-----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, ICKbaOOu68AT4WcyEoIDYfR6ERzkNNMWOHYQ36tzz+HJieQU/5n18U0WuNjKNksc oit47UCUc2mJA44lkK21Sw== 0000892569-97-002468.txt : 19970912 0000892569-97-002468.hdr.sgml : 19970912 ACCESSION NUMBER: 0000892569-97-002468 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970901 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970905 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOUBLETREE CORP CENTRAL INDEX KEY: 0000923472 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 860762415 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-24392 FILM NUMBER: 97676243 BUSINESS ADDRESS: STREET 1: 410 N 44TH ST STREET 2: STE 700 CITY: PHOENIX STATE: AR ZIP: 85008 BUSINESS PHONE: 6022206666 MAIL ADDRESS: STREET 1: 410 NORTH 44TH STREET STREET 2: SUITE 700 CITY: PHOENIX STATE: AZ ZIP: 85008 8-K 1 FORM 8-K 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1997 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 1, 1997 DOUBLETREE CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 0-24392 86 0762415 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation or Identification Number) organization) 410 NORTH 44TH STREET 85008 SUITE 700 (Zip Code) PHOENIX, ARIZONA (Address of principal executive offices) (602) 220-6666 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) - -------------------------------------------------------------------------------- 2 ITEM 5. Other Events On September 1, 1997, Doubletree Corporation ("Doubletree") Promus Hotel Corporation ("Promus"), and Parent Holding Corp., a newly-formed corporation jointly owned by Doubletree and Promus ("Parent"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Parent will form two subsidiaries that will merge with and into Promus and Doubletree such that Promus and Doubletree become wholly-owned subsidiaries of Parent (the "Mergers"). Pursuant to the Merger Agreement, upon the effectiveness of the Mergers, (i) each outstanding share of Common Stock, par value $.10 per share, of Promus will be converted into the right to receive 0.925 shares of Common Stock, par value $.01 per share, of Parent ("Parent Common Stock"), and (ii) each outstanding share of Common Stock, par value $.01 per share, of Doubletree will be converted into the right to receive one share of Parent Common Stock. Consummation of the Mergers is subject to the satisfaction or waiver by the parties of certain conditions, including the receipt of regulatory approvals and approvals by the stockholders of Promus and Doubletree. In connection with the Merger Agreement, Promus and Doubletree also have entered into (i) a Stock Option Agreement pursuant to which Promus granted to Doubletree an option to purchase up to 19.9% of the outstanding common stock of Promus under certain circumstances and (ii) a Stock Option Agreement pursuant to which Doubletree has granted to Promus an option to purchase up to 19.9% of the outstanding common stock of Doubletree under certain circumstances (together, the "Stock Option Agreements"). In addition, certain stockholders of Doubletree holding over 39% of the outstanding common stock of Doubletree have entered into a stockholder support agreement with Promus (the "Stockholder Support Agreement"), pursuant to which such stockholders agreed to vote their shares in favor of the adoption of the Merger Agreement and approval of the Doubletree Merger, subject to certain conditions. On September 2, 1997, Promus and Doubletree issued a joint press release announcing the execution of the Merger Agreement. The Merger Agreement, the Stock Option Agreements, the Stockholder Support Agreement and the press release are filed as exhibits hereto and are incorporated by reference herein. Doubletree has also adopted a Stockholder Rights Plan pursuant to which it will distribute one Preferred Stock Purchase Right with respect to each outstanding share of its Common Stock outstanding as of the close of business on September 11, 1997, and each additional such share issued thereafter until the earlier of the Distribution Date under the rights Agreement or the date on which the Rights expire or are redeemed. The Rights will expire immediately prior to the Effective Time or the transactions contemplated by the above-mentioned agreement with Promus, or, if the transactions are not consummated then on September 1, 2007, unless extended by Doubletree. The Rights will not be exercisable except on the occurrence of certain events described in the Rights Agreement. When exercisable, under certain circumstances, each Right, for an exercise price of $180 per share, will entitle the holder to purchase shares of Doubletree's Common Stock (or other shares, securities or property, as the case may be, of equivalent value) having a value equal to two times such exercise price. The Rights will be redeemable at $0.01 per Right. Copies of the Rights Agreement and the press release announcing adoption of the Stockholder Rights Plan are filed herewith as exhibits and are incorporated by reference herein. ITEM 7. Financial Statements and Exhibits (c) Exhibits. 2.1 Agreement and Plan of Merger, dated as of September 1, 1997, by and among Doubletree Corporation, Promus Hotel Corporation and Parent Holding Corp. 4.1 Rights Agreement, dated as of September 1, 1997, between Doubletree Corporation and Harris Trust Company of California, as Rights Agent. The Rights Agreement includes the Form of Certificate of Designations of Series A Junior Preferred Stock as Exhibit A, the Summary of Rights as Exhibit B and the Form of Rights Certificate as Exhibit C. 10.1 Stock Option Agreement (Doubletree), dated as of September 1, 1997, by and between Doubletree Corporation and Promus Hotel Corporation. 10.2 Stock Option Agreement (Promus), dated as of September 1, 1997, by and between Promus Hotel Corporation and Doubletree Corporation. 10.3 Stockholder Support Agreement, dated as of September 1, 1997, by and among certain stockholders of Doubletree, to and for the benefit of Promus.
3 99.1 Joint Press Release, dated September 2, 1997, issued by Promus Hotel Corporation and Doubletree Corporation. 99.2 Press Release, dated September 2, 1997, issued by Doubletree Corporation relating to the Stockholder Rights Plan.
4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PROMUS HOTEL CORPORATION /s/ DAVID STIVERS ------------------------------------------- David Stivers Senior Vice President and General Counsel Dated: September 5, 1997 5 EXHIBIT INDEX
Exhibit Number Description ------- ----------- 2.1 Agreement and Plan of Merger, dated as of September 1, 1997, by and among Doubletree Corporation, Promus Hotel Corporation and Parent Holding Corp. 4.1 Rights Agreement, dated as of September 1, 1997, between Doubletree Corporation and Harris Trust Company of California, as Rights Agent. The Rights Agreement includes the Form of Certificate of Designations of Series A Junior Preferred Stock as Exhibit A, the Summary of Rights as Exhibit B and the Form of Rights Certificate as Exhibit C. 10.1 Stock Option Agreement (Doubletree), dated as of September 1, 1997, by and between Doubletree Corporation and Promus Hotel Corporation. 10.2 Stock Option Agreement (Promus), dated as of September 1, 1997, by and between Promus Hotel Corporation and Doubletree Corporation. 10.3 Stockholder Support Agreement, dated as of September 1, 1997, by and among certain stockholders of Doubletree, to and for the benefit of Promus. 99.1 Joint Press Release, dated September 2, 1997, issued by Promus Hotel Corporation and Doubletree Corporation. 99.2 Press Release, dated September 2, 1997, issued by Doubletree Corporation relating to the Stockholder Rights Plan.
EX-2.1 2 AGREEMENT AND PLAN OF MERGER DATED SEPT. 1, 1997 1 EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER DATED AS OF SEPTEMBER 1, 1997 AMONG DOUBLETREE CORPORATION, PROMUS HOTEL CORPORATION AND PARENT HOLDING CORP. 2 TABLE OF CONTENTS
Page ARTICLE I. THE MERGERS................................................................2 Section 1.1. Certificate of Incorporation and Bylaws of Parent..........................2 Section 1.2. The Doubletree Merger......................................................2 Section 1.3. The Promus Merger..........................................................2 Section 1.4. Effective Time of the Mergers..............................................2 Section 1.5. Closing....................................................................3 Section 1.6. Effect of the Mergers......................................................3 Section 1.7. Certificate of Incorporation and Bylaws of the Surviving Corporations......3 Section 1.8. Directors and Officers of the Surviving Corporations.......................3 ARTICLE II. CONVERSION OF SECURITIES...................................................4 Section 2.1. Conversion of Doubletree Capital Stock.....................................4 Section 2.2. Conversion of Promus Capital Stock.........................................4 Section 2.3. Cancellation of Parent Stock...............................................5 Section 2.4. Exchange of Certificates...................................................5 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DOUBLETREE...............................8 Section 3.1. Organization of Doubletree.................................................8 Section 3.2. Doubletree Capital Structure...............................................9 Section 3.3. Authority; No Conflict; Required Filings and Consents.....................10 Section 3.4. SEC Filings; Financial Statements.........................................11 Section 3.5. No Undisclosed Liabilities................................................12 Section 3.6. Absence of Certain Changes or Events......................................12 Section 3.7. Taxes.....................................................................12 Section 3.8. Properties................................................................13 Section 3.9. Intellectual Property.....................................................14 Section 3.10. Agreements, Contracts and Commitments.....................................14 Section 3.11. Litigation................................................................14 Section 3.12. Environmental Matters.....................................................14 Section 3.13. Employee Benefit Plans....................................................15 Section 3.14. Compliance With Laws......................................................16 Section 3.15. Accounting and Tax Matters................................................16 Section 3.16. Registration Statement; Joint Proxy Statement/Prospectus..................17 Section 3.17. Labor Matters.............................................................17 Section 3.18. Insurance.................................................................18 Section 3.19. Doubletree Long-Range Plans...............................................18 Section 3.20. Opinion of Financial Advisor..............................................18 Section 3.21. No Existing Discussions...................................................18 Section 3.22. Section 203 of the DGCL Not Applicable....................................18
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Page Section 3.23. Doubletree Rights Plan....................................................18 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PROMUS..................................19 Section 4.1. Organization of Promus....................................................19 Section 4.2. Promus Capital Structure..................................................19 Section 4.3. Authority; No Conflict; Required Filings and Consents.....................20 Section 4.4. SEC Filings; Financial Statements.........................................21 Section 4.5. No Undisclosed Liabilities................................................22 Section 4.6. Absence of Certain Changes or Events......................................22 Section 4.7. Taxes.....................................................................22 Section 4.8. Properties................................................................23 Section 4.9. Intellectual Property.....................................................23 Section 4.10. Agreements, Contracts and Commitments.....................................24 Section 4.11. Litigation................................................................24 Section 4.12. Environmental Matters.....................................................24 Section 4.13. Employee Benefit Plans....................................................25 Section 4.14. Compliance With Laws......................................................26 Section 4.15. Accounting and Tax Matters................................................26 Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus..................26 Section 4.17. Labor Matters.............................................................27 Section 4.18. Insurance.................................................................27 Section 4.19. Promus Long-Range Plans...................................................27 Section 4.20. Opinion of Financial Advisor..............................................27 Section 4.21. No Existing Discussions...................................................27 Section 4.22. Section 203 of the DGCL Not Applicable....................................27 Section 4.23. Promus Rights Plan........................................................27 ARTICLE V. COVENANTS.................................................................28 Section 5.1. Conduct of Business.......................................................28 Section 5.2. Cooperation; Notice; Cure.................................................30 Section 5.3. No Solicitation...........................................................30 Section 5.4. Joint Proxy Statement/Prospectus; Registration Statement..................31 Section 5.5. NASDAQ Quotation and NYSE Listing.........................................32 Section 5.6. Access to Information.....................................................32 Section 5.7. Stockholders' Meetings....................................................32 Section 5.8. Legal Conditions to Merger................................................32 Section 5.9. Public Disclosure.........................................................33 Section 5.10. Nonrecognition Exchange...................................................33 Section 5.11. Pooling Accounting........................................................34 Section 5.12. Affiliate Agreements......................................................34 Section 5.13. NYSE Listing..............................................................34 Section 5.14. Stock Plans...............................................................34 Section 5.15. Brokers or Finders........................................................35 Section 5.16. Indemnification...........................................................36
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Page Section 5.17. Letter of Promus's Accountants............................................36 Section 5.18. Letter of Doubletree's Accountants........................................37 Section 5.19. Stock Option Agreements...................................................37 Section 5.20. Post-Merger Corporate Governance; Employment Arrangements.................37 Section 5.21. Name of Parent............................................................39 Section 5.22. Parent Stockholder Rights Plan; Amendment of Promus Rights Plan...........39 Section 5.23. GEPT Warrant; Doubletree Registration Rights Agreement....................39 Section 5.24. Conveyance Taxes..........................................................39 Section 5.25. Transfer Taxes............................................................40 Section 5.26. Stockholder Litigation....................................................40 Section 5.27. Employee Benefits; Severance..............................................40 ARTICLE VI. CONDITIONS TO MERGER......................................................41 Section 6.1. Conditions to Each Party's Obligation to Effect the Mergers...............41 Section 6.2. Additional Conditions to Obligations of Doubletree........................42 Section 6.3. Additional Conditions to Obligations of Promus............................43 ARTICLE VII. TERMINATION AND AMENDMENT................................................43 Section 7.1. Termination...............................................................43 Section 7.2. Effect of Termination.....................................................45 Section 7.3. Fees and Expenses.........................................................45 Section 7.4. Amendment.................................................................47 Section 7.5. Extension; Waiver.........................................................47 ARTICLE VIII. MISCELLANEOUS.............................................................48 Section 8.1. Nonsurvival of Representations, Warranties and Agreements.................48 Section 8.2. Notices...................................................................48 Section 8.3. Interpretation............................................................49 Section 8.4. Counterparts..............................................................49 Section 8.5. Entire Agreement; No Third Party Beneficiaries............................49 Section 8.6. Governing Law.............................................................49 Section 8.7. Assignment................................................................49
EXHIBITS Exhibit A Stock Option Agreement (Doubletree) Exhibit B Stock Option Agreement (Promus) Exhibit C Stockholder Support Agreement Exhibit D Certificate of Incorporation of Parent Exhibit E Bylaws of Parent Exhibit F Form of Doubletree Affiliate Agreement Exhibit G Form of Promus Affiliate Agreement iii 5 TABLES OF DEFINED TERMS
CROSS REFERENCE TERMS IN AGREEMENT - ----- ------------ Acquisition Proposal Section 5.3(a) Affiliate Section 5.12 Affiliate Agreement Section 5.12 Agreement Preamble Alternative Transaction Section 7.3(e) Bankruptcy and Equity Exception Section 3.3(a) Certificate of Merger Section 1.4 Certificates Section 2.4(b) Closing Section 1.5 Closing Date Section 1.5 Code Preamble Confidentiality Agreements Section 5.3(a) DGCL Section 1.2 Doubletree Preamble Doubletree Balance Sheet Section 3.4(b) Doubletree Common Stock Section 2.1 Doubletree Director Section 5.20(a) Doubletree Disclosure Schedule Article III Doubletree Employee Plans Section 3.13(a) Doubletree Employees Section 5.27(b) Doubletree Exchange Ratio Section 2.1(c) Doubletree Material Adverse Effect Section 3.1 Doubletree Material Contracts Section 3.10(a) Doubletree Merger Section 1.2 Doubletree Preferred Stock Section 3.2(a) Doubletree Rights Plan Section 3.2(b) Doubletree SEC Reports Section 3.4(a) Doubletree Stock Option Section 5.14(a) Doubletree Stock Option Agreement Preamble Doubletree Stock Plans Section 3.2(a) Doubletree Stockholders' Meeting Section 3.16 Doubletree Sub Section 1.2 Doubletree Surviving Corporation Section 1.6 Effective Time Section 1.4 Environmental Law Section 3.12(b) ERISA Section 3.13(a) ERISA Affiliate Section 3.13(a) Exchange Act Section 3.3(c) Exchange Agent Section 2.4(a) Exchange Fund Section 2.4(a) GEPT Warrant Section 3.2(b) Governmental Entity Section 3.3(c)
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CROSS REFERENCE TERMS IN AGREEMENT - ----- ------------ Hazardous Substance Section 3.12(c) HSR Act Section 3.3(c) Indemnified Parties Section 5.16(a) IRS Section 3.7(b) Joint Proxy Statement/Prospectus Section 3.16 Material Lease(s) Section 3.8(a) Mergers Section 1.3 NYSE Section 2.4(e) Order Section 5.8(b) Outside Date Section 7.1(b) Parent Preamble Parent Common Stock Section 2.1(c) Parent Rights Plan Section 5.22 Promus Preamble Promus Balance Sheet Section 4.4(b) Promus Common Stock Section 2.2 Promus Director Section 5.20(a) Promus Disclosure Schedule Article IV Promus Employee Plans Section 4.13(a) Promus Employees Section 5.27(b) Promus Exchange Ratio Section 2.2(c) Promus Material Adverse Effect Section 4.1 Promus Material Contracts Section 4.10(a) Promus Merger Section 1.3 Promus Preferred Stock Section 4.2(a) Promus Rights Plan Section 4.2(b) Promus SEC Reports Section 4.4(a) Promus Special Stock Section 4.2(a) Promus Stock Option Section 5.14(a) Promus Stock Option Agreement Preamble Promus Stock Plans Section 4.2(a) Promus Stockholders' Meeting Section 3.16 Promus Sub Section 1.3 Promus Surviving Corporation Section 1.6 Registration Statement Section 3.16 Rule 145 Section 5.12 SEC Section 3.3(c) Securities Act Section 2.4(j) Stock Option Agreements Preamble Stockholder Support Agreement Preamble Subsidiary Section 3.1 Superior Proposal Section 5.3(a) Surviving Corporation Section 1.6 Tax Section 3.7(a)
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CROSS REFERENCE TERMS IN AGREEMENT - ----- ------------ Taxes Section 3.7(a) Third Party Section 5.3(a) Transfer Taxes Section 5.25
vi 8 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September 1, 1997, by and among DOUBLETREE CORPORATION, a Delaware corporation ("Doubletree"), PROMUS HOTEL CORPORATION, a Delaware corporation ("Promus") and PARENT HOLDING CORP., a newly-formed Delaware corporation with nominal capitalization, one-half of the issued and outstanding capital stock of which is nominally owned by each of Doubletree and Promus ("Parent"). WHEREAS, the Boards of Directors of Doubletree and Promus deem it advisable and in the best interests of each corporation and its respective stockholders that Doubletree and Promus combine in a "merger of equals" in order to advance the interests of Doubletree and Promus and their respective stockholders; WHEREAS, the combination of Doubletree and Promus shall be effected by the terms of this Agreement through (i) a merger of a wholly-owned subsidiary of Parent with and into Doubletree and (ii) a merger of another wholly-owned subsidiary of Parent with and into Promus, such that Doubletree and Promus become wholly-owned subsidiaries of Parent and the stockholders of Doubletree and Promus become stockholders of Parent; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to each of Doubletree's and Promus's willingness to enter into this Agreement, Doubletree and Promus have entered into (i) a Stock Option Agreement dated as of the date of this Agreement and attached hereto as Exhibit A (the "Doubletree Stock Option Agreement"), pursuant to which Promus granted Doubletree an option to purchase shares of common stock of Promus under certain circumstances, and (ii) a Stock Option Agreement dated as of the date of this Agreement and attached hereto as Exhibit B (the "Promus Stock Option Agreement" and, together with the Doubletree Stock Option Agreement, the "Stock Option Agreements"), pursuant to which Doubletree granted Promus an option to purchase shares of common stock of Doubletree under certain circumstances; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Promus's willingness to enter into this Agreement, certain stockholders of Doubletree have entered into a Stockholder Support Agreement with Promus dated as of the date of this Agreement and attached hereto as Exhibit C (the "Stockholder Support Agreement"), pursuant to which such stockholders have agreed, among other things, to vote all voting securities of Doubletree beneficially owned by them in favor of approval and adoption of the Agreement and the Doubletree Merger (as defined in Section 1.2); WHEREAS, for Federal income tax purposes, it is intended that (i) the Doubletree Merger shall qualify as a reorganization described in Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and/or, taken together with the Promus Merger (as defined in Section 1.3), as a transfer of property to Parent by holders of Doubletree Common Stock (as defined in Section 2.1) described in Section 351 of the Code and (ii) the Promus Merger shall qualify as a reorganization described in Section 368(a) of the Code and/or, taken together with 1 9 the Doubletree Merger, as a transfer of property to Parent by holders of Promus Common Stock described in Section 351 of the Code; WHEREAS, for accounting purposes, it is intended that the transactions contemplated by this Agreement shall be accounted for as a pooling of interests; and WHEREAS, the Boards of Directors of Doubletree and Promus have approved this Agreement, the Stock Option Agreements and the Stockholder Support Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties agree as follows: ARTICLE I. THE MERGERS Section 1.1. Certificate of Incorporation and Bylaws of Parent Doubletree and Promus shall cause the Certificate of Incorporation and Bylaws of Parent to be amended prior to the Effective Time (as defined in Section 1.4) to be substantially in the form of Exhibit D and Exhibit E hereto, respectively. From the date hereof until the Effective Time, Doubletree and Promus shall consult with each other prior to causing or permitting Parent to take any action and neither shall cause or permit Parent to take any action inconsistent with the provisions of this Agreement without the written consent of the other. Section 1.2. The Doubletree Merger Doubletree and Promus shall cause Parent to form a wholly-owned subsidiary named Doubletree Acquisition Corp. ("Doubletree Sub") under the laws of the State of Delaware. Doubletree and Promus will cause Parent to cause Doubletree Sub to execute and deliver this Agreement. Upon the terms and subject to the provisions of this Agreement, and in accordance with the Delaware General Corporation Code (the "DGCL"), Doubletree Sub will merge with and into Doubletree (the "Doubletree Merger") at the Effective Time (as defined in Section 1.4). Doubletree Sub will be formed solely to facilitate the Doubletree Merger and will conduct no business or activity other than in connection with the Doubletree Merger. Section 1.3. The Promus Merger Doubletree and Promus shall cause Parent to form a wholly-owned subsidiary named Promus Acquisition Corp. ("Promus Sub") under the laws of the State of Delaware. Doubletree and Promus will cause Parent to cause Promus Sub to execute and deliver this Agreement. Upon the terms and subject to the provisions of this Agreement, and in accordance with the DGCL, Promus Sub will merge with and into Promus (the "Promus Merger" and together with the Doubletree Merger, the "Mergers") at the Effective Time (as defined in Section 1.4). Promus Sub will be formed solely to facilitate the Promus Merger and will conduct no business or activity other than in connection with the Promus Merger. Section 1.4. Effective Time of the Mergers Subject to the provisions of this Agreement, a certificate of merger with respect to each Merger in such form as is required by the relevant provisions of the DGCL (individually, a "Certificate of Merger" with respect to one of 2 10 the Mergers, and collectively with respect to both Mergers, the "Certificates of Merger") shall be duly prepared, executed and acknowledged and thereafter delivered to the Secretary of State of the State of Delaware for filing, as provided in the DGCL, as early as practicable on the Closing Date (as defined in Section 1.5). Each Merger shall become effective at such time as is specified in the Certificate of Merger (the time at which both Mergers have become fully effective being hereinafter referred to as the "Effective Time"). Section 1.5. Closing The closing of the Mergers (the "Closing") will take place at such time and place to be agreed upon by the parties hereto, on a date to be specified by Promus and Doubletree, which shall be no later than the second business day after satisfaction or, if permissible, waiver of the conditions set forth in Article VI (the "Closing Date"), unless another date is agreed to in writing by Promus and Doubletree. Section 1.6. Effect of the Mergers As a result of the Doubletree Merger, the separate corporate existence of Doubletree Sub shall cease and Doubletree shall continue as the surviving corporation (the "Doubletree Surviving Corporation"). As a result of the Promus Merger, the separate corporate existence of Promus Sub shall cease and Promus shall continue as the surviving corporation (the "Promus Surviving Corporation" and together with the Doubletree Surviving Corporation, the "Surviving Corporations"). Upon becoming effective, the Mergers shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, (i) all properties, rights, privileges, powers and franchises of Doubletree and Doubletree Sub shall vest in the Doubletree Surviving Corporation, and all debts, liabilities and duties of Doubletree and Doubletree Sub shall become the debts, liabilities and duties of the Doubletree Surviving Corporation and (ii) all properties, rights, privileges, powers and franchises of Promus and Promus Sub shall vest in the Promus Surviving Corporation, and all debts, liabilities and duties of Promus and Promus Sub shall become the debts, liabilities and duties of the Promus Surviving Corporation. Section 1.7. Certificate of Incorporation and Bylaws of the Surviving Corporations At the Effective Time, (i) the Certificate of Incorporation and Bylaws of the Doubletree Surviving Corporation shall be amended to be identical to the Certificate of Incorporation and Bylaws, respectively, of Doubletree Sub as in effect immediately prior to the Effective Time (except that the name of the Doubletree Surviving Corporation shall be Doubletree Inc.), in each case until duly amended in accordance with applicable law, and (ii) the Certificate of Incorporation and Bylaws of the Promus Surviving Corporation shall be amended to be identical to the Certificate of Incorporation and Bylaws, respectively, of Promus Sub as in effect immediately prior to the Effective Time (except that the name of the Promus Surviving Corporation shall be Promus Acquisition Corp.), in each case until duly amended in accordance with applicable law. Section 1.8. Directors and Officers of the Surviving Corporations (a) Doubletree Surviving Corporation. The directors of Doubletree Sub immediately prior to the Effective Time shall be the initial directors of the Doubletree Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Doubletree Surviving Corporation. The officers of Doubletree immediately prior to the Effective Time shall be the initial officers of the Doubletree Surviving Corporation, each to hold 3 11 office in accordance with the Certificate of Incorporation and Bylaws of the Doubletree Surviving Corporation. (b) Promus Surviving Corporation. The directors of Promus Sub immediately prior to the Effective Time shall be the initial directors of the Promus Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Promus Surviving Corporation. The officers of Promus immediately prior to the Effective Time shall be the initial officers of the Promus Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Promus Surviving Corporation. ARTICLE II. CONVERSION OF SECURITIES Section 2.1. Conversion of Doubletree Capital Stock At the Effective Time, by virtue of the Doubletree Merger and without any action on the part of any of the parties hereto or the holders of any shares of Common Stock, par value $.01 per share, of Doubletree ("Doubletree Common Stock") or common stock of Doubletree Sub: (a) Capital Stock of Doubletree Sub. Each issued and outstanding share of the common stock, par value $.01 per share, of Doubletree Sub shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.01 per share, of the Doubletree Surviving Corporation. (b) Cancellation of Treasury Stock and Promus-Owned Stock. All shares of Doubletree Common Stock that are owned by Doubletree as treasury stock and any shares of Doubletree Common Stock owned by Promus or any wholly-owned Subsidiary (as defined in Section 3.1) of Promus shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) Exchange Ratio for Doubletree Common Stock. Subject to Section 2.4(e), each issued and outstanding share of Doubletree Common Stock (other than shares to be canceled in accordance with Section 2.1(b)) shall be converted into the right to receive one share (the "Doubletree Exchange Ratio") of Common Stock, par value $.01 per share, of Parent ("Parent Common Stock"). All such shares of Doubletree Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any ownership or other rights with respect thereto, except the right to receive the shares of Parent Common Stock and an amount equal to certain dividends and other distributions described in Section 2.4(c), without interest, upon the surrender of such certificate in accordance with Section 2.4. Section 2.2. Conversion of Promus Capital Stock At the Effective Time, by virtue of the Promus Merger and without any action on the part of any of the parties hereto or the holders of any shares of Common Stock, par value $.10 per share, of Promus ("Promus Common Stock") or common stock of Promus Sub: 4 12 (a) Capital Stock of Promus Sub. Each issued and outstanding share of the common stock, par value $.01 per share, of Promus Sub shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.01 per share, of the Promus Surviving Corporation. (b) Cancellation of Treasury Stock and Doubletree-Owned Stock. All shares of Promus Common Stock that are owned by Promus as treasury stock and any shares of Promus Common Stock owned by Doubletree or any wholly-owned Subsidiary (as defined in Section 3.1) of Doubletree shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) Exchange Ratio for Promus Common Stock. Subject to Section 2.4(e), each issued and outstanding share of Promus Common Stock (other than shares to be canceled in accordance with Section 2.2(b)) shall be converted into the right to receive 0.925 shares (the "Promus Exchange Ratio") of Parent Common Stock. All such shares of Promus Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any ownership or other rights with respect thereto, except the right to receive the shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration therefor and an amount equal to certain dividends and other distributions described in Section 2.4(c), in each case upon the surrender of such certificate in accordance with Section 2.4 and without interest. Section 2.3. Cancellation of Parent Stock. At the Effective Time, by virtue of the Mergers and without any action on the part of any holder of any capital stock of Doubletree, Promus or Parent, each share of Parent Common Stock issued and outstanding immediately prior to the Effective Time shall be surrendered and canceled, and the amount paid by Doubletree and Promus for the shares of Parent Common Stock held by them shall be returned by Parent to them. Section 2.4. Exchange of Certificates The procedures for exchanging certificates which prior to the Effective Time represented shares of Doubletree Common Stock and Promus Common Stock for certificates representing Parent Common Stock pursuant to the Mergers are as follows: (a) Exchange Agent. As of the Effective Time, Parent shall deposit with a bank or trust company designated by Promus and Doubletree (the "Exchange Agent"), for the benefit of the holders of shares of Doubletree Common Stock and shares of Promus Common Stock outstanding immediately prior to the Effective Time, for exchange in accordance with this Section 2.4, through the Exchange Agent, certificates representing the shares of Parent Common Stock and, with respect to shares of Promus Common Stock, cash in lieu of fractional shares (such shares of Parent Common Stock and cash in lieu of fractional shares, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund"), issuable pursuant to Sections 2.1 and 2.2 in exchange for shares of Doubletree Common Stock and Promus Common Stock, respectively, outstanding immediately prior to the Effective Time. (b) Exchange Procedures. As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a certificate or certificates which 5 13 immediately prior to the Effective Time represented outstanding shares of Doubletree Common Stock or Promus Common Stock (collectively, the "Certificates") whose shares were converted pursuant to Section 2.1 or Section 2.2 into the right to receive shares of Parent Common Stock (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Doubletree and Promus may reasonably specify) and (ii) instructions for effecting the surrender of the Certificates in exchange for certificates representing shares of Parent Common Stock (plus cash in lieu of fractional shares, if any, of Parent Common Stock as provided below). Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Parent Common Stock, the amount of any cash payable in lieu of fractional shares of Parent Common Stock (with respect to shares of Promus Common Stock) and an amount equal to certain dividends and other distributions which such holder has the right to receive pursuant to the provisions of this Article II, and the Certificate so surrendered shall immediately be canceled. In the event of a transfer of ownership of Doubletree Common Stock or Promus Common Stock prior to the Effective Time which is not registered in the transfer records of Doubletree or Promus, respectively, a certificate representing the number of shares of Parent Common Stock issuable and any amounts payable in accordance with this Agreement may be issued and paid to a transferee if the Certificate representing such Doubletree Common Stock or Promus Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. (c) Distributions With Respect to Unexchanged Shares. No amount in respect of dividends or other distributions declared or made after the Effective Time with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock the holder thereof is entitled to receive in respect thereof and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to subsection (e) below until the holder of record of such Certificate shall surrender such Certificate to Parent in accordance herewith. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a fractional share of Parent Common Stock to which such holder is entitled pursuant to subsection (e) below and an amount equal to the amount of dividends or other distributions with a record date after the Effective Time previously paid with respect to whole shares of Parent Common Stock, and (ii) at the appropriate payment date, an amount equal to the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to whole shares of Parent Common Stock, in each case without interest. (d) No Further Ownership Rights in Doubletree Common Stock and Promus Common Stock. All shares of Parent Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms hereof (including any cash paid pursuant to subsection (c) or (e) of this Section 2.4) shall be deemed to have been issued in full satisfaction of all rights 6 14 pertaining to the shares of Doubletree Common Stock or Promus Common Stock theretofore represented by such Certificates, subject, however, to the applicable Surviving Corporation's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Doubletree on such shares of Doubletree Common Stock or by Promus on such shares of Promus Common Stock, as the case may be, in accordance with the terms of this Agreement (to the extent permitted under Section 5.1) prior to the date hereof and which remain unpaid at the Effective Time, and from and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Doubletree Surviving Corporation or the Promus Surviving Corporation, as the case may be, of the shares of Doubletree Common Stock or Promus Common Stock, respectively, which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to one of the Surviving Corporations or Parent for any reason, such Certificates shall be canceled and exchanged as provided in this Section 2.4. (e) No Fractional Shares. No certificate or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates representing shares of Promus Common Stock, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. Notwithstanding any other provision of this Agreement, each holder of shares of Promus Common Stock outstanding immediately prior to the Effective Time exchanged pursuant to the Promus Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock (after taking into account all Certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Parent Common Stock multiplied by the per share sales price of Parent Common Stock (as reported on the New York Stock Exchange Composite Tape) on the closing of the first day of regular-way trading of Parent Common Stock on the New York Stock Exchange (the "NYSE") after the Effective Time. (f) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the former stockholders of Doubletree or Promus for 180 days after the Effective Time shall be delivered to Parent upon demand, and any former stockholder of Doubletree or Promus who has not previously complied with this Section 2.4 shall thereafter look only to Parent for payment of such former stockholder's claim for Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock and any amounts in respect of dividends or distributions with respect to Parent Common Stock. (g) No Liability. None of Doubletree, Promus, Parent or the Exchange Agent shall be liable to any holder of shares of Doubletree Common Stock or Promus Common Stock, as the case may be, for any shares of Parent Common Stock (or cash in lieu of fractional shares of Parent Common Stock or any dividends or distributions with respect thereto) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (h) Withholding Rights. Parent and each of the Surviving Corporations shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Certificates which prior to the Effective Time represented shares of Doubletree Common Stock or Promus Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or one of the 7 15 Surviving Corporations, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Doubletree Common Stock or Promus Common Stock, as the case may be, in respect of which such deduction and withholding was made. (i) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or one of the Surviving Corporations, the posting by such person of a bond in such reasonable amount as Parent or such Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of Parent Common Stock and any cash in lieu of fractional shares, and unpaid dividends and distributions on shares of Parent Common Stock deliverable in respect thereof pursuant to this Agreement. (j) Affiliates. Notwithstanding anything herein to the contrary, Certificates surrendered for exchange by any Affiliate (as defined in Section 5.12) of Doubletree or Promus shall not be exchanged until (i) Parent has received an Affiliate Agreement (as defined in Section 5.12) from such Affiliate or (ii) until the later of such date as such shares of Parent Common Stock are freely tradable without jeopardizing the pooling of interests accounting treatment of the Mergers and without violating the Securities Act of 1933, as amended (the "Securities Act"). ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DOUBLETREE Doubletree represents and warrants to Promus that the statements contained in this Article III are true and correct except as set forth herein and in the disclosure schedule delivered by Doubletree to Promus on or before the date of this Agreement (the "Doubletree Disclosure Schedule"). The Doubletree Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III and the disclosure in any paragraph shall qualify other paragraphs in this Article III only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other paragraphs. Section 3.1. Organization of Doubletree Each of Doubletree and its Subsidiaries (as defined below) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power to own, lease and operate its property and to carry on its business as now being conducted and as proposed to be conducted, and is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, properties, financial condition or results of operations of Doubletree and its Subsidiaries, taken as a whole (an "Doubletree Material Adverse Effect"). A true and correct copy of the Certificate of Incorporation and Bylaws of Doubletree has been delivered to Promus. Except as set forth in Doubletree SEC Reports (as defined in Section 3.4) filed prior to the date hereof, neither Doubletree nor any of its Subsidiaries directly or indirectly owns (other than ownership 8 16 interests in Doubletree or in one or more of its Subsidiaries) any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity, excluding (i) securities in any publicly traded company held for investment by Doubletree and comprising less than five percent (5%) of the outstanding stock of such company and (ii) any investment or series of related investments with a book value of less than $15 million. As used in this Agreement, the word "Subsidiary" means, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner (excluding partnerships the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the economic interests in such partnership) or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. Section 3.2. Doubletree Capital Structure. a) The authorized capital stock of Doubletree consists of 100,000,000 shares of Common Stock, $.01 par value, and 5,000,000 shares of Preferred Stock, $.01 par value ("Doubletree Preferred Stock"). As of the date hereof, (i) 39,688,458 shares of Doubletree Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable and (ii) no shares of Doubletree Common Stock were held in the treasury of Doubletree or by Subsidiaries of Doubletree. The Doubletree Disclosure Schedule shows the number of shares of Doubletree Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of the date hereof and the plans under which such options were granted (collectively, the "Doubletree Stock Plans"). As of the date of this Agreement, none of the shares of Doubletree Preferred Stock is issued and outstanding. There are no obligations, contingent or otherwise, of Doubletree or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Doubletree Common Stock or the capital stock of any Subsidiary or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations or indebtedness for borrowed money of Subsidiaries entered into in the ordinary course of business and other than any obligation the failure of which to perform or satisfy would not have a Doubletree Material Adverse Effect. All of the outstanding shares of capital stock or other ownership interests of each of Doubletree's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are owned by Doubletree or another Subsidiary of Doubletree free and clear of all security interests, liens, claims, pledges, agreements, limitations in Doubletree's voting rights, charges or other encumbrances of any nature. (b) Except as set forth in this Section 3.2 or as reserved for future grants of options under the Doubletree Stock Plans or the Promus Stock Option Agreement and except for the preferred stock purchase rights issued and issuable under the Rights Agreement dated as of September 1, 1997 between Doubletree and Harris Trust Company of California (the "Doubletree Rights Plan"), options to purchase an aggregate of 20,000 shares of Doubletree Common Stock, issued on June 30, 1994, to GE Investment Hotel Partners I, Limited Partnership and the Warrants to purchase an aggregate of 262,753 shares of Doubletree Common Stock, 9 17 issued on November 8, 1996, to PT Investments Inc. (the "GEPT Warrant"), (i) there are no shares of capital stock of any class of Doubletree, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Doubletree or any of its Subsidiaries is a party or by which it is bound obligating Doubletree or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other ownership interests of Doubletree or any of its Subsidiaries or obligating Doubletree or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) to the best knowledge of Doubletree, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of Doubletree. All shares of Doubletree Common Stock subject to issuance as specified in this Section 3.2 are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. Section 3.3. Authority; No Conflict; Required Filings and Consents. a) Doubletree has all requisite corporate power and authority to enter into this Agreement and the Stock Option Agreements and to consummate the transactions contemplated by this Agreement and the Stock Option Agreements. The execution and delivery of this Agreement and the Stock Option Agreements and the consummation of the transactions contemplated by this Agreement and the Stock Option Agreements by Doubletree have been duly authorized by all necessary corporate action on the part of Doubletree, subject only to the approval and adoption of this Agreement and the Doubletree Merger by Doubletree's stockholders under the DGCL. This Agreement and the Stock Option Agreements have been duly executed and delivered by Doubletree and constitute the valid and binding obligations of Doubletree, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (the "Bankruptcy and Equity Exception"). (b) The execution and delivery of this Agreement and the Stock Option Agreements by Doubletree does not, and the consummation of the transactions contemplated by this Agreement and the Stock Option Agreements will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of Doubletree or any of its Subsidiaries, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which Doubletree or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (other than pursuant to the Credit Agreement dated as of November 8, 1996 by and among Doubletree, Morgan Stanley Senior Funding, Inc., The Bank of Nova Scotia and the lenders identified therein) or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, 10 18 ordinance, rule or regulation applicable to Doubletree or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which (x) are not, individually or in the aggregate, reasonably likely to have a Doubletree Material Adverse Effect or (y) would not substantially impair or delay the consummation of the Doubletree Merger. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to Doubletree or any of its Subsidiaries in connection with the execution and delivery of this Agreement and the Stock Option Agreements or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of the pre-merger notification report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of a Certificate of Merger with respect to the Doubletree Merger with the Delaware Secretary of State, (iii) the filing of the Joint Proxy Statement/Prospectus (as defined in Section 3.16 below) with the Securities and Exchange Commission (the "SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act, (iv) such consents, approvals, orders, authorizations, permits, filings or registrations related to, or arising out of, compliance with statutes, rules or regulations regulating the consumption, sale or serving of alcoholic beverages, (v) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities laws and the laws of any foreign country and (vi) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not (x) be reasonably likely to have a Doubletree Material Adverse Effect or (y) substantially impair or delay the consummation of the Doubletree Merger. Section 3.4. SEC Filings; Financial Statements. (a) Doubletree has filed and made available to Promus all forms, reports and documents required to be filed by Doubletree with the SEC since January 1, 1996 (collectively, the "Doubletree SEC Reports"). The Doubletree SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Doubletree SEC Reports or necessary in order to make the statements in such Doubletree SEC Reports, in the light of the circumstances under which they were made, not misleading. None of Doubletree's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes) of Doubletree contained in the Doubletree SEC Reports complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q under the Exchange Act) and fairly presented the consolidated financial position of Doubletree and its Subsidiaries as of the dates and the consolidated results of its operations and cash flows for the 11 19 periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. The audited balance sheet of Doubletree as of December 31, 1996 is referred to herein as the "Doubletree Balance Sheet." Section 3.5. No Undisclosed Liabilities Except as disclosed in the Doubletree SEC Reports filed prior to the date hereof, and except for normal or recurring liabilities incurred since December 31, 1996 in the ordinary course of business consistent with past practices, Doubletree and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate are reasonably likely to have a Doubletree Material Adverse Effect. Section 3.6. Absence of Certain Changes or Events Except as disclosed in the Doubletree SEC Reports filed prior to the date hereof, since the date of the Doubletree Balance Sheet, Doubletree and its Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been (i) any event, development, state of affairs or condition, or series or combination of events, developments, states of affairs or conditions, which, individually or in the aggregate, has had or is reasonably likely to have a Doubletree Material Adverse Effect (other than events, developments, states of affairs or conditions that are the effect or result of actions taken by Promus or economic factors affecting the economy as a whole or the industry in which Doubletree competes); (ii) any damage, destruction or loss (whether or not covered by insurance) with respect to Doubletree or any of its Subsidiaries which is reasonably likely to have a Doubletree Material Adverse Effect; (iii) any material change by Doubletree in its accounting methods, principles or practices to which Promus has not previously consented in writing; (iv) any revaluation by Doubletree of any of its assets which is reasonably likely to have a Doubletree Material Adverse Effect; or (v) any other action or event that would have required the consent of Promus pursuant to Section 5.1 of this Agreement had such action or event occurred after the date of this Agreement other than such actions or events that, individually or in the aggregate, have not had or are not reasonably likely to have a Doubletree Material Adverse Effect. Section 3.7. Taxes. (a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes," means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, gains, franchise, withholding, payroll, recapture, employment, excise, unemployment insurance, social security, business license, occupation, business organization, stamp, environmental and property taxes, together with all interest, penalties and additions imposed with respect to such amounts. For purposes of this Agreement, "Taxes" also includes any obligations under any agreements or arrangements with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity. 12 20 (b) Doubletree and each of its Subsidiaries have (i) filed all federal, state, local and foreign Tax returns and reports required to be filed by them prior to the date of this Agreement (taking into account all applicable extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clauses (i), (ii) or (iii) for any such filings, payments or accruals that are not reasonably likely, individually or in the aggregate, to have a Doubletree Material Adverse Effect. Neither the Internal Revenue Service (the "IRS") nor any other taxing authority has asserted any claim for Taxes, or to the actual knowledge of the executive officers of Doubletree, is threatening to assert any claims for Taxes, which claims, individually or in the aggregate, are reasonably likely to have a Doubletree Material Adverse Effect. Doubletree and each of its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected, except for amounts that are not reasonably likely, individually or in the aggregate, to have a Doubletree Material Adverse Effect. Neither Doubletree nor any of its Subsidiaries has made an election under Section 341(f) of the Code, except for any such election that shall not have a Doubletree Material Adverse Effect. There are no liens for Taxes upon the assets of Doubletree or any of its Subsidiaries (other than liens for Taxes that are not yet due or delinquent or that are being contested in good faith by appropriate proceedings), except for liens that are not reasonably likely, individually or in the aggregate, to have a Doubletree Material Adverse Effect. (c) Neither Doubletree nor any of its Subsidiaries is or has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) for any taxable period beginning on or after the taxable period ending December 31, 1993, other than a group the common parent of which is or was Doubletree or any Subsidiary of Doubletree. (d) Neither Doubletree nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity, except for obligations that are not reasonably likely, individually or in the aggregate, to have a Doubletree Material Adverse Effect. Section 3.8. Properties. (a) Neither Doubletree nor any of its Subsidiaries is in default under any leases for real property providing for the occupancy, in each case, of (i) a hotel or (ii) other facilities in excess of 50,000 square feet (collectively "Material Lease(s)"), except where the existence of such defaults, individually or in the aggregate, is not reasonably likely to have a Doubletree Material Adverse Effect. (b) With respect to each item of real property that Doubletree or any of its Subsidiaries owns, except for such matters that, individually or in the aggregate, are not reasonably likely to have a Doubletree Material Adverse Effect: (i) Doubletree or its Subsidiary has good and clear record and marketable title to such property, insurable by a recognized 13 21 national title insurance company at standard rates, free and clear of any security interest, easement, covenant or other restriction, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or occupancy of such property; and (ii) the improvements constructed on such property are in good condition, and all mechanical and utility systems servicing such improvements are in good condition, free in each case of material defects. Section 3.9. Intellectual Property Doubletree owns, or is licensed or otherwise possesses legally enforceable rights to use, all trademarks, trade names, service marks, copyrights, and any applications for such trademarks, trade names, service marks and copyrights, know-how, computer software programs or applications and tangible or intangible proprietary information or material that are necessary to conduct the business of Doubletree as currently conducted, subject to such exceptions that, individually and in the aggregate, would not be reasonably likely to have a Doubletree Material Adverse Effect. Doubletree has no knowledge of any assertion or claim challenging the validity of any of such intellectual property. Section 3.10. Agreements, Contracts and Commitments. (a) Doubletree has not breached, or received in writing any claim or notice that it has breached, any of the terms or conditions of any material agreement, contract or commitment filed as an exhibit to the Doubletree SEC Reports ("Doubletree Material Contracts") in such a manner as, individually or in the aggregate, are reasonably likely to have a Doubletree Material Adverse Effect. Each Doubletree Material Contract that has not expired by its terms is in full force and effect. (b) Without limiting Section 3.10(a), each of the management contracts and franchise agreements to which Doubletree is a party and each of Doubletree's Material Leases (i) is valid and binding in accordance with its terms and is in full force and effect, (ii) neither Doubletree nor any of its Subsidiaries is in default in any material respect thereof, nor does any condition exist that with notice or lapses of time or both would constitute a material default thereunder, and (iii) no party has given any written or (to the knowledge of Doubletree) oral notice of termination or cancellation thereof or that such party intends to assert a breach thereof, or seek to terminate or cancel, any such agreement, contract or lease, in each case as a result of the transactions contemplated hereby, subject to such exceptions that, individually and in the aggregate, would not be reasonably likely to have a Doubletree Material Adverse Effect. Section 3.11. Litigation Except as described in the Doubletree SEC Reports filed prior to the date hereof, there is no action, suit or proceeding, claim, arbitration or investigation against Doubletree pending or as to which Doubletree has received any written notice of assertion, which, individually or in the aggregate, is reasonably likely to have a Doubletree Material Adverse Effect or a material adverse effect on the ability of Doubletree to consummate the transactions contemplated by this Agreement. Section 3.12. Environmental Matters. (a) To the knowledge of Doubletree and except as disclosed in the Doubletree SEC Reports filed prior to the date hereof and except for such matters that, individually or in the 14 22 aggregate, are not reasonably likely to have a Doubletree Material Adverse Effect: (i) Doubletree and its Subsidiaries have complied with all applicable Environmental Laws (as defined in Section 3.12(b)); (ii) the properties currently owned or operated by Doubletree and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances (as defined in Section 3.12(c)); (iii) the properties formerly owned or operated by Doubletree or any of its Subsidiaries were not contaminated with Hazardous Substances during the period of ownership or operation by Doubletree or any of its Subsidiaries; (iv) neither Doubletree nor its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination on any third party property; (v) neither Doubletree nor any of its Subsidiaries has been associated with any release or threat of release of any Hazardous Substance; (vi) neither Doubletree nor any of its Subsidiaries has received any notice, demand, letter, claim or request for information alleging that Doubletree or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (vii) neither Doubletree nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; and (viii) there are no circumstances or conditions involving Doubletree or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of Doubletree or any of its Subsidiaries pursuant to any Environmental Law. (b) As used herein, the term "Environmental Law" means any federal, state, local or foreign law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health and safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property. (c) As used herein, the term "Hazardous Substance" means any substance that is: (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any other substance which is the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law. Section 3.13. Employee Benefit Plans. (a) For purposes of this Agreement, the "Doubletree Employee Plans" shall mean all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar employee benefit plans, and all unexpired severance agreements, written or otherwise, for the benefit of, or relating to, any current or former employee of Doubletree or any trade or business (whether or not incorporated) which is under common control with Doubletree within the meaning of Section 414 of the Code (an "ERISA Affiliate"), or any Subsidiary of Doubletree (together, the "Doubletree Employee Plans"). Doubletree has listed in Section 3.13 of the Doubletree Disclosure Schedule all Doubletree Employee Plans other plans that are "employee welfare benefit plans" within the meaning of Section 3(1) of ERISA. 15 23 (b) With respect to each Doubletree Employee Plan, Doubletree has made available to Promus, a true and correct copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii) such Doubletree Employee Plan and all amendments thereto, (iii) each trust agreement and group annuity contract, if any, and all amendments thereto relating to such Doubletree Employee Plan and (iv) the most recent actuarial report or valuation relating to a Doubletree Employee Plan subject to Title IV of ERISA. (c) With respect to the Doubletree Employee Plans, individually and in the aggregate, no event has occurred, and to the knowledge of Doubletree, there exists no condition or set of circumstances in connection with which Doubletree could be subject to any liability that is reasonably likely to have a Doubletree Material Adverse Effect under ERISA, the Code or any other applicable law. (d) With respect to the Doubletree Employee Plans, individually and in the aggregate, there are no funded benefit obligations for which contributions have not been made or properly accrued and there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with generally accepted accounting principles, on the financial statements of Doubletree, except for obligations which, individually or in the aggregate, are not reasonably likely to have a Doubletree Material Adverse Effect. (e) Except as disclosed in the Doubletree SEC Reports filed prior to the date of this Agreement, and except as provided for in this Agreement, neither Doubletree nor any of its Subsidiaries is a party to any oral or written (i) agreement with any officer or other key employee of Doubletree or any of its Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving Doubletree of the nature contemplated by this Agreement, (ii) agreement with any officer of Doubletree providing any term of employment or compensation guarantee extending for a period longer than one year from the date hereof and for the payment of compensation in excess of $100,000 per annum, or (iii) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, the vesting of the benefits of which will be accelerated or the funding of benefits of which will be required, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Section 3.14. Compliance With Laws Doubletree has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state or local statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Doubletree Material Adverse Effect. Section 3.15. Accounting and Tax Matters. (a) To the best knowledge of Doubletree, after consulting with its independent auditors with respect to clause (i) below and its tax advisors with respect to clause (ii) below, neither Doubletree nor any of its Affiliates (as defined in Section 5.12) has taken or agreed to take any action which would (i) prevent Parent from accounting for the business combination to be 16 24 effected by the Mergers as a pooling of interests or (ii) prevent the Doubletree Merger from qualifying as a reorganization described in Section 368(a) of the Code and/or, taken together with the Promus Merger, as a transfer of property to Parent by holders of Doubletree Common Stock described in Section 351 of the Code. Except as contemplated by the Doubletree Option Agreement, neither Doubletree nor any of its Subsidiaries owns any shares of Promus Common Stock or other securities convertible into shares of Promus Common Stock (exclusive of any shares owned by Doubletree's employee benefit plans). (b) To the best knowledge of Doubletree, the stockholders of Doubletree as a group have no present plan, intention or arrangement to sell or otherwise dispose of such number of the shares of Parent Common Stock received in the Doubletree Merger as would reduce their ownership in Parent Common Stock to a number of shares having a value, as of the date of the Doubletree Merger, of less than eighty percent (80%) of the value of all the formerly outstanding stock of Doubletree as of the same date. Section 3.16. Registration Statement; Joint Proxy Statement/Prospectus. The information to be supplied by Doubletree for inclusion in the registration statement on Form S-4 pursuant to which shares of Parent Common Stock issued in the Mergers will be registered under the Securities Act (the "Registration Statement"), shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information supplied by Doubletree for inclusion in the joint proxy statement/prospectus to be sent to the stockholders of Promus and Doubletree in connection with the meeting of Doubletree's stockholders (the "Doubletree Stockholders' Meeting") and the meeting of Promus's stockholders (the "Promus Stockholders' Meeting") to consider this Agreement and the Mergers (the "Joint Proxy Statement/Prospectus") shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of Doubletree or Promus, at the time of the Doubletree Stockholders' Meeting and the Promus Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Doubletree Stockholders' Meeting or the Promus Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to Doubletree or any of its Affiliates, officers or directors should be discovered by Doubletree which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, Doubletree shall promptly inform Promus. Section 3.17. Labor Matters. Except as disclosed in the Doubletree SEC Reports filed prior to the date hereof, neither Doubletree nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor, as of the date hereof, is Doubletree or any of its Subsidiaries the subject of any material proceeding asserting that Doubletree or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any 17 25 labor union or labor organization nor, as of the date of this Agreement, is there pending or, to the knowledge of the executive officers of Doubletree, threatened, any material labor strike, dispute, walkout, work stoppage, slow-down or lockout involving Doubletree or any of its Subsidiaries. Section 3.18. Insurance. All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by Doubletree or any of its Subsidiaries are with reputable insurance carriers, provide full and adequate coverage for all normal risks incident to the business of Doubletree and its Subsidiaries and their respective properties and assets, and are in character and amount at least equivalent to that carried by persons engaged in similar businesses and subject to the same or similar perils or hazards, except for any such failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a Doubletree Material Adverse Effect. Section 3.19. Doubletree Long-Range Plans. Doubletree has provided to Promus copies of Doubletree's most recent long-range plans prepared in draft form by Doubletree's management and Doubletree has not adopted any other long-range plans since January 1, 1997. Section 3.20. Opinion of Financial Advisor. The financial advisor of Doubletree, Morgan Stanley & Co. Incorporated, has delivered to Doubletree an opinion dated the date of this Agreement to the effect that the Doubletree Exchange Ratio is fair to the holders of Doubletree Common Stock from a financial point of view. Section 3.21. No Existing Discussions. As of the date hereof, Doubletree is not engaged, directly or indirectly, in any discussions or negotiations with any other party with respect to an Acquisition Proposal (as defined in Section 5.3). Section 3.22. Section 203 of the DGCL Not Applicable. The restrictions contained in Section 203 of the DGCL applicable to a "business combination" (as defined in DGCL Section 203) will not apply to the authorization, execution, delivery and performance of this Agreement or the Stock Option Agreements by Doubletree or the Stockholder Support Agreement by the parties thereto or the consummation of the Doubletree Merger by Doubletree. No other "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation is applicable to Doubletree or (by reason of Doubletree's participation therein) the Doubletree Merger or the other transactions contemplated by this Agreement. Section 3.23. Doubletree Rights Plan. Under the terms of the Doubletree Rights Plan, neither the execution of this Agreement, the Promus Stock Option Agreement, the Stockholder Support Agreement, nor the transactions contemplated hereby or thereby, will cause a Distribution Date to occur or cause the rights issued pursuant to the Doubletree Rights Plan to become exercisable, and all such rights shall become non-exercisable at the Effective Time. 18 26 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PROMUS Promus represents and warrants to Doubletree that the statements contained in this Article IV are true and correct, except as set forth in the disclosure schedule delivered by Promus to Doubletree on or before the date of this Agreement (the "Promus Disclosure Schedule"). The Promus Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article IV and the disclosure in any paragraph shall qualify other paragraphs in this Article IV only to the extent that it is reasonably apparent from a reading of such document that it also qualifies or applies to such other paragraphs. Section 4.1. Organization of Promus Each of Promus and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power to own, lease and operate its property and to carry on its business as now being conducted and as proposed to be conducted, and is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, properties, financial condition or results of operations of Promus and its Subsidiaries, taken as a whole (a "Promus Material Adverse Effect"). A true and correct copy of the Certificate of Incorporation and Bylaws of Promus has been delivered to Doubletree. Except as set forth in the Promus SEC Reports (as defined in Section 4.4) filed prior to the date hereof, neither Promus nor any of its Subsidiaries directly or indirectly owns (other than ownership interests in Promus or in one or more of its Subsidiaries) any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity, excluding (i) securities in any publicly traded company held for investment by Promus and comprising less than five percent (5%) of the outstanding stock of such company and (ii) any investment or series of related investments with a book value of less than $15 million. Section 4.2. Promus Capital Structure. (a) The authorized capital stock of Promus consists of 360,000,000 shares of Common Stock, $.10 par value, 150,000 shares of Preferred Stock, $100.00 par value ("Promus Preferred Stock") and 5,000,000 shares of Special Stock, par value $1.12-1/2 ("Promus Special Stock"). As of the date hereof, (i) 49,896,911 shares of Promus Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, and (ii) 1,580,101 additional shares of Promus Common Stock were held in the treasury of Promus or by Subsidiaries of Promus. The Promus Disclosure Schedule shows the number of shares of Promus Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of the date hereof and the plans under which such options were granted (collectively, the "Promus Stock Plans"). As of the date of this Agreement, none of the shares of Promus Preferred Stock or Promus Special Stock are issued and outstanding. There are no obligations, contingent or otherwise, of Promus or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Promus Common Stock or the capital stock of any Subsidiary or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations or indebtedness for borrowed money of Subsidiaries entered into in the ordinary course of business and other than any 19 27 obligation the failure of which to perform or satisfy would not have a Promus Material Adverse Effect. All of the outstanding shares of capital stock or other ownership interests of each of Promus's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are owned by Promus or another Subsidiary of Promus free and clear of all security interests, liens, claims, pledges, agreements, limitations in Promus's voting rights, charges or other encumbrances of any nature. (b) Except as set forth in this Section 4.2 or as reserved for future grants of options under the Promus Stock Plans or the Doubletree Stock Option Agreement, and except for the preferred stock purchase rights issued and issuable under the Rights Agreement dated as of June 30, 1995 between Promus and Continental Stock Transfer & Trust Company (the "Promus Rights Plan"), (i) there are no shares of capital stock of any class of Promus, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Promus or any of its Subsidiaries is a party or by which it is bound obligating Promus or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other ownership interests of Promus or any of its Subsidiaries or obligating Promus or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) to the best knowledge of Promus, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of Promus. All shares of Promus Common Stock subject to issuance as specified in this Section 4.2 are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. Section 4.3. Authority; No Conflict; Required Filings and Consents. (a) Promus has all requisite corporate power and authority to enter into this Agreement, the Stock Option Agreements and the Stockholder Support Agreement and to consummate the transactions contemplated by this Agreement, the Stock Option Agreements and the Stockholder Support Agreement. The execution and delivery of this Agreement, the Stock Option Agreements and the Stockholder Support Agreement and the consummation of the transactions contemplated by this Agreement, the Stock Option Agreements and the Stockholder Support Agreement by Promus have been duly authorized by all necessary corporate action on the part of Promus, subject only to the approval and adoption of this Agreement and the Promus Merger by Promus's stockholders under the DGCL. This Agreement, the Stock Option Agreements and the Stockholder Support Agreement have been duly executed and delivered by Promus and constitute the valid and binding obligations of Promus, enforceable in accordance with their terms, subject to the Bankruptcy and Equity Exception. (b) The execution and delivery of this Agreement, the Stock Option Agreements and the Stockholder Support Agreement by Promus does not, and the consummation of the transactions contemplated by this Agreement, the Stock Option Agreements and the Stockholder Support Agreement will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of Promus or any of its Subsidiaries, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or 20 28 give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which Promus or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (other than pursuant to the Tranche A Credit Agreement or the Tranche B Credit Agreement, each dated as of June 7, 1995, as amended, by and among Promus and certain of its subsidiaries and NationsBank, N.A. (Carolinas)) or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Promus or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which (x) are not, individually or in the aggregate, reasonably likely to have a Promus Material Adverse Effect or (y) would not substantially impair or delay the consummation of the Promus Merger. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Promus or any of its Subsidiaries in connection with the execution and delivery of this Agreement, the Stock Option Agreements and the Stockholder Support Agreement or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of the pre-merger notification report under the HSR Act, (ii) the filing of a Certificate of Merger with respect to the Promus Merger with the Delaware Secretary of State, (iii) the filing of the Joint Proxy Statement/Prospectus with the SEC in accordance with the Exchange Act and the Securities Act, (iv) such consents, approvals, orders, authorizations, permits, filings, or registrations related to, or arising out of, compliance with statutes, rules or regulations regulating the consumption, sale or serving of alcoholic beverages, (v) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities laws and the laws of any foreign country and (vi) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not (x) be reasonably likely to have a Promus Material Adverse Effect or (y) substantially impair or delay the consummation of the Promus Merger. Section 4.4. SEC Filings; Financial Statements. (a) Promus has filed and made available to Doubletree all forms, reports and documents required to be filed by Promus with the SEC since January 1, 1996 (collectively, the "Promus SEC Reports"). The Promus SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Promus SEC Reports or necessary in order to make the statements in such Promus SEC Reports, in the light of the circumstances under which they were make, not misleading. Other than Promus Hotels, Inc., none of Promus's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes) of Promus contained in the Promus SEC Reports complied as to form in all material 21 29 respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q under the Exchange Act) and fairly presented the consolidated financial position of Promus and its Subsidiaries as of the dates and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. The audited balance sheet of Promus as of December 31, 1996 is referred to herein as the "Promus Balance Sheet." Section 4.5. No Undisclosed Liabilities Except as disclosed in the Promus SEC Reports filed prior to the date hereof, and except for normal or recurring liabilities incurred since December 31, 1996 in the ordinary course of business consistent with past practices, Promus and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate, are reasonably likely to have a Promus Material Adverse Effect. Section 4.6. Absence of Certain Changes or Events Except as disclosed in the Promus SEC Reports filed prior to the date hereof, since the date of the Promus Balance Sheet, Promus and its Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been (i) any event, development, state of affairs or condition, or series or combination of events, developments, states of affairs or conditions, which, individually or in the aggregate, has had or which is reasonably likely to have a Promus Material Adverse Effect (other than events, developments, states of affairs or conditions that are the effect or result of actions taken by Doubletree or economic factors affecting the economy as a whole or the industry in which Promus competes); (ii) any damage, destruction or loss (whether or not covered by insurance) with respect to Promus or any of its Subsidiaries which is reasonably likely to have a Promus Material Adverse Effect; (iii) any material change by Promus in its accounting methods, principles or practices to which Doubletree has not previously consented in writing; (iv) any revaluation by Promus of any of its assets which is reasonably likely to have a Promus Material Adverse Effect; or (v) any other action or event that would have required the consent of Doubletree pursuant to Section 5.1 of this Agreement had such action or event occurred after the date of this Agreement, other than such actions or events that, individually or in the aggregate, have not had or are not reasonably likely to have a Promus Material Adverse Effect. Section 4.7. Taxes. (a) Promus and each of its Subsidiaries have (i) filed all federal, state, local and foreign Tax returns and reports required to be filed by them prior to the date of this Agreement (taking into account all applicable extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clauses (i), (ii) or (iii) for any such filings, payments or accruals that are not reasonably likely, individually or in the aggregate, to have a Promus Material Adverse Effect. Neither the IRS nor 22 30 any other taxing authority has asserted any claim for Taxes, or to the actual knowledge of the executive officers of Promus, is threatening to assert any claims for Taxes, which claims, individually or in the aggregate, are reasonably likely to have a Promus Material Adverse Effect. Promus and each of its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected, except for amounts that are not reasonably likely, individually or in the aggregate, to have a Promus Material Adverse Effect. Neither Promus nor any of its Subsidiaries has made an election under Section 341(f) of the Code, except for any such election that shall not have a Promus Material Adverse Effect. There are no liens for Taxes upon the assets of Promus or any of its Subsidiaries (other than liens for Taxes that are not yet due or delinquent or that are being contested in good faith by appropriate proceedings), except for liens that are not reasonably likely, individually or in the aggregate, to have a Promus Material Adverse Effect. (b) Neither Promus nor any of its Subsidiaries is or has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) for any taxable period beginning on or after February 7, 1990, other than a group the common parent of which is or was The Promus Companies Incorporated, Promus or any Subsidiary of Promus. (c) Neither Promus nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity, except for obligations that are not reasonably likely, individually or in the aggregate, to have an Promus Material Adverse Effect. Section 4.8. Properties. (a) Neither Promus nor any of its Subsidiaries is in default under any Material Leases, except where the existence of such defaults, individually or in the aggregate, is not reasonably likely to have a Promus Material Adverse Effect. (b) With respect to each item of real property that Promus or any of its Subsidiaries owns, except for such matters that, individually or in the aggregate, are not reasonably likely to have a Promus Material Adverse Effect: (i) Promus or its Subsidiary has good and clear record and marketable title to such property, insurable by a recognized national title insurance company at standard rates, free and clear of any security interest, easement, covenant or other restriction, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or occupancy of such property; and (ii) the improvements constructed on such property are in good condition, and all mechanical and utility systems servicing such improvements are in good condition, free in each case of material defects. Section 4.9. Intellectual Property Promus owns, or is licensed or otherwise