<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1997
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
SEPTEMBER 1, 1997
------------------
PROMUS HOTEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-11463 62-1596939
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification Number)
organization)
755 CROSSOVER LANE 38117
MEMPHIS, TENNESSEE (Zip Code)
(Address of principal executive offices)
(901) 374-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
- -------------------------------------------------------------------------------
<PAGE>
ITEM 5. Other Events
On September 1, 1997, Promus Hotel Corporation ("Promus"), Doubletree
Corporation ("Doubletree") and Parent Holding Corp., a newly-formed
corporation jointly formed by Promus and Doubletree ("Parent"), entered into
an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
Parent will form two subsidiaries that will merge with and into Promus and
Doubletree such that Promus and Doubletree become wholly-owned subsidiaries
of Parent (the "Mergers"). Pursuant to the Merger Agreement, upon the
effectiveness of the Mergers, (i) each outstanding share of Common Stock, par
value $.10 per share, of Promus will be converted into the right to receive
0.925 shares of Common Stock, par value $.01 per share, of Parent ("Parent
Common Stock"), and (ii) each outstanding share of Common Stock, par value
$.01 per share, of Doubletree will be converted into the right to receive one
share of Parent Common Stock. Consummation of the Mergers is subject to the
satisfaction or waiver by the parties of certain conditions, including the
receipt of regulatory approvals and approvals by the stockholders of Promus
and Doubletree.
In connection with the Merger Agreement, Promus and Doubletree also have
entered into (i) a Stock Option Agreement pursuant to which Promus granted to
Doubletree an option to purchase up to 19.9% of the outstanding common stock
of Promus under certain circumstances and (ii) a Stock Option Agreement
pursuant to which Doubletree has granted to Promus an option to purchase up
to 19.9% of the outstanding common stock of Doubletree under certain
circumstances (together, the "Stock Option Agreements"). In addition,
certain stockholders of Doubletree holding over 39% of the outstanding common
stock of Doubletree have entered into a stockholder support agreement with
Promus (the "Stockholder Support Agreement"), pursuant to which such
stockholders agreed to vote their shares in favor of the adoption of the
Merger Agreement and approval of the Doubletree Merger, subject to certain
conditions.
On September 2, 1997, Promus and Doubletree issued a joint press release
announcing the execution of the Merger Agreement. The Merger Agreement, the
Stock Option Agreements, the Stockholder Support Agreement and the press
release are filed as exhibits hereto and are incorporated by reference herein.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of September 1, 1997, by and
among Doubletree Corporation, Promus Hotel Corporation and Parent
Holding Corp.
10.1 Stock Option Agreement (Doubletree), dated as of September 1, 1997,
by and between Doubletree Corporation and Promus Hotel Corporation.
10.2 Stock Option Agreement (Promus), dated as of September 1, 1997, by
and between Promus Hotel Corporation and Doubletree Corporation.
10.3 Stockholder Support Agreement, dated as of September 1, 1997 by and
among certain stockholders of Doubletree, to and for the benefit of
Promus.
<PAGE>
99.1 Form of Restated Certificate of Incorporation of Promus Hotel
Corporation
99.2 Form of Amended and Restated Bylaws of Promus Hotel Corporation.
99.3 Joint Press Release, dated September 2, 1997, issued by Promus
Hotel Corporation and Doubletree Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROMUS HOTEL CORPORATION
/s/ RAYMOND E. SCHULTZ
-------------------------------------------------
Raymond E. Schultz
Chairman of the Board and Chief Executive Officer
Dated: September 5, 1997
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -------------
2.1 Agreement and Plan of Merger, dated as of September 1, 1997, by
and among Doubletree Corporation, Promus Hotel Corporation and
Parent Holding Corp.
10.1 Stock Option Agreement (Doubletree), dated as of September 1,
1997, by and between Doubletree Corporation and Promus Hotel
Corporation.
10.2 Stock Option Agreement (Promus), dated as of September 1, 1997,
by and between Promus Hotel Corporation and Doubletree
Corporation.
10.3 Stockholder Support Agreement, dated as of September 1, 1997,
by and among certain stockholders of Doubletree, to and for the
benefit of Promus.
99.1 Form of Restated Certificate of Incorporation of Promus Hotel
Corporation.
99.2 Form of Amended and Restated Bylaws of Promus Hotel Corporation.
99.3 Joint Press Release, dated September 2, 1997, issued by Promus
Hotel Corporation and Doubletree Corporation.
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 1, 1997
AMONG
DOUBLETREE CORPORATION,
PROMUS HOTEL CORPORATION
AND
PARENT HOLDING CORP.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. THE MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Certificate of Incorporation and Bylaws of Parent . . . . . . . . . . . 2
Section 1.2. The Doubletree Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. The Promus Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4. Effective Time of the Mergers . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6. Effect of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.7. Certificate of Incorporation and Bylaws of the Surviving Corporations . 3
Section 1.8. Directors and Officers of the Surviving Corporations . . . . . . . . . 3
ARTICLE II. CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Conversion of Doubletree Capital Stock . . . . . . . . . . . . . . . . 4
Section 2.2. Conversion of Promus Capital Stock . . . . . . . . . . . . . . . . . . 4
Section 2.3. Cancellation of Parent Stock . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DOUBLETREE . . . . . . . . . . . . . 8
Section 3.1. Organization of Doubletree . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.2. Doubletree Capital Structure . . . . . . . . . . . . . . . . . . . . . 9
Section 3.3. Authority; No Conflict; Required Filings and Consents . . . . . . . . . 10
Section 3.4. SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . 11
Section 3.5. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.6. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . 12
Section 3.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.8. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.9. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.10. Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . 14
Section 3.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.13. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.14. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.15. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.16. Registration Statement; Joint Proxy Statement/Prospectus . . . . . . . 17
Section 3.17. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.19. Doubletree Long-Range Plans . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.20. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . 18
Section 3.21. No Existing Discussions . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.22. Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . . . 19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 3.23. Doubletree Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PROMUS . . . . . . . . . . . . . . . 19
Section 4.1. Organization of Promus . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.2. Promus Capital Structure . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.3. Authority; No Conflict; Required Filings and Consents . . . . . . . . . 21
Section 4.4. SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . 22
Section 4.5. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.6. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . 22
Section 4.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.8. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.9. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.10. Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . 24
Section 4.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.13. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.14. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.15. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus . . . . . . . 27
Section 4.17. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.19. Promus Long-Range Plans . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.20. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . 28
Section 4.21. No Existing Discussions . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.22. Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . . . 28
Section 4.23. Promus Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.1. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.2. Cooperation; Notice; Cure . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.3. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.4. Joint Proxy Statement/Prospectus; Registration Statement . . . . . . . 32
Section 5.5. NASDAQ Quotation and NYSE Listing . . . . . . . . . . . . . . . . . . . 32
Section 5.6. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.7. Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.8. Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.9. Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.10. Nonrecognition Exchange . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.11. Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.12. Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.13. NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.14. Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.15. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.16. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 5.17. Letter of Promus's Accountants . . . . . . . . . . . . . . . . . . . . 37
Section 5.18. Letter of Doubletree's Accountants . . . . . . . . . . . . . . . . . . 38
Section 5.19. Stock Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.20. Post-Merger Corporate Governance; Employment Arrangements . . . . . . . 38
Section 5.21. Name of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.22. Parent Stockholder Rights Plan; Amendment of Promus Rights Plan . . . . 40
Section 5.23. GEPT Warrant; Doubletree Registration Rights Agreement . . . . . . . . 40
Section 5.24. Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.25. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.26. Stockholder Litigation . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.27. Employee Benefits; Severance . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VI. CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1. Conditions to Each Party's Obligation to Effect the Mergers . . . . . . 42
Section 6.2. Additional Conditions to Obligations of Doubletree . . . . . . . . . . 43
Section 6.3. Additional Conditions to Obligations of Promus . . . . . . . . . . . . 44
ARTICLE VII. TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.5. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.1. Nonsurvival of Representations, Warranties and Agreements . . . . . . . 49
Section 8.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.3. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.5. Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . 50
Section 8.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.7. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
EXHIBITS
EXHIBIT A STOCK OPTION AGREEMENT (DOUBLETREE)
EXHIBIT B STOCK OPTION AGREEMENT (PROMUS)
EXHIBIT C STOCKHOLDER SUPPORT AGREEMENT
EXHIBIT D CERTIFICATE OF INCORPORATION OF PARENT
EXHIBIT E BYLAWS OF PARENT
EXHIBIT F FORM OF DOUBLETREE AFFILIATE AGREEMENT
EXHIBIT G FORM OF PROMUS AFFILIATE AGREEMENT
iii
<PAGE>
TABLES OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C> <C>
TERMS CROSS REFERENCE
- ----- IN AGREEMENT
---------------
Acquisition Proposal Section 5.3(a)
Affiliate Section 5.12
Affiliate Agreement Section 5.12
Agreement Preamble
Alternative Transaction Section 7.3(e)
Bankruptcy and Equity Exception Section 3.3(a)
Certificate of Merger Section 1.4
Certificates Section 2.4(b)
Closing Section 1.5
Closing Date Section 1.5
Code Preamble
Confidentiality Agreements Section 5.3(a)
DGCL Section 1.2
Doubletree Preamble
Doubletree Balance Sheet Section 3.4(b)
Doubletree Common Stock Section 2.1
Doubletree Director Section 5.20(a)
Doubletree Disclosure Schedule Article III
Doubletree Employee Plans Section 3.13(a)
Doubletree Employees Section 5.27(b)
Doubletree Exchange Ratio Section 2.1(c)
Doubletree Material Adverse Effect Section 3.1
Doubletree Material Contracts Section 3.10(a)
Doubletree Merger Section 1.2
Doubletree Preferred Stock Section 3.2(a)
Doubletree Rights Plan Section 3.2(b)
Doubletree SEC Reports Section 3.4(a)
Doubletree Stock Option Section 5.14(a)
Doubletree Stock Option Agreement Preamble
Doubletree Stock Plans Section 3.2(a)
Doubletree Stockholders' Meeting Section 3.16
Doubletree Sub Section 1.2
Doubletree Surviving Corporation Section 1.6
Effective Time Section 1.4
Environmental Law Section 3.12(b)
ERISA Section 3.13(a)
ERISA Affiliate Section 3.13(a)
Exchange Act Section 3.3(c)
Exchange Agent Section 2.4(a)
Exchange Fund Section 2.4(a)
GEPT Warrant Section 3.2(b)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
TERMS CROSS REFERENCE
- ----- IN AGREEMENT
---------------
<S> <C>
Governmental Entity Section 3.3(c)
Hazardous Substance Section 3.12(c)
HSR Act Section 3.3(c)
Indemnified Parties Section 5.16(a)
IRS Section 3.7(b)
Joint Proxy Statement/Prospectus Section 3.16
Material Lease(s) Section 3.8(a)
Mergers Section 1.3
NYSE Section 2.4(e)
Order Section 5.8(b)
Outside Date Section 7.1(b)
Parent Preamble
Parent Common Stock Section 2.1(c)
Parent Rights Plan Section 5.22
Promus Preamble
Promus Balance Sheet Section 4.4(b)
Promus Common Stock Section 2.2
Promus Director Section 5.20(a)
Promus Disclosure Schedule Article IV
Promus Employee Plans Section 4.13(a)
Promus Employees Section 5.27(b)
Promus Exchange Ratio Section 2.2(c)
Promus Material Adverse Effect Section 4.1
Promus Material Contracts Section 4.10(a)
Promus Merger Section 1.3
Promus Preferred Stock Section 4.2(a)
Promus Rights Plan Section 4.2(b)
Promus SEC Reports Section 4.4(a)
Promus Special Stock Section 4.2(a)
Promus Stock Option Section 5.14(a)
Promus Stock Option Agreement Preamble
Promus Stock Plans Section 4.2(a)
Promus Stockholders' Meeting Section 3.16
Promus Sub Section 1.3
Promus Surviving Corporation Section 1.6
Registration Statement Section 3.16
Rule 145 Section 5.12
SEC Section 3.3(c)
Securities Act Section 2.4(j)
Stock Option Agreement Preamble
Stockholder Support Agreement Preamble
Subsidiary Section 3.1
Superior Proposal Section 5.3(a)
</TABLE>
v
<PAGE>
TERMS CROSS REFERENCE
- ----- IN AGREEMENT
---------------
Surviving Corporation Section 1.6
Tax Section 3.7(a)
Taxes Section 3.7(a)
Third Party Section 5.3(a)
Transfer Taxes Section 5.25
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September 1,
1997, by and among DOUBLETREE CORPORATION, a Delaware corporation
("Doubletree"), PROMUS HOTEL CORPORATION, a Delaware corporation ("Promus") and
PARENT HOLDING CORP., a newly-formed Delaware corporation with nominal
capitalization, one-half of the issued and outstanding capital stock of which is
nominally owned by each of Doubletree and Promus ("Parent").
WHEREAS, the Boards of Directors of Doubletree and Promus deem it advisable
and in the best interests of each corporation and its respective stockholders
that Doubletree and Promus combine in a "merger of equals" in order to advance
the interests of Doubletree and Promus and their respective stockholders;
WHEREAS, the combination of Doubletree and Promus shall be effected by the
terms of this Agreement through (i) a merger of a wholly-owned subsidiary of
Parent with and into Doubletree and (ii) a merger of another wholly-owned
subsidiary of Parent with and into Promus, such that Doubletree and Promus
become wholly-owned subsidiaries of Parent and the stockholders of Doubletree
and Promus become stockholders of Parent;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Doubletree's and Promus's willingness
to enter into this Agreement, Doubletree and Promus have entered into (i) a
Stock Option Agreement dated as of the date of this Agreement and attached
hereto as Exhibit A (the "Doubletree Stock Option Agreement"), pursuant to which
Promus granted Doubletree an option to purchase shares of common stock of Promus
under certain circumstances, and (ii) a Stock Option Agreement dated as of the
date of this Agreement and attached hereto as Exhibit B (the "Promus Stock
Option Agreement" and, together with the Doubletree Stock Option Agreement, the
"Stock Option Agreements"), pursuant to which Doubletree granted Promus an
option to purchase shares of common stock of Doubletree under certain
circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Promus's willingness to enter into this
Agreement, certain stockholders of Doubletree have entered into a Stockholder
Support Agreement with Promus dated as of the date of this Agreement and
attached hereto as Exhibit C (the "Stockholder Support Agreement"), pursuant to
which such stockholders have agreed, among other things, to vote all voting
securities of Doubletree beneficially owned by them in favor of approval and
adoption of the Agreement and the Doubletree Merger (as defined in Section 1.2);
WHEREAS, for Federal income tax purposes, it is intended that (i) the
Doubletree Merger shall qualify as a reorganization described in Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code") and/or, taken
together with the Promus Merger (as defined in Section 1.3), as a transfer of
property to Parent by holders of Doubletree Common Stock (as defined in Section
2.1) described in Section 351 of the Code and (ii) the Promus Merger shall
qualify as a reorganization described in Section 368(a) of the Code and/or,
taken
1
<PAGE>
together with the Doubletree Merger, as a transfer of property to Parent
by holders of Promus Common Stock described in Section 351 of the Code;
WHEREAS, for accounting purposes, it is intended that the transactions
contemplated by this Agreement shall be accounted for as a pooling of interests;
and
WHEREAS, the Boards of Directors of Doubletree and Promus have approved
this Agreement, the Stock Option Agreements and the Stockholder Support
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGERS
Section 1.1 CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT.
Doubletree and Promus shall cause the Certificate of Incorporation and Bylaws
of Parent to be amended prior to the Effective Time (as defined in Section
1.4) to be substantially in the form of Exhibit D and Exhibit E hereto,
respectively. From the date hereof until the Effective Time, Doubletree and
Promus shall consult with each other prior to causing or permitting Parent to
take any action and neither shall cause or permit Parent to take any action
inconsistent with the provisions of this Agreement without the written
consent of the other.
Section 1.2 THE DOUBLETREE MERGER. Doubletree and Promus shall cause
Parent to form a wholly-owned subsidiary named Doubletree Acquisition Corp.
("Doubletree Sub") under the laws of the State of Delaware. Doubletree and
Promus will cause Parent to cause Doubletree Sub to execute and deliver this
Agreement. Upon the terms and subject to the provisions of this Agreement, and
in accordance with the Delaware General Corporation Code (the "DGCL"),
Doubletree Sub will merge with and into Doubletree (the "Doubletree Merger") at
the Effective Time (as defined in Section 1.4). Doubletree Sub will be formed
solely to facilitate the Doubletree Merger and will conduct no business or
activity other than in connection with the Doubletree Merger.
Section 1.3 THE PROMUS MERGER. Doubletree and Promus shall cause Parent
to form a wholly-owned subsidiary named Promus Acquisition Corp. ("Promus Sub")
under the laws of the State of Delaware. Doubletree and Promus will cause
Parent to cause Promus Sub to execute and deliver this Agreement. Upon the
terms and subject to the provisions of this Agreement, and in accordance with
the DGCL, Promus Sub will merge with and into Promus (the "Promus Merger" and
together with the Doubletree Merger, the "Mergers") at the Effective Time (as
defined in Section 1.4). Promus Sub will be formed solely to facilitate the
Promus Merger and will conduct no business or activity other than in connection
with the Promus Merger.
Section 1.4 EFFECTIVE TIME OF THE MERGERS. Subject to the provisions of
this Agreement, a certificate of merger with respect to each Merger in such
form as is required by the
2
<PAGE>
relevant provisions of the DGCL (individually, a "Certificate of Merger" with
respect to one of the Mergers, and collectively with respect to both Mergers,
the "Certificates of Merger") shall be duly prepared, executed and
acknowledged and thereafter delivered to the Secretary of State of the State
of Delaware for filing, as provided in the DGCL, as early as practicable on
the Closing Date (as defined in Section 1.5). Each Merger shall become
effective at such time as is specified in the Certificate of Merger (the time
at which both Mergers have become fully effective being hereinafter referred
to as the "Effective Time").
Section 1.5 CLOSING. The closing of the Mergers (the "Closing") will take
place at such time and place to be agreed upon by the parties hereto, on a date
to be specified by Promus and Doubletree, which shall be no later than the
second business day after satisfaction or, if permissible, waiver of the
conditions set forth in Article VI (the "Closing Date"), unless another date is
agreed to in writing by Promus and Doubletree.
Section 1.6 EFFECT OF THE MERGERS. As a result of the Doubletree Merger,
the separate corporate existence of Doubletree Sub shall cease and Doubletree
shall continue as the surviving corporation (the "Doubletree Surviving
Corporation"). As a result of the Promus Merger, the separate corporate
existence of Promus Sub shall cease and Promus shall continue as the surviving
corporation (the "Promus Surviving Corporation" and together with the Doubletree
Surviving Corporation, the "Surviving Corporations"). Upon becoming effective,
the Mergers shall have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, (i) all
properties, rights, privileges, powers and franchises of Doubletree and
Doubletree Sub shall vest in the Doubletree Surviving Corporation, and all
debts, liabilities and duties of Doubletree and Doubletree Sub shall become the
debts, liabilities and duties of the Doubletree Surviving Corporation and (ii)
all properties, rights, privileges, powers and franchises of Promus and Promus
Sub shall vest in the Promus Surviving Corporation, and all debts, liabilities
and duties of Promus and Promus Sub shall become the debts, liabilities and
duties of the Promus Surviving Corporation.
Section 1.7 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATIONS. At the Effective Time, (i) the Certificate of Incorporation
and Bylaws of the Doubletree Surviving Corporation shall be amended to be
identical to the Certificate of Incorporation and Bylaws, respectively, of
Doubletree Sub as in effect immediately prior to the Effective Time (except that
the name of the Doubletree Surviving Corporation shall be Doubletree Inc.), in
each case until duly amended in accordance with applicable law, and (ii) the
Certificate of Incorporation and Bylaws of the Promus Surviving Corporation
shall be amended to be identical to the Certificate of Incorporation and Bylaws,
respectively, of Promus Sub as in effect immediately prior to the Effective Time
(except that the name of the Promus Surviving Corporation shall be Promus
Acquisition Corp.), in each case until duly amended in accordance with
applicable law.
Section 1.8 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATIONS
(a) DOUBLETREE SURVIVING CORPORATION. The directors of Doubletree
Sub immediately prior to the Effective Time shall be the initial directors of
the Doubletree Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Doubletree Surviving
Corporation. The officers of Doubletree immediately prior to the
3
<PAGE>
Effective Time shall be the initial officers of the Doubletree Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Doubletree Surviving Corporation.
(b) PROMUS SURVIVING CORPORATION. The directors of Promus Sub
immediately prior to the Effective Time shall be the initial directors of the
Promus Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Promus Surviving Corporation.
The officers of Promus immediately prior to the Effective Time shall be the
initial officers of the Promus Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Promus
Surviving Corporation.
ARTICLE II.
CONVERSION OF SECURITIES
Section 2.1 CONVERSION OF DOUBLETREE CAPITAL STOCK. At the Effective
Time, by virtue of the Doubletree Merger and without any action on the part
of any of the parties hereto or the holders of any shares of Common Stock,
par value $.01 per share, of Doubletree ("Doubletree Common Stock") or common
stock of Doubletree Sub:
(a) CAPITAL STOCK OF DOUBLETREE SUB. Each issued and outstanding
share of the common stock, par value $.01 per share, of Doubletree Sub shall
be converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Doubletree Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PROMUS-OWNED STOCK. All
shares of Doubletree Common Stock that are owned by Doubletree as treasury
stock and any shares of Doubletree Common Stock owned by Promus or any
wholly-owned Subsidiary (as defined in Section 3.1) of Promus shall be
canceled and retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE RATIO FOR DOUBLETREE COMMON STOCK. Subject to
Section 2.4(e), each issued and outstanding share of Doubletree Common Stock
(other than shares to be canceled in accordance with Section 2.1(b)) shall be
converted into the right to receive one share (the "Doubletree Exchange Ratio")
of Common Stock, par value $.01 per share, of Parent ("Parent Common Stock").
All such shares of Doubletree Common Stock, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares shall
cease to have any ownership or other rights with respect thereto, except the
right to receive the shares of Parent Common Stock and an amount equal to
certain dividends and other distributions described in Section 2.4(c), without
interest, upon the surrender of such certificate in accordance with Section 2.4.
Section 2.2 CONVERSION OF PROMUS CAPITAL STOCK. At the Effective Time,
by virtue of the Promus Merger and without any action on the part of any of
the parties hereto or the holders
4
<PAGE>
of any shares of Common Stock, par value $.10 per share, of Promus ("Promus
Common Stock") or common stock of Promus Sub:
(a) CAPITAL STOCK OF PROMUS SUB. Each issued and outstanding share
of the common stock, par value $.01 per share, of Promus Sub shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Promus Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND DOUBLETREE-OWNED STOCK. All
shares of Promus Common Stock that are owned by Promus as treasury stock and
any shares of Promus Common Stock owned by Doubletree or any wholly-owned
Subsidiary (as defined in Section 3.1) of Doubletree shall be canceled and
retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE RATIO FOR PROMUS COMMON STOCK. Subject to Section
2.4(e), each issued and outstanding share of Promus Common Stock (other than
shares to be canceled in accordance with Section 2.2(b)) shall be converted
into the right to receive 0.925 shares (the "Promus Exchange Ratio") of
Parent Common Stock. All such shares of Promus Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any ownership or other
rights with respect thereto, except the right to receive the shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock to
be issued or paid in consideration therefor and an amount equal to certain
dividends and other distributions described in Section 2.4(c), in each case
upon the surrender of such certificate in accordance with Section 2.4 and
without interest.
Section 2.3 CANCELLATION OF PARENT STOCK. At the Effective Time, by
virtue of the Mergers and without any action on the part of any holder of any
capital stock of Doubletree, Promus or Parent, each share of Parent Common
Stock issued and outstanding immediately prior to the Effective Time shall be
surrendered and canceled, and the amount paid by Doubletree and Promus for
the shares of Parent Common Stock held by them shall be returned by Parent to
them.
Section 2.4 EXCHANGE OF CERTIFICATES. The procedures for exchanging
certificates which prior to the Effective Time represented shares of
Doubletree Common Stock and Promus Common Stock for certificates representing
Parent Common Stock pursuant to the Mergers are as follows:
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit
with a bank or trust company designated by Promus and Doubletree (the
"Exchange Agent"), for the benefit of the holders of shares of Doubletree
Common Stock and shares of Promus Common Stock outstanding immediately prior
to the Effective Time, for exchange in accordance with this Section 2.4,
through the Exchange Agent, certificates representing the shares of Parent
Common Stock and, with respect to shares of Promus Common Stock, cash in lieu
of fractional shares (such shares of Parent Common Stock and cash in lieu of
fractional shares, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange
5
<PAGE>
Fund"), issuable pursuant to Sections 2.1 and 2.2 in exchange for shares of
Doubletree Common Stock and Promus Common Stock, respectively, outstanding
immediately prior to the Effective Time.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of
a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Doubletree Common Stock or Promus Common
Stock (collectively, the "Certificates") whose shares were converted pursuant
to Section 2.1 or Section 2.2 into the right to receive shares of Parent
Common Stock (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Doubletree and Promus may
reasonably specify) and (ii) instructions for effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Common Stock (plus cash in lieu of fractional shares, if any, of Parent
Common Stock as provided below). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Parent
Common Stock, the amount of any cash payable in lieu of fractional shares of
Parent Common Stock (with respect to shares of Promus Common Stock) and an
amount equal to certain dividends and other distributions which such holder
has the right to receive pursuant to the provisions of this Article II, and
the Certificate so surrendered shall immediately be canceled. In the event of
a transfer of ownership of Doubletree Common Stock or Promus Common Stock
prior to the Effective Time which is not registered in the transfer records
of Doubletree or Promus, respectively, a certificate representing the number
of shares of Parent Common Stock issuable and any amounts payable in
accordance with this Agreement may be issued and paid to a transferee if the
Certificate representing such Doubletree Common Stock or Promus Common Stock
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No amount in
respect of dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock the holder
thereof is entitled to receive in respect thereof and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to subsection
(e) below until the holder of record of such Certificate shall surrender such
Certificate to Parent in accordance herewith. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to subsection (e) below and an amount equal to the amount of
dividends or other distributions with a record date after the Effective Time
previously paid with respect to whole shares of Parent Common Stock, and (ii)
at the appropriate payment date, an amount equal to the amount of dividends
or other distributions with a record date after the Effective Time but prior
to surrender
6
<PAGE>
and a payment date subsequent to surrender payable with respect to whole
shares of Parent Common Stock, in each case without interest.
(d) NO FURTHER OWNERSHIP RIGHTS IN DOUBLETREE COMMON STOCK AND PROMUS
COMMON STOCK. All shares of Parent Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms hereof (including any
cash paid pursuant to subsection (c) or (e) of this Section 2.4) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
the shares of Doubletree Common Stock or Promus Common Stock theretofore
represented by such Certificates, subject, however, to the applicable
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Doubletree on such shares of Doubletree Common Stock
or by Promus on such shares of Promus Common Stock, as the case may be, in
accordance with the terms of this Agreement (to the extent permitted under
Section 5.1) prior to the date hereof and which remain unpaid at the
Effective Time, and from and after the Effective Time there shall be no
further registration of transfers on the stock transfer books of the
Doubletree Surviving Corporation or the Promus Surviving Corporation, as the
case may be, of the shares of Doubletree Common Stock or Promus Common Stock,
respectively, which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to one of the
Surviving Corporations or Parent for any reason, such Certificates shall be
canceled and exchanged as provided in this Section 2.4.
(e) NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates representing shares of Promus Common Stock, and
such fractional share interests will not entitle the owner thereof to vote or
to any other rights of a stockholder of Parent. Notwithstanding any other
provision of this Agreement, each holder of shares of Promus Common Stock
outstanding immediately prior to the Effective Time exchanged pursuant to the
Promus Merger who would otherwise have been entitled to receive a fraction of
a share of Parent Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Parent
Common Stock multiplied by the per share sales price of Parent Common Stock
(as reported on the New York Stock Exchange Composite Tape) on the closing of
the first day of regular-way trading of Parent Common Stock on the New York
Stock Exchange (the "NYSE") after the Effective Time.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the former stockholders of Doubletree or Promus for
180 days after the Effective Time shall be delivered to Parent upon demand,
and any former stockholder of Doubletree or Promus who has not previously
complied with this Section 2.4 shall thereafter look only to Parent for
payment of such former stockholder's claim for Parent Common Stock, any cash
in lieu of fractional shares of Parent Common Stock and any amounts in
respect of dividends or distributions with respect to Parent Common Stock.
