AGREEMENT AND PLAN OF MERGER among BRAVEHEART INVESTORS LP, BRAVEHEART II REALTY (OHIO) CORP., BRAVEHEART II PROPERTIES HOLDING LLC, BRAVEHEART II PROPERTIES COMPANY LLC, BOYKIN LODGING COMPANY and BOYKIN HOTEL PROPERTIES, L.P. May 19, 2006
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Exhibit 2.1
EXECUTION COPY
EXECUTION COPY
among
BRAVEHEART INVESTORS LP,
BRAVEHEART II REALTY (OHIO) CORP.,
BRAVEHEART II PROPERTIES HOLDING LLC,
BRAVEHEART II PROPERTIES COMPANY LLC,
XXXXXX LODGING COMPANY
and
XXXXXX HOTEL PROPERTIES, L.P.
May 19, 2006
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This Agreement and Plan of Merger (this “Agreement”) is entered into as of May 19,
2006, by and among BRAVEHEART INVESTORS LP, a Delaware limited partnership (“Parent”),
BRAVEHEART II REALTY (OHIO) CORP., an Ohio corporation and a wholly owned Subsidiary of Parent
(“REIT Merger Sub”), BRAVEHEART II PROPERTIES HOLDING LLC, a Delaware limited liability
company (“OP Holdco”), BRAVEHEART II PROPERTIES COMPANY LLC, an Ohio limited liability
company and an indirectly wholly owned Subsidiary of Parent (“OP Merger Sub”), XXXXXX
LODGING COMPANY, an Ohio corporation (the “Company”), and XXXXXX HOTEL PROPERTIES, L.P., an
Ohio limited partnership (the “Partnership”). Parent, REIT Merger Sub, OP Holdco, OP
Merger Sub, the Company and the Partnership are referred to collectively herein as the
“Parties,” and each individually as a “Party.”
RECITALS
A. The Managers of Parent and the Board of Directors of REIT Merger Sub have determined that
the acquisition of the Company, other than the Excluded Assets (which Parent and REIT Merger Sub do
not desire to acquire), pursuant to a cash merger of REIT Merger Sub into the Company is desirable
and, by resolutions duly adopted, have approved and adopted this Agreement.
B. The Board of Directors of the Company has determined that the cash merger of the REIT
Merger Sub into the Company is desirable, and, by resolutions duly adopted, have approved and
adopted this Agreement.
C. The Company, as General Partner of the Partnership, and REIT Merger Sub, as managing member
of OP Merger Sub, have determined that the acquisition of the Partnership by Parent pursuant to a
cash merger of OP Merger Sub into the Partnership is desirable and have approved and adopted this
Agreement.
D. The Parties desire to make certain representations, warranties, covenants and agreements in
connection with the aforementioned mergers and also to prescribe various conditions to the
aforementioned mergers.
ARTICLE I
DEFINITIONS
“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations of the SEC
promulgated under the Exchange Act.
“Aggregate Common Share Merger Consideration” means the Aggregate Company Merger
Consideration less the Aggregate Limited Partner Merger Consideration, if any.
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“Aggregate Company Merger Consideration” means (i) $11.00 less the REIT Dividend Per
Share Amount multiplied by (ii) the number of Common Share Equivalents.
“Aggregate Limited Partner Merger Consideration” means the Common Unit Merger
Consideration multiplied by the number of Common Units held by Limited Partners outstanding
immediately prior to the Effective Time as to which a Redemption Notice has not been delivered.
“Agreement” has the meaning set forth in the first paragraph of this Agreement.
“Bellboy” means Bellboy, Inc., a Delaware corporation.
“BMC” means Xxxxxx Management Company Limited Liability Company, an Ohio limited
liability company.
“Closing” has the meaning set forth in Section 2.10.
“Closing Agreement” has the meaning set forth in Section 3.1(n)(ix).
“Closing Date” has the meaning set forth in Section 2.10.
“Code” means the Internal Revenue Code of 1986, as amended.
“Commitment Letter” has the meaning set forth in Section 3.2(d).
“Common Share” means a common share, without par value, of the Company, together with
the Company Right related thereto.
“Common Shareholder” means a Person who or which is the holder of record of a Common
Share.
“Common Share Equivalents” means (i) the number of Common Shares (whether or not
restricted) outstanding immediately prior to the Effective Time (other than Parent-Owned Shares and
Treasury Shares) on a fully-diluted basis, treating each Share Unit outstanding immediately prior
to the Effective Time as a Common Share but without including any Common Shares issuable upon
exercise of any Incentive Options plus (ii) the number of Common Shares that could be issued to
Limited Partners assuming that Redemption Notices have been delivered with respect to all Common
Units outstanding immediately prior to the Effective Time.
“Common Share Merger Consideration” means the quotient of (i) the Aggregate Common
Share Merger Consideration divided by (ii) the number of Fully-diluted Common Shares.
“Common Unit” means a Common Partnership Unit of the Partnership.
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“Common Unit Merger Consideration” means the quotient of (i) the Hypothetical
Aggregate Partnership Merger Consideration divided by (ii) the number of Fully-diluted Common
Units.
“Company” has the meaning set forth in the first paragraph of this Agreement.
“Company Articles” means the Amended and Restated Articles of Incorporation, as
amended, of the Company as of the date of this Agreement as filed with the Secretary of State of
Ohio.
“Company Permits” has the meaning set forth in Section 3.1(o).
“Company Property” has the meaning set forth in Section 3.1(p)(i).
“Company Regulations” means the Code of Regulations of the Company as of the date of
this Agreement.
“Company Rights” has the meaning set forth in Section 3.1(e).
“Company Shareholder Approval” has the meaning set forth in Section 3.1(u).
“Company Superior Proposal” means a Company Takeover Proposal that the Company’s Board
of Directors determines in good faith, after consultation with counsel and a financial advisor of
nationally recognized reputation, taking into account all relevant material terms (including,
without limitation, financial terms, timing, ability to finance and likelihood of completion), of
such Company Takeover Proposal and this Agreement, is more favorable to the shareholders of the
Company and the Limited Partners than the Mergers and the other transactions contemplated by this
Agreement.
“Company Takeover Proposal” means any inquiry, proposal or offer from any Person
relating to any (i) direct or indirect acquisition or purchase of a business or assets (other than
the Excluded Assets) that constitutes 20% or more of the net revenues, net income or the assets
(other than the Excluded Assets) of the Company and its Subsidiaries on a consolidated basis, (ii)
direct or indirect acquisition or purchase of 20% or more of any class of equity securities of the
Company or the Partnership, (iii) tender offer or exchange offer that if consummated would result
in any Person or “group” (as such term is used in Rule 13d-5 under the Exchange Act) beneficially
owning (as determined in accordance with Rule 13d-3 under the Exchange Act) 20% or more of any
class of equity securities of the Company or the Partnership or the right to acquire such
beneficial ownership or (iv) merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or the Partnership;
provided, however, that the term “Company Takeover Proposal” shall not include the
transactions contemplated by this Agreement.
“Confidentiality Agreement” has the meaning set forth in Section 4.3(c).
“Debt Financing” has the meaning set forth in Section 3.2(d).
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“Deposit Agreement” has the meaning set forth in Section 2.9(c).
“Depositary” has the meaning set forth in Section 2.9(c).
“Disclosure Schedule” has the meaning set forth in Section 3.1.
“Dissenting Share” means a Common Share held of record by a Common Shareholder who has
properly exercised dissenters’ rights under the OGCL; provided, however, that if such Common
Shareholder for any reason fails to perfect such dissenters’ rights, such Common Shareholder’s
Common Shares shall cease to constitute Dissenting Shares.
“Effective Time” has the meaning set forth in Section 2.10.
“Employee Benefit Plans” has the meaning set forth in Section 3.1(m).
“Environmental Law” has the meaning set forth in Section 3.1(p)(viii).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Assets” means (i) the Excluded Properties, (ii) all of the equity interests
in Captiva Villas Development, LLC, a Delaware limited liability company, and (iii) all of the
equity interests in Marathon Partners Manager LLC, a Delaware limited liability company.
“Excluded Properties” means all of the interest of the Company and each of its
Subsidiaries in respect of each of the following properties (including, with respect thereto, all
real property, improvements, equipment, inventory, personal property and other assets located at
such properties): (i) the Marco Hotel, (ii) the Pink Shell Beach Resort and (iii) the Banana Bay
Resort and Marina located in Marathon, Florida.
“Excluded Property Contracts” means (i) the Limited Liability Company Interests
Purchase Agreement, dated as of the date hereof, by and among BellBoy, New Banana Bay LLC, a
Delaware limited liability company, and JABO LLC, a Delaware limited liability company, (ii) the
Limited Liability Company Interests and Asset Purchase Agreement, dated as of the date hereof, by
and among the Partnership, Sanibel View Development, LLC, a Delaware limited liability company,
White Sand Villas Development, LLC, a Delaware limited liability company, BeachBoy, LLC, a Delaware
limited liability company, Pink Shell Realty, LLC, a Delaware limited liability company, and
BellBoy, as sellers, and New Pink Shell LLC, a Delaware limited liability company, and JABO LLC, a
Delaware limited liability company, and (iii) the Marco Agreement.
“Expenses” has the meaning set forth in Section 6.3.
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“Financing” has the meaning set forth in Section 4.3(i).
“Fully-diluted Common Shares” means the number of Common Shares (whether or not
restricted) outstanding immediately prior to the Effective Time (other than Parent-Owned Shares and
Treasury Shares) on a fully-diluted basis, treating each Share Unit outstanding immediately prior
to the Effective Time as a Common Share, and including the number of Common Units as to which a
Redemption Notice has been delivered.
“Fully-diluted Common Units” means the sum of (i) the number of Common Units held by
the Limited Partners and the General Partner outstanding immediately prior to the Effective Time
plus (ii) the number of Share Units outstanding immediately prior to the Effective Time.
“GAAP” has the meaning set forth in Section 3.1(g)(i).
“General Partner” has the meaning set forth in the Partnership Agreement.
“Governmental Entity” has the meaning set forth in Section 3.1(j).
“Guaranty” means the Agreement and Guaranty, dated as of the date hereof, by Guarantor
in favor of the Company.
“Guarantor” means Westbridge Hospitality Management Limited, a Bermuda company, as
general partner of Westbridge Hospitality Fund, L.P., a Bermuda exempted limited partnership.
“Hazardous Materials” has the meaning set forth in Section 3.1(p)(ix).
“Hypothetical Aggregate Partnership Merger Consideration” means (i) the Aggregate
Company Merger Consideration less (ii) the outstanding principal amount immediately prior to the
Effective Time (plus all accrued but unpaid interest existing immediately prior to the Effective
Time) of the Intercompany Note.
“Incentive Options” has the meaning set forth in Section 3.1(e).
“Indemnified Party” has the meaning set forth in Section 4.2(a)(i).
“Intercompany Note” means the Second Amended and Restated Convertible Promissory Note,
dated November 4, 2001, from the Partnership to the Company.
“In the Money Options” means Incentive Options with an exercise price of less than
$11.00 per Common Share outstanding immediately prior to the REIT Effective Time.
“Knowledge of the Company” means the actual knowledge without any duty of
investigation of Xxxxxx Xxxxxx, Chairman and Chief Executive Officer, Xxxxxxx X. Xxxxx, President
and Chief Operating Officer, Xxxxxxx X. Xxxxx, Executive Vice President, Chief
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Financial Officer and Chief Investment Officer, Xxxxxx X. Xxxxxxxxx, Senior Vice President,
General Counsel and Secretary, Xxxx X. Xxxxxxxxx, Senior Vice President – Acquisitions, Xxxxx
Xxxxxxx, Vice President/Controller of the Company, and Xxxxxxx X. XxXxxxx, Director of Project
Management.
“Liens” means mortgages, pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever, rights of first refusal or offer and options.
“Limited Partners” has the meaning set forth in Section 2.9(d).
“Long-Term Incentive Plan” means the Xxxxxx Lodging Company Long-Term Incentive Plan.
“Losses” has the meaning set forth in Section 4.2(a)(ii).
“Marco Agreement” has the meaning set forth in Section 6.2(a).
“Marco Hotel” has the meaning set forth in Section 6.2(a).
“Marco Purchaser” has the meaning set forth in Section 6.2(a).
“Marco Termination Notice” has the meaning set forth in Section 6.2(a).
“Material Adverse Effect” means a material adverse effect on the business, assets,
financial condition or results of operations of the Company and its Subsidiaries, taken as a whole,
or a material adverse effect on the ability of the Company or the Partnership, or REIT Merger Sub,
Parent, OP Holdco or OP Merger Sub, to consummate the transactions contemplated hereby or an
occurrence or change in circumstances that would reasonably be expected to prevent or materially
delay the consummation of the transactions contemplated hereby; provided, however, that a Material
Adverse Effect shall not include any change in or effect upon the business, assets, financial
condition or results of operations of the Company and its Subsidiaries, taken as a whole, directly
or indirectly arising out of or attributable to or that is a consequence of (i) general economic
changes, (ii) changes in the United States financial markets generally, (iii) changes in national
or international political or social conditions including the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national emergency or war, or the
occurrence of any military or terrorist attack upon or within the United States, or any of its
territories, possessions or diplomatic or consular offices or upon any military installation,
equipment or personnel of the United States, (iv) any change, in and of itself, in the price or
trading volume of the Common Shares or the Series 2002 A Preferred Shares, (v) the failure, in and
of itself, of the Company to meet any internal or published projections, forecasts or revenue or
earnings predictions for any period ending on or after the date of this Agreement, (vi) the loss by
the Company or any of its Subsidiaries of any of its customers, suppliers, franchisors or employees
solely as a result of the transactions contemplated hereby, (vii) changes or losses arising as a
result of weather or natural disaster, (viii) seasonal fluctuations in the business and operations
of the Company and its Subsidiaries, (ix) any change, liability or adverse effect disclosed in or
specifically contemplated by this Agreement or the
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Disclosure Schedule, (x) changes arising as a result of the public announcement of this Agreement
or the transactions contemplated hereby, or (xi) any action or change specifically contemplated by
the provisions of this Agreement.
“Material Contract” means, with respect to the Company, the Partnership or any of the
Subsidiaries: (i) any loan agreement, indenture, note, bond, debenture or other document or
agreement evidencing a capitalized lease obligation or other indebtedness to any Person in a
principal amount greater than or equal to $500,000, (ii) each brokerage agreement, management
agreement, hotel franchise agreement and ground lease or other real property lease with respect to
each Company Property, (iii) any agreement that grants any option, right of first or last refusal
or right of first or last offer or similar right to acquire any real property assets or other
material assets of the Company or its Subsidiaries or that limits or purports to limit, in any
material manner, the ability of the Company, or any of its Subsidiaries to own, operate, sell,
transfer, pledge or otherwise dispose of any material amount of assets or business, (iv) any
employment agreement or any agreement or arrangement that contains any severance pay or
post-employment liabilities or obligations to any current employee of the Company or any of its
Subsidiaries, other than as required under law, (v) any non-competition agreement or other contract
or agreement that contains covenants that restrict the Company’s or any Subsidiary’s ability to (A)
operate a hotel or (B) conduct activities incident thereto except, in the case of this clause (B),
as would not have a Material Adverse Effect, (vi) any other agreement filed on or prior to the date
of this Agreement as an exhibit to the SEC Documents pursuant to Item 601(b)(10) of Regulation S-K
of the SEC; (vii) any license or other contract with respect to the name or marks under which the
Company Properties are operated; (viii) any contract pursuant to which the Company or any of its
Subsidiaries has any material contractual liability for indemnification or otherwise under any
agreement relating to the sale or lease of real estate or to pay additional purchase price for any
of the Company Properties or any other contracts pursuant to which the Company has indemnification
obligations that could reasonably be expected to exceed $500,000; (ix) with the exception of any
directly or indirectly wholly owned Subsidiaries, any partnership, limited liability company, joint
venture or similar contract or arrangement with respect to ownership or governance of any
Subsidiary or other entity in which the Company or the Partnership has a direct or indirect
interest; (x) any Tax Sharing Arrangement; (xi) any Tax Protection Agreements; and (xii) any other
contract providing for annual consideration payable thereunder in excess of $100,000 and that is
not terminable upon notice of 90 days or less.
“Mergers” means the REIT Merger and the OP Merger.
“Noncumulative Preferred Shares” has the meaning set forth in Section 3.1(e).
“OGCL” means the General Corporation Law of the State of Ohio, as amended.
“OLPL” means the Limited Partnership Law of the State of Ohio, as amended.
“OP Effective Time” has the meaning set forth in Section 2.10.