possesses legally enforceable rights to use, all trademarks, trade names, service marks, copyrights, and any applications for such trademarks, trade names, service marks and copyrights, know-how, computer software programs or applications, and tangible or intangible proprietary information or 23 31 material that are necessary to conduct the business of Promus as currently conducted, subject to such exceptions that, individually and in the aggregate, would not be reasonably likely to have a Promus Material Adverse Effect. Promus has no knowledge of any assertion or claim challenging the validity of any of such intellectual property. Section 4.10. Agreements, Contracts and Commitments. (a) Promus has not breached, or received in writing any claim or notice that it has breached, any of the terms or conditions of any material agreement, contract or commitment filed as an exhibit to the Promus SEC Reports ("Promus Material Contracts") in such a manner as, individually or in the aggregate, are reasonably likely to have a Promus Material Adverse Effect. Each Promus Material Contract that has not expired by its terms is in full force and effect. (b) Without limiting Section 4.10(a), each of the management contracts and franchise agreements to which Promus is a party and each of Promus's Material Leases (i) is valid and binding in accordance with its terms and is in full force and effect, (ii) neither Promus nor any of its Subsidiaries is in default in any material respect thereof, nor does any condition exist that with notice or lapses of time or both would constitute a material default thereunder, and (iii) no party has given any written or (to the knowledge of Promus) oral notice of termination or cancellation thereof or that such party intends to assert a breach thereof, or seek to terminate or cancel, any such agreement, contract or lease, in each case as a result of the transactions contemplated hereby, subject to such exceptions that, individually and in the aggregate, would not be reasonably likely to have a Promus Material Adverse Effect. Section 4.11. Litigation Except as described in the Promus SEC Reports filed prior to the date hereof, there is no action, suit or proceeding, claim, arbitration or investigation against Promus pending or as to which Promus has received any written notice of assertion, which, individually or in the aggregate, is reasonably likely to have a Promus Material Adverse Effect or a material adverse effect on the ability of Promus to consummate the transactions contemplated by this Agreement. Section 4.12. Environmental Matters To the knowledge of Promus and except as disclosed in the Promus SEC Reports filed prior to the date hereof and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Promus Material Adverse Effect: (i) Promus and its Subsidiaries have complied with all applicable Environmental Laws; (ii) the properties currently owned or operated by Promus and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances; (iii) the properties formerly owned or operated by Promus or any of its Subsidiaries were not contaminated with Hazardous Substances during the period of ownership or operation by Promus or any of its Subsidiaries; (iv) neither Promus nor its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination on any third party property; (v) neither Promus nor any of its Subsidiaries has been associated with any release or threat of release of any Hazardous Substance; (vi) neither Promus nor any of its Subsidiaries has received any notice, demand, letter, claim or request for information alleging that Promus or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (vii) neither Promus nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third 24 32 party relating to liability under any Environmental Law or relating to Hazardous Substances; and (viii) there are no circumstances or conditions involving Promus or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of Promus or any of its Subsidiaries pursuant to any Environmental Law. Section 4.13. Employee Benefit Plans. (a) For purposes of this Agreement, the "Promus Employee Plans" shall mean all employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar employee benefit plans, and all unexpired severance agreements, written or otherwise, for the benefit of, or relating to, any current or former employee of Promus or any ERISA Affiliate of Promus, or any Subsidiary of Promus (together, the "Promus Employee Plans"). Promus has listed in Section 4.13 of the Promus Disclosure Schedule all Promus Employee Plans other than plans that are "employee welfare benefit plans" within the meaning of Section 3(1) of ERISA. (b) With respect to each Promus Employee Plan, Promus has made available to Doubletree, a true and correct copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii) such Promus Employee Plan and all amendments thereto, (iii) each trust agreement and group annuity contract, if any, and all amendments thereto relating to such Promus Employee Plan and (iv) the most recent actuarial report or valuation relating to a Promus Employee Plan subject to Title IV of ERISA. (c) With respect to the Promus Employee Plans, individually and in the aggregate, no event has occurred, and to the knowledge of Promus, there exists no condition or set of circumstances in connection with which Promus could be subject to any liability that is reasonably likely to have a Promus Material Adverse Effect under ERISA, the Code or any other applicable law. (d) With respect to the Promus Employee Plans, individually and in the aggregate, there are no funded benefit obligations for which contributions have not been made or properly accrued and there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with generally accepted accounting principles, on the financial statements of Promus, except for obligations which, individually or in the aggregate, are not reasonably likely to have a Promus Material Adverse Effect. (e) Except as disclosed in the Promus SEC Reports filed prior to the date of this Agreement, and except as provided for in this Agreement, neither Promus nor any of its Subsidiaries is a party to any oral or written (i) agreement with any officer or other key employee of Promus or any of its Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving Promus of the nature contemplated by this Agreement, (ii) agreement with any officer of Promus providing any term of employment or compensation guarantee extending for a period longer than one year from the date hereof or for the payment of compensation in excess of $100,000 per annum, or (iii) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, the vesting of the benefits of which 25 33 will be accelerated or the funding of benefits of which will be required, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Section 4.14. Compliance With Laws Promus has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state or local statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Promus Material Adverse Effect. Section 4.15. Accounting and Tax Matters. (a) To the best knowledge of Promus, after consulting with its independent auditors with respect to clause (i) below and its tax advisors with respect to clause (ii) below, neither Promus nor any of its Affiliates (as defined in Section 5.12) has taken or agreed to take any action which would (i) prevent Parent from accounting for the business combination to be effected by the Mergers as a pooling of interests, or (ii) prevent the Promus Merger from qualifying as a reorganization described in Section 368(a) of the Code and/or, taken together with the Doubletree Merger, as a transfer of property to Parent by holders of Promus Common Stock described in Section 351 of the Code. Except as contemplated by the Promus Option Agreement, neither Promus nor any of its Subsidiaries owns any shares of Doubletree Common Stock or other securities convertible into shares of Doubletree Common Stock (exclusive of any shares owned by Promus's employee benefit plans). (b) To the best knowledge of Promus, the stockholders of Promus as a group have no present plan, intention or arrangement to sell or otherwise dispose of such number of the shares of Parent Common Stock received in the Promus Merger as would reduce their ownership in Parent Common Stock to a number of shares having a value, as of the date of the Promus Merger, of less than eighty percent (80%) of the value of all the formerly outstanding stock of Promus as of the same date. Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus The information to be supplied by Promus for inclusion in the Registration Statement shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information to be supplied by Promus for inclusion in the Joint Proxy Statement/Prospectus shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of Promus or Doubletree, at the time of the Promus Stockholders' Meeting and the Doubletree Stockholder's Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Promus Stockholders' Meeting or the Doubletree Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to Promus or any 26 34 of its Affiliates, officers or directors should be discovered by Promus which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, Promus shall promptly inform Doubletree. Section 4.17. Labor Matters Except as disclosed in the Promus SEC Reports filed prior to the date hereof, neither Promus nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor, as of the date hereof, is Promus or any of its Subsidiaries the subject of any material proceeding asserting that Promus or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization nor, as of the date of this Agreement, is there pending or, to the knowledge of the executive officers of Promus, threatened, any material labor strike, dispute, walkout, work stoppage, slow-down or lockout involving Promus or any of its Subsidiaries. Section 4.18. Insurance All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by Promus or any of its Subsidiaries are with reputable insurance carriers, provide full and adequate coverage for all normal risks incident to the business of Promus and its Subsidiaries and their respective properties and assets, and are in character and amount at least equivalent to that carried by persons engaged in similar businesses and subject to the same or similar perils or hazards, except for any such failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a Promus Material Adverse Effect. Section 4.19. Promus Long-Range Plans Promus has provided to Doubletree copies of Promus's long-range plans that are substantially identical to the long-range plans presented by Promus's management to, and adopted by, the Board of Directors of Promus on July 23, 1997, and Promus has not adopted any other long-range plans since such date. Section 4.20. Opinion of Financial Advisor The financial advisor of Promus, BT Wolfensohn, has delivered to Promus an opinion dated the date of this Agreement to the effect that the Promus Exchange Ratio is fair to holders of Promus Common Stock from a financial point of view. Section 4.21. No Existing Discussions As of the date hereof, Promus is not engaged, directly or indirectly, in any discussions or negotiations with any other party with respect to an Acquisition Proposal. Section 4.22. Section 203 of the DGCL Not Applicable. The restrictions contained in Section 203 of the DGCL applicable to a "business combination" (as defined in Section DGCL 203) will not apply to the authorization, execution, delivery or performance of this Agreement or the Stock Option Agreements by Promus or the consummation of the Promus Merger by Promus. No other "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation is applicable to Promus or (by reason of Promus's participation therein) the Promus Merger or the other transactions contemplated by this Agreement. Section 4.23. Promus Rights Plan. Under the terms of the Promus Rights Plan, neither the execution of this Agreement or the Doubletree Stock Option Agreement, nor the transactions 27 35 contemplated hereby or thereby will cause a Distribution Date to occur or cause the rights issued pursuant to the Promus Rights Plan to become exercisable, and all such rights shall become non-exercisable at the Effective Time. ARTICLE V. COVENANTS Section 5.1. Conduct of Business During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Doubletree and Promus each agrees as to itself and its respective Subsidiaries (except to the extent that the other party shall otherwise consent in writing) to carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted, to pay its debts and taxes when due subject to good faith disputes over such debts or taxes, to pay or perform its other obligations when due, and, to the extent consistent with such business, use all reasonable efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, and others having business dealings with it. Except as expressly contemplated by this Agreement or the Stock Option Agreements or as set forth in Section 5.1 of the Doubletree Disclosure Schedule, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Doubletree and Promus each shall not (and shall not permit any of its respective Subsidiaries to), without the written consent of the other party: (a) Accelerate, amend or change the period of exercisability of options or restricted stock granted under any employee stock plan of such party or authorize cash payments in exchange for any options granted under any of such plans except as required by the terms of such plans or any related agreements (including severance agreements) in effect as of the date of this Agreement; (b) Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or indirectly, any shares of its capital stock except from former employees, directors and consultants in accordance with agreements providing for the repurchase of shares in connection with any termination of service to such party; (c) Issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock or securities convertible into shares of its capital stock, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities, other than (i) the grant of options consistent with past practices to employees or directors, which options represent in the aggregate the right to acquire no more than 25,000 shares (net of cancellations) of Doubletree Common Stock or Promus Common Stock, as the case may be, (ii) the issuance of shares of Doubletree Common Stock or Promus Common Stock, as the case may be, pursuant to 28 36 the exercise of options or warrants outstanding on the date of this Agreement, and (iii) the issuance of capital stock under the Doubletree Rights Plan or the Promus Rights Plan if required by the respective terms thereof; (d) Acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership or other business organization or division, or otherwise acquire or agree to acquire any assets (other than hotel properties, inventory and other immaterial assets, in each case in the ordinary course of business); (e) Sell, lease, license or otherwise dispose of any of its material properties or assets, except for transactions (including sales, leases, licenses or dispositions of hotel properties, inventory and other immaterial assets) in the ordinary course of business; (f) (i) Increase or agree to increase the compensation payable or to become payable to its officers or employees, except for increases in salary or wages of employees (other than officers) in accordance with past practices, (ii) grant any additional severance or termination pay to, or enter into any employment or severance agreements with, any employees or officers, (iii) enter into any collective bargaining agreement (other than as required by law or extensions to existing agreements in the ordinary course of business), (iv) establish, adopt, enter into or amend any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, trust, fund, policy or arrangement for the benefit of any directors, officers or employees; (g) Amend or propose to amend its Certificate of Incorporation or Bylaws except as contemplated by this Agreement; (h) Incur any indebtedness for borrowed money other than in the ordinary course of business; (i) Take any action that would or is reasonably likely to result in a material breach of any provision of this Agreement or the Stock Option Agreements or in any of its representations and warranties set forth in this Agreement or the Stock Option Agreements being untrue on and as of the Closing Date; (j) Make or rescind any material express or deemed election relating to Taxes, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, or make any material change to any of its methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of its federal income tax return for the taxable year ending December 31, 1996, except as may be required by applicable law; (k) Settle any litigation relating to the transactions contemplated hereby other than any settlement which would not (i) have a Doubletree Material Adverse Effect (if settled by 29 37 Doubletree), a Promus Material Adverse Effect (if settled by Promus) or a material adverse effect on the business, properties, financial condition or results of operations of Parent (if settled by either Doubletree or Promus) or (ii) adversely effect the consummation of the transactions contemplated hereby; or (l) Take, or agree in writing or otherwise to take, any of the actions described in Sections (a) through (k) above. Section 5.2. Cooperation; Notice; Cure Subject to compliance with applicable law, from the date hereof until the Effective Time, each of Doubletree and Promus shall confer on a regular and frequent basis with one or more representatives of the other party to report on the general status of ongoing operations and shall promptly provide the other party or its counsel with copies of all filings made by such party with any Governmental Entity in connection with this Agreement, the Mergers and the transactions contemplated hereby and thereby. Each of Doubletree and Promus shall promptly notify the other in writing of, and will use all commercially reasonable efforts to cure before the Closing Date, any event, transaction or circumstance, as soon as practical after it becomes known to such party, that causes or will cause any covenant or agreement of Doubletree or Promus under this Agreement to be breached or that renders or will render untrue any representation or warranty of Doubletree or Promus contained in this Agreement. No notice given pursuant to this paragraph shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein. Section 5.3. No Solicitation. (a) Doubletree and Promus each shall not, directly or indirectly, through any officer, director, employee, financial advisor, representative or agent of such party (i) solicit, initiate, or encourage any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock (including without limitation by way of a tender offer) or similar transaction involving such party or any of its Subsidiaries, other than the transactions contemplated by this Agreement (any of the foregoing inquiries or proposals being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or discussions with any person (or group of persons) other than Doubletree or Promus or their respective affiliates (a "Third Party") concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal; provided, however, that nothing contained in this Agreement shall prevent Doubletree or Promus, or their respective Board of Directors, from (A) furnishing non-public information to, or entering into discussions or negotiations with, any person or entity in connection with an unsolicited bona fide written Acquisition Proposal by such person or entity or modifying or withdrawing its recommendation with respect to the transactions contemplated hereby or recommending an unsolicited bona fide written Acquisition Proposal to the stockholders of such party, if and only to the extent that (1) the Board of Directors of such party believes in good faith (after consultation with its financial advisor) that such Acquisition Proposal is reasonably capable of being completed on the terms proposed and, after taking into account the strategic benefits anticipated to be derived from the Mergers and the prospects of Doubletree and Promus as a combined company, would, if consummated, result in a transaction more favorable to the stockholders of such party over the long term than the transaction contemplated by this Agreement (a "Superior Proposal") and the Board of Directors of such party determines in good 30 38 faith after consultation with outside legal counsel that such action is required for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law and (2) prior to furnishing such non-public information to, or entering into discussions or negotiations with, such person or entity, such Board of Directors receives from such person or entity an executed confidentiality and standstill agreement with terms no less favorable to such party than those contained in the Confidentiality Agreements, each dated August 16, 1997 between Promus and Doubletree (the "Confidentiality Agreements"); or (B) complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. Each of Doubletree and Promus agrees not to release any third party from, or waive any provision of, any standstill agreement to which it is a party or any confidentiality agreement between it and another person who has made, or who may reasonably be considered likely to make, an Acquisition Proposal, unless its Board of Directors determines in good faith after consultation with outside legal counsel that such action is required for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law. (b) Doubletree and Promus shall each notify the other party immediately after receipt by Doubletree or Promus (or any of their advisors) of any Acquisition Proposal or any request for nonpublic information in connection with an Acquisition Proposal or for access to the properties, books or records of such party by any person or entity that informs such party that it is considering making, or has made, an Acquisition Proposal. Such notice shall be made orally and in writing and shall indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry or contact. Such party shall continue to keep the other party hereto informed, on a current basis, of the status of any such discussions or negotiations and the terms being discussed or negotiated. Section 5.4. Joint Proxy Statement/Prospectus; Registration Statement. (a) As promptly as practical after the execution of this Agreement, Doubletree and Promus shall prepare and file with the SEC the Joint Proxy Statement/Prospectus and the Registration Statement in which the Joint Proxy Statement/Prospectus will be included as a prospectus, provided that Doubletree and Promus may delay the filing of the Registration Statement until approval of the Joint Proxy Statement/Prospectus by the SEC. Doubletree and Promus shall use all reasonable efforts to cause the Registration Statement to become effective as soon after such filing as practical. The Joint Proxy Statement/Prospectus shall include the recommendation of the Board of Directors of Doubletree in favor of adoption of this Agreement and the Doubletree Merger and the recommendation of the Board of Directors of Promus in favor of adoption of this Agreement and the Promus Merger; provided that the Board of Directors of either party may modify or withdraw such recommendation if such Board of Directors believes in good faith after consultation with outside legal counsel that the modification or withdrawal of such recommendation is required for such Board of Directors to comply with its fiduciary duties under applicable law. (b) Doubletree and Promus shall make all necessary filings with respect to the Merger under the Securities Act, the Exchange Act, applicable state blue sky laws and the rules and regulations thereunder. 31 39 Section 5.5. NASDAQ Quotation and NYSE Listing Each of Doubletree and Promus agrees to continue the quotation and listing of Doubletree Common Stock and Promus Common Stock, respectively, on NASDAQ National Market and the NYSE, respectively, during the term of this Agreement. Section 5.6. Access to Information Upon reasonable notice, Doubletree and Promus shall each (and shall cause each of their respective Subsidiaries to) afford to the officers, employees, accountants, counsel and other representatives of the other, access, during normal business hours during the period prior to the Effective Time, to all its personnel, properties, books, contracts, commitments and records and, during such period, each of Doubletree and Promus shall, and shall cause each of their respective Subsidiaries to, furnish promptly to the other (a) copies of monthly financial reports and development reports, (b) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws and (c) all other information concerning its business, properties and personnel as such other party may reasonably request. The parties will hold any such information which is nonpublic in confidence in accordance with the Confidentiality Agreements. No information or knowledge obtained in any investigation pursuant to this Section 5.6 shall affect or be deemed to modify any representation or warranty contained in this Agreement or the conditions to the obligations of the parties to consummate the Merger. Section 5.7. Stockholders' Meetings Doubletree and Promus each shall call a meeting of its respective stockholders to be held as promptly as practicable for the purpose of voting, in the case of Doubletree, upon this Agreement and the Doubletree Merger and, in the case of Promus, upon this Agreement and the Promus Merger. Subject to Sections 5.3 and 5.4, Doubletree and Promus shall, through their respective Boards of Directors, recommend to their respective stockholders adoption of this Agreement and approval of such matters and shall coordinate and cooperate with respect to the timing of such meetings and shall use their best efforts to hold such meetings on the same day and as soon as practicable after the date hereof. Unless otherwise required to comply with the applicable fiduciary duties of the respective directors of Doubletree and Promus, as determined by such directors in good faith after consultation with outside legal counsel, each party shall use all reasonable efforts to solicit from stockholders of such party proxies in favor of such matters. Doubletree and Promus intend to submit additional proposals to their respective stockholders at the Doubletree Stockholders' Meeting and the Promus Stockholders' Meeting, respectively, separate from the proposals referred to in the first sentence of this Section 5.7. The approval by Doubletree's stockholders or Promus's stockholders, as the case may be, of such additional proposals shall not be a condition to the closing of the Mergers under this Agreement. Section 5.8. Legal Conditions to Merger. (a) Doubletree and Promus shall each use all reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary and proper under applicable law to consummate and make effective the transactions contemplated hereby as promptly as practicable, (ii) obtain from any Governmental Entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained or made by Doubletree or Promus or any of their Subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions 32 40 contemplated hereby including, without limitation, the Mergers, and (iii) as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the Mergers required under (A) the Securities Act and the Exchange Act, and any other applicable federal or state securities laws, (B) the HSR Act and any related governmental request thereunder, and (C) any other applicable law. Doubletree and Promus shall cooperate with each other in connection with the making of all such filings, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Doubletree and Promus shall use their reasonable efforts to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable law (including all information required to be included in the Joint Proxy Statement/Prospectus and the Registration Statement) in connection with the transactions contemplated by this Agreement. (b) Doubletree and Promus agree, and shall cause each of their respective Subsidiaries, to cooperate and to use their respective reasonable efforts to obtain any government clearances required for Closing (including through compliance with the HSR Act and any applicable foreign government reporting requirements), to respond to any government requests for information, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) (an "Order") that restricts, prevents or prohibits the consummation of the Mergers or any other transactions contemplated by this Agreement. The parties hereto will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act or any other federal, state or foreign antitrust or fair trade law. Doubletree and Promus shall cooperate and work together in any proceedings or negotiations with any Governmental Entity relating to any of the foregoing. Notwithstanding anything to the contrary in this Section 5.8, neither Doubletree nor Promus, nor any of their respective Subsidiaries, shall be required to take any action that would reasonably be expected to substantially impair the overall benefits expected, as of the date hereof, to be realized from the consummation of the Mergers. (c) Each of Doubletree and Promus shall give (or shall cause their respective Subsidiaries to give) any notices to third parties, and use, and cause their respective Subsidiaries to use, all reasonable efforts to obtain any third party consents related to or required in connection with the Mergers. Section 5.9. Public Disclosure Doubletree and Promus shall agree on the form and content of the initial press release regarding the transactions contemplated hereby and thereafter shall consult with each other before issuing, and use all reasonable efforts to agree upon, any press release or other public statement with respect to any of the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law. Section 5.10. Nonrecognition Exchange From and after the date hereof and until the Effective Time, neither Doubletree nor Promus, nor any of their respective Subsidiaries or other 33 41 Affiliates shall knowingly take any action, or knowingly fail to take any action, that is reasonably likely to jeopardize the treatment of either of the Mergers as a reorganization described in Section 368(a) of the Code and/or, taken together with the other of the Mergers, as a transfer of property to Parent by holders of Doubletree Common Stock or Promus Common Stock, as applicable, described in Section 351 of the Code. Section 5.11. Pooling Accounting From and after the date hereof and until the Effective Time, neither Doubletree nor Promus, nor any of their respective Subsidiaries or other Affiliates shall knowingly take any action, or knowingly fail to take any action, that is reasonably likely to jeopardize the treatment of the Mergers as a pooling of interests for accounting purposes. Section 5.12. Affiliate Agreements Upon the execution of this Agreement, Doubletree and Promus will provide each other with a list of those persons who are, in Doubletree's or Promus's respective reasonable judgment, "affiliates" of Doubletree or Promus, respectively, within the meaning of Rule 145 (each such person who is an "affiliate" of Doubletree or Promus within the meaning of Rule 145 is referred to as an "Affiliate") promulgated under the Securities Act ("Rule 145"). Doubletree and Promus shall provide each other such information and documents as the other party shall reasonably request for purposes of reviewing such list and shall notify the other party in writing regarding any change in the identity of its Affiliates prior to the Closing Date. Doubletree and Promus shall each use all reasonable efforts to deliver or cause to be delivered to each other by October 15, 1997 (and in any case prior to the Effective Time) from each of its Affiliates, an executed Affiliate Agreement, in substantially the form of Exhibit F (with respect to affiliates of Doubletree) or Exhibit G (with respect to affiliates of Promus) attached hereto (each, an "Affiliate Agreement," and together, the "Affiliate Agreements"). Section 5.13. NYSE Listing Doubletree and Promus shall cause Parent to promptly prepare and submit to the NYSE a listing application covering the shares of Parent Common Stock to be issued in the Mergers and upon exercise of Doubletree Stock Options, the GEPT Warrant and Promus Stock Options, and shall use all reasonable efforts to cause such shares to be approved for listing on the NYSE, prior to the Effective Time, subject to official notice of issuance. Section 5.14. Stock Plans. (a) At the Effective Time, each outstanding option to purchase shares of Doubletree Common Stock (an "Doubletree Stock Option") under the Doubletree Stock Plans and each outstanding option to purchase shares of Promus Common Stock (a "Promus Stock Option") under the Promus Stock Plans, in each case whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Doubletree Stock Option or Promus Stock Option, as the case may be, the same number of shares of Parent Common Stock as the holder of such Doubletree Stock Option or Promus Stock Option, as the case may be, would have been entitled to receive pursuant to the Doubletree Merger or the Promus Merger, respectively, had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of Doubletree Common Stock or Promus Common Stock, as the case may be, purchasable pursuant to such Doubletree Stock Option or such Promus Stock Option immediately 34 42 prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to such Doubletree Stock Option or Promus Stock Option, as the case may be, in accordance with the foregoing. (b) As soon as practicable after the Effective Time, Parent shall deliver to the participants in the Doubletree Stock Plans and the Promus Stock Plans appropriate notice setting forth such participants' rights pursuant thereto and the grants pursuant to Doubletree Stock Plans or Promus Stock Plans, as the case may be, shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 5.14 after giving effect to the Mergers). (c) Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery under Doubletree Stock Plans and Promus Stock Plans assumed in accordance with this Section 5.14. As soon as practicable after the Effective Time, Parent shall file a registration statement on Form S-8 (or any successor or other appropriate forms), or another appropriate form with respect to the shares of Parent Common Stock subject to such options and shall use its reasonable efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding. (d) The Board of Directors of each of Doubletree and Promus shall, prior to or as of the Effective Time, take all necessary actions, pursuant to and in accordance with the terms of the Doubletree Stock Plans and the instruments evidencing the Doubletree Stock Options, or the Promus Stock Plans and the instruments evidencing the Promus Stock Options, as the case may be, to provide for the conversion of the Doubletree Stock Options and the Promus Stock Options into options to acquire Parent Common Stock in accordance with this Section 5.14 without obtaining consent of the holders of the Doubletree Stock Options or Promus Stock Options in connection with such conversion; provided, however, that Promus shall use all reasonable efforts to obtain from each holder of Promus Stock Options a waiver of any right of such holder to receive any cash payment which may become due with respect to any Promus Stock Options that are exercisable immediately prior to the Effective Time as a result of the consummation of the transactions contemplated hereby. (e) The Board of Directors of each of Doubletree and Promus shall, prior to or as of the Effective Time, take appropriate action to approve the deemed cancellation of the Doubletree Stock Options or Promus Stock Options, as the case may be, for purposes of Section 16(b) of the Exchange Act. The Board of Directors of Parent shall, prior to or as of the Effective Time, take appropriate action to approve the deemed grant of options to purchase Parent Common Stock under the Doubletree Stock Options and the Promus Stock Options (as converted pursuant to this Section 5.14) for purposes of Section 16(b) of the Exchange Act. Section 5.15. Brokers or Finders Each of Doubletree and Promus represents, as to itself, its Subsidiaries and its Affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement except Morgan Stanley & Co. Incorporated, whose fees and expenses will be paid by 35 43 Doubletree in accordance with Doubletree's agreement with such firm (a copy of which has been delivered by Doubletree to Promus prior to the date of this Agreement), and BT Wolfensohn, whose fees and expenses will be paid by Promus in accordance with Promus's agreement with such firm (a copy of which has been delivered by Promus prior to the date of this Agreement). Each of Promus and Doubletree agrees to indemnify and hold the other harmless from and against any and all claims, liabilities or obligations with respect to any such fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have been made by such party or any of its Affiliates. Section 5.16. Indemnification. (a) From and after the Effective Time, Parent agrees that it will, and will cause the Surviving Corporations to, indemnify and hold harmless each present and former director and officer of Doubletree and Promus (the "Indemnified Parties"), against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in settlement incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that Doubletree or Promus, as the case may be, would have been permitted under Delaware law and its certificate of incorporation or bylaws in effect on the date hereof to indemnify such Indemnified Party (and Parent and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable law, provided the Indemnified Party to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification). (b) For a period of six years after the Effective Time, Parent shall maintain or shall cause the Surviving Corporations to maintain (to the extent available in the market) in effect a directors' and officers' liability insurance policy covering those persons who are currently covered by Doubletree's or Promus's directors' and officers' liability insurance policy (copies of which have been heretofore delivered by Doubletree and Promus to each other) with coverage in amount and scope at least as favorable as Doubletree's or Promus's existing coverage; provided that in no event shall Parent or the Surviving Corporations be required to expend in the aggregate in excess of 200% of the annual premium currently paid by Doubletree and Promus for such coverage; and if such premium would at any time exceed 200% of the such amount, then the Parent or the Surviving Corporations shall maintain insurance policies which provide the maximum and best coverage available at an annual premium equal to 200% of such amount. (c) The provisions of this Section 5.16 are intended to be an addition to the rights otherwise available to the current officers and directors of Doubletree and Promus by law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their representatives. Section 5.17. Letter of Promus's Accountants Promus shall use all reasonable efforts to cause to be delivered to Doubletree and Promus a letter of Arthur Andersen LLP, Promus's independent auditors, dated a date within two business days before the date on which the Registration Statement shall become effective and addressed to Doubletree, in form reasonably 36 44 satisfactory to Doubletree and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement. Section 5.18. Letter of Doubletree's Accountants Doubletree shall use all reasonable efforts to cause to be delivered to Promus and Doubletree a letter of KPMG Peat Marwick LLP, Doubletree's independent auditors, dated a date within two business days before the date on which the Registration Statement shall become effective and addressed to Promus, in form reasonably satisfactory to Promus and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement. Section 5.19. Stock Option Agreements Promus and Doubletree each agree to fully perform their respective obligations under the Stock Option Agreements. Section 5.20. Post-Merger Corporate Governance; Employment Arrangements. (a) At the Effective Time, the total number of persons serving on the Board of Directors of Parent shall be fourteen (unless otherwise agreed in writing by Doubletree and Promus prior to the Effective Time), half of whom shall be Doubletree Directors and half of whom shall be Promus Directors (as such terms are defined below), all of which Doubletree Directors and Promus Directors shall be spread as evenly as possible among Parent's three classes of Directors. The persons to serve initially on the Board of Directors of Parent at the Effective Time who are Doubletree Directors shall be selected solely by and at the absolute discretion of the Board of Directors of Doubletree prior to the Effective Time; and the persons to serve initially on the Board of Directors of Parent at the Effective Time who are Promus Directors shall be selected solely by and at the absolute discretion of the Board of Directors of Promus prior to the Effective Time. In the event that, prior to the Effective Time, any person so selected to serve on the Board of Directors of Parent after the Effective Time is unable or unwilling to serve in such position, the Board of Directors which selected such person shall designate another of its members to serve in such person's stead in accordance with the provisions of the immediately preceding sentence. From and after the Effective Time and until December 31, 2002, (a) the Board of Directors of Parent and each Committee of the Board of Directors of Parent as constituted following each election of Directors shall consist of an equal number of Doubletree Directors and Promus Directors, and (b) the size of the Board of Directors of Parent and each Committee of the Board of Directors of Parent shall not be increased unless such increase is approved by 75% of the members thereof. It is the intention of the parties hereto that Mr. Dale Frey shall be designated as the initial Chairman of the Human Resources Committee of Parent immediately following the Effective Time. If, at any time during the period referenced in the second preceding sentence, the number of Doubletree Directors and Promus Directors serving, or that would be serving following the next stockholders' meeting at which Directors are to be elected, as Directors of Parent or as members of any Committee of the Board of Directors of Parent, would not be equal, then, subject to the fiduciary duties of the Directors of Parent, the Board of Directors and the Nominating Committee thereof shall nominate for election at