(g) NO LIABILITY. None of Doubletree, Promus, Parent or the Exchange
Agent shall be liable to any holder of shares of Doubletree Common Stock or
Promus Common Stock, as the case may be, for any shares of Parent Common
Stock (or cash in lieu of fractional shares of
7
<PAGE>
Parent Common Stock or any dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(h) WITHHOLDING RIGHTS. Parent and each of the Surviving Corporations
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Certificates which prior
to the Effective Time represented shares of Doubletree Common Stock or Promus
Common Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld
by Parent or one of the Surviving Corporations, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Doubletree Common Stock or
Promus Common Stock, as the case may be, in respect of which such deduction
and withholding was made.
(i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or one of the Surviving Corporations, the posting by such person of a
bond in such reasonable amount as Parent or such Surviving Corporation may
direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of Parent Common Stock
and any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect thereof
pursuant to this Agreement.
(j) AFFILIATES. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in Section
5.12) of Doubletree or Promus shall not be exchanged until (i) Parent has
received an Affiliate Agreement (as defined in Section 5.12) from such
Affiliate or (ii) until the later of such date as such shares of Parent
Common Stock are freely tradable without jeopardizing the pooling of
interests accounting treatment of the Mergers and without violating the
Securities Act of 1933, as amended (the "Securities Act").
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF DOUBLETREE
Doubletree represents and warrants to Promus that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure schedule delivered by Doubletree to Promus on or before
the date of this Agreement (the "Doubletree Disclosure Schedule"). The
Doubletree Disclosure Schedule shall be arranged in paragraphs corresponding
to the numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article
III only to the extent that it is reasonably apparent from a reading of such
disclosure that it also qualifies or applies to such other paragraphs.
Section 3.1. ORGANIZATION OF DOUBLETREE. Each of Doubletree and its
Subsidiaries (as defined below) is duly organized, validly existing and in
good standing under the laws of the
8
<PAGE>
jurisdiction of its organization, has all requisite power to own, lease and
operate its property and to carry on its business as now being conducted and
as proposed to be conducted, and is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction
in which the failure to be so qualified would have a material adverse effect
on the business, properties, financial condition or results of operations of
Doubletree and its Subsidiaries, taken as a whole (an "Doubletree Material
Adverse Effect"). A true and correct copy of the Certificate of
Incorporation and Bylaws of Doubletree has been delivered to Promus. Except
as set forth in Doubletree SEC Reports (as defined in Section 3.4) filed
prior to the date hereof, neither Doubletree nor any of its Subsidiaries
directly or indirectly owns (other than ownership interests in Doubletree or
in one or more of its Subsidiaries) any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or
entity, excluding (i) securities in any publicly traded company held for
investment by Doubletree and comprising less than five percent (5%) of the
outstanding stock of such company and (ii) any investment or series of
related investments with a book value of less than $15 million. As used in
this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority of
the economic interests in such partnership) or (ii) at least a majority of
the securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
Section 3.2. DOUBLETREE CAPITAL STRUCTURE.
(a) The authorized capital stock of Doubletree consists of 100,000,000
shares of Common Stock, $.01 par value, and 5,000,000 shares of Preferred
Stock, $.01 par value ("Doubletree Preferred Stock"). As of the date hereof,
(i) 39,688,458 shares of Doubletree Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable and (ii) no
shares of Doubletree Common Stock were held in the treasury of Doubletree or
by Subsidiaries of Doubletree. The Doubletree Disclosure Schedule shows the
number of shares of Doubletree Common Stock reserved for future issuance
pursuant to stock options granted and outstanding as of the date hereof and
the plans under which such options were granted (collectively, the
"Doubletree Stock Plans"). As of the date of this Agreement, none of the
shares of Doubletree Preferred Stock is issued and outstanding. There are no
obligations, contingent or otherwise, of Doubletree or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Doubletree Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other
than guarantees of bank obligations or indebtedness for borrowed money of
Subsidiaries entered into in the ordinary course of business and other than
any obligation the failure of which to perform or satisfy would not have a
Doubletree Material Adverse Effect. All of the outstanding shares of capital
stock or other ownership interests of each of Doubletree's Subsidiaries are
duly authorized, validly issued, fully paid and nonassessable and all such
shares (other than directors' qualifying shares in
9
<PAGE>
the case of foreign Subsidiaries) are owned by Doubletree or another
Subsidiary of Doubletree free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Doubletree's voting rights,
charges or other encumbrances of any nature.
(b) Except as set forth in this Section 3.2 or as reserved for future
grants of options under the Doubletree Stock Plans or the Promus Stock Option
Agreement and except for the preferred stock purchase rights issued and
issuable under the Rights Agreement dated as of September 1, 1997 between
Doubletree and Harris Trust Company of California (the "Doubletree Rights
Plan"), options to purchase an aggregate of 20,000 shares of Doubletree
Common Stock, issued on June 30, 1994, to GE Investment Hotel Partners I,
Limited Partnership and the Warrants to purchase an aggregate of 262,753
shares of Doubletree Common Stock, issued on November 8, 1996, to PT
Investments Inc. (the "GEPT Warrant"), (i) there are no shares of capital
stock of any class of Doubletree, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding; (ii) there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which Doubletree or any
of its Subsidiaries is a party or by which it is bound obligating Doubletree
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other ownership
interests of Doubletree or any of its Subsidiaries or obligating Doubletree
or any of its Subsidiaries to grant, extend, accelerate the vesting of or
enter into any such option, warrant, equity security, call, right, commitment
or agreement; and (iii) to the best knowledge of Doubletree, there are no
voting trusts, proxies or other voting agreements or understandings with
respect to the shares of capital stock of Doubletree. All shares of
Doubletree Common Stock subject to issuance as specified in this Section 3.2
are duly authorized and, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, shall be validly
issued, fully paid and nonassessable.
Section 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Doubletree has all requisite corporate power and authority to
enter into this Agreement and the Stock Option Agreements and to consummate
the transactions contemplated by this Agreement and the Stock Option
Agreements. The execution and delivery of this Agreement and the Stock Option
Agreements and the consummation of the transactions contemplated by this
Agreement and the Stock Option Agreements by Doubletree have been duly
authorized by all necessary corporate action on the part of Doubletree,
subject only to the approval and adoption of this Agreement and the
Doubletree Merger by Doubletree's stockholders under the DGCL. This
Agreement and the Stock Option Agreements have been duly executed and
delivered by Doubletree and constitute the valid and binding obligations of
Doubletree, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles (the "Bankruptcy and Equity
Exception").
(b) The execution and delivery of this Agreement and the Stock Option
Agreements by Doubletree does not, and the consummation of the transactions
contemplated by this Agreement and the Stock Option Agreements will not, (i)
conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Doubletree
10
<PAGE>
or any of its Subsidiaries, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Doubletree or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound (other
than pursuant to the Credit Agreement dated as of November 8, 1996 by and
among Doubletree, Morgan Stanley Senior Funding, Inc., The Bank of Nova
Scotia and the lenders identified therein) or (iii) conflict with or violate
any permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Doubletree or any of its
Subsidiaries or any of its or their properties or assets, except in the case
of (ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which (x) are not, individually or in the
aggregate, reasonably likely to have a Doubletree Material Adverse Effect or
(y) would not substantially impair or delay the consummation of the
Doubletree Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Doubletree or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and the Stock
Option Agreements or the consummation of the transactions contemplated hereby
or thereby, except for (i) the filing of the pre-merger notification report
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR Act"), (ii) the filing of a Certificate of Merger with respect to the
Doubletree Merger with the Delaware Secretary of State, (iii) the filing of
the Joint Proxy Statement/Prospectus (as defined in Section 3.16 below) with
the Securities and Exchange Commission (the "SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act, (iv) such consents, approvals, orders, authorizations,
permits, filings or registrations related to, or arising out of, compliance
with statutes, rules or regulations regulating the consumption, sale or
serving of alcoholic beverages, (v) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable state securities laws and the laws of any foreign country
and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not (x) be reasonably
likely to have a Doubletree Material Adverse Effect or (y) substantially
impair or delay the consummation of the Doubletree Merger.
Section 3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Doubletree has filed and made available to Promus all forms,
reports and documents required to be filed by Doubletree with the SEC since
January 1, 1996 (collectively, the "Doubletree SEC Reports"). The Doubletree
SEC Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Doubletree SEC Reports or
necessary in order to make the statements in such Doubletree SEC
11
<PAGE>
Reports, in the light of the circumstances under which they were made, not
misleading. None of Doubletree's Subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) of Doubletree contained in the Doubletree SEC
Reports complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and fairly
presented the consolidated financial position of Doubletree and its
Subsidiaries as of the dates and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
audited balance sheet of Doubletree as of December 31, 1996 is referred to
herein as the "Doubletree Balance Sheet."
Section 3.5 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Doubletree SEC Reports filed prior to the date hereof, and except for normal
or recurring liabilities incurred since December 31, 1996 in the ordinary
course of business consistent with past practices, Doubletree and its
Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or
to become due, which individually or in the aggregate are reasonably likely
to have a Doubletree Material Adverse Effect.
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Doubletree SEC Reports filed prior to the date hereof, since the date of
the Doubletree Balance Sheet, Doubletree and its Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been (i) any event,
development, state of affairs or condition, or series or combination of
events, developments, states of affairs or conditions, which, individually or
in the aggregate, has had or is reasonably likely to have a Doubletree
Material Adverse Effect (other than events, developments, states of affairs
or conditions that are the effect or result of actions taken by Promus or
economic factors affecting the economy as a whole or the industry in which
Doubletree competes); (ii) any damage, destruction or loss (whether or not
covered by insurance) with respect to Doubletree or any of its Subsidiaries
which is reasonably likely to have a Doubletree Material Adverse Effect;
(iii) any material change by Doubletree in its accounting methods, principles
or practices to which Promus has not previously consented in writing; (iv)
any revaluation by Doubletree of any of its assets which is reasonably likely
to have a Doubletree Material Adverse Effect; or (v) any other action or
event that would have required the consent of Promus pursuant to Section 5.1
of this Agreement had such action or event occurred after the date of this
Agreement other than such actions or events that, individually or in the
aggregate, have not had or are not reasonably likely to have a Doubletree
Material Adverse Effect.
12
<PAGE>
Section 3.7 TAXES.
(a) For the purposes of this Agreement, a "Tax" or, collectively,
"Taxes," means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, gains, franchise, withholding, payroll, recapture, employment,
excise, unemployment insurance, social security, business license,
occupation, business organization, stamp, environmental and property taxes,
together with all interest, penalties and additions imposed with respect to
such amounts. For purposes of this Agreement, "Taxes" also includes any
obligations under any agreements or arrangements with any other person with
respect to Taxes of such other person (including pursuant to Treas. Reg.
Sections 1.1502-6 or comparable provisions of state, local or foreign tax
law) and including any liability for Taxes of any predecessor entity.
(b) Doubletree and each of its Subsidiaries have (i) filed all
federal, state, local and foreign Tax returns and reports required to be
filed by them prior to the date of this Agreement (taking into account all
applicable extensions), (ii) paid or accrued all Taxes due and payable, and
(iii) paid or accrued all Taxes for which a notice of assessment or
collection has been received (other than amounts being contested in good
faith by appropriate proceedings), except in the case of clauses (i), (ii) or
(iii) for any such filings, payments or accruals that are not reasonably
likely, individually or in the aggregate, to have a Doubletree Material
Adverse Effect. Neither the Internal Revenue Service (the "IRS") nor any
other taxing authority has asserted any claim for Taxes, or to the actual
knowledge of the executive officers of Doubletree, is threatening to assert
any claims for Taxes, which claims, individually or in the aggregate, are
reasonably likely to have a Doubletree Material Adverse Effect. Doubletree
and each of its Subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities (or are properly holding for such
payment) all Taxes required by law to be withheld or collected, except for
amounts that are not reasonably likely, individually or in the aggregate, to
have a Doubletree Material Adverse Effect. Neither Doubletree nor any of its
Subsidiaries has made an election under Section 341(f) of the Code, except
for any such election that shall not have a Doubletree Material Adverse
Effect. There are no liens for Taxes upon the assets of Doubletree or any of
its Subsidiaries (other than liens for Taxes that are not yet due or
delinquent or that are being contested in good faith by appropriate
proceedings), except for liens that are not reasonably likely, individually
or in the aggregate, to have a Doubletree Material Adverse Effect.
(c) Neither Doubletree nor any of its Subsidiaries is or has been a
member of an affiliated group of corporations filing a consolidated federal
income tax return (or a group of corporations filing a consolidated, combined
or unitary income tax return under comparable provisions of state, local or
foreign tax law) for any taxable period beginning on or after the taxable
period ending December 31, 1993, other than a group the common parent of
which is or was Doubletree or any Subsidiary of Doubletree.
(d) Neither Doubletree nor any of its Subsidiaries has any
obligation under any agreement or arrangement with any other person with
respect to Taxes of such other person (including pursuant to Treas. Reg.
Sections 1.1502-6 or comparable provisions of state, local or foreign tax
law) and including any liability for Taxes of any predecessor entity, except
for obligations
13
<PAGE>
that are not reasonably likely, individually or in the aggregate, to have a
Doubletree Material Adverse Effect.
Section 3.8 PROPERTIES.
(a) Neither Doubletree nor any of its Subsidiaries is in default
under any leases for real property providing for the occupancy, in each case,
of (i) a hotel or (ii) other facilities in excess of 50,000 square feet
(collectively "Material Lease(s)"), except where the existence of such
defaults, individually or in the aggregate, is not reasonably likely to have
a Doubletree Material Adverse Effect.
(b) With respect to each item of real property that Doubletree or
any of its Subsidiaries owns, except for such matters that, individually or
in the aggregate, are not reasonably likely to have a Doubletree Material
Adverse Effect: (i) Doubletree or its Subsidiary has good and clear record
and marketable title to such property, insurable by a recognized national
title insurance company at standard rates, free and clear of any security
interest, easement, covenant or other restriction, except for recorded
easements, covenants and other restrictions which do not materially impair
the current uses or occupancy of such property; and (ii) the improvements
constructed on such property are in good condition, and all mechanical and
utility systems servicing such improvements are in good condition, free in
each case of material defects.
Section 3.9 INTELLECTUAL PROPERTY. Doubletree owns, or is licensed or
otherwise possesses legally enforceable rights to use, all trademarks, trade
names, service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, know-how, computer software
programs or applications and tangible or intangible proprietary information
or material that are necessary to conduct the business of Doubletree as
currently conducted, subject to such exceptions that, individually and in the
aggregate, would not be reasonably likely to have a Doubletree Material
Adverse Effect. Doubletree has no knowledge of any assertion or claim
challenging the validity of any of such intellectual property.
Section 3.10. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Doubletree has not breached, or received in writing any claim
or notice that it has breached, any of the terms or conditions of any
material agreement, contract or commitment filed as an exhibit to the
Doubletree SEC Reports ("Doubletree Material Contracts") in such a manner as,
individually or in the aggregate, are reasonably likely to have a Doubletree
Material Adverse Effect. Each Doubletree Material Contract that has not
expired by its terms is in full force and effect.
(b) Without limiting Section 3.10(a), each of the management
contracts and franchise agreements to which Doubletree is a party and each of
Doubletree's Material Leases (i) is valid and binding in accordance with its
terms and is in full force and effect, (ii) neither Doubletree nor any of its
Subsidiaries is in default in any material respect thereof, nor does any
condition exist that with notice or lapses of time or both would constitute a
material default thereunder, and (iii) no party has given any written or (to
the knowledge of Doubletree) oral
14
<PAGE>
notice of termination or cancellation thereof or that such party intends to
assert a breach thereof, or seek to terminate or cancel, any such agreement,
contract or lease, in each case as a result of the transactions contemplated
hereby, subject to such exceptions that, individually and in the aggregate,
would not be reasonably likely to have a Doubletree Material Adverse Effect.
Section 3.11. LITIGATION. Except as described in the Doubletree SEC
Reports filed prior to the date hereof, there is no action, suit or proceeding,
claim, arbitration or investigation against Doubletree pending or as to which
Doubletree has received any written notice of assertion, which, individually or
in the aggregate, is reasonably likely to have a Doubletree Material Adverse
Effect or a material adverse effect on the ability of Doubletree to consummate
the transactions contemplated by this Agreement.
Section 3.12. ENVIRONMENTAL MATTERS.
(a) To the knowledge of Doubletree and except as disclosed in the
Doubletree SEC Reports filed prior to the date hereof and except for such
matters that, individually or in the aggregate, are not reasonably likely to
have a Doubletree Material Adverse Effect: (i) Doubletree and its
Subsidiaries have complied with all applicable Environmental Laws (as defined
in Section 3.12(b)); (ii) the properties currently owned or operated by
Doubletree and its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances (as defined in Section 3.12(c)); (iii) the properties formerly
owned or operated by Doubletree or any of its Subsidiaries were not
contaminated with Hazardous Substances during the period of ownership or
operation by Doubletree or any of its Subsidiaries; (iv) neither Doubletree
nor its Subsidiaries are subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither Doubletree
nor any of its Subsidiaries has been associated with any release or threat of
release of any Hazardous Substance; (vi) neither Doubletree nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that Doubletree or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vii) neither Doubletree
nor any of its Subsidiaries is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law or relating to Hazardous Substances; and (viii) there
are no circumstances or conditions involving Doubletree or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any property of Doubletree or any of its Subsidiaries pursuant to
any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal,
state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A)
the protection, investigation or restoration of the environment, health and
safety, or natural resources, (B) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance or (C) noise, odor,
wetlands, pollution, contamination or any injury or threat of injury to
persons or property.
(c) As used herein, the term "Hazardous Substance" means any
substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product
15
<PAGE>
or by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C)
any other substance which is the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
Section 3.13. EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the "Doubletree Employee Plans"
shall mean all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
and all unexpired severance agreements, written or otherwise, for the benefit
of, or relating to, any current or former employee of Doubletree or any trade
or business (whether or not incorporated) which is under common control with
Doubletree within the meaning of Section 414 of the Code (an "ERISA
Affiliate"), or any Subsidiary of Doubletree (together, the "Doubletree
Employee Plans"). Doubletree has listed in Section 3.13 of the Doubletree
Disclosure Schedule all Doubletree Employee Plans other plans that are
"employee welfare benefit plans" within the meaning of Section 3(1) of ERISA.
(b) With respect to each Doubletree Employee Plan, Doubletree has
made available to Promus, a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the IRS, (ii) such Doubletree Employee
Plan and all amendments thereto, (iii) each trust agreement and group annuity
contract, if any, and all amendments thereto relating to such Doubletree
Employee Plan and (iv) the most recent actuarial report or valuation relating
to a Doubletree Employee Plan subject to Title IV of ERISA.
(c) With respect to the Doubletree Employee Plans, individually and
in the aggregate, no event has occurred, and to the knowledge of Doubletree,
there exists no condition or set of circumstances in connection with which
Doubletree could be subject to any liability that is reasonably likely to
have a Doubletree Material Adverse Effect under ERISA, the Code or any other
applicable law.
(d) With respect to the Doubletree Employee Plans, individually and
in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves,
or otherwise properly footnoted in accordance with generally accepted
accounting principles, on the financial statements of Doubletree, except for
obligations which, individually or in the aggregate, are not reasonably
likely to have a Doubletree Material Adverse Effect.
(e) Except as disclosed in the Doubletree SEC Reports filed prior
to the date of this Agreement, and except as provided for in this Agreement,
neither Doubletree nor any of its Subsidiaries is a party to any oral or
written (i) agreement with any officer or other key employee of Doubletree or
any of its Subsidiaries, the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction
involving Doubletree of the nature contemplated by this Agreement, (ii)
agreement with any officer of Doubletree providing any term of employment or
compensation guarantee extending for a period longer than one year
16
<PAGE>
from the date hereof and for the payment of compensation in excess of
$100,000 per annum, or (iii) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, the vesting of the
benefits of which will be accelerated or the funding of benefits of which
will be required, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
Section 3.14. COMPLIANCE WITH LAWS. Doubletree has complied with, is
not in violation of, and has not received any notices of violation with
respect to, any federal, state or local statute, law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which, individually or
in the aggregate, have not had and are not reasonably likely to have a
Doubletree Material Adverse Effect.
Section 3.15 ACCOUNTING AND TAX MATTERS.
(a) To the best knowledge of Doubletree, after consulting with its
independent auditors with respect to clause (i) below and its tax advisors
with respect to clause (ii) below, neither Doubletree nor any of its
Affiliates (as defined in Section 5.12) has taken or agreed to take any
action which would (i) prevent Parent from accounting for the business
combination to be effected by the Mergers as a pooling of interests or (ii)
prevent the Doubletree Merger from qualifying as a reorganization described
in Section 368(a) of the Code and/or, taken together with the Promus Merger,
as a transfer of property to Parent by holders of Doubletree Common Stock
described in Section 351 of the Code. Except as contemplated by the
Doubletree Option Agreement, neither Doubletree nor any of its Subsidiaries
owns any shares of Promus Common Stock or other securities convertible into
shares of Promus Common Stock (exclusive of any shares owned by Doubletree's
employee benefit plans).
(b) To the best knowledge of Doubletree, the stockholders of
Doubletree as a group have no present plan, intention or arrangement to sell
or otherwise dispose of such number of the shares of Parent Common Stock
received in the Doubletree Merger as would reduce their ownership in Parent
Common Stock to a number of shares having a value, as of the date of the
Doubletree Merger, of less than eighty percent (80%) of the value of all the
formerly outstanding stock of Doubletree as of the same date.
Section 3.16. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
The information to be supplied by Doubletree for inclusion in the
registration statement on Form S-4 pursuant to which shares of Parent Common
Stock issued in the Mergers will be registered under the Securities Act (the
"Registration Statement"), shall not at the time the Registration Statement
is declared effective by the SEC contain any untrue statement of a material
fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which they were
made, not misleading. The information supplied by Doubletree for inclusion
in the joint proxy statement/prospectus to be sent to the stockholders of
Promus and Doubletree in connection with the meeting of Doubletree's
stockholders (the "Doubletree Stockholders' Meeting") and the meeting of
Promus's stockholders (the "Promus Stockholders' Meeting") to consider this
17
<PAGE>
Agreement and the Mergers (the "Joint Proxy Statement/Prospectus") shall not,
on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders of Doubletree or Promus, at the time of the Doubletree
Stockholders' Meeting and the Promus Stockholders' Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with
respect to any material fact, omit to state any material fact necessary in
order to make the statements made in the Joint Proxy Statement/Prospectus not
false or misleading, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation
of proxies for the Doubletree Stockholders' Meeting or the Promus
Stockholders' Meeting which has become false or misleading. If at any time
prior to the Effective Time any event relating to Doubletree or any of its
Affiliates, officers or directors should be discovered by Doubletree which
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, Doubletree shall promptly
inform Promus.
Section 3.17. LABOR MATTERS. Except as disclosed in the Doubletree SEC
Reports filed prior to the date hereof, neither Doubletree nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is Doubletree or any of its
Subsidiaries the subject of any material proceeding asserting that Doubletree
or any of its Subsidiaries has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization
nor, as of the date of this Agreement, is there pending or, to the knowledge
of the executive officers of Doubletree, threatened, any material labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving
Doubletree or any of its Subsidiaries.
Section 3.18. INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Doubletree or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Doubletree and its Subsidiaries
and their respective properties and assets, and are in character and amount
at least equivalent to that carried by persons engaged in similar businesses
and subject to the same or similar perils or hazards, except for any such
failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a Doubletree Material Adverse
Effect.
Section 3.19. DOUBLETREE LONG-RANGE PLANS. Doubletree has provided to
Promus copies of Doubletree's most recent long-range plans prepared in draft
form by Doubletree's management and Doubletree has not adopted any other
long-range plans since January 1, 1997.
Section 3.20. OPINION OF FINANCIAL ADVISOR. The financial advisor of
Doubletree, Morgan Stanley & Co. Incorporated, has delivered to Doubletree an
opinion dated the date of this Agreement to the effect that the Doubletree
Exchange Ratio is fair to the holders of Doubletree Common Stock from a
financial point of view.
Section 3.21. NO EXISTING DISCUSSIONS. As of the date hereof,
Doubletree is not engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to an Acquisition Proposal (as
defined in Section 5.3).
18
<PAGE>
Section 3.22. SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions
contained in Section 203 of the DGCL applicable to a "business combination"
(as defined in DGCL Section 203) will not apply to the authorization,
execution, delivery and performance of this Agreement or the Stock Option
Agreements by Doubletree or the Stockholder Support Agreement by the parties
thereto or the consummation of the Doubletree Merger by Doubletree. No other
"fair price," "moratorium," "control share acquisition" or other similar
anti-takeover statute or regulation is applicable to Doubletree or (by reason
of Doubletree's participation therein) the Doubletree Merger or the other
transactions contemplated by this Agreement.
Section 3.23. DOUBLETREE RIGHTS PLAN. Under the terms of the Doubletree
Rights Plan, neither the execution of this Agreement, the Promus Stock Option
Agreement, the Stockholder Support Agreement, nor the transactions
contemplated hereby or thereby, will cause a Distribution Date to occur or
cause the rights issued pursuant to the Doubletree Rights Plan to become
exercisable, and all such rights shall become non-exercisable at the
Effective Time.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PROMUS
Promus represents and warrants to Doubletree that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule delivered by Promus to Doubletree on or before the date
of this Agreement (the "Promus Disclosure Schedule"). The Promus Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV and the disclosure in any
paragraph shall qualify other paragraphs in this Article IV only to the
extent that it is reasonably apparent from a reading of such document that it
also qualifies or applies to such other paragraphs.
Section 4.1 ORGANIZATION OF PROMUS. Each of Promus and its
Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has all requisite power to
own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the failure to be so qualified would have a
material adverse effect on the business, properties, financial condition or
results of operations of Promus and its Subsidiaries, taken as a whole (a
"Promus Material Adverse Effect"). A true and correct copy of the
Certificate of Incorporation and Bylaws of Promus has been delivered to
Doubletree. Except as set forth in the Promus SEC Reports (as defined in
Section 4.4) filed prior to the date hereof, neither Promus nor any of its
Subsidiaries directly or indirectly owns (other than ownership interests in
Promus or in one or more of its Subsidiaries) any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or
entity, excluding (i) securities in any publicly traded company held for
investment by Promus and comprising less than five percent (5%) of the
outstanding stock of such company and (ii) any investment or series of
related investments with a book value of less than $15 million.
19
<PAGE>
Section 4.2. PROMUS CAPITAL STRUCTURE.
(a) The authorized capital stock of Promus consists of 360,000,000
shares of Common Stock, $.10 par value, 150,000 shares of Preferred Stock,
$100.00 par value ("Promus Preferred Stock") and 5,000,000 shares of Special
Stock, par value $1.12-1/2" ("Promus Special Stock"). As of the date hereof,
(i) 49,896,911 shares of Promus Common Stock were issued and outstanding, all
of which are validly issued, fully paid and nonassessable, and (ii) 1,580,101
additional shares of Promus Common Stock were held in the treasury of Promus
or by Subsidiaries of Promus. The Promus Disclosure Schedule shows the
number of shares of Promus Common Stock reserved for future issuance pursuant
to stock options granted and outstanding as of the date hereof and the plans
under which such options were granted (collectively, the "Promus Stock
Plans"). As of the date of this Agreement, none of the shares of Promus
Preferred Stock or Promus Special Stock are issued and outstanding. There
are no obligations, contingent or otherwise, of Promus or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Promus
Common Stock or the capital stock of any Subsidiary or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity other than guarantees
of bank obligations or indebtedness for borrowed money of Subsidiaries
entered into in the ordinary course of business and other than any obligation
the failure of which to perform or satisfy would not have a Promus Material
Adverse Effect. All of the outstanding shares of capital stock or other
ownership interests of each of Promus's Subsidiaries are duly authorized,
validly issued, fully paid and nonassessable and all such shares (other than
directors' qualifying shares in the case of foreign Subsidiaries) are owned
by Promus or another Subsidiary of Promus free and clear of all security
interests, liens, claims, pledges, agreements, limitations in Promus's voting
rights, charges or other encumbrances of any nature.
(b) Except as set forth in this Section 4.2 or as reserved for
future grants of options under the Promus Stock Plans or the Doubletree Stock
Option Agreement, and except for the preferred stock purchase rights issued
and issuable under the Rights Agreement dated as of June 30, 1995 between
Promus and Continental Stock Transfer & Trust Company (the "Promus Rights
Plan"), (i) there are no shares of capital stock of any class of Promus, or
any security exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding; (ii) there are no options,
warrants, equity securities, calls, rights, commitments or agreements of any
character to which Promus or any of its Subsidiaries is a party or by which
it is bound obligating Promus or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other ownership interests of Promus or any of its Subsidiaries or
obligating Promus or any of its Subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call,
right, commitment or agreement; and (iii) to the best knowledge of Promus,
there are no voting trusts, proxies or other voting agreements or
understandings with respect to the shares of capital stock of Promus. All
shares of Promus Common Stock subject to issuance as specified in this
Section 4.2 are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable.
