In the event Purchaser
wishes to exercise any Option granted by the MS Entities under Section 6,
Purchaser shall send a written notice (the "EXERCISE NOTICE") to such MS Entity
stating that it wishes to purchase such MS Entity's Owned Shares pursuant to
such exercise and the place, the date (not less than one nor more than 20
business days from the Exercise Notice), and the time for closing of such
purchase; provided, that such time and place may be earlier than one day after
the Exercise Notice if reasonably practicable; provided, further, that no
Exercise Notice shall be valid unless contemporaneously therewith an Exercise
Notice is delivered to all other MS Entities with respect to all other Options
that are then exercisable which provides for a contemporaneous closing. An
Exercise Notice may be delivered by Purchaser not later than 10 business days
after the occurrence of a Trigger Event, and, if such a Notice is not delivered
by such date, the Options shall terminate automatically and be of no further
force and effect. The closing of a purchase of Owned Shares upon the exercise of
any Option (a "CLOSING") shall take place at the place, on the date and at the
time designated by Purchase in its Exercise Notice; provided that if, at the
date of the Closing herein provided for, the conditions set forth in Section 9
shall not have been satisfied (or waived by the applicable MS Entity) or the
conditions set forth in Section 10 shall not have been satisfied (or waived by
Purchaser), Purchaser may, by written notice to the applicable MS Entity,
postpone the Closing until a date that is no later than five business days after
such conditions are satisfied (or so waived). If the Closing does not occur by
such date, the Options shall terminate and be of no further force or effect.
(b) Purchaser shall not be under any obligation to deliver any Exercise
Notice and may allow the Options to terminate without purchasing any Owned
Shares hereunder; provided, however, that once Purchaser has delivered to an MS
Entity an Exercise Notice, subject to the terms and conditions set forth in this
Agreement, Purchaser shall be bound to effect the purchase of the relevant Owned
Shares as described in such Exercise Notice.
8. Closing. At the Closing, (a) the relevant MS Entity shall deliver to
Purchaser a certificate or certificates, duly endorsed or accompanied by stock
powers duly executed in blank (collectively, the "CERTIFICATES") representing
(or cause to be made book entry delivery to an account designated by Purchaser
in the Exercise Notice of) such Owned Shares, and (b) Purchaser shall deliver to
the MS Entity a certified or bank cashier's check or checks payable to or upon
the order of the MS Entity in an amount equal to (i) the number of Owned Shares
being purchased from such MS Entity at such Closing multiplied by (ii) the Offer
Price.
9. Conditions to the MS Entity's Obligations. The obligation of an MS Entity to
sell Owned Shares pursuant to an exercise of an Option at any Closing is subject
to the following conditions:
(a) The representations and warranties of Purchaser contained in
Section 3 shall be true and correct in all material respects on the date
thereof.
(b) All waiting periods under the HSR Act applicable to the exercise of
the applicable Option shall have expired or been terminated.
(c) There shall be no preliminary or permanent injunction or other
order, decree or ruling issued by a Governmental Entity or court of competent
jurisdiction, nor any statute, rule, regulation or order promulgated or enacted
by any Governmental Entity, prohibiting the exercise of the applicable Option.
(d) Purchaser shall have purchased all the Owned Shares of all the MS
Entities.
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<PAGE> 6
10. Conditions to Purchaser's Obligations. The obligation of Purchaser to
purchase Owned Shares pursuant to an exercise of an Option at any Closing is
subject to the following conditions:
(a) The representations and warranties of the MS Entities contained in
Section 2 shall be true and correct in all material respects on the date
thereof.
(b) After giving effect to the Closing, Purchaser shall have purchased
at least 18,400,000 shares of Company Common Stock in the aggregate, which
18,400,000 shares represent at least 68.3% of the total issued and outstanding
shares (other than treasury shares) of Company Common Stock on the date hereof
(and no less than 51% of such Shares on the date of the Closing), from the MS
Entities.
