<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-27360
__________________
EXTENDED STAY AMERICA, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3996573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 E. BROWARD BOULEVARD, FT. LAUDERDALE, FLORIDA 33394
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 713-1600
__________________
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
At April 30, 1996, the registrant had issued and outstanding an aggregate of
22,853,092 shares of common stock.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXTENDED STAY AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------- -------------
(UNAUDITED) (1)
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $104,010,918 $123,357,510
Refundable deposits............................................ 621,654 344,064
Supply inventories............................................. 291,266 92,817
Prepaid expenses............................................... 366,142 318,541
Other current assets........................................... 56,768 20,758
------------ ------------
Total current assets....................................... 105,346,748 124,133,690
------------ ------------
Property and equipment, net...................................... 51,658,313 18,205,537
Site deposits and preacquisition costs........................... 3,913,811 1,931,215
Deferred loan costs.............................................. 5,294,114 5,293,119
Other assets..................................................... 156,741 55,088
------------ ------------
$166,369,727 $149,618,649
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 925,504 $ 670,708
Accrued salaries and related expenses........................... 67,855 271,230
Due to related parties.......................................... 71,845 133,149
Other accrued expenses.......................................... 440,612 691,117
Deferred revenue................................................ 330,856
Note payable.................................................... 630,200
------------ ------------
Total current liabilities................................... 1,836,672 2,396,404
------------ ------------
Commitments
Shareholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
no shares issued and outstanding...............................
Common stock, $.01 par value, 200,000,000 shares authorized,
22,853,092 and 22,130,855 shares issued and
outstanding, respectively...................................... 228,531 221,309
Additional paid in capital...................................... 166,041,256 148,308,358
Accumulated deficit............................................. (1,736,732) (1,307,422)
------------ ------------
Total shareholders' equity.................................. 164,533,055 147,222,245
------------ ------------
$166,369,727 $149,618,649
============ ============
- - -----------
</TABLE>
(1) Derived from audited financial statements
See notes to unaudited condensed consolidated financial statements
1
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EXTENDED STAY AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31, 1996 MARCH 31, 1995
--------------- ---------------
<S> <C> <C>
Revenue:
Room revenue.......................................... $ 1,137,841
Other revenue......................................... 32,988
-----------
Total revenue..................................... 1,170,829
-----------
Cost and expenses:
Property operating expenses........................... 442,540
Corporate operating and property management expenses.. 1,580,655 $ 195,823
Site selection costs.................................. 823,733 52,778
Depreciation and amortization......................... 203,343
----------- -----------
Total costs and expenses.......................... 3,050,271 248,601
----------- -----------
Loss from operations.............................. (1,879,442) (248,601)
Interest income......................................... 1,450,132
----------- -----------
Net loss.......................................... $ (429,310) $ (248,601)
=========== ===========
Net loss per common share......................... $ (0.02) $ (0.02)
=========== ===========
Weighted average number of common
shares outstanding during the period............. 22,467,393 11,489,017
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements
2
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EXTENDED STAY AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31, 1996 MARCH 31, 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $ (429,310) $(248,601)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization........................... 203,343
Write-off of site deposits and preacquisition costs..... 187,418
Changes in operating assets and liabilities............. 398,299 135,678
------------ ---------
Net cash provided by (used in) operating
activities.......................................... 359,750 (112,923)
------------ ---------
Cash flows from investing activities:
Acquisition of extended stay properties..................... (355,579)
Additions to property and equipment......................... (15,356,090) (281,301)
Payment for site deposits and preacquisition costs.......... (2,738,578) (120,086)
Refunds of deposits on property sites....................... 240,000
Payments for other assets................................... (60,746)
------------ ---------
Net cash used in investing activities................ (18,270,993) (401,387)
------------ ---------
Cash flows from financing activities:
Additions to deferred loan costs............................ (21,698)
Additions to prepaid registration costs..................... (52,035)
Proceeds from related party loans........................... 521,031
Payment of note payable..................................... (630,200)
Payments of initial public offering costs................... (731,416)
------------ ---------
Net cash (used in) provided by financing activities.. (1,435,349) 521,031
------------ ---------
(Decrease) increase in cash and cash equivalents.............. (19,346,592) 6,721
Cash and cash equivalents at beginning of period.............. 123,357,510
------------ ---------
Cash and cash equivalents at end of period.................... $104,010,918 $ 6,721
============ =========
Noncash investing and financing transactions:
Issuance of common stock for acquisition of extended stay
properties................................................. $ 17,852,865
============
Capitalized or deferred items included in accounts payable
and accrued liabilities.................................... $ 654,639 $ 454,178
============ =========
</TABLE>
See notes to unaudited condensed consolidated financial statements
3
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EXTENDED STAY AMERICA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are
unaudited and include the accounts of Extended Stay America, Inc. and
subsidiaries (the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
The condensed consolidated balance sheet data at December 31, 1995 was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
Certain previously reported amounts have been reclassified to conform
with the current period's presentation.
NOTE 2 -- NET LOSS PER COMMON SHARE
The net loss per common share amount in the statement of operations for
the three months ended March 31, 1996 has been computed in accordance with
Accounting Principles Board Opinion (APB) No. 15. The net loss per common share
amount for the three months ended March 31, 1995 has been computed in
accordance with a Staff Accounting Bulletin (SAB) of the Securities and
Exchange Commission. According to the SAB, equity securities, including stock,
warrants, options and other potentially dilutive securities, issued within a
twelve-month period prior to an initial public offering of common stock must be
treated as common stock equivalents when computing earnings per share for all
periods presented if the issue price of the common stock or the exercise price
of the warrants, options or other potentially dilutive securities is
substantially less than the initial public offering price, including loss years
where the impact of the incremental shares is anti-dilutive. As permitted by the
SAB, the treasury stock method has been used in determining the weighted
average number of shares of common stock outstanding during the period
presented.
NOTE 3 -- ACQUISITION OF EXTENDED STAY PROPERTIES
On January 26, 1996, the Company acquired an existing extended stay
property from Apartment/Inn, L.P. for approximately $8,324,000 which was paid
for by the issuance of 293,629 shares of common stock plus the payment of
related expenses of $106,000 in cash.
On February 23, 1996, the Company acquired two existing extended stay
properties from Hometown Inn I, LTD and Hometown Inn II, LTD for approximately
$9,603,000 which was paid for by the issuance of 428,608 shares of common stock
and $75,000 in cash plus the payment of related expenses of $175,000 in cash.
These acquisitions were accounted for using the purchase method of
accounting and, accordingly, the results of operations of the properties are
included in the unaudited condensed consolidated statement of operations from
the date of acquisition.
The following unaudited pro forma condensed consolidated statements of
operations are presented as if the acquisition of the above properties and the
related issuances of shares of common stock had occurred on January 9, 1995 (the
date of inception of the Company). The statement for 1995 also is presented as
if the acquisition of the Marietta, Georgia extended stay lodging facility in
August 1995 had occurred on January 9, 1995 and reflects
4
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estimated incremental expenses to operate as a publicly held company as if it
were publicly held on the date of inception.
<TABLE>
<CAPTION>
PRO FORMA FOR THE
PRO FORMA FOR THE PERIOD FROM
THREE MONTHS ENDED JANUARY 9, 1995 (INCEPTION)
MARCH 31, 1996 THROUGH MARCH 31, 1995
------------------- ----------------------------
<S> <C> <C>
Total revenue................ $ 1,644,863 $ 1,186,014
Total costs and expenses..... 3,297,473 1,262,778
----------- -----------
Loss from operations....... (1,652,610) (76,764)
Interest income.............. 1,450,132 __________
-----------
Net loss................... $ (202,478) $ (76,764)
=========== ===========
Net loss per common share.. $(0.01) $ (0.01)
=========== ===========
Weighted average........... 22,853,092 12,493,366
=========== ===========
</TABLE>
NOTE 4 -- RELATED PARTY LEASES
In the quarter ended March 31, 1996, the Company entered into (i) a 10-year
lease for a suite at Joe Robbie Stadium for a base rental of $115,000 per year,
subject to certain additional charges and periodic escalation, and (ii) a 3-year
lease for a suite at Homestead Motor Sports Complex for a base rental of $53,250
per year, subject to certain additional charges. The Chairman of the Company's
Board of Directors owns Joe Robbie Stadium and has an approximately 50% interest
in Homestead Motor Sports Complex.
NOTE 5 -- SUBSEQUENT EVENTS
Subsequent to March 31, 1996, the Company executed two purchase agreements
for the acquisition of two lodging facilities, each of which is subject to
certain terms and conditions. In addition, the Company received a commitment for
a new mortgage facility which is expected to provide up to $300 million in
mortgage financing, subject to certain conditions and limitations, for completed
facilities. The Company expects that upon completion of this new mortgage
facility, it will reduce the size of the existing mortgage facility to $100
million.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company was organized in January 1995 to develop, own, and manage
extended stay lodging facilities. The Company began construction of its first
lodging facility in Spartanburg, South Carolina on February 1, 1995. This
facility was completed and commenced operations in August 1995. The Company's
activities during the quarter ended March 31, 1995 consisted of corporate
organization, site selection, and site development. The Company did not have
operating facilities or other revenue sources during the quarter ended March 31,
1995.
As of March 31, 1996 the Company had 5 operating facilities, 17 facilities
under construction, and options to purchase 64 sites for development in 23
states. The Company expects to complete the construction of the facilities
currently under construction and to commence construction on the majority of
these sites under option during 1996. There can be no assurances, however, that
the Company will complete the acquisition of the sites under option or, if
acquired, commence construction during 1996 and the Company's ability to do so
may be materially impacted by various factors including zoning, permitting, and
environmental due diligence issues and weather-induced construction delays.
Although the Company expects that the construction and development of new
extended stay lodging facilities will be its primary means of expansion, the
Company has also made, and may continue making, acquisitions of existing
extended stay facilities or other properties that are suitable for conversion
to the extended stay concept.
During the quarter ended March 31, 1996, the Company acquired three
operating facilities (two in Norcross, GA and one in Riverdale, GA) and
commenced construction on eight additional facilities. On January 26, 1996, the
Company acquired substantially all of the assets of Apartment/Inn, L.P. which
owned and operated a 196-room economy extended stay lodging facility in
Norcross, Georgia. In consideration for the acquisition, the Company issued an
aggregate of 293,629 shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock. On February 23, 1996, the Company acquired
substantially all of the assets of Hometown Inn I, LTD and Hometown Inn II, LTD
which owned and operated a 130-room economy extended stay lodging facility in
Norcross, Georgia and a 144-room economy extended stay lodging facility in
Riverdale, Georgia. In consideration for the acquisition, the Company issued an
aggregate of 428,608 shares of Common Stock and paid an additional $75,000 in
cash. These acquisitions were accounted for using the purchase method of
accounting.
On April 23, 1996, the Company entered into an agreement to acquire
substantially all of the assets of American Apartmen-Tels Investors II, L.P.
which owns and operates a 59-room economy extended stay lodging facility in
Lenexa, Kansas, for a purchase price of approximately $3.3 million in cash.
This purchase includes adjacent land on which the Company intends to build a
new 60-room economy extended stay lodging facility. On May 1, 1996, the Company
also entered into an agreement to acquire from Kipling Hospitality Enterprises
Corporation a 145-room traditional lodging facility located in Lakewood,
Colorado, which the Company intends to remodel and convert to the economy
extended stay format. The purchase price will be approximately $3.0 million,
which the Company expects to pay by delivering shares of Common Stock. The
Company will account for these acquisitions using the purchase method of
accounting. Consummation of these proposed acquisitions is subject to a number
of conditions.
RESULTS OF OPERATIONS
PROPERTY OPERATIONS
The Company did not have operating facilities during the quarter ended
March 31, 1995. The Company began the quarter ended March 31, 1996 with two
operating facilities and acquired three additional operating facilities during
that quarter. During the period owned by the Company, these properties realized
average occupancy of 90% and average weekly room rates of $198 during the
quarter ended March 31, 1996.
The properties recognized total room revenue of $1,137,841 and other
revenues, consisting of telephone and vending revenues which vary based on
occupancy, of $32,988 during the quarter ended March 31, 1996. Property
operating expenses, consisting of all expenses directly allocable to the
operation of the properties, but excluding any allocation of corporate operating
expenses and depreciation, were $442,540 or 37.8% of total revenues. Property
operating expenses include primarily salaries and wages, telephone, utilities,
property taxes, insurance, maintenance, and supply costs.
6
<PAGE>
Depreciation of the cost of the facilities in the amount of $193,113 was
provided using the straight-line method over the estimated useful lives of the
properties. The provision for the quarter ended March 31, 1996 reflects a pro-
rata allocation of the annual depreciation charge for the period for which the
properties were in operation.
CORPORATE OPERATIONS
Corporate operating and property management expenses include all expenses not
directly related to the development or operation of facilities. Expenses of
$1,580,655 for the quarter ended March 31, 1996 and $195,823 for the quarter
ended March 31, 1995 consist primarily of personnel expenses, professional and
consulting fees, and related travel expenses. The increase in corporate
operating and property management expenses for the quarter ended March 31, 1996
as compared with the quarter ended March 31, 1995 reflects an increase in
personnel and related expenses in connection with the Company's increased level
of operating properties and site development. The total amount of these
expenses will increase in the future with the development of additional
facilities.
Site selection costs of $823,733 for the quarter ended March 31, 1996 and
$52,778 for the quarter ended March 31, 1995 consist of real estate and
construction personnel costs which are not directly related to a site that will
be developed by the Company, along with expenditures made to third parties for
services and costs related to the investigation of such sites. The increase in
these costs for the quarter ended March 31, 1996 as compared with the quarter
ended March 31, 1995 reflects the increased level of sites under development.
These costs will continue in the future and could increase depending on the rate
of expansion because the Company's development personnel must evaluate numerous
potential sites in an effort to identify sites meeting the Company's standards.
Depreciation and amortization in the amount of $10,230 were provided during
the quarter ended March 31, 1996 using the straight-line method over the
estimated useful lives of the assets for assets not directly related to the
operation of the facilities, including primarily organization costs and office
furniture and equipment. These assets were acquired subsequent to March 31,
1995 and therefore no provision for depreciation and amortization was made for
the quarter ended March 31, 1995.
The Company realized $1,450,132 of interest income during the quarter ended
March 31, 1996 which was primarily attributable to the short-term investment of
funds received from the initial capitalization of the Company in the third
quarter of 1995 and the consummation of the Company's initial public offering of
Common Stock and a concurrent offering of Common Stock to the Company's then
existing shareholders on December 19, 1995. There were no funds held for
investment by the Company during the quarter ended March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash balances of $104,010,918 as of March 31, 1996 compared to
$123,357,510 as of December 31, 1995. Substantially all of the cash balances as
of December 31, 1995 and March 31, 1996 were invested in an overnight sweep
account with a commercial bank which invests in short-term, interest bearing
reverse repurchase agreements for U.S. government securities. The market value
of the securities held pursuant to the agreements approximates the carrying
amount. In consideration for the three existing facilities acquired by the
Company in the quarter ended March 31, 1996, the Company issued Common Stock
valued at approximately $17.9 million and paid cash, including the payment of
related expenses of approximately $356,000. In addition, approximately $15.4
million was used to acquire land and develop and furnish the 17 sites under
construction during the quarter. This compares to approximately $281,000 used
to develop one property during the first quarter of 1995. A total of
approximately $2.7 million, less refunds of site deposits of $240,000, was used
for site deposits and preacquisition costs in the three months ended March 31,
1996, compared to approximately $120,000 used for such costs in the comparable
prior year period.
During the quarter ended March 31, 1996, the Company repaid outstanding
indebtedness of $630,200 under a note issued in connection with the purchase of
land for development. This note was due January 2, 1996 and was repaid from the
Company's cash balances. During the first quarter of 1996, the Company also
made payments of approximately $731,000 for initial public offering costs.
During the first quarter of 1995, the Company received proceeds from related
party loans of approximately $521,000.
The Company expects to finance the construction and development of its lodging
facilities principally with its cash balances and with loans under mortgage
facilities. The Company has an existing mortgage facility (the "Existing
Mortgage Facility") which provides for up to $200 million in loans, subject to
certain conditions and limitations, for facilities after completion of
construction. The Company has also received a commitment for a new
7
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mortgage facility which is expected to provide up to $300 million in mortgage
financing, subject to certain conditions and limitations, for completed
facilities. The Company expects that upon completion of this new mortgage
facility, it will reduce the size of the Existing Mortgage Facility to $100
million.
The Company in the future may seek to increase the amount of its credit
facilities, negotiate additional credit facilities, or issue corporate debt
instruments. Any debt incurred or issued by the Company may be secured or
unsecured, with a fixed or variable interest rate, and may be subject to such
terms as the Board of Directors of the Company deems prudent. The Company
expects that it will need to procure additional financing over time, although
there can be no assurance that such financing will be available when needed.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement No. 121
("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of". This statement requires the Company to
identify properties for which it has committed to an exit plan or which may be
otherwise impaired. The fixed assets for such properties must be written down
to fair market value. The Company anticipates that the adoption of SFAS 121,
required for fiscal years beginning after December 15, 1995, will not result in
a reduction of net fixed assets or an increase in expenses in the fiscal year
1996 statement of operations.
The FASB has also issued Statement No. 123 ("SFAS 123") "Accounting for Stock-
Based Compensation", effective for fiscal years beginning after December 15,
1995. Under SFAS 123, companies are encouraged but not required to recognize
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on fair value accounting rules. Companies that
choose not to record compensation expense under the new rules will be required
to disclose pro forma net income and earnings per share under the new method.
The Company has not yet determined the financial statement impact of SFAS 123
and has elected not to recognize the impact of this pronouncement in its fiscal
1995 statement of operations, but will disclose as required in the fiscal 1996
financial statements on a pro forma comparative basis the effect of SFAS 123 on
net income and earnings per share.
8
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE+
------- ---------------------- -----
<S> <C> <C>
2.2* Agreement to Purchase Hotel and related agreements dated January 24, 1996
between the Company and John W. Baker and Apartment/Inn, L.P.
2.3** Agreement to Purchase Hotel and related agreements dated February 23, 1996
among ESA 0992, Inc., ESA 0993, Inc., Hometown Inn I, LTD, and Hometown
Inn II, LTD
2.4 Agreement to Purchase Hotel and related agreements dated May 1, 1996 among
ESA Properties, Inc., Kipling Hospitality Enterprises Corporation, and
J. Craig McBride
10.3 Amended and Restated 1995 Employee Stock Option Plan of the Company
10.6 1995 Stock Option Plan for Non-Employee Directors of the Company, as amended
10.10 Amended and Restated 1996 Employee Stock Option Plan of the Company
10.11 Employment Agreement, dated as of March 18, 1996, between ESA Development,
Inc. and Harold E. Wright
10.13 Homestead Motorsports Complex Executive Suite License Agreement dated
February 14, 1996 among The Homestead Motorsports Joint Venture, Miami
Motorsports Joint Venture and the Company
10.14 Joe Robbie Stadium Executive Suite License Agreement dated March 18, 1996
between Robbie Stadium Corporation and the Company
10.15 Commitment letter for a mortgage facility between the Company and CS First
Boston Mortgage Capital Corporation
11.1 Statement re: Computation of Per Share Loss
27.1 Financial Data Schedule (for EDGAR filings only)
- - ------------
* Incorporated by reference to the corresponding exhibit to Post-Effective Amendment No. 1 to the
Company's registration statement on Form S-1, Registration No. 333-102.
** Incorporated by reference to the corresponding exhibit to Post-Effective Amendment No. 2 to the
Company's registration statement on Form S-1, Registration No. 333-102.
+ This information appears only in the manually signed copy of this report.
</TABLE>
(b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K dated January 26, 1996 relating to
the consummation of the acquisition by the Company of the 196-room economy
extended stay lodging facility located in Norcross, Georgia owned by
Apartment/Inn, L.P. The Company incorporated by reference in such report the
financial statements of Apartment/Inn, L.P. and the Pro Forma Financial
Statements of Extended Stay America, Inc. and Subsidiaries and Acquired
Companies contained in Post-Effective Amendment No. 1 to the Company's
Registration Statement on Form S-1 (No. 333-102).
The Company filed a report on Form 8-K dated February 23, 1996 relating to
the consummation of the acquisition by the Company of the 130-room economy
extended stay lodging facility located in Norcross, Georgia and the 144-room
economy extended stay lodging facility located in Riverdale, Georgia owned by
Hometown Inn I, LTD and Hometown Inn II, LTD. The Company incorporated by
reference in such report the financial statements of Hometown Inn I, LTD and
Hometown Inn II, LTD and the Pro Forma Financial Statements of Extended Stay
America, Inc. and Subsidiaries and Acquired Companies contained in Post-
Effective Amendment No. 2 to the Company's Registration Statement on Form S-1
(No. 333-102).
9
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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, thereunto duly authorized, on May 8, 1996.
EXTENDED STAY AMERICA, INC.
/s/ Robert A. Brannon
-----------------------------------
Robert A. Brannon
Senior Vice President,
Chief Financial Officer,
Secretary, and Treasurer
(Principal Financial Officer)
/s/ Gregory R. Moxley
-----------------------------------
Gregory R. Moxley
Vice President--Finance and
Controller
(Principal Accounting Officer)
10
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EXHIBIT 2.4
AGREEMENT TO PURCHASE HOTEL
---------------------------
THIS AGREEMENT is made this day of April, 1996, by and
between Kipling Hospitality Enterprise Corporation, a Colorado corporation
("Seller"), J. Craig McBride ("McBride"), and ESA Properties, Inc.
("Purchaser").
R E C I T A L S:
A. Seller is the fee owner of that certain parcel of land (and the
improvements and buildings located thereon) legally described in Exhibit A and
commonly referred to as the Econolodge, 715 Kipling Street, Lakewood, Colorado
80215 (the "Hotel") and the owner of the Fixtures and Tangible Personal
Property, Operating Equipment, Consumables, and Miscellaneous Hotel Assets (all
as hereinafter defined).
B. The Hotel's facilities include guest and public facilities
consisting of 145 rooms, administrative offices, and service areas.
C. Seller desires to sell, and Purchaser desires to purchase, the
Property upon and subject to the terms and conditions hereinafter set forth.
D. Purchaser has requested that McBride, as sole shareholder of
Seller, agree to indemnify (jointly with Seller) Purchaser as hereinafter
provided, and McBride has agreed to give such indemnity.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, agreements, covenants and conditions
herein contained, and other good and valuable consideration, Seller and
Purchaser agree as follows:
ARTICLE I
<PAGE>
DEFINITIONS AND REFERENCES
1.1 Definitions. As used herein, the following terms shall have the
respective meanings indicated below:
Affiliate: With respect to a specific entity, any natural person or
any firm, corporation, partnership, association, trust or other entity which,
directly or indirectly, controls, or is under common control with, the subject
entity, and with respect to any specific entity or person, any firm,
corporation, partnership, association, trust or other entity which is controlled
by the subject entity or person. For purposes hereof, the term "control" shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any such entity or the power to veto
major policy decision of any such entity, whether through the ownership of
voting securities, by contract, or otherwise.
Agreement: This Agreement to Purchase Hotel, including the Exhibits.
Bookings: Contracts for the use or occupancy of guest rooms of the
Hotel.
Closing: As defined in Section 6.1.
Compensation: The direct salaries and wages paid to, or accrued for
the benefit of, any Employee, incentive compensation, vacation pay, severance
pay, employer's contributions under F.I.C.A., unemployment compensation,
workmen's compensation, or other employment taxes, and payments under Employee
Benefit Plans (as hereinafter defined).
Consumables: All food and beverages (alcoholic, to the extent
transferable under applicable law, and non-alcoholic); engineering, maintenance
and housekeeping supplies, including soap, cleaning materials and matches;
stationery and printing; and other supplies of all kinds, in each case whether
partially used, unused, or held in reserve storage for future use in connection
with the maintenance and operation of the Hotel, which are on hand (which shall
include off-site storage) on the date hereof, subject to such
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depletion and restocking as shall occur and be made in the normal course of
business but in accordance with present standards, excluding, however, (i)
Operating Equipment and (ii) all items of personal property owned by Space
Lessees, guests, employees, or persons (other than Seller or any Affiliate of
Seller, unless denominated as an Excluded Asset hereunder) furnishing food or
services to the Hotel.
Cut-off Time: 12:01 A.M. on the Closing Date.
Department: Colorado Department of Revenue.
Deposit: As defined in Section 3.2.
Documents: Reproducible copies of all plans, specifications, drawings,
blueprints, surveys, environmental reports and other documents which Seller has
in its possession, or has a right to (provided Seller has knowledge of such
documents), as the same relate to the Real Property, including, but not limited
to those relating to any prior or ongoing construction or rehabilitation of the
Real Property.
Employee(s): All persons employed by Seller and/or an Affiliate
pursuant to Employment Contracts.
Employee Benefit Plans: All employee benefit plans, as that term is
defined in Section 3(2)(a) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including "multi-employer pension plans" as defined
in Section 3(37) of ERISA, and each other employee benefit plan or program
(including welfare benefit plans as defined in Section 3(1) of ERISA) to which
Seller contributes on behalf of any of the Employees.
Employment Contract(s): Those contracts and agreements, oral or
written, with all or any of the executives, staff and employees of Seller and/or
an Affiliate for work in or in connection with the Hotel including, but not
limited to, individual employment agreements, union agreements, employee
handbooks, group health insurance plans, life insurance plans and disability
insurance plans (other than Employee Benefit Plans).
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Environmental Laws: As defined in Section 5.1(u).
Environmental Study: As defined in Section 4.3.
Excluded Assets: The following: (i) those assets, if any, listed on
Exhibit B hereto owned and to be retained by Seller or Affiliates of Seller;
(ii) receivables; (iii) all assets that are marked with the Econolodge trademark
or logo; (iv) the Hotel Names; and (v) except as provided to the contrary in
Section 17.1(e) hereof, all records, files and proprietary operating manuals in
the Hotel.