20
<PAGE>
Section 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Promus has all requisite corporate power and authority to enter
into this Agreement, the Stock Option Agreements and the Stockholder Support
Agreement and to consummate the transactions contemplated by this Agreement,
the Stock Option Agreements and the Stockholder Support Agreement. The
execution and delivery of this Agreement, the Stock Option Agreements and the
Stockholder Support Agreement and the consummation of the transactions
contemplated by this Agreement, the Stock Option Agreements and the
Stockholder Support Agreement by Promus have been duly authorized by all
necessary corporate action on the part of Promus, subject only to the
approval and adoption of this Agreement and the Promus Merger by Promus's
stockholders under the DGCL. This Agreement, the Stock Option Agreements and
the Stockholder Support Agreement have been duly executed and delivered by
Promus and constitute the valid and binding obligations of Promus,
enforceable in accordance with their terms, subject to the Bankruptcy and
Equity Exception.
(b) The execution and delivery of this Agreement, the Stock Option
Agreements and the Stockholder Support Agreement by Promus does not, and the
consummation of the transactions contemplated by this Agreement, the Stock
Option Agreements and the Stockholder Support Agreement will not, (i)
conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Promus or any of its Subsidiaries,
(ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which Promus
or any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound (other than pursuant to the Tranche A
Credit Agreement or the Tranche B Credit Agreement, each dated as of June 7,
1995, as amended, by and among Promus and certain of its subsidiaries and
NationsBank, N.A. (Carolinas)) or (iii) conflict with or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Promus or any of its Subsidiaries
or any of its or their properties or assets, except in the case of (ii) and
(iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which (x) are not, individually or in the
aggregate, reasonably likely to have a Promus Material Adverse Effect or (y)
would not substantially impair or delay the consummation of the Promus Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Promus or any of its Subsidiaries in connection with the execution
and delivery of this Agreement, the Stock Option Agreements and the
Stockholder Support Agreement or the consummation of the transactions
contemplated hereby or thereby, except for (i) the filing of the pre-merger
notification report under the HSR Act, (ii) the filing of a Certificate of
Merger with respect to the Promus Merger with the Delaware Secretary of
State, (iii) the filing of the Joint Proxy Statement/Prospectus with the SEC
in accordance with the Exchange Act and the Securities Act, (iv) such
consents, approvals, orders, authorizations, permits, filings, or
registrations related to, or arising out of, compliance with statutes, rules
or regulations regulating the consumption, sale or serving of alcoholic
beverages, (v) such consents, approvals, orders, authorizations,
registrations,
21
<PAGE>
declarations and filings as may be required under applicable state securities
laws and the laws of any foreign country and (vi) such other consents,
authorizations, filings, approvals and registrations which, if not obtained
or made, would not (x) be reasonably likely to have a Promus Material Adverse
Effect or (y) substantially impair or delay the consummation of the Promus
Merger.
Section 4.4. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Promus has filed and made available to Doubletree all forms,
reports and documents required to be filed by Promus with the SEC since
January 1, 1996 (collectively, the "Promus SEC Reports"). The Promus SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Promus SEC Reports or
necessary in order to make the statements in such Promus SEC Reports, in the
light of the circumstances under which they were make, not misleading. Other
than Promus Hotels, Inc., none of Promus's Subsidiaries is required to file
any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) of Promus contained in the Promus SEC Reports
complied as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and fairly
presented the consolidated financial position of Promus and its Subsidiaries
as of the dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. The audited
balance sheet of Promus as of December 31, 1996 is referred to herein as the
"Promus Balance Sheet."
Section 4.5. NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Promus SEC Reports filed prior to the date hereof, and except for normal or
recurring liabilities incurred since December 31, 1996 in the ordinary course
of business consistent with past practices, Promus and its Subsidiaries do
not have any liabilities, either accrued, contingent or otherwise (whether or
not required to be reflected in financial statements in accordance with
generally accepted accounting principles), and whether due or to become due,
which individually or in the aggregate, are reasonably likely to have a
Promus Material Adverse Effect.
Section 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Promus SEC Reports filed prior to the date hereof, since the date of
the Promus Balance Sheet, Promus and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any event, development,
state of affairs or condition, or series or combination of events,
developments, states of affairs or
22
<PAGE>
conditions, which, individually or in the aggregate, has had or which is
reasonably likely to have a Promus Material Adverse Effect (other than
events, developments, states of affairs or conditions that are the effect or
result of actions taken by Doubletree or economic factors affecting the
economy as a whole or the industry in which Promus competes); (ii) any
damage, destruction or loss (whether or not covered by insurance) with
respect to Promus or any of its Subsidiaries which is reasonably likely to
have a Promus Material Adverse Effect; (iii) any material change by Promus in
its accounting methods, principles or practices to which Doubletree has not
previously consented in writing; (iv) any revaluation by Promus of any of its
assets which is reasonably likely to have a Promus Material Adverse Effect;
or (v) any other action or event that would have required the consent of
Doubletree pursuant to Section 5.1 of this Agreement had such action or event
occurred after the date of this Agreement, other than such actions or events
that, individually or in the aggregate, have not had or are not reasonably
likely to have a Promus Material Adverse Effect.
Section 4.7. TAXES.
(a) Promus and each of its Subsidiaries have (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid
or accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or accruals that are not reasonably likely, individually or
in the aggregate, to have a Promus Material Adverse Effect. Neither the IRS
nor any other taxing authority has asserted any claim for Taxes, or to the
actual knowledge of the executive officers of Promus, is threatening to
assert any claims for Taxes, which claims, individually or in the aggregate,
are reasonably likely to have a Promus Material Adverse Effect. Promus and
each of its Subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities (or are properly holding for such
payment) all Taxes required by law to be withheld or collected, except for
amounts that are not reasonably likely, individually or in the aggregate, to
have a Promus Material Adverse Effect. Neither Promus nor any of its
Subsidiaries has made an election under Section 341(f) of the Code, except
for any such election that shall not have a Promus Material Adverse Effect.
There are no liens for Taxes upon the assets of Promus or any of its
Subsidiaries (other than liens for Taxes that are not yet due or delinquent
or that are being contested in good faith by appropriate proceedings), except
for liens that are not reasonably likely, individually or in the aggregate,
to have a Promus Material Adverse Effect.
(b) Neither Promus nor any of its Subsidiaries is or has been a member
of an affiliated group of corporations filing a consolidated federal income
tax return (or a group of corporations filing a consolidated, combined or
unitary income tax return under comparable provisions of state, local or
foreign tax law) for any taxable period beginning on or after February 7,
1990, other than a group the common parent of which is or was The Promus
Companies Incorporated, Promus or any Subsidiary of Promus.
(c) Neither Promus nor any of its Subsidiaries has any obligation
under any agreement or arrangement with any other person with respect to
Taxes of such other person
23
<PAGE>
(including pursuant to Treas. Reg. SECTION 1.1502-6 or comparable provisions
of state, local or foreign tax law) and including any liability for Taxes of
any predecessor entity, except for obligations that are not reasonably
likely, individually or in the aggregate, to have an Promus Material Adverse
Effect.
Section 4.8. PROPERTIES.
(a) Neither Promus nor any of its Subsidiaries is in default under any
Material Leases, except where the existence of such defaults, individually or
in the aggregate, is not reasonably likely to have a Promus Material Adverse
Effect.
(b) With respect to each item of real property that Promus or any of
its Subsidiaries owns, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Promus Material Adverse
Effect: (i) Promus or its Subsidiary has good and clear record and marketable
title to such property, insurable by a recognized national title insurance
company at standard rates, free and clear of any security interest, easement,
covenant or other restriction, except for recorded easements, covenants and
other restrictions which do not materially impair the current uses or
occupancy of such property; and (ii) the improvements constructed on such
property are in good condition, and all mechanical and utility systems
servicing such improvements are in good condition, free in each case of
material defects.
Section 4.9. INTELLECTUAL PROPERTY. Promus owns, or is licensed or
otherwise possesses legally enforceable rights to use, all trademarks, trade
names, service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, know-how, computer software
programs or applications, and tangible or intangible proprietary information
or material that are necessary to conduct the business of Promus as currently
conducted, subject to such exceptions that, individually and in the
aggregate, would not be reasonably likely to have a Promus Material Adverse
Effect. Promus has no knowledge of any assertion or claim challenging the
validity of any of such intellectual property.
Section 4.10. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Promus has not breached, or received in writing any claim or
notice that it has breached, any of the terms or conditions of any material
agreement, contract or commitment filed as an exhibit to the Promus SEC
Reports ("Promus Material Contracts") in such a manner as, individually or in
the aggregate, are reasonably likely to have a Promus Material Adverse
Effect. Each Promus Material Contract that has not expired by its terms is
in full force and effect.
(b) Without limiting Section 4.10(a), each of the management contracts
and franchise agreements to which Promus is a party and each of Promus's
Material Leases (i) is valid and binding in accordance with its terms and is
in full force and effect, (ii) neither Promus nor any of its Subsidiaries is
in default in any material respect thereof, nor does any condition exist that
with notice or lapses of time or both would constitute a material default
thereunder, and (iii) no party has given any written or (to the knowledge of
Promus) oral notice of termination or cancellation thereof or that such party
intends to assert a breach thereof, or seek to terminate or cancel, any such
agreement, contract or lease, in each case as a result of the transactions
24
<PAGE>
contemplated hereby, subject to such exceptions that, individually and in the
aggregate, would not be reasonably likely to have a Promus Material Adverse
Effect.
Section 4.11. LITIGATION. Except as described in the Promus SEC Reports
filed prior to the date hereof, there is no action, suit or proceeding,
claim, arbitration or investigation against Promus pending or as to which
Promus has received any written notice of assertion, which, individually or
in the aggregate, is reasonably likely to have a Promus Material Adverse
Effect or a material adverse effect on the ability of Promus to consummate
the transactions contemplated by this Agreement.
Section 4.12. ENVIRONMENTAL MATTERS. To the knowledge of Promus and
except as disclosed in the Promus SEC Reports filed prior to the date hereof
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Promus Material Adverse Effect: (i) Promus and
its Subsidiaries have complied with all applicable Environmental Laws; (ii)
the properties currently owned or operated by Promus and its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures)
are not contaminated with any Hazardous Substances; (iii) the properties
formerly owned or operated by Promus or any of its Subsidiaries were not
contaminated with Hazardous Substances during the period of ownership or
operation by Promus or any of its Subsidiaries; (iv) neither Promus nor its
Subsidiaries are subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (v) neither Promus nor any of its
Subsidiaries has been associated with any release or threat of release of any
Hazardous Substance; (vi) neither Promus nor any of its Subsidiaries has
received any notice, demand, letter, claim or request for information
alleging that Promus or any of its Subsidiaries may be in violation of or
liable under any Environmental Law; (vii) neither Promus nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are
no circumstances or conditions involving Promus or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use or transfer of
any property of Promus or any of its Subsidiaries pursuant to any
Environmental Law.
Section 4.13. EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the "Promus Employee Plans" shall
mean all employee benefit plans (as defined in Section 3(3) of ERISA) and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
and all unexpired severance agreements, written or otherwise, for the benefit
of, or relating to, any current or former employee of Promus or any ERISA
Affiliate of Promus, or any Subsidiary of Promus (together, the "Promus
Employee Plans"). Promus has listed in Section 4.13 of the Promus Disclosure
Schedule all Promus Employee Plans other than plans that are "employee
welfare benefit plans" within the meaning of Section 3(1) of ERISA.
(b) With respect to each Promus Employee Plan, Promus has made
available to Doubletree, a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the IRS, (ii) such Promus Employee Plan
and all amendments thereto, (iii) each trust agreement
25
<PAGE>
and group annuity contract, if any, and all amendments thereto relating to
such Promus Employee Plan and (iv) the most recent actuarial report or
valuation relating to a Promus Employee Plan subject to Title IV of ERISA.
(c) With respect to the Promus Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Promus, there
exists no condition or set of circumstances in connection with which Promus
could be subject to any liability that is reasonably likely to have a Promus
Material Adverse Effect under ERISA, the Code or any other applicable law.
(d) With respect to the Promus Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting
principles, on the financial statements of Promus, except for obligations
which, individually or in the aggregate, are not reasonably likely to have a
Promus Material Adverse Effect.
(e) Except as disclosed in the Promus SEC Reports filed prior to the
date of this Agreement, and except as provided for in this Agreement, neither
Promus nor any of its Subsidiaries is a party to any oral or written (i)
agreement with any officer or other key employee of Promus or any of its
Subsidiaries, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Promus of
the nature contemplated by this Agreement, (ii) agreement with any officer of
Promus providing any term of employment or compensation guarantee extending
for a period longer than one year from the date hereof or for the payment of
compensation in excess of $100,000 per annum, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, the vesting of the benefits of which will be accelerated or the
funding of benefits of which will be required, by the occurrence of any of
the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
Section 4.14. COMPLIANCE WITH LAWS. Promus has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business,
except for failures to comply or violations which, individually or in the
aggregate, have not had and are not reasonably likely to have a Promus
Material Adverse Effect.
Section 4.15. ACCOUNTING AND TAX MATTERS.
(a) To the best knowledge of Promus, after consulting with its
independent auditors with respect to clause (i) below and its tax advisors
with respect to clause (ii) below, neither Promus nor any of its Affiliates
(as defined in Section 5.12) has taken or agreed to take any action which
would (i) prevent Parent from accounting for the business combination to be
effected by the Mergers as a pooling of interests, or (ii) prevent the Promus
Merger from qualifying as a reorganization described in Section 368(a) of the
Code and/or, taken together
26
<PAGE>
with the Doubletree Merger, as a transfer of property to Parent by holders of
Promus Common Stock described in Section 351 of the Code. Except as
contemplated by the Promus Option Agreement, neither Promus nor any of its
Subsidiaries owns any shares of Doubletree Common Stock or other securities
convertible into shares of Doubletree Common Stock (exclusive of any shares
owned by Promus's employee benefit plans).
(b) To the best knowledge of Promus, the stockholders of Promus as a
group have no present plan, intention or arrangement to sell or otherwise
dispose of such number of the shares of Parent Common Stock received in the
Promus Merger as would reduce their ownership in Parent Common Stock to a
number of shares having a value, as of the date of the Promus Merger, of less
than eighty percent (80%) of the value of all the formerly outstanding stock
of Promus as of the same date.
Section 4.16. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
The information to be supplied by Promus for inclusion in the Registration
Statement shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or omit
to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information to be supplied by Promus for inclusion in the
Joint Proxy Statement/Prospectus shall not, on the date the Joint Proxy
Statement/Prospectus is first mailed to stockholders of Promus or Doubletree,
at the time of the Promus Stockholders' Meeting and the Doubletree
Stockholder's Meeting and at the Effective Time, contain any statement which,
at such time and in light of the circumstances under which it shall be made,
is false or misleading with respect to any material fact, omit to state any
material fact necessary in order to make the statements made in the Joint
Proxy Statement/Prospectus not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Promus Stockholders'
Meeting or the Doubletree Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Promus or any of its Affiliates, officers or directors should be discovered
by Promus which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/Prospectus, Promus
shall promptly inform Doubletree.
Section 4.17. LABOR MATTERS. Except as disclosed in the Promus SEC
Reports filed prior to the date hereof, neither Promus nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is Promus or any of its
Subsidiaries the subject of any material proceeding asserting that Promus or
any of its Subsidiaries has committed an unfair labor practice or is seeking
to compel it to bargain with any labor union or labor organization nor, as of
the date of this Agreement, is there pending or, to the knowledge of the
executive officers of Promus, threatened, any material labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving Promus or any of its
Subsidiaries.
Section 4.18. INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Promus or any of its Subsidiaries are
with reputable insurance carriers, provide full and adequate
27
<PAGE>
coverage for all normal risks incident to the business of Promus and its
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for
any such failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a Promus Material Adverse
Effect.
Section 4.19. PROMUS LONG-RANGE PLANS. Promus has provided to
Doubletree copies of Promus's long-range plans that are substantially
identical to the long-range plans presented by Promus's management to, and
adopted by, the Board of Directors of Promus on July 23, 1997, and Promus has
not adopted any other long-range plans since such date.
Section 4.20. OPINION OF FINANCIAL ADVISOR. The financial advisor of
Promus, BT Wolfensohn, has delivered to Promus an opinion dated the date of
this Agreement to the effect that the Promus Exchange Ratio is fair to
holders of Promus Common Stock from a financial point of view.
Section 4.21. NO EXISTING DISCUSSIONS. As of the date hereof, Promus is
not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to an Acquisition Proposal.
Section 4.22. SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions
contained in Section 203 of the DGCL applicable to a "business combination"
(as defined in Section DGCL 203) will not apply to the authorization,
execution, delivery or performance of this Agreement or the Stock Option
Agreements by Promus or the consummation of the Promus Merger by Promus. No
other "fair price," "moratorium," "control share acquisition" or other
similar anti-takeover statute or regulation is applicable to Promus or (by
reason of Promus's participation therein) the Promus Merger or the other
transactions contemplated by this Agreement.
Section 4.23. PROMUS RIGHTS PLAN. Under the terms of the Promus Rights
Plan, neither the execution of this Agreement or the Doubletree Stock Option
Agreement, nor the transactions contemplated hereby or thereby will cause a
Distribution Date to occur or cause the rights issued pursuant to the Promus
Rights Plan to become exercisable, and all such rights shall become
non-exercisable at the Effective Time.
ARTICLE V
COVENANTS
Section 5.1. CONDUCT OF BUSINESS. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Doubletree and Promus each agrees as to
itself and its respective Subsidiaries (except to the extent that the other
party shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and taxes when due subject to good
faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use
all reasonable efforts consistent with past practices and policies to
preserve intact its present
28
<PAGE>
business organization, keep available the services of its present officers
and key employees and preserve its relationships with customers, suppliers,
distributors, and others having business dealings with it. Except as
expressly contemplated by this Agreement or the Stock Option Agreements or as
set forth in Section 5.1 of the Doubletree Disclosure Schedule, during the
period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Doubletree and
Promus each shall not (and shall not permit any of its respective
Subsidiaries to), without the written consent of the other party:
(a) Accelerate, amend or change the period of exercisability of
options or restricted stock granted under any employee stock plan of such
party or authorize cash payments in exchange for any options granted under
any of such plans except as required by the terms of such plans or any
related agreements (including severance agreements) in effect as of the date
of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock,
or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service to such party;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than (i) the grant of options consistent with past
practices to employees or directors, which options represent in the aggregate
the right to acquire no more than 25,000 shares (net of cancellations) of
Doubletree Common Stock or Promus Common Stock, as the case may be, (ii) the
issuance of shares of Doubletree Common Stock or Promus Common Stock, as the
case may be, pursuant to the exercise of options or warrants outstanding on
the date of this Agreement, and (iii) the issuance of capital stock under the
Doubletree Rights Plan or the Promus Rights Plan if required by the
respective terms thereof;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire
or agree to acquire any assets (other than hotel properties, inventory and
other immaterial assets, in each case in the ordinary course of business);
(e) Sell, lease, license or otherwise dispose of any of its material
properties or assets, except for transactions (including sales, leases,
licenses or dispositions of hotel properties, inventory and other immaterial
assets) in the ordinary course of business;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary
or wages of employees (other
29
<PAGE>
than officers) in accordance with past practices, (ii) grant any additional
severance or termination pay to, or enter into any employment or severance
agreements with, any employees or officers, (iii) enter into any collective
bargaining agreement (other than as required by law or extensions to existing
agreements in the ordinary course of business), (iv) establish, adopt, enter
into or amend any bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees;
(g) Amend or propose to amend its Certificate of Incorporation or
Bylaws except as contemplated by this Agreement;
(h) Incur any indebtedness for borrowed money other than in the
ordinary course of business;
(i) Take any action that would or is reasonably likely to result in a
material breach of any provision of this Agreement or the Stock Option
Agreements or in any of its representations and warranties set forth in this
Agreement or the Stock Option Agreements being untrue on and as of the
Closing Date;
(j) Make or rescind any material express or deemed election relating
to Taxes, settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Taxes, or make any material change to any of its methods of reporting income
or deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
December 31, 1996, except as may be required by applicable law;
(k) Settle any litigation relating to the transactions contemplated
hereby other than any settlement which would not (i) have a Doubletree
Material Adverse Effect (if settled by Doubletree), a Promus Material Adverse
Effect (if settled by Promus) or a material adverse effect on the business,
properties, financial condition or results of operations of Parent (if
settled by either Doubletree or Promus) or (ii) adversely effect the
consummation of the transactions contemplated hereby; or
(l) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (k) above.
Section 5.2. COOPERATION; NOTICE; CURE. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of
Doubletree and Promus shall confer on a regular and frequent basis with one
or more representatives of the other party to report on the general status of
ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Mergers and the transactions contemplated
hereby and thereby. Each of Doubletree and Promus shall promptly notify the
other in writing of, and will use all commercially reasonable efforts to cure
before the Closing Date, any event, transaction or circumstance, as soon as
practical after it becomes known to such party, that causes or will cause any
covenant or agreement of Doubletree or Promus under this Agreement to be
breached or that
30
<PAGE>
renders or will render untrue any representation or warranty of Doubletree or
Promus contained in this Agreement. No notice given pursuant to this
paragraph shall have any effect on the representations, warranties, covenants
or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
Section 5.3. NO SOLICITATION.
(a) Doubletree and Promus each shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent of such party (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transaction involving such
party or any of its Subsidiaries, other than the transactions contemplated by
this Agreement (any of the foregoing inquiries or proposals being referred to
in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations
or discussions with any person (or group of persons) other than Doubletree or
Promus or their respective affiliates (a "Third Party") concerning, or
provide any non-public information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to or recommend any Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent Doubletree or Promus, or their respective Board of Directors, from
(A) furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited
bona fide written Acquisition Proposal by such person or entity or modifying
or withdrawing its recommendation with respect to the transactions
contemplated hereby or recommending an unsolicited bona fide written
Acquisition Proposal to the stockholders of such party, if and only to the
extent that (1) the Board of Directors of such party believes in good faith
(after consultation with its financial advisor) that such Acquisition
Proposal is reasonably capable of being completed on the terms proposed and,
after taking into account the strategic benefits anticipated to be derived
from the Mergers and the prospects of Doubletree and Promus as a combined
company, would, if consummated, result in a transaction more favorable to the
stockholders of such party over the long term than the transaction
contemplated by this Agreement (a "Superior Proposal") and the Board of
Directors of such party determines in good faith after consultation with
outside legal counsel that such action is required for such Board of
Directors to comply with its fiduciary duties to stockholders under
applicable law and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality and standstill agreement with terms no less favorable to such
party than those contained in the Confidentiality Agreements, each dated
August 16, 1997 between Promus and Doubletree (the "Confidentiality
Agreements"); or (B) complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal. Each of Doubletree and Promus
agrees not to release any third party from, or waive any provision of, any
standstill agreement to which it is a party or any confidentiality agreement
between it and another person who has made, or who may reasonably be
considered likely to make, an Acquisition Proposal, unless its Board of
Directors determines in good faith after consultation with outside legal
counsel that such action is required for such Board of Directors to comply
with its fiduciary duties to stockholders under applicable law.
31
<PAGE>
(b) Doubletree and Promus shall each notify the other party immediately
after receipt by Doubletree or Promus (or any of their advisors) of any
Acquisition Proposal or any request for nonpublic information in connection
with an Acquisition Proposal or for access to the properties, books or
records of such party by any person or entity that informs such party that it
is considering making, or has made, an Acquisition Proposal. Such notice
shall be made orally and in writing and shall indicate in reasonable detail
the identity of the offeror and the terms and conditions of such proposal,
inquiry or contact. Such party shall continue to keep the other party hereto
informed, on a current basis, of the status of any such discussions or
negotiations and the terms being discussed or negotiated.
Section 5.4 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practical after the execution of this Agreement,
Doubletree and Promus shall prepare and file with the SEC the Joint Proxy
Statement/Prospectus and the Registration Statement in which the Joint Proxy
Statement/Prospectus will be included as a prospectus, provided that
Doubletree and Promus may delay the filing of the Registration Statement
until approval of the Joint Proxy Statement/Prospectus by the SEC.
Doubletree and Promus shall use all reasonable efforts to cause the
Registration Statement to become effective as soon after such filing as
practical. The Joint Proxy Statement/Prospectus shall include the
recommendation of the Board of Directors of Doubletree in favor of adoption
of this Agreement and the Doubletree Merger and the recommendation of the
Board of Directors of Promus in favor of adoption of this Agreement and the
Promus Merger; provided that the Board of Directors of either party may
modify or withdraw such recommendation if such Board of Directors believes in
good faith after consultation with outside legal counsel that the
modification or withdrawal of such recommendation is required for such Board
of Directors to comply with its fiduciary duties under applicable law.
(b) Doubletree and Promus shall make all necessary filings with respect to
the Merger under the Securities Act, the Exchange Act, applicable state blue sky
laws and the rules and regulations thereunder.
Section 5.5 NASDAQ QUOTATION AND NYSE LISTING. Each of Doubletree and
Promus agrees to continue the quotation and listing of Doubletree Common
Stock and Promus Common Stock, respectively, on NASDAQ National Market and
the NYSE, respectively, during the term of this Agreement.
Section 5.6 ACCESS TO INFORMATION. Upon reasonable notice, Doubletree
and Promus shall each (and shall cause each of their respective Subsidiaries
to) afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its personnel, properties, books,
contracts, commitments and records and, during such period, each of
Doubletree and Promus shall, and shall cause each of their respective
Subsidiaries to, furnish promptly to the other (a) copies of monthly
financial reports and development reports, (b) 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 (c) all other information concerning its business, properties and
personnel as such other party may reasonably request. The parties
32
<PAGE>
will hold any such information which is nonpublic in confidence in accordance
with the Confidentiality Agreements. No information or knowledge obtained in
any investigation pursuant to this Section 5.6 shall affect or be deemed to
modify any representation or warranty contained in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
Section 5.7 STOCKHOLDERS' MEETINGS. Doubletree and Promus each shall
call a meeting of its respective stockholders to be held as promptly as
practicable for the purpose of voting, in the case of Doubletree, upon this
Agreement and the Doubletree Merger and, in the case of Promus, upon this
Agreement and the Promus Merger. Subject to Sections 5.3 and 5.4, Doubletree
and Promus shall, through their respective Boards of Directors, recommend to
their respective stockholders adoption of this Agreement and approval of such
matters and shall coordinate and cooperate with respect to the timing of such
meetings and shall use their best efforts to hold such meetings on the same
day and as soon as practicable after the date hereof. Unless otherwise
required to comply with the applicable fiduciary duties of the respective
directors of Doubletree and Promus, as determined by such directors in good
faith after consultation with outside legal counsel, each party shall use all
reasonable efforts to solicit from stockholders of such party proxies in
favor of such matters. Doubletree and Promus intend to submit additional
proposals to their respective stockholders at the Doubletree Stockholders'
Meeting and the Promus Stockholders' Meeting, respectively, separate from the
proposals referred to in the first sentence of this Section 5.7. The
approval by Doubletree's stockholders or Promus's stockholders, as the case
may be, of such additional proposals shall not be a condition to the closing
of the Mergers under this Agreement.
Section 5.8 LEGAL CONDITIONS TO MERGER.
(a) Doubletree and Promus shall each use all reasonable efforts to (i)
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary and proper under applicable law to consummate and
make effective the transactions contemplated hereby as promptly as
practicable, (ii) obtain from any Governmental Entity or any other third
party any consents, licenses, permits, waivers, approvals, authorizations, or
orders required to be obtained or made by Doubletree or Promus or any of
their Subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby including, without limitation, the Mergers, and (iii) as
promptly as practicable, make all necessary filings, and thereafter make any
other required submissions, with respect to this Agreement and the Mergers
required under (A) the Securities Act and the Exchange Act, and any other
applicable federal or state securities laws, (B) the HSR Act and any related
governmental request thereunder, and (C) any other applicable law.
Doubletree and Promus shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such documents
to the non-filing party and its advisors prior to filing and, if requested,
to accept all reasonable additions, deletions or changes suggested in
connection therewith. Doubletree and Promus shall use their reasonable
efforts to furnish to each other all information required for any application
or other filing to be made pursuant to the rules and regulations of any
applicable law (including all information required to be included in the
Joint Proxy Statement/Prospectus and the Registration Statement) in
connection with the transactions contemplated by this Agreement.
33
<PAGE>
(b) Doubletree and Promus agree, and shall cause each of their
respective Subsidiaries, to cooperate and to use their respective reasonable
efforts to obtain any government clearances required for Closing (including
through compliance with the HSR Act and any applicable foreign government
reporting requirements), to respond to any government requests for
information, and to contest and resist any action, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an "Order") that restricts, prevents or
prohibits the consummation of the Mergers or any other transactions
contemplated by this Agreement. The parties hereto will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any
party hereto in connection with proceedings under or relating to the HSR Act
or any other federal, state or foreign antitrust or fair trade law.