(c) any applicable waiting period under the HSR Act has expired or
terminated.
(d) at any time on or after the occurrence of a Trigger Event and
before the Closing,
(i) there shall not be any statute, rule, regulation,
judgment, order or injunction promulgated, entered, enforced, enacted,
issued or applicable to the Options or the Merger by any domestic or
foreign federal or state governmental regulatory or administrative
agency or authority or court or legislative body or commission which
(1) prohibits, or imposes any material limitations on, Parent's or
Purchaser's ownership or operation of all or a material portion of the
Company's businesses or assets, (2) prohibits, or makes illegal the
acceptance for payment, payment for or purchase of the Shares or the
Owned Shares or the consummation of the Options or the Merger, (3)
restricts the ability of Purchaser, or renders Purchaser unable, to
accept for payment, pay for or purchase some or all the Shares or the
Owned Shares, or (4) imposes material limitations on the ability of
Purchaser or Parent effectively to exercise full rights of ownership of
the Shares or the Owned Shares, including, without limitation, the
right to vote the Shares to be purchased by it on all matters properly
presented to the Company's stockholders, provided, however, that Parent
shall have used its reasonable best efforts to cause any such judgment,
order or injunction to be vacated or lifted;
(ii) there shall not be any action or proceeding pending or
instituted by any domestic or foreign national or federal governmental
regulatory or administrative agency or authority, or by any U.S. state
governmental regulatory or administrative agency or authority, which:
(A) (1) seeks to prohibit, or impose any material limitation on,
Parent's or Purchaser's ownership or operation of all or a material
portion of the Company's businesses or assets, (2) seeks to prohibit or
make illegal the acceptance for payment, payment for or purchase of
Shares or the consummation of the Options or the Merger, (3) seeks to
restrict the ability of Purchaser, or render Purchaser unable, to
accept for payment, pay for or purchase some or all the Shares or the
Owned Shares or (4) seeks to impose material limitations on the ability
of Purchaser or Parent effectively to exercise full rights of ownership
of the Shares or the Owned Shares, including, without limitation, the
right to vote the Shares or the Owned Shares purchased or to be
purchased by it on all matters properly presented to the Company's
stockholders; and (B) Parent shall have used all reasonable best
efforts to cause to be dismissed; and (C) the Management Board or
Supervisory Board of Parent shall have determined, after consultation
with legal counsel, would, if adversely determined, have any of the
results described in any of clauses (A)(1) through (A)(4) of this
paragraph (ii) if the relief sought were to be obtained;
(iii) the representations and warranties of the Company set
forth in the Merger Agreement shall be true and correct in any respect,
disregarding for this purpose any standard of materiality contained in
any such representation or warranty, as of the date of consummation of
the Options as though made on or as of such date, except (i) for
changes specifically permitted by the Merger Agreement or (ii) (A)
those representations and warranties that address matters only as of a
particular date which are true and correct as of such date or (B) where
the failure of such representations and warranties to be true and
correct, do not, individually or in the
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aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole; or
(iv) the Company shall not have breached or failed in any
material respect to perform or comply with any material obligation,
agreement or covenant required by the Merger Agreement to be performed
or complied with by it (including, without limitation, if the Company
shall have entered into any definitive agreement or any agreement in
principle with any Person (other than Parent, Purchaser or any
affiliate thereof) with respect to an Acquisition Proposal or similar
business combination with the Company); or
(v) there shall not have occurred (1) any general suspension
of trading in, or limitation on prices for, securities on the New York
Stock Exchange, the Nasdaq National Market System or the Paris Stock
Exchange, which suspension or limitation shall have continued for at
least five New York Stock Exchange trading days, (2) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States or in France or any limitation (whether or not
mandatory) by Federal, state or foreign authorities on the extension of
credit by lending institutions, which moratorium, suspension, or
limitation is reasonably likely to materially affect the ability of
Parent to pay for the Shares or the Owned Shares, (3) a commencement of
a war or armed hostilities or other national or international calamity
directly or indirectly involving the United States or France and
reasonably likely to have a material adverse effect on the Company and
its Subsidiaries taken as a whole or materially and adversely affect
the consummation of the Options or the Merger, or (4) in the case of
clauses (1), (2) and (3) above existing at the time of the giving of
the Exercise Notice, a material acceleration or worsening thereof.
