Exhibit 2.1
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGERS
by and among
BRE/HOMESTEAD VILLAGE L.L.C.
and
HOMESTEAD VILLAGE INCORPORATED
and
SECURITY CAPITAL LODGING INCORPORATED
and
CERTAIN DIRECT CORPORATE SUBSIDIARIES
OF HOMESTEAD VILLAGE INCORPORATED
(Dated as of November 20, 2001)
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ARTICLE I DEFINITIONS ................................................................................ 4
1.1 Definitions .................................................................................. 4
ARTICLE II THE MERGER ................................................................................. 17
2.1 The Mergers .................................................................................. 17
2.2 Consideration for the Mergers ................................................................ 19
2.4 Purchaser's Investigation of the Company ..................................................... 20
2.5 Allocation of Merger Consideration ........................................................... 21
2.6 Merger Distribution .......................................................................... 21
2.7 Escrow Closing ............................................................................... 21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND LODGING .................................. 22
3.1 Due Incorporation ............................................................................ 22
3.2 Authority; Noncontravention; Consents ........................................................ 22
3.3 Capital Structure ............................................................................ 23
3.4 Other Interests .............................................................................. 25
3.5 Company Subsidiaries ......................................................................... 25
3.6 Financial Statements; Financial Information .................................................. 26
3.7 Absence of Certain Changes or Events ......................................................... 27
3.8 Properties ................................................................................... 27
3.9 Environmental Laws ........................................................................... 30
3.10 Access and Utilities ......................................................................... 31
3.11 Employees and Employee Benefits .............................................................. 32
3.12 Employment Relations and Agreements .......................................................... 35
3.13 Taxes ........................................................................................ 35
3.14 No Defaults or Violations .................................................................... 37
3.15 Litigation ................................................................................... 37
3.16 Contracts; Debt Instruments .................................................................. 37
3.17 Insurance .................................................................................... 39
3.18 No Conflict of Interest ...................................................................... 39
3.19 Claims Against Officers and Directors ........................................................ 39
3.20 Brokers ...................................................................................... 39
3.21 Forward Looking Statements ................................................................... 40
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3.22 Operation of Business Since Original Agreement Date .......................................... 40
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER ................................................ 43
4.1 Organization, Standing and Power of Purchaser ................................................ 43
4.2 Authority; Noncontravention; Consents ........................................................ 43
4.3 Financial Capacity of Purchaser .............................................................. 44
4.4 Litigation ................................................................................... 44
4.5 Confidentiality .............................................................................. 44
4.6 Brokers ...................................................................................... 44
4.7 Required Stockholder Approvals ............................................................... 45
4.8 Tax Matters .................................................................................. 45
ARTICLE V COVENANTS .................................................................................. 45
5.1 Transfer of Excluded Assets .................................................................. 45
5.2 Reasonable Inspection After Closing .......................................................... 45
5.3 Other Action ................................................................................ 45
5.4 Publicity .................................................................................... 45
5.5 Tax Covenants ................................................................................ 46
5.6 ERISA/Employee Benefits ...................................................................... 50
5.7 Admission of BRE Limited Partner ............................................................. 50
5.8 Las Vegas Lease .............................................................................. 51
5.9 HVI(2) Loan .................................................................................. 51
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER ........................................... 51
6.1 Payoff of Loans .............................................................................. 51
6.2 Documents .................................................................................... 51
6.3 No Injunctions or Restraints ................................................................. 51
6.4 Transfer of Excluded Assets .................................................................. 51
6.5 FIRPTA Certificate ........................................................................... 51
6.6 HPT Estoppel ................................................................................. 51
6.7 Las Vegas Estoppel ........................................................................... 51
6.8 Title to Company Properties .................................................................. 52
6.9 HPT Assumption ............................................................................... 52
6.10 HVI(2) Note .................................................................................. 52
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY ......................................... 52
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7.1 Documents .................................................................................... 52
7.2 No Injunctions or Restraints ................................................................. 52
7.3 HPT Assumption ............................................................................... 52
ARTICLE VIII MERGER CONSIDERATION ADJUSTMENTS ........................................................... 52
8.1 Determination of Net Tangible Liability ...................................................... 52
ARTICLE IX CLOSING .................................................................................... 53
9.1 Closing ...................................................................................... 53
9.2 Deliveries by Lodging ........................................................................ 53
9.3 Deliveries by Purchaser ...................................................................... 55
ARTICLE X INDEMNIFICATION ............................................................................ 56
10.1 Survival ..................................................................................... 56
10.2 Indemnification by Lodging ................................................................... 56
10.3 Indemnification by Purchaser ................................................................. 57
10.4 Notice of Third Party Claims; Assumption of Defense .......................................... 58
10.5 Settlement or Compromise ..................................................................... 59
10.6 Failure of Indemnifying Person to Act ........................................................ 59
10.7 Indemnity Payments ........................................................................... 59
10.8 Limitation on Liability ...................................................................... 59
10.9 Limitation on Indemnification ................................................................ 60
ARTICLE XI MISCELLANEOUS .............................................................................. 60
11.1 Expenses ..................................................................................... 60
11.2 Amendment .................................................................................... 61
11.3 Notices ...................................................................................... 61
11.4 Waivers ...................................................................................... 62
11.5 Counterparts ................................................................................. 62
11.6 Interpretation ............................................................................... 62
11.7 Applicable Law ............................................................................... 63
11.8 Assignment ................................................................................... 63
11.9 No Third Party Beneficiaries ................................................................. 63
11.10 Calculation of Time Periods .................................................................. 63
11.11 Further Assurances ........................................................................... 63
11.12 Severability ................................................................................. 63
11.13 Entire Understanding ......................................................................... 64
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11.14 Construction ................................................................................. 64
[A copy of any exhibit or schedule to this Agreement which has been omitted from
this filing will be provided to the Commission upon request.]
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGERS
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGERS is made as of
November 20, 2001, by and among (i) BRE/HOMESTEAD VILLAGE L.L.C., a Delaware
limited liability company ("Purchaser"), (ii) SECURITY CAPITAL LODGING
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INCORPORATED, a Delaware corporation ("Lodging"), (iii) HOMESTEAD VILLAGE
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INCORPORATED, a Maryland corporation and a wholly-owned subsidiary of Lodging
(the "Company"), and (iv) certain direct corporate subsidiaries of the Company
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listed on Schedule 1.1 hereof (the "Merging Subsidiaries"). Certain capitalized
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terms used herein are defined in Article I.
W I T N E S S E T H
WHEREAS, the parties hereto executed the Agreement and Plan of Mergers
(the "Original Agreement") on August 14, 2001 and thereafter certain amendments
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thereto (collectively, the "Amendments");
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WHEREAS, the parties hereto now desire to amend and restate the
Original Agreement, as amended by the Amendments, in its entirety;
WHEREAS, the Board of Directors of the Company and the managing member
of Purchaser deem it advisable and in the best interests of their stockholders
and members, respectively, upon the terms and subject to the conditions
contained herein, that the Company shall merge with and into Purchaser, with
Purchaser being the surviving entity in such merger (the "Merger");
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WHEREAS, the Boards of Directors of the Company and each of the Merging
Subsidiaries and the managing member of Purchaser deem it advisable and in the
best interests of their stockholders and members, respectively, upon the terms
and subject to the conditions contained herein, that the Merging Subsidiaries
shall merge with and into Purchaser, with Purchaser being the surviving entity
in each such Subsidiary Merger (as defined herein) (collectively, each such
Subsidiary Merger together with the Merger, referred to as the "Mergers");
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WHEREAS, for federal income tax purposes, it is intended that each of
the Mergers be treated as a taxable sale of the assets of the Company or the
Merging Subsidiary, as applicable, to Purchaser followed by a complete
liquidation of the Company or the Merging Subsidiary, as applicable;
WHEREAS, each of the parties hereto agrees that it is in their
respective best interests for the Mergers to occur upon the terms and
conditions, and in the order, set forth herein;
WHEREAS, upon the terms and subject to the conditions set forth herein,
Purchaser and PTR Homestead Village (1) Incorporated, a Maryland corporation
("PTR 1"), shall execute Articles of Merger (the "PTR 1 Articles of Merger") in
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a form agreed to by Purchaser and PTR 1 and shall file such PTR 1 Articles of
Merger in accordance with the Maryland General Corporation Law ("Maryland Law")
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to effectuate the merger of PTR 1 with and into Purchaser
(the "PTR 1 Merger"), and Purchaser and PTR 1 shall execute a Certificate of
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Merger (the "PTR 1 Certificate of Merger") in accordance with the Delaware
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Revised Limited Liability Company Act ("Delaware Law") in a form agreed to by
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Purchaser and PTR 1 and shall file such PTR 1 Certificate of Merger in
accordance with Delaware Law to effectuate the PTR 1 Merger;
WHEREAS, upon the terms and subject to the conditions set forth herein,
Purchaser and PTR Homestead Village (2) Incorporated, a Maryland corporation
("PTR 2"), shall execute Articles of Merger (the "PTR 2 Articles of Merger") in
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a form agreed to by Purchaser and PTR 2 and shall file such PTR 2 Articles of
Merger in accordance with Maryland Law to effectuate the merger of PTR 2 with
and into Purchaser (the "PTR 2 Merger"), and Purchaser and PTR 2 shall execute a
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Certificate of Merger (the "PTR 2 Certificate of Merger") in accordance with
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Delaware Law in a form agreed to by Purchaser and PTR 2 and shall file such PTR
2 Certificate of Merger in accordance with Delaware Law to effectuate the PTR 2
Merger;
WHEREAS, upon the terms and subject to the conditions set forth herein,
Purchaser and K.C. Homestead Village Redevelopment Corporation, a Missouri
corporation ("KC Homestead"), shall execute Articles of Merger (the "KC
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Homestead Articles of Merger") in a form agreed to by Purchaser and KC Homestead
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and shall file such KC Homestead Articles of Merger in accordance with the
Missouri General and Business Corporation Law ("Missouri Law") to effectuate the
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merger of KC Homestead with and into Purchaser (the "KC Homestead Merger"), and
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Purchaser and KC Homestead shall execute a Certificate of Merger (the "KC
--
Homestead Certificate of Merger") in accordance with Delaware Law in a form
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agreed to by Purchaser and KC Homestead and shall file such KC Homestead
Certificate of Merger in accordance with Delaware Law to effectuate the KC
Homestead Merger;
WHEREAS, upon the terms and subject to the conditions set forth herein,
Purchaser and Homestead Alabama Incorporated, an Alabama corporation ("Homestead
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Alabama"), shall execute Articles of Merger (the "Homestead Alabama Articles of
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Merger") in a form agreed to by Purchaser and Homestead Alabama and shall file
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such Homestead Alabama Articles of Merger in accordance with the Alabama
Business Corporation Act ("Alabama Law") to effectuate the merger of Homestead
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Alabama with and into Purchaser (the "Homestead Alabama Merger"), and Purchaser
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and Homestead Alabama shall execute a Certificate of Merger (the "Homestead
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Alabama Certificate of Merger") in accordance with Delaware Law in a form agreed
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to by Purchaser and Homestead Alabama and shall file such Homestead Alabama
Certificate of Merger in accordance with Delaware Law to effectuate the
Homestead Alabama Merger;
WHEREAS, upon the terms and subject to the conditions set forth herein,
Purchaser and Atlantic Homestead Village (1) Incorporated, a Maryland
corporation ("Atlantic 1"), shall execute Articles of Merger (the "Atlantic 1
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Articles of Merger") in a form agreed to by Purchaser and Atlantic 1 and shall
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file such Atlantic 1 Articles of Merger in accordance with Maryland Law to
effectuate the merger of Atlantic 1 with and into Purchaser (the "Atlantic 1
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Merger"), and Purchaser and Atlantic 1 shall execute a Certificate of Merger
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(the "Atlantic 1 Certificate of Merger") in accordance with Delaware Law in a
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form agreed to by Purchaser and Atlantic 1 and shall file such Atlantic 1
Certificate of Merger in accordance with Delaware Law to effectuate the Atlantic
1 Merger;
2
WHEREAS, upon the terms and subject to the conditions set forth herein,
Purchaser and Atlantic Homestead Village (2) Incorporated, a Maryland
corporation ("Atlantic 2" and together with XXX 0, XXX 0, XX Homestead,
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Homestead Alabama and Atlantic 1, the "Merging Subsidiaries"), shall execute
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Articles of Merger (the "Atlantic 2 Articles of Merger" and together with the
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PTR 1 Articles of Merger, the PTR 2 Articles of Merger, the KC Homestead
Articles of Merger, the Homestead Alabama Articles of Merger and the Atlantic 1
Articles of Merger, the "Merging Subsidiaries Articles of Merger") in a form
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agreed to by Purchaser and Atlantic 2 and shall file such Atlantic 2 Articles of
Merger in accordance with Maryland Law to effectuate the merger of Atlantic 2
with and into Purchaser (the "Atlantic 2 Merger" and together with the PTR 1
Merger, the PTR 2 Merger, the KC Homestead Merger, the Homestead Alabama Merger
and the Atlantic 1 Merger, the "Merging Subsidiary Mergers", and Purchaser and
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Atlantic 2 shall execute a Certificate of Merger (the "Atlantic 2 Certificate of
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Merger" and together with the PTR 1 Certificate of Merger, the PTR 2 Certificate
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of Merger, the KC Homestead Certificate of Merger, the Homestead Alabama
Certificate of Merger and the Atlantic 1 Certificate of Merger, the "Merging
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Subsidiary Certificates of Merger") in accordance with Delaware Law in a form
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agreed to by Purchaser and Atlantic 2 and shall file such Atlantic 2 Certificate
of Merger in accordance with Delaware Law to effectuate the Atlantic 2 Merger;
WHEREAS, immediately following the effective time of each of the
Merging Subsidiaries Mergers, the Company shall make a distribution (the "Merger
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Distribution") to Lodging, equal to the aggregate amount of the Merging
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Subsidiaries Merger Consideration (as defined herein);
WHEREAS, immediately following the completion of the Merger
Distribution and upon the terms and subject to the conditions set forth herein,
Purchaser and the Company shall execute Articles of Merger (the "Articles of
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Merger") and shall file such Articles of Merger in accordance with Maryland Law
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to effectuate the Merger; and Purchaser and the Company shall execute a
Certificate of Merger (the "Certificate of Merger") in accordance with Delaware
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Law and shall file such Certificate of Merger in accordance with Delaware Law to
effectuate the Merger; and
WHEREAS, as an inducement to each of the parties hereto to enter into
this Agreement, each of the parties agrees to undertake certain obligations in
connection with the transactions contemplated hereby pursuant to an Amended and
Restated Transaction Agreement (the "Transaction Agreement"), dated the date
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hereof, by and among Lodging, the Company, Purchaser and Security Capital Group
Incorporated, a Maryland corporation ("Parent").
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties hereto agree
that the Original Agreement, as amended by the Amendments, is hereby amended and
restated in its entirety as follows:
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ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the following meanings for
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the purposes of this Agreement:
"Acquired Assets" shall mean all of the assets of the Company and the
Company Subsidiaries, less the Excluded Assets.
"Administrative Services Agreement" shall have the meaning set forth in
Section 3.6(b).
"Affiliate" shall mean, with respect to any specified Person, any other
Person which, directly or indirectly, controls, is under common control with, or
is controlled by, such specified Person; provided, however, that at any time
after the Closing, the Company on the one hand and Lodging and its Affiliates
(other than the Company) shall not be deemed to be Affiliates of each other
solely by reason of entering into this Agreement.
"Affiliated Group" shall mean any affiliated group within the meaning
of Section 1504(a) of the Code or any group defined under a similar provision of
state, local or foreign Law.
"Agreement" shall mean this Amended and Restated Agreement and Plan of
Mergers, including all exhibits and schedules hereto, as it may be amended,
supplemented or modified from time to time.
"Alabama Law" shall have the meaning set forth in the recitals.
"Amendments" shall have the meaning set forth in the recitals.
"Archstone Agreement" shall mean that certain Protection of Business
Agreement, dated as of October 17, 1996, by and among Parent, the Company and
Archstone Communities Trust (formerly known as Security Capital Pacific Trust
and successor by merger to Security Capital Atlantic Incorporated).
"Articles of Merger" shall have the meaning set forth in the recitals.
"Atlantic LP" shall mean Atlantic Homestead Village Limited
Partnership, a Delaware limited partnership.
"Atlantic 1" shall have the meaning set forth in the recitals.
"Atlantic 1 Articles of Merger" shall have the meaning set forth in the
recitals.
"Atlantic 1 Certificate of Merger" shall have the meaning set forth in
the recitals.
"Atlantic 1 Merger" shall have the meaning set forth in the recitals.
"Atlantic 2" shall have the meaning set forth in the recitals.
4
"Atlantic 2 Articles of Merger" shall have the meaning set forth in the
recitals.
"Atlantic 2 Certificate of Merger" shall have the meaning set forth in
the recitals.
"Atlantic 2 Merger" shall have the meaning set forth in the recitals.
"Authorizations" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body, department,
commission, board, bureau, instrumentality or officer, or private association,
or otherwise appropriate with respect to the construction, ownership, operation,
leasing, maintenance, or use of any of the Company Properties or any part
thereof.
"Blackstone" shall mean Blackstone Hospitality Acquisitions III L.L.C.,
a Delaware limited liability company.
"Blackstone Pledge Agreement" shall mean the Pledge Agreement (in the
form of Exhibit E) by Blackstone (on behalf of Lodging) pursuant to which
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Blackstone pledges its ownership interest in Holding to secure Holding's
obligations under the Holding Note.
"BRE Limited Partner" shall have the meaning set forth in Section 5.7.
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"BRE Properties" shall mean BRE/HV Properties L.L.C., a Delaware
limited liability company.
"Business Day" shall mean any day of the year other than (i) any
Saturday or Sunday or (ii) any other day on which banks located in New York
generally are closed for business.
"Capital Expenditure Budgets" shall mean the capital expenditure
budgets of the Company and the Company Subsidiaries for 2001 which were
previously delivered by the Company to Purchaser as evidenced by the transmittal
letter, dated August 10, 2001, from Xxxxxxx Xxxxx of the Company to Xxxxxxxx X.
Xxxx of Blackstone Real Estate Acquisitions III, L.L.C.
"Certificate of Merger" shall have the meaning set forth in the
recitals.
"Change in Control Agreements" shall mean the change in control
agreements between the Company and each of the employees listed on Section
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3.11(g) of the Company Disclosure Letter.
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"CIC Employees" shall mean the employees of the Company or the Company
Subsidiaries who have entered into Change in Control Agreements.
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Article IX.
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"Closing Date" shall mean November 20, 2001.
"Closing Schedule" shall have the meaning set forth in Section 8.1.
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5
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and as interpreted in Treasury Regulations adopted or promulgated
thereunder.
"Company" shall have the meaning set forth in the recitals.
"Company Benefit Plan" shall mean all "employee pension benefit plans"
(as defined in Section 3(2) of ERISA), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA including, without limitation, multiemployer
plans within the meaning of Section 3(37) of ERISA), bonus, incentive, life,
medical, dental, vision, disability, salary continuation, change in control,
death benefit, deferred compensation, excess benefit, severance pay, holiday
pay, personal leave pay, vacation pay, education or similar programs, Code
Section 125 "cafeteria" and "flexible benefit", employee assistance, stock
option and stock purchase or other stock-related plans, programs and
arrangements, and all fringe benefits, perquisites, and other employee benefit
plans, arrangements, agreements, trusts, contracts, policies, and commitments,
whether or not subject to ERISA, now or heretofore sponsored, maintained or
contributed to, or required to be contributed to, by the Company or by any ERISA
Affiliate for the benefit of any current or former employees, officers,
consultants, or directors of the Company or of any Company Subsidiary or any
other Person.
"Company Bylaws" shall mean the Amended and Restated Bylaws of the
Company as in effect on the date of this Agreement as such may be amended from
time to time.
"Company Charter" shall mean the Articles of Amendment and Restatement
of the Company as in effect on the date of this Agreement as such may be amended
from time to time.
"Company Common Stock" shall have the meaning set forth in Section
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3.3(a).
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"Company Disclosure Letter" shall have the meaning set forth in the
introduction to Article III.
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"Company Financial Statement Date" shall have the meaning set forth in
Section 3.7.
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"Company 401(k) Plan" shall mean the Homestead Village Incorporated
401(k) Savings Plan.