Doubletree and Promus shall cooperate and work together in any proceedings or
negotiations with any Governmental Entity relating to any of the foregoing.
Notwithstanding anything to the contrary in this Section 5.8, neither
Doubletree nor Promus, nor any of their respective Subsidiaries, shall be
required to take any action that would reasonably be expected to
substantially impair the overall benefits expected, as of the date hereof, to
be realized from the consummation of the Mergers.
(c) Each of Doubletree and Promus shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, all reasonable efforts to obtain
any third party consents related to or required in connection with the
Mergers.
Section 5.9 PUBLIC DISCLOSURE. Doubletree and Promus shall agree on
the form and content of the initial press release regarding the transactions
contemplated hereby and thereafter shall consult with each other before
issuing, and use all reasonable efforts to agree upon, any press release or
other public statement with respect to any of the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law.
Section 5.10 NONRECOGNITION EXCHANGE. From and after the date hereof
and until the Effective Time, neither Doubletree nor Promus, nor any of their
respective Subsidiaries or other Affiliates shall knowingly take any action,
or knowingly fail to take any action, that is reasonably likely to jeopardize
the treatment of either of the Mergers as a reorganization described in
Section 368(a) of the Code and/or, taken together with the other of the
Mergers, as a transfer of property to Parent by holders of Doubletree Common
Stock or Promus Common Stock, as applicable, described in Section 351 of the
Code.
Section 5.11 POOLING ACCOUNTING. From and after the date hereof and
until the Effective Time, neither Doubletree nor Promus, nor any of their
respective Subsidiaries or other Affiliates shall knowingly take any action,
or knowingly fail to take any action, that is reasonably likely to jeopardize
the treatment of the Mergers as a pooling of interests for accounting
purposes.
34
<PAGE>
Section 5.12 AFFILIATE AGREEMENTS. Upon the execution of this
Agreement, Doubletree and Promus will provide each other with a list of those
persons who are, in Doubletree's or Promus's respective reasonable judgment,
"affiliates" of Doubletree or Promus, respectively, within the meaning of
Rule 145 (each such person who is an "affiliate" of Doubletree or Promus
within the meaning of Rule 145 is referred to as an "Affiliate") promulgated
under the Securities Act ("Rule 145"). Doubletree and Promus shall provide
each other such information and documents as the other party shall reasonably
request for purposes of reviewing such list and shall notify the other party
in writing regarding any change in the identity of its Affiliates prior to
the Closing Date. Doubletree and Promus shall each use all reasonable
efforts to deliver or cause to be delivered to each other by October 15, 1997
(and in any case prior to the Effective Time) from each of its Affiliates, an
executed Affiliate Agreement, in substantially the form of Exhibit F (with
respect to affiliates of Doubletree) or Exhibit G (with respect to affiliates
of Promus) attached hereto (each, an "Affiliate Agreement," and together, the
"Affiliate Agreements").
Section 5.13 NYSE LISTING. Doubletree and Promus shall cause Parent to
promptly prepare and submit to the NYSE a listing application covering the
shares of Parent Common Stock to be issued in the Mergers and upon exercise
of Doubletree Stock Options, the GEPT Warrant and Promus Stock Options, and
shall use all reasonable efforts to cause such shares to be approved for
listing on the NYSE, prior to the Effective Time, subject to official notice
of issuance.
Section 5.14 STOCK PLANS.
(a) At the Effective Time, each outstanding option to purchase shares
of Doubletree Common Stock (an "Doubletree Stock Option") under the
Doubletree Stock Plans and each outstanding option to purchase shares of
Promus Common Stock (a "Promus Stock Option") under the Promus Stock Plans,
in each case whether vested or unvested, shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Doubletree Stock Option or Promus Stock Option, as the case may be, the
same number of shares of Parent Common Stock as the holder of such Doubletree
Stock Option or Promus Stock Option, as the case may be, would have been
entitled to receive pursuant to the Doubletree Merger or the Promus Merger,
respectively, had such holder exercised such option in full immediately prior
to the Effective Time (rounded downward to the nearest whole number), at a
price per share (rounded downward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of Doubletree Common Stock or Promus
Common Stock, as the case may be, purchasable pursuant to such Doubletree
Stock Option or such Promus Stock Option immediately prior to the Effective
Time divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Doubletree Stock Option or Promus Stock Option,
as the case may be, in accordance with the foregoing.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the participants in the Doubletree Stock Plans and the Promus
Stock Plans appropriate notice setting forth such participants' rights
pursuant thereto and the grants pursuant to Doubletree Stock Plans or Promus
Stock Plans, as the case may be, shall continue in effect on the same terms
and
35
<PAGE>
conditions (subject to the adjustments required by this Section 5.14 after
giving effect to the Mergers).
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
under Doubletree Stock Plans and Promus Stock Plans assumed in accordance
with this Section 5.14. As soon as practicable after the Effective Time,
Parent shall file a registration statement on Form S-8 (or any successor or
other appropriate forms), or another appropriate form with respect to the
shares of Parent Common Stock subject to such options and shall use its
reasonable efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
(d) The Board of Directors of each of Doubletree and Promus shall,
prior to or as of the Effective Time, take all necessary actions, pursuant to
and in accordance with the terms of the Doubletree Stock Plans and the
instruments evidencing the Doubletree Stock Options, or the Promus Stock
Plans and the instruments evidencing the Promus Stock Options, as the case
may be, to provide for the conversion of the Doubletree Stock Options and the
Promus Stock Options into options to acquire Parent Common Stock in
accordance with this Section 5.14 without obtaining consent of the holders of
the Doubletree Stock Options or Promus Stock Options in connection with such
conversion; provided, however, that Promus shall use all reasonable efforts
to obtain from each holder of Promus Stock Options a waiver of any right of
such holder to receive any cash payment which may become due with respect to
any Promus Stock Options that are exercisable immediately prior to the
Effective Time as a result of the consummation of the transactions
contemplated hereby.
(e) The Board of Directors of each of Doubletree and Promus shall,
prior to or as of the Effective Time, take appropriate action to approve the
deemed cancellation of the Doubletree Stock Options or Promus Stock Options,
as the case may be, for purposes of Section 16(b) of the Exchange Act. The
Board of Directors of Parent shall, prior to or as of the Effective Time,
take appropriate action to approve the deemed grant of options to purchase
Parent Common Stock under the Doubletree Stock Options and the Promus Stock
Options (as converted pursuant to this Section 5.14) for purposes of Section
16(b) of the Exchange Act.
Section 5.15 BROKERS OR FINDERS. Each of Doubletree and Promus
represents, as to itself, its Subsidiaries and its Affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement except Morgan Stanley & Co. Incorporated, whose fees and expenses
will be paid by Doubletree in accordance with Doubletree's agreement with
such firm (a copy of which has been delivered by Doubletree to Promus prior
to the date of this Agreement), and BT Wolfensohn, whose fees and expenses
will be paid by Promus in accordance with Promus's agreement with such firm
(a copy of which has been delivered by Promus prior to the date of this
Agreement). Each of Promus and Doubletree agrees to indemnify and hold the
other harmless from and against any and all claims, liabilities or
obligations with respect to any such fees, commissions or
36
<PAGE>
expenses asserted by any person on the basis of any act or statement alleged
to have been made by such party or any of its Affiliates.
Section 5.16 INDEMNIFICATION.
(a) From and after the Effective Time, Parent agrees that it will, and
will cause the Surviving Corporations to, indemnify and hold harmless each
present and former director and officer of Doubletree and Promus (the
"Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid
in settlement incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that Doubletree or Promus, as the case
may be, would have been permitted under Delaware law and its certificate of
incorporation or bylaws in effect on the date hereof to indemnify such
Indemnified Party (and Parent and the Surviving Corporation shall also
advance expenses as incurred to the fullest extent permitted under applicable
law, provided the Indemnified Party to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification).
(b) For a period of six years after the Effective Time, Parent shall
maintain or shall cause the Surviving Corporations to maintain (to the extent
available in the market) in effect a directors' and officers' liability
insurance policy covering those persons who are currently covered by
Doubletree's or Promus's directors' and officers' liability insurance policy
(copies of which have been heretofore delivered by Doubletree and Promus to
each other) with coverage in amount and scope at least as favorable as
Doubletree's or Promus's existing coverage; provided that in no event shall
Parent or the Surviving Corporations be required to expend in the aggregate
in excess of 200% of the annual premium currently paid by Doubletree and
Promus for such coverage; and if such premium would at any time exceed 200%
of the such amount, then the Parent or the Surviving Corporations shall
maintain insurance policies which provide the maximum and best coverage
available at an annual premium equal to 200% of such amount.
(c) The provisions of this Section 5.16 are intended to be an addition
to the rights otherwise available to the current officers and directors of
Doubletree and Promus by law, charter, statute, bylaw or agreement, and shall
operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
Section 5.17 LETTER OF PROMUS'S ACCOUNTANTS. Promus shall use all
reasonable efforts to cause to be delivered to Doubletree and Promus a letter
of Arthur Andersen LLP, Promus's independent auditors, dated a date within
two business days before the date on which the Registration Statement shall
become effective and addressed to Doubletree, in form reasonably satisfactory
to Doubletree and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
37
<PAGE>
Section 5.18 LETTER OF DOUBLETREE'S ACCOUNTANTS. Doubletree shall use
all reasonable efforts to cause to be delivered to Promus and Doubletree a
letter of KPMG Peat Marwick LLP, Doubletree's independent auditors, dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to Promus, in form reasonably
satisfactory to Promus and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
Section 5.19 STOCK OPTION AGREEMENTS. Promus and Doubletree each agree
to fully perform their respective obligations under the Stock Option
Agreements.
Section 5.20 POST-MERGER CORPORATE GOVERNANCE; EMPLOYMENT ARRANGEMENTS.
(a) At the Effective Time, the total number of persons serving on the
Board of Directors of Parent shall be fourteen (unless otherwise agreed in
writing by Doubletree and Promus prior to the Effective Time), half of whom
shall be Doubletree Directors and half of whom shall be Promus Directors (as
such terms are defined below), all of which Doubletree Directors and Promus
Directors shall be spread as evenly as possible among Parent's three classes
of Directors. The persons to serve initially on the Board of Directors of
Parent at the Effective Time who are Doubletree Directors shall be selected
solely by and at the absolute discretion of the Board of Directors of
Doubletree prior to the Effective Time; and the persons to serve initially on
the Board of Directors of Parent at the Effective Time who are Promus
Directors shall be selected solely by and at the absolute discretion of the
Board of Directors of Promus prior to the Effective Time. In the event that,
prior to the Effective Time, any person so selected to serve on the Board of
Directors of Parent after the Effective Time is unable or unwilling to serve
in such position, the Board of Directors which selected such person shall
designate another of its members to serve in such person's stead in
accordance with the provisions of the immediately preceding sentence. From
and after the Effective Time and until December 31, 2002, (a) the Board of
Directors of Parent and each Committee of the Board of Directors of Parent as
constituted following each election of Directors shall consist of an equal
number of Doubletree Directors and Promus Directors, and (b) the size of the
Board of Directors of Parent and each Committee of the Board of Directors of
Parent shall not be increased unless such increase is approved by 75% of the
members thereof. It is the intention of the parties hereto that Mr. Dale
Frey shall be designated as the initial Chairman of the Human Resources
Committee of Parent immediately following the Effective Time. If, at any
time during the period referenced in the second preceding sentence, the
number of Doubletree Directors and Promus Directors serving, or that would be
serving following the next stockholders' meeting at which Directors are to be
elected, as Directors of Parent or as members of any Committee of the Board
of Directors of Parent, would not be equal, then, subject to the fiduciary
duties of the Directors of Parent, the Board of Directors and the Nominating
Committee thereof shall nominate for election at the next stockholders'
meeting at which Directors are to be elected, such person or persons as may
be requested by the remaining Doubletree Directors (if the number of
Doubletree Directors is, or would otherwise become, less than the number of
Promus Directors) or by the remaining Promus Directors (if the number of
Promus Directors is, or would otherwise become, less than the number of
Doubletree Directors) to ensure that there shall be an equal number of
Doubletree Directors and Promus Directors. The provisions of the preceding
sentence shall not apply in
38
<PAGE>
respect of any stockholders' meeting which takes place after December 31,
2002. The term "Doubletree Director" means (i) any person serving as a
Director of Doubletree or any of its Subsidiaries on the date hereof who
becomes a Director of Parent at the Effective Time and (ii) any person who
becomes a Director of Parent pursuant to the second preceding sentence and
who is designated by the Doubletree Directors; and the term "Promus Director"
means (i) any person serving as a Director of Promus or any of its
Subsidiaries on the date hereof who becomes a Director of Parent at the
Effective Time and (ii) any person who becomes a Director of Parent pursuant
to the second preceding sentence and who is designated by the Promus
Directors.
(b) At the Effective Time, pursuant to the terms of the employment
contracts referred to in Section 5.20(c) hereof, (i) Raymond E. Schultz, the
current Chief Executive Officer of Promus, shall hold the position of Chief
Executive Officer and Chairman of the Board of Parent, (ii) Richard M.
Kelleher, the current President and Chief Executive Officer of Doubletree,
shall hold the position of President and Chief Operating Officer of Parent,
(iii) William L. Perocchi, the current Executive Vice President and Chief
Financial Officer of Doubletree, shall hold the position of Executive Vice
President and Chief Financial Officer of Parent and (iv) Thomas L. Keltner,
the current Executive Vice President, Development of Promus, shall hold the
position of Executive Vice President, Development of Parent. Mr. Schultz
will continue as Chairman of the Board and Chief Executive Officer of Parent
until his retirement no later than December 31, 1999, and, pursuant to the
terms of the employment contracts referred to in Section 5.20(c) hereof and
subject to the Bylaws of Parent, Mr. Kelleher will succeed Mr. Schultz as
Chairman of the Board and Chief Executive Officer of Parent. If any of the
persons identified above in this Section 5.20(b) is unable or unwilling to
hold such offices as set forth above, his successor shall be selected by the
Board of Directors of Parent in accordance with the Bylaws of Parent. The
authority, duties and responsibilities of the Chairman and Chief Executive
Officer, the President and Chief Operating Officer, the Executive Vice
President and Chief Financial Officer and the Executive Vice President,
Development shall be set forth in the employment contracts entered into
pursuant to Section 5.20(c) hereof, which employment contracts shall also set
forth in their entirety the rights and remedies of Messrs. Schultz, Kelleher,
Perocchi and Keltner with respect to employment by Parent , and none of them
shall have any right, remedy or cause of action under this Section 5.20, nor
shall they be third party beneficiaries of this Section 5.20.
(c) Prior to the Closing, Parent shall offer to enter into employment
agreements with Raymond E. Schultz, Richard M. Kelleher, William L. Perocchi
and Thomas L. Keltner on substantially the terms previously agreed to by
Doubletree and Promus.
(d) At the Effective Time, Parent shall have an Executive Committee
which initially will be comprised of the following four members of the Board
of Directors of Parent: Richard J. Ferris, Michael D. Rose, Raymond E.
Schultz and Peter V. Ueberroth. In addition, Richard M. Kelleher shall be an
ex-officio member of the Executive Committee with the right to attend but not
vote at all meetings of the Executive Committee. The Executive Committee
shall have responsibility for developing Parent's long-term strategic plans,
making significant capital allocation decisions and such other duties and
responsibilities as specified by the Board of Directors of Parent at or after
the Effective Time. The Executive Committee also shall be required to
oversee the implementation of Promus's existing 100% guest satisfaction
guarantee
39
<PAGE>
program at all of Promus's and Doubletree's hotel properties following the
Effective Time. Each member of the Executive Committee that is not an
employee of Parent will be entitled to receive $300,000 per year as
compensation for serving on the Executive Committee.
(e) Each of Doubletree and Promus shall cause Parent to incorporate the
provisions contained in this Section 5.20 into the Bylaws of Parent in effect
at the Effective Time, which provisions shall thereafter be amended only with
the approval of 75% of the members of the Board of Directors of Parent.
Section 5.21 NAME OF PARENT. At the Effective Time, Parent shall
change its corporate name to Promus Hotel Corporation.
Section 5.22 PARENT STOCKHOLDER RIGHTS PLAN. Prior to the Effective
Time, Doubletree and Promus shall cause Parent to adopt a Stockholder Rights
Plan (the "Parent Rights Plan") that is substantially similar to the Promus
Rights Plan, with such modifications as are acceptable to both Doubletree and
Promus.
Section 5.23 GEPT WARRANT; DOUBLETREE REGISTRATION RIGHTS AGREEMENT.
(a) At the Effective Time, Parent shall assume all obligations under
the GEPT Warrant, and the holder of the GEPT Warrant thereafter shall have
the right to acquire, on the same pricing and payment terms and conditions as
are currently applicable under the GEPT Warrant, the same number of shares of
Parent Common Stock as the holder of the GEPT Warrant would have been
entitled to receive pursuant to the Doubletree Merger had such holder
exercised the GEPT Warrant in full immediately prior to the Effective Time
(rounded downward to the nearest whole number), at the price per share
(rounded downward to the nearest whole cent) equal to (y) the aggregate
exercise price for the shares of Doubletree Common Stock purchasable pursuant
to the GEPT Warrant immediately prior to the Effective Time divided by (z)
the number of full shares of Parent Common Stock deemed purchasable pursuant
to the GEPT Warrant in accordance with the foregoing.
(b) At the Effective Time, Doubletree and Promus shall cause Parent to
enter into a Registration Rights Agreement (the "Parent Registration Rights
Agreement") substantially similar to the Incorporation and Registration
Rights Agreement dated as of December 16, 1993, as amended on June 30, 1994,
February 27, 1996 and November 8, 1996 by and among Doubletree and certain
stockholders of Doubletree (the "Doubletree Registration Rights Agreement")
pursuant to which Parent will provide registration rights to parties to the
Doubletree Registration Rights Agreement (other than Doubletree) with respect
to all shares of Parent Common Stock issued in the Doubletree Merger on
account of the shares of Doubletree Common Stock covered by the Doubletree
Registration Rights Agreement.
Section 5.24 CONVEYANCE TAXES. Doubletree and Promus shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees or any similar taxes which
40
<PAGE>
become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the
Effective Time.
Section 5.25 TRANSFER TAXES. Doubletree shall pay, and Promus shall
pay, on behalf of the stockholders of Doubletree and Promus, respectively,
any New York State Real Estate Transfer Tax, New York City Real Property
Transfer Tax, New York State Stock Transfer Tax and any similar taxes imposed
on the stockholders of Doubletree and Promus, respectively, by any other
State of the United States (and any interest with respect to such taxes) (the
"Transfer Taxes"), which become payable in connection with the transactions
contemplated by this Agreement. Doubletree and Promus shall cooperate in the
preparation, execution and filing of any required returns with respect to
such Transfer Taxes (including returns on behalf of the stockholders of
Doubletree and Promus) and in the determination of the portion of the
consideration allocable to the real property of Doubletree and the Doubletree
Subsidiaries and Promus and the Promus Subsidiaries in New York State and
City (or in any other jurisdiction, if applicable). The Joint Proxy
Statement/Prospectus shall provide that the stockholders of Doubletree and
Promus shall be deemed to have (i) authorized Doubletree and Promus,
respectively, to prepare, execute and file any tax returns relating to
Transfer Taxes and pay any Transfer Taxes arising in connection with the
Mergers, in each case, on behalf of such holders and (ii) agreed to be bound
by the values and allocations established by Doubletree and Promus in the
preparation of any return with respect to the Transfer Taxes, if applicable.
Section 5.26 STOCKHOLDER LITIGATION. Each of Doubletree and Promus
shall give the other the reasonable opportunity to participate in the defense
of any stockholder litigation against Doubletree or Promus, as applicable,
and its directors relating to the transactions contemplated hereby.
Section 5.27 EMPLOYEE BENEFITS; SEVERANCE.
(a) Parent shall cause to continue to be maintained the Doubletree and
Promus annual bonus plans for management employees for the 1997 fiscal year
and shall calculate the amounts payable to participants thereunder on a basis
consistent with the terms of each such plan and the past practice of
Doubletree or Promus, as applicable.
(b) For purposes of determining eligibility to participate, vesting,
entitlement to benefits and in all other respects where length of service is
relevant (except for pension benefit accruals) under any employee benefit
plan or arrangement covering employees of Doubletree and its Subsidiaries
("Doubletree Employees") employees of Promus and its Subsidiaries ("Promus
Employees") following the Effective Time, Parent shall cause such plans or
arrangements to recognize service credit for service with Doubletree or
Promus (as applicable) and any of their respective Subsidiaries to the same
extent such service was recognized under the applicable employee benefit
plans immediately prior to the Effective Time.
(c) At the Effective Time, Parent shall assume and honor in accordance
with their terms the severance agreements and severance pay policies
identified in Section 5.27 of the Doubletree Disclosure Schedule and Section
5.27 of the Promus Disclosure Schedule.
41
<PAGE>
(d) Promus and Doubletree agree that each may enter into retention and
transition bonus arrangements with its employees prior to the Effective Time,
with the terms and amounts of such payments to be determined jointly by the
Chief Executive Officers of Promus and Doubletree; provided, however, that in
no event shall the aggregate of all such payments exceed approximately $2.5
million.
(e) Promus agrees to use all reasonable efforts, including obtaining
any necessary employee consents, to prevent the automatic funding of any
escrow, trust or similar arrangement pursuant to any employment agreement,
arrangement or benefit plan that arises in connection with the execution of
this Agreement or the consummation of any of the transactions contemplated
hereby.
ARTICLE VI.
CONDITIONS TO MERGER
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS. The respective obligations of each party to this Agreement to effect
the Mergers shall be subject to the satisfaction or waiver by each party
prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement, the Doubletree Merger and
the Promus Merger shall have been approved in the manner required under the
DGCL by the respective holders of the issued and outstanding shares of
capital stock of Doubletree and Promus.
(b) HSR ACT. The waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated.
(c) APPROVALS. Other than the filing provided for by Section 1.4, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity
the failure of which to file, obtain or occur is reasonably likely to have a
Doubletree Material Adverse Effect or a Promus Material Adverse Effect shall
have been filed, been obtained or occurred.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(e) NO INJUNCTIONS. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any order, executive order, stay,
decree, judgment or injunction or statute, rule, regulation which is in
effect and which has the effect of making the Mergers illegal or otherwise
prohibiting consummation of the Mergers.
(f) POOLING LETTERS. Doubletree and Promus shall have received
letters from KPMG Peat Marwick LLP and Arthur Andersen LLP, respectively,
addressed to Doubletree and Promus, respectively, regarding their concurrence
with the respective conclusions of
42
<PAGE>
management of Doubletree and Promus, as to the appropriateness of the pooling
of interests accounting, under Accounting Principles Board Opinion No. 16 for
the transactions contemplated hereby, it being agreed that Doubletree and
Promus shall each provide reasonable cooperation to KPMG Peat Marwick LLP and
Arthur Andersen LLP to enable them to issue such letters.
(g) NYSE LISTING. The shares of Parent Common Stock to be issued in
the Merger and upon exercise of Doubletree Options, the GEPT Warrant and
Promus Options shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(h) CORPORATE GOVERNANCE. Doubletree and Promus shall have taken all
actions necessary so that (i) not later than the Effective Time, the
Certificate of Incorporation and Bylaws of Parent shall have been amended to
be substantially in the form of Exhibit D and Exhibit E hereto; (ii) at the
Effective Time, the composition of the Board of Directors of Parent and of
each Committee of the Board of Directors of Parent shall comply with Section
5.20 hereof (assuming Doubletree has designated the Doubletree Directors and
Promus has designated the Promus Directors, in each case as contemplated by
Section 5.20(a) hereof); and (iii) not later than the Effective Time, Parent
shall have adopted the Parent Rights Plan.
Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF DOUBLETREE.
The obligation of Doubletree to effect the Doubletree Merger is subject to
the satisfaction of each of the following conditions prior to the Effective
Time, any of which may be waived in writing exclusively by Doubletree:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Promus set forth in this Agreement shall be true and correct as
of the date of this Agreement and (except to the extent such representations
speak as of an earlier date) as of the Closing Date as though made on and as
of the Closing Date, except for, (i) changes contemplated by this Agreement
and (ii) inaccuracies which, individually or in the aggregate, have not had
and are not reasonably likely to have a Promus Material Adverse Effect or a
material adverse effect upon the consummation of the transactions
contemplated hereby; and Doubletree shall have received a certificate signed
on behalf of Promus by the chief executive officer and the chief financial
officer of Promus to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PROMUS. Promus shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Doubletree shall have
received a certificate signed on behalf of Promus by the chief executive
officer and the chief financial officer of Promus to such effect.
(c) TAX OPINION. Doubletree shall have received the opinion of Dewey
Ballantine, counsel to Doubletree, based upon reasonably requested
representation letters and dated the Closing Date, to the effect that the
Doubletree Merger will be treated as a reorganization described in Section
368(a) of the Code and/or, taken together with the Promus Merger, as a
transfer of property to Parent by holders of Doubletree Common Stock
described in Section 351 of the Code.
43
<PAGE>
(d) NO TRIGGER OF PROMUS RIGHTS PLAN. No event shall have occurred
that has or would result in the triggering of any right or entitlement of
stockholders of Promus under the Promus Rights Plan, or will occur as a
result of the consummation of the Mergers.
Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PROMUS. The
obligations of Promus to effect the Promus Merger are subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by Promus:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Doubletree set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except for, (i) changes
contemplated by this Agreement and (ii) inaccuracies which, individually or
in the aggregate, have not had and are not reasonably likely to have a
Doubletree Material Adverse Effect, or a material adverse effect upon the
consummation of the transactions contemplated hereby; and Promus shall have
received a certificate signed on behalf of Doubletree by the chief executive
officer and the chief financial officer of Doubletree to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF DOUBLETREE. Doubletree shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date; and Promus shall
have received a certificate signed on behalf of Doubletree by the chief
executive officer and the chief financial officer of Doubletree to such
effect.
(c) TAX OPINION. Promus shall have received the opinion of Latham &
Watkins, counsel to Promus, based upon reasonably requested representation
letters and dated the Closing Date, to the effect that the Promus Merger will
be treated as a reorganization described in Section 368(a) of the Code
and/or, taken together with the Doubletree Merger, as a transfer of property
to Parent by holders of Promus Common Stock described in Section 351 of the
Code.
(d) NO TRIGGER OF DOUBLETREE RIGHTS PLAN. No event shall have
occurred that has or would result in the triggering of any right or
entitlement of stockholders of Doubletree under the Doubletree Rights Plan,
or will occur as a result of the consummation of the Mergers.
ARTICLE VII.