11. Restrictions on Transfer, Other Proxies; No Solicitation.
(a) Except as provided in Sections 4, 5 or 6 hereof, no MS Entity
shall, until the termination of this Agreement, pursuant to Section 15, directly
or indirectly: (i) Transfer to any Person any or all of its Owned Shares; or
(ii) grant any proxies or powers of attorney, deposit any of its Owned Shares
into a voting trust or enter into a voting agreement, understanding or
arrangement with respect to such Owned Shares. Nothing contained herein shall
prevent any MS Entity from transferring any or all of its Owned Shares to an
Affiliate of such MS Entity which is or agrees to be bound by this Agreement;
provided that such MS Entity shall continue to remain liable for all its
obligations under this Agreement.
(b) Each MS Entity hereby agrees, solely in its capacity as a
stockholder of the Company, that it and its subsidiaries or Affiliates shall
not, and such MS Entity shall cause its Representatives not to, directly or
indirectly, (i) initiate, solicit or encourage (including by way of furnishing
non-public information) any inquiries or the making of any proposal that
constitutes or is reasonably likely to lead to an Acquisition Proposal or (ii)
engage in any negotiations or discussions with, or furnish any information or
data, to, any third party relating to an Acquisition Proposal. The MS Entities
will promptly inform Parent of the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by the
MS Entities in connection with such proposal, discussion, negotiation or
inquiry) and the identity of the party making such proposal or inquiry which the
MS Entities may receive in respect of any Acquisition Proposal. The MS Entities
will also promptly request each Person that has heretofore received any
non-public information in connection with its consideration of an Acquisition
Proposal to return all such non-public information furnished to such person by
or on behalf of the MS Entities, the Company or any of the Company's
Subsidiaries. Any action taken by the Company or any member of the Board of
Directors of the Company or any Affiliate of any MS Entity as a financial
advisor to the Company in his or its capacity as such in accordance with the
terms of the Merger Agreement shall be deemed not to violate this Section 11(b).
12. Stop Transfer. No MS Entity shall request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated interest
representing any of its Owned Shares, unless such transfer is made in compliance
with this Agreement.
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13. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or appropriate to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
14. Waiver of Appraisal Rights. Each MS Entity hereby waives any rights of
appraisal or rights to dissent from the Merger that it may have.
15. Termination. This Agreement, and all rights and obligations of the parties
hereunder, shall terminate upon the earlier of (a) the date upon which Purchaser
shall have purchased and paid for all of the Owned Shares of the MS Entities in
accordance with the terms of the Offer or pursuant to this exercise of the
Options granted by the MS Entities, (b) the date on which the Options have
expired in accordance with this Agreement, or (c) the date upon which the Merger
Agreement is terminated in accordance with its terms.
16. Miscellaneous.
(a) This Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements;
understandings, representations and warranties, both written and oral, between
the parties with respect to the subject matter hereof.
(b) Each of the MS Entities agrees that this Agreement and the
respective rights and obligations of the MS Entities hereunder shall attach to
all Owned Shares.
(c) Without limiting Sections 3.20 and 5.9 of the Merger Agreement, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(d) This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties and their respective successors,
personal or legal representatives, executors, administrators, heirs,
distributees, devisees, legatees and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party (whether by operation of law or otherwise) without the
prior written consent of the other party; provided, that Parent and Purchaser
may assign their rights and obligations hereunder to any assignee of such
parties' rights and obligations under the Merger Agreement or to any other
Subsidiary of Parent; provided that, in the case of any such assignment by
Parent or Purchaser, Parent or Purchaser, as the case may be, shall remain
liable for all of its obligations under this Agreement. Except for the last
sentence of Section 6 hereof, which is intended to benefit the Company's
stockholders, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
(e) This Agreement may not be amended, changed, supplemented, or
otherwise modified or terminated, except upon the execution and delivery of a
written agreement executed by each of the parties hereto. The parties may waive
compliance by the other parties hereto with any representation, agreement or
condition otherwise required to be complied with by such other party hereunder,
but any such waiver shall be effective only if in writing executed by the
waiving party.