“OP Holdco” has the meaning set forth in the first paragraph of this Agreement.
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“OP Merger” has the meaning set forth in Section 2.1.
“OP Merger Certificate” means the Certificate of Merger with respect to the OP Merger,
containing the provisions required by, and executed in accordance with, the OLPL.
“OP Merger Sub” has the meaning set forth in the first paragraph of this Agreement.
“Options” has the meaning set forth in Section 3.1(e).
“Ordinary Course of Business” means the ordinary course of business consistent with
past practice.
“Parent” has the meaning set forth in the first paragraph of this Agreement.
“Parent Financing Document” has the meaning set forth in Section 4.3(i).
“Parent-Owned Share” means a Common Share or Series 2002-A Preferred Share that Parent
or any of its Affiliates, including REIT Merger Sub, OP Holdco and OP Merger Sub, owns beneficially
within the meaning of Rule 13d-3 under the Exchange Act.
“Parent Payment Amount” means an amount equal to the Aggregate Company Merger
Consideration plus the amount payable with respect to In the Money Options pursuant to Section
4.3(f)(i) plus the amount payable pursuant to Section 4.3(f)(ii)(B) with respect to Share Unit
Accounts in installment payment status immediately prior to the REIT Effective Time.
“Parties” has the meaning set forth in the first paragraph of this Agreement.
“Partnership” has the meaning set forth in the first paragraph of this Agreement.
“Partnership Agreement” means the Third Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of September 30, 2002, as amended.
“Paying Agent” has the meaning set forth in Section 2.9(a).
“Person” means an individual, corporation, partnership, limited liability company,
association, trust or any other entity, organization or group (as such term is used in Rule 13d-5
under the Exchange Act), including a Governmental Entity.
“Preferred Shareholder” means a Person who is or which is, directly or indirectly
through the ownership of depositary shares, the holder of Series 2002-A Preferred Shares.
“Preferred Share Merger Consideration” has the meaning set forth in Section 2.7(c).
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“Preferred Unit” means a Series 2002-A Preferred Partnership Unit of the Partnership.
“Proxy Statement” has the meaning set forth in Section 4.1(c).
“Redemption Notice” means a Notice of Redemption as defined in the Partnership
Agreement.
“REIT” has the meaning set forth in Section 3.1(n)(ii).
“REIT Dividend” has the meaning set forth in Section 4.3(k).
“REIT Dividend Per Share Amount” means an amount equal to (i) the REIT Dividend
divided by (ii) the number of Common Shares issued and outstanding on the record date for the
applicable REIT Dividend.
“REIT Effective Time” has the meaning set forth in Section 2.10.
“REIT Merger” has the meaning set forth in Section 2.2.
“REIT Merger Certificate” means the Certificate of Merger with respect to the REIT
Merger, containing the provisions required by, and executed in accordance with, the OGCL.
“REIT Merger Sub” has the meaning set forth in the first paragraph of this Agreement.
“Retention Plans” has the meaning set forth in Section 4.2(b).
“Rights Agreement” has the meaning set forth in Section 3.1(e).
“Rule 16b-3 No-Action Letter” means the no-action letter of the SEC Staff to Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP publicly available as of January 12, 1999.
“SEC” means the United States Securities and Exchange Commission.
“SEC Documents” has the meaning set forth in Section 3.1(g).
“Securities Act” means the Securities Act of 1933, as amended.
“Series 2002-A Preferred Shares” has the meaning set forth in Section 3.1(e).
“Share Unit Plan” has the meaning set forth in Section 4.3(f)(ii)(A).
“Share Units” has the meaning set forth in Section 4.3(f)(ii)(A).
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“Share Unit Account” has the meaning set forth in Section 4.3(f)(ii)(A).
“Special Meeting” has the meaning set forth in Section 4.3(a).
“Standstill Period” has the meaning set forth in the Section 6.2(b).
“Subsidiary” means any corporation, partnership, limited liability company, joint
venture, trust, unincorporated organization, or other form of business or legal entity with respect
to which another specified entity (i) has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors or is the general partner or managing member or
(ii) owns or controls, directly or indirectly, at least 25% of the equity or other ownership
interests.
“Surviving Corporation” has the meaning set forth in Section 2.2.
“Surviving Partnership” has the meaning set forth in Section 2.1.
“Tax” means any federal, state or local income, sales, use, franchise, transfer and
recording taxes, withholding (including dividend withholding and withholding required pursuant to
Sections 1445 and 1446 of the Code) employment, payroll, or excise tax, charges, levy, tariff or
governmental charge (domestic or foreign), together with penalties, interest or additions thereto.
“Tax Protection Agreement” means any agreement pursuant to which the Company, the
Partnership or any of its Subsidiaries has agreed to indemnify any Person for Taxes arising as a
result of any sale or other disposition, for tax purposes, of any Company Property or upon
repayment, refinancing or restructuring of any indebtedness of the Partnership or of any guarantees
of such indebtedness.
“Tax Return” means any return, reports, declarations, statements or other information
required to be supplied to a taxing authority in connection with Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
“Tax Ruling” has the meaning set forth in Section 3.1(n)(ix).
“Tax Sharing Arrangement” means any written or unwritten agreement or arrangement for
the allocation or payment of federal, state or local income Tax liabilities or payment for federal,
state or local income Tax benefits with respect to any Person other than the Company or any of its
Subsidiaries.
“Termination Fee” has the meaning set forth in Section 6.3(b).
“Treasury Share” means a Common Share or Series 2002-A Preferred Share directly or
indirectly owned by the Company.
“UBS” means UBS Securities LLC.
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ARTICLE II
THE MERGERS
2.1 The OP Merger.
Subject to the terms and conditions hereof, at the OP Effective
Time, OP Merger Sub shall merge with and into the Partnership (the “OP Merger”). Following
the OP Merger, the separate existence of OP Merger Sub shall cease, and the Partnership shall
continue as the surviving limited partnership. The Partnership, in its capacity as the limited
partnership surviving the OP Merger, is hereinafter sometimes referred to as the “Surviving
Partnership.”
2.2 The REIT Merger.
Subject to the terms and conditions hereof, immediately
following the OP Effective Time and at the REIT Effective Time, REIT Merger Sub shall merge with
and into the Company (the “REIT Merger”). Following the REIT Merger, the separate existence
of REIT Merger Sub shall cease, and the Company shall continue as the surviving corporation. The
Company, in its capacity as the corporation surviving the REIT Merger, is hereinafter sometimes
referred to as the “Surviving Corporation.” OP Holdco will become a wholly owned
Subsidiary of the Surviving Corporation.
2.3 Effects of the Mergers.
The OP Merger shall have the effects set forth in Section
1782.434 of the OLPL. The REIT Merger shall have the effects set forth in Section 1701.82 of the
OGCL. The Surviving Partnership and the Surviving Corporation may, at any time after the OP
Effective Time and the REIT Effective Time, respectively, take any action (including executing and
delivering any document) in the name and on behalf of either the Partnership or OP Merger Sub or
the Company or REIT Merger Sub, respectively, in order to carry out and effectuate the transactions
contemplated by this Agreement.
2.4 Surviving Partnership of the OP Merger.
(a) Certificate of Limited Partnership. The certificate of limited partnership of the
Partnership immediately prior to the OP Effective Time shall continue as the certificate of limited
partnership of the Surviving Partnership after the OP Effective Time.
(b) Agreement of Limited Partnership. The Partnership Agreement of the Partnership
immediately prior to the OP Effective Time shall continue as the agreement of limited partnership
of the Surviving Partnership after the OP Effective Time.
(c) Officers. The officers of OP Merger Sub immediately prior to the OP Effective
Time shall be the officers of the Surviving Partnership until the earlier of their resignation or
removal or until their successors are elected or appointed and qualified, as the case may be.
2.5 Surviving Corporation of the REIT Merger.
(a) Articles of Incorporation. The Company Articles immediately prior to the REIT
Effective Time shall continue as the articles of incorporation of the Surviving Corporation after
the REIT Effective Time.
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(b) Code of Regulations. The Company Regulations immediately prior to the REIT
Effective Time shall continue as the Code of Regulations of the Surviving Corporation after the
REIT Effective Time.
(c) Board of Directors. The directors of REIT Merger Sub immediately prior to the
REIT Effective Time shall be the initial directors of the Surviving Corporation until the earlier
of their resignation or removal or until their successors are elected or appointed and qualified,
as the case may be.
(d) Officers. The officers of REIT Merger Sub immediately prior to the REIT Effective
Time shall be the officers of the Surviving Corporation until the earlier of their resignation or
removal or until their successors are appointed and qualified, as the case may be.
2.6 Conversion of Interests upon OP Merger.
(a) Conversion of OP Merger Sub Interests. At the OP Effective Time, (i) each equity
interest in OP Merger Sub issued and outstanding immediately prior to the OP Effective Time owned
by OP Holdco shall be converted into one common unit in the Surviving Partnership, and (ii) each
equity interest in OP Merger Sub issued and outstanding immediately prior to the OP Effective Time
owned by REIT Merger Sub shall be canceled and no consideration shall be delivered in exchange
therefor or in respect thereof. OP Holdco shall automatically be admitted as the new limited
partner of the Surviving Partnership.
(b) Conversion of Common Units. At the OP Effective Time, (i) each Common Unit issued
and outstanding immediately prior to the OP Effective Time as to which a Redemption Notice has not
been delivered (other than any Common Unit owned by the Company or any Subsidiary of the Company)
shall be converted into the right to receive a cash payment in an amount equal to the Common Unit
Merger Consideration, (ii) each Common Unit issued and outstanding immediately prior to the OP
Effective Time as to which a Redemption Notice has been delivered (other than any Common Unit owned
by the Company or any Subsidiary of the Company) shall be converted into the right to receive a
cash payment in an amount equal to the Common Share Merger Consideration, (iii) each Common Unit
issued and outstanding immediately prior to the OP Effective Time owned by any Subsidiary of the
Company shall be canceled and no consideration shall be delivered in exchange therefor or in
respect thereof and (iv) each Common Unit issued and outstanding immediately prior to the OP
Effective Time owned by the Company shall remain as one issued and outstanding common unit of the
Surviving Partnership. The Company shall be the general partner of the Surviving Partnership. At
the OP Effective Time, all Common Units issued and outstanding immediately prior to the OP
Effective Time (other than Common Units owned by the Company) shall no longer be outstanding and
shall automatically be canceled and cease to exist, and each holder (other than the Company) of
Common Units issued and outstanding immediately prior to the OP Effective Time shall cease to have
any rights with respect thereto, except (other than with respect to Common Units owned by any
Subsidiary of the Company) the right to receive (i) the Common Unit Merger Consideration in the
case of a Common Unit as to which a Redemption Notice has not been delivered at the Effective Time
or (ii) the Common Share Merger Consideration in the
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case of a Common Unit as to which a Redemption Notice has been delivered at the Effective
Time.
(c) Conversion of Preferred Units. At the OP Effective Time, each Preferred Unit
issued and outstanding immediately prior to the OP Effective Time shall be canceled and cease to
exist and no consideration shall be delivered in exchange therefor or in respect thereof.
2.7 Conversion of Shares upon REIT Merger.
(a) Conversion of REIT Merger Sub Shares. At the REIT Effective Time, each common
share, without par value, of REIT Merger Sub issued and outstanding immediately prior to the REIT
Effective Time shall be converted into one common share, without par value, of the Surviving
Corporation, which shall thereafter constitute all of the issued and outstanding capital stock of
the Surviving Corporation.
(b) Conversion of Common Shares. At the REIT Effective Time, (i) each Common Share
issued and outstanding immediately prior to the REIT Effective Time (other than any Dissenting
Share, Treasury Share or Parent-Owned Share) shall be converted into the right to receive a cash
payment in an amount equal to the Common Share Merger Consideration, (ii) each Dissenting Share
issued and outstanding immediately prior to the REIT Effective Time shall be converted into the
right to receive payment from the Surviving Corporation in accordance with the provisions of
Sections 1701.84 and 1701.85 of the OGCL and (iii) each Treasury Share and each Parent-Owned Share
issued and outstanding immediately prior to the REIT Effective Time shall be canceled and no
consideration shall be delivered in exchange therefor or in respect thereof. As of the REIT
Effective Time, all Common Shares issued and outstanding immediately prior to the REIT Effective
Time shall no longer be outstanding and shall automatically be canceled and cease to exist, and
each holder of a certificate that, immediately prior to the REIT Effective Time, represented Common
Shares shall cease to have any rights with respect thereto, except (other than with respect to
certificates previously representing Treasury Shares or Parent-Owned Shares) the right to receive
the Common Share Merger Consideration, or, in the case of any Dissenting Shares, the rights, if
any, accorded under the OGCL with respect thereto.
(c) Conversion of Series 2002-A Preferred Shares. At the REIT Effective Time, (i)
each Series 2002-A Preferred Share issued and outstanding immediately prior to the REIT Effective
Time (other than any Treasury Share or Parent-Owned Share) shall be converted into the right to
receive a cash payment of $250.00 (plus all accrued and unpaid dividends (whether or not declared)
existing immediately prior to the REIT Effective Time) (the “Preferred Share Merger
Consideration”) and (ii) each Treasury Share and Parent-Owned Share issued and outstanding
immediately prior to the REIT Effective Time shall be canceled and no consideration shall be
delivered in exchange therefor or in respect thereof. As of the REIT Effective Time, all Series
2002-A Preferred Shares issued and outstanding immediately prior to the REIT Effective Time shall
no longer be outstanding and shall automatically be canceled and cease to exist, and each holder of
a certificate that, immediately prior to the REIT Effective Time, represented Series 2002-A
Preferred Shares shall cease to have any rights with respect
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thereto, except (other than with respect to certificates previously representing Treasury
Shares or Parent-Owned Shares) the right to receive the Preferred Share Merger Consideration.
2.8 Adjustments to Merger Consideration.
If during the period between the date of
this Agreement and the Effective Time, any change in the number of outstanding Common Shares,
Series 2002-A Preferred Shares or Common Units shall occur, including by reason of any
reclassification, recapitalization, share or unit dividend, share or unit split, reverse split or
combination, exchange or readjustment of Common Shares, Series 2002-A Preferred Shares or Common
Units, or any share dividend thereon with a record date during such period (but not as a result of
(i) the exercise of outstanding Incentive Options or (ii) the redemption of any outstanding Common
Units for Common Shares), the Common Share Merger Consideration, the Preferred Share Merger
Consideration or the Common Unit Merger Consideration, as applicable, shall be appropriately
adjusted.
2.9 Payment Procedure.
(a) Paying Agent. On the date hereof, Parent (on behalf of itself and OP Holdco)
shall designate National City Bank as paying agent for the Mergers (the “Paying Agent”).
Immediately prior to the OP Effective Time, Parent shall deposit with the Paying Agent (i) the
Parent Payment Amount and (ii) an amount of cash sufficient to enable the Paying Agent to effect
the payments for Series 2002-A Preferred Shares contemplated by Section 2.7(c). In no event shall
any holder of Common Shares, Series 2002-A Preferred Shares or Common Units be entitled to any
interest or earnings on the amounts deposited by Parent with the Paying Agent pending distribution.
(b) Common Shares. As soon as practicable after the REIT Effective Time, but in no
event later than five business days thereafter, Parent shall cause the Paying Agent to send to each
holder of certificates for Common Shares (other than Dissenting Shares or Parent-Owned Shares) (i)
a letter of transmittal and (ii) instructions for use in effecting the surrender of the
certificates for Common Shares in exchange for the cash payment provided for by Section 2.7(b).
Upon surrender of a certificate representing Common Shares for cancellation to the Paying Agent
together with such letter of transmittal, duly executed and completed in accordance with the
instructions thereon, the holder of such certificate shall be entitled to receive in exchange
therefor the aggregate Common Share Merger Consideration to which the holder of Common Shares is
entitled pursuant to Section 2.7(b).
(c) Preferred Shares. All of the Series 2002-A Preferred Shares are held of record by
National City Bank, a national banking association, as depositary (the “Depositary”), under
the Deposit Agreement, dated as of October 1, 2002 (the “Deposit Agreement”), between the
Company and the Depositary. Upon surrender to the Paying Agent by the Depositary of the
certificate(s) representing the Series 2002-A Preferred Shares for cancellation, together with a
duly executed stock power, the Paying Agent shall pay to the Depositary by wire transfer of
immediately available funds an amount equal to the aggregate Preferred Share Merger Consideration
in order to permit the Depositary to distribute the aggregate Preferred Share Merger Consideration
to holders of depositary receipts representing such Series 2002-A Preferred Shares in accordance
with the Deposit Agreement.
