-----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, R2vx139X2rQDHQYpU9eLuGCfsKkJQd24RkU9Nymvwpj1rpRGwWNhCu1C5yc8I6de 26O0W/VkcaHzZMASm8Q2aQ== 0000912057-97-030056.txt : 19970912 0000912057-97-030056.hdr.sgml : 19970912 ACCESSION NUMBER: 0000912057-97-030056 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970901 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970905 SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROMUS HOTEL CORP CENTRAL INDEX KEY: 0000944647 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 621596939 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11463 FILM NUMBER: 97676083 BUSINESS ADDRESS: STREET 1: 6800 POPLAR AVENUE STREET 2: STE 200 CITY: MEMPHIS STATE: TN ZIP: 38138 BUSINESS PHONE: 9013745103 MAIL ADDRESS: STREET 1: 6800 POPLAR AVENUE STREET 2: STE 200 CITY: MEMPHIS STATE: TN ZIP: 38138 8-K 1 FORM 8-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1997 - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 1, 1997 ------------------ PROMUS HOTEL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 1-11463 62-1596939 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation or Identification Number) organization) 755 CROSSOVER LANE 38117 MEMPHIS, TENNESSEE (Zip Code) (Address of principal executive offices) (901) 374-5000 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) - ------------------------------------------------------------------------------- ITEM 5. Other Events On September 1, 1997, Promus Hotel Corporation ("Promus"), Doubletree Corporation ("Doubletree") and Parent Holding Corp., a newly-formed corporation jointly formed by Promus and Doubletree ("Parent"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Parent will form two subsidiaries that will merge with and into Promus and Doubletree such that Promus and Doubletree become wholly-owned subsidiaries of Parent (the "Mergers"). Pursuant to the Merger Agreement, upon the effectiveness of the Mergers, (i) each outstanding share of Common Stock, par value $.10 per share, of Promus will be converted into the right to receive 0.925 shares of Common Stock, par value $.01 per share, of Parent ("Parent Common Stock"), and (ii) each outstanding share of Common Stock, par value $.01 per share, of Doubletree will be converted into the right to receive one share of Parent Common Stock. Consummation of the Mergers is subject to the satisfaction or waiver by the parties of certain conditions, including the receipt of regulatory approvals and approvals by the stockholders of Promus and Doubletree. In connection with the Merger Agreement, Promus and Doubletree also have entered into (i) a Stock Option Agreement pursuant to which Promus granted to Doubletree an option to purchase up to 19.9% of the outstanding common stock of Promus under certain circumstances and (ii) a Stock Option Agreement pursuant to which Doubletree has granted to Promus an option to purchase up to 19.9% of the outstanding common stock of Doubletree under certain circumstances (together, the "Stock Option Agreements"). In addition, certain stockholders of Doubletree holding over 39% of the outstanding common stock of Doubletree have entered into a stockholder support agreement with Promus (the "Stockholder Support Agreement"), pursuant to which such stockholders agreed to vote their shares in favor of the adoption of the Merger Agreement and approval of the Doubletree Merger, subject to certain conditions. On September 2, 1997, Promus and Doubletree issued a joint press release announcing the execution of the Merger Agreement. The Merger Agreement, the Stock Option Agreements, the Stockholder Support Agreement and the press release are filed as exhibits hereto and are incorporated by reference herein. ITEM 7. Financial Statements and Exhibits (c) Exhibits. 2.1 Agreement and Plan of Merger, dated as of September 1, 1997, by and among Doubletree Corporation, Promus Hotel Corporation and Parent Holding Corp. 10.1 Stock Option Agreement (Doubletree), dated as of September 1, 1997, by and between Doubletree Corporation and Promus Hotel Corporation. 10.2 Stock Option Agreement (Promus), dated as of September 1, 1997, by and between Promus Hotel Corporation and Doubletree Corporation. 10.3 Stockholder Support Agreement, dated as of September 1, 1997 by and among certain stockholders of Doubletree, to and for the benefit of Promus. 99.1 Form of Restated Certificate of Incorporation of Promus Hotel Corporation 99.2 Form of Amended and Restated Bylaws of Promus Hotel Corporation. 99.3 Joint Press Release, dated September 2, 1997, issued by Promus Hotel Corporation and Doubletree Corporation. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PROMUS HOTEL CORPORATION /s/ RAYMOND E. SCHULTZ ------------------------------------------------- Raymond E. Schultz Chairman of the Board and Chief Executive Officer Dated: September 5, 1997 EXHIBIT INDEX Exhibit Number Description ------- ------------- 2.1 Agreement and Plan of Merger, dated as of September 1, 1997, by and among Doubletree Corporation, Promus Hotel Corporation and Parent Holding Corp. 10.1 Stock Option Agreement (Doubletree), dated as of September 1, 1997, by and between Doubletree Corporation and Promus Hotel Corporation. 10.2 Stock Option Agreement (Promus), dated as of September 1, 1997, by and between Promus Hotel Corporation and Doubletree Corporation. 10.3 Stockholder Support Agreement, dated as of September 1, 1997, by and among certain stockholders of Doubletree, to and for the benefit of Promus. 99.1 Form of Restated Certificate of Incorporation of Promus Hotel Corporation. 99.2 Form of Amended and Restated Bylaws of Promus Hotel Corporation. 99.3 Joint Press Release, dated September 2, 1997, issued by Promus Hotel Corporation and Doubletree Corporation. EX-2.1 2 EXHIBIT 2-1 AGREEMENT AND PLAN OF MERGER DATED AS OF SEPTEMBER 1, 1997 AMONG DOUBLETREE CORPORATION, PROMUS HOTEL CORPORATION AND PARENT HOLDING CORP. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.8. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.9. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.10. Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . 14 Section 3.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.13. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.14. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 3.15. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . 17 Section 3.16. Registration Statement; Joint Proxy Statement/Prospectus . . . . . . . 17 Section 3.17. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.19. Doubletree Long-Range Plans . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.20. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . 18 Section 3.21. No Existing Discussions . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.22. Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . . . 19
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Page Section 3.23. Doubletree Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PROMUS . . . . . . . . . . . . . . . 19 Section 4.1. Organization of Promus . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 4.2. Promus Capital Structure . . . . . . . . . . . . . . . . . . . . . . . 20 Section 4.3. Authority; No Conflict; Required Filings and Consents . . . . . . . . . 21 Section 4.4. SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . 22 Section 4.5. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 22 Section 4.6. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . 22 Section 4.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 4.8. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 4.9. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 4.10. Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . 24 Section 4.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 4.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 4.13. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 4.14. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 4.15. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . 26 Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus . . . . . . . 27 Section 4.17. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 4.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 4.19. Promus Long-Range Plans . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 4.20. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . 28 Section 4.21. No Existing Discussions . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 4.22. Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . . . 28 Section 4.23. Promus Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 5.1. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 5.2. Cooperation; Notice; Cure . . . . . . . . . . . . . . . . . . . . . . . 30 Section 5.3. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 5.4. Joint Proxy Statement/Prospectus; Registration Statement . . . . . . . 32 Section 5.5. NASDAQ Quotation and NYSE Listing . . . . . . . . . . . . . . . . . . . 32 Section 5.6. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 5.7. Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 5.8. Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . 33 Section 5.9. Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 5.10. Nonrecognition Exchange . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 5.11. Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 5.12. Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 5.13. NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 5.14. Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 5.15. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 5.16. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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Page Section 5.17. Letter of Promus's Accountants . . . . . . . . . . . . . . . . . . . . 37 Section 5.18. Letter of Doubletree's Accountants . . . . . . . . . . . . . . . . . . 38 Section 5.19. Stock Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 5.20. Post-Merger Corporate Governance; Employment Arrangements . . . . . . . 38 Section 5.21. Name of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 5.22. Parent Stockholder Rights Plan; Amendment of Promus Rights Plan . . . . 40 Section 5.23. GEPT Warrant; Doubletree Registration Rights Agreement . . . . . . . . 40 Section 5.24. Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 5.25. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 5.26. Stockholder Litigation . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 5.27. Employee Benefits; Severance . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE VI. CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 6.1. Conditions to Each Party's Obligation to Effect the Mergers . . . . . . 42 Section 6.2. Additional Conditions to Obligations of Doubletree . . . . . . . . . . 43 Section 6.3. Additional Conditions to Obligations of Promus . . . . . . . . . . . . 44 ARTICLE VII. TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 7.5. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 8.1. Nonsurvival of Representations, Warranties and Agreements . . . . . . . 49 Section 8.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 8.3. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 8.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 8.5. Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . 50 Section 8.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 8.7. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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 TABLES OF DEFINED TERMS
TERMS CROSS REFERENCE - ----- IN AGREEMENT --------------- Acquisition Proposal Section 5.3(a) Affiliate Section 5.12 Affiliate Agreement Section 5.12 Agreement Preamble Alternative Transaction Section 7.3(e) Bankruptcy and Equity Exception Section 3.3(a) Certificate of Merger Section 1.4 Certificates Section 2.4(b) Closing Section 1.5 Closing Date Section 1.5 Code Preamble Confidentiality Agreements Section 5.3(a) DGCL Section 1.2 Doubletree Preamble Doubletree Balance Sheet Section 3.4(b) Doubletree Common Stock Section 2.1 Doubletree Director Section 5.20(a) Doubletree Disclosure Schedule Article III Doubletree Employee Plans Section 3.13(a) Doubletree Employees Section 5.27(b) Doubletree Exchange Ratio Section 2.1(c) Doubletree Material Adverse Effect Section 3.1 Doubletree Material Contracts Section 3.10(a) Doubletree Merger Section 1.2 Doubletree Preferred Stock Section 3.2(a) Doubletree Rights Plan Section 3.2(b) Doubletree SEC Reports Section 3.4(a) Doubletree Stock Option Section 5.14(a) Doubletree Stock Option Agreement Preamble Doubletree Stock Plans Section 3.2(a) Doubletree Stockholders' Meeting Section 3.16 Doubletree Sub Section 1.2 Doubletree Surviving Corporation Section 1.6 Effective Time Section 1.4 Environmental Law Section 3.12(b) ERISA Section 3.13(a) ERISA Affiliate Section 3.13(a) Exchange Act Section 3.3(c) Exchange Agent Section 2.4(a) Exchange Fund Section 2.4(a) GEPT Warrant Section 3.2(b)
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TERMS CROSS REFERENCE - ----- IN AGREEMENT --------------- Governmental Entity Section 3.3(c) Hazardous Substance Section 3.12(c) HSR Act Section 3.3(c) Indemnified Parties Section 5.16(a) IRS Section 3.7(b) Joint Proxy Statement/Prospectus Section 3.16 Material Lease(s) Section 3.8(a) Mergers Section 1.3 NYSE Section 2.4(e) Order Section 5.8(b) Outside Date Section 7.1(b) Parent Preamble Parent Common Stock Section 2.1(c) Parent Rights Plan Section 5.22 Promus Preamble Promus Balance Sheet Section 4.4(b) Promus Common Stock Section 2.2 Promus Director Section 5.20(a) Promus Disclosure Schedule Article IV Promus Employee Plans Section 4.13(a) Promus Employees Section 5.27(b) Promus Exchange Ratio Section 2.2(c) Promus Material Adverse Effect Section 4.1 Promus Material Contracts Section 4.10(a) Promus Merger Section 1.3 Promus Preferred Stock Section 4.2(a) Promus Rights Plan Section 4.2(b) Promus SEC Reports Section 4.4(a) Promus Special Stock Section 4.2(a) Promus Stock Option Section 5.14(a) Promus Stock Option Agreement Preamble Promus Stock Plans Section 4.2(a) Promus Stockholders' Meeting Section 3.16 Promus Sub Section 1.3 Promus Surviving Corporation Section 1.6 Registration Statement Section 3.16 Rule 145 Section 5.12 SEC Section 3.3(c) Securities Act Section 2.4(j) Stock Option Agreement Preamble Stockholder Support Agreement Preamble Subsidiary Section 3.1 Superior Proposal Section 5.3(a)
v TERMS CROSS REFERENCE - ----- IN AGREEMENT --------------- Surviving Corporation Section 1.6 Tax Section 3.7(a) Taxes Section 3.7(a) Third Party Section 5.3(a) Transfer Taxes Section 5.25 vi AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September 1, 1997, by and among DOUBLETREE CORPORATION, a Delaware corporation ("Doubletree"), PROMUS HOTEL CORPORATION, a Delaware corporation ("Promus") and PARENT HOLDING CORP., a newly-formed Delaware corporation with nominal capitalization, one-half of the issued and outstanding capital stock of which is nominally owned by each of Doubletree and Promus ("Parent"). WHEREAS, the Boards of Directors of Doubletree and Promus deem it advisable and in the best interests of each corporation and its respective stockholders that Doubletree and Promus combine in a "merger of equals" in order to advance the interests of Doubletree and Promus and their respective stockholders; WHEREAS, the combination of Doubletree and Promus shall be effected by the terms of this Agreement through (i) a merger of a wholly-owned subsidiary of Parent with and into Doubletree and (ii) a merger of another wholly-owned subsidiary of Parent with and into Promus, such that Doubletree and Promus become wholly-owned subsidiaries of Parent and the stockholders of Doubletree and Promus become stockholders of Parent; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to each of Doubletree's and Promus's willingness to enter into this Agreement, Doubletree and Promus have entered into (i) a Stock Option Agreement dated as of the date of this Agreement and attached hereto as Exhibit A (the "Doubletree Stock Option Agreement"), pursuant to which Promus granted Doubletree an option to purchase shares of common stock of Promus under certain circumstances, and (ii) a Stock Option Agreement dated as of the date of this Agreement and attached hereto as Exhibit B (the "Promus Stock Option Agreement" and, together with the Doubletree Stock Option Agreement, the "Stock Option Agreements"), pursuant to which Doubletree granted Promus an option to purchase shares of common stock of Doubletree under certain circumstances; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Promus's willingness to enter into this Agreement, certain stockholders of Doubletree have entered into a Stockholder Support Agreement with Promus dated as of the date of this Agreement and attached hereto as Exhibit C (the "Stockholder Support Agreement"), pursuant to which such stockholders have agreed, among other things, to vote all voting securities of Doubletree beneficially owned by them in favor of approval and adoption of the Agreement and the Doubletree Merger (as defined in Section 1.2); WHEREAS, for Federal income tax purposes, it is intended that (i) the Doubletree Merger shall qualify as a reorganization described in Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and/or, taken together with the Promus Merger (as defined in Section 1.3), as a transfer of property to Parent by holders of Doubletree Common Stock (as defined in Section 2.1) described in Section 351 of the Code and (ii) the Promus Merger shall qualify as a reorganization described in Section 368(a) of the Code and/or, taken 1 together with the Doubletree Merger, as a transfer of property to Parent by holders of Promus Common Stock described in Section 351 of the Code; WHEREAS, for accounting purposes, it is intended that the transactions contemplated by this Agreement shall be accounted for as a pooling of interests; and WHEREAS, the Boards of Directors of Doubletree and Promus have approved this Agreement, the Stock Option Agreements and the Stockholder Support Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties agree as follows: ARTICLE I. THE MERGERS Section 1.1 CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT. Doubletree and Promus shall cause the Certificate of Incorporation and Bylaws of Parent to be amended prior to the Effective Time (as defined in Section 1.4) to be substantially in the form of Exhibit D and Exhibit E hereto, respectively. From the date hereof until the Effective Time, Doubletree and Promus shall consult with each other prior to causing or permitting Parent to take any action and neither shall cause or permit Parent to take any action inconsistent with the provisions of this Agreement without the written consent of the other. Section 1.2 THE DOUBLETREE MERGER. Doubletree and Promus shall cause Parent to form a wholly-owned subsidiary named Doubletree Acquisition Corp. ("Doubletree Sub") under the laws of the State of Delaware. Doubletree and Promus will cause Parent to cause Doubletree Sub to execute and deliver this Agreement. Upon the terms and subject to the provisions of this Agreement, and in accordance with the Delaware General Corporation Code (the "DGCL"), Doubletree Sub will merge with and into Doubletree (the "Doubletree Merger") at the Effective Time (as defined in Section 1.4). Doubletree Sub will be formed solely to facilitate the Doubletree Merger and will conduct no business or activity other than in connection with the Doubletree Merger. Section 1.3 THE PROMUS MERGER. Doubletree and Promus shall cause Parent to form a wholly-owned subsidiary named Promus Acquisition Corp. ("Promus Sub") under the laws of the State of Delaware. Doubletree and Promus will cause Parent to cause Promus Sub to execute and deliver this Agreement. Upon the terms and subject to the provisions of this Agreement, and in accordance with the DGCL, Promus Sub will merge with and into Promus (the "Promus Merger" and together with the Doubletree Merger, the "Mergers") at the Effective Time (as defined in Section 1.4). Promus Sub will be formed solely to facilitate the Promus Merger and will conduct no business or activity other than in connection with the Promus Merger. Section 1.4 EFFECTIVE TIME OF THE MERGERS. Subject to the provisions of this Agreement, a certificate of merger with respect to each Merger in such form as is required by the 2 relevant provisions of the DGCL (individually, a "Certificate of Merger" with respect to one of the Mergers, and collectively with respect to both Mergers, the "Certificates of Merger") shall be duly prepared, executed and acknowledged and thereafter delivered to the Secretary of State of the State of Delaware for filing, as provided in the DGCL, as early as practicable on the Closing Date (as defined in Section 1.5). Each Merger shall become effective at such time as is specified in the Certificate of Merger (the time at which both Mergers have become fully effective being hereinafter referred to as the "Effective Time"). Section 1.5 CLOSING. The closing of the Mergers (the "Closing") will take place at such time and place to be agreed upon by the parties hereto, on a date to be specified by Promus and Doubletree, which shall be no later than the second business day after satisfaction or, if permissible, waiver of the conditions set forth in Article VI (the "Closing Date"), unless another date is agreed to in writing by Promus and Doubletree. Section 1.6 EFFECT OF THE MERGERS. As a result of the Doubletree Merger, the separate corporate existence of Doubletree Sub shall cease and Doubletree shall continue as the surviving corporation (the "Doubletree Surviving Corporation"). As a result of the Promus Merger, the separate corporate existence of Promus Sub shall cease and Promus shall continue as the surviving corporation (the "Promus Surviving Corporation" and together with the Doubletree Surviving Corporation, the "Surviving Corporations"). Upon becoming effective, the Mergers shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, (i) all properties, rights, privileges, powers and franchises of Doubletree and Doubletree Sub shall vest in the Doubletree Surviving Corporation, and all debts, liabilities and duties of Doubletree and Doubletree Sub shall become the debts, liabilities and duties of the Doubletree Surviving Corporation and (ii) all properties, rights, privileges, powers and franchises of Promus and Promus Sub shall vest in the Promus Surviving Corporation, and all debts, liabilities and duties of Promus and Promus Sub shall become the debts, liabilities and duties of the Promus Surviving Corporation. Section 1.7 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATIONS. At the Effective Time, (i) the Certificate of Incorporation and Bylaws of the Doubletree Surviving Corporation shall be amended to be identical to the Certificate of Incorporation and Bylaws, respectively, of Doubletree Sub as in effect immediately prior to the Effective Time (except that the name of the Doubletree Surviving Corporation shall be Doubletree Inc.), in each case until duly amended in accordance with applicable law, and (ii) the Certificate of Incorporation and Bylaws of the Promus Surviving Corporation shall be amended to be identical to the Certificate of Incorporation and Bylaws, respectively, of Promus Sub as in effect immediately prior to the Effective Time (except that the name of the Promus Surviving Corporation shall be Promus Acquisition Corp.), in each case until duly amended in accordance with applicable law. Section 1.8 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATIONS (a) DOUBLETREE SURVIVING CORPORATION. The directors of Doubletree Sub immediately prior to the Effective Time shall be the initial directors of the Doubletree Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Doubletree Surviving Corporation. The officers of Doubletree immediately prior to the 3 Effective Time shall be the initial officers of the Doubletree Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Doubletree Surviving Corporation. (b) PROMUS SURVIVING CORPORATION. The directors of Promus Sub immediately prior to the Effective Time shall be the initial directors of the Promus Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Promus Surviving Corporation. The officers of Promus immediately prior to the Effective Time shall be the initial officers of the Promus Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Promus Surviving Corporation. ARTICLE II. CONVERSION OF SECURITIES Section 2.1 CONVERSION OF DOUBLETREE CAPITAL STOCK. At the Effective Time, by virtue of the Doubletree Merger and without any action on the part of any of the parties hereto or the holders of any shares of Common Stock, par value $.01 per share, of Doubletree ("Doubletree Common Stock") or common stock of Doubletree Sub: (a) CAPITAL STOCK OF DOUBLETREE SUB. Each issued and outstanding share of the common stock, par value $.01 per share, of Doubletree Sub shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.01 per share, of the Doubletree Surviving Corporation. (b) CANCELLATION OF TREASURY STOCK AND PROMUS-OWNED STOCK. All shares of Doubletree Common Stock that are owned by Doubletree as treasury stock and any shares of Doubletree Common Stock owned by Promus or any wholly-owned Subsidiary (as defined in Section 3.1) of Promus shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) EXCHANGE RATIO FOR DOUBLETREE COMMON STOCK. Subject to Section 2.4(e), each issued and outstanding share of Doubletree Common Stock (other than shares to be canceled in accordance with Section 2.1(b)) shall be converted into the right to receive one share (the "Doubletree Exchange Ratio") of Common Stock, par value $.01 per share, of Parent ("Parent Common Stock"). All such shares of Doubletree Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any ownership or other rights with respect thereto, except the right to receive the shares of Parent Common Stock and an amount equal to certain dividends and other distributions described in Section 2.4(c), without interest, upon the surrender of such certificate in accordance with Section 2.4. Section 2.2 CONVERSION OF PROMUS CAPITAL STOCK. At the Effective Time, by virtue of the Promus Merger and without any action on the part of any of the parties hereto or the holders 4 of any shares of Common Stock, par value $.10 per share, of Promus ("Promus Common Stock") or common stock of Promus Sub: (a) CAPITAL STOCK OF PROMUS SUB. Each issued and outstanding share of the common stock, par value $.01 per share, of Promus Sub shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.01 per share, of the Promus Surviving Corporation. (b) CANCELLATION OF TREASURY STOCK AND DOUBLETREE-OWNED STOCK. All shares of Promus Common Stock that are owned by Promus as treasury stock and any shares of Promus Common Stock owned by Doubletree or any wholly-owned Subsidiary (as defined in Section 3.1) of Doubletree shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) EXCHANGE RATIO FOR PROMUS COMMON STOCK. Subject to Section 2.4(e), each issued and outstanding share of Promus Common Stock (other than shares to be canceled in accordance with Section 2.2(b)) shall be converted into the right to receive 0.925 shares (the "Promus Exchange Ratio") of Parent Common Stock. All such shares of Promus Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any ownership or other rights with respect thereto, except the right to receive the shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration therefor and an amount equal to certain dividends and other distributions described in Section 2.4(c), in each case upon the surrender of such certificate in accordance with Section 2.4 and without interest. Section 2.3 CANCELLATION OF PARENT STOCK. At the Effective Time, by virtue of the Mergers and without any action on the part of any holder of any capital stock of Doubletree, Promus or Parent, each share of Parent Common Stock issued and outstanding immediately prior to the Effective Time shall be surrendered and canceled, and the amount paid by Doubletree and Promus for the shares of Parent Common Stock held by them shall be returned by Parent to them. Section 2.4 EXCHANGE OF CERTIFICATES. The procedures for exchanging certificates which prior to the Effective Time represented shares of Doubletree Common Stock and Promus Common Stock for certificates representing Parent Common Stock pursuant to the Mergers are as follows: (a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit with a bank or trust company designated by Promus and Doubletree (the "Exchange Agent"), for the benefit of the holders of shares of Doubletree Common Stock and shares of Promus Common Stock outstanding immediately prior to the Effective Time, for exchange in accordance with this Section 2.4, through the Exchange Agent, certificates representing the shares of Parent Common Stock and, with respect to shares of Promus Common Stock, cash in lieu of fractional shares (such shares of Parent Common Stock and cash in lieu of fractional shares, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange 5 Fund"), issuable pursuant to Sections 2.1 and 2.2 in exchange for shares of Doubletree Common Stock and Promus Common Stock, respectively, outstanding immediately prior to the Effective Time. (b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Doubletree Common Stock or Promus Common Stock (collectively, the "Certificates") whose shares were converted pursuant to Section 2.1 or Section 2.2 into the right to receive shares of Parent Common Stock (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Doubletree and Promus may reasonably specify) and (ii) instructions for effecting the surrender of the Certificates in exchange for certificates representing shares of Parent Common Stock (plus cash in lieu of fractional shares, if any, of Parent Common Stock as provided below). Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Parent Common Stock, the amount of any cash payable in lieu of fractional shares of Parent Common Stock (with respect to shares of Promus Common Stock) and an amount equal to certain dividends and other distributions which such holder has the right to receive pursuant to the provisions of this Article II, and the Certificate so surrendered shall immediately be canceled. In the event of a transfer of ownership of Doubletree Common Stock or Promus Common Stock prior to the Effective Time which is not registered in the transfer records of Doubletree or Promus, respectively, a certificate representing the number of shares of Parent Common Stock issuable and any amounts payable in accordance with this Agreement may be issued and paid to a transferee if the Certificate representing such Doubletree Common Stock or Promus Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. (c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No amount in respect of dividends or other distributions declared or made after the Effective Time with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock the holder thereof is entitled to receive in respect thereof and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to subsection (e) below until the holder of record of such Certificate shall surrender such Certificate to Parent in accordance herewith. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a fractional share of Parent Common Stock to which such holder is entitled pursuant to subsection (e) below and an amount equal to the amount of dividends or other distributions with a record date after the Effective Time previously paid with respect to whole shares of Parent Common Stock, and (ii) at the appropriate payment date, an amount equal to the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender 6 and a payment date subsequent to surrender payable with respect to whole shares of Parent Common Stock, in each case without interest. (d) NO FURTHER OWNERSHIP RIGHTS IN DOUBLETREE COMMON STOCK AND PROMUS COMMON STOCK. All shares of Parent Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms hereof (including any cash paid pursuant to subsection (c) or (e) of this Section 2.4) shall be deemed to have been issued in full satisfaction of all rights pertaining to the shares of Doubletree Common Stock or Promus Common Stock theretofore represented by such Certificates, subject, however, to the applicable Surviving Corporation's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Doubletree on such shares of Doubletree Common Stock or by Promus on such shares of Promus Common Stock, as the case may be, in accordance with the terms of this Agreement (to the extent permitted under Section 5.1) prior to the date hereof and which remain unpaid at the Effective Time, and from and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Doubletree Surviving Corporation or the Promus Surviving Corporation, as the case may be, of the shares of Doubletree Common Stock or Promus Common Stock, respectively, which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to one of the Surviving Corporations or Parent for any reason, such Certificates shall be canceled and exchanged as provided in this Section 2.4. (e) NO FRACTIONAL SHARES. No certificate or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates representing shares of Promus Common Stock, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. Notwithstanding any other provision of this Agreement, each holder of shares of Promus Common Stock outstanding immediately prior to the Effective Time exchanged pursuant to the Promus Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock (after taking into account all Certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Parent Common Stock multiplied by the per share sales price of Parent Common Stock (as reported on the New York Stock Exchange Composite Tape) on the closing of the first day of regular-way trading of Parent Common Stock on the New York Stock Exchange (the "NYSE") after the Effective Time. (f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which remains undistributed to the former stockholders of Doubletree or Promus for 180 days after the Effective Time shall be delivered to Parent upon demand, and any former stockholder of Doubletree or Promus who has not previously complied with this Section 2.4 shall thereafter look only to Parent for payment of such former stockholder's claim for Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock and any amounts in respect of dividends or distributions with respect to Parent Common Stock. (g) NO LIABILITY. None of Doubletree, Promus, Parent or the Exchange Agent shall be liable to any holder of shares of Doubletree Common Stock or Promus Common Stock, as the case may be, for any shares of Parent Common Stock (or cash in lieu of fractional shares of 7 Parent Common Stock or any dividends or distributions with respect thereto) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (h) WITHHOLDING RIGHTS. Parent and each of the Surviving Corporations shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Certificates which prior to the Effective Time represented shares of Doubletree Common Stock or Promus Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or one of the Surviving Corporations, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Doubletree Common Stock or Promus Common Stock, as the case may be, in respect of which such deduction and withholding was made. (i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or one of the Surviving Corporations, the posting by such person of a bond in such reasonable amount as Parent or such Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of Parent Common Stock and any cash in lieu of fractional shares, and unpaid dividends and distributions on shares of Parent Common Stock deliverable in respect thereof pursuant to this Agreement. (j) AFFILIATES. Notwithstanding anything herein to the contrary, Certificates surrendered for exchange by any Affiliate (as defined in Section 5.12) of Doubletree or Promus shall not be exchanged until (i) Parent has received an Affiliate Agreement (as defined in Section 5.12) from such Affiliate or (ii) until the later of such date as such shares of Parent Common Stock are freely tradable without jeopardizing the pooling of interests accounting treatment of the Mergers and without violating the Securities Act of 1933, as amended (the "Securities Act"). ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DOUBLETREE Doubletree represents and warrants to Promus that the statements contained in this Article III are true and correct except as set forth herein and in the disclosure schedule delivered by Doubletree to Promus on or before the date of this Agreement (the "Doubletree Disclosure Schedule"). The Doubletree Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III and the disclosure in any paragraph shall qualify other paragraphs in this Article III only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other paragraphs. Section 3.1. ORGANIZATION OF DOUBLETREE. Each of Doubletree and its Subsidiaries (as defined below) is duly organized, validly existing and in good standing under the laws of the 8 jurisdiction of its organization, has all requisite power to own, lease and operate its property and to carry on its business as now being conducted and as proposed to be conducted, and is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, properties, financial condition or results of operations of Doubletree and its Subsidiaries, taken as a whole (an "Doubletree Material Adverse Effect"). A true and correct copy of the Certificate of Incorporation and Bylaws of Doubletree has been delivered to Promus. Except as set forth in Doubletree SEC Reports (as defined in Section 3.4) filed prior to the date hereof, neither Doubletree nor any of its Subsidiaries directly or indirectly owns (other than ownership interests in Doubletree or in one or more of its Subsidiaries) any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity, excluding (i) securities in any publicly traded company held for investment by Doubletree and comprising less than five percent (5%) of the outstanding stock of such company and (ii) any investment or series of related investments with a book value of less than $15 million. As used in this Agreement, the word "Subsidiary" means, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner (excluding partnerships the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the economic interests in such partnership) or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. Section 3.2. DOUBLETREE CAPITAL STRUCTURE. (a) The authorized capital stock of Doubletree consists of 100,000,000 shares of Common Stock, $.01 par value, and 5,000,000 shares of Preferred Stock, $.01 par value ("Doubletree Preferred Stock"). As of the date hereof, (i) 39,688,458 shares of Doubletree Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable and (ii) no shares of Doubletree Common Stock were held in the treasury of Doubletree or by Subsidiaries of Doubletree. The Doubletree Disclosure Schedule shows the number of shares of Doubletree Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of the date hereof and the plans under which such options were granted (collectively, the "Doubletree Stock Plans"). As of the date of this Agreement, none of the shares of Doubletree Preferred Stock is issued and outstanding. There are no obligations, contingent or otherwise, of Doubletree or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Doubletree Common Stock or the capital stock of any Subsidiary or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations or indebtedness for borrowed money of Subsidiaries entered into in the ordinary course of business and other than any obligation the failure of which to perform or satisfy would not have a Doubletree Material Adverse Effect. All of the outstanding shares of capital stock or other ownership interests of each of Doubletree's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and all such shares (other than directors' qualifying shares in 9 the case of foreign Subsidiaries) are owned by Doubletree or another Subsidiary of Doubletree free and clear of all security interests, liens, claims, pledges, agreements, limitations in Doubletree's voting rights, charges or other encumbrances of any nature. (b) Except as set forth in this Section 3.2 or as reserved for future grants of options under the Doubletree Stock Plans or the Promus Stock Option Agreement and except for the preferred stock purchase rights issued and issuable under the Rights Agreement dated as of September 1, 1997 between Doubletree and Harris Trust Company of California (the "Doubletree Rights Plan"), options to purchase an aggregate of 20,000 shares of Doubletree Common Stock, issued on June 30, 1994, to GE Investment Hotel Partners I, Limited Partnership and the Warrants to purchase an aggregate of 262,753 shares of Doubletree Common Stock, issued on November 8, 1996, to PT Investments Inc. (the "GEPT Warrant"), (i) there are no shares of capital stock of any class of Doubletree, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Doubletree or any of its Subsidiaries is a party or by which it is bound obligating Doubletree or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other ownership interests of Doubletree or any of its Subsidiaries or obligating Doubletree or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) to the best knowledge of Doubletree, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of Doubletree. All shares of Doubletree Common Stock subject to issuance as specified in this Section 3.2 are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. Section 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Doubletree has all requisite corporate power and authority to enter into this Agreement and the Stock Option Agreements and to consummate the transactions contemplated by this Agreement and the Stock Option Agreements. The execution and delivery of this Agreement and the Stock Option Agreements and the consummation of the transactions contemplated by this Agreement and the Stock Option Agreements by Doubletree have been duly authorized by all necessary corporate action on the part of Doubletree, subject only to the approval and adoption of this Agreement and the Doubletree Merger by Doubletree's stockholders under the DGCL. This Agreement and the Stock Option Agreements have been duly executed and delivered by Doubletree and constitute the valid and binding obligations of Doubletree, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (the "Bankruptcy and Equity Exception"). (b) The execution and delivery of this Agreement and the Stock Option Agreements by Doubletree does not, and the consummation of the transactions contemplated by this Agreement and the Stock Option Agreements will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of Doubletree 10 or any of its Subsidiaries, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which Doubletree or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (other than pursuant to the Credit Agreement dated as of November 8, 1996 by and among Doubletree, Morgan Stanley Senior Funding, Inc., The Bank of Nova Scotia and the lenders identified therein) or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Doubletree or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which (x) are not, individually or in the aggregate, reasonably likely to have a Doubletree Material Adverse Effect or (y) would not substantially impair or delay the consummation of the Doubletree Merger. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to Doubletree or any of its Subsidiaries in connection with the execution and delivery of this Agreement and the Stock Option Agreements or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of the pre-merger notification report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of a Certificate of Merger with respect to the Doubletree Merger with the Delaware Secretary of State, (iii) the filing of the Joint Proxy Statement/Prospectus (as defined in Section 3.16 below) with the Securities and Exchange Commission (the "SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act, (iv) such consents, approvals, orders, authorizations, permits, filings or registrations related to, or arising out of, compliance with statutes, rules or regulations regulating the consumption, sale or serving of alcoholic beverages, (v) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities laws and the laws of any foreign country and (vi) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not (x) be reasonably likely to have a Doubletree Material Adverse Effect or (y) substantially impair or delay the consummation of the Doubletree Merger. Section 3.4 SEC FILINGS; FINANCIAL STATEMENTS. (a) Doubletree has filed and made available to Promus all forms, reports and documents required to be filed by Doubletree with the SEC since January 1, 1996 (collectively, the "Doubletree SEC Reports"). The Doubletree SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Doubletree SEC Reports or necessary in order to make the statements in such Doubletree SEC 11 Reports, in the light of the circumstances under which they were made, not misleading. None of Doubletree's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes) of Doubletree contained in the Doubletree SEC Reports complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q under the Exchange Act) and fairly presented the consolidated financial position of Doubletree and its Subsidiaries as of the dates and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. The audited balance sheet of Doubletree as of December 31, 1996 is referred to herein as the "Doubletree Balance Sheet." Section 3.5 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Doubletree SEC Reports filed prior to the date hereof, and except for normal or recurring liabilities incurred since December 31, 1996 in the ordinary course of business consistent with past practices, Doubletree and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate are reasonably likely to have a Doubletree Material Adverse Effect. Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Doubletree SEC Reports filed prior to the date hereof, since the date of the Doubletree Balance Sheet, Doubletree and its Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been (i) any event, development, state of affairs or condition, or series or combination of events, developments, states of affairs or conditions, which, individually or in the aggregate, has had or is reasonably likely to have a Doubletree Material Adverse Effect (other than events, developments, states of affairs or conditions that are the effect or result of actions taken by Promus or economic factors affecting the economy as a whole or the industry in which Doubletree competes); (ii) any damage, destruction or loss (whether or not covered by insurance) with respect to Doubletree or any of its Subsidiaries which is reasonably likely to have a Doubletree Material Adverse Effect; (iii) any material change by Doubletree in its accounting methods, principles or practices to which Promus has not previously consented in writing; (iv) any revaluation by Doubletree of any of its assets which is reasonably likely to have a Doubletree Material Adverse Effect; or (v) any other action or event that would have required the consent of Promus pursuant to Section 5.1 of this Agreement had such action or event occurred after the date of this Agreement other than such actions or events that, individually or in the aggregate, have not had or are not reasonably likely to have a Doubletree Material Adverse Effect. 12 Section 3.7 TAXES. (a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes," means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, gains, franchise, withholding, payroll, recapture, employment, excise, unemployment insurance, social security, business license, occupation, business organization, stamp, environmental and property taxes, together with all interest, penalties and additions imposed with respect to such amounts. For purposes of this Agreement, "Taxes" also includes any obligations under any agreements or arrangements with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Sections 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity. (b) Doubletree and each of its Subsidiaries have (i) filed all federal, state, local and foreign Tax returns and reports required to be filed by them prior to the date of this Agreement (taking into account all applicable extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clauses (i), (ii) or (iii) for any such filings, payments or accruals that are not reasonably likely, individually or in the aggregate, to have a Doubletree Material Adverse Effect. Neither the Internal Revenue Service (the "IRS") nor any other taxing authority has asserted any claim for Taxes, or to the actual knowledge of the executive officers of Doubletree, is threatening to assert any claims for Taxes, which claims, individually or in the aggregate, are reasonably likely to have a Doubletree Material Adverse Effect. Doubletree and each of its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected, except for amounts that are not reasonably likely, individually or in the aggregate, to have a Doubletree Material Adverse Effect. Neither Doubletree nor any of its Subsidiaries has made an election under Section 341(f) of the Code, except for any such election that shall not have a Doubletree Material Adverse Effect. There are no liens for Taxes upon the assets of Doubletree or any of its Subsidiaries (other than liens for Taxes that are not yet due or delinquent or that are being contested in good faith by appropriate proceedings), except for liens that are not reasonably likely, individually or in the aggregate, to have a Doubletree Material Adverse Effect. (c) Neither Doubletree nor any of its Subsidiaries is or has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) for any taxable period beginning on or after the taxable period ending December 31, 1993, other than a group the common parent of which is or was Doubletree or any Subsidiary of Doubletree. (d) Neither Doubletree nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Sections 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity, except for obligations 13 that are not reasonably likely, individually or in the aggregate, to have a Doubletree Material Adverse Effect. Section 3.8 PROPERTIES. (a) Neither Doubletree nor any of its Subsidiaries is in default under any leases for real property providing for the occupancy, in each case, of (i) a hotel or (ii) other facilities in excess of 50,000 square feet (collectively "Material Lease(s)"), except where the existence of such defaults, individually or in the aggregate, is not reasonably likely to have a Doubletree Material Adverse Effect. (b) With respect to each item of real property that Doubletree or any of its Subsidiaries owns, except for such matters that, individually or in the aggregate, are not reasonably likely to have a Doubletree Material Adverse Effect: (i) Doubletree or its Subsidiary has good and clear record and marketable title to such property, insurable by a recognized national title insurance company at standard rates, free and clear of any security interest, easement, covenant or other restriction, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or occupancy of such property; and (ii) the improvements constructed on such property are in good condition, and all mechanical and utility systems servicing such improvements are in good condition, free in each case of material defects. Section 3.9 INTELLECTUAL PROPERTY. Doubletree owns, or is licensed or otherwise possesses legally enforceable rights to use, all trademarks, trade names, service marks, copyrights, and any applications for such trademarks, trade names, service marks and copyrights, know-how, computer software programs or applications and tangible or intangible proprietary information or material that are necessary to conduct the business of Doubletree as currently conducted, subject to such exceptions that, individually and in the aggregate, would not be reasonably likely to have a Doubletree Material Adverse Effect. Doubletree has no knowledge of any assertion or claim challenging the validity of any of such intellectual property. Section 3.10. AGREEMENTS, CONTRACTS AND COMMITMENTS. (a) Doubletree has not breached, or received in writing any claim or notice that it has breached, any of the terms or conditions of any material agreement, contract or commitment filed as an exhibit to the Doubletree SEC Reports ("Doubletree Material Contracts") in such a manner as, individually or in the aggregate, are reasonably likely to have a Doubletree Material Adverse Effect. Each Doubletree Material Contract that has not expired by its terms is in full force and effect. (b) Without limiting Section 3.10(a), each of the management contracts and franchise agreements to which Doubletree is a party and each of Doubletree's Material Leases (i) is valid and binding in accordance with its terms and is in full force and effect, (ii) neither Doubletree nor any of its Subsidiaries is in default in any material respect thereof, nor does any condition exist that with notice or lapses of time or both would constitute a material default thereunder, and (iii) no party has given any written or (to the knowledge of Doubletree) oral 14 notice of termination or cancellation thereof or that such party intends to assert a breach thereof, or seek to terminate or cancel, any such agreement, contract or lease, in each case as a result of the transactions contemplated hereby, subject to such exceptions that, individually and in the aggregate, would not be reasonably likely to have a Doubletree Material Adverse Effect. Section 3.11. LITIGATION. Except as described in the Doubletree SEC Reports filed prior to the date hereof, there is no action, suit or proceeding, claim, arbitration or investigation against Doubletree pending or as to which Doubletree has received any written notice of assertion, which, individually or in the aggregate, is reasonably likely to have a Doubletree Material Adverse Effect or a material adverse effect on the ability of Doubletree to consummate the transactions contemplated by this Agreement. Section 3.12. ENVIRONMENTAL MATTERS. (a) To the knowledge of Doubletree and except as disclosed in the Doubletree SEC Reports filed prior to the date hereof and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Doubletree Material Adverse Effect: (i) Doubletree and its Subsidiaries have complied with all applicable Environmental Laws (as defined in Section 3.12(b)); (ii) the properties currently owned or operated by Doubletree and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances (as defined in Section 3.12(c)); (iii) the properties formerly owned or operated by Doubletree or any of its Subsidiaries were not contaminated with Hazardous Substances during the period of ownership or operation by Doubletree or any of its Subsidiaries; (iv) neither Doubletree nor its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination on any third party property; (v) neither Doubletree nor any of its Subsidiaries has been associated with any release or threat of release of any Hazardous Substance; (vi) neither Doubletree nor any of its Subsidiaries has received any notice, demand, letter, claim or request for information alleging that Doubletree or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (vii) neither Doubletree nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; and (viii) there are no circumstances or conditions involving Doubletree or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of Doubletree or any of its Subsidiaries pursuant to any Environmental Law. (b) As used herein, the term "Environmental Law" means any federal, state, local or foreign law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health and safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property. (c) As used herein, the term "Hazardous Substance" means any substance that is: (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product 15 or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any other substance which is the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law. Section 3.13. EMPLOYEE BENEFIT PLANS. (a) For purposes of this Agreement, the "Doubletree Employee Plans" shall mean all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar employee benefit plans, and all unexpired severance agreements, written or otherwise, for the benefit of, or relating to, any current or former employee of Doubletree or any trade or business (whether or not incorporated) which is under common control with Doubletree within the meaning of Section 414 of the Code (an "ERISA Affiliate"), or any Subsidiary of Doubletree (together, the "Doubletree Employee Plans"). Doubletree has listed in Section 3.13 of the Doubletree Disclosure Schedule all Doubletree Employee Plans other plans that are "employee welfare benefit plans" within the meaning of Section 3(1) of ERISA. (b) With respect to each Doubletree Employee Plan, Doubletree has made available to Promus, a true and correct copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii) such Doubletree Employee Plan and all amendments thereto, (iii) each trust agreement and group annuity contract, if any, and all amendments thereto relating to such Doubletree Employee Plan and (iv) the most recent actuarial report or valuation relating to a Doubletree Employee Plan subject to Title IV of ERISA. (c) With respect to the Doubletree Employee Plans, individually and in the aggregate, no event has occurred, and to the knowledge of Doubletree, there exists no condition or set of circumstances in connection with which Doubletree could be subject to any liability that is reasonably likely to have a Doubletree Material Adverse Effect under ERISA, the Code or any other applicable law. (d) With respect to the Doubletree Employee Plans, individually and in the aggregate, there are no funded benefit obligations for which contributions have not been made or properly accrued and there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with generally accepted accounting principles, on the financial statements of Doubletree, except for obligations which, individually or in the aggregate, are not reasonably likely to have a Doubletree Material Adverse Effect. (e) Except as disclosed in the Doubletree SEC Reports filed prior to the date of this Agreement, and except as provided for in this Agreement, neither Doubletree nor any of its Subsidiaries is a party to any oral or written (i) agreement with any officer or other key employee of Doubletree or any of its Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving Doubletree of the nature contemplated by this Agreement, (ii) agreement with any officer of Doubletree providing any term of employment or compensation guarantee extending for a period longer than one year 16 from the date hereof and for the payment of compensation in excess of $100,000 per annum, or (iii) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, the vesting of the benefits of which will be accelerated or the funding of benefits of which will be required, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Section 3.14. COMPLIANCE WITH LAWS. Doubletree has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state or local statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Doubletree Material Adverse Effect. Section 3.15 ACCOUNTING AND TAX MATTERS. (a) To the best knowledge of Doubletree, after consulting with its independent auditors with respect to clause (i) below and its tax advisors with respect to clause (ii) below, neither Doubletree nor any of its Affiliates (as defined in Section 5.12) has taken or agreed to take any action which would (i) prevent Parent from accounting for the business combination to be effected by the Mergers as a pooling of interests or (ii) prevent the Doubletree Merger from qualifying as a reorganization described in Section 368(a) of the Code and/or, taken together with the Promus Merger, as a transfer of property to Parent by holders of Doubletree Common Stock described in Section 351 of the Code. Except as contemplated by the Doubletree Option Agreement, neither Doubletree nor any of its Subsidiaries owns any shares of Promus Common Stock or other securities convertible into shares of Promus Common Stock (exclusive of any shares owned by Doubletree's employee benefit plans). (b) To the best knowledge of Doubletree, the stockholders of Doubletree as a group have no present plan, intention or arrangement to sell or otherwise dispose of such number of the shares of Parent Common Stock received in the Doubletree Merger as would reduce their ownership in Parent Common Stock to a number of shares having a value, as of the date of the Doubletree Merger, of less than eighty percent (80%) of the value of all the formerly outstanding stock of Doubletree as of the same date. Section 3.16. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS. The information to be supplied by Doubletree for inclusion in the registration statement on Form S-4 pursuant to which shares of Parent Common Stock issued in the Mergers will be registered under the Securities Act (the "Registration Statement"), shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information supplied by Doubletree for inclusion in the joint proxy statement/prospectus to be sent to the stockholders of Promus and Doubletree in connection with the meeting of Doubletree's stockholders (the "Doubletree Stockholders' Meeting") and the meeting of Promus's stockholders (the "Promus Stockholders' Meeting") to consider this 17 Agreement and the Mergers (the "Joint Proxy Statement/Prospectus") shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of Doubletree or Promus, at the time of the Doubletree Stockholders' Meeting and the Promus Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Doubletree Stockholders' Meeting or the Promus Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to Doubletree or any of its Affiliates, officers or directors should be discovered by Doubletree which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, Doubletree shall promptly inform Promus. Section 3.17. LABOR MATTERS. Except as disclosed in the Doubletree SEC Reports filed prior to the date hereof, neither Doubletree nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor, as of the date hereof, is Doubletree or any of its Subsidiaries the subject of any material proceeding asserting that Doubletree or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization nor, as of the date of this Agreement, is there pending or, to the knowledge of the executive officers of Doubletree, threatened, any material labor strike, dispute, walkout, work stoppage, slow-down or lockout involving Doubletree or any of its Subsidiaries. Section 3.18. INSURANCE. All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by Doubletree or any of its Subsidiaries are with reputable insurance carriers, provide full and adequate coverage for all normal risks incident to the business of Doubletree and its Subsidiaries and their respective properties and assets, and are in character and amount at least equivalent to that carried by persons engaged in similar businesses and subject to the same or similar perils or hazards, except for any such failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a Doubletree Material Adverse Effect. Section 3.19. DOUBLETREE LONG-RANGE PLANS. Doubletree has provided to Promus copies of Doubletree's most recent long-range plans prepared in draft form by Doubletree's management and Doubletree has not adopted any other long-range plans since January 1, 1997. Section 3.20. OPINION OF FINANCIAL ADVISOR. The financial advisor of Doubletree, Morgan Stanley & Co. Incorporated, has delivered to Doubletree an opinion dated the date of this Agreement to the effect that the Doubletree Exchange Ratio is fair to the holders of Doubletree Common Stock from a financial point of view. Section 3.21. NO EXISTING DISCUSSIONS. As of the date hereof, Doubletree is not engaged, directly or indirectly, in any discussions or negotiations with any other party with respect to an Acquisition Proposal (as defined in Section 5.3). 18 Section 3.22. SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions contained in Section 203 of the DGCL applicable to a "business combination" (as defined in DGCL Section 203) will not apply to the authorization, execution, delivery and performance of this Agreement or the Stock Option Agreements by Doubletree or the Stockholder Support Agreement by the parties thereto or the consummation of the Doubletree Merger by Doubletree. No other "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation is applicable to Doubletree or (by reason of Doubletree's participation therein) the Doubletree Merger or the other transactions contemplated by this Agreement. Section 3.23. DOUBLETREE RIGHTS PLAN. Under the terms of the Doubletree Rights Plan, neither the execution of this Agreement, the Promus Stock Option Agreement, the Stockholder Support Agreement, nor the transactions contemplated hereby or thereby, will cause a Distribution Date to occur or cause the rights issued pursuant to the Doubletree Rights Plan to become exercisable, and all such rights shall become non-exercisable at the Effective Time. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PROMUS Promus represents and warrants to Doubletree that the statements contained in this Article IV are true and correct, except as set forth in the disclosure schedule delivered by Promus to Doubletree on or before the date of this Agreement (the "Promus Disclosure Schedule"). The Promus Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article IV and the disclosure in any paragraph shall qualify other paragraphs in this Article IV only to the extent that it is reasonably apparent from a reading of such document that it also qualifies or applies to such other paragraphs. Section 4.1 ORGANIZATION OF PROMUS. Each of Promus and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power to own, lease and operate its property and to carry on its business as now being conducted and as proposed to be conducted, and is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, properties, financial condition or results of operations of Promus and its Subsidiaries, taken as a whole (a "Promus Material Adverse Effect"). A true and correct copy of the Certificate of Incorporation and Bylaws of Promus has been delivered to Doubletree. Except as set forth in the Promus SEC Reports (as defined in Section 4.4) filed prior to the date hereof, neither Promus nor any of its Subsidiaries directly or indirectly owns (other than ownership interests in Promus or in one or more of its Subsidiaries) any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity, excluding (i) securities in any publicly traded company held for investment by Promus and comprising less than five percent (5%) of the outstanding stock of such company and (ii) any investment or series of related investments with a book value of less than $15 million. 19 Section 4.2. PROMUS CAPITAL STRUCTURE. (a) The authorized capital stock of Promus consists of 360,000,000 shares of Common Stock, $.10 par value, 150,000 shares of Preferred Stock, $100.00 par value ("Promus Preferred Stock") and 5,000,000 shares of Special Stock, par value $1.12-1/2" ("Promus Special Stock"). As of the date hereof, (i) 49,896,911 shares of Promus Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, and (ii) 1,580,101 additional shares of Promus Common Stock were held in the treasury of Promus or by Subsidiaries of Promus. The Promus Disclosure Schedule shows the number of shares of Promus Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of the date hereof and the plans under which such options were granted (collectively, the "Promus Stock Plans"). As of the date of this Agreement, none of the shares of Promus Preferred Stock or Promus Special Stock are issued and outstanding. There are no obligations, contingent or otherwise, of Promus or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Promus Common Stock or the capital stock of any Subsidiary or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations or indebtedness for borrowed money of Subsidiaries entered into in the ordinary course of business and other than any obligation the failure of which to perform or satisfy would not have a Promus Material Adverse Effect. All of the outstanding shares of capital stock or other ownership interests of each of Promus's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are owned by Promus or another Subsidiary of Promus free and clear of all security interests, liens, claims, pledges, agreements, limitations in Promus's voting rights, charges or other encumbrances of any nature. (b) Except as set forth in this Section 4.2 or as reserved for future grants of options under the Promus Stock Plans or the Doubletree Stock Option Agreement, and except for the preferred stock purchase rights issued and issuable under the Rights Agreement dated as of June 30, 1995 between Promus and Continental Stock Transfer & Trust Company (the "Promus Rights Plan"), (i) there are no shares of capital stock of any class of Promus, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Promus or any of its Subsidiaries is a party or by which it is bound obligating Promus or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other ownership interests of Promus or any of its Subsidiaries or obligating Promus or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) to the best knowledge of Promus, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of Promus. All shares of Promus Common Stock subject to issuance as specified in this Section 4.2 are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. 20 Section 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Promus has all requisite corporate power and authority to enter into this Agreement, the Stock Option Agreements and the Stockholder Support Agreement and to consummate the transactions contemplated by this Agreement, the Stock Option Agreements and the Stockholder Support Agreement. The execution and delivery of this Agreement, the Stock Option Agreements and the Stockholder Support Agreement and the consummation of the transactions contemplated by this Agreement, the Stock Option Agreements and the Stockholder Support Agreement by Promus have been duly authorized by all necessary corporate action on the part of Promus, subject only to the approval and adoption of this Agreement and the Promus Merger by Promus's stockholders under the DGCL. This Agreement, the Stock Option Agreements and the Stockholder Support Agreement have been duly executed and delivered by Promus and constitute the valid and binding obligations of Promus, enforceable in accordance with their terms, subject to the Bankruptcy and Equity Exception. (b) The execution and delivery of this Agreement, the Stock Option Agreements and the Stockholder Support Agreement by Promus does not, and the consummation of the transactions contemplated by this Agreement, the Stock Option Agreements and the Stockholder Support Agreement will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of Promus or any of its Subsidiaries, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which Promus or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (other than pursuant to the Tranche A Credit Agreement or the Tranche B Credit Agreement, each dated as of June 7, 1995, as amended, by and among Promus and certain of its subsidiaries and NationsBank, N.A. (Carolinas)) or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Promus or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which (x) are not, individually or in the aggregate, reasonably likely to have a Promus Material Adverse Effect or (y) would not substantially impair or delay the consummation of the Promus Merger. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Promus or any of its Subsidiaries in connection with the execution and delivery of this Agreement, the Stock Option Agreements and the Stockholder Support Agreement or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of the pre-merger notification report under the HSR Act, (ii) the filing of a Certificate of Merger with respect to the Promus Merger with the Delaware Secretary of State, (iii) the filing of the Joint Proxy Statement/Prospectus with the SEC in accordance with the Exchange Act and the Securities Act, (iv) such consents, approvals, orders, authorizations, permits, filings, or registrations related to, or arising out of, compliance with statutes, rules or regulations regulating the consumption, sale or serving of alcoholic beverages, (v) such consents, approvals, orders, authorizations, registrations, 21 declarations and filings as may be required under applicable state securities laws and the laws of any foreign country and (vi) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not (x) be reasonably likely to have a Promus Material Adverse Effect or (y) substantially impair or delay the consummation of the Promus Merger. Section 4.4. SEC FILINGS; FINANCIAL STATEMENTS. (a) Promus has filed and made available to Doubletree all forms, reports and documents required to be filed by Promus with the SEC since January 1, 1996 (collectively, the "Promus SEC Reports"). The Promus SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Promus SEC Reports or necessary in order to make the statements in such Promus SEC Reports, in the light of the circumstances under which they were make, not misleading. Other than Promus Hotels, Inc., none of Promus's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes) of Promus contained in the Promus SEC Reports complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q under the Exchange Act) and fairly presented the consolidated financial position of Promus and its Subsidiaries as of the dates and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. The audited balance sheet of Promus as of December 31, 1996 is referred to herein as the "Promus Balance Sheet." Section 4.5. NO UNDISCLOSED LIABILITIES. Except as disclosed in the Promus SEC Reports filed prior to the date hereof, and except for normal or recurring liabilities incurred since December 31, 1996 in the ordinary course of business consistent with past practices, Promus and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate, are reasonably likely to have a Promus Material Adverse Effect. Section 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Promus SEC Reports filed prior to the date hereof, since the date of the Promus Balance Sheet, Promus and its Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been (i) any event, development, state of affairs or condition, or series or combination of events, developments, states of affairs or 22 conditions, which, individually or in the aggregate, has had or which is reasonably likely to have a Promus Material Adverse Effect (other than events, developments, states of affairs or conditions that are the effect or result of actions taken by Doubletree or economic factors affecting the economy as a whole or the industry in which Promus competes); (ii) any damage, destruction or loss (whether or not covered by insurance) with respect to Promus or any of its Subsidiaries which is reasonably likely to have a Promus Material Adverse Effect; (iii) any material change by Promus in its accounting methods, principles or practices to which Doubletree has not previously consented in writing; (iv) any revaluation by Promus of any of its assets which is reasonably likely to have a Promus Material Adverse Effect; or (v) any other action or event that would have required the consent of Doubletree pursuant to Section 5.1 of this Agreement had such action or event occurred after the date of this Agreement, other than such actions or events that, individually or in the aggregate, have not had or are not reasonably likely to have a Promus Material Adverse Effect. Section 4.7. TAXES. (a) Promus and each of its Subsidiaries have (i) filed all federal, state, local and foreign Tax returns and reports required to be filed by them prior to the date of this Agreement (taking into account all applicable extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clauses (i), (ii) or (iii) for any such filings, payments or accruals that are not reasonably likely, individually or in the aggregate, to have a Promus Material Adverse Effect. Neither the IRS nor any other taxing authority has asserted any claim for Taxes, or to the actual knowledge of the executive officers of Promus, is threatening to assert any claims for Taxes, which claims, individually or in the aggregate, are reasonably likely to have a Promus Material Adverse Effect. Promus and each of its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected, except for amounts that are not reasonably likely, individually or in the aggregate, to have a Promus Material Adverse Effect. Neither Promus nor any of its Subsidiaries has made an election under Section 341(f) of the Code, except for any such election that shall not have a Promus Material Adverse Effect. There are no liens for Taxes upon the assets of Promus or any of its Subsidiaries (other than liens for Taxes that are not yet due or delinquent or that are being contested in good faith by appropriate proceedings), except for liens that are not reasonably likely, individually or in the aggregate, to have a Promus Material Adverse Effect. (b) Neither Promus nor any of its Subsidiaries is or has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) for any taxable period beginning on or after February 7, 1990, other than a group the common parent of which is or was The Promus Companies Incorporated, Promus or any Subsidiary of Promus. (c) Neither Promus nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other person with respect to Taxes of such other person 23 (including pursuant to Treas. Reg. SECTION 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity, except for obligations that are not reasonably likely, individually or in the aggregate, to have an Promus Material Adverse Effect. Section 4.8. PROPERTIES. (a) Neither Promus nor any of its Subsidiaries is in default under any Material Leases, except where the existence of such defaults, individually or in the aggregate, is not reasonably likely to have a Promus Material Adverse Effect. (b) With respect to each item of real property that Promus or any of its Subsidiaries owns, except for such matters that, individually or in the aggregate, are not reasonably likely to have a Promus Material Adverse Effect: (i) Promus or its Subsidiary has good and clear record and marketable title to such property, insurable by a recognized national title insurance company at standard rates, free and clear of any security interest, easement, covenant or other restriction, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or occupancy of such property; and (ii) the improvements constructed on such property are in good condition, and all mechanical and utility systems servicing such improvements are in good condition, free in each case of material defects. Section 4.9. INTELLECTUAL PROPERTY. Promus owns, or is licensed or otherwise possesses legally enforceable rights to use, all trademarks, trade names, service marks, copyrights, and any applications for such trademarks, trade names, service marks and copyrights, know-how, computer software programs or applications, and tangible or intangible proprietary information or material that are necessary to conduct the business of Promus as currently conducted, subject to such exceptions that, individually and in the aggregate, would not be reasonably likely to have a Promus Material Adverse Effect. Promus has no knowledge of any assertion or claim challenging the validity of any of such intellectual property. Section 4.10. AGREEMENTS, CONTRACTS AND COMMITMENTS. (a) Promus has not breached, or received in writing any claim or notice that it has breached, any of the terms or conditions of any material agreement, contract or commitment filed as an exhibit to the Promus SEC Reports ("Promus Material Contracts") in such a manner as, individually or in the aggregate, are reasonably likely to have a Promus Material Adverse Effect. Each Promus Material Contract that has not expired by its terms is in full force and effect. (b) Without limiting Section 4.10(a), each of the management contracts and franchise agreements to which Promus is a party and each of Promus's Material Leases (i) is valid and binding in accordance with its terms and is in full force and effect, (ii) neither Promus nor any of its Subsidiaries is in default in any material respect thereof, nor does any condition exist that with notice or lapses of time or both would constitute a material default thereunder, and (iii) no party has given any written or (to the knowledge of Promus) oral notice of termination or cancellation thereof or that such party intends to assert a breach thereof, or seek to terminate or cancel, any such agreement, contract or lease, in each case as a result of the transactions 24 contemplated hereby, subject to such exceptions that, individually and in the aggregate, would not be reasonably likely to have a Promus Material Adverse Effect. Section 4.11. LITIGATION. Except as described in the Promus SEC Reports filed prior to the date hereof, there is no action, suit or proceeding, claim, arbitration or investigation against Promus pending or as to which Promus has received any written notice of assertion, which, individually or in the aggregate, is reasonably likely to have a Promus Material Adverse Effect or a material adverse effect on the ability of Promus to consummate the transactions contemplated by this Agreement. Section 4.12. ENVIRONMENTAL MATTERS. To the knowledge of Promus and except as disclosed in the Promus SEC Reports filed prior to the date hereof and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Promus Material Adverse Effect: (i) Promus and its Subsidiaries have complied with all applicable Environmental Laws; (ii) the properties currently owned or operated by Promus and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances; (iii) the properties formerly owned or operated by Promus or any of its Subsidiaries were not contaminated with Hazardous Substances during the period of ownership or operation by Promus or any of its Subsidiaries; (iv) neither Promus nor its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination on any third party property; (v) neither Promus nor any of its Subsidiaries has been associated with any release or threat of release of any Hazardous Substance; (vi) neither Promus nor any of its Subsidiaries has received any notice, demand, letter, claim or request for information alleging that Promus or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (vii) neither Promus nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; and (viii) there are no circumstances or conditions involving Promus or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of Promus or any of its Subsidiaries pursuant to any Environmental Law. Section 4.13. EMPLOYEE BENEFIT PLANS. (a) For purposes of this Agreement, the "Promus Employee Plans" shall mean all employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar employee benefit plans, and all unexpired severance agreements, written or otherwise, for the benefit of, or relating to, any current or former employee of Promus or any ERISA Affiliate of Promus, or any Subsidiary of Promus (together, the "Promus Employee Plans"). Promus has listed in Section 4.13 of the Promus Disclosure Schedule all Promus Employee Plans other than plans that are "employee welfare benefit plans" within the meaning of Section 3(1) of ERISA. (b) With respect to each Promus Employee Plan, Promus has made available to Doubletree, a true and correct copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii) such Promus Employee Plan and all amendments thereto, (iii) each trust agreement 25 and group annuity contract, if any, and all amendments thereto relating to such Promus Employee Plan and (iv) the most recent actuarial report or valuation relating to a Promus Employee Plan subject to Title IV of ERISA. (c) With respect to the Promus Employee Plans, individually and in the aggregate, no event has occurred, and to the knowledge of Promus, there exists no condition or set of circumstances in connection with which Promus could be subject to any liability that is reasonably likely to have a Promus Material Adverse Effect under ERISA, the Code or any other applicable law. (d) With respect to the Promus Employee Plans, individually and in the aggregate, there are no funded benefit obligations for which contributions have not been made or properly accrued and there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with generally accepted accounting principles, on the financial statements of Promus, except for obligations which, individually or in the aggregate, are not reasonably likely to have a Promus Material Adverse Effect. (e) Except as disclosed in the Promus SEC Reports filed prior to the date of this Agreement, and except as provided for in this Agreement, neither Promus nor any of its Subsidiaries is a party to any oral or written (i) agreement with any officer or other key employee of Promus or any of its Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving Promus of the nature contemplated by this Agreement, (ii) agreement with any officer of Promus providing any term of employment or compensation guarantee extending for a period longer than one year from the date hereof or for the payment of compensation in excess of $100,000 per annum, or (iii) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, the vesting of the benefits of which will be accelerated or the funding of benefits of which will be required, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Section 4.14. COMPLIANCE WITH LAWS. Promus has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state or local statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Promus Material Adverse Effect. Section 4.15. ACCOUNTING AND TAX MATTERS. (a) To the best knowledge of Promus, after consulting with its independent auditors with respect to clause (i) below and its tax advisors with respect to clause (ii) below, neither Promus nor any of its Affiliates (as defined in Section 5.12) has taken or agreed to take any action which would (i) prevent Parent from accounting for the business combination to be effected by the Mergers as a pooling of interests, or (ii) prevent the Promus Merger from qualifying as a reorganization described in Section 368(a) of the Code and/or, taken together 26 with the Doubletree Merger, as a transfer of property to Parent by holders of Promus Common Stock described in Section 351 of the Code. Except as contemplated by the Promus Option Agreement, neither Promus nor any of its Subsidiaries owns any shares of Doubletree Common Stock or other securities convertible into shares of Doubletree Common Stock (exclusive of any shares owned by Promus's employee benefit plans). (b) To the best knowledge of Promus, the stockholders of Promus as a group have no present plan, intention or arrangement to sell or otherwise dispose of such number of the shares of Parent Common Stock received in the Promus Merger as would reduce their ownership in Parent Common Stock to a number of shares having a value, as of the date of the Promus Merger, of less than eighty percent (80%) of the value of all the formerly outstanding stock of Promus as of the same date. Section 4.16. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS. The information to be supplied by Promus for inclusion in the Registration Statement shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information to be supplied by Promus for inclusion in the Joint Proxy Statement/Prospectus shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of Promus or Doubletree, at the time of the Promus Stockholders' Meeting and the Doubletree Stockholder's Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Promus Stockholders' Meeting or the Doubletree Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to Promus or any of its Affiliates, officers or directors should be discovered by Promus which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, Promus shall promptly inform Doubletree. Section 4.17. LABOR MATTERS. Except as disclosed in the Promus SEC Reports filed prior to the date hereof, neither Promus nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor, as of the date hereof, is Promus or any of its Subsidiaries the subject of any material proceeding asserting that Promus or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization nor, as of the date of this Agreement, is there pending or, to the knowledge of the executive officers of Promus, threatened, any material labor strike, dispute, walkout, work stoppage, slow-down or lockout involving Promus or any of its Subsidiaries. Section 4.18. INSURANCE. All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by Promus or any of its Subsidiaries are with reputable insurance carriers, provide full and adequate 27 coverage for all normal risks incident to the business of Promus and its Subsidiaries and their respective properties and assets, and are in character and amount at least equivalent to that carried by persons engaged in similar businesses and subject to the same or similar perils or hazards, except for any such failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a Promus Material Adverse Effect. Section 4.19. PROMUS LONG-RANGE PLANS. Promus has provided to Doubletree copies of Promus's long-range plans that are substantially identical to the long-range plans presented by Promus's management to, and adopted by, the Board of Directors of Promus on July 23, 1997, and Promus has not adopted any other long-range plans since such date. Section 4.20. OPINION OF FINANCIAL ADVISOR. The financial advisor of Promus, BT Wolfensohn, has delivered to Promus an opinion dated the date of this Agreement to the effect that the Promus Exchange Ratio is fair to holders of Promus Common Stock from a financial point of view. Section 4.21. NO EXISTING DISCUSSIONS. As of the date hereof, Promus is not engaged, directly or indirectly, in any discussions or negotiations with any other party with respect to an Acquisition Proposal. Section 4.22. SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions contained in Section 203 of the DGCL applicable to a "business combination" (as defined in Section DGCL 203) will not apply to the authorization, execution, delivery or performance of this Agreement or the Stock Option Agreements by Promus or the consummation of the Promus Merger by Promus. No other "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation is applicable to Promus or (by reason of Promus's participation therein) the Promus Merger or the other transactions contemplated by this Agreement. Section 4.23. PROMUS RIGHTS PLAN. Under the terms of the Promus Rights Plan, neither the execution of this Agreement or the Doubletree Stock Option Agreement, nor the transactions contemplated hereby or thereby will cause a Distribution Date to occur or cause the rights issued pursuant to the Promus Rights Plan to become exercisable, and all such rights shall become non-exercisable at the Effective Time. ARTICLE V COVENANTS Section 5.1. CONDUCT OF BUSINESS. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Doubletree and Promus each agrees as to itself and its respective Subsidiaries (except to the extent that the other party shall otherwise consent in writing) to carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted, to pay its debts and taxes when due subject to good faith disputes over such debts or taxes, to pay or perform its other obligations when due, and, to the extent consistent with such business, use all reasonable efforts consistent with past practices and policies to preserve intact its present 28 business organization, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, and others having business dealings with it. Except as expressly contemplated by this Agreement or the Stock Option Agreements or as set forth in Section 5.1 of the Doubletree Disclosure Schedule, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Doubletree and Promus each shall not (and shall not permit any of its respective Subsidiaries to), without the written consent of the other party: (a) Accelerate, amend or change the period of exercisability of options or restricted stock granted under any employee stock plan of such party or authorize cash payments in exchange for any options granted under any of such plans except as required by the terms of such plans or any related agreements (including severance agreements) in effect as of the date of this Agreement; (b) Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or indirectly, any shares of its capital stock except from former employees, directors and consultants in accordance with agreements providing for the repurchase of shares in connection with any termination of service to such party; (c) Issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock or securities convertible into shares of its capital stock, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities, other than (i) the grant of options consistent with past practices to employees or directors, which options represent in the aggregate the right to acquire no more than 25,000 shares (net of cancellations) of Doubletree Common Stock or Promus Common Stock, as the case may be, (ii) the issuance of shares of Doubletree Common Stock or Promus Common Stock, as the case may be, pursuant to the exercise of options or warrants outstanding on the date of this Agreement, and (iii) the issuance of capital stock under the Doubletree Rights Plan or the Promus Rights Plan if required by the respective terms thereof; (d) Acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership or other business organization or division, or otherwise acquire or agree to acquire any assets (other than hotel properties, inventory and other immaterial assets, in each case in the ordinary course of business); (e) Sell, lease, license or otherwise dispose of any of its material properties or assets, except for transactions (including sales, leases, licenses or dispositions of hotel properties, inventory and other immaterial assets) in the ordinary course of business; (f) (i) Increase or agree to increase the compensation payable or to become payable to its officers or employees, except for increases in salary or wages of employees (other 29 than officers) in accordance with past practices, (ii) grant any additional severance or termination pay to, or enter into any employment or severance agreements with, any employees or officers, (iii) enter into any collective bargaining agreement (other than as required by law or extensions to existing agreements in the ordinary course of business), (iv) establish, adopt, enter into or amend any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, trust, fund, policy or arrangement for the benefit of any directors, officers or employees; (g) Amend or propose to amend its Certificate of Incorporation or Bylaws except as contemplated by this Agreement; (h) Incur any indebtedness for borrowed money other than in the ordinary course of business; (i) Take any action that would or is reasonably likely to result in a material breach of any provision of this Agreement or the Stock Option Agreements or in any of its representations and warranties set forth in this Agreement or the Stock Option Agreements being untrue on and as of the Closing Date; (j) Make or rescind any material express or deemed election relating to Taxes, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, or make any material change to any of its methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of its federal income tax return for the taxable year ending December 31, 1996, except as may be required by applicable law; (k) Settle any litigation relating to the transactions contemplated hereby other than any settlement which would not (i) have a Doubletree Material Adverse Effect (if settled by Doubletree), a Promus Material Adverse Effect (if settled by Promus) or a material adverse effect on the business, properties, financial condition or results of operations of Parent (if settled by either Doubletree or Promus) or (ii) adversely effect the consummation of the transactions contemplated hereby; or (l) Take, or agree in writing or otherwise to take, any of the actions described in Sections (a) through (k) above. Section 5.2. COOPERATION; NOTICE; CURE. Subject to compliance with applicable law, from the date hereof until the Effective Time, each of Doubletree and Promus shall confer on a regular and frequent basis with one or more representatives of the other party to report on the general status of ongoing operations and shall promptly provide the other party or its counsel with copies of all filings made by such party with any Governmental Entity in connection with this Agreement, the Mergers and the transactions contemplated hereby and thereby. Each of Doubletree and Promus shall promptly notify the other in writing of, and will use all commercially reasonable efforts to cure before the Closing Date, any event, transaction or circumstance, as soon as practical after it becomes known to such party, that causes or will cause any covenant or agreement of Doubletree or Promus under this Agreement to be breached or that 30 renders