(f) All notices (which term shall include any other communications)
required or permitted to be given under this Agreement or in connection with the
matters contemplated by this Agreement shall be in writing and shall be deemed
to have been duly given to the intended party (i) when personally delivered,
(ii) upon receipt if sent by reputable overnight courier service or (iii) when
successfully transmitted by telecopier without interruption (with a confirming
copy of such transmission sent within one business day by reputable overnight
courier service) to the party for whom intended, provided that any notice
received by telecopy or otherwise at the addressee's location on any business
day after 5:00 p.m. (addressee's local time) shall be deemed to have been
received at 9:00 a.m. (addressee's local
8
<PAGE> 9
time) on the next business day. Any party to this Agreement may notify any other
party of any changes to the address or any of the other details specified in
this paragraph, provided that such notification shall only be effective on the
date specified in such notice or five (5) business days after the notice is
given, whichever is later. All notices required to be given under this Agreement
shall be sent to the party using the addresses or telecopy numbers specified
below:
If to Parent or Purchaser,
to it at: c/o Accor S.A.
Tour Maine Montparnasse
33, avenue du Maine
Paris 75015
France
Attention: Secretaire General
Telephone No.: 33-1-45-38-87-32
Telecopy No.: 33-1-45-38-87-30
- and -
c/o Motel 6
14651 Dallas Parkway
Suite 500
Dallas, Texas 75240
Attention: Chief Financial Officer
Telephone No.: 1-972-702-6843
Telecopy No.: 1-972-702-6909
- and -
Attention: General Counsel
Telephone No.: 1-972-702-6961
Telecopy No.: 1-972-702-5995
with a copy to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036-8299
Attention: Jeffrey A. Horwitz, Esq.
Telephone No.: 1-212-969-3229
Telecopy No.: 1-212-969-2900
If to any MS Entity: c/o Morgan Stanley Dean Witter & Co.
1585 Broadway
New York, New York 10036
Attention: John A. Henry
Telephone No.: 1-212- 761-7767
Telecopy No.: 1-212-761-0285
with a copies to: Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Thomas Patrick Dore, Jr., Esq.
Telephone No.: 1-212-450-4136
Telecopy No.: 1-212-450-4800
- and-
9
<PAGE> 10
Red Roof Inns, Inc.
4355 Davidson Road
Hilliard, OH 43026-2491
Attention: David L. Rea, Executive Vice President
Chief Financial Officer and Treasurer
Telephone No.: 1-614-876-3210
Telecopy No.: 1-614-876-0544
-and-
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffrey W. Tindell, Esq.
Telephone No.: 1-212-735-3380
Telecopy No.: 1-212-735-2000
(g) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without affecting the validity or
enforceability of the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable, provided the commercial objective of this
Agreement is not frustrated.
(h) Each of the parties hereto acknowledges and agrees that in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached, each non-breaching party
would be irreparably and immediately harmed and could not be made whole by
monetary damages. Accordingly, it is agreed that the parties hereto (a) shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to compel specific performance of this Agreement in any proceeding
instituted in the courts of the State of New York or the United States of
America for the Southern District of New York or in the Court of Chancery in and
for New Castle County in the State of Delaware or the courts of the United
States of America for the District of Delaware (or, if any such court lacks
subject matter jurisdiction, any appropriate state or federal court in the State
of New York or the State of Delaware), this being in addition to any other
remedy to which they are entitled at law or in equity, and (b) will waive, in
any proceeding for specific performance, the defense of adequacy of a remedy at
law. Each of the parties further agrees to waive any requirement for the
securing or posting of any bond or other security in connection with any
proceeding for specific performance.