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(d) Common Units. As soon as reasonably practicable after the Effective Time, but in
no event later than five business days thereafter, the Paying Agent shall mail to each limited
partner holding Common Units (the “Limited Partners”) (i) as to which a Redemption Notice
has not been delivered at the Effective Time, at the address set forth in the Disclosure Schedule a
certified check payable to such Limited Partner in an amount equal to the Common Unit Merger
Consideration multiplied by the number of Common Units owned by such Limited Partner immediately
prior to the Effective Time and (ii) as to which a Redemption Notice has been delivered at the
Effective Time, at the address set forth in the Disclosure Schedule a certified check payable to
such Limited Partner in an amount equal to the Common Share Merger Consideration multiplied by the
number of Common Shares issuable upon redemption of the Common Units owned by such Limited Partner
immediately prior to the Effective Time; provided, however, in each case that prior to the OP
Effective Time such Limited Partner has acknowledged its record and beneficial ownership of the
Common Units and indicated the address to which the Common Unit Merger Consideration or Common
Share Merger Consideration, as applicable, shall be sent. If the Paying Agent has not received
such acknowledgement prior to the OP Effective Time, the Paying Agent shall mail to a Limited
Partner delivering such acknowledgement after the OP Effective Time a certified check in the
appropriate amount payable to such Limited Partner as soon as reasonably practicable after receipt
of such acknowledgement, but in no event later than two business days after receipt thereof.
(e) Options and Directors’ Deferred Compensation. As soon as reasonably practicable
after the Effective Time, but in no event later than five business days thereafter, the Paying
Agent shall mail to each holder of In the Money Options and Share Units a certified check payable
to such holder in the amounts contemplated to be paid in cash pursuant to Section 4.3(f). In
addition, as soon as reasonably practicable after the Effective Time, but in no event later than
five business days thereafter, the Paying Agent shall mail to each participant in the Share Unit
Plan whose Share Unit Account is in installment payment status a certified check payable to such
participant in the amount contemplated to be paid in cash pursuant to Section 4.3(f)(ii)(B).
(f) Closing of Transfer Records. After the Effective Time, transfers of Common
Shares, Preferred Shares, Common Units and Preferred Units outstanding prior to the Effective Time
shall not be made on the stock transfer books of the Surviving Corporation or the Surviving
Partnership. After the REIT Effective Time, certificates evidencing Common Shares and Series
2002-A Preferred Shares that are presented to the Paying Agent shall be canceled and exchanged for
the consideration provided for in Section 2.9(b) and 2.9(c) in accordance with the procedures set
forth in this Article II.
(g) Unclaimed Amounts. Parent may cause the Paying Agent to return any amounts
deposited by Parent with the Paying Agent remaining unclaimed 365 days after the Effective Time,
and thereafter each remaining holder of Common Shares or Series 2002-A Preferred Shares or Limited
Partner shall look only to Parent as a general creditor thereof with respect to consideration to
which such holder or Limited Partner is entitled upon surrender of such Person’s Common Shares,
Preferred Shares or Common Units. Notwithstanding the foregoing, neither the Paying Agent nor any
Party shall be liable to a holder of one or more certificates for Common Shares or Series 2002-A
Preferred Shares or a Limited Partner for any
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amount properly paid and required to be paid to a public official pursuant to any abandoned
property, escheat or similar law.
(h) Dissenting Shareholders. (i) Notwithstanding anything in this Agreement to the
contrary, to the extent required by the OGCL, Common Shares which are issued and outstanding
immediately prior to the REIT Effective Time and which are held by any Common Shareholder who shall
not have voted in favor of this Agreement and the REIT Merger at the Special Meeting and who files
with the Company within ten days after such vote at the Special Meeting a written demand to be paid
the fair cash value for such Common Shares in accordance with Sections 1701.84 and 1701.85 of the
OGCL shall not be converted into the right to receive cash as provided in Section 2.7(b) unless and
until such Common Shareholder fails to demand payment properly or otherwise loses such Common
Shareholder’s dissenters’ rights, if any, under the OGCL. If such Common Shareholder shall have
failed to perfect or loses any such dissenters’ rights, that Common Shareholder’s Common Shares
shall thereupon be deemed to have been converted as of the REIT Effective Time into only the right
to receive at the REIT Effective Time the cash provided for in Section 2.7(b), without interest.
From and after the REIT Effective Time, no Common Shareholder who has asserted dissenters’ rights
as provided in Sections 1701.84 and 1701.85 of the OGCL shall be entitled to vote the Common Shares
as to which dissenters’ rights have been asserted for any purpose or to receive payment of
dividends or other distributions with respect to such Common Shares. The Company shall notify
Parent of each Common Shareholder who asserts dissenters’ rights. Prior to the REIT Effective
Time, the Company shall not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any dissenters’ rights asserted under Section 1701.85 of
the OGCL.
(ii) No holder of any Series 2002-A Preferred Shares or units in the Partnership is entitled
under applicable law, the Company Articles or the Partnership Agreement to appraisal, dissenters or
other similar rights as a result of the OP Merger.
2.10 The Closing; Effective Time.
The closing of the transactions contemplated by
this Agreement (the “Closing”) shall take place at the offices of Xxxxx & Xxxxxxxxx LLP,
0000 Xxxxxxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxxx, commencing at 10:00 a.m., Cleveland time, on a date
(the “Closing Date”) which shall be the first business day after the satisfaction or waiver
of all of the conditions set forth in Article V (other than those conditions that by their nature
are to be fulfilled at Closing, but subject to the satisfaction or waiver of such conditions). At
the Closing, (a) the Company and the Partnership shall deliver to Parent, REIT Merger Sub, OP
Holdco and OP Merger Sub the various agreements, certificates and documents to be delivered
pursuant to Section 5.3, (b) Parent, REIT Merger Sub, OP Holdco and OP Merger Sub shall deliver to
the Company and the Partnership the various agreements, certificates, documents and consideration
to be delivered pursuant to Section 5.2, (c) OP Merger Sub and the Partnership shall execute and
file the OP Merger Certificate, in accordance with, and shall make all other filings or recordings
and take all such other action required with respect to the OP Merger, under the OLPL and (d)
immediately after the OP Effective Time or as soon thereafter as practicable, REIT Merger Sub and
the Company shall execute and file the REIT Merger Certificate, in accordance with, and shall make
all other filings or recordings and take all such other action required with respect to the REIT
Merger under, the OGCL. The OP Merger shall become effective when the OP Merger Certificate has
been accepted for filing by the office of
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the Secretary of State of Ohio or at such other subsequent date or time as Parent and the
Company may agree in writing and specify in the OP Merger Certificate in accordance with the OLPL.
The REIT Merger shall become effective when the REIT Merger Certificate shall have been accepted
for filing by the Secretary of State of Ohio or at such other subsequent date or time as Parent and
the Company may agree in writing and specify in the REIT Merger Certificate in accordance with the
OGCL; provided such time is after the OP Effective Time. The time at which the OP Merger becomes
effective is referred to as the “OP Effective Time.” The time at which the REIT Merger
becomes effective is referred to as the “REIT Effective Time.” The time at which both the
OP Merger and the REIT Merger become effective is the “Effective Time.”
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
3.1 Representations and Warranties of the Company. Except as disclosed in the
Disclosure Schedule delivered by the Company to Parent on or prior to the date of this Agreement
(the “Disclosure Schedule”) or as otherwise expressly contemplated by this Agreement, the
Company represents and warrants to Parent, REIT Merger Sub, OP Holdco and OP Merger Sub as follows
as of the date of this Agreement.
(a) Company Authority. The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to receipt of the Company Shareholder Approval, to
consummate the transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company, subject to the Company Shareholder
Approval. This Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company enforceable against the Company in accordance with its
terms.
(b) Partnership Authority. The Partnership has all requisite limited partnership
power and authority to enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary limited partnership
action on the part of the Partnership. This Agreement has been duly executed and delivered by the
Partnership and constitutes a valid and binding obligation of the Partnership enforceable against
the Partnership in accordance with its terms.
(c) Organization of the Company and its Subsidiaries. Each of the Company and its
Subsidiaries, including the Partnership, is a corporation, limited partnership or limited liability
company validly existing and in good standing under the laws of the jurisdiction in which it is
organized. Each of the Company and its Subsidiaries, including the Partnership, is duly authorized
to conduct its business and is in good standing under the laws of each jurisdiction in which the
nature of its business or the ownership or leasing of its properties requires such qualification,
except where the lack of such qualification would not reasonably be expected to have a Material
Adverse Effect. Each of the Company and its Subsidiaries, including the Partnership, has full
corporate, limited partnership or limited liability company power and authority to carry on the
business in which it is engaged. Each of the Company and
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its Subsidiaries has at all times complied with, and is not in default under or in violation
of, any provision of its charter, by-laws or other organizational documents, except as would not
have a Material Adverse Effect.
(d) Subsidiaries. The Disclosure Schedule sets forth the names and jurisdictions of
organization of all of the Subsidiaries of the Company (other than the Partnership). All
outstanding shares of stock of each such Subsidiary that is a corporation have been duly
authorized, are validly issued, fully paid and nonassessable and free of preemptive rights, are
owned by the Company or a Subsidiary of the Company and are so owned free and clear of all Liens.
All equity interests in each such Subsidiary of the Company that is a limited partnership or
limited liability company have been duly authorized, are validly issued and are owned by the
Company or a Subsidiary of the Company and are so owned free and clear of all Liens. Any capital
contribution required to be made with respect to such equity interests has been made. Except as
set forth in Section 3.1(d) of the Disclosure Schedule with respect to investments in the
Subsidiaries, neither the Company nor the Partnership has any direct or indirect interest in any
material debt or any material equity of any other Person.
(e) Capitalization of the Company. The authorized capital stock of the Company
consists of (i) 40,000,000 Common Shares, (ii) 5,000,000 Class A Cumulative Preferred Shares,
without par value, of which (A) 75,000 shares have been designated “Class A Cumulative Preferred
Shares, Series 1999-A” and (B) 300,000 shares have been designated “10 1/2% Class A Cumulative
Preferred Shares, Series 2002-A” (the “Series 2002-A Preferred Shares”) and (iii) 5,000,000
Class A Noncumulative Preferred Shares, without par value, of which 500,000 shares have been
designated “Class A Series 1999-A Noncumulative Preferred Shares” (the “Noncumulative Preferred
Shares”). The Noncumulative Preferred Shares are issuable in connection with the rights to
purchase Class A Series 1999-A Noncumulative Preferred Shares (the “Company Rights”) that
were issued pursuant to the Shareholder Rights Agreement, dated as of May 25, 1999, between the
Company and National City Bank, as amended by the Amendment to Shareholder Rights Agreement, dated
as of December 31, 2001 (the “Rights Agreement”). At the close of business on May 11,
2006: (i) 17,968,667 Common Shares were outstanding, all of which were validly issued, fully paid
and nonassessable and free of preemptive rights; (ii) there were 168,685 Treasury Shares; (iii)
options to acquire 824,139 Common Shares (the “Incentive Options”) from the Company
pursuant to the Long-Term Incentive Plan were issued and outstanding; (iv) no Class A Cumulative
Preferred Shares, Series 1999-A were issued and outstanding; (v) 181,000 Series 2002-A Preferred
Shares were issued and outstanding, all of which were validly issued, fully paid and nonassessable
and free of preemptive rights; and (vi) 500,000 Noncumulative Preferred Shares were reserved for
issuance in connection with the Company Rights. Except for Common Shares issuable upon the
exercise of the Incentive Options or as set forth on Section 3.1(e) of the Disclosure Schedule, at
the close of business on May 11, 2006, no Common Shares or other voting securities of the Company
were issued, reserved for issuance or outstanding. There are not any bonds, debentures, notes or
other indebtedness of the Company or its Subsidiaries having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters on which holders of
equity interests must vote. Except for the Incentive Options or as set forth on Section 3.1(e) of
the Disclosure Schedule, there are no options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind (collectively, “Options”) to which the Company or
any of its Subsidiaries is a party or by which any of them is bound relating to the issued or
unissued
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shares or other equity interests of the Company or any of its Subsidiaries, or obligating the
Company or any of its Subsidiaries to issue, transfer, grant or sell any shares or other equity
interests in, or securities convertible into or exchangeable for any shares or other equity
interests in, the Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any such Options. All Common Shares that are
subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the
instrument pursuant to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. Except as provided in the Partnership Agreement, there are not any outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares or other equity interests of the Company or any of its Subsidiaries,
or make any material investment (in the form of a loan, capital contribution or otherwise) in, any
Person other than a Subsidiary of the Company. Except for the Share Unit Accounts, there are no
outstanding stock appreciation, phantom stock or similar rights with respect to the Company or its
Subsidiaries. All dividends and distributions on securities of the Company or its Subsidiaries
that have been declared or authorized prior to the date of this Agreement have been paid in full.
(f) Capitalization of the Partnership. The authorized equity interests of the
Partnership consist of Common Units, Preferred Units and Series 1999-A Preferred Partnership Units.
As of May 11, 2006, 18,686,923 Common Units and 181,000 Preferred Units are duly authorized and
validly issued and any capital contribution required to be made by the holders thereof has been
made. As of such date, no Series 1999-A Preferred Partnership Units were issued and outstanding.
As of such date, 15,968,667 Common Units and all of the Preferred Units were owned by the Company.
The remaining Common Units were owned of record as set forth in Section 3.1(f) of the Disclosure
Schedule. All distributions on the Common Units or Preferred Units that have been declared or
authorized prior to the date of this Agreement have been paid in full.
(g) Filings With the SEC.
(i) The Company has filed with the SEC all forms, reports, schedules,
statements and other documents required to be filed by it since January 1, 2003
through the date hereof under the Exchange Act or the Securities Act (such documents
required to be filed by the Company since January 1, 2005, as supplemented and
amended since the time of filing, collectively, the “SEC Documents”). Each
SEC Document at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
consolidated financial statements of the Company and its Subsidiaries included in
the Company’s SEC Documents at the time filed complied as to form in all material
respects with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis during
the periods involved
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(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Rule 10-01 of Regulation S-X of the SEC), and fairly
present (subject in the case of unaudited statements to normal year-end audit
adjustments) the consolidated financial position of the Company and its Subsidiaries
as of the indicated dates and the consolidated results of their operations and cash
flows for the indicated periods. Since December 31, 2005, there has been no
material change in the Company’s accounting methods or principles that would be
required to be disclosed in the Company’s financial statements in accordance with
generally accepted accounting principles in the United States (“GAAP”), except as
disclosed in the notes to such Company financial statements. There are no
outstanding or unresolved comments in comment letters received from the SEC staff
with respect to any of the SEC Documents.
(ii) The Company has been and is in compliance in all material respects with
the applicable provisions of the Xxxxxxxx-Xxxxx Act. No officer or director of the
Company is currently indebted to the Company or the Partnership.
(iii) The Company has designed and maintains disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that
material information relating to it and its consolidated Subsidiaries is made known
to its principal executive officer and principal financial officer by others within
those entities.
(iv) The Company has designed and maintains a system of internal controls over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act) sufficient to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP (within the meaning of such terms under the
Xxxxxxxx-Xxxxx Act). The Company has disclosed, based on its most recent evaluation
to its respective auditors and the audit committee of the Company’s Board of
Directors (A) any significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably likely
to adversely affect in any material respect the Company’s ability to record,
process, summarize and report financial information and (B) any fraud, whether or
not material, that involves management or other employees who have a significant
role in its internal controls over financial reporting. The Company has delivered to
Parent any such disclosures (i) prior to the date of this Agreement or (ii) with
respect to evaluations after the date of this Agreement, promptly following the
disclosures to the applicable auditors and audit committee.
(v) The Company has previously provided or made available to Parent a complete
and correct copy of any actual or proposed amendments or modifications to any SEC
Documents (including any exhibits to any SEC Documents) which have not yet been
filed with the SEC.
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(h) No Material Adverse Change. Except as disclosed in the SEC Documents filed prior
to the date of this Agreement, since December 31, 2005, there has been no change which has had or
could reasonably be expected to have a Material Adverse Effect.
(i) Absence of Undisclosed Liabilities. None of the Company, the Partnership or their
respective Subsidiaries has as of December 31, 2005 or has incurred since that date any liabilities
or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies (i) which are accrued or reserved against in the
financial statements of the Company included in the applicable SEC Document or reflected in the
notes thereto or (ii) which were incurred after December 31, 2005 in the Ordinary Course of
Business, (b) liabilities, obligations or contingencies which have been discharged or paid in full
prior to the date hereof in the Ordinary Course of Business, (c) liabilities, obligations and
contingencies which are of a nature or amount not required to be reflected in the consolidated
financial statements of the Company and its Subsidiaries prepared in accordance with GAAP
consistently applied and (d) as would not have a Material Adverse Effect.