"Company Merger Consideration" shall have the meaning set forth in
Section 2.2(a)(ii).
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"Company Other Interests" shall have the meaning set forth in Section
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3.4.
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"Company Properties" shall have the meaning set forth in Section
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3.8(a).
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"Company Stock Options" shall have the meaning set forth in Section
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3.3(b).
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"Company Stock Rights" shall have the meaning set forth in Section
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3.3(b).
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"Company Subsidiary" shall mean any Subsidiary of the Company.
6
"Company Subsidiary Formation Documents" shall have the meaning set
forth in Section 3.5(b).
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"Company's Knowledge", as used in this Agreement, shall mean the actual
knowledge of those individuals identified in Schedule 1.1(l), without any duty
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of inquiry or investigation.
"Company's Parties" shall mean the agents, consultants, attorneys,
accountants and other representatives of the Company.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement, dated as of April 27, 2001, between the Company and Blackstone Real
Estate Acquisitions III, L.L.C.
"Consultation Notice" shall have the meaning set forth in Section
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5.5(h).
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"Contract" shall mean any contract, lease (including, without
limitation, the Leases), commitment, understanding, sales order, purchase order,
agreement, indenture, mortgage, note, bond, right, warrant, instrument, plan,
permit or license, whether written or verbal, which is intended or purports to
be binding and enforceable.
"Controlled Group Liability" means any and all liabilities (i) under
Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Code Sections
412 and 4971, (iv) as a result of a failure to comply with the continuation
coverage requirements of Section 601, et seq. of ERISA and Section 4980B of the
Code, and (v) under corresponding or similar provisions of foreign Laws or
regulations.
"Delaware Law" shall have the meaning set forth in the recitals.
"Dollars" or numbers preceded by the symbol "$" shall mean amounts in
United States Dollars.
"Xxxxxxx Money" shall have the meaning set forth in Section 2.3(a).
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"Effective Time" shall have the meaning set forth in Section
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2.1(a)(iii).
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"Effective Time of the Merging Subsidiary Mergers" shall have the
meaning set forth in Section 2.1(b)(iii).
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"El Paso Lease" shall mean that certain Lease, dated April 20, 1998,
between Parent and the Company, pursuant to which the Company leases office
space from Parent.
"Environmental Claims" shall have the meaning set forth in Section 3.9.
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"Environmental Laws" shall have the meaning set forth in Section 3.9.
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"Environmental Permit" shall mean any permit, license, approval,
consent or other Authorization required by or pursuant to any applicable
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
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"ERISA Affiliate" means any former or current trade or business
(whether or not incorporated) or any other entity that is or was part of the
same controlled group, or under common control with, or part of an affiliated
service group that includes the Company and Lodging within the meaning of Code
Sections 414(b), (c), (m) or (o) and/or ERISA Section 4001(b)(1) or that is a
member of the same "controlled group" as Lodging pursuant to Section 4001(a)(14)
of ERISA.
"Escrow Agent" shall mean Chicago Title Company. The contact person is
Xxxxxx Xxxxxxx; the address is 000 X. Xxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX
00000; the telephone number is 000-000-0000; and the facsimile number is
000-000-0000.
"Escrow Agreement" shall mean the Escrow Agreement (in the form of
Exhibit H), dated the date hereof, between Purchaser, Lodging and Escrow Agent.
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"Excluded Assets" shall mean those assets listed on Schedule 1.1(a).
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"Financial Information" shall mean (a) the operating reports and income
statements for each Company Property for the shorter of (i) calendar years 1999
and 2000 and the ten month period ended October 31, 2001, or (ii) the period in
which the Company or a Company Subsidiary has owned any Company Property, and
(b) the schedule of general and administrative expenses for calendar year 2000
and the ten month period ended October 31, 2001, true and correct copies of each
of which have been previously delivered to Purchaser by the Company as evidenced
by the transmittal letters, dated August 10, 2001, November 1, 2001 and November
13, 2001 from Xxxxxxx Xxxxx of the Company to Xxxxxxxx X. Xxxx of Blackstone
Real Estate Acquisitions III, L.L.C. The Financial Information excludes all
forecasts, budgets and any other forward-looking statements regarding the
Company, the Company Subsidiaries or the Company Properties provided by the
Company or Lodging to Purchaser.
"Financial Statements" shall mean the audited financial statements of
the Company and the Company Subsidiaries for the fiscal years ended December 31,
1999 and December 31, 2000, and the unaudited financial statements of the
Company and the Company Subsidiaries for the quarter ended September 30, 2001.
"Financing Agreement" shall have the meaning set forth in Section 4.3.
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"GAAP" shall mean generally accepted accounting principles in effect in
the United States, as consistently applied by the Company and the Company
Subsidiaries.
"Governmental Authority" shall mean the government of the United States
or any foreign country or any state or political subdivision thereof and any
entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, the Pension Benefit Guaranty Corporation and
other quasi-governmental entities established to perform such functions.
"Hazardous Materials" shall mean and include: (i) all substances
defined as "hazardous substances" under Section 101(14) of the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C.
(S) 9601(14); (ii) petroleum, including crude oil or any fraction thereof,
natural gas, natural gas liquids, liquefied natural gas, or
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synthetic gas usable for fuel (or mixture of natural gas or such synthetic gas);
(iii) asbestos and asbestos-containing materials; and (iv) any substance,
material or waste listed or defined as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Holding" shall have the meaning set forth in Section 2.2(a)(ii)(B).
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"Holding Note" shall have the meaning set forth in Section
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2.2(a)(ii)(B).
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"Holding Pledge Agreement" shall mean the Pledge Agreement (in the form
of Exhibit D) by Holding (on behalf of Lodging) pursuant to which Holding
pledges its ownership interest in Purchaser to secure its obligations under the
Holding Note.
"Homestead Alabama" shall have the meaning set forth in the recitals.
"Homestead Alabama Articles of Merger" shall have the meaning set forth
in the recitals.
"Homestead Alabama Certificate of Merger" shall have the meaning set
forth in the recitals.
"Homestead Alabama Merger" shall have the meaning set forth in the
recitals.
"Homestead Management" shall mean Homestead Village Management, LLC, a
Delaware limited liability company.
"Homestead Partnerships" shall have the meaning set forth in Section
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5.7.
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"HPT" shall mean HPT HSD Properties Trust, a Maryland real estate
investment trust and its permitted successors and assigns.
"HPT Agreement of Merger" shall mean that certain Agreement of Merger,
dated as of February 4, 1999, by and among (i) Homestead Village Limited
Partnership, (ii) the Company, (iii) HVI Incorporated, (iv) Atlantic Homestead
Village Limited Partnership, (v) Atlantic Homestead Village (1) Incorporated,
and (vi) HPT.
"HPT Agreement to Lease" shall mean that certain Agreement to Lease
entered into as of February 4, 1999, by and between HPT and the Company.
"HPT Agreements" shall mean, collectively, (i) the HPT Lease, (ii) the
HPT Management Agreement, (iii) the HPT Guaranty, (iv) the HPT FF&E Reserve
Agreement, (v) the HPT Pledge, (vi) the HPT Trademark Agreement, (vii) the HPT
Security Agreement, (viii) the HPT Indemnification Agreement, (ix) the HPT
Agreement of Merger, and (x) the HPT Agreement to Lease.
"HPT Assumption" shall mean either (i) an assumption of the Company's
obligation under the HPT Guaranty by written agreement in form and substance
reasonably satisfactory to HPT, or (ii) a guaranty in favor of HPT in the
identical form of the HPT Guaranty.
9
"HPT Estoppel" shall mean an estoppel certificate, duly executed and
delivered by HPT, (i) certifying the specific items required to be certified
under Section 17.1 of the HPT Lease, and (ii) containing no material deviations
from the Company's representations and warranties set forth in Section 3.8(i).
--------------
"HPT FF&E Reserve Agreement" shall mean that certain FF&E Reserve
Assignment and Security Agreement, dated as of February 23, 1999, by and between
HPT and HVI (2) Incorporated.
"HPT Guaranty" shall mean the Guaranty Agreement, dated as of February
23, 1999, by the Company for the benefit of HPT and Hospitality Properties
Trust, a Maryland real estate investment trust.
"HPT Indemnification Agreement" shall mean that certain Indemnification
Agreement, entered into February 23, 1999, by and among (i) Homestead Village
Limited Partnership, (ii) the Company, (iii) HVI Incorporated, (iv) Atlantic
Homestead Village Limited Partnership, (v) Atlantic Homestead Village (1)
Incorporated, (vi) Hospitality Properties Trust, and (vii) HPT.
"HPT Lease" shall mean that certain Lease Agreement, dated as of
February 23, 1999, by and between HPT and HVI (2) Incorporated.
"HPT Management Agreement" shall mean that certain Management
Agreement, dated as of February 23, 1999, by and between Homestead Village
Management Incorporated and HVI (2) Incorporated.
"HPT Pledge" shall mean that certain Stock Pledge, dated as of February
23, 1999, by the Company for the benefit of HPT.
"HPT Security Agreement" shall mean that certain Security Agreement,
dated as of February 23, 1999, by and between HVI (2) Incorporated and HPT.
"HPT Trademark Agreement" shall mean that certain Trademark and Trade
Name License Agreement, dated as of February 23, 1999, by and between the
Company and HVI (2) Incorporated.
"HSD Trademarks" shall mean (i) the name "Homestead Village" and its
related design and (ii) the name "Homestead Studio Suites" and its related
design.
"HSR" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"HVI(2)" shall mean HVI(2), LLC, a Delaware limited liability company
and the successor (pursuant to a conversion under Section 266 of the Delaware
Law) to HVI(2) Incorporated, a Delaware corporation.
"HVI(2) Note" shall mean that certain subordinated promissory note,
dated November 5, 2001, from the Company to HVI(2) in the amount of $29,000,000.
10
"Improvements" shall mean the Company Properties and all buildings,
improvements, and other items of real estate located on the Land or the Leased
Properties.
"Indebtedness" shall have the meaning set forth in Section 3.16(a).
---------------
"Indemnified Person" shall mean the Person or Persons entitled to, or
claiming a right to, indemnification under Article X.
---------
"Indemnifying Person" shall mean the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification under Article X.
---------
"Intangible Personal Property" shall mean all right, title and interest
in and to all intangible personal property and intellectual property owned, held
or possessed by the Company or a Company Subsidiary and used in connection with
the ownership, lease or operation of the Company Properties (other than the
Excluded Assets), including, without limitation, (i) Authorizations, (ii)
utility and development rights and privileges, general intangibles, business
records, plans and specifications pertaining to the Acquired Assets, and (iii)
trademarks, tradenames, service marks, brand names, corporate names, domain
names, logos and other source indicators, together with the goodwill of the
business relating thereto, copyrights or copyrightable works, including
software, databases or internet site content, patents, trade secrets, know-how
or confidential or proprietary information used in connection with the Company
Properties or the registrations and applications thereto and the right to bring
actions at Law or in equity for the infringement or other violations of any of
the foregoing arising prior to the Closing Date and to retain all damages and
proceeds therefrom.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement (in the form of Exhibit F), dated the date hereof, and by and between
---------
Holding, Lodging and Lender.
"KC Homestead" shall have the meaning set forth in the recitals.
"KC Homestead Articles of Merger" shall have the meaning set forth in
the recitals.
"KC Homestead Certificate of Merger" shall have the meaning set forth
in the recitals.
"KC Homestead Merger" shall have the meaning set forth in the recitals.
"Land" shall mean those certain parcels of real estate as described and
depicted in the Title Commitments.
"Las Vegas Estoppel" shall mean that certain estoppel certificate in
substantially the form required pursuant to the Las Vegas Lease.
"Las Vegas Lease" shall mean that certain Ground Lease, dated June 23,
1997, by and between Paradise Homes, a Nevada general partnership, as landlord,
and the Company, as tenant.
"Las Vegas Leased Property" shall mean the parcels of real property and
related buildings, structures and other improvements that are subject to the Las
Vegas Lease.
11
"Law" shall mean any law, statute, regulation, ordinance, rule, order,
decree, judgment, injunction, consent decree, settlement agreement, arbitration
award or governmental requirement enacted, promulgated, entered into, agreed or
imposed by any Governmental Authority.
"Leased Personal Property" shall mean all leased items of Tangible
Personal Property, subject to any capital lease, operating lease, financing
lease, or any similar agreement.
"Leased Personal Property Agreements" shall mean the lease agreements
pertaining to the Leased Personal Property.
"Leased Properties" shall mean (i) the nineteen (19) parcels of real
property more particularly described on Schedule 1.1(f), and (ii) the buildings,
---------------
structures, and other improvements situated on all of said leased parcels, all
of which are leased by HVI (2) from HPT pursuant to the terms of the HPT Lease,
other than the Las Vegas Leased Property which is leased by the Company pursuant
to the Las Vegas Lease.
"Leases" shall mean all leases of the real property used by the Company
or any of the Company Subsidiaries in their business, together with the
buildings and improvements thereon.
"Lender" shall mean Bear, Xxxxxxx Funding, Inc., a Delaware
corporation.
"Letter of Credit" shall have the meaning set forth in Section 2.3(a).
--------------
"Lien" shall mean any mortgage, lien (except for any lien for Taxes not
yet due and payable), charge, restriction, pledge, security agreement, security
interest, option to purchase, lease or sublease, claim, right of any third
party, easement, encroachment or encumbrance.
"Limitation Period" shall have the meaning set forth in Section 10.1.
------------
"Lodging" shall have the meaning set forth in the recitals.
"Lodging's Parties" shall mean the agents, consultants, attorneys,
accountants and representatives of Lodging.
"Loss" or "Losses" shall mean any and all liabilities, losses, costs,
claims, deficiencies, obligations, damages (including, without limitation,
consequential damages), penalties, fines, interest and expenses (including,
without limitation, attorneys' fees and expenses and costs of investigation and
litigation). In the event any of the foregoing are indemnifiable hereunder, the
terms "Loss" and "Losses" shall include any and all attorneys' fees and expenses
and costs of investigation and litigation incurred by the Indemnified Person in
enforcing such indemnity.
"Maryland Law" shall have the meaning set forth in the recitals.
"Material Adverse Effect" shall mean an effect on the business,
properties, assets, results of operations (other than revenues), cash flows or
financial condition of the Company and the Company Subsidiaries, taken as a
whole, in an amount greater than $74.0 million, provided, however, that such
effect shall exclude (i) changes in occupancy rates; (ii) changes in rental
rates; and (iii) other changes in operating performance of the Company
Properties.
12
"Material Contracts" shall have the meaning set forth in Section
-------
3.16(a).
-------
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" shall mean $740,000,000, less the Net Tangible
Liability.
"Merger Distribution" shall have the meaning set forth in the recitals.
"Mergers" shall have the meaning set forth in the recitals.
"Merging Subsidiaries" shall have the meaning set forth in the
recitals.
"Merging Subsidiaries Articles of Merger" shall have the meaning set
forth in the recitals.
"Merging Subsidiaries Certificates of Merger" shall have the meaning
set forth in the recitals.
"Merging Subsidiaries Merger Consideration" shall have the meaning set
forth in Section 2.2(b).
--------------
"Merging Subsidiaries Mergers" shall have the meaning set forth in the
recitals.
"Missouri Law" shall have the meaning set forth in the recitals.
"Monetary Title Encumbrances" shall have the meaning set forth in
Section 2.4(c).
--------------
"Net Tangible Liability" shall mean, with respect to the Company, the
amount calculated in accordance with Section 8.1 as of the Closing Date from the
-----------
specific line items set forth on Schedule 1.1(g). Schedule 1.1(g) contains an
--------------- ---------------
example of the calculation of Net Tangible Liability as of June 30, 2001
prepared by the Company, but such calculation has not been approved by
Purchaser. For the avoidance of doubt, the line items set forth on Schedule
--------
1.1(g) and used to calculate Net Tangible Liability shall reflect accruals of
------
actual expenses incurred up to the Closing and shall not include any contingent
or uncertain liabilities or any speculative claims or amounts or any liability
or asset with respect to Taxes other than the property-related Taxes set forth
in Schedule 1.1(g).
---------------
"New Title Policies" shall mean any title policy issued by the Title
Company to Purchaser on the Closing Date.
"Occupancy Agreements" shall mean all leases, concession or occupancy
agreements, if any, in effect with respect to the Company Properties under which
any tenants (other than guests of the Company Properties) or concessionaires
occupy space upon the Company Properties.
"Operating Agreements" shall mean (a) all Contracts identified as such
in the Company Disclosure Letter, and (b) all other immaterial service, supply,
maintenance and other similar Contracts in effect with respect to any of the
Company Properties (other than the Occupancy Agreements and Leased Personal
Property Agreements) necessary for the management,
13
operation, or maintenance of any of the Company Properties and entered into on
an arms length basis in the ordinary course of business on prevailing market
terms and conditions with parties which are not Affiliates of Lodging.
"Original Agreement" shall have the meaning set forth in the recitals.
"Original Agreement Date" shall mean August 14, 2001.
"Owned Properties" shall mean the Land and the Improvements located on
the Land.
"Parent" shall have the meaning set forth in the recitals.
"Parent Assets" means the assets owned by Parent and used by the
Company and the Company Subsidiaries as set forth in Schedule 1.1(j).
---------------
"Parent Group" shall mean the Affiliated Group of which Parent is the
common parent corporation and Lodging, the Company, and the Company Subsidiaries
that are treated as corporations are members.
"Parent Mortgage Loans" shall mean the mortgage loans of the Company
and the Company Subsidiaries set forth in Schedule 1.1(h).
---------------
"Parent Mortgages" shall mean the mortgages securing the Parent
Mortgage Loans.
"Parent Support Services" means the human resources, Tax and
accounting, cash management, risk management, and other administrative services
provided by Parent to the Company and the Company Subsidiaries.
"Permitted Title Exceptions" shall have the meaning set forth in
Section 3.8(a).
--------------
"Person" shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability company, trust, association
or other entity.
"Personal Property" shall mean, collectively, the Tangible Personal
Property and the Intangible Personal Property.
"Pre-Closing Tax Period" shall have the meaning set forth in Section
-------
3.13(a).
-------
"PTR LP" shall mean PTR Homestead Village Limited Partnership, a
Delaware limited partnership.
"PTR 1" shall have the meaning set forth in the recitals.
"PTR 1 Articles of Merger" shall have the meaning set forth in the
recitals.
"PTR 1 Certificate of Merger" shall have the meaning set forth in the
recitals.
"PTR 1 Merger" shall have the meaning set forth in the recitals.
14
"PTR 2" shall have the meaning set forth in the recitals.
"PTR 2 Articles of Merger" shall have the meaning set forth in the
recitals.
"PTR 2 Certificate of Merger" shall have the meaning set forth in the
recitals.
"PTR 2 Merger" shall have the meaning set forth in the recitals.
"Purchaser" shall have the meaning set forth in the recitals.
"Purchaser Indemnified Parties" shall mean Purchaser and each of its
Affiliates (including, after the Closing, the Company and the Company
Subsidiaries), and their respective officers, directors, employees, agents,
representatives, successors and assigns; provided that in no event shall Lodging
be deemed a Purchaser Indemnified Party.
"Purchaser's Knowledge", as used in this Agreement, shall mean the
current actual knowledge of the individual identified in Schedule 1.1(k),
---------------
without any duty of inquiry or investigation.
"Purchaser's Parties" shall mean the agents, consultants, attorneys,
accountants and other representatives of Purchaser.
"Recognized Environmental Conditions" shall mean the presence or likely
presence of any Hazardous Materials on a property under conditions that indicate
an existing Release, a past Release, or a material threat of a Release of any
Hazardous Materials from or into the structures on the property or from or into
the ground, ground water, or surface water of the property. The term includes
Hazardous Materials even under conditions in compliance with Laws. The term is
not intended to include de minimis conditions that generally do not present a
material risk of harm to public health or the environment and that generally
would not be the subject of an enforcement action if brought to the attention of
appropriate Governmental Authorities. Conditions determined to be de minimis are
not Recognized Environmental Conditions.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing.
"Remedial Action" shall have the meaning set forth in Section 3.9.
-----------
"Revised Closing Schedule" shall have the meaning set forth in Section
-------
8.1.
---
"Secretary" shall have the meaning set forth in Section 9.2(d).
--------------
"Securities Act" shall have the meaning set forth in Section 3.3(f).
--------------
"Shares" shall mean all of the issued and outstanding shares of Company
Common Stock.
