-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DQPzYd1uHbaJJyySdZUif1x/ZfaQUXY8tS46Xv+bDXajk8qWe3F4sbPVQQywyB83 Vf3p09e3D1Sy0j95JmNZCg== 0000950103-97-000298.txt : 19970509 0000950103-97-000298.hdr.sgml : 19970509 ACCESSION NUMBER: 0000950103-97-000298 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19970508 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BRISTOL HOTEL CO CENTRAL INDEX KEY: 0001002115 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 752584227 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-48351 FILM NUMBER: 97598197 BUSINESS ADDRESS: STREET 1: 14285 MIDWAY RD STREET 2: STE 300 CITY: DALLAS STATE: TX ZIP: 75244 BUSINESS PHONE: 2147880001 MAIL ADDRESS: STREET 1: 14285 MIDWAY RD BRISTOL HOTEL CO STREET 2: STE 340 CITY: DALLAS STATE: TX ZIP: 75244 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HOLIDAY CORP CENTRAL INDEX KEY: 0000764898 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 621222192 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: THREE RAVINIA STREET 2: SUITE 2900 CITY: ATLANTA STATE: GA ZIP: 30346 MAIL ADDRESS: STREET 1: THREE RAVINIA STREET 2: SUITE 2900 CITY: ATLANTA STATE: GA ZIP: 30346 SC 13D 1 ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. __) BRISTOL HOTEL COMPANY (Name of Issuer) COMMON STOCK $.01 PAR VALUE (Title of Class of Securities) -------------- 110039104 (CUSIP Number) BASS PLC BASS AMERICA INC. HOLIDAY CORPORATION (Names of Persons Filing Statement) WILLIAM L. ROSOFF Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Tel. No.: (212) 450-4000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 28, 1997 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this statement because of Rule 13d-1(b)(3) or (4), check the following: [ ] ============================================================================== SCHEDULE 13D CUSIP No. 110039104 Page 2 of __ Pages - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON BASS PLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION UK NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 9,361,308 9 SOLE DISPOSITIVE POWER 10 SHARED DISPOSITIVE POWER 9,361,308 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 36.1% 14 TYPE OF REPORTING PERSON* CO SCHEDULE 13D CUSIP No. 110039104 Page 3 of __ Pages - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON BASS AMERICA INC. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION UK NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 6,970,022 9 SOLE DISPOSITIVE POWER 10 SHARED DISPOSITIVE POWER 6,970,022 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 26.9% 14 TYPE OF REPORTING PERSON* CO SCHEDULE 13D CUSIP No. 110039104 Page 4 of __ Pages - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON HOLIDAY CORPORATION 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION UK NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 2,391,386 9 SOLE DISPOSITIVE POWER 10 SHARED DISPOSITIVE POWER 2,391,386 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.2% 14 TYPE OF REPORTING PERSON* CO Item 1. Security and Issuer. The class of equity securities to which this statement relates is the Common Stock, $0.01 par value per share (the "Shares"), of Bristol Hotel Company, a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 14285 Midway Road, Suite 340, Dallas, Texas 75244. Item 2. Identity and Background. The name of the persons filing this statement are Holiday Corporation, a Delaware corporation ("HC"), Bass America, Inc., a Delaware corporation ("BAI") and Bass plc, an English public limited company ("Bass"). The address of the principal business and the principal office of HC is Three Ravinia Drive, Suite 2900, Atlanta, Georgia 30346. The name, business address, present principal occupation or employment, and citizenship of each director and executive officer of HC is set forth on Schedule A. The address of the principal business and the principal office of BAI is 1105 North Market Street, Suite 1046, Wilmington, Delaware 19801. The name, business address, present principal occupation or employment, and citizenship of each director and executive officer of BAI is set forth on Schedule B. The address of the principal business address and the principal office of Bass is 20 North Audley Street, London W1Y1WE. The name, business address, present principal occupation or employment, and citizenship of each director of Bass is set forth on Schedule C. Bass is a United Kingdom holding company that is the ultimate parent of HC and BAI. BAI provides financing to certain United States subsidiaries of Bass. HC licenses the trademarks known as "Holiday Inns" and "Crowne Plaza" and, prior to the merger referred to below, owned all the outstanding securities of Holiday Inns, Inc., a Tennessee corporation ("HII"). During the last five years, none of Bass, BAI or HC, nor any other person controlling Bass, BAI or HC nor, to the best of each of their knowledge, any of the persons listed on Schedules A, B and C attached hereto, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. In accordance with the terms and conditions of the Agreement and Plan of Merger, dated as of December 15, 1996, as amended by Amendment No. 1 thereto dated as of April 1, 1997, among HC, HII and Issuer (the "Merger Agreement"), HII was merged (the "Merger") with and into Issuer. HC received 2,391,286 Shares as consideration therefor and indebtedness of HII to BAI in the principal amount of $199,533,217 assumed by Issuer pursuant the Merger was exchanged immediately after the Merger for 6,970,022 Shares. A copy of the Agreement is attached hereto as Exhibit 1, which exhibit is incorporated herein by reference. Item 4. Purpose of Transaction. Each of Bass, HC and BAI has acquired the Shares for investment. None of Bass, HC or BAI has plans or proposals which relate to or would result in any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. (a)(i) HC has acquired and, for the purpose of Rule 13d-3 promulgated under the Exchange Act, beneficially owns 2,391,286 Shares, representing approximately 9.2% of the outstanding Shares of the Issuer; (a)(ii) BAI has acquired and, for the purpose of Rule 13d-3 promulgated under the Exchange Act, beneficially owns 6,970,022 Shares, representing approximately 26.9% of the outstanding Shares of the Issuer; and (a)(iii) Bass, for purposes of Rule 13d-3 promulagated under the Exchange Act, beneficially owns 9,361,308 Shares, representing approximately 36.1% of the outstanding Shares of the Issuer. Except as set forth in this Item 5, none of Bass, HC or BAI, nor any other person controlling, Bass, BAI or HC, nor, to the best of their knowledge, any persons named in Schedules A, B and C hereto owns beneficially any Shares. (b)(i) HC has shared power to vote and to dispose of 2,391,286 Shares. (b)(ii) BAI has shared power to vote and to dispose of 6,970,022 Shares. (b)(iii) Bass has shared power to vote and to dispose of 9,361,308 Shares. (c) None other than the transactions described in Item 3. (d) Inapplicable. (e) Inapplicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. A copy of the Merger Agreement is attached hereto as Exhibit 1 and incorporated herein by reference. A copy of the Stockholders' Agreement dated as of April 28, 1997 by and among United/Harvey Holdings, L.P., HC, BAI, Bass and Issuer is attached hereto as Exhibit 2 and incorporated herein by reference. Except for the Agreements referred to above, to the knowledge of Bass, BAI and HC, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the persons enumerated in Item 2, and any other person, with respect to any securities of the Issuer, including, but not limited to, transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits. Exhibit 1: Agreement and Plan of Merger dated as of December 15, 1996, as amended by Amendment No. 1 thereto dated as of April 1, 1997, among HC, HII and Issuer Exhibit 2: Stockholders' Agreement dated as of April 28, 1997 by and among United/Harvey Holdings, L.P., HC, BAI, Bass and Issuer. SIGNATURES After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: May 7, 1997 BASS AMERICA INCORPORATED By: /s/ Michael L. Goodson --------------------------------- Name: Michael L. Goodson Title: President After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: May 7, 1997 HOLIDAY CORPORATION By: /s/ Michael L. Goodson --------------------------------- Name: Michael L. Goodson Title: Vice President After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: May 7, 1997 BASS PLC By: /s/ Tony Portno --------------------------------- Name: Tony Portno Title: Director SCHEDULE A DIRECTORS AND EXECUTIVE OFFICERS OF BAI The name, business address, title, present principal occupation or employment of each of the directors and executive officers of BAI are set forth below. If no business address is given the director's or officer's business address is 1105 North Market Street, Suite 1046, Wilmington Delaware, 19801. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to BAI. Unless otherwise indicated, all of the persons listed below are citizens of the United States of America. Present Principal Occupation Including Name and Name and Business Address Address(1) of Employer - ------------------------- ----------------------------------------------- Directors Julian Hank Baumann...... Director, Vice President and Secretary and Director, Vice President and Secretary of Richards Layton & Finger Michael L. Goodson....... Director, Chairman of the Board of Directors, and President Anthony E. Stern......... Director, Treasurer, Vice President; British Citizen Present Principal Occupation Including Name Name and Business Address and Address(2) of Employer - ------------------------- ------------------------------------------- Executive Officers (Who Are Not Directors) David P. Fontello........ Assistant Secretary - ----------- (1) Same address as director's or officer's business address except where indicated. (2) Same address as director's or officer's business address except where indicated. SCHEDULE B DIRECTORS AND EXECUTIVE OFFICERS OF HC The name, business address, title, present principal occupation or employment of each of the directors and executive officers of HC are set forth below. If no business address is given the director's or officer's business address is Three Ravinia Drive, Suite 2900, Atlanta, GA 30346. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to HC. Unless otherwise indicated, all of the persons listed below are citizens of the United States of America. Present Principal Occupation Including Name and Name and Business Address Address(1) of Employer - ------------------------- ------------------------------------------------- Directors Thomas R. Oliver......... Director, Chairman, Chief Executive Officer, President Craig H. Hunt............ Director, President of Americas Franchise Division Martin J. Reavley........ Director, Executive Vice President and Chief Financial Officer; British Citizen Present Principal Occupation Including Name Name and Business Address and Address(2) of Employer - ------------------------- -------------------------------------------- Executive Officers (Who Are Not Directors) Robert D. Hill........... Executive Vice President, General Counsel and Secretary Michael J. Rumke......... Executive Vice President, Human Resources John T. Sweetwood........ Executive Vice President and Chief Marketing Officer Morton H. Aronson........ Assistant Secretary Vice President and Associate General Counsel - Franchise Chris J. Ballad.......... Controller Vice President; British Citizen J. Max Gayler............ Vice President, Franchise Relations and System Quality Michael L. Goodson....... Treasurer and Vice President, Tax & Treasury Elaine R. Pope........... Assistant Secretary Steven W. Smith.......... Assistant Secretary - ------------ (1) Same address as director's or officer's business address except where indicated. (2) Same address as director's or officer's business address except where indicated. SCHEDULE C DIRECTORS AND EXECUTIVE OFFICERS OF BASS The name, business address, title, present principal occupation or employment of each of the directors and executive officers of Bass are set forth below. If no business address is given the director's or officer's business address is 20 North Audley Street, London W1Y1WE. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to Bass. Unless otherwise indicated, all of the persons listed below are British citizens. Present Principal Occupation Including Name and Name and Business Address Address(1) of Employer - ------------------------- ----------------------------------------------- Directors Sir Ian Prosser........... Chairman and Chief Executive Roger Carr................ Chief Executive of Williams Holdings plc Tim Clarke................ Chief Executive of Bass Taverns Robert C. Larson.......... Chairman of the Taubman Realty Group and Vice Chairman of Taubman Centres Inc.; U.S. Citizen Iain Napier............... Chief Executive of Bass Brewers Sir Peter Middleton....... Chairman of Barclays de Zoete Wedd Sir Geoffrey Mulcahy...... Chief Executive of King-Fisher plc Richard North............. Finance Director and Chairman of Britvic Soft Drinks Sir Michael Perry......... Deputy Chairman of Dunlop Slazenger Group Limited Tony Portno............... Chairman of Bass Brewers, Bass International Brewers and Bass Leisure Present Principal Occupation Including Name and Name and Business Address Address(2) of Employer - ------------------------- ----------------------------------------------- Executive Officers (Who Are Not Directors) Thomas R. Oliver.......... Chief Executive Officer of Holiday Inn Worldwide; U.S. Citizen F. Spencer Wigley......... Company Secretary - ------------- (1) Same address as director's or officer's business address except where indicated. (2) Same address as director's or officer's business address except where indicated. EX-1 2 AGREEMENT AND PLAN OF MERGER dated as of December 15, 1996, as amended as of April 1, 1997, among HOLIDAY CORPORATION, HOLIDAY INNS, INC. and BRISTOL HOTEL COMPANY TABLE OF CONTENTS _____________ Page ---- ARTICLE 1 Definitions Section 1.01. Definitions.............................................2 ARTICLE 2 The Merger Section 2.01. The Merger.............................................12 Section 2.02. Closing................................................12 Section 2.03. Conversion of Shares...................................12 Section 2.04. Surrender and Payment..................................13 Section 2.05. HII Intercompany Debt..................................13 Section 2.06. Debt Exchange..........................................13 Section 2.07. Working Capital Statement..............................13 Section 2.08. Working Capital Adjustment.............................15 Section 2.09. Capital Expenditures...................................15 ARTICLE 3 The Surviving Corporation Section 3.01. Certificate of Incorporation...........................17 Section 3.02. Bylaws.................................................17 Section 3.03. Directors and Officers.................................17 ARTICLE 4 Certain Pre-merger Transactions Section 4.01. Contribution of Assets and Assumption of Liabilities...17 Section 4.02. Exchange...............................................17 ARTICLE 5 Representations and Warranties of HII and HC Section 5.01. Corporate Organization and Qualification...............18 Section 5.02. Corporate Authority....................................18 Section 5.03. No Violations; Consents and Approvals..................19 Section 5.04. Capital Stock..........................................20 Section 5.05. Retained Companies.....................................20 Section 5.06. Information............................................21 Section 5.07. HII Operating Statements, Etc..........................21 Section 5.08. Absence of Certain Changes or Events...................22 Section 5.09. Compliance with Applicable Laws........................22 Section 5.10. Retained Real Property.................................23 Section 5.11. Litigation.............................................24 Section 5.12. Taxes..................................................24 Section 5.13. Employee Benefit Plans.................................25 Section 5.14. Environmental Matters..................................26 Section 5.15. Brokers and Finders....................................26 Section 5.16. Employees..............................................26 Section 5.17. Contracts..............................................26 Section 5.18. No Representations or Warranties.......................27 ARTICLE 6 Representations and Warranties of Acquiror Section 6.01. Corporate Organization and Qualification...............27 Section 6.02. Corporate Authority....................................27 Section 6.03. No Violations; Consents and Approvals..................28 Section 6.04. Capital Stock..........................................29 Section 6.05. Subsidiaries...........................................30 Section 6.06. Information............................................30 Section 6.07. SEC Filings............................................31 Section 6.08. Absence of Certain Events and Changes..................31 Section 6.09. Compliance with Applicable Laws........................31 Section 6.10. Acquiror Real Property.................................32 Section 6.11. Litigation.............................................32 Section 6.12. Taxes..................................................33 Section 6.13. Environmental Matters..................................33 Section 6.14. Brokers and Finders....................................34 Section 6.15. Employees..............................................34 Section 6.16. Financing..............................................34 Section 6.17. Capital Expenditure Plan...............................34 Section 6.18. No Representations or Warranties.......................34 ARTICLE 7 Covenants of HII and HC Section 7.01. Conduct of HII and HC..................................35 Section 7.02. Notices of Certain Events..............................39 Section 7.03. Liquor and Other Licenses..............................39 Section 7.04. Financial Statements...................................40 ARTICLE 8 Covenants of Acquiror Section 8.01. Conduct of Acquiror....................................40 Section 8.02. Notices of Certain Events..............................42 Section 8.03. Tax-Free Contribution, Exchange and Merger.............42 Section 8.04. HII Names..............................................43 Section 8.05. Employee Communications................................44 ARTICLE 9 Covenants of Acquiror, HC and HII Section 9.01. Access to Information..................................44 Section 9.02. Reasonable Efforts.....................................45 Section 9.03. Certain Filings........................................45 Section 9.04. Public Announcements...................................45 Section 9.05. Further Assurances.....................................46 Section 9.06. Meetings of Stockholders...............................46 Section 9.07. Franchise Agreements...................................46 Section 9.08. Certain Contracts......................................46 Section 9.09. Environmental and Structural Matters...................46 ARTICLE 10 Employee Benefits Section 10.01. Maintenance of Benefits...............................47 Section 10.02. Severance Obligations.................................48 Section 10.03. Savings Plan..........................................49 Section 10.04. Nonqualified Plans....................................50 Section 10.05. Group Health Plans; Workers' Compensation.............50 Section 10.06. Executive Medical and Dental Plan.....................51 Section 10.07. Severance Pay Plan....................................51 Section 10.08. COBRA.................................................51 Section 10.09. Collective Bargaining Agreements......................51 Section 10.10. Relocation Expenses...................................52 Section 10.11. Vacation and Sick Leave...............................52 Section 10.12. Loyalty Bonuses.......................................52 Section 10.13. WARN..................................................52 Section 10.14. Cooperation...........................................53 ARTICLE 11 Conditions to the Merger Section 11.01. Conditions to the Obligations of Each Party...........53 Section 11.02. Conditions to the Obligations of HII..................54 Section 11.03. Conditions to the Obligations of Acquiror.............55 ARTICLE 12 Survival; Indemnification Section 12.01. Survival..............................................56 Section 12.02. Indemnification.......................................56 Section 12.03. Indemnification Procedures............................58 ARTICLE 13 Termination Section 13.01. Termination...........................................60 Section 13.02. Effect of Termination.................................61 ARTICLE 14 Miscellaneous Section 14.01. Entire Agreement......................................61 Section 14.02. Notices...............................................61 Section 14.03. Amendments; No Waivers................................62 Section 14.04. Expenses..............................................63 Section 14.05. Successors and Assigns................................63 Section 14.06. Governing Law.........................................63 Section 14.07. Counterparts; Effectiveness...........................63 Section 14.08. Defined Terms.........................................63 Section 14.09. Schedules.............................................63 Section 14.10. Knowledge.............................................64 Section 14.11. Consent to Jurisdiction...............................64 SCHEDULES
Schedule Title - ---------------------------- ----------------------------------- Schedule 1.01(a)(1) Contributed Assets Schedule 1.01(a)(2) Core Employees Schedule 1.01(a)(3)(A) Permitted Liens--Retained Companies Schedule 1.01(a)(3)(B) Permitted Liens--Acquiror Schedule 1.01(a)(4) Retained Companies Schedule 2.05(a) Valuation of Hotels Schedule 2.07(a) Adjustments to Working Capital Schedule 5.03 Retained Companies' Consents Schedule 5.05 Retained Assets Schedule 5.07(a)(i) Corporate Allocations Schedule 5.07(a)(ii) HII Operating Schedules Schedule 5.07(b) Hotels - Opening Year and Room Count Schedule 5.08 Certain Changes or Events Schedule 5.09 Compliance with Applicable Laws Schedule 5.10(a)(i) Retained Real Property - Owned Schedule 5.10(a)(ii) Retained Real Property - Leased Schedule 5.10(a)(iii) Retained Real Property - Joint Ventures or Partnership Schedule 5.10(a)(iv) Retained Real Property - Management Agreements Schedule 5.10(c) Retained Real Property - Deficiencies in Operating Condition and Repair Schedule 5.11 Litigation Schedule 5.12(b) Taxes - Waivers and Extensions Schedule 5.12(e) Representations and Covenants of HC Schedule 5.13(a) HII Employee Plans Schedule 5.13(d) HII Benefit Arrangements Schedule 5.14 Environmental Matters Schedule 5.16 Collective Bargaining Agreements Schedule 5.17 Contracts Schedule 6.03 Acquiror Consents Schedule 6.04 Capital Stock Schedule 6.05 Subsidiaries - List Schedule 6.08 Certain Events and Changes Schedule 6.09 Compliance with Applicable Laws Schedule 6.10(a)(i) Acquiror Real Property - Owned Schedule 6.10(a)(ii) Acquiror Real Property - Leased Schedule 6.10(a)(iii) Acquiror Real Property - Joint Ventures or Partnerships Schedule 6.11 Litigation Schedule 6.12(a) Representations and Covenants of Acquiror Schedule 6.13 Environmental Matters Schedule 6.15 Collective Bargaining Agreements Schedule 7.01(c) Conduct of HII and HC - Existing Acquisition Contractual Obligations Schedule 7.01(d) Conduct of HII and HC - Dispositions Schedule 8.01(d) Conduct of Acquiror - Dispositions Schedule 9.07(1) Hotels Subject to New Franchise Agreements Schedule 9.07(2) Acquiror Hotels to be Converted to New Brands Schedule 9.08 Certain Contracts Schedule 10.01(b) Employee Plans and Benefit Arrangements Schedule 10.10 Retained Companies' Employees Schedule 11.03(c) Conditions to the Obligation of Acquiror - Acquiror Required Consents Schedule 14.10(a) Knowledge - HII or HC Schedule 14.10(b) Knowledge - Acquiror
EXHIBITS
Exhibit Title - ------------- ------------------------------------------------------------ Exhibit A Form of the Contribution and Assumption Agreement Exhibit B Form of the Stockholders Agreement Exhibit C Form of the Hotel Properties Agreement Exhibit D Form of the Registration Rights Agreement Exhibit E Form of the Franchise Agreements Exhibit F Description of the San Francisco Agreement of Purchase and Sale Exhibit G Description of the Canadian Agreement of Purchase and Sale Exhibit H Description of the Contingency Agreement Exhibit I Form of the Certificate of Incorporation of the Surviving Corporation Exhibit J Form of the Bylaws of the Surviving Corporation
AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of December 15, 1996, as amended as of April 1, 1997, among Holiday Corporation, a Delaware corporation ("HC"), Holiday Inns, Inc., a Tennessee corporation and wholly owned subsidiary of HC ("HII"), and Bristol Hotel Company, a Delaware corporation ("Acquiror"). W I T N E S S E T H: WHEREAS, HC and HII have (i) determined to enter into this Agreement which, among other things, provides for HII to merge with and into Acquiror, with Acquiror as the surviving corporation (the "Merger"), as a result of which HC will become a stockholder of Acquiror, and (ii) approved a contribution and assumption agreement substantially in the form of Exhibit A attached hereto (the "Contribution Agreement"), pursuant to which and subject to the terms of which HII will contribute all of its assets and liabilities other than the Retained Business (as defined herein) to New Spinco, a Delaware corporation to be formed in connection with the Contribution (as defined herein) ("New Spinco"); WHEREAS, Acquiror has informed HC that it is unwilling to acquire in the Merger any assets or liabilities of HII other than those relating solely to the Retained Business as provided herein and in the Contribution Agreement and the purpose of the Contribution Agreement is to make possible the Merger by divesting HII of the businesses, operations and liabilities to be conducted by New Spinco. WHEREAS, following the time of the Contribution and prior to the Effective Time, HII shall, in a partial liquidation, exchange with HC all outstanding shares of common stock, par value $0.01 per share, of New Spinco ("New Spinco Common Stock") for 900 shares of HII Common Stock (as defined herein) owned by HC (the "Exchange"); WHEREAS, the respective Boards of Directors of HC, HII and Acquiror have determined that, following the Contribution and the Exchange, the Merger and the other transactions contemplated under this Agreement would be in the best interest of their respective corporations and stockholders and are consistent with, and in furtherance of, their respective businesses, strategies and goals; WHEREAS, in a related transaction immediately after the Merger, Acquiror shall (i) subject to the adjustments described herein, exchange a portion of the amount of HII Intercompany Debt (as defined herein) assumed by Acquiror pursuant to the Merger for 6,981,832 shares of Acquiror Stock (as defined herein) and (ii) repay the portion of HII Intercompany Debt remaining after such exchange in cash; WHEREAS, it is the intention of the parties to this Agreement that for federal income tax purposes (a) the Contribution and the Exchange shall qualify as a "reorganization" within the meaning of Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"), and that the Exchange shall constitute a tax-free distribution under Section 355 of the Code and (b) the Merger shall qualify as a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code in which no gain or loss is recognized; and WHEREAS, in connection with this Agreement, the parties hereto, or, if applicable, their respective Affiliates, have, subject to certain conditions, agreed to enter into, a stockholders agreement, a hotel properties agreement, a registration rights agreement and franchise agreements, substantially in the form of Exhibits B through E, respectively, attached hereto and have agreed to enter into asset purchase agreements, in accordance with the descriptions in Exhibits F and G attached hereto. NOW, THEREFORE, in consideration of the promises, and of the representations, warranties, covenants and agreements set forth herein, the parties hereto hereby agree as follows: ARTICLE 1 Definitions Section 1.01. Definitions. The following terms used herein shall have the following meanings: "Acquiror Material Adverse Effect" means a Material Adverse Effect on Acquiror and its Subsidiaries, taken as a whole. "Acquiror SEC Documents" means all reports, schedules, forms, statements and other documents required to be filed by Acquiror with the SEC under the Securities Act and the Exchange Act since December 12, 1995. "Acquiror Stock" means the common stock, par value $0.01 per share, of Acquiror. "Affiliate" means, with respect to any Person, any other Person who is directly or indirectly controlling, controlled by or under the common control with such Person; provided that no shareholder of Acquiror shall be deemed an Affiliate of any other stockholder of Acquiror solely by reason of any investment in Acquiror. For the purposes of this definition, the term "control", when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Asset Purchase Agreements" means the Canadian Agreement of Purchase and Sale and of the San Francisco Agreement of Purchase and Sale. "Base Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Benefit Arrangement" means any employment, severance or similar contract or arrangement whether or not written or any plan, policy, fund, program or contract or arrangement (whether or not written) providing for compensation, bonus, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance coverage (including any self-insured arrangements), health or medical benefits, disability benefits, workers' compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance or other benefits) that is not an Employee Plan. "Building Codes" means, with respect to any Retained Real Property, all applicable requirements of all building, construction, fire, life-safety and similar Laws relating to the construction, use and occupancy of such Retained Real Property as in effect and applicable as of the relevant time; provided that Building Codes shall not include (i) requirements thereof that first become effective after the Effective Time and (ii) the Americans with Disabilities Act or other applicable handicap access laws. "Canadian Agreement of Purchase and Sale" means the Agreement of Purchase and Sale between Holiday Inns of Canada Ltd. and Bristol Hotel Asset Co., the terms of which shall be substantially in accordance with the description thereof on Exhibit G. "Canadian Hotels" means the Hotels (as defined in the Canadian Agreement of Purchase and Sale). "Carve-out Business" means the Retained Business, the business conducted by the San Francisco Hotel and the business conducted by the Canadian Hotels. "COBRA Coverage" means the continuation coverage required by Section 4980B(f) of the Code. "Confidentiality Agreement" means the Confidentiality Agreements dated as of June 14, 1996 and September 14, 1996 among Bass plc, HII and Acquiror. "Contingency Agreement" means the Contingency Agreement among HC, HII and Acquiror the terms of which shall be substantially in accordance with the description thereof on Exhibit H. "Contract" means any note, bond, mortgage, indenture, lease, contract, obligation, commitment or agreement (whether written or oral). "Contributed Assets" means all Assets (as defined in the Contribution Agreement) of HII and its Subsidiaries, other than the Retained Assets, including but not limited to the interests in the Hotels listed on Schedule 1.01(a)(i) and the franchise business. "Contributed Liabilities" means all Liabilities (as defined in the Contribution Agreement) of HII and its Subsidiaries other than the Retained Liabilities including without limitation any costs, expenses or liabilities incurred by the Retained Companies in connection with the Transactions prior to the Effective Time and, without limiting the generality or effect of the foregoing, all liabilities or obligations, whether arising by contract or otherwise to any Person relating to, resulting from or arising out of any franchise or similar agreement or any of HII's franchising business, whether such liability arises or is first asserted prior to or after the Effective Time. "Contribution" means the contribution of the Contributed Assets to New Spinco and the assumption of the Contributed Liabilities by New Spinco contemplated by Article 2 of the Contribution Agreement. "Core Employees" shall mean those 145 employees listed on Schedule 1.01(a)(2) hereto. "Damages" means any damage (including without limitation punitive damages if assessed or amended in a third-party action), loss (including without limitation lost profits), liability, cost or expense (including without limitation reasonable expenses of investigation and reasonable attorneys' fees and expenses). "DGCL" means the General Corporation Law of the State of Delaware. "Employee Plan" means any "employee benefit plan," as defined in Section 3(3) of ERISA. "Environmental Laws" means any applicable federal, state, local or foreign law, regulation or rule, each as in effect as of the date hereof and as of the Effective Time, relating to the environment or to pollutants, contaminants or wastes or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, material or waste. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "ERISA Affiliate" of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Environmental Liabilities" means Liabilities, whether accrued, contingent, absolute, determined, determinable or otherwise, which arise out of or in connection with (i) the Hotels, (ii) any Environmental Law and (iii) actions occurring or conditions existing on or prior to the Closing Date (including without limitation those matters identified pursuant to Section 9.09 hereof). "Franchise Agreements" means the franchise agreements, each substantially in one of the forms attached as Exhibit E, to be entered into, pursuant to Section 9.07, by HIFI and Acquiror or the Subsidiaries of Acquiror reasonably approved by HIFI. "GAAP" means United States generally accepted accounting principles consistently applied. "Governmental Entity" means any government or any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, federal, state, local or foreign. "Group Health Plans" means the Holiday Inns, Inc. Life Insurance and Health Care Benefit Plan. "HIFI" means Holiday Inns Franchising, Inc., a Delaware corporation. "HII By-laws" means the by-laws of HII, as amended. "HII Charter" means the articles of incorporation of HII, as amended. "HII Common Stock" means the common stock, par value $1.50, of HII. "HII Intercompany Debt" means the debt in the principal amount of $500 million owed by HII to BAI, unless adjusted in accordance with this Agreement. "Holiday Parties" means HC and HII. "Hotel" means each of the hotels listed on Schedule 5.10(a)(i) through (a)(iv), which may be amended at the option of HC prior to February 1, 1997 to add the Holiday Inn Salt Lake City Airport Hotel, including the Retained Real Property used in connection with the operations of such hotel and all furniture, fixtures, furnishings, equipment, attachments, inventory and other tangible and intangible personal property located in or about, or used exclusively in connection with, such Retained Real Property, to the extent the same constitute Retained Assets. "Hotel Properties Agreement" means the Hotel Properties Agreement to be dated the date of the Effective Time between HC and Acquiror, substantially in the form of Exhibit C hereto. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976. "HSR Filings" means any filings required under the HSR Act. "Intellectual Property" means domestic and foreign patents, patent applications, invention disclosures to be filed or awaiting filing determinations, trademark and service mark applications, registered trademarks, registered service marks, registered copyrights, trademarks, service marks and trade names. "Laws" means all applicable statutes, laws, regulations, rules, judgments, orders and decrees of Governmental Entities. "Lien" means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, restriction on voting or transfer, encumbrance, adverse claim or defect in title of any kind whatsoever in respect of such property. For the purposes hereof, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset. "Material Adverse Effect" means, with respect to any entity (or group of entities taken as a whole), such state of facts, event, change or effect as has had, or could reasonably be expected to have, a material adverse effect on the business, results of operations, financial condition or prospects of such entity (or, if with respect thereto, of such group of entities taken as a whole) other than events, changes or developments relating to the economy in general or resulting from industry-wide developments affecting companies in similar businesses, or on the ability of such entity (or group of entities) to consummate the transactions contemplated hereby, including the Contribution, the Exchange and the Merger, or to perform in all material respects its obligations under any of the Transaction Documents to which it is or will be a party; provided that any determination of whether any state of facts, event, change or effect would have a Material Adverse Effect on the Retained Companies shall be made giving effect to the transactions contemplated by the Contribution Agreement. "Multiemployer Plan" means each Employee Plan that is a Multiemployer Plan, as defined in Section 3(37) of ERISA. "Nonqualified Plans" means the Holiday Inns, Inc. Nonqualified Savings Plan, the Executive Deferred Compensation Plan, the Deferred Compensation Plan and the Supplemental Executive Retirement Plan. "NYSE" means the New York Stock Exchange, Inc. "Permit" means any license, franchise, permit, concession, order, approval or registration from, of or with a Governmental Entity. "Permitted Liens" means those Liens (i) listed on Schedule 1.01(a)(3)(A), with respect to the Retained Companies, (ii) listed on Schedule 1.01(a)(3)(B), with respect to Acquiror, (iii) for Taxes not yet due or payable or being contested in good faith and for which appropriate reserves have been taken, (iv) that constitute mechanics', carriers', workers' or like liens with respect to obligations that are not overdue or are being contested in good faith and for which appropriate reserves have been taken, (v) that constitute leases or tenancies of parts or areas of the property in question, (vi) that individually or in the aggregate would not and could not reasonably be expected to have a material adverse effect on the use or value of the property to which the Lien relates or (vii) that are created, suffered or assumed by Acquiror. "Person" means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Pre-Effective Returns" means all Tax Returns and reports required to be filed prior to the Effective Time which include any of the Retained Companies. "Proxy Statement" means the proxy statement and form of proxies relating to the issuance of Acquiror Stock in the Merger and the adoption of this Agreement as filed with the SEC and delivered to the stockholders of Acquiror. "Qualifying Event" shall have the meaning set forth in Section 4980(f)(3) of the Code. "Registration Rights Agreement" means the Registration Rights among HC, Bass America Inc., United/Harvey Holdings, L.P. and Acquiror, which shall be substantially in the form attached hereto as Exhibit D . "Retained Assets" shall have the meaning set forth in the Contribution Agreement. "Retained Business" means the business conducted using the Retained Assets and the Retained Liabilities but excluding without limitation the Contributed Assets and the Contributed Liabilities to be transferred to or assumed by New Spinco pursuant to the Contribution Agreement. "Retained Companies" means HII and its direct and indirect Subsidiaries in which any of HII and its direct and indirect Subsidiaries has an interest, each such Person being listed on Schedule 1.01(a)(4), but excluding those companies to be transferred to New Spinco pursuant to the Contribution Agreement. "Retained Companies' Employees" means the employees of the Retained Companies at the Hotels and the San Francisco Hotel as of the Effective Time. "Retained Companies Material Adverse Effect" means a Material Adverse Effect on the Retained Companies, taken as a whole. "Retained Liabilities" shall have the meaning set forth in the Contribution Agreement. "San Francisco Agreement of Purchase and Sale" means the Agreement of Purchase and Sale between Holiday Inns B.V. and Acquiror, the terms of which shall be substantially in accordance with the description thereof on Exhibit F. "San Francisco Hotel" means the Hotel (as defined in the San Francisco Agreement of Purchase and Sale). "Savings Plan" means the Holiday Inns, Inc. Savings and Retirement Plan. "SEC" means the Securities Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Stockholders' Agreement" means the Amended and Restated Stockholders' Agreement to be dated the date of the Effective Time among Acquiror, United/Harvey Holdings, L.P., HC, Bass plc and Bass America, Inc., substantially in the form of Exhibit B hereto. "Structural Deficiency" or "Structural Defects" means, with respect to any Retained Real Property, any failure or imminent failure of any major structural (such as, without limitation, foundation, load-bearing walls and columns and roof), mechanical (such as, without limitation, HVAC), electrical and plumbing components of such Retained Real Property (or any part thereof) to perform the function for which it was designed, or any failure of such Retained Real Property (or any part thereof) to be in compliance with applicable Building Codes. "Subsidiary" means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Tax" (including with correlative meaning, the terms "Taxes" and "Taxable") means (A) all forms of taxation, whenever created or imposed, and whether imposed by a local, municipal, governmental, state, foreign, federal or other body (the "Taxing Authority") and, without limiting the generality of the foregoing, shall include any income, gross receipts, ad valorem, excise, value-added, sales, use, transfer, franchise, license, stamp, occupation, withholding (on amounts paid to or by a Person), employment, payroll, property, environmental tax, real estate tax or assessment, premium or charge of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any Taxing Authority responsible for the imposition of any such tax, (B) any liability for the payment of any amounts of the type described in (A) as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby the liability for payments of such amounts was determined or taken into account with reference to the liability of any other Person, and (C) liability for the payment of any amounts as a result of being party or subject to any tax sharing agreement or with respect to the payment of any amounts of the type described in (A) or (B) as a result of any express or implied obligations to indemnify any other Person. "Tax Return" means any return, report, statement, information statement and the like required to be filed with any authority with respect to Taxes. "TBCA" means the Tennessee Business Corporation Act. "Title IV Plan" means an Employee Plan subject to Title IV of ERISA other than any Multiemployer Plan. "Transaction Documents" means this Agreement, the Contribution Agreement, the Stockholders' Agreement, the Hotel Properties Agreement, the Asset Purchase Agreements, the Franchise Agreements, the Registration Rights Agreement and any other documents relating to each of the foregoing agreements. "Transactions" means all transactions contemplated by the Transaction Documents. (b) The following terms shall have the meanings assigned to such terms in the following sections: Term Section ----- ------- Acquiror Consents 6.03(a) Acquiror Permits 6.02 Acquiror Real Property 6.10 Acquiror Securities 6.04(b) Acquiror Subsidiary Securities 6.05(b) Adverse Tax Development 11.02(c) Affected Employee 10.02 Articles of Merger 2.01(a) BAI 2.06 Capex Notes 2.09(b) Capital Expenditure 2.09(a) Capital Expenditure Period 2.09(a) Capital Expenditure Statement 2.09(a) Certificate of Merger 2.01(a) Closing 2.02 Commitment 6.16 Contingency Date 13.01(b) Effective Time 2.01(a) Executive Medical Plan 10.06 Existing Acquiror Credit Agreement 8.01(A)(c) Final Estimated Cost 9.09(b) Final Working Capital 2.08 Financial Statements 7.04 HC Report 9.09(b) HII Affiliated Group 5.12(a) HII Shares 5.04(a) Holiday Indemnitees 12.02(c) indemnified party 12.03(a) indemnifying party 12.03(a) Individual Item 12.02(a) Initial Report 9.09(a) IRS 7.01(B)(d) IRS Ruling 7.01(B)(d) Joint Venture 5.10(a) Management Agreement 5.10(a) Merger Consideration 2.03(b) 1993 - 1995 Operating Statements 5.07 1996 Operating Statements 5.07 Retained Company Plan 5.13(a) Retained Companies' Consents 5.03(a) Retained Companies' Permits 5.03(a) Retained Companies' Savings Plan 10.03(b) Retained Company Securities 5.05(b) Retained Real Property 5.10(a) Severance Payments 10.02 Surviving Corporation 2.01(b) Total Revenues 2.09(b) Working Capital 2.07(a) Working Capital Statement 2.07(a) ARTICLE 2 The Merger Section 2.01. The Merger. (a) As soon as practicable after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Merger set forth in this Agreement, HII and Acquiror will file a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware and an Articles of Merger (the "Articles of Merger") with the Secretary of State of the State of Tennessee and make all other filings or recordings required by the DGCL and the TBCA in connection with the Merger. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or at such later time as is specified in the Certificate of Merger (the "Effective Time"). (b) At the Effective Time, HII shall be merged with and into Acquiror in accordance with the DGCL and the TBCA whereupon the separate existence of HII shall cease, and Acquiror shall be the surviving corporation (as such, the "Surviving Corporation"). (c) From and after the Effective Time, Acquiror shall possess all the rights, privileges and powers and be subject to all of the restrictions, disabilities and duties of HII and Acquiror, all as provided under the DGCL and the TBCA. Section 2.02. Closing. Unless this Agreement has terminated and the transactions contemplated under this Agreement have been abandoned pursuant to Section 13.01 and subject to the fulfillment or, if permitted, waiver of the conditions set forth in Article 11, the closing of the Merger (the "Closing") will take place at a location in New York City to be mutually agreed upon prior to the Closing as promptly as practicable (and in any event within two business days) following the fulfillment or, if permissible, waiver of the conditions of Article 11, unless another date or time is agreed to in writing by Acquiror and the Holiday Parties. Section 2.03. Conversion of Shares. At the Effective Time: (a) each outstanding share of HII Common Stock held by HII as treasury stock immediately prior to the Effective Time shall be canceled, and no payment shall be made with respect thereto; (b) except as otherwise provided in Section 2.03(a) above, the 100 shares of HII Common Stock outstanding immediately prior to the Effective Time will be converted into the right to receive in the aggregate 2,391,286 shares (the "Merger Consideration") of duly authorized, validly issued, fully paid and nonassessable shares of Acquiror Stock. Section 2.04. Surrender and Payment. Upon surrender to Acquiror of a certificate or certificates representing the 100 shares of HII Common Stock outstanding immediately prior to the Effective Time, HC will be entitled to receive Acquiror Stock issuable in respect of such shares. Until so surrendered, each such certificate shall, as of and after the Effective Time, represent for all purposes, only the right to receive such Acquiror Stock. Section 2.05. HII Intercompany Debt. At the Effective Time, the amount of HII Intercompany Debt outstanding shall be $500 million; provided that if, upon the mutual agreement of the parties hereto, any of the Hotels listed on Schedule 2.05(a) shall cease to be a Retained Asset, the amount of the HII Intercompany Debt shall be reduced by the amount listed opposite such Hotel's name on Schedule 2.05(a) and the Contributed Liabilities shall be increased by a like amount. Section 2.06. Debt Exchange. Immediately following the Effective Time, Acquiror shall (i) exchange principal amount $199,854,939 of the HII Intercompany Debt assumed by Acquiror pursuant to the Merger for 6,981,832 shares of Acquiror Stock and (ii) repay the portion of the HII Intercompany Debt remaining after such exchange in a certified or official bank check payable in immediately available funds to Bass America Inc. ("BAI"); provided that if the amount of HII Intercompany Debt is reduced pursuant to Section 2.05, the number of shares and cash exchanged for HII Intercompany Debt pursuant to this Section 2.06 shall be reduced such that the total number of shares and cash received by HC and BAI collectively pursuant to the Merger and the debt exchange is reduced pro rata. Section 2.07. Working Capital Statement. (a) As promptly as practicable and in any event within 90 days after the Effective Time, HC will cause to be prepared and delivered to Acquiror a working capital statement, together with an unqualified report of Deloitte & Touche LLP thereon, and a certificate based on such working capital statement setting forth HC's calculation of Working Capital. The working capital statement contemplated hereby (the "Working Capital Statement") shall, in accordance with Schedule 2.07(a), fairly present the Working Capital position of HII immediately prior to the Effective Time and after giving effect to the Contribution and the Exchange. HC will afford Acquiror the opportunity to participate in and review HC's preparation of the Working Capital Statement, including without limitation the opportunity to observe any physical inventory count and other accounting procedures and a reasonable opportunity to review HC's final draft of the Working Capital Statement prior to the delivery thereof to Acquiror as hereafter provided. If Acquiror and HC agree upon such computation within the 90-day period referred to above, the remaining provisions of this Section 2.07 will not apply; if Acquiror and HC do not so agree, then the Working Capital Statement prepared by HC will be delivered by HC to Acquiror and the remaining provisions of this Section 2.07 will apply. "Working Capital" shall be calculated as set forth in Schedule 2.07(a). (b) If Acquiror disagrees with HC's calculation of Working Capital delivered pursuant to Section 2.07(a), Acquiror may, within 90 days after delivery of the documents referred to in Section 2.07(a) deliver a notice to HC disagreeing with such calculation and setting forth Acquiror's calculation of such amount. Any such notice of disagreement shall specify in reasonable detail those items or amounts as to which Acquiror disagrees, and Acquiror shall be deemed to have agreed with all other items and amounts contained in the Working Capital Statement and the calculation of Working Capital delivered pursuant to Section 2.07(a). (c) If a notice of disagreement shall be delivered pursuant to Section 2.07(b), Acquiror and HC shall cause Coopers & Lybrand LLP or another firm of independent accountants of nationally recognized standing reasonably satisfactory to Acquiror and HC (who shall not have any material relationship with Acquiror or HC) promptly to review this Agreement and the disputed items or amounts for the purpose of calculating Working Capital. In making such calculation, such independent accountants shall consider only those items or amounts in the Working Capital Statement or HC's calculation of Working Capital as to which Acquiror has disagreed and such other issues as may be impacted by the issues as to which Acquiror has disagreed. Such independent accountants shall deliver to Acquiror and HC, as promptly as practicable, a report setting forth such calculation. Such report shall be final and binding upon Acquiror and HC. The cost of such review and report shall be borne by HC if the difference between Final Working Capital and HC's calculation of Working Capital delivered pursuant to Section 2.07(a) is greater than the difference between Final Working Capital and Acquiror's calculation of Working Capital delivered pursuant to Section 2.07(b) and by Acquiror if the first such difference is less than the second such difference and otherwise equally by Acquiror and HC. (d) Acquiror and HC agree that they will, and agree to cause their respective independent accountants and HII to, cooperate and assist in the preparation of the Working Capital Statement and the calculation of Working Capital and in the conduct of the audits and reviews referred to in this Section, including without limitation the making available to the extent necessary of books, records, work papers and personnel. Section 2.08. Working Capital Adjustment. (a) If Final Working Capital exceeds $0, Acquiror shall pay to New Spinco, in the manner and with interest as provided in Section 2.08(b), the amount of such excess. If Final Working Capital is less than $0, HC shall pay to Acquiror, in the manner and with interest as provided in Section 2.08(b), the amount of such deficiency. "Final Working Capital" means the Working Capital as agreed by Acquiror and HC pursuant to Section 2.07(a), or (ii) if a notice of disagreement is delivered pursuant to Section 2.07(b), as shown in the independent accountant's calculation delivered pursuant to Section 2.07(c); provided that, in no event shall Final Working Capital be more than HC's calculation of Working Capital delivered pursuant to Section 2.07(a) or less than Acquiror's calculation of Working Capital delivered pursuant to Section 