TERMINATION AND AMENDMENT
Section 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(h),
by written notice by the terminating party to the other party), whether
before or after approval of the matters presented in connection with the
Mergers by the stockholders of Doubletree or Promus:
(a) by mutual written consent of Doubletree and Promus; or
44
<PAGE>
(b) by either Doubletree or Promus if the Mergers shall not have been
consummated by January 31, 1998 (provided that (i) either Doubletree or
Promus may extend such date to March 31, 1998 by providing written notice
thereof to the other party on or prior to January 31, 1998 (January 31, 1998,
as it may be so extended, shall be referred to herein as the "Outside Date")
and (ii) 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 the
Mergers to occur on or before such date); or
(c) by either Doubletree or Promus if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Mergers; or
(d) (i) by Doubletree or Promus, if, at the Promus Stockholders'
Meeting (including any adjournment or postponement), the requisite vote of
the stockholders of Promus in favor of the approval and adoption of this
Agreement and the Promus Merger shall not have been obtained; or (ii) by
Promus or Doubletree if, at the Doubletree Stockholders' Meeting (including
any adjournment or postponement), the requisite vote of the stockholders of
Doubletree in favor of the approval and adoption of this Agreement and the
Doubletree Merger shall not have been obtained; or
(e) by Doubletree, if (i) the Board of Directors of Promus shall have
withdrawn or modified its recommendation of this Agreement or the Promus
Merger (provided that Doubletree's right to terminate this Agreement under
such clause (i) shall not be available if at such time Promus would be
entitled to terminate this Agreement under Section 7.1(h) without giving
effect to the cure period); (ii) after the receipt by Promus of an
Acquisition Proposal, Doubletree requests in writing that the Board of
Directors of Promus reconfirm its recommendation of this Agreement and the
Promus Merger to the stockholders of Promus and the Board of Directors of
Promus fails to do so within 10 business days after its receipt of
Doubletree's request; (iii) the Board of Directors of Promus shall have
recommended to the stockholders of Promus an Alternative Transaction (as
defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or
more of the outstanding shares of Promus Common Stock is commenced (other
than by Doubletree or an Affiliate of Doubletree) and the Board of Directors
of Promus recommends that the stockholders of Promus tender their shares in
such tender or exchange offer; or (v) for any reason Promus fails to call and
hold the Promus Stockholders' Meeting by the Outside Date (provided that
Doubletree's right to terminate this Agreement under such clause (v) shall
not be available if at such time Promus would be entitled to terminate this
Agreement under Section 7.1(h) without giving effect to the cure period); or
(f) by Promus, if (i) the Board of Directors of Doubletree shall have
withdrawn or modified its recommendation of this Agreement or the Doubletree
Merger (provided that Promus's right to terminate this Agreement under such
clause (i) shall not be available if at such time Doubletree would be
entitled to terminate this Agreement under Section 7.1(h) without giving
effect to the cure period); (ii) after the receipt by Doubletree of an
Acquisition Proposal, Promus requests in writing that the Board of Directors
of Doubletree reconfirm its recommendation of this Agreement and the
Doubletree Merger to the stockholders of Promus
45
<PAGE>
and the Board of Directors of Doubletree fails to do so within 10 business
days after its receipt of Promus's request; (iii) the Board of Directors of
Doubletree shall have recommended to the stockholders of Doubletree an
Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender offer
or exchange offer for 20% or more of the outstanding shares of Doubletree
Common Stock is commenced (other than by Promus or an Affiliate of Promus)
and the Board of Directors of Doubletree recommends that the stockholders of
Doubletree tender their shares in such tender or exchange offer; or (v) for
any reason Doubletree fails to call and hold the Doubletree Stockholders'
Meeting by the Outside Date (provided that Promus's right to terminate this
Agreement under such clause (v) shall not be available if at such time
Doubletree would be entitled to terminate this Agreement under Section 7.1(h)
without giving effect to the cure period); or
(g) by Doubletree or Promus, prior to the approval of this Agreement
by the stockholders of such party, if, as a result of a Superior Proposal
received by such party from a Third Party, the Board of Directors of such
party determines in good faith after consultation with outside legal counsel
that accepting such Superior Proposal is required for such Board of Directors
to comply with its fiduciary duties to stockholders under applicable law;
provided, however, that no termination shall be effective pursuant to this
Section 7.1(g) under circumstances in which a termination fee is payable by
the terminating party pursuant to Section 7.3(b)(iii) or (c)(iii), unless
concurrently with such termination, such termination fee is paid in full by
the terminating party in accordance with Section 7.3(b)(iii) or (c)(iii), as
applicable; or
(h) by Doubletree or Promus, if (A) there has been a breach of any
representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) will cause the conditions
set forth in Section 6.2(a) or (b) (in the case of termination by Doubletree)
or 6.3(a) or (b) (in the case of termination by Promus) not to be satisfied,
and (ii) shall not have been cured within 20 business days following receipt
by the breaching party of written notice of such breach from the other party;
or (B) any event shall have occurred which makes it impossible for the
conditions set forth in Article VI hereof (other than Section 6.1(a), 6.1(e),
6.2(d) and 6.3(d)) to be satisfied, provided that any termination pursuant to
this clause (B) shall not be effective until 20 business days after notice
thereof is delivered by the party seeking to terminate to the other party,
and shall be automatically rescinded if (1) such condition is solely for the
benefit of the party receiving such notice and (2) such party, prior to such
20th business day, irrevocably waives satisfaction of such condition based on
such event.
Section 7.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Doubletree,
Promus, Parent or their respective officers, directors, stockholders or
Affiliates, except as set forth in Sections 5.15 and 7.3 and except that such
termination shall not limit liability for a willful breach of this Agreement;
provided that, the provisions of Sections 5.15 and 7.3 of this Agreement, the
Stock Option Agreements and the Confidentiality Agreements shall remain in
full force and effect and survive any termination of this Agreement.
46
<PAGE>
Section 7.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Mergers are consummated.
(b) Doubletree shall pay Promus a termination fee of $45 million upon
the earliest to occur of the following events:
(i) the termination of this Agreement by either Promus or
Doubletree pursuant to Section 7.1(d)(ii), if a proposal for an Alternative
Transaction (as defined below) involving Doubletree shall have been publicly
announced prior to the Doubletree Stockholders' Meeting and either a definitive
agreement for an Alternative Transaction is entered into, or an Alternative
Transaction is consummated, within eighteen months of such termination;
(ii) the termination of this Agreement by Promus pursuant to
Section 7.1(f); or
(iii) the termination of this Agreement by Doubletree
pursuant to Section 7.1(g).
Doubletree's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of Promus against Doubletree and any of
its Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment; provided that this limitation shall not apply in the event of a
willful breach of this Agreement by Doubletree. Notwithstanding the foregoing,
if and to the extent that Promus has purchased shares of Doubletree Common Stock
pursuant to the Promus Stock Option Agreement prior to the payment of the $45
million fee provided for herein (the "Fee Payment Date"), the amount payable to
Promus under this Section 7.3(b), together with (i)(x) the net cash amount
received by Promus prior to the Fee Payment Date pursuant to Doubletree's
repurchase of Shares (as defined in the Promus Stock Option Agreement) pursuant
to Section 7 of the Promus Stock Option Agreement, less (y) Promus's purchase
price for such Shares, and (ii)(x) the amounts received by Promus prior to the
Fee Payment Date pursuant to the sale of Shares (or any other securities into
which such Shares are converted or exchanged), less (y) Promus's purchase price
for such Shares, shall not exceed $65 million.
(c) Promus shall pay Doubletree a termination fee of $45 million upon
the earliest to occur of the following events:
(i) the termination of this Agreement by either Doubletree
or Promus pursuant to Section 7.1(d)(i), if a proposal for an Alternative
Transaction (as defined below) involving Promus shall have been publicly
announced prior to the Promus Stockholders' Meeting and either an Alternative
Transaction is entered into, or an Alternative Transaction is consummated,
within eighteen months of such termination;
(ii) the termination of this Agreement by Doubletree
pursuant to Section 7.1(e); or
47
<PAGE>
(iii) the termination of this Agreement by Promus pursuant to
Section 7.1 (g).
Promus's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of Doubletree against Promus and any of
its Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment; provided that this limitation shall not apply in the event of a
willful breach of this Agreement by Promus. Notwithstanding the foregoing, if
and to the extent that Doubletree has purchased shares of Promus Common Stock
pursuant to the Doubletree Stock Option Agreement prior to the Fee Payment Date,
the amount payable to Doubletree under this Section 7.3(c), together with (i)(x)
the net cash amount received by Doubletree prior to the Fee Payment Date
pursuant to Promus's repurchase of Shares (as defined in the Doubletree Stock
Option Agreement) pursuant to Section 7 of the Doubletree Stock Option
Agreement, less (y) Doubletree's purchase price for such Shares, and (ii)(x) the
amounts received by Doubletree prior to the Fee Payment Date pursuant to the
sale of Shares (or any other securities into which such Shares are converted or
exchanged), less (y) Doubletree's purchase price for such Shares, shall not
exceed $65 million.
(d) The fees payable pursuant to Section 7.3(b) or 7.3(c) shall be paid
concurrently with the first to occur of the events described in Section
7.3(b)(i), (ii) or (iii) or 7.3(c)(i), (ii) or (iii), respectively.
(e) As used in this Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any Third Party acquires more than 20% of
the outstanding shares of Doubletree Common Stock or Promus Common Stock, as the
case may be, pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger or other business combination involving Doubletree or Promus pursuant to
which any Third Party (or the stockholders of a Third Party) acquires more than
20% of the outstanding shares of Doubletree Common Stock or Promus Common Stock,
as the case may be, or the entity surviving such merger or business combination,
(iii) any other transaction pursuant to which any Third Party acquires control
of assets (including for this purpose the outstanding equity securities of
Subsidiaries of Doubletree or Promus, and the entity surviving any merger or
business combination including any of them) of Doubletree or Promus having a
fair market value (as determined by the Board of Directors of Doubletree or
Promus, as the case may be, in good faith) equal to more than 20% of the fair
market value of all the assets of Doubletree or Promus, as the case may be, and
their respective Subsidiaries, taken as a whole, immediately prior to such
transaction, or (iv) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
Section 7.4 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Mergers by the stockholders of Doubletree or Promus, but,
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto; provided, however, that this Agreement
may be amended in writing without obtaining the
48
<PAGE>
signatures of Doubletree, Promus or Parent solely for the purpose of adding
Doubletree Sub and Merger Sub as parties to this Agreement.
Section 7.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained here. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Sections 1.6, 2.1, 2.2, 2.4, 5.16,
5.19, 5.20 and 5.27 and Article VIII, and the agreements of the Affiliates
delivered pursuant to Section 5.12. The Confidentiality Agreements shall
survive the execution and delivery of this Agreement.
Section 8.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Doubletree, to
Doubletree Corporation
410 North 44th Street, Suite 700
Phoenix, AZ 85008
Attn: Richard M. Kelleher
Telecopy: (602) 220-6753
with a copy to
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019-6092
Attn: William J. Phillips, Esq.
Telecopy: (212) 295-6333
49
<PAGE>
(b) if to Promus, to
Promus Hotel Corporation
755 Crossover Lane
Memphis, TN 38117
Attn: Raymond E. Schultz
Telecopy: (901) 374-5636
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Attn: John M. Newell, Esq.
Telecopy: (213) 891-8763
Section 8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
September 1, 1997.
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; NO THIRD PARTY BENEFICIARIES. This
Agreement and all documents and instruments referred to herein (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.16 are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality Agreements shall remain in full force and
effect until the Effective Time. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, neither Doubletree
nor Promus makes any other representations or warranties, and each hereby
disclaims any other representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement or
the transactions contemplated hereby, notwithstanding the delivery or disclosure
to the other or the other's representatives of any documentation or other
information with respect to any one or more of the foregoing.
50
<PAGE>
Section 8.6 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
Section 8.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
51
<PAGE>
Signature Page for Agreement and Plan of Merger
IN WITNESS WHEREOF, Doubletree, Promus and Parent have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
DOUBLETREE CORPORATION
/s/ Richard M. Kelleher
-----------------------------------
By: Richard M. Kelleher
Its: President and Chief Executive
officer
PROMUS HOTEL CORPORATION
/s/ Raymond E. Schultz
-----------------------------------
By: Raymond E. Schultz
Its: President and Chief Executive Officer
PARENT HOLDING CORP.
/s/ Raymond E. Schultz
-----------------------------------
By: Raymond E. Schultz
Its: Chief Executive Officer and
Chairman of the Board
S-1
<PAGE>
STOCK OPTION AGREEMENT (DOUBLETREE)
STOCK OPTION AGREEMENT, dated as of September 1, 1997 (the
"Agreement"), between DOUBLETREE CORPORATION., a Delaware corporation (the
"Grantee"), and PROMUS HOTEL CORPORATION, a Delaware corporation (the
"Grantor").
WHEREAS, the Grantee, Parent Holding Corp., a Delaware corporation
("Parent"), and the Grantor are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, for the merger (the "Doubletree Merger") of a subsidiary
of Parent with and into the Grantee and the merger (the "Promus Merger") of
another subsidiary of Parent with and into the Grantor, such that the Grantee
and the Grantor will become wholly-owned subsidiaries of Parent and the
stockholders of the Grantee and the Grantor will become stockholders of
Parent (the Doubletree Merger and the Promus Merger collectively, the
"Mergers");
WHEREAS, pursuant to a Stock Option Agreement dated as of the date
hereof between the Grantee and the Grantor, the Grantee has granted the
Grantor an option to acquire shares of common stock of the Grantee on terms
that are substantially similar to the terms of this Agreement (the "Promus
Option");
WHEREAS, as a condition and inducement to their willingness to enter
into the Merger Agreement and the Promus Option, the Grantee and Parent have
requested that the Grantor grant to the Grantee an option to purchase
9,929,485 shares of Common Stock, par value $0.10 per share, of the Grantor
(the "Common Stock"), upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger
Agreement and grant the Promus Option, the Grantor is willing to grant the
Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS; PAYMENT OF SPREAD.
(a) Contemporaneously herewith the Grantee, Parent and the
Grantor are entering into the Merger Agreement. Subject to the other terms
and conditions set forth herein, the Grantor hereby grants to the Grantee an
irrevocable option (the "Option") to purchase up to 9,929,485 (as adjusted as
provided herein) shares of Common Stock (together with the associated
purchase rights issued with respect thereto pursuant to the Rights Agreement
dated as of June 30, 1995 between the Grantor and Continental Stock Transfer &
Trust Company (the "Grantor Rights Plan")) (the "Shares") at a per share
cash purchase price equal to the lower of (i) $38.8125 per Share or (ii) the
average closing sales price of the Common Stock on the New York Stock
Exchange Composite Tape (the "NYSE Composite Tape") for the five consecutive
trading days beginning on and including the day that the Mergers are publicly
announced (as adjusted as provided herein) (such lower price being the
"Purchase Price"). The Option may be exercised by the Grantee, in whole or
in part, at any time, or from time to time, following the occurrence of
<PAGE>
one of the events set forth in Section 2(c) hereof and prior to the
termination of the Option in accordance with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Stock Exercise
Notice") specifying a date (subject to the HSR Act (as defined below)) not
later than 10 business days and not earlier than the next business day
following the date such notice is given for the closing of such purchase. In
the event of any change in the number of issued and outstanding shares of
Common Stock by reason of any stock dividend, stock split, split-up,
reclassification, recapitalization, merger or other change in the corporate
or capital structure of the Grantor (including the occurrence of a
Distribution Date under the Grantor Rights Plan), the number of Shares
subject to this Option and the purchase price per Share shall be
appropriately adjusted to restore the Grantee to its rights hereunder,
including its right to purchase Shares representing 19.9% of the capital
stock of the Grantor entitled to vote generally for the election of the
directors of the Grantor which is issued and outstanding immediately prior to
the exercise of the Option at an aggregate purchase price equal to the
Purchase Price multiplied by 9,929,485. In the event that any additional
shares of Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the preceding sentence), the number of
Shares subject to this Option shall be increased by 19.9% of the number of
the additional shares of Common Stock so issued (and such additional Shares
shall have a purchase price per share equal to the Purchase Price).
(c) If at any time the Option is then exercisable pursuant to
the terms of Section 1(a) hereof, the Grantee may elect, in lieu of
exercising the Option to purchase Shares provided in Section 1(a) hereof, to
send a written notice to the Grantor (the "Cash Exercise Notice") specifying
a date not later than 20 business days and not earlier than 10 business days
following the date such notice is given on which date the Grantor shall pay
to the Grantee an amount in cash equal to the Spread (as hereinafter defined)
multiplied by all or such portion of the Shares subject to the Option as
Grantee shall specify. As used herein "Spread" shall mean the excess, if
any, over the Purchase Price of the higher of (x) if applicable, the highest
price per share of Common Stock (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by any person in an
Alternative Transaction (as defined in clause (i), (ii) or (iii) of
Section 7.3(e) of the Merger Agreement) (the "Alternative Purchase Price") or
(y) the closing sales price of the shares of Common Stock on the NYSE
Composite Tape on the last trading day immediately prior to the date of the
Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase
Price includes any property other than cash, the Alternative Purchase Price
shall be the sum of (i) the fixed cash amount, if any, included in the
Alternative Purchase Price plus (ii) the fair market value of such other
property. If such other property consists of securities with an existing
public trading market, the average of the closing sales prices (or the
average of the closing bid and asked prices if closing sales prices are
unavailable) for such securities in their principal public trading market on
the five trading days ending five days prior to the date of the Cash Exercise
Notice shall be deemed to equal the fair market value of such property. If
such other property consists of something other than cash or securities with
an existing public trading market and, as of the payment date for the Spread,
agreement on the value of such other property has not been reached, the
Alternative Purchase Price shall be deemed to equal the Closing Price. Upon
exercise of the Grantee's right to receive cash pursuant to this
2
<PAGE>
Section 1(c) and the payment of such cash to the Grantee, the obligations of
the Grantor to deliver Shares pursuant to Section 3 shall be terminated with
respect to such number of Shares for which the Grantee shall have elected to
be paid the Spread.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to
deliver Shares upon exercise of the Option is subject only to the conditions
that:
(a) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the United
States prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been
terminated and all other consents, approvals, orders, notifications or
authorizations, the failure of which to obtain or make would have the effect
of making the issuance of the Shares illegal (collectively, the "Regulatory
Approvals") shall have been obtained or made; and
(c) (i) a proposal for an Alternative Transaction (as defined
in the Merger Agreement) involving the Grantor shall have been publicly
announced prior to the time the Merger Agreement is terminated pursuant to
the terms thereof (the "Merger Termination Date") and one or more of the
following events shall have occurred on or after the time of the making of
such proposal: (A) the requisite vote of the stockholders of the Grantor in
favor of adoption and approval of the Merger Agreement shall not have been
obtained at the Promus Stockholders' Meeting (as defined in the Merger
Agreement) or any adjournment or postponement thereof; (B) the Board of
Directors of the Grantor shall have withdrawn or modified its recommendation
of the Merger Agreement or the Promus Merger or failed to confirm its
recommendation of the Merger Agreement or the Promus Merger to the
stockholders of the Grantor within ten business days after a written request
by the Grantee to do so; (C) the Board of Directors of the Grantor shall have
recommended to the stockholders of the Grantor an Alternative Transaction (as
defined in the Merger Agreement); (D) a tender offer or exchange offer for
20% or more of the outstanding shares of Grantor Common Stock shall have been
commenced (other than by the Grantee or an affiliate of the Grantee) and the
Board of Directors of the Grantor shall have recommended that the
stockholders of the Grantor tender their shares in such tender or exchange
offer; or (E) for any reason Grantor shall have failed to call and hold the
Promus Stockholders' Meeting (as defined in the Merger Agreement) by the
Outside Date (as defined in the Merger Agreement; provided, however, that the
Option may not be exercised if the Grantee is in material breach of any of
its material representations, warranties, covenants or agreements contained
in this Agreement or in the Merger Agreement; or (ii) the Merger Agreement
shall have been terminated by the Grantor pursuant to Section 7.1(g) of the
Merger Agreement.
3. THE CLOSING.
(a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice or Cash Exercise
Notice, as the case may be, at 8:00 A.M., local time, at the offices of
Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles,
3
<PAGE>
CA 90071, or, if the conditions set forth in Section 2(a) or 2(b) have not
then been satisfied, on the second business day following the satisfaction of
such conditions, or at such other time and place as the parties hereto may
agree (the "Closing Date"). On the Closing Date, (i) in the event of a
closing pursuant to Section 1(b) hereof, the Grantor will deliver to the
Grantee a certificate or certificates, duly endorsed (or accompanied by duly
executed stock powers), representing the Shares in the denominations
designated by the Grantee in its Stock Exercise Notice and the Grantee will
purchase such Shares from the Grantor at the price per Share equal to the
Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
hereof, the Grantor will deliver to the Grantee cash in an amount determined
pursuant to Section 1(c) hereof. Any payment made by the Grantee to the
Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall
be made by certified or official bank check or by wire transfer of federal
funds to a bank designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act").
4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor
represents and warrants to the Grantee that (a) the Grantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
enter into and perform this Agreement; (b) the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
the Grantor and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantor and constitutes a valid and binding
obligation of the Grantor, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles; (c) the Grantor has taken all
necessary corporate action to authorize and reserve the Shares issuable upon
exercise of the Option and the Shares, when issued and delivered by the
Grantor upon exercise of the Option, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights; (d) except as
otherwise required by the HSR Act and other than any filings required under
the blue sky laws of any states or by the New York Stock Exchange, Inc. (the
"NYSE"), the execution and delivery of this Agreement by the Grantor and the
issuance of Shares upon exercise of the Option do not require the consent,
waiver, approval or authorization of or any filing with any person or public
authority and will not violate, result in a breach of or the acceleration of
any obligation under, or constitute a default under, any provision of any
charter or by-law, indenture, mortgage, lien, lease, agreement, contract,
instrument, order, law, rule, regulation, judgment, ordinance, or decree, or
restriction by which the Grantor or any of its subsidiaries or any of their
respective properties or assets is bound; (e) no "fair price", "moratorium",
"control share acquisition" or other form of antitakeover statute or
regulation (including, without limitation, the restrictions on "business
combinations" set forth in Section 203 of the Delaware General Corporation
Law) is or shall be applicable to the acquisition of Shares pursuant to this
Agreement (and the Board of Directors of Grantor has taken all action to
approve the acquisition of the Shares to the extent necessary to avoid such
application) and (f) the Grantor has taken all corporate action necessary so
that the grant and any
4
<PAGE>
subsequent exercise of the Option by the Grantee will not result in the
separation or exercisability of rights under the Grantor Rights Plan.
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee
represents and warrants to the Grantor that (a) the execution and delivery of
this Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Grantee and this Agreement has been duly executed
and delivered by a duly authorized officer of the Grantee and will constitute
a valid and binding obligation of Grantee; and (b) the Grantee is acquiring
the Option after the Grantee has been afforded the opportunity to obtain, and
has obtained, sufficient information regarding the Grantor to make an
informed investment decision with respect to the Grantee's purchase of the
Shares issuable upon the exercise thereof, and, if and when the Grantee
exercises the Option, it will be acquiring the Shares issuable upon the
exercise thereof for its own account and not with a view to distribution or
resale in any manner which would be in violation of the Securities Act.
6. LISTING OF SHARES; HSR ACT FILINGS; REGULATORY APPROVALS.
Subject to applicable law and the rules and regulations of the NYSE, the
Grantor will promptly file an application to list the Shares on the NYSE and
will use its best efforts to obtain approval of such listing and to file all
necessary filings by the Grantor under the HSR Act; provided, however, that
if the Grantor is unable to effect such listing on the NYSE by the Closing
Date, the Grantor will nevertheless be obligated to deliver the Shares upon
the Closing Date. Each of the parties hereto will use its best efforts to
obtain consents of all third parties and all Regulatory Approvals, if any,
necessary to the consummation of the transactions contemplated.
7. REPURCHASE OF SHARES; SALE OF SHARES. If a Change in Control
Event has not occurred prior to the first anniversary date of the Merger
Termination Date, then beginning on such anniversary date, the Grantor shall
have the right to purchase (the "Repurchase Right") all, but not less than
all, of the Shares then beneficially owned by the Grantee or any of its
affiliates at a price per share equal to the greater of (i) the Purchase
Price, or (ii) the average of the closing sales prices for shares of Common
Stock on the twenty trading days ending five days prior to the date the
Grantor gives written notice of its intention to exercise the Repurchase
Right. If the Grantor does not exercise the Repurchase Right within thirty
days following the first anniversary of the Merger Termination Date, the
Repurchase Right terminates. In the event the Grantor wishes to exercise the
Repurchase Right, the Grantor shall send a written notice to the Grantee
specifying a date (not later than 10 business days and not earlier than the
next business day following the date such notice is given) for the closing of
such purchase. For purposes of the Agreement, a "Change in Control Event"
shall be deemed to have occurred if (i) any person or group has a acquired
beneficial ownership of more than fifty percent (excluding the Shares) of the
outstanding shares of Common Stock or (ii) the Grantor shall have entered
into an agreement, including without limitation an agreement in principle,
providing for (x) a merger or other business combination involving the
Grantor in which the Grantor's stockholders do not own a majority of the
outstanding capital stock of the entity surviving such merger or business
combination immediately following such transaction or (y) the acquisition of
20% or more of the assets of the Grantor and its subsidiaries, taken as a
whole.
5
<PAGE>
8. REGISTRATION RIGHTS.
(a) In the event that the Grantee shall desire to sell any of
the Shares within two years after the purchase of such Shares pursuant
hereto, and such sale requires, in the opinion of counsel to the Grantee,
which opinion shall be reasonably satisfactory to the Grantor and its
counsel, registration of such Shares under the Securities Act, the Grantor
will cooperate with the Grantee and any underwriters in registering such
Shares for resale, including, without limitation, promptly filing a
registration statement which complies with the requirements of applicable
federal and state securities laws, entering into an underwriting agreement
with such underwriters upon such terms and conditions as are customarily
contained in underwriting agreements with respect to secondary distributions;
provided that the Grantor shall not be required to have declared effective
more than two registration statements hereunder and shall be entitled to
delay the filing or effectiveness of any registration statement for up to 120
days if the offering would, in the judgment of the Board of Directors of the
Grantor, require premature disclosure of any material corporate development
or otherwise interfere with or adversely affect any pending or proposed
offering of securities of the Grantor or any other material transaction
involving the Grantor.
(b) If the Common Stock is registered pursuant to the
provisions of this Section 8, the Grantor agrees (i) to furnish copies of the
registration statement and the prospectus relating to the Shares covered
thereby in such numbers as the Grantee may from time to time reasonably
request and (ii) if any event shall occur as a result of which it becomes
necessary to amend or supplement any registration statement or prospectus, to
prepare and file under the applicable securities laws such amendments and
supplements as may be necessary to keep effective for at least 90 days a
prospectus covering the Common Stock meeting the requirements of such
securities laws, and to furnish the Grantee such numbers of copies of the
registration statement and prospectus as amended or supplemented as may
reasonably be requested. The Grantor shall bear the cost of the
registration, including, but not limited to, all registration and filing
fees, printing expenses, and fees and disbursements of counsel and
accountants for the Grantor, except that the Grantee shall pay the fees and
disbursements of its counsel, the underwriting fees and selling commissions
applicable to the shares of Common Stock sold by the Grantee. The Grantor
shall indemnify and hold harmless Grantee, its affiliates and its officers,
directors and controlling persons from and against any and all losses,
claims, damages, liabilities and expenses arising out of or based upon any
statements contained or incorporated by reference in, and omissions or
alleged omissions from, each registration statement filed pursuant to this
paragraph; provided, however, that this provision does not apply to any loss,
liability, claim, damage or expense to the extent it arises out of any untrue
statement or omission made in reliance upon and in conformity with written
information furnished to the Grantor by the Grantee, its affiliates and its
officers expressly for use in any registration statement (or any amendment
thereto) or any preliminary prospectus filed pursuant to this paragraph. The
Grantor shall also indemnify and hold harmless each underwriter and each
person who controls any underwriter within the meaning of either the
Securities Act or the Securities Exchange Act of 1934, as amended, against
any and all losses, claims, damages, liabilities and expenses arising out of
or based upon any statements contained or incorporated by reference in, and
omissions or alleged omissions from, each registration statement filed
pursuant
6
<PAGE>
to this paragraph; provided, however, that this provision does not apply to
any loss, liability, claim, damage or expense to the extent it arises out of
any untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Grantor by the underwriters expressly
for use in any registration statement (or any amendment thereto) or any
preliminary prospectus filed pursuant to this paragraph.
9. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed $65
million and, if it does exceed such amount, the Grantee, at its sole election,
shall, within five business days, either (a) deliver to the Grantor for
cancellation Shares (valued, for the purposes of this Section 9(a), at the
average closing sales price of the Common Stock on the NYSE Composite Tape for
the twenty consecutive trading days preceding the day on which the Grantee's
Total Profit exceeds $65 million) previously purchased by the Grantee, (b) pay
cash or other consideration to the Grantor or (c) undertake any combination
thereof, so that the Grantee's Total Profit shall not exceed $65 million after
taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount of cash
received by the Grantee pursuant to Section 7.3(c) of the Merger Agreement and
Section 1(c) hereof, (ii)(x) the net cash amount received by the Grantee
pursuant to the Grantor's repurchase of Shares pursuant to Section 7 hereof,
less (y) the Grantee's purchase price for such Shares, and (iii)(x) the amount
received by the Grantee pursuant to the sale of Shares (or any other securities
into which such Shares are converted or exchanged), less (y) the Grantee's
purchase price for such Shares.
10. EXPENSES. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically provided
herein.
11. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the
Grantor fails to perform any of its obligations under this Agreement immediate
and irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
12. NOTICE. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth
7
<PAGE>
below, or such other address as may be designated in writing hereafter, in
the same manner, by such person:
If to the Grantee:
Doubletree Corporation
410 North 44th Street, Suite 700
Phoenix, AZ 85008
Attn: Richard M. Kelleher
Telecopy: (602) 220-6753
With a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019-6092
Attn: William J. Phillips, Esq.
Telecopy: (212) 295-6333
If to the Grantor:
Promus Hotel Corporation
755 Crossover Lane
Memphis, TN 38117
Attn: Raymond E. Schultz
Telecopy: (901) 374-5636
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Attn: John M. Newell, Esq.