or will render untrue any representation or warranty of Doubletree or Promus contained in this Agreement. No notice given pursuant to this paragraph shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein. Section 5.3. NO SOLICITATION. (a) Doubletree and Promus each shall not, directly or indirectly, through any officer, director, employee, financial advisor, representative or agent of such party (i) solicit, initiate, or encourage any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock (including without limitation by way of a tender offer) or similar transaction involving such party or any of its Subsidiaries, other than the transactions contemplated by this Agreement (any of the foregoing inquiries or proposals being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or discussions with any person (or group of persons) other than Doubletree or Promus or their respective affiliates (a "Third Party") concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal; provided, however, that nothing contained in this Agreement shall prevent Doubletree or Promus, or their respective Board of Directors, from (A) furnishing non-public information to, or entering into discussions or negotiations with, any person or entity in connection with an unsolicited bona fide written Acquisition Proposal by such person or entity or modifying or withdrawing its recommendation with respect to the transactions contemplated hereby or recommending an unsolicited bona fide written Acquisition Proposal to the stockholders of such party, if and only to the extent that (1) the Board of Directors of such party believes in good faith (after consultation with its financial advisor) that such Acquisition Proposal is reasonably capable of being completed on the terms proposed and, after taking into account the strategic benefits anticipated to be derived from the Mergers and the prospects of Doubletree and Promus as a combined company, would, if consummated, result in a transaction more favorable to the stockholders of such party over the long term than the transaction contemplated by this Agreement (a "Superior Proposal") and the Board of Directors of such party determines in good faith after consultation with outside legal counsel that such action is required for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law and (2) prior to furnishing such non-public information to, or entering into discussions or negotiations with, such person or entity, such Board of Directors receives from such person or entity an executed confidentiality and standstill agreement with terms no less favorable to such party than those contained in the Confidentiality Agreements, each dated August 16, 1997 between Promus and Doubletree (the "Confidentiality Agreements"); or (B) complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. Each of Doubletree and Promus agrees not to release any third party from, or waive any provision of, any standstill agreement to which it is a party or any confidentiality agreement between it and another person who has made, or who may reasonably be considered likely to make, an Acquisition Proposal, unless its Board of Directors determines in good faith after consultation with outside legal counsel that such action is required for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law. 31 (b) Doubletree and Promus shall each notify the other party immediately after receipt by Doubletree or Promus (or any of their advisors) of any Acquisition Proposal or any request for nonpublic information in connection with an Acquisition Proposal or for access to the properties, books or records of such party by any person or entity that informs such party that it is considering making, or has made, an Acquisition Proposal. Such notice shall be made orally and in writing and shall indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry or contact. Such party shall continue to keep the other party hereto informed, on a current basis, of the status of any such discussions or negotiations and the terms being discussed or negotiated. Section 5.4 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. (a) As promptly as practical after the execution of this Agreement, Doubletree and Promus shall prepare and file with the SEC the Joint Proxy Statement/Prospectus and the Registration Statement in which the Joint Proxy Statement/Prospectus will be included as a prospectus, provided that Doubletree and Promus may delay the filing of the Registration Statement until approval of the Joint Proxy Statement/Prospectus by the SEC. Doubletree and Promus shall use all reasonable efforts to cause the Registration Statement to become effective as soon after such filing as practical. The Joint Proxy Statement/Prospectus shall include the recommendation of the Board of Directors of Doubletree in favor of adoption of this Agreement and the Doubletree Merger and the recommendation of the Board of Directors of Promus in favor of adoption of this Agreement and the Promus Merger; provided that the Board of Directors of either party may modify or withdraw such recommendation if such Board of Directors believes in good faith after consultation with outside legal counsel that the modification or withdrawal of such recommendation is required for such Board of Directors to comply with its fiduciary duties under applicable law. (b) Doubletree and Promus shall make all necessary filings with respect to the Merger under the Securities Act, the Exchange Act, applicable state blue sky laws and the rules and regulations thereunder. Section 5.5 NASDAQ QUOTATION AND NYSE LISTING. Each of Doubletree and Promus agrees to continue the quotation and listing of Doubletree Common Stock and Promus Common Stock, respectively, on NASDAQ National Market and the NYSE, respectively, during the term of this Agreement. Section 5.6 ACCESS TO INFORMATION. Upon reasonable notice, Doubletree and Promus shall each (and shall cause each of their respective Subsidiaries to) afford to the officers, employees, accountants, counsel and other representatives of the other, access, during normal business hours during the period prior to the Effective Time, to all its personnel, properties, books, contracts, commitments and records and, during such period, each of Doubletree and Promus shall, and shall cause each of their respective Subsidiaries to, furnish promptly to the other (a) copies of monthly financial reports and development reports, (b) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws and (c) all other information concerning its business, properties and personnel as such other party may reasonably request. The parties 32 will hold any such information which is nonpublic in confidence in accordance with the Confidentiality Agreements. No information or knowledge obtained in any investigation pursuant to this Section 5.6 shall affect or be deemed to modify any representation or warranty contained in this Agreement or the conditions to the obligations of the parties to consummate the Merger. Section 5.7 STOCKHOLDERS' MEETINGS. Doubletree and Promus each shall call a meeting of its respective stockholders to be held as promptly as practicable for the purpose of voting, in the case of Doubletree, upon this Agreement and the Doubletree Merger and, in the case of Promus, upon this Agreement and the Promus Merger. Subject to Sections 5.3 and 5.4, Doubletree and Promus shall, through their respective Boards of Directors, recommend to their respective stockholders adoption of this Agreement and approval of such matters and shall coordinate and cooperate with respect to the timing of such meetings and shall use their best efforts to hold such meetings on the same day and as soon as practicable after the date hereof. Unless otherwise required to comply with the applicable fiduciary duties of the respective directors of Doubletree and Promus, as determined by such directors in good faith after consultation with outside legal counsel, each party shall use all reasonable efforts to solicit from stockholders of such party proxies in favor of such matters. Doubletree and Promus intend to submit additional proposals to their respective stockholders at the Doubletree Stockholders' Meeting and the Promus Stockholders' Meeting, respectively, separate from the proposals referred to in the first sentence of this Section 5.7. The approval by Doubletree's stockholders or Promus's stockholders, as the case may be, of such additional proposals shall not be a condition to the closing of the Mergers under this Agreement. Section 5.8 LEGAL CONDITIONS TO MERGER. (a) Doubletree and Promus shall each use all reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary and proper under applicable law to consummate and make effective the transactions contemplated hereby as promptly as practicable, (ii) obtain from any Governmental Entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained or made by Doubletree or Promus or any of their Subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby including, without limitation, the Mergers, and (iii) as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the Mergers required under (A) the Securities Act and the Exchange Act, and any other applicable federal or state securities laws, (B) the HSR Act and any related governmental request thereunder, and (C) any other applicable law. Doubletree and Promus shall cooperate with each other in connection with the making of all such filings, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Doubletree and Promus shall use their reasonable efforts to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable law (including all information required to be included in the Joint Proxy Statement/Prospectus and the Registration Statement) in connection with the transactions contemplated by this Agreement. 33 (b) Doubletree and Promus agree, and shall cause each of their respective Subsidiaries, to cooperate and to use their respective reasonable efforts to obtain any government clearances required for Closing (including through compliance with the HSR Act and any applicable foreign government reporting requirements), to respond to any government requests for information, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) (an "Order") that restricts, prevents or prohibits the consummation of the Mergers or any other transactions contemplated by this Agreement. The parties hereto will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act or any other federal, state or foreign antitrust or fair trade law. Doubletree and Promus shall cooperate and work together in any proceedings or negotiations with any Governmental Entity relating to any of the foregoing. Notwithstanding anything to the contrary in this Section 5.8, neither Doubletree nor Promus, nor any of their respective Subsidiaries, shall be required to take any action that would reasonably be expected to substantially impair the overall benefits expected, as of the date hereof, to be realized from the consummation of the Mergers. (c) Each of Doubletree and Promus shall give (or shall cause their respective Subsidiaries to give) any notices to third parties, and use, and cause their respective Subsidiaries to use, all reasonable efforts to obtain any third party consents related to or required in connection with the Mergers. Section 5.9 PUBLIC DISCLOSURE. Doubletree and Promus shall agree on the form and content of the initial press release regarding the transactions contemplated hereby and thereafter shall consult with each other before issuing, and use all reasonable efforts to agree upon, any press release or other public statement with respect to any of the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law. Section 5.10 NONRECOGNITION EXCHANGE. From and after the date hereof and until the Effective Time, neither Doubletree nor Promus, nor any of their respective Subsidiaries or other Affiliates shall knowingly take any action, or knowingly fail to take any action, that is reasonably likely to jeopardize the treatment of either of the Mergers as a reorganization described in Section 368(a) of the Code and/or, taken together with the other of the Mergers, as a transfer of property to Parent by holders of Doubletree Common Stock or Promus Common Stock, as applicable, described in Section 351 of the Code. Section 5.11 POOLING ACCOUNTING. From and after the date hereof and until the Effective Time, neither Doubletree nor Promus, nor any of their respective Subsidiaries or other Affiliates shall knowingly take any action, or knowingly fail to take any action, that is reasonably likely to jeopardize the treatment of the Mergers as a pooling of interests for accounting purposes. 34 Section 5.12 AFFILIATE AGREEMENTS. Upon the execution of this Agreement, Doubletree and Promus will provide each other with a list of those persons who are, in Doubletree's or Promus's respective reasonable judgment, "affiliates" of Doubletree or Promus, respectively, within the meaning of Rule 145 (each such person who is an "affiliate" of Doubletree or Promus within the meaning of Rule 145 is referred to as an "Affiliate") promulgated under the Securities Act ("Rule 145"). Doubletree and Promus shall provide each other such information and documents as the other party shall reasonably request for purposes of reviewing such list and shall notify the other party in writing regarding any change in the identity of its Affiliates prior to the Closing Date. Doubletree and Promus shall each use all reasonable efforts to deliver or cause to be delivered to each other by October 15, 1997 (and in any case prior to the Effective Time) from each of its Affiliates, an executed Affiliate Agreement, in substantially the form of Exhibit F (with respect to affiliates of Doubletree) or Exhibit G (with respect to affiliates of Promus) attached hereto (each, an "Affiliate Agreement," and together, the "Affiliate Agreements"). Section 5.13 NYSE LISTING. Doubletree and Promus shall cause Parent to promptly prepare and submit to the NYSE a listing application covering the shares of Parent Common Stock to be issued in the Mergers and upon exercise of Doubletree Stock Options, the GEPT Warrant and Promus Stock Options, and shall use all reasonable efforts to cause such shares to be approved for listing on the NYSE, prior to the Effective Time, subject to official notice of issuance. Section 5.14 STOCK PLANS. (a) At the Effective Time, each outstanding option to purchase shares of Doubletree Common Stock (an "Doubletree Stock Option") under the Doubletree Stock Plans and each outstanding option to purchase shares of Promus Common Stock (a "Promus Stock Option") under the Promus Stock Plans, in each case whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Doubletree Stock Option or Promus Stock Option, as the case may be, the same number of shares of Parent Common Stock as the holder of such Doubletree Stock Option or Promus Stock Option, as the case may be, would have been entitled to receive pursuant to the Doubletree Merger or the Promus Merger, respectively, had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of Doubletree Common Stock or Promus Common Stock, as the case may be, purchasable pursuant to such Doubletree Stock Option or such Promus Stock Option immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to such Doubletree Stock Option or Promus Stock Option, as the case may be, in accordance with the foregoing. (b) As soon as practicable after the Effective Time, Parent shall deliver to the participants in the Doubletree Stock Plans and the Promus Stock Plans appropriate notice setting forth such participants' rights pursuant thereto and the grants pursuant to Doubletree Stock Plans or Promus Stock Plans, as the case may be, shall continue in effect on the same terms and 35 conditions (subject to the adjustments required by this Section 5.14 after giving effect to the Mergers). (c) Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery under Doubletree Stock Plans and Promus Stock Plans assumed in accordance with this Section 5.14. As soon as practicable after the Effective Time, Parent shall file a registration statement on Form S-8 (or any successor or other appropriate forms), or another appropriate form with respect to the shares of Parent Common Stock subject to such options and shall use its reasonable efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding. (d) The Board of Directors of each of Doubletree and Promus shall, prior to or as of the Effective Time, take all necessary actions, pursuant to and in accordance with the terms of the Doubletree Stock Plans and the instruments evidencing the Doubletree Stock Options, or the Promus Stock Plans and the instruments evidencing the Promus Stock Options, as the case may be, to provide for the conversion of the Doubletree Stock Options and the Promus Stock Options into options to acquire Parent Common Stock in accordance with this Section 5.14 without obtaining consent of the holders of the Doubletree Stock Options or Promus Stock Options in connection with such conversion; provided, however, that Promus shall use all reasonable efforts to obtain from each holder of Promus Stock Options a waiver of any right of such holder to receive any cash payment which may become due with respect to any Promus Stock Options that are exercisable immediately prior to the Effective Time as a result of the consummation of the transactions contemplated hereby. (e) The Board of Directors of each of Doubletree and Promus shall, prior to or as of the Effective Time, take appropriate action to approve the deemed cancellation of the Doubletree Stock Options or Promus Stock Options, as the case may be, for purposes of Section 16(b) of the Exchange Act. The Board of Directors of Parent shall, prior to or as of the Effective Time, take appropriate action to approve the deemed grant of options to purchase Parent Common Stock under the Doubletree Stock Options and the Promus Stock Options (as converted pursuant to this Section 5.14) for purposes of Section 16(b) of the Exchange Act. Section 5.15 BROKERS OR FINDERS. Each of Doubletree and Promus represents, as to itself, its Subsidiaries and its Affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement except Morgan Stanley & Co. Incorporated, whose fees and expenses will be paid by Doubletree in accordance with Doubletree's agreement with such firm (a copy of which has been delivered by Doubletree to Promus prior to the date of this Agreement), and BT Wolfensohn, whose fees and expenses will be paid by Promus in accordance with Promus's agreement with such firm (a copy of which has been delivered by Promus prior to the date of this Agreement). Each of Promus and Doubletree agrees to indemnify and hold the other harmless from and against any and all claims, liabilities or obligations with respect to any such fees, commissions or 36 expenses asserted by any person on the basis of any act or statement alleged to have been made by such party or any of its Affiliates. Section 5.16 INDEMNIFICATION. (a) From and after the Effective Time, Parent agrees that it will, and will cause the Surviving Corporations to, indemnify and hold harmless each present and former director and officer of Doubletree and Promus (the "Indemnified Parties"), against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in settlement incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that Doubletree or Promus, as the case may be, would have been permitted under Delaware law and its certificate of incorporation or bylaws in effect on the date hereof to indemnify such Indemnified Party (and Parent and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable law, provided the Indemnified Party to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification). (b) For a period of six years after the Effective Time, Parent shall maintain or shall cause the Surviving Corporations to maintain (to the extent available in the market) in effect a directors' and officers' liability insurance policy covering those persons who are currently covered by Doubletree's or Promus's directors' and officers' liability insurance policy (copies of which have been heretofore delivered by Doubletree and Promus to each other) with coverage in amount and scope at least as favorable as Doubletree's or Promus's existing coverage; provided that in no event shall Parent or the Surviving Corporations be required to expend in the aggregate in excess of 200% of the annual premium currently paid by Doubletree and Promus for such coverage; and if such premium would at any time exceed 200% of the such amount, then the Parent or the Surviving Corporations shall maintain insurance policies which provide the maximum and best coverage available at an annual premium equal to 200% of such amount. (c) The provisions of this Section 5.16 are intended to be an addition to the rights otherwise available to the current officers and directors of Doubletree and Promus by law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their representatives. Section 5.17 LETTER OF PROMUS'S ACCOUNTANTS. Promus shall use all reasonable efforts to cause to be delivered to Doubletree and Promus a letter of Arthur Andersen LLP, Promus's independent auditors, dated a date within two business days before the date on which the Registration Statement shall become effective and addressed to Doubletree, in form reasonably satisfactory to Doubletree and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement. 37 Section 5.18 LETTER OF DOUBLETREE'S ACCOUNTANTS. Doubletree shall use all reasonable efforts to cause to be delivered to Promus and Doubletree a letter of KPMG Peat Marwick LLP, Doubletree's independent auditors, dated a date within two business days before the date on which the Registration Statement shall become effective and addressed to Promus, in form reasonably satisfactory to Promus and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement. Section 5.19 STOCK OPTION AGREEMENTS. Promus and Doubletree each agree to fully perform their respective obligations under the Stock Option Agreements. Section 5.20 POST-MERGER CORPORATE GOVERNANCE; EMPLOYMENT ARRANGEMENTS. (a) At the Effective Time, the total number of persons serving on the Board of Directors of Parent shall be fourteen (unless otherwise agreed in writing by Doubletree and Promus prior to the Effective Time), half of whom shall be Doubletree Directors and half of whom shall be Promus Directors (as such terms are defined below), all of which Doubletree Directors and Promus Directors shall be spread as evenly as possible among Parent's three classes of Directors. The persons to serve initially on the Board of Directors of Parent at the Effective Time who are Doubletree Directors shall be selected solely by and at the absolute discretion of the Board of Directors of Doubletree prior to the Effective Time; and the persons to serve initially on the Board of Directors of Parent at the Effective Time who are Promus Directors shall be selected solely by and at the absolute discretion of the Board of Directors of Promus prior to the Effective Time. In the event that, prior to the Effective Time, any person so selected to serve on the Board of Directors of Parent after the Effective Time is unable or unwilling to serve in such position, the Board of Directors which selected such person shall designate another of its members to serve in such person's stead in accordance with the provisions of the immediately preceding sentence. From and after the Effective Time and until December 31, 2002, (a) the Board of Directors of Parent and each Committee of the Board of Directors of Parent as constituted following each election of Directors shall consist of an equal number of Doubletree Directors and Promus Directors, and (b) the size of the Board of Directors of Parent and each Committee of the Board of Directors of Parent shall not be increased unless such increase is approved by 75% of the members thereof. It is the intention of the parties hereto that Mr. Dale Frey shall be designated as the initial Chairman of the Human Resources Committee of Parent immediately following the Effective Time. If, at any time during the period referenced in the second preceding sentence, the number of Doubletree Directors and Promus Directors serving, or that would be serving following the next stockholders' meeting at which Directors are to be elected, as Directors of Parent or as members of any Committee of the Board of Directors of Parent, would not be equal, then, subject to the fiduciary duties of the Directors of Parent, the Board of Directors and the Nominating Committee thereof shall nominate for election at the next stockholders' meeting at which Directors are to be elected, such person or persons as may be requested by the remaining Doubletree Directors (if the number of Doubletree Directors is, or would otherwise become, less than the number of Promus Directors) or by the remaining Promus Directors (if the number of Promus Directors is, or would otherwise become, less than the number of Doubletree Directors) to ensure that there shall be an equal number of Doubletree Directors and Promus Directors. The provisions of the preceding sentence shall not apply in 38 respect of any stockholders' meeting which takes place after December 31, 2002. The term "Doubletree Director" means (i) any person serving as a Director of Doubletree or any of its Subsidiaries on the date hereof who becomes a Director of Parent at the Effective Time and (ii) any person who becomes a Director of Parent pursuant to the second preceding sentence and who is designated by the Doubletree Directors; and the term "Promus Director" means (i) any person serving as a Director of Promus or any of its Subsidiaries on the date hereof who becomes a Director of Parent at the Effective Time and (ii) any person who becomes a Director of Parent pursuant to the second preceding sentence and who is designated by the Promus Directors. (b) At the Effective Time, pursuant to the terms of the employment contracts referred to in Section 5.20(c) hereof, (i) Raymond E. Schultz, the current Chief Executive Officer of Promus, shall hold the position of Chief Executive Officer and Chairman of the Board of Parent, (ii) Richard M. Kelleher, the current President and Chief Executive Officer of Doubletree, shall hold the position of President and Chief Operating Officer of Parent, (iii) William L. Perocchi, the current Executive Vice President and Chief Financial Officer of Doubletree, shall hold the position of Executive Vice President and Chief Financial Officer of Parent and (iv) Thomas L. Keltner, the current Executive Vice President, Development of Promus, shall hold the position of Executive Vice President, Development of Parent. Mr. Schultz will continue as Chairman of the Board and Chief Executive Officer of Parent until his retirement no later than December 31, 1999, and, pursuant to the terms of the employment contracts referred to in Section 5.20(c) hereof and subject to the Bylaws of Parent, Mr. Kelleher will succeed Mr. Schultz as Chairman of the Board and Chief Executive Officer of Parent. If any of the persons identified above in this Section 5.20(b) is unable or unwilling to hold such offices as set forth above, his successor shall be selected by the Board of Directors of Parent in accordance with the Bylaws of Parent. The authority, duties and responsibilities of the Chairman and Chief Executive Officer, the President and Chief Operating Officer, the Executive Vice President and Chief Financial Officer and the Executive Vice President, Development shall be set forth in the employment contracts entered into pursuant to Section 5.20(c) hereof, which employment contracts shall also set forth in their entirety the rights and remedies of Messrs. Schultz, Kelleher, Perocchi and Keltner with respect to employment by Parent , and none of them shall have any right, remedy or cause of action under this Section 5.20, nor shall they be third party beneficiaries of this Section 5.20. (c) Prior to the Closing, Parent shall offer to enter into employment agreements with Raymond E. Schultz, Richard M. Kelleher, William L. Perocchi and Thomas L. Keltner on substantially the terms previously agreed to by Doubletree and Promus. (d) At the Effective Time, Parent shall have an Executive Committee which initially will be comprised of the following four members of the Board of Directors of Parent: Richard J. Ferris, Michael D. Rose, Raymond E. Schultz and Peter V. Ueberroth. In addition, Richard M. Kelleher shall be an ex-officio member of the Executive Committee with the right to attend but not vote at all meetings of the Executive Committee. The Executive Committee shall have responsibility for developing Parent's long-term strategic plans, making significant capital allocation decisions and such other duties and responsibilities as specified by the Board of Directors of Parent at or after the Effective Time. The Executive Committee also shall be required to oversee the implementation of Promus's existing 100% guest satisfaction guarantee 39 program at all of Promus's and Doubletree's hotel properties following the Effective Time. Each member of the Executive Committee that is not an employee of Parent will be entitled to receive $300,000 per year as compensation for serving on the Executive Committee. (e) Each of Doubletree and Promus shall cause Parent to incorporate the provisions contained in this Section 5.20 into the Bylaws of Parent in effect at the Effective Time, which provisions shall thereafter be amended only with the approval of 75% of the members of the Board of Directors of Parent. Section 5.21 NAME OF PARENT. At the Effective Time, Parent shall change its corporate name to Promus Hotel Corporation. Section 5.22 PARENT STOCKHOLDER RIGHTS PLAN. Prior to the Effective Time, Doubletree and Promus shall cause Parent to adopt a Stockholder Rights Plan (the "Parent Rights Plan") that is substantially similar to the Promus Rights Plan, with such modifications as are acceptable to both Doubletree and Promus. Section 5.23 GEPT WARRANT; DOUBLETREE REGISTRATION RIGHTS AGREEMENT. (a) At the Effective Time, Parent shall assume all obligations under the GEPT Warrant, and the holder of the GEPT Warrant thereafter shall have the right to acquire, on the same pricing and payment terms and conditions as are currently applicable under the GEPT Warrant, the same number of shares of Parent Common Stock as the holder of the GEPT Warrant would have been entitled to receive pursuant to the Doubletree Merger had such holder exercised the GEPT Warrant in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at the price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of Doubletree Common Stock purchasable pursuant to the GEPT Warrant immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to the GEPT Warrant in accordance with the foregoing. (b) At the Effective Time, Doubletree and Promus shall cause Parent to enter into a Registration Rights Agreement (the "Parent Registration Rights Agreement") substantially similar to the Incorporation and Registration Rights Agreement dated as of December 16, 1993, as amended on June 30, 1994, February 27, 1996 and November 8, 1996 by and among Doubletree and certain stockholders of Doubletree (the "Doubletree Registration Rights Agreement") pursuant to which Parent will provide registration rights to parties to the Doubletree Registration Rights Agreement (other than Doubletree) with respect to all shares of Parent Common Stock issued in the Doubletree Merger on account of the shares of Doubletree Common Stock covered by the Doubletree Registration Rights Agreement. Section 5.24 CONVEYANCE TAXES. Doubletree and Promus shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees or any similar taxes which 40 become payable in connection with the transactions contemplated by this Agreement that are required or permitted to be filed on or before the Effective Time. Section 5.25 TRANSFER TAXES. Doubletree shall pay, and Promus shall pay, on behalf of the stockholders of Doubletree and Promus, respectively, any New York State Real Estate Transfer Tax, New York City Real Property Transfer Tax, New York State Stock Transfer Tax and any similar taxes imposed on the stockholders of Doubletree and Promus, respectively, by any other State of the United States (and any interest with respect to such taxes) (the "Transfer Taxes"), which become payable in connection with the transactions contemplated by this Agreement. Doubletree and Promus shall cooperate in the preparation, execution and filing of any required returns with respect to such Transfer Taxes (including returns on behalf of the stockholders of Doubletree and Promus) and in the determination of the portion of the consideration allocable to the real property of Doubletree and the Doubletree Subsidiaries and Promus and the Promus Subsidiaries in New York State and City (or in any other jurisdiction, if applicable). The Joint Proxy Statement/Prospectus shall provide that the stockholders of Doubletree and Promus shall be deemed to have (i) authorized Doubletree and Promus, respectively, to prepare, execute and file any tax returns relating to Transfer Taxes and pay any Transfer Taxes arising in connection with the Mergers, in each case, on behalf of such holders and (ii) agreed to be bound by the values and allocations established by Doubletree and Promus in the preparation of any return with respect to the Transfer Taxes, if applicable. Section 5.26 STOCKHOLDER LITIGATION. Each of Doubletree and Promus shall give the other the reasonable opportunity to participate in the defense of any stockholder litigation against Doubletree or Promus, as applicable, and its directors relating to the transactions contemplated hereby. Section 5.27 EMPLOYEE BENEFITS; SEVERANCE. (a) Parent shall cause to continue to be maintained the Doubletree and Promus annual bonus plans for management employees for the 1997 fiscal year and shall calculate the amounts payable to participants thereunder on a basis consistent with the terms of each such plan and the past practice of Doubletree or Promus, as applicable. (b) For purposes of determining eligibility to participate, vesting, entitlement to benefits and in all other respects where length of service is relevant (except for pension benefit accruals) under any employee benefit plan or arrangement covering employees of Doubletree and its Subsidiaries ("Doubletree Employees") employees of Promus and its Subsidiaries ("Promus Employees") following the Effective Time, Parent shall cause such plans or arrangements to recognize service credit for service with Doubletree or Promus (as applicable) and any of their respective Subsidiaries to the same extent such service was recognized under the applicable employee benefit plans immediately prior to the Effective Time. (c) At the Effective Time, Parent shall assume and honor in accordance with their terms the severance agreements and severance pay policies identified in Section 5.27 of the Doubletree Disclosure Schedule and Section 5.27 of the Promus Disclosure Schedule. 