"SSB" shall mean Xxxxxxx Xxxxx Barney, the investment banker for
Lodging in connection with the transactions contemplated by this Agreement.
"Straddle Period" shall have the meaning set forth in Section 5.5(d).
--------------
15
"Submission Matters" shall have the meaning set forth in Section
-------
2.4(a).
------
"Subsidiary" shall have the meaning set forth in Section 3.5(a).
--------------
"Surveys" shall have the meaning set forth in Section 2.4(a)(6).
-----------------
"Surviving Entity" shall have the meaning set forth in Section
-------
2.1(a)(i).
---------
"Tangible Personal Property" shall mean the items of tangible personal
property consisting of all furniture, fixtures, equipment, machinery, motor
vehicles, inventory and other tangible personal property of every kind and
nature (which does not include the Excluded Assets) owned or leased by the
Company or any of the Company Subsidiaries and located at, or used exclusively
in connection with the operation of, the Company Properties, including, without
limitation, the Company's or any Company Subsidiary's interest as lessee with
respect to any such leased Tangible Personal Property.
"Tax" or "Taxes" shall mean all taxes, charges, fees, duties, levies or
other assessments, including, without limitation, income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, occupancy, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational, windfall
profits, severance, employee's income withholding, other withholding,
employment, unemployment, Social Security taxes, and taxes relating to any
Company Benefit Plan, which are imposed by any Governmental Authority, whether
computed on a separate, consolidated, unitary, combined or any other basis, and
such term shall include any interest, penalties and additions to tax
attributable thereto.
"Tax Covenants" shall mean the provisions of Sections 2.5, 5.5 and
------------ ---
11.1.
----
"Tax Return" shall mean any report, return or other information
supplied or required to be supplied to a Governmental Authority in connection
with any Taxes including, without limitation, any claims for refunds and any
amendments or supplements to any of the foregoing or in connection with any
Company Benefit Plan (including, without limitation, Forms 5500 and the
schedules thereto).
"Tax Statute of Limitations Date" shall mean the day that is 90 days
after the date of the expiration of the applicable statute of limitations with
respect to Taxes, including any extensions thereof requested by the Company or
Lodging (or if such date is a not a Business Day, the next Business Day).
"Tax Warranties" shall mean the provisions of Sections 3.13 and 4.8.
------------- ---
"Terminated Group" shall mean each employee of the Company and any
Company Subsidiary who has been identified by Purchaser in writing to Lodging as
an employee who is to be terminated prior to the Closing.
"Title Commitments" shall have the meaning set forth in Section
-------
2.4(a)(6).
---------
"Title Company" shall mean Chicago Title Insurance Company.
16
"Transaction Agreement" shall have the meaning set forth in the
recitals.
"Transaction Taxes" shall have the meaning set forth in Section 11.1.
------------
"WARN Act" shall mean the Worker Adjustment and Retraining Notification
Act.
ARTICLE II
THE MERGER
2.1 The Mergers.
-----------
(a) The Merger
----------
(i) Immediately following completion of the Merger
Distribution (which shall occur subsequent to the Effective Time
of the Merging Subsidiary Mergers (as defined below)) and on the
terms and subject to the conditions set forth in this Agreement,
at the Effective Time (as defined below), the Company shall be
merged with and into Purchaser, with Purchaser being the surviving
entity in the Merger (in such capacity as well as in the capacity
as the surviving entity of each of the Merging Subsidiary Mergers,
the "Surviving Entity") and with the shares of capital stock of
----------------
the Company (including treasury stock, if any) being canceled,
retired and ceasing to exist and the issued and outstanding
membership interests in Purchaser being unaffected by such Merger.
(ii) At the Effective Time, the Merger shall have the effects
set forth in this Agreement and the applicable provisions of
Maryland Law and Delaware Law. Accordingly, the separate corporate
existence of the Company shall cease as of the Effective Time, and
the Surviving Entity shall have all the properties, rights,
privileges, purposes and powers and debts, duties and liabilities
of the Company.
(iii) On the Closing Date, the parties shall execute and file
the Articles of Merger and the Certificate of Merger, in
accordance with, and shall make all other filings or recordings
and take all such other action required with respect to the Merger
under, Maryland Law and Delaware Law. The Merger shall become
effective when the later of the Articles of Merger or the
Certificate of Merger have been accepted for filing by the
Maryland State Department of Assessments and Taxation or the
Office of the Delaware Secretary of State, as the case may be (the
"Effective Time"), it being understood that the parties shall
--------------
cause the Effective Time to occur as soon as practicable on the
Closing Date.
(iv) The Certificate of Formation and the Limited Liability
Company Agreement of Purchaser as in effect as of the Effective
Time shall continue in full force and effect following the Merger
until amended in accordance with their respective terms. The
Manager and officers of Purchaser immediately prior to the
Effective Time shall, from and after the Effective Time,
17
be the Manager and officers of the Surviving Entity, until their
respective successors are duly elected or appointed and qualified.
(b) The Merging Subsidiary Mergers
------------------------------
(i) On the terms and subject to the conditions set forth in
this Agreement, at the Effective Time of the Merging Subsidiary
Mergers (as defined below), each Merging Subsidiary shall be
separately merged with and into Purchaser, with Purchaser being
the Surviving Entity in each such Merging Subsidiary Merger and
with the shares of capital stock of each Merging Subsidiary
(including treasury stock, if any) being canceled, retired and
ceasing to exist and the issued and outstanding membership
interests in Purchaser being unaffected by each such Merging
Subsidiary Merger.
(ii) At the Effective Time of the Merging Subsidiary Mergers,
the PTR 1 Merger, the PTR 2 Merger, the Atlantic 1 Merger and the
Atlantic 2 Merger shall have the effects set forth in this
Agreement and the applicable provisions of Maryland Law and
Delaware Law. At the Effective Time of the Merging Subsidiary
Mergers, the KC Homestead Merger shall have the effects set forth
in this Agreement and the applicable provisions of Missouri Law
and Delaware Law. At the Effective Time of the Merging Subsidiary
Mergers, the Homestead Alabama Merger shall have the effects set
forth in this Agreement and the applicable provisions of Alabama
Law and Delaware Law. Accordingly, the separate corporate
existence of each of the Merging Subsidiaries shall cease as of
the Effective Time of the Merging Subsidiary Mergers, and the
Surviving Entity shall have all the properties, rights,
privileges, purposes and powers and debts, duties and liabilities
of each Merging Subsidiary.
(iii) On the Closing Date, the parties shall execute and file
the respective Merging Subsidiary Articles of Merger and the
Merging Subsidiary Certificates of Merger, as applicable, in
accordance with, and shall make all other filings or recordings
and take all such other action required with respect to the
respective Merging Subsidiary Mergers under, Maryland Law,
Delaware Law, Missouri Law and Alabama Law, as applicable. Each of
the Merging Subsidiary Mergers shall become effective at such time
on the Closing Date as may be agreed to by Purchaser and the
Company as will be specified in the respective Merging Subsidiary
Articles of Merger and Merging Subsidiary Certificates of Merger,
as the case may be (the "Effective Time of the Merging Subsidiary
----------------------------------------
Mergers"), it being understood that the Effective Time of the
-------
Merging Subsidiary Mergers shall be the same for each Merging
Subsidiary Merger and that the Effective Time of the Merging
Subsidiary Mergers shall be soon as practicable on the Closing
Date.
(iv) The Certificate of Formation and the Limited Liability
Company Agreement of Purchaser as in effect as of the Effective
Time of the Merging Subsidiary Mergers shall continue in full
force and effect following each of the Merging Subsidiary Mergers
until amended in accordance with their
18
respective terms. The Manager and officers of Purchaser
immediately prior to the Effective Time of the Merging Subsidiary
Mergers shall, from and after the Effective Time of the Merging
Subsidiary Mergers, be the Manager and officers of the Surviving
Entity, until their respective successors are duly elected or
appointed and qualified.
2.2 Consideration for the Mergers.
-----------------------------
(a) The Merger. At the Effective Time, in consideration for the
----------
Shares, Purchaser shall pay to Lodging the Merger Consideration in
the following manner:
(i) Purchaser shall receive a credit against the Merger
Consideration in an amount equal to the amount of the Merger
Distribution.
(ii) Purchaser shall pay the balance of the Merger
Consideration (the "Company Merger Consideration") to Lodging (or
----------------------------
other party designated by Lodging) at Closing as follows:
(A) in cash, by wire transfer of immediately available
funds to the account of Lodging (or other party designated by
Lodging) in an amount equal to the Merger Consideration, less
the credit described in Section 2.2(a)(i), and less
-----------------
$115,000,000 (the amount of the Holding Note (as defined
below); and
(B) pursuant to a promissory note in the amount of
$115,000,000 from BRE/HV Holdings L.L.C., a Delaware limited
liability company and the parent of Purchaser ("Holding"), in
-------
the form set forth as Exhibit C (the "Holding Note").
--------- ------------
(b) The Merging Subsidiary Mergers. At the Effective Time of the
------------------------------
Merging Subsidiary Mergers, in consideration for the outstanding
shares of capital stock of each respective Merging Subsidiary,
Purchaser shall pay to the Company (or such other party designated
by the Company), pursuant to the fund transfer procedures described
in the Escrow Agreement, to the account of the Company (or such
other party designated by the Company) the amounts set forth on
Schedule 2.5 with respect to the Merging Subsidiary Mergers. The
------------
total amount set forth on Schedule 2.5 with respect to the Merging
------------
Subsidiary Mergers shall be referred to as the "Merging Subsidiaries
--------------------
Merger Consideration."
--------------------
2.3 Xxxxxxx Money.
-------------
(a) In accordance with the Original Agreement, Purchaser deposited
$5,000,000 with the Escrow Agent as xxxxxxx money pursuant to that
certain Letter of Credit ("Letter of Credit") issued by Chase
----------------
Manhattan Bank, N.A. on August 14, 2001 (the "Xxxxxxx Money"). At
-------------
Closing, the Escrow Agent shall return such Letter of Credit to
Purchaser.
19
(b) The parties acknowledge that the Escrow Agent is acting solely
as a stakeholder at their request and for their convenience, that
the Escrow Agent shall not be deemed to be the agent of any of the
parties, and that the Escrow Agent shall not be liable to any of the
parties for any action or omission on its part taken or made in good
faith, and not in disregard of this Agreement or the Escrow
Agreement, but shall be liable for its negligent acts and for any
loss, cost or expense incurred by any party hereto resulting from
the Escrow Agent's mistake of Law respecting the Escrow Agent's
scope or nature of its duties. Lodging and Purchaser shall jointly
and severally indemnify and hold the Escrow Agent harmless from and
against all costs, claims and expenses, including reasonable
attorneys' fees, incurred in connection with the performance of the
Escrow Agent's duties hereunder, except with respect to actions or
omissions taken or made by the Escrow Agent in bad faith, in
disregard of this Agreement, or involving negligence or a mistake of
Law respecting the Escrow Agent's scope or nature of its duties on
the part of the Escrow Agent.
(c) Except as provided above, the fees and expenses of the Escrow
Agent shall be paid one-half by Lodging and one-half by Purchaser.
(d) Any fees attributable to the Letter of Credit shall be paid by
Purchaser.
2.4 Purchaser's Investigation of the Company.
----------------------------------------
(a) Submission Matters and Access to Books and Records. Prior to
--------------------------------------------------
the date of this Agreement, Lodging delivered to Purchaser copies of
the following items relating to the Company Properties (items (1) -
(7), when delivered, shall be referred to herein as the "Submission
----------
Matters"):
-------
(1) Copies of all Occupancy Agreements, Operating Agreements
and Leased Personal Property Agreements, if any, in
effect as of the date of this Agreement to the extent
such agreements are located at the Data Room;
(2) The Financial Information and the Financial Statements;
(3) The Company Disclosure Letter;
(4) The HPT Agreements;
(5) The Las Vegas Lease;
(6) The title commitments committing to insure title to the
Company Properties in the Company or the applicable
Company Subsidiary ("Title Commitments") and the surveys
-----------------
with respect to the Company Properties (collectively, the
"Surveys"), to the extent identified in Section 2.4(a)(6)
------- -----------------
of the Company Disclosure Letter; and
20
(7) The environmental assessments with respect to the Company
Properties to the extent identified in Section 2.4(a)(7)
-----------------
of the Company Disclosure Letter.
Except as otherwise expressly provided herein, the Company makes
no representations or warranties as to the accuracy or completeness of
the Submission Materials or any of the books and records made available
to Purchaser and Purchaser's Parties hereunder.
(b) Return of Submission Matters and Other Materials. If for any
------------------------------------------------
reason whatsoever the Merger does not occur or the Closing does not
timely occur, Purchaser shall, in accordance with the terms of the
Confidentiality Agreement, promptly deliver to the Company, or
destroy, all copies of all the Submission Matters and any other
materials delivered to or copied by Purchaser or Purchaser's Parties
in connection with the transactions contemplated by this Agreement.
The provisions of this Section 2.4(b) shall survive the termination
--------------
of this Agreement.
(c) Notwithstanding anything herein to the contrary, on or prior
to the Closing Date, Lodging shall pay and discharge (or bond
against in a manner sufficient to cause the Title Company to insure
without exception for) mortgages, deeds of trust, security
agreements, or other Liens or charges in a fixed sum or capable of
computation as a fixed sum which were created or expressly assumed
by the Company other than Liens that are otherwise Permitted Title
Exceptions (collectively, "Monetary Title Encumbrances"). For such
---------------------------
purposes, Lodging may use all or a portion of the Merger
Consideration to pay or discharge or bond against any such Monetary
Title Encumbrances at the Closing.
2.5 Allocation of Merger Consideration. Set forth as Schedule 2.5 is
---------------------------------- ------------
the allocation (as determined for United States federal income tax purposes) of
the Merger Consideration among the assets acquired in each of the respective
Mergers in accordance with the requirements of Section 1060 of the Code and the
regulations thereunder. Following the consummation of the transactions
contemplated by this Agreement, none of Purchaser, Lodging, Parent or the
Company, in connection with their respective U.S. federal, state and local
income Tax Returns, shall take any position inconsistent with such allocation
(or any adjustment to such allocation). Any adjustment to the Merger
Consideration shall be allocated among the Acquired Assets in accordance with
Section 1060 of the Code and the regulations thereunder.
2.6 Merger Distribution. Immediately following the Effective Time of
-------------------
the Merging Subsidiary Mergers and before the Effective Time, the Company shall
make the Merger Distribution to Lodging.
2.7 Escrow Closing. The consummation of the transactions contemplated
--------------
by this Agreement shall occur through an escrow arrangement (governed by the
terms of the Escrow Agreement) under which none of the Merging Subsidiary
Mergers or the Merger can occur without all of such transactions being
completed.
21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND LODGING
The Company and Lodging represent and warrant to Purchaser, as of the
date of this Agreement (except to the extent any such representation and
warranty is limited to a specific date by its express terms), as follows (in
each case as qualified by and subject to matters reflected on the disclosure
letter dated as of the date of this Agreement and delivered to Purchaser by the
Company (the "Company Disclosure Letter")):
-------------------------
3.1 Due Incorporation. Lodging and the Company are duly organized,
-----------------
validly existing and in good standing under the laws of the States of Delaware
and Maryland, respectively, with all requisite power and authority to own,
lease, encumber, manage and operate their respective properties and to carry on
their respective businesses as they are now being owned, leased, encumbered,
managed, operated and conducted. The Company is licensed or qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the nature of the properties owned, leased or operated by it and the
businesses transacted by it require such licensing or qualification. True,
correct and complete copies of the Company's Charter and Bylaws, as amended,
which are in full force and effect in accordance with their terms, have been
made available to Purchaser. True, correct and complete copies of all minutes of
all meetings (or written consents in lieu of meetings) since January 1, 1999 of
the Board of Directors (and all committees thereof) and stockholders of the
Company have been made available to Purchaser. All action taken by the Board of
Directors (and all committees thereof) and stockholders of the Company since
January 1, 1999 is reflected in such minutes and written consents.
3.2 Authority; Noncontravention; Consents.
-------------------------------------
(a) The Board of Directors of the Company and Lodging have
approved this Agreement, the Transaction Agreement and the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Transaction Agreement by the
Company and Lodging and the consummation by the Company and Lodging
of the transactions contemplated by this Agreement and the
Transaction Agreement have been duly authorized by all necessary
action on the part of the Company and Lodging. Each of the Company
and Lodging has the requisite power and authority to enter into this
Agreement and the Transaction Agreement and execute, deliver and
perform its obligations under this Agreement and the Transaction
Agreement. This Agreement and the Transaction Agreement have been
duly executed and delivered by the Company and Lodging, and
(assuming the valid authorization, execution and delivery of this
Agreement and the Transaction Agreement by Purchaser) this Agreement
and the Transaction Agreement constitute valid and binding
obligations of the Company and Lodging, enforceable against the
Company and Lodging in accordance with and subject to its terms,
subject to applicable bankruptcy, insolvency, moratorium or other
similar Laws relating to creditors' rights, general principles of
equity and equitable limitations on the availability of specific
remedies.
22
(b) Except as set forth in Section 3.2(b) of the Company
--------------
Disclosure Letter, the execution and delivery of this Agreement by
the Company and Lodging does not, and the consummation of the
transactions contemplated by this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to a
loss of a benefit under, or result in the creation of any Lien upon
any of the properties or assets of Lodging, the Company or any
Company Subsidiary under, (i) the organizational documents of
Lodging, the Company and/or any of the Company Subsidiaries, each as
amended or supplemented, (ii) any Material Contracts including the
HPT Agreements or (iii) any Laws applicable to Lodging, the Company
or any Company Subsidiary, or their respective properties or assets.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal, state or local government
or any court, administrative or regulatory agency or commission or
other Governmental Authority, is required by or on behalf of
Lodging, the Company, or any Company Subsidiary in connection with
the execution and delivery of this Agreement by the Company and
Lodging or the consummation by the Company and Lodging of the
transactions contemplated by this Agreement, except for filings
which, if not obtained or made, would not prevent or materially
delay in any material respect the consummation of any of the
transactions contemplated by this Agreement, or otherwise prevent
the Company or Lodging from performing its obligations under this
Agreement in any material respect.
(c) The Board of Directors of each Merging Subsidiary have
approved this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by each Merging
Subsidiary and the consummation by each Merging Subsidiary of each
of the transactions contemplated by this Agreement have been duly
authorized by all necessary action on the part of each Merging
Subsidiary. Each Merging Subsidiary has the requisite power and
authority to enter into this Agreement and execute, deliver and
perform its obligations under this Agreement. This Agreement has
been duly executed and delivered by each of the Merging Subsidiaries
and constitutes a valid and binding obligation of the Merging
Subsidiaries in accordance with and subject to its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar Laws
relating to creditors' rights, general principles of equity and
equitable limitations on the availability of specific remedies.
3.3 Capital Structure.
-----------------
(a) The authorized shares of common stock of the Company consist
of 250,000,000 shares, par value $.01 per share ("Company Common
--------------
Stock"). As of the date hereof, 120,041,477 shares of Company Common
-----
Stock are issued and outstanding, all of which are held clear of all
Liens. Lodging has the full power and authority to vote the shares
held by it.
(b) Set forth in Section 3.3(b) of the Company Disclosure Letter
--------------
is a true and complete list of the following: (i) each option to
purchase Company Common Stock granted under the Company's 1996
Long-Term Incentive Plan and the Company's
23
1999 Long-Term Incentive Plan and all other formal and informal
arrangements regarding issuances of Company Common Stock
(collectively, the "Company Stock Options"); and (ii) all stock
---------------------
appreciation rights, restricted stock, dividend equivalents,
deferred compensation accounts, performance awards, restricted stock
unit awards and other awards which are outstanding on the date of
this Agreement (collectively, the "Company Stock Rights"). Section
-------------------- -------
3.3(b) of the Company Disclosure Letter sets forth for each Company
------
Stock Option and Company Stock Right, the name of the grantee, the
date of the grant, the type of grant, the status of the option
grants as qualified or nonqualified under Section 422 of the Code,
the number of shares of Company Common Stock subject to each option
or other award, the number of shares subject to options or awards
that are currently exercisable, the exercise price per share, and
the number and type of such shares subject to stock appreciation
rights. On the date of this Agreement, except as set forth in this
Section 3.3 or as set forth in Section 3.3(b) of the Company
----------- --------------
Disclosure Letter, no shares of Company Common Stock are outstanding
or reserved for issuance.