Excluded Permits: Permits and licenses required for the ownership and
operation of the Hotel which, under applicable law, are nontransferable.
Fixtures and Tangible Personal Property: All fixtures, furniture,
furnishings, fittings, equipment, cars, trucks, machinery, apparatus, signage,
appliances, draperies, carpeting, and other articles of personal property now
located on the Real Property or held in storage for future use at the Hotel and
used or usable in connection with any part of the Hotel, subject to such
depletions, resupplies, substitutions and replacements as shall occur and be
made in the normal course of business but in accordance with present standards
excluding, however: (i) Consumables; (ii) Operating Equipment; (iii) equipment
and property leased pursuant to Hotel Contracts; (iv) property owned by Space
Lessees, guests, employees or other persons (other than Seller or any affiliate
of Seller, unless denominated as an Excluded Asset hereunder) furnishing goods
or services to the Hotel; and (v) Improvements.
FIRPTA Certificate: As defined in Section 17.1(l).
Hazardous Material: As defined in Section 5.1(u).
Hotel: The hotel referred to in the Recitals.
Hotel Contracts: All management, service, maintenance, purchase
orders, leases and other contracts or agreements, including equipment leases
capitalized for accounting purposes, and
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any amendments thereto, with respect to the ownership, maintenance, operation,
provisioning, or equipping of the Hotel, or any of the Property, as well as
written warranties and guaranties relating thereto, if any, including, but not
limited to, those relating to heating and cooling equipment and/or mechanical
equipment, but exclusive, however, of (i) insurance policies, (ii) the Bookings,
(iii) the Space Leases, (iv) the Employment Contracts, and (v) the Employee
Benefit Plans.
Hotel Names: All names or other identifications used in connection
with the operation of Hotel.
Impositions: All taxes and other governmental charges of any kind
whatsoever that may at any time be assessed or levied against or with respect to
the Property, or any part thereof or any interest therein, including, without
limitation, all general and special real estate taxes and assessments or taxes
assessed specifically in whole or in part in substitution of general real estate
taxes or assessments; any taxes levied upon or with respect to the revenue,
income or profits of Seller from all or any part of the Property which, if not
paid, will become a lien on all or any part of the Property, or a lien or charge
on the rents, revenues or receipts therefrom; all assessed ad valorem taxes; all
utility and other charges incurred in the operation, maintenance, use, occupancy
and upkeep of the Property and all assessments and other charges made by any
governmental agency for improvements that may be secured by a lien on the
Property.
Improvements: The buildings, structures (surface and sub-surface) and
other improvements, including such fixtures as shall constitute real property,
located on the Land.
Inspection Period: As defined in Section 4.1.
Land: The parcel of real estate described in Exhibit A hereto,
together with all rights, title and interest, if any, of Seller in and to all
land lying in any street, alley, road or avenue, open or proposed, in front of
or adjoining said Land, to the centerline thereof, and all right, title and
interest of Seller in and to any award made or to be made in lieu thereof and in
and to any unpaid award for the damage to said Land by reason of change
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of grade of any street.
Legal Requirements: All laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all governments and governmental
authorities having jurisdiction of the Hotel (including, for purposes hereof,
any local Board of Fire Underwriters), and the operation thereof.
Material Bookings: All Bookings for meetings and banquet facilities
and, with respect to guest rooms, any contract for ten (10) or more room nights.
Material Contracts: All Hotel Contracts which cannot be cancelled by
30 days' or less notice without penalty or premium payment.
Miscellaneous Hotel Assets: All contract rights, leases, concessions,
trademarks, logos, copyrights, assignable warranties and other items of
intangible personal property relating to the ownership or operation of Hotel,
but such term shall not include (i) Bookings; (ii) Hotel Contracts; (iii) Space
Leases; (iv) Permits; (v) cash or other funds, whether in petty cash or house
banks, or on deposit in bank accounts or in transit for deposit; (vi) books and
records (except as provided in Section 16.1(f); (vii) refunds, rebates, or other
claims, or any interest thereon, for periods or events occurring prior to the
Cut-off Time; (viii) utility and similar deposits; (ix) prepaid insurance or
other prepaid items; or (x) prepaid license and permit fees; except to the
extent that Seller receives a credit at Closing for any such item or matter.
Non-Compete Agreements: The Non-Compete Agreements delivered by Seller
to Purchaser pursuant to the terms of Section 7.1 hereof.
Note: The promissory note delivered to Seller pursuant to Section 3.1
hereof, the form of which is attached hereto as Exhibit T.
Operating Equipment: All china, glassware, linens, silverware and
uniforms, whether in use or held in reserve storage for future
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use, in connection with the operation of the Hotel, which are on hand (including
off-site storage) on the date hereof, subject to such depletion and restocking
as shall be made in the normal course of business but in accordance with present
standards.
Parent: Extended Stay America, Inc., a Delaware corporation.
Permits: All licenses, franchises and permits, certificates of
occupancy, authorizations and approvals used in or relating to the ownership,
occupancy or operation of any part of the Hotel.
Permitted Exceptions: Any liens, encumbrances, restrictions,
exceptions and other matters specified in Exhibit C to which title to the
Property may be subject on the Closing Date.
Personal Property: All of the Property other than the Real Property.
Property: (i) The Real Property; (ii) the Fixtures and Tangible
Personal Property; (iii) the Operating Equipment; (iv) the Consumables; (v) the
transferable right, title and interest of Seller in, to and under the Hotel
Contracts and Space Leases; (vi) the Bookings; (vii) the Permits (other than
Excluded Permits); (viii) the Documents; and (ix) all other Miscellaneous Hotel
Assets, provided, however, that Property shall not include the Excluded Assets.
Purchase Price: As defined in Section 3.1.
Real Property: The Land together with the Improvements located on the
Land.
Searches: As defined in Section 6.3(c).
Section 1445: As defined in Section 17.1(l).
Shares: The shares of common stock, par value $.01 per share, of
Extended Stay America, Inc., a Delaware corporation.
Software Program: The software programs for accounting functions for
the Hotel.
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Space Leases: All leases, licenses, concessions and other occupancy
agreements, and any amendments thereto, whether or not of record, for the use or
occupancy of any portion of the Real Property excluding, however, Bookings.
Space Lessee: Any person or entity entitled to occupancy of any
portion of the Real Property under a Space Lease.
Submittals: As defined in Section 4.2.
Submitted Financial Statements: Those financial statements of the
Hotel identified in Exhibit D hereto.
Survey: The survey for the Property prepared in accordance with
Section 6.3(a).
Title Commitment: The commitment for title insurance issued in
accordance with Section 6.3(b).
Title Company: First American Title Insurance Company.
Title Defect: A lien, claim, charge, security interest or
encumbrance other than a Permitted Exception.
Title Documents: As defined in Section 6.3.
Title Papers: As defined in Section 6.3(b).
Title Policy: As defined in Section 7.1(e).
UCC: The Uniform Commercial Code in effect in the state of Colorado.
Violation: Any condition with respect to the Property which
constitutes a violation of any Legal Requirements.
1.2 References. Except as otherwise specifically indicated, all
references to Section and Subsection numbers refer to Sections and Subsections
of this Agreement, and all references to Exhibits refer to the Exhibits attached
hereto. The words "hereby," "hereof," "herein," "hereto," "hereunder,"
"hereinafter," and words
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of similar import refer to this Agreement as a whole and not to any
particular Section or Subsection hereof. The word "hereafter" shall mean
after, and the term "heretofore" shall mean before, the date of this
Agreement. Captions used herein are for convenience only and shall not be
used to construe the meaning of any part of this Agreement.
ARTICLE II
SALE AND PURCHASE
2.1 Sale and Purchase. Seller hereby agrees to sell (or to
cause to be sold) to Purchaser, and Purchaser hereby agrees to purchase
from Seller, the Property on the terms and subject to the conditions of
this Agreement.
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ARTICLE III
PURCHASE PRICE
3.1 Purchase Price; Allocation Thereof. The purchase price
("Purchase Price") for the Property and the Non-Compete Agreements shall be
Three Million Twenty-Five Thousand Dollars ($3,025,000.00), subject to
adjustments and prorations as provided herein, payable by delivery of the
Note.
The Purchase Price shall be allocated in accordance with the values reasonably
attributable to the components of the Property and the Non-Compete Agreements
as set forth on Exhibit E hereto.
3.2 Deposit. Concurrently herewith, Purchaser is depositing the
sum of Twenty-Five Thousand Dollars ($25,000.00) (the "Deposit") with Title
Company to secure performance of Purchaser's obligations hereunder. The Deposit
shall be held in an interest bearing account until the Closing Date (except as
otherwise provided herein) at which time the Deposit (which shall include all
accrued interest thereon) shall be paid as a credit against the Purchase Price.
Except as hereinafter provided, if the transaction contemplated hereby does not
close because of a default by Purchaser hereunder, the parties agree that the
Deposit shall be delivered to Seller and Seller shall be entitled to pursue
against Purchaser any and all remedies available to Seller, at law or in equity;
provided, however, that Purchaser shall not be liable to Seller for damages in
excess of $100,000.00. Notwithstanding the foregoing, if the transaction
contemplated hereby does not close because of a default by Seller as hereinafter
provided and Purchaser shall not have defaulted hereunder, the Deposit shall be
returned promptly to Purchaser and Purchaser shall be entitled to pursue against
Seller any and all remedies available to Purchaser, at law or in equity;
provided, however, that Seller shall not be liable to Purchaser for damages in
excess of $100,000.00.
3.3 No Assumption of Seller's Obligations. Except as specifically
provided herein to the contrary, Purchaser shall not assume, or become obligated
with respect to, any obligation of Seller, including, but not limited to, the
following:
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(a) Obligations of Seller now existing or which may arise
prior to the Cut-off Time with respect to any accounts payable or other
payables;
(b) Obligations prior to the Closing Date of any term,
covenant or provision of any Employee Benefit Plan, Employment Contract,
Hotel Contract or Space Lease;
(c) Obligations of Seller now existing or which may hereafter
exist by reason of or in connection with any alleged misfeasance or
malfeasance by Seller in the conduct of its business prior to the Closing Date,
and with respect to any tort liability;
(d) Obligations to Employees with respect to any Compensation
(or pursuant to any Employment Contract or Employee Benefit Plan) provided,
however, that nothing herein shall cause Seller to assume any liability to
Employees who are hired by Purchaser for compensation due such Employees
arising from their employment by Purchaser; and
(e) Obligations of Seller incurred in connection with or
relating to the transfer of the Property pursuant to this Agreement, including
without limitation, any Federal, state or local income, sales, transfer or
other tax incurred by reason of said transfer, all of which shall be the sole
responsibility of Seller.
3.4 Payment of the Note. Purchaser shall satisfy its obligations
under the Note by delivering Shares or cash to Seller, as the case may be, on
or before the Note's maturity, subject to the following:
(a) Purchaser and Seller acknowledge that Seller intends to
sell the Shares which are delivered by Purchaser in satisfaction of the Note.
Seller agrees that it shall sell such Shares prior to the maturity of the
Note only in bona fide private placements which are approved by Purchaser in
its absolute discretion to a person or persons not affiliated with, related to,
or associated with Seller ("Approved Sales"). Purchaser shall deliver to Seller
that number of Shares equal to the number of Shares which are sold pursuant to
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Approved Sales.
(b) If the proceeds from Approved Sales are less than the
amount due under the Note, Purchaser shall also deliver cash to Seller
having a value equal to the difference between the amount due under the Note and
the proceeds from Approved Sales. Notwithstanding the above, if proceeds
received from Approved Sales are insufficient to satisfy any mortgages or deeds
of trust created or suffered by Seller which are a lien on the Property,
Purchaser shall set off against amounts due under the Note an amount equal to
such insufficiency and Purchaser shall apply such amount to satisfy and release
such liens.
(c) The delivery of the Shares pursuant to Section 3.4(a)
above shall be pursuant to an escrow agreement, the form of which is attached
hereto as Exhibit U to be entered into between Purchaser, Seller and an escrow
agent mutually agreed upon by Purchaser and Seller. The escrow agreement shall
provide that Purchaser shall deliver to the escrow agent the Shares to be sold
pursuant to Approved Sales, which Shares shall be delivered by the escrow agent
to the purchaser of the Shares against delivery to the escrow agent of the
proceeds from the Approved Sales. The escrow agent shall first apply the
proceeds to satisfy any mortgages or deeds of trust created or suffered by
Seller which are a lien on the Property. The remainder of the proceeds shall
be delivered to Seller. All costs of such escrow shall be borne by Purchaser.
(d) Purchaser shall indemnify, defend, and hold Seller
harmless against and with respect to all losses, damages, liabilities, costs,
and expenses to which Seller may become subject under the Securities Act of
1933, as amended, or otherwise in connection with or arising out of Approved
Sales.
ARTICLE IV
INSPECTION PERIOD
4.1 Inspection Period. The "Inspection Period" shall be the period
from the date hereof to 11:59 P.M. on the day which is sixty (60) days after
the date when Seller has furnished to Purchaser all
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of the submittals referred to in Section 4.2 below ("Submittals") and a
letter certifying that all Submittals have been delivered to Purchaser.
4.2 Submittals to Purchaser. Seller, at its expense, shall
deliver to Purchaser on or before April 19, 1996, true and correct copies
of the following:
(a) the Permits, Hotel Contracts, Employment Contracts,
Employee Benefit Plans, a summary of the amounts, dates, and
creditworthiness of Material Bookings (whether for periods before or after
the Closing Date), Space Leases and notices of Violations (if any);
(b) a descriptive summary of the manner in which all
Bookings are made, whether oral or written, with or without deposits or
firm or contingent commitments for reservations, along with a copy of the
written agreements or confirmation letters used in connection with the
Bookings;
(c) a descriptive summary of all pending or threatened
litigation listed on Exhibit L;
(d) the most recent real estate and personal property tax
statements for the Property;
(e) all Documents listed in Exhibit M, including, but not
limited to, the plans and specifications;
(f) the most current inventory of all Fixtures and Tangible
Personal Property, Operating Equipment and Consumables;
(g) all other documents or instruments of record or
otherwise relating to the Property available to Seller;
(h) copies of all financial reports prepared by the accountant
for Seller for the fiscal year of Seller for the three (3) years preceding the
date hereof ("Submitted Financial Statements"); and
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(i) information reflecting the insurance loss history of the
Property for the period from January 1, 1994 to the present and copies of all
insurance policies relating to the Property.
4.3 Review and Inspection.
(a) During the Inspection Period, Purchaser shall review the
Submittals and shall have the right to enter upon the Real Property to inspect
the Property and to conduct tests and investigations at its sole cost and
expense, except as provided herein. Seller shall cooperate with Purchaser, or
its agents, in arranging such inspections. Without limitation of the foregoing,
Purchaser or Purchaser's accountants or both may review the Submitted Financial
Statements and, in connection therewith, Seller shall supply such documentation
as Purchaser or Purchaser's accountants may reasonably request to facilitate
such review. In addition, Seller shall cooperate with Purchaser and Purchaser's
representatives in the event Purchaser determines to conduct an audit of the
Submitted Financial Statements. Purchaser shall conduct all such inspections and
reviews in confidence and so as not to interfere unreasonably with the operation
of the Hotel. During the Inspection Period, Purchaser may order an environmental
report, at Purchaser's sole cost and expense, to be conducted by an
environmental engineering firm selected by Purchaser (the "Environmental
Study").
(b) Purchaser shall give Seller at least twenty-four (24)
hours advance notice of any intended physical inspection requiring access to
non-public portions of the Property. Purchaser shall indemnify, defend and hold
Seller harmless from all claims, damages, losses, liabilities, costs and
expenses, including attorneys' fees arising out of, resulting from or caused by
acts or activities of Purchaser or Purchaser's agents, consultants, inspectors
or contractors on or about the Property, including without limitation any claims
of lien. Purchaser shall not make holes for inspections, remove flooring, make
excavations, or engage in any other activities destructive of the Property,
without the prior written consent of Seller. Any damage to the Property made by
Purchaser or any persons acting for or on behalf of Purchaser shall be repaired
promptly.
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(c) Notwithstanding any provision of this Agreement to the
contrary, prior to any entry upon the Property by Purchaser or Purchaser's
agents, contractors, subcontractors, consultants, inspectors or employees,
Purchaser (or the agent, contractor, subcontractor, consultant or inspector
entering the Property) shall deliver to Seller an original endorsement to
Purchaser's commercial general liability insurance policy which evidences that
Purchaser is carrying a commercial general liability insurance policy with a
financially responsible insurance company reasonably acceptable to Seller, with
a Best's rating of A, VI or better, covering (i) the activities of Purchaser and
Purchaser's agents, contractors, subcontractors, consultants, inspectors and
employees on or upon the Property, and (ii) Purchaser's indemnity obligation
contained in Section 4.3(a). Such endorsement t o such policy shall evidence
that such insurance policy shall have a per occurrence limit of at least One
Million Dollars ($1,000,000.00) and an aggregate limit of at least Three Million
Dollars ($3,000,000.00), shall name Seller as an addition insured, shall be
primary and non-contributing with any other insurance available to Seller and
shall contain a full wavier of subrogation clause. The indemnity and insurance
obligations of Purchaser set forth in this Section 4.3 (and subsections
thereunder) shall survive any termination of this Agreement.
4.4 Purchaser's Acceptance or Rejection. If, in its sole and
absolute discretion, Purchaser accepts the condition of the Property, it
shall give Seller written notice of such acceptance before expiration of
the Inspection Period. If Purchaser shall give Seller a notice of
disapproval before expiration of the Inspection Period or fails to give
such notice, then, without the necessity of further documentation, this
Agreement shall be deemed terminated and the Deposit shall be returned to
Purchaser. Purchaser shall pay to Seller the sum of $100.00 as fixed and
liquidated compensation for such termination, and neither party shall have
any further obligation or liability to the other party hereunder. The
parties hereto acknowledge that Purchaser has incurred substantial costs in
connection with the negotiation and execution of this Agreement, will incur
additional substantial costs in conducting the inspections contemplated by
Section 4.3 and would not have entered into this Agreement without the
availability of the Inspection Period. Therefore, the parties agree that
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adequate consideration exists to support the obligations of the parties
hereunder, even before expiration of the Inspection Period. If this
Agreement is terminated pursuant to this Section 4.4, Purchaser shall
deliver to Seller copies of the plans, analyses, reports and other written
information concerning the Property obtained by Purchaser during its review
and inspection of the property; and Purchaser shall remain obligated to
perform Purchaser's indemnification obligation described in Section 4.3 (and
subsections thereunder).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller. Seller hereby
represents and warrants the following to Purchaser:
(a) Due Organization, etc. Seller is a Colorado corporation duly
formed and validly existing in good standing under the laws of its state of
formation and has full power and authority (i) to own or lease its properties
and to carry on its business as it is now being conducted, (ii) to enter into
this Agreement and to sell, convey, transfer, assign, and deliver the Property
to Purchaser as provided herein, and (iii) to carry out the other transactions
and agreements contemplated hereby. This Agreement has been duly authorized by
all requisite action on the part of Seller. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby, except
as otherwise provided herein, do not require the consent or approval of any
governmental authority, nor shall such execution and delivery result in a breach
or Violation of any Legal Requirement, or constitute a default (or an event
which with notice and passage of time or both will constitute a default) under
any contract or agreement to which Seller or an Affiliate is a party or by which
it or the Property is bound.
(b) Title to Real Property. Seller's interest in the Real
Property is good and marketable title in fee simple, free and clear of all
mortgages, options, liens, charges, easements, agreements, claims,
restrictions or other encumbrances of any kind
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or nature except for the Permitted Exceptions.
(c) Title to Personal Property. Seller has good and
marketable title to the Personal Property, subject only to the Permitted
Exceptions. All items of Personal Property have been fully paid for to
the extent that normal business practice permits, except those items
which are subject to installment payments and with respect to which there
are no installments due which are delinquent.
(d) Permits. (i) Exhibit F identifies all existing Permits and is
complete and correct in all material respects; (ii) such Permits constitute all
of the Permits currently necessary for the ownership and operation of the Hotel;
(iii) to Seller's knowledge, no default has occurred in the due observance or
condition of any Permit which has not been heretofore corrected (iv) to Seller's
best knowledge, no Space Lessee has received any notice from any source to the
effect that there is lacking any Permit needed in connection with the operation
of the Hotel or any other operation connected therewith; and (v) all Permits
(except those Permits which are designated Excluded Permits on Exhibit F) are
assignable to Purchaser.
(e) Hotel Contracts. Exhibit G identifies all Hotel
Contracts and the information noted therein is complete and correct in all
material respects. Except as disclosed in Exhibit G, there is no default
under any Hotel Contract. Seller has provided (or will provide during the
Inspection Period) true and correct copies of all Hotel Contracts to
Purchaser. Each Hotel Contract (other than the Hotel Contracts designated
as Material Contracts on Exhibit G) may be
cancelled upon 30 days' or less notice without penalty or premium payment.
(f) Hotel Names. Exhibit O hereto identifies all Hotel
Names and is complete and correct in all respects. Except as provided in
Exhibit O, Seller has not received any notice that the use of any thereof
infringes on the rights of a third party.
(g) Space Leases. Exhibit J identifies all Space Leases
and is complete and correct in all material respects. Except as disclosed
in Exhibit J, there is no default, under any Space Lease.
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Seller has given (or will give, during the Inspection Period) to Purchaser true
and correct copies of all Space Leases. Seller owns all right, title and
interest of the lessor under each Space Lease.
(h) Commissions, etc. Except as may be disclosed on Exhibits G or
J and other than in the ordinary course of business in connection with Bookings,
there are no commissions or referral fees relating to the Hotel currently
outstanding, nor will there be any such commissions or referral fees
outstanding, on or before the Closing Date. Seller has not entered into any
agreements with any referral organization or booking agent which contain any
obligations that extend beyond the Closing Date.
(i) Impositions.
-----------
(i) Except as described on Exhibit N hereto, Seller has
timely filed all returns and reports for sales, use and property taxes
required to be filed by it with respect to the operation of the
Property and has paid in full or made adequate provision by the
establishment of reserves for Impositions which have become due with
respect to the operation of the Property. There is no sales, use or
property tax deficiency proposed or threatened against Seller with
respect to the operation of the Property. There are no tax liens upon
any property or assets of Seller. Seller has made all payments of
sales, use and property taxes when due in amounts sufficient to avoid
the imposition of any penalty with respect to the Property.
(ii) Impositions which Seller was required by law to
withhold or to collect with respect to the Property have been duly
withheld and collected, and have been paid over to the proper
governmental entity or are being held by Seller for such payment, and
all such withholdings and collections and all other payments due in
connection therewith as of the date of the Submitted Financial
Statements are duly reflected on the Submitted Financial Statements.
(iii) Seller is not currently being audited by, and has not
received any notice of intention to audit from, any
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federal, state or local sales, use or property taxing authority.
(j) Fixtures, Tangible Personal Property, etc. Attached hereto as
Exhibit V is a complete inventory of the furniture and furnishings contained in
the guest rooms of the Hotel. The quantities of Fixtures and Tangible Personal
Property, Consumables and Operating Equipment in the Hotel, including physical
reserves, are sufficient for the proper and efficient operation of the Hotel in
accordance with the standards of operation heretofore maintained by Seller.
Seller shall continue to maintain the same at a level consistent with the
average maintenance for the 12 months preceding the date hereof.
(k) Submitted Financial Statements. The Submitted Financial
Statements for the Hotel (which shall include the income of restaurants, bars,
retail rental space and garage portions of the Hotel, if any) fairly present the
results of operation of the Hotel for the periods indicated, and were prepared
in accordance with generally accepted accounting principles on a consistent
basis, and there has been no material adverse change in the results of the
operations of the Hotel since the statement dated for the period ended February
29, 1996.
(l) Bookings. Exhibit I identifies all Bookings for periods from
and after the date hereof, which Exhibit shall be updated at the Closing.
(m) Pending Litigation. Except as described in Exhibit L, there
are no actions, suits, or proceedings, pending or threatened against Seller or
affecting any of Seller's rights, in each case, with respect to the Property, at
law or in equity, or before any federal, state, municipal, or other governmental
agency or instrumentality, which might result in any order, injunction, decree
or judgment having an adverse effect on the Hotel or the Property, nor is Seller
aware of any facts which to its knowledge might result in any action, suit or
proceedings. Except as noted in Exhibit K, the Hotel complies with all Legal
Requirements. Except as noted in Exhibit K, Seller has not received any notice
of any Violation of a Legal Requirement which has not been heretofore corrected.
Prior to the Closing Date, any uncured Violations
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listed in Exhibit K and any other Violations that arise shall be cured by Seller
at its sole expense.
(n) Condemnation. There are no pending, or, to the knowledge of
Seller, threatened, condemnation proceedings or condemnation actions against the
Real Property or any of the rights-of-way located adjacent thereto.
(o) Zoning. The Land is currently zoned for its
present use.
(p) Assessments. No governmental assessment for sewer, sidewalk,
water, paving, electrical, power or other improvements is pending or threatened,
except as may be set forth on Exhibit C.
(q) Labor Disputes. During the three (3) years preceding the date
hereof, Seller has not experienced any labor disputes or labor trouble other
than routine grievances or organizational efforts, none of which have had a
material adverse effect on the operations of the Property.
(r) Employees. Exhibit H is a complete list of all Employees with
their salaries, position and terms of employment; and (i) except as set forth on
Exhibit H, Seller is not a party to any Employment Contract and no union is
presently serving as collective bargaining agent for any Employees; (ii) to the
best of Seller's knowledge, no union presently is conducting or planning to
conduct an organizational campaign for any Employees; and (iii) with the
exception of the Employee Benefit Plans listed on Exhibit P, there is no
pension, profit-sharing, bonus or other employee benefit plan relating to
current or past Employees.
(s) Utilities. All utility equipment and facilities required for
the operation and use of the Hotel are located on the Property and all
agreements for providing utilities are with direct providers.