41 (d) Promus and Doubletree agree that each may enter into retention and transition bonus arrangements with its employees prior to the Effective Time, with the terms and amounts of such payments to be determined jointly by the Chief Executive Officers of Promus and Doubletree; provided, however, that in no event shall the aggregate of all such payments exceed approximately $2.5 million. (e) Promus agrees to use all reasonable efforts, including obtaining any necessary employee consents, to prevent the automatic funding of any escrow, trust or similar arrangement pursuant to any employment agreement, arrangement or benefit plan that arises in connection with the execution of this Agreement or the consummation of any of the transactions contemplated hereby. ARTICLE VI. CONDITIONS TO MERGER Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS. The respective obligations of each party to this Agreement to effect the Mergers shall be subject to the satisfaction or waiver by each party prior to the Effective Time of the following conditions: (a) STOCKHOLDER APPROVAL. This Agreement, the Doubletree Merger and the Promus Merger shall have been approved in the manner required under the DGCL by the respective holders of the issued and outstanding shares of capital stock of Doubletree and Promus. (b) HSR ACT. The waiting period applicable to the consummation of the Mergers under the HSR Act shall have expired or been terminated. (c) APPROVALS. Other than the filing provided for by Section 1.4, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity the failure of which to file, obtain or occur is reasonably likely to have a Doubletree Material Adverse Effect or a Promus Material Adverse Effect shall have been filed, been obtained or occurred. (d) REGISTRATION STATEMENT. The Registration Statement shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order. (e) NO INJUNCTIONS. No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction or statute, rule, regulation which is in effect and which has the effect of making the Mergers illegal or otherwise prohibiting consummation of the Mergers. (f) POOLING LETTERS. Doubletree and Promus shall have received letters from KPMG Peat Marwick LLP and Arthur Andersen LLP, respectively, addressed to Doubletree and Promus, respectively, regarding their concurrence with the respective conclusions of 42 management of Doubletree and Promus, as to the appropriateness of the pooling of interests accounting, under Accounting Principles Board Opinion No. 16 for the transactions contemplated hereby, it being agreed that Doubletree and Promus shall each provide reasonable cooperation to KPMG Peat Marwick LLP and Arthur Andersen LLP to enable them to issue such letters. (g) NYSE LISTING. The shares of Parent Common Stock to be issued in the Merger and upon exercise of Doubletree Options, the GEPT Warrant and Promus Options shall have been approved for listing on the NYSE, subject to official notice of issuance. (h) CORPORATE GOVERNANCE. Doubletree and Promus shall have taken all actions necessary so that (i) not later than the Effective Time, the Certificate of Incorporation and Bylaws of Parent shall have been amended to be substantially in the form of Exhibit D and Exhibit E hereto; (ii) at the Effective Time, the composition of the Board of Directors of Parent and of each Committee of the Board of Directors of Parent shall comply with Section 5.20 hereof (assuming Doubletree has designated the Doubletree Directors and Promus has designated the Promus Directors, in each case as contemplated by Section 5.20(a) hereof); and (iii) not later than the Effective Time, Parent shall have adopted the Parent Rights Plan. Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF DOUBLETREE. The obligation of Doubletree to effect the Doubletree Merger is subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by Doubletree: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Promus set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (i) changes contemplated by this Agreement and (ii) inaccuracies which, individually or in the aggregate, have not had and are not reasonably likely to have a Promus Material Adverse Effect or a material adverse effect upon the consummation of the transactions contemplated hereby; and Doubletree shall have received a certificate signed on behalf of Promus by the chief executive officer and the chief financial officer of Promus to such effect. (b) PERFORMANCE OF OBLIGATIONS OF PROMUS. Promus shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Doubletree shall have received a certificate signed on behalf of Promus by the chief executive officer and the chief financial officer of Promus to such effect. (c) TAX OPINION. Doubletree shall have received the opinion of Dewey Ballantine, counsel to Doubletree, based upon reasonably requested representation letters and dated the Closing Date, to the effect that the Doubletree Merger will be treated as a reorganization described in Section 368(a) of the Code and/or, taken together with the Promus Merger, as a transfer of property to Parent by holders of Doubletree Common Stock described in Section 351 of the Code. 43 (d) NO TRIGGER OF PROMUS RIGHTS PLAN. No event shall have occurred that has or would result in the triggering of any right or entitlement of stockholders of Promus under the Promus Rights Plan, or will occur as a result of the consummation of the Mergers. Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PROMUS. The obligations of Promus to effect the Promus Merger are subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by Promus: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Doubletree set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (i) changes contemplated by this Agreement and (ii) inaccuracies which, individually or in the aggregate, have not had and are not reasonably likely to have a Doubletree Material Adverse Effect, or a material adverse effect upon the consummation of the transactions contemplated hereby; and Promus shall have received a certificate signed on behalf of Doubletree by the chief executive officer and the chief financial officer of Doubletree to such effect. (b) PERFORMANCE OF OBLIGATIONS OF DOUBLETREE. Doubletree shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date; and Promus shall have received a certificate signed on behalf of Doubletree by the chief executive officer and the chief financial officer of Doubletree to such effect. (c) TAX OPINION. Promus shall have received the opinion of Latham & Watkins, counsel to Promus, based upon reasonably requested representation letters and dated the Closing Date, to the effect that the Promus Merger will be treated as a reorganization described in Section 368(a) of the Code and/or, taken together with the Doubletree Merger, as a transfer of property to Parent by holders of Promus Common Stock described in Section 351 of the Code. (d) NO TRIGGER OF DOUBLETREE RIGHTS PLAN. No event shall have occurred that has or would result in the triggering of any right or entitlement of stockholders of Doubletree under the Doubletree Rights Plan, or will occur as a result of the consummation of the Mergers. ARTICLE VII. TERMINATION AND AMENDMENT Section 7.1. TERMINATION. This Agreement may be terminated at any time prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(h), by written notice by the terminating party to the other party), whether before or after approval of the matters presented in connection with the Mergers by the stockholders of Doubletree or Promus: (a) by mutual written consent of Doubletree and Promus; or 44 (b) by either Doubletree or Promus if the Mergers shall not have been consummated by January 31, 1998 (provided that (i) either Doubletree or Promus may extend such date to March 31, 1998 by providing written notice thereof to the other party on or prior to January 31, 1998 (January 31, 1998, as it may be so extended, shall be referred to herein as the "Outside Date") and (ii) the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the Mergers to occur on or before such date); or (c) by either Doubletree or Promus if a court of competent jurisdiction or other Governmental Entity shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Mergers; or (d) (i) by Doubletree or Promus, if, at the Promus Stockholders' Meeting (including any adjournment or postponement), the requisite vote of the stockholders of Promus in favor of the approval and adoption of this Agreement and the Promus Merger shall not have been obtained; or (ii) by Promus or Doubletree if, at the Doubletree Stockholders' Meeting (including any adjournment or postponement), the requisite vote of the stockholders of Doubletree in favor of the approval and adoption of this Agreement and the Doubletree Merger shall not have been obtained; or (e) by Doubletree, if (i) the Board of Directors of Promus shall have withdrawn or modified its recommendation of this Agreement or the Promus Merger (provided that Doubletree's right to terminate this Agreement under such clause (i) shall not be available if at such time Promus would be entitled to terminate this Agreement under Section 7.1(h) without giving effect to the cure period); (ii) after the receipt by Promus of an Acquisition Proposal, Doubletree requests in writing that the Board of Directors of Promus reconfirm its recommendation of this Agreement and the Promus Merger to the stockholders of Promus and the Board of Directors of Promus fails to do so within 10 business days after its receipt of Doubletree's request; (iii) the Board of Directors of Promus shall have recommended to the stockholders of Promus an Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of Promus Common Stock is commenced (other than by Doubletree or an Affiliate of Doubletree) and the Board of Directors of Promus recommends that the stockholders of Promus tender their shares in such tender or exchange offer; or (v) for any reason Promus fails to call and hold the Promus Stockholders' Meeting by the Outside Date (provided that Doubletree's right to terminate this Agreement under such clause (v) shall not be available if at such time Promus would be entitled to terminate this Agreement under Section 7.1(h) without giving effect to the cure period); or (f) by Promus, if (i) the Board of Directors of Doubletree shall have withdrawn or modified its recommendation of this Agreement or the Doubletree Merger (provided that Promus's right to terminate this Agreement under such clause (i) shall not be available if at such time Doubletree would be entitled to terminate this Agreement under Section 7.1(h) without giving effect to the cure period); (ii) after the receipt by Doubletree of an Acquisition Proposal, Promus requests in writing that the Board of Directors of Doubletree reconfirm its recommendation of this Agreement and the Doubletree Merger to the stockholders of Promus 45 and the Board of Directors of Doubletree fails to do so within 10 business days after its receipt of Promus's request; (iii) the Board of Directors of Doubletree shall have recommended to the stockholders of Doubletree an Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of Doubletree Common Stock is commenced (other than by Promus or an Affiliate of Promus) and the Board of Directors of Doubletree recommends that the stockholders of Doubletree tender their shares in such tender or exchange offer; or (v) for any reason Doubletree fails to call and hold the Doubletree Stockholders' Meeting by the Outside Date (provided that Promus's right to terminate this Agreement under such clause (v) shall not be available if at such time Doubletree would be entitled to terminate this Agreement under Section 7.1(h) without giving effect to the cure period); or (g) by Doubletree or Promus, prior to the approval of this Agreement by the stockholders of such party, if, as a result of a Superior Proposal received by such party from a Third Party, the Board of Directors of such party determines in good faith after consultation with outside legal counsel that accepting such Superior Proposal is required for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law; provided, however, that no termination shall be effective pursuant to this Section 7.1(g) under circumstances in which a termination fee is payable by the terminating party pursuant to Section 7.3(b)(iii) or (c)(iii), unless concurrently with such termination, such termination fee is paid in full by the terminating party in accordance with Section 7.3(b)(iii) or (c)(iii), as applicable; or (h) by Doubletree or Promus, if (A) there has been a breach of any representation, warranty, covenant or agreement on the part of the other party set forth in this Agreement, which breach (i) will cause the conditions set forth in Section 6.2(a) or (b) (in the case of termination by Doubletree) or 6.3(a) or (b) (in the case of termination by Promus) not to be satisfied, and (ii) shall not have been cured within 20 business days following receipt by the breaching party of written notice of such breach from the other party; or (B) any event shall have occurred which makes it impossible for the conditions set forth in Article VI hereof (other than Section 6.1(a), 6.1(e), 6.2(d) and 6.3(d)) to be satisfied, provided that any termination pursuant to this clause (B) shall not be effective until 20 business days after notice thereof is delivered by the party seeking to terminate to the other party, and shall be automatically rescinded if (1) such condition is solely for the benefit of the party receiving such notice and (2) such party, prior to such 20th business day, irrevocably waives satisfaction of such condition based on such event. Section 7.2. EFFECT OF TERMINATION. In the event of termination of this Agreement as provided in Section 7.1, this Agreement shall immediately become void and there shall be no liability or obligation on the part of Doubletree, Promus, Parent or their respective officers, directors, stockholders or Affiliates, except as set forth in Sections 5.15 and 7.3 and except that such termination shall not limit liability for a willful breach of this Agreement; provided that, the provisions of Sections 5.15 and 7.3 of this Agreement, the Stock Option Agreements and the Confidentiality Agreements shall remain in full force and effect and survive any termination of this Agreement. 46 Section 7.3 FEES AND EXPENSES. (a) Except as set forth in this Section 7.3, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Mergers are consummated. (b) Doubletree shall pay Promus a termination fee of $45 million upon the earliest to occur of the following events: (i) the termination of this Agreement by either Promus or Doubletree pursuant to Section 7.1(d)(ii), if a proposal for an Alternative Transaction (as defined below) involving Doubletree shall have been publicly announced prior to the Doubletree Stockholders' Meeting and either a definitive agreement for an Alternative Transaction is entered into, or an Alternative Transaction is consummated, within eighteen months of such termination; (ii) the termination of this Agreement by Promus pursuant to Section 7.1(f); or (iii) the termination of this Agreement by Doubletree pursuant to Section 7.1(g). Doubletree's payment of a termination fee pursuant to this subsection shall be the sole and exclusive remedy of Promus against Doubletree and any of its Subsidiaries and their respective directors, officers, employees, agents, advisors or other representatives with respect to the occurrences giving rise to such payment; provided that this limitation shall not apply in the event of a willful breach of this Agreement by Doubletree. Notwithstanding the foregoing, if and to the extent that Promus has purchased shares of Doubletree Common Stock pursuant to the Promus Stock Option Agreement prior to the payment of the $45 million fee provided for herein (the "Fee Payment Date"), the amount payable to Promus under this Section 7.3(b), together with (i)(x) the net cash amount received by Promus prior to the Fee Payment Date pursuant to Doubletree's repurchase of Shares (as defined in the Promus Stock Option Agreement) pursuant to Section 7 of the Promus Stock Option Agreement, less (y) Promus's purchase price for such Shares, and (ii)(x) the amounts received by Promus prior to the Fee Payment Date pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) Promus's purchase price for such Shares, shall not exceed $65 million. (c) Promus shall pay Doubletree a termination fee of $45 million upon the earliest to occur of the following events: (i) the termination of this Agreement by either Doubletree or Promus pursuant to Section 7.1(d)(i), if a proposal for an Alternative Transaction (as defined below) involving Promus shall have been publicly announced prior to the Promus Stockholders' Meeting and either an Alternative Transaction is entered into, or an Alternative Transaction is consummated, within eighteen months of such termination; (ii) the termination of this Agreement by Doubletree pursuant to Section 7.1(e); or 47 (iii) the termination of this Agreement by Promus pursuant to Section 7.1 (g). Promus's payment of a termination fee pursuant to this subsection shall be the sole and exclusive remedy of Doubletree against Promus and any of its Subsidiaries and their respective directors, officers, employees, agents, advisors or other representatives with respect to the occurrences giving rise to such payment; provided that this limitation shall not apply in the event of a willful breach of this Agreement by Promus. Notwithstanding the foregoing, if and to the extent that Doubletree has purchased shares of Promus Common Stock pursuant to the Doubletree Stock Option Agreement prior to the Fee Payment Date, the amount payable to Doubletree under this Section 7.3(c), together with (i)(x) the net cash amount received by Doubletree prior to the Fee Payment Date pursuant to Promus's repurchase of Shares (as defined in the Doubletree Stock Option Agreement) pursuant to Section 7 of the Doubletree Stock Option Agreement, less (y) Doubletree's purchase price for such Shares, and (ii)(x) the amounts received by Doubletree prior to the Fee Payment Date pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) Doubletree's purchase price for such Shares, shall not exceed $65 million. (d) The fees payable pursuant to Section 7.3(b) or 7.3(c) shall be paid concurrently with the first to occur of the events described in Section 7.3(b)(i), (ii) or (iii) or 7.3(c)(i), (ii) or (iii), respectively. (e) As used in this Agreement, "Alternative Transaction" means either (i) a transaction pursuant to which any Third Party acquires more than 20% of the outstanding shares of Doubletree Common Stock or Promus Common Stock, as the case may be, pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or other business combination involving Doubletree or Promus pursuant to which any Third Party (or the stockholders of a Third Party) acquires more than 20% of the outstanding shares of Doubletree Common Stock or Promus Common Stock, as the case may be, or the entity surviving such merger or business combination, (iii) any other transaction pursuant to which any Third Party acquires control of assets (including for this purpose the outstanding equity securities of Subsidiaries of Doubletree or Promus, and the entity surviving any merger or business combination including any of them) of Doubletree or Promus having a fair market value (as determined by the Board of Directors of Doubletree or Promus, as the case may be, in good faith) equal to more than 20% of the fair market value of all the assets of Doubletree or Promus, as the case may be, and their respective Subsidiaries, taken as a whole, immediately prior to such transaction, or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. Section 7.4 AMENDMENT. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Mergers by the stockholders of Doubletree or Promus, but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto; provided, however, that this Agreement may be amended in writing without obtaining the 48 signatures of Doubletree, Promus or Parent solely for the purpose of adding Doubletree Sub and Merger Sub as parties to this Agreement. Section 7.5 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained here. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. ARTICLE VIII. MISCELLANEOUS Section 8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the agreements contained in Sections 1.6, 2.1, 2.2, 2.4, 5.16, 5.19, 5.20 and 5.27 and Article VIII, and the agreements of the Affiliates delivered pursuant to Section 5.12. The Confidentiality Agreements shall survive the execution and delivery of this Agreement. Section 8.2 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Doubletree, to Doubletree Corporation 410 North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Richard M. Kelleher Telecopy: (602) 220-6753 with a copy to Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attn: William J. Phillips, Esq. Telecopy: (212) 295-6333 49 (b) if to Promus, to Promus Hotel Corporation 755 Crossover Lane Memphis, TN 38117 Attn: Raymond E. Schultz Telecopy: (901) 374-5636 with a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Attn: John M. Newell, Esq. Telecopy: (213) 891-8763 Section 8.3 INTERPRETATION. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The phrases "the date of this Agreement", "the date hereof," and terms of similar import, unless the context otherwise requires, shall be deemed to refer to September 1, 1997. Section 8.4 COUNTERPARTS. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement and all documents and instruments referred to herein (a) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Section 5.16 are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder; provided that the Confidentiality Agreements shall remain in full force and effect until the Effective Time. Each party hereto agrees that, except for the representations and warranties contained in this Agreement, neither Doubletree nor Promus makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement or the transactions contemplated hereby, notwithstanding the delivery or disclosure to the other or the other's representatives of any documentation or other information with respect to any one or more of the foregoing. 50 Section 8.6 GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware without regard to any applicable conflicts of law. Section 8.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 51 Signature Page for Agreement and Plan of Merger IN WITNESS WHEREOF, Doubletree, Promus and Parent have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. DOUBLETREE CORPORATION /s/ Richard M. Kelleher ----------------------------------- By: Richard M. Kelleher Its: President and Chief Executive officer PROMUS HOTEL CORPORATION /s/ Raymond E. Schultz ----------------------------------- By: Raymond E. Schultz Its: President and Chief Executive Officer PARENT HOLDING CORP. /s/ Raymond E. Schultz ----------------------------------- By: Raymond E. Schultz Its: Chief Executive Officer and Chairman of the Board S-1 EX-10.1 3 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 one of the events set forth in Section 2(c) hereof and prior to the termination of the Option in accordance with the terms of this Agreement. (b) In the event the Grantee wishes to exercise the Option, the Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice") specifying a date (subject to the HSR Act (as defined below)) not later than 10 business days and not earlier than the next business day following the date such notice is given for the closing of such purchase. In the event of any change in the number of issued and outstanding shares of Common Stock by reason of any stock dividend, stock split, split-up, reclassification, recapitalization, merger or other change in the corporate or capital structure of the Grantor (including the occurrence of a Distribution Date under the Grantor Rights Plan), the number of Shares subject to this Option and the purchase price per Share shall be appropriately adjusted to restore the Grantee to its rights hereunder, including its right to purchase Shares representing 19.9% of the capital stock of the Grantor entitled to vote generally for the election of the directors of the Grantor which is issued and outstanding immediately prior to the exercise of the Option at an aggregate purchase price equal to the Purchase Price multiplied by 9,929,485. In the event that any additional shares of Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the preceding sentence), the number of Shares subject to this Option shall be increased by 19.9% of the number of the additional shares of Common Stock so issued (and such additional Shares shall have a purchase price per share equal to the Purchase Price). (c) If at any time the Option is then exercisable pursuant to the terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to purchase Shares provided in Section 1(a) hereof, to send a written notice to the Grantor (the "Cash Exercise Notice") specifying a date not later than 20 business days and not earlier than 10 business days following the date such notice is given on which date the Grantor shall pay to the Grantee an amount in cash equal to the Spread (as hereinafter defined) multiplied by all or such portion of the Shares subject to the Option as Grantee shall specify. As used herein "Spread" shall mean the excess, if any, over the Purchase Price of the higher of (x) if applicable, the highest price per share of Common Stock (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by any person in an Alternative Transaction (as defined in clause (i), (ii) or (iii) of Section 7.3(e) of the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing sales price of the shares of Common Stock on the NYSE Composite Tape on the last trading day immediately prior to the date of the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase Price includes any property other than cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if any, included in the Alternative Purchase Price plus (ii) the fair market value of such other property. If such other property consists of securities with an existing public trading market, the average of the closing sales prices (or the average of the closing bid and asked prices if closing sales prices are unavailable) for such securities in their principal public trading market on the five trading days ending five days prior to the date of the Cash Exercise Notice shall be deemed to equal the fair market value of such property. If such other property consists of something other than cash or securities with an existing public trading market and, as of the payment date for the Spread, agreement on the value of such other property has not been reached, the Alternative Purchase Price shall be deemed to equal the Closing Price. Upon exercise of the Grantee's right to receive cash pursuant to this 2 Section 1(c) and the payment of such cash to the Grantee, the obligations of the Grantor to deliver Shares pursuant to Section 3 shall be terminated with respect to such number of Shares for which the Grantee shall have elected to be paid the Spread. 2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to deliver Shares upon exercise of the Option is subject only to the conditions that: (a) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Shares shall be in effect; and (b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated and all other consents, approvals, orders, notifications or authorizations, the failure of which to obtain or make would have the effect of making the issuance of the Shares illegal (collectively, the "Regulatory Approvals") shall have been obtained or made; and (c) (i) a proposal for an Alternative Transaction (as defined in the Merger Agreement) involving the Grantor shall have been publicly announced prior to the time the Merger Agreement is terminated pursuant to the terms thereof (the "Merger Termination Date") and one or more of the following events shall have occurred on or after the time of the making of such proposal: (A) the requisite vote of the stockholders of the Grantor in favor of adoption and approval of the Merger Agreement shall not have been obtained at the Promus Stockholders' Meeting (as defined in the Merger Agreement) or any adjournment or postponement thereof; (B) the Board of Directors of the Grantor shall have withdrawn or modified its recommendation of the Merger Agreement or the Promus Merger or failed to confirm its recommendation of the Merger Agreement or the Promus Merger to the stockholders of the Grantor within ten business days after a written request by the Grantee to do so; (C) the Board of Directors of the Grantor shall have recommended to the stockholders of the Grantor an Alternative Transaction (as defined in the Merger Agreement); (D) a tender offer or exchange offer for 20% or more of the outstanding shares of Grantor Common Stock shall have been commenced (other than by the Grantee or an affiliate of the Grantee) and the Board of Directors of the Grantor shall have recommended that the stockholders of the Grantor tender their shares in such tender or exchange offer; or (E) for any reason Grantor shall have failed to call and hold the Promus Stockholders' Meeting (as defined in the Merger Agreement) by the Outside Date (as defined in the Merger Agreement; provided, however, that the Option may not be exercised if the Grantee is in material breach of any of its material representations, warranties, covenants or agreements contained in this Agreement or in the Merger Agreement; or (ii) the Merger Agreement shall have been terminated by the Grantor pursuant to Section 7.1(g) of the Merger Agreement. 