(j) No Conflicts. The execution and delivery of this Agreement do not, and the
consummation by the Company and the Partnership of the transactions contemplated hereby will not,
violate, result in a default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation under (i) any provision
of the Company Articles, the Company Regulations or the Partnership Agreement, or (ii) any Material
Contract, other than any such defaults, terminations, cancellations or accelerations which
individually or in the aggregate would not have a Material Adverse Effect, or (iii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of
any court or governmental authority applicable to the Company, the Partnership or their respective
Subsidiaries or any of their respective properties or assets, other than any such defaults,
terminations, cancellations or accelerations which individually or in the aggregate would not have
a Material Adverse Effect. 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 (a “Governmental Entity”) or other Person is required by or
with respect to the Company or the Partnership in connection with the execution and delivery of
this Agreement or the consummation by the Company and the Partnership of the transactions
contemplated hereby, except for (i) the filing by the Company with the SEC of the Proxy Statement,
(ii) the filing by the Company of the REIT Merger Certificate with the Secretary of State of Ohio
and appropriate documents with the relevant authorities of other states in which the Company is
qualified to do business, (iii) the giving of notice by the Company in accordance with Section
1701.78 of the OGCL, (iv) the Company Shareholder Approval, (v) the filing by the Partnership of
the OP Merger Certificate with the Secretary of State of Ohio and appropriate documents with the
relevant authorities of other states in which the Partnership is qualified to do business and (vi)
any such consent, approval, order, authorization, registration, declaration or filing that the
failure to obtain or make would not have a Material Adverse Effect.
(k) Litigation. There are no actions, suits, proceedings, orders, investigations or
claims pending or, to the Knowledge of the Company, threatened against the Company or any of its
Subsidiaries (or any of the directors or officers of the Company or any of its Subsidiaries with
respect to the Company or any of its Subsidiaries) at law or in equity or
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before or by any Governmental Entity which are reasonably likely to have a Material Adverse
Effect, nor is there any injunction, rule or order of any Governmental Entity or arbitrator
outstanding specifically applicable to the Company or any of its Subsidiaries that has had or would
reasonably be expected to have any such effect.
(l) Material Contracts. The Disclosure Schedule lists all Material Contracts. Each
Material Contract is valid, binding and enforceable and in full force and effect with respect to
the Company and its Subsidiaries and, to the Knowledge of the Company, each other party thereto,
except where such failure to be so valid, binding and enforceable and in full force and effect
would not have a Material Adverse Effect. To the Knowledge of the Company, there are no defaults
under any Material Contracts, except those defaults that would not have a Material Adverse Effect.
True, correct and complete copies of all Material Contracts have been delivered or made available
to Parent.
(m) Employee Benefits. The Disclosure Schedule lists all material employee benefit
plans that each of the Company and its Subsidiaries currently maintains or contributes to, is
required to contribute to, or with respect to which the Company and its Subsidiaries are liable,
for the benefit of any current or former employee of the Company or its Subsidiaries (collectively,
the “Employee Benefit Plans”).
(i) Except as would not have a Material Adverse Effect, each Employee Benefit
Plan complies in form and in operation with all laws, rules and regulations
applicable thereto, including ERISA and the Code.
(ii) Except as would not have a Material Adverse Effect, all contributions
which are due have been paid to each Employee Benefit Plan and all payments required
to be made under each Employee Benefit Plan have been made.
(iii) There are no pending or, to the Knowledge of the Company, threatened
claims that are reasonably likely to have a Material Adverse Effect by or on behalf
of any of the Employee Benefit Plans by any individual covered under any Employee
Benefit Plan or otherwise involving any Employee Benefit Plan (other than routine
claims for benefits).
(iv) Neither the Company nor any Subsidiary of the Company maintains or
contributes to (A) any plan or arrangement that is subject to Title IV of ERISA or
Section 412 of the Code, or (B) any plan or arrangement that is a multiemployer plan
within the meaning of Section 3(37) or 4001(a)(3) of ERISA.
(v) Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (i) result in any material payment
(including, severance or “excess parachute payment” (within the meaning of Section
280G of the Code)) becoming due to any director or employee of the Company or any of
its Subsidiaries under any Employee Benefit Plan, (ii) materially increase any
benefits otherwise payable under any Employee Benefit Plan or (iii) result in any
acceleration of the time of payment or vesting of
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any such benefits. For purposes of this paragraph (c) only, “material” shall
mean in excess of the aggregate amount of $100,000.
(vi) The Company and its Subsidiaries are not a party to or bound by any
employment, consulting, termination, severance or similar agreement (other than any
immaterial agreements) with any individual officer, director or employee of the
Company or any of its Subsidiaries or any agreement pursuant to which any such
Person is entitled to receive any benefits upon the occurrence of a change in
control of the Company.
(n) Taxes.
(i) (A) Each of the Company and its Subsidiaries has timely filed all Tax
Returns required to be filed by it (after giving effect to any filing extension
properly granted by a Governmental Entity having authority to do so or otherwise
permitted by applicable law), except for such failures to file that would not have a
Material Adverse Effect, (B) each such Tax Return was, at the time filed, true,
correct and complete, except for such failures to be true, correct and complete that
would not have a Material Adverse Effect and (C) each of the Company and its
Subsidiaries has paid (or the Company has paid on behalf of such Subsidiary), within
the time and in the manner prescribed by applicable law, all Taxes that are shown to
be due and payable as reflected on such Tax Returns, except where the failure to pay
would not have a Material Adverse Effect. The most recent consolidated financial
statements contained in the SEC Documents filed with the SEC prior to the date of
this Agreement reflect adequate accrued liabilities for all Taxes due and payable by
the Company and its Subsidiaries as a group for all taxable periods and portions
thereof through the date of such financial statements, except where the failure to
establish adequate accrued liabilities would not have a Material Adverse Effect. To
the Knowledge of the Company, the Company and its Subsidiaries (as a group) have
established on their books and records reserves or accrued liabilities or expenses
that are adequate for the payment of all Taxes for which the Company or any of its
Subsidiaries is liable but are not yet due and payable, except where the failure to
establish adequate reserves or accrued liabilities or expenses would not have a
Material Adverse Effect. Except as would not have a Material Adverse Effect, since
the date of the most recent audited consolidated financial statements included in
the SEC Documents, the Company has incurred no liability for any Taxes under
Sections 857(b), 860(c) or 4981 of the Code or IRS Notice 88-19 or Treasury
Regulation Sections 1.337(d)-5T, 1.337(d)-6 and 1.337(d)-7 including any Tax arising
from a prohibited transaction described in Section 857(b)(6) of the Code. Except
for deficiencies or Taxes that would not have a Material Adverse Effect, no
deficiencies for Taxes have been asserted or assessed in writing by a Governmental
Entity against the Company or any of its Subsidiaries which have not been paid or
remain pending, including claims by any Governmental Entity in a jurisdiction where
the Company or any of its Subsidiaries does not file Tax Returns, and no requests
for waivers of the time to assess any Taxes have been granted and remain in effect
or are pending.
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(ii) The Company (A) for each taxable year of the Company’s existence through
its taxable year ended December 31, 2005, has been subject to taxation as a real
estate investment trust (a “REIT”) within the meaning of the Code and has
satisfied the requirements to qualify as a REIT for such years, (B) has operated
consistent with the requirements for qualification and taxation as a REIT for the
period from December 31, 2005 through the date hereof, and (C) has not taken any
action or omitted to take any action which would reasonably be expected to result in
a successful challenge by the Internal Revenue Service to its status as a REIT, and
no such challenge is pending or, to the Knowledge of the Company, threatened. The
Company does not own any assets that would cause it not to satisfy the asset test
set forth in Section 856(c)(4) of the Code. Each Subsidiary of the Company which
files Tax Returns as a partnership for federal income tax purposes has since its
inception or acquisition by the Company been classified for federal income tax
purposes as a partnership and not as an association taxable as a corporation, or a
“publicly traded partnership” within the meaning of Section 7704(b) of the Code that
is treated as a corporation for federal income tax purposes under Section 7704(a) of
the Code. Neither the Company nor the Partnership holds any asset (x) the
disposition of which would be subject to rules similar to Section 1374 of the Code
as announced in IRS Notice 88-19 or Treasury Regulation Section 1.337(d)-5t,
1.337(d)-6 and 1.337(d)-7 or (y) that is subject to a consent filed pursuant to
Section 341(f) of the Code.
(iii) As of the date of this Agreement, the Company does not have any earnings
and profits attributable to the Company or any other corporation in any non-REIT
year within the meaning of Section 857 of the Code.
(iv) All Taxes which the Company or its Subsidiaries are required by law to
withhold in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party and sales, gross receipts and
use taxes, have been duly withheld or collected and, to the extent required, have
been paid over to the proper Governmental Entities or are held in separate bank
accounts for such purpose, except where such failure to withhold or collect or pay
over would not have a Material Adverse Effect. There are no material Liens for
Taxes (other than for current Taxes not yet due and payable) on the assets of the
Company or any of its Subsidiaries.
(v) There are no audits pending regarding federal income Tax Returns of the
Company and each of its Subsidiaries consolidated in such Tax Returns.
(vi) Neither the Company nor any of its Subsidiaries is a party to any Tax
Protection Agreement or Tax Sharing Agreement.
(vii) Except as would not have a Material Adverse Effect, the Company does not
have any liability for the Taxes of any Person other than the Company and its
Subsidiaries, and none of its Subsidiaries have any liability for the Taxes of any
Person other than the Company and its Subsidiaries (A) under
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Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), (B) as a transferee or successor or (C) by contract.
(viii) Neither the Company nor any of its Subsidiaries made any payments, is
obligated to make any payments, or is a party to an agreement that could obligate it
to make any payments that will not be deductible under Section 162(m) of the Code.
(ix) Neither the Company nor any of its Subsidiaries has applied for, received
or has pending a Tax Ruling or commenced negotiations or entered into a Closing
Agreement with any taxing authority. As defined herein, “Tax Ruling” means a
written ruling of a taxing Governmental Entity relating to Taxes, and “Closing
Agreement” means a written and legally binding agreement with a taxing authority
relating to Taxes.
(x) For taxable years beginning after December 31, 2000, a timely taxable REIT
subsidiary election was made for all corporations where the Company owned, directly
or indirectly, greater than ten percent of the total voting power or value of the
outstanding securities of such issuer (other than securities of a qualified REIT
subsidiary or securities the ownership of which did not violate Section 856(c)(4)(B)
of the Code). Without limiting any of the other representations in this Agreement,
to the extent the Company owns any stock, directly or indirectly, in a taxable REIT
subsidiary, as defined in Section 856(l) of the Code:
(A) The taxable REIT subsidiary has complied in all material respects with the
requirements in Section 856(l)(3) and (4) of the Code, relating to (a) restrictions
on operating or managing a lodging facility or healthcare facility, and (b)
restrictions on providing to any Person rights to a brand name under which any
lodging facility or healthcare facility is operated.
(B) With respect to any amounts treated by the Company as qualified rents from
real property for purposes of Section 856(c) of the Code, and which were received
from a taxable REIT subsidiary of the Company for the lease of a qualified lodging
facility as defined in Section 856(d)(9)(D) of the Code, such lodging facility has
been operated at all times on behalf of the taxable REIT subsidiary by a Person who
qualified as an eligible independent contractor within the meaning of Section
856(d)(8) and 856(d)(9) of the Code, and whose agreements and relations with each of
the Company and the taxable REIT subsidiary have been at all times negotiated and
maintained on an arm’s length basis.
(xi) On the date hereof, the amount of the basis for federal income Tax
purposes of the Partnership in the Company Properties set forth in Section 3.1(n) of
the Disclosure Schedule is not less than 85% of the amount set forth in such section
of the Disclosure Schedule in the aggregate and for any individual Company Property.
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(o) Compliance with Laws. Each of the Company and its Subsidiaries is in compliance
with all applicable laws, regulations, orders, judgments and decrees, except where such
noncompliance would not have a Material Adverse Effect. The Company and its Subsidiaries hold all
permits, licenses, certificates, registrations, variances, exemptions, orders, franchises and
approvals of, from and with all Governmental Entities necessary for the lawful conduct of their
respective businesses (the “Company Permits”), except where the failure so to hold,
individually or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect. The Company and its Subsidiaries are in compliance with the terms of each of the Company
Permits, except where the failure to so comply, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. This Section 3.1(o) shall not apply to
ERISA, Taxes or compliance with Environmental Laws, which are the subject of Sections 3.1(m),
3.1(n) and 3.1(p), respectively. In addition, the Company makes no representation or warranty in
this Section 3.1(o) with respect to compliance with the Americans with Disabilities Act or any rule
or regulation issued by a Governmental Entity pursuant thereto.
(p) Environmental, Health and Safety Matters. Except as would not have a Material
Adverse Effect:
(i) to the Knowledge of the Company, neither the Company nor any
Subsidiary of the Company nor any other Person has caused or
permitted the presence during its ownership or tenancy of any
Hazardous Materials (including the presence of structural mold or
asbestos) at, on or under any hotel or other property owned or leased
by the Company, the Partnership or any of their respective
Subsidiaries (each, a “Company Property”) in violation of
Environmental Laws;
(ii) to the Knowledge of the Company, there have been no releases of
Hazardous Materials at, on, under or from any of the Company
Properties in violation of Environmental Laws during the period of
the Company’s or any Subsidiary’s ownership or tenancy and neither
the Company nor any Subsidiary of the Company nor, to the Knowledge
of the Company, any other Person, has received any notice of alleged,
actual or potential responsibility for, or any inquiry or
investigation regarding, any such releases or threatened releases of
Hazardous Materials, nor, to the Knowledge of the Company, is there
any information which might form the basis of any such notice or any
claim;
(iii) the Company and its Subsidiaries are in compliance with all
applicable Environmental Laws;
(iv) to the Knowledge of the Company, neither the Company nor any
Subsidiary of the Company nor any other Person, has transported or
arranged for the transport of Hazardous Materials from the Company
Properties in violation of Environmental Laws;
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(v) the Company and its Subsidiaries have been duly issued, and
currently have and will maintain through the Closing Date, all
environmental permits necessary to operate their businesses as
currently operated;
(vi) there is no suit, action, investigation or proceeding pending
or, to the Knowledge of the Company, threatened against or affecting
the Company or any Subsidiary of the Company directly relating to or
involving their respective businesses, any of their respective Assets
or any of the directors, officers, employees or agents thereof who
may be subject to indemnification by the Company or any Subsidiary of
the Company relating to any Environmental Law; and
(vii) the Company has delivered to Parent correct and, in all
material respects, complete copies of all environmental assessments
commissioned by the Company, the Partnership or any of there
respective Subsidiaries with respect to any Company Property.
(viii) As used herein, “Environmental Law” means any federal, state,
local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order, judgment,
decree, injunction, requirement or binding agreement of or with any
governmental entity relating to (x) the protection, preservation or
restoration of the environment (including air, water vapor, surface
water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to
human health or safety, or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of hazardous
substances or wastes, in each case as amended and as in effect at the
Effective Time. The term “Environmental Law” includes the Federal
Comprehensive Environmental Response Compensation, and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air
Act, the Federal Clean Water Act, the Federal Resource Conservation
and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substances Control Act, and the Federal Insecticide,
Fungicide and Rodenticide Act, each as amended and as in effect at
the Effective Time.
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(ix) As used herein, “Hazardous Materials” means any substance
presently regulated as hazardous, toxic or radioactive under any
Environmental Law including any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, or petroleum
or any derivative or by-product thereof, radon, radioactive material,
asbestos, or asbestos-containing material, urea formaldehyde foam
insulation, lead-based paint or polychlorinated biphenyls.