(t) Material Changes and Accurate Information. There are no facts
or circumstances not disclosed to Purchaser of which Seller has knowledge, which
have or could have a material adverse effect upon the Hotel. Seller agrees to
notify Purchaser
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immediately of such facts or circumstances if it becomes aware of the same. No
representation or warranty made by Seller in this Agreement, nor any statement
or certificate furnished or to be furnished by Seller pursuant to this
Agreement, contains or will contain any untrue statement of a material fact the
omission of which would be misleading.
(u) Environmental Matters.
---------------------
(i) To Seller's knowledge, Seller has not transported,
stored, treated, or disposed of, nor has it allowed or arranged for
any third parties to transport, store, handle, treat, or dispose (as
hereinafter defined) of Hazardous Substances or other waste to or at
any location other than a site lawfully permitted to receive such
Hazardous Substances or other waste for such purposes, nor has it
performed, arranged for, or allowed by any method or procedure such
transportation, storage, treatment, or disposal in contravention of
any laws or regulations or in a manner giving rise to any liability
whatsoever. Seller has not stored, handled, treated, or disposed of,
nor allowed or arranged for any third parties to store, handle, treat,
or dispose of Hazardous Substances or other waste upon property owned
or leased by it, except as permitted by law. For purposes of this
Section 5.1(u), the term "Hazardous Substances" shall include, without
limitation, any material or substance that is one or more of the
following: (i) defined as a conventional, hazardous, toxic, regulated
or solid pollutant, contaminant, substance or waste pursuant to any
Environmental Law (as hereinafter defined), (ii) petroleum, (iii)
asbestos, (iv) corrosive, toxic, flammable, explosive, reactive,
mutagenic, carcinogenic, infectious or radioactive, (v) materials
mixed with, containing or derived from any of the foregoing or (xvii)
any material which is or becomes regulated by any Environmental Law
which is released (as hereinafter defined) at or from the Real
Property or which has migrated to or from the Real Property or is
found on the Real Property or any other site affected by such release
at, to, on or from the Real Property. The terms
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release(d), transport(ed), store(d), treat(ed), handle(d), arrange(d),
dispose(d) and disposal shall have the meanings assigned by the
Comprehensive Environmental Response Compensation and Liability Act,
42 U.S.C.A. Section 9601 et seq. ("CERCLA") or the Resource
Conservation and Recovery Act, 42 U.S.C.A. Section 6901 et seq. (42
U.S.C.A. Section 6903 ("RCRA").
(ii) To Seller's knowledge, there has not occurred during
Seller's occupancy nor is there currently occurring, a release of any
Hazardous Substance to, from, on, into, or beneath the surface of the
Land.
(iii) To Seller's knowledge, the Seller has not shipped,
transported, or disposed of, nor has it allowed or arranged, by
contract, agreement, or otherwise, for any third parties to ship,
transport, or dispose of, any Hazardous Substance or other waste to or
at a site which, pursuant to CERCLA or any similar state law, (i) has
been placed on the National Priorities List or its state equivalent,
or (ii) the Environmental Protection Agency or the relevant state
agency has proposed or is proposing to place on the National
Priorities List or its state equivalent. Seller has not received
written notice, nor does it have knowledge of any facts which could
give rise to any written notice, that Seller is a potentially
responsible party for a federal or state environmental cleanup site or
for corrective action under CERCLA or any other applicable law or
regulation. Seller has not submitted nor to Seller's knowledge was it
required to submit any notice pursuant to Section 103(c) of CERCLA, or
pursuant to any federal, state or local requirement for notification
of a release with respect to the Real Property. Seller has not
received any written request for information from any federal, state
or local governmental authority in connection with any release. Seller
has not been required to or has not undertaken any response,
investigation, monitoring, or remedial actions or clean-up actions of
any kind at the request of any federal, state, or local governmental
entity, or at the request of any other person or entity.
(iv) Seller does not use, and has not used, any
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Underground Storage Tanks, and to Seller's knowledge there are not now
nor have there ever been any Underground Storage Tanks on the Land.
For purposes of this Section 5.1(u)(iv), the term "Underground Storage
Tanks" shall have the meaning given it in the Resource Conservation
and Recovery Act (42 U.S.C. Sections 6901 et seq.).
(v) To Seller's knowledge, there is no asbesto in or on the
Real Property.
(vi) Seller has not received written notice of any
violation, noncompliance or breach of any environmental or worker
safety laws or regulations which require any work, repairs,
construction, or capital expenditures with respect to the assets or
properties of Seller.
(vii) Exhibit S identifies: (i) all environmental audits,
assessments, or occupational health studies undertaken by Seller or
its respective agents or known to have been undertaken by or at the
order or request of governmental agencies; (ii) the results of any
ground, water, soil, air, or asbestos monitoring or investigation
undertaken with respect to the Real Property; (iii) all written
communications between Seller and any environmental agencies; and (iv)
all citations issued under the Occupational Safety and Health Act (29
U.S.C. Sections 651 et seq.).
(viii) For purposes of this Section 5.1(u), the phrase "to
Seller's knowledge" shall not imply any investigation by Seller or its
agents.
(v) Software. Exhibit G identifies all of the Software used in
connection with the ownership and operation of the Hotel, Seller is the owner or
licensee of the Software and, except as listed on Exhibit G, the Software and
all rights thereunder are transferable to Purchaser without restriction.
(w) Documents. Exhibit M is a list of all of the Documents;
Seller knows of no other document or instrument relating
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to the Hotel, or the ownership or operation thereof.
(x) Pension Plan. This transaction will constitute a "complete
withdrawal," as that term is defined in Section 4203 of the Employee Retirement
Income Security Act of 1974, as amended, by Seller from the multiemployer
pension plan identified in Exhibit P hereto.
(y) Seller's Knowledge. For the purposes of this Section 5.1 (but
subject to Section 5.1(u)(viii)), the phrases "to the best of Seller's
knowledge," "to Seller's knowledge" and similar phrases shall imply a reasonable
investigation by Seller and its agents.
(z) Third Party Property. Seller is not in possession of any
property owned by third parties other than (i) property leased by Seller
pursuant to leases disclosed to Purchaser pursuant to this Agreement; (ii)
baggage of current guests which has been checked with or left in the care of
Seller; and (iii) contents in safe deposit boxes deposited by current guests.
(aa) Investment Representations. Seller represents and warrants
that each of it and its shareholders either (i) is an "accredited investor" as
defined in 17 C.F.R. 230.501(a); or (ii) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of investment in the Shares as contemplated by this Agreement. Seller
represents that it has received a prospectus of Parent dated March 1, 1996.
5.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants the following to Seller:
(a) Due Organization, etc. Purchaser is a corporation duly formed
and validly existing in good standing under the laws of its state of formation
and has full power and authority (i) to own or lease its properties and to carry
on its business as it is now being conducted, (ii) to enter into this Agreement
and to purchase the Property from Seller as provided herein, and (iii) to carry
out the other transactions and agreements contemplated hereby. This Agreement
has been duly authorized by all requisite action on the part of Purchaser.
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(b) Authority. Purchaser has all requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby pursuant to the terms and conditions hereof.
(c) No Conflict. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not conflict with,
breach, result in a default under, or violate any commitment, document or
instrument to which Purchaser is a party or by which it is bound.
(d) Parent Shares. The Shares have been registered by the Parent
pursuant to a registration statement filed with the Securities and Exchange
Commission (the "SEC"), a so-called "shelf" registration statement (the
"Registration Statement"), in accordance with the provisions of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the "1933 Act"). Upon the issuance and delivery of the Shares to the Seller
[and to the Parent (for the hold back), as the case may be,] in accordance with
this Agreement, such shares will constitute legally and validly authorized and
issued, fully paid, and nonassessable shares of Common Stock. The Registration
Statement has been declared effective under the 1933 Act. The Parent is in
compliance with the undertakings contained in the Registration Statement and to
the knowledge of the Purchaser, no stop order suspending the effectiveness of
the Registration Statement has been issued under the 1933 Act.
(e) No Approvals Required. No authorization or approval of, or
filing with, any governmental agency, authority or other body or any other third
persons will be required in connection with Purchaser's execution and delivery
of this Agreement or its consummation of the transactions contemplated hereby,
except as expressly referred to in this Agreement and except as otherwise
expressly provided in this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby are not
events which of themselves or with the giving of notice or the passage of time
or both would constitute, on the part of Purchaser, a violation of or conflict
with or result in any breach of, or default under the terms, conditions or
provisions of, any order, writ, injunction, decree, judgment, law
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or regulation, relating to Purchaser, or of Purchaser's organizational documents
or any agreement or instrument to which Purchaser is a party or by or to which
it or any of its assets or properties are bound or subject.
(f) Accurate Information. No representation or warranty made by
Purchaser in this Agreement, nor any statement or certificate furnished or to be
furnished by it pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit any material fact the
omission of which would be misleading.
5.3 Duration of Representations and Warranties. All representations
and warranties contained in Sections 5.1 and 5.2 shall be deemed restated on and
as of the Closing Date and shall survive the Closing.
ARTICLE VI
CLOSING MATTERS
6.1 Closing. The closing of the transaction contemplated hereby (the
"Closing") shall take place at the offices of the Title Company on the date
specified by Purchaser which is not earlier than two (2) days and not later than
fifteen (15) days after Purchaser has delivered notice to Seller of Purchaser's
acceptance pursuant to Section 4.4 (the "Closing Date") or such other date as
may be mutually agreed by the parties. Seller and Purchaser acknowledge that
each shall have the right to waive any of its closing conditions.
6.2 Manner of Closing. The transaction shall be closed with the
concurrent delivery of the documents of title, transfer of interests, delivery
of the title policy described in Section 7.1(e) and the payment of the Purchase
Price. Seller shall provide and pay for any undertaking (the "Gap
Undertaking") to the Title Company necessary for the Closing to occur.
6.3 Survey, Title Commitment and Searches. Seller shall deliver to
Purchaser the following (hereinafter referred to
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collectively as the "Title Documents") within twenty (20) days from the date
hereof:
(a) Survey. Five (5) copies of a Plat of Survey of the Property
prepared by a surveyor licensed by the State of Colorado, in conformity with
Class A minimum detail requirements and the current standards for Land Title
Surveys of the American Title Association and American Congress on Surveying and
Mapping and such standards as are required by the Title Insurer as a condition
to the removal of any survey exceptions from the Title Commitment, certified to
Purchaser, its lender, if any, and the Title Insurer after the date hereof,
showing, without limitation of the foregoing requirements, the following
information with respect to the Property:
(i) the legal description and boundaries thereof;
(ii) the location and street and common addresses of
all improvements situated thereon;
(iii) the location, course and recording numbers, if
applicable, of all water, gas, electric, sewer line and other easements, either
visible or recorded, and party walls;
(iv) public and private streets, roads, alleys and
highways and their common or official names;
(v) record and physical access to and from a
public road or way;
(vi) no encroachments thereon or by any
Improvements located thereon on adjacent property;
(vii) the amount of gross square feet and net square feet
(that is, after deducting the area of that portion of the Property, if any,
lying in the existing or proposed right-of-way of a public street or road)
contained in the Real Property;
(viii) building lines or other restrictions affecting the
Property; and
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(ix) whether any portion of the Property is located in an
area designated as being subject to flood hazards or flood risks or wetlands by
any agency of the United States of America.
(b) Title Commitment. A Title Commitment for an ALTA Seller's
Policy issued by the Title Company in the amount of $1,000.00 (to be increased
at Closing to the amount of the Purchase Price) showing title to the Real
Property in the Seller, subject only to the Permitted Exceptions, containing
"gap" coverage, full extended coverage over all general exceptions, a 3.1 zoning
endorsement (amended to include parking), location, survey and contiguity
endorsements, an endorsement that the real estate tax bills for the Property do
not include taxes pertaining to other real estate, and such other endorsements
as may be reasonably requested by Purchaser, and dated after the date hereof.
Seller shall also deliver full and legible copies of all documents ("Title
Papers") referred to in the Title Commitment.
(c) Searches. UCC, judgment and tax lien searches on the names of
the Seller covering a date not earlier than seven (7) days prior to the date
hereof (the "Searches") showing no Title Defect as to the Property unless the
same is to be paid by Seller and released at or prior to Closing.
(d) Defects. With respect to the Title Documents required to be
provided, as aforesaid, if the same shall reflect any facts that would result in
a Title Defect, Seller shall have thirty (30) days from the expiration of the
Inspection Period within which to cure or remove the Title Defect. Seller shall
be obligated to remove mortgages, deeds of trust and other liens or encumbrances
of a definite and ascertainable amount, which the parties agree may be removed
by the use of the proceeds of sale at Closing as provided in Section 6.3(e)
below. In the alternative, Seller may make arrangements satisfactory to the
Title Company for the cure (including insurance over) or removal of record of
any such Title Defect. If any such Title Defect is not cured or otherwise
provided for as aforesaid on or prior to the thirtieth (30th) day, the Purchaser
shall either: (i) terminate this Agreement, in which event (hereinafter referred
to as "Election No. 1") the Deposit shall be returned to Purchaser and the
parties shall have no further obligation or liability to each other
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hereunder; or (ii) accept the Title Commitment, Survey, or Searches as is, with
the right, however, to deduct the amount of Title Defects represented by liens
or encumbrances of a definite or ascertainable amount from the Purchase Price
payable at Closing (hereinafter referred to as "Election No. 2"). Title Defects
which are acceptable as part of Election No. 2 shall thereupon be deemed to be
Permitted Exceptions and Exhibit C shall be amended, if necessary, to include
such additional Permitted Exceptions. Election No. 2 shall be made by the
Purchaser giving Seller written notice thereof within five (5) days after notice
of Seller's inability to cure or remove the Title Defect and in the absence of
notice of Election No. 2 within such five (5) day period, Purchaser shall be
deemed to have elected Election No. 1. In the event Purchaser elects Election
No. 1 and a Title Defect was created or suffered by Seller, Purchaser shall be
paid by Seller the actual costs of Purchaser's investigation not to exceed
$25,000.00 in addition to recovery of the Deposit.
(e) Removal of Liens, etc. If on the Closing Date there shall be
any Title Defect which is capable of satisfaction by the payment of money, then
Seller shall either (a) use a portion of the Purchase Price to satisfy the same,
provided Seller shall simultaneously either deliver to Purchaser at Closing
instruments, in recordable form, sufficient to satisfy such Title Defect of
record, together with the cost of recording or filing said instrument; or (b) in
the alternative, make arrangements with the Title Company, in advance of
Closing, whereby Seller will deposit with the Title Company sufficient monies,
acceptable to the Title Company to induce the Title Company to issue the Title
Policy to Purchaser, either free of any such Title Defect or with insurance
which "insures over" such Title Defect. Purchaser agrees to provide at Closing
separate certified checks as requested, to facilitate the satisfaction of any
such Title Defects, if request is made within a reasonable time prior to the
Closing Date. The existence of any Title Defects capable of satisfaction by the
payment of money shall not be deemed to be Title Defects for the purposes of
cure periods, as discussed supra in Section 6.3(d), if Seller shall comply with
the foregoing requirements.
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ARTICLE VII
CLOSING DELIVERIES
7.1 Seller's Deliveries. At Closing, Seller shall deliver, or cause to
be delivered to Purchaser, the following, each of which shall be in form and
substance acceptable to counsel for Purchaser and, in the case of documents of
transfer or conveyance, shall be accepted or consented to by all parties
required to make such transfer or conveyance effective:
(a) a recordable general warranty deed from Seller to Purchaser
subject only to the Permitted Exceptions in the form attached hereto as Exhibit
W;
(b) a Bill of Sale, with special covenants of title, transferring
to Purchaser all of Seller's right, title and interest in and to each and every
item of Fixtures and Tangible Personal Property, Documents, Consumables and
Operating Equipment to be transferred hereunder subject only to Permitted
Exceptions in the form attached hereto as Exhibit X, and with respect to any
vehicles included therein, such separate forms of assignment as are required to
be filed with any governmental agency to effect such change in registration of
ownership;
(c) all of the Bookings, Hotel Contracts, Space Leases, Permits
and other tangible Miscellaneous Hotel Assets, together with an Assignment
conveying and transferring to Purchaser all of Seller's right, title and
interest in, to and under the Bookings, Hotel Contracts, Space Leases, Permits
(other than Excluded Permits) and all other Miscellaneous Hotel Assets;
(d) the certificates referred to in Section 10.1(b) hereof;
(e) an ALTA Owner's Insurance Policy, Form B-1987, issued by the
Title Company in exact conformity with the Title Commitment in favor of
Purchaser, in the amount of the Purchase Price, showing good and marketable fee
simple title in the Real Property to be vested in Purchaser, subject only to
Permitted Exceptions (the "Title Policy");
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(f) a FIRPTA Certificate;
(g) estoppel letters from all of the Space Lessees in the form of
Exhibit J-1 and any estoppel certificates for Hotel Contracts which may be
required pursuant to Section 10.1(f);
(h) appropriate instruments conveying or transferring Seller's
right, title and interest in and to the Software to Purchaser;
(i) Affidavit of Title for the Real Property, in customary form;
(j) notices to Space Lessees of change in ownership of the Hotel,
if requested by Purchaser;
(k) appropriate assignments of the insurance policies designated
by Purchaser to be assigned to Purchaser at Closing, if any;
(l) evidence of termination of the Employees;
(m) the opinion of Seller's counsel as provided by
Section 10.1(c);
(n) State of Colorado and County of Jefferson documentary stamp
and transaction declarations;
(o) certified copies of resolutions of the shareholders and
directors of Seller authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby;
(p) a certificate of the secretary of Seller, dated as of the
Closing Date, certifying the incumbency of the officer(s) of Seller executing
the documents delivered by Seller pursuant to this Agreement;
(q) Non-Compete Agreements substantially in the form of Exhibit R
executed by Seller and Craig McBride.
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7.2 Purchaser's Deliveries. At the Closing, Purchaser shall cause to
be delivered to Seller:
(a) the Note;
(b) the certificate referred to in Section 9.1(b) hereof;
(c) the opinion of Purchaser's counsel as provided by
Section 9.1(c); and
(d) State of Colorado and County of Jefferson documentary stamp
declarations.
7.3 Concurrent Transactions. All documents or other deliveries
required to be made by Purchaser or Seller at Closing, and all transactions
required to be consummated concurrently with Closing, shall be deemed to have
been delivered and to have been consummated simultaneously with all other
transactions and all other deliveries, and no delivery shall be deemed to have
been made, and no transaction shall be deemed to have been consummated, until
all deliveries required by Purchaser, or its designee, and Seller shall have
been made, and all concurrent or other transactions shall have been consummated.
7.4 Further Assurances. Seller and Purchaser will, at the Closing, or
at any time or from time to time thereafter, upon request of either party,
execute such additional instruments, documents or certificates as either party
deems reasonably necessary in order to convey, assign and transfer the Property
to Purchaser, hereunder.
7.5 Possession. Possession of the Property shall be delivered at
Closing. Subject to the provisions of Section 16.1(f), Excluded Assets (other
than any thereof under leases to be assumed by Purchaser) shall be removed from
the Hotel by Seller, at its expense, on or before the Closing Date. Seller, at
its expense shall make all repairs necessitated by such removal but shall have
no obligation to replace any Excluded Asset so removed.
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ARTICLE VIII
ADJUSTMENTS AND PRORATIONS
8.1 Adjustments and Prorations. The following matters and items shall
be apportioned between the parties hereto or, where appropriate, credited in
total to a particular party, as of the Cut-off Time as provided below:
(a) Down Payments for Reservations. Any pre-closing down payments
made to Seller on confirmed reservations for dates after the Closing Date will
be credited to Purchaser as of the Closing. Any post-closing down payments made
to Seller on confirmed reservations for dates after the Closing Date will be
forwarded to Purchaser upon receipt.
(b) Taxes and Assessments. All ad valorem taxes, special or
general assessments, personal property taxes, attorneys' fees directly related
to the reduction of taxes or assessments, water and sewer rents, rates and
charges, vault charges, canopy permit fees, and other municipal permit fees. If
the amount of any such item is not ascertainable on the date the proration
schedule is completed pursuant to Section 8.3, the credit therefor shall be
based on one hundred percent (100%) of the most recent available bill and shall
be reprorated upon receipt of the actual tax bill. Notwithstanding the above,
special real property tax assessments for which the work is substantially
completed as of the Closing Date shall be paid by Seller.
(c) Utility Contracts. Telephone and telex contracts and
contracts for the supply of heat, steam, electric power, gas, lighting and any
other utility service, with Seller receiving a credit for each deposit, if any,
made by Seller as security under any such public service contracts if the same
is transferable and provided such deposit remains on deposit for the benefit of
Purchaser. Where possible, cut-off readings will be secured for all utilities on
the Closing Date.
(d) Hotel Contracts and Space Leases. Any amounts prepaid or
payable under any Hotel Contracts and Space Leases shall be apportioned between
the parties. Any percentage rentals under
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Space Leases shall be prorated on the basis of the ratio of the number of days
expired before Closing to the number of days after Closing, for the current
percentage rent period of the Space Lease. All security deposits held by Seller
shall be transferred to Purchaser and all obligations with respect to such
security deposits shall be assumed by Purchaser.
(e) License Fees. Fees paid or payable for Permits (other than
Excluded Permits) shall be apportioned between the parties.
(f) Hotel Matters.
(i) Advance payments, if any, under Bookings for Hotel
facilities (which shall include prepaid amounts by current guests);
(ii) Coin machine, telephone, washroom and checkroom income;
and
(iii) Commissions to credit and referral organizations.
(g) Insurance. Prepaid premiums for policies of insurance. Seller
shall assign such of its policies of insurance for the Property which has been
designated by Purchaser to be assigned to Purchaser as of the Closing Date.
(h) Employment Contracts. Seller shall be responsible for, and
shall pay when due, all Compensation of Employees. Purchaser assumes no
Employment Contracts or obligation with respect to any Employee Benefits all of
which, together with any sums due any Terminated Employee as a consequence of
the termination of his employment, shall be the responsibility of Seller.
(i) Consumable Items. The cost of any Consumables or Operating
Equipment (not including items marked with any Econolodge trademarks or logos)
which are at a level below the level required to be maintained under this
Agreement shall be credited to
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Purchaser.
(j) Other. Such other items as are provided for in this Agreement
or as are normally prorated and adjusted in the sale of a hotel, including
without limitation, all petty cash funds and cash in house banks, and all
deposits and prepaid items which inure to the benefit of the Purchaser.
8.2 Receivables. Purchaser is not purchasing any of the receivables of
the Hotel and Seller shall be solely responsible for the collection of accounts
receivable arising prior to the Closing Date. If Purchaser shall receive any
payment made on any unpurchased accounts receivable within ninety (90) days
after the Closing Date, it shall promptly remit such payment to Seller. With
regard to any collection made from any person or entity who is indebted to the
Hotel both with respect to accounts receivable accruing prior to the Closing
Date and to the accounts receivable accruing subsequent to the Closing Date,
such collection shall be applied as designated by the payor, but if there is no
designation, then any such collections received within ninety (90) days after
the Closing Date shall be applied first to the indebtedness accrued prior to the
Closing Date, but thereafter, any such collections shall be applied first to the
payment in full of any amounts due to Purchaser on accounts accruing subsequent
to the Closing Date. Seller shall have the right to review Purchaser's records
pertaining to accounts receivable to verify the proper application of payments
as provided above.
8.3 Proration Schedule.
(a) A schedule setting forth the adjustments and prorations to be
made pursuant to Section 8.1 above shall be prepared by Purchaser and forwarded
to Seller within thirty (30) days after the Closing Date. Seller shall be
afforded the opportunity to review all work papers and computations used by
Purchaser in the preparation of the adjustments and prorations. The schedule as
delivered shall be deemed accepted by Seller except to the extent, if any, that
Seller, within ten (10) days after the date of delivery thereof to Seller, has
delivered a written notice to Purchaser stating any exceptions Seller may have
to such schedule. If within such period Seller shall give written notice
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to Purchaser of any exceptions to the schedule as delivered by Purchaser, the
parties shall attempt to resolve all of the exceptions. To the extent that any
such exceptions are not resolved within fifteen (15) days after the delivery to
Purchaser of Seller's exceptions to the schedule, such differences shall be
submitted as soon as practicable thereafter to such "Big Six" accounting firm
upon which the parties shall agree, for final determination thereof. If the
parties are not able to agree upon an accounting firm, each shall designate a
"Big Six" accounting firm and give written notice to the other of the name and
address of the firm so designated. The two firms shall consult with each other
and, if possible, determine the exceptions in question by mutual agreement, and
their determination so agreed upon, if certified to the parties prior to their
reaching agreement independently of arbitration, shall be final and conclusive.
If the two firms are not able to agree upon the exceptions in question, they
jointly shall designate a third firm whose determination concerning the
exceptions shall be final and conclusive, if certified to the parties prior to
their reaching agreement independent of arbitration. Any determination by such
accounting firm(s) as to the proper determination of any such item submitted to
it for determination shall be conclusive and binding upon the parties for
purposes of this Agreement. Seller and Purchaser shall each pay one-half of such
fees charged by such accounting firm(s) in connection with any matter submitted
to it hereunder.
(b) The net amount due pursuant to the adjustments and prorations
made as required by this Section 8.3 shall be paid by cash or bank cashier's
check payable in immediately available funds in United States currency to the
order of the party to whom the same shall be due upon final determination of the
adjustments and prorations required hereunder.
(c) Period for Recalculation. Notwithstanding the foregoing, if
at any time within six (6) months following the Closing Date, either party
discovers any items which should have been included in the prorations but were
omitted therefrom, then such items shall be adjusted in the same manner as if
their existence had been known at the time of the preparation of the prorations.
The foregoing limitations shall not apply to any items
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which, by their nature, cannot be finally determined within the periods
specified.
ARTICLE IX
CONDITIONS TO SELLER'S OBLIGATIONS
9.1 Conditions. Seller's obligation to close hereunder shall be
subject to the occurrence of each of the following conditions, any one or more
of which may be waived by Seller in writing:
(a) Purchaser's Compliance with Obligations. Purchaser shall have
complied with all obligations required by this Agreement to be complied with by
Purchaser.