(i) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) Notwithstanding anything herein to the contrary, nothing set forth
herein shall in any way restrict any person, including any officer, partner,
director or employee of the MS Entities, in the exercise of his or her fiduciary
duties as a director of the Company.
(k) This Agreement shall be governed and construed in accordance with
the laws of the State of Delaware without giving effect to the principles of
conflicts of law thereof or of any other jurisdiction.
10
<PAGE> 11
(l) The descriptive headings used herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement. "INCLUDE," "INCLUDES," and "INCLUDING" shall
be deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import. The words "HEREOF," "HEREIN" and
"HEREWITH" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. All terms defined in
this Agreement shall have the defined meanings contained herein when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the gender and neuter genders of such term. The term "BUSINESS DAY"
shall mean any day other than Saturday, Sunday or any other day on which banks
in New York City, New York or Paris, France are required to or permitted to be
closed.
(m) This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but all of which, taken together, shall constitute
one and the same instrument. This Agreement may be executed by facsimile
signatures and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.
(n) Any legal action or proceeding with respect to this Agreement or any
matters arising out of or in connection with this Agreement or otherwise, and
any action for enforcement of any judgment in respect thereof shall be brought
exclusively in the courts of the State of New York or of the United States of
America for the Southern District of New York, the Court of Chancery of Delaware
or the courts of the United States of America for the District of Delaware and,
by execution and delivery of this Agreement, each of the MS Entities, Parent and
Purchaser each hereby accept for itself and in respect of its property,
generally and unconditionally, the exclusive jurisdiction of the aforesaid
courts and appellate courts thereof. Each of the MS Entities, Parent and
Purchaser irrevocably consents to service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, or by recognized
international express carrier or delivery service, to any MS Entity at the
address referred to in Section 16(f) or, in the case of Parent or Purchaser, as
provided in Section 16(o).
(o) Each of Parent and Purchaser hereby designates CT Corporation as its
respective agent for service of process in the State of New York and RL&F
Service Corp. as its agent for the service of process in the State of Delaware,
in each case solely with respect to any dispute or controversy arising out of
this Agreement only, and service upon Parent or Purchaser for such purposes
shall be deemed to be effective upon service of either CT Corporation or RL&F
Service Corp., as applicable, as aforesaid or of its successor designated in
accordance with the following sentence in the appropriate State. Parent or
Purchaser may designate another corporate agent or law firm reasonably
acceptable to the MS Entities and located in the Borough of Manhattan, in the
City of New York, or in the County of Newcastle in the State of Delaware, as
applicable, as successor agent for service of process upon 30 days' prior
written notice to the MS Entities. Parent further covenants and agrees to
execute, upon the MS Entities' request, such documents and agreements as are
reasonably necessary to confirm such designations.
(p) Each of the MS Entities, Parent and Purchaser each hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or
11
<PAGE> 12
proceedings arising out of or in connection with this Agreement or otherwise
brought in the courts referred to above and hereby further irrevocably waives
and agrees, to the extent permitted by applicable law, not to plead or claim in
any such court, by way of motion, as a defense, counterclaim or otherwise, in
any action or proceeding with respect to this Agreement, (a) any claim that it
is not personally subject to the jurisdiction of the above-named courts, (b)
that it or its property is exempt or immune from jurisdiction of any such court
or from any legal process commenced in such courts (whether through service of
notice, attachment before judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), (c) that the proceeding in any such court
is brought in an inconvenient forum, (d) that the venue of such proceeding is
improper or (e) that this Agreement, or the subject matter hereof, may not be
enforced in or by such court. Nothing herein shall affect the right of any party
hereto to serve process in any other manner permitted by law.
(q) Wherever this Agreement requires Purchaser to take any action, such
requirement shall be deemed to include an undertaking on the part of Parent to
cause Purchaser to cause such action.