(q) Title to Assets. Each of the Company, the Partnership and each of their
respective Subsidiaries has good and valid title in fee simple to all its owned real property, good
title to all of its other properties and a valid leasehold or subleasehold interest in each of its
respective leasehold interests, as reflected in the most recent balance sheet included in the SEC
Documents, except for properties and assets that have been disposed of in the Ordinary Course of
Business since the date of such balance sheet, free and clear of all Liens, except (i) Liens for
current taxes, payments of which are not yet delinquent or are being disputed in good faith; (ii)
such Liens, if any, as are not substantial in character, amount or extent and do not materially
detract from the value, or materially interfere with the present use, of the property subject
thereto or affected thereby, or otherwise materially impair the Company’s business operations (in
the manner presently carried on by the Company), including, without limitation, inchoate mechanics’
and materialmen’s Liens related to construction; (iii) all matters of record, including instruments
and agreements of record; and (iv) all matters disclosed in zoning reports and title commitments
made available to Parent prior to the date of this Agreement. All leases under which the Company,
the Partnership or any of their respective Subsidiaries leases any real or personal property are
valid and effective in accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or both would become a
default other than failures to be valid and effective and defaults under such leases which would
not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
To the Knowledge of the Company, none of the Company, the Partnership nor any of their respective
Subsidiaries has received any notice to the effect that any condemnation event or involuntary
rezoning proceedings are pending or threatened with respect to any of the Company Properties which,
individually or in the aggregate, have resulted in, or would reasonably be expected to result in, a
Material Adverse Effect. The Disclosure Schedule lists each parcel of real property currently or
formerly owned by the Company, the Partnership and each of their respective Subsidiaries at any
time during the twenty-four months preceding the date of this Agreement and each parcel of real
property currently leased or subleased by the Company, the Partnership or any of their respective
Subsidiaries.
(r) Labor Matters. Neither the Company, the Partnership nor any of their respective
Subsidiaries are a party to or bound by, and no employees at a Company Property are a party to or
bound by, any collective bargaining agreement, and there are no labor unions or other organizations
representing any employees employed by the Company, the Partnership nor any of their respective
Subsidiaries or at any Company Property. Since January 1, 2004, there has not occurred any strike
and, to the Knowledge of the Company, there has not been threatened in writing any strike,
slowdown, picketing, work stoppage or other similar labor activity with respect to any employees of
the Company, the Partnership nor any of their respective Subsidiaries or at any Company Property,
except as would not have a Material
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Adverse Effect. Except for such matters that would not have a Material Adverse Effect, there
are no labor disputes currently subject to any grievance procedure, arbitration or litigation and
there is no representation petition pending or, to the Knowledge of the Company, threatened in
writing with respect to any employee of the Company, the Partnership or their respective
Subsidiaries or at any Company Property.
(s) Intellectual Property. Neither the Company, the Partnership nor any of their
respective Subsidiaries (i) owns any material registered trademarks, patents or copyrights, (ii)
has any pending applications, registrations or recordings for any material trademarks, patents or
copyrights or (iii) is a party to any material licenses, contracts or agreements with respect to
use by the Company or its Subsidiaries of any trademarks or patents. To the Knowledge of the
Company, none of the Company, the Partnership nor any of their respective Subsidiaries has
misappropriated or is infringing upon the intellectual property of others.
(t) Transactions with Affiliates. There are no material arrangements, agreements or
contracts entered into by the Company or any of its Subsidiaries, on the one hand, and any Person
who is a current officer, director or Affiliate of the Company or any of its Subsidiaries, any
relative of the foregoing or a Person of which any of the foregoing is an Affiliate, on the other
hand, and which are in effect.
(u) Vote Required. The affirmative vote of the holders of a majority of the
outstanding Common Shares in favor of the adoption of this Agreement (the “Company Shareholder
Approval”) is the only vote of the holders of any class or series of beneficial interest of the
Company or any of its Subsidiaries required by applicable law (including the OGCL), the Company
Articles or the Company Regulations to duly effect such approval. The approval of the Agreement by
the General Partner of the Partnership, which has already been obtained, is the only approval of
the partners of the Partnership required by applicable law (including the OLPL) or the Partnership
Agreement to duly effect such approval.
(v) Rights Agreement. The Company has taken all necessary action to (i) render the
Company Rights inapplicable to the REIT Merger and the other transactions contemplated by this
Agreement and (ii) ensure that (A) neither Parent nor any of its Affiliates is or becomes an
Acquiring Person (as defined in the Rights Agreement), (B) no Distribution Date shall occur as a
result of the announcement of or execution of this Agreement or any of the transactions
contemplated hereby, and (C) the Company Rights shall expire immediately prior to the REIT
Effective Time without any payment being made in respect thereof.
(w) State Takeover Statutes. Each of the Company and the Partnership has taken all
action necessary to exempt the transactions contemplated by this Agreement from the operation of
any “fair price,” “moratorium,” “control share acquisition” or any other anti-takeover statute or
law.
(x) Information Supplied. None of the information supplied or to be supplied by the
Company, the Partnership or any of their respective Subsidiaries for inclusion or incorporation by
reference in the Proxy Statement will, at the date the Proxy Statement is first mailed to the
Common Shareholders and Preferred Shareholders or at the time of the Special
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Meeting, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement and any and all other
documents that the Company is responsible for filing with the SEC in connection with the
transactions contemplated hereby will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated thereunder, except that
no representation or warranty is made by the Company with respect to statements made or
incorporated by reference therein based solely on information supplied by Parent, REIT Merger Sub,
OP Holdco or OP Merger Sub expressly for inclusion or incorporation by reference in the Proxy
Statement.
(y) Brokers’ Fees. With the exception of UBS, neither the Company, the Partnership
nor any of their respective Subsidiaries has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions contemplated by this
Agreement.
(z) Opinion of Financial Advisor. The Board of Directors of the Company has received
the opinion of UBS, the Company’s financial advisor, to the effect that, as of the date of such
opinion and based upon and subject to the matters set forth in such opinion, the Consideration (as
such term is defined in such opinion) is fair, from a financial point of view, to the holders of
Common Shares (other than holders of Common Shares who are proposing to acquire, or are affiliates
of entities proposing to acquire, any of the Excluded Properties and their respective
affiliates).
(aa) Insurance. The Disclosure Schedule identifies all insurance policies maintained
by the Company or any of its Subsidiaries as of the date of this Agreement. There is no claim by
the Company, the Partnership or any of their respective Subsidiaries under any such insurance
policies which (x) have been denied or disputed or covered under reservation of rights by the
insurer; and (y) would reasonably be likely to have, individually or in the aggregate, a Material
Adverse Effect. All such insurance policies are in full force and effect; all premiums due and
payable thereunder have been paid in full; and no notice of cancellation, non-renewal or
termination has been received by the Company or its Subsidiaries with respect to any such policy
which has not been replaced on substantially similar terms prior to the date of such cancellation
or termination.
3.2 Representations and Warranties of Parent,
REIT Merger Sub, OP Holdco and OP Merger
Sub. Parent, REIT Merger Sub, OP Holdco and OP Merger Sub jointly and severally represent and
warrant to the Company and the Partnership as follows as of the date of this Agreement.
(a) Organization. Each of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub is a
corporation or limited liability company validly existing and in good standing under the laws of
the jurisdiction in which it was organized. Each of Parent, REIT Merger Sub, OP Holdco and OP
Merger Sub is duly authorized to conduct its business and is in good standing under the laws of
each jurisdiction in which the nature of its business or the ownership or leasing of its properties
requires such qualification, except where the lack of such qualification would not have a material
adverse effect on the ability of Parent, REIT Merger Sub,
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OP Holdco or OP Merger Sub to consummate the transactions contemplated hereby. Each of
Parent, REIT Merger Sub, OP Holdco and OP Merger Sub has full corporate or limited liability
company power and authority and all licenses, permits and authorizations necessary to carry on the
business in which it is engaged and to own and use the properties owned and used by it except where
the failure to have such licenses, permits and authorizations would not have a material adverse
effect on the ability of Parent, REIT Merger Sub, OP Holdco or OP Merger Sub to consummate the
transactions contemplated hereby.
(b) Authority. Each of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub has all
requisite corporate or limited liability company power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate or limited liability company action on the part of Parent,
REIT Merger Sub, OP Holdco and OP Merger Sub. This Agreement has been duly executed and delivered
by Parent, REIT Merger Sub, OP Holdco and OP Merger Sub and constitutes a valid and binding
obligation of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub, enforceable against each in
accordance with its terms.
(c) No Conflicts. The execution and delivery of this Agreement do not, and the
consummation by Parent, REIT Merger Sub, OP Holdco and OP Merger Sub of the transactions
contemplated hereby in accordance with the terms of this Agreement will not, result in a default
under (with or without notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation under, (i) any provision of the articles of
incorporation or code of regulations or analogous governing documents of Parent, REIT Merger Sub,
OP Holdco or OP Merger Sub or (ii) any material agreement, indenture, instrument, order, judgment
or decree applicable to Parent, REIT Merger Sub, OP Holdco or OP Merger Sub or their respective
properties or assets, other than any such violations, defaults, terminations, cancellations or
accelerations which individually or in the aggregate would not have a material adverse effect on
the ability of Parent, REIT Merger Sub, OP Holdco or OP Merger Sub to consummate the transactions
contemplated hereby. No consent, approval, order or authorization of, or registration, declaration
or filing with, any Governmental Entity or any other Person is required by or with respect to
Parent, REIT Merger Sub, OP Holdco or OP Merger Sub in connection with the execution and delivery
of this Agreement or the consummation by Parent, REIT Merger Sub, OP Holdco or OP Merger Sub of the
transactions contemplated hereby, except for (i) the filing by REIT Merger Sub of the REIT Merger
Certificate with the Secretary of State of Ohio and appropriate documents with the relevant
authorities of other states in which REIT Merger Sub is qualified to do business, (ii) the filing
by OP Merger Sub of the OP Merger Certificate with the Secretary of State of Ohio and appropriate
documents with the relevant authorities of other states in which OP Merger Sub is qualified to do
business and (iii) any such consent, approval, order, authorization, registration, declaration or
filing that the failure to obtain or make would not have a material adverse effect on the ability
of Parent, REIT Merger Sub, OP Holdco or OP Merger Sub to consummate the transactions contemplated
hereby.
(d) Transaction Financing. Parent, REIT Merger Sub, OP Holdco and OP Merger Sub have
delivered to the Company a fully executed (i) commitment letter from Citigroup Global Markets
Realty Corp., dated May 12, 2006, providing the detailed terms and conditions upon which Citigroup
Global Markets Realty Corp. has committed to provide the
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entire debt portion of the financing required to consummate the transactions contemplated by
this Agreement (the “Commitment Letter” and the financing, the “Debt Financing”)
and (ii) Guaranty, pursuant to which the Guarantor has agreed to make capital calls to its partners
to provide the entire equity portion of the financing required to consummate the transactions
contemplated by this Agreement and to guarantee Parent’s obligations under this Agreement up to
$135,000,000. The Guaranty is valid and in full force and effect, and no event has occurred which,
with or without notice, lapse of time or both, would constitute a default on the part of Guarantor
under the Guaranty.
(e) Solvency. Immediately after giving effect to the transactions contemplated by
this Agreement and the closing of any financing to be obtained by Parent, REIT Merger Sub, OP
Holdco or OP Merger Sub in order to effect the transactions contemplated by this Agreement, each of
Parent, REIT Merger Sub, the Surviving Corporation, OP Holdco, OP Merger Sub and the Surviving
Partnership will be able to pay its debts as they become due and will own property having a fair
saleable value greater than the amounts required to pay its debts (including a reasonable estimate
of the amount of all contingent liabilities). Immediately after giving effect to the transactions
contemplated by this Agreement and the closing of any financing to be obtained by Parent, REIT
Merger Sub, OP Holdco or OP Merger Sub in order to effect the transactions contemplated by this
Agreement, each of Parent, REIT Merger Sub, the Surviving Corporation, OP Holdco, OP Merger Sub and
the Surviving Partnership will have adequate capital to carry on its business. No transfer of
property is being made and no obligation is being incurred in connection with the transactions
contemplated by this Agreement and the closing of any financing to be obtained by Parent, REIT
Merger Sub, OP Holdco or OP Merger Sub in order to effect the transactions contemplated by this
Agreement with the intent to hinder, delay or defraud either present or future creditors of Parent,
REIT Merger Sub, the Surviving Corporation, OP Merger Sub, OP Holdco or the Surviving Partnership.
(f) Litigation. There are no actions, suits, proceedings, orders, investigations or
claims pending or, to the knowledge of Parent, REIT Merger Sub, OP Holdco or OP Merger Sub,
threatened against Parent, REIT Merger Sub, OP Holdco or OP Merger Sub at law or in equity, or
before or by any Governmental Entity which could reasonably be expected to prevent or materially
delay the consummation of the transactions contemplated hereby.
(g) Brokers’ Fees. Neither Parent nor any of its Subsidiaries has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Company or its Subsidiaries could become
liable or obligated. Parent has retained only RBC Capital Markets Corporation to advise Parent in
connection with the transactions contemplated hereby.
(h) Information to be Disclosed. None of the information supplied or to be supplied
by Parent, REIT Merger Sub, OP Holdco or OP Merger Sub expressly for inclusion or incorporation by
reference in the Proxy Statement will, at the date the Proxy Statement is first mailed to the
Common Shareholders and Preferred Shareholders or at the time of the Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
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ARTICLE IV
COVENANTS OF THE PARTIES
The Parties agree as follows with respect to the period from and after the execution of this
Agreement.
4.1 Mutual Covenants.
(a) General. Each of the Parties shall use all reasonable efforts to take all action
and to do all things necessary, proper or advisable to consummate and make effective as soon as
practicable the transactions contemplated by this Agreement (including satisfying the conditions
precedent to the Mergers).
(b) Governmental Matters. Each of the Parties shall take any additional action that
may be necessary, proper or advisable in connection with any notices to, filings with, and
authorizations, consents and approvals of Governmental Entities that it may be required to give,
make or obtain.
(c) Proxy Statement. The Company shall (i) as promptly as practicable prepare and
file with the SEC, after providing Parent with a reasonable opportunity to review and comment
thereon, (ii) have cleared by the SEC and (iii) mail to its Common Shareholders and Preferred
Shareholders a proxy statement and to its Common Shareholders a form of proxy with respect to the
Special Meeting in connection with the REIT Merger (such proxy statement and the form of proxy,
including all amendments, supplements, or modifications thereto, is herein referred to as the
“Proxy Statement”). The Proxy Statement shall comply in all material respects with the
Exchange Act and shall include all information and statements which any Party shall reasonably
believe to be necessary for inclusion therein. The Company agrees that none of the information
concerning or related to the Company or any of its Subsidiaries or any of the Company Properties
contained or incorporated by reference in the Proxy Statement will, at the date it is first mailed
to the shareholders of the Company and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Company shall use reasonable efforts to obtain and furnish the
information required to be included in the Proxy Statement, promptly inform Parent of the receipt
of comments from the SEC, and respond promptly, after review and comment by Parent, to any comments
made by the SEC with respect to the Proxy Statement and any preliminary version thereof. Parent
shall as expeditiously as practicable supply all information concerning itself, REIT Merger Sub, OP
Holdco and OP Merger Sub and their directors, officers, shareholders and Affiliates as reasonably
may be requested by the Company in connection with the preparation of the Proxy Statement.
Whenever any event occurs, or there is any change in facts, which is required to be set forth in an
amendment or supplement to the Proxy Statement, the Company on the one hand, and Parent on the
other hand, shall promptly inform the other of such occurrence with respect thereto and, promptly
after review and comment thereon by Parent, the Company shall file with the SEC and/or mail to the
Common Shareholders and Preferred Shareholders, such amendment or supplement to the Proxy
Statement.
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4.2 Covenants of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub.
(a) Indemnification and Insurance.
(i) Parent shall, and shall cause the Surviving Corporation and the Surviving
Partnership to, jointly and severally, honor all the Company’s and its Subsidiaries’
obligations to indemnify (including any obligations to advance funds for expenses)
the current and former directors and officers of the Company and any of its
Subsidiaries (an “Indemnified Party”) for acts or omissions by such
Indemnified Parties occurring prior to the Effective Time of the Mergers to the
extent that such obligations of the Company and such Subsidiaries exist on the date
of this Agreement, whether pursuant to the Company Articles, the Company
Regulations, the Partnership Agreement, individual indemnity agreements or
otherwise, and such obligations shall survive the Mergers and shall continue in full
force and effect in accordance with the terms of such Company Articles, Company
Regulations, Partnership Agreement and individual indemnity agreements (all as in
effect on the date hereof) from the Effective Time of the Mergers until the
expiration of the applicable statute of limitations with respect to any claims
against such Indemnified Parties arising out of such acts or omissions.