(b) Truth of Purchaser's Representations and Warranties. The
representations and warranties of Purchaser contained in Section 5.2 were true
in all material respects when made, and are true in all material respects on the
Closing Date (or any deferred Closing Date), and Seller shall have received a
certificate to that effect signed by an authorized agent of Purchaser.
(c) Opinion of Purchaser's Counsel. Purchaser shall have
delivered to Seller a favorable written opinion of Pedersen & Houpt in
connection with this transaction, dated the Closing Date, in the form attached
hereto as Exhibit Y.
(d) Termination of Existing Franchise. Seller shall have
terminated that certain August 29, 1989 Franchise Agreement with Econolodge upon
commercially reasonable terms, acceptable to the Seller. Seller shall, in good
faith and with fair dealing, exert diligent efforts toward achieving and
consummating such termination with Econolodge.
9.2 Failure of Conditions. If any of the conditions enumerated in
Section 9.1 (a) through (c) are not fulfilled and, as a consequence thereof,
Seller elects to terminate this Agreement, such failure shall be deemed a
default by Purchaser hereunder and the consequences thereof shall be governed by
the provisions of
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Section 3.2.
ARTICLE X
CONDITIONS TO PURCHASER'S OBLIGATIONS
10.1 Conditions. Purchaser's obligation to close hereunder shall be
subject to the occurrence of each of the following conditions, any one or more
of which may be waived by Purchaser in writing:
(a) Seller's Compliance with Obligations. Seller shall have
complied with all obligations required by this Agreement to be complied with by
Seller.
(b) Truth of Seller's Representations and Warranties. The
representations and warranties of Seller contained in Section 5.1 were true in
all material respects when made, and are true in all material respects on the
Closing Date (or any deferred Closing Date), and Purchaser shall have received a
certificate to that effect signed by an authorized agent of Seller.
(c) Opinion of Seller's Counsel. There shall have been delivered
to Purchaser a favorable opinion of Philip A. Rouse, Jr., counsel to Seller in
connection with this transaction, dated the Closing Date, in the form attached
hereto as Exhibit Z.
(d) Obtaining of Excluded Permits. Purchaser shall have obtained
(or otherwise assured itself of the availability of), in its own or its
designee's name, all Permits of the type designated as Excluded Permits on
Exhibit F, except liquor licenses and permits, necessary for the operation of
the Hotel. Purchaser agrees to use commercially reasonable efforts (and Seller,
at Purchaser's expense, agrees to cooperate fully with Purchaser in such regard)
to obtain all such Excluded Permits.
(e) Governmental Approvals. Except as provided to the
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contrary in subsection (d) above, if this transaction, or any part or parts
hereof, or the consummation of any of the transactions herein contemplated,
shall require authorization or approval of any governmental agency having
jurisdiction, all such authorizations and approvals shall have been obtained and
shall be in full force and effect on and as of the Closing Date. Seller agrees
to use its commercially reasonable efforts and all due diligence to cause such
authorizations or approvals to be obtained, and Purchaser agrees to cooperate
with Seller in all reasonable respects with respect thereto, but at the sole
cost and expense of Seller. If such authorizations and approvals shall not have
been obtained on or prior to the last day for Closing hereinabove provided, the
Closing Date may be deferred, at the election of Purchaser, for an additional
period of time, not to exceed thirty (30) days, as shall be necessary to obtain
any authorizations or approvals not then obtained.
(f) Estoppel Certificates--Hotel Contracts. Purchaser shall
notify Seller, in writing at least thirty (30) days prior to the Closing Date,
of the Material Contracts for which Purchaser requires estoppel certificates.
Each of said estoppel certificates shall be in writing from the parties to such
Material Contract stating that such Material Contract is in full force and
effect, has not been amended or modified except as therein indicated, that such
party consents to the assignment to Purchaser and that no party is then in
default under such Material Contract (or if any default is known to exist, or
would arise with the giving of notice or the passage of time, stating the nature
of such default). The estoppel certificates herein referred to shall be in form
and substance reasonably satisfactory to Purchaser and dated not more than
thirty (30) days prior to the Closing Date.
(g) No Pending Adverse Litigation. On the Closing Date, there
shall not then be pending or, to the knowledge of either Purchaser or Seller,
threatened, any litigation, administrative proceeding, investigation or other
form of governmental enforcement, or executive or legislative proceeding which,
if determined adversely, would restrain the consummation of any of the
transactions herein referred to, declare illegal, invalid or non-binding any of
the covenants or obligations of the parties herein, or have a material and
adverse effect on the operations or cash
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flow of the Hotel, or materially and adversely affect the value of the Property
or the ability of Purchaser, after the Closing, to operate the Hotel in the
manner contemplated hereby, other than those matters previously disclosed and
approved by Purchaser.
(h) Securities Laws. Parent shall have received all necessary
permits and otherwise complied with any state blue sky or other securities laws
applicable to the issuance of shares of Parent's common stock in connection with
the transaction contemplated hereby and Purchaser agrees to use its best efforts
to cause Parent to accomplish the foregoing.
10.2 Failure of Conditions. If any of the conditions enumerated in
subsections (d), (e), (f) and (g), of Section 10.1 are not fulfilled, then the
sole remedy of Purchaser shall be to terminate this Agreement (whereupon the
Deposit shall be returned to Purchaser and neither party shall have any further
obligation or liability hereunder), unless the failure to fulfill such condition
constitutes, or results from, either (i) a material breach of an express
representation or warranty made by Seller hereunder, or (ii) a material default
of an express covenant made by Seller hereunder, in which event Purchaser shall
be entitled to pursue against Seller any and all remedies available to
Purchaser, at law or in equity. If any of the conditions enumerated in
subsections (a), (b) and (c) of Section 10.1 are not fulfilled and, as a
consequence thereof, Purchaser elects to terminate this Agreement, such failure
shall be deemed a default by Seller hereunder, the Deposit referred to in
Section 3.2 shall be promptly returned to Purchaser, and Purchaser shall be
entitled to pursue against Seller any and all remedies available to Purchaser,
at law or in equity.
ARTICLE XI
ACTIONS AND OPERATIONS PENDING CLOSING
11.1 Actions and Operations Pending Closing. Seller agrees that after
the expiration of the Inspection Period and until the Closing Date:
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(a) The Hotel will continue to be operated and maintained
substantially in accordance with present standards.
(b) Seller will not enter into any new Material Contract or Space
Lease, or cancel, modify or renew any existing Material Contract or Space Lease,
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld or delayed. If Purchaser fails to respond to a request for
consent within 15 business days after receipt of such request, such consent
shall be deemed given.
(c) Seller shall have the right, without notice to or consent of
Purchaser, to make Bookings in the ordinary course of business, at no less than
the Hotel's standard rates including customary discounted rates. Additionally,
Seller agrees to entertain in good faith Purchaser's suggestions relating to the
policy of the Hotel with respect to future Bookings and extension of credit.
(d) Seller shall use commercially reasonable efforts to preserve
in force all existing Permits and to cause all those expiring to be renewed
prior to the Closing Date. If any such Permit shall be suspended or revoked,
Seller shall promptly so notify Purchaser and shall take all measures necessary
to cause the reinstatement of such Permit without any additional limitation or
condition.
(e) Seller shall notify Purchaser promptly if Seller becomes
aware of any transaction or occurrence prior to the Closing Date which would
make any of the representations or warranties of Seller contained in Section 5.1
not true in any material respect.
(f) Seller will maintain in effect, all policies of casualty and
liability insurance, or similar policies of insurance, with the same limits of
coverage which it now carries with respect to the Hotel.
(g) Seller will not dispose of any of the Property, except in the
ordinary course of business and in accordance with
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this Agreement.
(h) Seller shall allow Purchaser and its agents or
representatives to inspect the Property, and all books and records relating
thereto, at such times as Purchaser may reasonably request, provided such
inspection does not unreasonably interfere with the continued operation of the
Hotel in the ordinary course of business. Purchaser shall also have the right to
have, and Seller shall provide accommodations for, a full-time on-site
representative to observe the operations of the Hotel. Such accommodations shall
be rent-free except for those nights when all other guest rooms at the Hotel are
fully occupied, in which event Purchaser shall reimburse Seller for such nights
at the Hotel's lowest corporate rate for such accommodations. Purchaser agrees
that the results of all such observations will be treated as confidential, and
Purchaser shall not disclose the same to any other person or entity except for
Purchaser's counsel, accountants, and other agents or representatives consulted
in connection with the acquisition of the Hotel. In the event that the sale is
not consummated, any and all reports, financial and operating information
obtained by Purchaser or its representatives shall be returned to the Seller,
and Purchaser agrees that the confidentiality provisions described above shall
survive the termination of this Agreement.
ARTICLE XII
CASUALTIES AND TAKINGS
12.1 Casualties.
(a) If any damage to the Property shall occur prior to the
Closing Date by reason of fire, windstorm, hail, explosion or other casualty,
and if, in Purchaser's reasonable judgment, the cost of repairing such damage
will exceed Fifty Thousand Dollars ($50,000.00), Purchaser may elect to: (i)
terminate this Agreement by giving written notice to Seller in which event, the
Deposit, and all interest earned thereon, shall be returned to Purchaser and
neither party shall have any further Obligations or liability
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whatsoever to the other hereunder or (ii) receive an assignment of all of
Seller's rights to any insurance proceeds (including business interruption
proceeds) relating to such damage and acquire the Property without any
adjustment in the purchase price provided that, in such latter event, Seller
shall pay to Purchaser the amount of any deductible under applicable insurance
policies.
(b) If, in the reasonable business judgment of the insurance
adjuster or other representative of the insurer of the Property, the cost of
repairing such damage will not exceed Fifty Thousand Dollars ($50,000.00), the
transactions contemplated hereby shall close without any adjustment in the
Purchase Price, Purchaser shall receive an assignment of all of Seller's rights
to any insurance proceeds (including business interruption proceeds), and Seller
shall pay to Purchaser the amount of any deductible under applicable insurance
policies.
12.2 Takings. In the event of the actual or threatened taking (either
temporary or permanent) in any condemnation proceedings by exercise of right of
eminent domain, of all or any part of the Real Property, between the date hereof
and the Closing Date, and if, in Purchaser's reasonable judgment, such taking
will result in the inability to conduct the operations of the Hotel
substantially in accordance with the present standards, Purchaser may elect to:
(i) terminate this Agreement by giving written notice to Seller, in which event
the Deposit shall be returned to Purchaser and neither party shall have any
further obligations or liability whatsoever to the other hereunder or (ii)
receive an assignment of all of Seller's rights to any condemnation award
relating to such taking and acquire the Property without any adjustment in the
Purchase Price.
ARTICLE XIII
EMPLOYEES
13.1 Employees, Compensation and Indemnification. Purchaser shall have
the continuing right to review all employment records and files of, and to
interview, Employees. Seller shall terminate its
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employer-employee relationship with all Employees as of the Cut-off Time. Seller
shall be solely responsible for all Compensation and other liabilities with
respect to Employees and liabilities and obligations to Employees pursuant to
any Employment Contract. Purchaser shall not be responsible for any such
liability or obligations and Seller agrees to indemnify and hold Purchaser
harmless from and against any such liability or obligations. All Compensation,
obligations, liabilities and claims (including any under the Fair Labor
Standards Act) to or by any Employee of Seller arising or occurring prior to the
Cut-off Time shall be the responsibility of Seller. Purchaser shall not be
responsible for any Compensation thereof and Seller agrees to indemnify and hold
Purchaser harmless from and against same. Purchaser shall not assume or be
liable upon any Employment Contract of Seller.
ARTICLE XIV
INDEMNITIES
14.1 Seller's and McBride's Indemnity. Seller and McBride, jointly and
severally, agree to indemnify, defend (with Purchaser having the right to retain
counsel for the purpose of participating in such defense, at its sole cost and
expense) and hold Purchaser harmless against and with respect to the following:
(a) any and all obligations, liabilities, claims, accounts,
demands, liens or encumbrances, whether direct or contingent and no matter how
arising, in any way related to the Property and arising or accruing on or before
the Closing Date or in any way related to or arising from any act, conduct,
omission, contract or commitment of Seller or any predecessor in interest of
Seller, at any time or times on or before the Closing Date (including, but not
limited to, any damage to property or injury to or death of any person); without
limitation on the generality of the foregoing, Seller indemnifies Purchaser from
any claim or judgment under any lawsuit or proceeding filed or pending prior to
the Closing Date against the Property, or any part thereof, and any costs or
expenses (including reasonable attorneys' fees) heretofore or hereafter incurred
in connection with any such lawsuit or
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proceeding;
(b) any loss or damage to Purchaser resulting from any inaccuracy
in or breach of any representation or warranty of Seller or resulting from any
breach or default by Seller of any obligation of Seller under this Agreement;
and
(c) all costs and expenses, including reasonable attorneys' fees,
related to any actions, suits or judgments incident to any of the foregoing.
Notwithstanding anything herein to the contrary, (a) McBride's
liability hereunder shall not exceed $250,000; and (b) McBride shall have no
obligation for claims made after the first anniversary of the Closing Date.
14.2 Purchaser's Indemnity. Purchaser agrees to indemnify, defend
(with Seller having the right to retain counsel for the purpose of participating
in such defense, at its sole cost and expense), and hold Seller harmless against
and with respect to the following:
(a) any loss or damage to Seller, subsequent to the Closing Date,
resulting from any inaccuracy in or breach of any representation or warranty of
Purchaser under this Agreement;
(b) any injury to person or property causing any loss or damage
to Seller resulting from or arising out of work performed by Purchaser pursuant
to Section 11.1(h) hereof;
(c) any and all obligations, liabilities, claims, accounts,
demands, liens or encumbrances, whether direct or contingent and no matter how
arising, in any way related to the Property and arising from any act, conduct,
omission, contract or commitment of Purchaser or any predecessor in interest of
Purchaser after the Closing Date (including, but not limited to, any damage to
property or injury to or death of any person).
(d) all costs and expenses, including reasonable attorney's fees,
related to any actions, suits or judgments incident to any of the foregoing.
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14.3 Notice of Claims. Seller and Purchaser, as applicable, shall
promptly notify the other in the event any claim is made against Seller or
Purchaser as to which the other party has agreed to indemnify and the indemnitor
shall thereupon undertake to defend and hold the indemnitee saved and harmless
therefrom.
ARTICLE XV
SECURITIES LAW MATTERS
15.1 Disposition of Shares. In the event Seller receives Shares
pursuant to the terms hereof, Seller represents and warrants that the Shares are
being acquired and will be acquired for its own account and will not be sold or
otherwise disposed of except pursuant to (i) the provisions of Rule 145(d) under
the 1933 Act, as in effect at the time of sale, (ii) some other exemption or
exclusion from the registration requirements under the 1933 Act, which does not
require the filing by the Parent with the SEC of any registration statement,
offering circular, or other document, in which case Seller shall first supply to
the Parent an opinion of counsel (which opinion and counsel shall be
satisfactory to the Parent) that such exemption or exclusion is available, or
(iii) a registration statement filed by the Parent with the SEC under the 1933
Act (which the Seller acknowledges the Parent has no obligation to file).
15.2 Acknowledgment of Restrictions. Seller acknowledges that, under
current SEC interpretations of Rule 145, Seller is subject to restrictions on
transfer of the Shares following the Closing Date and that an exemption from the
requirement to register the Shares for public resale is provided by Rule 145(d).
15.3 Evidence of Compliance. Seller further covenants and agrees that
the Parent will be supplied with such written evidence of compliance by it and
its broker with Rule 145(d) as in effect at the time of any sale by it pursuant
thereto, as the Parent may reasonably request.
15.4 Legend. Seller agrees that the certificates for the Shares
received shall bear the following legend:
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The Shares represented by this certificate are subject to the
provisions of Rule 145(d) promulgated under the Securities Act of
1933, and may not be transferred or disposed of by the holder
without compliance with said Rule unless registered under said
Act or pursuant to another applicable exemption from the
requirements of said Act.
and that the Parent may place stop transfer orders with its transfer agents with
respect to such certificates. The appropriate portions of the legend will be
removed at such time or times as the Seller may reasonably request if at the
time of such request the Seller is not an Affiliate (as defined in the 1933 Act)
of the Parent, upon the expiration of the two-year holding period provided in
Rule 145(d).
ARTICLE XVI
NOTICES
Except as otherwise provided in this Agreement, all notices, demands, requests,
consents, approvals and other communications (herein collectively called
"Notices") required or permitted to be given hereunder, or which are to be given
with respect to this Agreement, shall be in writing and shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, or by overnight express courier, postage prepaid, addressed
to the party to be so notified as follows:
If intended for Seller, to: c/o McBride Lighting
260 Raritan
Denver, Colorado 80223
Attn: J. Craig McBride
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Copies to: Philip A. Rouse, Jr.
1600 Broadway, Suite 1800
Denver, Colorado 80202
If intended for c/o Extended Stay America, Inc.
Purchaser, to: 500 East Broward Blvd., #950
Ft. Lauderdale, Florida 33394
Attn: Robert A. Brannon
Copies to: Pedersen & Houpt
161 North Clark, Suite 3100
Chicago, Illinois 60601
Attn: Michael W. Black
Notice mailed by registered or certified mail shall be deemed received
by the addressee three (3) days after mailing thereof. Notice personally
delivered shall be deemed received when delivered. Notice mailed by overnight
express courier shall be deemed received by the addressee two (2) days after
mailing thereof. Either party may at any time change the address for notice to
such party by mailing a Notice as aforesaid.
ARTICLE XVII
ADDITIONAL COVENANTS
17.1 Additional Covenants. In addition, the parties agree as follows:
(a) Expenses. Seller shall be responsible for the payment of
fifty percent (50%) of all escrow fees, all costs of the Survey, and all title
insurance premiums and charges for the issuance of the Title Policy. Purchaser
shall be responsible for the payment of all sales, use, and State of Colorado
and County of Jeffersen transfer taxes, all recording fees, and fifty percent
(50%) of all other escrow fees. The fees and expenses of Seller's designated
representatives, accountants and attorneys shall be borne by Seller, and the
fees and expenses of Purchaser's designated representatives, accountants and
attorneys shall be
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borne by Purchaser.
(b) Brokerage. Subject to the following sentence, Seller and
Purchaser each hereby represent and warrant to the other that neither has dealt
with any broker or finder in connection with the transaction contemplated
hereby, and each hereby agrees to indemnify, defend and hold the other harmless
against and from any and all manner of claims, liabilities, loss, damage,
attorneys' fees and expenses, incurred by either party and arising out of, or
resulting from, any claim by any such broker or finder in contravention of its
representation and warranty herein contained: Seller agrees that it is
responsible for and shall pay (and shall indemnify Purchaser from any claim in
connection with) all fees owed to Moore Commercial Company and Sullivan-Hayes.
(c) Guest Baggage. All baggage of guests who are still in the
Hotel on the Closing Date, which has been checked with or left in the care of
Seller shall be inventoried, sealed, and tagged jointly by Seller and Purchaser
on the Closing Date. Purchaser hereby indemnifies Seller against any claims,
losses or liabilities in connection with such baggage arising out of the acts or
omissions of Purchaser after the Closing Date. Seller hereby indemnifies
Purchaser against any claim, loss or liability with respect to such baggage
arising out of the acts or omissions of Seller prior to the Closing Date.
Purchaser hereby indemnifies Seller against any claim, loss, or liability with
respect to such baggage arising out of the acts or omissions of Purchaser after
the Closing Date.
(d) Safe Deposits. Immediately after the Closing, Seller shall
send written notice to guests or tenants or other persons who have safe deposit
boxes, advising of the sale of the Hotel to Purchaser and requesting immediate
removal of the contents thereof or the removal thereof and concurrent re-deposit
of such contents pursuant to new safe deposit agreements with Purchaser. Seller,
at its own expense, shall have a representative present when the boxes are
opened, in the presence of a representative of the Purchaser. Purchaser shall
not be liable or responsible for any items claimed to have been in such boxes
unless such items are so removed and re-deposited, and Seller agrees to
indemnify and hold harmless Purchaser from and against any such liability or
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responsibility.
(e) Books and Records. The transaction contemplated hereby
includes the books and records of Seller (except those relating to performance
of employees) pertaining strictly to the business of the Hotel. Purchaser
covenants and agrees that such books and records will remain in the Hotel for
examination and audit by Seller and its agents after the Closing as provided in
this clause (e). Books and records not pertaining strictly to the business of
the Hotel may be removed by Seller within a reasonable time after the Closing
Date. Purchaser agrees to preserve all books and records, files and
correspondence, for at least five (5) years after the Closing Date, and not to
destroy or dispose of the same, for at least five (5) years after the Closing
Date. Purchaser agrees to provide access to Seller and its representatives, to
such books, records, files and correspondence at all reasonable times.
(f) Hart-Scott-Rodino Act. If it shall be determined that the
within transaction is subject to the reporting requirements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, 15 U.S.C. (S)18(a) (1976) (the
"Act"), then notwithstanding anything to the contrary contained in Section
10.1(e) hereof, each party shall forthwith proceed to make the necessary
filings, and take all other actions necessary to comply with the Act and the
rules and regulations thereunder. If such requirements have not been fulfilled
by the Closing Date, then the Closing Date shall be adjourned until such
requirements have been fulfilled, but not more than sixty (60) days. If such
requirements have not been fulfilled prior to the expiration of such sixty (60)
day period, Seller or Purchaser, by notice to the other, may terminate this
Agreement in which event the Deposit shall be returned to Purchaser and neither
party shall have any further obligation or liability to the other party
hereunder.
(g) Survival of Covenants, etc. The representations, warranties,
obligations, covenants, agreements, undertakings and indemnifications of Seller
and Purchaser contained herein shall survive the Closing.
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(h) Investigation and Inspections. Any investigation or
inspection conducted by Purchaser or Seller, or any agent or representative of
Purchaser or Seller, pursuant to this Agreement, in order to verify
independently Purchaser's or Seller's, as applicable, satisfaction of any
conditions precedent to Purchaser's or Seller's obligations hereunder or to
determine whether Purchaser's or Seller's warranties are true and accurate,
shall not affect (or constitute a waiver by Purchaser or Seller of) any of
Purchaser's or Seller's obligations hereunder or Purchaser's or Seller's
reliance thereon.
(i) Construction. This Agreement shall not be construed more
strictly against one party than against the other, merely by virtue of the fact
that it may have been prepared primarily by counsel for one of the parties, it
being recognized that both Purchaser and Seller have contributed substantially
and materially to the preparation of this Agreement.
(j) Publicity. All notice to third parties and all other
publicity concerning the transactions contemplated hereby shall be jointly
planned and coordinated by and between Purchaser and Seller. None of the parties
shall act unilaterally in this regard without the prior written approval of the
other; however, this approval shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, Purchaser may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities.
(k) General. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original but all of which, taken
together, shall constitute but one and the same instrument. This Agreement
(including all exhibits hereto) contains the entire agreement between the
parties with respect to the subject matter hereof, supersedes all prior
understandings, if any, with respect thereto and may not be amended,
supplemented or terminated, nor shall any obligation hereunder or condition
hereof be deemed waived, except by a written instrument to such effect signed by
the party to be charged. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado. The warranties,
representations, agreements and
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undertakings contained herein shall not be deemed to have been made for the
benefit of any person or entity, other than the parties hereto and their
permitted successors and assigns. Seller has no right to assign its rights or to
delegate its duties hereunder. Purchaser may assign this Agreement upon; (i) the
written notice of assignment served on Seller no later than 10 days prior to
closing of the assignment, identifying assignee and its address, phone number
and representative for the transaction; (ii) the written warranty of Purchaser
and assignee, in the notice, that assignee has the ability, financial and
otherwise to perform all of Purchaser's obligations under this Agreement; and
(iii) the condition Purchaser shall remain responsible and liable for all
obligations of the Purchaser hereunder. Captions used herein are for convenience
only and shall not be used to construe the meaning of any part of this
Agreement.
(l) FIRPTA and Colorado Taxes.
(i) Seller agrees to furnish Purchaser with an executed
Certification in the form attached hereto as Exhibit R ("FIRPTA Certificate"),
and such other evidence as Purchaser may reasonably request, to establish that
Seller is not a foreign person for the purpose of Section 1445 of the Internal
Revenue Code of 1986, as amended ("Section 1445"). In the event that Seller does
not furnish such Certification or a qualifying statement for the U.S. Treasury
Department that the transaction is exempt from the withholding requirements of
Section 1445, Seller agrees that Purchaser shall be directed to pay such amount
required by law to the Internal Revenue Service in accordance with the laws and
regulations regarding the withholding requirements of Section 1445.
(ii) Seller shall notify the Department and the Colorado
Department of Labor of the pending sale on or before thirty (30) days after
expiration of the Inspection Period and shall deliver copies of such notices to
Purchaser pursuant to Section 16.1 hereof. Purchaser shall withhold any amounts
required by the Department or the Department of Labor until the appropriate
agency furnishes Seller and Purchaser with a letter advising that all sales and
income taxes and contributions for unemployment compensation due to the State of
Colorado from the Seller have been paid and releasing Purchaser from any
withholding requirements, or
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<PAGE>
the period of time to furnish such letter in accordance with the applicable
statutes of the State of Colorado has expired, whichever is earlier.
(m) Like-Kind Exchange. Seller shall have the right, at Seller's
option, to sell the Property to Purchaser through a transaction that is
structured to qualify as a like-kind exchange of property within the meaning of
Section 1031 of the Internal Revenue Code of 1986 ("Code"). Purchaser agrees to
reasonably cooperate with Seller in effecting a qualifying like-kind exchange
through a trust, escrow or other means as determined by Seller, provided,
however, Purchaser shall not be required to incur any obligation or liability to
a third party as a part of the exchange. In any event Seller shall have the
right to assign its rights under this contract, in whole or in part, to a
qualified intermediary (as defined under current Code regulations governing
like-kind exchanges) or as otherwise necessary or appropriate to effectuate a
like-kind exchange, provided that Seller shall remain liable for its obligations
hereunder and Seller shall execute such additional documentation as Purchaser
may reasonably request to evidence such continuing liability. Seller shall bear
the additional transaction costs and all costs and expenses incurred by
Purchaser and attributable to exchange procedures in this transaction that are
requested or implemented by Seller. Seller shall be solely responsible for
assuring the effectiveness of the exchange for Seller's tax purposes. In no
event shall any like-kind exchange contemplated by this provision cause an
extension of the date of closing set forth herein nor shall Purchaser be
required to take title to any property other than the Property.