[END OF TEXT; EXECUTION PAGE FOLLOWS]
12
<PAGE> 13
[EXECUTION PAGE]
IN WITNESS WHEREOF, Parent, Purchaser and the MS Entities have
caused this Agreement to be duly executed as of the day and year first above
written.
ACCOR SA
By: /s/ ANDRE MARTINEZ
---------------------------------
Name: Andre Martinez
Title: Authorized Signatory
By: /s/ PIERRE TODOROV
---------------------------------
Name: Pierre Todorov
Title: Authorized Signatory
RRI ACQUISITION CORP.
By: /s/ ARMAND SEBBAN
---------------------------------
Name: Armand Sebban
Title: Executive Vice President
and Chief Financial Officer
THE MORGAN STANLEY REAL ESTATE FUND, L.P.
By: /s/ JOHN HENRY
---------------------------------
Name: John Henry
Title: Vice President
MORGAN STANLEY REAL ESTATE INVESTMENT
MANAGEMENT, INC., as nominee
By: /s/ JOHN HENRY
---------------------------------
Name: John Henry
Title: Vice President
MORGAN STANLEY REAL ESTATE CO-INVESTMENT
PARTNERSHIP II, L.P.
By: /s/ JOHN HENRY
---------------------------------
Name: John Henry
Title: Vice President
<PAGE> 14
ANNEX A
MS Entities and their Owned Shares
<TABLE>
<CAPTION>
MS ENTITY OWNED SHARES
- --------- ------------
<S> <C>
THE MORGAN STANLEY REAL ESTATE FUND, L.P., a 12,872,640 shares of Company Common Stock
Delaware limited partnership
MORGAN STANLEY REAL ESTATE INVESTMENT 901,600 shares of Company Common Stock
MANAGEMENT, INC., a Delaware corporation, as
nominee
MORGAN STANLEY REAL ESTATE CO-INVESTMENT 4,625,760 shares of Company Common Stock
PARTNERSHIP II, L.P., a Delaware limited
partnership
</TABLE>
A-1
<PAGE> 1
Exhibit (c)(3)
June 14, 1999
Mr. Jean-Marc Espalioux
Chairman of the Management Board and CEO
Accor
Tour Maine Montparnasse 33 avenue du Maine
75755 Paris Cedex 15 France
CONFIDENTIALITY AGREEMENT
Dear Sirs:
In connection with your continued possible interest in a transaction (the
"Transaction") involving, Red Roof Inns, Inc. (the "Company") and in order to
confirm, extend and otherwise supplement our Letter Agreement dated March 5,
1998, you have requested that we or our representatives furnish you or your
representatives with certain information relating to the Company or the
Transaction. All such written information furnished on or after the date hereof
by us or our directors, officers, employees, affiliates, representatives
(including, without limitation, financial advisors, attorneys and accountants)
or agents (collectively, "our Representatives") to you or your directors,
officers, employees, affiliates (including Motel 6), representatives (including,
without limitation, financial advisors, attorneys and accountants) or agents or
your potential sources of financing for the Transaction (collectively, "your
Representatives") and all analyses, compilations, forecasts, studies or other
documents prepared by you or your Representatives in connection with your or
their review of, or your interest in, the Transaction which contain or reflect
any such information is hereinafter referred to as the "Information". The term
Information will not, however, include information which (i) is or becomes
publicly available other than as a result of a disclosure by you or your
Representatives or (ii) is or becomes available to you on a nonconfidential
basis from a source (other than us or our Representatives) which, to the best of
your knowledge after due inquiry, is not prohibited from disclosing such
information to you by a legal, contractual or fiduciary obligation to us.