(c) All outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and nonassessable and not
subject to preemptive or similar rights under Law or the Company's
Charter or the Company's Bylaws, or any contract or instrument to
which the Company is a party or by which it is bound. Except for the
Parent Mortgage Loans, there are no bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable or exercisable for, securities
having the right to vote) on any matters on which stockholders of
the Company may vote.
(d) Other than as set forth in this Section 3.3 or in Section
----------- -------
3.3(b) of the Company Disclosure Letter, there are no outstanding
------
securities, options, warrants, calls, rights, Contracts,
commitments, agreements, arrangements or undertaking of any kind to
which the Company or any Company Subsidiary is a party or by which
such entity is bound, obligating the Company or any Company
Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock, voting
securities or other ownership interests of the Company or any
Company Subsidiary or obligating the Company or any Company
Subsidiary to issue, grant, extend or enter into any such security,
option, warrant, call, right, Contract, commitment, agreement,
arrangement or undertaking (other than to the Company or a Company
Subsidiary).
(e) All dividends on shares of Company Common Stock or any other
security or equity interest of the Company or any other Company
Subsidiary, which have been declared and are payable prior to the
date of this Agreement have been paid in full. Notwithstanding the
foregoing, Purchaser acknowledges that nothing herein shall limit
the ability of Lodging to cause the Company to declare and pay cash
dividends or make distributions of the Excluded Assets between the
date hereof and the Closing Date.
(f) Set forth on Section 3.3(f) of the Company Disclosure Letter
--------------
is a list of each registration rights agreement or other agreements
between the Company and/or
24
any Company Subsidiary, and one or more other parties, on the other
hand, which sets forth the rights of any such other party or
parties to cause the registration of any securities of the Company
pursuant to the Securities Act of 1933, as amended (the "Securities
----------
Act"). The Company acknowledges and agrees that all agreements set
---
forth on Section 3.3(f) of the Disclosure Letter shall be
--------------
terminated as of the Closing.
3.4 Other Interests. Except for interests in the Company Subsidiaries
---------------
and certain other entities as set forth in Section 3.4 of the Company Disclosure
-----------
Letter (the "Company Other Interests"), neither the Company nor any Company
-----------------------
Subsidiary owns, directly or indirectly, any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust,
limited liability company or other entity (other than investments in short-term
investment securities). Neither the Company nor any Company Subsidiary is in
breach of any agreement, document or contract governing its rights in or to the
Company Other Interests, all of which agreements, documents and Contracts are
(a) listed in Section 3.4 of the Company Disclosure Letter and (b) unmodified
-----------
except as described therein in full force and effect. To the Company's
Knowledge, the other parties to any such agreement, document or Contract are not
in breach of any of their respective obligations under such agreements,
documents or Contracts.
3.5 Company Subsidiaries.
--------------------
(a) Section 3.5(a) of the Company Disclosure Letter sets forth (i)
--------------
each Subsidiary (as defined herein) of the Company; (ii) the
ownership interest therein of the Company or any Company Subsidiary;
(iii) if not directly or indirectly wholly-owned by the Company, the
identity and ownership interest of each of the other owners of such
Company Subsidiary; (iv) each real property or interest in real
property owned by such Company Subsidiary; and (v) if not
wholly-owned by such Company Subsidiary, the identity and ownership
interest of each of the other owners of such real property or
interest in real property. As used in this Agreement, "Subsidiary"
----------
of any Person (as defined herein) means any corporation,
partnership, limited liability company, joint venture, trust or
other legal entity of which such Person owns (either directly or
through or together with another Subsidiary of such Person) either
(i) a general partner, managing member or other similar interest, or
(ii)(A) voting power of the voting capital stock or other voting
equity interests, or (B) economic interests of such corporation,
partnership, limited liability company, joint venture or other legal
entity, including all of the Merging Subsidiaries.
(b) Except as set forth in Section 3.5(b) of the Company
--------------
Disclosure Letter, (i) all of the outstanding shares of capital
stock of the Company or a Company Subsidiary of each Company
Subsidiary that is a corporation have been duly authorized, validly
issued and are (A) fully paid and nonassessable and not subject to
preemptive or similar rights, and (B) owned free and clear of all
Liens, and (ii) all equity interests in each Company Subsidiary that
is a partnership, joint venture, limited liability company or trust
which are owned by the Company or by a Company Subsidiary are (A)
fully paid, and (B) owned free and clear of all Liens. Each Company
Subsidiary that is a corporation is duly incorporated, validly
existing and in good standing under the Laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to
own, operate, lease, manage and encumber its
25
properties and carry on its business as now being conducted, and
each Company Subsidiary that is a partnership, limited liability
company or trust is duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization and has
the requisite power and authority to own, operate, lease, manage and
encumber its properties and carry on its business as now being
conducted. Each Company Subsidiary is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary. True,
complete and correct copies of the articles of incorporation,
bylaws, organization documents and partnership, joint venture and
operating agreements of each Company Subsidiary, as amended to the
date of this Agreement (the "Company Subsidiary Formation
----------------------------
Documents"), and all minutes of meetings (or written consents in
---------
lieu of meetings of the Board of Directors and committees thereof,
stockholders and partners of each Company Subsidiary) since January
1, 1999 have been previously delivered or made available to
Purchaser. The Company Subsidiary Formation Documents are in full
force and effect in accordance with their terms. All action taken
since January 1, 1999 by the Board of Directors (and all committees
thereof) and stockholders of each Company Subsidiary is reflected in
such minutes and written consents.
3.6 Financial Statements; Financial Information.
-------------------------------------------
(a) The Financial Statements have been prepared in accordance with
GAAP, applied on a consistent basis, during the periods involved
(except, in the case of unaudited statements, the lack of footnote
disclosure, statement of changes in stockholders' equity and
statement of cash flows) and have fairly presented in all material
respects, in accordance with the applicable requirements of GAAP,
the consolidated financial position of the Company and the Company
Subsidiaries, taken as a whole, as of the dates thereof and the
consolidated results of operations and cash flows for the periods
then ended. The Company has no Subsidiaries which are not
consolidated for accounting purposes. Except for liabilities and
obligations set forth in Section 3.6 of the Company Disclosure
-----------
Letter, or those contained in the Financial Statements, neither the
Company nor any Company Subsidiary has any liabilities, indebtedness
or obligations (whether fixed, contingent or otherwise) of any
nature required by GAAP to be set forth on a consolidated balance
sheet of the Company or in the notes thereto other than liabilities
incurred since such dates that will be discharged prior to the
Closing Date.
(b) The Financial Information is (i) true, correct and complete in
all material respects and (ii) presents fairly the historical
operations of the Company Properties and the Company's and the
Company Subsidiaries' corporate overhead and administrative expenses
for the periods covered by the Financial Information in accordance
with GAAP, other than information such as Taxes, depreciation and
footnotes as required by GAAP, provided, however, that Purchaser
acknowledges that (A) a portion of the corporate overhead and
administrative resources of the Company and the Company Subsidiaries
is currently provided by Parent, the costs of which are allocated to
the Company's and the Company's Subsidiaries' operations in the
Financial Information in accordance with the terms of that certain
Administrative
26
Services Agreement dated as of January 1, 1999, as amended on
January 1, 2000 and January 1, 2001 (the "Administrative Services
-----------------------
Agreement"), by and between the Company and Parent, and (B) no
---------
misrepresentation under this Section 3.6(b) shall be deemed to arise
--------------
or result from the fact that the allocation of overhead in
accordance with such Administrative Services Agreement may have
resulted in the Financial Information not accurately reflecting
corporate overhead and administrative expenses that would have been
incurred by the Company or the Company Subsidiaries if such overhead
and administrative resources had been provided solely by the Company
or the Company Subsidiaries.
3.7 Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Section 3.7 of the Company Disclosure Letter, since September 30, 2001 (the
-----------
"Company Financial Statement Date"), the Company and the Company Subsidiaries
--------------------------------
have conducted their business only in the ordinary course and there has not been
(a) any circumstance, event, occurrence, change or effect that has had a
Material Adverse Effect, nor has there been any circumstance, event, occurrence,
change or effect that, with the passage of time, would reasonably be expected to
result in a Material Adverse Effect (although no representation is made with
respect to economic or market conditions which apply generally to the industry,
or with respect to employee retention failure expectations of this Agreement),
(b) any damage, destruction or loss, whether or not covered by insurance, (c)
any change in accounting methods, principles or practices by the Company or any
Company Subsidiary, affecting its assets, liabilities or business, except
insofar as may have been required by a change in GAAP, (d) any express or deemed
election for Tax purposes, or offer to settle or compromise or any settlement or
compromise of any liability with respect to Taxes, or (e) the incurrence,
assumption or guaranty by the Company or any Company Subsidiary of any debt for
borrowed money, other than such indebtedness which will be discharged at
Closing.
3.8 Properties.
----------
(a) Except for any Excluded Asset, the Company or one of the
Company Subsidiaries set forth on Section 3.8(a) of the Company
--------------
Disclosure Letter owns or leases fee simple title to each of the
real properties identified in Section 3.8(a) of the Company
--------------
Disclosure Letter, as such properties are more particularly
described and depicted in the Title Commitments (the "Company
-------
Properties"), which are all of the real estate properties owned or
----------
leased by them, in each case free and clear of all Liens and subject
only to the Permitted Title Exceptions. The "Permitted Title
---------------
Exceptions" are (i) title exceptions set forth in the Title
----------
Commitments and facts disclosed in the Surveys except to the extent
set forth on Section 3.8(a) of the Company Disclosure Letter, (ii)
--------------
matters set forth on Section 2.4(a)(6) of the Company Disclosure
-----------------
Letter, (iii) Laws applicable to real property (excluding any
defect, Lien or encumbrance resulting from a violation of such Laws
that is not otherwise a Permitted Title Exception), (iv) easements,
restrictions, encroachments, encumbrances, conditions and
conveyances not included in (i) above which are typical for the
applicable property type and locality and which do not materially
and adversely affect the value, use, or operation of the applicable
Company Properties, (v) Liens for real estate Taxes and assessments
(including those arising by private covenant) not yet due and
payable, (vi) inchoate mechanics', materialmen's, and similar Liens
or any Liens that are claimed against a Company Property but that
are either included in Net Tangible
27
Liability or that Lodging causes to be insured over by the Title
Company under any New Title Policy without payment of additional
premiums by Purchaser, and (vii) any matter not otherwise a
Permitted Title Exception that is insured over or endorsed against
in the applicable New Title Policy.
(b) Except as set forth in Section 3.8(b) of the Company
--------------
Disclosure Letter or in the Title Commitments, none of the Company
Properties is subject to any restriction on the sale or other
disposition thereof (including, but not limited to, options to
purchase or rights of first offer or refusal) or on the financing or
release of financing thereon.
(c) The Title Commitments (excluding for this purpose title
commitments included within the definition of Title Commitments) are
validly issued insuring the Company's or the applicable Company
Subsidiary's fee simple title or leasehold title to the Company
Properties owned or leased, as applicable, by it in amounts
approximately equal to the purchase price therefore paid by the
Company or such Company Subsidiary.
(d) Except as provided in Section 3.8(d) of the Company Disclosure
--------------
Letter, (i) each certificate, permit or license from any
Governmental Authority having jurisdiction over any of the Company
Properties or any agreement, easement or other right which is
necessary to permit the lawful use and operation of the Company
Properties as extended-stay lodging facilities as currently being
utilized, or of any buildings and improvements on any of the Company
Properties or which is necessary to permit the lawful use and
operation of all driveways, roads and other means of egress and
ingress to and from any of the Company Properties has been obtained
and is in full force and effect, and, to the Company's Knowledge,
there is no pending threat of modification or cancellation of any of
the same; (ii) the Company and the Company Subsidiaries are in
material compliance with all Laws applicable to the Company
Properties; (iii) neither Lodging, the Company nor any Company
Subsidiary has received any written notice of any violation of any
federal, state or municipal Law, ordinance, order, regulation or
requirement affecting any of the Company Properties issued by any
Governmental Authority; (iv) there are no structural defects
relating to any Company Property, including flood damage; (v) each
Company Property's building systems are in good working order,
ordinary wear and tear excepted; (vi) there is no unrepaired
physical damage to any Company Property for which there is no
insurance in effect covering the cost of the restoration and the
loss of revenue (subject to a reasonable deduction or retention
limit); (vii) there are no Company Properties located in flood zones
except as shown on the Surveys; (viii) there are no pending Tax
proceedings specifically relating to a Company Property to protest
any ad valorem Tax or special assessment or to impose any special
assessment; (ix) there are no third party real estate broker or
agency agreements relating to Company Properties; (x) there is no
construction or renovation work at any Company Property being
performed by Lodging, the Company or the Company Subsidiaries which
is incomplete on the Effective Date (other than renovation or
construction work being performed in accordance with the Company's
Capital Expenditure Budget), and (xi) neither the Company nor any
Company Subsidiary has
28
violated any material covenants, conditions or restrictions
affecting any of the Company Properties in any material respect.
(e) Except as set forth in Section 3.8(e) of the Company
--------------
Disclosure Letter, neither Lodging, nor the Company nor any Company
Subsidiary has received any written or published notice to the
effect that (i) any condemnation or involuntary rezoning proceedings
are pending or threatened with respect to any of the Company
Properties or any portion thereof, and to the Company's Knowledge,
no such proceedings are contemplated by any Governmental Authority,
or (ii) any zoning, building or similar Law is or will be violated
by the continued maintenance, operation or use of the Company
Properties as extended-stay lodging facilities as currently being
utilized, or by buildings or other improvements on any of the
Company Properties. Except as set forth in Section 3.8(e) of the
--------------
Company Disclosure Letter, (x) all work required to be performed,
payments required to be made and actions required to be taken, in
each case prior to the date hereof, pursuant to any agreement
entered into with a Governmental Authority in connection with a site
approval, zoning reclassification, water, sewer or other utility or
other similar action relating to any Company Properties have been
performed, taken, completed and paid for in full, as the case may
be, and (y) to the Company's Knowledge, there are no presently
planned or currently proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements, in each
of cases (x) and (y) except as paid in the ordinary course in
installments pursuant to a special assessment or similar capital
assessment installment obligation or as set forth in development or
operating budgets for such Company Properties delivered to Purchaser
prior to the date hereof and with respect to any noncompliance with
such agreements.
(f) There are no insolvency proceedings of any character including
bankruptcy, receivership, reorganization, composition or arrangement
with creditors, including any assignment for the benefit of
creditors, or voluntary or involuntary bankruptcies involving the
Company or any Company Subsidiaries pending or, to the Company's
Knowledge, threatened against Company or any of the Company
Subsidiaries by any other Person.
(g) Except as otherwise set forth in Section 3.8(g) of the Company
--------------
Disclosure Letter, the Tangible Personal Property, other than
inventory, is suitable for the purposes for which intended and in
reasonable operating condition and repair consistent with normal
industry standards for similar type properties, except for ordinary
wear and tear, and except for such Tangible Personal Property as
shall have been taken out of service on a temporary basis for
repairs or replacement consistent with the Company's and the Company
Subsidiaries' prior practices and normal industry standards. Except
as set forth in Section 3.8(g) of the Company Disclosure Letter, the
--------------
Company and each Company Subsidiary, as applicable, have legal and
beneficial ownership of, or valid leasehold interests in, all of the
Tangible Personal Property.
(h) The Company and each Company Subsidiary, as applicable, are
the sole owners of, or have a valid right to use, all of the
Intangible Personal Property, free
29
and clear of any claim or conflict with or infringement or violation
of the intellectual property rights of others and all Liens. The
Intangible Personal Property is sufficient and includes all
intellectual property rights necessary for the Company and the
Company Subsidiaries to lawfully conduct their businesses as
presently conducted. Except as set forth in Section 3.8(h) of the
--------------
Company Disclosure Letter, to the extent required by applicable Law,
the Intangible Personal Property is duly registered or filed with
applicable Governmental Authorities and no actions or fees are due
with regard to any registration or application within 90 days after
the Closing Date.
(i) True and complete copies of the HPT Agreements have been
delivered to Purchaser. Except for the termination of the Pledge and
the substitution of this agreement by the LLC Interests Pledge,
dated as of November19, 2001, between HPT and HVI. The HPT
Agreements (i) have not been amended, modified or supplemented and
(ii) are in full force and effect in accordance with their terms.
Neither Lodging nor the Company nor any Company Subsidiary has
received any notice of default under any of the HPT Agreements. The
aggregate Total Hotel Sales (as defined in the HPT Lease) for each
Property (as defined in the HPT Lease) for the Base Year (as defined
in the HPT Lease) was $35,282,670.
(j) The Las Vegas Lease (i) has not been amended, modified or
supplemented and (ii) contains the entire agreement between the
ground lessor and ground lessee named therein. Neither the ground
lessee nor, to the Company's Knowledge, the ground lessor, is in
default in the performance of its obligations under the Las Vegas
Lease, and the Las Vegas Lease is in full force and effect in
accordance with its terms. A true and complete copy of the Las Vegas
Lease has been provided to Purchaser.
(k) There are no Operating Agreements, Occupancy Agreements or
Leased Personal Property Agreements in effect with respect to the
Company Properties other than those incurred in the ordinary course
of business or included in the Company Disclosure Letter. Within the
12 month period prior to the Effective Date, the Company has not
received any written notices of any defaults on the part of the
Company or any Company Subsidiary under any material Operating
Agreements, Occupancy Agreements or Leased Personal Property
Agreements.
(l) Since January 1, 2001, the Company and the Company
Subsidiaries have maintained their inventory levels in the ordinary
course of their business and consistent with past practices.
3.9 Environmental Laws. Except as otherwise specifically disclosed in
------------------
environmental site assessments set forth in Section 3.9 of the Company
-----------
Disclosure Letter; (i) the Company and all Company Subsidiaries are in
compliance with all, and have not violated any, applicable Environmental Laws;
(ii) there has been no Release of any Hazardous Material, nor is any Hazardous
Material present, in, on, or under any of the Company Properties or any other
property with respect to which the Company or any Company Subsidiary is or may
be liable, in either case constituting a Recognized Environmental Condition;
(iii) neither Lodging (with respect to any Company Properties, the Company or
the Company Subsidiaries) nor the
30
Company nor any Company Subsidiary has received any notice that it is a
"potentially responsible party" under any Environmental Law; (iv) there are no
Environmental Claims pending or, to the Company's Knowledge, threatened against
the Company or any Company Subsidiary; (v) neither the Company nor any Company
Subsidiary is conducting, nor have they undertaken or completed, any Remedial
Action, nor have any Remedial Actions relating to any Company Property or
otherwise relating to the Company or any Company Subsidiary been conducted by
any other Person; (vi) the Company has provided to Purchaser all written audits,
and other reports prepared for the Company or any Company Subsidiary that are in
its possession or control concerning Environmental Laws or Hazardous Materials
at any of the Company Properties or at any other property with respect to which
the Company or any Company Subsidiary is or may have liability; and (vii) the
Company and each Company Subsidiary has all permits required under applicable
Environmental Laws with regard to the Company Properties or otherwise with
respect to any operations or activities conducted by any of them. For purposes
of this Agreement: (X) the term "Environmental Laws" means any statute,
------------------
ordinance, rule, regulation, policy, permit, consent, approval, license,
judgment, order, decree, injunction or other authorization of any Governmental
Authority (other than building codes and workplace violations) relating to: (1)
pollution or protection of human health or safety, health assessments or safety
of employees, sanitation, or the environment (including, without limitation,
indoor or ambient air, surface water, ground water, land surface or subsurface
strata); (2) Releases or threatened Releases of Hazardous Materials into the
environment; or (3) the generation, treatment, storage, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Material, (Y) the term
"Remedial Action" means all action to (1) clean up, remove, treat or handle in
---------------
any other way Hazardous Material in the environment; (2) restore or reclaim the
environment or natural resources; (3) prevent the Release of Hazardous Materials
so that it does not migrate, endanger or threaten to endanger public health or
the environment; or (4) perform remedial investigations, feasibility studies,
corrective actions, closures and postremedial or postclosure studies,
investigations, operations, maintenance and monitoring on, about or in any
applicable property; and (Z) the term "Environmental Claims" means any and all
--------------------
actions, suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, notices of liability or potential liability, investigations,
proceedings, consent orders or consent agreements relating in any way to any
Environmental Law or any Hazardous Materials.