-53-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed, all as of the day and year first above written.
SELLER:
KIPLING HOSPITALITY ENTERPRISE
CORPORATION
By___________________________________
Its__________________________________
PURCHASER:
ESA PROPERTIES, INC.
By___________________________________
Its__________________________________
_____________________________________
J. CRAIG MCBRIDE
-54-
<PAGE>
PROMISSORY NOTE
---------------
$3,025,000.00 ___________, 1996
FOR VALUE RECEIVED, the undersigned, ESA Properties, Inc. (the "Maker"),
hereby promises to pay to Kipling Hospitality Enterprise Corporation (the
"Payee"), the principal sum of THREE MILLION TWENTY-FIVE THOUSAND DOLLARS
($3,025,000.00) with interest thereon from the date hereof at the rate of eight
and one-quarter percent (8 1/4%) per annum. The principal amount shall be
payable on or before twenty-one (21) days from the date hereof (the "Maturity
Date") to Payee at such address as Payee shall specify in writing.
All payments made on account of the indebtedness evidenced by this Note
shall be made in accordance with the terms of Section 3.4 of the certain
Agreement to Purchase Hotel dated April __, 1996, by and between Maker and
Payee and the certain Escrow Agreement of even date herewith, by and among
Maker, Payee, and others.
All parties hereto severally waive presentment for payment, notice of
dishonor, protest and notice of protest.
This Note may not be changed orally, but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
Maker agrees that this instrument and the rights and obligations of all
parties hereunder shall be governed by and construed under the substantive
laws of the State of Colorado.
The undersigned shall pay all expenses incurred by Payee in collecting
this Note, including, without limitation, the reasonable fees and expenses of
any attorney to whom this Note may be referred for such collection.
The indebtedness evidence by this Note is secured by a Deed of Trust of
even date herewith, and until released said Deed of Trust contains additional
rights of the Payee. Such rights may cause acceleration of the indebtedness
evidenced by this Note. Reference is made to said Deed of Trust for such
additional terms. Said Deed of Trust grants rights to the property described
on Exhibit A attached hereto and located in Jefferson County, State of
Colorado.
Time is of the essence hereof.
IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as
of the day and year first above written.
ESA PROPERTIES, INC.
By
-------------------------------------
Its
------------------------------------
<PAGE>
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT ("Agreement") is made this ____ day of ________,
1996, by and among Exchange Accomodator Corporation ("QI"), a Colorado
corporation, Kipling Hospitality Enterprise Corporation ("Kipling"), a
Colorado corporation, Extended Stay America, Inc. ("ESA"), a Delaware
corporation, ESA Properties, Inc., a Delaware corporation ("ESA Properties"),
and First American Title Insurance Company, a California corporation ("Escrow
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Kipling and ESA Properties, Inc. have entered into an Agreement
to Purchase Hotel, dated April ____, 1996 (the "Purchase Agreement"); and
WHEREAS, ESA Properties acknowledges that it is the intention of Kipling,
by and through QI, to undertake an I.R.C. Section 1031 tax deferred exchange
and that Kipling's rights to receipt of proceeds under the Purchase Agreement
may be assigned to facilitate such exchange. ESA agrees to reasonably
cooperate with Kipling and QI so as to enable Kipling to qualify for tax
deferral; provided, such cooperation shall not require ESA Properties to incur
any additional cost of liability nor to take title to any property other than
the Property;
WHEREAS, pursuant to the Purchase Agreement, ESA Properties has delivered
to Kipling a promissory note (the "Note"), the form of which is attached
hereto as Exhibit A; and
WHEREAS, to secure ESA Properties' obligations under the Note, Kipling,
ESA, and ESA Properties desire Escrow Agent to hold certain monies and to
take certain actions in accordance with the terms hereof or as otherwise
directed jointly by Kipling and ESA.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Escrow Agent is appointed as the entity responsible for holding,
investing and disbursing the Cash Deposit and Proceeds (as those terms are
hereinafter defined) and Escrow Agent accepts such appointment, all subject
to the terms and conditions of this Agreement.
2. Concurrently herewith, ESA shall deposit with Escrow Agent the
amount of $3,025,000 (the "Cash Deposit") which shall be invested together
with the Proceeds, if any, as ESA directs or, if Escrow Agent receives no
such direction, then in an interest bearing money market account or other
account (the "Investment"). Escrow Agent is authorized to file appropriate
or necessary reports or returns of interest earned on the Investment with
the United States Treasury Department, Internal Revenue Service, and any
applicable State or local taxing authority, in aid of which ESA's Federal
Taxpayer Identification Number is 36-
<PAGE>
3996573. Escrow Agent shall have no liability or responsibility for any
loss or cost which may be suffered by ESA, ESA Properties, QI or Kipling as
a result of the failure or insolvency of any financial institution, or the
loss of any interest in which the Investment may be made, unless caused by
Escrow Agent's conversion of funds to its own account.
3. ESA may deposit, from time to time, stock certificates representing
its common shares ("Certificates") with Escrow Agent, who shall hold such
Certificates subject to the terms hereof. Alternatively, ESA and Kipling may
jointly determine to deliver such Certificates directly to a third party in
exchange for the Proceeds from the sale or sales of such Certificates, provided
that such Proceeds are delivered to Escrow Agent and disbursed pursuant to the
terms of Section 4 hereof.
4. On notice from ESA and QI, which specifies the number of
Certificates, Escrow Agent shall deliver such Certificates from time to time
to such third parties as directed by ESA and QI. Escrow Agent shall receive
the proceeds ("Proceeds") from the sale of such Certificates and shall
disburse such Proceeds as follows:
a. First, pari passu to Kipling's lenders (the "Lenders") in
accordance with the payoff letters attached hereto as Exhibit B.
b. Second, when the indebtedness of the Lenders is paid in full
pursuant to such payoff letters, the balance, if any, as directed
by QI, up to the remaining balance of the Note which shall be
reduced dollar for dollar by the amount paid to the Lenders.
c. Third, undisbursed Proceeds shall be invested as the Cash
Deposit is invested until contrary instructions are received from
ESA and QI, pending payment in full to the Lenders and QI.
d. Fourth, when payment in full has been made to the Lenders and
to QI, the balance of the Investment shall be paid to ESA or as
directed by ESA; whereupon this Agreement shall terminate for all
purposes and any Certificates remaining in Escrow's Agent's
possession shall be returned to ESA, or as directed by it.
5. In the event the aggregate Proceeds received and disbursed by
Escrow Agent on or before _______, 1996 do not equal or exceed the amount due
from ESA Properties under the Note, Escrow Agent shall disburse the Cash
Deposit as follows:
a. First, pari passu to the Lenders in accordance with the payoff
letters attached hereto as Exhibit B.
b. Second, to QI, in an amount equal to the remaining balance due
from ESA Properties under the Note, giving credit for the amount
paid to the Lenders; and
-2-
<PAGE>
c. Third, the balance of the Investment, if any, to ESA,
whereupon this Agreement shall terminate for all purposes and any
Certificates remaining in Escrow Agent's possession shall be
returned to ESA, or as directed by ESA.
6. Escrow Agent shall not be liable for any loss, cost or damage
which either ESA, ESA Properties, or QI may suffer or incur as a result of
Escrow Agent's act, omission or performance under this Agreement unless caused
by Escrow Agent's willful misconduct or gross negligence. In performing its
duties hereunder, Escrow Agent shall be held to the standard of an ordinary
man.
7. In performing its duties hereunder, Escrow Agent shall be entitled to
rely in good faith on any written notice or direction which it may receive from
either or both of QI or ESA and, without duty to inquire further (unless Escrow
Agent has actual notice of the need for inquiry) upon the authenticity of
signature and of the authority of any person or persons acting or purporting to
act on behalf of either QI or ESA.
8. In the event any dispute should arise or exist as between ESA and
Kipling as to the distribution and disbursement of the Cash Deposit or
Proceeds, or interest earned thereon (in any case, or any combination of
circumstances, a "Dispute"), or in the event Escrow Agent reasonably believes
in good faith that a Dispute exists, Escrow Agent shall have the right to file
an action in interpleader, naming ESA, QI and Kipling, in either: (a) the
District Court, Jeffersen County, Colorado, or (b) the United States District
Court for the District of Colorado, (ESA, QI and Kipling, and each of them,
hereby evidencing their consent to the venue and jurisdiction of either of the
foregoing courts, subject only to satisfaction of the requirements for federal
jurisdiction, if that is the forum selected by Escrow Agent) and to deposit the
balance of the Cash Deposit, the Proceeds, the Certificates, and interest there
on into the registry thereof, after first deducting Escrow Agent's reasonable
and actual costs of filing the action, including, without limitation,
attorneys' fees, court costs and costs incurred in consulting legal counsel
of Escrow Agent's selection prior to filing the interpleader action.
Concurrently with such filing, Escrow Agent shall be dismissed from such
action, whereupon this Agreement shall terminate and all liability,
obligation and responsibility of Escrow Agent hereunder shall be released,
discharged and accounted for, absolutely and forever, as shall also be the
case upon any full disbursements of the Investment and/or Proceeds and/or
Certificates and interest thereon, under and by virtue of Paragraphs 4 or 5
or Paragraph 10(b) hereof.
9. As a matter which shall survive any termination of this Agreement,
ESA and Kipling, jointly and severally, shall indemnify and hold harmless
Escrow Agent from and against any and all loss, cost, claim, expense, damage
or demand including, but not limited to, court costs and reasonable, actual
attorneys' fees, which Escrow Agent may suffer, incur or be threatened with
and which arise from, and in connection with, or may in any manner whatsoever
be derivative of, Escrow Agent's performance of its duties and
responsibilities hereunder. In order for Escrow Agent to invoke the benefit
of this indemnity, it shall only be necessary for Escrow Agent to give notice
to ESA and Kipling of the issue involved under this Paragraph 9 and, from and
after the date of such notice, Escrow Agent shall be fully and
-3-
<PAGE>
completely reimbursed for all costs and, if necessary, defended by legal
counsel approved by Escrow Agent against all claims.
10. (a) Except by operation of law, or by virtue of a corporate
reorganization or merger of Escrow Agent, or as expressly provided herein,
Escrow Agent shall not have the right to assign this Agreement or Escrow
Agent's duties and responsibilities hereunder, nor transfer the Cash Deposit
and/or Proceeds or the Certificates and interest to another person or entity.
In the event of any such transfer or assignment as is contemplated by the
first sentence of this Paragraph 10(a), Escrow Agent shall cause to be
delivered to ESA, QI and Kipling an assumption agreement in writing whereby
Escrow Agent's successor (who shall become "Escrow Agent" hereunder) assumes
all duties and responsibilities of Escrow Agent existing under and by virtue
of this Agreement and in respect of the Cash Deposit, Certificates, and
Proceeds and which contains then-current information regarding notice. Neither
Escrow Agent nor any successor under this Paragraph 10(a) shall be relieved of
liability to ESA, QI and Kipling by reason of any transfer and assignment of
Escrow Agent's duties effected pursuant to this Paragraph 10(a).
(b) ESA, QI and Kipling, acting jointly, only, and with or without
cause, may terminate Escrow Agent's duties and obligations under this Agreement
at any time upon prior written notice to Escrow Agent to such effect, which
notice shall specify the person or entity to whom the Investment, and all
interest thereon, and the Certificates shall be disbursed. Upon such
disbursement, all duties, liabilities and obligations of Escrow Agent under
this Agreement shall terminate.
11. All notices or directions required, necessary or desired to be given
in respect of this Agreement shall be in writing, executed by ESA, QI and
Kipling, or Escrow Agent, or their designated representative, and, except as
otherwise provided in Paragraph 12, shall be deemed given and effective when
hand delivered against receipt by any means to the party for whom such notice
is intended, or on the third (3rd) business day following the day upon which
such notice is deposited, postage prepaid, certified mail, return receipt
requested, to the United States Postal Service (or successor thereto) and, in
all cases, hand delivered, by facsimile transmission, or mailed, addressed as
follows:
a) If to Kipling: Kipling Hospitality Enterprise Corporation
c/o McBride Lighting
260 Raritan
Denver, Colorado 80223
Attn: J. Craig McBride
Telephone No. (303) 778-8787
Facsimile No. (303) 778-8244
Designated Representative(s): J. Craig McBride
Signature of Designated Representative
---------
-4-
<PAGE>
b) If to ESA or c/o Extended Stay America, Inc.
ESA Properties: 500 East Broward Boulevard, #950
Ft. Lauderdale, Florida 33394
Attn: Robert A. Brannon
Telephone No. (954) 713-1600
Facsimile No. (954) 713-1655
Designated Representative(s): Robert A. Brannon
Signature of Designated Representative __________
c) If to QI: Exchange Accomodator Corporation
885 S. Colorado Boulevard
Denver, Colorado 80222-8006
Attn: Jay Pansing
Telephone No. (303) 722-6500
Facsimile No. (303) 722-9270
Designated Representative(s): Jay Pansing
Signature of Designated Representative: _________
d) If to Escrow Agent: First American Title Insurance Company
____________________________
____________________________
Attn: ______________________
Telephone No. ______________
Facsimile No. ______________
Designated Representative(s): ___________________
Signature of Designated Representative: _________
or to such other address or attention as may be directed by proper notice.
12. Except as may be otherwise expressly provided herein, this Agreement
and the terms, covenants and conditions hereof, shall be binding upon and shall
inure to the benefit of ESA, Kipling, and Escrow Agent and their respective or
permitted successors or assigns. As used herein, the terms "ESA", "Kipling" and
"Escrow Agent" mean and include the persons or entities signatory hereto and
their respective successors, assigns and legal representatives.
13. This Agreement is a contract for performance of escrow services and is
to be governed, interpreted, construed and enforced under and by reference to
the substantive (but not the conflicts) laws of the State of Colorado.
14. It is not intended that any provision of this Agreement, now or
hereafter contained, shall constitute, or be deemed or construed so as to
constitute, a commitment or undertaking by Escrow Agent with respect to title,
examination or certification of title, the status of title, or the insurance of
title to the any property. No practice or conduct of the parties under and in
respect of this Agreement and the rights, duties, obligations and
-5-
<PAGE>
activities hereof shall produce, or be deemed or construed to produce, a
contrary result to this express intention of the parties, in any manner
whatsoever.
15. This Agreement may not be altered, modified or amended in any manner
other than in writing, executed by each party hereto in the same degree of
dignity in which this Agreement is executed.
16. This Agreement may be executed in one or more counterparts, provided
that any aggregate number of counterparts having at least one original
execution of each party affixed, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, ESA, ESA Properties, Kipling and Escrow Agent, in each
case acting by and through their duly authorized and incumbent representatives,
have caused this Agreement to be executed, in multiple counterpart original,
and have delivered the same, each to the others as of the day and year first
above written.
KIPLING HOSPITALITY ENTERPRISE
CORPORATION, a Colorado corporation
By:
--------------------------------
Its:
-------------------------------
EXCHANGE ACCOMODATOR
CORPORATION, a Colorado corporation
By:
---------------------------------------
Its:
--------------------------------------
EXTENDED STAY AMERICA, INC.
By:
----------------------------------------
Robert A. Brannon, Senior Vice President
-6-
<PAGE>
ESA PROPERTIES, INC.,
a Delaware corporation
By:
---------------------------------
Robert A. Brannon, Vice President
FIRST AMERICAN TITLE INSURANCE
COMPANY, a California corporation
By:
---------------------------------
(Type Name):
------------------------
Its:
--------------------------------
(Type Title):
-----------------------
<PAGE>
COVENANT NOT TO COMPETE
-----------------------
THIS COVENANT NOT TO COMPETE (the "Agreement") dated as of the ___ day
of ________, 1996, is delivered by J. CRAIG MCBRIDE ("McBride") to EXTENDED
STAY AMERICA, INC., a Delaware corporation (the "Company").
R E C I T A L S:
A. McBride is the sole shareholder of Kipling Hospitality Enterprises
Corporation ("Kipling").
B. Kipling entered into an agreement (the "Purchase Agreement") with
an affiliate of the Company to transfer a certain hotel known as the
Econolodge located in Lakewood, Colorado (the "Hotel").
C. It is a condition to the execution of the Purchase Agreement by
the affiliate of the Company that McBride execute and deliver to the Company
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, McBride agrees as follows:
1. No Solicitation of Employees. McBride agrees that from the date
of this Agreement and continuing for a period of two years (the "Term"),
neither McBride nor any person or enterprise controlled by McBride will
solicit for employment any person employed by the Company or any of its
affiliates.
2. Covenant Not to Compete. McBride agrees that during the Term of
this Agreement, neither McBride nor any person or enterprise controlled by
McBride will become
<PAGE>
a stockholder, director, officer, agent, consultant or employee of a
business, whether or not incorporated, or have any financial stake of any
nature in any of the foregoing or otherwise engage directly or indirectly
in any enterprise which is a Competing Business (defined below) in the
Prohibited Area (defined below); provided, however, that the foregoing
shall not prohibit the ownership of less than 5% of the outstanding shares
of stock of any corporation engaged in any business, which shares are
regularly traded on a national securities exchange or in any
over-the-counter market. The Term "Competing Business" shall mean any
business, person, or entity which is engaged in the ownership, management,
operation, or development of Extended-Stay Lodging Facilities (defined below)
generally similar to those owned or operated by the Company or its affiliates
during the Term. The term "Prohibited Area" shall mean any area within
twenty-five (25) miles of either (i) any Extended-Stay Lodging Facilities
owned or operated by the Company or any of its affiliates; and(ii) any real
property owned, leased, or under contract for purchase by the Company or any of
its affiliates where the Company or its affiliates intends to develop an
Extended-Stay Lodging Facility. The term "Extended-Stay Lodging Facilities"
shall mean a facility marketed and advertised primarily as one offering lodging
for extended periods, as opposed to transient periods, and is one in which a
minimum of 80 percent of available sleeping rooms are equipped with kitchen
appliances consisting minimally of a micro refrigerator, microwave oven, and
sink/counter space plus a table suitable for dining. Upon the written request
of McBride, the Company shall deliver to McBride a description of the properties
referred to
-2-
<PAGE>
above. Notwithstanding the foregoing, the properties described on Exhibit A
hereto shall be permitted exceptions to the terms of this Section 2.
3. Remedies for Breach of Covenants. In the event that a covenant
included in this Agreement shall be deemed by any court to be unreasonably
broad in any respect, it shall be modified in order to make it reasonable and
shall be enforced accordingly; provided, however, that in the event that any
court shall refuse to enforce any of the covenants contained in sections 1 and
2, then the unenforceable covenant shall be deemed eliminated from the
provisions of this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining covenant to be enforced so that the
validity,legality or enforceability of the remaining provisions of this
Agreement shall not be affected thereby.
McBride acknowledges that any material breach of his covenants contained
in Sections 1 and 2 will cause irreparable harm to the Company, which will be
difficult if not impossible to ascertain, and the Company shall be entitled
to equitable relief, including injunctive relief, against any actual or
threatened breach hereof, without bond and without liability should such
relief be denied, modified or vacated. Neither the right to obtain such
relief or the obtaining of such relief shall be exclusive of or preclude the
Company from any other remedy.
4. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.
-3-
<PAGE>
IN WITNESS WHEREOF, J. Craig McBride has executed this Agreement as of the
day and year first above written.
---------------------------------------
J. CRAIG MCBRIDE
-4-
<PAGE>
EXHIBIT "A"
(COVENANT NOT TO COMPETE)
1. Denver Travelodge Hotel - 200 West 38th Avenue, Denver, Colorado 80216
2. Days Inn - 8300 E. Kellogg, Wichita, Kansas 67207
3. Williamsburg Inn - 8300 E. Kellogg, Wichita, Kansas 67207
-5-
<PAGE>
EXHIBIT 10.3
EXTENDED STAY AMERICA, INC.
AMENDED AND RESTATED
1995 EMPLOYEE STOCK OPTION PLAN
1. STATEMENT OF PURPOSE. The purpose of this Stock Option Plan (the
"Plan") is to benefit Extended Stay America, Inc. (the "Company") and its
subsidiaries by offering certain present and future key individuals a favorable
opportunity to become holders of stock in the Company over a period of years,
thereby giving them a stake in the growth and prosperity of the Company and
encouraging the continuance of their services with the Company or its
subsidiaries.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee") of the board of directors of the Company (the "Board
of Directors"), whose interpretation of the terms and provisions of the Plan and
whose determination of matters pertaining to options granted under the Plan
shall be final and conclusive. The Committee shall be composed of two or more
disinterested members of the Board of Directors of the Company.
3. ELIGIBILITY. Options shall be granted only to key employees and
consultants of the Company and its subsidiaries (including officers of the
Company and its subsidiaries but excluding members of the Committee) selected
initially and from time to time thereafter by the Committee on the basis of the
special importance of their services in the management, development and
operations of the Company or its subsidiaries (each such individual receiving
options granted under the Plan and each other person entitled to exercise an
option granted under the Plan is referred to herein as an "Optionee").
4. GRANTING OF OPTIONS. (a) The Committee may grant options to employees,
directors and consultants of the Company and its subsidiaries; provided,
however, that members of the Committee shall not be eligible to receive grants
of options under the Plan. Pursuant to the Plan, a maximum of 1,677,060 shares
of the $.01 par value common stock of the Company (the "Common Stock") may be
purchased from the Company, subject to adjustment as provided in Paragraph 10
hereof; provided, however, that the maximum number of shares subject to all
options granted to an individual under the Plan shall in no event exceed 50% of
the shares of Common Stock authorized for issuance under the Plan. Options
granted under the Plan are intended not to be treated as incentive stock options
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) No options shall be granted under the Plan subsequent to the tenth
anniversary of the adoption of the Plan. In the event that an option expires or
is terminated or canceled unexercised as to any shares, such released shares may
again be optioned (including a grant in substitution for a canceled option).
Shares subject to options may be made available from unissued or reacquired
shares of Common Stock.
(c) Nothing contained in the Plan or in any option granted pursuant
thereto shall confer upon any Optionee any right to be continued in the
employment of, or a consulting
<PAGE>
arrangement with, the Company or any subsidiary, or interfere in any way with
the right of the Company or its subsidiaries to terminate his or her employment
or consulting arrangement at any time.
5. OPTION PRICE. The option price of any option granted under the Plan
shall be determined by the Committee and shall not be less than the fair market
value of the shares of Common Stock subject to the option on the date of the
grant of such option. Unless the Committee otherwise determines, for purposes
of this Paragraph 5, "fair market value" shall be the average of the highest and
lowest sales prices of the Common Stock reported on the Nasdaq National Market
(or on the principal national stock exchange on which it is listed or quotation
service on which it is listed) (as reported in The Wall Street Journal) on the
date the option is granted (or, if the date of grant is not a trading date, on
the first trading date immediately preceding the date of grant). In the event
that the Common Stock is not listed or quoted on the Nasdaq National Market or
any other national stock exchange, the fair market value of the shares of Common
Stock for all purposes of this Plan shall be reasonably determined by the
Committee.
6. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS. (a) Subject to the
provisions of Paragraph 8 hereof, each option shall be for such term of not more
than ten years as shall be determined by the Committee at the date of the grant.
Each option shall become exercisable with respect to one-fourth of the total
number of shares subject to the option 12 months after the date of its grant and
with respect to an additional one-fourth at the end of each 12-month period
thereafter during the succeeding three years.
(b) Notwithstanding any other provisions of the Plan to the contrary,
the Committee may in its discretion (i) specifically provide as of the date of
the grant for another time or times of exercise; (ii) accelerate the
exercisability of any option, subject to such terms and conditions as the
Committee deems necessary and appropriate to effectuate the purposes of the
Plan, which may include, without limitation, a requirement that the Optionee
grant to the Committee an option to repurchase all or a portion of the number of
shares acquired upon exercise of the accelerated option for their fair market
value, as determined by the Committee, as of the date of acceleration; (iii) at
any time prior to the expiration or termination of any options previously
granted, extend the term of any option (including such options held by officers)
for such additional period or periods as the Committee, in its discretion, may
determine. In no event, however, shall the aggregate option period with respect
to any option, including the original term of the option and any extensions
thereof, exceed ten years. Subject to the foregoing, all or any part of the
options as to which the right to exercise has accrued may be exercised at the
time of such accrual or at any time or times thereafter during the option term.
(c) In the event of a change in control of the Company, all
outstanding options shall become immediately exercisable. For the purposes of
the Plan, the term "change in control" shall mean (1) that any person is or
becomes the beneficial owner, directly or indirectly, of at least 50% of the
combined voting power of the Company's outstanding securities, except by reason
of a repurchase by the Company of its own securities, or (2) that a change in
the composition of the Board of Directors of the Company occurs as a result of
which fewer than one-half of the incumbent directors are directors who either
had been directors of the Company
2
<PAGE>
24 months prior to such change or were elected or nominated for election to the
Board of Directors with the approval of at least a majority of the directors who
had been directors of the Company 24 months prior to such change and who were
still in office at the time of the election or nomination.