3. THE CLOSING. (a) Any closing hereunder shall take place on the date specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 8:00 A.M., local time, at the offices of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, 3 CA 90071, or, if the conditions set forth in Section 2(a) or 2(b) have not then been satisfied, on the second business day following the satisfaction of such conditions, or at such other time and place as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or certificates, duly endorsed (or accompanied by duly executed stock powers), representing the Shares in the denominations designated by the Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor at the price per Share equal to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver to the Grantee cash in an amount determined pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall be made by certified or official bank check or by wire transfer of federal funds to a bank designated by the party receiving such funds. (b) The certificates representing the Shares may bear an appropriate legend relating to the fact that such Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). 4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor represents and warrants to the Grantee that (a) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to enter into and perform this Agreement; (b) the execution and delivery of this Agreement by the Grantor and the consummation by it of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Grantor and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantor and constitutes a valid and binding obligation of the Grantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (c) the Grantor has taken all necessary corporate action to authorize and reserve the Shares issuable upon exercise of the Option and the Shares, when issued and delivered by the Grantor upon exercise of the Option, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights; (d) except as otherwise required by the HSR Act and other than any filings required under the blue sky laws of any states or by the New York Stock Exchange, Inc. (the "NYSE"), the execution and delivery of this Agreement by the Grantor and the issuance of Shares upon exercise of the Option do not require the consent, waiver, approval or authorization of or any filing with any person or public authority and will not violate, result in a breach of or the acceleration of any obligation under, or constitute a default under, any provision of any charter or by-law, indenture, mortgage, lien, lease, agreement, contract, instrument, order, law, rule, regulation, judgment, ordinance, or decree, or restriction by which the Grantor or any of its subsidiaries or any of their respective properties or assets is bound; (e) no "fair price", "moratorium", "control share acquisition" or other form of antitakeover statute or regulation (including, without limitation, the restrictions on "business combinations" set forth in Section 203 of the Delaware General Corporation Law) is or shall be applicable to the acquisition of Shares pursuant to this Agreement (and the Board of Directors of Grantor has taken all action to approve the acquisition of the Shares to the extent necessary to avoid such application) and (f) the Grantor has taken all corporate action necessary so that the grant and any 4 subsequent exercise of the Option by the Grantee will not result in the separation or exercisability of rights under the Grantor Rights Plan. 5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee represents and warrants to the Grantor that (a) the execution and delivery of this Agreement by the Grantee and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Grantee and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantee and will constitute a valid and binding obligation of Grantee; and (b) the Grantee is acquiring the Option after the Grantee has been afforded the opportunity to obtain, and has obtained, sufficient information regarding the Grantor to make an informed investment decision with respect to the Grantee's purchase of the Shares issuable upon the exercise thereof, and, if and when the Grantee exercises the Option, it will be acquiring the Shares issuable upon the exercise thereof for its own account and not with a view to distribution or resale in any manner which would be in violation of the Securities Act. 6. LISTING OF SHARES; HSR ACT FILINGS; REGULATORY APPROVALS. Subject to applicable law and the rules and regulations of the NYSE, the Grantor will promptly file an application to list the Shares on the NYSE and will use its best efforts to obtain approval of such listing and to file all necessary filings by the Grantor under the HSR Act; provided, however, that if the Grantor is unable to effect such listing on the NYSE by the Closing Date, the Grantor will nevertheless be obligated to deliver the Shares upon the Closing Date. Each of the parties hereto will use its best efforts to obtain consents of all third parties and all Regulatory Approvals, if any, necessary to the consummation of the transactions contemplated. 7. REPURCHASE OF SHARES; SALE OF SHARES. If a Change in Control Event has not occurred prior to the first anniversary date of the Merger Termination Date, then beginning on such anniversary date, the Grantor shall have the right to purchase (the "Repurchase Right") all, but not less than all, of the Shares then beneficially owned by the Grantee or any of its affiliates at a price per share equal to the greater of (i) the Purchase Price, or (ii) the average of the closing sales prices for shares of Common Stock on the twenty trading days ending five days prior to the date the Grantor gives written notice of its intention to exercise the Repurchase Right. If the Grantor does not exercise the Repurchase Right within thirty days following the first anniversary of the Merger Termination Date, the Repurchase Right terminates. In the event the Grantor wishes to exercise the Repurchase Right, the Grantor shall send a written notice to the Grantee specifying a date (not later than 10 business days and not earlier than the next business day following the date such notice is given) for the closing of such purchase. For purposes of the Agreement, a "Change in Control Event" shall be deemed to have occurred if (i) any person or group has a acquired beneficial ownership of more than fifty percent (excluding the Shares) of the outstanding shares of Common Stock or (ii) the Grantor shall have entered into an agreement, including without limitation an agreement in principle, providing for (x) a merger or other business combination involving the Grantor in which the Grantor's stockholders do not own a majority of the outstanding capital stock of the entity surviving such merger or business combination immediately following such transaction or (y) the acquisition of 20% or more of the assets of the Grantor and its subsidiaries, taken as a whole. 5 8. REGISTRATION RIGHTS. (a) In the event that the Grantee shall desire to sell any of the Shares within two years after the purchase of such Shares pursuant hereto, and such sale requires, in the opinion of counsel to the Grantee, which opinion shall be reasonably satisfactory to the Grantor and its counsel, registration of such Shares under the Securities Act, the Grantor will cooperate with the Grantee and any underwriters in registering such Shares for resale, including, without limitation, promptly filing a registration statement which complies with the requirements of applicable federal and state securities laws, entering into an underwriting agreement with such underwriters upon such terms and conditions as are customarily contained in underwriting agreements with respect to secondary distributions; provided that the Grantor shall not be required to have declared effective more than two registration statements hereunder and shall be entitled to delay the filing or effectiveness of any registration statement for up to 120 days if the offering would, in the judgment of the Board of Directors of the Grantor, require premature disclosure of any material corporate development or otherwise interfere with or adversely affect any pending or proposed offering of securities of the Grantor or any other material transaction involving the Grantor. (b) If the Common Stock is registered pursuant to the provisions of this Section 8, the Grantor agrees (i) to furnish copies of the registration statement and the prospectus relating to the Shares covered thereby in such numbers as the Grantee may from time to time reasonably request and (ii) if any event shall occur as a result of which it becomes necessary to amend or supplement any registration statement or prospectus, to prepare and file under the applicable securities laws such amendments and supplements as may be necessary to keep effective for at least 90 days a prospectus covering the Common Stock meeting the requirements of such securities laws, and to furnish the Grantee such numbers of copies of the registration statement and prospectus as amended or supplemented as may reasonably be requested. The Grantor shall bear the cost of the registration, including, but not limited to, all registration and filing fees, printing expenses, and fees and disbursements of counsel and accountants for the Grantor, except that the Grantee shall pay the fees and disbursements of its counsel, the underwriting fees and selling commissions applicable to the shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold harmless Grantee, its affiliates and its officers, directors and controlling persons from and against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the Grantee, its affiliates and its officers expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. The Grantor shall also indemnify and hold harmless each underwriter and each person who controls any underwriter within the meaning of either the Securities Act or the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant 6 to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the underwriters expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. 9. PROFIT LIMITATION. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $65 million and, if it does exceed such amount, the Grantee, at its sole election, shall, within five business days, either (a) deliver to the Grantor for cancellation Shares (valued, for the purposes of this Section 9(a), at the average closing sales price of the Common Stock on the NYSE Composite Tape for the twenty consecutive trading days preceding the day on which the Grantee's Total Profit exceeds $65 million) previously purchased by the Grantee, (b) pay cash or other consideration to the Grantor or (c) undertake any combination thereof, so that the Grantee's Total Profit shall not exceed $65 million after taking into account the foregoing actions. (b) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount of cash received by the Grantee pursuant to Section 7.3(c) of the Merger Agreement and Section 1(c) hereof, (ii)(x) the net cash amount received by the Grantee pursuant to the Grantor's repurchase of Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase price for such Shares, and (iii)(x) the amount received by the Grantee pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) the Grantee's purchase price for such Shares. 10. EXPENSES. Each party hereto shall pay its own expenses incurred in connection with this Agreement, except as otherwise specifically provided herein. 11. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor fails to perform any of its obligations under this Agreement immediate and irreparable harm or injury would be caused to the Grantee for which money damages would not be an adequate remedy. In such event, the Grantor agrees that the Grantee shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. Accordingly, if the Grantee should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Grantor hereby waives the claim or defense that the Grantee has an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Grantor further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 12. NOTICE. All notices, requests, demands and other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the party for whom it is intended or delivered by registered or certified mail, return receipt requested, or if sent by facsimile transmission, upon receipt of oral confirmation that such transmission has been received, to the person at the address set forth 7 below, or such other address as may be designated in writing hereafter, in the same manner, by such person: If to the Grantee: Doubletree Corporation 410 North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Richard M. Kelleher Telecopy: (602) 220-6753 With a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attn: William J. Phillips, Esq. Telecopy: (212) 295-6333 If to the Grantor: Promus Hotel Corporation 755 Crossover Lane Memphis, TN 38117 Attn: Raymond E. Schultz Telecopy: (901) 374-5636 With a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Attn: John M. Newell, Esq. Telecopy: (213) 891-8763 13. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective permitted successors and assigns; provided, however, that such successor in interest or assigns shall agree to be bound by the provisions of this Agreement. Except as set forth in Section 8, nothing in this Agreement, express or implied, is intended to confer upon any person other than the Grantor or the Grantee, or their successors or assigns, any rights or remedies under or by reason of this Agreement. 14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Merger Agreement and the other documents referred to therein, contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 8 15. ASSIGNMENT. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the Grantee may assign its rights and obligations hereunder to any of its direct or indirect wholly owned subsidiaries, but no such transfer shall relieve the Grantee of its obligations hereunder if such transferee does not perform such obligations. Any assignment made in violation of this Section 15 shall be void. 16. HEADINGS. The section headings herein are for convenience only and shall not affect the construction of this Agreement. 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 18. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law). 19. TERMINATION. The right to exercise the Option granted pursuant to this Agreement shall terminate at the earlier of (i) the Effective Time (as defined in the Merger Agreement), (ii) the date on which the Grantee realizes a Total Profit of $65 million, (iii) the date on which the Merger Agreement is terminated; provided the Option is not exercisable at such time and does not become exercisable simultaneous with such termination and (iv) 90 days after the date the Option becomes exercisable (the date referred to in clause (iv) being hereinafter referred to as the "Option Termination Date"); provided that, if the Option cannot be exercised or the Shares cannot be delivered to the Grantee upon such exercise because the conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the Option Termination Date shall be extended until thirty days after such impediment to exercise has been removed. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares. 20. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 21. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and the Grantor will consult with the Grantee before issuing any press release with respect to the initial announcement of this Agreement, the Option or the transactions contemplated hereby and neither party shall issue any such press release prior to such consultation except as may be required by law. 9 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 4 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 time, or from time to time, following the occurrence of one of the events set forth in Section 2(c) hereof and prior to the termination of the Option in accordance with the terms of this Agreement. (b) In the event the Grantee wishes to exercise the Option, the Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice") specifying a date (subject to the HSR Act (as defined below)) not later than 10 business days and not earlier than the next business day following the date such notice is given for the closing of such purchase. In the event of any change in the number of issued and outstanding shares of Common Stock by reason of any stock dividend, stock split, split-up, reclassification, recapitalization, merger or other change in the corporate or capital structure of the Grantor (including the occurrence of a Distribution Date under the Grantor Rights Plan), the number of Shares subject to this Option and the purchase price per Share shall be appropriately adjusted to restore the Grantee to its rights hereunder, including its right to purchase Shares representing 19.9% of the capital stock of the Grantor entitled to vote generally for the election of the directors of the Grantor which is issued and outstanding immediately prior to the exercise of the Option at an aggregate purchase price equal to the Purchase Price multiplied by 7,898,003 . In the event that any additional shares of Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the preceding sentence), the number of Shares subject to this Option shall be increased by 19.9% of the number of the additional shares of Common Stock so issued (and such additional Shares shall have a purchase price per share equal to the Purchase Price). (c) If at any time the Option is then exercisable pursuant to the terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to purchase Shares provided in Section 1(a) hereof, to send a written notice to the Grantor (the "Cash Exercise Notice") specifying a date not later than 20 business days and not earlier than 10 business days following the date such notice is given on which date the Grantor shall pay to the Grantee an amount in cash equal to the Spread (as hereinafter defined) multiplied by all or such portion of the Shares subject to the Option as Grantee shall specify. As used herein "Spread" shall mean the excess, if any, over the Purchase Price of the higher of (x) if applicable, the highest price per share of Common Stock (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by any person in an Alternative Transaction (as defined in clause (i), (ii) or (iii) of Section 7.3(e) of the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing sales price of the shares of Common Stock on NASDAQ on the last trading day immediately prior to the date of the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase Price includes any property other than cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if any, included in the Alternative Purchase Price plus (ii) the fair market value of such other property. If such other property consists of securities with an existing public trading market, the average of the closing sales prices (or the average of the closing bid and asked prices if closing sales prices are unavailable) for such securities in their principal public trading market on the five trading days ending five days prior to the date of the Cash Exercise Notice shall be deemed to equal the fair market value of such property. If such other property consists of something other than cash or securities with an existing public trading market and, as of the payment date for the Spread, agreement on the value of such other property has not been reached, the Alternative Purchase Price shall be deemed to equal the Closing Price. Upon exercise of the Grantee's right to receive cash pursuant to this Section 1(c) and the 2 payment of such cash to the Grantee, the obligations of the Grantor to deliver Shares pursuant to Section 3 shall be terminated with respect to such number of Shares for which the Grantee shall have elected to be paid the Spread. 2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to deliver Shares upon exercise of the Option is subject only to the conditions that: (a) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Shares shall be in effect; and (b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated and all other consents, approvals, orders, notifications or authorizations, the failure of which to obtain or make would have the effect of making the issuance of the Shares illegal (collectively, the "Regulatory Approvals") shall have been obtained or made; and (c) (i) a proposal for an Alternative Transaction (as defined in the Merger Agreement) involving the Grantor shall have been publicly announced prior to the time the Merger Agreement is terminated pursuant to the terms thereof (the "Merger Termination Date") and one or more of the following events shall have occurred on or after the time of the making of such proposal: (A) the requisite vote of the stockholders of the Grantor in favor of adoption and approval of the Merger Agreement shall not have been obtained at the Doubletree Stockholders' Meeting (as defined in the Merger Agreement) or any adjournment or postponement thereof; (B) the Board of Directors of the Grantor shall have withdrawn or modified its recommendation of the Merger Agreement or the Doubletree Merger or failed to confirm its recommendation of the Merger Agreement or the Doubletree Merger to the stockholders of the Grantor within ten business days after a written request by the Grantee to do so; (C) the Board of Directors of the Grantor shall have recommended to the stockholders of the Grantor an Alternative Transaction (as defined in the Merger Agreement); (D) a tender offer or exchange offer for 20% or more of the outstanding shares of Grantor Common Stock shall have been commenced (other than by the Grantee or an affiliate of the Grantee) and the Board of Directors of the Grantor shall have recommended that the stockholders of the Grantor tender their shares in such tender or exchange offer; or (E) for any reason the Grantor shall have failed to call and hold the Doubletree Stockholders' Meeting (as defined in the Merger Agreement) by the Outside Date (as defined in the Merger Agreement); provided, however, that the Option may not be exercised if the Grantee is in material breach of any of its material representations, warranties, covenants or agreements contained in this Agreement or in the Merger Agreement; or (ii) the Merger Agreement shall have been terminated by the Grantor pursuant to Section 7.1(g) of the Merger Agreement. 3. THE CLOSING. (a) Any closing hereunder shall take place on the date specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 8:00 A.M., local time, at the offices of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, 3 CA 90071, or, if the conditions set forth in Section 2(a) or 2(b) have not then been satisfied, on the second business day following the satisfaction of such conditions, or at such other time and place as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or certificates, duly endorsed (or accompanied by duly executed stock powers), representing the Shares in the denominations designated by the Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor at the price per Share equal to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver to the Grantee cash in an amount determined pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall be made by certified or official bank check or by wire transfer of federal funds to a bank designated by the party receiving such funds. (b) The certificates representing the Shares may bear an appropriate legend relating to the fact that such Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). 4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor represents and warrants to the Grantee that (a) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to enter into and perform this Agreement; (b) the execution and delivery of this Agreement by the Grantor and the consummation by it of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Grantor and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantor and constitutes a valid and binding obligation of the Grantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (c) the Grantor has taken all necessary corporate action to authorize and reserve the Shares issuable upon exercise of the Option and the Shares, when issued and delivered by the Grantor upon exercise of the Option, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights; (d) except as otherwise required by the HSR Act and other than any filings required under the blue sky laws of any states or by NASDAQ, the execution and delivery of this Agreement by the Grantor and the issuance of Shares upon exercise of the Option do not require the consent, waiver, approval or authorization of or any filing with any person or public authority and will not violate, result in a breach of or the acceleration of any obligation under, or constitute a default under, any provision of any charter or by-law, indenture, mortgage, lien, lease, agreement, contract, instrument, order, law, rule, regulation, judgment, ordinance, or decree, or restriction by which the Grantor or any of its subsidiaries or any of their respective properties or assets is bound; (e) no "fair price", "moratorium", "control share acquisition" or other form of antitakeover statute or regulation (including, without limitation, the restrictions on "business combinations" set forth in Section 203 of the Delaware General Corporation Law) is or shall be applicable to the acquisition of Shares pursuant to this Agreement (and the Board of Directors of Grantor has taken all action to approve the acquisition of the Shares to the extent necessary to avoid such application) and (f) the Grantor has taken all corporate action necessary so that the grant and any 4 subsequent exercise of the Option by the Grantee will not result in the separation or exercisability of rights under the Grantor Rights Plan.. 5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee represents and warrants to the Grantor that (a) the execution and delivery of this Agreement by the Grantee and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Grantee and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantee and will constitute a valid and binding obligation of Grantee; and (b) the Grantee is acquiring the Option after the Grantee has been afforded the opportunity to obtain, and has obtained, sufficient information regarding the Grantor to make an informed investment decision with respect to the Grantee's purchase of the Shares issuable upon exercise thereof, and, if and when the Grantee exercises the Option, it will be acquiring the Shares issuable upon the exercise thereof for its own account and not with a view to distribution or resale in any manner which would be in violation of the Securities Act. 6. QUOTATION OF SHARES; HSR ACT FILINGS; REGULATORY APPROVALS. Subject to applicable law and the rules and regulations of NASDAQ, the Grantor will promptly file an application to have the Shares quoted on NASDAQ and will use its best efforts to obtain approval of such quotation and to file all necessary filings by the Grantor under the HSR Act; provided, however, that if the Grantor is unable to effect such quotation on NASDAQ by the Closing Date, the Grantor will nevertheless be obligated to deliver the Shares upon the Closing Date. Each of the parties hereto will use its best efforts to obtain consents of all third parties and all Regulatory Approvals, if any, necessary to the consummation of the transactions contemplated. 7. REPURCHASE OF SHARES; SALE OF SHARES. If a Change in Control Event has not occurred prior to the first anniversary date of the Merger Termination Date, then beginning on such anniversary date, the Grantor shall have the right to purchase (the "Repurchase Right") all, but not less than all, of the Shares then beneficially owned by the Grantee or any of its affiliates at a price per share equal to the greater of (i) the Purchase Price, or (ii) the average of the closing sales prices for shares of Common Stock on the twenty trading days ending five days prior to the date the Grantor gives written notice of its intention to exercise the Repurchase Right. If the Grantor does not exercise the Repurchase Right within thirty days following the first anniversary of the Merger Termination Date, the Repurchase Right terminates. In the event the Grantor wishes to exercise the Repurchase Right, the Grantor shall send a written notice to the Grantee specifying a date (not later than 10 business days and not earlier than the next business day following the date such notice is given) for the closing of such purchase. For purposes of the Agreement, a "Change in Control Event" shall be deemed to have occurred if (i) any person or group has a acquired beneficial ownership of more than fifty percent (excluding the Shares) of the outstanding shares of Common Stock or (ii) the Grantor shall have entered into an agreement, including without limitation an agreement in principle, providing for (x) a merger or other business combination involving the Grantor in which the Grantor's stockholders do not own a majority of the outstanding capital stock of the entity surviving such merger or business combination immediately following such transaction or (y) the acquisition of 20% or more of the assets of the Grantor and its subsidiaries, taken as a whole. 5 8. REGISTRATION RIGHTS. (a) In the event that the Grantee shall desire to sell any of the Shares within two years after the purchase of such Shares pursuant hereto, and such sale requires, in the opinion of counsel to the Grantee, which opinion shall be reasonably satisfactory to the Grantor and its counsel, registration of such Shares under the Securities Act, the Grantor will cooperate with the Grantee and any underwriters in registering such Shares for resale, including, without limitation, promptly filing a registration statement which complies with the requirements of applicable federal and state securities laws, entering into an underwriting agreement with such underwriters upon such terms and conditions as are customarily contained in underwriting agreements with respect to secondary distributions; provided that the Grantor shall not be required to have declared effective more than two registration statements hereunder and shall be entitled to delay the filing or effectiveness of any registration statement for up to 120 days if the offering would, in the judgment of the Board of Directors of the Grantor, require premature disclosure of any material corporate development or otherwise interfere with or adversely affect any pending or proposed offering of securities of the Grantor or any other material transaction involving the Grantor. (b) If the Common Stock is registered pursuant to the provisions of this Section 8, the Grantor agrees (i) to furnish copies of the registration statement and the prospectus relating to the Shares covered thereby in such numbers as the Grantee may from time to time reasonably request and (ii) if any event shall occur as a result of which it becomes necessary to amend or supplement any registration statement or prospectus, to prepare and file under the applicable securities laws such amendments and supplements as may be necessary to keep effective for at least 90 days a prospectus covering the Common Stock meeting the requirements of such securities laws, and to furnish the Grantee such numbers of copies of the registration statement and prospectus as amended or supplemented as may reasonably be requested. The Grantor shall bear the cost of the registration, including, but not limited to, all registration and filing fees, printing expenses, and fees and disbursements of counsel and accountants for the Grantor, except that the Grantee shall pay the fees and disbursements of its counsel, the underwriting fees and selling commissions applicable to the shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold harmless Grantee, its affiliates and its officers, directors and controlling persons from and against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the Grantee, its affiliates and its officers expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. The Grantor shall also indemnify and hold harmless each underwriter and each person who controls any underwriter within the meaning of either the Securities Act or the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant 6 to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the underwriters expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. 9. PROFIT LIMITATION. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $65 million and, if it does exceed such amount, the Grantee, at its sole election, shall, within five business days, either (a) deliver to the Grantor for cancellation Shares (valued, for the purposes of this Section 9(a), at the average closing sales price of the Common Stock on NASDAQ for the twenty consecutive trading days preceding the day on which the Grantee's Total Profit exceeds $65 million) previously purchased by the Grantee, (b) pay cash or other consideration to the Grantor or (c) undertake any combination thereof, so that the Grantee's Total Profit shall not exceed $65 million after taking into account the foregoing actions. (b) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount of cash received by the Grantee pursuant to Section 7.3(b) of the Merger Agreement and Section 1(c) hereof, (ii)(x) the net cash amount received by the Grantee pursuant to the Grantor's repurchase of Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase price for such Shares, and (iii)(x) the amount received by the Grantee pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) the Grantee's purchase price for such Shares. 10. EXPENSES. Each party hereto shall pay its own expenses incurred in connection with this Agreement, except as otherwise specifically provided herein. 11. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor fails to perform any of its obligations under this Agreement immediate and irreparable harm or injury would be caused to the Grantee for which money damages would not be an adequate remedy. In such event, the Grantor agrees that the Grantee shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. Accordingly, if the Grantee should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Grantor hereby waives the claim or defense that the Grantee has an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Grantor further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 12. NOTICE. All notices, requests, demands and other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the party for whom it is intended or delivered by registered or certified mail, return receipt requested, or if sent by facsimile transmission, upon receipt of oral confirmation that such transmission has been received, to the person at the address set forth 7 below, or such other address as may be designated in writing hereafter, in the same manner, by such person: If to the Grantee: Promus Hotel Corporation 755 Crossover Lane Memphis, TN 38117 Attn: Raymond E. Schultz Telecopy: (901) 374-5636 With a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Attn: John M. Newell, Esq. Telecopy: (213) 891-8763 If to the Grantor: Doubletree Corporation North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Richard M. Kelleher Telecopy: (602) 220-6753 With a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019-6092 Attn: William J. Phillips, Esq. Telecopy: (212) 295-6333 13. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective permitted successors and assigns; provided, however, that such successor in interest or assigns shall agree to be bound by the provisions of this Agreement. Except as set forth in Section 8, nothing in this Agreement, express or implied, is intended to confer upon any person other than the Grantor or the Grantee, or their successors or assigns, any rights or remedies under or by reason of this Agreement. 14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Merger Agreement and the other documents referred to therein, contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 8 15. ASSIGNMENT. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the Grantee may assign its rights and obligations hereunder to any of its direct or indirect wholly owned subsidiaries, but no such transfer shall relieve the Grantee of its obligations hereunder if such transferee does not perform such obligations. Any assignment made in violation of this Section 15 shall be void. 16. HEADINGS. The section headings herein are for convenience only and shall not affect the construction of this Agreement. 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 18. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law). 19. TERMINATION. The right to exercise the Option granted pursuant to this Agreement shall terminate at the earlier of (i) the Effective Time (as defined in the Merger Agreement), (ii) the date on which the Grantee realizes a Total Profit of $65 million, (iii) the date on which the Merger Agreement is terminated; provided that the Option is not exercisable at such time and does not become exercisable simultaneous with such termination and (iv) 90 days after the date the Option becomes exercisable (the date referred to in clause (iv) being hereinafter referred to as the "Option Termination Date"); provided that, if the Option cannot be exercised or the Shares cannot be delivered to the Grantee upon such exercise because the conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the Option Termination Date shall be extended until thirty days after such impediment to exercise has been removed. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares. 20. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 21. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and the Grantor will consult with the Grantee before issuing any press release with respect to the initial announcement of this Agreement, the Option or the transactions contemplated hereby and neither party shall issue any such press release prior to such consultation except as may be required by law. 9 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 5 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 Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which, upon the terms and subject to the conditions thereof, (i) a newly formed subsidiary of Parent will be merged with and into Doubletree (the "Doubletree Merger"), and (ii) a second newly formed subsidiary of Parent will be merged with and into Promus (the "Promus Merger") such that Doubletree and Promus will become wholly-owned subsidiaries of Parent and the stockholders of Doubletree and Promus will become stockholders of Parent; and WHEREAS, as a condition to the willingness of Promus and Doubletree to enter into the Merger Agreement and the Stock Option Agreements (as defined in the Merger Agreement), Promus has requested the Stockholders agree, and in order to induce Promus to enter into the Merger Agreement and the Stock Option Agreements, the Stockholders are willing to agree, severally but not jointly, to vote in favor of adopting the Merger Agreement and approving the Doubletree Merger, upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereby agree, severally and not jointly, as follows: Section 1. VOTING OF SHARES. Until the termination of this Agreement in accordance with the terms hereof, each Stockholder hereby agrees that, at the Doubletree Stockholders' Meeting or any other meeting of the stockholders of Doubletree, however called, and in any action by written consent of the stockholders of Doubletree, such Stockholder will vote all of its respective Shares (a) in favor of adoption of the Merger Agreement and approval of the Doubletree Merger and the other transactions contemplated by the Merger Agreement, and (b) in favor of any other matter necessary to the consummation of the transactions contemplated by the Merger Agreement and considered and voted upon by the stockholders of Doubletree (or any class thereof). In addition, each Stockholder agrees that it will, upon request by Promus, furnish written confirmation, in form and substance reasonably satisfactory to Promus, of such Stockholder's support for the Merger Agreement and the Doubletree Merger. Each Stockholder acknowledges receipt and review of a copy of the Merger Agreement. Section 2. TRANSFER OF SHARES. Each Stockholder represents and warrants that it has no present intention of taking any action, prior to the termination of this Agreement in accordance with the terms hereof, to, directly or indirectly, (a) sell, assign, transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise by operation of law), pledge, encumber or otherwise dispose of any of its respective Shares, (b) deposit any of its respective Shares into a voting trust or enter into a voting agreement or arrangement with respect to any such Shares or grant any proxy or power of attorney with respect thereto which is inconsistent with this Agreement or (c) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect sale, assignment, transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise by operation of law) or other disposition of any Shares. 2 Section 3. NO SOLICITATION. Prior to the termination of this Agreement in accordance with its terms, each Stockholder agrees (a) that it will not, nor will it authorize or permit any of its officers, directors, employees, agents and representatives to, directly or indirectly, initiate or solicit any inquiries or the making of any Acquisition Proposal and (b) that it will notify Promus as soon as possible (and in any event within 48 hours) if any such inquiries or proposals are received by, any information or documents is requested from, or any negotiations or discussions are sought to be initiated or continued with, it or any of its affiliates. Section 4. TERMINATION. This Agreement shall terminate upon the earliest to occur of (i) the Effective Time or (ii) any termination of the Merger Agreement in accordance with the terms thereof; provided that the provisions of Section 7 shall survive any termination of this Agreement, and provided further that no such termination shall relieve any party of liability for a breach hereof prior to termination. Section 5. REGISTRATION RIGHTS. Until the termination of this Agreement in accordance with the terms hereof, no Stockholder will exercise any of its rights to request or require registration of any securities under the Incorporation and Registration Rights Agreement dated as of December 16, 1993, as amended on June 30, 1994, February 27, 1996 and November 8, 1996, by and among Doubletree and certain stockholders of Doubletree (the "Registration Rights Agreement). Section 6. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. Section 7. MISCELLANEOUS. (a) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect thereto. This Agreement may not be amended, modified or rescinded except by an instrument in writing signed by each of the parties hereto. (b) If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible. (c) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof. 3 (d) Notwithstanding anything herein to the contrary, the covenants and agreements set forth herein shall not prevent any of the Stockholders' designees, partners or affiliates serving on the Board of Directors of Doubletree from taking any action, subject to the applicable provisions of the Merger Agreement, while acting in such capacity as a director of Doubletree. (e) Notwithstanding any provisions hereof, none of the obligations of any Stockholder under or contemplated by this Agreement shall be an obligation of (i) any officer, director, stockholder, limited partner, general partner or owner of such Stockholder, or any of their respective officers, directors, stockholders, limited partners, general partners or owners, or successors or assigns or (ii) any other Stockholder. Each Stockholder shall be the only person or entity liable with respect to its obligations. Any monetary liability of a Stockholder under this Agreement shall be satisfied solely out of the assets of such Stockholder. Each Stockholder hereby irrevocably waives any right it may have against any such officer, director, stockholder, limited partner, general partner, owner, successor or assign identified above as a result of the performance of the provisions under or contemplated by this Agreement. Nothing in this Section 7(e) shall prevent Promus from obtaining specific enforcement of the obligations of any Stockholder under this Agreement. (f) This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 4 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 Signature Page for Stockholder Support Agreement /s/ Richard J. Ferris ----------------------------------------- Richard J. Ferris RIDGE PARTNERS, L.P. By: Kelrick, Inc. Its: General Partner /s/ Richard J. Ferris ----------------------------------------- By: Richard J. Ferris Its: President KELRICK, INC. /s/ Richard J. Ferris ----------------------------------------- By: Richard J. Ferris Its: President /s/ Peter V. Ueberroth ----------------------------------------- Peter V. Ueberroth THE UEBERROTH FAMILY TRUST /s/ Peter V. Ueberroth ----------------------------------------- By: Peter V. Ueberroth Its: Trustee S-2 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 6 EXHIBIT 99-1 RESTATED CERTIFICATE OF INCORPORATION OF PROMUS HOTEL CORPORATION The present name of the Corporation is Promus Hotel Corporation. The Corporation was incorporated under the name "Parent Holding Corp." by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on August 29, 1997. This Restated Certificate of Incorporation of the Corporation, which both restates and further amends the provisions of the Corporation's Certificate of Incorporation, was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware and by the written consent of stockholders in accordance with Section 228 of the General Corporation Law of the State of Delaware. The Certificate of Incorporation of the Corporation is hereby amended and restated to read in its entirety as follows: FIRST: The name of the Corporation is Promus Hotel Corporation. SECOND: The address of the registered office of the Corporation in the State of Delaware is Corporation Service Company, 1013 Centre Road, in the City of Wilmington, County of New Castle, State of Delaware. The name of its registered agent at that address is Corporation Service Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware as set forth in Title 8 of the Delaware Code (the "GCL"). FOURTH: A. The total number of shares of stock which the Corporation shall have authority to issue is 510,000,000 (the "Capital Stock") consisting of 500,000,000 shares of Common Stock, par value $0.01 per share (the "Common Stock"), and 10,000,000 shares of Preferred Stock, par value of $.01 per share (the "Preferred Stock"). B. Shares of Preferred Stock may be issued from time to time in one or more series, as provided for herein or as provided for by the Board of Directors as permitted hereby. All shares of Preferred Stock shall be of equal rank and shall be identical, except in respect of the terms fixed herein for the series provided for herein or fixed by the Board of Directors for series provided for by the Board of Directors as permitted hereby. All shares of any one series shall be identical in all respects with all the other shares of such series, except the shares of any one series issued at different times may differ as to the dates from which dividends thereon may be cumulative. The Board of Directors is hereby authorized, by resolution or resolutions, to establish, out of the unissued shares of Preferred Stock not then allocated to any series of Preferred Stock, additional series of Preferred Stock. Before any shares of any such additional series are issued, the Board of Directors shall fix and determine, and is hereby expressly empowered to fix and determine, by resolution or resolutions, the number of shares constituting such series and the distinguishing characteristics and the relative rights, preferences, privileges and immunities, if any, and any qualifications, limitations or restrictions thereof, of the shares thereof, so far as not inconsistent with the provisions of this Article FOURTH. Without limiting the generality of the foregoing, the Board of Directors may fix and determine: 1. The designation of such series and the number of shares which shall constitute such series of such shares; 2. The rate of dividend, if any, payable on shares of such series; 3. Whether the shares of such series shall be cumulative, non-cumulative or partially cumulative as to dividends, and the dates from which any cumulative dividends are to accumulate; 4. Whether the shares of such series may be redeemed, and, if so, the price or prices at which and the terms and conditions on which shares of such series may be redeemed; 5. The amount payable upon shares of such series in the event of the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation; 6. The sinking fund provisions, if any, for the redemption of shares of such series; 7. The voting rights, if any, of the shares of such series; 8. The terms and conditions, if any, on which shares of such series may be converted into shares of capital stock of the Corporation of any other class or series; 9. Whether the shares of such series are to be preferred over shares of capital stock of the Corporation of any other class or series as to dividends, or upon the voluntary or involuntary dissolution, liquidation, or winding up of the affairs of the Corporation, or otherwise; and 10. Any other characteristics, preferences, limitations, rights, privileges, immunities or terms not inconsistent with the provisions of this Article FOURTH. C. Except as otherwise provided in this Restated Certificate of Incorporation, each holder of Common Stock shall be entitled to one vote for each share of Common Stock held by him on all matters submitted to stockholders for a vote and each holder of Preferred Stock of any series that is Voting Stock shall be entitled to such number of votes for each share held by him as may be specified in the resolutions providing for the issuance of such series. Except as otherwise provided by law, the presence, in person or by proxy, of the holders of record of issued and outstanding shares of Capital Stock entitling the holders thereof to cast a majority of the votes entitled to be cast by the holders of issued and outstanding shares of Capital Stock entitled to vote shall constitute a quorum at all meetings of the stockholders. 2 FIFTH: A. The Board of Directors shall have the power to make, adopt, alter, amend, change or repeal the Bylaws of the Corporation by resolution adopted by the affirmative vote of a majority of the entire Board of Directors, subject to any bylaw requiring the affirmative vote of a larger percentage of the members of the Board of Directors. B. Stockholders may not make, adopt, alter, amend, change or repeal the Bylaws of the Corporation except upon the affirmative vote of at least 75% of the votes entitled to be cast by the holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class. SIXTH: The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which shall consist of not less than three or more than twenty directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors, subject to any bylaw requiring the affirmative vote of a larger percentage of the members of the Board of Directors. The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III. Class I shall consist of four directors, and each of Class II and Class III shall consist of five directors. Class I directors shall be initially elected for a term expiring at the first annual meeting of stockholders of the Corporation following the date hereof, Class II directors shall be initially elected for a term expiring at the second annual meeting of stockholders of the Corporation following the date hereof, and Class III directors shall be initially elected for a term expiring at the third annual meeting of stockholders of the Corporation following the date hereof. At each succeeding annual meeting of stockholders, beginning in 1999, successors to the class of directors whose term expires at that annual meeting shall be elected for a three year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, prior to death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors and any other vacancy may only be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Notwithstanding the foregoing, whenever the holders of any one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, removal, filling of vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation applicable thereto (including the resolutions of the Board of Directors pursuant to Article FOURTH hereof), and such Directors so elected shall not be divided into classes pursuant to this Article SIXTH unless expressly provided by such terms. 3 SEVENTH: Special meetings of the stockholders of the Corporation, for any purpose or purposes, may only be called at any time by a majority of the entire Board of Directors or by either the Chairman or the President of the Corporation. EIGHTH: No stockholder action may be taken except at an annual or special meeting of stockholders of the Corporation and stockholders of the corporation may not take any action by written consent in lieu of a meeting. NINTH: A. In addition to any affirmative vote required by law or this Restated Certificate of Incorporation (including any resolutions of the Board of Directors pursuant to Article FOURTH hereof) or the Bylaws of the Corporation, and except as otherwise expressly provided in Section B of this Article NINTH, a Business Combination (as hereinafter defined) with, or proposed by or on behalf of, any Interested Stockholder (as hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of any Interested Stockholder or any person who thereafter would be an Affiliate or Associate of such Interested Stockholder shall, except as otherwise prohibited by applicable law, require the affirmative vote of (i) not less than 75% of the votes entitled to be cast by the holders of all of the then outstanding shares of Voting Stock (as hereinafter defined), voting together as a single class and (ii) not less than a majority of the votes entitled to be cast by holders of all the then outstanding Voting Stock, voting together as a single class, excluding Voting Stock beneficially owned by such Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise. B. The provisions of Section A of this Article NINTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of this Restated Certification of Incorporation (including any resolutions of the Board of Directors pursuant to Article FOURTH hereof) or the Bylaws of the Corporation, or any agreement with any national securities exchange, if all the conditions specified in either of the following Paragraphs 1 or 2 are met or, in the case of Business Combination not involving the payment of consideration to the holders of the Corporation's outstanding Capital Stock (as hereinafter defined), if the condition specified in the following Paragraph 1 is met: 1. The Business Combination shall have been approved, either specifically or as a transaction which is in an approved category of transactions, by a majority (whether such approval is made prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Interested Stockholder to become an Interested Stockholder) of the Continuing Directors (as hereinafter defined). 2. All of the following conditions shall have been met: a. The aggregate amount of cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders 4 of Common Stock in such Business Combination shall be at least equal to the highest amount determined under clauses (i) and (ii) below: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of Common Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of Common Stock within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to common stock; and (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder. b. The aggregate amount of cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of each class or series of outstanding Capital Stock, other than Common Stock, shall be at least equal to the highest amount determined under clauses (i), (ii) and (iii) below: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of such class or series of Capital Stock (x) within the two-year period immediately prior to the Announcement Date or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; (ii) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; and (iii) (if applicable) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock would be entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation regardless of 5 whether the Business Combination to be consummated constitutes such an event. The provisions of this Paragraph 2(b) shall be required to be met with respect to every class or series of outstanding Capital Stock, whether or not the Interested Stockholder has previously acquired beneficial ownership of any shares of a particular class or series of Capital Stock. c. The consideration to be received by holders of a particular class or series of outstanding Capital Stock shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Stockholder in connection with its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varied as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Stockholder. d. After the Determination Date and prior to the consummation of such Business Combination: (i) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full periodic dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (ii) there shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock), except as approved by a majority of the Continuing Directors; (iii) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (iv) such Interested Stockholders shall not have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that results in such Interested Stockholder becoming an Interested Stockholder and except in a transaction that, after giving effect thereto, would not result in any increase in the Interested Stockholder's percentage beneficial ownership of any class or series of Capital Stock. e. A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (the "Act") (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The 6 proxy or information statement shall contain on the first page thereof, in a prominent place, such statement, if any, as to the advisability (or inadvisability) of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by a majority of the Continuing Directors, the opinion of an investment banking firm selected by a majority of the Continuing Directors as to the fairness (or not) of the terms of the Business Combination from a financial point of view to the holders of the outstanding shares of Capital Stock other than the Interested Stockholder and its Affiliates or Associates, such investment banking firm to be paid a reasonable fee for its services by the Corporation. f. Such Interested Stockholder shall not have made any major change in the Corporation's business or equity capital structure without the approval of a majority of the Continuing Directors. g. After the Determination Date, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. C. The following definitions shall apply with respect to this article NINTH: 1. The term "Business Combination" shall mean: a. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii) any other company (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Stockholder; or b. any sale, lease, exchange, mortgage, pledge, transfer or other disposition or security arrangement, investment, loan, advance, guarantee, agreement to purchase or sell, agreement to pay, extension of credit, joint venture participation or other arrangement (in one transaction or a series of transactions) with or for the benefit of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets, securities or commitments of the Corporation, any Subsidiary or any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder which (except for any arrangement, whether as employee or consultant or otherwise, other than as director, pursuant to which any Interested Stockholder or any Affiliate or Associate thereof shall, directly or indirectly, have any control over or responsibility for the management of any aspect of the business or affairs of the Corporation, with respect to which 7 arrangement the value test set forth below shall not apply), together with all other such arrangements (including all contemplated future events), has an aggregate Fair Market Value and/or involves aggregate commitments of $100,000,000 or more or constitutes more than 5 percent of the book value of the total assets (in the case of transactions involving assets or commitments other than capital stock) or 5 percent of the stockholders' equity (in the case of transactions in capital stock) of the entity in question (the "Substantial Part"), as reflected in the most recent fiscal year-end consolidated balance sheet of such entity existing at the time the stockholders of the Corporation would be required to approve or authorize the Business Combination involving the assets, securities and/or commitments constituting any Substantial Part; provided, that if stockholders' equity is negative, the fair market value of the outstanding Capital Stock at the date of such balance sheet shall be used in lieu thereof in determining if a transaction involves a Substantial Part; or c. the adoption of any plan or proposal for the liquidation or dissolution of the Corporation or for any amendment to the Corporation's Bylaws; or d. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any affiliate or Associate of any Interested Stockholder; or e. any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (a) to (d). 2. The term "Voting Stock" shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally. 3. The term "person" shall mean any individual, firm, company or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. 4. The term "Interested Stockholder" shall mean any person (other than (i) the Corporation or any Subsidiary, any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity and (ii) Doubletree Corporation, Promus Hotel Corporation and any Subsidiary thereof) who (a) is, or has announced or publicly disclosed a plan or intention to become, the beneficial owner of 8 Voting Stock representing ten percent or more of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock representing ten percent or more of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock; or (c) is an assignee of or has otherwise succeeded to any Voting Stock which was at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. 5. A person shall be a "beneficial owner" of any Capital Stock (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding (but neither such person nor any such Affiliate or Associate shall be deemed to be the beneficial owner of any shares of Voting Stock solely by reason of a revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, and with respect to which shares neither such person nor any such Affiliate or Associate is otherwise deemed the beneficial owner); or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except to the extent contemplated by the parenthetical clause in Section C.5(b)(ii)) or disposing of any shares of Capital Stock; provided that: (x) no director or officer of the Corporation (nor any Affiliate or Associate of any such director or officer) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed the "beneficial owner" of any shares of Capital Stock that are beneficially owned by any other such director or officer; (y) in the case of any employee stock ownership or similar plan of the Corporation or of any Subsidiary in which the beneficiaries thereof possess the right to vote the shares of Voting Stock held by such plan, no such plan nor any trustee with respect thereto (nor any Affiliate or Associate of such trustee), solely by reason of such capacity of such trustee, shall be deemed the "beneficial owner" of the shares of Voting Stock held under such plan; and (z) no person shall be deemed the "beneficial owner" of any shares of Voting Stock held in any voting trust, employee stock ownership plan or any similar plan or trust if such person does not possess the right to vote such shares. For the purposes of determining whether a person is an Interested Stockholder pursuant to Paragraph 4 of this section C, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph 5 of Section C, but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. Notwithstanding the foregoing, for purposes of 9 this Article NINTH, a person shall not be deemed a "beneficial owner" of any Capital Stock which such person has the right to acquire upon exercise of the Rights issued pursuant to the Parent Rights Agreement, dated as of , 1997, between the Corporation and (including any successor rights plan thereto, the "Rights Agreement"), if such person would not be deemed the beneficial owner of such Capital Stock under the terms of such Rights Agreement. 6. The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Act as in effect on the date that this Article NINTH is approved by the Board (the term "registrant" in said Rule 12b-2 meaning in this case the Corporation). 7. The term "Subsidiary" means any company of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 4 of this Section C, the term "Subsidiary" shall mean only a company of which a majority of each class of equity security is beneficially owned by the Corporation. 