3.10 Access and Utilities. Except as set forth in Section 3.10 of the
-------------------- ------------
Company Disclosure Letter or in the Title Commitments and Surveys, each parcel
of real estate comprising the Owned Properties and each parcel of real estate
comprising the Leased Properties (i) has direct access to public roads or access
to public roads by means of a perpetual access easement, such access being
sufficient to satisfy the current transportation requirements of the operations
of the Company Properties presently conducted at such parcel, and (ii) is served
by all utilities in such quantity and quality as are sufficient to satisfy the
current normal occupancy levels and operations of the Company Properties
presently conducted at such parcel. Except as set forth in Section 3.8(e) of the
--------------
Company Disclosure Letter, neither Lodging nor the Company nor any Company
Subsidiary has received notice of any special assessment which may affect the
Company Properties and, to the Company's Knowledge, no such special assessment
is contemplated by any Governmental Authority.
31
3.11 Employees and Employee Benefits.
-------------------------------
(a) Except as set forth in Section 3.11(a) of the Company
---------------
Disclosure Letter, there are no existing employment agreements,
consulting agreements, change in control agreements or similar
agreements (whether oral or written) between the Company or the
Company Subsidiaries and any employees of the Company or the Company
Subsidiaries, and no such agreements are currently in the process of
being negotiated.
(b) Except as disclosed on Section 3.11(b) of the Company
---------------
Disclosure Letter, no union has been recognized as the collective
bargaining representative for any employee of the Company or the
Company Subsidiaries, and the Company and the Company Subsidiaries
are not a party to any collective bargaining agreement or other
contract or agreement with respect to their work force or any
portion thereof. Except as disclosed on Section 3.11(b) of the
---------------
Company Disclosure Letter, since January 1, 1998, (i) no employee
strike, work stoppage or lock-out has occurred, is pending or, to
the Company's Knowledge, threatened against or involving the
business of the Company or the Company Subsidiaries; (ii) no union
grievance has occurred, is pending or, to the Company's Knowledge,
threatened with respect to the Company or the Company Subsidiaries;
(iii) no collective bargaining agreement has been negotiated, is
currently being negotiated, or is currently subject to negotiation
or renegotiation with respect to employees of the Company or the
Company Subsidiaries; (iv) no union organizing campaign has
occurred, is pending or, to the Company's Knowledge, threatened at
any of the Company's or the Company Subsidiaries' facilities; (v)
there has been no, nor is there a pending or, to the Company's
Knowledge, threatened demand for union recognition, nor is there any
representation proceeding pending or, to the Company's Knowledge,
threatened before the National Labor Relations Board with respect to
the Company or the Company Subsidiaries; (vi) neither the Company
nor any of the Company Subsidiaries are, or have been, a party to
any court or agency order, consent decree, conciliation agreement or
other settlement agreement, nor is it the subject of any pending or,
to the Company's Knowledge, threatened government compliance
proceeding with respect to any labor matter relating to the business
of the Company or the Company Subsidiaries; (vii) no work-related
accidents, injuries or claims have been made or reported to the
Company or the Company Subsidiaries; and (viii) no unfair labor
practice charge or complaint is pending or, to the Company's
Knowledge, threatened against or otherwise affecting the Company or
any Company Subsidiary. Neither the Company nor any Company
Subsidiary provides benefits to any employee or former employee who
resides outside the United States nor do they have any liabilities
for employee benefits outside the United States.
(c) Section 3.11(c) of the Company Disclosure Letter lists each
---------------
Company Benefit Plan which is currently sponsored, maintained, or
contributed to, or required to be contributed to, by the Company or
any Company Subsidiary or in which any employee of the Company or
any Company Subsidiary is a participant.
32
(d) The Company and the Company Subsidiaries do not have any
Controlled Group Liability, nor do any conditions exist that could
reasonably be expected to result in any Controlled Group Liability.
Without limiting the generality of the foregoing, neither Lodging, nor
any of Lodging's ERISA Affiliates, has engaged in a transaction
described in Sections 4062, 4069, 4204, or 4212 of ERISA.
(e) With respect to each Company Benefit Plan, the Company has
made available to Purchaser a true, correct, and complete copy (or to
the extent no such copy exists, an accurate description) of, to the
extent applicable: (i) each Company Benefit Plan; (ii) the current
summary plan description and any material modifications thereto and,
other written communications with respect thereto to the extent such
communications reflect benefits which are substantially different from
the plan terms; (iii) the most recent determination letter from the
IRS; (iv) any trust agreement or other funding instrument relating to
a Company Benefit Plan and (v) the most recent Form 5500 (including
attached schedules) filed with respect to any Company Benefit Plan.
(f) The Company's 401(k) Plan is the only Company Benefit Plan
which is intended to be qualified under Section 401(a) of the Code.
The IRS has issued a favorable determination letter with respect to
the Company's 401(k) Plan as to its qualification that has not been
revoked; and no circumstances exist, and no events have occurred
whether by action or failure to act, that could reasonably be expected
to adversely affect the qualified status thereof.
(g) Except as set forth in Section 3.11(g) of the Company
---------------
Disclosure Letter, no Company Benefit Plan exists that, as a result of
the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby or as a result of or in
connection with the transactions contemplated hereunder (either alone
or in conjunction with any other event), will result in, cause the
accelerated vesting, funding or delivery of, or increase the amount or
value of, any payment or benefit to any current or former employee,
officer, director or agent of the Company or any Company Subsidiary.
(h) (i) Each Company Benefit Plan has been established and
administered in all material respects in accordance with its terms,
and in material compliance with the applicable provisions of ERISA,
the Code and other applicable Laws; (ii) no event has occurred and no
condition exists with respect to any Company Benefit Plan which could
reasonably be expected to subject to the Company or any Company
Subsidiary to any tax, fine, Lien, penalty or other liability imposed
by ERISA, the Code or other applicable Laws, or under any agreement or
arrangement under which the Company or a Company Subsidiary is
required to indemnify any Person against such liability; (iii) no
Company Benefit Plan provides retiree welfare benefits and neither the
Company nor any Company Subsidiary has any obligation to provide
retiree welfare benefits, except as required by Law or the terms of
any Change in Control Agreement; (iv) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are
pending or threatened and, to the Company's Knowledge, no facts or
circumstances exist that could rise to any such actions, suits or
claims; and (v)
33
neither Lodging, the Company nor any Company Subsidiary has received any
notification of any administrative investigation, audit or other
administrative proceeding by from the Department of Labor, the Internal
Revenue Service or any other Governmental Authority with respect to any
Company Benefit Plan.
(i) Except as set forth in Section 3.11(i) of the Company Disclosure
---------------
Letter, no action, suit, complaint, charge, arbitration, inquiry,
proceeding or investigation by or before any court, governmental agency,
administrative agency, arbitrator or commission brought by or on behalf of
any employee, prospective employee, former employee, retiree, labor
organization or other representative of the Company's or Company
Subsidiaries' employees is pending or, to the Company's Knowledge,
threatened against the Company or any Company Subsidiary.
(j) The Company and each Company Subsidiary has paid in full to all
employees of the Company and the Company Subsidiary, respectively, all
wages, salaries, commissions, bonuses, benefits and other compensation due
to such employees or otherwise arising under any policy, practice,
agreement, plan, program, statue or other Law.
(k) Except as set forth in Section 3.11(k) of the Company Disclosure
---------------
Letter, neither the Company nor any Company Subsidiary is liable for any
severance pay or other payments to any employee, director, or officer or
former employee, director, or officer arising from the termination of
employment, nor will the Company or any Company Subsidiary have any
liability under any benefit or severance policy, practice, agreement, plan,
or program which exists or arises, or may be deemed to exist or arise,
under any applicable Law or otherwise, as a result of or in connection with
the transactions contemplated hereunder or as a result of the termination
by the Company or any Company Subsidiary of any persons employed by the
Company or any Company Subsidiary on or prior to the Closing.
(l) Except as set forth in Section 3.11(l) of the Company Disclosure
---------------
Letter, neither the Company nor any Company Subsidiary has closed any plant
or facility, effectuated any layoffs of employees or implemented any early
retirement, separation or window program within the past five years, nor
has the Company or any Company Subsidiary planned or announced any such
action or program for the future.
(m) Except as set forth in Section 3.11(m) of the Company Disclosure
---------------
Letter, the Company and each Company Subsidiary is in compliance with its
respective obligations pursuant to the WARN Act and all other modification
and bargaining obligations arising under any collective bargaining
agreement, statute or otherwise.
(n) The Company and the Company Subsidiaries have not, at any time
within the 60 day period prior to the Closing Date, effectuated a "plant
closing" or "mass layoff" as those terms are defined in the WARN Act or any
other applicable Law, affecting in whole or in part any site of employment,
facility, operating unit or employee of the Company or a Company Subsidiary
without notifying Purchaser in
34
advance and without complying with the notice requirements and
all other provisions of the WARN Act and any other applicable
Law.
3.12 Employment Relations and Agreements. The Company and each Company
-----------------------------------
Subsidiary is in compliance in all material respects with all Laws,
agreements, Contracts, and Company or Company Subsidiary policies relating
to employment and employment practices, terms and conditions of employment,
occupational safety and health, withholding any payment of Taxes from or
with respect to the compensation of employees and wages and hours.
3.13 Taxes.
-----
(a) The amounts provided as a liability on the Financial
Statements of the Company and the Company Subsidiaries for all Taxes
(other than amounts, if any, provided as a liability for deferred
taxes that reflect timing differences between book and tax income) are
adequate to cover all material unpaid liabilities for all Taxes,
whether or not disputed, that have accrued or been imposed with
respect to or are applicable to a Pre-Closing Tax Period (or portions
thereof ending on or about the Closing Date) and for which the Company
or any Company Subsidiary may be directly or contingently liable.
There are no Tax Liens (other than Liens for current Taxes not yet due
and payable) upon the Acquired Assets or the properties of the Company
or any Company Subsidiary. Except as set forth in Section 3.13(a) of
---------------
the Company Disclosure Letter, there are no consents, agreements
(including closing agreements), grants or requests for the extension
or waiver of any statutes of limitations applicable to any Taxes for
which the Company or any Company Subsidiary is or may be liable. For
purposes hereof, "Pre-Closing Tax Period" means a taxable period of
----------------------
the Company or any Company Subsidiary ending on and including the
Closing Date and all prior tax years or periods of the Company and the
Company Subsidiaries.
(b) All material federal, state, local and foreign income,
corporation and other Tax Returns have been, or the Company shall
cause such Tax Returns to be, duly and timely filed for the Company
and each Company Subsidiary, and all other material filings in respect
of Taxes have been, or the Company shall cause such filings to be,
duly and timely made for the Company and each Company Subsidiary, for
all periods through and including the Closing Date as required by
applicable Law. All material Taxes for which the Company or any
Company Subsidiary is liable (whether or not shown as due on all such
Tax Returns or other filings) have been, or the Company shall cause
such material Taxes to be, duly and timely paid. Each such Tax Return
and filing is true, correct and complete in all material respects and
neither the Company nor any Company Subsidiary has or will have any
additional liability for Taxes with respect to any Tax Return or other
filing heretofore filed, other than as reflected as liabilities on the
Financial Statements of the Company or the Company Subsidiaries.
Except as set forth in Section 3.13(b) of the Company Disclosure
---------------
Letter, none of the Tax Returns or other filings that include the
operations of the Company or any Company Subsidiary has ever been
audited or investigated by any Governmental Authority, no notification
has been given to the Company or any Company Subsidiary that such an
audit or other proceeding is pending or threatened,
35
and no facts exist which would constitute grounds for the
assessment of any additional Taxes by any Governmental Authority
with respect to the taxable years covered in such Tax Returns and
filings. All Taxes which the Company or any Company Subsidiary is
required by Law to withhold or collect, including without
limitation, sales and use taxes, and amounts required to be
withheld for Taxes of employees and other withholding taxes, have
been duly withheld or collected and, to the extent required, have
been paid over to the proper Governmental Authorities or are held
in separate bank accounts for such purpose.
(c) Neither the Company nor any Company Subsidiary has filed
a consent under Section 341(f) of the Code concerning collapsible
corporations. Neither the Company nor any Company Subsidiary has
been a member of an Affiliated Group, other than (i) the Parent
Group, of which it is a member on the date hereof, and (ii) the
Affiliated Group of which the Company previously was the common
parent corporation, prior to its inclusion in the Parent Group.
Neither the Company nor any Company Subsidiary has any liability
for the Taxes of any other Person under Treas. Reg. ss.1.1502-6
(or any similar provision of state, local or foreign Law) or as a
transferee or successor by contract or otherwise.
(d) Lodging is not a "foreign person" as defined in Section
1445(f)(3) of the Code or any comparable state statute.
Accordingly, neither Lodging, the Company nor any Company
Subsidiary is subject to FIRPTA withholding required with the
disposition of United States real property in Section 897(c) of
the Code. Further, neither Lodging, the Company nor any Company
Subsidiary is subject to withholding for any state or local
jurisdiction as a result of transactions contemplated by this
Agreement.
(e) No claim has ever been made by a Governmental Authority
in a jurisdiction where the Company or a Company Subsidiary has
not filed Tax Returns that the Company or such Company Subsidiary
is or may be subject to taxation by that jurisdiction.
(f) No power of attorney that is currently in force has been
granted with respect to the Company or any Company Subsidiary
with respect to any matters relating to Taxes. No tax sharing,
indemnity, allocation or similar agreement requiring the Company
or any of its Subsidiaries to make payments to any Person exists
or has any effect as of the Closing Date.
(g) Either (i) a valid election under Section 754 of the
Code is in effect with respect to each entity treated as a
partnership for income tax purposes in which the Company or a
Company Subsidiary holds an equity interest or (ii) such election
is not prohibited by the partnership or limited liability company
agreement or other governing documents of such entity.
(h) Section 3.13(h) of the Company Disclosure Letter lists
---------------
each entity treated as a partnership for income tax purposes in
which the Company or a Company Subsidiary holds an equity
interest.
36
(i) Neither the Company nor any of the Company Subsidiaries has been a
party to any distribution occurring during the last two years in which
the parties to such distribution treated the distribution as one to which
Section 355 of the Code is applicable.
(j) None of the assets or properties of the Company or any of the
Company Subsidiaries is tax-exempt use property within the meaning of
Section 168(h)(1) of the Code.
3.14 No Defaults or Violations.
-------------------------
(a) Neither the Company nor any Company Subsidiary has breached any
provision of, nor is it in default under the terms of, any Material
Contract to which it is a party or under which it has any rights or by
which it is bound, and, to the Company's Knowledge, no other party to any
such Material Contract has breached such Material Contract or is in
default thereunder.
(b) The Company and each Company Subsidiary is in compliance in all
material respects with, and no material violation exists under, any and
all Laws applicable to the Company or such Company Subsidiary.
(c) No notice from any Governmental Authority has been received by
Lodging, the Company or any Company Subsidiary claiming any violation of
any Law (including any building, zoning or other ordinance) or requiring
any work, construction or expenditure, or asserting any assessment or
penalty.
3.15 Litigation. As of the date hereof, except as disclosed in Section 3.15
----------
of the Company Disclosure Letter, and other than (i) personal injury and other
routine tort litigation arising from the ordinary course of operations of the
Company and the Company Subsidiaries which are covered by insurance, subject to
a reasonable deductible or retention limit, and (ii) Lodging indemnification
obligations under Section 10.2(d), there is no suit, action, arbitration, claim
or other proceeding or notices of violation pending or, to the Company's
Knowledge, threatened against or affecting the Company or any Company
Subsidiary, including any such litigation that, individually or in the
aggregate, would reasonably be expected to (x) have a material adverse effect or
(y) prevent or materially impair the ability of the Company or any Company
Subsidiary to perform any of its obligations hereunder or prevent or materially
threaten or impair the consummation of any of the transactions contemplated by
this Agreement, nor is there any judgment, decree, injunction, rule, writ or
order of any court or Governmental Authority or arbitrator outstanding against
the Company or any Company Subsidiary having any such effect.
3.16 Contracts; Debt Instruments.
---------------------------
(a) Section 3.16(a) of the Company Disclosure Letter lists all (i)loan
--------------
or credit agreements, notes, bonds, mortgages, indentures and any other
agreement or instrument pursuant to which any Indebtedness (as defined
herein) of the Company or any Company Subsidiary is outstanding or may be
incurred, and leases; (ii) permits, concessions, franchises, licenses,
leases or any other material Contracts, agreements,
37
written arrangements or understandings (in addition to the HPT Agreements),
in each case, other than property specific contracts necessary for the
normal course, operation and maintenance of the Company Properties, such as
cable contracts, trash pick-up, office equipment leases and similar items
that, in each case, involve the payment of less than $100,000 on an annual
basis or that are cancelable without charge or penalty on notice of 30 days
or less; and (iii) the Submission Matters listed in Sections 2.4(a)(1), (4)
------------------ ---
and (5) (collectively, the "Material Contracts") of the Company and the
--- ------------------
Company Subsidiaries. Except as set forth in Section 3.16(a) of the Company
---------------
Disclosure Letter, each Material Contract is valid, binding and enforceable
and in full force and effect and has not been amended, modified or
supplemented. Neither the Company nor any Company Subsidiary (x) is in
violation of or in default under or received any notices of default (nor,
to the Company's Knowledge, does there exist any condition which upon the
passage of time or the giving of notice or both would cause such a
violation of or default under) in any respect under any Material Contract
or (y) has received any written notice from any other party to a Material
Contract terminating such contract or alleging a material default
thereunder by the Company or any Company Subsidiary. For purposes of this
Section 3.16, "Indebtedness" shall mean (i) indebtedness for borrowed
------------ ------------
money, whether secured or unsecured, (ii) obligations under conditional
sale or other title retention agreements relating to property purchased by
such Person, (iii) capitalized lease obligations, (iv) obligations under
any interest rate cap, swap, collar or similar transaction or currency
hedging transactions, and (v) guarantees of any such indebtedness of any
other Person.
(b) Section 3.16(b) of the Company Disclosure Letter sets forth, with
---------------
respect to all Indebtedness of the Company and the Company Subsidiaries,
(i) any consents required in connection with the transactions contemplated
by this Agreement and (ii) any fees or prepayment penalties required to be
paid as a result of the transactions contemplated by this Agreement,
including the amount of any such fee.
(c) Except as set forth in Section 3.16(c) of the Company Disclosure
---------------
Letter, neither the Company nor any Company Subsidiary is a party to any
agreement which would restrict any of them from prepaying any of their
Indebtedness without penalty or premium at any time.
(d) Neither the Company nor any Company Subsidiary is a party to any
agreement relating to the management of any of the Company Properties by
any Person other than the Company or a Company Subsidiary.
(e) Neither the Company nor any Company Subsidiary is a party to any
agreement pursuant to which the Company or any Company Subsidiary manages
or provides services with respect to any real properties other than Company
Properties, except for the agreements listed in Section 3.16(e) of the
---------------
Company Disclosure Letter.
(f) Section 3.16(f) of the Company Disclosure Letter lists all
---------------
agreements entered into by the Company or any Company Subsidiary providing
for the sale of, or option to sell, any Company Properties or the purchase
of, or option to purchase, by
38
the Company or any Company Subsidiary, on the one hand, or the other
party thereto, on the other hand, any real estate not yet consummated
as of the date hereof.
(g) Except as set forth in Section 3.16(g) of the Company
---------------
Disclosure Letter, neither the Company nor any Company Subsidiary has
any material continuing contractual liability (A) for indemnification
or otherwise under any agreement relating to the sale of real estate
previously owned, whether directly or indirectly, by the Company or
any Company Subsidiary or (B) to pay any additional purchase
consideration for any of the Company Properties.
(h) Section 3.16(h) of the Company Disclosure Letter sets forth
---------------
any agreement of the Company or any Company Subsidiary (which is not
terminable at will by the Company or the applicable Company
Subsidiary) to provide free room nights in exchange for goods or
services. Neither the Company nor any Company Subsidiary discounts its
room rates in exchange for goods or services.
(i) The Archstone Agreement has been terminated without any
continuing liability to the Company and is of no further force or
effect.
3.17 Insurance. Section 3.17 of the Company Disclosure Letter contains a
--------- ------------
true and complete list, by type of insurance, carrier, coverages (including
limits) and term, of all material policies of casualty, liability and other
types of insurance (except title insurance) carried by the Company or any
Company Subsidiary. All such policies are in full force and effect, all premiums
required to be paid thereunder through the date of this Agreement have been
paid, and neither the Company nor any Company Subsidiary has received from any
insurance company notice of any material defects or deficiencies affecting the
insurability of the Company or any Company Subsidiary or any of their respective
assets thereunder.