7. EXERCISE OF OPTION. (a) An option may be exercised by giving written
notice to the Committee, specifying the number of shares to be purchased. The
option price for the number of shares of Common Stock for which the option is
exercised shall become immediately due and payable; provided, however, that in
lieu of cash an Optionee may, with the approval of the Committee, exercise his
or her option by (i) delivering a promissory note in accordance with the terms
of the Plan and in a form specified by the Company; (ii) tendering to the
Company shares of Common Stock owned by him or her and with the certificates
therefor registered in his or her name, having a fair market value equal to the
cash exercise price of the shares being purchased; or (iii) delivery of an
irrevocable written notice instructing the Company to deliver the shares of
Common Stock being purchased to a broker selected by the Company, subject to the
broker's written guarantee to deliver the cash to the Company, in each case
equal to the full consideration of the exercise price for the shares of Common
Stock being purchased. For this purpose, the per share value of Common Stock
shall be the fair market value on the date of exercise (or, if the date of
exercise is not a trading date, on the first trading date immediately preceding
the date of exercise), which shall, unless the Committee otherwise determines,
be the average of the highest and lowest sales prices of the Common Stock
reported on the Nasdaq National Market (or on the principal national stock
exchange on which it is listed or quotation service on which it is listed) (as
reported in The Wall Street Journal) on such date.
(b) In connection with the exercise of options granted under the Plan,
the Company may make loans to such Optionees as the Committee, in its
discretion, may determine. Such loans shall be subject to the following terms
and conditions and such other terms and conditions as the Committee shall
determine to be not inconsistent with the Plan. Such loans shall bear interest
at such rates as the Committee shall determine from time to time, which rates
may be below then current market rates or may be made without interest. In no
event may any such loan exceed the fair market value, at the date of exercise,
of the shares covered by the option, or portion thereof, exercised by the
Optionee. No loan shall have an initial term exceeding two years, but any such
loan may be renewable at the discretion of the Committee. When a loan shall have
been made, shares of Common Stock having a fair market value at least equal to
150 percent of the principal amount of the loan shall be pledged by the Optionee
to the Company as security for payment of the unpaid balance of the loan.
(c) At the time of the exercise of any option, the Company may
require, as a condition of the exercise of such option, the Optionee to pay the
Company an amount equal to the amount of the tax the Company may be required to
withhold to obtain a deduction for federal and state income tax purposes as a
result of the exercise of such option by the Optionee or to comply with
applicable law. An Optionee may, with the approval of the Committee, make an
election to satisfy the tax withholding obligation by either (1) tendering to
the Company shares of Common Stock owned by him or her and with the certificates
therefor registered in his or her name, having a fair market value equal to the
tax withholding obligation, (2) deduct from any
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cash payment pursuant to any broker-assisted option exercise (net to Optionee in
cash or shares) an amount sufficient to satisfy any withholding tax
requirements, or (3) instructing the Company to withhold from the shares of
Common Stock otherwise issuable upon the exercise of the option that number of
shares having a fair market value equal to the tax withholding obligation. The
value of the shares to be delivered or withheld shall be based on the fair
market value of the shares of Common Stock on the date of exercise, which shall,
unless the Committee otherwise determines, be the average of the highest and
lowest sales prices of the Common Stock reported on the Nasdaq National Market
(or on the principal national stock exchange on which it is listed or quotation
service on which it is listed) (as reported in The Wall Street Journal) on the
date of exercise.
(d) At the time of any exercise of any option, the Company may, if the
Company shall determine it necessary or desirable for any reason, require the
Optionee (or his or her heirs, legatees, or legal representative, as the case
may be) as a condition upon the exercise thereof, to deliver to the Company a
written representation of present intention to purchase the shares for
investment and not for distribution. In the event such representation is
required to be delivered, an appropriate legend may be placed upon each
certificate delivered to the Optionee upon his or her exercise of part or all of
the option and a stop order may be placed with the transfer agent for the Common
Stock. Each option shall also be subject to the requirement that, if at any time
the Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to the option upon any securities exchange
or under any state, federal or foreign law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issue or purchase of shares thereunder, the option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.
8. TERMINATION OF EMPLOYMENT OR CONSULTING ARRANGEMENT - EXERCISE
THEREAFTER. (a) In the event the employment or consulting arrangement of an
Optionee with the Company or any of its subsidiaries is terminated for any
reason other than the Optionee's death, permanent disability, retirement after
age 65 or following a change in control (as defined in Paragraph 6(c) hereof),
such Optionee's option shall expire and all rights to purchase shares pursuant
thereto shall terminate immediately. Temporary absence from employment because
of illness, vacation, approved leaves of absence, and transfers of employment
among the Company and its subsidiaries, shall not be considered to terminate
employment or to interrupt continuous employment. Temporary cessation of the
provision of consulting services because of illness, vacation or any other
reason approved in advance by the Company shall not be considered a termination
of the consulting arrangement or an interruption of the continuity thereof.
Conversion of an Optionee's employment relationship to a consulting arrangement
shall not result in termination of previously granted options.
(b) In the event of termination of employment or consulting
arrangement following a change in control (as defined in Paragraph 6(c) hereof),
the option may be exercised in full (without regard to any times of exercise
established under Paragraph 6 hereof; provided, however, that no options shall
be exercisable during the first six months after the date of grant)
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<PAGE>
by the Optionee or, if the Optionee is not living, by the Optionee's heirs,
legatees, or legal representatives, as the case may be, during its specified
term. In the event of termination of employment or consulting arrangement
because of death, permanent disability (as that term is defined in Section
22(e)(3) of the Code, as now in effect or as shall be subsequently amended) or
retirement after age 65, the option may be exercised by the Optionee, or, if the
Optionee dies after such termination, by the Optionee's heirs, legatees, or
legal representatives, as the case may be, at any time during its specified term
prior to three years after the date of such termination, but only to the extent
the option was exercisable at the date of such termination.
9. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and each option shall be
exercisable during an Optionee's lifetime only by the Optionee or by the
Optionee's legal representative. This restriction on transferability is
effective only so long as it is required pursuant to Section 16 under the
Securities Exchange Act of 1934, as amended. At the time such restriction on
transferability is no longer so required, the Committee, in its discretion, may
permit the transfer of an option on such terms and subject to such conditions as
the Committee may deem necessary or appropriate or as otherwise may be required
by applicable law or regulation.
10. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
number of outstanding shares of Common Stock is changed by any stock dividend,
stock split or combination of shares, the number of shares subject to the Plan
and to options granted thereunder shall be proportionately adjusted; (b) in the
event of any merger, consolidation or reorganization of the Company with any
other corporation or legal entity there shall be substituted, on an equitable
basis as determined by the Committee, for each share of Common Stock then
subject to the Plan and for each share of Common Stock then subject to an option
granted under the Plan, the number and kind of shares of stock or other
securities to which the holders of shares of Common Stock will be entitled
pursuant to the transaction; and (c) in the event of any other relevant change
in the capitalization of the Company, the Committee shall provide for an
equitable adjustment in the number of shares of Common Stock then subject to the
Plan and to each share of Common Stock then subject to an option granted under
the Plan. In the event of any such adjustment, the option price per share of
Common Stock shall be proportionately adjusted.
11. AMENDMENT OF THE PLAN. The Board of Directors of the Company or any
authorized committee thereof may amend or discontinue the Plan at any time.
However, no such amendment or discontinuance shall (a) without the consent of
the Optionee change or impair any option previously granted, or (b) without the
approval of the holders of a majority of the shares of the Common Stock which
vote in person or by proxy at a duly held stockholders' meeting, (i) increase
the maximum number of shares which may be purchased by all employees pursuant to
this Plan, (ii) change the minimum purchase price of any option, or (iii) change
the limitations on the option period or increase the time limitations on the
grant of options.
12. EFFECTIVE DATE. The Plan is effective as of August 18, 1995.
5
<PAGE>
EXHIBIT 10.6
EXTENDED STAY AMERICA, INC.
1995 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. STATEMENT OF PURPOSE. The purpose of this Stock Option Plan (the
"Plan") is to benefit Extended Stay America, Inc. (the "Company") and its
subsidiaries by offering its non-employee directors a favorable opportunity to
become holders of stock in the Company over a period of years, thereby giving
them a stake in the growth and prosperity of the Company and encouraging the
continuance of their services with the Company.
2. ADMINISTRATION. The Plan shall be administered by the board of
directors of the Company (the "Board of Directors"), whose interpretation of the
terms and provisions of the Plan and whose determination of matters pertaining
to options granted under the Plan shall be final and conclusive.
3. ELIGIBILITY. Options shall be granted only to current directors of the
Company who are not officers or employees of the Company (each such individual
receiving options granted under the Plan and each other person entitled to
exercise an option granted under the Plan is referred to herein as an
"Optionee").
4. GRANTING OF OPTIONS. (a) (1) A one-time option, under which a total of
20,000 shares of common stock of the Company, $.01 par value (the "Common
Stock"), may be purchased from the Company, shall be automatically granted to
each director of the Company upon the consummation of the initial public
offering of the Common Stock at an option price equal to the initial public
offering price for the Common Stock, provided such director is eligible at that
time under the terms of Paragraph 3 of this Plan.
(2) After the initial public offering of the Common Stock, a one-time
option, under which a total of 20,000 shares of the Common Stock may
be purchased from the Company, shall be automatically granted to each
director of the Company upon his or her initial election or
appointment as a director of the Company, provided such director is
eligible at that time under the terms of Paragraph 3 hereof.
(3) With respect to each director of the Company, an additional option
under which a total of 5,000 shares of Common Stock may be purchased from
the Company shall be granted to such director each year, for the next four
years, on the anniversary of the granting of the initial option to such
director described in Paragraph 4(a)(1) or (2) hereof, as the case may be,
provided such director continues to be eligible at that time under the
terms of Paragraph 3 of this Plan.
The aggregate number of shares which shall be available to be so optioned under
the Plan shall be 240,000 shares. Such number of shares, and the number of
shares subject to options outstanding under the Plan, shall be subject in all
cases to adjustment as provided in
<PAGE>
Paragraph 10 hereof. Options granted under the Plan are intended not be treated
as incentive stock options as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
(b) No options shall be granted under the Plan subsequent to the
tenth anniversary of the adoption of the Plan. In the event that an option
expires or is terminated or cancelled unexercised as to any shares, such
released shares may again be optioned (including a grant in substitution for a
cancelled option). Shares subject to options may be made available from unissued
or reacquired shares of Common Stock.
(c) Nothing contained in the Plan or in any option granted pursuant
thereto shall confer upon any Optionee any right to continue servicing as a
director of the Company or interfere in any way with the right of the Board of
Directors or stockholders of the Company to remove such director pursuant to the
certificate or articles of incorporation or bylaws of the Company or pursuant to
applicable law.
5. OPTION PRICE. Except with respect to those options granted under the
terms of Paragraph 4(a)(1) hereof and subject to the adjustment in Paragraph 10
hereof, the option price for all options granted under this Plan shall be the
fair market value of the shares of Common Stock subject to the option on the
date of the grant of such option. For purposes of this Paragraph 5, "fair
market value" shall be the average of the highest and lowest sales prices of the
Common Stock reported on the NASDAQ National Market System (or on the principal
national stock exchange on which it is listed or quotation service on which it
is listed) (as reported in The Wall Street Journal) on the date the option is
granted (or, if the date of grant is not a trading date, on the first trading
date immediately preceding the date of grant). In the event that the Common
Stock is not listed or quoted on the NASDAQ National Market System or any other
national stock exchange, the fair market value of the shares of Common Stock for
all purposes of this Plan shall be reasonably determined by the Board of
Directors.
6. DURATION OF OPTIONS AND INCREMENTS. Subject to the provisions of
Paragraph 8 hereof, each option shall be for a term of ten years. Each option
shall become exercisable with respect to all of the shares subject to the option
6 months after the date of its grant.
7. EXERCISE OF OPTION. (a) An option may be exercised by giving written
notice to the Secretary of the Company, specifying the number of shares to be
purchased. The option price for the number of shares of Common Stock for which
the option is exercised shall become immediately due and payable; provided,
however, that in lieu of cash an Optionee may, with the approval of the Board of
Directors, exercise his or her option by (i) delivering a promissory note in
accordance with the terms of the Plan and in a form specified by the Company;
(ii) tendering to the Company shares of Common Stock owned by him or her and
with the certificates therefor registered in his or her name, having a fair
market value equal to the cash exercise price of the shares being purchased; or
(iii) delivery of an irrevocable written notice instructing the Company to
deliver the shares of Common Stock being purchased to a broker selected by the
Company, subject to the broker's written guarantee to deliver the cash to the
Company, in each case equal to the full consideration of the exercise price of
the shares being purchased. For this purpose, the
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<PAGE>
per share value of Common Stock shall be the fair market value on the date of
exercise (or, if the date of exercise is not a trading date, on the first
trading date immediately preceding the date of exercise), which shall be the
average of the highest and lowest sales prices of the Common Stock reported on
the NASDAQ National Market System (or on the principal national stock exchange
on which it is listed or quotation service on which it is listed) (as reported
in The Wall Street Journal) on such date.
(b) In connection with the exercise of options granted under the Plan,
the Company may make loans to such Optionees as the Board of Directors, in its
discretion, may determine. Such loans shall be subject to the following terms
and conditions and such other terms and conditions as the Board of Directors
shall determine to be not inconsistent with the Plan. Such loans shall bear
interest at such rates as the Board of Directors shall determine from time to
time, which rates may be below then current market rates or may be made without
interest. In no event may any such loan exceed the fair market value, at the
date of exercise, of the shares covered by the option, or portion thereof,
exercised by the Optionee. No loan shall have an initial term exceeding two
years, but any such loan may be renewable at the discretion of the Board of
Directors. When a loan shall have been made, shares of Common Stock having a
fair market value at least equal to 150 percent of the principal amount of the
loan shall be pledged by the Optionee to the Company as security for payment of
the unpaid balance of the loan.
(c) If at any time an Optionee is required to pay an amount required
to be withheld under applicable income tax or other laws in connection with the
exercise of an option in order for the Company to obtain a deduction for federal
and state income tax purposes, the Company shall withhold shares of Common Stock
having a value equal to the amount required to be withheld. The value of the
shares to be withheld or delivered shall be based on the fair market value of
the shares of Common Stock on the date of exercise, which shall be the average
of the highest and lowest sales prices of the Common Stock reported on the
NASDAQ National Market System (or on the principal stock exchange on which it is
listed or quotation service on which it is listed) (as reported in The Wall
Street Journal)on the date of exercise.
(d) At the time of any exercise of any option, the Company may, if the
Company shall determine it necessary or desirable for any reason, require the
Optionee (or his or her heirs, legatees, or legal representative, as the case
may be) as a condition upon the exercise thereof, to deliver to the Company a
written representation of present intention to purchase the shares for
investment and not for distribution. In the event such representation is
required to be delivered, an appropriate legend may be placed upon each
certificate delivered to the Optionee upon his or her exercise of part or all of
the option and a stop order may be placed with the transfer agent for the Common
Stock. Each option shall also be subject to the requirement that, if at any time
the Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to the option upon any securities exchange
or under any state, federal or foreign law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the issue or purchase of shares thereunder, the option may not
be exercised in whole or in part unless such listing, registration,
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<PAGE>
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.
8. CESSATION OF BOARD MEMBERSHIP - EXERCISE THEREAFTER. (a) In the event
that an Optionee ceases to be a director of the Company for any reason other
than for cause, such Optionee shall have 360 days from the date such Optionee
ceased to be a director of the Company to exercise those options owned by such
Optionee which were exercisable as of the date of such cessation.
(b) In the event that an Optionee is removed from the Board of
Directors of the Company for cause (as hereinafter defined), such Optionee's
option shall expire and all rights to purchase shares of Common Stock pursuant
thereto shall terminate immediately. For purposes of the Plan, removal for
"cause" shall mean (a) the Optionee's gross negligence, dishonesty,
incompetency, willful breach of any employment or consulting agreement with the
Company, or the violation of any reasonable rule or regulation of the Company, a
violation of which results in significant damage to the Company and with respect
to which, except in the case of dishonesty or incompetency, the Optionee fails
to make reasonable efforts to correct in a reasonable time; (b) the Optionee's
engaging in other conduct which materially adversely reflects on the Company or
which is damaging to the Company upon written notice of such violation; or (c)
continued failure by the Optionee to substantially perform his or her duties
(other than any such failure resulting from his or her incapacity due to
physical or mental disability), following the delivery of a demand for
substantial performance by the Company.
9. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and each option shall be
exercisable during an Optionee's lifetime only by the Optionee or by the
Optionee's legal representative.
10. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
number of outstanding shares of Common Stock is changed by any stock dividend,
stock split or combination of shares, the number of shares subject to the Plan
and to options granted thereunder shall be proportionately adjusted; (b) in the
event of any merger, consolidation or reorganization of the Company with any
other corporation or legal entity there shall be substituted, on an equitable
basis as determined by the Board of Directors, for each share of Common Stock
then subject to the Plan and for each share of Common Stock then subject to an
option granted under the Plan, the number and kind of shares of stock or other
securities to which the holders of shares of Common Stock will be entitled
pursuant to the transaction; and (c) in the event of any other relevant change
in the capitalization of the Company, the Board of Directors shall provide for
an equitable adjustment in the number of shares of Common Stock then subject to
the Plan and to each share of Common Stock then subject to an option granted
under the Plan. In the event of any such adjustment, the option price per share
of Common Stock shall be proportionately adjusted.
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<PAGE>
11. AMENDMENT OF THE PLAN. The Board of Directors of the Company or any
authorized committee thereof may amend or discontinue the Plan at any time,
provided, however, that the Plan may not be amended more than once every six
months except to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules and regulations under each, and provided
further, that no such amendment or discontinuance shall (a) without the consent
of the Optionee change or impair any option previously granted, or (b) without
the approval of the holders of a majority of the shares of Common Stock which
vote in person or by proxy at a duly held stockholders' meeting, (i) increase
the maximum number of shares which may be purchased by all eligible directors
pursuant to the Plan, (ii) change the purchase price of any option, or (iii)
change the option period or increase the time limitations on the grant of
options.
12. EFFECTIVE DATE. The Plan is effective as of November 17, 1995.
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<PAGE>
EXHIBIT 10.10
EXTENDED STAY AMERICA, INC.
AMENDED AND RESTATED
1996 EMPLOYEE STOCK OPTION PLAN
1. STATEMENT OF PURPOSE. The purpose of this Stock Option Plan (the
"Plan") is to benefit Extended Stay America, Inc. (the "Company") and its
subsidiaries by offering certain present and future key individuals a favorable
opportunity to become holders of stock in the Company over a period of years,
thereby giving them a stake in the growth and prosperity of the Company and
encouraging the continuance of their services with the Company or its
subsidiaries.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee") of the board of directors of the Company (the "Board
of Directors"), whose interpretation of the terms and provisions of the Plan and
whose determination of matters pertaining to options granted under the Plan
shall be final and conclusive. The Committee shall be composed of two or more
disinterested members of the Board of Directors of the Company.
3. ELIGIBILITY. Options shall be granted only to key employees and
consultants of the Company and its subsidiaries (including officers of the
Company and its subsidiaries but excluding members of the Committee) selected
initially and from time to time thereafter by the Committee on the basis of the
special importance of their services in the management, development and
operations of the Company or its subsidiaries (each such individual receiving
options granted under the Plan and each other person entitled to exercise an
option granted under the Plan is referred to herein as an "Optionee").
4. GRANTING OF OPTIONS. (a) The Committee may grant options to employees,
directors and consultants of the Company and its subsidiaries; provided,
however, that members of the Committee shall not be eligible to receive grants
of options under the Plan. Pursuant to the Plan, a maximum of 2,500,000 shares
of the $.01 par value common stock of the Company (the "Common Stock") may be
purchased from the Company, subject to adjustment as provided in Paragraph 10
hereof; provided, however, that the maximum number of shares subject to all
options granted to an individual under the Plan shall in no event exceed 50% of
the shares of Common Stock authorized for issuance under the Plan. Options
granted under the Plan are intended not to be treated as incentive stock options
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) No options shall be granted under the Plan subsequent to the tenth
anniversary of the adoption of the Plan. In the event that an option expires or
is terminated or canceled unexercised as to any shares, such released shares may
again be optioned (including a grant in substitution for a canceled option).
Shares subject to options may be made available from unissued or reacquired
shares of Common Stock.
(c) Nothing contained in the Plan or in any option granted pursuant
thereto shall confer upon any Optionee any right to be continued in the
employment of, or a consulting
<PAGE>
arrangement with, the Company or any subsidiary, or interfere in any way with
the right of the Company or its subsidiaries to terminate his or her employment
or consulting arrangement at any time.
5. OPTION PRICE. The option price of any option granted under the Plan
shall be determined by the Committee and shall not be less than the fair market
value of the shares of Common Stock subject to the option on the date of the
grant of such option. Unless the Committee otherwise determines, for purposes
of this Paragraph 5, "fair market value" shall be the average of the highest and
lowest sales prices of the Common Stock reported on the Nasdaq National Market
(or on the principal national stock exchange on which it is listed or quotation
service on which it is listed) (as reported in The Wall Street Journal) on the
date the option is granted (or, if the date of grant is not a trading date, on
the first trading date immediately preceding the date of grant). In the event
that the Common Stock is not listed or quoted on the Nasdaq National Market or
any other national stock exchange, the fair market value of the shares of Common
Stock for all purposes of this Plan shall be reasonably determined by the
Committee.
6. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS. (a) Subject to the
provisions of Paragraph 8 hereof, each option shall be for such term of not more
than ten years as shall be determined by the Committee at the date of the grant.
Each option shall become exercisable with respect to one-fourth of the total
number of shares subject to the option 12 months after the date of its grant and
with respect to an additional one-fourth at the end of each 12-month period
thereafter during the succeeding three years.
(b) Notwithstanding any other provisions of the Plan to the contrary,
the Committee may in its discretion (i) specifically provide as of the date of
the grant for another time or times of exercise; (ii) accelerate the
exercisability of any option, subject to such terms and conditions as the
Committee deems necessary and appropriate to effectuate the purposes of the
Plan, which may include, without limitation, a requirement that the Optionee
grant to the Committee an option to repurchase all or a portion of the number of
shares acquired upon exercise of the accelerated option for their fair market
value, as determined by the Committee, as of the date of acceleration; (iii) at
any time prior to the expiration or termination of any options previously
granted, extend the term of any option (including such options held by officers)
for such additional period or periods as the Committee, in its discretion, may
determine. In no event, however, shall the aggregate option period with respect
to any option, including the original term of the option and any extensions
thereof, exceed ten years. Subject to the foregoing, all or any part of the
options as to which the right to exercise has accrued may be exercised at the
time of such accrual or at any time or times thereafter during the option term.
(c) In the event of a change in control of the Company, all
outstanding options shall become immediately exercisable. For the purposes of
the Plan, the term "change in control" shall mean (1) that any person is or
becomes the beneficial owner, directly or indirectly, of at least 50% of the
combined voting power of the Company's outstanding securities, except by reason
of a repurchase by the Company of its own securities, or (2) that a change in
the composition of the Board of Directors of the Company occurs as a result of
which fewer than one-half of the incumbent directors are directors who either
had been directors of the Company
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24 months prior to such change or were elected or nominated for election to the
Board of Directors with the approval of at least a majority of the directors who
had been directors of the Company 24 months prior to such change and who were
still in office at the time of the election or nomination.
7. EXERCISE OF OPTION. (a) An option may be exercised by giving written
notice to the Committee, specifying the number of shares to be purchased. The
option price for the number of shares of Common Stock for which the option is
exercised shall become immediately due and payable; provided, however, that in
lieu of cash an Optionee may, with the approval of the Committee, exercise his
or her option by (i) delivering a promissory note in accordance with the terms
of the Plan and in a form specified by the Company; (ii) tendering to the
Company shares of Common Stock owned by him or her and with the certificates
therefor registered in his or her name, having a fair market value equal to the
cash exercise price of the shares being purchased; or (iii) delivery of an
irrevocable written notice instructing the Company to deliver the shares of
Common Stock being purchased to a broker selected by the Company, subject to the
broker's written guarantee to deliver the cash to the Company, in each case
equal to the full consideration of the exercise price for the shares of Common
Stock being purchased. For this purpose, the per share value of Common Stock
shall be the fair market value on the date of exercise (or, if the date of
exercise is not a trading date, on the first trading date immediately preceding
the date of exercise), which shall, unless the Committee otherwise determines,
be the average of the highest and lowest sales prices of the Common Stock
reported on the Nasdaq National Market (or on the principal national stock
exchange on which it is listed or quotation service on which it is listed) (as
reported in The Wall Street Journal) on such date.
(b) In connection with the exercise of options granted under the Plan,
the Company may make loans to such Optionees as the Committee, in its
discretion, may determine. Such loans shall be subject to the following terms
and conditions and such other terms and conditions as the Committee shall
determine to be not inconsistent with the Plan. Such loans shall bear interest
at such rates as the Committee shall determine from time to time, which rates
may be below then current market rates or may be made without interest. In no
event may any such loan exceed the fair market value, at the date of exercise,
of the shares covered by the option, or portion thereof, exercised by the
Optionee. No loan shall have an initial term exceeding two years, but any such
loan may be renewable at the discretion of the Committee. When a loan shall have
been made, shares of Common Stock having a fair market value at least equal to
150 percent of the principal amount of the loan shall be pledged by the Optionee
to the Company as security for payment of the unpaid balance of the loan.
(c) At the time of the exercise of any option, the Company may
require, as a condition of the exercise of such option, the Optionee to pay the
Company an amount equal to the amount of the tax the Company may be required to
withhold to obtain a deduction for federal and state income tax purposes as a
result of the exercise of such option by the Optionee or to comply with
applicable law. An Optionee may, with the approval of the Committee, make an
election to satisfy the tax withholding obligation by either (1) tendering to
the Company shares of Common Stock owned by him or her and with the certificates
therefor registered in his or her name, having a fair market value equal to the
tax withholding obligation, (2) deduct from any
3
<PAGE>
cash payment pursuant to any broker-assisted option exercise (net to Optionee in
cash or shares) an amount sufficient to satisfy any withholding tax
requirements, or (3) instructing the Company to withhold from the shares of
Common Stock otherwise issuable upon the exercise of the option that number of
shares having a fair market value equal to the tax withholding obligation. The
value of the shares to be delivered or withheld shall be based on the fair
market value of the shares of Common Stock on the date of exercise, which shall,
unless the Committee otherwise determines, be the average of the highest and
lowest sales prices of the Common Stock reported on the Nasdaq National Market
(or on the principal national stock exchange on which it is listed or quotation
service on which it is listed) (as reported in The Wall Street Journal) on the
date of exercise.