the next stockholders' meeting at which Directors are to be elected, such person or persons as may be requested by the remaining Doubletree Directors (if the number of 37 45 Doubletree Directors is, or would otherwise become, less than the number of Promus Directors) or by the remaining Promus Directors (if the number of Promus Directors is, or would otherwise become, less than the number of Doubletree Directors) to ensure that there shall be an equal number of Doubletree Directors and Promus Directors. The provisions of the preceding sentence shall not apply in respect of any stockholders' meeting which takes place after December 31, 2002. The term "Doubletree Director" means (i) any person serving as a Director of Doubletree or any of its Subsidiaries on the date hereof who becomes a Director of Parent at the Effective Time and (ii) any person who becomes a Director of Parent pursuant to the second preceding sentence and who is designated by the Doubletree Directors; and the term "Promus Director" means (i) any person serving as a Director of Promus or any of its Subsidiaries on the date hereof who becomes a Director of Parent at the Effective Time and (ii) any person who becomes a Director of Parent pursuant to the second preceding sentence and who is designated by the Promus Directors. (b) At the Effective Time, pursuant to the terms of the employment contracts referred to in Section 5.20(c) hereof, (i) Raymond E. Schultz, the current Chief Executive Officer of Promus, shall hold the position of Chief Executive Officer and Chairman of the Board of Parent, (ii) Richard M. Kelleher, the current President and Chief Executive Officer of Doubletree, shall hold the position of President and Chief Operating Officer of Parent, (iii) William L. Perocchi, the current Executive Vice President and Chief Financial Officer of Doubletree, shall hold the position of Executive Vice President and Chief Financial Officer of Parent and (iv) Thomas L. Keltner, the current Executive Vice President, Development of Promus, shall hold the position of Executive Vice President, Development of Parent. Mr. Schultz will continue as Chairman of the Board and Chief Executive Officer of Parent until his retirement no later than December 31, 1999, and, pursuant to the terms of the employment contracts referred to in Section 5.20(c) hereof and subject to the Bylaws of Parent, Mr. Kelleher will succeed Mr. Schultz as Chairman of the Board and Chief Executive Officer of Parent. If any of the persons identified above in this Section 5.20(b) is unable or unwilling to hold such offices as set forth above, his successor shall be selected by the Board of Directors of Parent in accordance with the Bylaws of Parent. The authority, duties and responsibilities of the Chairman and Chief Executive Officer, the President and Chief Operating Officer, the Executive Vice President and Chief Financial Officer and the Executive Vice President, Development shall be set forth in the employment contracts entered into pursuant to Section 5.20(c) hereof, which employment contracts shall also set forth in their entirety the rights and remedies of Messrs. Schultz, Kelleher, Perocchi and Keltner with respect to employment by Parent , and none of them shall have any right, remedy or cause of action under this Section 5.20, nor shall they be third party beneficiaries of this Section 5.20. (c) Prior to the Closing, Parent shall offer to enter into employment agreements with Raymond E. Schultz, Richard M. Kelleher, William L. Perocchi and Thomas L. Keltner on substantially the terms previously agreed to by Doubletree and Promus. (d) At the Effective Time, Parent shall have an Executive Committee which initially will be comprised of the following four members of the Board of Directors of Parent: Richard J. Ferris, Michael D. Rose, Raymond E. Schultz and Peter V. Ueberroth. In addition, Richard M. Kelleher shall be an ex-officio member of the Executive Committee with the right to attend but not vote at all meetings of the Executive Committee. The Executive Committee shall have responsibility for developing Parent's long-term strategic plans, making significant capital 38 46 allocation decisions and such other duties and responsibilities as specified by the Board of Directors of Parent at or after the Effective Time. The Executive Committee also shall be required to oversee the implementation of Promus's existing 100% guest satisfaction guarantee program at all of Promus's and Doubletree's hotel properties following the Effective Time. Each member of the Executive Committee that is not an employee of Parent will be entitled to receive $300,000 per year as compensation for serving on the Executive Committee. (e) Each of Doubletree and Promus shall cause Parent to incorporate the provisions contained in this Section 5.20 into the Bylaws of Parent in effect at the Effective Time, which provisions shall thereafter be amended only with the approval of 75% of the members of the Board of Directors of Parent. Section 5.21. Name of Parent At the Effective Time, Parent shall change its corporate name to Promus Hotel Corporation. Section 5.22. Parent Stockholder Rights Plan Prior to the Effective Time, Doubletree and Promus shall cause Parent to adopt a Stockholder Rights Plan (the "Parent Rights Plan") that is substantially similar to the Promus Rights Plan, with such modifications as are acceptable to both Doubletree and Promus. Section 5.23. GEPT Warrant; Doubletree Registration Rights Agreement (a) At the Effective Time, Parent shall assume all obligations under the GEPT Warrant, and the holder of the GEPT Warrant thereafter shall have the right to acquire, on the same pricing and payment terms and conditions as are currently applicable under the GEPT Warrant, the same number of shares of Parent Common Stock as the holder of the GEPT Warrant would have been entitled to receive pursuant to the Doubletree Merger had such holder exercised the GEPT Warrant in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at the price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of Doubletree Common Stock purchasable pursuant to the GEPT Warrant immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to the GEPT Warrant in accordance with the foregoing. (b) At the Effective Time, Doubletree and Promus shall cause Parent to enter into a Registration Rights Agreement (the "Parent Registration Rights Agreement") substantially similar to the Incorporation and Registration Rights Agreement dated as of December 16, 1993, as amended on June 30, 1994, February 27, 1996 and November 8, 1996 by and among Doubletree and certain stockholders of Doubletree (the "Doubletree Registration Rights Agreement") pursuant to which Parent will provide registration rights to parties to the Doubletree Registration Rights Agreement (other than Doubletree) with respect to all shares of Parent Common Stock issued in the Doubletree Merger on account of the shares of Doubletree Common Stock covered by the Doubletree Registration Rights Agreement. Section 5.24. Conveyance Taxes Doubletree and Promus shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and 39 47 stamp taxes, any transfer, recording, registration and other fees or any similar taxes which become payable in connection with the transactions contemplated by this Agreement that are required or permitted to be filed on or before the Effective Time. Section 5.25. Transfer Taxes Doubletree shall pay, and Promus shall pay, on behalf of the stockholders of Doubletree and Promus, respectively, any New York State Real Estate Transfer Tax, New York City Real Property Transfer Tax, New York State Stock Transfer Tax and any similar taxes imposed on the stockholders of Doubletree and Promus, respectively, by any other State of the United States (and any interest with respect to such taxes) (the "Transfer Taxes"), which become payable in connection with the transactions contemplated by this Agreement. Doubletree and Promus shall cooperate in the preparation, execution and filing of any required returns with respect to such Transfer Taxes (including returns on behalf of the stockholders of Doubletree and Promus) and in the determination of the portion of the consideration allocable to the real property of Doubletree and the Doubletree Subsidiaries and Promus and the Promus Subsidiaries in New York State and City (or in any other jurisdiction, if applicable). The Joint Proxy Statement/Prospectus shall provide that the stockholders of Doubletree and Promus shall be deemed to have (i) authorized Doubletree and Promus, respectively, to prepare, execute and file any tax returns relating to Transfer Taxes and pay any Transfer Taxes arising in connection with the Mergers, in each case, on behalf of such holders and (ii) agreed to be bound by the values and allocations established by Doubletree and Promus in the preparation of any return with respect to the Transfer Taxes, if applicable. Section 5.26. Stockholder Litigation Each of Doubletree and Promus shall give the other the reasonable opportunity to participate in the defense of any stockholder litigation against Doubletree or Promus, as applicable, and its directors relating to the transactions contemplated hereby. Section 5.27. Employee Benefits; Severance (a) Parent shall cause to continue to be maintained the Doubletree and Promus annual bonus plans for management employees for the 1997 fiscal year and shall calculate the amounts payable to participants thereunder on a basis consistent with the terms of each such plan and the past practice of Doubletree or Promus, as applicable. (b) For purposes of determining eligibility to participate, vesting, entitlement to benefits and in all other respects where length of service is relevant (except for pension benefit accruals) under any employee benefit plan or arrangement covering employees of Doubletree and its Subsidiaries ("Doubletree Employees") employees of Promus and its Subsidiaries ("Promus Employees") following the Effective Time, Parent shall cause such plans or arrangements to recognize service credit for service with Doubletree or Promus (as applicable) and any of their respective Subsidiaries to the same extent such service was recognized under the applicable employee benefit plans immediately prior to the Effective Time. (c) At the Effective Time, Parent shall assume and honor in accordance with their terms the severance agreements and severance pay policies identified in Section 5.27 of the Doubletree Disclosure Schedule and Section 5.27 of the Promus Disclosure Schedule. 40 48 (d) Promus and Doubletree agree that each may enter into retention and transition bonus arrangements with its employees prior to the Effective Time, with the terms and amounts of such payments to be determined jointly by the Chief Executive Officers of Promus and Doubletree; provided, however, that in no event shall the aggregate of all such payments exceed approximately $2.5 million. (e) Promus agrees to use all reasonable efforts, including obtaining any necessary employee consents, to prevent the automatic funding of any escrow, trust or similar arrangement pursuant to any employment agreement, arrangement or benefit plan that arises in connection with the execution of this Agreement or the consummation of any of the transactions contemplated hereby. ARTICLE VI. CONDITIONS TO MERGER Section 6.1. Conditions to Each Party's Obligation to Effect the Mergers The respective obligations of each party to this Agreement to effect the Mergers shall be subject to the satisfaction or waiver by each party prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement, the Doubletree Merger and the Promus Merger shall have been approved in the manner required under the DGCL by the respective holders of the issued and outstanding shares of capital stock of Doubletree and Promus. (b) HSR Act. The waiting period applicable to the consummation of the Mergers under the HSR Act shall have expired or been terminated. (c) Approvals. Other than the filing provided for by Section 1.4, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity the failure of which to file, obtain or occur is reasonably likely to have a Doubletree Material Adverse Effect or a Promus Material Adverse Effect shall have been filed, been obtained or occurred. (d) Registration Statement. The Registration Statement shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order. (e) No Injunctions. No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction or statute, rule, regulation which is in effect and which has the effect of making the Mergers illegal or otherwise prohibiting consummation of the Mergers. (f) Pooling Letters. Doubletree and Promus shall have received letters from KPMG Peat Marwick LLP and Arthur Andersen LLP, respectively, addressed to Doubletree and Promus, respectively, regarding their concurrence with the respective conclusions of management of Doubletree and Promus, as to the appropriateness of the pooling of interests accounting, under 41 49 Accounting Principles Board Opinion No. 16 for the transactions contemplated hereby, it being agreed that Doubletree and Promus shall each provide reasonable cooperation to KPMG Peat Marwick LLP and Arthur Andersen LLP to enable them to issue such letters. (g) NYSE Listing. The shares of Parent Common Stock to be issued in the Merger and upon exercise of Doubletree Options, the GEPT Warrant and Promus Options shall have been approved for listing on the NYSE, subject to official notice of issuance. (h) Corporate Governance. Doubletree and Promus shall have taken all actions necessary so that (i) not later than the Effective Time, the Certificate of Incorporation and Bylaws of Parent shall have been amended to be substantially in the form of Exhibit D and Exhibit E hereto; (ii) at the Effective Time, the composition of the Board of Directors of Parent and of each Committee of the Board of Directors of Parent shall comply with Section 5.20 hereof (assuming Doubletree has designated the Doubletree Directors and Promus has designated the Promus Directors, in each case as contemplated by Section 5.20(a) hereof); and (iii) not later than the Effective Time, Parent shall have adopted the Parent Rights Plan. Section 6.2. Additional Conditions to Obligations of Doubletree The obligation of Doubletree to effect the Doubletree Merger is subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by Doubletree: (a) Representations and Warranties. The representations and warranties of Promus set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (i) changes contemplated by this Agreement and (ii) inaccuracies which, individually or in the aggregate, have not had and are not reasonably likely to have a Promus Material Adverse Effect or a material adverse effect upon the consummation of the transactions contemplated hereby; and Doubletree shall have received a certificate signed on behalf of Promus by the chief executive officer and the chief financial officer of Promus to such effect. (b) Performance of Obligations of Promus. Promus shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Doubletree shall have received a certificate signed on behalf of Promus by the chief executive officer and the chief financial officer of Promus to such effect. (c) Tax Opinion. Doubletree shall have received the opinion of Dewey Ballantine, counsel to Doubletree, based upon reasonably requested representation letters and dated the Closing Date, to the effect that the Doubletree Merger will be treated as a reorganization described in Section 368(a) of the Code and/or, taken together with the Promus Merger, as a transfer of property to Parent by holders of Doubletree Common Stock described in Section 351 of the Code. (d) No Trigger of Promus Rights Plan. No event shall have occurred that has or would result in the triggering of any right or entitlement of stockholders of Promus under the Promus Rights Plan, or will occur as a result of the consummation of the Mergers. 42 50 Section 6.3. Additional Conditions to Obligations of Promus The obligations of Promus to effect the Promus Merger are subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by Promus: (a) Representations and Warranties. The representations and warranties of Doubletree set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (i) changes contemplated by this Agreement and (ii) inaccuracies which, individually or in the aggregate, have not had and are not reasonably likely to have a Doubletree Material Adverse Effect, or a material adverse effect upon the consummation of the transactions contemplated hereby; and Promus shall have received a certificate signed on behalf of Doubletree by the chief executive officer and the chief financial officer of Doubletree to such effect. (b) Performance of Obligations of Doubletree. Doubletree shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date; and Promus shall have received a certificate signed on behalf of Doubletree by the chief executive officer and the chief financial officer of Doubletree to such effect. (c) Tax Opinion. Promus shall have received the opinion of Latham & Watkins, counsel to Promus, based upon reasonably requested representation letters and dated the Closing Date, to the effect that the Promus Merger will be treated as a reorganization described in Section 368(a) of the Code and/or, taken together with the Doubletree Merger, as a transfer of property to Parent by holders of Promus Common Stock described in Section 351 of the Code. (d) No Trigger of Doubletree Rights Plan. No event shall have occurred that has or would result in the triggering of any right or entitlement of stockholders of Doubletree under the Doubletree Rights Plan, or will occur as a result of the consummation of the Mergers. ARTICLE VII. TERMINATION AND AMENDMENT Section 7.1. Termination This Agreement may be terminated at any time prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(h), by written notice by the terminating party to the other party), whether before or after approval of the matters presented in connection with the Mergers by the stockholders of Doubletree or Promus: (a) by mutual written consent of Doubletree and Promus; or (b) by either Doubletree or Promus if the Mergers shall not have been consummated by January 31, 1998 (provided that (i) either Doubletree or Promus may extend such date to March 31, 1998 by providing written notice thereof to the other party on or prior to January 31, 1998 (January 31, 1998, as it may be so extended, shall be referred to herein as the "Outside Date") and (ii) the right to terminate this Agreement under this Section 7.1(b) shall not 43 51 be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the Mergers to occur on or before such date); or (c) by either Doubletree or Promus if a court of competent jurisdiction or other Governmental Entity shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Mergers; or (d) (i) by Doubletree or Promus, if, at the Promus Stockholders' Meeting (including any adjournment or postponement), the requisite vote of the stockholders of Promus in favor of the approval and adoption of this Agreement and the Promus Merger shall not have been obtained; or (ii) by Promus or Doubletree if, at the Doubletree Stockholders' Meeting (including any adjournment or postponement), the requisite vote of the stockholders of Doubletree in favor of the approval and adoption of this Agreement and the Doubletree Merger shall not have been obtained; or (e) by Doubletree, if (i) the Board of Directors of Promus shall have withdrawn or modified its recommendation of this Agreement or the Promus Merger (provided that Doubletree's right to terminate this Agreement under such clause (i) shall not be available if at such time Promus would be entitled to terminate this Agreement under Section 7.1(h) without giving effect to the cure period); (ii) after the receipt by Promus of an Acquisition Proposal, Doubletree requests in writing that the Board of Directors of Promus reconfirm its recommendation of this Agreement and the Promus Merger to the stockholders of Promus and the Board of Directors of Promus fails to do so within 10 business days after its receipt of Doubletree's request; (iii) the Board of Directors of Promus shall have recommended to the stockholders of Promus an Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of Promus Common Stock is commenced (other than by Doubletree or an Affiliate of Doubletree) and the Board of Directors of Promus recommends that the stockholders of Promus tender their shares in such tender or exchange offer; or (v) for any reason Promus fails to call and hold the Promus Stockholders' Meeting by the Outside Date (provided that Doubletree's right to terminate this Agreement under such clause (v) shall not be available if at such time Promus would be entitled to terminate this Agreement under Section 7.1(h) without giving effect to the cure period); or (f) by Promus, if (i) the Board of Directors of Doubletree shall have withdrawn or modified its recommendation of this Agreement or the Doubletree Merger (provided that Promus's right to terminate this Agreement under such clause (i) shall not be available if at such time Doubletree would be entitled to terminate this Agreement under Section 7.1(h) without giving effect to the cure period); (ii) after the receipt by Doubletree of an Acquisition Proposal, Promus requests in writing that the Board of Directors of Doubletree reconfirm its recommendation of this Agreement and the Doubletree Merger to the stockholders of Promus and the Board of Directors of Doubletree fails to do so within 10 business days after its receipt of Promus's request; (iii) the Board of Directors of Doubletree shall have recommended to the stockholders of Doubletree an Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of Doubletree Common Stock is commenced (other than by Promus or an Affiliate of Promus) and the Board of Directors of Doubletree recommends that the stockholders of Doubletree tender their shares in such tender or 44 52 exchange offer; or (v) for any reason Doubletree fails to call and hold the Doubletree Stockholders' Meeting by the Outside Date (provided that Promus's right to terminate this Agreement under such clause (v) shall not be available if at such time Doubletree would be entitled to terminate this Agreement under Section 7.1(h) without giving effect to the cure period); or (g) by Doubletree or Promus, prior to the approval of this Agreement by the stockholders of such party, if, as a result of a Superior Proposal received by such party from a Third Party, the Board of Directors of such party determines in good faith after consultation with outside legal counsel that accepting such Superior Proposal is required for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law; provided, however, that no termination shall be effective pursuant to this Section 7.1(g) under circumstances in which a termination fee is payable by the terminating party pursuant to Section 7.3(b)(iii) or (c)(iii), unless concurrently with such termination, such termination fee is paid in full by the terminating party in accordance with Section 7.3(b)(iii) or (c)(iii), as applicable; or (h) by Doubletree or Promus, if (A) there has been a breach of any representation, warranty, covenant or agreement on the part of the other party set forth in this Agreement, which breach (i) will cause the conditions set forth in Section 6.2(a) or (b) (in the case of termination by Doubletree) or 6.3(a) or (b) (in the case of termination by Promus) not to be satisfied, and (ii) shall not have been cured within 20 business days following receipt by the breaching party of written notice of such breach from the other party; or (B) any event shall have occurred which makes it impossible for the conditions set forth in Article VI hereof (other than Section 6.1(a), 6.1(e), 6.2(d) and 6.3(d)) to be satisfied, provided that any termination pursuant to this clause (B) shall not be effective until 20 business days after notice thereof is delivered by the party seeking to terminate to the other party, and shall be automatically rescinded if (1) such condition is solely for the benefit of the party receiving such notice and (2) such party, prior to such 20th business day, irrevocably waives satisfaction of such condition based on such event. Section 7.2. Effect of Termination In the event of termination of this Agreement as provided in Section 7.1, this Agreement shall immediately become void and there shall be no liability or obligation on the part of Doubletree, Promus, Parent or their respective officers, directors, stockholders or Affiliates, except as set forth in Sections 5.15 and 7.3 and except that such termination shall not limit liability for a willful breach of this Agreement; provided that, the provisions of Sections 5.15 and 7.3 of this Agreement, the Stock Option Agreements and the Confidentiality Agreements shall remain in full force and effect and survive any termination of this Agreement. Section 7.3. Fees and Expenses. (a) Except as set forth in this Section 7.3, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Mergers are consummated. (b) Doubletree shall pay Promus a termination fee of $45 million upon the earliest to occur of the following events: 45 53 (i) the termination of this Agreement by either Promus or Doubletree pursuant to Section 7.1(d)(ii), if a proposal for an Alternative Transaction (as defined below) involving Doubletree shall have been publicly announced prior to the Doubletree Stockholders' Meeting and either a definitive agreement for an Alternative Transaction is entered into, or an Alternative Transaction is consummated, within eighteen months of such termination; (ii) the termination of this Agreement by Promus pursuant to Section 7.1(f); or (iii) the termination of this Agreement by Doubletree pursuant to Section 7.1(g). Doubletree's payment of a termination fee pursuant to this subsection shall be the sole and exclusive remedy of Promus against Doubletree and any of its Subsidiaries and their respective directors, officers, employees, agents, advisors or other representatives with respect to the occurrences giving rise to such payment; provided that this limitation shall not apply in the event of a willful breach of this Agreement by Doubletree. Notwithstanding the foregoing, if and to the extent that Promus has purchased shares of Doubletree Common Stock pursuant to the Promus Stock Option Agreement prior to the payment of the $45 million fee provided for herein (the "Fee Payment Date"), the amount payable to Promus under this Section 7.3(b), together with (i)(x) the net cash amount received by Promus prior to the Fee Payment Date pursuant to Doubletree's repurchase of Shares (as defined in the Promus Stock Option Agreement) pursuant to Section 7 of the Promus Stock Option Agreement, less (y) Promus's purchase price for such Shares, and (ii)(x) the amounts received by Promus prior to the Fee Payment Date pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) Promus's purchase price for such Shares, shall not exceed $65 million. (c) Promus shall pay Doubletree a termination fee of $45 million upon the earliest to occur of the following events: (i) the termination of this Agreement by either Doubletree or Promus pursuant to Section 7.1(d)(i), if a proposal for an Alternative Transaction (as defined below) involving Promus shall have been publicly announced prior to the Promus Stockholders' Meeting and either an Alternative Transaction is entered into, or an Alternative Transaction is consummated, within eighteen months of such termination; (ii) the termination of this Agreement by Doubletree pursuant to Section 7.1(e); or (iii) the termination of this Agreement by Promus pursuant to Section 7.1 (g). Promus's payment of a termination fee pursuant to this subsection shall be the sole and exclusive remedy of Doubletree against Promus and any of its Subsidiaries and their respective directors, officers, employees, agents, advisors or other representatives with respect to the occurrences giving rise to such payment; provided that this limitation shall not apply in the event of a willful breach of this Agreement by Promus. Notwithstanding the foregoing, if and to 46 54 the extent that Doubletree has purchased shares of Promus Common Stock pursuant to the Doubletree Stock Option Agreement prior to the Fee Payment Date, the amount payable to Doubletree under this Section 7.3(c), together with (i)(x) the net cash amount received by Doubletree prior to the Fee Payment Date pursuant to Promus's repurchase of Shares (as defined in the Doubletree Stock Option Agreement) pursuant to Section 7 of the Doubletree Stock Option Agreement, less (y) Doubletree's purchase price for such Shares, and (ii)(x) the amounts received by Doubletree prior to the Fee Payment Date pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) Doubletree's purchase price for such Shares, shall not exceed $65 million. (d) The fees payable pursuant to Section 7.3(b) or 7.3(c) shall be paid concurrently with the first to occur of the events described in Section 7.3(b)(i), (ii) or (iii) or 7.3(c)(i), (ii) or (iii), respectively. (e) As used in this Agreement, "Alternative Transaction" means either (i) a transaction pursuant to which any Third Party acquires more than 20% of the outstanding shares of Doubletree Common Stock or Promus Common Stock, as the case may be, pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or other business combination involving Doubletree or Promus pursuant to which any Third Party (or the stockholders of a Third Party) acquires more than 20% of the outstanding shares of Doubletree Common Stock or Promus Common Stock, as the case may be, or the entity surviving such merger or business combination, (iii) any other transaction pursuant to which any Third Party acquires control of assets (including for this purpose the outstanding equity securities of Subsidiaries of Doubletree or Promus, and the entity surviving any merger or business combination including any of them) of Doubletree or Promus having a fair market value (as determined by the Board of Directors of Doubletree or Promus, as the case may be, in good faith) equal to more than 20% of the fair market value of all the assets of Doubletree or Promus, as the case may be, and their respective Subsidiaries, taken as a whole, immediately prior to such transaction, or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. Section 7.4. Amendment This Agreemen ay be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Mergers by the stockholders of Doubletree or Promus, but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto; provided, however, that this Agreement may be amended in writing without obtaining the signatures of Doubletree, Promus or Parent solely for the purpose of adding Doubletree Sub and Merger Sub as parties to this Agreement. Section 7.5. Extension; Waiver At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained here. Any agreement on the part of a party hereto 47 55 to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. ARTICLE VIII. MISCELLANEOUS Section 8.1. Nonsurvival of Representations, Warranties and Agreements None of the representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the agreements contained in Sections 1.6, 2.1, 2.2, 2.4, 5.16, 5.19, 5.20 and 5.27 and Article VIII, and the agreements of the Affiliates delivered pursuant to Section 5.12. The Confidentiality Agreements shall survive the execution and delivery of this Agreement. Section 8.2. Notices . All notices nd ther communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Doubletree, to Doubletree Corporation 410 North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Richard M. Kelleher Telecopy: (602) 220-6753 with a copy to Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attn: William J. Phillips, Esq. Telecopy: (212) 295-6333 (b) if to Promus, to Promus Hotel Corporation 755 Crossover Lane Memphis, TN 38117 Attn: Raymond E. Schultz Telecopy: (901) 374-5636 48 56 with a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Attn: John M. Newell, Esq. Telecopy: (213) 891-8763 Section 8.3. Interpretation When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The phrases "the date of this Agreement", "the date hereof," and terms of similar import, unless the context otherwise requires, shall be deemed to refer to September 1, 1997. Section 8.4. Counterparts This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 8.5. Entire Agreement; No Third Party Beneficiaries This Agreement and all documents and instruments referred to herein (a) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Section 5.16 are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder; provided that the Confidentiality Agreements shall remain in full force and effect until the Effective Time. Each party hereto agrees that, except for the representations and warranties contained in this Agreement, neither Doubletree nor Promus makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement or the transactions contemplated hereby, notwithstanding the delivery or disclosure to the other or the other's representatives of any documentation or other information with respect to any one or more of the foregoing. Section 8.6. Governing Law This Agreement shall be governed and construed in accordance with the laws of the State of Delaware without regard to any applicable conflicts of law. Section 8.7. Assignment Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 49 57 Signature Page for Agreement and Plan of Merger IN WITNESS WHEREOF, Doubletree, Promus and Parent have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. DOUBLETREE CORPORATION /s/ Richard M. Kelleher By: Richard M. Kelleher Its: President and Chief Executive Officer PROMUS HOTEL CORPORATION /s/ Raymond E. Schultz By: Raymond E. Schultz Its: President and Chief Executive Officer PARENT HOLDING CORP. /s/ Raymond E. Schultz By: Raymond E. Schultz Its: Chief Executive Officer and Chairman of the Board EX-4.1 3 RIGHTS AGREEMENT DATED SEPT. 1, 1997 1 PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT FOR DISCUSSION PURPOSES ONLY - -------------------------------------------------------------------------------- DOUBLETREE CORPORATION and HARRIS TRUST COMPANY OF CALIFORNIA As Rights Agent ------------ Rights Agreement Dated as of September 1, 1997 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Section Page - ------- ---- Section 1. Certain Definitions...............................................1 Section 2. Appointment of Rights Agent.......................................8 Section 3. Issuance of Rights Certificates...................................8 Section 4. Form of Rights Certificates......................................11 Section 5. Countersignature and Registration................................12 Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates..............................................12 Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights...................................................14 Section 8. Cancellation and Destruction of Rights Certificates..............17 Section 9. Reservation and Availability of Shares of Preferred Stock........18 Section 10. Preferred Stock Record Date......................................20 Section 11. Adjustment of Exercise Price, Number and Kind of Shares or Number of Rights.................................................21 Section 12. Certification of Adjusted Exercise Price or Number of Shares.....33 Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power....................................................33 Section 14. Fractional Rights and Fractional Shares..........................39 Section 15. Rights of Action.................................................40 Section 16. Agreement of Right Holders.......................................40 Section 17. Rights Certificate Holder Not Deemed a Stockholder...............41 Section 18. Concerning the Rights Agent......................................42 Section 19. Merger or Consolidation of, or Change in Name of, the Rights Agent.....................................................43 Section 20. Duties of Rights Agent...........................................44 Section 21. Change of Rights Agent...........................................48
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Section Page - ------- ---- Section 22. Issuance of New Rights Certificates..............................49 Section 23. Redemption.......................................................50 Section 24. Exchange.........................................................51 Section 25. Notice of Proposed Actions.......................................54 Section 26. Notices..........................................................55 Section 27. Supplements and Amendments.......................................56 Section 28. Successors.......................................................57 Section 29. Benefits of this Rights Agreement................................57 Section 30. Determinations and Actions by the Board; etc.....................57 Section 31. Delaware Contract................................................58 Section 32. Counterparts.....................................................58 Section 33. Descriptive Headings.............................................59 Section 34. Severability.....................................................59