3.18 No Conflict of Interest. Neither Lodging nor any of its Affiliates,
-----------------------
other than the Company and the Company Subsidiaries, has or claims to have any
direct or indirect interest in any tangible or intangible property used in the
business of the Company, except (i) as a holder of the Shares, (ii) as the owner
of the Parent Mortgage Loans, (iii) as a party to the Administrative Services
Agreement, and (iv) as the landlord under the El Paso Lease.
3.19 Claims Against Officers and Directors. There are no pending or, to
-------------------------------------
the Company's Knowledge, threatened claims against any director, officer or
agent of the Company or any Company Subsidiary or any other Person which could
give rise to any claim for indemnification against the Company.
3.20 Brokers. Other than SSB, neither Lodging nor the Company nor any
-------
Company Subsidiary has used any broker or finder in connection with the
transactions contemplated hereby, and neither Purchaser nor any Affiliate of
Purchaser has or shall have any liability or otherwise suffer or incur any Loss
as a result of or in connection with any brokerage or finder's fee or other
commission of any Person retained by Lodging or the Company or any Company
Subsidiary in connection with any of the transactions contemplated by this
Agreement. Lodging is responsible for the payments of all fees to SSB as a
result of this transaction.
39
3.21 Forward Looking Statements. Notwithstanding the foregoing
--------------------------
representations and warranties in this Article III, Purchaser acknowledges that
-----------
the Company makes no representations or warranties in this Agreement regarding
forward looking statements.
3.22 Operation of Business Since Original Agreement Date. During the period
---------------------------------------------------
from the Original Agreement Date until the Closing Date, and except as otherwise
specifically contemplated by this Agreement or the Transaction Agreement or as
disclosed in Section 3.7 of the Company Disclosure Letter, the Company and the
-----------
Company Subsidiaries have:
(a) conducted their respective businesses only in the usual, regular
and ordinary course and in substantially the manner as heretofore
conducted, except as set forth on Section 3.22(a) of the Company
---------------
Disclosure Letter;
(b) used commercially reasonable efforts to preserve intact their
respective business organizations and goodwill;
(c) subject to the restrictions contained herein, operated and
maintained the Company Properties in substantially the same manner in
which they were operated and maintained prior to the Original Agreement
Date, including the maintenance of inventory levels consistent with past
practice;
(d) consistent with past practices, preserved intact the Acquired
Assets (including maintaining, repairing and making capital improvements
to the Acquired Assets in the ordinary course of business of the Company
and the Company's Subsidiaries in general accordance with the Capital
Expenditure Budgets and the goodwill associated with the ownership and
operation thereof, it being acknowledged by the parties hereto that the
Company has not made all expenditures described in the Capital
Expenditure Budgets prior to Closing); and timely made any filings or
payments, if required, in connection with the HSD Trademarks;
(e) not, other than in transactions contemplated by this Agreement or,
with respect to any Personal Property, in the ordinary course of their
business, sold, leased or otherwise disposed of any of the Acquired
Assets (other than the Excluded Assets);
(f) not mortgaged or otherwise encumbered or subjected to any Lien any
of the Company Properties or Personal Property other than in the ordinary
course of business;
(g) not made any commitment, or series of commitments, or entered into
any material Contract or agreement, except as set forth in Section
-------
3.22(g) of the Company Disclosure Letter, or series of Contracts or
-------
agreements relating to the ownership or operation of the Acquired Assets
other than such commitments, Contracts or agreements which: (i) were made
in the ordinary course of business consistent with past practice (and in
general accordance with the Capital Expenditure Budgets); (ii)
individually (A) will not bind any of the Company, a Company Subsidiary
or the Company Properties after the Closing Date or are subject to
termination on not more than 30 days' notice without penalty or charge
and (B) involve a financial commitment of less than $250,000; (iii) the
Company obtained Purchaser's prior
40
written consent to such agreement or modification, or (iv) were (A)
made in the ordinary course of the Company's business, (B) do not, in
the aggregate, involve a financial commitment by the Company or the
Company Subsidiaries in excess of $250,000 over any one year period,
and (C) do not exceed a one year term;
(h) maintained in full force and effect insurance coverage
substantially the same as provided in the liability and casualty
insurance policies listed on Section 3.22(h) of the Company Disclosure
---------------
Letter;
(i) not modified, amended or terminated any of the Material
Contracts without the consent of Purchaser;
(j) not consented to any zoning changes or amendments to any
permits, including certificates of occupancy, with respect to any of
the Acquired Assets, except as consistent with past practices and
which do not have a material adverse effect;
(k) maintained the Company Properties and made capital
expenditures consistent with the practices of the Company and the
Company Subsidiaries during 2000 and the first six months of 2001 and
generally in accordance with the Capital Expenditure Budgets;
(l) not (i) increased the compensation or fringe benefits of any
present or former officer, consultant or employee except for increases
in salary or wages in the ordinary course of business consistent with
past practice, (ii) granted any severance or termination pay to any
present or former employee other than pursuant to Company Benefit
Plans in existence on the Original Agreement Date, (iii) loaned or
advanced any money or other property to any present or former employee
of the Company or any of the Company Subsidiaries, or (iv)
established, adopted, entered into, amended or terminated any Company
Benefit Plan or any plan, agreement, program policy, trust, fund or
other arrangement that would be a Company Benefit Plan if it were in
existence as of the Original Agreement Date, other than as required by
applicable Law, and other than with respect to any Company Benefit
Plan which is not being assumed by Purchaser at Closing and in which
such action did not increase the benefits to the participants under
such Company Benefit Plan;
(m) maintained its books and records based on GAAP principles
consistent with past practices and not changed in any material manner
any of its methods, principles or practices of accounting, except as
required by applicable law or GAAP;
(n) duly and timely filed all material reports, Tax Returns and
other documents required to be filed with Governmental Authorities,
subject to extensions permitted by Law (and if the Company or a
Company Subsidiary availed itself of such extension, it notified
Purchaser accordingly);
(o) not amended the Company Charter or the Company Bylaws, or the
articles or certificate of incorporation, bylaws, code or regulations,
partnership agreement,
41
operating agreement or joint venture agreement or comparable charter
or organization document of any Company Subsidiary;
(p) not classified or re-classified or issued any unissued shares
of capital stock of the Company or made any change in the number of
shares of capital stock, membership interests or units of limited
partnership of any Company Subsidiary issued and outstanding or merged
the Company or any Company Subsidiary with or into or consolidated the
Company or any Company Subsidiary with any other Person (except as
contemplated herein);
(q) not granted any options or other right or commitment relating
to its, or any Company Subsidiary's, shares of capital stock,
membership interests or units of limited partnership interest or any
security convertible into such shares of capital stock, membership
interests or units of limited partnership interest, or any security
the value of which is measured by shares of beneficial interest, or
any security subordinated to the claim of its general creditors, and
not amended or waived any rights under any of the Company Stock
Options or Company Stock rights;
(r) continued to declare and/or make dividends, other
distributions and interest payments to Lodging, Parent or their
Affiliates in the ordinary course of their respective businesses and
consistent with Section 3.3(e);
--------------
(s) not taken any of the following actions to the extent such
action would have had a material adverse Tax effect on Purchaser: (i)
made or rescinded (and Lodging has not made, permitted to be made or
rescinded with respect to the Company or any Company Subsidiary) any
express or deemed election for Tax purposes, (ii) offered to settle or
compromise or settled or compromised any material liability with
respect to Taxes, (iii) changed any annual Tax accounting period, (iv)
changed any method of Tax accounting, (v) filed any amended Tax
Return, (vi) entered into any closing agreement with respect to any
Tax, or (vii) consented to any extension or waiver of the applicable
limitations period for any Tax claim or assessment;
(t) used commercially reasonable efforts to keep available the
services of the Company's or Company Subsidiaries' officers and
employees (other than those employees comprising the Terminated
Group), and used commercially reasonable efforts to maintain
satisfactory relationships with licensors, suppliers, creditors,
distributors, customers and others transacting business with the
Company or any Company Subsidiary;
(u) except as required by the terms thereof or hereof, not in any
manner changed, modified, extended, renewed or terminated any of the
HPT Agreements or any lease for the Leased Properties;
(v) promptly notified Purchaser in writing of any material
litigation, arbitration or administrative hearing (or any written
threats of any such litigation,
42
arbitration or administrative hearing) concerning or affecting the
Company, the Company Subsidiaries or the Company Properties within
Company's Knowledge; or
(w) not agreed or otherwise committed to take any of the
foregoing actions or taken, or agreed to take, any action which would:
(i) make any of the representations or warranties of the Company with
respect to itself or the Company Subsidiaries contained in this
Agreement untrue or incorrect in any material respect as of the date
when made, or (ii) violated any applicable Laws in any material
respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Lodging and the Company, as of the
date of this Agreement (except to the extent that any such representation and
warranty is limited to a specific date by its express terms), as follows:
4.1 Organization, Standing and Power of Purchaser. Purchaser is a limited
---------------------------------------------
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. Purchaser has all requisite power and
authority to own, operate, lease, manage and encumber its properties and carry
on its business as now being conducted. Purchaser is duly qualified or licensed
to do business as a foreign limited liability company and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary.
4.2 Authority; Noncontravention; Consents.
-------------------------------------
(a) Purchaser has the requisite power and authority to enter into this
Agreement and the Transaction Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement and the Transaction Agreement by Purchaser and the consummation
by Purchaser of the transactions contemplated by this Agreement and the
Transaction Agreement have been duly authorized by all necessary action on
the part of Purchaser. This Agreement and the Transaction Agreement have
been duly executed and delivered by Purchaser and constitute valid and
binding obligations of Purchaser, enforceable against Purchaser in
accordance with and subject to its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
and general principles of equity and by equitable limitations on the
availability of specific remedies.
(b) The execution and delivery of this Agreement by Purchaser do not,
and the compliance by Purchaser with the provisions of this Agreement will
not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to
loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of under, (i) Purchaser's certificate
of formation or limited liability company agreement, each as amended or
supplemented
43
to the date of this Agreement, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, reciprocal easement agreement, lease
or other agreement, instrument, permit, concession, franchise or
license applicable to its properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any Laws applicable to Purchaser or its properties or
assets. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority
is required by or with respect to Purchaser in connection with the
execution and delivery of this Agreement by Purchaser or the
consummation by Purchaser of any of the transactions contemplated by
this Agreement except for (i) such filings as may be required in
connection with the payment of any transfer and gains Taxes and (ii)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings (A) as may be required under federal, state
or local environmental Laws, or (B) which, if not obtained or made,
would not prevent or delay in any material respect the consummation of
any of the transactions contemplated by this Agreement.
4.3 Financial Capacity of Purchaser. Purchaser has the financial capacity
-------------------------------
to pay the Merger Consideration and complete the transactions contemplated by
this Agreement. Purchaser has provided to Lodging a true and correct copy of its
loan agreement with Bear Xxxxxxx Funding, Inc., including all exhibits,
schedules or amendments thereto (the "Financing Agreement") relating to the
-------------------
financing required for the transactions contemplated by this Agreement.
Following the consummation of the transactions contemplated by this Agreement,
Purchaser shall have a net worth (as such term is defined in the HPT Lease) in
excess of $250,000,000 and shall provide written evidence of such prospective
net worth at or prior to Closing to HPT and Lodging.
4.4 Litigation. Purchaser has not received any written notices of and no
----------
action or proceeding is pending or, to Purchaser's Knowledge, threatened against
Purchaser in any court or before any arbitrator or before any Governmental
Authority which (a) questions the validity or enforceability of this Agreement
or any action to be taken pursuant hereto or contemplated hereby, or (b) would
materially and adversely affect the ability of Purchaser to perform its
obligations hereunder, or under any document to be delivered pursuant hereto.
4.5 Confidentiality. To Purchaser's Knowledge, Purchaser is in full
---------------
compliance with the terms of the Confidentiality Agreement. Purchaser agrees
that any information concerning the Company or any of the Company Subsidiaries
or the Acquired Assets disclosed or delivered to Purchaser in connection with
this transaction shall be deemed to be Evaluation Material pursuant to the terms
of the Confidentiality Agreement and shall be subject to the confidentiality
provisions and other covenants contained in the Confidentiality Agreement with
respect to such information. The provisions of this Section 4.5 shall survive
-----------
the termination of this Agreement.
4.6 Brokers. Purchaser has not retained any broker or finder in connection
-------
with any of the transactions contemplated by this Agreement other than Bear
Xxxxxxx & Co. whose fees shall be paid by Purchaser or its Affiliates pursuant
to a separate agreement.
44
4.7 Required Stockholder Approvals. No votes of the holders of any class
------------------------------
or series of shares of Purchaser capital stock is necessary or required under
this Agreement or under applicable Law to approve the transactions contemplated
hereby.
4.8 Tax Matters. Purchaser is an entity taxable as a partnership for U.S.
-----------
federal income tax purposes. Purchaser has no current plan or intention to (i)
transfer any interests in Purchaser that would constitute a change of control of
Purchaser (within the meaning set forth in Section 5.5(b)), (ii) cause Purchaser
---------------
to become taxable as a corporation, (iii) transfer the interests in either
Homestead Management or HVI(2), or (iv) transfer more than an insubstantial
portion of the assets acquired in the Merger or any one of the Merging
Subsidiary Mergers to an Affiliate of the Purchaser taxable as a corporation (or
to a partnership or disregarded entity owned by an Affiliate of Purchaser
taxable as a corporation).
ARTICLE V
COVENANTS
5.1 Transfer of Excluded Assets. At or prior to Closing, all Excluded
---------------------------
Assets shall be transferred to Lodging or its designee at Lodging's expense.
Purchaser shall not be entitled to any compensation for the Excluded Assets.
Lodging shall have the right to remove any Excluded Assets from the Company
Properties in a manner which does not disrupt or impair the operations of the
Company. Purchaser may, at its option, continue to use the leased office space
of the Company in El Paso, Texas for a period not to exceed 120 days after the
Closing and shall pay sublease rent to Lodging for such space on a straight
pass-through, per diem basis. If Purchaser elects not to use such space, it
shall vacate such premises within 2 Business Days following the Closing.
5.2 Reasonable Inspection After Closing. Following the Closing, Purchaser
-----------------------------------
shall afford Lodging and its agents reasonable access to the Company's and the
Company Subsidiaries' books of account, financial and other records,
information, employees and auditors to the extent such items and contact with
such persons related to the Acquired Assets or employees of the Company or the
Company Subsidiaries prior to the Closing and to the extent necessary in
connection with any audit or any other reasonable business purpose relating to
the assets or liabilities of the Company or the Company Subsidiaries or
employees of the Company or the Company Subsidiaries; provided that any such
access by Lodging shall not unreasonably interfere with the conduct of
Purchaser's business. The provisions of this Section 5.2 shall survive the
-----------
Closing.
5.3 Other Action. If, at any time after the Closing Date, any further
------------
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of Purchaser, the Company and Lodging shall
take all such necessary action. The provisions of this Section 5.3 shall survive
-----------
the Closing.
5.4 Publicity. Following the execution of this Agreement, the parties
---------
hereto agree to consult with each other, and use commercially reasonable efforts
to agree upon the text of any press release relating to the matters contemplated
by this Agreement, before issuing any such press release or otherwise making any
filings with any federal or state governmental or
45
regulatory agency or with any national securities exchange or automated
quotation system with respect thereto.
5.5 Tax Covenants.
-------------
(a) The parties acknowledge that the Merger and each of the Merging
Subsidiary Mergers will be treated for federal, state and local income or
franchise tax purposes as a taxable sale of assets by the Company or the
Merging Subsidiary, as the case may be, to Purchaser, followed
immediately by a deemed liquidation of the transferor, in the order
prescribed in this Agreement, and agree to report the Merger and each
Subsidiary Merger consistently with such characterization for income
or franchise tax purposes. Income, gains, losses or deductions
attributable to such asset sales will be included in the Pre-Closing
Tax Period.
(b) Purchaser shall (i) continue as an entity taxable as a
partnership, and (ii) shall not transfer more than an insubstantial
portion of the assets acquired in the Merger or any one of the Merging
Subsidiary Mergers to any Affiliate of Purchaser taxable as a
corporation (or to a partnership or disregarded entity owned by an
Affiliate of Purchaser taxable as a corporation), in each case, during
the period that expires upon the earlier of (i) the date which is 9
months after the Closing and (ii) the date of any change in control of
Purchaser. A "change of control" for purposes of this provision and
Section 4.8 means a transfer to an unaffiliated party of more than 51
-----------
percent of voting power and more than 51 percent of the equity value of
Purchaser. Purchaser shall, until the earlier to occur of (i) the 12
month anniversary of the Closing or (ii) the sale or other disposition
to a Person which is not an Affiliate of Purchaser of all of its
interest in Homestead Management or HVI(2), as applicable, cause each of
Homestead Management and HVI(2) to be treated as a single member limited
liability company disregarded as an entity separate from its owner for
federal income tax purposes.
(c) Any Tax sharing, indemnity, allocation or other similar agreement
currently in effect among the Parent Group and the Company or any of the
Company Subsidiaries shall terminate effective immediately prior to the
Closing Date and there shall be no further liability of the Company, the
Company Subsidiaries (or any successors of them) or Lodging, Parent, or
the Parent Group, or any Affiliate of any of them, under any such
agreements.
(d) Lodging shall prepare and duly file (in a manner consistent with
past practice) all required Tax Returns for the Company and the Company
Subsidiaries for all Pre-Closing Tax Periods, including, without
limitation, for those jurisdictions and Tax authorities that permit or
require a short period Tax Return, for the period ending on the Closing
Date. Lodging has either paid, or shall pay or cause to be paid (or with
respect to sales, occupancy and property Taxes referenced in Schedule
--------
1.1(g) (excluding sales taxes which are Transaction Taxes), has provided
------
or shall provide adequate accruals, which accruals are reflected as a
line item in the calculation of Net Tangible Liability for purposes of
determining the Merger Consideration), all Taxes accruing with respect
to the operations of, or imposed on, the Company or any
46
Company Subsidiary for any Pre-Closing Tax Period. Purchaser or an
Affiliate of Purchaser shall prepare and duly file, or cause the
Company Subsidiaries or their successors to prepare and duly file, all
required Tax Returns for the business and operations of the Company,
the Company Subsidiaries or their respective successors for all
periods ending after the Closing Date, provided that with respect to
any Tax Return for a Straddle Period (as defined below), Purchaser
shall prepare the Tax Return consistent with past practice. Purchaser
shall pay or cause to be paid all Taxes that accrue with respect to
the operations of, or imposed on, the Company, the Company
Subsidiaries or their respective successors for such periods. With
respect to any taxable period commencing before the Closing Date and
ending after the Closing Date (a "Straddle Period"), Lodging shall
---------------
pay, or cause to be paid (or with respect to sales, occupancy or
property Taxes referenced in Schedule 1.1(g) (excluding sales taxes
---------------
which are Transaction Taxes), has provided or shall provide adequate
accruals, which accruals are reflected as a line item in the
calculation of Net Tangible Liability for purposes of determining the
Merger Consideration), to the Company or the relevant Company
Subsidiary, or successors of either, as the case may be, all Taxes of
the Company and the Company Subsidiaries attributable to the portion
of the Straddle Period prior to and including the Closing Date. For
purposes of this Agreement, the portion of any Tax that is
attributable to the portion of the Straddle Period prior to and
including the Closing Date, shall be (i) in the case of a Tax that is
not based on net income, gross income, premiums or gross receipts
(including, but not limited to, a property Tax), the total amount of
such Tax for the period in question multiplied by a fraction, the
numerator of which is the number of days in the Straddle Period prior
to and including the Closing Date, and the denominator of which is the
total number of days in such Straddle Period, and (ii) in the case of
a Tax that is based on net income, gross income, premiums or gross
receipts, the Tax that would be due with respect to the portion of the
Straddle Period prior to and including the Closing Date if such
portion were a separate taxable period, except that exemptions,
allowances, deductions or credits that are calculated on an annual
basis (such as the deduction for depreciation or capital allowances)
shall be apportioned on a per diem basis. Any Taxes, penalties or
interest imposed upon, or attributable to the operations of, the
Company, the Company Subsidiaries or their successors payable as a
result of an audit of any Tax Return shall be deemed to have accrued
in the period to which such Taxes, penalties or interest are
attributable.