Telecopy: (213) 891-8763
13. PARTIES IN INTEREST. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
permitted successors and assigns; provided, however, that such successor in
interest or assigns shall agree to be bound by the provisions of this
Agreement. Except as set forth in Section 8, nothing in this Agreement,
express or implied, is intended to confer upon any person other than the
Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with
the Merger Agreement and the other documents referred to therein, contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
8
<PAGE>
15. ASSIGNMENT. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned
subsidiaries, but no such transfer shall relieve the Grantee of its obligations
hereunder if such transferee does not perform such obligations. Any assignment
made in violation of this Section 15 shall be void.
16. HEADINGS. The section headings herein are for convenience only
and shall not affect the construction of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (regardless of the laws
that might otherwise govern under applicable Delaware principles of conflicts of
law).
19. TERMINATION. The right to exercise the Option granted pursuant
to this Agreement shall terminate at the earlier of (i) the Effective Time (as
defined in the Merger Agreement), (ii) the date on which the Grantee realizes a
Total Profit of $65 million, (iii) the date on which the Merger Agreement is
terminated; provided the Option is not exercisable at such time and does not
become exercisable simultaneous with such termination and (iv) 90 days after the
date the Option becomes exercisable (the date referred to in clause (iv) being
hereinafter referred to as the "Option Termination Date"); provided that, if the
Option cannot be exercised or the Shares cannot be delivered to the Grantee upon
such exercise because the conditions set forth in Section 2(a) or Section 2(b)
hereof have not yet been satisfied, the Option Termination Date shall be
extended until thirty days after such impediment to exercise has been removed.
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
20. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, 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.
21. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor
and the Grantor will consult with the Grantee before issuing any press release
with respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law.
9
<PAGE>
Signature page for Stock Option Agreement (Doubletree)
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
DOUBLETREE CORPORATION
/s/ Richard M. Kelleher
------------------------------------------
By: Richard M. Kelleher
Its: President and Chief Executive Officer
PROMUS HOTEL CORPORATION
/s/ Raymond E. Schultz
------------------------------------------
By: Raymond E. Schultz
Its: President and Chief Executive Officer
S-1
<PAGE>
STOCK OPTION AGREEMENT (PROMUS)
STOCK OPTION AGREEMENT, dated as of September 1, 1997 (the
"Agreement"), between PROMUS HOTEL CORPORATION, a Delaware corporation (the
"Grantee"), and DOUBLETREE CORPORATION, a Delaware corporation (the
"Grantor").
WHEREAS, the Grantee, Parent Holding Corp., a Delaware corporation
("Parent"), and the Grantor are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, for the merger (the "Doubletree Merger") of a subsidiary
of Parent with and into the Grantor and the merger (the "Promus Merger") of
another subsidiary of Parent with and into the Grantee, such that the Grantor
and the Grantee will become wholly-owned subsidiaries of Parent and the
stockholders of the Grantor and the Grantee will become stockholders of
Parent (the Doubletree Merger and the Promus Merger collectively, the
"Mergers");
WHEREAS, pursuant to a Stock Option Agreement dated as of the date
hereof between the Grantee and the Grantor, the Grantee has granted the
Grantor an option to acquire shares of common stock of the Grantee on terms
that are substantially similar to the terms of this Agreement (the
"Doubletree Option");
WHEREAS, as a condition and inducement to their willingness to enter
into the Merger Agreement and the Doubletree Option, the Grantee and Parent
have requested that the Grantor grant to the Grantee an option to purchase
7,898,003 shares of Common Stock, par value $0.01 per share, of the Grantor
(the "Common Stock"), upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger
Agreement and grant the Doubletree Option, the Grantor is willing to grant
the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS; PAYMENT OF SPREAD.
(a) Contemporaneously herewith the Grantee, Parent and the
Grantor are entering into the Merger Agreement. Subject to the other terms
and conditions set forth herein, the Grantor hereby grants to the Grantee an
irrevocable option (the "Option") to purchase up to 7,898,003 (as adjusted as
provided herein) shares of Common Stock (together with the associated
purchase rights issued with respect thereto pursuant to the Rights Agreement
dated as of September 1, 1997 between the Grantor and Harris Trust & Savings
Bank (the "Grantor Rights Plan")) (the "Shares") at a per share cash purchase
price equal to the lower of (i) $50.00 per Share or (ii) the average closing
sales price of the Common Stock on the NASDAQ National Market ("NASDAQ") for
the five consecutive trading days beginning on and including the day that the
Mergers are publicly announced (as adjusted as provided herein) (such lower
price being the "Purchase Price"). The Option may be exercised by the
Grantee, in whole or in part, at any
<PAGE>
time, or from time to time, following the occurrence of one of the events set
forth in Section 2(c) hereof and prior to the termination of the Option in
accordance with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option,
the Grantee shall send a written notice to the Grantor (the "Stock Exercise
Notice") specifying a date (subject to the HSR Act (as defined below)) not
later than 10 business days and not earlier than the next business day
following the date such notice is given for the closing of such purchase. In
the event of any change in the number of issued and outstanding shares of
Common Stock by reason of any stock dividend, stock split, split-up,
reclassification, recapitalization, merger or other change in the corporate
or capital structure of the Grantor (including the occurrence of a
Distribution Date under the Grantor Rights Plan), the number of Shares
subject to this Option and the purchase price per Share shall be
appropriately adjusted to restore the Grantee to its rights hereunder,
including its right to purchase Shares representing 19.9% of the capital
stock of the Grantor entitled to vote generally for the election of the
directors of the Grantor which is issued and outstanding immediately prior to
the exercise of the Option at an aggregate purchase price equal to the
Purchase Price multiplied by 7,898,003 . In the event that any additional
shares of Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the preceding sentence), the number of
Shares subject to this Option shall be increased by 19.9% of the number of
the additional shares of Common Stock so issued (and such additional Shares
shall have a purchase price per share equal to the Purchase Price).
(c) If at any time the Option is then exercisable pursuant to
the terms of Section 1(a) hereof, the Grantee may elect, in lieu of
exercising the Option to purchase Shares provided in Section 1(a) hereof, to
send a written notice to the Grantor (the "Cash Exercise Notice") specifying
a date not later than 20 business days and not earlier than 10 business days
following the date such notice is given on which date the Grantor shall pay
to the Grantee an amount in cash equal to the Spread (as hereinafter defined)
multiplied by all or such portion of the Shares subject to the Option as
Grantee shall specify. As used herein "Spread" shall mean the excess, if
any, over the Purchase Price of the higher of (x) if applicable, the highest
price per share of Common Stock (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by any person in an
Alternative Transaction (as defined in clause (i), (ii) or (iii) of Section
7.3(e) of the Merger Agreement) (the "Alternative Purchase Price") or (y) the
closing sales price of the shares of Common Stock on NASDAQ on the last
trading day immediately prior to the date of the Cash Exercise Notice (the
"Closing Price"). If the Alternative Purchase Price includes any property
other than cash, the Alternative Purchase Price shall be the sum of (i) the
fixed cash amount, if any, included in the Alternative Purchase Price plus
(ii) the fair market value of such other property. If such other property
consists of securities with an existing public trading market, the average of
the closing sales prices (or the average of the closing bid and asked prices
if closing sales prices are unavailable) for such securities in their
principal public trading market on the five trading days ending five days
prior to the date of the Cash Exercise Notice shall be deemed to equal the
fair market value of such property. If such other property consists of
something other than cash or securities with an existing public trading
market and, as of the payment date for the Spread, agreement on the value of
such other property has not been reached, the Alternative Purchase Price
shall be deemed to equal the Closing Price. Upon exercise of the Grantee's
right to receive cash pursuant to this Section 1(c) and the
2
<PAGE>
payment of such cash to the Grantee, the obligations of the Grantor to
deliver Shares pursuant to Section 3 shall be terminated with respect to such
number of Shares for which the Grantee shall have elected to be paid the
Spread.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to
deliver Shares upon exercise of the Option is subject only to the conditions
that:
(a) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the United
States prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been
terminated and all other consents, approvals, orders, notifications or
authorizations, the failure of which to obtain or make would have the effect
of making the issuance of the Shares illegal (collectively, the "Regulatory
Approvals") shall have been obtained or made; and
(c) (i) a proposal for an Alternative Transaction (as defined
in the Merger Agreement) involving the Grantor shall have been publicly
announced prior to the time the Merger Agreement is terminated pursuant to
the terms thereof (the "Merger Termination Date") and one or more of the
following events shall have occurred on or after the time of the making of
such proposal: (A) the requisite vote of the stockholders of the Grantor in
favor of adoption and approval of the Merger Agreement shall not have been
obtained at the Doubletree Stockholders' Meeting (as defined in the Merger
Agreement) or any adjournment or postponement thereof; (B) the Board of
Directors of the Grantor shall have withdrawn or modified its recommendation
of the Merger Agreement or the Doubletree Merger or failed to confirm its
recommendation of the Merger Agreement or the Doubletree Merger to the
stockholders of the Grantor within ten business days after a written request
by the Grantee to do so; (C) the Board of Directors of the Grantor shall have
recommended to the stockholders of the Grantor an Alternative Transaction (as
defined in the Merger Agreement); (D) a tender offer or exchange offer for
20% or more of the outstanding shares of Grantor Common Stock shall have been
commenced (other than by the Grantee or an affiliate of the Grantee) and the
Board of Directors of the Grantor shall have recommended that the
stockholders of the Grantor tender their shares in such tender or exchange
offer; or (E) for any reason the Grantor shall have failed to call and hold
the Doubletree Stockholders' Meeting (as defined in the Merger Agreement) by
the Outside Date (as defined in the Merger Agreement); provided, however,
that the Option may not be exercised if the Grantee is in material breach of
any of its material representations, warranties, covenants or agreements
contained in this Agreement or in the Merger Agreement; or (ii) the Merger
Agreement shall have been terminated by the Grantor pursuant to Section
7.1(g) of the Merger Agreement.
3. THE CLOSING.
(a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice or Cash Exercise
Notice, as the case may be, at 8:00 A.M., local time, at the offices of
Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles,
3
<PAGE>
CA 90071, or, if the conditions set forth in Section 2(a) or 2(b) have not
then been satisfied, on the second business day following the satisfaction of
such conditions, or at such other time and place as the parties hereto may
agree (the "Closing Date"). On the Closing Date, (i) in the event of a
closing pursuant to Section 1(b) hereof, the Grantor will deliver to the
Grantee a certificate or certificates, duly endorsed (or accompanied by duly
executed stock powers), representing the Shares in the denominations
designated by the Grantee in its Stock Exercise Notice and the Grantee will
purchase such Shares from the Grantor at the price per Share equal to the
Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
hereof, the Grantor will deliver to the Grantee cash in an amount determined
pursuant to Section 1(c) hereof. Any payment made by the Grantee to the
Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall
be made by certified or official bank check or by wire transfer of federal
funds to a bank designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act").
4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor
represents and warrants to the Grantee that (a) the Grantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
enter into and perform this Agreement; (b) the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
the Grantor and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantor and constitutes a valid and binding
obligation of the Grantor, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles; (c) the Grantor has taken all
necessary corporate action to authorize and reserve the Shares issuable upon
exercise of the Option and the Shares, when issued and delivered by the
Grantor upon exercise of the Option, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights; (d) except as
otherwise required by the HSR Act and other than any filings required under
the blue sky laws of any states or by NASDAQ, the execution and delivery of
this Agreement by the Grantor and the issuance of Shares upon exercise of the
Option do not require the consent, waiver, approval or authorization of or
any filing with any person or public authority and will not violate, result
in a breach of or the acceleration of any obligation under, or constitute a
default under, any provision of any charter or by-law, indenture, mortgage,
lien, lease, agreement, contract, instrument, order, law, rule, regulation,
judgment, ordinance, or decree, or restriction by which the Grantor or any of
its subsidiaries or any of their respective properties or assets is bound;
(e) no "fair price", "moratorium", "control share acquisition" or other form
of antitakeover statute or regulation (including, without limitation, the
restrictions on "business combinations" set forth in Section 203 of the
Delaware General Corporation Law) is or shall be applicable to the
acquisition of Shares pursuant to this Agreement (and the Board of Directors
of Grantor has taken all action to approve the acquisition of the Shares to
the extent necessary to avoid such application) and (f) the Grantor has
taken all corporate action necessary so that the grant and any
4
<PAGE>
subsequent exercise of the Option by the Grantee will not result in the
separation or exercisability of rights under the Grantor Rights Plan..
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee
represents and warrants to the Grantor that (a) the execution and delivery of
this Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Grantee and this Agreement has been duly executed
and delivered by a duly authorized officer of the Grantee and will constitute
a valid and binding obligation of Grantee; and (b) the Grantee is acquiring
the Option after the Grantee has been afforded the opportunity to obtain, and
has obtained, sufficient information regarding the Grantor to make an
informed investment decision with respect to the Grantee's purchase of the
Shares issuable upon exercise thereof, and, if and when the Grantee exercises
the Option, it will be acquiring the Shares issuable upon the exercise
thereof for its own account and not with a view to distribution or resale in
any manner which would be in violation of the Securities Act.
6. QUOTATION OF SHARES; HSR ACT FILINGS; REGULATORY APPROVALS.
Subject to applicable law and the rules and regulations of NASDAQ, the
Grantor will promptly file an application to have the Shares quoted on NASDAQ
and will use its best efforts to obtain approval of such quotation and to
file all necessary filings by the Grantor under the HSR Act; provided,
however, that if the Grantor is unable to effect such quotation on NASDAQ by
the Closing Date, the Grantor will nevertheless be obligated to deliver the
Shares upon the Closing Date. Each of the parties hereto will use its best
efforts to obtain consents of all third parties and all Regulatory Approvals,
if any, necessary to the consummation of the transactions contemplated.
7. REPURCHASE OF SHARES; SALE OF SHARES. If a Change in Control
Event has not occurred prior to the first anniversary date of the Merger
Termination Date, then beginning on such anniversary date, the Grantor shall
have the right to purchase (the "Repurchase Right") all, but not less than
all, of the Shares then beneficially owned by the Grantee or any of its
affiliates at a price per share equal to the greater of (i) the Purchase
Price, or (ii) the average of the closing sales prices for shares of Common
Stock on the twenty trading days ending five days prior to the date the
Grantor gives written notice of its intention to exercise the Repurchase
Right. If the Grantor does not exercise the Repurchase Right within thirty
days following the first anniversary of the Merger Termination Date, the
Repurchase Right terminates. In the event the Grantor wishes to exercise the
Repurchase Right, the Grantor shall send a written notice to the Grantee
specifying a date (not later than 10 business days and not earlier than the
next business day following the date such notice is given) for the closing of
such purchase. For purposes of the Agreement, a "Change in Control Event"
shall be deemed to have occurred if (i) any person or group has a acquired
beneficial ownership of more than fifty percent (excluding the Shares) of the
outstanding shares of Common Stock or (ii) the Grantor shall have entered
into an agreement, including without limitation an agreement in principle,
providing for (x) a merger or other business combination involving the
Grantor in which the Grantor's stockholders do not own a majority of the
outstanding capital stock of the entity surviving such merger or business
combination immediately following such transaction or (y) the acquisition of
20% or more of the assets of the Grantor and its subsidiaries, taken as a
whole.
5
<PAGE>
8. REGISTRATION RIGHTS.
(a) In the event that the Grantee shall desire to sell any of
the Shares within two years after the purchase of such Shares pursuant
hereto, and such sale requires, in the opinion of counsel to the Grantee,
which opinion shall be reasonably satisfactory to the Grantor and its
counsel, registration of such Shares under the Securities Act, the Grantor
will cooperate with the Grantee and any underwriters in registering such
Shares for resale, including, without limitation, promptly filing a
registration statement which complies with the requirements of applicable
federal and state securities laws, entering into an underwriting agreement
with such underwriters upon such terms and conditions as are customarily
contained in underwriting agreements with respect to secondary distributions;
provided that the Grantor shall not be required to have declared effective
more than two registration statements hereunder and shall be entitled to
delay the filing or effectiveness of any registration statement for up to 120
days if the offering would, in the judgment of the Board of Directors of the
Grantor, require premature disclosure of any material corporate development
or otherwise interfere with or adversely affect any pending or proposed
offering of securities of the Grantor or any other material transaction
involving the Grantor.
(b) If the Common Stock is registered pursuant to the
provisions of this Section 8, the Grantor agrees (i) to furnish copies of the
registration statement and the prospectus relating to the Shares covered
thereby in such numbers as the Grantee may from time to time reasonably
request and (ii) if any event shall occur as a result of which it becomes
necessary to amend or supplement any registration statement or prospectus, to
prepare and file under the applicable securities laws such amendments and
supplements as may be necessary to keep effective for at least 90 days a
prospectus covering the Common Stock meeting the requirements of such
securities laws, and to furnish the Grantee such numbers of copies of the
registration statement and prospectus as amended or supplemented as may
reasonably be requested. The Grantor shall bear the cost of the
registration, including, but not limited to, all registration and filing
fees, printing expenses, and fees and disbursements of counsel and
accountants for the Grantor, except that the Grantee shall pay the fees and
disbursements of its counsel, the underwriting fees and selling commissions
applicable to the shares of Common Stock sold by the Grantee. The Grantor
shall indemnify and hold harmless Grantee, its affiliates and its officers,
directors and controlling persons from and against any and all losses,
claims, damages, liabilities and expenses arising out of or based upon any
statements contained or incorporated by reference in, and omissions or
alleged omissions from, each registration statement filed pursuant to this
paragraph; provided, however, that this provision does not apply to any loss,
liability, claim, damage or expense to the extent it arises out of any untrue
statement or omission made in reliance upon and in conformity with written
information furnished to the Grantor by the Grantee, its affiliates and its
officers expressly for use in any registration statement (or any amendment
thereto) or any preliminary prospectus filed pursuant to this paragraph. The
Grantor shall also indemnify and hold harmless each underwriter and each
person who controls any underwriter within the meaning of either the
Securities Act or the Securities Exchange Act of 1934, as amended, against
any and all losses, claims, damages, liabilities and expenses arising out of
or based upon any statements contained or incorporated by reference in, and
omissions or alleged omissions from, each registration statement filed
pursuant
6
<PAGE>
to this paragraph; provided, however, that this provision does not apply to
any loss, liability, claim, damage or expense to the extent it arises out of
any untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Grantor by the underwriters expressly
for use in any registration statement (or any amendment thereto) or any
preliminary prospectus filed pursuant to this paragraph.
9. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this Agreement, in
no event shall the Grantee's Total Profit (as hereinafter defined) exceed $65
million and, if it does exceed such amount, the Grantee, at its sole
election, shall, within five business days, either (a) deliver to the Grantor
for cancellation Shares (valued, for the purposes of this Section 9(a), at
the average closing sales price of the Common Stock on NASDAQ for the twenty
consecutive trading days preceding the day on which the Grantee's Total
Profit exceeds $65 million) previously purchased by the Grantee, (b) pay cash
or other consideration to the Grantor or (c) undertake any combination
thereof, so that the Grantee's Total Profit shall not exceed $65 million
after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount of cash
received by the Grantee pursuant to Section 7.3(b) of the Merger Agreement
and Section 1(c) hereof, (ii)(x) the net cash amount received by the Grantee
pursuant to the Grantor's repurchase of Shares pursuant to Section 7 hereof,
less (y) the Grantee's purchase price for such Shares, and (iii)(x) the
amount received by the Grantee pursuant to the sale of Shares (or any other
securities into which such Shares are converted or exchanged), less (y) the
Grantee's purchase price for such Shares.
10. EXPENSES. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise specifically
provided herein.
11. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the
Grantor fails to perform any of its obligations under this Agreement
immediate and irreparable harm or injury would be caused to the Grantee for
which money damages would not be an adequate remedy. In such event, the
Grantor agrees that the Grantee shall have the right, in addition to any
other rights it may have, to specific performance of this Agreement.
Accordingly, if the Grantee should institute an action or proceeding seeking
specific enforcement of the provisions hereof, the Grantor hereby waives the
claim or defense that the Grantee has an adequate remedy at law and hereby
agrees not to assert in any such action or proceeding the claim or defense
that such a remedy at law exists. The Grantor further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief.
12. NOTICE. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given and made if
in writing and if served by personal delivery upon the party for whom it is
intended or delivered by registered or certified mail, return receipt
requested, or if sent by facsimile transmission, upon receipt of oral
confirmation that such transmission has been received, to the person at the
address set forth
7
<PAGE>
below, or such other address as may be designated in writing hereafter, in
the same manner, by such person:
If to the Grantee:
Promus Hotel Corporation
755 Crossover Lane
Memphis, TN 38117
Attn: Raymond E. Schultz
Telecopy: (901) 374-5636
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Attn: John M. Newell, Esq.
Telecopy: (213) 891-8763
If to the Grantor:
Doubletree Corporation
North 44th Street, Suite 700
Phoenix, AZ 85008
Attn: Richard M. Kelleher
Telecopy: (602) 220-6753
With a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019-6092
Attn: William J. Phillips, Esq.
Telecopy: (212) 295-6333
13. PARTIES IN INTEREST. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
permitted successors and assigns; provided, however, that such successor in
interest or assigns shall agree to be bound by the provisions of this
Agreement. Except as set forth in Section 8, nothing in this Agreement,
express or implied, is intended to confer upon any person other than the
Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with
the Merger Agreement and the other documents referred to therein, contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
8
<PAGE>
15. ASSIGNMENT. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent
of the other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned
subsidiaries, but no such transfer shall relieve the Grantee of its
obligations hereunder if such transferee does not perform such obligations.
Any assignment made in violation of this Section 15 shall be void.
16. HEADINGS. The section headings herein are for convenience only
and shall not affect the construction of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable Delaware principles of
conflicts of law).
19. TERMINATION. The right to exercise the Option granted pursuant
to this Agreement shall terminate at the earlier of (i) the Effective Time
(as defined in the Merger Agreement), (ii) the date on which the Grantee
realizes a Total Profit of $65 million, (iii) the date on which the Merger
Agreement is terminated; provided that the Option is not exercisable at such
time and does not become exercisable simultaneous with such termination and
(iv) 90 days after the date the Option becomes exercisable (the date referred
to in clause (iv) being hereinafter referred to as the "Option Termination
Date"); provided that, if the Option cannot be exercised or the Shares cannot
be delivered to the Grantee upon such exercise because the conditions set
forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the
Option Termination Date shall be extended until thirty days after such
impediment to exercise has been removed.
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
20. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, 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.
21. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor
and the Grantor will consult with the Grantee before issuing any press
release with respect to the initial announcement of this Agreement, the
Option or the transactions contemplated hereby and neither party shall issue
any such press release prior to such consultation except as may be required
by law.
9
<PAGE>
Signature Page for Stock Option Agreement (Promus)
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
DOUBLETREE CORPORATION
/S/ Richard M. Kelleher
------------------------------------------
By: Richard M. Kelleher
Its: President and Chief Executive Officer
PROMUS HOTEL CORPORATION
/S/ Raymond E. Schultz
------------------------------------------
By: Raymond E. Schultz
Its: President and Chief Executive Officer
S-1
<PAGE>
STOCKHOLDER SUPPORT AGREEMENT
STOCKHOLDER SUPPORT AGREEMENT dated as of September 1, 1997 (this
"Agreement"), by GE Investment Management Incorporated ("GEIM"), GE
Investment Hotel Partners I, Limited Partnership ("GEHOP" and together with
GEIM, the "GE Entities"), the Trustees of General Electric Pension Trust
("GEPT"), Red Lion, a California limited partnership ("Red Lion"), Richard J.
Ferris ("Ferris"), Ridge Partners, L.P. ("Ridge"), Kelrick, Inc. ("Kelrick"
and together with Ferris and Ridge, the "Ferris Entities"), Peter V.
Ueberroth ("Ueberroth"), The Ueberroth Family Trust ("Ueberroth FT") and The
Ueberroth Investment Trust ("Ueberroth IT" and together with Ueberroth and
Ueberroth FT, the "Ueberroth Entities"), to and for the benefit of Promus
Hotel Corporation, a Delaware corporation ("Promus"). Each of the GE
Entities, GEPT, Red Lion, the Ferris Entities and the Ueberroth Entities are
referred to herein as a "Stockholder" and collectively as the "Stockholders."
Capitalized terms used and not otherwise defined herein shall have the
respective meanings assigned to them in the Merger Agreement referred to
below.
WHEREAS, as of the date hereof, the GE Entities own of record and
beneficially 6,060,981 shares (such shares, together with any other voting or
equity securities of Doubletree hereafter acquired by the GE Entities prior
to the termination of this Agreement, being referred to herein collectively
as the "GE Shares") of common stock, par value $.01 per share ("Doubletree
Common Stock"), of Doubletree Corporation, a Delaware corporation
("Doubletree");
WHEREAS, as of the date hereof, GEPT owns of record and
beneficially 3,027,441 shares (such shares, together with any other voting or
equity securities of Doubletree hereafter acquired by GEPT prior to the
termination of this Agreement, being referred to herein collectively as "GEPT
Shares") of Doubletree Common Stock;
WHEREAS, as of the date hereof, Red Lion owns of record and
beneficially 3,882,283 shares (such shares, together with any other voting or
equity securities of Doubletree hereafter acquired by Red Lion prior to the
termination of this Agreement, being referred to herein collectively as the
"Red Lion Shares") of Doubletree Common Stock;
WHEREAS, as of the date hereof, the Ferris Entities own of record
and beneficially 1,576,182 shares (such shares, together with any other
voting or equity securities of Doubletree hereafter acquired by the Ferris
Entities prior to the termination of this Agreement, being referred to herein
collectively as the "Ferris Shares") of Doubletree Common Stock;
WHEREAS, as of the date hereof, the Ueberroth Entities own of
record and beneficially 1,124,182 shares (such shares, together with any
other voting or equity securities of Doubletree hereafter acquired by the
Ueberroth Entities prior to the termination of this Agreement, being referred
to herein collectively as the "Ueberroth Shares" and, together with the GE
Shares, the GEPT Shares, the Red Lion Shares and the Ferris Shares, the
"Shares") of Doubletree Common Stock;
<PAGE>
WHEREAS, concurrently with the execution of this Agreement,
Doubletree, Promus and Parent Holding Corp., a Delaware corporation
("Parent"), are entering into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), pursuant to which, upon the terms
and subject to the conditions thereof, (i) a newly formed subsidiary of
Parent will be merged with and into Doubletree (the "Doubletree Merger"), and
(ii) a second newly formed subsidiary of Parent will be merged with and into
Promus (the "Promus Merger") such that Doubletree and Promus will become
wholly-owned subsidiaries of Parent and the stockholders of Doubletree and
Promus will become stockholders of Parent; and
WHEREAS, as a condition to the willingness of Promus and Doubletree
to enter into the Merger Agreement and the Stock Option Agreements (as
defined in the Merger Agreement), Promus has requested the Stockholders
agree, and in order to induce Promus to enter into the Merger Agreement and
the Stock Option Agreements, the Stockholders are willing to agree, severally
but not jointly, to vote in favor of adopting the Merger Agreement and
approving the Doubletree Merger, upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereby agree, severally and not jointly, as follows:
Section 1. VOTING OF SHARES. Until the termination of this
Agreement in accordance with the terms hereof, each Stockholder hereby agrees
that, at the Doubletree Stockholders' Meeting or any other meeting of the
stockholders of Doubletree, however called, and in any action by written
consent of the stockholders of Doubletree, such Stockholder will vote all of
its respective Shares (a) in favor of adoption of the Merger Agreement and
approval of the Doubletree Merger and the other transactions contemplated by
the Merger Agreement, and (b) in favor of any other matter necessary to the
consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon by the stockholders of Doubletree (or any class
thereof). In addition, each Stockholder agrees that it will, upon request by
Promus, furnish written confirmation, in form and substance reasonably
satisfactory to Promus, of such Stockholder's support for the Merger
Agreement and the Doubletree Merger. Each Stockholder acknowledges receipt
and review of a copy of the Merger Agreement.
Section 2. TRANSFER OF SHARES. Each Stockholder represents and
warrants that it has no present intention of taking any action, prior to the
termination of this Agreement in accordance with the terms hereof, to,
directly or indirectly, (a) sell, assign, transfer (including by merger,
testamentary disposition, interspousal disposition pursuant to a domestic
relations proceeding or otherwise by operation of law), pledge, encumber or
otherwise dispose of any of its respective Shares, (b) deposit any of its
respective Shares into a voting trust or enter into a voting agreement or
arrangement with respect to any such Shares or grant any proxy or power of
attorney with respect thereto which is inconsistent with this Agreement or
(c) enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect sale, assignment, transfer (including by
merger, testamentary disposition, interspousal disposition pursuant to a
domestic relations proceeding or otherwise by operation of law) or other
disposition of any Shares.