Exhibit A -- Form of Certificate of Designations of Series A Junior Preferred Stock Exhibit B -- Summary of Rights Exhibit C -- Form of Rights Certificate ii 4 RIGHTS AGREEMENT Agreement, dated as of September 1, 1997 by and between DOUBLETREE CORPORATION, a Delaware corporation (the "Company"), and HARRIS TRUST COMPANY OF CALIFORNIA (the "Rights Agent"). W I T N E S S E T H : WHEREAS, on September 1, 1997, the Board of Directors of the Company authorized the issuance, and declared a dividend, of one right (a "Right") for each share of Common Stock, $.01 par value per share, of the Company outstanding as of the close of business on September 11, 1997 (the "Record Date"), each such Right representing the right to purchase one one-hundredth of a share of Series A Junior Preferred Stock of the Company ("Preferred Stock") having the rights and preferences set forth in the form of Certificate of Designations attached hereto as Exhibit A authorized by the Board of Directors on September 1, 1997 upon the terms and subject to the conditions hereinafter set forth; and WHEREAS, the Board of Directors of the Company further authorized the issuance of one Right (subject to adjustment) with respect to each share of Common Stock which may be issued between the Record Date and the earlier to occur of the Redemption Date or the Final Expiration Date (as such terms are hereinafter defined); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter 5 defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the shares of any class of Voting Stock (as such term is hereinafter defined) of the Company then outstanding; provided that, an Acquiring Person shall not include (i) an Exempt Person (as such term is hereinafter defined), (ii) GE Investment Management Incorporated, GE Investment Hotel Partners I, Limited Partnership, the Trustees of GE Pension Trust or Red Lion, a California limited partnership, (iii) Promus Hotel Corporation ("Promus") or Parent Holding Corp. ("Parent"), solely by reason of the execution of the Agreement and Plan of Merger, dated as of September 1, 1997, between the Corporation, Promus and Parent (the "Merger Agreement") or the execution and implementation of the Promus Stock Option Agreement, dated as of September 1, 1997, between the Corporation and Promus or (iv) any Person, together with all Affiliates and Associates of such Person, who or which would be an Acquiring Person solely by reason of (x) being the Beneficial Owner of shares of Voting Stock of the Company, the Beneficial Ownership of which was acquired by such Person pursuant to any action or transaction or series of related actions or transactions approved by the Board of Directors before such Person otherwise became an Acquiring Person or (y) a reduction in the number of issued and outstanding shares of Voting Stock of the Company pursuant to a transaction or a series of related transactions approved by the Board of Directors of the Company (upon approval, in the case of subclauses (x) and (y), by a majority of the Continuing Directors (as such term is hereinafter defined)) (provided that, in the case of the person set forth in clause (iv) does not become an Acquiring Person by reason of clause (x) or (y) above, such persons set forth in clause (iv) shall nonetheless become an Acquiring Person upon acquisition of any additional shares of the Company's Voting Stock unless such acquisition of additional Voting 2 6 Stock will not result in such person or group becoming an Acquiring Person by reason of such clause (x) or (y)). Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith (upon approval by a majority of the Continuing Directors) that a Person who would otherwise be an "Acquiring Person" as defined pursuant to the foregoing provisions of this paragraph (a) has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an "Acquiring Person" as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed an "Acquiring Person" for any purposes of this Rights Agreement. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended ("Exchange Act"), as in effect on the date of this Rights Agreement. (c) A person shall be deemed the "Beneficial Owner" of, or to "Beneficially Own", any securities (and correlative terms shall have correlative meanings); (i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, "beneficially owns" (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act); or (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time or the fulfillment of a condition or both) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, other rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "Beneficially Own", 3 7 securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange or (B) the right to vote, alone or in concert with others, pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "Beneficially Own", any securities if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act and (2) is not at the time reportable by such Person on a Schedule 13D report under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except as described in clause (B) of subparagraph (ii) of this paragraph (c)) or disposing of any securities of the Company. Notwithstanding anything in this paragraph (c) to the contrary, if a Person, who together with any other stockholders of the Company holds, in the aggregate, greater than 50% of the Voting Stock of the Company, approves any action of the stockholders by written consent in lieu of a stockholders meeting, such Person shall be deemed to be the "Beneficial Owner" of all of the Voting Stock that is voted pursuant to such written consent. Further, notwithstanding anything in this paragraph (c) to the contrary, a Person engaged in the business of underwriting securities shall not be deemed the "Beneficial 4 8 Owner" of, or to "Beneficially Own," any securities acquired in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. Notwithstanding anything in this paragraph (c) to the contrary, the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. (d) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Illinois are authorized or obligated by law or executive order to close. (e) "Close of Business" on any given date shall mean 5:00 P.M., New York or Chicago time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York or Chicago time, on the next succeeding Business Day. (f) "Common Stock" when used with reference to the Company shall mean the Common Stock (presently $.01 par value) of the Company. "Common Stock" when used with reference to any Person other than the Company which shall be organized in corporate form shall mean the capital stock or other equity security with the greatest per share voting power of such Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. "Common Stock" when used with reference to any Person other than the Company which shall not be organized in corporate form shall mean units of beneficial interest which shall represent the right to participate in profits, losses, 5 9 deductions and credits of such Person and which shall be entitled to exercise the greatest voting power per unit of such Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. (g) "Continuing Director" shall mean any member of the Board of Directors, while such person is a member of the Board of Directors, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative or nominee of an Acquiring Person or of any such Affiliate or Associate, and who either (i) was a member of the Board of Directors on the date of this Agreement or (ii) subsequently became a member of the Board of Directors, and whose nomination for election or election to the Board of Directors was recommended or approved by a majority of the Continuing Directors then on the Board of Directors. (h) "Distribution Date" shall have the meaning set forth in Section 3(b) hereof. (i) "Exchange Act" shall have the meaning set forth in Section 1(b) hereof. (j) "Exempt Person" shall mean (i) the Company, (ii) any Subsidiary of the Company or (iii) any employee benefit plan or employee stock plan of the Company or any Subsidiary of the Company, or any trust or other entity organized, appointed, established or holding Common Stock for or pursuant to the terms of any such plan. (k) "Exercise Price" shall have the meaning set forth in Section 4 and 7(b) hereof. (l) "Fair Market Value" of any property shall mean the fair market value of such property as determined in accordance with Section 11(d) hereof. (m) "Final Expiration Date" shall have the meaning set forth in Section 7(a) hereof. 6 10 (n) "Person" shall mean any individual, firm, corporation or other entity and shall include any successor (by merger of otherwise) of such entity. (o) "Preferred Stock" shall mean shares of Series A Junior Preferred Stock, $.01 par value, of the Company and, to the extent that there is not a sufficient number of shares of Series A Junior Preferred Stock authorized to permit the full exercise of the Rights, any other series of Preferred Stock, $.01 par value, of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Preferred Stock. (p) "Principal Party" shall have the meaning set forth in Section 13(b) hereof. (q) "Record Date" shall have the meaning set forth in the recital. (r) "Redemption Date" shall have the meaning set forth in Section 7(a) hereof. (s) "Redemption Price" shall have the meaning set forth in Section 23(a) hereof. (t) "Rights Certificate" shall have the meaning set forth in Section 3(d) hereof. (u) "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof. (v) "Stock Acquisition Date" shall mean the first date on which there shall be a public announcement by the Company or an Acquiring Person that an Acquiring Person has become such (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) or such earlier date as a majority of the Continuing Directors shall become aware of the existence of an Acquiring Person. (w) "Subsidiary" of a Person shall mean any corporation or other entity of which securities or other ownership interests having voting power sufficient to elect a majority of the board of directors or other persons performing similar functions are beneficially owned, directly or indirectly, by such Person or by any corporation or other entity that is otherwise controlled by 7 11 such Person. (x) "Summary of Rights" shall have the meaning set forth in Section 3(a) hereof. (y) "Trading Day" shall have the meaning set forth in Section 11(d) hereof. (z) "Transfer Tax" shall mean any tax or charge, including any documentary stamp tax, imposed or collected by any governmental or regulatory authority in respect of any transfer of any security, instrument or right, including Rights, shares of Common Stock and Shares of Preferred Stock. (aa)"Triggering Event" shall mean any event described in Section 11(a)(ii) or Section 13(a). (bb)"Voting Stock" shall mean (i) the Common Stock of the Company and (ii) any other shares of capital stock of the Company entitled to vote generally in the election of directors or entitled to vote together with the Common Stock in respect of any merger, consolidation, sale of all or substantially all of the Company's assets, liquidation, dissolution or winding up. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. Section 3. Issuance of Rights Certificates (a) On the Record Date (or as soon as practicable thereafter), the Company or the Rights Agent, at the expense of the Company, shall send a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit B (the "Summary of Rights"), by first class 8 12 mail, postage prepaid, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. (b) Until the Close of Business on the day (or such later date as may be determined by action of the Board of Directors, upon approval by a majority of the Continuing Directors) which is the earlier of (i) the tenth day after the Stock Acquisition Date or (ii) the tenth business day after the date of the commencement by any person (other than an Exempt Person) of, or the first public announcement of the intent of any Person (other than an Exempt Person) to commence, a tender or exchange offer upon the successful consummation of which such Person, together with its Affiliates and Associates, would be the Beneficial Owner of 15% or more of any class of the then outstanding shares of Voting Stock of the Company (irrespective of whether any shares are actually purchased pursuant to any such offer) (the earlier of such dates being herein referred to as the "Distribution Date"), (x) the Rights shall be evidenced by the certificates for Common Stock registered in the name of the holders of Common Stock (together with, in the case of certificates for Common Stock outstanding as of the Record Date, the Summary of Rights) and not by separate Rights Certificates and the record holders of such certificates for Common Stock shall be the record holders of the Rights represented thereby and (y) each Right shall be transferable only simultaneously and together with the transfer of a share of Common Stock (subject to adjustment as hereinafter provided). Until the Distribution Date (or, if earlier, the Redemption Date or Final Expiration Date), the surrender for transfer of any certificate for Common Stock shall constitute the surrender for transfer of the Right or Rights associated with the Common Stock evidenced thereby, whether or not accompanied by a copy of the Summary of Rights. (c) Rights shall be issued in respect of all shares of Common Stock that become 9 13 outstanding after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date and, in certain circumstances provided in Section 22 hereof, may be issued in respect of shares of Common Stock that become outstanding after the Distribution Date. Certificates for Common Stock issued (including, without limitation, certificates issued upon original issuance, disposition from the Company's treasury or transfer or exchange of Common Stock) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date, or the Final Expiration Date (or, in certain circumstances as provided in Section 22 hereof, after the Distribution Date) shall have impressed, printed, written or stamped thereon or otherwise affixed thereto the following legend: This certificate also evidences and entitles the holder hereof to the same number of Rights (subject to adjustment) as the number of shares of Common Stock represented by this certificate, such Rights being on the terms provided under the Rights Agreement between Doubletree Corporation and Harris Trust Company of California (the "Rights Agent"), dated as of September 1, 1997, as it may be amended from time to time (the "Rights Agreement"), the terms of which are incorporated herein by reference and a copy of which is on file at the principal executive offices of Doubletree Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights shall be evidenced by separate certificates and shall no longer be evidenced by this certificate. Doubletree Corporation shall mail to the registered holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances as provided in Section 7(e) of the Rights Agreement, Rights issued to or Beneficially Owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights Agreement) or any subsequent holder of such Rights shall be null and void and may not be transferred to any Person. (d) As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent 10 14 (and the Rights Agent will, if requested, send), by first class mail, postage prepaid, to each record holder of the Common Stock as of the Close of Business on the Distribution Date, as shown by the records of the Company, at the address of such holder shown on such records, a certificate in the form provided by Section 4 hereof (a "Rights Certificate"), evidencing one Right (subject to adjustment as provided herein) for each share of Common Stock so held. As of and after the Distribution Date, the rights shall be evidenced solely by Rights Certificates and may be transferred by the transfer of the Rights Certificate as permitted hereby, separately and apart from any transfer of one or more shares of Common Stock. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the forms of election to purchase shares, certificate and assignment to be printed on the reverse thereof), when, as and if issued, shall be substantially in the form set forth in Exhibit C hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Common Stock or the Rights may from time to time be listed or as the Company may deem appropriate to conform to usage or otherwise and as are not inconsistent with the provisions of this Rights Agreement. Subject to the provisions of Section 22 hereof, Rights Certificates evidencing Rights whenever issued (i) shall be dated as of the date of issuance of the Rights they represent and (ii) subject to adjustment from time to time as provided herein, on their face shall entitle the holders thereof to purchase such number of shares (including fractional shares which are integral multiples of one-hundredth of a share) of Preferred Stock as shall be set forth therein at the price payable upon exercise of a Right provided by Section 7(b) hereof as the same may from time to time be adjusted as provided 11 15 herein (the "Exercise Price"). Section 5. Countersignature and Registration. (a) Each Rights Certificate shall be executed on behalf of the Company by its Chairman of the Board, President, any Vice President or its Treasurer, either manually or by facsimile signature. Each Rights Certificate shall be countersigned by the Rights Agent manually and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any Rights Certificate shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery of the certificate by the Company, such Rights Certificate, nevertheless, may be countersigned by the Rights Agent and issued and delivered with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company. Any Rights Certificate may be signed on behalf of the Company by any person who, on the date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or one or more offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, and in such other locations as may be required by law, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; 12 16 Mutilated, Destroyed, Lost or Stolen Rights Certificates (a) Subject to the provisions of Sections 7(e), 7(f), 14 and 24 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Final Expiration Date, any Rights Certificate may be (i) transferred or (ii) split up, combined or exchanged for one or more other Rights Certificates, entitling the registered holder to purchase a like number of shares of Preferred Stock as the Rights Certificate or Rights Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer any Rights Certificate shall surrender the Rights Certificate at the office of the Rights Agent designated for the surrender of Rights Certificates with the form of certificate and assignment on the reverse side thereof duly endorsed (or enclosed with such Rights Certificate a written instrument of transfer in form satisfactory to the Company and the Rights Agent), duly executed by the registered holder thereof or his attorney duly authorized in writing, and with such signature duly guaranteed. Any registered holder desiring to split up, combine or exchange any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate to be split up, combined or exchanged at the office of the Rights Agent designated therefor. Thereupon, the Rights Agent shall countersign and deliver to the person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any Transfer Tax that may be imposed in connection with any transfer, split up, combination or exchange of any Rights Certificates. (b) Subject to the provisions of Sections 7(e), 7(f), 14 and 24 hereof, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of 13 17 indemnity or security reasonably satisfactory to them and, if requested by the Company, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, or upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company shall issue and deliver a new Rights Certificate of like tenor to the Rights Agent for delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights. (a) The Rights shall not be exercisable until, and shall become exercisable on, the Distribution Date (unless otherwise provided herein, including, without limitation, the restrictions on exercisability set forth in Sections 7(e), 23 and 24 hereof). Except as otherwise provided herein, the Rights may be exercised, in whole or in part, at any time commencing with the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and certificate on the reverse side thereof duly executed (with signatures duly guaranteed), to the Rights Agent at the principal office of the Rights Agent in New York, New York, together with payment of the Exercise Price for each Right exercised, subject to adjustment as hereinafter provided, prior to the earliest of (i) the Effective Time of the transactions contemplated by the Merger Agreement; provided, however, that if the Merger Agreement is terminated without consummation of the transactions contemplated thereby, then at or prior to the Close of Business on September 1, 2007 (the "Final Expiration Date"), (ii) the Close of Business on the date on which the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), (iii) the date on which such Rights are exchanged as provided in Section 24 hereof or (iv) the time at which the Rights expire pursuant to Section 13(e) hereof. (b) The Exercise Price shall initially be $180 for each one one-hundredth (1/100) 14 18 of a share of Preferred Stock issued pursuant to the exercise of a Right. The Exercise Price and the number of shares of Preferred Stock or other securities to be acquired upon exercise of a Right shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof. The Exercise Price shall be payable in lawful money of the United States of America, in accordance with paragraph (c) below. (c) Except as otherwise provided herein, upon receipt of a Rights Certificate representing exercisable Rights with the form of election to purchase and the certificate contained therein duly executed, accompanied by payment by certified check, cashier's check, bank draft or money order payable to the Company of the Exercise Price for the shares to be purchased and an amount equal to any applicable Transfer Tax required to be paid by the holder of the Rights Certificate in accordance with Section 9(e) hereof, the Rights Agent shall thereupon promptly (i) requisition from any transfer agent of the Preferred Stock of the Company one or more certificates representing the number of shares of Preferred Stock to be so purchased, and the Company hereby authorizes such transfer agent to comply with all such requests, (ii) as provided in Section 14(b), at the election of the Company, cause depositary receipts to be issued in lieu of fractional shares of Preferred Stock, (iii) if the election provided for in the immediately preceding clause (ii) has not been made, requisition from the Company the amount of cash to be paid in lieu of the issuance of fractional shares in accordance with section 14(b) hereof, (iv) after receipt of such Preferred Stock certificates and, if applicable, depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (v) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Rights Certificate; provided, however, that in the case of a purchase of securities, other than Preferred 15 19 Stock, pursuant to Section 13 hereof, the Rights Agent shall promptly take the appropriate actions corresponding in such case to that referred to in the foregoing clauses (i) through (v) of this Section 7(c). Notwithstanding the foregoing provisions of this Section 7(c), the Company may suspend the exercisability of the Rights for a period not in excess of ninety (90) days, during which the Company seeks to register under the Securities Act of 1933, as amended (the "Act"), and any applicable securities law of any other jurisdiction, the shares of Preferred Stock to be issued pursuant to the Rights. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Rights Certificate or his assign, subject to the provisions of Section 14(b) hereof. (e) Notwithstanding any provision of this Rights Agreement to the contrary, from and after the time (the "invalidation time") when any Person first becomes an Acquiring Person, any Rights that are beneficially owned by (x) such Acquiring Person (or any Associate or Affiliate of such Acquiring Person), (y) a transferee of such Acquiring Person (or any such Associate or Affiliate) who becomes a transferee after the invalidation time or (z) a transferee of such Acquiring Person (or any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the invalidation time pursuant to either (I) a transfer from the Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding regarding the transferred Rights or (II) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding the provisions of this Section 7(e) (upon approval by a majority of the Continuing Directors) and subsequent transferees of such Persons referred to in 16 20 clause (y) and (z) above, shall be void without any further action and any holder of such Rights shall thereafter have no rights whatsoever with respect to such Rights under any provision of this Rights Agreement. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) are complied with, but shall have no liability to any holder of Rights Certificates or any other Person as a result of its failure to make any determination with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. No Rights Certificate shall be issued pursuant to Section 3 hereof that represents Rights beneficially owned by an Acquiring Person whose Rights would be void pursuant to the provisions of this Section 7(e) or any Associate or Affiliate hereof; no Rights Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the provisions of this Section 7(e) or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Rights Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the provisions of this Section 7(e) shall be cancelled. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate following the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights 17 21 Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall cancel and retire, any Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Shares of Preferred Stock. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock or out of its authorized and issued shares of Preferred Stock held in its treasury, such number of shares of Preferred Stock as will from time to time be sufficient to permit the exercise in full of all outstanding Rights and, after the occurrence of a Triggering Event, shall, to the extent reasonably practicable, so reserve and keep available a sufficient number of shares of Common Stock (and/or other securities) which may be required to permit the exercise in full of all outstanding Rights. (b) If the Preferred Stock (or, following the occurrence of a Triggering Event, the Common Stock and/or other securities) is at any time listed on a national securities exchange or included for quotation on any transaction reporting system, then so long as the Preferred Stock (and, following the occurrence of any such Triggering Event, Common Stock and/or other securities) issuable and deliverable upon exercise of the Rights may be listed on such exchange 18 22 or included for quotation on any such transaction reporting system, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares reserved for such issuance to be listed on such exchange or included for quotation on any such transaction reporting system upon official notice of issuance upon such exercise. (c) The Company covenants and agrees that it will take all such action as may be necessary to insure that all shares of Preferred Stock delivered upon the exercise of Rights (or, following the occurrence of a Triggering Event, shares of Common Stock and/or other securities) shall, at the time of delivery of the certificates for such shares or other securities (subject to payment of the Exercise Price in respect thereof), be duly and validly authorized and issued and fully paid and nonassessable. (d) The Company shall use its best efforts to (i) file, as soon as practicable following the occurrence of an event described in Section 11(a)(ii), or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (b) the date of the expiration of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days, the exercisability of the Rights in order to prepare and file a registration statement under the Act and permit it to become effective. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with 19 23 the exercisability of the Rights. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification is such jurisdiction shall have been obtained and until a registration statement under the Act (if required) shall have been declared effective. (e) The Company covenants and agrees that it will pay when due and payable any and all U.S. federal and state Transfer Taxes which may be payable in respect of the issuance or delivery of the Rights Certificates or of any shares of Preferred Stock (or, following the occurrence of a Triggering Event, Common Stock and/or other securities) issued or delivered upon the exercise of Rights. The Company shall not, however, be required to pay any Transfer Tax which may be payable in respect of any transfer or delivery of a Rights Certificate to a Person other than, or the issuance or delivery of certificates for Preferred Stock (or, following the occurrence of a Triggering Event, Common Stock and/or other securities) upon exercise of Rights in a name other than that of, the registered holder of the Rights Certificate, and the Company shall not be required to issue or deliver a Rights Certificate or certificate for Preferred Stock (or, following the occurrence of a Triggering Event, Common Stock and/or other securities) to a Person other than such registered holder until any such Transfer Tax shall have been paid (any such Transfer Tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such Transfer Tax is due. Section 10. Preferred Stock Record Date. Each Person in whose name any certificate for shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the securities represented thereby on, and such certificate shall be dated as 20 24 of, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Exercise Price (and any applicable Transfer Taxes) was made; provided, however, that, if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated as of, the next succeeding Business Day on which the applicable transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate, as such, shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Exercise Price, Number and Kind of Shares or Number of Rights. The Exercise Price, the number and kind of shares which may be purchased upon exercise of a Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares of Preferred Stock or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Exercise Price in effect at the time of the 21 25 record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to this Section 11(a)(ii). (ii) Subject to Section 24 of this Agreement, in the event that any Person (other than an Exempt Person), alone or together with its Affiliates and Associates, shall become an Acquiring Person, unless the event causing such Person to become an Acquiring Person is an acquisition of shares of Common Stock pursuant to a cash tender offer made pursuant to Section 14(d) of the Exchange Act for all outstanding shares of Common Stock (other than shares of Voting Stock beneficially owned by the Person making the offer or by its Affiliates or Associates) at a price and on terms determined by at least a majority of the Continuing Directors to be (a) at a price which is fair to stockholders (taking into account all factors which such members of the Board deem relevant, 22 26 including, without limitation, prices which could reasonably be achieved if the Company or its assets were sold on an orderly basis designed to realize maximum value) and (b) otherwise in the best interests of the Company and its stockholders, then, except as otherwise provided in this Section 11, each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon exercise of such Right at a price equal to the then current Exercise Price multiplied by the number of one one-hundredths of a share of Preferred Stock for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Exercise Price by the number of one one-hundredths of a share of Preferred Stock for which a Right is then exercisable and dividing that product by (y) 50% of the Fair Market Value of the Company's Common Stock (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event; provided, however, that if the transaction that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13 hereof, then only the provisions of Section 13 hereof shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii). (iii) In lieu of issuing Common Stock in accordance with Section 11(a)(ii) hereof, the Company may, if the Board of Directors of the Company, upon approval by a majority of the Continuing Directors, determines that such action is necessary or appropriate and not contrary to the interest of holders of Rights (and, in the event that the number of shares of Common Stock 23 27 which are authorized by the Company's Restated Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights, the Company shall): (A) determine the excess of (1) the value of the Common Stock issuable upon the exercise of a Right (the "Current Value") over (2) the Exercise Price (such excess being referred to as the "Spread") and (B) with respect to each Right, make adequate provision to substitute for such Common Stock, upon exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3) other equity securities of the Company (including, without limitation, shares or units of shares of any series of preferred stock which the Board of Directors of the Company, upon approval by a majority of the Continuing Directors, has deemed to have the same value as Common Stock (such shares or units of shares of preferred stock are herein called "common stock equivalents")), (4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board of Directors of the Company, upon approval by a majority of the Continuing Directors; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the occurrence of an event described in Section 11(a)(ii), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Exercise Price, Common Stock (to the extent available), and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Board of Directors, upon 24 28 approval by a majority of the Continuing Directors, shall determine in good faith that it is likely that sufficient additional Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the occurrence of an event described in Section 11(a)(ii), in order that the Company may seek stockholder approval for the authorization of such additional shares. To the extent that the Company determines that some action need be taken pursuant to the preceding sentences of this Section 11(a)(iii), the Company may suspend the exercisability of the Rights until the expiration of any such period, as extended, in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to this Section 11(a)(iii) and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect and shall promptly notify the Rights Agent of such suspension. For purposes of this Section 11(a)(iii), the value of the Common Stock shall be the Fair Market Value (as determined pursuant to Section 11(d) hereof) per share of the Common Stock at the Close of Business on the date of the occurrence of an event described in Section 11(a)(ii) and the value of any "common stock equivalent" shall be deemed to have the same value as the Common Stock on such date. (b) In the event that the Company shall, after the Record Date, fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them (for 25 29 a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Stock (or shares having the same rights, privileges and preferences as the Preferred Stock ("equivalent preferred stock")) or securities convertible into Preferred Stock or equivalent preferred stock at a price per share of Preferred Stock or equivalent preferred stock (or having a conversion price per share, if a security convertible into Preferred Stock or equivalent preferred stock) less than the Fair Market Value per share of the Preferred Stock (as defined in Section 11(d)) on such record date, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or the equivalent preferred stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Fair Market Value and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date plus the number of additional shares of Preferred Stock and/or equivalent preferred stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Exercise Price shall be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed. 26 30 (c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) or evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Fair Market Value per share of the Preferred Stock on such record date, less the Fair Market Value of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one share of Preferred Stock and the denominator of which shall be the Fair Market Value per share of the Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed. (d) For the purpose of this Rights Agreement, the "Fair Market Value" of any share of Preferred Stock, Common Stock or any other stock or any Rights or other security or any other property on any date shall be determined as provided in this Section 11(d). In the case of a publicly-traded stock or other security, the Fair Market Value on any date shall be deemed to be the average of the daily closing prices per share of such stock or per unit of such other security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately 27 31 prior to such date; provided, however, that in the event that the Fair Market Value per share of any security is determined during a period which includes any date that is within 30 Trading Days after (i) the ex-dividend date for a dividend or distribution on such security payable in shares of such security or securities convertible into shares of such security, or (ii) the effective date of any subdivision, split, combination, consolidation, reverse stock split or reclassification of such security, then, and in each such case, the Fair Market Value shall be appropriately adjusted by the Board of Directors of the Company to take into account ex-dividend or post-effective date trading. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way (in either case, as reported in the applicable transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange), or, if the securities are not listed or admitted to trading on the New York Stock Exchange, as reported in the applicable transaction reporting system with respect to securities listed on the principal national securities exchange on which such security is listed or admitted to trading; or, if not listed or admitted to trading on any national securities exchange, the last quoted price (or, if not so quoted, the average of the high bid and low asked prices) in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use; or, if no bids for such security are quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such security selected by the Board of Directors of the Company (upon approval by a majority of the Continuing Directors). The term "Trading Day" shall mean a day on which the principal national securities exchange on which such security is listed or admitted to trading is open for the transaction of business or, if such security is not 28 32 listed or admitted to trading on any national securities exchange, a Business Day. If a security is not publicly held or not so listed or traded, "Fair Market Value" shall mean the fair value per share of stock or per other unit of such other security, as determined in good faith by the Board of Directors of the Company (upon approval by a majority of the Continuing Directors); provided, however, that, if the Preferred Stock is not publicly traded, the Fair Market Value of a share of Preferred Stock shall be conclusively deemed to be the Fair Market Value of a share of Common Stock (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. In the case of property other than securities, the "Fair Market Value" thereof shall be determined in good faith by the Board of Directors of the Company (upon approval by a majority of the Continuing Directors). Any such determination of Fair Market Value shall be described in a statement filed with the Rights Agent and shall be binding upon the Rights Agent and the holders of the Rights. (e) All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-hundredth of a share, as the case may be. No adjustment in the Exercise Price shall be required unless adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. Notwithstanding the preceding sentence, any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates the adjustment or (ii) the date of the expiration of the right to exercise the Rights. (f) Irrespective of any adjustment or change in the Exercise Price or the number of shares of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Exercise Price and the number of 29 33 shares to be issued upon exercise of the Rights as in the initial Rights Certificates issued hereunder but, nevertheless, shall represent the Rights as so adjusted. (g) Before taking any action that would cause an adjustment reducing the purchase price per whole share of Preferred Stock upon exercise of the Rights below the then par value, if any, of the shares of Preferred Stock, the Company shall use its best efforts to take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Preferred Stock at such adjusted purchase price per share. (h) If as a result of an adjustment made pursuant to Section 11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (f), (g), (i), (j) and (k), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares. (i) Unless the Company shall have exercised its election as provided in Section 11(j), upon each adjustment of the Exercise Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of one one-hundredth of a share of Preferred Stock (calculated to the nearest one one-millionth of a share) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y) the Exercise Price in effect immediately prior to such 30 34 adjustment of the Exercise Price and (ii) dividing the product so obtained by the Exercise Price in effect immediately after such adjustment of the Exercise Price. (j) The Company may elect on or after the date of any adjustment of the Exercise Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Exercise Price in effect immediately prior to adjustment of the Exercise Price by the Exercise Price in effect immediately after adjustment of the Exercise Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Exercise Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(j), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the 31 35 Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (k) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Exercise Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it, in its sole discretion, shall determine to be advisable in order that any consolidation or subdivision of the Preferred Stock, issuance wholly for cash of any Preferred Stock at less than the current market price, issuance wholly for cash of Preferred Stock or securities which by their terms are convertible into or exchangeable for Preferred Stock, dividends on Preferred Stock payable in Preferred Stock or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders. (l) In the event that at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Stock payable in Common Stock or (ii) effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise than by payment of dividends in Common Stock) into a greater or lesser number of shares of Common Stock, then in any such case (A) the number of one one-hundredths of a share of Preferred Stock purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a share of Preferred Stock so purchasable immediately prior to such event by a fraction, the numerator of which is the number of shares of 32 36 Common Stock outstanding immediately before such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event, and (B) each share of Common Stock outstanding immediately after such event shall have issued with respect to it that number of Rights which each share of Common Stock outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(l) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. Section 12. Certification of Adjusted Exercise Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or Section 13, the Company shall (a) promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts giving rise to such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 25. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or give such notice shall not affect the validity of or the force or effect of the requirement for such adjustment. Any adjustment to be made pursuant to Section 11 or Section 13 of this Rights Agreement shall be effective as of the date of the event giving rise to such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be obligated or responsible for calculating any adjustment nor shall it be deemed to have knowledge of any adjustment unless and until it shall have received such certificate. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power (a) Except for any transaction approved by the Board of Directors (upon approval by a majority of the Continuing Directors), in the event that, at any time on or after the Stock Acquisition Date, (x) the Company shall, directly or indirectly, consolidate with, or merge with 33 37 and into, any other Person or Persons and the Company shall not be the surviving or continuing corporation of such consolidation or merger, or (y) any Person or Persons shall, directly or indirectly, consolidate with, or merge with and into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person or of the Company or cash or any other property, or (z) the Company or one or more of its Subsidiaries shall, directly or indirectly, sell or otherwise transfer to any other Person or any Affiliate or Associate of such Person, in one or more transactions, or the Company or one or more of its Subsidiaries shall sell or otherwise transfer to any Persons in one or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole), then, on the first occurrence of any such event (except as may be contemplated by Section 13(e) hereof), proper provision shall be made so that (i) each holder of record of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof and payment of the Exercise Price in accordance with the terms of this Rights Agreement, such number of shares of validly issued, fully paid, non-assessable and freely tradeable Common Stock of the Principal Party (as defined herein), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall, based on the Fair Market Value of the Common Stock of the Principal Party on the date of the consummation of such consolidation, merger, sale or transfer, equal twice the Exercise Price; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Rights Agreement; (iii) the term "Company" for all purposes of this Rights Agreement shall 34 38 thereafter be deemed to refer to such Principal Party; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock in accordance with the provisions of Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the occurrence of any event described in clause (x), (y) or (z) above of this Section 13(a). The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. (b) "Principal Party" shall mean (i) in the case of any transaction described in (x) or (y) of the first sentence of Section 13(a) hereof: (A) the Person that is the issuer of the securities into which shares of Common Stock of the Company are changed or otherwise exchanged or converted in such merger or consolidation, or, if there is more than one such issuer, the issuer of the Common Stock of which has the greatest market value or (B) if no securities are so issued, (x) the Person that is the other party to the merger or consolidation and that survives such merger or consolidation, or, if there is more than one such Person, the Person the Common Stock of which has the greatest market value or (y) if the Person that is the other party to the merger or consolidation does not survive the merger or consolidation, the Person that does survive the merger or consolidation (including the Company if its survives); and (ii) in the case of any transaction described in (z) of the first sentence in Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to 35 39 such transaction or transactions receives the same portion of the assets or earning power so transferred or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons as is the issuer of Common Stock having the greatest market value of shares outstanding; provided, however, that in any such case, if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, the term "Principal Party" shall refer to such other Person, or if such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of all of which are and have been so registered, the term "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest market value of shares outstanding. (c) The Company shall not consummate any consolidation, merger or sale or transfer of assets or earning power referred to in Section 13(a) unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock that have not been issued or reserved for issuance to permit exercise in full of all Rights in accordance with this Section 13 and unless prior thereto the Company and the Principal Party involved therein shall have executed and delivered to the Rights Agent an agreement confirming that the Principal Party shall, upon consummation of such consolidation, merger or sale or transfer of assets or earning power, assume this Rights Agreement in accordance with Section 13(a) hereof and that all rights of first refusal or preemptive rights in respect of the issuance of shares of Common Stock of the Principal Party upon exercise of outstanding Rights have been waived and that such transaction shall not result in a default by the Principal Party under this Rights Agreement, and further providing that, as soon as practicable after the date of any consolidation, merger or sale or 37 40 transfer of assets or earning power referred to in Section 13(a) hereof, the Principal Party will: (i) prepare and file a registration statement under the act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the date of expiration of the Rights, and similarly comply with applicable state securities laws; (ii) use its best efforts to list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities exchange or to meet the eligibility requirements for quotation on NASDAQ; and (iii) deliver to holders of the Rights historical financial statements for the Principal Party which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act. In the event that any of the transactions described in Section 13(a) hereof shall occur at any time after the occurrence of a transaction described in Section 11(a)(ii) hereof, the Rights which have not theretofore been exercised shall, subject to the provisions of Section 7(e) hereof, thereafter be exercisable in the manner described in Section 13(a). (d) In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has provision in any of its authorized securities or in its Certificate of Incorporation or By-laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than the then Fair Market Value per share 37 41 (determined pursuant to Section 11(b) hereof) or securities exercisable for, or convertible into, Common Stock of such Principal Party at less than such then Fair Market Value (other than to holders of Rights pursuant to this Section 13) or (ii) providing for any special tax or similar payment in connection with the issuance to any holder of a Right of Common Stock of such Principal Party pursuant to the provisions of this Section 13, then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect on the benefits intended to be afforded by the Rights in connection with, or as a consequence of, the consummation of the proposed transaction. (e) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is consummated with a Person or Persons (or a wholly-owned subsidiary of any such Person or Persons) who acquired shares of Common Stock pursuant to a cash tender offer for all outstanding shares of Common Stock which complies with the provisions of Section 11(a)(ii) hereof relating to fair price determination by a majority of the Continuing Directors, (ii) the price per share of Common Stock offered in such transaction is not less than the price per share of Common Stock paid to all holders of Common Stock whose shares were purchased pursuant to such cash tender offer and (iii) the form of consideration being offered to the remaining holders of shares of Common Stock pursuant to such transaction is the same as the form of consideration paid pursuant to such cash tender offer. Upon consummation of any such transaction contemplated by this Section 13(e), all Rights hereunder shall expire. 38 42 Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights (i.e., Rights to acquire less than one one-hundredth of a share of Preferred Stock). If the Company shall determine not to issue such fractional Rights, then, in lieu of such fractional Rights, there shall be paid to the holders of record of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the Fair Market Value of a whole Right. (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one-hundredth of a share) upon exercise of the Rights or to distribute certificates which evidence fractional shares (other than fractions which are integral multiples of one-hundredth of a share). In lieu of issuing fractions of shares of Preferred Stock, the Company may, at its election, issue depositary receipts evidencing fractions of shares pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all of the rights, privileges and preferences to which they would be entitled as owners of the Preferred Stock. With respect to fractional shares that are not integral multiples of one-hundredth of a share, if the Company does not issue such fractional shares or depositary receipts in lieu thereof, there shall be paid to the holders of record of Rights Certificates at the time such Rights Certificates are exercised as herein provided an amount in cash equal to the same fraction of the Fair Market Value of a share of Preferred Stock. (c) The holder of a Right by the acceptance of a Right expressly waives his right to receive any fractional Right or any fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share) upon exercise of a Right. 39 43 Section 15. Rights of Action. All rights of action in respect of this Rights Agreement, except the rights of action given to the Rights Agent in Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the holders of record of the Common Stock); and any holder of record of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his or her own behalf and for his or her own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his or her right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Rights Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Rights Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Rights Agreement. Section 16. Agreement of Right Holders. Each holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights shall be evidenced by the certificates for Common Stock registered in the name of the holders of Common Stock (together, as applicable, with the Summary of Rights), which certificates for Common Stock shall also constitute certificates for Rights, and not by separate Rights Certificates, and each Right shall be transferable only simultaneously and together with the transfer of shares of Common Stock; 40 44 (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer; (c) the Company and the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation. Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of Preferred Stock or any other securities which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or 41 45 upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Rights Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted to be done by the Rights Agent in connection with the acceptance and administration of this Rights Agreement, including the cost and expenses of defending against any claim of liability relating to the Rights or this Rights Agreement, including the costs and expenses of defending against any claim of liability in the premises. The indemnification provided for hereunder shall survive the expiration of the Rights and termination of this Agreement. The costs and expenses of enforcing this right of indemnification shall also be paid by the Company. (b) The Rights Agent may conclusively rely upon and shall be protected against, and shall incur no liability for or in respect of, any action taken, suffered or omitted by it in connection with its administration of this Rights Agreement in reliance upon any Rights Certificate or certificate for Preferred Stock or for other securities of the Company, instrument of 42 46 assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons. Section 19. Merger or Consolidation of, or Change in Name of, the Rights Agent. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Rights Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Rights Agreement any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Rights Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights 43 47 Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Rights Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Rights Agreement upon the following terms and conditions, and no implied duties or obligations shall be read into this Agreement against the Rights Agent, by all of which the Company and the holders of Rights Certificates by their acceptance thereof shall be bound: (a) Before the Rights Agent acts or refrains from acting, the Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Rights Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter, including without limitation, the identity of any Acquiring Person (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent. Any such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Rights Agreement in reliance upon such certificate. 44 48 (c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Rights Agreement or in the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent is serving as an administrative agent and accordingly shall not be under any responsibility in respect of the validity of this Rights Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Rights Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt of a certificate describing any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred Stock to be issued pursuant to this Rights Agreement or any Rights Certificate or as to whether any shares of Preferred Stock will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying 45 49 out or performing by the Rights Agent of the provisions of the Rights Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President or any Vice President or the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for these instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with the proposal included in any such application on or after the date specified in such application (which date shall not be less than ten Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application subject to the proposed action or omission and/or specifying the action to be taken or omitted. Notwithstanding anything in this Agreement to the contrary, in no event shall the Rights Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of the action. (h) The Rights Agent and any shareholder, director, officer or employee of the 46 50 Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Rights Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. (j) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate following the form of election to purchase set forth on the reverse side of such Rights Certificate has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take further action with respect to the requested exercise or transfer without first consulting with the Company. (k) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (l) The Rights Agent shall not be required to take notice or be deemed to have notice of any fact, event or determination (including, without limitation, any dates or events 47 51 defined in this Agreement or the designation of any Person as an Acquiring Person, Affiliate or Associate) under this Agreement unless and until the Rights Agent shall be specifically notified in writing by the Company of such fact, event or determination. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Rights Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Stock and the Preferred Stock by registered or certified mail and, at the expense of the Company, to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent (with or without cause) upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and the Preferred Stock by registered or certified mail and at the expense of the Company, to the holders of the rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. Notwithstanding the foregoing provisions of this Section 21, in no event shall the resignation or removal of a Rights Agent be effective until a successor Rights Agent shall have been appointed and have accepted such appointment. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then the incumbent Rights Agent or the holder of record of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the 48 52 laws of the United States or of any state thereof, in good standing, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination in the conduct of its corporate trust or stock transfer business by federal or state authorities and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an Affiliate controlled by a corporation described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed, but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and Preferred Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Notwithstanding the foregoing provisions, in the event of resignation, removal or incapacity of the Rights Agent, the Company shall have the authority to act as the Rights Agent until a successor Rights Agent shall have assumed the duties of the Rights Agent hereunder. Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Rights Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors or Executive Committee thereof to reflect any adjustment or change in the 49 53 Exercise Price per share and the number or kind or class of shares of stock or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Rights Agreement. Section 23. Redemption. (a) The Company may, at its option, but only by the vote of a majority of the Board of Directors (upon approval by a majority of the Continuing Directors) redeem all but not less than all of the then outstanding Rights, at any time prior to the Close of Business on the earlier of (i) the tenth day following the Stock Acquisition Date; provided, however, that, during the time period relating to when the Rights may be redeemed, the Board of Directors of the Company (upon approval of a majority of the Continuing Directors) may extend the time during which the Rights may be redeemed to be at any time as may be determined by the Board of Directors of the Company and the Continuing Directors or (ii) the Final Expiration Date, at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction after the date hereof (the "Redemption Price"). Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of the event described in Section 11(a)(ii) until such time as the Company's right of redemption hereunder has expired. (b) Without any further action and without any notice, the right to exercise the Rights will terminate at the effective time of the action of the Board of Directors and the Continuing Directors ordering the redemption of the Rights and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Within 10 days after the effective time of the action of the Board of Directors and the Continuing Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the 50 54 then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Each notice of redemption will state the method by which the payment of the Redemption Price will be made. At the option of the Board of Directors, the Redemption Price may be paid in cash to each Rights holder or by the issuance of shares (and, at the Company's election pursuant to Section 14(b) hereof, cash or depositary receipts in lieu of fractions of shares other than fractions which are integral multiples of one one-hundredth (1/100) of a share) of Preferred Stock having a Fair Market Value equal to such cash payment. Section 24. Exchange. (a) By the vote of a majority of the Board of Directors (upon approval by a majority of the Continuing Directors), the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights which have become void pursuant to Section 7(e) hereof) for shares of Common Stock at an exchange rate of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than an Exempt Person), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of any class of voting stock of the Company then outstanding. 51 55 (b) Without any further action and without any notice, the right to exercise the Rights to be so exchanged will terminate at the effective time of the action of the Board of Directors and the Continuing Directors ordering the exchange and the only right thereafter of each holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give notice of the exchange to the holders of such Rights then outstanding by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such exchange. Each such notice shall state the method by which the exchange for rights will be effected and, in the event of a partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to Section 7(e) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute shares of Preferred Stock for shares of Common Stock exchangeable for the Rights, at the initial rate of one one-hundredth of a share of Preferred Stock for each share of Common Stock, as appropriately adjusted to reflect adjustments in the voting rights of the Preferred Stock pursuant to the terms thereof, so that the fraction of a share of Preferred Stock delivered in lieu of each share of Common Stock shall have the same voting rights as one share of Common Stock. (d) In the event that there shall not be sufficient shares of Common Stock or 52 56 Preferred Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall either take such action as may be necessary to authorize additional Common Stock or Preferred Stock for issuance upon exchange of the Rights or, alternatively, by the vote of a majority of the Board of Directors (upon approval by a majority of the Continuing Directors) with respect to each Right, (i) pay cash in an amount equal to the Exercise Price, in lieu of issuing Common Stock or Preferred Stock in exchange therefor, or (ii) issue debt or equity securities, or a combination thereof, having a value equal to the Current Value (as hereinafter defined) of the Common Stock or Preferred Stock exchangeable for each such Right, where the value of such securities shall be determined in good faith by the Board of Directors (upon approval by a majority of the Continuing Directors), or (iii) deliver any combination of cash, property, Common Stock, Preferred Stock and/or other securities having a value equal to the Current Value in exchange for each Right. The term "Current Value," for purposes of this Section 24, shall mean the product of the per share market price of the Common Stock (determined pursuant to Section 11(d) on the date of the occurrence of the event described above in subparagraph (a)), multiplied by the number of shares of Common Stock for which the Right otherwise would be exchangeable if there were sufficient shares available. To the extent that the Company determines that some action need be taken pursuant to clauses (i), (ii) or (iii) of this Section 24(d), the Board of Directors (upon approval by a majority of the Continuing Directors) may temporarily suspend the exercisability of the Rights for a period of up to sixty (60) days following the date on which the event described in Section 24(a) shall have occurred, in order to seek any authorization of additional Common Stock or Preferred Stock and/or to decide the appropriate form of distribution to be made pursuant to the above provision and to determine the value thereof. In 53 57 the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended. (e) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, the Company shall pay to each registered holder of a Rights Certificate with regard to which a fractional share of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the fair market value of a whole share of Common Stock. For the purposes of this paragraph (e), the fair market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. Notice of Proposed Actions. (a) In case the Company, after the Distribution Date, shall propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Stock or to make any other distribution to the holders of its Preferred Stock (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock rights or warrants to subscribe for or to purchase any additional Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding Preferred Stock), (iv) to effect any consolidation or merger with or into, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person or Persons, or (v) to effect the liquidation, dissolution or winding up of the 54 58 Company, then, in each such case, the Company shall give to each holder of record of a Rights Certificate, in accordance with Section 26, notice of such proposed action, which shall specify the record date for the purposes of such stock dividend or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale or transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of record of Common Stock or Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of record of the Preferred Stock for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of record of Common Stock or Preferred Stock, whichever shall be the earlier. The failure to give notice required by this Section 25 or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action. (b) In case an event described in Section 11(a)(ii) hereof shall occur, then the Company shall, as soon as practicable thereafter, give to each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof. Section 26. Notices. Notices or demands authorized by this Rights Agreement to be given or made by the Rights Agent or by the holder of record of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by registered or certified mail and shall be deemed given upon receipt and addressed (until another address is filed in writing with the Rights Agent) as follows: 55 59 Doubletree Corporation 410 North 44th Street, Suite 700 Phoenix, Arizona 85008 Attention: Secretary Subject to the provisions of Section 21, any notice or demand authorized by this Rights Agreement to be given or made by the Company or by the holder of record of any Rights Certificate or Right to or on the Rights Agent shall be sufficiently given or made if sent by registered or certified mail and shall be deemed given upon receipt and addressed (until another address is filed in writing with the Company) as follows: Harris Trust Company of California 601 S. Figueroa , Suite 4900 Los Angeles, California 90017 Attention: Stock Transfer Administration Notices or demand authorized by this Rights Agreement to be given or made by the Company or the Rights Agent to the holder of record of any Rights Certificate or Right shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. For as long as the Rights are then redeemable and except as provided in the last sentence of this Section 27, the Company may in its sole and absolute discretion, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of the Rights. At any time when the Rights are not then redeemable and except as provided in the last sentence of this Section 27, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend this Rights Agreement without the approval of any holders of Rights Certificates (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein or (iii) to change or supplement the provisions hereunder in any manner which the Company may deem 56 60 necessary or desirable, provided that no such supplement or amendment pursuant to this clause (iii) shall materially adversely affect the interest of the holders of Rights Certificates. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained in this Rights Agreement to the contrary, supplements or amendments may be made only upon approval by a majority of the Continuing Directors. Further, notwithstanding anything in this Agreement to the contrary, no supplement or amendment that changes the rights and duties of the Rights Agent under this Agreement shall be effective without the written consent of the Rights Agent. Section 28. Successors. All of the covenants and provisions of this Rights Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Benefits of this Rights Agreement. Nothing in this Rights Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the holders of Common Stock in their capacity as holders of the Rights) any legal or equitable right, remedy or claim under this Rights Agreement; but this Rights Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the holders of record of the Rights Certificates (and, prior to the Distribution Date, the holders of Common Stock in their capacity as holders of the Rights). Section 30. Determinations and Actions by the Board; etc. The Board of Directors (upon approval by a majority of the Continuing Directors) shall have the exclusive power and 57 61 authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement. All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors in good faith (and with the approval of a majority of the Continuing Directors then in office) in accordance with the preceding sentence, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties and (y) not subject any director to any liability to the holders of the Rights. Notwithstanding anything contained in this Agreement to the contrary, whenever any action, calculation, interpretation or determination made pursuant to this Agreement requires the approval of a majority of the Continuing Directors, and no Continuing Directors are then in office, such action, calculation, interpretation or determination may not be made. Section 31. Delaware Contract. This Rights Agreement and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed and enforced in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state, except as to Sections 18, 20 and 21 which shall be governed by and construed in accordance with the laws of the State of Illinois. Section 32. Counterparts. This Rights Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, 58 62 and all such counterparts shall together constitute but one and the same instrument. Section 33. Descriptive Headings. Descriptive headings of the several Sections of this Rights Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Section 34. Severability. If any term, provision, covenant or restriction of this Rights Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Rights Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 59 63 IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed, all as of the day and year first above written. DOUBLETREE CORPORATION By: /s/ DAVID STIVERS -------------------------------- HARRIS TRUST COMPANY OF CALIFORNIA By: /s/ NEIL ROSSO -------------------------------- Name: Title: 60 64 EXHIBIT A FORM of CERTIFICATE OF DESIGNATIONS of SERIES A JUNIOR PREFERRED STOCK of DOUBLETREE CORPORATION (Pursuant to Section 151 of the Delaware General Corporation Law) ----------------------------------------------------- DOUBLETREE CORPORATION., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), DOES HEREBY CERTIFY that pursuant to the authority vested in the Board of Directors by the Restated Certificate of Incorporation of the Corporation and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors on September 1, 1997 adopted a resolution providing for the authorization of a series of Preferred Stock, as follows: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Restated Certificate of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows: Section 1.EE Designation and Amount. The shares of such series shall be designated as "Series A Junior Preferred Stock" (the "Series A Junior Preferred Stock") and the number of shares constituting the Series A Junior Preferred Stock shall be Nine Hundred Thousand (900,000). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A 65 Junior Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Junior Preferred Stock. Section 2.EE Dividends and Distributions. Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Junior Preferred Stock with respect to dividends, the holders of shares of Series A Junior Preferred Stock, in preference to the holders of Common Stock, par value $.01 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Junior Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (A) The Corporation shall declare a dividend or distribution on the Series A Junior Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (B) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to 2 66 accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3.EE Voting Rights. The holders of shares of Series A Junior Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Junior Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Junior Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Junior Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 3 67 Section 4.EE Certain Restrictions. Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Preferred Stock, except dividends paid ratably on the Series A Junior Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation and winding up) to the Series A Junior Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Junior Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (A) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 4 68 Section 5.EE Reacquired Shares. Any shares of Series A Junior Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Restated Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6.EE Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Junior Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Preferred Stock, except distributions made ratably on the Series A Junior Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Junior Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7.EE Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of 5 69 which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8.EE No Redemption. The shares of Series A Junior Preferred Stock shall not be redeemable. Section 9.EE Rank. The Series A Junior Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock. Section 10.EE Amendment. The Restated Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority of the outstanding shares of Series A Junior Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Chairman of the Board and Chief Executive Officer and attested by its Secretary this 1st day of September, 1997. DOUBLETREE CORPORATION By: _______________________________ Name: Title: Attest: By:_______________________ Name: Title: 6 70 EXHIBIT B UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE RIGHTS AGREEMENT (AS REFERRED TO BELOW), RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL AND VOID AND MAY NOT BE TRANSFERRED TO ANY PERSON. DOUBLETREE CORPORATION SUMMARY OF RIGHTS TO PURCHASE SERIES A JUNIOR PREFERRED STOCK On September 1, 1997, the Board of Directors of Doubletree Corporation. (the "Company") declared a dividend distribution of one preferred stock purchase right (a "Right") for each outstanding share of Common Stock, par value $.01 per share (the "Common Stock"), of the Company. The distribution is payable as of September 11, 1997 to stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-hundredth (1/100) of a share of preferred stock of the Company, designated as Series A Junior Preferred Stock (the "Preferred Stock") at a price of $180 per one one-hundredth (1/100) of a share ("Exercise Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of September 1, 1997 (the "Rights Agreement"), between the Company and Harris Trust Company of California, as Rights Agent (the "Rights Agent"). As discussed below, initially the Rights will not be exercisable, certificates will not be sent to stockholders and the Rights will automatically trade with the Common Stock. The Rights become exercisable upon the close of business on the day (the "Distribution Date") which is the earlier of (i) the tenth day following a public announcement that a person or group of affiliated or associated persons, with certain exceptions set forth below, has acquired beneficial ownership of 15% or more of any class of the outstanding voting stock of the Company (an "Acquiring Person") and (ii) the tenth business day after the date of the commencement or announcement of a person's or group's intention to commence a tender or exchange offer the consummation of which would result in the ownership of 15% or more of any class of the Company's outstanding voting stock (even if no shares are actually purchased pursuant to such offer), or such later date as may be determined by a majority of the Board of Directors and the Continuing Directors (as defined in the Rights Agreement); prior thereto, the Rights will not be exercisable, will not be represented by a separate certificate, and will not be transferable apart from the Company's Common Stock, but will instead be evidenced, with respect to any of the Common Stock certificates outstanding as of September 11, 1997, by such Common Stock certificate with a copy of this Summary of Rights attached thereto. An Acquiring Person 71 does not include (A) the Company, (B) any subsidiary of the Company, (C) any employee benefit plan or employee stock plan of the Company or of any subsidiary of the Company, or any trust or other entity organized, appointed, established or holding Common Stock for or pursuant to the terms of any such plan, (D) GE Investment Management Incorporated, GE Investment Hotel Partners I, Limited Partnership, the Trustees of GE Pension Trust or Red Lion, a California limited partnership, (E) Promus Hotel Corporation ("Promus") or Parent Holding Corp. ("Parent") solely by reason of the execution of the Agreement and Plan of Merger, dated as of September 1, 1997, between the Corporation, Promus and Parent (the "Merger Agreement") or the execution and implementation of the Promus Stock Option Agreement dated as of September 1, 1997 between the Company and Promus or (F) any person or group whose ownership of 15% or more of the shares of any class of voting stock of the Company then outstanding results solely from (i) any action or transaction or transactions approved by a majority of the Board of Directors and the Continuing Directors before such person or group became an Acquiring Person or (ii) a reduction in the number of issued and outstanding shares of voting stock of the Company pursuant to a transaction or transactions approved by a majority of the Board of Directors and the Continuing Directors (provided that, in the case of the person set forth in clause (F) does not become an Acquiring Person by reason of clause (i) or (ii) above, such persons set forth in clause (F) shall nonetheless become an Acquiring Person upon acquisition of any additional shares of the Company's voting stock unless such acquisition of additional voting stock will not result in such person or group becoming an Acquiring Person by reason of such clause (i) or (ii)). Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Stock certificates issued after September 11, 1997 will contain a legend incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any of the Common Stock certificates outstanding as of September 11, 1997 with or without a copy of this Summary of Rights attached thereto, will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and such separate certificates alone will evidence the Rights from and after the Distribution Date. The Rights are not exercisable until the Distribution Date. The Rights will expire immediately prior to the Effective Time of the transactions contemplated by the Merger Agreement; provided, however, that if the Merger Agreement is terminated without consummation of the transactions contemplated thereby, then at or prior to the Close of Business on September 2, 2007, unless earlier redeemed or exchanged by the Company, in each case as described below. The Preferred Stock is nonredeemable and, unless otherwise provided in connection with the creation of a subsequent series of preferred stock, subordinate to any other series of the Company's preferred stock. Each share of Preferred Stock will be entitled to a minimum quarterly dividend payment of $1.00 per share but will be entitled to an aggregate dividend of 100 times the dividend declared on the Company's Common Stock. In the event of the liquidation of the Company, the holders of Preferred Stock will be entitled to receive a payment of the greater of (i) $100 per share or (ii) 100 times the payment made per share of 2 72 Common Stock. Each share of Preferred Stock will have 100 votes, voting together with the Common Stock. In the event of any merger, consolidation or other transaction in which Common Stock is exchanged, each share of Preferred Stock will be entitled to receive 100 times the amount received per share of Common Stock. The rights of Preferred Stock as to dividends, liquidation and voting are protected by anti-dilution provisions. The Exercise Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for or purchase Preferred Stock at a price, or securities convertible into Preferred Stock with a conversion price, less than the then current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings or dividends payable in Preferred Stock) or of subscription rights or warrants (other than those referred to above). The number of outstanding Rights and the number of one one-hundredths of a share of Preferred Stock issuable upon exercise of each Right are also subject to adjustment in the event of a stock split of the Common Stock or a dividend on the Common Stock payable in Common Stock or subdivisions, consolidations or combinations of the Common Stock occurring, in any such case, prior to the Distribution Date. Unless the transaction is approved by a majority of the Board of Directors and the Continuing Directors, in the event that, after the time the Rights become exercisable, the Company were to be acquired in a merger or other business combination (in which any shares of Common Stock are changed into or exchanged for other securities or assets) (other than a merger that follows a cash tender offer for all outstanding shares of the Company, at a price determined by a majority of the Continuing Directors to be fair and otherwise in the best interests of the Company and its stockholders) or more than 50% of the assets or earning power of the Company and its subsidiaries (taken as a whole) were to be sold or transferred in one or a series of related transactions, the Rights Agreement provides that proper provision will be made so that each holder of record of a Right, other than the Acquiring Person (whose Rights will thereupon become null and void), will from and after such date, have the right to receive, upon payment of the Exercise Price, that number of shares of common stock of the acquiring company having a market value at the time of such transaction equal to two times the Exercise Price. In addition, in the event that a person or group of affiliated or associated persons becomes an Acquiring Person (unless such acquisition is made pursuant to a cash tender offer determined to be fair to the stockholders of the Company, as described in the preceding sentence), the Rights Agreement provides that proper provision will be made so that each holder of record of a Right, other than the Acquiring Person (whose Rights will thereupon become null and void), will thereafter have the right to receive, upon payment of the Exercise Price, that number of shares of the Common Stock (or cash, other securities or property) having a market value at the time of the transaction equal to two times the Exercise Price (such market value to be determined with reference to the market value of the Company's Common Stock as provided in the Rights Agreement). 3 73 Fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share) may, at the election of the Company, be evidenced by depositary receipts. The Company may also issue cash in lieu of fractional shares which are not integral multiples of one one-hundredth of a share. At any time on or prior to the close of business on the earlier of (i) the tenth day after the time that a person (or group of affiliated or associated persons) has become an Acquiring Person (or such later date as a majority of the Board of Directors and the Continuing Directors may determine) or (ii) September 1, 2007, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"), with the approval of the Continuing Directors. Immediately upon the effective time of the action of the Board of Directors of the Company authorizing redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. For as long as the Rights are then redeemable, the Company may amend the Rights in any manner, including an amendment to extend the time period in which the Rights may be redeemed. At any time when the Rights are not then redeemable, the Company may amend the Rights in any manner that does not materially adversely affect the interests of holders of the Rights as such. Amendments to the Rights Agreement require the approval of the Continuing Directors. At any time after a person (or group of affiliated or associated persons) becomes an Acquiring Person and prior to the acquisition by any such person or group of 50% or more of any class of outstanding voting stock of the Company, the Board of Directors of the Company (with the approval of the Continuing Directors) may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of Common Stock (or a fraction of a share of Preferred Stock or other consideration having equivalent market value) per Right (subject to adjustment). Until a Right is exercised, the holder, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated September ___, 1997. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement which is incorporated herein by reference. 