(e) Purchaser, Parent and Lodging shall cooperate fully and shall
cause their respective Affiliates and representatives to cooperate
with each other in connection with (i) the preparation and filing of
any Tax Returns with respect to the Company, the Company Subsidiaries
or their successors and (ii) any audit or other examination by any
Governmental Authority of the Tax Returns referred to in clause (i).
Such cooperation shall include, without limitation, the furnishing or
making available of records, books of account or other materials of
the Company, the Company Subsidiaries or their successors necessary or
helpful for the defense against assertions of any Governmental
Authority as to any Tax Returns which include the business and
operations of the Company, the Company Subsidiaries or their
successors. Whenever any Governmental Authority asserts a claim, makes
an assessment or otherwise disputes the amount of Taxes for a
Pre-Closing Tax Period, Purchaser or its Affiliates
47
shall, if informed in writing of such an assertion, inform
Lodging as soon as reasonably practical, but in any event within 15
Business Days of being so informed, and Lodging shall have the right
to control any resulting proceedings and to determine whether and when
to settle any such claim, assessment or dispute to the extent such
proceedings or determinations affect the amount of Taxes for which
Lodging is or may be liable under this Agreement; provided, however,
that failure to inform Lodging in accordance with this provision shall
not affect Purchaser's right to indemnification hereunder unless, and
to the extent that, such failure materially impairs the ability of
Lodging to defend against such assertion; and provided, further,
however, that Purchaser shall have the right to consent, which consent
shall not be unreasonably withheld or delayed, to any settlement to
the extent such proceedings or settlement could materially affect the
amount of Taxes imposed on the Company, any Company Subsidiary or any
successor for any Straddle Period or any period beginning after the
Closing. Whenever any Governmental Authority asserts a claim, makes an
assessment or otherwise disputes the amount of Taxes for a Straddle
Period or period beginning after the Closing, Purchaser shall have the
right to control any resulting proceedings and to determine whether
and when to settle any such claim, assessment or dispute; provided,
however, that Lodging shall have the right to consent, which consent
shall not be unreasonably withheld or delayed, to any settlement to
the extent such proceedings or settlement could materially affect the
amount of Taxes imposed on the Company or any Company Subsidiary for
any Pre-Closing Tax Period or Straddle Period.
(f) Except with respect to Transaction Taxes allocated to
Purchaser under Section 11.1 below, Lodging shall indemnify and hold
------------
Purchaser, the Company and the Company Subsidiaries harmless on an
actual after-tax basis from any Losses of Purchaser, the Company, the
Company Subsidiaries or their successors by reason of or resulting,
directly or indirectly, from (i) any and all Taxes imposed upon, or
with respect to the operations of, the Company or the Company
Subsidiaries (A) with respect to any Pre-Closing Tax Period, and (B)
with respect to any Straddle Period, but only with respect to Taxes
apportioned under Section 5.5(d) to the portion of such Straddle
--------------
Period deemed to end on the Closing Date; (ii) the breach of any Tax
Warranty or Tax Covenant (without duplication); and (iii) liability
under Treas. Reg. 1.1502-6 (or any similar provision under state,
local or foreign Law); provided, however, that Lodging shall be
required to make an indemnification with respect to property Taxes
only to the extent that the amount thereof exceeds the amounts accrued
for property Taxes included in the computation of Net Tangible
Liability for purposes of determining the Merger Consideration (and
not previously taken into account in determining the amount of
Lodging's obligations under this Section 5.5). Any Taxes, penalties or
-----------
interest attributable to the operations of the Company and the Company
Subsidiaries payable as a result of an audit of any Tax Return shall
be deemed to have accrued in the period to which such Taxes, penalties
or interest are attributable.
(g) Except with respect to Transaction Taxes allocated to
Lodging under Section 11.1 below, Purchaser shall indemnify and hold
------------
Lodging and the Parent Group harmless on an actual after-tax basis
from any Losses of Lodging and the
48
Parent Group by reason of or resulting, directly or indirectly,
from (i) any and all Taxes imposed upon, or with respect to the
operations of, the Company or the Company Subsidiaries for (A) any Tax
period beginning after the Closing Date and (B) any Straddle Period,
but only with respect to the portion of the Straddle Period deemed to
begin on the day after the Closing Date in the manner provided in
Section 5.5(d); (ii) breach of any Tax Warranty or Tax Covenant
--------------
(without duplication), and (iii) any and all Taxes imposed upon
Lodging or the Parent Group by reason of any transaction involving the
Company, the Company Subsidiaries or successors thereto, not in the
ordinary course of business occurring on the Closing Date after the
Closing.
(h) If either Lodging or Purchaser disagrees as to the amount of
Taxes for which it may be liable under this Agreement, the parties
shall promptly consult each other to resolve such dispute following
the receipt of written notice from either party or begin such
consultation (the "Consultation Notice"). If any such point of
-------------------
disagreement cannot be resolved within 60 days of the date of the
Consultation Notice, Lodging and Purchaser shall, within 10 days after
such period, jointly select a nationally recognized independent public
accounting or law firm which has not, except pursuant to this Section
-------
5.5(h), performed any services since January 1, 1999 for Lodging or
-----
Purchaser or any of their respective Affiliates, to act as an
arbitrator to resolve, within 60 days after its selection, all points
of disagreement concerning Tax matters with respect to this Agreement
and presented to such firm at the time of its selection. If the
parties cannot agree on the selection of an accounting or law firm
within such ten-day period, they shall cause their respective
accounting firms to select such firm within 5 Business Days of the end
of such ten-day period. Any such resolution shall be conclusive and
binding on Lodging and Purchaser. The fees of such firm shall be paid
by the party whose proposed final adjustment is furthest in dollar
amount from the final determination of the accounting or law firm.
Lodging and Purchaser shall (and shall cause their respective
Affiliates to) provide to such firm full cooperation. Such firm shall
be instructed to reach its conclusion regarding the dispute within 60
days of its selection.
(i) Notwithstanding any other provision of this Agreement, the
provisions of this Agreement relating to Taxes shall survive until the
Tax Statute of Limitations Date. Notwithstanding any other provision
of this Agreement, in case of conflict, the provisions of this Section
-------
5.5 shall govern with respect to Taxes.
---
(j) Except with respect to Transaction Taxes allocated to
Purchaser under Section 11.1 below, Lodging shall be entitled to any
------------
and all refunds or rebates received relating to Taxes incurred or paid
with respect to the Company or any Company Subsidiary (i) with respect
to the Pre-Closing Tax Period and (ii) with respect to the portion of
any Straddle Period deemed to end on the Closing Date. Except with
respect to Transaction Taxes allocated to Lodging under Section 11.1
------------
below, Purchaser shall be entitled to all refunds or rebates relating
to Taxes incurred or paid with respect to the Company, any Company
Subsidiary or any successor after the Closing with respect to (i) any
taxable period of the Company, any Company Subsidiary or any successor
beginning on or after the day after the Closing Date and
49
(ii) any portion of any Straddle Period deemed to begin on the day
after the Closing Date.
(k) Lodging shall be responsible for and shall promptly pay the
amount of any recapture of the abatement for all ad valorem taxes,
whether expressed as a recapture of past tax abatements, additional
Taxes or otherwise, including any applicable penalty or interest
(other than penalty or interest accruing by reason of Purchaser's
delay in or failure to promptly notify Lodging of any such assessment
received by Purchaser or to promptly pay over to any Governmental
Authority amounts received from Lodging under this paragraph), with
respect to the ad valorem tax periods before the Closing Date and the
portion of the current ad valorem tax period ending on the Closing
Date incurred by reason of the KC Homestead Merger or the transfer at
Closing of the Company Property owned by KC Homestead to an Affiliate
of Purchaser. Such amounts shall not be treated as Transaction Taxes
and shall be in addition to any Transaction Taxes for which Lodging is
liable pursuant to Section 11.1 hereof.
------------
5.6 ERISA/Employee Benefits.
-----------------------
(a) Immediately prior to the Closing, Lodging shall assume or
retain sponsorship of, and any and all liabilities and obligations
under, (i) all Company Benefit Plans (other than (A) the Company's
401(k) Plan, the Company's Nonqualified Savings Plan and the Company's
Flexible Spending Account Plan, and (B) liabilities and obligations
under any Change in Control Agreements or severance policies to the
extent covering employees of the Company and any Company Subsidiary
who are not in the Terminated Group and who are employed by Purchaser
after the Effective Time), including, without limitation, obligations
under the Company's 1999 Long-Term Incentive Plan, 1996 Long-Term
Incentive Plan, the Separation Agreement with Xxxxx X. Xxxxxxxx,
Company Stock Options and Company Stock Rights, and all other equity
incentive plans and all stock option agreements to which Lodging, the
Company and/or the Company Subsidiaries are parties, and (ii)
liabilities and obligations under any indemnification agreements with
current or former employees, officers and directors of the Company and
the Company Subsidiaries, but only for obligations accruing prior to
and including the Closing.
(b) Effective immediately prior to Closing, each Company Stock
Option and each Company Stock Right shall be cancelled as described in
Section 3.11(g) of the Company Disclosure Schedule.
---------------
5.7 Admission of BRE Limited Partner. Effective immediately prior to
--------------------------------
the Effective Time, the Company shall cause a Person selected by Purchaser to be
admitted as a special limited partner (the "BRE Limited Partner") to each of PTR
-------------------
LP and Atlantic LP (collectively, the "Homestead Partnerships"). The BRE Limited
----------------------
Partner admitted to the Homestead Partnerships shall have no interest in the
profits, losses and capital of the Homestead Partnerships and shall have no
right to receive any distributions from the Homestead Partnerships. Pursuant to
Section 17-301(d) of the Delaware Revised Uniform Limited Partnership Act, the
BRE Limited Partner shall not be required to make any contributions to the
Homestead Partnerships.
50
5.8 Las Vegas Lease. Effective immediately prior to the Effective Time,
---------------
the Company shall execute and deliver a recordable assignment and assumption
agreement of the Las Vegas Lease in the form attached hereto as Exhibit G,
---------
assigning the Company's rights and obligations under the Las Vegas Lease to
BRE/HV or another Affiliate designated by Purchaser in a written notice to the
Company.
5.9 HVI(2) Note. Effective as of the Effective Time, the Company shall
-----------
cause the HVI(2) Note to be cancelled and it shall be replaced by a note from an
Affiliate of Purchaser.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under Article II of this Agreement are subject
----------
to the satisfaction or waiver by Purchaser of the following conditions precedent
on or before the Closing Date:
6.1 Payoff of Loans. Lodging and Parent shall have paid, or caused to be
---------------
paid, all outstanding amounts under the Third Amended and Restated Credit
Agreement, dated as of April 27, 2001, by and between the Company and
Commerzbank AG, together with all outstanding amounts under any and all other
indebtedness for borrowed money incurred by Lodging, the Company or the Company
Subsidiaries or for which any of them are liable or which is secured by any of
their assets.
6.2 Documents. Purchaser shall have received all of the agreements,
---------
documents and items specified in Section 9.2.
-----------
6.3 No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any Governmental
Authority of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect.
6.4 Transfer of Excluded Assets. The transfer of the Excluded Assets as
---------------------------
set forth in Section 5.1 shall have been completed.
-----------
6.5 FIRPTA Certificate. Parent shall have provided (or cause to be
------------------
provided) to Purchaser a duly executed certificate complying with the
requirements of Treas. Reg. 1.1445-2(b) to the effect that Purchaser is not
required to withhold from the Merger Consideration or the Subsidiary Merger
Consideration under Section 1445 of the Code.
6.6 HPT Estoppel. HPT shall have executed and delivered to the Company the
------------
HPT Estoppel.
6.7 Las Vegas Estoppel. The ground lessor under the Las Vegas Lease or
------------------
Parent shall have executed and delivered the Las Vegas Estoppel.
51
6.8 Title to Company Properties. Title to the Company Properties shall be
---------------------------
vested in the Company or the Company Subsidiaries, as applicable, free and clear
of all Liens other than Permitted Title Exceptions.
6.9 HPT Assumption. HPT and Purchaser shall have duly entered into and
--------------
executed the HPT Assumption.
6.10 HVI(2) Note. The Company shall have caused the HVI(2) Note to be
-----------
cancelled effective as of the Effective Time.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company and the Company Subsidiaries under Article
-------
II of this Agreement are subject to the satisfaction or waiver by the Company of
--
the following conditions precedent on or before the Closing Date:
7.1 Documents. The Company shall have received all of the agreements,
---------
documents and items specified in Section 9.3.
-----------
7.2 No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any Governmental
Authority of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect.
7.3 HPT Assumption. HPT and Purchaser shall have duly entered into and
--------------
executed the HPT Assumption.
ARTICLE VIII
MERGER CONSIDERATION ADJUSTMENTS
Merger Consideration adjustments shall be made as of the Closing Date as
set forth in this Article VIII.
------------
8.1 Determination of Net Tangible Liability. Lodging and Purchaser have
---------------------------------------
prepared a schedule (the "Closing Schedule") in accordance with Schedule 1.1(g),
---------------- ---------------
setting forth their mutual good faith estimate of the Net Tangible Liability as
of the Closing. Lodging has delivered a copy thereof to Purchaser and has
provided to Purchaser a detailed listing of all assets and liabilities reflected
thereon. Within 90 days after the Closing Date, Purchaser shall provide to
Lodging a revised Closing Schedule (the "Revised Closing Schedule") setting
------------------------
forth its revised calculation of Net Tangible Liability as of the Closing, and
shall include a written statement in reasonable detail of any changes to the
Closing Schedule (or a statement that Purchaser proposes no such changes). In
the event Purchaser proposes changes to the Closing Schedule, Purchaser shall
provide Lodging any information reasonably requested by Lodging in order to
confirm the Revised Closing Schedule. In the event that Lodging does not agree
with the Revised Closing Schedule (or with Purchaser's proposal that no changes
be made to the Closing Schedule) and
52
the parties cannot agree in good faith to the calculation of Net Tangible
Liability set forth in the Revised Closing Schedule (or otherwise proposed by
Lodging in the event Purchaser proposes no changes to such Schedule) within 30
days after delivery by Purchaser of the Revised Closing Schedule, the items not
agreed to shall be so determined by a nationally recognized firm of independent
public accountants mutually agreed upon by the parties. Each party shall submit
to the accounting firm the dollar amount of its proposed adjustment, if any, to
Net Tangible Liability as reflected on the Closing Schedule, and the fees and
expenses of such firm shall be paid by the party whose proposed final adjustment
is furthest in dollar amount from the final determination of the accounting
firm. In the event that, as finally determined, Net Tangible Liability is
greater than the Net Tangible Liability set forth on the Closing Schedule,
Lodging shall make a prompt payment in cash to Purchaser in the amount of such
difference. For purposes of determining Net Tangible Liability, any receivable
which is more than 60 days past due shall be deemed uncollectible and shall not
be included in the calculation of Net Tangible Liability; provided that
Purchaser shall not act to compromise, discount or otherwise impair the
collectibility of any such receivable and, provided further, that Purchaser
shall have no affirmative obligation to collect any such receivable. Purchaser
shall promptly remit to Lodging any such receivable actually collected. Any
receivable used in the calculation of Net Tangible Liability which becomes more
than 60 days past due may be assigned by Purchaser to Lodging at Purchaser's
option, in which case Lodging shall immediately remit to Purchaser the full
amount of such assigned receivable. For purposes of calculating the Net Tangible
Liability, (i) the liability of the HPT Lease shall be deemed to be $134,600,000
without further adjustment or modification, (ii) any security deposit under the
HPT Lease shall be excluded as an asset (except that the HPT FF&E Reserve shall
be included as an asset) and (iii) liabilities set forth on Schedule 1.1(g)
---------------
shall be calculated consistent with the most recent Financial Statements.
ARTICLE IX
CLOSING
9.1 Closing. The Closing shall take place at the offices of Xxxxxxx
-------
Thacher & Xxxxxxxx, New York, New York at 10:00 a.m. on the Closing Date.
9.2 Deliveries by Lodging. At the Closing, in addition to any other
---------------------
documents or agreements required under this Agreement, Lodging and the Company
shall deliver to Purchaser the following:
(a) Certificates evidencing all of the Shares, which certificates
shall be duly endorsed in blank or accompanied by duly executed stock
powers, with all signatures guaranteed;
(b) Certificates evidencing all of the outstanding securities of the
Company Subsidiaries;
(c) The resignations of the directors of the Company and the Company
Subsidiaries;
53
(d) A certificate of the secretary or equivalent Person (a
"Secretary") certifying (i) resolutions of the board of directors of the
---------
Company, the Merging Subsidiaries and Lodging approving and authorizing the
execution, delivery and performance of this Agreement and the agreements
related hereto and the consummation of the transactions contemplated
hereby, and (ii) the articles of incorporation (or equivalent document) and
bylaws (or equivalent document) of Lodging, the Company, and the Merging
Subsidiaries;
(e) Evidence that the Parent Mortgage Loans and the Parent Mortgages
have been contributed to the Company;
(f) Evidence of the payoff of the loan identified in Section 6.1 from
-----------
Commerzbank AG, or any other applicable lender referred to in Section 6.1,
-----------
and the commitment by Commerzbank AG, or other applicable lenders to
release all Liens securing any such loan(s) satisfactory to the Title
Company in order to issue the New Title Policies without exception
therefor;
(g) Legal opinions from the Company's counsel as to due incorporation,
due authority, execution and delivery as to Parent, Lodging, the Company
and the Company Subsidiaries;
(h) Affidavits by Lodging with respect to debts, Liens and parties in
possession and nonimputation, in the form delivered to the Title Company in
connection with the issuance of any New Title Policies; provided that
Lodging may make appropriate disclosures for existing title and survey
facts, and Lodging's obligations under such affidavits to pay off or
indemnify over Liens shall be limited to those obligations necessary to
insure without exception for, or to effectively endorse against (without
expense to Purchaser), any Monetary Title Encumbrances or any exception
arising by reason of Lodging's breach of its covenant in Section 2.4(c);
--------------
(i) The Protection of Business Agreement, in substantially the form
attached hereto as Exhibit B, duly executed by Parent;
---------
(j) Certificates of Good Standing of the Company and each of the
Company Subsidiaries (issued by the appropriate Governmental Authority in
such entity's state of incorporation and in each jurisdiction where
qualified to conduct business as a foreign business entity), dated as of a
date not earlier than 10 days prior to the Closing Date;
(k) The FIRPTA Certificate described in Section 6.5;
-----------
(l) An Assignment and Assumption Agreement with respect to the Las
Vegas Lease, duly executed by the Company and in the form of Exhibit G; and
---------
(m) Evidence that the HVI(2) Note has been cancelled.
54
9.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver
-----------------------
to Lodging the following:
(a) The Subsidiary Merger Consideration payable to the Company,
and the Company Merger Consideration payable to Lodging, at the Closing
pursuant to Section 2.2 and the funding provisions of the Escrow
-----------
Agreement;
(b) A certificate of Purchaser's secretary, certifying (i) the
resolutions of the manager or managing member of Purchaser approving
this Agreement and the agreements related hereto and the transactions
contemplated hereby, and (ii) the certificate of formation and the
limited liability company agreement of Purchaser;
(c) A certificate of Holding's secretary, certifying (i) the
resolutions of the manager or managing member of Holding approving the
execution of the Holding Note, the Blackstone Pledge Agreement, the
Holding Pledge Agreement, and the Intercreditor Agreement and the
consummation of the transactions contemplated thereby and (ii) the
certificate of formation and limited liability company agreement of each
of Holding and Blackstone;
(d) Legal opinions from Purchaser's and Holding's counsel as to
due organization, due authority, execution and delivery as to Purchaser,
Holding and Blackstone and, solely with respect to the Holding Note, the
absence of conflicts with applicable Law or Holding's certificate of
formation and limited liability agreement;
(e) Certificates of Good Standing of Purchaser, Holding,
Blackstone and BRE Properties (issued by the appropriate Governmental
Authority in such entity's state of organization and in each
jurisdiction where qualified to conduct business as a foreign business
entity), dated as of a date not earlier than ten (10) days prior to the
Closing Date;
(f) The Holding Note, duly executed by Holding;
(g) The Blackstone Pledge Agreement, duly executed by Blackstone;
(h) The Holding Pledge Agreement, duly executed by Holding;
(i) UCC financing statements related to the Holding Pledge
Agreement, in form and substance reasonably acceptable to Lodging;
(j) UCC financing statements related to the Blackstone Pledge
Agreement, in form and substance reasonably acceptable to Lodging; and
(k) An Assignment and Assumption Agreement with respect to the
Las Vegas Lease, duly executed by BRE Properties (or another Affiliate
of Purchaser) and in the form of Exhibit G.