Accordingly, you hereby agree that:
<PAGE> 2
1. You and your Representatives (i) will keep the Information confidential
and will not (except as required by applicable law, regulation or legal
process, and only after compliance with paragraph 3 below), without our
prior written consent, disclose any Information in any manner
whatsoever, (ii) will not use the information in any way detrimental to
the Company, and (iii) will not use any Information other than in
connection with the Transaction; provided, however, that you may reveal
the Information to your Representatives (a) who need to know the
Information for the purpose of evaluating the Transaction, (b) who are
informed by you of the confidential nature of the Information and (c)
who agree to act in accordance with the terms of this letter agreement.
You will cause your Representatives to observe the terms of this letter
agreement, and you will be responsible for any breach of this letter
agreement by any of your Representatives.
2. You and your Representatives will not (except as required by
applicable law, regulation or legal process, and only after compliance
with paragraph 3 below), without our prior written consent, disclose
to any person the fact the Information exists or has been made
available, that you are considering the Transaction or any other
transaction involving the Company, or that discussions or negotiations
are taking or have taken place concerning the Transaction or involving
the Company or any term, condition or other fact relating to the
Transaction or such discussions or negotiations, including, without
limitation, the status thereof. The Company and its Representatives
will not (except as required by applicable law, regulation or legal
process) disclose to any person the fact that discussions or
negotiations are taking place or have taken place with Accor
concerning the Transaction.
3. In the event that you or any of your Representatives are requested
pursuant to, or acquired by, applicable law, regulation or legal
process to disclose any of the Information, you will notify us promptly
so that we may seek a protective order or other appropriate remedy or,
in our sole discretion, waive compliance with the terms of this letter
agreement. In the event that no such protective order or other remedy
is obtained, or that the Company does not waive compliance with the
terms of this letter agreement, you will furnish only that portion of
the Information which you are advised by your counsel is legally
required and will exercise all reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded the Information.
2
<PAGE> 3
4. If you determine not to proceed with the Transaction, you will promptly
inform our Representative, Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), of that decision and, in that case, and at any time upon the
written request of the Company or any of our Representatives, you will
either (i) promptly destroy all copies of the written Information in your
or your Representatives' possession and confirm such destruction to us in
writing, or (ii) promptly deliver to the Company at your own expense all
copies of the written Information in your or your Representatives'
possession; except that you may retain, subject to your continuing
obligations under this letter agreement, written information that does not
contain or make reference to Information provided by the Company and was
developed by you and your representatives for purposes of your own
analysis and internal review.
5. You acknowledge that neither we, nor Morgan Stanley or its affiliates, nor
our other Representatives, nor any of our or their respective officers,
directors, employees, agents or controlling persons within the meaning of
Section 20 of the Securities and Exchange Act of 1934, as amended, makes
any express or implied representation or warranty as to the accuracy or
completeness of the Information, and you agree that no such person will
have any liability relating to the Information or for any errors therein
or omissions therefrom unless and to the extent provided for in an
executed definitive transaction agreement. You further agree that you are
not entitled to rely on the accuracy or completeness of the Information
and that you will be entitled to rely solely on such representations and
warranties as may be included in any definitive agreement with respect to
the Transaction, subject to such limitations and restrictions as may be
contained therein.
6. You are aware, and you will advise your Representatives who are informed
of the matters that are the subject of this letter agreement, of the
restrictions imposed by the United States securities laws on the purchase
or sale of securities by any person who has received material, non-public
information from the issuer of such securities and on the communication of
such information to any other person when it is reasonably foreseeable
that such other person is likely to purchase or sell such securities in
reliance upon such information.