(ii) From and after the Effective Time of the Mergers, to the fullest extent
permitted by law, Parent shall, and shall cause the Surviving Corporation and the
Surviving Partnership to, indemnify, defend and hold harmless the Indemnified
Parties against all losses, claims, damages, liabilities, fees and expenses
(including attorneys’ fees and disbursements), judgments, fines and amounts paid in
settlement (in the case of settlements, with the approval of the indemnifying party
(which approval shall not be unreasonably withheld)) (collectively,
“Losses”), as incurred (payable monthly upon written request which request
shall include reasonable evidence of the Losses set forth therein) to the extent
arising from, relating to, or otherwise in respect of, any actual or threatened
action, suit, proceeding or investigation, in respect of actions or omissions
occurring at or prior to the Effective Time of the Mergers in connection with such
Indemnified Party’s duties as an officer or director of the Company or any of its
Subsidiaries, including with respect to this Agreement, the Mergers and the other
transactions contemplated by this Agreement; provided, however, that an Indemnified
Party shall not be entitled to indemnification under this Section 4.2(a)(ii) for
Losses arising out of actions or omissions by the Indemnified Party constituting (A)
a material breach of this Agreement or (B) criminal conduct; provided, further that
neither Parent nor the Surviving Corporation shall be liable for any settlement
effected without its written consent and, provided further, that if Parent or the
Surviving Corporation advances or pays any amount to any Person under this paragraph
(ii) and if it shall thereafter be finally determined by a court of competent
jurisdiction that such Person was not entitled to be indemnified hereunder for all
or any portion of such amount, to the extent required by law, such Person shall
repay such amount or such portion thereof, as the case may be, to Parent or the
Surviving Corporation, as the case may be. The Indemnified Parties as a group may
not retain more than one law
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firm to represent them with respect to each matter, except to the extent that
under applicable standards of professional conduct such counsel would have a
conflict representing such Indemnified Party or Indemnified Parties or any
Indemnified Party shall have reasonably concluded that there may be legal defenses
available to that Indemnified Party that are not available to other Indemnified
Parties, in which case such Indemnified Party shall have the right to separate
counsel to assert such defenses and otherwise participate in the defense of such
Indemnified Party.
(iii) At or prior to the Effective Time of the Mergers, Parent shall purchase
extended reporting or “tail” coverage directors’ and officers’ liability insurance,
in form and substance acceptable to the Company, for the Company’s and each
Subsidiary’s directors and officers for a period of six years after the Effective
Time. The insurance shall be in the aggregate amount of $20,000,000 and consist of
a policy providing $10,000,000 of primary coverage and a policy providing
$10,000,000 of “Side A” excess coverage; provided, however, that Parent and the
Surviving Corporation shall not be required to expend for such insurance an amount
in excess of $750,000; and provided, further, that if the premium of such insurance
coverage exceeds such amount, Parent shall be obligated to obtain a policy with the
best coverage available, in the reasonable judgment of the Company, for a cost not
exceeding such amount.
(iv) This Section 4.2(a) is intended for the irrevocable benefit of, and to
grant third party rights to, the Indemnified Parties and shall be binding on all
successors and assigns of Parent, the Surviving Corporation and the Surviving
Partnership. Each of the Indemnified Parties shall be entitled to enforce the
covenants contained in this Section 4.2(a), each of which such covenants shall
survive the Closing Date.
(v) In the event that the Surviving Corporation or the Surviving Partnership or
any of its successors or assigns (A) consolidates with or merges into any other
Person after the Effective Time and shall not be the continuing or surviving entity
of such consolidation or merger or (B) transfers or conveys a majority of its
properties and assets to any Person after the Effective Time, then, and in each such
case, proper provision shall be made so that the successors, assigns and transferees
of the Surviving Corporation or the Surviving Partnership, as the case may be,
assume the obligations set forth in this Section 4.2(a).
(b) Benefit Plans.
(i) From and after the Effective Time of the Mergers, Parent and the Surviving
Corporation shall, and shall cause their Subsidiaries to, honor in accordance with
their respective terms (as in effect on the date hereof) all the employment,
retention, severance, termination, change of control and deferred compensation
agreements and plans of the Company and its Subsidiaries (the “Retention
Plans”).
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(ii) The participation by employees of the Company and its Subsidiaries in
employee benefits plans, programs or arrangements sponsored by BMC shall terminate
effective as of the Closing Date. Effective as of the Closing Date, Parent shall
provide, or cause its Subsidiaries to provide, group health plan continuation
coverage that is comparable to the group health plan continuation coverage provided
for under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
and Sections 601 through 608 of ERISA (“Group Health Continuation Coverage”) (as
applied without regard to the exception for small-employer plans under Treasury
Regulation Section 54.4980B-2) to all employees and former employees of the Company
and its Subsidiaries and their dependents who, as of the Closing Date, have coverage
under a BMC group health plan or are eligible to elect to receive Group Health
Continuation Coverage under a BMC group health plan.
(c) Financing. Parent shall use all commercially reasonable efforts to arrange the
Debt Financing on the terms and conditions described in the Commitment Letter, including using such
efforts to (i) negotiate definitive agreements with respect thereto on terms and conditions
contained therein and (ii) to satisfy all conditions applicable to Parent, REIT Merger Sub, OP
Holdco and OP Merger Sub in such definitive agreements that are within its control. In the event
any portion of the Debt Financing becomes unavailable on the terms and conditions contemplated in
the Commitment Letter, Parent shall use such efforts to arrange to obtain any such portion from
alternative sources as promptly as practicable following the occurrence of such event. For the
avoidance of doubt, if the Debt Financing (or any alternative financing) has not been obtained,
Parent, REIT Merger Sub, OP Holdco and OP Merger Sub shall continue to be obligated to consummate
the Mergers on the terms contemplated by this Agreement and subject only to the satisfaction or
waiver of the conditions set forth in Sections 5.1, 5.2 and 5.3 of this Agreement and to Parent’s
rights under Sections 6.1 and 6.2, regardless of whether Parent, REIT Merger Sub, OP Holdco and OP
Merger Sub have complied with all of their other obligations under this Agreement (including their
obligations under this Section 4.2(c)).
4.3 Covenants of the Company.
(a) Shareholder Meeting; Recommendation. As soon as practicable after the date of
this Agreement, except to the extent permitted in Section 4.3(b), the Company shall duly call, give
notice of and convene a meeting of its Common Shareholders and Preferred Shareholders (the
“Special Meeting”) in accordance with the OGCL, the Company Articles and the Company
Regulations for the Common Shareholders to consider and vote upon adoption of this Agreement and
the REIT Merger. Except to the extent permitted in Section 4.3(b), the Proxy Statement shall
contain the recommendation of the Board of Directors of the Company in favor of the REIT Merger,
and the Board of Directors of the Company shall recommend that the Common Shareholders vote to
adopt this Agreement and the REIT Merger.
(b) No Solicitation by the Company.
(i) From the date of this Agreement until the earlier of the Effective Time or
the date of termination of this Agreement pursuant to Section
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6.1 or 6.2(a), the Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or knowingly permit any officer, director or
employee of or any investment banker, attorney, accountant or other advisor or
representative of, the Company or any of its Subsidiaries to, (A) solicit, initiate
or knowingly encourage, or take any other action designed to, or that could
reasonably be expected to facilitate, any inquiries or offers with respect to, or
that reasonably may be expected to lead to, the submission of any Company Takeover
Proposal, (B) enter into any agreement with respect to any Company Takeover Proposal
or (C) provide any non-public information regarding the Company and its Subsidiaries
to any third party or engage in any negotiations or substantive discussions in
connection with any Company Takeover Proposal; provided, however, that prior to
receipt of the Company Shareholder Approval, the Company may, in response to a
Company Takeover Proposal that was not solicited by the Company and did not
otherwise result from a breach of this Section 4.3(b), subject to the execution by
the Person making the Company Takeover Proposal of a confidentiality agreement no
less favorable to the Company than the Confidentiality Agreement executed by Parent,
provide any non-public information regarding the Company and its Subsidiaries to any
third party or engage in any negotiations or substantive discussions with such
Person regarding any Company Takeover Proposal, in each case only if the Company’s
Board of Directors determines in good faith, after consultation with counsel and its
financial advisors, that such actions could reasonably be expected to result in a
Company Superior Proposal. The Company shall, and shall cause each of its
Subsidiaries to, immediately cease and cause to be terminated any existing
activities, discussions or negotiations by the Company, any of its Subsidiaries or
any officer, director or employee of or investment banker, attorney, accountant or
other advisor or representative of, the Company or any of its Subsidiaries, with any
Persons conducted heretofore with respect to any of the foregoing and, subject to
the terms of any applicable confidentiality agreements between such Persons and the
Company or any of its Subsidiaries, require any such Persons to return to the
Company or destroy any confidential information previously provided to such Persons,
and any such Persons shall be denied access to any electronic dataroom or similar
access to confidential information relating to the Company or any of its
Subsidiaries. Notwithstanding anything to the contrary contained in this Agreement,
the Company and its Subsidiaries and their officers, directors, employees,
investment bankers, attorneys, accountants or other advisors or representatives may
solicit proposals, enter into agreements and take any other action necessary or
desirable to enable the Company or its Subsidiaries to dispose of their interests in
each of the Excluded Assets, and no inquiry, proposal or offer from any Person with
respect solely thereto shall constitute a Company Takeover Proposal.
(ii) From the date of this Agreement until the earlier of the Effective Time or
the date of termination of this Agreement pursuant to Section 6.1 or 6.2(a), neither
the Board of Directors of the Company nor any committee thereof shall (A) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent,
REIT Merger Sub, OP Holdco or OP Merger Sub,
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the approval by such Board of Directors or such committee of this Agreement or
the Mergers or (B) approve or recommend, or propose publicly to approve or
recommend, any Company Takeover Proposal. Notwithstanding the foregoing, at any time
after the date hereof and prior to receipt of the Company Shareholder Approval, (X)
in response to a Company Takeover Proposal which was not solicited by the Company or
any of its Affiliates or advisors, the Board of Directors of the Company and the
Partnership may terminate this Agreement and cause the Company to enter into an
agreement with respect to any Company Superior Proposal, but only if the Company’s
Board of Directors determines in good faith, after consultation with counsel, that
failing to take any such action would result in a breach of the directors’ duties
and only at a time that is after the fifth business day following the Company’s
delivery to Parent of written notice advising Parent that the Board of Directors of
the Company is prepared to accept a Company Superior Proposal, specifying the
material terms and conditions of such Company Superior Proposal and identifying the
Person making such Company Superior Proposal, and only after irrevocably directing
payment of the Termination Fee specified in Section 6.3(b), and (Y) the Board of
Directors of the Company may withdraw or modify in a manner adverse to Parent its
recommendation to the Common Shareholders that they give the Company Shareholder
Approval, but only if and to the extent that the Company’s Board of Directors
determines in good faith, after consultation with counsel, that failing to take any
such action would result in a breach of the fiduciary duties of the Company’s Board
of Directors. Notwithstanding anything to the contrary contained herein, the
Company shall not exercise its right to terminate this Agreement and the Board of
Directors shall not recommend a Company Superior Proposal to the Common Shareholders
or withdraw or modify in a manner adverse to Parent its recommendation to the Common
Shareholders pursuant to this Section 4.3(b) unless the Company shall have delivered
to Parent a prior written notice advising Parent that the Company or its Board of
Directors intends to take such action with respect to a Company Superior Proposal,
specifying in reasonable detail the material terms and conditions of the Company
Superior Proposal, such notice to be delivered not less than five Business Days
prior to the time the action is taken, and, during this five Business Day period,
the Company and its advisors shall have negotiated in good faith with Parent to make
such adjustments in the terms and conditions of this Agreement such that such
Company Takeover Proposal would no longer constitute a Company Superior Proposal.
(iii) The Company promptly shall advise Parent orally and within 24 hours in
writing of the receipt of any Company Takeover Proposal or the request for any
non-public information relating to the Company or any of its Subsidiaries or for
access to the properties, books or records of the Company or any Subsidiary by any
Person that informs the Board of Directors of the Company or such Subsidiary that it
is considering making or has made a Company Takeover Proposal. The Company promptly
shall advise Parent of the identity of the Person making any such Company Takeover
Proposal and of the material terms of any such Company Takeover Proposal and of any
changes thereto. The
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Company promptly shall advise Parent orally and within 24 hours in writing of
the commencement of any discussions with any third party or its representatives
regarding a Company Takeover Proposal by such third party and any material change in
the status thereof, including whether any such Company Takeover Proposal has been
rejected or withdrawn.
(iv) Nothing contained in this Section 4.3(b) or in Sections 4.1(c) or 7.2
shall prohibit the Company or its Board of Directors from taking and disclosing to
the shareholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any other disclosure to the shareholders if, in the good
faith judgment of the Company’s Board of Directors after consultation with outside
counsel, the failure so to disclose could be inconsistent with its obligations under
applicable law.
(c) Access; Transition Meetings; Reports.
(i) Subject to applicable confidentiality obligations of the Company and its
Subsidiaries and the terms of the letter agreement between Westmont USA Development,
Inc. and the Company, dated November 10, 2005 (the “Confidentiality
Agreement”), from and after the date of this Agreement until the Effective Time
(or the termination of this Agreement), the Company shall permit representatives of
Parent to have reasonable access during customary business hours, and in a manner so
as not to interfere with the normal business operations of the Company, to all
premises, properties, books, records, contracts, tax records and documents of or
pertaining to the Company and its Subsidiaries.
(ii) Parent and the Company shall form a transitional working group, comprised
of the persons set forth on Section 4.3(c)(ii) of the Disclosure Schedule, which
shall meet (in person or by conference call) periodically (and no less frequently
than monthly) prior to the Closing to discuss transitional matters relating to the
Company and the Company Properties. The Company shall deliver to Parent copies of
any financial reports provided to the Company or any of its Subsidiaries by the
management company for the Company Properties in the ordinary course of business
relating to the operations of the Company and the Company Properties other than the
Excluded Properties. The Company shall organize periodic (and no less frequently
than monthly) in person or telephonic meetings between representatives of Parent and
the management company for the Company Properties, and shall, upon the reasonable
request of Parent, use its commercially reasonable efforts to cause the general
managers (or persons performing similar functions) of the Company Properties to meet
with representatives of Parent. Each meeting will be held at a time mutually
agreeable to Parent and the Company. As part of such meetings, subject to the
provisions of this Section 4.3(c) and applicable law, Parent and its representatives
shall be permitted to inquire as to, and management of the Company and its
Subsidiaries and the Company shall undertake commercially reasonable efforts to
respond with respect to, all material matters relating to the Company, its
Subsidiaries and the Company Properties.
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(d) Notices. Each of the Company and the Partnership shall give Parent prompt notice,
(i) if any representation or warranty made by it contained in this Agreement that is qualified as
to materiality becomes untrue or inaccurate in any respect or any such representation or warranty
that is not so qualified becomes untrue or inaccurate in any material respect or (ii) of any event,
circumstance or condition which would reasonably be expected to result in the failure by it to
comply with or satisfy in any material respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties hereto or the
conditions to the obligations of the parties under this Agreement.
(e) Rights Agreement. Except as provided in Section 3.1(v) or as requested in writing
by Parent, prior to the Special Meeting, the Board of Directors of the Company shall not amend the
Rights Agreement or redeem the Company Rights.
(f) Incentive Options, Restricted Common Shares and Share Units.
(i) Prior to the REIT Effective Time, the Board of Directors of the Company
shall adopt resolutions by written action to:
(A) provide that each In the Money Option granted under the Long-Term Incentive
Plan that is outstanding immediately prior to the REIT Effective Time (whether
vested or unvested) shall be canceled as of the REIT Effective Time in exchange for
a lump sum cash payment from Parent to the holder of such In the Money Option in an
amount equal to the excess, if any, of $11.00 over the applicable per share exercise
price for such In the Money Option;
(B) provide that each Incentive Option that is outstanding immediately prior to
the REIT Effective Time that is not an In the Money Option shall be cancelled and no
consideration shall be paid or issued in respect thereof; and
(C) vest and make transferable all restricted Common Shares granted under the
Long-Term Incentive Plan.
(ii) (A) The Company has adopted the Xxxxxx Lodging Company Directors’ Deferred
Compensation Plan (the “Share Unit Plan”) pursuant to which eligible
directors may elect to defer payment of fees and credit such fees to an account (the
“Share Unit Account”) consisting of units that are equivalent in value to
Common Shares (“Share Units”). The Company shall take all actions necessary
so that all Share Units outstanding immediately prior to the REIT Effective Time
under all Share Unit Accounts, except for those Share Unit Accounts allocated to
installment payments which have commenced but have not been completed prior to the
REIT Effective Time, shall be canceled as of the REIT Effective Time in exchange for
a lump sum cash payment from Parent equal to the product of (1) the Common Share
Merger Consideration plus the
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aggregate REIT Dividend Per Share Amount and (2) the number of Share Units in
such holder’s Share Unit Account outstanding immediately prior to the REIT Effective
Time.