2
<PAGE>
Section 3. NO SOLICITATION. Prior to the termination of this
Agreement in accordance with its terms, each Stockholder agrees (a) that it
will not, nor will it authorize or permit any of its officers, directors,
employees, agents and representatives to, directly or indirectly, initiate or
solicit any inquiries or the making of any Acquisition Proposal and (b) that
it will notify Promus as soon as possible (and in any event within 48 hours)
if any such inquiries or proposals are received by, any information or
documents is requested from, or any negotiations or discussions are sought to
be initiated or continued with, it or any of its affiliates.
Section 4. TERMINATION. This Agreement shall terminate upon the
earliest to occur of (i) the Effective Time or (ii) any termination of the
Merger Agreement in accordance with the terms thereof; provided that the
provisions of Section 7 shall survive any termination of this Agreement, and
provided further that no such termination shall relieve any party of
liability for a breach hereof prior to termination.
Section 5. REGISTRATION RIGHTS. Until the termination of this
Agreement in accordance with the terms hereof, no Stockholder will exercise
any of its rights to request or require registration of any securities under
the Incorporation and Registration Rights Agreement dated as of December 16,
1993, as amended on June 30, 1994, February 27, 1996 and November 8, 1996, by
and among Doubletree and certain stockholders of Doubletree (the
"Registration Rights Agreement).
Section 6. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or in equity.
Section 7. MISCELLANEOUS.
(a) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, between the
parties with respect thereto. This Agreement may not be amended, modified or
rescinded except by an instrument in writing signed by each of the parties
hereto.
(b) If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public policy,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to
the fullest extent possible.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of law thereof.
3
<PAGE>
(d) Notwithstanding anything herein to the contrary, the covenants
and agreements set forth herein shall not prevent any of the Stockholders'
designees, partners or affiliates serving on the Board of Directors of
Doubletree from taking any action, subject to the applicable provisions of
the Merger Agreement, while acting in such capacity as a director of
Doubletree.
(e) Notwithstanding any provisions hereof, none of the obligations
of any Stockholder under or contemplated by this Agreement shall be an
obligation of (i) any officer, director, stockholder, limited partner,
general partner or owner of such Stockholder, or any of their respective
officers, directors, stockholders, limited partners, general partners or
owners, or successors or assigns or (ii) any other Stockholder. Each
Stockholder shall be the only person or entity liable with respect to its
obligations. Any monetary liability of a Stockholder under this Agreement
shall be satisfied solely out of the assets of such Stockholder. Each
Stockholder hereby irrevocably waives any right it may have against any such
officer, director, stockholder, limited partner, general partner, owner,
successor or assign identified above as a result of the performance of the
provisions under or contemplated by this Agreement. Nothing in this Section
7(e) shall prevent Promus from obtaining specific enforcement of the
obligations of any Stockholder under this Agreement.
(f) This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same instrument.
4
<PAGE>
Signature Page for Stockholder Support Agreement
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
GE INVESTMENT MANAGEMENT INCORPORATED
/s/ John Myers
----------------------------------------
By: John Myers
Its:
GE INVESTMENT HOTEL PARTNERS I, LIMITED PARTNERSHIP
By: GE Investment Management Inc.
Its: General Partner
/s/ John Myers
------------------------------------
By: John Myers
Its:
TRUSTEES OF GENERAL ELECTRIC PENSION TRUST
/s/ John Myers
------------------------------------------
By: John Myers
Its:
RED LION
By: RLA-GP, Inc.
Its: General Partner
/s/ Michael Michelson
------------------------------------
By: Michael Michelson
Its:
S-1
<PAGE>
Signature Page for Stockholder Support Agreement
/s/ Richard J. Ferris
-----------------------------------------
Richard J. Ferris
RIDGE PARTNERS, L.P.
By: Kelrick, Inc.
Its: General Partner
/s/ Richard J. Ferris
-----------------------------------------
By: Richard J. Ferris
Its: President
KELRICK, INC.
/s/ Richard J. Ferris
-----------------------------------------
By: Richard J. Ferris
Its: President
/s/ Peter V. Ueberroth
-----------------------------------------
Peter V. Ueberroth
THE UEBERROTH FAMILY TRUST
/s/ Peter V. Ueberroth
-----------------------------------------
By: Peter V. Ueberroth
Its: Trustee
S-2
<PAGE>
Signature Page for Stockholder Support Agreement
THE UEBERROTH INVESTMENT TRUST
/s/ Peter V. Ueberroth
----------------------------------------
By: Peter V. Ueberroth
Its: Trustee
Agreed and Acknowledged:
PROMUS HOTEL CORPORATION
/s/ Raymond E. Schultz
- -------------------------------------------
By: Raymond E. Schultz
Its: President and Chief Executive Officer
S-3
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
PROMUS HOTEL CORPORATION
The present name of the Corporation is Promus Hotel Corporation. The
Corporation was incorporated under the name "Parent Holding Corp." by the
filing of its original Certificate of Incorporation with the Secretary of
State of the State of Delaware on August 29, 1997. This Restated Certificate
of Incorporation of the Corporation, which both restates and further amends
the provisions of the Corporation's Certificate of Incorporation, was duly
adopted in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware and by the written consent
of stockholders in accordance with Section 228 of the General Corporation Law
of the State of Delaware. The Certificate of Incorporation of the
Corporation is hereby amended and restated to read in its entirety as follows:
FIRST: The name of the Corporation is Promus Hotel Corporation.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Service Company, 1013 Centre Road, in the
City of Wilmington, County of New Castle, State of Delaware. The name of its
registered agent at that address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: A. The total number of shares of stock which the Corporation
shall have authority to issue is 510,000,000 (the "Capital Stock") consisting
of 500,000,000 shares of Common Stock, par value $0.01 per share (the "Common
Stock"), and 10,000,000 shares of Preferred Stock, par value of $.01 per
share (the "Preferred Stock").
B. Shares of Preferred Stock may be issued from time to time in one or
more series, as provided for herein or as provided for by the Board of
Directors as permitted hereby. All shares of Preferred Stock shall be of
equal rank and shall be identical, except in respect of the terms fixed
herein for the series provided for herein or fixed by the Board of Directors
for series provided for by the Board of Directors as permitted hereby. All
shares of any one series shall be identical in all respects with all the
other shares of such series, except the shares of any one series issued at
different times may differ as to the dates from which dividends thereon may
be cumulative.
The Board of Directors is hereby authorized, by resolution or
resolutions, to establish, out of the unissued shares of Preferred Stock not
then allocated to any series of Preferred Stock, additional series of
Preferred Stock. Before any shares of any such additional series are issued,
the Board of Directors shall fix and determine, and is hereby expressly
empowered to fix and determine, by resolution or resolutions, the number of
shares constituting such series and the distinguishing characteristics and
the relative rights, preferences, privileges and immunities, if
<PAGE>
any, and any qualifications, limitations or restrictions thereof, of the
shares thereof, so far as not inconsistent with the provisions of this
Article FOURTH. Without limiting the generality of the foregoing, the Board
of Directors may fix and determine:
1. The designation of such series and the number of shares which
shall constitute such series of such shares;
2. The rate of dividend, if any, payable on shares of such series;
3. Whether the shares of such series shall be cumulative,
non-cumulative or partially cumulative as to dividends, and the dates
from which any cumulative dividends are to accumulate;
4. Whether the shares of such series may be redeemed, and, if so,
the price or prices at which and the terms and conditions on which
shares of such series may be redeemed;
5. The amount payable upon shares of such series in the event of
the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Corporation;
6. The sinking fund provisions, if any, for the redemption of
shares of such series;
7. The voting rights, if any, of the shares of such series;
8. The terms and conditions, if any, on which shares of such
series may be converted into shares of capital stock of the Corporation
of any other class or series;
9. Whether the shares of such series are to be preferred over
shares of capital stock of the Corporation of any other class or series
as to dividends, or upon the voluntary or involuntary dissolution,
liquidation, or winding up of the affairs of the Corporation, or
otherwise; and
10. Any other characteristics, preferences, limitations, rights,
privileges, immunities or terms not inconsistent with the provisions of
this Article FOURTH.
C. Except as otherwise provided in this Restated Certificate of
Incorporation, each holder of Common Stock shall be entitled to one vote for
each share of Common Stock held by him on all matters submitted to
stockholders for a vote and each holder of Preferred Stock of any series that
is Voting Stock shall be entitled to such number of votes for each share held
by him as may be specified in the resolutions providing for the issuance of
such series.
Except as otherwise provided by law, the presence, in person or by
proxy, of the holders of record of issued and outstanding shares of Capital
Stock entitling the holders thereof to cast a majority of the votes entitled
to be cast by the holders of issued and outstanding shares of Capital Stock
entitled to vote shall constitute a quorum at all meetings of the
stockholders.
2
<PAGE>
FIFTH: A. The Board of Directors shall have the power to make, adopt,
alter, amend, change or repeal the Bylaws of the Corporation by resolution
adopted by the affirmative vote of a majority of the entire Board of
Directors, subject to any bylaw requiring the affirmative vote of a larger
percentage of the members of the Board of Directors.
B. Stockholders may not make, adopt, alter, amend, change or repeal the
Bylaws of the Corporation except upon the affirmative vote of at least 75% of
the votes entitled to be cast by the holders of all outstanding shares then
entitled to vote generally in the election of directors, voting together as a
single class.
SIXTH: The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors, which shall consist of not
less than three or more than twenty directors, the exact number of directors
to be determined from time to time by resolution adopted by affirmative vote
of a majority of the entire Board of Directors, subject to any bylaw
requiring the affirmative vote of a larger percentage of the members of the
Board of Directors. The Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III. Class I shall consist
of four directors, and each of Class II and Class III shall consist of five
directors. Class I directors shall be initially elected for a term expiring
at the first annual meeting of stockholders of the Corporation following the
date hereof, Class II directors shall be initially elected for a term
expiring at the second annual meeting of stockholders of the Corporation
following the date hereof, and Class III directors shall be initially elected
for a term expiring at the third annual meeting of stockholders of the
Corporation following the date hereof. At each succeeding annual meeting of
stockholders, beginning in 1999, successors to the class of directors whose
term expires at that annual meeting shall be elected for a three year term.
If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the remaining term of
that class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the
annual meeting for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, prior to death,
resignation, retirement, disqualification or removal from office. Any
vacancy on the Board of Directors that results from an increase in the number
of directors and any other vacancy may only be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same remaining term as
that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right,
voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, removal,
filling of vacancies and other features of such directorships shall be
governed by the terms of this Restated Certificate of Incorporation
applicable thereto (including the resolutions of the Board of Directors
pursuant to Article FOURTH hereof), and such Directors so elected shall not
be divided into classes pursuant to this Article SIXTH unless expressly
provided by such terms.
3
<PAGE>
SEVENTH: Special meetings of the stockholders of the Corporation, for
any purpose or purposes, may only be called at any time by a majority of the
entire Board of Directors or by either the Chairman or the President of the
Corporation.
EIGHTH: No stockholder action may be taken except at an annual or
special meeting of stockholders of the Corporation and stockholders of the
corporation may not take any action by written consent in lieu of a meeting.
NINTH: A. In addition to any affirmative vote required by law or this
Restated Certificate of Incorporation (including any resolutions of the Board
of Directors pursuant to Article FOURTH hereof) or the Bylaws of the
Corporation, and except as otherwise expressly provided in Section B of this
Article NINTH, a Business Combination (as hereinafter defined) with, or
proposed by or on behalf of, any Interested Stockholder (as hereinafter
defined) or any Affiliate or Associate (as hereinafter defined) of any
Interested Stockholder or any person who thereafter would be an Affiliate or
Associate of such Interested Stockholder shall, except as otherwise
prohibited by applicable law, require the affirmative vote of (i) not less
than 75% of the votes entitled to be cast by the holders of all of the then
outstanding shares of Voting Stock (as hereinafter defined), voting together
as a single class and (ii) not less than a majority of the votes entitled to
be cast by holders of all the then outstanding Voting Stock, voting together
as a single class, excluding Voting Stock beneficially owned by such
Interested Stockholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article NINTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required
by law or by any other provision of this Restated Certification of
Incorporation (including any resolutions of the Board of Directors pursuant
to Article FOURTH hereof) or the Bylaws of the Corporation, or any agreement
with any national securities exchange, if all the conditions specified in
either of the following Paragraphs 1 or 2 are met or, in the case of Business
Combination not involving the payment of consideration to the holders of the
Corporation's outstanding Capital Stock (as hereinafter defined), if the
condition specified in the following Paragraph 1 is met:
1. The Business Combination shall have been approved, either
specifically or as a transaction which is in an approved category of
transactions, by a majority (whether such approval is made prior to or
subsequent to the acquisition of, or announcement or public disclosure
of the intention to acquire, beneficial ownership of the Voting Stock
that caused the Interested Stockholder to become an Interested
Stockholder) of the Continuing Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
a. The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders
4
<PAGE>
of Common Stock in such Business Combination shall be at least
equal to the highest amount determined under clauses (i) and (ii)
below:
(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested
Stockholder for any share of Common Stock in connection with
the acquisition by the Interested Stockholder of beneficial
ownership of shares of Common Stock within the two-year period
immediately prior to the first public announcement of the
proposed Business Combination (the "Announcement Date") or (y)
in the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as adjusted
for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to common stock; and
(ii) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder.
b. The aggregate amount of cash and the Fair Market Value, as
of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders
of shares of each class or series of outstanding Capital Stock,
other than Common Stock, shall be at least equal to the highest
amount determined under clauses (i), (ii) and (iii) below:
(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested
Stockholder for any share of such class or series of Capital
Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of such class or
series of Capital Stock (x) within the two-year period
immediately prior to the Announcement Date or (y) in the
transaction in which it became an Interested Stockholder,
whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of
Capital Stock;
(ii) the Fair Market Value per share of such class or
series of Capital Stock on the Announcement Date or on the
Determination Date, whichever is higher, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of
Capital Stock; and
(iii) (if applicable) the highest preferential amount per
share to which the holders of shares of such class or series of
Capital Stock would be entitled in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation regardless of
5
<PAGE>
whether the Business Combination to be consummated constitutes
such an event.
The provisions of this Paragraph 2(b) shall be required to be
met with respect to every class or series of outstanding Capital
Stock, whether or not the Interested Stockholder has previously
acquired beneficial ownership of any shares of a particular
class or series of Capital Stock.
c. The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in
the same form as previously has been paid by or on behalf of the
Interested Stockholder in connection with its direct or indirect
acquisition of beneficial ownership of shares of such class or
series of Capital Stock. If the consideration so paid for shares
of any class or series of Capital Stock varied as to form, the form
of consideration for such class or series of Capital Stock shall be
either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder.
d. After the Determination Date and prior to the consummation
of such Business Combination: (i) except as approved by a majority
of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any full periodic
dividends (whether or not cumulative) payable in accordance with
the terms of any outstanding Capital Stock; (ii) there shall have
been no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any stock split, stock
dividend or subdivision of the Common Stock), except as approved by
a majority of the Continuing Directors; (iii) there shall have been
an increase in the annual rate of dividends paid on the Common
Stock as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any
similar transaction that has the effect of reducing the number of
outstanding shares of Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the
Continuing Directors; and (iv) such Interested Stockholders shall
not have become the beneficial owner of any additional shares of
Capital Stock except as part of the transaction that results in
such Interested Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving effect thereto, would
not result in any increase in the Interested Stockholder's
percentage beneficial ownership of any class or series of Capital
Stock.
e. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Act") (or any subsequent provisions replacing such
Act, rules or regulations) shall be mailed to all stockholders of
the Corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or
subsequent provisions). The
6
<PAGE>
proxy or information statement shall contain on the first page
thereof, in a prominent place, such statement, if any, as to the
advisability (or inadvisability) of the Business Combination that
the Continuing Directors, or any of them, may choose to make and,
if deemed advisable by a majority of the Continuing Directors, the
opinion of an investment banking firm selected by a majority of the
Continuing Directors as to the fairness (or not) of the terms of
the Business Combination from a financial point of view to the
holders of the outstanding shares of Capital Stock other than the
Interested Stockholder and its Affiliates or Associates, such
investment banking firm to be paid a reasonable fee for its
services by the Corporation.
f. Such Interested Stockholder shall not have made any major
change in the Corporation's business or equity capital structure
without the approval of a majority of the Continuing Directors.
g. After the Determination Date, such Interested Stockholder
shall not have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
C. The following definitions shall apply with respect to this article
NINTH:
1. The term "Business Combination" shall mean:
a. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested
Stockholder or (ii) any other company (whether or not itself an
Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested
Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase or sell, agreement to
pay, extension of credit, joint venture participation or other
arrangement (in one transaction or a series of transactions) with
or for the benefit of any Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder involving any assets,
securities or commitments of the Corporation, any Subsidiary or any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder which (except for any arrangement, whether
as employee or consultant or otherwise, other than as director,
pursuant to which any Interested Stockholder or any Affiliate or
Associate thereof shall, directly or indirectly, have any control
over or responsibility for the management of any aspect of the
business or affairs of the Corporation, with respect to which
7
<PAGE>
arrangement the value test set forth below shall not apply),
together with all other such arrangements (including all
contemplated future events), has an aggregate Fair Market Value
and/or involves aggregate commitments of $100,000,000 or more or
constitutes more than 5 percent of the book value of the total
assets (in the case of transactions involving assets or commitments
other than capital stock) or 5 percent of the stockholders' equity
(in the case of transactions in capital stock) of the entity in
question (the "Substantial Part"), as reflected in the most recent
fiscal year-end consolidated balance sheet of such entity existing
at the time the stockholders of the Corporation would be required
to approve or authorize the Business Combination involving the
assets, securities and/or commitments constituting any Substantial
Part; provided, that if stockholders' equity is negative, the fair
market value of the outstanding Capital Stock at the date of such
balance sheet shall be used in lieu thereof in determining if a
transaction involves a Substantial Part; or
c. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or for any amendment to the
Corporation's Bylaws; or
d. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or otherwise involving
an Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class or
series of Capital Stock, or any securities convertible into Capital
Stock or into equity securities of any Subsidiary, that is
beneficially owned by any Interested Stockholder or any affiliate
or Associate of any Interested Stockholder; or
e. any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing clauses
(a) to (d).
2. The term "Voting Stock" shall mean all Capital Stock which by
its terms may be voted on all matters submitted to stockholders of the
Corporation generally.
3. The term "person" shall mean any individual, firm, company or
other entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing
of Capital Stock.
4. The term "Interested Stockholder" shall mean any person (other
than (i) the Corporation or any Subsidiary, any profit-sharing, employee
stock ownership or other employee benefit plan of the Corporation or any
Subsidiary or any trustee of or fiduciary with respect to any such plan
when acting in such capacity and (ii) Doubletree Corporation, Promus
Hotel Corporation and any Subsidiary thereof) who (a) is, or has
announced or publicly disclosed a plan or intention to become, the
beneficial owner of
8
<PAGE>
Voting Stock representing ten percent or more of the votes entitled to
be cast by the holders of all the then outstanding shares of Voting
Stock; or (b) is an Affiliate or Associate of the Corporation and at any
time within the two-year period immediately prior to the date in
question was the beneficial owner of Voting Stock representing ten
percent or more of the votes entitled to be cast by the holders of all
the then outstanding shares of Voting Stock; or (c) is an assignee of or
has otherwise succeeded to any Voting Stock which was at any time within
the two-year period immediately prior to the date in question
beneficially owned by an Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the meaning of
the Securities Act of 1933, as amended.
5. A person shall be a "beneficial owner" of any Capital Stock (a)
which such person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; (b) which such person or any of its
Affiliates or Associates has, directly or indirectly, (i) the right to
acquire (whether such right is exercisable immediately or subject only
to the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding (but neither
such person nor any such Affiliate or Associate shall be deemed to be
the beneficial owner of any shares of Voting Stock solely by reason of a
revocable proxy granted for a particular meeting of stockholders,
pursuant to a public solicitation of proxies for such meeting, and with
respect to which shares neither such person nor any such Affiliate or
Associate is otherwise deemed the beneficial owner); or (c) which is
beneficially owned, directly or indirectly, by any other person with
which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting (except to the extent contemplated by the parenthetical
clause in Section C.5(b)(ii)) or disposing of any shares of Capital
Stock; provided that: (x) no director or officer of the Corporation
(nor any Affiliate or Associate of any such director or officer) shall,
solely by reason of any or all of such directors or officers acting in
their capacities as such, be deemed the "beneficial owner" of any shares
of Capital Stock that are beneficially owned by any other such director
or officer; (y) in the case of any employee stock ownership or similar
plan of the Corporation or of any Subsidiary in which the beneficiaries
thereof possess the right to vote the shares of Voting Stock held by
such plan, no such plan nor any trustee with respect thereto (nor any
Affiliate or Associate of such trustee), solely by reason of such
capacity of such trustee, shall be deemed the "beneficial owner" of the
shares of Voting Stock held under such plan; and (z) no person shall be
deemed the "beneficial owner" of any shares of Voting Stock held in any
voting trust, employee stock ownership plan or any similar plan or trust
if such person does not possess the right to vote such shares. For the
purposes of determining whether a person is an Interested Stockholder
pursuant to Paragraph 4 of this section C, the number of shares of
Capital Stock deemed to be outstanding shall include shares deemed
beneficially owned by such person through application of this Paragraph
5 of Section C, but shall not include any other shares of Capital Stock
that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise. Notwithstanding the foregoing, for purposes of
9
<PAGE>
this Article NINTH, a person shall not be deemed a "beneficial owner" of
any Capital Stock which such person has the right to acquire upon
exercise of the Rights issued pursuant to the Parent Rights Agreement,
dated as of , 1997, between the Corporation and (including
any successor rights plan thereto, the "Rights Agreement"), if such person
would not be deemed the beneficial owner of such Capital Stock under the
terms of such Rights Agreement.
6. The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Act as in effect
on the date that this Article NINTH is approved by the Board (the term
"registrant" in said Rule 12b-2 meaning in this case the Corporation).
7. The term "Subsidiary" means any company of which a majority of
any class of equity security is beneficially owned by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in Paragraph 4 of this Section C, the term
"Subsidiary" shall mean only a company of which a majority of each class
of equity security is beneficially owned by the Corporation.
8. The term "Continuing Director" means any member of the Board of
Directors of the Corporation (the "Board of Directors"), while such
person is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any director who is
thereafter chosen to fill any vacancy or newly-created directorship on
the Board of Directors or who is elected and who, in either event, is
not an Affiliate or Associate or representative of the Interested
Stockholder and, in connection with such person's initial assumption of
office, is recommended for appointment or election by a majority of the
Continuing Directors then on the Board.
9. The term "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) in the case of stock the highest closing sales
price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York
Stock Exchange--Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States securities
exchange registered under the Act on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest closing sales
price or bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the NASDAQ National
Market or any similar system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of
such stock as determined by a majority of the Continuing Directors in
good faith; and (c) in the case of property other than cash or stock,
the fair market value of such property on the date in question as
determined in good faith by a majority of the Continuing Directors.
10
<PAGE>
10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in Paragraphs 2.a and 2.b of Section B of this Article
NINTH shall include the shares of Common Stock and/or the shares of any
other class or series of Capital Stock retained by the holders of such
shares.
D. A majority of the Continuing Directors shall have the power and duty
to determine for the purposes of this Article NINTH, on the basis of
information known to them after reasonable inquiry, all questions arising
under this Article NINTH including, without limitation, (a) whether a person
is an Interested Stockholder, (b) the number of shares of Capital Stock or
other securities beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, (d) whether a Proposed Action (as
hereinafter defined) is with, or proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder, (e)
whether the assets that are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities
by the Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of $100,000,000 or more, (f) whether the assets
or securities that are the subject of any Business Combination constitute a
Substantial Part, and (g) whether the applicable conditions set forth in
paragraph 2 of Section B of this Article NINTH have been met with respect to
any Business Combination. Any such determination made good faith shall be
binding and conclusive on all parties.
E. Nothing contained in this Article NINTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
F. The fact that any Business combination complies with the provisions
of Section B of this Article NINTH shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or recommend its
adoption or approval to the stockholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of or actions
and responses taken with respect to such Business Combination.
G. For the purpose of this Article NINTH, a Business Combination or any
proposal to amend, repeal or adopt any provision of this Restated Certificate
of Incorporation inconsistent with this Article NINTH (collectively,
"Proposed Action") is presumed to have been proposed by, or on behalf of, an
Interested Stockholder or a person who thereafter would become such if (1)
after the Interested Stockholder became such, the Proposed Action is proposed
following the election of any director of the Corporation who with respect to
such Interested Stockholder, would not qualify to serve as a Continuing
Director or (2) such Interested Stockholder, Affiliate, Associate or person
votes for or consents to the adoption of any such Proposed Action, unless as
to such Interested Stockholder, Affiliate, Associate or person, a majority of
the Continuing Directors makes a good faith determination that such Proposed
Action is not proposed by or on behalf of such Interested Stockholder,
Affiliate, Associate or person, based on information known to them after
reasonable inquiry.
11
<PAGE>
H. Notwithstanding any other provisions of this Restated Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Restated Certificate of Incorporation or the Bylaws of the Corporation), or
any proposal to amend, repeal or adopt any provision of this Restated
Certificate of Incorporation inconsistent with this Article NINTH which is
proposed by or on behalf of an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder shall require the affirmative vote of
(i) the holders of not less than 75% of the votes entitled to be cast by the
holders of all the then outstanding shares of Voting Stock, voting together
as a single class, and (ii) the holders of not less than a majority of the
votes entitled to be cast by the holders of the then outstanding shares of
Voting Stock, voting together as a single class, excluding Voting Stock
beneficially owned by such Interested Stockholder, provided, however, that
this Section H shall not apply to, and such vote shall not be required for,
any amendment, repeal or adoption unanimously recommended by the Board of
Directors if all of such directors are persons who would be eligible to serve
as Continuing Directors within the meaning of Section C, Paragraph 8 of this
Article NINTH.
TENTH: A. Subject to Section C of this Article TENTH, the Corporation
shall indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in or not opposed to the best
interest of the Corporation, or, with respect to any criminal action or
proceeding, had reasonable cause to believe his conduct was unlawful.
B. Subject to Section C of this Article TENTH, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interest of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon
12
<PAGE>
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
C. Any indemnification under this Article TENTH (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section A or Section B of this
Article TENTH, as the case may be. Such determination shall be made (i) by a
majority vote of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders. To the
extent, however, that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described in Section A or Section B of this
Article TENTH, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific case.
D. For purposes of any determination under Section C of this Article
TENTH, a person shall be deemed to have acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser
or other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section D of
Article TENTH shall mean any other corporation or any partnership, joint
venture, trust or other enterprise of which such person is or was serving at
the request of the Corporation as a director, officer, employee or agent.
The provisions of this Section D shall not be deemed to be exclusive or to
limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Sections A or B of this
Article TENTH as the case may be.
E. Notwithstanding any contrary determination in the specific case under
Section C of this Article TENTH, and notwithstanding the absence of any
determination thereunder, any director or officer may apply to any court of
competent jurisdiction in the State of Delaware for indemnification to the
extent otherwise permissible under Sections A and B of this Article TENTH.
The basis of such indemnification by a court shall be a determination by such
court that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standards of conduct set
forth in Sections A or B of this Article TENTH, as the case may be. Notice
of any application for indemnification pursuant to this Section E of Article
TENTH shall be given to the Corporation promptly upon the filing of such
application.
13
<PAGE>
F. Expenses incurred in defending or investigating a threatened or
pending action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of the director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article TENTH.
G. The indemnification and advancement of expenses provided by this
Article TENTH shall not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses may be entitled
under any Bylaw, agreement, contract, vote of stockholders or disinterested
directors or pursuant to the direction (howsoever embodied) of any court of
competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of, and advancement
of expenses to, the persons specified in Sections A and B of this Article
TENTH shall be made to the fullest extent permitted by law. The provisions
of this Article TENTH shall not be deemed to preclude the indemnification of,
and advancement of expenses to, any person who is not specified in Sections A
or B of this Article TENTH but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law
of the State of Delaware, or otherwise. The indemnification provided by this
Article TENTH shall continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such person.
H. The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Corporation, or, while a
director or officer of the Corporation, is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would
have the power or the obligation to indemnify him against such liability
under the provisions of this Article TENTH.
I. For purposes of this Article TENTH, reference to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers, so that
any person who is or was a director or officer of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the
same position under the provisions of this Article TENTH with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
ELEVENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for this
14
<PAGE>
Corporation under the provisions of Section 291 of the GCL or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of the
GCL, order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation,
in the manner now or thereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this reservation.
THIRTEENTH: No director of this Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (iii) under Section 174 of the GCL, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the GCL is hereafter amended to authorize corporate action
further limiting or eliminating the personal liability of directors, then the
liability of each director of the Corporations shall be limited or eliminated
to the fullest extent permitted by the GCL as so amended from time to time.
15
<PAGE>
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Raymond E. Schultz, its Chief Executive Officer and attested by
Ralph B. Lake, its Secretary, this __ day of _________, 1997.