7. As of the date of this letter agreement, Accor does not beneficially own
any securities entitled to be voted generally in the election of directors
of the Company or any direct or indirect options or other rights to
acquire any such
3
<PAGE> 4
securities. You agree that, for a period of one year from the date of this
letter agreement, neither you nor any of your affiliates will, without the
prior written consent of the Company or its Board of Directors: (i)
acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities or direct or indirect rights
to acquire any voting securities of the Company or any subsidiary thereof
or of any successor to or person in Control of the Company, or any assets
of the Company or any subsidiary or division thereof, or of any such
successor or controlling person; (ii) make, or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" (as such terms are
used in the rules of the Securities Exchange Commission) to vote, or seek
to advise or influence any person or entity with respect to the voting of,
any voting securities of the Company; (iii) make any public announcement
with respect to, or submit a proposal for, or offer of (with or without
conditions) any extraordinary transaction involving the Company or its
securities or assets; (iv) form, join or in any way participate in a
"group" (as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended) in connection with any of the foregoing; or (v) request
the Company or any of our Representatives, directly or indirectly, to amend
or waive any provision of this paragraph. You will promptly advise the
Company of any inquiry or proposal made to you with respect to any of the
foregoing.
8. You agree that, for a period of one year from the date of this letter
agreement, you will not, directly or indirectly, actively solicit for
employment or hire any management employee of the Company or any of its
subsidiaries with whom you have had contact or who became known to you in
connection with your consideration of the Transaction; provided, however,
that the foregoing provision will not prevent you from employing any such
person who contacts you on his or her own initiative without any direct or
indirect solicitation by or encouragement from you.
9. You agree that all (i) communications regarding the Transaction, (ii)
requests for additional information, facility tours or management
meetings, and (iii) discussions or questions regarding procedures with
respect to the Transaction, will be first submitted or directed to Morgan
Stanley and not to the Company. You acknowledge and agree that (a) we and
our Representatives are free to conduct the process leading up to a
possible Transaction as we and our Representatives, in our sole
discretion, determine (including, without limitation, by negotiating with
any prospective buyer and entering into a prelimi-
4
<PAGE> 5
nary or definitive agreement without prior notice to you or any other
person), (b) we reserve the right, in our sole discretion, to change the
procedures relating to our consideration of the Transaction at any time
without prior notice to you or any other person, to reject any and all
proposals made by you or any of your Representatives with regard to the
Transaction, and to terminate discussions and negotiations with you at any
time and for any reason, and (c) unless and until a written definitive
agreement concerning the Transaction has been executed, neither we nor any
of our Representatives will have any liability to you with respect to the
Transaction, whether by virtue of this letter agreement, any other written
or oral expression with respect to the Transaction or otherwise.
10. You acknowledge that remedies at law may be inadequate to protect us
against any actual or threatened breach of this letter agreement by you or
by your Representatives, and, without prejudice to any other rights and
remedies otherwise available to us, you agree to the granting of injunctive
relief in our favor. In the event of litigation relating to this letter
agreement, if a court of competent jurisdiction determines in a final,
nonappealable order that this letter agreement has been breached by you or
by your Representatives, then you will reimburse the Company for its costs
and expenses (including, without limitation, legal fees and expenses)
incurred in connection with all such litigation.
11. You agree that no failure or delay by us in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any right, power or privilege hereunder.
12. This letter agreement will be governed by and construed in accordance with
the laws of the State of Ohio applicable to contracts between residents of
that State and executed in and to be performed in that State.
13. The confidentiality provisions contained in paragraphs 1(j) and 2 above
shall terminate on the earlier of the date of execution of a definitive
transaction agreement or two years from the date hereof.
14. This letter agreement contains the entire agreement between you and us
concerning confidentiality of the Information, and no modification of this
5
<PAGE> 6
letter agreement or waiver of the terms and conditions hereof will be
binding upon you or us, unless approved in writing by each of you and us.
Please confirm your agreement with the foregoing by signing and returning to
the undersigned the duplicate copy of this letter enclosed herewith.
Very truly yours,
Red Roof Inns, Inc.
By: /s/ FRANCIS CASH
---------------------------------
Name: Francis Cash
-------------------------------
Title: Chairman, President and
Chief Executive Officer
------------------------------
Accepted and Agreed as of the date
first written above:
- ----------------------------------
Accor
By: /s/ JEAN-MARC EPALLOUX
-------------------------------
Name: Jean-Marc Epalloux
-----------------------------
Title:
----------------------------
6