2.07(b). (b) Any payment by Acquiror pursuant to Section 2.08(a) shall be made under a contingent note from HII to New Spinco (such contingent note having been delivered to New Spinco prior to the Effective Time and being in form reasonably acceptable to Acquiror) and any such payment or other payment contemplated by Section 2.08(a) shall be made within 10 days after the Working Capital has been determined by delivery by Acquiror in payment of the contingent note of a certified or official bank check payable in immediately available funds to New Spinco or by causing such payments to be credited to the account of New Spinco as may be designated by it. Any payment due Acquiror pursuant to Section 2.08(a) shall be made within 10 days after Working Capital has been determined by delivery by HC of a certified or official bank check in immediately available funds to Acquiror or by causing such payment to be credited to the account of Acquiror designated by it. The amount of any payment to be made pursuant to this Section shall bear interest from and including the Effective Time to but excluding the date of payment at a rate per annum equal to the Base Rate in effect from time to time during the period from the Effective Time to the date of payment. Such interest shall be payable at the same time as the payment to which it relates and shall be calculated daily on the basis of a year of 365 days and the actual number of days elapsed. Section 2.09. Capital Expenditures. (a) As promptly as practicable and in any event within 90 days after the Effective Time, HC shall deliver to Acquiror a statement of capital expenditures setting forth the Capital Expenditures made on the Hotels from and including October 1, 1996 to and including the date of the Effective Time (the "Capital Expenditure Period") together with an unqualified opinion of Deloitte & Touche thereon. The statement of capital expenditures contemplated hereby (the "Capital Expenditure Statement") shall fairly present the Capital Expenditures during the Capital Expenditure Period. HC will afford Acquiror the opportunity to participate in and review HC's preparation of the Capital Expenditure Statement. "Capital Expenditures" means the cost incurred in making additions to, improvements to and replacements of Hotels owned or leased by any Retained Company, that in accordance with Holiday Inn Worldwide's normal accounting practice, provided that such practice is in accordance with the Uniform System of Accounts for Hotels and GAAP, are to be capitalized rather than expensed. (b) HII shall borrow from BAI under a revolving credit facility (the "Capex Notes") the amounts spent on Capital Expenditures it believes in good faith to be in excess of the sum of $15,000,000 and 4% of Total Revenues during the Capital Expenditure Period for the portion of the Capital Expenditure Period then elapsed as such amounts become due and payable. Upon determination of the amount of Capital Expenditures pursuant to Section 2.09(a), the amount outstanding under the Capex Notes shall be automatically adjusted so that the principal amount thereof shall be equal to the excess of the amount spent on Capital Expenditures during the Capital Expenditure Period over the sum of $15,000,000 and 4% of Total Revenues for the Capital Expenditure Period and the amount of the Capex Notes outstanding shall be deemed to be such adjusted amount for all purposes hereunder. Acquiror shall assume the Capex Notes pursuant to the Merger and repay the Capex Notes within 10 days after Capital Expenditures has been determined according to Section 2.09(a) by delivery by Acquiror of a certified or official bank check in immediately available funds to BAI or by causing such payment to be credited to the account of BAI designated by it. If Capital Expenditures, determined according to Section 2.09(a), are less than the sum of $15,000,000 and 4% of Total Revenues for the Capital Expenditure Period, HC shall pay to Acquiror within 10 days after Capital Expenditures have been determined the amount of such deficiency by delivery by HC of a certified or official bank check in immediately available funds to Acquiror or by causing such payment to be credited to the account of Acquiror designated by it. The amount of any payment to be made pursuant to this Section shall bear interest from and including the Effective Time to but excluding the date of payment at a rate per annum equal to the Base Rate in effect from time to time during the period from the Effective Time to the date of payment. Such interest shall be payable at the same time as the payment to which it relates and shall be calculated daily on the basis of a year of 365 days and the actual number of days elapsed. "Total Revenues" means, with respect to any period all revenues and income derived directly or indirectly from the use or operation of any Hotel owned or leased by any Retained Company (including, without limitation, total room sales, food and beverage sales, telephone, telegraph and telex revenues, rental or other payments from lessees, sublessees and concessionaires (but not the gross receipts of such lessees, sublessees or concessionaires), and the actual cash proceeds of business interruption, use, occupancy or similar insurance). ARTICLE 3 The Surviving Corporation Section 3.01. Certificate of Incorporation. The certificate of incorporation of the Surviving Corporation shall be substantially in the form of Exhibit I hereto until amended in accordance with DGCL and other applicable laws. Section 3.02. Bylaws. The bylaws of the Surviving Corporation shall be substantially in the form of Exhibit J hereto until amended in accordance with DGCL and other applicable laws. Section 3.03. Directors and Officers. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law, (a) the directors of the Surviving Corporation shall be as provided for in Section 2.01 of the Stockholders' Agreement, and (b) the officers of Acquiror at the Effective Time shall be the officers of the Surviving Corporation. ARTICLE 4 Certain Pre-merger Transactions Section 4.01. Contribution of Assets and Assumption of Liabilities. HII and New Spinco will consummate the Contribution pursuant to the terms of, and subject to the conditions to, the Contribution Agreement, prior to the Effective Time. Section 4.02. Exchange. Following the Contribution and prior to the Effective Time, HII shall, in a partial liquidation, exchange with HC all outstanding shares of New Spinco Common Stock for 900 shares of HII Common Stock. ARTICLE 5 Representations and Warranties of HII and HC Except as otherwise indicated herein, each of HII and HC hereby represents and warrants to Acquiror as follows: Section 5.01. Corporate Organization and Qualification. Each of the Holiday Parties and the other Retained Companies is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is organized. Each of the Holiday Parties and the other Retained Companies is duly qualified, or licensed to do business and in good standing as a foreign corporation, in each jurisdiction in which the properties owned, leased or operated, or the business conducted, by it require such qualification, except for any such failure so to qualify, or be licensed or be in good standing which would not, individually or in the aggregate, have a Retained Companies Material Adverse Effect. Each of the Holiday Parties and the other Retained Companies has the requisite corporate power and authority to own and operate its properties and carry on its businesses as they are now being or will be (immediately after the Contribution) conducted. Each of the Holiday Parties and the other Retained Companies have heretofore made available to Acquiror complete and correct copies of the charter and by- laws of such Person, each as amended to date and currently in full force- and effect. Section 5.02. Corporate Authority. Each Holiday Party has the requisite corporate power and authority to execute, deliver and perform each Transaction Document to which it is a party and to consummate the transactions contemplated thereby. The execution, delivery and performance of each Transaction Document by each Holiday Party that is a party thereto and the consummation by HII of the Contribution, the Exchange, the Merger and of the other transactions contemplated to be performed by it under the Transaction Documents have been duly authorized by all necessary corporate actions, including without limitation, the approval of this Agreement by HII's Board of Directors and HC as the sole shareholder of HII, and no other corporate proceedings on the part of any Holiday Party are necessary to authorize any Transaction Document or to consummate the transactions so contemplated. Each Transaction Document to which a Holiday Party is a party is, or when executed and delivered will be, a valid and binding agreement of such party, enforceable against such party in accordance with the terms thereof except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally, and except that the availability of equitable remedies, including specific performance, may be subject to the discretion of the court before which any proceeding therefore may be brought. Section 5.03. No Violations; Consents and Approvals. (a) None of the execution, delivery or performance by any Holiday Party of each Transaction Document to which it is a party or the consummation by any Holiday Party of the transactions contemplated thereby will conflict with, or result in a violation or breach of, or constitute a default (with or without notice or lapse of time or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any material obligation or loss of a material benefit under, or result in the creation of a Lien (other than a Permitted Lien) upon, any of the properties or assets (including without limitation the Retained Assets) of the Retained Companies under (i) the charter or bylaws of the Retained Companies, (ii) subject to obtaining the third-party consents set forth in Schedule 5.03 (the "Retained Companies' Consents"), any loan or credit agreement, note, bond, mortgage, indenture, lease (other than tenant leases), Management Agreement or Joint Venture agreement applicable to any Retained Company, or any of their respective properties or assets, (iii) other agreements, instruments, or any permits, concessions, franchises, licenses, variances, exemptions, orders and approvals of all Governmental Entities applicable to any Retained Company, or any of their respective properties or assets ("Retained Companies' Permits"), or (iv) subject to the governmental filings and other matters referred to in Section 5.03(b), any Law applicable to the Retained Companies or any of their respective properties or assets (including without limitation the Retained Assets), other than, in the case of clauses (iii) and (iv), any such conflicts, violations, defaults, rights, losses or Liens that, individually or in the aggregate, could not reasonably be expected to have a Retained Companies Material Adverse Effect. (b) Except for the filing of the Certificate of Merger, the Articles of Merger, applicable HSR Filings and other consents, approvals, orders, authorizations, registrations, declarations, filings and agreements expressly provided for in the Transaction Documents, no consent, approval, order, authorization of, or registration, declaration or filing with, any Governmental Entity is required with respect to HC, HII or any of the other Retained Companies in connection with the execution, delivery or performance by each of HC and HII of each Transaction Document to which it is or will be a party or the consummation by HC or HII, as the case may be, of the transactions contemplated thereby, except for consents, approvals, orders, authorizations, registrations, declarations or filings the failure of which to obtain or to make would not, individually or in the aggregate, have a Retained Companies Material Adverse Effect. Section 5.04. Capital Stock. The authorized capital stock of HII consists of 120,000,000 shares of HII Common Stock. As of the date hereof and immediately prior to the Contribution, there are and will be issued and outstanding 1,000 shares of HII Common Stock, all of which are, as of the date hereof, owned by HC and no shares are, as of the date hereof, held as treasury stock. After the Contribution and the Exchange there will be outstanding 100 shares of HII common stock (the "HII Shares"), all of which are and will be owned by HC. (b) The HII Shares have been duly authorized and validly issued and are fully paid and non-assessable. Except for the HII Shares, there are no outstanding (i) shares of capital stock or other voting securities of HII, (ii) securities of HII convertible into or exchangeable for shares of capital stock or other voting securities of HII, (iii) options or other rights to acquire from HII, or other obligations of HII to issue, any capital stock, other voting securities or securities convertible into or exchangeable for capital stock or voting securities of HII, or (iv) bonds, debentures, notes or other obligations or securities other than HII Shares the holders of which have the right to vote with the stockholders on any matter (the items in clauses (i), (ii), (iii) and (iv) being referred to collectively as the "HII Securities"). There will be, immediately after the Exchange, no outstanding obligations of any Retained Company to repurchase, redeem or otherwise acquire any HII Securities. No class of capital stock of HII is entitled to preemptive rights. (c) HC is and as of immediately prior to the Effective Time will be, the sole record and beneficial owner of all of the HII Shares, free and clear of any Lien and any other limitation or restriction (including without limitation any restriction on the right to vote, sell or otherwise dispose of such HII Shares), and will transfer and deliver to Acquiror at the Effective Time valid title to such HII Shares free or clear of any Lien or any such limitation or restriction. Section 5.05. Retained Companies. (a) Schedule 5.05 completely and correctly (i) lists each Hotel and the identity of the Retained Company, Joint Venture or other Person that owns or holds an interest in the Hotel and the nature of that ownership or other interest in the Hotel; and (ii) sets forth the name and jurisdiction of incorporation or organization of each Retained Company identified in (i). (b) Except as disclosed in Schedule 5.05, all of the outstanding capital stock of, or other voting securities or ownership interests in, each Retained Company has been duly authorized and validly issued and are fully paid and non-assessable and are owned solely by HII, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). Except as listed on Schedule 5.05, there are no outstanding (i) shares of capital stock or other voting securities of, or ownership interest in, any Retained Company, (ii) securities of any Retained Company convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any Retained Company, or (iii) options or other rights to acquire from any Retained Company, or other obligation of any Retained Company to issue, any capital stock or other voting securities of, or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities of, or ownership interests in, any Retained Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the "Retained Company Securities"). There will be, immediately after the Exchange and immediately prior to the Effective Time, no outstanding obligations of any Retained Company to repurchase, redeem or otherwise acquire any outstanding Retained Company Securities. (c) Upon completion of the Contribution and the Exchange, except for interests in the Retained Companies and Joint Ventures identified in Schedule 5.05, none of the Retained Companies will own, directly or indirectly, any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business, trust or entity. Section 5.06. Information. (a) None of the information supplied or to be supplied by any Holiday Party or any Affiliate thereof or any of their respective representatives for inclusion or incorporation by reference in the Proxy Statement will at the time such Proxy Statement is filed with the SEC and at the time of the mailing of the Proxy Statement to the stockholders of Acquiror contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No representation is made by any Holiday Party with respect to statements made in the Proxy Statement based on information supplied by Acquiror or any of its Subsidiaries for inclusion therein, or with respect to information concerning Acquiror or any of its Subsidiaries incorporated by reference therein. Section 5.07. HII Operating Statements, Etc. (a) Except as set forth on Schedule 5.07(a)(i), the 1996 HII Operating Statements fairly present the results of operations of each Hotel for the periods set forth therein. The 1993-1995 Operating Statements fairly present the results of operations of each Hotel for the periods set forth therein, except for the corporate allocations of costs and revenues actually made by HII for those years in a manner consistent with those allocations set forth in Schedule 5.07(a)(i). As used herein, the "1996 HII Operating Statements" and the "1993-1995 Operating Statements" means the operating statements for the years ended September 30, 1996, and 1995, 1994 and 1993, respectively. Each of the 1993-1995 and 1996 Operating Statements has been prepared in accordance with GAAP, except as identified on Schedule 5.07(a)(ii), and is based on the books and records maintained for each Hotel. (b) For each Hotel, Schedule 5.07(b) lists both the year in which such hotel opened and the total number of rooms available in such Hotel. (c) As of the Effective Time, the Retained Companies will have no liabilities, actual or contingent, except (i) for the Retained Liabilities, (ii) for those Liabilities as to which Acquiror is indemnified under Article 12 and (iii) as reflected in the Working Capital Statement. Section 5.08. Absence of Certain Changes or Events. Except as disclosed in Schedule 5.08, or as otherwise contemplated by the Transaction Documents, since September 30, 1996, HII and the other Retained Companies have conducted the Retained Business in the ordinary course, consistent with past practices, and there have not been (i) any events, changes or developments which would have, individually or in the aggregate, a Retained Companies Material Adverse Effect, (ii) any change by the Holiday Parties in their accounting methods, principles or practices, (iii) any entering into, establishment or amendment of, any Holiday Employee Plan or any other increase in the compensation payable or to become payable to any Retained Companies' Employee, except for annual plan renewals and as otherwise noted on the Schedules or (iv) any revaluation for financial statement purposes by HII or any of the other Retained Companies of any asset (including without limitation any writing down of the value of any property, investment or asset or writing off of notes or accounts receivable). Section 5.09. Compliance with Applicable Laws. Except as listed in Schedule 5.09, the Retained Companies are in compliance with the Retained Companies' Permits and all Laws applicable to them, except where the failure to be in compliance would not, individually or in the aggregate, have a Retained Companies Material Adverse Effect. The Retained Companies have not received any written notice of any administrative, civil or criminal investigation or audit (other than Tax audits) by any Governmental Entity relating to the Retained Business that, individually or in the aggregate, would have a Retained Companies Material Adverse Effect. The Retained Business has all Permits that are required in order to permit it to carry on its business as it is presently conducted, except those Permits which the failure to have would not, individually or in the aggregate, have a Retained Companies Material Adverse Effect. All such Permits relating to the Retained Business are in full force and effect, except for any such Permit as to which the failure so to be in full force and effect would not, individually or in the aggregate, have a Retained Companies Material Adverse Effect. This Section 5.09 does not relate to real property matters (for which Section 5.10 is applicable), Tax matters (for which Section 5.12 is applicable), employee benefits matters (for which Section 5.13 is applicable) or environmental matters (for which Section 5.14 is applicable). Section 5.10. Retained Real Property. Schedules 5.10(a)(i) through (a)(iv) describes all real properties owned, held or used by the Retained Companies (each a "Retained Real Property"), (i) Schedule 5.10(a)(i) lists the Retained Real Properties owned by the Retained Companies, (ii) Schedule 5.10(a)(ii) lists the Retained Real Properties held by the Retained Companies under leases and the leases under which the same are held, (iii) Schedule 5.10(a)(iii) lists the Retained Real Properties held by the Retained Companies under joint ventures or partnerships (each a "Joint Venture") and the joint venture or partnership agreements under which the same are held , and (iv) Schedule 5.10(a)(iv) lists each management agreement (each a "Management Agreement") to which a Retained Company is a party and the hotels that are the subject of such Management Agreements and the owners and lessors of those properties. (b) Each lease, Joint Venture agreement and Management Agreement described in Schedules 5.10(a)(i) through (a)(iv) is valid, binding and enforceable in accordance with its material terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of rights generally and to general principles of equity, neither the applicable Retained Company nor, to the knowledge of HII, any other party thereto is in default under any material provision of such lease or agreement, and to the knowledge of HII no event or circumstance has occurred which, with notice or lapse of time or both, would constitute a default under any material provision of such lease or agreement. (c) Except as set forth on Schedule 5.10(c), the facilities and equipment owned by the Retained Companies and each Joint Venture and the facilities under Management Agreements are in good operating condition and repair and have been reasonably maintained except for such condition and repair as would not have a Material Adverse Effect on the operations of such facility. (d) Each Retained Company listed on Schedules 5.10(a)(i) through (a)(iv) as being the owner or lessee of a Retained Real Property has insurable fee simple title to, or an insurable leasehold interest in, such Retained Real Property. No such Retained Real Property (i) is subject to any Liens other than Permitted Liens or (ii) is subject to any encumbrances, easements, exceptions, encroachments, protrusions, options, rights of first refusal, rights of first offer, other purchase rights or any other title matters that are generally objectionable to purchasers of similar assets or their secured lenders, except for such matters that do not, individually or in the aggregate, have a material adverse effect on the use or value of such Retained Real Property. Section 5.11. Litigation. Except as disclosed in Schedule 5.11, there are no civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of HII, threatened against any of the Retained Companies that, individually or in the aggregate, would if decided adversely have a Retained Companies Material Adverse Effect. Except as disclosed in Schedule 5.11, there are no outstanding judgments, orders, decrees, stipulations or awards against any of the Retained Companies or their respective properties or businesses that would, individually or in the aggregate, have a Retained Companies Material Adverse Effect. This Section 5.11 does not relate to environmental matters (for which Section 5.14 is applicable). Section 5.12. Taxes. (a) HII and each other entity with which HII is included as a member of a consolidated group for tax purposes (collectively, the "HII Affiliated Group") has filed, or will file or cause to be filed, with the appropriate United States, state, local and foreign Governmental Entities, all material Tax Returns required to be filed by it on or prior to the Effective Time (taking into account all extensions of due dates) and such Tax Returns were true, complete and correct in all material respects (as to Tax Returns not filed as of the date of this Agreement but filed at or prior to the Effective Time, will be true, complete and correct in all material respects) and reflected (or will so reflect) the liability for taxes of HII and each of its Subsidiaries, and each member of the HII Affiliated Group has paid or adequately reserved or provided for all Taxes shown thereon as owing. (b) Except as set forth on Schedule 5.12(b), the Retained Companies have not waived or extended any applicable statute of limitations relating to the assessment of any federal, state or local Taxes relating to the Retained Business. (c) There is no Tax sharing or allocation agreement under which any Retained Company will have any obligations after the Effective Time. (d) HII is not, and immediately prior to the Effective Time will not be, an investment company within the meaning of Section 368(a)(2)(F)(iii) or (iv) of the Code. (e) The representations and covenants of HC in Schedule 5.12(e) are incorporated herein by reference. Section 5.13. Employee Benefit Plans. (a) Schedule 5.13(a) identifies each Employee Plan that is entered into, maintained, administered or contributed to, as the case may be, by HII or any of its ERISA Affiliates, and under which any such Person has any liability or obligation, or which covers any Retained Companies' Employee or any former employee of the Retained Companies ("Retained Company Plan"). HII has furnished or made available to Acquiror copies of such Employee Plans (and, if applicable, related trust agreements) and all amendments thereto and summary plan descriptions thereof together with the annual reports (Form 5500 including, if applicable, Schedule B thereto) and the most recent actuarial valuation reports prepared in connection with any such Employee Plan during the past three years. No Retained Company Plan is a Multiemployer Plan or a Title IV Plan. (b) Neither HII nor any of its ERISA Affiliates has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Section 4069 of ERISA. (c) Each Retained Company Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and, to the knowledge of HII, no event has occurred since the date of such determination letter to adversely affect the qualified status of such Employee Plan. There are no matters for which a filing has to be made under the IRS' Voluntary Compliance Resolution Program and each such Employee Plan has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all applicable Laws. (d) Schedule 5.13(d) identifies each Benefit Arrangement that is entered into, maintained, administered or contributed to, as the case may be, by HII or any of its ERISA Affiliates, or under which any such Person has any liability or obligation, or which covers any Retained Companies' Employee or any former employee of the Retained Companies. HII has furnished or made available to Acquiror copies or descriptions of each such Benefit Arrangement (and, if applicable, related trust agreements) and all amendments thereto and summary plan and descriptions thereof. Each such Benefit Arrangement has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all applicable Laws. Section 5.14. Environmental Matters. Except as set forth in Schedule 5.14: (a) No notice, notification, demand, request for information, citation, summons, complaint or order has been received by or is pending, or to the knowledge of the Holiday Parties, is threatened by any Person against the Retained Business, other than where such notice, notification, demand, request for information, citation, summons, complaint or order has been fully resolved, or where such resolution, individually or in the aggregate, would not result in a Retained Companies Material Adverse Effect; (b) Since January 1, 1994, there has been no environmental investigation conducted in relation to any Hotel with respect to any matter which would, individually or in the aggregate, have a Retained Companies Material Adverse Effect; and (c) To the knowledge of HII, no Retained Company has any liability or obligation, fixed or contingent, under, or is in violation of, any Environmental Law, which, individually or in the aggregate, would have a Retained Companies Material Adverse Effect. Section 5.15. Brokers and Finders. None of HII or any of its directors, officers or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the transactions contemplated hereby, except that Bass plc has retained Lazard Freres & Co. LLC as its financial advisor, the fees and expenses of which shall be paid by HC. Section 5.16. Employees. There is no labor strike or work stoppage pending or, to the knowledge of the Holiday Parties, threatened against any of the Retained Companies. Except as set forth on Schedule 5.16, none of the Retained Companies is on the date hereof a party to any collective bargaining agreement relating to its employees. Section 5.17. Contracts. Except as disclosed in Schedule 5.17, neither HII nor any of the other Retained Companies is in breach or default under any Contract, except where such breach or default would not, individually or in the aggregate, have a Retained Companies Material Adverse Effect. To the knowledge of HII, as of the date of this Agreement, none of the other parties to any Contract that is material to the operation or value of the Retained Business is (with or without the lapse of time or the giving of notice, or both) in breach or default, except for those breaches or defaults which would not, individually or in the aggregate, have a Retained Companies Material Adverse Effect. Section 5.18. No Representations or Warranties. The Holiday Parties acknowledge that none of Acquiror or its Subsidiaries, any of their Affiliates or any other Person has made any representation or warranty, expressed or implied, as to the accuracy or completeness of any information regarding any of Acquiror or its Subsidiaries not included in the Transaction Documents, and none of Acquiror or its Subsidiaries or Affiliates or any other Person will have or be subject to any liability to the Holiday Parties or any of their respective Subsidiaries, any of their Affiliates or any other Person resulting from the distribution to the Holiday Parties or any Subsidiary's use of, any such information. The Holiday Parties further acknowledge that, except as expressly set forth in the Transaction Documents, there are no representations or warranties of any kind, expressed or implied, with respect to any of Acquiror or any of its Subsidiaries. ARTICLE 6 Representations and Warranties of Acquiror Acquiror represents and warrants that, except as disclosed in Acquiror SEC Reports filed prior to the date hereof: Section 6.01. Corporate Organization and Qualification. Each of Acquiror and its Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is organized and is duly qualified or licensed to do business and in good standing as a foreign corporation in each jurisdiction in which the properties owned, leased or operated, or the businesses conducted, by it require such qualification or license, except for any such failure so to qualify, or be licensed or be in good standing which would not, individually or in the aggregate, have an Acquiror Material Adverse Effect. Acquiror and its Subsidiaries have the requisite corporate power and authority to carry on its businesses as they are now being conducted. Acquiror has heretofore made available to HC complete and correct copies of the certificate of incorporation and by-laws of Acquiror, each as amended to date and currently in full force and effect. Section 6.02. Corporate Authority. Acquiror has the requisite corporate power and authority to execute, deliver and, subject to the approval of the Merger and the authorization of the issuance of shares of Acquiror Stock in the Merger by the stockholders of Acquiror, perform each Transaction Document to which it is a party and to consummate the transactions contemplated thereby. The execution, delivery and performance by Acquiror of each Transaction Document to which it is a party and the consummation by it of the transactions contemplated thereby have been duly authorized by its Board of Directors, and no other corporate proceedings on its part are or will be necessary to authorize each Transaction Document to which it is a party or to consummate the transactions contemplated thereby, subject to the approval of the adoption of this Agreement and the authorization of the issuance of shares of Acquiror Stock in connection with the Merger by the stockholders of Acquiror. Each Transaction Document to which Acquiror is a party is, or when executed and delivered will be, a valid and binding agreement of Acquiror, enforceable against Acquiror in accordance with the terms thereof except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally, and except that the availability of equitable remedies, including specific performance, may be subject to the discretion of the court before which any proceeding therefore may be brought. Section 6.03. No Violations; Consents and Approvals. (a) None of the execution, delivery or performance by any of Acquiror or its Subsidiaries of each Transaction Document to which it is a party or the consummation by any of Acquiror and its Subsidiaries of the transactions contemplated thereby will conflict with, or result in a violation or breach of, or constitute a default (with or without notice or lapse of time or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any material obligation or loss of a material benefit under, or result in the creation of a Lien upon, any of the properties or assets of Acquiror and its Subsidiaries under (i) the charters or bylaws, or comparable documents of Acquiror and its Subsidiaries, (ii) subject to obtaining the third-party consents set forth in Schedule 6.03 (the "Acquiror Consents"), any loan or credit agreement, note, bond, mortgage, indenture, lease, management or joint venture agreement, (iii) other agreements, instruments, or any permits, concessions, franchises, licenses, variances, exemptions, orders and approvals of all Governmental Entities applicable to Acquiror and its Subsidiaries, or any of their respective properties or assets (the "Acquiror's Permits") , or (iv) subject to the governmental filings and other matters referred to in Section 6.03(b), any Law applicable to Acquiror or its Subsidiaries or any of their respective properties or assets other than, in the case of clauses (iii) and (iv), any such conflicts, violations, defaults, rights, losses or Liens that, individually or in the aggregate, could not reasonably be expected to have an Acquiror Material Adverse Effect. (b) Except for the filing of the Certificate of Merger, the Articles of Merger, applicable HSR Filings and other consents, approvals, orders, authorizations, registrations, declarations, filings and agreements expressly provided for in the Transaction Documents, and except for filings under the Exchange Act, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required with respect to Acquiror or any of its Subsidiaries, in connection with the execution, delivery or performance by Acquiror of each Transaction Document to which it is or will be a party or the consummation by it of the transactions contemplated thereby except for consents, approvals, orders, authorizations, registrations, declarations or filings the failure of which to obtain or to make would not, individually or in the aggregate, have an Acquiror Material Adverse Effect. Section 6.04. Capital Stock. (a) The authorized capital stock of Acquiror consists solely of (i) 75,000,000 shares of Acquiror Stock, of which an aggregate of 16,565,840 shares of Acquiror Stock were issued and outstanding as of the close of business on December 12, 1996 and no shares were held in the treasury of Acquiror as of the close of business on December 12, 1996; and (ii) 25,000,000 shares of preferred stock, par value $0.01 per share, of Acquiror, of which no shares were issued and outstanding on December 12, 1996. As of the close of business on December 12, 1996, there were outstanding under Acquiror Option Plans options to purchase an aggregate of 883,843 shares of Acquiror Stock (subject to adjustment on the terms set forth in Acquiror Option Plans). As of December 12, 1996, Acquiror had no shares of its capital stock reserved for issuance other than shares of Acquiror Stock reserved for issuance pursuant to Acquiror Option Plans. Except as set forth above, as of the date of this Agreement, there are no securities convertible into or exchangeable for, or options, warrants, calls, subscriptions, rights or Contracts of any kind to which Acquiror or any of its Subsidiaries is a party to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of Acquiror or of any of its Subsidiaries. (b) All of the outstanding shares of capital stock of Acquiror have been duly authorized and validly issued and are fully paid and non- assessable. All of the shares of Acquiror Stock to be issued in the Merger are duly authorized and, when issued in accordance with the terms of this Agreement (including the approval by the stockholders of Acquiror of the issuance thereof), will be duly and validly issued, fully paid, non- assessable and free of preemptive rights. Except as listed in Schedule 6.04, there are no outstanding (i) shares of capital stock or other voting securities of Acquiror, (ii) securities of Acquiror convertible into or exchangeable for shares of capital stock or other voting securities of Acquiror, (iii) options or other rights to acquire from Acquiror, or other obligations of Acquiror to issue, any capital stock, other voting securities or securities convertible into or exchangeable for capital stock or voting securities of Acquiror or (iv) bonds, debentures, notes or other obligations or securities other than Acquiror Common Stock the holders of which have the right to vote with the stockholders on any matter (the items in clauses (i), (ii), (iii) and (iv) being referred to collectively as the "Acquiror Securities"). There are no outstanding obligations of Acquiror to repurchase, redeem or otherwise acquire any Acquiror Securities. No class of capital stock of Acquiror is entitled to preemptive rights. Section 6.05. Subsidiaries. (a) Schedule 6.05 lists the name and jurisdiction of incorporation or organization of each Subsidiary of Acquiror. (b) Except as disclosed in Schedule 6.05, all of the outstanding capital stock of, or other voting securities or ownership interests in, each Subsidiary of Acquiror, has been duly authorized and validly issued and is fully paid and non-assessable and is owned by Acquiror, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). Except as listed on Schedule 6.05(b)(2), there are no outstanding (i) shares of capital stock or other voting securities of, or ownership interest in, any Subsidiary of Acquiror, (ii) securities of any Subsidiary of Acquiror convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any such Subsidiary, (iii) options or other rights to acquire from Acquiror or its Subsidiaries, or other obligation of Acquiror or any of its Subsidiary to issue, any capital stock or other voting securities of, or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities of, or ownership interests in, any Subsidiary of Acquiror, or (iv) bonds, debentures, notes or other obligations or securities of any subsidiary of Acquiror, the holders of which have the right to vote with the stockholders of such Subsidiary on any matter (the items in clauses (i), (ii), (iii) and (iv) being referred to collectively as the "Acquiror Subsidiary Securities"). There are no outstanding obligations of Acquiror or any of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding Acquiror Subsidiary Securities. Section 6.06. Information. (a) The financial statements of Acquiror included in Acquiror SEC Documents have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, with respect to any unaudited financial statement, the absence of footnote disclosures and subject to normal year-end adjustments and other adjustments described therein). Each of the consolidated balance sheets of Acquiror and its Subsidiaries fairly presents in all material respects the consolidated financial position of Acquiror and its Subsidiaries as of its date and each of the consolidated statements of income, cash flows and stockholders' equity of Acquiror and its Subsidiaries fairly presents in all material respects the consolidated results of operations, cash flows and retained earnings, as the case may be, of Acquiror and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end adjustments and other adjustments described therein), in each case in accordance with GAAP. (b) None of the information supplied or to be supplied by Acquiror or its representatives for inclusion or incorporation by reference in the Proxy Statement will at the time such Proxy Statement is filed with the SEC and at the time of the mailing of the Proxy Statement to the stockholders of Acquiror contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No representation is made by Acquiror with respect to statements made in the Proxy Statement based on information supplied by the Holiday Parties or any of their respective Subsidiaries for inclusion therein or with respect to information concerning the Holiday Parties or any of their respective Subsidiaries incorporated by reference therein. Section 6.07. SEC Filings. (a) Acquiror has filed the Acquiror SEC Documents. As of its filing date, each Acquiror SEC Document filed, as amended or supplemented, if applicable, (i) complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as applicable and the rules and regulations thereunder and (ii) did not, at the time it was filed (and at the effective date thereof, in the case of a registration statement), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Section 6.08. Absence of Certain Events and Changes. Except as disclosed in Schedule 6.08 or as otherwise contemplated by the Transaction Documents, since September 30, 1996 Acquiror and its Subsidiaries have conducted their respective businesses in the ordinary course, consistent with past practices, and there have not been any events, changes or developments which would have, individually or in the aggregate, an Acquiror Material Adverse Effect. Section 6.09. Compliance with Applicable Laws. Except as disclosed in Schedule 6.09, Acquiror and its Subsidiaries are in compliance with all Acquiror Permits and Laws applicable to them, except where the failure to be in compliance would not individually or in the aggregate, have an Acquiror Material Adverse Effect. None of Acquiror or any of its Subsidiaries has received any written notice of any administrative, civil or criminal investigation or audit (other than Tax audits) by any Governmental Entity that, individually or in the aggregate, would have an Acquiror Material Adverse Effect. Each of Acquiror and its Subsidiaries has all Permits that are required in order to permit it to carry on its business as it is presently conducted, except those Permits which the failure to have would not, individually or in the aggregate, have an Acquiror Material Adverse Effect. All Permits are in full force and effect, except for any such Permit as to which the failure so to be in full force and effect would not, individually or in the aggregate, have an Acquiror Material Adverse Effect. This Section 6.09 does not relate to Tax matters (for which Section 6.12 is applicable) or environmental matters (for which Section 6.13 is applicable). Section 6.10. Acquiror Real Property. (a) Schedules 6.10(a)(i) through (a)(iv) describes all real properties owned, held or used by Acquiror and its Subsidiaries as of the date hereof (each an "Acquiror Real Property"), (i) Schedule 6.10(a)(i) describes Acquiror Real Properties owned by Acquiror and its Subsidiaries as of the date hereof, (ii) Schedule 6.10(a)(ii) describes Acquiror Real Properties held by Acquiror and its Subsidiaries under leases as of the date hereof and the leases under which the same are held, and (iii) Schedule 6.10(a)(iii) describes Acquiror Real Properties held by Acquiror and its Subsidiaries as of the date hereof under joint ventures or partnerships and the joint venture or partnership agreements under which the same are held. (b) Each lease, joint venture agreement and partnership agreement described in Schedules 6.10(a)(i) through (a)(iv) is, to the knowledge of Acquiror, valid, binding and enforceable in accordance with its material terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of rights generally and to general principles of equity, neither Acquiror or its Subsidiary (as applicable) nor, to the knowledge of Acquiror, any other party thereto is in default under any material provision of such lease or agreement, and to the knowledge of Acquiror, no event or circumstance has occurred which, with notice or lapse of time or both, would constitute a default under any material provision of such lease or agreement, except in each case to the extent that any invalidity, unenforceability or default, individually or in the aggregate, would not have an Acquiror Material Adverse Effect. Section 6.11. Litigation. Except as disclosed in Schedule 6.11, there are no civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of Acquiror, threatened, against Acquiror or any of its Subsidiaries that, individually or in the aggregate, would, if decided adversely, have an Acquiror Material Adverse Effect. Except as disclosed in Schedule 6.11, there are no outstanding judgments, orders, decrees, stipulations or awards against Acquiror or any of its Subsidiaries or their respective properties or businesses that would, individually or in the aggregate, have an Acquiror Material Adverse Effect. This Section 6.11 does not relate to environmental matters (for which Section 6.13 is applicable). Section 6.12. Taxes. (a) The representations and covenants of Acquiror in Schedule 6.12(a) are incorporated herein by reference. (b) Absent a final determination to the contrary by the competent Tax Authority, Acquiror shall treat the Merger as a tax-free "reorganization", within the meaning of Section 368(a)(1)(A), in which no gain or loss is recognized, for all Tax purposes. (c) All Tax Returns required to be filed by Acquiror before the date hereof have been filed, and all Taxes shown as due and payable on such Returns have been timely paid, except to the extent that the failure to file or to file timely, individually or in the aggregate, could not be reasonably expected to have an Acquiror Material Adverse Effect. (d) There are no claims or investigations pending or, to the knowledge of Acquiror, threatened relating to Taxes that individually or in the aggregate, could be reasonably expected to have an Acquiror Material Effect on Acquiror and its Subsidiaries, and none of Acquiror or any of its Subsidiaries have waived or extended any applicable statute of limitations in connection with the assessment of federal, state or local Taxes relating to Acquiror and its Subsidiaries. (e) There is no Tax sharing or allocation agreement under which Acquiror or any of its Subsidiaries will have any obligations after the Effective Time. Section 6.13. Environmental Matters. Except as set forth in Schedule 6.13: (a) No notice, notification, demand, request for information, citation, summons, complaint or order has been received by, or is pending or, to the knowledge of Acquiror, is threatened by any Person against, Acquiror or any of its Subsidiaries, other than where such notice, notification, demand, request for information, citation, summons, complaint or order has been fully resolved, or where such resolution would not, individually or in the aggregate, result in an Acquiror Material Adverse Effect; (b) Since January 1, 1994, there has been no environmental investigation conducted of which Acquiror has knowledge in relation to Acquiror or any of its Subsidiaries or any property or facility owned, leased or operated by Acquiror or any of its Subsidiaries with respect to any matter which would, individually or in the aggregate, have an Acquiror Material Adverse Effect, which has not been delivered to HC at least five days prior to the date hereof; and (c) To the knowledge of Acquiror, none of Acquiror or any of its Subsidiaries has any liability or obligation, fixed or contingent, under, or is in violation of, any Environmental Law, which, individually or in the aggregate, could reasonably be expected to have an Acquiror Material Adverse Effect. Section 6.14. Brokers and Finders. None of Acquiror or any of its directors, officers or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the transactions contemplated hereby, except that Acquiror has retained Merrill Lynch & Co. as its financial advisor, the fees and expenses of which shall be paid by Acquiror. Section 6.15. Employees. There is no labor strike or work stoppage pending or, to the knowledge of Acquiror, threatened against Acquiror or any of its Subsidiaries. Except as set forth in Schedule 6.15, none of Acquiror or its Subsidiaries is on the date hereof a party to any collective bargaining agreement relating to its employees, that individually or in the aggregate, would have an Acquiror Material Adverse Effect. Section 6.16. Financing. Acquiror has entered into the Commitment (the "Commitment") as previously delivered to HC. Section 6.17. Capital Expenditure Plan. Acquiror has adopted a capital expenditure plan, pursuant to which it plans to spend an additional $150 million to further upgrade the hotels acquired pursuant to the Merger and Asset Purchase Agreements. Section 6.18. No Representations or Warranties. Acquiror acknowledges that none of the Holiday Parties, any of their Affiliates or any other Person has made any representation or warranty, expressed or implied, as to the accuracy or completeness of any information regarding any of HII, HC, New Spinco or the Retained Business not included in the Transaction Documents, and none of the Holiday Parties or any of their Affiliates or any other Person will have or be subject to any liability to Acquiror or any of its Subsidiaries, any of their Affiliates or any other Person resulting from the distribution to Acquiror or Acquiror's or any of Acquiror's Subsidiaries' use of, any such information. Acquiror further acknowledges that, except as expressly set forth in the Transaction Documents, there are no representations or warranties of any kind, expressed or implied, with respect to any of HII, HC, New Spinco or the Retained Companies. ARTICLE 7 Covenants of HII and HC Section 7.01. Conduct of HII and HC. (A) During the period from the date of this Agreement and continuing until the Effective Time, each of the Holiday Parties as to itself and the Retained Companies (with respect to the conduct of the Retained Business) agrees that, except for the Contribution, the Exchange and as otherwise contemplated by the Transaction Documents, HII will, and will cause each of the other Retained Companies to, conduct the Retained Business in the ordinary course thereof consistent with past practice and in compliance in all material respects with all applicable Laws and Permits and, to the extent consistent therewith, use reasonable efforts to (a) preserve intact the Hotels, (b) keep available the services of their current officers and other key employees, and (c) preserve their relationships with those Persons having business dealings with them to the end that their goodwill and ongoing businesses will be unimpaired at the Effective Time. Without limiting the generality or effect of the foregoing, and except as otherwise expressly provided in this Agreement or the Contribution Agreement, prior to the Effective Time, HII will not, and will not permit any of the other Retained Companies to: (a) Issuance of Securities. Issue, transfer, sell, dispose of or pledge, or authorize or agree to the issuance, transfer, sale or disposition or pledge by any of the Retained Companies (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) of, any shares of capital stock or any voting securities of any of the Retained Companies, or any options or other securities convertible into or exchangeable for any such shares of capital stock or any voting securities of any of the Retained Companies or amend any of the terms of any such securities or agreements relating to such capital stock outstanding on the date hereof, other than the issuance, transfer, sale or disposition by a wholly-owned Subsidiary of its capital stock to its parent. (b) Governing Documents. Amend the HII Charter or HII By-laws or the certificate of incorporation or by-laws or comparable organizational documents of any Retained Company. (c) No Acquisitions. (i) Acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any property or business or (ii) make or agree to make any other investment in any person (whether by means of loan, capital contribution, purchase of capital stock or other securities or otherwise) that would be part of the Retained Business, except for acquisitions or investments by HII pursuant to the existing contractual obligations listed in Schedule 7.01(c) or investments in any entity that was a Retained Business before giving effect to such investment. (d) No Dispositions. Sell, lease, license, encumber or otherwise dispose of, or agree to sell, lease, license, encumber or otherwise dispose of, any of the assets of the Retained Business other than in the ordinary course of business consistent with past practice or pursuant to the existing contractual commitments and other arrangements, each as listed in Schedule 7.01(d). (e) Benefit Plans. Except as required by Law, (i) adopt any plan, arrangement or policy which would become an Employee Plan or amend an Employee Plan to the extent such adoption or amendment would create or increase any liability or obligation on the part of the Retained Business that will not either (A) be fully performed or satisfied prior to the Effective Time or (B) be assumed by New Spinco or one of its Subsidiaries pursuant to the Contribution Agreement or (ii) adopt any increase in or establishment of any bonus, insurance, welfare, severance, deferred