(B) The Company shall take all actions necessary so that all Share Unit
Accounts in installment payment status immediately prior to the REIT Effective Time
shall be distributed by the Company pursuant to the “Change of Control” provisions
contained in paragraph 7 of the Share Unit Plan in the form of a lump sum cash
payment from Parent.
(iii) All cash amounts payable under Sections 4.3(f)(i) and (ii) shall be
subject to any required tax withholdings and shall be paid at Closing immediately
following the REIT Effective Time.
(iv) The Company shall take such actions as are necessary to cause dispositions
of Company equity securities (including derivative securities) pursuant to the
transactions contemplated by this Agreement by each individual that is an officer or
director of the Company to be exempt from Section 16(b) of the Exchange Act under
Rule 16b-3 under the Exchange Act in accordance with the Rule 16b-3 No-Action
Letter.
(g) Operation of Business. During the period from the date of this Agreement to the
Effective Time, the Company, the Partnership and their respective Subsidiaries shall conduct their
operations in the Ordinary Course of Business and shall use all reasonable efforts, and be
permitted to take all actions necessary, to maintain and preserve their business organizations and
the Company’s status as a REIT within the meaning of the Code. Without limitation of the
foregoing, the Company, the Partnership and their respective Subsidiaries shall, except as set
forth in Section 4.3(g) of the Disclosure Schedule or as may be necessary to maintain the Company’s
status as a REIT:
(i) not (A) amend or propose to amend their respective articles of
incorporation or bylaws or equivalent constitutional documents, (B)
split, combine or reclassify their outstanding capital stock or other
equity interests, (C) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except
for the payment of dividends or distributions to the Company or a
wholly owned Subsidiary of the Company by a direct or indirect wholly
owned Subsidiary of the Company or (D) repurchase, redeem or
otherwise acquire, or modify or amend, any shares of the capital
stock or other equity interests of the Company or any of its
Subsidiaries or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(ii) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of, their
capital stock of any class or any debt or equity securities
convertible into
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or exchangeable for such capital stock, or any Share Units or similar
instruments, except that the Company may issue shares upon the
exercise of options and redemption of Common Units outstanding on the
date hereof;
(iii) not (A) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (1) borrowings in the
Ordinary Course of Business, and (2) borrowings to refinance existing
outstanding indebtedness on terms which are reasonably acceptable to
Parent; provided that in no event shall aggregate
indebtedness of the Company and its Subsidiaries, net of all cash and
cash equivalents, exceed $180,000,000, (B) make any acquisition of
any assets or businesses other than expenditures for current assets
in the Ordinary Course of Business and expenditures for fixed or
capital assets in the Ordinary Course of Business, (C) sell, pledge,
dispose of or encumber any assets or businesses other than (1) sales
of the Excluded Assets in accordance with the terms of the Excluded
Property Contracts, (2) sales or dispositions of businesses or assets
as may be required by applicable law and (3) sales or dispositions of
assets in the Ordinary Course of Business, or (D) enter into any
binding contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(iv) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of
their respective present officers and key employees, and preserve the
goodwill and business relationships with customers and others having
business relationships with them, other than as expressly permitted
by the terms of this Agreement;
(v) not enter into, amend, modify or renew any employment,
consulting, severance, indemnification or similar agreements with,
pay any bonus or grant any increase in salary, wage or other
compensation or any increase in any employee benefit to, any
directors, officers or employees of the Company or its Subsidiaries,
except in each such case (A) as may be required by applicable law (B)
to satisfy obligations existing as of the date hereof or (C) in the
Ordinary Course of Business or hire any additional employees except
in the Ordinary Course of Business;
(vi) not enter into, establish, adopt, amend or modify any pension,
retirement, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare plan, agreement, program or
arrangement, in respect of any directors, officers or employees of
the Company or its Subsidiaries, except, in each such case
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(A) as may be required by applicable law or pursuant to the terms of
this Agreement, (B) to satisfy obligations existing as of the date
hereof, including pursuant to any collective bargaining agreement or
(C) in the Ordinary Course of Business;
(vii) not make capital expenditures or enter into any binding
commitment or contract to make capital expenditures, except (A)
capital expenditures which the Company or its Subsidiaries are
currently committed to make, (B) capital expenditures consistent with
the amounts set forth in Section 4.3(g)(vii) of the Disclosure
Schedule and the Company’s consolidated capital spending budget (a
copy of which for fiscal year 2006 has been delivered to Parent prior
to the date hereof), (C) capital expenditures for emergency repairs
and other capital expenditures necessary in light of circumstances
not anticipated as of the date of this Agreement which are necessary
to avoid significant disruption to the Company’s business or
operations consistent with past practice (and, if reasonably
practicable, after consultation with Parent), or (D) repairs and
maintenance in the Ordinary Course of Business;
(viii) not change in any material manner any of its methods,
principles or practices of accounting in effect at December 31, 2005,
except as may be required by the SEC, applicable law or GAAP;
(ix) not make, change or revoke any material Tax election unless
required by law or make any agreement or settlement with any taxing
authority regarding any material amount of Taxes or which would
reasonably be expected to materially increase the obligations of the
Company or the Partnership or the Surviving Corporation or the
Surviving Partnership to pay Taxes in the future;
(x) not authorize the manager of any of the Company Properties to
take any action under any of the relevant management agreements
requiring the consent of the owner of such Company Properties without
Parent’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, except for actions
otherwise permitted hereunder;
(xi) instruct the manager of each of the Company Properties to
operate and maintain each of such Company Properties in a manner that
is substantially the same manner in which it is currently being
operated and maintained;
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(xii) not enter into, terminate or amend any Material Contract
(including any Excluded Property Contract) except in the Ordinary
Course of Business and except for amendments to the Employee Benefit
Plans required by applicable law and not enter into, terminate or
amend any Contract (including any Excluded Property Contract) with
any of its Affiliates or any management agreement relating to any of
the Company Properties, in each case, without Parent’s prior written
consent, which consent shall not be unreasonably withheld,
conditioned or delayed;
(xiii) maintain, or cause to be maintained, all existing insurance
carried on the Company Properties except with Parent’s prior written
consent, which consent shall not be unreasonably withheld,
conditioned or delayed;
(xiv) not enter into any agreement or authorize any Person (including
the manager of any of the Company Properties) to take any of the
foregoing prohibited actions;
(xv) not settle or compromise any material litigation or waive,
release or assign any material rights or claims without Parent’s
prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed; and
(xvi) not authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the
Company or any Subsidiary of the Company.
Notwithstanding anything to the contrary contained herein and in addition to the other matters
permitted by this Section 4.3(g), the Company and its Subsidiaries shall be permitted to (i) pay
prior to the Effective Time of the Mergers, if earned based on the determination of the
Compensation Committee of the Board of Directors of the Company, annual bonuses to employees of the
Company and its Subsidiaries with respect to any fiscal year, whether or not the Effective Time of
the Mergers occurs prior to the end of such fiscal year; provided such bonuses are consistent with
amounts paid in previous years, (ii) purchase letters of credit to secure the obligations of the
Company and its Subsidiaries under all Retention Plans, (iii) terminate, and release all
obligations under, at the Effective Time of the Mergers each Guaranty, dated November 4, 2001,
executed by a Limited Partner in favor of the Company guaranteeing the obligations of the
Partnership to the Company under the Intercompany Note, (iv) take such actions as are necessary or
desirable to enable the Company and its Subsidiaries to dispose of an Excluded Asset in accordance
with the terms of the Excluded Property Contracts, (v) subject to Parent’s reasonable approval,
consent to BMC’s entry into a collective bargaining agreement with BMC employees at the DoubleTree
Berkeley Marina, (vi) authorize, declare and pay the REIT Dividend as contemplated by Section
4.3(k), (vii) make distributions in accordance with the terms of the Partnership Agreement
necessary to enable the Company to pay the REIT Dividend and incur indebtedness if necessary to
fund such distributions (it being understood that
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no such dividend or distribution shall be paid upon or accrued with respect to any Share Unit other
than the payment contemplated by Section 4.3(f)(ii)), (viii) issue Common Shares in connection with
the redemption of Common Units pursuant to the Partnership Agreement, (ix) authorize, declare and
pay regular dividends on the outstanding Series 2002-A Preferred Shares and (x) take any actions
contemplated by Section 4.3(f).
(h) Control of the Company’s Operations. Nothing contained in this Agreement shall
give to Parent, directly or indirectly, rights to control or direct the Company’s operations prior
to the Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision of its operations.
(i) Cooperation with Financing. Each of the Company and the Partnership shall, and
shall cause their respective Subsidiaries, directors, officers, employees, accountants and agents
to, cooperate with Parent in connection with any debt or equity financing undertaken in connection
with the transactions contemplated hereby (the “Financing”) and use their commercially
reasonable efforts to take all actions reasonably requested by Parent in connection therewith,
including (a) providing such financial and other information as Parent may reasonably request,
subject to applicable Laws, for inclusion in any offering memorandum or other document relating to
the Financing (each, a “Parent Financing Document”) and (b) making appropriate personnel
available (upon reasonable advance notice to permit scheduling) to discuss matters relating to the
Company, the Partnership and their respective Subsidiaries that Parent proposes to include in any
Parent Financing Document and to attend and make presentations to prospective investors or lenders
regarding the business of the Company and the Partnership. If at any time prior to the Effective
Time, the Company shall learn that any information pertaining to the Company, the Partnership or
any of their respective Subsidiaries contained (or incorporated by reference) in, or omitted from,
a Parent Financing Document, copies of which shall previously have been provided to Parent, makes
any of the statements therein false or misleading, the Company shall promptly inform Parent thereof
and use its commercially reasonable efforts to promptly provide Parent with all information
necessary to correct any such false or misleading statement and make the statements contained in
Parent Financing Documents not false or misleading. Notwithstanding the foregoing, none of the
Company, the Partnership or any Subsidiary shall be required to pay any commitment or other similar
fee or incur any other liability in connection with the Financing prior to the Effective Time. If
this Agreement is terminated, Parent shall, promptly upon request by the Company or the
Partnership, reimburse the Company for all reasonable out-of-pocket costs incurred by the Company,
the Partnership or any Subsidiary in connection with such cooperation. Parent, REIT Merger Sub, OP
Holdco and OP Merger Sub shall, on a joint and several basis, indemnify and hold harmless the
Company, the Partnership and any Subsidiary and their respective directors, officers, employees,
accountants and agents for and against any and all liabilities, losses, damages, claims, costs,
expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with
the arrangement of the Financing and any information utilized in connection therewith (other than
historical information relating to the Company, the Partnership or any Subsidiary).
(j) Waiver of Ownership Limitation by Company. The Company shall waive any ownership
limitation in the Company Articles that could adversely affect Parent’s ownership of the Company’s
Common Shares following the Mergers, subject to the
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Company’s receipt of a legal opinion of Parent’s counsel in the form previously agreed to the
Company to the effect required in the Company Articles.
(k) REIT Dividend. The Company shall authorize, declare and pay one or more dividends
(the “REIT Dividend”) in respect of the Common Shares in an aggregate amount equal to the
minimum dividend necessary in such period to avoid (i) jeopardizing its status as a REIT under the
Code, and (ii) the imposition of income tax under Section 857(b) of the Code and the imposition of
excise tax under Section 4981 of the Code. The Partnership shall use (i) proceeds from the
disposition of the Excluded Assets, (ii) cash on hand or (iii) indebtedness to fund the
distributions in accordance with the Partnership Agreement necessary to enable the Company to pay
the REIT Dividend. The final REIT Dividend will be paid no later than one day prior to the
Closing. If a number of Common Units are surrendered as payment of the purchase price under the
Excluded Property Contracts (other than the Marco Agreement), such Common Units shall be deemed
outstanding for purposes of calculating the distributions required by the Partnership to enable the
payment of the REIT Dividend, but shall not be deemed outstanding for purposes of calculating the
merger consideration payable under this Agreement.
(l) Excluded Properties. The Company and its Subsidiaries shall use all reasonable
efforts to take all action and to do all things necessary, proper or advisable to consummate prior
to the Effective Time the transactions contemplated by the Excluded Property Contracts in
accordance with the terms of the Excluded Property Contracts.
ARTICLE V
CONDITIONS PRECEDENT TO THE MERGERS
5.1 Mutual Conditions.
The obligations of each of the Parties to consummate the
Mergers shall be subject to fulfillment of the following conditions precedent:
(a) The Company Shareholder Approval shall have been obtained; and
(b) No temporary restraining order or preliminary or permanent injunction or other order or
decree which prevents the consummation of either of the Mergers shall have been issued and remain
in effect (each Party agreeing to use its commercially reasonable best efforts to cause any such
injunction, order or decree to be lifted), and no statute, rule or regulation shall have been
enacted by any state or federal Governmental Entity which would prevent the consummation of either
of the Mergers.
5.2 Additional Conditions to Obligations of the Company and the Partnership.
The
obligation of the Company and the Partnership to effect the Mergers shall also be subject to the
fulfillment of the following conditions:
(a) The representations and warranties of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub
set forth in Article III shall be true and correct (i) at and as of the date hereof and (ii) at and
as of the Effective Time as though then made (except for changes permitted by or necessitated by
compliance with this Agreement and except that representations and warranties made as of a
specified date need be true and correct only as of the specified date),
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without giving effect to any materiality or Material Adverse Effect qualification, except
where such failure of such representations or warranties to be true and correct would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) Each of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub shall have performed in all
material respects each obligation and agreement and complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to the Effective Time.
(c) Each of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub shall have furnished to the
Company a certificate executed by its respective chairman, president or any vice president dated
the Closing Date in which such officer shall certify on behalf of Parent, REIT Merger Sub, OP
Holdco or OP Merger Sub, as the case may be, that the conditions set forth in Sections 5.2(a) and
5.2(b) have been fulfilled.
5.3 Additional Conditions to Obligations of Parent,
REIT Merger Sub, OP Holdco and OP
Merger Sub. The obligations of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub to effect
the Mergers shall also be subject to the fulfillment of the following conditions:
(a) The representations and warranties of the Company set forth in Article III shall be true
and correct (i) at and as of the date hereof and (ii) at and as of the Effective Time as though
then made (except for changes permitted by or necessitated by compliance with this Agreement and
except that representations and warranties made as of a specified date need be true and correct
only as of the specified date), without giving effect to any materiality or Material Adverse Effect
qualification, except where such failure of such representations or warranties to be true and
correct would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Each of the Company and the Partnership shall have performed in all material respects each
obligation and agreement and complied in all material respects with each covenant to be performed
and complied with by each of them hereunder at or prior to the Effective Time.
(c) Each of the Company and the Partnership shall have furnished to Parent a certificate
executed by, in the case of the Company, its chairman, president or any vice president or, in the
case of the Partnership, its General Partner dated the Closing Date in which such officer or
General Partner shall certify on behalf of the Company and the Partnership, respectively, that the
conditions set forth in Sections 5.3(a) and 5.3(b) hereof have been fulfilled.
(d) The Company shall have paid the REIT Dividend.
(e) Xxxxx & Xxxxxxxxx LLP, counsel to the Company, shall have delivered to Parent an opinion,
in the form previously agreed, regarding the qualification of the Company as a “real estate
investment trust” under the Code.
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ARTICLE VI
TERMINATION
6.1 Termination of Agreement.
This Agreement may be terminated and the Mergers may be
abandoned, whether before or after receipt of the Company Shareholder Approval, at any time prior
to the Effective Time (or with respect to Section 6.1(i) in accordance with Section 6.2(a)) as
provided below:
(a) By mutual written agreement of the Company and Parent;
(b) By the Company or Parent if the Mergers shall not have been consummated before December
21, 2006, unless extended by the Boards of Directors of the Company and the general partner of
Parent (provided that the right to terminate this Agreement under this Section 6.1(b) shall not be
available to any Party whose failure or whose Affiliate’s failure to perform any material covenant
or obligation under this Agreement has been the cause of or resulted in the failure of the Mergers
to occur on or before such date);
(c) By the Company or Parent if a court of competent jurisdiction or other Governmental Entity
shall have issued a final and nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or otherwise prohibiting the
Mergers;
(d) By Parent or the Company, if the Company Shareholder Approval shall not have been obtained
by reason of failure to obtain the required vote at the Special Meeting or at any adjournment or
postponement thereof;
(e) By the Company, if the Board of Directors of the Company shall have approved, and the
Company shall promptly following such termination enter into, a definitive agreement providing for
a Company Superior Proposal; provided that (i) the Company shall have complied with its obligations
under Section 4.3(b); and (ii) the Company shall simultaneously make the payment required by
Section 6.3;
(f) By the Company, following a breach of any representation, warranty or covenant of Parent,
REIT Merger Sub, OP Holdco or OP Merger Sub set forth in this Agreement, in any case such that the
conditions set forth in Section 5.2(a) or 5.2(b), as the case may be, are not satisfied or would be
incapable of being satisfied within 30 days after the giving of written notice to Parent;
(g) By Parent, following a breach of any representation, warranty or covenant of the Company
or the Partnership set forth in this Agreement, in either case such that the conditions set forth
in Section 5.3(a) or 5.3(b), as the case may be, are not satisfied or would be incapable of being
satisfied within 30 days after the giving of written notice to the Company;
(h) By Parent, if the Company’s Board of Directors shall have (i) withdrawn or modified in a
manner adverse to Parent its recommendation to the Company’s Common Shareholders that they give the
Company Shareholder Approval or (ii) approved or recommended any Company Takeover Proposal; or
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(i) By Parent, pursuant to Section 6.2(a).