8. The term "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board of Directors"), while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any director who is thereafter chosen to fill any vacancy or newly-created directorship on the Board of Directors or who is elected and who, in either event, is not an Affiliate or Associate or representative of the Interested Stockholder and, in connection with such person's initial assumption of office, is recommended for appointment or election by a majority of the Continuing Directors then on the Board. 9. The term "Fair Market Value" means (a) in the case of cash, the amount of such cash; (b) in the case of stock the highest closing sales price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange--Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing sales price or bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the NASDAQ National Market or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (c) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Continuing Directors. 10 10. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs 2.a and 2.b of Section B of this Article NINTH shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. D. A majority of the Continuing Directors shall have the power and duty to determine for the purposes of this Article NINTH, on the basis of information known to them after reasonable inquiry, all questions arising under this Article NINTH including, without limitation, (a) whether a person is an Interested Stockholder, (b) the number of shares of Capital Stock or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether a Proposed Action (as hereinafter defined) is with, or proposed by, or on behalf of, an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder, (e) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $100,000,000 or more, (f) whether the assets or securities that are the subject of any Business Combination constitute a Substantial Part, and (g) whether the applicable conditions set forth in paragraph 2 of Section B of this Article NINTH have been met with respect to any Business Combination. Any such determination made good faith shall be binding and conclusive on all parties. E. Nothing contained in this Article NINTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. F. The fact that any Business combination complies with the provisions of Section B of this Article NINTH shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the stockholders of the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of or actions and responses taken with respect to such Business Combination. G. For the purpose of this Article NINTH, a Business Combination or any proposal to amend, repeal or adopt any provision of this Restated Certificate of Incorporation inconsistent with this Article NINTH (collectively, "Proposed Action") is presumed to have been proposed by, or on behalf of, an Interested Stockholder or a person who thereafter would become such if (1) after the Interested Stockholder became such, the Proposed Action is proposed following the election of any director of the Corporation who with respect to such Interested Stockholder, would not qualify to serve as a Continuing Director or (2) such Interested Stockholder, Affiliate, Associate or person votes for or consents to the adoption of any such Proposed Action, unless as to such Interested Stockholder, Affiliate, Associate or person, a majority of the Continuing Directors makes a good faith determination that such Proposed Action is not proposed by or on behalf of such Interested Stockholder, Affiliate, Associate or person, based on information known to them after reasonable inquiry. 11 H. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Restated Certificate of Incorporation or the Bylaws of the Corporation), or any proposal to amend, repeal or adopt any provision of this Restated Certificate of Incorporation inconsistent with this Article NINTH which is proposed by or on behalf of an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder shall require the affirmative vote of (i) the holders of not less than 75% of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock, voting together as a single class, and (ii) the holders of not less than a majority of the votes entitled to be cast by the holders of the then outstanding shares of Voting Stock, voting together as a single class, excluding Voting Stock beneficially owned by such Interested Stockholder, provided, however, that this Section H shall not apply to, and such vote shall not be required for, any amendment, repeal or adoption unanimously recommended by the Board of Directors if all of such directors are persons who would be eligible to serve as Continuing Directors within the meaning of Section C, Paragraph 8 of this Article NINTH. TENTH: A. Subject to Section C of this Article TENTH, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation, or, with respect to any criminal action or proceeding, had reasonable cause to believe his conduct was unlawful. B. Subject to Section C of this Article TENTH, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon 12 application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. C. Any indemnification under this Article TENTH (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section A or Section B of this Article TENTH, as the case may be. Such determination shall be made (i) by a majority vote of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section A or Section B of this Article TENTH, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. D. For purposes of any determination under Section C of this Article TENTH, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section D of Article TENTH shall mean any other corporation or any partnership, joint venture, trust or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section D shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections A or B of this Article TENTH as the case may be. E. Notwithstanding any contrary determination in the specific case under Section C of this Article TENTH, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections A and B of this Article TENTH. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Sections A or B of this Article TENTH, as the case may be. Notice of any application for indemnification pursuant to this Section E of Article TENTH shall be given to the Corporation promptly upon the filing of such application. 13 F. Expenses incurred in defending or investigating a threatened or pending action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article TENTH. G. The indemnification and advancement of expenses provided by this Article TENTH shall not be deemed exclusive of any other rights to which any person seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of, and advancement of expenses to, the persons specified in Sections A and B of this Article TENTH shall be made to the fullest extent permitted by law. The provisions of this Article TENTH shall not be deemed to preclude the indemnification of, and advancement of expenses to, any person who is not specified in Sections A or B of this Article TENTH but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. The indemnification provided by this Article TENTH shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. H. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article TENTH. I. For purposes of this Article TENTH, reference to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article TENTH with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. ELEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this 14 Corporation under the provisions of Section 291 of the GCL or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of the GCL, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. TWELFTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or thereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. THIRTEENTH: No director of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the GCL is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors, then the liability of each director of the Corporations shall be limited or eliminated to the fullest extent permitted by the GCL as so amended from time to time. 15 IN WITNESS WHEREOF, said corporation has caused this Certificate to be signed by Raymond E. Schultz, its Chief Executive Officer and attested by Ralph B. Lake, its Secretary, this __ day of _________, 1997. By: ________________________ Raymond E. Schultz Chief Executive Officer ATTEST: ________________________ Ralph B. Lake Secretary 16 EX-99.2 7 EXHIBIT 99-2 EXHIBIT 99.2 AMENDED AND RESTATED BYLAWS OF PROMUS HOTEL CORPORATION ARTICLE I. OFFICES Section 1. REGISTERED OFFICE. The registered office of Promus Hotel Corporation (the "Corporation") shall be at Corporation Service Company, 1013 Centre Road, in the City of Wilmington, County of New Castle, State of Delaware. Section 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors of the Corporation (the "Board of Directors") may from time to time determine. ARTICLE II. MEETINGS OF STOCKHOLDERS Section 1. PLACE OF MEETINGS. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. ANNUAL MEETINGS. The annual meeting of stockholders shall be held on the last Wednesday in April in each year or on such other date and at such time as may be fixed by the Board of Directors and stated in the notice of the meeting, for the purpose of electing directors and for the transaction of only such other business as is properly brought before the meeting in accordance with these Bylaws. Written notice of an annual meeting stating the place, date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. To be properly brought before the annual meeting, business must be either (i) specified in the notice of annual meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the annual meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the annual meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than seventy (70) days notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by a stockholder, to be timely, must be received no later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs. A stockholder's notice to the Secretary shall set forth (a) as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, and (ii) any material interest of the stockholder in such business, and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder and (ii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Article II, Section 2. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine and declare to the annual meeting that business was not properly brought before the annual meeting in accordance with the provisions of this Article II, Section 2, and if such officer should so determine, such officer shall so declare to the annual meeting and any such business not properly brought before the meeting shall not be transacted. Section 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by the Restated Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), special meetings of stockholders, for any purpose or purposes, may only be called by a majority of the entire Board of Directors or by the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer. Written notice of a special meeting stating the place, date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. QUORUM. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the holders of a majority of the votes entitled to be cast by the stockholders entitled to vote thereat, present in person or represented by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than 2 thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. Section 5. VOTING. Unless otherwise required by law, the Certificate of Incorporation, the rules or regulations of any stock exchange applicable to the Corporation or these Bylaws, any question (other than the election of directors) brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect. Each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder, unless otherwise provided by the Certificate of Incorporation. Such votes may be cast in person or by proxy but no proxy shall be voted after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 6. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. Section 7. STOCK LEDGER. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 6 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. ARTICLE III. DIRECTORS Section 1. NUMBER OF DIRECTORS; QUALIFICATIONS. The total number of persons serving on the Board of Directors of the Corporation shall be fourteen, half of whom shall be Doubletree Directors and half of whom shall be Promus Directors (as such terms are defined below), all of which Doubletree Directors and Promus Directors shall be spread as evenly as possible among the Corporation's three classes of Directors. Until December 31, 2002, (a) the Board of Directors of the Corporation and each Committee of the Board of Directors of the Corporation as constituted following each election of Directors shall consist of an equal number of Doubletree Directors and Promus Directors, and (b) the size of the Board of Directors of the 3 Corporation and each Committee of the Board of Directors of the Corporation shall not be increased unless such increase is approved by 75% of the members. If, at any time during the period referenced in the immediately preceding sentence, the number of Doubletree Directors and Promus Directors serving, or that would be serving following the next stockholders' meeting at which Directors are to be elected, as Directors of the Corporation or as members of any Committee of the Board of Directors of the Corporation, would not be equal, then, subject to the fiduciary duties of the Directors of the Corporation, the Board of Directors and the Nominating Committee thereof shall nominate for election at the next stockholders' meeting at which Directors are to be elected, such person or persons as may be requested by the remaining Doubletree Directors (if the number of Doubletree Directors is, or would otherwise become, less than the number of Promus Directors) or by the remaining Promus Directors (if the number of Promus Directors is, or would otherwise become, less than the number of Doubletree Directors) to ensure that there shall be an equal number of Doubletree Directors and Promus Directors. The provisions of the preceding sentence shall not apply in respect of any stockholders' meeting which takes place after December 31, 2002. The term "Doubletree Director" means (i) any person who was selected by the Board of Directors of Doubletree Corporation, a Delaware corporation, to serve as a Director of the Corporation and (ii) any person who becomes a Director of the Corporation pursuant to the second preceding sentence and who is designated by the Doubletree Directors; and the term "Promus Director" means (i) any person who was selected by the Board of Directors of Promus Hotel Corporation, a Delaware corporation, to serve as a Director of the Corporation and (ii) any person who becomes a Director of the Corporation pursuant to the second preceding sentence and who is designated by the Promus Directors. The provisions of this Article III, Section 1 may be amended only with the approval of 75% of the members of the Board of Directors of the Corporation. Section 2. NOMINATION OF DIRECTORS. Nominations of persons for election to the Board of Directors of the Corporation at a meeting of stockholders of the Corporation may be made at such meeting by or at the direction of the Board of Directors, by any committee or persons appointed by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Article III, Section 2. Such nominations by any stockholder shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided however, that in the event that less than seventy (70) days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder, to be timely, must be received no later than that the close of business on the tenth (10th) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (a) the name, age, business address and residence address of the person, (b) the principal occupation or employment of the person, (c) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person, and (d) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to the Rules and Regulations of the Securities and Exchange Commission under Section 14 of the 4 Securities Exchange Act of 1934, as amended; and (ii) as to the stockholder giving the notice (a) the name and record address of the stockholder and (b) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 3. MEETINGS. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer or a majority of the entire Board of Directors. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or telegram on twenty-four (24) hours notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Section 4. QUORUM. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 5. ACTIONS OF BOARD OF DIRECTORS. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 6. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Article III, Section 6 shall constitute presence in person at such meeting. 5 Section 7. COMMITTEES. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 8. EXECUTIVE COMMITTEE. The Executive Committee of the Corporation shall have responsibility for developing the long-term strategic plans of the Corporation, making significant capital allocation decisions and such other duties and responsibilities as specified by the Board of Directors. The Executive Committee shall also be required to oversee the implementation of the 100% guest satisfaction guarantee program at all of the Corporation's hotel properties. Section 9. COMPENSATION. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 10. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the shareholders. Common or interested directors may be counted in 6 determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV. OFFICERS Section 1. GENERAL. The officers of the Corporation shall be elected by the Board of Directors and shall consist of: a Chairman of the Board and Chief Executive Officer; a President and Chief Operating Officer; a Secretary; and a Treasurer. The Board of Directors, in its discretion, may also elect one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers, a Controller and such other officers as in the judgment of the Board of Directors may be necessary or desirable. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation. Section 2. ELECTION. The Board of Directors at its first meeting held after each annual meeting of stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Except as otherwise provided in this Article IV, any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers who are directors of the Corporation shall be fixed by the Board of Directors. Section 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board and Chief Executive Officer, the President and Chief Operating Officer or any Vice President, and any such officer may, in the name and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. Section 4. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. The Chairman of the Board shall be a member of the Board of Directors and an officer of the Corporation, and, if present, shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall be the Chief Executive Officer of the Corporation and shall 7 supervise, coordinate and manage the Corporation's business and activities and supervise, coordinate and manage its operating expenses and capital allocation, shall have general authority to exercise all the powers necessary for the Chief Executive Officer of the Corporation and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or these Amended and Restated Bylaws, all in accordance with basic policies as established by and subject to the oversight of the Board of Directors. Raymond E. Schultz shall serve as Chairman of the Board and Chief Executive Officer of the Corporation until his retirement no later than December 31, 1999. Richard M. Kelleher shall succeed Mr. Schultz as Chairman of the Board and Chief Executive Officer no later than January 1, 2000, unless 75% or more of the members of the Board of Directors vote otherwise. Section 5. PRESIDENT AND CHIEF OPERATING OFFICER. The President and Chief Operating Officer shall supervise, coordinate and manage the Corporation's business and activities and supervise, coordinate and manage its operating expenses and capital allocation, shall have general authority to exercise all the powers necessary for the President and Chief Operating Officer of the Corporation and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or these Amended and Restated Bylaws, all in accordance with basic policies as established by and subject to the oversight of the Board of Directors and the Chairman of the Board and Chief Executive Officer. In the absence or disability of the Chairman of the Board and Chief Executive Officer, the duties of the Chairman of the Board shall be performed and the Chairman of the Board's authority may be exercised by the President and Chief Operating Officer and, in the event the President and Chief Operating Officer is absent or disabled, such duties shall be performed and such authority may be exercised by a director designated for such purpose by the Board of Directors. Unless 75% or more of the members of the Board of Directors vote otherwise, Richard M. Keller shall continue to serve as President and Chief Operating Officer until Raymond E. Schultz retires as Chairman of the Board and Chief Executive Officer. Section 6. VICE PRESIDENTS. At the request of the President and Chief Operating Officer or in the absence of both the Chairman of the Board and Chief Executive Officer and the President and Chief Operating Officer, or in the event of their inability or refusal to act , the Vice President or the Vice Presidents if there is more than one (in the order designated by the Board of Directors) shall perform the duties of the Chairman of the Board and Chief Executive Officer and/or the President and Chief Operating Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon such offices (other than as Chairman of the Board). Each Vice President shall perform such other duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the Chairman of the Board and Chief Executive Officer and the President and Chief Operating Officer or in the event of the inability or refusal of such officers to act, shall perform the duties of such offices (other than as Chairman of the Board), and when so acting, shall have all the powers of and be subject to all the restrictions upon such offices (other than as Chairman of the Board). Section 7. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or 8 books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer, under whose supervision the Secretary shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then the Board of Directors, the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 8. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 9. ASSISTANT SECRETARIES. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board and Chief Executive Officer, the President and Chief Operating Officer, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board and Chief Executive Officer, the President and Chief Operating Officer, any Vice President, if there be one, or the Treasurer, and in the absence of the 9 Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 11. CONTROLLER. The Controller shall establish and maintain the accounting records of the Corporation in accordance with generally accepted accounting principles applied on a consistent basis, maintain proper internal control of the assets of the Corporation and shall perform such other duties as the Board of Directors, the Chairman of the Board and Chief Executive Officer, the President and Chief Operating Officer or any Vice President of the Corporation may prescribe. Section 12. OTHER OFFICERS. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. Initially and until such time as Richard M. Kelleher succeeds Raymond E. Schultz as Chairman of the Board and Chief Executive Officers of the Corporation, William L. Perocchi shall serve as Executive Vice President and Chief Financial Officer of the Corporation, unless 75% or more of the members of the Board of Directors vote otherwise. ARTICLE V. STOCK Section 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board and Chief Executive Officer, the President and Chief Operating Officer or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Section 2. SIGNATURES. Any or all of the signatures on the certificate may be a facsimile, including, but not limited to, signatures of officers of the Corporation and countersignatures of a transfer agent or registrar. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 3. LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the 10 certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. TRANSFERS. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall be issued. 11 EX-99.3 8 EXHIBIT 99-3 FOR IMMEDIATE RELEASE Contact: For Doubletree: For Promus: William L. Perocchi, CFO John C. Hawkins, Corporate Doubletree Corporation Communications (602)220-6810 Promus Hotel Corporation Ruth Pachman/Michael Freitag (901)374-5529 Kekst and Company Gregg A. Swearingen, Investor (212)521-4800 Relations Promus Hotel Corporation (901)374-5468 DOUBLETREE CORPORATION AND PROMUS HOTEL CORPORATION SIGN $4.7 BILLION DEFINITIVE MERGER AGREEMENT PHOENIX, AZ AND MEMPHIS, TN, SEPTEMBER 2, 1997 - Doubletree Corporation (NASDAQ: TREE) and Promus Hotel Corporation (NYSE: PRH) today announced the execution of a definitive merger agreement, creating one of the world's largest hotel companies with a portfolio of fast-growing upscale and mid-priced brands including Doubletree Hotels, Embassy Suites, Doubletree Guest Suites, Homewood Suites, Club Hotels by Doubletree, Hampton Inn, Hampton Inn & Suites, and Red Lion. This stock-for-stock transaction, valued at approximately $4.7 billion, is a merger of equals, combining Doubletree's strength in hotel management with Promus' strength in franchising and building brands. With approximately $5 billion in annual system-wide revenues under management contract for franchise agreement, the combined company will be the lodging industry's third largest revenue producer. As of June 30, the new company had 1,136 hotels, approximately 172,000 rooms, and more than 40,000 employees in all regions of the United States and its major markets, as well as selected locations in Latin America and Asia. The terms of the agreement call for the two companies to be merged into subsidiaries of a new holding company to be named Promus Hotel Corporation. Doubletree shareholders will receive one share in the new company for each of their shares in Doubletree. Promus shareholders will receive 0.925 shares in the new company for each of their shares in Promus. The transaction is intended to be accounted for as a pooling-of-interests and is expected to be tax-free. The merger is expected to be accretive to earnings per share in the first full year, excluding costs related to the transaction. The shares of the new company are expected to be listed on the New York Stock Exchange. The companies have agreed that: - Promus' President and Chief Executive Officer, Raymond E. Schultz, will serve as Chairman and Chief Executive Officer of the new company, and as a member of the Board's Executive Committee. - Doubletree's President and Chief Executive Officer, Richard M. Kelleher, will serve as President and Chief Operating Officer following the merger, and will succeed Mr. Schultz as Chief Executive Officer upon his retirement. He will also be an ex-officio member of the Board's Executive Committee. - The key management team will consist of top managers of both Doubletree and Promus, including William L. Perocchi, currently Executive Vice President and Chief Financial Officer of Doubletree, as Executive Vice President and Chief Financial Officer, and Thomas L. Keltner, currently Executive Vice President and Chief Development Officer of Promus, as Executive Vice President and Chief Development Officer. - The new company will be governed by a 14-member Board of Directors, with seven directors designated by each company. The Board will include Richard J. Ferris and Peter V. Ueberroth, Doubletree Co-Chairmen, and Michael D. Rose, Promus Chairman, who will serve as members of the Board's Executive Committee. - Each company has granted the other an option to acquire 19.9 percent of its common stock under certain conditions. Doubletree also announced that it has adopted a Stockholder Rights Plan, the details of which will be released separately. Approximately 40% of Doubletree's shareholders, including, among others, General Electric Pension Trust and Kohlberg Kravis Roberts & Co., have indicated they intend to vote in favor of the merger. GE and KKR will continue to be represented on the Board of the new company. Raymond E. Schultz, Promus President and Chief Executive Officer, said: "This transaction is truly a merger of equals. The combined company will greatly benefit from the complementary strengths of each partner. Doubletree has grown rapidly through acquisitions and an aggressive conversion strategy. It has an outstanding record and reputation as a quality operator and brand marketer of full service hotels. Promus has grown through franchising and new hotel development. We have grown our proprietary brands primarily on a one-at-a-time basis with emphasis on product quality and consistency and our unique 100% satisfaction guaranteed service culture, which will be extended to all Doubletree's brands." Mr. Schultz added, "This merger is a "defining moment" for Promus. We have achieved a significant presence in the upscale suites and extended-stay markets, and are the industry leader in the mid-priced limited service segment. In joining with a quality upscale full-service brand in Doubletree Hotels, as well as its other brands, the combined company will be able to offer a full range of quality accommodations to meet the needs of business and leisure travelers in markets throughout the United States. Our ability to cross-sell and cross-market our brands will be a key driver of our future growth. We will also be able to offer to franchisees, developers and investors an even more complete line of hotel development opportunities in virtually every important segment of the lodging business. "The combination of two of the strongest and most successful management teams in our industry will provide the depth to continue to grow rapidly and expand to new areas. Rick Kelleher and I worked together for many years, so I know we share the same values and commitment to product quality, customer service and creating shareholder value. The cultures of our companies are remarkably similar and that should make the transition more seamless. We will immediately form transition task forces so that we will hit the ground running," Mr. Schultz continued. Richard M. Kelleher, President and Chief Executive Officer of Doubletree Corporation, said, "The merger of Doubletree and Promus is a natural marriage of two strong institutions with a common heritage and a focus on growth. Doubletree traces its roots to a company that was one of the original franchisees of Embassy Suites. Today, Embassy Suites is the clear market leader in 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. 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) 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 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 DOUBLETREE AND PROMUS MERGER FACT SHEET CONTINUED HOTEL PORTFOLIO (AS OF 6/30/07) BRAND HOTELS ROOMS REVPAR Doubletree Guest Suites 42 8,987 $95.34 Embassy Suites 136 32,810 86.97 Homewood Suites 43 4,439 71.84 Doubletree Hotels 101 30,368 70.54 Red Lion 16 2,902 59.29 Club Hotels 19 3,977 51.77 Hampton Inn & Suites 23 2,500 48.75 Hampton Inn 679 73,326 46.00 Non-Branded 77 12,344 58.38 ------ ------- TOTAL 1,136 171,653 OWNERSHIP HOTELS ROOMS Owned 45 8,105 Joint Venture 26 7,264 Leased 86 14,448 Managed 164 41,920 Franchise 815 99,916 ------ ------- TOTAL 1,136 171,653 OTHER INFORMATION Form of Transaction Merger of equals, stock-for-stock exchange Subject to Approval of Promus and Doubletree hareholders; approximately 40% of Doubletree shareholders have agreed to vote in favor of the merger Hart-Scott-Rodino review Expected Closing By year-end 1997 -----END PRIVACY-ENHANCED MESSAGE-----