compensation, pension, retirement, profit sharing, stock option (including without limitation the granting of stock options, stock appreciation rights performance awards or restricted stock awards) or stock purchase rights or plans. (f) Pay Increases. Other than in the ordinary course of the Retained Business consistent with past practices, (i) grant any increases in the base compensation of any Retained Companies' Employee except for increases in the base compensation of any Retained Companies' Employees scheduled to go into effect on January 1, 1997 as previously provided to Acquiror or (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required by any of the Employee Plans as in effect on the date hereof to any Retained Companies' Employee. (g) Liens. Create, incur, suffer to exist or assume any Lien on the Retained Assets, except for Permitted Liens. (h) Tax-Free Contribution, Exchange and Merger. Take or cause to be taken prior to the Effective Time any action that would disqualify the Contribution and the Exchange from being treated as a "reorganization" within the meaning of Section 368(a)(1)(D) of the Code or the Exchange from being treated as tax-free under Section 355 of the Code or the Merger from being treated as a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code. (i) Representation and Warranties. Take or agree or commit to take any action that would make any representation and warranty of HII or HC hereunder inaccurate in any material respect at, or as of any time prior to, the Effective Time. (j) The Contribution Agreement. Terminate, amend, modify or waive compliance with any of the terms or conditions of the Contribution Agreement directly or indirectly affecting the Retained Assets or the Retained Liabilities or affecting the rights or obligations of HII thereunder from and after the Effective Time. (k) Certain Transactions. Adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of HII or any of the other Retained Companies (other than the Contribution, the Exchange and the Merger). (l) Certain Contracts. Enter into any contract providing for acceleration of payment of any liability or performance of any benefit or payment or other consequence as a result of a change of control of HII or any of the Retained Companies or enter into any contract, arrangement or understanding requiring the lease or purchase of equipment, materials, supplies or services over a period greater than 12 months, which is not cancelable without penalty on 30 days' or less notice or involves the payment by HII or any of the Retained Companies of more than $100,000 unless such purchase or lease is necessary to correct, on an emergency basis, any condition that could be reasonably expected to affect adversely the life, safety or health of the customers and employees of the Retained Business. (m) Other Actions. Enter into any contract, agreement, commitment or arrangement, or take any corporate or other action, to do any of the foregoing. (B) Without limiting the generality or effect of the above, and except as otherwise expressly provided in this Agreement or the Contribution Agreement, prior to the Effective Time, HII will, and will cause the other Retained Companies to: (a) Further Covenants. (i) Prepare and timely file with the relevant Taxing Authority all material Pre-Effective Returns; (ii) promptly notify Acquiror of any action, suit, proceeding, claim or audit pending against or with respect to the Retained Companies in respect of any Taxes where there is a reasonable possibility of a determination or decision which would materially increase the Tax liabilities of any of the Retained Companies (other than Taxes for which New Spinco has assumed liability under the Contribution Agreement); and (iii) not, without the prior written consent of Acquiror, change any of the Tax elections, accounting methods, conventions or principles which relate to the Retained Business that has the effect of increasing the Retained Liabilities of the Retained Companies. (b) Maintenance of Properties. Continue to maintain and repair all property material to the operation of the Retained Business in a manner consistent with past practice. (c) Asset Purchase Agreements. Use its reasonable efforts to cause the Asset Purchase Agreements to become effective and to cause the closing of each Asset Purchase Agreement to take place simultaneously with the closing of this Agreement. (d) IRS Ruling. To obtain as promptly as possible (i) an advance letter ruling from the Internal Revenue Service (the "IRS") in response to the HII ruling request submitted to the IRS on November 12, 1996, to the effect that the Contribution and Exchange will be a "reorganization" within the meaning of Section 368(a)(1)(D) of the Code and will be tax-free under Section 355 of the Code (the "IRS Ruling") and (ii) an opinion of Davis Polk & Wardwell to the effect that the Merger constitutes a tax-free reorganization under Section 368(a)(1)(A) of the Code in which no gain or loss is recognized. (e) Representation Letter. To deliver to Acquiror a representation letter substantially in the form of the HC representation letter attached hereto as Schedule 5.12(e). (f) Drop-down; Consents. Use its reasonable efforts to cooperate with Acquiror to (i) contribute certain of the Retained Assets to one or more wholly owned Subsidiaries of HII and (ii) obtain certain consents, subordination and/or estoppel agreements with respect to ground leases, Joint Venture agreements, Management Agreements and other material contracts as required by Acquiror's lenders in connection with the Transactions; provided that HII will not be required to incur any expense, obligation or liability in connection with such efforts. Section 7.02. Notices of Certain Events. HII and HC shall promptly notify Acquiror of: (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the Transactions, other than consents, the failure of which to obtain would not have a Retained Companies Material Adverse Effect; (b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by the Transaction Documents; (c) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting the Retained Business which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 5.11 or which relate to the consummation of the transactions contemplated by this Agreement; and (d) any fact, event or circumstance which makes any representation or warranty of the Holiday Parties herein untrue or incorrect in any material respect or involves a breach of any covenant herein of the Holiday Parties. Section 7.03. Liquor and Other Licenses. (a) The Holiday Parties shall cooperate, and prior to the Effective Time shall cause the Retained Business to cooperate, with Acquiror in connection with obtaining the regulatory approvals of the transactions contemplated by this Agreement as may be required by any Governmental Entities administering laws regulating the sale of alcoholic beverages, including but not limited to Acquiror obtaining, by transfer or otherwise, such approvals for, and/or the issuance of all liquor, cabaret and other federal, state and local licenses necessary to maintain the continuity of service of alcoholic beverages. If any such regulatory approval or license issuances shall not be obtained by Acquiror prior to the Effective Time, HC shall, after the Effective Time, cooperate with Acquiror, at Acquiror's sole expense, to maintain continuity of the liquor service as well as the continuity of the same forms of business operations conducted at, in or upon each property by the Retained Companies or Acquiror and its Subsidiaries immediately before the Effective Time. Nothing herein shall require any holder of any liquor, cabaret or other federal, state or local license to permit any unlicensed person to unlawfully exercise any privilege under such license or to have any unlawful interest in liquor inventory or in revenues from any business operated under such license. (b) After the Effective Time, the Holiday Parties and Acquiror shall communicate and cooperate regarding the application of alcoholic beverage laws to Acquiror's business and the businesses of the Holiday Parties and their Affiliates. Section 7.04. Financial Statements. HC will cause to be delivered to Acquiror as promptly as practicable the financial statements of the Carve-out Business required to be filed in the Proxy Statement together with an unqualified opinion of Deloitte & Touche thereon (the "Financial Statements"). The Financial Statements will be prepared in accordance with GAAP, consistently applied, and present fairly, in all material respects, the financial position and results of operations for the Carve-out Business as of and for the periods set forth therein. ARTICLE 8 Covenants of Acquiror Section 8.01. Conduct of Acquiror. (A) During the period from the date of this Agreement and continuing until the Effective Time, Acquiror agrees as to itself and its Subsidiaries that, except as otherwise contemplated by the Transaction Documents or agreed by HC and Acquiror, Acquiror will, and will cause each of its Subsidiaries to, conduct the business of Acquiror in the ordinary course thereof consistent with past practice and in compliance in all material respects with all applicable Laws and Permits and, to the extent consistent therewith, use reasonable efforts to (a) preserve intact the business of Acquiror and each of its Subsidiaries, (b) to keep available the services of their current officers and other key employees, and (c) preserve their relationships with those Persons having business dealings with them to the end that their goodwill and ongoing businesses will be unimpaired at the Effective Time (as used hereafter in this Article 8, "Acquiror" means "Acquiror and its Subsidiaries"). Without limiting the generality or effect of the foregoing, and except as aforesaid or as otherwise expressly provided in this Agreement or the Contribution Agreement, prior to the Effective Time, Acquiror will not: (a) Issuance of Securities. Issue, transfer, sell, dispose of, or pledge, or authorize or agree to the issuance, transfer, sale or disposition or pledge by Acquiror (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) of , any shares of capital stock or any voting securities of Acquiror, or any options or other securities convertible into or exchangeable for any such shares of capital stock or any voting securities of Acquiror or amend any of the terms of any such securities or agreements relating to such capital stock outstanding on the date hereof, other than pursuant to employee or director plans filed as exhibits to Acquiror SEC Documents or the issuance, transfer, sale or disposition by a wholly-owned Subsidiary of its capital stock to its parent. (b) Governing Documents. Amend Acquiror's charter or by-laws or comparable organizational documents. (c) Debt. Debt of Acquiror, determined on a consolidated basis, shall not prior to the Effective Time be in excess of the indebtedness permitted to be incurred by Acquiror pursuant to the Term Credit Agreement, dated December 12, 1995, among Bristol Hotel Asset Company, Bankers Trust Company, as agent, and the lenders party thereto (the "Existing Acquiror Credit Agreement"), without giving effect to any amendment, modification or waiver thereof or thereunder, plus $25 million aggregate principal amount of additional indebtedness at any time outstanding. (d) No Dispositions. Sell, lease, license, encumber or otherwise dispose of, or agree to sell, lease, license, encumber or otherwise dispose of, any of Acquiror's hotels other than pursuant to the existing contractual commitments or other arrangements, each as listed in Schedule 8.01(d). (e) Representation and Warranties. Take or agree or commit to take any action that would make any representation and warranty of Acquiror hereunder inaccurate in any material respect at, or as of any time prior to, the Effective Time. (f) Accounting Principles. Change any of its accounting principles, except as may be required by GAAP. (g) Other Actions. Enter into any contract, agreement, commitment or arrangement, or take any corporate or other action, to do any of the foregoing. Notwithstanding the foregoing, Acquiror may take any action that otherwise would be prohibited under this Section 8.01(A), (i) if such action could not reasonably be expected to involve the expenditure or incurrence of obligations of more than $25 million, (ii) if, in the case of any action referred to in subsection 8.01(d) above, the proceeds for the hotel to be disposed of, which when added to the proceeds received for hotels the disposition of which would be prohibited by subsection 8.01(d), is less than $25 million, or (iii) with the prior written consent of HC. Section 8.02. Notices of Certain Events. Acquiror shall promptly notify HC and HII of: (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the Transactions, other than consents, the failure of which to obtain would not have an Acquiror Material Adverse Effect; (b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by the Transaction Documents; (c) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting the Retained Business which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 6.11 or which relate to the consummation of the transactions contemplated by this Agreement; and (d) any fact, event or circumstance which makes any representation or warranty of Acquiror herein untrue or incorrect in any material respect or involves a breach of any covenant herein of Acquiror. Section 8.03. Tax-Free Contribution, Exchange and Merger. (a) (i) Prior to the Effective Time, each of HC, HII and Acquiror will not, and will not permit any of its respective Affiliates to, and (ii) thereafter Acquiror (to the extent of actual knowledge of likely disqualification), will not, and will not permit any of its respective Affiliates (other than HC and its Affiliates, which shall not be considered Affiliates of Acquiror for purposes of this Section 8.03) to take or cause or permit to be taken, any action that would disqualify the Contribution and the Exchange from being treated as a "reorganization" within the meaning of Section 368(a)(1)(D) of the Code or the Exchange from being treated as tax-free under Section 355 of the Code or the Merger from being treated as a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code. During the one-year period after the Effective Time: (i) Acquiror shall continue or cause to be continued the historic business of HII within the meaning of Treasury Regulations Section 1.368- 1(d) and not sell, transfer, distribute or otherwise dispose of a significant portion (within the meaning of Treasury Regulations Section 1.3681-(d)) of the Hotels, except that Acquiror may contribute some of or all of the Hotels to one or more a wholly owned subsidiaries if such contributions do not give rise to the recognition of gain under Section 351 of the Code and otherwise qualifies under Section 368(a)(2)(C) of the Code; and (ii) Acquiror shall not adopt a plan of liquidation or initiate and enter into an agreement of merger, a redemption or other transaction pursuant to which the corporate legal existence of Acquiror would terminate or the outstanding stock of Acquiror would, in a taxable transaction, be converted into cash, other property or the stock or securities of any other issuer, unless Acquiror first obtains an opinion, in form and substance satisfactory to HC, of Jones, Day, Reavis & Pogue or other nationally recognized tax counsel satisfactory to HC, to the effect that the proposed action will not result in the Exchange or the Merger failing to qualify for tax-free treatment under Sections 368(a)(1)(D) and 355 of the Code and Section 368(a)(1)(A) of the Code, respectively. (b) Acquiror shall reasonably cooperate with, as and to the extent reasonably requested by HII, in connection with the obtaining of (i) the advance letter ruling from the IRS in response to the ruling request submitted to the IRS on November 12, 1996 to the effect that the Contribution and Exchange will be a "reorganization" within the meaning of Section 368(a)(1)(D) of the Code and will be tax-free under Section 355 of the Code, and (ii) an opinion of Davis Polk & Wardwell to the effect that the Merger constitutes a tax-free reorganization under Section 368(a)(1)(A) of the Code. (c) Acquiror shall provide to HII a representation letter substantially in the form of Acquiror representation letter attached hereto as Schedule 6.12(a). Section 8.04. HII Names. Acquiror understands that the names "Holiday Inn" and "Crowne Plaza" are the names applied to the international system of hotels operated or licensed by HII and/or its affiliates and defined as the "System" in the Franchise Agreements. Acquiror recognizes the exclusive right of HII and, following the Effective Time, New Spinco and its permitted assigns to the System, including the names "Holiday Inn" and "Crowne Plaza" and all service marks, trademarks, copyrights, trade names, patents or other trade registrations now or hereafter held or applied for in connection therewith, and hereby disclaims any right, title or interest therein, regardless of the legal protection afforded the service marks, trademarks, patents, trade names, copyrighted items or other trade registrations of HII and, following the Effective Time, New Spinco and its permitted assigns. Acquiror agrees not to use the names "Holiday Inn" and "Crowne Plaza", the words "Holiday" or "Bass" or any combination or any variation of such names or words, or any other trademarks, trade names, service marks, patents, copyrighted items or other trade registrations of HII, HC or any parent, Subsidiary (direct or indirect) or related entity, or any of their permitted assigns, in connection with the operation of any Hotel or any hotel listed on Schedule 9.07(2) except in accordance with and subject to the terms and conditions of the Franchise Agreement relating to such Hotel or hotel. Accordingly, and notwithstanding any other provisions hereof, prior to the Effective Time, HC will change the name of each Retained Company the name of which includes the word "Holiday," "Crowne Plaza" or "Bass", so that the name of such Retained Company no longer includes such word. Section 8.05. Employee Communications. Prior to the Effective Time, HII and Acquiror shall each use their reasonable efforts to cooperate in making any required communications with Transferred Employees with respect to employee benefit plans maintained by HII or Acquiror and with respect to other matters arising in connection with the Merger. ARTICLE 9 Covenants of Acquiror, HC and HII The parties hereto agree that: Section 9.01. Access to Information. From the date hereof until the Effective Time, each of the parties hereto will give the other party, its counsel, financial advisors, auditors and other authorized representatives reasonable access during normal business hours to its and its Subsidiaries' offices, properties, books and records, will furnish to the other party such financial and operating data and other information as such Persons may reasonably request and as is reasonably related to the Transactions and will instruct their respective employees, counsel and financial advisors to cooperate with the other party in its investigation of the business of HII and the other Retained Companies or Acquiror and its Subsidiaries, as applicable. Any information exchanged among the parties pursuant to this Section 9.01 shall be subject to the terms of the Confidentiality Agreement. As this Section 9.01 applies to HC and HII, such parties need not provide any information relating to their respective franchising businesses unless (i) access to such information is reasonable under the circumstances (as determined by HC or HII, as the case may be, in good faith), and (ii) such information relates directly to the Retained Business. Acquiror agrees that in no event shall the above-described access to information include the right to perform any soil, groundwater or other physical sampling or testing without the prior written consent of HC, which consent shall not be unreasonably withheld or delayed. Section 9.02. Reasonable Efforts. Subject to the terms and conditions of this Agreement, each party will use its reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Transactions, including without limitation all actions necessary, proper and advisable to ensure that each Management Agreement or interest in a Joint Venture to which any Retained Company is a party is, if required, assigned to Acquiror; provided, however, that in connection with the foregoing neither Acquiror nor any of its Subsidiaries will be required to commit to any divestiture or hold separate or similar transaction and otherwise take or commit to take any action, in each case, that materially limits its freedom of action with respect to, or its ability to retain, HII or any of the other Retained Companies or any material portion of the assets (including without limitation the Hotels) of the Retained Companies existing and material businesses or assets (as of the date hereof) of Acquiror or any of Acquiror's Subsidiaries. (B) Without limiting the generality or effect of the above, and except as otherwise expressly provided in this Agreement, prior to February 7, 1997, HC and Acquiror shall negotiate in good faith and use their reasonable efforts to agree upon the forms of (i) the Asset Purchase Agreements and (ii) the Contingency Agreement. Section 9.03. Certain Filings. (a) Acquiror shall use reasonable efforts to prepare and file promptly with the SEC a preliminary proxy statement. (b) HII, HC and Acquiror shall cooperate with each other and provide to each other all information necessary in order to prepare the Proxy Statement and any other required filings. The information provided by HII, HC and Acquiror for use in the Proxy Statement and such other filings shall at all times prior to the Effective Time be true and correct in all material respects and shall not omit to state any material fact required to be stated therein or necessary in order to make such information not false or misleading. Each such filing shall, when filed with the SEC or any other Governmental Entity, comply in all material respects with all applicable requirements of law. Section 9.04. Public Announcements. Acquiror, HC and HII will consult and agree, such agreement not to be unreasonably withheld, with each other before (i) with respect to any date between the Effective Time and the first anniversary of the Effective Time, issuing any press release relating to the Transactions or (ii) with respect to any date between the date hereof and the Effective Time, issuing any press release or making any public statement relating to the Transactions and, except as may be required by applicable law, Governmental Entity or any securities exchange, will not issue any such press release or make any such public statement prior to such consultation and agreement. Section 9.05. Further Assurances. At and after the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of HII, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of HII, any other actions and things reasonably necessary to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of HII acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger. Section 9.06. Meetings of Stockholders. Acquiror shall take all action necessary, in accordance with applicable law and its charter and bylaws, to duly call, give notice of, convene and hold a meeting of its stockholders to consider and vote upon the adoption of this Agreement and the issuance of Acquiror Stock in the Merger. The stockholder vote required for the adoption and approval of such transactions shall be the vote required by the DGCL and Acquiror's certificate of incorporation. Section 9.07. Franchise Agreements. At the Effective Time, HIFI and Acquiror, or a Subsidiary of Acquiror reasonably acceptable to HIFI, shall enter into Franchise Agreements with respect to the Hotels identified on Schedule 9.07(1). At the Effective Time, HIFI and Acquiror, or a Subsidiary of Acquiror reasonably acceptable to HIFI, shall also have entered into Franchise Agreements with respect to the conversion of the properties identified on Schedule 9.07(2) to the brands listed on Schedule 9.07(2). Section 9.08. Certain Contracts. HC and Acquiror shall use their reasonable good faith efforts to negotiate with the parties to each of the contracts listed on Schedule 9.08 with a view toward securing and equitably allocating the benefits originally contemplated by HII to be derived from such contracts. Section 9.09. Environmental and Structural Matters. (a) HC agrees that, during the 80 calendar days following the date hereof, Acquiror may, at its own cost and expense, perform Phase I environmental audits and/or engineering audits of the Hotels owned by the Joint Ventures and of the Hotels which are owned or leased by the Retained Companies. Such audits shall be performed by an independent third party consultant reasonably satisfactory to HC, and shall be provided to HC in the form of a written report or reports (each an "Initial Report") within 5 days after Acquiror's receipt thereof. To the extent recommended in such Phase I environmental audits or structural audits and with the prior written consent of HC, which consent will not be unreasonably withheld or delayed, Acquiror may conduct Phase II environmental audits and other follow- up testing and investigations prior to the Effective Time and Acquiror agrees to provide to HC, promptly after Acquiror's receipt thereof, but in no event later than five days after the receipt thereof, the results of such audits, testing or investigation. (b) If HC determines in good faith that any recommendation or cost estimate in any Initial Report is erroneous, HC may, at its own cost and expense, retain an independent third party consultant, which consultant is listed on Bankers Trust Company's list of approved consultants, to review such Initial Reports and, if applicable, any Phase II or other reports prepared as permitted in clause (a) above. If HC delivers to Acquiror, within 10 days following the date HC received the Initial Report or, if applicable, any subsequent Acquiror Reports, a report or reports (each an "HC Report") setting forth such consultant's maximum estimated cost of repairing or remediating any violation of an Environmental Law, any violation of a Building Code, or any other Structural Deficiency, then the "Final Estimated Cost" with respect to each such matter shall be deemed to be such consultant's maximum estimated cost set forth in the HC Report. With respect to any matter for which a cost estimate is identified in the Initial Report and with respect to which HC does not object as provided above, then the maximum estimated cost set forth in the Initial Report shall be deemed to be the Final Estimated Cost for such matter. Acquiror and HC agree to cooperate in preparing any such reports and to provide each other with reasonably available information relating to such reports. ARTICLE 10 Employee Benefits Section 10.01. Maintenance of Benefits. (a) For a period of 12 months following the Effective Time, Acquiror shall, subject to the following provisions of this paragraph, (i) provide Retained Companies' Employees