----------
55
ARTICLE X
INDEMNIFICATION
10.1 Survival. The covenants, obligations, including indemnification,
--------
representations and warranties of the parties hereto contained herein or in any
document delivered at Closing shall survive the Closing for a period of 6
months, except that (a) the representations and warranties contained in Sections
--------
3.8 (other than paragraphs (h), (i) and (k) of Section 3.8), 3.9 and 3.10 shall
--- ----------- --- ----
not survive the Closing (except to the extent Lodging or the Company has made
any intentional misrepresentation in any such representation or warranty), (b)
Tax Warranties and Tax Covenants shall survive until the Tax Statute of
Limitations Date, (c) the indemnities for employee claims referred to in Section
-------
10.2(c) or Section 10.3(c) shall survive the Closing for a period of 18 months,
------ --------------
other than indemnities for employee claims referred to in Section 10.2(c) with
---------------
respect to the Terminated Group; and (d) any indemnity obligation for claims
under Section 3.3, Section 3.5, Section 5.6, indemnities for employee claims
----------- ----------- -----------
referred to in Section 10.2(c) with respect to the Terminated Group, or
---------------
indemnity claims under Section 10.2(d) shall survive until the date which is 90
---------------
days after the expiration of the statute of limitations applicable to the
subject matter of that claim (each, the applicable "Limitation Period").
-----------------
10.2 Indemnification by Lodging. Lodging agrees to indemnify each of the
--------------------------
Purchaser Indemnified Parties against, and agrees to hold each of them harmless
from (on an after-Tax basis), any and all Losses incurred or suffered by them
and discovered during the applicable Limitation Period relating to or arising
out of or in connection with any of the following (provided, however, that a
notice of the Purchaser Indemnified Party's claim shall have been given to
Lodging not later than the close of business on the last day of the applicable
Limitation Period):
(a) any breach of or any inaccuracy in any representation or
warranty made by Lodging or the Company in this Agreement or any document
delivered at the Closing, subject to Section 10.1; or
------------
(b) any breach of or failure by the Company, any Company Subsidiary
or Lodging to perform any covenant or obligation of Lodging set out or
contemplated in this Agreement or any document delivered at the Closing; or
(c) any claims, causes of action, judgments, damages, penalties and
liabilities (i) arising under or with respect to the Company Benefits Plans
(including, without limitation, liabilities under or with respect to
Company Stock Options and Company Stock Rights, but excluding (A) the
Company's 401(k) Plan, the Company's Nonqualified Savings Plan and the
Company's Flexible Spending Account Plan, and (B) liabilities under Change
in Control Agreements or severance policies to the extent covering
employees of the Company or the Company Subsidiaries who are not in the
Terminated Group and who are employed by Purchaser after the Effective Time
and excluding liabilities under any indemnification agreements with
employees, officers and directors of the Company and the Company
Subsidiaries for events occurring after the Closing, (ii) with respect to
any Controlled Group Liability, or (iii) asserted
56
by former or current employees, directors or consultants of the
Company or the Company Subsidiaries arising out of or related to any
act or failure to act, any transaction or any facts or circumstances
occurring on or prior to the Closing, including without limitation:
(A) the termination of such employees at or prior to the Closing; (B)
any alleged discrimination, breach of contract or other wrongful
termination claim arising out of or related to any act or failure to
act, any transaction or any facts or circumstances occurring on or
prior to Closing; and (C) any alleged right to workers' compensation
benefits, unemployment compensation, or statutory or contractual
severance arising out of or related to any act or failure to act, any
transaction or any facts or circumstances occurring on or prior to
Closing; for the avoidance of doubt, notwithstanding any other
provision of this Agreement, Purchaser shall have no liability or
obligation, and Lodging shall indemnify Purchaser and hold Purchaser
harmless from and against all liabilities and obligations with respect
to the Terminated Group; or
(d) any liabilities or obligations of the Company or any Company
Subsidiary of any kind or nature (including any liabilities required
by GAAP to be set forth on a consolidated balance sheet of the Company
or in the notes thereto as of the Closing), and any third party tort,
breach of contract or other litigation claims against the Company or
any Company Subsidiary) to any party other than Purchaser or its
Affiliates, to the extent arising out of or related to (i) any act or
failure to act, any transaction or any facts or circumstances
occurring on or prior to the Closing, which shall not include an
injury-causing act, failure to act or breach occurring after the
Closing, or (ii) any Excluded Asset or any other asset previously
owned by the Company or any Company Subsidiary and sold or otherwise
disposed of prior to the Closing, except, with respect to both clauses
(i) and (ii) above, (x) to the extent reflected in Net Tangible
Liability, or (y) to the extent covered by indemnities for employee
claims under Section 10.2(c).
--------------
10.3 Indemnification by Purchaser. Purchaser agrees to indemnify Lodging
----------------------------
and each of its respective Affiliates, officers, directors, employees, agents
and representatives against, and agrees to hold each of them harmless from (on
an after-Tax basis), any and all Losses incurred or suffered by them and
discovered during the applicable Limitation Period relating to or arising out of
or in connection with any of the following (provided, however, that a notice of
the claim by Lodging or one of its Affiliates shall have been given to Purchaser
not later than the close of business on the last day of the applicable
Limitation Period):
(a) any breach of or any inaccuracy in any representation or
warranty made by Purchaser in this Agreement or any document delivered
at the Closing; or
(b) any breach of or failure by Purchaser to perform any
covenant or obligation of Purchaser set out or contemplated in this
Agreement or any document delivered at the Closing; or
(c) any claims, causes of action, judgments, damages, penalties
and liabilities (i) arising under or with respect to Change in Control
Agreements or severance
57
policies to the extent covering employees of the Company or the
Company Subsidiaries who are not in the Terminated Group and who are
employed by Purchaser after the Effective Time or under any
indemnification agreements with employees, officers and directors of
the Company and the Company Subsidiaries for events occurring after
the Closing; or (ii) arising under or with respect to the Company's
401(k) Plan, the Company's Nonqualified Savings Plan and the Company's
Flexible Spending Account Plan; or (iii) asserted by any employees of
the Company or any Company Subsidiary who are not in the Terminated
Group and who are employed by Purchaser after the Effective Time
arising out of or related to any act or failure to act, any
transaction, or any facts or circumstances to the extent (A) occurring
after the Closing or (B) undertaken or caused by Purchaser after the
Closing, including, without limitation, (1) the termination of any
employees of the Company or any Company Subsidiary subsequent to the
Closing; (2) Purchaser's failure to pay any supplemental unemployment
benefits, including separation allowances and severance benefits,
required to be paid to any employee of the Company or any Company
Subsidiary under any employment or change of control contract entered
into by the Company after the Closing; (3) any and all liability under
the WARN Act or any other applicable Law arising from events occurring
after the Closing; (4) without limitation, any and all liability
caused by any alleged discrimination, breach of contract or other
wrongful termination occurring after the Closing; (5) any alleged
right to workers' compensation benefits, unemployment compensation or
statutory or contractual severance arising out of events occurring
after the Closing; and (6) any payments due to employees of the
Company or any Company Subsidiary pursuant to any change in control or
other such agreements with the Company or the Company Subsidiaries
entered into after the Closing resulting from Purchaser's decision to
terminate any such employee subsequent to the Closing.
10.4 Notice of Third Party Claims; Assumption of Defense. The Indemnified
---------------------------------------------------
Person shall give notice as promptly as is reasonably practicable to the
Indemnifying Person (and, if the Indemnified Person is a Purchaser Indemnified
Party and the Escrow continues to be held by the Escrow Agent, the Escrow Agent)
of the assertion of any claim, or the commencement of any suit, action or
proceeding, by any Person not a party hereto in respect of which indemnity may
be sought under this Agreement; provided that the failure of the Indemnified
Person to give notice shall not relieve the Indemnifying Person of its
indemnification obligations under this Agreement except to the extent (if any)
that the Indemnifying Person shall have been prejudiced thereby. The
Indemnifying Person may, at its own expense, (a) participate in the defense of
any claim, suit, action or proceeding and (b) upon notice to the Indemnified
Person and the Indemnifying Person's delivering to the Indemnified Person a
written agreement that the Indemnified Person is entitled to indemnification
hereunder for all Losses arising out of such claim, suit, action or proceeding
and that the Indemnifying Person shall be liable for the entire amount of any
Loss, at any time during the course of any such claim, suit, action or
proceeding, assume the defense thereof; provided, however, that (i) the
Indemnifying Person's counsel is reasonably satisfactory to the Indemnified
Person, and (ii) the Indemnifying Person shall thereafter consult with the
Indemnified Person upon the Indemnified Person's reasonable request for such
consultation from time to time with respect to such claim, suit, action or
proceeding. If the Indemnifying Person assumes such defense, the Indemnified
Person shall have the right (but not the duty) to participate in the defense
thereof and to employ
58
counsel, at its own expense, separate from the counsel employed by the
Indemnifying Person. If, however, the Indemnified Person reasonably determines
in its judgment that representation by the Indemnifying Person's counsel of both
the Indemnifying Person and the Indemnified Person would present such counsel
with a conflict of interest, then such Indemnified Person may employ separate
counsel to represent or defend it in any such claim, action, suit or proceeding
and the Indemnifying Person shall pay the fees and disbursements of such
separate counsel. Whether or not the Indemnifying Person chooses to defend or
prosecute any such claim, suit, action or proceeding, all of the parties hereto
shall cooperate in the defense or prosecution thereof.
10.5 Settlement or Compromise. Any settlement or compromise made or
------------------------
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any such claim, suit, action or proceeding of the kind referred
to in Section 10.4 shall also be binding upon the Indemnifying Person or the
------------
Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise; provided, however, that no obligation,
restriction or Loss shall be imposed on the Indemnified Person as a result of
such settlement without its prior written consent. The Indemnified Person shall
give the Indemnifying Person at least 30 days' notice of any proposed settlement
or compromise of any claim, suit, action or proceeding it is defending, during
which time the Indemnifying Person may reject such proposed settlement or
compromise; provided, however, that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full and
complete liability and responsibility for such claim, suit, action or proceeding
and any and all Losses in connection therewith in excess of the amount of
unindemnifiable Losses which the Indemnified Person would have been obligated to
pay under the proposed settlement or compromise.
10.6 Failure of Indemnifying Person to Act. In the event that the
-------------------------------------
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
10.7 Indemnity Payments. The amount of any indemnity payable under
------------------
the terms of this Article X or Section 5.5 shall be treated by Purchaser,
--------- -----------
Lodging and the Company as an adjustment to the Merger Consideration, and shall
be calculated after giving effect to any proceeds received from insurance
policies covering the damage, loss, liability or expense that is the subject of
the claim for indemnity to the extent that the premiums for such coverage were
paid by the Indemnifying Person or any of its Affiliates.
10.8 Limitation on Liability. Following the Closing, Lodging's
-----------------------
liability for breach of any covenant, obligation, including indemnification,
representation or warranty shall be limited to claims (excluding (i) Taxes for
Pre-Closing Tax Periods and Straddle Periods as provided in Section 5.5 or any
-----------
claims relating to Tax matters which are the subject matter of Section 5.5, (ii)
-----------
employee claims as provided in Section 10.2(c), (iii) any claims made under
---------------
Section 10.2(d), (iv) breaches of Lodging's representations and warranties in
---------------
Sections 3.3 and 3.5, and (v) Lodging's obligations under Section 5.6 and to
------------ --- -----------
make any payment required under Section 8.1) in excess of $7,400,000 in the
-----------
aggregate. The aggregate liability of Lodging for claims arising out of such
covenants, obligations, representations and warranties shall not exceed
59
$74,000,000. Notwithstanding the immediately preceding sentence, no such
limitations shall apply to Lodging's obligation to indemnify the Purchaser
Indemnified Parties for (i) Taxes for Pre-Closing Tax Periods and Straddle
Periods as provided in Section 5.5 or any claims relating to Tax matters which
-----------
are the subject matter of Section 5.5, (ii) employee claims as provided in
-----------
Section 10.2(c), (iii) any claims made under Section 10.2(d), (iv) breaches of
--------------- ---------------
Lodging's representations and warranties in Sections 3.3 and 3.5, and (v)
------------ ---
Lodging's obligations under Section 5.6 and to make any payment required under
-----------
Section 8.1).
-----------
10.9 Limitation on Indemnification.
-----------------------------
(a) Any liabilities of the Company which are used in the
calculation of Net Tangible Liability shall not be subject to the
indemnification provisions of this Article X.
---------
(b) Any indemnification obligation of Lodging for breaches of
the representations and warranties set forth in Section 3.14 shall
------------
exclude breaches related to matters set forth in Sections 3.8, 3.9
------------ ---
and 3.10.
----
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Except as otherwise expressly provided herein, each
--------
party hereto shall bear its own expenses with respect to the transactions
contemplated hereby; provided, that (i) the expenses incurred by the Company
prior to or as of the Closing with respect to the transactions contemplated
hereby shall be paid by Lodging, and (ii) if Purchaser or the Company receives
any invoice for such expenses of the Company, Purchaser may pay such fees,
provided, however, that such payment shall, if not promptly reimbursed by
Lodging at Purchaser's request, constitute Losses recoverable under Section 10.2
------------
and such Losses shall not be subject to Section 10.8. Lodging shall pay all
------------
transfer, documentary, sales, use, real property transfer, stamp, registration
and other such Taxes and fees (including penalties and interest) incurred in
connection with transactions contemplated by this Agreement or in connection
with a one-time subsequent transfer on the Closing Date of all or any number of
the Acquired Assets to one or more Affiliates of Purchaser, whether imposed on
Lodging or the Company or on Purchaser or any Affiliates of Purchaser (the
"Transaction Taxes") to the extent the aggregate amount of Transaction Taxes
-----------------
does not exceed $3.5 million. Purchaser shall pay all Transaction Taxes, whether
imposed on Lodging or the Company or on Purchaser, to the extent the aggregate
amount thereof exceeds $3.5 million. Lodging shall be entitled to any and all
refunds or rebates received relating to Transaction Taxes to the extent such
rebate or refund reduces the aggregate amount of Transaction Taxes to less than
$3.5 million. Purchaser shall be entitled to all refunds or rebates relating to
Transaction Taxes to the extent such rebate or refund does not reduce the
aggregate amount of Transaction Taxes to less than $3.5 million. Following the
Closing, each of Purchaser and Lodging agree to notify the other party promptly
of any notice of entitlement to, or payment of, any rebate or refund due with
respect to the Company, any Company Subsidiary, the Acquired Assets or the
transactions contemplated hereby. The costs of title insurance insuring title to
the Company Properties under extended coverage policies (excluding any
endorsements) for values consistent with the price allocations agreed to
pursuant to Section 2.5
-----------
60
shall be shared equally by Lodging and Purchaser. The provisions of this Section
-------
11.1 shall survive the termination of this Agreement.
----
11.2 Amendment. This Agreement may be amended or supplemented only
---------
by an instrument in writing executed by the party against whom enforcement is
sought.
11.3 Notices. Any notice, request, instruction or other document to
-------
be given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a courier
service, or (b) on the date of transmission if sent by telex, facsimile or other
wire transmission so long as a copy is delivered by overnight courier the next
Business Day:
(a) If to Lodging, addressed as follows:
Security Capital Lodging Incorporated
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) If to the Company or any Company Subsidiary, addressed as
follows:
Homestead Village Incorporated
0000 Xxxxx Xxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
61
with a copy (which shall not constitute notice) to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
(c) If to Purchaser, addressed as follows:
c/o Blackstone Real Estate Acquisitions III L.L.C.
000 Xxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxx
Senior Managing Director
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.4 Waivers. The failure of a party hereto at any time or times to
-------
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
11.5 Counterparts. This Agreement may be executed in counterparts
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and/or by facsimile, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.6 Interpretation. The headings preceding the text of Articles and
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Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender herein shall
62
not limit any provision of this Agreement. The use of the terms "including" or
"include" shall in all cases herein mean "including, without limitation" or
"include, without limitation," respectively. Underscored references to Articles,
Sections, Subsections or Schedules shall refer to those portions of this
Agreement. Consummation of the transactions contemplated herein shall not be
deemed a waiver of a breach of or inaccuracy in any representation, warranty or
covenant or of any party's rights and remedies with regard thereto. No specific
representation, warranty or covenant contained herein shall limit the generality
or applicability of a more general representation, warranty or covenant
contained herein. A breach of or inaccuracy in any representation, warranty or
covenant shall not be affected by the fact that any more general or less general
representation, warranty or covenant was not also breached or inaccurate.
11.7 Applicable Law. This Agreement shall be governed by and
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construed and enforced in accordance with the internal Laws of the State of New
York without giving effect to the principles of conflicts of law thereof.
11.8 Assignment. Neither party may assign this Agreement without the
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prior written consent of the other, and any such prohibited assignment shall be
void. The foregoing notwithstanding, Purchaser may assign this Agreement to any
Affiliate of Purchaser or any lender to Purchaser or its Affiliates; provided
that any such successor assumes in writing and agrees to bound by the provisions
of this Agreement and the assignment does not require any consent or approval
under, or additional assignment or assumption of, the HPT Agreements. No
assignment shall relieve the assignor of any liability hereunder. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
respective legal representatives, successors, assigns, heirs, and devisees of
the parties.
11.9 No Third Party Beneficiaries. This Agreement is solely for the
----------------------------
benefit of the parties hereto, and no provision of this Agreement shall be
deemed to confer upon other third parties any remedy, claim, liability,
reimbursement, cause of action or other right.
11.10 Calculation of Time Periods. Unless otherwise specified, in
---------------------------
computing any period of time described herein, the day of the act or event after
which the designated period of time begins to run is not to be included and the
last day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday for national banks in New York, in which event
the period shall run until the end of the next day which is neither a Saturday,
Sunday or legal holiday. The last day of any period of time described herein
shall be deemed to end at 5:00 p.m., Eastern time.
11.11 Further Assurances. Upon the reasonable request of Purchaser,
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Lodging shall, on and after the Closing Date, execute and deliver to Purchaser
such other documents, releases, assignments and other instruments as may be
required to effectuate completely the transactions contemplated by this
Agreement and to otherwise carry out the purposes of this Agreement.
11.12 Severability. If any provision of this Agreement shall be held
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invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at
63
issue a valid, legal and enforceable provision as similar as possible to the
provision at issue.
11.13 Entire Understanding. This Agreement embodies the entire
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agreement between the parties and supersedes all prior agreements, arrangements
and understandings relating among the parties.
11.14 Construction. The parties acknowledge that the parties and their
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counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
BRE/HOMESTEAD VILLAGE L.L.C.
By: /s/ Xxxxxxxx Xxxx
------------------------------------------
Name: Xxxxxxxx Xxxx
Title: Senior Managing Director
SECURITY CAPITAL LODGING INCORPORATED
By: /s/ Xxxxxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxxxxx X. Xxxxx
Title: President
HOMESTEAD VILLAGE INCORPORATED
By: /s/ Xxxxx X. Xxxxx
------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
ATLANTIC HOMESTEAD VILLAGE (1) INCORPORATED
By: /s/ Xxxxx X. Xxxxx
------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
ATLANTIC HOMESTEAD VILLAGE (2) INCORPORATED
By: /s/ Xxxxx X. Xxxxx
------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
HOMESTEAD ALABAMA INCORPORATED
By: /s/ Xxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
K.C. HOMESTEAD VILLAGE REDEVELOPMENT INCORPORATED
By: /s/ Xxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
PTR HOMESTEAD VILLAGE (1) INCORPORATED
By: /s/ Xxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
PTR HOMESTEAD VILLAGE (2) INCORPORATED
By: /s/ Xxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
JOINDER OF ESCROW AGENT
The undersigned has executed this Joinder as Escrow Agent as of the
date first above written in order to confirm that it has received the Xxxxxxx
Money and shall hold it in escrow, and shall disburse the Xxxxxxx Money pursuant
to the provisions of Section 2.3 hereof.
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CHICAGO TITLE COMPANY
By: /s/ Xxxxx X. Xxxxx
-----------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