(d) At the time of any exercise of any option, the Company may, if the
Company shall determine it necessary or desirable for any reason, require the
Optionee (or his or her heirs, legatees, or legal representative, as the case
may be) as a condition upon the exercise thereof, to deliver to the Company a
written representation of present intention to purchase the shares for
investment and not for distribution. In the event such representation is
required to be delivered, an appropriate legend may be placed upon each
certificate delivered to the Optionee upon his or her exercise of part or all of
the option and a stop order may be placed with the transfer agent for the Common
Stock. Each option shall also be subject to the requirement that, if at any time
the Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to the option upon any securities exchange
or under any state, federal or foreign law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issue or purchase of shares thereunder, the option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.
8. TERMINATION OF EMPLOYMENT OR CONSULTING ARRANGEMENT - EXERCISE
THEREAFTER. (a) In the event the employment or consulting arrangement of an
Optionee with the Company or any of its subsidiaries is terminated for any
reason other than the Optionee's death, permanent disability, retirement after
age 65 or following a change in control (as defined in Paragraph 6(c) hereof),
such Optionee's option shall expire and all rights to purchase shares pursuant
thereto shall terminate immediately. Temporary absence from employment because
of illness, vacation, approved leaves of absence, and transfers of employment
among the Company and its subsidiaries, shall not be considered to terminate
employment or to interrupt continuous employment. Temporary cessation of the
provision of consulting services because of illness, vacation or any other
reason approved in advance by the Company shall not be considered a termination
of the consulting arrangement or an interruption of the continuity thereof.
Conversion of an Optionee's employment relationship to a consulting arrangement
shall not result in termination of previously granted options.
(b) In the event of termination of employment or consulting
arrangement following a change in control (as defined in Paragraph 6(c) hereof),
the option may be exercised in full (without regard to any times of exercise
established under Paragraph 6 hereof; provided, however, that no options shall
be exercisable during the first six months after the date of grant)
4
<PAGE>
by the Optionee or, if the Optionee is not living, by the Optionee's heirs,
legatees, or legal representatives, as the case may be, during its specified
term. In the event of termination of employment or consulting arrangement
because of death, permanent disability (as that term is defined in Section
22(e)(3) of the Code, as now in effect or as shall be subsequently amended) or
retirement after age 65, the option may be exercised by the Optionee, or, if the
Optionee dies after such termination, by the Optionee's heirs, legatees, or
legal representatives, as the case may be, at any time during its specified term
prior to three years after the date of such termination, but only to the extent
the option was exercisable at the date of such termination.
(c) Notwithstanding any other provision of the Plan to the contrary,
the Committee may in its discretion provide for such other terms of expiration
and termination of an option in the event of termination of the employment or
consulting arrangement of the optionee as the Committee shall determine.
9. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and each option shall be
exercisable during an Optionee's lifetime only by the Optionee or by the
Optionee's legal representative. This restriction on transferability is
effective only so long as it is required pursuant to Section 16 under the
Securities Exchange Act of 1934, as amended. At the time such restriction on
transferability is no longer so required, the Committee, in its discretion, may
permit the transfer of an option on such terms and subject to such conditions as
the Committee may deem necessary or appropriate or as otherwise may be required
by applicable law or regulation.
10. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
number of outstanding shares of Common Stock is changed by any stock dividend,
stock split or combination of shares, the number of shares subject to the Plan
and to options granted thereunder shall be proportionately adjusted; (b) in the
event of any merger, consolidation or reorganization of the Company with any
other corporation or legal entity there shall be substituted, on an equitable
basis as determined by the Committee, for each share of Common Stock then
subject to the Plan and for each share of Common Stock then subject to an option
granted under the Plan, the number and kind of shares of stock or other
securities to which the holders of shares of Common Stock will be entitled
pursuant to the transaction; and (c) in the event of any other relevant change
in the capitalization of the Company, the Committee shall provide for an
equitable adjustment in the number of shares of Common Stock then subject to the
Plan and to each share of Common Stock then subject to an option granted under
the Plan. In the event of any such adjustment, the option price per share of
Common Stock shall be proportionately adjusted.
11. AMENDMENT OF THE PLAN. The Board of Directors of the Company or any
authorized committee thereof may amend or discontinue the Plan at any time.
However, no such amendment or discontinuance shall (a) without the consent of
the Optionee change or impair any option previously granted, or (b) without the
approval of the holders of a majority of the shares of the Common Stock which
vote in person or by proxy at a duly held stockholders' meeting, (i) increase
the maximum number of shares which may be purchased by all employees pursuant to
5
<PAGE>
this Plan, (ii) change the minimum purchase price of any option, or (iii)
change the limitations on the option period or increase the time limitations on
the grant of options.
12. Effective Date. The Plan is effective as of January 24, 1996.
6
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of the 18th day of
March, 1996, between ESA DEVELOPMENT, INC., a Delaware corporation (hereinafter
referred to as the "Company"), and HAROLD E. WRIGHT (hereinafter referred to as
"Wright"):
W I T N E S S E T H:
-------------------
WHEREAS, the Company has hired Wright as President of the Company; and
WHEREAS, the Company and Wright desire to set forth in this Agreement the
terms, conditions and obligations of the parties with respect to such employment
and this Agreement is intended by the parties to supersede all previous
agreements and understandings, whether written or oral, concerning such
employment.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs Wright effective as of the date
hereof, and Wright hereby accepts employment as President of the Company upon
the terms and conditions hereinafter set forth. Wright shall perform such duties
and responsibilities for the Company which are commensurate with his capacity as
may be assigned him by the Company's Board of Directors. In connection with the
duties to be performed pursuant to this Agreement, Wright shall report directly
to the Chairman of the Board of Directors of the Company. Incident to the
performance of such duties, Wright shall be provided by the Company with office
space, facilities and secretarial assistance commensurate with his position.
2. TERM. The term of Wright's employment hereunder shall be for a period
beginning March 18, 1996 and ending June 30, 1999 (the "Term").
3. COMPENSATION.
(a) Base Salary. The Company agrees to pay Wright during the Term a
minimum annual base salary of $175,000. The salary shall be payable at intervals
not less often than monthly and otherwise in accordance with the Company's
policies. Such salary shall be reviewed annually by the Company's Board of
Directors (or a duly constituted and
<PAGE>
empowered committee thereof) and may be increased (but in no event decreased) by
such amount as it deems proper.
(b) Additional Compensation. Wright shall be paid as additional
compensation, a commission of $15,000 for the selection and approval of each
site upon which the Company or its subsidiaries and, after December 31, 1996,
the Company or its Affiliates (to the extent Wright is responsible for selection
and/or approval of such sites) commences the construction of an extended stay
lodging facility during the Term. Notwithstanding the foregoing, commissions
earned pursuant to this Section 3(b) shall apply only to the first 40 sites for
which construction is commenced in any calendar year ending December 31, 1996,
1997, or 1998, and only to the first 20 sites for which construction is
commenced in the period beginning January 1, 1999 and ending June 30, 1999. All
amounts due to Wright pursuant to this Section 3(b) shall be paid annually on
January 15 of the year following the calendar year in which such amounts were
earned. The Company shall be entitled to pay all or part, as determined in the
Company's sole discretion, of such additional compensation due Wright pursuant
to this Section 3(b) by delivering such number of shares of common stock, par
value $.01 per share, of Extended Stay America, Inc. (the "Common Stock") as is
equal to the amount due Wright divided by the fair market value of the Common
Stock. For purposes of this Section 3(b), "fair market value" shall mean the
average of the high and low per share sales prices of the Common Stock on the
Nasdaq National Market (or on the principal national stock exchange on which it
is listed or quotation service on which it is listed) (as reported in The Wall
Street Journal) for the trading day immediately preceding the date of delivery
of such shares. The Company hereby agrees that in the event it elects to deliver
Common Stock in payment of amounts due pursuant to this Section 3(b), all of
such delivered shares shall have been registered with the Securities and
Exchange Commission on an effective registration statement prior to the time of
delivery, shall be freely tradeable without further registration, and the
certificates representing such shares shall not contain any restrictive legend.
(c) Stock Options. Concurrently with the execution of this Agreement,
Wright shall be granted options to purchase 600,000 shares of the common stock
of Extended Stay America, Inc., in accordance with the Extended Stay America,
Inc. 1996 Amended and Restated Employee Stock Option Plan, a copy of which is
attached hereto as Exhibit A. Wright shall also be eligible to participate in
any future grants of stock options pursuant to Extended Stay America, Inc.'s
then current employee stock option plan.
(d) Other Benefits. During the term of his employment, Wright shall be
entitled to participate in all other employee benefits, perquisites, vacation
days, benefit plans or programs of the Company which were available generally to
officers of the Company who are also employees of the Company in accordance with
the terms of such plans, benefits or programs.
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<PAGE>
(e) Expenses. Wright shall be reimbursed for his reasonable travel
expenses related to and for promoting the business of the Company, and any such
expenses paid by Wright from his own funds shall be promptly reimbursed to him
by the Company in accordance with the policies and procedures of the Company in
effect from time to time.
4. EXTENT OF SERVICE. Wright shall devote his entire time, attention and
energies to the business of the Company and shall not during the term of this
Agreement be engaged (whether or not during normal business hours) in any other
business or professional activity, whether or not such activity is pursued for
gain, profit or other pecuniary advantage; but this shall not be construed as
preventing Wright from (a) investing his personal assets in businesses which do
not compete with the Company or its Affiliates in such form or manner as will
not require any services on the part of Wright in the operation or the affairs
of the companies in which such investments are made and in which his
participation is solely that of an investor; (b) purchasing securities in any
corporation whose securities are publicly traded; or (c) accepting appointments
to the boards of directors of other companies provided that the Chairman of the
Company approves of such appointments and Wright's performance of his duties on
such boards does not result in a violation of his covenants under Section 5
hereof.
5. CONFIDENTIAL INFORMATION AND COVENANT NOT TO COMPETE. All payments and
benefits to Wright under the Agreement shall be subject to Wright's compliance
with the provisions of this Section 5.
(a) Confidential Information. Wright acknowledges that in his
employment he is or will be making use of, acquiring or adding to the Company's
and the Company's Affiliate's confidential information which includes, but is
not limited to, memoranda and other materials or records of a proprietary
nature; technical information regarding the operations of the Company and its
Affiliates; and records and policy matters relating to finance, personnel,
management, and operations. Therefore, in order to protect the Company's and the
Company's Affiliate's confidential information and to protect other employees
who depend on the Company and its Affiliates for regular employment, Wright
agrees that he will not in any way utilize any of said confidential information
except in connection with his employment by the Company, and except in
connection with the business of the Company he (i) will not copy, reproduce, or
take with him the original or any copies of said confidential information, and
(ii) will not directly or indirectly divulge any of said confidential
information to anyone without the prior written consent of the Company.
(b) Litigation Support. Wright shall, upon reasonable notice, furnish
such information and proper assistance to the Company as may reasonably be
required by the Company in connection with any litigation in which the Company
or any of its subsidiaries or Affiliates is, or may become a party. Wright's
reasonable expenses (including travel and
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<PAGE>
reasonable attorneys fees) incurred in complying with this covenant shall be
promptly reimbursed.
(c) No Solicitation of Employees. Wright agrees that during the Term
of this Agreement and continuing for a period of two years after the termination
of this Agreement, neither Wright nor any person or enterprise controlled by
Wright will solicit for employment any person employed by the Company or any of
its Affiliates.
(d) Covenant Not to Compete. Wright agrees that during the Term of
this Agreement and for a period of two years after the termination of his
employment with the Company, neither Wright nor any person or enterprise
controlled by Wright will become a stockholder, director, officer, agent,
consultant or employee of a business, whether or not incorporated, or have any
financial stake of any nature in any of the foregoing or otherwise engage
directly or indirectly in any enterprise which is a Competing Business (defined
below) in the Prohibited Area (defined below); provided, however, that the
foregoing shall not prohibit the ownership of less than 5% of the outstanding
shares of stock of any corporation engaged in any business, which shares are
regularly traded on a national securities exchange or in any over-the-counter
market. The term "Competing Business" shall mean any business, person, or entity
which is engaged in the ownership, management, operation, or development of
extended-stay lodging facilities generally similar to those owned or operated by
the Company or its Affiliates during the Term. The term "Prohibited Area" shall
mean, on the date of the termination of Wright's employment hereunder, any area
within 25 miles of (i) any extended-stay lodging facilities owned or operated by
the Company or any of its Affiliates; and (ii) any real property owned, leased,
or under contract for purchase by the Company or any of its Affiliates where the
Company or any of its Affiliates intends to develop an extended-stay lodging
facility. Upon termination of this Agreement, the Company shall deliver to
Wright a description of the location of each facility and parcel of real
property referred to in the preceding sentence.
(e) Remedies for Breach of Covenants. In the event that a covenant
included in this Agreement shall be deemed by any court to be unreasonably broad
in any respect, it shall be modified in order to make it reasonable and shall be
enforced accordingly; provided, however, that in the event that any court shall
refuse to enforce any of the covenants contained in subsections 5(a) through
(d), then the unenforceable covenant shall be deemed eliminated from the
provisions of this Agreement for the purpose of those proceedings to the extent
necessary to permit the remaining covenants to be enforced so that the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
If Wright violates any of the covenants contained in this Section 5, then
the Company shall have no further obligation to make any payments to Wright
otherwise due him under this Agreement other than the portion of Wright's salary
provided for in Section 3(a) and
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<PAGE>
additional compensation provided for in Section 3(b) accrued prior to the date
Wright violates any of such covenants. In addition, Wright acknowledges that any
material breach of his covenants contained in this Section 5 will cause
irreparable harm to the Company, which will be difficult if not impossible to
ascertain, and the Company shall be entitled to equitable relief, including
injunctive relief, against any actual or threatened breach hereof, without bond
and without liability should such relief be denied, modified or vacated. Neither
the right to obtain such relief or the obtaining of such relief shall be
exclusive of or preclude the Company from any other remedy.
6. TERMINATION.
(a) Death or Disability. The Company shall have the right to terminate
this Agreement if Wright should die or become physically or mentally disabled
and unable to perform duties hereunder for a continuous period in excess of
ninety (90) days (in the reasonable opinion of the Company). If this Agreement
is terminated pursuant to this Section 6(a), the Company shall have no further
obligations to Wright under this Agreement other than the portion of Wright's
salary provided for in Section 3(a) and additional compensation provided for in
Section 3(b) accrued prior to the effective date of such termination.
(b) Termination for Cause. The Company shall have the right to
terminate this Agreement for "Cause" upon prior written notice if, in the
reasonable determination of the Company, Wright has engaged in misconduct so as
to constitute "Cause." For purposes of this Agreement, such misconduct shall be
defined as:
(i) Wright's failure or refusal, after written notice thereof,
to perform specific directives approved by a majority of
the Board of Directors which are delivered to Wright in
writing and are consistent with the scope and nature of
Wright's duties and responsibilities as President of the
Company;
(ii) Dishonesty of Wright which directly or indirectly has a
materially adverse affect on the Company;
(iii) Habitual drunkenness or use of drugs which interferes with
the performance of Wright's duties and obligations under
this Agreement;
(iv) Wright's conviction of a felony or of any crime involving
moral turpitude, fraud, defalcation, or misrepresentation;
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<PAGE>
(v) Any gross or willful misconduct of Wright resulting in
substantial loss to the Company or substantial damages to
the Company's reputation;
(vi) Any breach of Wright's covenants contained in Sections
5(a) through (d) hereof.
If this Agreement is terminated for Cause pursuant to this Section 6(b),
the Company shall have no further obligations to Wright under this Agreement
other than the portion of Wright's salary provided for in Section 3(a) and
additional compensation provided for in Section 3(b) accrued prior to the
effective date of such termination. However, Wright's covenants under Section 5
hereof shall remain in full force and effect.
(c) Termination by the Company Without Cause. If the Company
terminates the employment of Wright for any reason other than as specified in
Section 6(a) or 6(b), the Company shall (i) continue to pay Wright his base
salary in accordance with Section 3(a); and (ii) pay to Wright an amount equal
to the excess of (A) $15,000 times the number of sites upon which the Company or
its subsidiaries and, after December 31, 1996, the Company or its Affiliates (to
the extent Wright is responsible for selection and/or approval of such sites)
commenced construction of an extended stay lodging facility since the Company's
inception, provided that for purposes of such calculation, the number of sites
shall not exceed 140, over (B) the aggregate amount paid to Wright pursuant to
Section 3(b), which amount shall be paid ratably on a monthly basis from the
termination date through June 1999. The amount payable by the Company pursuant
to this Section 6(c) shall be reduced by the gross income earned by Wright for
services performed for others, but shall not include any amounts received by
Wright from Property Trust of America or HVI, Inc. by reason of that certain
First Amendment to Agreement Terminating Master Agreement and/or First Amendment
to Site Location Agreement, each dated December 29, 1994. In addition, Wright's
covenants under Section 5(d) shall terminate but the other provisions of Section
5 will remain in full force and effect.
7. ADDITIONAL AGREEMENTS BY THE COMPANY.
(a) The Company acknowledges that Wright is subject to a certain
Amended and Reaffirmed Non-Competition Agreement dated December 29, 1994,
between Wright, Property Trust of America, Security Capital Atlantic
Incorporated, and Security Capital Pacific Incorporated (the "Non-Competition
Agreement"), and agrees that (i) in the event it engages in a "Competing
Business" in the "Area" during the "Covenant Period" (all as defined in the Non-
Competition Agreement), the Company shall be deemed to have terminated this
Agreement pursuant to Section 6(c) above; and (ii) in the event Wright has
knowledge that the Company intends to engage in a "Competing Business" in the
"Area" during the "Covenant Period", Wright shall have the option to declare
such intention a
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<PAGE>
termination of this Agreement by the Company pursuant to Section 6(c) hereof,
such option to be exercised by delivery of written notice thereof to the
Company.
(b) In the event it becomes necessary for Wright, at anytime during a
period commencing with the date of this Agreement and extending to and including
the date that is one (1) year following the date limitations shall run on any
and all claims and causes of action that may be brought against Wright under the
Non-Competition Agreement, to employ an attorney with respect to any suit
threatened or brought by Property Trust of America, Security Capital Atlantic
Incorporated, and/or Security Capital Pacific Incorporated ("Complaining
Parties"), against Wright alleging or claiming that Wright's employment by the
Company has in any way caused a breach or constituted a failure to comply with
the Non-Competition Agreement, the Company agrees to reimburse Wright for all
attorneys' fees and expenses incurred or paid by Wright with respect thereto,
not to exceed the total sum of $200,000.00. Such amount to be so reimbursed to
Wright pursuant to this Agreement shall be paid to Wright within twenty (20)
days after receipt by the Company of documentation of such suit or threat of
such suit and an itemized statement of such fees and expenses, with copies of
invoices, if available, in order that Wright may pay such fees and expenses as
they become due. All amounts becoming due hereunder shall be paid to Wright at
the address shown below or at such other address as Wright shall hereafter
advise the Company in writing.
8. WITHHOLDING OF TAXES. The Company may withhold from any benefits
payable under the Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
9. SEVERABILITY. If any provision of this Agreement, as applied to any
party or to any circumstance, shall be found by a court to be void, invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement the application of any such provision in any other circumstance, or
the validity or enforceability of this Agreement.
10. ENTIRE UNDERSTANDING. This Agreement contains the entire understanding
of the parties hereto relating to the subject matter contained herein and
supersedes all prior and collateral agreements, understandings, statements and
negotiations of the parties. Each party acknowledges that no representations,
inducements, promises, or agreements, oral or written, with reference to the
subject matter hereof have been made other than as expressly set forth herein.
This Agreement cannot be changed, rescinded or terminated orally.
11. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
deposited in the U.S. mail in a registered, postage prepaid envelope addressed:
If to Wright, at his address set forth below, and if to the Company, ESA
Development, Inc., 500 East Broward
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<PAGE>
Boulevard, #950, Ft. Lauderdale, FL 33394, Attention: Robert A. Brannon, with a
copy to Michael W. Black, c/o Pedersen & Houpt, 161 North Clark Street, #3100,
Chicago, Illinois 60601.
12. ASSIGNMENT. Wright may not assign his obligations hereunder. The
rights of Wright and the rights and obligations of the Company hereunder shall
inure to the benefit of and shall be binding upon their respective heirs,
personal representatives, successors and assigns.
13. DEFINITION OF AFFILIATE. An "Affiliate" of the Company shall be any
natural person or any firm, corporation, partnership, associate, trust or other
entity which, directly or indirectly, controls, or is under common control with,
the Company.
14. MISCELLANEOUS.
(a) This Agreement and the options issued pursuant to Section 3(c)
shall supersede that certain Employment Agreement dated June 1, 1995, between
the parties hereto, and that certain Stock Option Agreement dated June 1, 1995,
between the parties hereto.
(b) This Agreement shall be subject to and governed by the laws of
the State of Delaware.
(c) Failure to insist upon strict compliance with any provisions
hereof shall not be deemed a waiver of such provisions or any other provision
hereof.
(d) The invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ESA DEVELOPMENT, INC.
By /s/ George D. Johnson, Jr.
------------------------------
Its Chairman
------------------------------
/s/ Harold E. Wright
------------------------------
Harold E. Wright
Address: 1235 East Lake Dr.
----------------------
Ft. Lauderdale, Fl
------------------------------
33316
------------------------------
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<PAGE>
EXHIBIT A
EXTENDED STAY AMERICA, INC.
AMENDED AND RESTATED
1996 EMPLOYEE STOCK OPTION PLAN
1. STATEMENT OF PURPOSE. The purpose of this Stock Option Plan (the
"Plan") is to benefit Extended Stay America, Inc. (the "Company") and its
subsidiaries by offering certain present and future key individuals a favorable
opportunity to become holders of stock in the Company over a period of years,
thereby giving them a stake in the growth and prosperity of the Company and
encouraging the continuance of their services with the Company or its
subsidiaries.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee") of the board of directors of the Company (the "Board
of Directors"), whose interpretation of the terms and provisions of the Plan and
whose determination of matters pertaining to options granted under the Plan
shall be final and conclusive. The Committee shall be composed of two or more
disinterested members of the Board of Directors of the Company.
3. ELIGIBILITY. Options shall be granted only to key employees and
consultants of the Company and its subsidiaries (including officers of the
Company and its subsidiaries but excluding members of the Committee) selected
initially and from time to time thereafter by the Committee on the basis of the
special importance of their services in the management, development and
operations of the Company or its subsidiaries (each such individual receiving
options granted under the Plan and each other person entitled to exercise an
option granted under the Plan is referred to herein as an "Optionee").
4. GRANTING OF OPTIONS. (a) The Committee may grant options to employees,
directors and consultants of the Company and its subsidiaries; provided,
however, that members of the Committee shall not be eligible to receive grants
of options under the Plan. Pursuant to the Plan, a maximum of 2,500,000 shares
of the $.01 par value common stock of the Company (the "Common Stock") may be
purchased from the Company, subject to adjustment as provided in Paragraph 10
hereof; provided, however, that the maximum number of shares subject to all
options granted to an individual under the Plan shall in no event exceed 50% of
the shares of Common Stock authorized for issuance under the Plan. Options
granted under the Plan are intended not to be treated as incentive stock options
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) No options shall be granted under the Plan subsequent to the tenth
anniversary of the adoption of the Plan. In the event that an option expires or
is terminated or canceled unexercised as to any shares, such released shares may
again be optioned (including a grant in substitution for a canceled option).
Shares subject to options may be made available from unissued or reacquired
shares of Common Stock.
(c) Nothing contained in the Plan or in any option granted pursuant
thereto shall confer upon any Optionee any right to be continued in the
employment of, or a consulting
<PAGE>
arrangement with, the Company or any subsidiary, or interfere in any way with
the right of the Company or its subsidiaries to terminate his or her employment
or consulting arrangement at any time.
5. OPTION PRICE. The option price of any option granted under the Plan
shall be determined by the Committee and shall not be less than the fair market
value of the shares of Common Stock subject to the option on the date of the
grant of such option. Unless the Committee otherwise determines, for purposes
of this Paragraph 5, "fair market value" shall be the average of the highest and
lowest sales prices of the Common Stock reported on the Nasdaq National Market
(or on the principal national stock exchange on which it is listed or quotation
service on which it is listed) (as reported in The Wall Street Journal) on the
date the option is granted (or, if the date of grant is not a trading date, on
the first trading date immediately preceding the date of grant). In the event
that the Common Stock is not listed or quoted on the Nasdaq National Market or
any other national stock exchange, the fair market value of the shares of Common
Stock for all purposes of this Plan shall be reasonably determined by the
Committee.
6. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS. (a) Subject to the
provisions of Paragraph 8 hereof, each option shall be for such term of not more
than ten years as shall be determined by the Committee at the date of the grant.
Each option shall become exercisable with respect to one-fourth of the total
number of shares subject to the option 12 months after the date of its grant and
with respect to an additional one-fourth at the end of each 12-month period
thereafter during the succeeding three years.
(b) Notwithstanding any other provisions of the Plan to the contrary,
the Committee may in its discretion (i) specifically provide as of the date of
the grant for another time or times of exercise; (ii) accelerate the
exercisability of any option, subject to such terms and conditions as the
Committee deems necessary and appropriate to effectuate the purposes of the
Plan, which may include, without limitation, a requirement that the Optionee
grant to the Committee an option to repurchase all or a portion of the number of
shares acquired upon exercise of the accelerated option for their fair market
value, as determined by the Committee, as of the date of acceleration; (iii) at
any time prior to the expiration or termination of any options previously
granted, extend the term of any option (including such options held by officers)
for such additional period or periods as the Committee, in its discretion, may
determine. In no event, however, shall the aggregate option period with respect
to any option, including the original term of the option and any extensions
thereof, exceed ten years. Subject to the foregoing, all or any part of the
options as to which the right to exercise has accrued may be exercised at the
time of such accrual or at any time or times thereafter during the option term.