4 74 EXHIBIT C [Form of Rights Certificate] Certificate No. R- ____________ Rights NOT EXERCISABLE AT OR AFTER THE EFFECTIVE DATE OF THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND PLAN OF MERGER, DATED AS OF SEPTEMBER 1, 1997, AMONG PARENT HOLDING CORP., THE COMPANY AND PROMUS HOTEL CORPORATION; PROVIDED, HOWEVER, THAT IF SUCH AGREEMENT IS TERMINATED WITHOUT CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, THEN NOT EXERCISABLE AFTER THE CLOSE OF BUSINESS ON SEPTEMBER 1, 2007 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT THE OPTION OF THE COMPANY AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE RIGHTS AGREEMENT (AS REFERRED TO BELOW), RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL AND VOID AND MAY NOT BE TRANSFERRED TO ANY PERSON. Rights Certificate DOUBLETREE CORPORATION This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of September 1, 1997 (the "Rights Agreement") between Doubletree Corporation, a Delaware corporation (the "Company"), and Harris Trust Company of California (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to the Effective Date of the Agreement and Plan of Merger, dated as of September 1, 1997, between Parent Holding Corp., the Company and Promus Hotel Corporation (the "Merger Agreement") or if the Merger Agreement is terminated without consummation of the transactions contemplated thereby then prior to 5:00 P.M. (New York time) on September 1, 2007 at the office of the Rights Agent designated in the Rights Agreement for such purpose, or its successor as Rights Agent, one one-hundredth (1/100) of a fully paid nonassessable share of Series A Junior Preferred Stock (the "Preferred Stock") of the Company at a purchase price of $180, as the same may from time to time be adjusted in accordance with the Rights Agreement (the "Exercise Price"), upon 75 presentation and surrender of this Rights Certificate with the Form of Election to Purchase attached hereto duly executed. As provided in the Rights Agreement, the Exercise Price and the number of shares of Preferred Stock which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events and, upon the happening of certain events, securities other than shares of Preferred Stock, or other property, may be acquired upon exercise of the Rights evidenced by this Rights Certificate, as provided in the Rights Agreement. This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the holders of record of Rights Certificates. Copies of the Rights Agreement are on file at the principal executive office of the Company. This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated in the Rights Agreement for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder of record to purchase a like aggregate number of shares of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Company at a redemption price of $.01 per Right, subject to adjustment or (ii) may be exchanged in whole or in part for shares of the Company's Common Stock, par value $.01 per share, shares of Preferred Stock or substantially equivalent rights or other consideration as determined by the Company. No fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth (1/100) of a share) are required to be issued upon the exercise of any Right or Rights evidenced hereby, and in lieu thereof the Company may cause depositary receipts to be issued and/or a cash payment may be made, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at meeting thereof, or to give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or 2 76 subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company. Dated as of ____________. DOUBLETREE CORPORATION By:_________________________ Name: Title: Countersigned: HARRIS TRUST COMPANY OF CALIFORNIA By: __________________________ Name: Title: 3 77 [Form of Reverse Side of Rights Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights Certificates.) FOR VALUE RECEIVED______________________________________________ hereby sells, assigns and transfers unto_______________________________________ _______________________________________________________________________________ (Please print name and address of transferee) Rights evidenced by this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint____________ _________________________________________ Attorney to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution. Dated: _____________ __________________________________________ Signature (Signature must conform in all respects to name of holder as specified on the face of this Rights Certificate) Signature Guaranteed: 4 78 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) this Rights Certificate [ ] is [ ] is not being sold, assigned or transferred by or on behalf of a Person who is or was an Acquiring Person or an Associate or an Affiliate thereof (as such terms are defined in the Rights Agreement); and (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement). Dated: ____________________ ________________________________ Signature (Signature must conform in all respects to name of holder as specified on the face of this Rights Certificate) 5 79 FORM OF ELECTION TO PURCHASE (To be executed if registered holder desires to exercise the Rights Certificate.) TO DOUBLETREE CORPORATION: The undersigned hereby irrevocably elects to exercise ________________ Rights represented by this Rights Certificate to purchase the shares of Preferred Stock (or other securities) issuable upon the exercise of such Rights and requests that certificates for such share(s) be issued in the following name: Please insert social security or other identifying number:___________________________________________________ _______________________________________________________________________________ (Please print name and address) _______________________________________________________________________________ If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number:___________________________________________________ _______________________________________________________________________________ (Please print name and address) _______________________________________________________________________________ Dated: ________________ ___________________________________________ Signature (Signature must conform in all respects to name of holder as specified on the face of this Rights Certificate) Signature Guaranteed: 6 80 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) this Rights Certificate [ ] is [ ] is not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Associate or an Affiliate thereof (as such terms are defined in the Rights Agreement); and (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement). Dated: ____________________ ______________________________________ Signature (Signature must conform in all respects to name of holder as specified on the face of this Rights Certificate) 7 EX-10.1 4 STOCK OPTION AGREEMENT (DOUBLETREE) 1 EXHIBIT 10.1 STOCK OPTION AGREEMENT (DOUBLETREE) STOCK OPTION AGREEMENT, dated as of September 1, 1997 (the "Agreement"), between DOUBLETREE CORPORATION., a Delaware corporation (the "Grantee"), and PROMUS HOTEL CORPORATION, a Delaware corporation (the "Grantor"). WHEREAS, the Grantee, Parent Holding Corp., a Delaware corporation ("Parent"), and the Grantor are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides, among other things, for the merger (the "Doubletree Merger") of a subsidiary of Parent with and into the Grantee and the merger (the "Promus Merger") of another subsidiary of Parent with and into the Grantor, such that the Grantee and the Grantor will become wholly-owned subsidiaries of Parent and the stockholders of the Grantee and the Grantor will become stockholders of Parent (the Doubletree Merger and the Promus Merger collectively, the "Mergers"); WHEREAS, pursuant to a Stock Option Agreement dated as of the date hereof between the Grantee and the Grantor, the Grantee has granted the Grantor an option to acquire shares of common stock of the Grantee on terms that are substantially similar to the terms of this Agreement (the "Promus Option"); WHEREAS, as a condition and inducement to their willingness to enter into the Merger Agreement and the Promus Option, the Grantee and Parent have requested that the Grantor grant to the Grantee an option to purchase 9,929,485 shares of Common Stock, par value $0.10 per share, of the Grantor (the "Common Stock"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce the Grantee to enter into the Merger Agreement and grant the Promus Option, the Grantor is willing to grant the Grantee the requested option. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Option; Exercise; Adjustments; Payment of Spread. (a) Contemporaneously herewith the Grantee, Parent and the Grantor are entering into the Merger Agreement. Subject to the other terms and conditions set forth herein, the Grantor hereby grants to the Grantee an irrevocable option (the "Option") to purchase up to 9,929,485 (as adjusted as provided herein) shares of Common Stock (together with the associated purchase rights issued with respect thereto pursuant to the Rights Agreement dated as of June 30, 1995 between the Grantor and Continental Stock Transfer & Trust Company (the "Grantor Rights Plan")) (the "Shares") at a per share cash purchase price equal to the lower of (i) $38.8125 per Share or (ii) the average closing sales price of the Common Stock on the New York Stock Exchange Composite Tape (the "NYSE Composite Tape") for the five consecutive trading days beginning on and including the day that the Mergers are publicly announced (as adjusted as provided herein) (such lower price being the "Purchase Price"). The Option may be exercised by the Grantee, in whole or in part, at any time, or from time to time, following the occurrence of 2 one of the events set forth in Section 2(c) hereof and prior to the termination of the Option in accordance with the terms of this Agreement. (b) In the event the Grantee wishes to exercise the Option, the Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice") specifying a date (subject to the HSR Act (as defined below)) not later than 10 business days and not earlier than the next business day following the date such notice is given for the closing of such purchase. In the event of any change in the number of issued and outstanding shares of Common Stock by reason of any stock dividend, stock split, split-up, reclassification, recapitalization, merger or other change in the corporate or capital structure of the Grantor (including the occurrence of a Distribution Date under the Grantor Rights Plan), the number of Shares subject to this Option and the purchase price per Share shall be appropriately adjusted to restore the Grantee to its rights hereunder, including its right to purchase Shares representing 19.9% of the capital stock of the Grantor entitled to vote generally for the election of the directors of the Grantor which is issued and outstanding immediately prior to the exercise of the Option at an aggregate purchase price equal to the Purchase Price multiplied by 9,929,485. In the event that any additional shares of Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the preceding sentence), the number of Shares subject to this Option shall be increased by 19.9% of the number of the additional shares of Common Stock so issued (and such additional Shares shall have a purchase price per share equal to the Purchase Price). (c) If at any time the Option is then exercisable pursuant to the terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to purchase Shares provided in Section 1(a) hereof, to send a written notice to the Grantor (the "Cash Exercise Notice") specifying a date not later than 20 business days and not earlier than 10 business days following the date such notice is given on which date the Grantor shall pay to the Grantee an amount in cash equal to the Spread (as hereinafter defined) multiplied by all or such portion of the Shares subject to the Option as Grantee shall specify. As used herein "Spread" shall mean the excess, if any, over the Purchase Price of the higher of (x) if applicable, the highest price per share of Common Stock (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by any person in an Alternative Transaction (as defined in clause (i), (ii) or (iii) of Section 7.3(e) of the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing sales price of the shares of Common Stock on the NYSE Composite Tape on the last trading day immediately prior to the date of the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase Price includes any property other than cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if any, included in the Alternative Purchase Price plus (ii) the fair market value of such other property. If such other property consists of securities with an existing public trading market, the average of the closing sales prices (or the average of the closing bid and asked prices if closing sales prices are unavailable) for such securities in their principal public trading market on the five trading days ending five days prior to the date of the Cash Exercise Notice shall be deemed to equal the fair market value of such property. If such other property consists of something other than cash or securities with an existing public trading market and, as of the payment date for the Spread, agreement on the value of such other property has not been reached, the Alternative Purchase Price shall be deemed to equal the Closing Price. Upon exercise of the Grantee's right to receive cash pursuant to this Section 1(c) and the payment of such cash to the Grantee, the obligations of the Grantor to deliver Shares pursuant to Section 3 2 3 shall be terminated with respect to such number of Shares for which the Grantee shall have elected to be paid the Spread. 2. Conditions to Delivery of Shares. The Grantor's obligation to deliver Shares upon exercise of the Option is subject only to the conditions that: (a) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Shares shall be in effect; and (b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated and all other consents, approvals, orders, notifications or authorizations, the failure of which to obtain or make would have the effect of making the issuance of the Shares illegal (collectively, the "Regulatory Approvals") shall have been obtained or made; and (c) (i) a proposal for an Alternative Transaction (as defined in the Merger Agreement) involving the Grantor shall have been publicly announced prior to the time the Merger Agreement is terminated pursuant to the terms thereof (the "Merger Termination Date") and one or more of the following events shall have occurred on or after the time of the making of such proposal: (A) the requisite vote of the stockholders of the Grantor in favor of adoption and approval of the Merger Agreement shall not have been obtained at the Promus Stockholders' Meeting (as defined in the Merger Agreement) or any adjournment or postponement thereof; (B) the Board of Directors of the Grantor shall have withdrawn or modified its recommendation of the Merger Agreement or the Promus Merger or failed to confirm its recommendation of the Merger Agreement or the Promus Merger to the stockholders of the Grantor within ten business days after a written request by the Grantee to do so; (C) the Board of Directors of the Grantor shall have recommended to the stockholders of the Grantor an Alternative Transaction (as defined in the Merger Agreement); (D) a tender offer or exchange offer for 20% or more of the outstanding shares of Grantor Common Stock shall have been commenced (other than by the Grantee or an affiliate of the Grantee) and the Board of Directors of the Grantor shall have recommended that the stockholders of the Grantor tender their shares in such tender or exchange offer; or (E) for any reason Grantor shall have failed to call and hold the Promus Stockholders' Meeting (as defined in the Merger Agreement) by the Outside Date (as defined in the Merger Agreement; provided, however, that the Option may not be exercised if the Grantee is in material breach of any of its material representations, warranties, covenants or agreements contained in this Agreement or in the Merger Agreement; or (ii) the Merger Agreement shall have been terminated by the Grantor pursuant to Section 7.1(g) of the Merger Agreement. 3. The Closing. (a) Any closing hereunder shall take place on the date specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 8:00 A.M., local time, at the offices of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, CA 90071, or, if the conditions set forth in Section 2(a) or 2(b) have not then been satisfied, on 3 4 the second business day following the satisfaction of such conditions, or at such other time and place as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or certificates, duly endorsed (or accompanied by duly executed stock powers), representing the Shares in the denominations designated by the Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor at the price per Share equal to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver to the Grantee cash in an amount determined pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall be made by certified or official bank check or by wire transfer of federal funds to a bank designated by the party receiving such funds. (b) The certificates representing the Shares may bear an appropriate legend relating to the fact that such Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). 4. Representations And Warranties of the Grantor. The Grantor represents and warrants to the Grantee that (a) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to enter into and perform this Agreement; (b) the execution and delivery of this Agreement by the Grantor and the consummation by it of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Grantor and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantor and constitutes a valid and binding obligation of the Grantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (c) the Grantor has taken all necessary corporate action to authorize and reserve the Shares issuable upon exercise of the Option and the Shares, when issued and delivered by the Grantor upon exercise of the Option, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights; (d) except as otherwise required by the HSR Act and other than any filings required under the blue sky laws of any states or by the New York Stock Exchange, Inc. (the "NYSE"), the execution and delivery of this Agreement by the Grantor and the issuance of Shares upon exercise of the Option do not require the consent, waiver, approval or authorization of or any filing with any person or public authority and will not violate, result in a breach of or the acceleration of any obligation under, or constitute a default under, any provision of any charter or by-law, indenture, mortgage, lien, lease, agreement, contract, instrument, order, law, rule, regulation, judgment, ordinance, or decree, or restriction by which the Grantor or any of its subsidiaries or any of their respective properties or assets is bound; (e) no "fair price", "moratorium", "control share acquisition" or other form of antitakeover statute or regulation (including, without limitation, the restrictions on "business combinations" set forth in Section 203 of the Delaware General Corporation Law) is or shall be applicable to the acquisition of Shares pursuant to this Agreement (and the Board of Directors of Grantor has taken all action to approve the acquisition of the Shares to the extent necessary to avoid such application) and (f) the Grantor has taken all corporate action necessary so that the grant and any subsequent exercise of the Option by the Grantee will not result in the separation or exercisability of rights under the Grantor Rights Plan. 4 5 5. Representations and Warranties of the Grantee. The Grantee represents and warrants to the Grantor that (a) the execution and delivery of this Agreement by the Grantee and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Grantee and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantee and will constitute a valid and binding obligation of Grantee; and (b) the Grantee is acquiring the Option after the Grantee has been afforded the opportunity to obtain, and has obtained, sufficient information regarding the Grantor to make an informed investment decision with respect to the Grantee's purchase of the Shares issuable upon the exercise thereof, and, if and when the Grantee exercises the Option, it will be acquiring the Shares issuable upon the exercise thereof for its own account and not with a view to distribution or resale in any manner which would be in violation of the Securities Act. 6. Listing of Shares; HSR Act Filings; Regulatory Approvals. Subject to applicable law and the rules and regulations of the NYSE, the Grantor will promptly file an application to list the Shares on the NYSE and will use its best efforts to obtain approval of such listing and to file all necessary filings by the Grantor under the HSR Act; provided, however, that if the Grantor is unable to effect such listing on the NYSE by the Closing Date, the Grantor will nevertheless be obligated to deliver the Shares upon the Closing Date. Each of the parties hereto will use its best efforts to obtain consents of all third parties and all Regulatory Approvals, if any, necessary to the consummation of the transactions contemplated. 7. Repurchase of Shares; Sale of Shares. If a Change in Control Event has not occurred prior to the first anniversary date of the Merger Termination Date, then beginning on such anniversary date, the Grantor shall have the right to purchase (the "Repurchase Right") all, but not less than all, of the Shares then beneficially owned by the Grantee or any of its affiliates at a price per share equal to the greater of (i) the Purchase Price, or (ii) the average of the closing sales prices for shares of Common Stock on the twenty trading days ending five days prior to the date the Grantor gives written notice of its intention to exercise the Repurchase Right. If the Grantor does not exercise the Repurchase Right within thirty days following the first anniversary of the Merger Termination Date, the Repurchase Right terminates. In the event the Grantor wishes to exercise the Repurchase Right, the Grantor shall send a written notice to the Grantee specifying a date (not later than 10 business days and not earlier than the next business day following the date such notice is given) for the closing of such purchase. For purposes of the Agreement, a "Change in Control Event" shall be deemed to have occurred if (i) any person or group has a acquired beneficial ownership of more than fifty percent (excluding the Shares) of the outstanding shares of Common Stock or (ii) the Grantor shall have entered into an agreement, including without limitation an agreement in principle, providing for (x) a merger or other business combination involving the Grantor in which the Grantor's stockholders do not own a majority of the outstanding capital stock of the entity surviving such merger or business combination immediately following such transaction or (y) the acquisition of 20% or more of the assets of the Grantor and its subsidiaries, taken as a whole. 8. Registration Rights. (a) In the event that the Grantee shall desire to sell any of the Shares within two years after the purchase of such Shares pursuant hereto, and such sale requires, in the 5 6 opinion of counsel to the Grantee, which opinion shall be reasonably satisfactory to the Grantor and its counsel, registration of such Shares under the Securities Act, the Grantor will cooperate with the Grantee and any underwriters in registering such Shares for resale, including, without limitation, promptly filing a registration statement which complies with the requirements of applicable federal and state securities laws, entering into an underwriting agreement with such underwriters upon such terms and conditions as are customarily contained in underwriting agreements with respect to secondary distributions; provided that the Grantor shall not be required to have declared effective more than two registration statements hereunder and shall be entitled to delay the filing or effectiveness of any registration statement for up to 120 days if the offering would, in the judgment of the Board of Directors of the Grantor, require premature disclosure of any material corporate development or otherwise interfere with or adversely affect any pending or proposed offering of securities of the Grantor or any other material transaction involving the Grantor. (b) If the Common Stock is registered pursuant to the provisions of this Section 8, the Grantor agrees (i) to furnish copies of the registration statement and the prospectus relating to the Shares covered thereby in such numbers as the Grantee may from time to time reasonably request and (ii) if any event shall occur as a result of which it becomes necessary to amend or supplement any registration statement or prospectus, to prepare and file under the applicable securities laws such amendments and supplements as may be necessary to keep effective for at least 90 days a prospectus covering the Common Stock meeting the requirements of such securities laws, and to furnish the Grantee such numbers of copies of the registration statement and prospectus as amended or supplemented as may reasonably be requested. The Grantor shall bear the cost of the registration, including, but not limited to, all registration and filing fees, printing expenses, and fees and disbursements of counsel and accountants for the Grantor, except that the Grantee shall pay the fees and disbursements of its counsel, the underwriting fees and selling commissions applicable to the shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold harmless Grantee, its affiliates and its officers, directors and controlling persons from and against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the Grantee, its affiliates and its officers expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. The Grantor shall also indemnify and hold harmless each underwriter and each person who controls any underwriter within the meaning of either the Securities Act or the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the underwriters expressly for use in any 6 7 registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. 9. Profit Limitation. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $65 million and, if it does exceed such amount, the Grantee, at its sole election, shall, within five business days, either (a) deliver to the Grantor for cancellation Shares (valued, for the purposes of this Section 9(a), at the average closing sales price of the Common Stock on the NYSE Composite Tape for the twenty consecutive trading days preceding the day on which the Grantee's Total Profit exceeds $65 million) previously purchased by the Grantee, (b) pay cash or other consideration to the Grantor or (c) undertake any combination thereof, so that the Grantee's Total Profit shall not exceed $65 million after taking into account the foregoing actions. (b) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount of cash received by the Grantee pursuant to Section 7.3(c) of the Merger Agreement and Section 1(c) hereof, (ii)(x) the net cash amount received by the Grantee pursuant to the Grantor's repurchase of Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase price for such Shares, and (iii)(x) the amount received by the Grantee pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) the Grantee's purchase price for such Shares. 10. Expenses. Each party hereto shall pay its own expenses incurred in connection with this Agreement, except as otherwise specifically provided herein. 11. Specific Performance. The Grantor acknowledges that if the Grantor fails to perform any of its obligations under this Agreement immediate and irreparable harm or injury would be caused to the Grantee for which money damages would not be an adequate remedy. In such event, the Grantor agrees that the Grantee shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. Accordingly, if the Grantee should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Grantor hereby waives the claim or defense that the Grantee has an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Grantor further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 12. Notice. All notices, requests, demands and other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the party for whom it is intended or delivered by registered or certified mail, return receipt requested, or if sent by facsimile transmission, upon receipt of oral confirmation that such transmission has been received, to the person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such person: 7 8 If to the Grantee: Doubletree Corporation 410 North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Richard M. Kelleher Telecopy: (602) 220-6753 With a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attn: William J. Phillips, Esq. Telecopy: (212) 295-6333 If to the Grantor: Promus Hotel Corporation 755 Crossover Lane Memphis, TN 38117 Attn: Raymond E. Schultz Telecopy: (901) 374-5636 With a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Attn: John M. Newell, Esq. Telecopy: (213) 891-8763 13. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective permitted successors and assigns; provided, however, that such successor in interest or assigns shall agree to be bound by the provisions of this Agreement. Except as set forth in Section 8, nothing in this Agreement, express or implied, is intended to confer upon any person other than the Grantor or the Grantee, or their successors or assigns, any rights or remedies under or by reason of this Agreement. 14. Entire Agreement; Amendments. This Agreement, together with the Merger Agreement and the other documents referred to therein, contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 15. Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the Grantee may assign its rights and obligations hereunder to any of its direct or 8 9 indirect wholly owned subsidiaries, but no such transfer shall relieve the Grantee of its obligations hereunder if such transferee does not perform such obligations. Any assignment made in violation of this Section 15 shall be void. 16. Headings. The section headings herein are for convenience only and shall not affect the construction of this Agreement. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law). 19. Termination. The right to exercise the Option granted pursuant to this Agreement shall terminate at the earlier of (i) the Effective Time (as defined in the Merger Agreement), (ii) the date on which the Grantee realizes a Total Profit of $65 million, (iii) the date on which the Merger Agreement is terminated; provided the Option is not exercisable at such time and does not become exercisable simultaneous with such termination and (iv) 90 days after the date the Option becomes exercisable (the date referred to in clause (iv) being hereinafter referred to as the "Option Termination Date"); provided that, if the Option cannot be exercised or the Shares cannot be delivered to the Grantee upon such exercise because the conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the Option Termination Date shall be extended until thirty days after such impediment to exercise has been removed. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares. 20. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 21. Public Announcement. The Grantee will consult with the Grantor and the Grantor will consult with the Grantee before issuing any press release with respect to the initial announcement of this Agreement, the Option or the transactions contemplated hereby and neither party shall issue any such press release prior to such consultation except as may be required by law. 9 10 Signature page for Stock Option Agreement (Doubletree) IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. DOUBLETREE CORPORATION /s/ Richard M. Kelleher ------------------------------------------- By: Richard M. Kelleher Its: President and Chief Executive Officer PROMUS HOTEL CORPORATION /s/ Raymond E. Schultz ------------------------------------------- By: Raymond E. Schultz Its: President and Chief Executive Officer S-1 EX-10.2 5 STOCK OPTION AGREEMENT (PROMUS) 1 EXHIBIT 10.2 STOCK OPTION AGREEMENT (PROMUS) STOCK OPTION AGREEMENT, dated as of September 1, 1997 (the "Agreement"), between PROMUS HOTEL CORPORATION, a Delaware corporation (the "Grantee"), and DOUBLETREE CORPORATION, a Delaware corporation (the "Grantor"). WHEREAS, the Grantee, Parent Holding Corp., a Delaware corporation ("Parent"), and the Grantor are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides, among other things, for the merger (the "Doubletree Merger") of a subsidiary of Parent with and into the Grantor and the merger (the "Promus Merger") of another subsidiary of Parent with and into the Grantee, such that the Grantor and the Grantee will become wholly-owned subsidiaries of Parent and the stockholders of the Grantor and the Grantee will become stockholders of Parent (the Doubletree Merger and the Promus Merger collectively, the "Mergers"); WHEREAS, pursuant to a Stock Option Agreement dated as of the date hereof between the Grantee and the Grantor, the Grantee has granted the Grantor an option to acquire shares of common stock of the Grantee on terms that are substantially similar to the terms of this Agreement (the "Doubletree Option"); WHEREAS, as a condition and inducement to their willingness to enter into the Merger Agreement and the Doubletree Option, the Grantee and Parent have requested that the Grantor grant to the Grantee an option to purchase 7,898,003 shares of Common Stock, par value $0.01 per share, of the Grantor (the "Common Stock"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce the Grantee to enter into the Merger Agreement and grant the Doubletree Option, the Grantor is willing to grant the Grantee the requested option. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Option; Exercise; Adjustments; Payment of Spread. (a) Contemporaneously herewith the Grantee, Parent and the Grantor are entering into the Merger Agreement. Subject to the other terms and conditions set forth herein, the Grantor hereby grants to the Grantee an irrevocable option (the "Option") to purchase up to 7,898,003 (as adjusted as provided herein) shares of Common Stock (together with the associated purchase rights issued with respect thereto pursuant to the Rights Agreement dated as of September 1, 1997 between the Grantor and Harris Trust & Savings Bank (the "Grantor Rights Plan")) (the "Shares") at a per share cash purchase price equal to the lower of (i) $50.00 per Share or (ii) the average closing sales price of the Common Stock on the NASDAQ National Market ("NASDAQ") for the five consecutive trading days beginning on and including the day that the Mergers are publicly announced (as adjusted as provided herein) (such lower price being the "Purchase Price"). The Option may be exercised by the Grantee, in whole or in part, at any 2 time, or from time to time, following the occurrence of one of the events set forth in Section 2(c) hereof and prior to the termination of the Option in accordance with the terms of this Agreement. (b) In the event the Grantee wishes to exercise the Option, the Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice") specifying a date (subject to the HSR Act (as defined below)) not later than 10 business days and not earlier than the next business day following the date such notice is given for the closing of such purchase. In the event of any change in the number of issued and outstanding shares of Common Stock by reason of any stock dividend, stock split, split-up, reclassification, recapitalization, merger or other change in the corporate or capital structure of the Grantor (including the occurrence of a Distribution Date under the Grantor Rights Plan), the number of Shares subject to this Option and the purchase price per Share shall be appropriately adjusted to restore the Grantee to its rights hereunder, including its right to purchase Shares representing 19.9% of the capital stock of the Grantor entitled to vote generally for the election of the directors of the Grantor which is issued and outstanding immediately prior to the exercise of the Option at an aggregate purchase price equal to the Purchase Price multiplied by 7,898,003 . In the event that any additional shares of Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the preceding sentence), the number of Shares subject to this Option shall be increased by 19.9% of the number of the additional shares of Common Stock so issued (and such additional Shares shall have a purchase price per share equal to the Purchase Price). (c) If at any time the Option is then exercisable pursuant to the terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to purchase Shares provided in Section 1(a) hereof, to send a written notice to the Grantor (the "Cash Exercise Notice") specifying a date not later than 20 business days and not earlier than 10 business days following the date such notice is given on which date the Grantor shall pay to the Grantee an amount in cash equal to the Spread (as hereinafter defined) multiplied by all or such portion of the Shares subject to the Option as Grantee shall specify. As used herein "Spread" shall mean the excess, if any, over the Purchase Price of the higher of (x) if applicable, the highest price per share of Common Stock (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by any person in an Alternative Transaction (as defined in clause (i), (ii) or (iii) of Section 7.3(e) of the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing sales price of the shares of Common Stock on NASDAQ on the last trading day immediately prior to the date of the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase Price includes any property other than cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if any, included in the Alternative Purchase Price plus (ii) the fair market value of such other property. If such other property consists of securities with an existing public trading market, the average of the closing sales prices (or the average of the closing bid and asked prices if closing sales prices are unavailable) for such securities in their principal public trading market on the five trading days ending five days prior to the date of the Cash Exercise Notice shall be deemed to equal the fair market value of such property. If such other property consists of something other than cash or securities with an existing public trading market and, as of the payment date for the Spread, agreement on the value of such other property has not been reached, the Alternative Purchase Price shall be deemed to equal the Closing Price. Upon exercise of the Grantee's right to receive cash pursuant to this Section 1(c) and the payment of such cash to the Grantee, the obligations of the Grantor to deliver Shares pursuant to Section 3 shall be terminated 2 3 with respect to such number of Shares for which the Grantee shall have elected to be paid the Spread. 2. Conditions to Delivery of Shares. The Grantor's obligation to deliver Shares upon exercise of the Option is subject only to the conditions that: (a) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Shares shall be in effect; and (b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated and all other consents, approvals, orders, notifications or authorizations, the failure of which to obtain or make would have the effect of making the issuance of the Shares illegal (collectively, the "Regulatory Approvals") shall have been obtained or made; and (c) (i) a proposal for an Alternative Transaction (as defined in the Merger Agreement) involving the Grantor shall have been publicly announced prior to the time the Merger Agreement is terminated pursuant to the terms thereof (the "Merger Termination Date") and one or more of the following events shall have occurred on or after the time of the making of such proposal: (A) the requisite vote of the stockholders of the Grantor in favor of adoption and approval of the Merger Agreement shall not have been obtained at the Doubletree Stockholders' Meeting (as defined in the Merger Agreement) or any adjournment or postponement thereof; (B) the Board of Directors of the Grantor shall have withdrawn or modified its recommendation of the Merger Agreement or the Doubletree Merger or failed to confirm its recommendation of the Merger Agreement or the Doubletree Merger to the stockholders of the Grantor within ten business days after a written request by the Grantee to do so; (C) the Board of Directors of the Grantor shall have recommended to the stockholders of the Grantor an Alternative Transaction (as defined in the Merger Agreement); (D) a tender offer or exchange offer for 20% or more of the outstanding shares of Grantor Common Stock shall have been commenced (other than by the Grantee or an affiliate of the Grantee) and the Board of Directors of the Grantor shall have recommended that the stockholders of the Grantor tender their shares in such tender or exchange offer; or (E) for any reason the Grantor shall have failed to call and hold the Doubletree Stockholders' Meeting (as defined in the Merger Agreement) by the Outside Date (as defined in the Merger Agreement); provided, however, that the Option may not be exercised if the Grantee is in material breach of any of its material representations, warranties, covenants or agreements contained in this Agreement or in the Merger Agreement; or (ii) the Merger Agreement shall have been terminated by the Grantor pursuant to Section 7.1(g) of the Merger Agreement. 3. The Closing. (a) Any closing hereunder shall take place on the date specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 8:00 A.M., local time, at the offices of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, CA 90071, or, if the conditions set forth in Section 2(a) or 2(b) have not then been satisfied, on 3 4 the second business day following the satisfaction of such conditions, or at such other time and place as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or certificates, duly endorsed (or accompanied by duly executed stock powers), representing the Shares in the denominations designated by the Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor at the price per Share equal to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver to the Grantee cash in an amount determined pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall be made by certified or official bank check or by wire transfer of federal funds to a bank designated by the party receiving such funds. (b) The certificates representing the Shares may bear an appropriate legend relating to the fact that such Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). 