with the same base pay levels and comparable long-term and short- term incentive compensation bonus opportunities as were in place immediately prior (x) to the date hereof, to the extent such pay levels and bonus opportunities were modified between the date hereof and the Effective Time other than in accordance with this Agreement and (y) to the Effective Time, to the extent such pay levels and bonus plans were not modified after the date hereof or were modified after the date hereof in accordance with this Agreement and (ii) provide the Retained Companies' Employees with compensation and benefits comparable to the Savings Plan, the Group Health Plans, the Nonqualified Plans and the Additional Welfare Plans for the benefit of those Retained Companies' Employees who participated in such plans immediately prior to the Effective Time. Not less than 30 days after the date hereof, Acquiror shall deliver to the Finance Director of Bass plc a written analysis of the comparability of the various benefits noted in subsection (ii) above, together with a proposal for Acquiror to provide to Retained Companies' Employees additional compensation and/or benefits if required to ensure comparability. If the comparability of the various benefits referred to in the preceding sentence is approved by the Finance Director of Bass plc, such benefits will be deemed to be comparable with those provided to Retained Companies' Employees prior to the Effective Time. If such benefits are not so approved, Acquiror may provide such benefits to Retained Companies' Employees as it shall determine; provided, however, that such benefits shall be comparable in the aggregate to those provided to Retained Companies' Employees prior to the Effective Time. It is understood that in providing such comparable benefits Acquiror shall utilize additional cash compensation if it determines not to amend or otherwise revise benefits under an Acquiror Benefit Arrangement or Employee Plan. Notwithstanding any other provision hereof, (x) nothing herein will confer third-party beneficiary rights on any individual Retained Companies' Employee or group of Retained Companies' Employees, (y) nothing herein will prohibit Acquiror from substituting any compensation or benefit plan, program, arrangement or structure for Retained Companies' Employees so long as such Retained Companies' Employees are treated on substantially the same basis as similarly situated employees of Acquiror and its Subsidiaries prior to the Merger, provided that comparability of the various benefits noted in subsection (ii) above is maintained and (z) nothing herein will limit Acquiror's or its Subsidiaries' rights to terminate the employment of any Retained Companies' Employee as of or following the Effective Time. (b) Acquiror will give the Retained Companies' Employees full credit for purposes of eligibility and vesting under any plans or arrangements maintained by Acquiror for such employees' service recognized for such purposes under the Employee Plans and Benefit Arrangements listed on Schedule 10.01(b). All Acquiror Employee Plans and Benefit Arrangements shall (i) recognize all service with HII for eligibility purposes, (ii) waive all pre-existing condition exclusions for all eligible Retained Companies' Employees and (iii) credit each such Retained Companies' Employee for purposes of deductible limits with amounts so credited with respect to that portion of the calendar year preceding the Effective Time. Section 10.02. Severance Obligations. New Spinco shall be responsible for making all severance payments and making all required filings and withholdings relating thereto, pursuant to the current Holiday Inns, Inc. Human Resource severance policy ("Severance Payments") due those Core Employees who (i) are not employees of New Spinco or any Affiliate thereof six months after the Effective Time and (ii) who have not accepted employment with Acquiror or any Affiliate thereof after the Effective Time (an "Affected Employee") at substantially the same compensation rate as noted in Section 10.01(a)(i) above; provided that Acquiror shall, not later than 10 days following the date Severance Payments are made by New Spinco, (i) reimburse New Spinco for 50% of the actual severance paid to severed Core Employees; provided that the total amount of reimbursements pursuant to this clause (i) shall not exceed $625,000 and (ii) reimburse New Spinco for 100% of any payments in respect of accrued and unused vacation paid to Affected Employees and not reflected in the Working Capital Statement. Acquiror and New Spinco agree to treat any payment made to New Spinco pursuant to the preceding sentence as a reimbursement for severance payments made by New Spinco on behalf of Acquiror. Section 10.03. Savings Plan. (a) Effective as of the Effective Time, HC shall cause New Spinco to take all action required or deemed appropriate to cause New Spinco to adopt and become the sponsor of and the employer under, and to assume the obligations with respect to the New Spinco Employees under, the Savings Plan and to amend the Savings Plan to cause the active participation of the Retained Companies' Employees therein to cease as of the Effective Time. (b) Effective as of the Effective Time, Acquiror shall establish or designate a defined contribution retirement plan, which shall be qualified under Section 401(a) and 401(k) of the Code (the "Retained Companies' Savings Plan") covering the Retained Companies' Employees. (c) As soon as practicable after the Effective Time, following receipt by Acquiror of a favorable determination letter, or Acquiror's certification to New Spinco in a manner reasonably acceptable to New Spinco, that the Retained Companies' Savings Plan is qualified under the applicable provisions of the Code, HC shall cause the trustee of the Savings Plan to transfer in respect of the account balances of the Retained Companies' Employees assets in cash or in kind, as the trustee shall determine, valued as of the date of transfer, to the trustee of the Retained Companies' Savings Plan. Following such transfer of accounts, (i) New Spinco shall have no further liability whatsoever (either under this Agreement or otherwise) with respect to participants in the Retained Companies' Savings Plan and (ii) Acquiror shall have no further liability whatsoever (either under this Agreement or otherwise) with respect to participants in the Savings Plan. HC and Acquiror shall each use reasonable efforts to effect the account transfers contemplated in this Section 10.03 as soon as practicable after the Effective Time. (d) Notwithstanding the foregoing, if Acquiror cannot reasonably implement the Retained Companies' Savings Plan prior to the Effective Time, New Spinco shall allow Acquiror to adopt the Savings Plan as a participating employer for up to a 90 day period. During that period thereafter, Acquiror will make contributions thereto for or on behalf of Retained Companies' Employees in accordance with the terms thereof and pay its share of expenses related thereto based on the ratio that the number of Retained Companies' Employees participating therein bear to the total number of participants in the Savings Plan during such period in accordance with the terms thereof. Section 10.04. Nonqualified Plans. Effective as of the Effective Time, HC shall cause New Spinco to take all actions required or deemed appropriate to cause New Spinco to become the sponsor of and the employer under, and to assume the obligations with respect to the New Spinco Employees under, the Nonqualified Plans. All liabilities of HII with respect to the New Spinco Employees under the Nonqualified Plans shall be Contributed Liabilities and not Retained Liabilities and all rights of HII with respect to New Spinco Employees under the Nonqualified Plans and all insurance policies, contracts and agreements and all contracts, arrangements and agreements with other providers and service organizations pursuant to the Nonqualified Plans shall be Contributed Assets and not Retained Assets. The assumption of the sponsorship and liabilities and rights under the Nonqualified Plan by New Spinco shall not constitute a termination of employment for the New Spinco Employees pursuant to the provisions of the plan. All obligations and liabilities under the Nonqualified Plans other than those liabilities and obligations described in this Section 10.04 shall be Retained Liabilities. All participants in the Nonqualified Plans shall be vested in their accrued benefits thereunder, effective as of the Effective Time. Section 10.05. Group Health Plans; Workers' Compensation. Effective as of the Effective Time, HC shall cause New Spinco to take all actions required or deemed appropriate to cause New Spinco to become the sponsor of and the employer under, and to assume the obligations of HII with respect to the New Spinco Employees under the Group Health Plans. All such Group Health Plans and all rights of HII thereunder shall be Contributed Assets and not Retained Assets. With respect to the Retained Companies' Employees, HC shall cause New Spinco to assume responsibility for and continue to pay all expenses and benefits with respect to claims incurred prior to the Effective Time under the Group Health Plans and workers compensation claims with respect to events occurring prior to the Effective Time. Notwithstanding the foregoing, with respect to any Retained Companies' Employee or his or her covered dependents who enters a hospital or is on long-term disability under any Group Health Plan on or prior to the Effective Time and continues in a hospital or on long-term disability after the Effective Time, HC shall cause New Spinco to assume responsibility for claims and expenses incurred both before and after the Effective Time in connection with such person, to the extent that such claims and expenses are covered by the Group Health Plan, until such time (if any) that such employee assumes full-time employment with Acquiror and, in the case of any covered dependent, such person's hospitalization has terminated; provided that, with respect to maternity leave and any extraordinary expenses relating to a newborn child, Acquiror shall reimburse HC for such claims incurred after the Effective Time. For purposes of this paragraph, a medical, dental, workers' compensation or similar claim is deemed incurred when the services that are the subject of the claim are performed. Section 10.06. Executive Medical and Dental Plan. Effective as of the Effective Time, HC shall cause New Spinco to take all actions required or deemed appropriate to cause New Spinco to become the sponsor of and the employer under, and to assume the obligations of HII with respect to the Executive Medical and Dental Plan (the "Executive Medical Plan"). Such Executive Medical Plan and all rights of HII thereunder shall be Contributed Assets and not Retained Assets. Section 10.07. Severance Pay Plan. Effective as of the Effective Time, HC shall cause New Spinco to take all actions required, or deemed appropriate to cause New Spinco to become the sponsor of and the employer under, and to assume the obligations of HII with respect to the New Spinco Employees under the Severance Pay Plan. Section 10.08. COBRA. New Spinco will be responsible for COBRA Coverage for all Qualifying Events with respect to all employees (and their covered beneficiaries) of HII and its Subsidiaries that occur prior to the Effective Time and HII will be responsible for COBRA Coverage for all Qualifying Events that occur with respect to Retained Companies' Employees (and their covered beneficiaries) following the Effective Time. Section 10.09. Collective Bargaining Agreements. (a) Acquiror shall, and HC shall cause New Spinco to, take such action as may be required to cause Acquiror to assume any and all union contracts then existing for any and all Retained Companies' Employees who are union employees of HII. HII's obligations under any collective bargaining agreements covering any New Spinco Employee shall be Contributed Liabilities, HII's rights under any such agreement shall be Contributed Assets and New Spinco shall be the successor employer under such collective bargaining agreements. HII's obligations under any collective bargaining agreements covering any Retained Companies' Employee shall be Retained Liabilities, and HII's rights under any such agreement shall be Retained Assets. (b) Acquiror agrees to take whatever actions are necessary to ensure that the transactions contemplated pursuant to this agreement will not be treated as a withdrawal resulting in any withdrawal liability of HII from any Multiemployer Plan. Section 10.10. Relocation Expenses. Acquiror shall provide relocation benefits to each of the Retained Companies' Employees listed on Schedule 10.10, which such list shall be finalized no later than the Effective Time, who are to be relocated, which such benefits shall be at least equal to those benefits provided to Acquiror's employees immediately prior to the date hereof in accordance with Acquiror's policies. Section 10.11. Vacation and Sick Leave. (a) Acquiror will adopt vacation and sick leave policies substantially comparable to those maintained by HII immediately prior to the Effective Time, and, to the extent fully accrued in the Working Capital Statement, will credit all service earned by the Retained Companies' Employees prior to the Effective Time and will accept all liability for vacation and sick leave days accrued by the Retained Companies' Employees as of the Effective Time; to the extent not so accrued, HC will be liable in respect of all of the foregoing and will indemnify Acquiror and its Affiliates in respect thereof. (b) HC will cause New Spinco to adopt vacation and sick leave policies comparable to those maintained by HII immediately prior to the Effective Time, will credit all service earned by New Spinco Employees prior to the Effective Time and will accept all liability for vacation and sick leave days accrued by the New Spinco Employees as of the Effective Time. Section 10.12. Loyalty Bonuses. New Spinco shall pay to each of the Core Employees designated by HC and agreed to by Acquiror, a loyalty bonus equal to 25% of the base annual salary for such employee for the period between the date hereof and either (a) the date of such employees' date of severance or (b) six months after the Effective Time, whichever such period is shorter. Acquiror shall reimburse New Spinco for any loyalty bonus paid pursuant to this Section 10.12 within 20 days from the date New Spinco makes such payment. Acquiror and New Spinco agree to treat any payment made to New Spinco pursuant to the preceding sentence as a reimbursement for loyalty payments made by New Spinco on behalf of Acquiror. Section 10.13. WARN. (a) Acquiror shall not, at any time prior to 90 days after the Effective Time, effectuate a "plant closing" or "mass layoff" as those terms are defined in the Worker Adjustment and Retraining Notification Act of 1988 ("WARN") affecting in whole or in part any facility, site of employment, operating unit or employee of HII without complying fully with the requirements of WARN. (b) HC shall not, at any time prior to 90 days after the Effective Time, effectuate a "plant closing" or "mass layoff" as those terms are defined in WARN affecting in whole or in part any facility, site of employment, operating unit or employee of HII without complying fully with the requirements of WARN. Section 10.14. Cooperation. Without limiting the generality of Articles 7 and 8 hereof, HII, Acquiror and New Spinco agree to furnish each other promptly with such information concerning employees and employee benefit plans, arrangements or policies as is reasonably necessary and appropriate to effect the transactions contemplated by this Article 10. ARTICLE 11 Conditions to the Merger Section 11.01. Conditions to the Obligations of Each Party. The obligations of each of HII and Acquiror to consummate the Merger are subject to the satisfaction of the following conditions: (a) the adoption of this Agreement and issuance of Acquiror Stock in the Merger shall have been approved by the requisite vote of the stockholders of Acquiror in accordance with the DGCL; (b) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Merger or the Transactions; (c) the transactions contemplated by Article 4, including, without limitation, the Contribution and the Exchange, shall have been consummated in accordance with the terms of this Agreement and the Contribution Agreement; (d) the parties or their respective Affiliates shall have entered into the Stockholders Agreement, the Hotel Properties Agreement and the Registration Rights Agreement and shall also enter into the Asset Purchase Agreements, the form of such agreements to be agreed upon by the parties prior to February 7, 1997 and the closings under the Asset Purchase Agreements shall have taken place simultaneously with the Closing; (e) the parties shall have entered into the Franchise Agreements substantially in the form attached hereto as Exhibit E; and (f) the waiting period under the HSR Act relating to the Transactions shall have expired or been terminated. Section 11.02. Conditions to the Obligations of HII. The obligation of HII to consummate the Merger is subject to the satisfaction of each of the following further conditions: (a) Acquiror shall have performed in all material respects all obligations required to be performed by it under the Transaction Documents at or prior to the Effective Time, and HII shall have received a certificate signed on behalf of Acquiror by an executive officer of Acquiror to such effect; (b) The representations and warranties of Acquiror contained in this Agreement and in any certificate or other writing (including Acquiror Representation Letter) delivered by Acquiror pursuant hereto shall be true in all material respects at and as of the Effective Time as if made at and as of such time (it being understood that where any such representation or warranty already includes a Material Adverse Effect or materiality exception, no further materiality exception is to be permitted by this Section) and HII shall have received a certificate signed by an executive officer of Acquiror to the foregoing effect; (c) HII shall have determined in good faith, after considering the advice of Davis Polk & Wardwell, that there has not occurred after the date of this Agreement any Adverse Tax Development (as defined below) after the date hereof that has a reasonable possibility of or will result in the imposition of a material amount of federal income Tax to HII, New Spinco or any of their respective Affiliates, Subsidiaries or stockholders by reason of the Contribution, the Exchange or the Merger. "Adverse Tax Development" means the enactment or proposal of any legislation or any regulation or notice that would cause the Contribution, Exchange or Merger to become taxable for federal income tax purposes; (d) HII shall have received (i) an advance letter ruling from the IRS as contemplated by Section 7.01(B)(d)(i) to the effect that the Contribution and Exchange qualify as a "reorganization" within the meaning of Section 368(a)(1)(D) of the Code and as a tax free distribution under Section 355 of the Code and (ii) an opinion of Davis Polk & Wardwell to the effect that the Merger constitutes a tax-free reorganization under Section 368(a)(1)(A) of the Code in which no gain is recognized by HC or HII; (e) No event resulting in an Acquiror Material Adverse Effect shall have occurred; and (f) Acquiror shall have entered into employment agreements with Peter Kline and John Beckert previously described. Section 11.03. Conditions to the Obligations of Acquiror. The obligation of Acquiror to consummate the Merger is subject to the satisfaction of each of the following further conditions: (a) Each of HII and New Spinco shall have performed in all material respects all obligations required to be performed by it under the Transaction Documents at or prior to the Effective Time, and Acquiror shall have received a certificate signed on behalf of HII by an executive officer of HII to such effect; (b) The representations and warranties of HII contained in this Agreement and in any certificate or other writing delivered by HII pursuant hereto shall be true in all material respects at and as of the Effective Time as if made at and as of such time (it being understood that where any such representation or warranty already includes a Material Adverse Effect or materiality exception, no further materiality exception is to be permitted by this Section) and Acquiror shall have received a certificate signed by an executive officer of HII to the foregoing effect; (c) The Acquiror Required Consents listed on Schedule 11.03(c), the failure of which to obtain could reasonably be expected to have an Acquiror Material Adverse Effect, shall have been obtained; (d) No event resulting in a Retained Companies Material Adverse Effect shall have occurred; (e) Acquiror shall have obtained the financing contemplated to be provided to Acquiror pursuant to the Commitment Letter previously delivered to HC; (f) There shall not be pending or threatened any litigation, proceeding or claim brought by any Governmental Authority seeking to enjoin the Merger or any transaction contemplated by this Agreement seeking any hold-separate, divestiture or other order relating thereto or to any other business or asset of Acquiror or any Subsidiary thereof or seeking any other relief that Acquiror reasonably determines would be materially adverse; and (g) Bass International Holdings N.V. shall have entered into a guarantee of the indemnity obligations of HC and New Spinco under this Agreement and the Contribution Agreement reasonably satisfactory to Acquiror. ARTICLE 12 Survival; Indemnification Section 12.01. Survival. The covenants, agreements, representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive until June 1, 1998; provided that (i) except as set forth below, the covenants and agreements contained in this Agreement shall survive for the period set forth therein, or, if no specific period is set forth therein, indefinitely, (ii) the representations and warranties contained in Sections 5.10(c), 5.11, 5.12(a), (b) and (c), 5.14(a) and (b), 6.11, 6.12(c), (d) and (e) and 6.13(a) and (b) shall not survive after the Effective Time, (iii) the representations and warranties contained in Section 5.14(c) and 6.13(c) shall survive until 40 months from the Effective Time, (v) the representations and warranties, covenants and agreements, as the case may be, set forth in Sections 5.12(e), 6.12(a) and 8.03(a) shall survive all applicable statutes of limitations (including applicable extensions) and (v) the indemnifications set forth in Section 12.02(b) shall survive until 40 months from the Effective Time, and thereafter each HII and the Acquiror and any of their respective Affiliates hereby waives any contribution or similar rights it may have against HC, whether in law or in equity, with respect to Environmental Liabilities. Notwithstanding the preceding sentence, any covenant, agreement, representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the claim for indemnity shall have been given to the party against whom such indemnity may be sought prior to such time. Section 12.02. Indemnification. (a) HC hereby indemnifies Acquiror, and will cause New Spinco to indemnify Acquiror jointly and severally, and, effective at the Effective Time, without duplication, HII or any of their respective Affiliates against and agrees to hold them harmless from any and all Damages incurred or suffered by Acquiror, HII or any of their respective Affiliates arising out of any misrepresentation or breach of covenant made or to be performed by HII (prior to the Effective Time) or HC pursuant to this Agreement; provided that (i) HC shall not be liable under this Section 12.02(a) for any Damages relating to Taxes which are governed by Article 5 of the Contribution Agreement, (ii) notwithstanding anything else in this Agreement or the Contribution Agreement to the contrary, HC shall not be liable for any Damages relating to any violation of any Building Code or other Structural Deficiency, any matter identified in any Initial Report relating to Structural Deficiencies or Building Codes delivered pursuant to Section 9.09(a) or, except as provided in Section 12.02(b), any other matter relating to the Retained Real Properties' compliance with applicable Laws or physical condition and (iii) no claim may be made against HC for indemnification pursuant to this Section 12.02(a) with respect to any Individual Item of liability or damage for breach of any representation or warranty, unless such item exceeds $5,000 and unless the aggregate of all such liabilities and damages of Acquiror with respect to this Section 12.02(a), plus all liabilities and damages incurred under comparable provisions of the Asset Purchase Agreements, shall exceed $1,000,000, after which HC shall be liable for the full amount of all Damages (without regard to the foregoing threshold). "Individual Item" means an item or series of items relating to a single event or arising out of the same misrepresentation. Notwithstanding anything to the contrary in this Section 12.02(a) or elsewhere in this Agreement, after the Effective Time, the representations and warranties contained in Section 5.10(d) with respect to each Retained Real Property referred to in Section 5.10(d) shall be deemed to exclude (and HC shall not be liable for any Damages relating to) all Liens and other matters referred to in Section 5.10(d) with respect to such Retained Real Property disclosed in any title commitment, report, abstract or opinion or survey or other written notice relating to such Retained Real Property received prior to the Effective Time by Acquiror unless Acquiror gives HC notice of such matter promptly within a reasonable time after receiving such disclosure and gives HC the opportunity to attempt to cure, remove or insure over the matter. (b) HC hereby indemnifies Acquiror and, effective at the Effective Time, without duplication, HII and any of their respective Subsidiaries against and agrees to hold them harmless from 70% of the aggregate of all Damages incurred or suffered by Acquiror, HII or any of their Subsidiaries arising out of events occurring on or prior to the Effective Time at the Hotels which arise directly and solely as a result of any violation or requirement of any Environmental Law or Environmental Liability or obligation thereunder which was identified in either an Initial Report or an HC Report pursuant to the terms of Section 9.09; provided that (x) no items covered by this Section 12.02(b) may be asserted under Section 12.02(a) and (y) HC's maximum liability under this Section 12.02(b) and the maximum liability of certain Affiliates of HC under the comparable indemnification provisions of the Asset Purchase Agreements shall not exceed $4 million. (c) Acquiror hereby indemnifies HC, New Spinco and their respective Affiliates (the "Holiday Indemnitees") against and agrees to hold them harmless from any and all Damages incurred or suffered by the Holiday Indemnities arising out of any misrepresentation or breach of covenant made or to be performed by Acquiror pursuant to this Agreement; provided, that no claim may be made against Acquiror for indemnification pursuant to this Section 12.02(c) with respect to any Individual Item of liability or damage, unless such item exceeds $5,000 and unless the aggregate of all such liabilities and damages of the Holiday Indemnitees with respect to this Section 12.02(c), plus all liabilities and damages incurred under comparable provisions of the Asset Purchase Agreements, shall exceed $1,000,000 after which Acquiror shall be liable for the full amount of the Damages (without regard to the foregoing threshold). Section 12.03. Indemnification Procedures. (a) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Sections 12.02(a), (b) and (c) hereof, such Person (the "indemnified party") shall promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding; provided that the failure of any indemnified party so to notify the indemnifying party shall not relieve the indemnifying party of its obligations hereunder except to the extent that the indemnifying party is actually prejudiced by such failure to notify. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (b) In addition to and without limiting the terms of Section 12.03(a) above, with respect to any claim for indemnification made pursuant to Section 12.02(b) hereof, the parties agree that any investigative, monitoring, removal, remedial or other action required to address a failure to comply with Environmental Laws shall be performed in a reasonable and cost-effective manner and, with respect to a violation of an Environmental Law, shall be limited to those actions required by regulatory authorities to comply with such Environmental Law given the use of the site as of the Effective Time. Acquiror agrees, prior to initiating any activity relating to any environmental matter allegedly covered by Section 12.02(b), to provide HC with a reasonably detailed description of the proposed activity and a reasonable period of time, given the specific circumstances, to permit HC to comment on such proposed activity and agrees to consider any such comments in good faith. Acquiror agrees to use reasonable efforts to perform any such activities in a manner that will permit the maximum available recovery of funds under any applicable insurance policy or any applicable state reimbursement or similar fund, and the amount of Damages for which indemnification would otherwise be provided under this Agreement shall be decreased to take account of any such recovery. ARTICLE 13 Termination Section 13.01. Termination. (a) This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Effective Time: (i) by mutual written consent of HC, HII and Acquiror; (ii) by HC or HII if, at the stockholders' meetings referred to in Section 9.06 (including any postponement or adjournment thereof), the Transactions contemplated hereby that require such approval shall fail to be approved and adopted by the affirmative vote specified therein; (iii) by HC, HII or Acquiror, so long as the terminating party is not then in breach of any of its obligations hereunder, after June 30, 1997 if the Merger shall not have been consummated on or before such date; (iv) by HC or HII, provided neither HC or HII is then in breach of any of its obligations hereunder, if either (i) Acquiror fails to perform any covenant in this Agreement when performance thereof is due and does not cure the failure within twenty business days after HC or HII delivers written notice thereof, or (ii) any condition in Section 11.02 has not been satisfied and is not capable of being satisfied prior to June 30, 1997; and (v) by Acquiror, provided it is not then in breach of any of its obligations hereunder, if either (i) HII or HC fails to perform any covenant in this Agreement when performance thereof is due and does not cure the failure within twenty business days after Acquiror delivers written notice thereof or (ii) any condition in Section 11.03 has not been satisfied and is not capable of being satisfied prior to June 30, 1997. (b) If (i) the transactions contemplated by Article 4 have not been consummated by virtue of the failure or non-waiver of the conditions set forth in Section 7.01(b) of the Contribution Agreement or (ii) either of the conditions set forth in Section 11.02(c) and (d) have not been satisfied (other than by reason of a breach of a covenant by the relevant party) or waived by April 30, 1997 (the "Contingency Date"), or such earlier date if the parties mutually determine in good faith that certain conditions cannot be met, then the Contingency Agreement shall, without further action, become automatically effective. Section 13.02. Effect of Termination. In the event of the termination of this Agreement pursuant to Section 13.01 hereof, this Agreement, except for the provisions of Section 14.04, and the confidentiality provisions of Section 9.01, shall forthwith become null and void and have no effect, without any liability on the part of any party or its directors, officers or stockholders. Nothing in this Section 13.02 shall, however, relieve any party to this Agreement of liability for breach of this Agreement. ARTICLE 14 Miscellaneous Section 14.01. Entire Agreement. This Agreement and the Transaction Documents constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, other than the Confidentiality Agreement with respect to the subject matter hereof and except as otherwise expressly provided herein and therein. Section 14.02. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to HC, HII (prior to the Merger) or New Spinco, to: Holiday Corporation Three Ravinia Drive Suite 2900 Atlanta, Georgia 30346 Telecopy: (770) 604-5403 Attention: Senior Vice President, General Counsel with a copy to: Bass plc 20 North Audley Street London W1Y 1WE England Attention: Spencer Wigley Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: William Rosoff Telecopy: (212) 450-4800 if to Acquiror, or HII (following the Merger), to: Bristol Hotel Company 14285 Midway Road Suite 340 Dallas, Texas 75244 Attention: Joel M. Eastman Telecopy: (972) 687-0326 with a copy to: Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 Attention: Robert A. Profusek Telecopy: (212) 755-7306 or such other address or telecopy number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the appropriate telecopy confirmation is received or (b) if given by any other means, when delivered at the address specified in this Section. Section 14.03. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by HC and HII and Acquiror or in the case of a waiver, by the party against whom the waiver is to be effective; provided that after the adoption of this Agreement by the stockholders of Acquiror, no such amendment or waiver shall, without the further approval of such stockholders, alter or change (i) the amount or kind of consideration to be received in exchange for any shares of capital stock of HII, (ii) any term of the certificate of incorporation of the Surviving Corporation or (iii) any of the terms or conditions of this Agreement if such alteration or change would adversely affect the holders of any shares of capital stock of Acquiror. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 14.04. Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. Section 14.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto. Section 14.06. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware regardless of the laws that might otherwise govern under principles of conflict of laws applicable thereto. Section 14.07. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. Section 14.08. Defined Terms. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Contribution Agreement. Section 14.09. Schedules. Notwithstanding anything herein to the contrary, on or prior to the Effective Time, HII and Acquiror may supplement or amend the Schedules applicable to such party with respect to any matter arising after the date hereof which, if existing or occurring on the date hereof would have been required to be set forth or described in such Schedule; but no supplement or amendment will affect the supplementing or amending party's liabilities or obligations for any prior breach of this Agreement whether or not the Effective Time occurs. Section 14.10. Knowledge. (a) For purposes of this Agreement, "to the knowledge" of HII or HC shall mean actual knowledge, after reasonable inquiry of those persons listed on Schedule 14.10(a). (b) For purposes of this Agreement, "to the knowledge" of Acquiror shall mean actual knowledge, after reasonable inquiry, of those persons listed on Schedule 14.10(b). Section 14.11. Consent to Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in the Court of Chancery in the State of Delaware, and each of the parties hereby consents to the non-exclusive jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 14.02 shall be deemed effective service of process on such party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. HOLIDAY CORPORATION By: /s/ Michael L. Goodson --------------------------- Name: Michael L. Goodson Title: Vice President HOLIDAY INNS, INC. By: /s/ James L. Kacena --------------------------- Name: James L. Kacena Title: Vice President BRISTOL HOTEL COMPANY By: /s/ Joel M. Eastman --------------------------- Name: Joel M. Eastman Title: Vice President EX-2 3 STOCKHOLDERS' AGREEMENT dated as of April 28, 1997 by and among UNITED/HARVEY HOLDINGS, L.P., HOLIDAY CORPORATION, BASS AMERICA INC., BASS PLC and BRISTOL HOTEL COMPANY TABLE OF CONTENTS Page ---- ARTICLE 1 Definitions Section 1.01. Definitions.............................................2 ARTICLE 2 Corporate Governance Section 2.01. Composition of the Board................................6 Section 2.02. Vacancies...............................................7 Section 2.03. Executive Committee; Management Committee...............7 Section 2.04. Capital Transactions....................................8 Section 2.05. Voting..................................................8 ARTICLE 3 Restrictions on Transfer Section 3.01. General Restriction.....................................9 Section 3.02. Transfers in Compliance with Law........................9 Section 3.03. Legend..................................................9 Section 3.04. Unauthorized Transfers.................................10 ARTICLE 4 Right of First Refusal; Right to Participate in Sales Section 4.01. Right of First Refusal.................................10 Section 4.02. Right to Participate in Sales..........................12 Section 4.03. Execution of the Stockholders' Agreement...............14 Section 4.04. Certain Actions by Acquiror............................14 ARTICLE 5 Preemptive rights Section 5.01. Preemptive Rights......................................14 Section 5.02. Subsequent Offering....................................15 ARTICLE 6 Standstill obligations Section 6.01. Acquisition of Voting Securities.......................15 Section 6.02. Certain Actions by Stockholders........................16 Section 6.03. Termination............................................16 ARTICLE 7 Miscellaneous Section 7.01. Entire Agreement.......................................17 Section 7.02. Notices................................................17 Section 7.03. Amendment; Waiver; Termination.........................19 Section 7.04. Expenses...............................................19 Section 7.05. Assignability..........................................19 Section 7.06. Governing law..........................................20 Section 7.07. Counterparts; Effectiveness............................20 Section 7.08. Binding Effect; Benefit................................20 Section 7.09. Headings...............................................20 Section 7.10. Specific Enforcement...................................20 Section 7.11. Consent to Jurisdiction................................20 Section 7.12. After-Acquired Securities..............................21 STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT dated April 28, 1997 (the "Agreement") among United/Harvey Holdings, L.P., a Delaware limited partnership ("Holdings"), Holiday Corporation, a Delaware corporation ("HC"), Bass America Inc., a Delaware corporation ("BAI"), Bass plc, an English public limited company, and Bristol Hotel Company, a Delaware corporation (the "Acquiror"). W I T N E S S E T H: WHEREAS, pursuant to the Agreement and Plan of Merger dated as of December 15, 1996 (the "Merger Agreement") among the Acquiror, HC and Holiday Inns, Inc. ("HII"), a Tennessee corporation and wholly owned subsidiary of HC, HC has acquired 2,391,286 shares of common stock, par value $.01 per share, of the Acquiror and the Acquiror has acquired the Retained Business (as defined in the Merger Agreement) through the merger of HII with and into the Acquiror (the "Merger"); WHEREAS, in a related transaction immediately after the Merger, the Acquiror satisfied a portion of the amount of HII Intercompany Debt (as defined in the Merger Agreement) assumed pursuant to the Merger with 6,981,832 Shares (as defined herein) to BAI and repaid the remaining portion of such debt in cash; WHEREAS, pursuant to the Registration Rights Agreement dated the date hereof (the "Registration Rights Agreement") the Acquiror has granted the parties hereto certain registration rights with respect to the Shares of the Acquiror; WHEREAS, certain employee stockholders of the Acquiror (the "Management Stockholders") have entered into a separate Management Stockholders' Agreement dated the date hereof (the "Management Stockholders' Agreement"); WHEREAS, Bass plc has agreed to be a party to the Agreement solely with respect to Article 6 hereof; and WHEREAS, the parties hereto desire to provide, on the terms and subject to the conditions set forth herein, for certain rights and obligations of the parties hereto; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1 Definitions Section 1.01. Definitions . (a) The following terms, as used herein, have the following meanings: "Acquisition Proposal" means any offer or proposal for, or any indication of interest in, a merger or other business combination involving the Acquiror or the acquisition of any equity securities representing more than 50% of Total Voting Power, or all or substantially all of the assets, of the Acquiror. "Affiliate" means, with respect to any Person, any other Person who is directly or indirectly Controlling, Controlled by or under the common Control with such Person; provided that no Stockholder of the Acquiror shall be deemed an Affiliate of any other Stockholder of the Acquiror solely by reason of any investment in the Acquiror or by this Agreement. "Associate" means (i) any Person who is a director, officer or partner or who is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities of any corporation or entity, (ii) any Person who has a substantial beneficial interest in or who serves as a trustee for any trust or other estate, and (iii) any relative or spouse of a Person, or any relative of such spouse, who has the same home as such Person. "Bass Entities" means HC and BAI. "Beneficial ownership", "beneficially own" and "beneficial owner" shall be determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the date hereof. "Board" means the board of directors of the Acquiror. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Contribution Agreement" means the Contribution and Assumption Agreement dated as of April 21, 1997 among the Acquiror, HC, HII and Holiday Hospitality Corp., a wholly owned subsidiary of HII, pursuant to which HII, in contemplation of the transactions contemplated by the Merger Agreement, contributed certain of its assets and liabilities to Holiday Hospitality Corp. "Control" (including the terms "Controlling", "Controlled by" and "under common Control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Securities" means (i) options granted to directors, officers and employees of the Acquiror to purchase capital stock of the Acquiror, and the securities issued pursuant to such options or plans under which options may be granted, which have been authorized by the Board, (ii) capital stock issued or sold upon exercise of warrants, options or rights, or upon conversion of convertible securities, which warrants, options, rights or convertible securities were the subject of the preemptive rights under Article 5 or (iii) any securities which are issued to all stockholders by means of a distribution, stock dividend or stock split or reclassification. "Hotel Properties Agreement" means the Hotel Properties Agreement dated the date hereof between HC and Acquiror whereby the Acquiror has granted a certain right of first offer to franchise certain hotel properties to HC and HC has granted a certain right of first offer on certain Opportunities (as defined in such agreement) to the Acquiror. "Initial Ownership" means, with respect to each Stockholder, the total number of Shares beneficially owned (without duplication) by such Stockholder as of the date the Acquiror consummates the transactions contemplated by the Merger Agreement (equitably adjusted to reflect any stock split, dividend, reclassification or any similar event); provided that if the Contingency Agreement (as defined in the Merger Agreement) is executed, "Initial Ownership" means, with respect to the Bass Entities, the total number of Shares beneficially owned (equitably adjusted to reflect any stock split, dividend, reclassification or any similar event) by the Bass Entities six months after the date of the Initial Closing (as defined in the Contingency Agreement) as a result of the transactions thereunder, or, if relevant prior to such date, the number of Shares beneficially owned (equitably adjusted to reflect any stock split, dividend, reclassification or any similar event) by the Bass Entities at such time. "Mid-Scale Lodging Facilities" means a full service lodging facility providing a degree of sophistication and full service amenities and facilities which (i) is of a type and standard generally consistent with hotels operated as Holiday Inn hotels in the United States and Canada, (ii) does not primarily offer suites, (iii) is not designed to accommodate "extended stays" (generally more than five days) and (iv) does not generally compete as an "upscale" or "economy" hotel. By way of example and for the guidance of the parties, the parties acknowledge that as of this date they would, without dispute, classify the hotel operations listed on Schedules 2.01(a)(1) and 2.01(a)(2) of the Hotel Properties Agreement as "upscale" hotels and "economy" hotels, respectively. "Outside Director" means any director of the Acquiror who is not an employee, executive officer or Affiliate of the Acquiror, Bass Entities or Holdings and who is not an Associate of a business primarily engaged in operating, managing or developing Mid-Scale Lodging Facilities and who qualifies as an "independent director" within the meaning of the New York Stock Exchange Listed Company Manual. "Ownership Percentage" means with respect to each Stockholder at any time, the percentage derived by dividing (i) the aggregate number of Shares beneficially owned by such Stockholder as of such time, by (ii) the total number of Shares outstanding as of such time (determined on a fully diluted basis but excluding employee and director options). "Permitted Transferee" means with respect to each Stockholder, any Affiliate of such Stockholder; provided that each such transferee shall execute a copy of this Agreement and be bound by the provisions herein to be a Permitted Transferee. "Person" means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Primary Owner" means a Person or group of Affiliated Persons who is the beneficial owner of a sufficient number of Shares so as to be one of the two largest beneficial owners of Shares. "Public Offering" means an underwritten public offering of Securities of the Acquiror pursuant to an effective registration statement under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Shares" means shares of common stock, par value $.01 per share, of the Acquiror outstanding at any given time. "Stockholder" means each of (i) the Bass Entities and their Permitted Transferees, as a group, and (ii) Holdings and its Permitted Transferees, as a group. "Subsidiary" means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Third Party" means a prospective purchaser of Shares in an arm's-length transaction from a Stockholder where such purchaser is not a Permitted Transferee of such Stockholder. "Total Voting Power" means the aggregate number of votes which may be cast by holders of outstanding Voting Securities. "Transaction Documents" means this Agreement, the Merger Agreement, the Contribution Agreement, the Hotel Properties Agreement, the asset purchase agreements, the franchise agreements, the services agreements, the Registration Rights Agreement and any other documents relating to each of the foregoing agreements. "Voting Securities" means all securities of the Acquiror entitled, in the ordinary course, to vote in the election of directors of the Acquiror. "$" means United States dollars. (b) Each of the following terms is defined in the Section set forth opposite such term: Term Section ---- ------- Acceptance Notice 4.01(b) Acquiror Recitals Agreement Recitals BAI Recitals Buyer 4.01(c) Capital Transaction 2.04 Co-Sale Notice 4.02(a) Co-Selling Stockholder 4.02(a) Derivatives 3.01 Executive Committee 2.03(a) Fair Market Value 4.01(b) Term Section ---- ------- HC Recitals HII Recitals Holdings Recitals Management Committee 2.03(b) Management Stockholders Recitals Management Stockholders' Agreement Recitals Merger Recitals Merger Agreement Recitals Nominee 2.02 Non-Offering Stockholder 4.01(b) Offer Notice 4.01(b) Offer Price 4.01(b) Offered Securities 4.01(a) Offering Stockholder 4.01(a) Portion 4.02(a) Pro Rata Number 4.02(a) Proportionate Amount 5.02 Registration Rights Agreement Recitals ROFR Acceptance Period 4.01(b) ROFR Closing 4.01(c) ROFR Closing Period 4.01(c) Securities 3.01 Subsequent Offering 5.02 Third-Party Sale 4.01(a) Transfer 3.01 Unauthorized Transfer 3.04 ARTICLE 2 Corporate Governance Section 2.01. Composition of the Board. (a) The Board shall consist of nine directors, consisting of the chief executive officer and chief operating officer of the Acquiror (so long as such Persons are entitled to be on the Board pursuant to the Management Stockholders' Agreement), three directors designated by the Bass Entities (of which one director must be an Outside Director), three directors designated by Holdings (of which one director must be an Outside Director), and one Outside Director designated by the chief executive officer and chief operating officer of the Acquiror, collectively (so long as such Persons are entitled to be on the Board pursuant to the Management Stockholders' Agreement); provided, however, if a Stockholder is not a Primary Owner, it will be entitled to designate (i) only two directors, neither of whom need be an Outside Director, if it beneficially owns less than 3,936,710 Shares and (ii) only one director, who need not be an Outside Director, if it beneficially owns less than 2,624,473 Shares (in each case equitably adjusted to reflect any stock split, stock dividend, reclassification or any similar event). (b) If a Stockholder fails to designate the maximum number of Persons for election to the Board that it is entitled to designate under Section 2.01(a), each directorship in respect of which such Stockholder fails to make a designation will remain vacant unless that vacancy results in there being fewer than the minimum number of directors required by law, in which case that vacancy or vacancies will be filled by a Person or Persons selected by a majority of the directors of the Acquiror then in office. (c) If HC delivers a termination notice pursuant to Section 2.02(b) of the Hotel Properties Agreement, within the six month period from the date HC delivers such termination notice, the Bass Entities will cause the directors on the Board which they designated under Section 2.01(a) who do not qualify as Outside Directors to resign and designate in their place Persons who would qualify as Outside Directors. Section 2.02. Vacancies. If, as a result of death, disability, retirement, resignation, removal (with or without cause) or otherwise, there shall exist or occur any vacancy of the Board: (i) the Person or Persons entitled under Section 2.01(a) to designate or nominate such director whose death, disability, retirement, resignation or removal resulted in such vacancy may designate another individual (the "Nominee") to fill such capacity and serve as a director of the Acquiror; and (ii) each Stockholder then entitled to vote for the election of the Nominee as a director of the Acquiror agrees that it will vote its Voting Securities, or execute a written consent, as the case may be, in order to ensure that the Nominee is elected to the Board. Section 2.03. Executive Committee; Management Committee. (a) The Acquiror and the Stockholders will take all actions necessary to cause the Executive Committee of the Board (the "Executive Committee") to consist of at least (i) either the chief executive officer or the chief operating officer of the Acquiror (so long as such Persons are entitled to be on the Board pursuant to the Management Stockholders' Agreement), (ii) a director designated by the Bass Entities under Section 2.01(a) and (iii) a director designated by Holdings under Section 2.01(a). (b) The Acquiror and the Stockholders will take all actions necessary to cause the Management Committee of the Board (the "Management Committee") to consist of at least three Persons among the chief executive officer, chief financial officer, chief operating officer and general counsel of Acquiror. Section 2.04. Capital Transactions. The Acquiror and the Stockholders will take all action necessary to provide that any acquisition, improvement, disposition or financing transaction (a "Capital Transaction") will be approved in the following manner: (i) Capital Transactions, the amount of which is or is reasonably anticipated to be $25 million or less, shall be authorized by the Management Committee; (ii) Capital Transactions, the amount of which is or is reasonably anticipated to be in excess of $25 million and up to $50 million, shall be approved unanimously by the Executive Committee; and (iii) Capital Transactions, the amount of which is or is reasonably anticipated to be in excess of $50 million, shall be approved by the Board. Section 2.05. Voting. Each Stockholder entitled to vote for the election of directors to the Board agrees that it will vote its Voting Securities or execute written consents, as the case may be, and each Stockholder and Acquiror will take all other necessary action (including causing the Acquiror to call a special meeting of stockholders) in order to ensure that the composition of the Board is as set forth in this Section 2.01. If, at any time, either Stockholder is then entitled to vote for the removal of directors of the Acquiror, it will not vote any of its Shares in favor of the removal of any director who shall have been designated or nominated pursuant to Section 2.01(a), unless