6.2 Marco Agreement.
(a) If prior to May 26, 2006, the purchaser of the Radisson Suite Beach Resort – Marco Island
(the “Marco Purchaser” and the hotel, the “Marco Hotel”) pursuant to the Hotel
Purchase Agreement, dated as of May 7, 2006, between the Marco Purchaser and Xxxxxx Xxxxx LLC, a
Delaware limited liability company (the “Marco Agreement”), has not made the Additional
Deposit (as defined in the Marco Agreement) with the escrow agent under the Marco Agreement, Parent
shall have the right to (i) deliver a notice of termination to the Company (the “Marco
Termination Notice”) on or prior to June 8, 2006, or (ii) remain obligated under the terms and
subject to the conditions of this Agreement and, if the Effective Time occurs, retain any deposit
made by the Marco Purchaser. If Parent does not deliver a Marco Termination Notice on or prior to
June 8, 2006, Parent will not have the right to terminate this Agreement pursuant to this Section
6.2(a). Following receipt from Parent of a Marco Termination Notice, the Company shall have the
right, by written notice to Parent, to accept the Marco Termination Notice, in which case this
Agreement shall terminate as of the date of such acceptance. So long as the Company has not
accepted the Marco Termination Notice, the Company shall have until July 7, 2006 to enter into an
agreement or other arrangement for the sale or other disposition of the Marco Hotel, and if the
Company enters into such an agreement or arrangement within such time period, the parties will
negotiate in good faith concerning any increase or decrease in the consideration payable by Parent
pursuant to this Agreement based on the terms of such new agreement or arrangement. If, by the
date that is the earlier of July 12, 2006 and five (5) days after the Company enters into such new
agreement or arrangement, the parties are unable to agree on the increase or decrease in the
consideration payable by Parent pursuant hereto, this Agreement shall terminate as of such earlier
date. If the Marco Purchaser makes the Additional Deposit or completes the purchase of the Marco
Hotel pursuant to the terms of the Marco Agreement prior to termination of this Agreement pursuant
to the preceding sentence, then Parent shall cease to have the right to deliver a Marco Termination
Notice, any Marco Termination Notice that has been delivered previously shall be deemed to be
rescinded automatically, and Parent shall cease to have any right to terminate this Agreement
pursuant to this Section 6.2(a).
(b) During the Standstill Period (as defined below), without the prior written consent of the
Company, Parent agrees that it shall not, nor shall it permit any of its Subsidiaries, Westmont USA
Development Inc. or its Affiliates or Cadim, Inc. to, contact, discuss, negotiate with or enter
into any agreement with, any Person (including, without limitation, any franchisor, lender,
customer or vendor of the Company, its Affiliates or its hotel operators or any Affiliate of such
parties) regarding any aspect of the transactions contemplated hereunder or the business of the
Company and its Subsidiaries, except for discussions with any lender or ground lessor from whom a
consent is required to be obtained as a result of the transactions contemplated hereby and except
for discussions with any actual or potential equity partner, lender, other potential financing
source or advisor of Parent. The term “Standstill Period” means that period commencing
immediately upon execution of the Merger Agreement and expiring upon the earlier to occur of (i)
the termination of the Merger Agreement or (ii) the date on which Parent no longer has the right to
terminate this Agreement pursuant to this Section 6.2. If Parent breaches or violates the covenant
in this Section 6.2(b), then notwithstanding a
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termination of this Agreement pursuant to Section 6.2(a), Parent shall not be entitled under
any circumstances to reimbursement of Expenses of any amount pursuant to Section 6.3(a) or a
Termination Fee pursuant to Section 6.3(b).
6.3 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 6.1(d), 6.1(g) or 6.2(a) (but subject
to the provisions of Section 6.2(b)), then the Company shall pay Parent an amount equal to the sum
of Parent’s Expenses (not to exceed $3,500,000 in the aggregate with respect to a termination
pursuant to Section 6.1(d) or 6.1(g) and not to exceed $2,000,000 in the aggregate with respect to
a termination pursuant to Section 6.2(a)) for which Parent has not theretofore been reimbursed by
the Company. “Expenses” means all reasonable out-of-pocket expenses (including, without
limitation, all fees and expenses of financing sources, counsel, accountants, investment bankers,
experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf
in connection with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby, including the Financing.
Payment of Parent’s Expenses pursuant to this Section 6.3(a) shall be made not later than five
Business Days after delivery to the Company of notice of demand for payment and a documented
itemization setting forth in reasonable detail all Expenses of Parent (which itemization may be
supplemented and updated from time to time by Parent until the ninetieth day after Parent delivers
such notice of demand for payment).
(b) In the event that (i) any Person makes a Company Takeover Proposal on or before the date
of the Special Meeting and thereafter this Agreement is terminated pursuant to Section 6.1(d) and
within 12 months of the date of such termination the Company or the Partnership enters into an
agreement providing for, or consummates, a Company Takeover Proposal, (ii) this Agreement is
terminated pursuant to Section 6.1(h), (iii) this Agreement is terminated by the Company pursuant
to Section 6.1(e) or (iv) this Agreement is terminated by Parent pursuant to Section 6.1(g) and
within 12 months of the date of such termination the Company enters into an agreement providing
for, or consummates, a Company Takeover Proposal, then the Company shall pay to Parent a fee of
$8,000,000 (the “Termination Fee”), minus the amount, if any, previously paid pursuant to
Section 6.3(a), which amount shall be payable by wire transfer of same day funds, in the case of
the foregoing clauses (i) or (iv), on the date of the consummation of such Company Takeover
Proposal, and in the case of clause (ii) or (iii), on the date of termination of this Agreement.
In no event shall the Termination Fee be paid to Parent pursuant to this Agreement if Parent
delivers a Marco Termination Notice or if Parent breaches the covenant contained in Section 6.2(b).
(c) It is expressly agreed that the Termination Fee to be paid pursuant to this Section 6.3
constitutes liquidated damages negotiated at arm’s-length and does not constitute, and is not
intended by the Parties to operate as, a penalty. Receipt of the Termination Fee shall constitute
the sole and exclusive remedy of Parent, REIT Merger Sub, OP Holdco and OP Merger Sub under the
events and circumstances giving rise to payment of the Termination Fee as specified in this
Agreement, and none of Parent, REIT Merger Sub, OP Holdco or OP Merger Sub shall (i) seek to obtain
any other recovery or judgment against the Company or the Partnership or any of their officers,
directors, employees, partners, managers, members or
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shareholders or (ii) be entitled to seek or obtain any other damages of any kind, including
consequential, indirect or punitive damages.
(d) In the event of termination of this Agreement by either the Company or Parent as provided
in Section 6.1 or 6.2(a), this Agreement shall forthwith become void and have no effect, without
any liability or obligation on the part of Parent, REIT Merger Sub, OP Holdco, OP Merger Sub, the
Company or the Partnership, other than the confidentiality provisions of Section 4.3(c), this
Section 6.3 and Article VII, which provisions shall survive such termination. Notwithstanding the
foregoing, to the extent that such termination results from the willful and material breach by a
Party of any representation or warranty set forth in this Agreement, from the material breach by a
Party of any covenant set forth in this Agreement or a breach by Parent of the covenant in Section
6.2(b), then such Party shall be liable for any damages incurred or suffered by the other Parties
as a result of such breach.
ARTICLE VII
MISCELLANEOUS
7.1 Survival.
None of the representations and warranties of the Parties will survive
the Effective Time.
7.2 Press Releases and Announcements.
No Party shall issue any press release or
announcement relating to the subject matter of this Agreement without the prior written approval of
the other Parties; provided, however, that each of the Company and Parent may make any public
disclosure it believes in good faith, based upon the advice of its counsel, is required by law or
regulation or the listing standards of the New York Stock Exchange (in which case the Company or
Parent will advise the other to the extent practicable prior to making the disclosure and, to the
extent practicable, give such other party the reasonable opportunity to comment on such proposed
public disclosure).
7.3 Entire Agreement.
This Agreement (including the documents referred to herein),
the Guaranty and the Confidentiality Agreement constitute the entire agreement among the Parties
and supersede any prior understandings, agreements, or representations by or among the Parties,
written or oral, that may have related in any way to the subject matter hereof.
7.4 Succession and Assignment.
This Agreement shall be binding upon and inure to the
benefit of the Parties named herein and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of its rights, interests or obligations hereunder without
the prior written consent of the other Parties.
7.5 Third-Party Beneficiaries.
Nothing in this Agreement, express or implied, is
intended or shall be construed to create any third-party beneficiaries, except as provided in
Section 4.2(a) hereof.
7.6 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one and the same
instrument.
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7.7 Headings.
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
7.8 Notices.
All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Company or the Partnership:
|
Copy to: | |
Xxxxxx Lodging Company
|
Xxxxx & Xxxxxxxxx LLP | |
00 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
|
0000 Xxxxxxxx Xxxx Xxxxxx | |
Xxxxxxxxx, Xxxx 00000
|
Xxxxxxxxx, Xxxx 00000 | |
Attn: President and Chief Operating Officer
|
Attn: Xxxx X. Xxxxxxxx | |
If to Parent, REIT Merger Sub, OP Holdco
or OP Merger Sub:
|
Copy to: | |
Braveheart Investors LP |
||
Westmont USA Development Inc.
|
Davies Xxxx Xxxxxxxx & Xxxxxxxx LLP | |
0000 Xxx Xxxxxx Xxxx, Xxxxx 000
|
625 Madison Avenue, 12th Floor | |
Houston, Texas 77057
|
Xxx Xxxx, Xxx Xxxx 00000 | |
Attn: Xxxxx Xxxxxx and Xxxxxxx Xxxxxxxx
|
Attn: Xxxxxx X. Xxxxxxxx |
Any Party may give any notice, request, demand, claim, or other communication hereunder using any
other means (including personal delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it actually is received by
the Party for whom it is intended. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
7.9 Governing Law.
This Agreement shall be governed by and construed in accordance
with the internal laws (and not the law of conflicts) of the State of Ohio.
7.10 Consent to Jurisdiction; Venue.
(a) Each of the Parties irrevocably submits to the exclusive jurisdiction of the state courts
of Ohio and to the jurisdiction of the United States District Court for the Northern District of
Ohio, for the purpose of any action or proceeding arising out of or relating to this Agreement and
each of the Parties irrevocably agrees that all claims in respect to such action or proceeding may
be heard and determined exclusively in any Ohio state or federal court sitting in the City of
Cleveland. Each of the Parties agrees that a final judgment in any
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action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
(b) Each of the Parties irrevocably consents to the service of any summons and complaint and
any other process in any other action or proceeding relating to this Agreement, on behalf of itself
or its property, by the personal delivery of copies of such process to such Party. Nothing in this
Section 7.10 shall affect the right of any Party hereto to serve legal process in any other manner
permitted by law.
7.11 Amendments and Waivers.
The Parties may mutually amend any provision of this
Agreement at any time prior to the Effective Time with the prior authorization of their respective
boards of directors or other governing bodies. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver by
any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent occurrence.
7.12 Severability.
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within which the judgment may
be appealed.
7.13 Expenses.
Except as provided in Section 6.3(a), each of the Parties shall bear
its own costs and expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
7.14 Construction.
The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of strict construction
shall be applied against any Party. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless
the context otherwise requires. Whenever the words “include,” “includes,” or “including” are used
in this Agreement, they shall be deemed to be followed by the words “without limitation.” Whenever
the context requires, words used in the singular shall be construed to mean or include the plural
and vice versa, and pronouns of any gender shall be deemed to include and designate the masculine,
feminine or neuter gender.
[signature page follows]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above
written.
| XXXXXX LODGING COMPANY | ||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Xxxxxxx X. Xxxxx, President and Chief Operating | ||||
| Officer | ||||
| XXXXXX HOTEL PROPERTIES, L.P. | ||||
| By: | Xxxxxx Lodging Company, its general partner | |||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Xxxxxxx X. Xxxxx, President and Chief Operating Officer | ||||
| BRAVEHEART INVESTORS LP | ||||
| By: | BRAVEHEART GP, LLC, its general partner | |||
| By: | /s/ Xxxxxxx Xxxxxxxx | |||
| Xxxxxxx Xxxxxxxx, Assistant Vice President | ||||
| BRAVEHEART II REALTY (OHIO) CORP. | ||||
| By: | /s/ Xxxxxxx Xxxxxxxx | |||
| Xxxxxxx Xxxxxxxx, Assistant Secretary and | ||||
| Treasurer | ||||
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| BRAVEHEART II PROPERTIES HOLDING LLC | ||||
| By: | /s/ Xxxxxxx Xxxxxxxx | |||
| Xxxxxxx Xxxxxxxx, Assistant Secretary and | ||||
| Treasurer | ||||
| BRAVEHEART II PROPERTIES COMPANY LLC | ||||
| By: | Braveheart II Realty (Ohio) Corp., its managing member | |||
| By: | /s/ Xxxxxxx Xxxxxxxx | |||
| Xxxxxxx Xxxxxxxx, Assistant Secretary and | ||||
| Treasurer | ||||
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DISCLOSURE SCHEDULE
TO
AGREEMENT AND PLAN OF MERGER
AMONG
BRAVEHEART INVESTORS LP, BRAVEHEART II REALTY (OHIO) CORP.,
BRAVEHEART II PROPERTIES HOLDING LLC, BRAVEHEART II PROPERTIES
COMPANY LLC, XXXXXX LODGING COMPANY AND XXXXXX HOTEL
PROPERTIES, L.P.
TO
AGREEMENT AND PLAN OF MERGER
AMONG
BRAVEHEART INVESTORS LP, BRAVEHEART II REALTY (OHIO) CORP.,
BRAVEHEART II PROPERTIES HOLDING LLC, BRAVEHEART II PROPERTIES
COMPANY LLC, XXXXXX LODGING COMPANY AND XXXXXX HOTEL
PROPERTIES, L.P.
Section 3.1(d) — Subsidiaries
Section 3.1(e) — Capitalization of the Company
Section 3.1(f) — Capitalization of the Partnership
Section 3.1(g) — Filings with the SEC
Section 3.1(i) — Absence of Undisclosed Liabilities
Section 3.1(j) — No Conflicts
Section 3.1(k) — Litigation
Section 3.1(l) — Material Contracts
Section 3.1(m) — Employee Benefits
Section 3.1(n) — Taxes
Section 3.1(o) — Compliance with Laws
Section 3.1(p) — Environmental, Health and Safety Matters
Section 3.1(q) — Title to Assets
Section 3.1(r) — Labor Matters
Section 3.1(s) — Intellectual Property
Section 3.1(t) — Transactions with Affiliates
Section 3.1(y) — Brokers’ Fees
Section 3.1(aa) — Insurance
Section 4.3(c)(ii) — Transitional Working Group
Section 4.3(g) — Operation of Business
Section 3.1(e) — Capitalization of the Company
Section 3.1(f) — Capitalization of the Partnership
Section 3.1(g) — Filings with the SEC
Section 3.1(i) — Absence of Undisclosed Liabilities
Section 3.1(j) — No Conflicts
Section 3.1(k) — Litigation
Section 3.1(l) — Material Contracts
Section 3.1(m) — Employee Benefits
Section 3.1(n) — Taxes
Section 3.1(o) — Compliance with Laws
Section 3.1(p) — Environmental, Health and Safety Matters
Section 3.1(q) — Title to Assets
Section 3.1(r) — Labor Matters
Section 3.1(s) — Intellectual Property
Section 3.1(t) — Transactions with Affiliates
Section 3.1(y) — Brokers’ Fees
Section 3.1(aa) — Insurance
Section 4.3(c)(ii) — Transitional Working Group
Section 4.3(g) — Operation of Business
THE COMPANY AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED EXHIBIT AND SCHEDULE TO THE
SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.
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