4. Representations And Warranties of the Grantor. The Grantor represents and warrants to the Grantee that (a) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to enter into and perform this Agreement; (b) the execution and delivery of this Agreement by the Grantor and the consummation by it of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Grantor and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantor and constitutes a valid and binding obligation of the Grantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (c) the Grantor has taken all necessary corporate action to authorize and reserve the Shares issuable upon exercise of the Option and the Shares, when issued and delivered by the Grantor upon exercise of the Option, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights; (d) except as otherwise required by the HSR Act and other than any filings required under the blue sky laws of any states or by NASDAQ, the execution and delivery of this Agreement by the Grantor and the issuance of Shares upon exercise of the Option do not require the consent, waiver, approval or authorization of or any filing with any person or public authority and will not violate, result in a breach of or the acceleration of any obligation under, or constitute a default under, any provision of any charter or by-law, indenture, mortgage, lien, lease, agreement, contract, instrument, order, law, rule, regulation, judgment, ordinance, or decree, or restriction by which the Grantor or any of its subsidiaries or any of their respective properties or assets is bound; (e) no "fair price", "moratorium", "control share acquisition" or other form of antitakeover statute or regulation (including, without limitation, the restrictions on "business combinations" set forth in Section 203 of the Delaware General Corporation Law) is or shall be applicable to the acquisition of Shares pursuant to this Agreement (and the Board of Directors of Grantor has taken all action to approve the acquisition of the Shares to the extent necessary to avoid such application) and (f) the Grantor has taken all corporate action necessary so that the grant and any subsequent exercise of the Option by the Grantee will not result in the separation or exercisability of rights under the Grantor Rights Plan. 4 5 5. Representations and Warranties of the Grantee. The Grantee represents and warrants to the Grantor that (a) the execution and delivery of this Agreement by the Grantee and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Grantee and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantee and will constitute a valid and binding obligation of Grantee; and (b) the Grantee is acquiring the Option after the Grantee has been afforded the opportunity to obtain, and has obtained, sufficient information regarding the Grantor to make an informed investment decision with respect to the Grantee's purchase of the Shares issuable upon exercise thereof, and, if and when the Grantee exercises the Option, it will be acquiring the Shares issuable upon the exercise thereof for its own account and not with a view to distribution or resale in any manner which would be in violation of the Securities Act. 6. Quotation of Shares; HSR Act Filings; Regulatory Approvals. Subject to applicable law and the rules and regulations of NASDAQ, the Grantor will promptly file an application to have the Shares quoted on NASDAQ and will use its best efforts to obtain approval of such quotation and to file all necessary filings by the Grantor under the HSR Act; provided, however, that if the Grantor is unable to effect such quotation on NASDAQ by the Closing Date, the Grantor will nevertheless be obligated to deliver the Shares upon the Closing Date. Each of the parties hereto will use its best efforts to obtain consents of all third parties and all Regulatory Approvals, if any, necessary to the consummation of the transactions contemplated. 7. Repurchase of Shares; Sale of Shares. If a Change in Control Event has not occurred prior to the first anniversary date of the Merger Termination Date, then beginning on such anniversary date, the Grantor shall have the right to purchase (the "Repurchase Right") all, but not less than all, of the Shares then beneficially owned by the Grantee or any of its affiliates at a price per share equal to the greater of (i) the Purchase Price, or (ii) the average of the closing sales prices for shares of Common Stock on the twenty trading days ending five days prior to the date the Grantor gives written notice of its intention to exercise the Repurchase Right. If the Grantor does not exercise the Repurchase Right within thirty days following the first anniversary of the Merger Termination Date, the Repurchase Right terminates. In the event the Grantor wishes to exercise the Repurchase Right, the Grantor shall send a written notice to the Grantee specifying a date (not later than 10 business days and not earlier than the next business day following the date such notice is given) for the closing of such purchase. For purposes of the Agreement, a "Change in Control Event" shall be deemed to have occurred if (i) any person or group has a acquired beneficial ownership of more than fifty percent (excluding the Shares) of the outstanding shares of Common Stock or (ii) the Grantor shall have entered into an agreement, including without limitation an agreement in principle, providing for (x) a merger or other business combination involving the Grantor in which the Grantor's stockholders do not own a majority of the outstanding capital stock of the entity surviving such merger or business combination immediately following such transaction or (y) the acquisition of 20% or more of the assets of the Grantor and its subsidiaries, taken as a whole. 8. Registration Rights. (a) In the event that the Grantee shall desire to sell any of the Shares within two years after the purchase of such Shares pursuant hereto, and such sale requires, in the 5 6 opinion of counsel to the Grantee, which opinion shall be reasonably satisfactory to the Grantor and its counsel, registration of such Shares under the Securities Act, the Grantor will cooperate with the Grantee and any underwriters in registering such Shares for resale, including, without limitation, promptly filing a registration statement which complies with the requirements of applicable federal and state securities laws, entering into an underwriting agreement with such underwriters upon such terms and conditions as are customarily contained in underwriting agreements with respect to secondary distributions; provided that the Grantor shall not be required to have declared effective more than two registration statements hereunder and shall be entitled to delay the filing or effectiveness of any registration statement for up to 120 days if the offering would, in the judgment of the Board of Directors of the Grantor, require premature disclosure of any material corporate development or otherwise interfere with or adversely affect any pending or proposed offering of securities of the Grantor or any other material transaction involving the Grantor. (b) If the Common Stock is registered pursuant to the provisions of this Section 8, the Grantor agrees (i) to furnish copies of the registration statement and the prospectus relating to the Shares covered thereby in such numbers as the Grantee may from time to time reasonably request and (ii) if any event shall occur as a result of which it becomes necessary to amend or supplement any registration statement or prospectus, to prepare and file under the applicable securities laws such amendments and supplements as may be necessary to keep effective for at least 90 days a prospectus covering the Common Stock meeting the requirements of such securities laws, and to furnish the Grantee such numbers of copies of the registration statement and prospectus as amended or supplemented as may reasonably be requested. The Grantor shall bear the cost of the registration, including, but not limited to, all registration and filing fees, printing expenses, and fees and disbursements of counsel and accountants for the Grantor, except that the Grantee shall pay the fees and disbursements of its counsel, the underwriting fees and selling commissions applicable to the shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold harmless Grantee, its affiliates and its officers, directors and controlling persons from and against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the Grantee, its affiliates and its officers expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. The Grantor shall also indemnify and hold harmless each underwriter and each person who controls any underwriter within the meaning of either the Securities Act or the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the underwriters expressly for use in any 6 7 registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. 9. Profit Limitation. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $65 million and, if it does exceed such amount, the Grantee, at its sole election, shall, within five business days, either (a) deliver to the Grantor for cancellation Shares (valued, for the purposes of this Section 9(a), at the average closing sales price of the Common Stock on NASDAQ for the twenty consecutive trading days preceding the day on which the Grantee's Total Profit exceeds $65 million) previously purchased by the Grantee, (b) pay cash or other consideration to the Grantor or (c) undertake any combination thereof, so that the Grantee's Total Profit shall not exceed $65 million after taking into account the foregoing actions. (b) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount of cash received by the Grantee pursuant to Section 7.3(b) of the Merger Agreement and Section 1(c) hereof, (ii)(x) the net cash amount received by the Grantee pursuant to the Grantor's repurchase of Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase price for such Shares, and (iii)(x) the amount received by the Grantee pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) the Grantee's purchase price for such Shares. 10. Expenses. Each party hereto shall pay its own expenses incurred in connection with this Agreement, except as otherwise specifically provided herein. 11. Specific Performance. The Grantor acknowledges that if the Grantor fails to perform any of its obligations under this Agreement immediate and irreparable harm or injury would be caused to the Grantee for which money damages would not be an adequate remedy. In such event, the Grantor agrees that the Grantee shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. Accordingly, if the Grantee should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Grantor hereby waives the claim or defense that the Grantee has an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Grantor further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 12. Notice. All notices, requests, demands and other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the party for whom it is intended or delivered by registered or certified mail, return receipt requested, or if sent by facsimile transmission, upon receipt of oral confirmation that such transmission has been received, to the person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such person: 7 8 If to the Grantee: Promus Hotel Corporation 755 Crossover Lane Memphis, TN 38117 Attn: Raymond E. Schultz Telecopy: (901) 374-5636 With a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Attn: John M. Newell, Esq. Telecopy: (213) 891-8763 If to the Grantor: Doubletree Corporation North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Richard M. Kelleher Telecopy: (602) 220-6753 With a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attn: William J. Phillips, Esq. Telecopy: (212) 295-6333 13. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective permitted successors and assigns; provided, however, that such successor in interest or assigns shall agree to be bound by the provisions of this Agreement. Except as set forth in Section 8, nothing in this Agreement, express or implied, is intended to confer upon any person other than the Grantor or the Grantee, or their successors or assigns, any rights or remedies under or by reason of this Agreement. 14. Entire Agreement; Amendments. This Agreement, together with the Merger Agreement and the other documents referred to therein, contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 15. Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the Grantee may assign its rights and obligations hereunder to any of its direct or 8 9 indirect wholly owned subsidiaries, but no such transfer shall relieve the Grantee of its obligations hereunder if such transferee does not perform such obligations. Any assignment made in violation of this Section 15 shall be void. 16. Headings. The section headings herein are for convenience only and shall not affect the construction of this Agreement. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law). 19. Termination. The right to exercise the Option granted pursuant to this Agreement shall terminate at the earlier of (i) the Effective Time (as defined in the Merger Agreement), (ii) the date on which the Grantee realizes a Total Profit of $65 million, (iii) the date on which the Merger Agreement is terminated; provided that the Option is not exercisable at such time and does not become exercisable simultaneous with such termination and (iv) 90 days after the date the Option becomes exercisable (the date referred to in clause (iv) being hereinafter referred to as the "Option Termination Date"); provided that, if the Option cannot be exercised or the Shares cannot be delivered to the Grantee upon such exercise because the conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the Option Termination Date shall be extended until thirty days after such impediment to exercise has been removed. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares. 20. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 21. Public Announcement. The Grantee will consult with the Grantor and the Grantor will consult with the Grantee before issuing any press release with respect to the initial announcement of this Agreement, the Option or the transactions contemplated hereby and neither party shall issue any such press release prior to such consultation except as may be required by law. 9 10 Signature Page for Stock Option Agreement (Promus) IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. DOUBLETREE CORPORATION /s/ Richard M. Kelleher ------------------------------------------- By: Richard M. Kelleher Its: President and Chief Executive Officer PROMUS HOTEL CORPORATION /s/ Raymond E. Schultz ------------------------------------------- By: Raymond E. Schultz Its: President and Chief Executive Officer S-1 EX-10.3 6 STOCKHOLDER SUPPORT AGREEMENT 1 EXHIBIT 10.3 STOCKHOLDER SUPPORT AGREEMENT STOCKHOLDER SUPPORT AGREEMENT dated as of September 1, 1997 (this "Agreement"), by GE Investment Management Incorporated ("GEIM"), GE Investment Hotel Partners I, Limited Partnership ("GEHOP" and together with GEIM, the "GE Entities"), the Trustees of General Electric Pension Trust ("GEPT"), Red Lion, a California limited partnership ("Red Lion"), Richard J. Ferris ("Ferris"), Ridge Partners, L.P. ("Ridge"), Kelrick, Inc. ("Kelrick" and together with Ferris and Ridge, the "Ferris Entities"), Peter V. Ueberroth ("Ueberroth"), The Ueberroth Family Trust ("Ueberroth FT") and The Ueberroth Investment Trust ("Ueberroth IT" and together with Ueberroth and Ueberroth FT, the "Ueberroth Entities"), to and for the benefit of Promus Hotel Corporation, a Delaware corporation ("Promus"). Each of the GE Entities, GEPT, Red Lion, the Ferris Entities and the Ueberroth Entities are referred to herein as a "Stockholder" and collectively as the "Stockholders." Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned to them in the Merger Agreement referred to below. WHEREAS, as of the date hereof, the GE Entities own of record and beneficially 6,060,981 shares (such shares, together with any other voting or equity securities of Doubletree hereafter acquired by the GE Entities prior to the termination of this Agreement, being referred to herein collectively as the "GE Shares") of common stock, par value $.01 per share ("Doubletree Common Stock"), of Doubletree Corporation, a Delaware corporation ("Doubletree"); WHEREAS, as of the date hereof, GEPT owns of record and beneficially 3,027,441 shares (such shares, together with any other voting or equity securities of Doubletree hereafter acquired by GEPT prior to the termination of this Agreement, being referred to herein collectively as "GEPT Shares") of Doubletree Common Stock; WHEREAS, as of the date hereof, Red Lion owns of record and beneficially 3,882,283 shares (such shares, together with any other voting or equity securities of Doubletree hereafter acquired by Red Lion prior to the termination of this Agreement, being referred to herein collectively as the "Red Lion Shares") of Doubletree Common Stock; WHEREAS, as of the date hereof, the Ferris Entities own of record and beneficially 1,576,182 shares (such shares, together with any other voting or equity securities of Doubletree hereafter acquired by the Ferris Entities prior to the termination of this Agreement, being referred to herein collectively as the "Ferris Shares") of Doubletree Common Stock; WHEREAS, as of the date hereof, the Ueberroth Entities own of record and beneficially 1,124,182 shares (such shares, together with any other voting or equity securities of Doubletree hereafter acquired by the Ueberroth Entities prior to the termination of this Agreement, being referred to herein collectively as the "Ueberroth Shares" and, together with the GE Shares, the GEPT Shares, the Red Lion Shares and the Ferris Shares, the "Shares") of Doubletree Common Stock; WHEREAS, concurrently with the execution of this Agreement, Doubletree, Promus and Parent Holding Corp., a Delaware corporation ("Parent"), are entering into an 2 Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which, upon the terms and subject to the conditions thereof, (i) a newly formed subsidiary of Parent will be merged with and into Doubletree (the "Doubletree Merger"), and (ii) a second newly formed subsidiary of Parent will be merged with and into Promus (the "Promus Merger") such that Doubletree and Promus will become wholly-owned subsidiaries of Parent and the stockholders of Doubletree and Promus will become stockholders of Parent; and WHEREAS, as a condition to the willingness of Promus and Doubletree to enter into the Merger Agreement and the Stock Option Agreements (as defined in the Merger Agreement), Promus has requested the Stockholders agree, and in order to induce Promus to enter into the Merger Agreement and the Stock Option Agreements, the Stockholders are willing to agree, severally but not jointly, to vote in favor of adopting the Merger Agreement and approving the Doubletree Merger, upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereby agree, severally and not jointly, as follows: Section 1. Voting of Shares. Until the termination of this Agreement in accordance with the terms hereof, each Stockholder hereby agrees that, at the Doubletree Stockholders' Meeting or any other meeting of the stockholders of Doubletree, however called, and in any action by written consent of the stockholders of Doubletree, such Stockholder will vote all of its respective Shares (a) in favor of adoption of the Merger Agreement and approval of the Doubletree Merger and the other transactions contemplated by the Merger Agreement, and (b) in favor of any other matter necessary to the consummation of the transactions contemplated by the Merger Agreement and considered and voted upon by the stockholders of Doubletree (or any class thereof). In addition, each Stockholder agrees that it will, upon request by Promus, furnish written confirmation, in form and substance reasonably satisfactory to Promus, of such Stockholder's support for the Merger Agreement and the Doubletree Merger. Each Stockholder acknowledges receipt and review of a copy of the Merger Agreement. Section 2. Transfer of Shares. Each Stockholder represents and warrants that it has no present intention of taking any action, prior to the termination of this Agreement in accordance with the terms hereof, to, directly or indirectly, (a) sell, assign, transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise by operation of law), pledge, encumber or otherwise dispose of any of its respective Shares, (b) deposit any of its respective Shares into a voting trust or enter into a voting agreement or arrangement with respect to any such Shares or grant any proxy or power of attorney with respect thereto which is inconsistent with this Agreement or (c) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect sale, assignment, transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise by operation of law) or other disposition of any Shares. Section 3. No Solicitation. Prior to the termination of this Agreement in accordance with its terms, each Stockholder agrees (a) that it will not, nor will it authorize or 2 3 permit any of its officers, directors, employees, agents and representatives to, directly or indirectly, initiate or solicit any inquiries or the making of any Acquisition Proposal and (b) that it will notify Promus as soon as possible (and in any event within 48 hours) if any such inquiries or proposals are received by, any information or documents is requested from, or any negotiations or discussions are sought to be initiated or continued with, it or any of its affiliates. Section 4. Termination. This Agreement shall terminate upon the earliest to occur of (i) the Effective Time or (ii) any termination of the Merger Agreement in accordance with the terms thereof; provided that the provisions of Section 7 shall survive any termination of this Agreement, and provided further that no such termination shall relieve any party of liability for a breach hereof prior to termination. Section 5. Registration Rights. Until the termination of this Agreement in accordance with the terms hereof, no Stockholder will exercise any of its rights to request or require registration of any securities under the Incorporation and Registration Rights Agreement dated as of December 16, 1993, as amended on June 30, 1994, February 27, 1996 and November 8, 1996, by and among Doubletree and certain stockholders of Doubletree (the "Registration Rights Agreement). Section 6. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. Section 7. Miscellaneous. (a) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect thereto. This Agreement may not be amended, modified or rescinded except by an instrument in writing signed by each of the parties hereto. (b) If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible. (c) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof. (d) Notwithstanding anything herein to the contrary, the covenants and agreements set forth herein shall not prevent any of the Stockholders' designees, partners or 3 4 affiliates serving on the Board of Directors of Doubletree from taking any action, subject to the applicable provisions of the Merger Agreement, while acting in such capacity as a director of Doubletree. (e). Notwithstanding any provisions hereof, none of the obligations of any Stockholder under or contemplated by this Agreement shall be an obligation of (i) any officer, director, stockholder, limited partner, general partner or owner of such Stockholder, or any of their respective officers, directors, stockholders, limited partners, general partners or owners, or successors or assigns or (ii) any other Stockholder. Each Stockholder shall be the only person or entity liable with respect to its obligations. Any monetary liability of a Stockholder under this Agreement shall be satisfied solely out of the assets of such Stockholder. Each Stockholder hereby irrevocably waives any right it may have against any such officer, director, stockholder, limited partner, general partner, owner, successor or assign identified above as a result of the performance of the provisions under or contemplated by this Agreement. Nothing in this Section 7(e) shall prevent Promus from obtaining specific enforcement of the obligations of any Stockholder under this Agreement. (f) This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 4 5 Signature Page for Stockholder Support Agreement IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. GE INVESTMENT MANAGEMENT INCORPORATED /s/ JOHN MYERS --------------------------------------------- By: John Myers Its: GE INVESTMENT HOTEL PARTNERS I, LIMITED PARTNERSHIP By: GE Investment Management Inc. Its: General Partner /s/ JOHN MYERS ---------------------------------------- By: John Myers Its: TRUSTEES OF GENERAL ELECTRIC PENSION TRUST /s/ JOHN MYERS --------------------------------------------- By: John Myers Its: RED LION By: RLA-GP, Inc. Its: General Partner /s/ MICHAEL MICHELSON ---------------------------------------- By: Michael Michelson Its: S-1 6 /s/ RICHARD J. FERRIS --------------------------------------------- Richard J. Ferris RIDGE PARTNERS, L.P. By: Kelrick, Inc. Its: General Partner /s/ RICHARD J. FERRIS ---------------------------------------- By: Richard J. Ferris Its: President KELRICK, INC. /s/ RICHARD J. FERRIS --------------------------------------------- By: Richard J. Ferris Its: President /s/ PETER V. UEBERROTH --------------------------------------------- Peter V. Ueberroth THE UEBERROTH FAMILY TRUST /s/ PETER V. UEBERROTH --------------------------------------------- By: Peter V. Ueberroth Its: Trustee S-2 7 Signature Page for Stockholder Support Agreement THE UEBERROTH INVESTMENT TRUST /s/ PETER V. UEBERROTH ------------------------------------- By: Peter V. Ueberroth Its: Trustee Agreed and Acknowledged: PROMUS HOTEL CORPORATION /s/ RAYMOND E. SCHULTZ - ----------------------------------- By: Raymond E. Schultz Its: President and Chief Executive Officer S-3 EX-99.1 7 JOINT PRESS RELEASE, DATED SEPT. 2, 1997 1 EXHIBIT 99.1 FOR IMMEDIATE RELEASE Contact: For Doubletree: For Promus: William L. Perocchi, CFO John C. Hawkins, Corporate Communications Doubletree Corporation Promus Hotel Corporation (602)220-6810 (901)374-5529 Ruth Pachman/Michael Freitag Gregg A. Swearingen, Investor Relations Kekst and Company Promus Hotel Corporation (212)521-4800 (901)374-5468 DOUBLETREE CORPORATION AND PROMUS HOTEL CORPORATION SIGN $4.7 BILLION DEFINITIVE MERGER AGREEMENT PHOENIX, AZ AND MEMPHIS, TN, SEPTEMBER 2, 1997 - Doubletree Corporation (NASDAQ: TREE) and Promus Hotel Corporation (NYSE: PRH) today announced the execution of a definitive merger agreement, creating one of the world's largest hotel companies with a portfolio of fast-growing upscale and mid-priced brands including Doubletree Hotels, Embassy Suites, Doubletree Guest Suites, Homewood Suites, Club Hotels by Doubletree, Hampton Inn, Hampton Inn & Suites, and Red Lion. This stock-for-stock transaction, valued at approximately $4.7 billion, is a merger of equals, combining Doubletree's strength in hotel management with Promus' strength in franchising and building brands. With approximately $5 billion in annual system-wide revenues under management contract for franchise agreement, the combined company will be the lodging industry's third largest revenue producer. As of June 30, the new company had 1,136 hotels, approximately 172,000 rooms, and more than 40,000 employees in all regions of the United States and its major markets, as well as selected locations in Latin America and Asia. The terms of the agreement call for the two companies to be merged into subsidiaries of a new holding company to be named Promus Hotel Corporation. Doubletree shareholders will receive one share in the new company for each of their shares in Doubletree. Promus shareholders will receive 0.925 shares in the new company for each of their shares in Promus. The transaction is intended to be accounted for as a pooling-of-interests and is expected to be tax-free. The merger is 2 expected to be accretive to earnings per share in the first full year, excluding costs related to the transaction. The shares of the new company are expected to be listed on the New York Stock Exchange. The companies have agreed that: - Promus' President and Chief Executive Officer, Raymond E. Schultz, will serve as Chairman and Chief Executive Officer of the new company, and as a member of the Board's Executive Committee. - Doubletree's President and Chief Executive Officer, Richard M. Kelleher, will serve as President and Chief Operating Officer following the merger, and will succeed Mr. Schultz as Chief Executive Officer upon his retirement. He will also be an ex-officio member of the Board's Executive Committee. - The key management team will consist of top managers of both Doubletree and Promus, including William L. Perocchi, currently Executive Vice President and Chief Financial Officer of Doubletree, as Executive Vice President and Chief Financial Officer, and Thomas L. Keltner, currently Executive Vice President and Chief Development Officer of Promus, as Executive Vice President and Chief Development Officer. - The new company will be governed by a 14-member Board of Directors, with seven directors designated by each company. The Board will include Richard J. Ferris and Peter V. Ueberroth, Doubletree Co-Chairmen, and Michael D. Rose, Promus Chairman, who will serve as members of the Board's Executive Committee. - Each company has granted the other an option to acquire 19.9 percent of its common stock under certain conditions. Doubletree also announced that it has adopted a Stockholder Rights Plan, the details of which will be released separately. Approximately 40% of Doubletree's shareholders, including, among others, General Electric Pension Trust and Kohlberg Kravis Roberts & Co., have indicated they intend to vote in 3 favor of the merger. GE and KKR will continue to be represented on the Board of the new company. Raymond E. Schultz, Promus President and Chief Executive Officer, said: "This transaction is truly a merger of equals. The combined company will greatly benefit from the complementary strengths of each partner. Doubletree has grown rapidly through acquisitions and an aggressive conversion strategy. It has an outstanding record and reputation as a quality operator and brand marketer of full service hotels. Promus has grown through franchising and new hotel development. We have grown our proprietary brands primarily on a one-at-a-time basis with emphasis on product quality and consistency and our unique 100% satisfaction guaranteed service culture, which will be extended to all Doubletree's brands." Mr. Schultz added, "This merger is a `defining moment' for Promus. We have achieved a significant presence in the upscale suites and extended-stay markets, and are the industry leader in the mid-priced limited service segment. In joining with a quality upscale full-service brand in Doubletree Hotels, as well as its other brands, the combined company will be able to offer a full range of quality accommodations to meet the needs of business and leisure travelers in markets throughout the United States. Our ability to cross-sell and cross-market our brands will be a key driver of our future growth. We will also be able to offer to franchisees, developers and investors an even more complete line of hotel development opportunities in virtually every important segment of the lodging business. "The combination of two of the strongest and most successful management teams in our industry will provide the depth to continue to grow rapidly and expand to new areas. Rick Kelleher and I worked together for many years, so I know we share the same values and commitment to product quality, customer service and creating shareholder value. The cultures of our companies are remarkably similar and that should make the transition more seamless. We will immediately form transition task forces so that we will hit the ground running," Mr. Schultz continued. Richard M. Kelleher, President and Chief Executive Officer of Doubletree Corporation, said, "The merger of Doubletree and Promus is a natural marriage of two strong institutions with a common heritage and a focus on growth. Doubletree traces its roots to a company that was one of 4 the original franchisees of Embassy Suites. Today, Embassy Suites is the clear market leader in the upscale all-suites segment and accounts for more than half of Promus' operating profit. The blending of Embassy Suites and Doubletree Guest Suites will give the new company an even stronger base on which to build market share." "There are also tremendous opportunities for growth in the extended-stay market, with the upscale Homewood Suites brand complementing Doubletree's investment in the mid-market Candlewood Hotels brand. Likewise, our smaller Club Hotels by Doubletree and Red Lion brands will benefit from Promus' strength as a franchisor and builder of brands. We are also excited about having Hampton Inn, one of this decade's fastest growing mid-market brands, included in our combined portfolio." Mr. Kelleher added, "At a time when the lodging industry is rapidly consolidating, the merger creates a company with significant free cash flow, one of the strongest balance sheets in our industry and access to sources of lower-cost capital than most of our competitors. We are very well positioned to leverage these financial strengths to accelerate our growth in the future. Both companies expect to realize substantial synergies and cost savings from the merger. They will be able to combine their respective reservation systems, information system development and maintenance, purchasing functions, accounting, payroll, and many other corporate support functions to provide substantial efficiencies. The companies said that their preliminary estimated cost savings and synergies should yield approximately $15 to $20 million annually. Both companies have preferred vendor programs which provide growing revenue streams that will benefit from the combined larger room count. Consummation of this transaction is subject to customary conditions, including regulatory approvals and approval of the merger by shareholders of each company. It is anticipated that this transaction will close prior to 1997 year-end. Morgan Stanley & Co. served as financial adviser to Doubletree and BT Wolfensohn served as financial adviser to Promus. 5 Doubletree Corporation is a leading hotel management company and is the exclusive franchisor of Doubletree Hotels, Doubletree Guest Suites, Club Hotels by Doubletree and Red Lion hotel brands. Promus Hotel Corporation is one of the world's premier lodging companies and the franchisor and operator of the Embassy Suites, Hampton Inn, Hampton Inn & Suites, Homewood Suites, Embassy Vacation Resort and Hampton Vacation Resort brands. Based in Memphis, Tenn., the company currently serves guests with an unconditional 100% Satisfaction Guarantee in more than 900 hotels and 115,000 rooms throughout the United States, Canada, Mexico, Latin America and Asia. A company overview and financial highlights can be found on the internet by accessing http://www.promus-hotel.com. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts, such as those concerning future financial performance and growth, are forward looking statements that are subject to change based on various factors which may be beyond Doubletree's and Promus' control. Accordingly, the future performance and financial results of the new company may differ materially from those expressed or implied in any such forward looking statements. Such factors include, but are not limited to, those described in Doubletree's and Promus' filings with the Securities and Exchange Commission, as well as various factors related to the transaction described in this release, including the costs of integrating their business and the realization of synergies anticipated with respect to the transaction. (Fact Sheet Attached) 6 DOUBLETREE AND PROMUS MERGER FACT SHEET TRANSACTION - - Merger of Doubletree and Promus to create one of the world's largest hotel companies. - - Tax-free exchange of stock into a new issue of a new company to be called Promus Hotel Corp. - - Each share of Doubletree will be converted into one share of new Promus. - - Each share of Promus will be converted into 0.925 shares of new Promus. - - The transaction is intended to be accounted for as a pooling of interests, with no goodwill created. STRATEGIC RATIONALE - - Creates a powerful presence in the U.S. hotel market with a portfolio of brands including: -Doubletree Hotels -Embassy Suites -Embassy Vacation Resort -Doubletree Guest Suites -Homewood Suites -Club Hotels by Doubletree -Hampton Inn -Hampton Inn & Suites -Hampton Vacation Resort -Red Lion -Highlights of new Promus Hotel Corp.: -1,136 hotels (as of June 30, 1997) -172,000 rooms (as of June 30, 1997) -#3 in total system-wide revenues under management or franchise -#4 in market capitalization -#5 in number of hotels -#5 in number of rooms - - Strong balance sheet, increased size and complementary hotel brands create platform for further expansion -Full-service segment and international market expansion opportunities -Further development - - Compatible organizations -Complementary lines of business (franchising and management operations) -History of delivering shareholder value -#1 in customer satisfaction index -Proven ability to grow organically and through acquisitions -Proven ability to integrate mergers and acquisitions 7 DOUBLETREE AND PROMUS MERGER FACT SHEET CONTINUED POTENTIAL MERGER BENEFITS SHAREHOLDERS - - Promus' franchise and development expertise combined with Doubletree's management expertise provides significant opportunities for growth. - - Potential for savings in corporate overhead, information technology, purchasing, reservation systems and financing costs. - - Cross-selling opportunities - - Enhances new and existing developer, franchisee and investor relationships Increased financial strength -Larger, more diversified asset base -Maintains low debt level - - Strong cash flow from business and increase size enhance prospects for continued growth - - Likely reduction in cost of capital CUSTOMERS - - Ability to leverage a larger, more diversified portfolio of brand names - - Continued focus on providing quality service across entire range of hotel brands - - Ability to leverage Doubletree brands through Promus franchise network EMPLOYEES - - New company will be one of the strongest and best positioned domestic U.S. hotel companies - - Ability to participate both financially and professionally in growth companies PRO FORMA FINANCIAL PROFILE Annual System-wide Revenues under Management or Franchise $5.0 billion 1996 Revenues $937 million 1996 EBITDA $322 million 1996 Net Income $106 million Book Value (as of June 30, 1997) $1.1 billion Assets (as of June 30, 1997) $2.4 billion Debt to Capital (as of June 30, 1997) 40% Shares Outstanding (as of August 29, 1997) 86 million Market Capitalization (as of August 29, 1997) $4.0 billion Enterprise Value (as of August 29, 1997) $4.7 billion ORGANIZATION Key Officers: Chairman & CEO Raymond E. Schultz President & COO Richard M. Kelleher Chief Financial Officer William L. Perocchi Chief Development Officer Thomas L. Keltner Board of Directors 14 Members (7 each from Promus and Doubletree) Employees Approximately 40,000 State of Incorporation Delaware 8 DOUBLETREE AND PROMUS MERGER ---------------------------- FACT SHEET CONTINUED
HOTEL PORTFOLIO (AS OF 6/30/07) BRAND HOTELS ROOMS REVPAR Doubletree Guest Suites 42 8,987 $95.34 Embassy Suites 136 32,810 86.97 Homewood Suites 43 4,439 71.84 Doubletree Hotels 101 30,368 70.54 Red Lion 16 2,902 59.29 Club Hotels 19 3,977 51.77 Hampton Inn & Suites 23 2,500 48.75 Hampton Inn 679 73,326 46.00 Non-Branded 77 12,344 58.38 ----- ------- TOTAL 1,136 171,653 OWNERSHIP HOTELS ROOMS Owned 45 8,105 Joint Venture 26 7,264 Leased 86 14,448 Managed 164 41,920 Franchise 815 99,916 ----- ------- TOTAL 1,136 171,653
OTHER INFORMATION Form of Transaction Merger of equals, stock-for-stock exchange Subject to Approval of Promus and Doubletree shareholders; approximately 40% of Doubletree shareholders have agreed to vote in favor of the merger Hart-Scott-Rodino review Expected Closing By year-end 1997 EX-99.2 8 PRESS RELEASE DATED SEPTEMBER 2, 1997 1 EXHIBIT 99.2 FOR IMMEDIATE RELEASE Contact: William L. Perocchi, CFO Doubletree Corporation (602) 220-6810 DOUBLETREE CORPORATION ADOPTS STOCKHOLDER RIGHTS PLAN PHOENIX, ARIZONA, SEPTEMBER 2, 1997 -- Doubletree Corporation (NASDAQ: TREE) (the "Company"), announced that its Board of Directors has today adopted a Stockholder Rights Plan in which preferred stock purchase rights will be distributed as a dividend at the rate of one Right for each share of common stock, par value $0.01 per share, of the Company held by stockholders of record as of the close of business on September 11, 1997. Each Right initially will entitle stockholders to buy one one-hundredth of a share of preferred stock for $180. The Rights will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's common stock or commences a tender or exchange offer upon consummation of which such person or group would beneficially own 15% or more of the Company's common stock. The Rights will expire immediately prior to the consummation of the "merger of equals" transaction with Promus Hotel Corporation. If any person becomes the beneficial owner of 15% or more of the Company's common stock, other than pursuant to a tender or exchange offer for all outstanding shares of the Company approved by a majority of the independent directors not affiliated with a 15%-or-more stockholder, then each Right not owned by a 15%-or-more stockholder or related parties will entitle its holder to purchase, at the Right's then current exercise price, shares of the Company's common stock (or, in certain circumstances as determined by the Board, cash, other property, or other securities) having a value of twice the Right's then current exercise price. In addition, if after any person has become a 15%-or-more stockholder, the Company is involved in a merger or other business combination transaction with another person in which the Company 2 does not survive or in which its common stock is changed or exchanged, or sells 50% or more of its assets or earning power to another person, each Right will entitle its holder to purchase, at the Right's then current exercise price, shares of common stock of such other person having a value of twice the Right's then current exercise price. If any person acquires beneficial ownership of between 15% and 50% of the outstanding voting stock, the Board may, in lieu of allowing Rights to be exercised, require each outstanding Right, other than any Rights held by the acquiring person, to be exchanged for one share of Common Stock. The Company will generally be entitled to redeem the Rights at $0.01 per Right at any time until 10 days (subject to extension) following a public announcement that a 15% position has been acquired. Doubletree Corporation is a leading hotel management company and is the exclusive franchisor of Doubletree Hotels, Doubletree Guests Suites, Club Hotels by Doubletree and Red Lion hotel brands. # # # -----END PRIVACY-ENHANCED MESSAGE-----