such removal shall be for cause or pursuant to Section 2.01(c) or the Persons entitled to designate or nominate such director shall have consented to such removal in writing. ARTICLE 3 Restrictions on Transfer Section 3.01. General Restriction. No Stockholder may, directly or indirectly, sell, assign, transfer, grant a participation in, pledge or otherwise dispose of ("Transfer") any Shares or securities convertible into, or exchangeable for Shares or rights to purchase Shares ("Derivatives" and collectively with the Shares referred to herein as "Securities") except (i) to a Permitted Transferee, (ii) in a Public Offering in accordance with the Registration Rights Agreement, (iii) pursuant to Article 4 herein, (iv) pursuant to a tender offer or other transaction that has been approved by the Board and is made to all holders of Securities that are the subject of the tender offer or other transaction, (v) any pledge of Securities by a Stockholder made in connection with a bona fide loan to such Stockholder (provided that the lender's security interest in the Securities so pledged will be subject to the right of first refusal granted to the other Stockholder under Section 4.01), (vi) any involuntary Transfer resulting from a lender foreclosing on any pledge of any Securities which pledge existed on the date hereof or was made in accordance with this Section 3.01 or (vii) any Transfer made with the prior written consent of the other Stockholder. Section 3.02. Transfers in Compliance with Law. No Stockholder may Transfer any Securities at any time to any Person except in compliance with applicable federal, state and foreign securities laws. Section 3.03. Legend. In addition to any other legend required by applicable law, all certificates representing Securities held by any Stockholder, or their Permitted Transferees, will bear legend number (1) to assure the enforceability of this Agreement until the time the Securities are no longer subject to the provisions of this Agreement and legend number (2) if the Securities have not been registered under the Securities Act. (1) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A STOCKHOLDERS' AGREEMENT AND MAY NOT BE TRANSFERRED, SOLD, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED AND THEN ONLY IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICES OF THE COMPANY." (2) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF THAT ACT OR LAWS AND THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL WITH RESPECT TO THAT EXEMPTION." If any Securities cease to be subject to any restrictions on Transfer set forth in this Agreement, the Acquiror shall, upon the written request of the holder thereof, issue to such holder a new certificate evidencing such Securities without legend number (1). Section 3.04. Unauthorized Transfers. Any purported Transfer of any Securities in violation of the provisions of this Article 3 (an "Unauthorized Transfer") will be null and void. Acquiror will not register, recognize or give effect to any Unauthorized Transfer and the purported transferee of any Securities pursuant to an Unauthorized Transfer will not thereby acquire any rights in those Securities. Acquiror will, immediately upon becoming aware of an actual or attempted Unauthorized Transfer, instruct the transfer agent or registrar for the Securities to issue an appropriate stop-transfer order with regard to the Unauthorized Transfer or attempted Unauthorized Transfer. ARTICLE 4 Right of First Refusal; Right to Participate in Sales Section 4.01. Right of First Refusal. Each Stockholder (the "Offering Stockholder") may from time to time sell any or all of the Securities owned by the Offering Stockholder (the "Offered Securities") to a Third-Party in a bona fide sale transaction (a "Third-Party Sale"), provided that the Offering Stockholder shall have complied with the provisions of Section 4.01(b). (b) Prior to effecting any Third-Party Sale, the Offering Stockholder will deliver to the other Stockholder (the "Non-Offering Stockholder") a written notice (an "Offer Notice") specifying (i) the aggregate amount of cash consideration, the amount of any promissory note or other debt instrument and the Fair Market Value of any other non-cash consideration (the "Offer Price"), for which the Offering Stockholder proposes to sell the Offered Securities in the proposed Third-Party Sale, (ii) the identity of the purchaser in the proposed Third-Party Sale, (iii) the date the proposed Third-Party Sale is scheduled to close and (iv) all other material terms of the proposed Third-Party Sale, including without limitation any other contract or transaction entered into or proposed to be entered into in connection with the Third-Party Sale. If the Non-Offering Stockholder delivers to the Offering Stockholder a written notice (an "Acceptance Notice") within 20 Business Days following the delivery of the Offer Notice (the "ROFR Acceptance Period") stating that the Non-Offering Stockholder is willing to purchase all of the Offered Securities for the Offer Price and on the other terms set forth in the Offer Notice, the Offering Stockholder will sell all (but not less than all) of the Offered Securities to the Non-Offering Stockholder, and the Non-Offering Stockholder will purchase the Offered Securities from the Offering Stockholder, on the terms and subject to the conditions set forth in Section 4.01(c). If the consideration under the Third-Party Sale includes a promissory note or other debt instrument payable to the Offering Stockholder, the Non-Offering Stockholder may deliver a similar promissory note or debt instrument in payment of the Offer Price. As used herein, "Fair Market Value" means the price agreed upon by a willing buyer and a willing seller both in possession of reasonable knowledge of all relevant facts, with neither party being under any compulsion to act or not act; provided that if the Non-Offering Stockholder, on the one hand, and the Offering Stockholder, on the other hand, disagree on the calculation of the Fair Market Value, they shall select an unaffiliated financial advisory firm to determine the Fair Market Value and such firm's determination shall be final and binding. All costs relating to the financial advisor shall be borne equally by the Offering Stockholder on the one hand, and the Non- Offering Stockholder on the other hand. (c) The consummation of any purchase and sale pursuant to Section 4.01(b) (the "ROFR Closing") will occur 30 Business Days following the delivery of the Acceptance Notice or on such other date as may be agreed upon by the Offering Stockholder and the Non-Offering Stockholder (the "ROFR Closing Period") at the time and place as may be agreed upon by the Offering Stockholder and the Non-Offering Stockholder delivering the Acceptance Notice (the "Buyer"). At the ROFR Closing, (i) the Offering Stockholder will deliver to the Buyer one or more certificates evidencing all of the Offered Securities, duly endorsed for Transfer to the Buyer, together with such other duly executed instruments or documents as may be required to permit the Buyer to acquire the Offered Securities free and clear of any and all encumbrances, except for encumbrances under this Agreement, if applicable, (ii) the Buyer will deliver to the Offering Stockholder by certified or official bank check or wire transfer to an account designated by the Offering Stockholder an amount in immediately available funds equal to the Offer Price and (iii) the Offering Stockholder will be deemed to represent and warrant to the Buyer that, upon the ROFR Closing, the Offering Stockholder will convey and the Buyer will acquire the entire record and beneficial ownership of, and good and valid title to, the Offered Securities, free and clear of any and all encumbrances, except for encumbrances under this Agreement, if applicable. (d) If no Acceptance Notice relating to a proposed Third-Party Sale is delivered to the Offering Stockholder prior to the expiration of the ROFR Acceptance Period, or an Acceptance Notice is so delivered to the Offering Stockholder but the ROFR Closing fails to occur prior to the expiration of the ROFR Closing Period (unless the Buyer was ready, willing and able prior to the expiration of the ROFR Closing Period to consummate the transactions to be consummated by the Buyer at the ROFR Closing or the Buyer was not so ready, willing and able to consummate the transactions to be consummated by the Buyer at the ROFR Closing as a result of the Offering Stockholder's failure reasonably to cooperate in good faith with the efforts of Buyer to consummate such transactions), the Offering Stockholder may consummate the proposed Third-Party Sale in accordance with Section 4.01(e). (e) The Offering Stockholder may consummate the Third-Party Sale to the Third-Party purchaser identified in the Offer Notice (the "Third-Party Purchaser") only (i) during the 60 calendar day period immediately following the expiration of the ROFR Acceptance Period (in the event that no Acceptance Notice was timely delivered to the Offering Stockholder) or the 60 calendar day period immediately following the expiration of the ROFR Closing Period, (ii) at a price at least equal to the Offer Price, and (iii) upon terms not materially less favorable to the Offering Stockholder than those set forth in the Offer Notice. (f) Within 3 Business Days following the foreclosure of a pledge of Securities permitted under Section 3.01, the Pledgee shall send an Offer Notice pursuant to Section 4.01(b) and the procedures set forth in Sections 4.01(b) through (e) shall apply to such Offer Notice, except that the Offer Price shall be the market price on the Business Day immediately preceding the date of the Offer Notice. Section 4.02. Right to Participate in Sales. (a) If requested by the other Stockholder (the "Co-Selling Stockholder") in a written notice (a "Co-Sale Notice") delivered to the Offering Stockholder during the ROFR Acceptance Period, the Co-Selling Stockholder will be permitted to sell in that Third-Party Sale, on the same terms as the Offering Stockholder, up to the number of Securities held by the Co-Selling Stockholder as is specified in the Co-Sale Notice; provided that the number of Securities to be sold by the Co-Selling Stockholder participating in such Third-Party Sale shall in no event exceed the Portion corresponding to such Co-Selling Stockholder. As used herein, "Portion" means, with respect to the Co-Selling Stockholder, the number of Securities beneficially owned by such Co-Selling Stockholder multiplied by a fraction the numerator of which is the number of Securities to be sold by the Offering Stockholder and its Permitted Transferees in such Third-Party Sale and the denominator of which is the aggregate number of Securities beneficially owned by the Offering Stockholder and its Permitted Transferees, without duplication, immediately prior to such Third-Party Sale. If a Co-Selling Stockholder requests to include more Securities than provided under the preceding sentences, the Offering Stockholder will attempt to cause the Third-Party Purchaser to acquire those additional Securities, but will have no liability for the Third-Party Purchaser's refusal to purchase those additional Securities. To the extent that the Third-Party Purchaser is unwilling to purchase all of the Securities proposed to be sold by the Offering Stockholder and the Co-Selling Stockholder, the number of Securities to be sold by each of the Offering Stockholder and the Co-Selling Stockholder shall be reduced to their respective Pro Rata Number of Securities. "Pro Rata Number" means, with respect to the participation of the Offering Stockholder or the Co- Selling Stockholder in a Third-Party Sale, the product of (i) the total number of Securities proposed to be sold by such Stockholder and (ii) a fraction, the numerator of which is the total number of Securities proposed to be purchased by the Third-Party Purchaser, and the denominator of which is the total number of Securities proposed to be sold by both the Offering Stockholder and the Co-Selling Stockholder. Notwithstanding anything to the contrary herein contained, (i) the Co-Selling Stockholder may not deliver to the Offering Stockholder both an Acceptance Notice and a Co-Sale Notice with respect to the same proposed Third-Party Sale and (ii) the Offering Stockholder will have the right to elect not to consummate any Third-Party Sale (without liability to the Co-Selling Stockholder) if it is unable to sell all of the Offered Securities as initially set forth in the Offer Notice and (iii) may increase the Securities included in the Offered Securities to accommodate any Securities proposed to be sold by a Co-Selling Stockholder. (b) If the Co-Selling Stockholder properly elects to participate in a Third-Party Sale, the Offering Stockholder will represent the Co-Selling Stockholder in the sale but will not assume any fiduciary duty to the Co- Selling Stockholder under this Agreement. The Co-Selling Stockholder will execute and deliver the documentation providing for the Third-Party Sale as negotiated by the Offering Stockholder on terms that are reasonably acceptable to the Co-Selling Stockholder; provided that, at any time prior to such execution and delivery, the Co-Selling Stockholder may decline to participate in the Third-Party Sale if the documentation is not reasonably acceptable to it. If the Co-Selling Stockholder fails to execute and deliver the documentation or timely to perform its obligations thereunder, the Offering Stockholder may complete the Third-Party Sale without the participation of the Co-Selling Stockholder. The Offering Stockholder will have no responsibility to the Co-Selling Stockholder if it fails to consummate a Third-Party Sale, and the Offering Stockholder will in all events be free to abandon any Third-Party Sale at any time prior to its consummation without any liability to the Co-Selling Stockholder. Section 4.03. Execution of the Stockholders' Agreement. (a) Any Third-Party to whom Transfers are made pursuant to this Article 4 who (i) acquires Securities representing at least 50% of the transferring Stockholder's Initial Ownership and (ii) is assigned, at the sole discretion of the transferring Stockholder, all of such transferring Stockholder's rights and obligations hereunder, shall execute a copy of this Agreement and be bound by all the provisions herein as the successor-in-interest, in which event, such transferring Stockholder shall be relieved of all its rights and obligations hereunder; provided that such transferring Stockholder shall continue to be bound by the provisions of Article 6 herein. (b) Any Third-Party to whom Transfers are made pursuant to this Article 4 who acquires in such Transfer beneficial ownership of Voting Securities representing at least 5% of the Total Voting Power shall agree in writing to be bound by the provisions of Article 6 herein. (c) Any Third-Party to whom Securities are pledged pursuant to Section 3.01 shall agree in writing to be bound by the provisions of Section 4.01(f). Section 4.04. Certain Actions by Acquiror. Acquiror will not take any action, including without limitation the adoption of a stockholders' rights plan, which would make it impossible or would otherwise adversely affect a Stockholder's ability to acquire additional Securities pursuant to Section 4.01 herein. ARTICLE 5 Preemptive rights Section 5.01. Preemptive Rights. Except for the issuance of Excluded Securities and subject to Section 5.02, the Acquiror shall provide the Stockholders with written notice of any proposed issuance for cash of any equity securities or any securities convertible into or exchangeable for, or any rights or warrants to acquire, any equity securities of the Acquiror no later than 30 Business Days prior to the proposed issuance thereof. Such notice shall specify the securities to be issued, the purchase price, the proposed issuance date and all other material terms of such issuance. Upon delivery to the Acquiror by any of the Stockholders no later than 20 Business Days after such notice by the Acquiror of a notice stating that such Stockholder intends to acquire a portion of the securities to be issued, such Stockholder shall be entitled, on the terms offered by the Acquiror to other prospective purchasers of the securities to be issued, to purchase up to an amount of the securities such that, upon consummation of the proposed issuance, the Stockholder would hold that Ownership Percentage of the Acquiror as such Stockholder holds immediately prior to such issuance. Any such notice from any Stockholder shall indicate the amount of securities it intends to purchase and shall constitute a binding contract to acquire such securities on the terms set forth in the notice delivered to such Stockholder by the Acquiror with respect to such issuance. Notwithstanding anything herein to the contrary, the Acquiror shall be entitled not to proceed with the proposed issuance or to alter the terms thereof; provided that, in the event that any material terms of the proposed issuance are altered, (i) any notice delivered by a Stockholder to the Acquiror pursuant to this Section 5.01 shall be revoked automatically and (ii) such Stockholder shall be entitled to participate in such proposed issuance on the revised terms in accordance with this Section 5.01. Section 5.02. Subsequent Offering. Notwithstanding the provisions of Section 5.01, no Stockholder will have any rights under Section 5.01 with respect to Acquiror's first three Public Offerings of equity securities after the Merger (the "Subsequent Offering") unless the Stockholder beneficially owns at least 30 percent of the Shares and the proposed sale would cause the Stockholder to beneficially own less than 30 percent of the Shares (after giving effect to the proposed sale of securities). If the Subsequent Offering would so cause a Stockholder to beneficially own less than 30 percent of the Shares, the Acquiror will offer in accordance with Section 5.01 to each Stockholder the option to purchase in the proposed sale the Stockholder's Proportionate Amount of the securities. For purposes of this Section 5.02, the term "Proportionate Amount" for any Stockholder means the amount of securities, that when added to the number of securities then beneficially owned by that Stockholder, equals 30 percent of the Shares. ARTICLE 6 Standstill obligations Section 6.01. Acquisition of Voting Securities. Each Stockholder will not, and will not permit its Affiliates to, purchase or otherwise acquire, or agree or offer to purchase or otherwise acquire, beneficial ownership of any Voting Securities, if after giving effect thereto the Stockholder would beneficially own Voting Securities representing more than 36.5% of the Total Voting Power, without the prior written consent of (i) the other Stockholder, if the Stockholder would beneficially own Voting Securities representing less than 45% of the Total Voting Power, and (ii) the other Stockholder and a majority of the Board, exclusive of those members of the Board designated by the Stockholder seeking such consent, if the Stockholder would beneficially own Voting Securities representing 45% or more of the Total Voting Power; provided that a Stockholder shall not be deemed to have violated this Section 6.01 if a Stockholder beneficially owns Voting Securities representing more than 36.5% of the Total Voting Power as a result of (i) a recapitalization of the Acquiror, a repurchase or redemption of securities by the Acquiror or any other action taken by the Acquiror, (ii) purchases pursuant to Section 4.01 hereof or (iii) inadvertent purchases, if such Stockholder as promptly as practicable divests itself of beneficial ownership of a sufficient number of Voting Securities so as to beneficially own Voting Securities representing no more than 36.5% of the Total Voting Power. Section 6.02. Certain Actions by Stockholders. Each Stockholder will not, and will not permit its Affiliates to: (a) make, or take any action to solicit, initiate or encourage, an Acquisition Proposal; (b) "solicit", or become a "participant" in any "solicitation" of, any "Proxy" (as such terms are defined in Regulation 14A under the Exchange Act) from any holder of Voting Securities in connection with any vote on any matter, or agree or announce its intention to vote with any Person undertaking a "solicitation;" (c) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any Voting Securities; or (d) grant any Proxies with respect to any Voting Securities to any Person (other than as recommended by the Board of Directors of the Acquiror) or deposit any Voting Securities in a voting trust or enter into any other arrangement or agreement with respect to the voting thereof. Section 6.03. Termination. This Article 6 shall terminate upon the earlier of (i) the third anniversary of the date hereof and (ii) the date provided for in Section 7.03(b). ARTICLE 7 Miscellaneous Section 7.01. Entire Agreement. This Agreement and the Transaction Documents constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, with respect to the subject matter hereof and except as otherwise expressly provided herein and therein. This Agreement will have no effect on any rights or obligations the Stockholders or the Acquiror may have under the Registration Rights Agreement. Section 7.02. Notices. (a) All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to the Acquiror, to: Bristol Hotel Company 14285 Midway Road Suite 340 Dallas, Texas 75244 Attention: Joel M. Eastman Telecopy: (972) 687-0326 with a copy to: Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 Attention: Robert A. Profusek Telecopy: (212) 755-7306 if to Holdings, to: United/Harvey Holdings, L.P. 4200 Texas Commerce Tower West 2200 Ross Avenue Dallas, Texas 75201 Attention: Daniel A. Decker Telecopy: (214) 220-4949 with a copy to: Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 Attention: Robert A. Profusek Telecopy: (212) 755-7306 if to the Bass Entities or Bass plc, to: Holiday Corporation Three Ravinia Drive Suite 2900 Atlanta, Georgia 30346 Attention: Senior Vice President, General Counsel Telecopy: (770) 604-5403 Bass plc 20 North Audley Street London, W1Y 1WE England Attention: Spencer Wigley Telecopy: 011-44-171-409-8513 with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: William Rosoff Telecopy: (212) 450-4800 (b) Each party hereto may hereafter specify such other address or telecopy number for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in Section 7.02(a) and the appropriate telecopy confirmation is received or (b) if given by any other means, when delivered at the address specified in Section 7.02(a). (c) Any Person who becomes a Stockholder shall provide its address and telecopy number to the Acquiror, which shall promptly provide such information to each other Stockholder. Section 7.03. Amendment; Waiver; Termination. (a) No provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the waiver is to be effective. No provision of Articles 5 and 6 may be amended or otherwise modified except by an instrument in writing executed by the Acquiror with the approval of the Board and each Stockholder and no provision of Articles 2, 3 and 4 may be amended or otherwise modified except by an instrument in writing executed by each Stockholder. (b) This Agreement shall terminate on the earliest of (i) the voluntary or involuntary dissolution or liquidation of the Acquiror, (ii) the mutual agreement of the parties hereto, (iii) the date on which either Stockholder ceases to beneficially own any Shares and (iv) a merger, consolidation or other business combination in which the Acquiror is not the surviving entity (excluding any merger, consolidation or other business combination in which the Stockholders own a majority of the capital stock of the surviving corporation). Section 7.04. Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense; provided, however, that, in any action or proceeding brought to enforce any provision of this Agreement or where any provision of any this Agreement is validly asserted as a defense, the successful party will be entitled to recover its cost and expense (including reasonable attorneys' fees and charges) in addition to any other available remedy. Section 7.05. Assignability. Except as otherwise provided herein, this Agreement shall not be assignable by any party hereto. Any Person acquiring Shares who is required by the terms of this Agreement to become a party hereto shall execute and deliver to the Acquiror a copy of this Agreement and shall thenceforth be a "Stockholder". Any Stockholder who ceases to own beneficially any Shares shall cease to be bound by the terms hereof. Section 7.06. Governing law. This Agreement shall be construed in accordance with and governed by the laws of the state of Delaware regardless of the laws that might otherwise govern under the principles of conflict of laws applicable thereto. Section 7.07. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. Section 7.08. Binding Effect; Benefit. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, expressed or implied, shall confer on any Person other than the parties hereto and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. Section 7.09. Headings. The headings contained in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. Section 7.10. Specific Enforcement. Each party hereto acknowledges that the remedies at law of the other parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond, and in addition to all other remedies which may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available. Section 7.11. Consent to Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in the Court of Chancery in the State of Delaware, and each of the parties hereby consents to the non-exclusive jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 7.02 shall be deemed effective service of process on such party. Section 7.12. After-Acquired Securities. Except as otherwise expressly provided herein, all of the provisions of this Agreement will apply to and include all Securities acquired by each Stockholder on and after the date of this Agreement, including without limitation such Securities received by each Stockholder as a result of (i) a stock dividend on or other payment made to holders of Securities, (ii) any exchange for, or reclassification of, any Securities, (iii) a reorganization, recapitalization, consolidation or merger, (iv) the exercise of any Securities or (v) the exercise of any rights under Sections 4.01 and 5.01. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BRISTOL HOTEL COMPANY By: /s/ Joel M. Eastman ---------------------------------- UNITED/HARVEY HOLDINGS, L.P. By: Holdings Genpar, L.P. its General Partner By: HH Genpar Partners, its General Partner By: Holdings Associates, Inc., its Managing General Partner By: /s/ Daniel A. Decker ---------------------------------- HOLIDAY CORPORATION By: /s/ Michael L. Goodson ---------------------------------- BASS AMERICA INC. By: /s/ Michael L. Goodson ---------------------------------- With respect to Article 6 of this Agreement, accepted and agreed as of the day and year first above written. BASS PLC By: /s/ Richard North ---------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----