By:
________________________
Raymond E. Schultz
Chief Executive Officer
ATTEST:
________________________
Ralph B. Lake
Secretary
16
<PAGE>
EXHIBIT 99.2
AMENDED AND RESTATED
BYLAWS
OF
PROMUS HOTEL CORPORATION
ARTICLE I.
OFFICES
Section 1. REGISTERED OFFICE. The registered office of Promus Hotel
Corporation (the "Corporation") shall be at Corporation Service Company, 1013
Centre Road, in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board
of Directors of the Corporation (the "Board of Directors") may from time to
time determine.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETINGS. The annual meeting of stockholders shall
be held on the last Wednesday in April in each year or on such other date and
at such time as may be fixed by the Board of Directors and stated in the
notice of the meeting, for the purpose of electing directors and for the
transaction of only such other business as is properly brought before the
meeting in accordance with these Bylaws.
Written notice of an annual meeting stating the place, date and hour of
the meeting, shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
To be properly brought before the annual meeting, business must be
either (i) specified in the notice of annual meeting (or any supplement or
amendment thereto) given by or at the direction of the Board of Directors,
(ii) otherwise brought before the annual meeting by or at the direction of
the Board of Directors, or (iii) otherwise properly brought before the annual
meeting
<PAGE>
by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided, however, that in the event that less than
seventy (70) days notice or prior public disclosure of the date of the annual
meeting is given or made to stockholders, notice by a stockholder, to be
timely, must be received no later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made, whichever first
occurs. A stockholder's notice to the Secretary shall set forth (a) as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting,
and (ii) any material interest of the stockholder in such business, and (b)
as to the stockholder giving the notice (i) the name and record address of
the stockholder and (ii) the class, series and number of shares of capital
stock of the Corporation which are beneficially owned by the stockholder.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures
set forth in this Article II, Section 2. The officer of the Corporation
presiding at an annual meeting shall, if the facts warrant, determine and
declare to the annual meeting that business was not properly brought before
the annual meeting in accordance with the provisions of this Article II,
Section 2, and if such officer should so determine, such officer shall so
declare to the annual meeting and any such business not properly brought
before the meeting shall not be transacted.
Section 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or
by the Restated Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), special meetings of stockholders, for any
purpose or purposes, may only be called by a majority of the entire Board of
Directors or by the Chairman of the Board and Chief Executive Officer or the
President and Chief Operating Officer.
Written notice of a special meeting stating the place, date and hour of
the meeting, shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the holders of
a majority of the votes entitled to be cast by the stockholders entitled to vote
thereat, present in person or represented by proxy may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented by proxy. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. If the
adjournment is for more than
2
<PAGE>
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting.
Section 5. VOTING. Unless otherwise required by law, the Certificate
of Incorporation, the rules or regulations of any stock exchange applicable
to the Corporation or these Bylaws, any question (other than the election of
directors) brought before any meeting of stockholders shall be decided by the
vote of the holders of a majority of the stock represented and entitled to
vote thereat. At all meetings of stockholders for the election of directors,
a plurality of the votes cast shall be sufficient to elect. Each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote
for each share of the capital stock entitled to vote thereat held by such
stockholder, unless otherwise provided by the Certificate of Incorporation.
Such votes may be cast in person or by proxy but no proxy shall be voted
after three years from its date, unless such proxy provides for a longer
period. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his discretion, may
require that any votes cast at such meeting shall be cast by written ballot.
Section 6. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder of the
Corporation who is present.
Section 7. STOCK LEDGER. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 6 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III.
DIRECTORS
Section 1. NUMBER OF DIRECTORS; QUALIFICATIONS. The total number of
persons serving on the Board of Directors of the Corporation shall be
fourteen, half of whom shall be Doubletree Directors and half of whom shall
be Promus Directors (as such terms are defined below), all of which
Doubletree Directors and Promus Directors shall be spread as evenly as
possible among the Corporation's three classes of Directors. Until December
31, 2002, (a) the Board of Directors of the Corporation and each Committee of
the Board of Directors of the Corporation as constituted following each
election of Directors shall consist of an equal number of Doubletree
Directors and Promus Directors, and (b) the size of the Board of Directors of
the
3
<PAGE>
Corporation and each Committee of the Board of Directors of the Corporation
shall not be increased unless such increase is approved by 75% of the
members. If, at any time during the period referenced in the immediately
preceding sentence, the number of Doubletree Directors and Promus Directors
serving, or that would be serving following the next stockholders' meeting at
which Directors are to be elected, as Directors of the Corporation or as
members of any Committee of the Board of Directors of the Corporation, would
not be equal, then, subject to the fiduciary duties of the Directors of the
Corporation, the Board of Directors and the Nominating Committee thereof
shall nominate for election at the next stockholders' meeting at which
Directors are to be elected, such person or persons as may be requested by
the remaining Doubletree Directors (if the number of Doubletree Directors is,
or would otherwise become, less than the number of Promus Directors) or by
the remaining Promus Directors (if the number of Promus Directors is, or
would otherwise become, less than the number of Doubletree Directors) to
ensure that there shall be an equal number of Doubletree Directors and Promus
Directors. The provisions of the preceding sentence shall not apply in
respect of any stockholders' meeting which takes place after December 31,
2002. The term "Doubletree Director" means (i) any person who was selected
by the Board of Directors of Doubletree Corporation, a Delaware corporation,
to serve as a Director of the Corporation and (ii) any person who becomes a
Director of the Corporation pursuant to the second preceding sentence and who
is designated by the Doubletree Directors; and the term "Promus Director"
means (i) any person who was selected by the Board of Directors of Promus
Hotel Corporation, a Delaware corporation, to serve as a Director of the
Corporation and (ii) any person who becomes a Director of the Corporation
pursuant to the second preceding sentence and who is designated by the Promus
Directors. The provisions of this Article III, Section 1 may be amended only
with the approval of 75% of the members of the Board of Directors of the
Corporation.
Section 2. NOMINATION OF DIRECTORS. Nominations of persons for
election to the Board of Directors of the Corporation at a meeting of
stockholders of the Corporation may be made at such meeting by or at the
direction of the Board of Directors, by any committee or persons appointed by
the Board of Directors or by any stockholder of the Corporation entitled to
vote for the election of directors at the meeting who complies with the
notice procedures set forth in this Article III, Section 2. Such nominations
by any stockholder shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided however, that in the event that less than
seventy (70) days notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder, to be
timely, must be received no later than that the close of business on the
tenth (10th) day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made, whichever first
occurs. Such stockholder's notice to the Secretary shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or
reelection as a director, (a) the name, age, business address and residence
address of the person, (b) the principal occupation or employment of the
person, (c) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person, and (d) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to the Rules and
Regulations of the Securities and Exchange Commission under Section 14 of the
4
<PAGE>
Securities Exchange Act of 1934, as amended; and (ii) as to the stockholder
giving the notice (a) the name and record address of the stockholder and (b)
the class and number of shares of capital stock of the Corporation which are
beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be
required by the Corporation to determine the eligibility of such proposed
nominee to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein. The officer of the
Corporation presiding at an annual meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 3. MEETINGS. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State
of Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined
by the Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman of the Board and Chief Executive Officer or the
President and Chief Operating Officer or a majority of the entire Board of
Directors. Notice thereof stating the place, date and hour of the meeting
shall be given to each director either by mail not less than forty-eight (48)
hours before the date of the meeting, by telephone or telegram on twenty-four
(24) hours notice, or on such shorter notice as the person or persons calling
such meeting may deem necessary or appropriate in the circumstances.
Section 4. QUORUM. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these Bylaws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be
the act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors, a majority of the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 5. ACTIONS OF BOARD OF DIRECTORS. Unless otherwise provided
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee.
Section 6. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless
otherwise provided by the Certificate of Incorporation or these Bylaws,
members of the Board of Directors of the Corporation, or any committee
designated by the Board of Directors, may participate in a meeting of the
Board of Directors or such committee by means of a conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting pursuant
to this Article III, Section 6 shall constitute presence in person at such
meeting.
5
<PAGE>
Section 7. COMMITTEES. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent allowed by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation. Each committee shall keep regular
minutes and report to the Board of Directors when required.
Section 8. EXECUTIVE COMMITTEE. The Executive Committee of the
Corporation shall have responsibility for developing the long-term strategic
plans of the Corporation, making significant capital allocation decisions and
such other duties and responsibilities as specified by the Board of
Directors. The Executive Committee shall also be required to oversee the
implementation of the 100% guest satisfaction guarantee program at all of the
Corporation's hotel properties.
Section 9. COMPENSATION. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 10. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors
or officers, or have a financial interest, shall be void or voidable solely
for this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his or their relationship or interest and as to
the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof or the
shareholders. Common or interested directors may be counted in
6
<PAGE>
determining the presence of a quorum at a meeting of the Board of Directors
or of a committee which authorizes the contract or transaction.
ARTICLE IV.
OFFICERS
Section 1. GENERAL. The officers of the Corporation shall be elected
by the Board of Directors and shall consist of: a Chairman of the Board and
Chief Executive Officer; a President and Chief Operating Officer; a
Secretary; and a Treasurer. The Board of Directors, in its discretion, may
also elect one or more Executive Vice Presidents, Senior Vice Presidents,
Vice Presidents, Assistant Secretaries, Assistant Treasurers, a Controller
and such other officers as in the judgment of the Board of Directors may be
necessary or desirable. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate of Incorporation
or these Bylaws. The officers of the Corporation need not be stockholders of
the Corporation nor, except in the case of the Chairman of the Board of
Directors, need such officers be directors of the Corporation.
Section 2. ELECTION. The Board of Directors at its first meeting held
after each annual meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their
earlier resignation or removal. Except as otherwise provided in this Article
IV, any officer elected by the Board of Directors may be removed at any time
by the affirmative vote of a majority of the Board of Directors. Any vacancy
occurring in any office of the Corporation shall be filled by the Board of
Directors. The salaries of all officers who are directors of the Corporation
shall be fixed by the Board of Directors.
Section 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed
in the name of and on behalf of the Corporation by the Chairman of the Board
and Chief Executive Officer, the President and Chief Operating Officer or any
Vice President, and any such officer may, in the name and on behalf of the
Corporation, take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any
corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident
to the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. The
Chairman of the Board shall be a member of the Board of Directors and an
officer of the Corporation, and, if present, shall preside at all meetings of
the stockholders and of the Board of Directors. The Chairman of the Board
shall be the Chief Executive Officer of the Corporation and shall
7
<PAGE>
supervise, coordinate and manage the Corporation's business and activities
and supervise, coordinate and manage its operating expenses and capital
allocation, shall have general authority to exercise all the powers necessary
for the Chief Executive Officer of the Corporation and shall perform such
other duties and have such other powers as may be prescribed by the Board of
Directors or these Amended and Restated Bylaws, all in accordance with basic
policies as established by and subject to the oversight of the Board of
Directors. Raymond E. Schultz shall serve as Chairman of the Board and Chief
Executive Officer of the Corporation until his retirement no later than
December 31, 1999. Richard M. Kelleher shall succeed Mr. Schultz as Chairman
of the Board and Chief Executive Officer no later than January 1, 2000,
unless 75% or more of the members of the Board of Directors vote otherwise.
Section 5. PRESIDENT AND CHIEF OPERATING OFFICER. The President and
Chief Operating Officer shall supervise, coordinate and manage the
Corporation's business and activities and supervise, coordinate and manage
its operating expenses and capital allocation, shall have general authority
to exercise all the powers necessary for the President and Chief Operating
Officer of the Corporation and shall perform such other duties and have such
other powers as may be prescribed by the Board of Directors or these Amended
and Restated Bylaws, all in accordance with basic policies as established by
and subject to the oversight of the Board of Directors and the Chairman of
the Board and Chief Executive Officer. In the absence or disability of the
Chairman of the Board and Chief Executive Officer, the duties of the Chairman
of the Board shall be performed and the Chairman of the Board's authority may
be exercised by the President and Chief Operating Officer and, in the event
the President and Chief Operating Officer is absent or disabled, such duties
shall be performed and such authority may be exercised by a director
designated for such purpose by the Board of Directors. Unless 75% or more of
the members of the Board of Directors vote otherwise, Richard M. Keller shall
continue to serve as President and Chief Operating Officer until Raymond E.
Schultz retires as Chairman of the Board and Chief Executive Officer.
Section 6. VICE PRESIDENTS. At the request of the President and Chief
Operating Officer or in the absence of both the Chairman of the Board and
Chief Executive Officer and the President and Chief Operating Officer, or in
the event of their inability or refusal to act , the Vice President or the
Vice Presidents if there is more than one (in the order designated by the
Board of Directors) shall perform the duties of the Chairman of the Board and
Chief Executive Officer and/or the President and Chief Operating Officer, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon such offices (other than as Chairman of the Board). Each
Vice President shall perform such other duties and have such other powers as
the Board of Directors from time to time may prescribe. If there be no Vice
President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the Chairman of the Board and Chief
Executive Officer and the President and Chief Operating Officer or in the
event of the inability or refusal of such officers to act, shall perform the
duties of such offices (other than as Chairman of the Board), and when so
acting, shall have all the powers of and be subject to all the restrictions
upon such offices (other than as Chairman of the Board).
Section 7. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or
8
<PAGE>
books to be kept for that purpose; the Secretary shall also perform like
duties for the standing committees when required. The Secretary shall give,
or cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as
may be prescribed by the Board of Directors, the Chairman of the Board and
Chief Executive Officer or the President and Chief Operating Officer, under
whose supervision the Secretary shall be. If the Secretary shall be unable
or shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board of Directors, and if there be
no Assistant Secretary, then the Board of Directors, the Chairman of the
Board and Chief Executive Officer or the President and Chief Operating
Officer may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary
or any Assistant Secretary, if there be one, shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be
attested by the signature of the Secretary or by the signature of any such
Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to
be kept or filed are properly kept or filed, as the case may be.
Section 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, the Treasurer
shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 9. ASSISTANT SECRETARIES. Except as may be otherwise provided
in these Bylaws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the Chairman of the Board and Chief Executive
Officer, the President and Chief Operating Officer, any Vice President, if
there be one, or the Secretary, and in the absence of the Secretary or in the
event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may
be assigned to them by the Board of Directors, the Chairman of the Board and
Chief Executive Officer, the President and Chief Operating Officer, any Vice
President, if there be one, or the Treasurer, and in the absence of the
9
<PAGE>
Treasurer or in the event of his disability or refusal to act, shall perform
the duties of the Treasurer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Treasurer. If required by
the Board of Directors, an Assistant Treasurer shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
Section 11. CONTROLLER. The Controller shall establish and maintain
the accounting records of the Corporation in accordance with generally
accepted accounting principles applied on a consistent basis, maintain proper
internal control of the assets of the Corporation and shall perform such
other duties as the Board of Directors, the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer or any Vice
President of the Corporation may prescribe.
Section 12. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and
powers. Initially and until such time as Richard M. Kelleher succeeds
Raymond E. Schultz as Chairman of the Board and Chief Executive Officers of
the Corporation, William L. Perocchi shall serve as Executive Vice President
and Chief Financial Officer of the Corporation, unless 75% or more of the
members of the Board of Directors vote otherwise.
ARTICLE V.
STOCK
Section 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of
the Corporation (i) by the Chairman of the Board and Chief Executive Officer,
the President and Chief Operating Officer or a Vice President and (ii) by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by him in
the Corporation.
Section 2. SIGNATURES. Any or all of the signatures on the
certificate may be a facsimile, including, but not limited to, signatures of
officers of the Corporation and countersignatures of a transfer agent or
registrar. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the
10
<PAGE>
certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate, or his legal representative, to
advertise the same in such manner as the Board of Directors shall require
and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. TRANSFERS. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these Bylaws. Transfers of stock
shall be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
11
<PAGE>
FOR IMMEDIATE RELEASE
Contact: For Doubletree: For Promus:
William L. Perocchi, CFO John C. Hawkins, Corporate
Doubletree Corporation Communications
(602)220-6810 Promus Hotel Corporation
Ruth Pachman/Michael Freitag (901)374-5529
Kekst and Company Gregg A. Swearingen, Investor
(212)521-4800 Relations
Promus Hotel Corporation
(901)374-5468
DOUBLETREE CORPORATION AND PROMUS HOTEL CORPORATION
SIGN $4.7 BILLION DEFINITIVE MERGER AGREEMENT
PHOENIX, AZ AND MEMPHIS, TN, SEPTEMBER 2, 1997 - Doubletree Corporation
(NASDAQ: TREE) and Promus Hotel Corporation (NYSE: PRH) today announced the
execution of a definitive merger agreement, creating one of the world's
largest hotel companies with a portfolio of fast-growing upscale and
mid-priced brands including Doubletree Hotels, Embassy Suites, Doubletree
Guest Suites, Homewood Suites, Club Hotels by Doubletree, Hampton Inn,
Hampton Inn & Suites, and Red Lion. This stock-for-stock transaction, valued
at approximately $4.7 billion, is a merger of equals, combining Doubletree's
strength in hotel management with Promus' strength in franchising and
building brands.
With approximately $5 billion in annual system-wide revenues under
management contract for franchise agreement, the combined company will be the
lodging industry's third largest revenue producer. As of June 30, the new
company had 1,136 hotels, approximately 172,000 rooms, and more than 40,000
employees in all regions of the United States and its major markets, as well
as selected locations in Latin America and Asia.
The terms of the agreement call for the two companies to be merged into
subsidiaries of a new holding company to be named Promus Hotel Corporation.
Doubletree shareholders will receive one share in the new company for each of
their shares in Doubletree. Promus shareholders will receive 0.925 shares in
the new company for each of their shares in Promus. The transaction is
intended to be accounted for as a pooling-of-interests and is expected to be
tax-free. The merger is
<PAGE>
expected to be accretive to earnings per share in the first full year,
excluding costs related to the transaction. The shares of the new company are
expected to be listed on the New York Stock Exchange.
The companies have agreed that:
- Promus' President and Chief Executive Officer, Raymond E. Schultz, will
serve as Chairman and Chief Executive Officer of the new company, and
as a member of the Board's Executive Committee.
- Doubletree's President and Chief Executive Officer, Richard M. Kelleher,
will serve as President and Chief Operating Officer following the
merger, and will succeed Mr. Schultz as Chief Executive Officer upon his
retirement. He will also be an ex-officio member of the Board's
Executive Committee.
- The key management team will consist of top managers of both Doubletree
and Promus, including William L. Perocchi, currently Executive Vice
President and Chief Financial Officer of Doubletree, as Executive Vice
President and Chief Financial Officer, and Thomas L. Keltner, currently
Executive Vice President and Chief Development Officer of Promus, as
Executive Vice President and Chief Development Officer.
- The new company will be governed by a 14-member Board of Directors, with
seven directors designated by each company. The Board will include
Richard J. Ferris and Peter V. Ueberroth, Doubletree Co-Chairmen, and
Michael D. Rose, Promus Chairman, who will serve as members of the
Board's Executive Committee.
- Each company has granted the other an option to acquire 19.9 percent of
its common stock under certain conditions.
Doubletree also announced that it has adopted a Stockholder Rights Plan,
the details of which will be released separately.
Approximately 40% of Doubletree's shareholders, including, among others,
General Electric Pension Trust and Kohlberg Kravis Roberts & Co., have
indicated they intend to vote in favor of the merger. GE and KKR will
continue to be represented on the Board of the new company.
<PAGE>
Raymond E. Schultz, Promus President and Chief Executive Officer, said:
"This transaction is truly a merger of equals. The combined company will
greatly benefit from the complementary strengths of each partner. Doubletree
has grown rapidly through acquisitions and an aggressive conversion strategy.
It has an outstanding record and reputation as a quality operator and brand
marketer of full service hotels. Promus has grown through franchising and
new hotel development. We have grown our proprietary brands primarily on a
one-at-a-time basis with emphasis on product quality and consistency and our
unique 100% satisfaction guaranteed service culture, which will be extended
to all Doubletree's brands."
Mr. Schultz added, "This merger is a "defining moment" for Promus. We
have achieved a significant presence in the upscale suites and extended-stay
markets, and are the industry leader in the mid-priced limited service
segment. In joining with a quality upscale full-service brand in Doubletree
Hotels, as well as its other brands, the combined company will be able to
offer a full range of quality accommodations to meet the needs of business
and leisure travelers in markets throughout the United States. Our ability to
cross-sell and cross-market our brands will be a key driver of our future
growth. We will also be able to offer to franchisees, developers and
investors an even more complete line of hotel development opportunities in
virtually every important segment of the lodging business.
"The combination of two of the strongest and most successful management
teams in our industry will provide the depth to continue to grow rapidly and
expand to new areas. Rick Kelleher and I worked together for many years, so I
know we share the same values and commitment to product quality, customer
service and creating shareholder value. The cultures of our companies are
remarkably similar and that should make the transition more seamless. We will
immediately form transition task forces so that we will hit the ground
running," Mr. Schultz continued.
Richard M. Kelleher, President and Chief Executive Officer of Doubletree
Corporation, said, "The merger of Doubletree and Promus is a natural marriage
of two strong institutions with a common heritage and a focus on growth.
Doubletree traces its roots to a company that was one of the original
franchisees of Embassy Suites. Today, Embassy Suites is the clear market
leader in
<PAGE>
the upscale all-suites segment and accounts for more than half of Promus'
operating profit. The blending of Embassy Suites and Doubletree Guest Suites
will give the new company an even stronger base on which to build market
share."
"There are also tremendous opportunities for growth in the extended-stay
market, with the upscale Homewood Suites brand complementing Doubletree's
investment in the mid-market Candlewood Hotels brand. Likewise, our smaller
Club Hotels by Doubletree and Red Lion brands will benefit from Promus'
strength as a franchisor and builder of brands. We are also excited about
having Hampton Inn, one of this decade's fastest growing mid-market brands,
included in our combined portfolio."
Mr. Kelleher added, "At a time when the lodging industry is rapidly
consolidating, the merger creates a company with significant free cash flow,
one of the strongest balance sheets in our industry and access to sources of
lower-cost capital than most of our competitors. We are very well positioned
to leverage these financial strengths to accelerate our growth in the future."
Both companies expect to realize substantial synergies and cost savings
from the merger. They will be able to combine their respective reservation
systems, information system development and maintenance, purchasing
functions, accounting, payroll, and many other corporate support functions to
provide substantial efficiencies. The companies said that their preliminary
estimated cost savings and synergies should yield approximately $15 to $20
million annually. Both companies have preferred vendor programs which provide
growing revenue streams that will benefit from the combined larger room count.
Consummation of this transaction is subject to customary conditions,
including regulatory approvals and approval of the merger by shareholders of
each company. It is anticipated that this transaction will close prior to
1997 year-end.
Morgan Stanley & Co. served as financial adviser to Doubletree and BT
Wolfensohn served as financial adviser to Promus.
<PAGE>
Doubletree Corporation is a leading hotel management company and is the
exclusive franchisor of Doubletree Hotels, Doubletree Guest Suites, Club
Hotels by Doubletree and Red Lion hotel brands.
Promus Hotel Corporation is one of the world's premier lodging companies
and the franchisor and operator of the Embassy Suites, Hampton Inn, Hampton
Inn & Suites, Homewood Suites, Embassy Vacation Resort and Hampton Vacation
Resort brands. Based in Memphis, Tenn., the company currently serves guests
with an unconditional 100% Satisfaction Guarantee in more than 900 hotels and
115,000 rooms throughout the United States, Canada, Mexico, Latin America and
Asia. A company overview and financial highlights can be found on the
internet by accessing http://www.promus-hotel.com.
Safe Harbor Statement Under the Private Securities Litigation Reform Act
of 1995: The statements contained in this release which are not historical
facts, such as those concerning future financial performance and growth, are
forward looking statements that are subject to change based on various
factors which may be beyond Doubletree's and Promus' control. Accordingly,
the future performance and financial results of the new company may differ
materially from those expressed or implied in any such forward looking
statements. Such factors include, but are not limited to, those described in
Doubletree's and Promus' filings with the Securities and Exchange Commission,
as well as various factors related to the transaction described in this
release, including the costs of integrating their business and the
realization of synergies anticipated with respect to the transaction.
(Fact Sheet Attached)
<PAGE>
DOUBLETREE AND PROMUS MERGER
FACT SHEET
TRANSACTION
- - Merger of Doubletree and Promus to create one of the world's largest
hotel companies.
- - Tax-free exchange of stock into a new issue of a new company to be called
Promus Hotel Corp.
- - Each share of Doubletree will be converted into one share of new Promus.
- - Each share of Promus will be converted into 0.925 shares of new Promus.
- - The transaction is intended to be accounted for as a pooling of interests,
with no goodwill created.
STRATEGIC RATIONALE
- - Creates a powerful presence in the U.S. hotel market with a portfolio of
brands including:
-Doubletree Hotels
-Embassy Suites
-Embassy Vacation Resort
-Doubletree Guest Suites
-Homewood Suites
-Club Hotels by Doubletree
-Hampton Inn
-Hampton Inn & Suites
-Hampton Vacation Resort
-Red Lion
- - Highlights of new Promus Hotel Corp.:
-1,136 hotels (as of June 30, 1997)
-172,000 rooms (as of June 30, 1997)
-#3 in total system-wide revenues under management or franchise
-#4 in market capitalization
-#5 in number of hotels
-#5 in number of rooms
- - Strong balance sheet, increased size and complementary hotel brands create
platform for further expansion
-Full-service segment and international market expansion opportunities
-Further development
- - Compatible organizations
-Complementary lines of business (franchising and management operations)
-History of delivering shareholder value
-#1 in customer satisfaction index
-Proven ability to grow organically and through acquisitions
-Proven ability to integrate mergers and acquisitions
<PAGE>
DOUBLETREE AND PROMUS MERGER
FACT SHEET CONTINUED
POTENTIAL MERGER BENEFITS
SHAREHOLDERS
- - Promus' franchise and development expertise combined with Doubletree's
management expertise provides significant opportunities for growth.
- - Potential for savings in corporate overhead, information technology,
purchasing, reservation systems and financing costs.
- - Cross-selling opportunities
- - Enhances new and existing developer, franchisee and investor relationships
- - Increased financial strength
-Larger, more diversified asset base
-Maintains low debt level
- - Strong cash flow from business and increase size enhance prospects for
continued growth
- - Likely reduction in cost of capital
CUSTOMERS
- - Ability to leverage a larger, more diversified portfolio of brand names
- - Continued focus on providing quality service across entire range of hotel
brands
- - Ability to leverage Doubletree brands through Promus franchise network
EMPLOYEES
- - New company will be one of the strongest and best positioned domestic U.S.
hotel companies
- - Ability to participate both financially and professionally in growth
companies
PRO FORMA FINANCIAL PROFILE
Annual System-wide Revenues under Management or Franchise $5.0 billion
1996 Revenues $937 million
1996 EBITDA $322 million
1996 Net Income $106 million
Book Value (as of June 30, 1997) $1.1 billion
Assets (as of June 30, 1997) $2.4 billion
Debt to Capital (as of June 30, 1997) 40%
Shares Outstanding (as of August 29, 1997) 86 million
Market Capitalization (as of August 29, 1997) $4.0 billion
Enterprise Value (as of August 29, 1997) $4.7 billion
ORGANIZATION
Key Officers:
Chairman & CEO Raymond E. Schultz
President & COO Richard M. Kelleher
Chief Financial Officer William L. Perocchi
Chief Development Officer Thomas L. Keltner
Board of Directors 14 Members (7 each from Promus and Doubletree)
Employees Approximately 40,000
State of Incorporation Delaware
<PAGE>
DOUBLETREE AND PROMUS MERGER
FACT SHEET CONTINUED
HOTEL PORTFOLIO (AS OF 6/30/07)
BRAND HOTELS ROOMS REVPAR
Doubletree Guest Suites 42 8,987 $95.34
Embassy Suites 136 32,810 86.97
Homewood Suites 43 4,439 71.84
Doubletree Hotels 101 30,368 70.54
Red Lion 16 2,902 59.29
Club Hotels 19 3,977 51.77
Hampton Inn & Suites 23 2,500 48.75
Hampton Inn 679 73,326 46.00
Non-Branded 77 12,344 58.38
------ -------
TOTAL 1,136 171,653
OWNERSHIP HOTELS ROOMS
Owned 45 8,105
Joint Venture 26 7,264
Leased 86 14,448
Managed 164 41,920
Franchise 815 99,916
------ -------
TOTAL 1,136 171,653
OTHER INFORMATION
Form of Transaction Merger of equals, stock-for-stock exchange
Subject to Approval of Promus and Doubletree hareholders;
approximately 40% of Doubletree shareholders
have agreed to vote in favor of the merger
Hart-Scott-Rodino review
Expected Closing By year-end 1997