(c) In the event of a change in control of the Company, all
outstanding options shall become immediately exercisable. For the purposes of
the Plan, the term "change in control" shall mean (1) that any person is or
becomes the beneficial owner, directly or indirectly, of at least 50% of the
combined voting power of the Company's outstanding securities, except by reason
of a repurchase by the Company of its own securities, or (2) that a change in
the composition of the Board of Directors of the Company occurs as a result of
which fewer than one-half of the incumbent directors are directors who either
had been directors of the Company
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24 months prior to such change or were elected or nominated for election to the
Board of Directors with the approval of at least a majority of the directors who
had been directors of the Company 24 months prior to such change and who were
still in office at the time of the election or nomination.
7. EXERCISE OF OPTION. (a) An option may be exercised by giving written
notice to the Committee, specifying the number of shares to be purchased. The
option price for the number of shares of Common Stock for which the option is
exercised shall become immediately due and payable; provided, however, that in
lieu of cash an Optionee may, with the approval of the Committee, exercise his
or her option by (i) delivering a promissory note in accordance with the terms
of the Plan and in a form specified by the Company; (ii) tendering to the
Company shares of Common Stock owned by him or her and with the certificates
therefor registered in his or her name, having a fair market value equal to the
cash exercise price of the shares being purchased; or (iii) delivery of an
irrevocable written notice instructing the Company to deliver the shares of
Common Stock being purchased to a broker selected by the Company, subject to the
broker's written guarantee to deliver the cash to the Company, in each case
equal to the full consideration of the exercise price for the shares of Common
Stock being purchased. For this purpose, the per share value of Common Stock
shall be the fair market value on the date of exercise (or, if the date of
exercise is not a trading date, on the first trading date immediately preceding
the date of exercise), which shall, unless the Committee otherwise determines,
be the average of the highest and lowest sales prices of the Common Stock
reported on the Nasdaq National Market (or on the principal national stock
exchange on which it is listed or quotation service on which it is listed) (as
reported in The Wall Street Journal) on such date.
(b) In connection with the exercise of options granted under the Plan,
the Company may make loans to such Optionees as the Committee, in its
discretion, may determine. Such loans shall be subject to the following terms
and conditions and such other terms and conditions as the Committee shall
determine to be not inconsistent with the Plan. Such loans shall bear interest
at such rates as the Committee shall determine from time to time, which rates
may be below then current market rates or may be made without interest. In no
event may any such loan exceed the fair market value, at the date of exercise,
of the shares covered by the option, or portion thereof, exercised by the
Optionee. No loan shall have an initial term exceeding two years, but any such
loan may be renewable at the discretion of the Committee. When a loan shall have
been made, shares of Common Stock having a fair market value at least equal to
150 percent of the principal amount of the loan shall be pledged by the Optionee
to the Company as security for payment of the unpaid balance of the loan.
(c) At the time of the exercise of any option, the Company may
require, as a condition of the exercise of such option, the Optionee to pay the
Company an amount equal to the amount of the tax the Company may be required to
withhold to obtain a deduction for federal and state income tax purposes as a
result of the exercise of such option by the Optionee or to comply with
applicable law. An Optionee may, with the approval of the Committee, make an
election to satisfy the tax withholding obligation by either (1) tendering to
the Company shares of Common Stock owned by him or her and with the certificates
therefor registered in his or her name, having a fair market value equal to the
tax withholding obligation, (2) deduct from any
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cash payment pursuant to any broker-assisted option exercise (net to Optionee in
cash or shares) an amount sufficient to satisfy any withholding tax
requirements, or (3) instructing the Company to withhold from the shares of
Common Stock otherwise issuable upon the exercise of the option that number of
shares having a fair market value equal to the tax withholding obligation. The
value of the shares to be delivered or withheld shall be based on the fair
market value of the shares of Common Stock on the date of exercise, which shall,
unless the Committee otherwise determines, be the average of the highest and
lowest sales prices of the Common Stock reported on the Nasdaq National Market
(or on the principal national stock exchange on which it is listed or quotation
service on which it is listed) (as reported in The Wall Street Journal) on the
date of exercise.
(d) At the time of any exercise of any option, the Company may, if the
Company shall determine it necessary or desirable for any reason, require the
Optionee (or his or her heirs, legatees, or legal representative, as the case
may be) as a condition upon the exercise thereof, to deliver to the Company a
written representation of present intention to purchase the shares for
investment and not for distribution. In the event such representation is
required to be delivered, an appropriate legend may be placed upon each
certificate delivered to the Optionee upon his or her exercise of part or all of
the option and a stop order may be placed with the transfer agent for the Common
Stock. Each option shall also be subject to the requirement that, if at any time
the Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to the option upon any securities exchange
or under any state, federal or foreign law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issue or purchase of shares thereunder, the option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.
8. Termination of Employment or Consulting Arrangement - Exercise
Thereafter. (a) In the event the employment or consulting arrangement of an
Optionee with the Company or any of its subsidiaries is terminated for any
reason other than the Optionee's death, permanent disability, retirement after
age 65 or following a change in control (as defined in Paragraph 6(c) hereof),
such Optionee's option shall expire and all rights to purchase shares pursuant
thereto shall terminate immediately. Temporary absence from employment because
of illness, vacation, approved leaves of absence, and transfers of employment
among the Company and its subsidiaries, shall not be considered to terminate
employment or to interrupt continuous employment. Temporary cessation of the
provision of consulting services because of illness, vacation or any other
reason approved in advance by the Company shall not be considered a termination
of the consulting arrangement or an interruption of the continuity thereof.
Conversion of an Optionee's employment relationship to a consulting arrangement
shall not result in termination of previously granted options.
(b) In the event of termination of employment or consulting
arrangement following a change in control (as defined in Paragraph 6(c) hereof),
the option may be exercised in full (without regard to any times of exercise
established under Paragraph 6 hereof; provided, however, that no options shall
be exercisable during the first six months after the date of grant)
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<PAGE>
by the Optionee or, if the Optionee is not living, by the Optionee's heirs,
legatees, or legal representatives, as the case may be, during its specified
term. In the event of termination of employment or consulting arrangement
because of death, permanent disability (as that term is defined in Section
22(e)(3) of the Code, as now in effect or as shall be subsequently amended) or
retirement after age 65, the option may be exercised by the Optionee, or, if the
Optionee dies after such termination, by the Optionee's heirs, legatees, or
legal representatives, as the case may be, at any time during its specified term
prior to three years after the date of such termination, but only to the extent
the option was exercisable at the date of such termination.
(c) Notwithstanding any other provision of the Plan to the contrary,
the Committee may in its discretion provide for such other terms of expiration
and termination of an option in the event of termination of the employment or
consulting arrangement of the optionee as the Committee shall determine.
9. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and each option shall be
exercisable during an Optionee's lifetime only by the Optionee or by the
Optionee's legal representative. This restriction on transferability is
effective only so long as it is required pursuant to Section 16 under the
Securities Exchange Act of 1934, as amended. At the time such restriction on
transferability is no longer so required, the Committee, in its discretion, may
permit the transfer of an option on such terms and subject to such conditions as
the Committee may deem necessary or appropriate or as otherwise may be required
by applicable law or regulation.
10. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
number of outstanding shares of Common Stock is changed by any stock dividend,
stock split or combination of shares, the number of shares subject to the Plan
and to options granted thereunder shall be proportionately adjusted; (b) in the
event of any merger, consolidation or reorganization of the Company with any
other corporation or legal entity there shall be substituted, on an equitable
basis as determined by the Committee, for each share of Common Stock then
subject to the Plan and for each share of Common Stock then subject to an option
granted under the Plan, the number and kind of shares of stock or other
securities to which the holders of shares of Common Stock will be entitled
pursuant to the transaction; and (c) in the event of any other relevant change
in the capitalization of the Company, the Committee shall provide for an
equitable adjustment in the number of shares of Common Stock then subject to the
Plan and to each share of Common Stock then subject to an option granted under
the Plan. In the event of any such adjustment, the option price per share of
Common Stock shall be proportionately adjusted.
11. AMENDMENT OF THE PLAN. The Board of Directors of the Company or any
authorized committee thereof may amend or discontinue the Plan at any time.
However, no such amendment or discontinuance shall (a) without the consent of
the Optionee change or impair any option previously granted, or (b) without the
approval of the holders of a majority of the shares of the Common Stock which
vote in person or by proxy at a duly held stockholders' meeting, (i) increase
the maximum number of shares which may be purchased by all employees pursuant to
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this Plan, (ii) change the minimum purchase price of any option, or (iii) change
the limitations on the option period or increase the time limitations on the
grant of options.
12. EFFECTIVE DATE. The Plan is effective as of January 24, 1996.
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EXTENDED STAY AMERICA, INC.
NON-QUALIFIED STOCK OPTION CERTIFICATE
This is to certify that on this 18th day of March, 1996, EXTENDED STAY
AMERICA, INC., a Delaware corporation (the "Company"), pursuant to the Extended
Stay America, Inc. 1996 Amended and Restated Employee Stock Option Plan (the
"Plan"), hereby grants to Harold E. Wright ("Optionee"), an employee of the
Company or one of its affiliated entities, an option to purchase 600,000 shares
(the "Option Shares") of common stock, par value $.01 per share, of the Company,
subject to all terms and conditions of the Plan (a copy of which is attached
hereto and incorporated herein by reference) and the following, which shall
supersede any conflicting provisions of the Plan:
1. The option price, payable upon exercise of the option, shall be $21.00
per share, subject to adjustment as provided in Paragraph 10 of the
Plan.
2. The option shall be exercisable by Optionee with respect to twenty-
five percent (25%) of the Option Shares after September 19, 1996; an
additional twenty-five percent (25%) of the Option Shares shall be
exercisable by Optionee after each of June 1, 1997, June 1, 1998, and
June 1, 1999.
3. The term of the option is ten years, subject to earlier termination as
provided herein.
4. If Optionee's employment with the Company or one of its affiliated
entities is terminated without Cause (as defined in the Employment
Agreement dated March 18, 1996, by and between Optionee and ESA
Development, Inc. (the "Employment Agreement")), all of the options
granted herein shall immediately vest and be exercisable at any time,
or from time to time, but in no event later than the first to occur of
(i) two (2) years from the date of termination, or (ii) the
termination date specified in paragraph 3 above, at which time any
unexercised options shall expire.
5. If Optionee's employment with the Company or one of its affiliated
entities is terminated with Cause (as defined in the Employment
Agreement), Optionee may exercise any options granted herein which are
exercisable on the date of such termination at any time, or from time
to time, within thirty (30) days from the date of such termination, at
which time any unexercised options shall expire. Any of the options
granted herein that are not exercisable on the date of Optionee's
employment shall expire on the date of such termination.
<PAGE>
6. If Optionee terminates his employment with the Company or one of its
affiliates pursuant to the terms of the Employment Agreement at any
time after June 1, 1998, all of the options granted herein shall vest
and be exercisable as if such employment had not been terminated.
7. If Optionee terminates his employment with the Company or one of its
affiliates pursuant to the terms of the Employment Agreement prior to
June 1, 1998, Optionee may exercise any options granted herein which
are exercisable on the date of such termination at any time, or from
time to time, within two (2) years from the date of such termination,
at which time any unexercisable options shall expire. Any of the
options granted herein that are not exercisable on the date of the
termination of Optionee's employment shall expire on the date of such
termination.
IN WITNESS WHEREOF, this instrument has been executed by a duly authorized
officer of the Company as of the date written above.
EXTENDED STAY AMERICA, INC.
By: /s/ George D. Johnson, Jr.
--------------------------
OPTIONEE:
By: /s/ Harold E. Wright
--------------------------
<PAGE>
HOMESTEAD MOTORSPORTS COMPLEX
EXECUTIVE SUITE LICENSE AGREEMENT
This license Agreement made and entered into this 14th day of February
1996, by and between and among THE HOMESTEAD MOTORSPORTS JOINT VENTURE, a
Florida joint venture ("Owner"), MIAMI MOTORSPORTS JOINT VENTURE, a Florida
joint venture ("MMJV") and Extended Stay America, Inc. ("Licensee").
WITNESSETH:
In consideration of mutual covenants set forth in this Agreement, Owner,
MMJV and Licensee do hereby agree as follows:
1. Grant and License - Executive Suite.
Subject to the terms and conditions set forth in this Agreement, Owner
hereby grants Licensee the privilege and right to the use and possession as
described herein, of the executive suite (the "Suite") located in the Homestead
Motorsports Complex, Dade County, Florida (the "Complex") and identified by
number on Exhibit One. A diagram of the Complex showing the specific location of
the Suite is attached as Exhibit Two.
2. Term of Agreement.
The term of this Agreement shall commence upon the execution of this
Agreement by Owner, MMJV and Licensee, and shall expire three (3) years from the
date of execution of this Agreement.
3. License Fee and Licensee's Privilege and Right to Suite.
The use and possession of the Suite shall be contingent upon the timely
payment to Owner of the fee (the "License Fee") in the amounts and at the times
set forth in Exhibit One plus any applicable sales, use, property or other
governmental taxes due.
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4. Furnishings, Decor and Alterations.
At the commencement of Licensee's use of the Suite hereunder, the Suite
shall be furnished and equipped with the fixtures, furnishing and equipment
described in Exhibit One. Licensee shall not make any additions or alterations
in the interior or exterior of the Suite or to the Fixtures, furnishings and
equipment therein without the prior written consent of Owner, which may be
withheld in its sole discretion. However, Licensee may supply articles of
appointment, such as pictures, plants or insignia reasonable in size and in good
taste, as determined in the sole discretion of the Owner. Any such additions, or
alterations permitted by Owner shall be made at Licensee's expense and shall be
made free of any liens or encumbrances, in a good workmanlike manner, and in
compliance with all applicable permits, authorization, building and zoning laws,
ordinances, orders, rules, regulations and requirements of all governmental
authorities having applicable jurisdiction. Any fixtures or materials
incorporated in or attached to the Suite by Licensee shall become the property
of Owner unless Licensee shall have obtained the advanced written approval of
Owner to remove same prior to the expiration of the term of this Agreement, and
if so removed, Licensee shall, at its own expense, repair and restore the Suite
to its condition as of the commencement of this Agreement, and to the
satisfaction of the Owner.
5. Possession and Use
(a) During MMJV Promoted Events:
Licensee shall be entitled to the exclusive use and possession of the
Suite during the term of this Agreement, subject to the provisions of this
Agreement. Licensee shall be entitled to use the Suite only at times for which
appropriate tickets for admission to the Suite have been issued by MMJV for
motorsports events promoted by MMJV. Licensee acknowledges and understands that
the number of motorsports events promoted by MMJV may be subject to change from
time to time. Moreover, the dates of these events may also be subject to change
for
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reasons beyond the control of MMJV. At present, it is contemplated that MMJV
will promote the following motorsports events: NASCAR Busch Grand National; a
CART Sanctioned Event; NASCAR SuperTrucks; AMA Motorcycle Race; and the SCCA
Trans Am. MMJV shall issue Licensee tickets for these events at no additional
charge. The number of tickets to be issued to Licensee for each such event is
set forth in Exhibit One. MMJV events will also include the Miami Grand Prix
Indy Car Race.
(b) Non-MMJV Promoted Events
Licensee acknowledges and understands that MMJV does not at this time
promote motor races for any of the following motorsports events: Formula One;
Grand Prix Motorcycles; World Super Bike; and the Winston Cup series ("Non-MMJV
Promoted Events"). Should MMJV subsequently promote one or more of these Non-
MMJV Promoted Events, or should another promoter eventually promote any Non-MMJV
Promoted Events, then subject to availability of tickets, Licensee shall have
the first right of refusal to purchase tickets to these events. See paragraph
6(b) below. Moreover, from time to time, non-motor racing events are expected to
be held at the Complex which may or may not be promoted by MMJV ("Non-racing
Events"). Neither Owner or MMJV guarantees Licensee use of the Suite or tickets
for any of these Non-MMJV Promoted Events or Non-racing events.
(c) Additional Terms and Conditions
Licensee and Licensee's guests shall be bound by and shall observe the
terms and conditions upon which tickets for admission to the Complex have been
issued by the sponsor or promoter of each event (whether or not promoted by
MMJV), for which tickets have been issued, including, without limitation, the
policy adopted by the issuer of such tickets with respect to the pricing of such
tickets and the cancellation or postponement of any event.
(d) Limited Right of Use and Possession
This Agreement provides Licensee only with the right and privilege to
possess and use
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the Suite in the manner set forth herein, and except as pertains to the special
right and privilege to so possess and use the Suite, this Agreement does not
confer upon Licensee and Licensee's guests any greater or lesser rights and
privileges with respect to admission to the Complex than afforded to other
holders of tickets for admission thereto.
(e) Suite Access
Access to all Suites shall be from the main entrance to the Race Control
Tower Building. Access to the suite level shall be shared only by persons
holding appropriate tickets for admission to the suite level or by such other
persons authorized by Owner or MMJV. Each suite shall be provided with a lock
system.
6. Admission Tickets
(a) Tickets for MMJV Motorsports Events
During the term of this Agreement, MMJV shall issue Licensee with the
number of admission tickets to the Complex for access to the Suite as set forth
in Exhibit One for each MMJV promoted motorsports event conducted at the
Complex. Licensee understands that the number of tickets issued to the Licensee
must comply with all applicable fire code regulations governing occupancy as
applied to a facility the size of the Suite, and Licensee agrees to observe such
regulations at all times.
(b) Tickets for Non-MMJV Events
Admission tickets for any Non-MMJV Promoted Events and Non-Racing Events
held at the Complex must be purchased by the Licensee. These admission tickets
will be priced by the Sponsor or promoter of each such event, and the prices for
the admission tickets are subject to change. However, the admission price
charged to Licensee shall not exceed the admission price charged for an
admission ticket to the highest priced category of seats in the Complex for the
particular event.
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(c) Licensee's First Right of Refusal
Subject to the foregoing, the Licensee shall have the first right of
refusal to use the Suite for any event promoted or sponsored at the Complex.
Should Licensee decline to use the Suite for any event, then Owner shall be
entitled to use the Suite for its own purposes, including, but not limited to,
the sale of seating in the Suite. Licensee shall be advised of all scheduled
events to be held at the Complex by registered mail no later than forty-five
(45)days prior thereto. Licensee shall have fifteen (15) days from receipt of
the notice to notify Owner of Licensee's intent to use the Suite for any
scheduled event. Should the Owner not receive any response within the fifteen
(15) day deadline, the non-response shall be construed by the Owner to mean that
the Licensee is declining the right to use the Suite, and the Owner shall have
the right to proceed to use the Suite for its own purposes.
7. Furnishings and Services
------------------------
During the term of this Agreement, Owner shall provide the following
furniture, fixtures and services:
(a) The furnishings, fixtures and equipment described in Exhibit One;
(b) One color television, with closed circuit broadcasts, where available,
of any motorsports event held at the Complex;
(c) Air conditioning, ventilation, running cold water, and electricity
during all events for which the Complex is open for use by the general public.
(d) Ordinary repair and maintenance of the interior and exterior of the
Suite made necessary by normal wear and tear;
(e) Dusting, sweeping and cleaning of the Suite and rubbish removal and
disposal following each event;
(f) Telephone equipment and local area telephone service at Owner's
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expenses;
(g) Food and beverage services solely through the official caterer licensed
by Owner at Licensee's order and expense; and
(h) Such other special services as Owner, in its sole discretion, may offer
at prevailing rates and terms established from time to time by Owner.
8. Special Parking
---------------
Licensee shall have the right specially to occupy, at no additional cost,
twelve (12) parking spaces for automobiles located in the designated Complex
parking areas in close proximity to the Suite at the times during which Licensee
is entitled to use the Suite. Licensee shall have the option to purchase
additional parking passes in the Complex's General Parking areas depending upon
availability on a first-come, first serve basis at prevailing rates.
9. Licensee's Right of First Refusal to Renew License
--------------------------------------------------
If not in default in the performance of Licensee's obligations under this
Agreement, Licensee shall have the right of first refusal to renew this license
after the expiration of the term of this Agreement at such license fee and on
such other terms and conditions as Owner may, in its sole discretion, determine.
On or before six (6) months prior to the expiration of the term of this
Agreement, Owner shall submit to Licensee an agreement which sets forth the
license fee and other terms and conditions established by Owner for the renewal
license. Licensee may exercise, if at all, its right of first refusal by
executing and returning the agreement to Owner, together with any deposit or
other payment which may be required thereunder, within thirty (30) days after
the Agreement is sent to Licensee by Owner.
10. Covenants of Licensee
---------------------
a) Licensee shall keep and maintain the Suite in good repair, order and
condition, except for normal wear and tear, and shall reimburse Owner for costs
incurred by
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Owner to repair any damage caused by Licensee or Licensee's guests to the Suite
(or to a substitute suite used by Licensee or Licensee's guests) or the property
of Owner therein.
(b) Licensee and Licensee's guests shall abide by and observe all rules
and regulations established from time to time by Owner pertaining to the use and
occupancy of the Suite.
(c) Licensee and Licensee's guests shall at all times maintain proper
decorum while using the Suite and shall comply with all present and future laws,
ordinances, orders, rules and regulations of all governmental authorities, and
will not suffer or permit to remain any use or manner of use of the Suite in
violation thereof.
(d) Licensee shall not permit the preparation of food in the Suite nor
shall food or beverages (whether alcoholic or non-alcoholic) be brought into the
Suite, except through the official caterer designated by Owner.
11. Default
-------
(a) Termination of Licensee's Rights
In the event Licensee fails to pay when due any amounts (including without
limitation the License Fee) to be paid by Licensee pursuant to this Agreement or
otherwise defaults in the performance or observation of its duties and
obligations under this Agreement (whether owned to Owner or MMJV), Owner may, at
its option, terminate the rights of Licensee hereunder by giving Licensee twenty
(20) days prior written notice. In the event that Licensee shall not have cured
the default or breach specified in said notice within said twenty (20) day
period, the Owner may terminate the right of Licensee to use and possession of
the Suite and all other rights or privileges of Licensee under this Agreement
and declare the entire unpaid balance of the License Fee immediately due and
payable. Whereupon, Owner and MMJV shall have no further obligation of any kind
to Licensee and may enter the Suite and remove all items of property of
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Licensee for storage at Licensee's expense.
(b) Upon Termination Owner May Relicense
In the event of the termination of this Agreement due to licensee's default
prior to the end of the term, Owner shall use reasonable efforts to relicense
the right to the use and possession of the Suite to another party. Nevertheless,
if there are any other suites in the Complex available to be licensed, Owner may
give priority to licensing other suites. Licensee shall remain obligated to make
all payments due or becoming due under this Agreement, but if Owner licenses the
right to the use and possession of the Suite to another party, then all amounts
received from such other party applicable to any remaining period of this
Agreement shall be applied first to the expense of relicensing and then to the
reduction of any obligations of Licensee to Owner under this Agreement. If the
consideration collected by Owner upon any such relicensing is not sufficient to
pay the full amount of all such obligations of Licensee, Licensee shall pay any
such deficiency upon demand.
(c) Owner Shall Have Other Available Remedies
The foregoing remedies of Owner shall not be to the exclusion of any other
right or remedy set forth herein or otherwise available to Owner in law or in
equity. Should any proceeding be commenced by Owner or MMJV to enforce its
rights under this Agreement. Licensee agrees to submit to the subject matter and
personal jurisdiction and venue of the Courts of Dade County, Florida and to be
responsible for all attorney's fees and costs incurred by Owner or MMJV in the
enforcement of this Agreement (including any appellate proceedings), whether or
not litigation is actually commenced. Licensee hereby waives trial by jury.
(d) Owner and MMJV Do Not Waive or Release Any Rights
No waiver by Owner or MMJV of any default or breach by Licensee of its
obligations hereunder shall be construed to be a waiver or release of any other
or subsequent default or
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breach by Licensee hereunder. Moreover, no failure or delay by Owner or MMJV in
the exercise of any remedy provided for herein shall be construed to constitute
a forfeiture or waiver thereof or of any other right or remedy available to
Owner.
12. Strikes, Damage, Destruction, Etc.
----------------------------------
In the event of any strike or other labor disturbance which results in the
cancellation of any scheduled event, then, the Owner shall return to Licensee
the aggregate ticket price or value for such cancelled event purchased by
Licensee for the Suite. In the event of any damage to or destruction of the
Suite or the Complex which renders the Suite or the Complex unusable, then,
Owner shall attempt to relocate Licensee to another executive suite at the
Complex. However, if Owner is unable to relocate Licensee to another executive
suite at the Complex, then, the License Fee payable hereunder shall be abated
during the period of time that the Suite is unusable. Any such abatement of the
License Fee shall be computed annually by applying a pro rata formula by
dividing the number of events for which the Suite was unusable, by the total
number of events in the Complex during the applicable year including the number
of such scheduled events which were canceled as a result of any such strike,
labor disturbance, damage or destruction. Any such abatement shall be offset
against the next succeeding installment of the License Fee payable by Licensee.
Should any damage or destruction be caused to the Suite or the Complex, and
Owner elects not to repair or restore same, this Agreement shall terminate as of
the date of such damage or destruction, and the entire amount of the abatement
shall be promptly paid to License.
13. Access by Owner
---------------
Owner, its officers, agents, employees, and representatives shall be
entitled to have access to the Suite on such occasions and to such extent as
Owner, shall in its sole discretion, deem necessary or appropriate for the
proper performance of the duties and obligations required
9
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or contemplated to be performed by Owner or to be observed by Licensee under
this Agreement for the compliance with the rules and regulations governing use
of the Complex. For such purposes, Owner shall retain duplicate keys to the
Suite, and Licensee shall not change the locks or place any additional locks on,
or otherwise restrict or impede Owner's access to the Suite.
14. Owner's and MMJV's Disclaimer of Liability
------------------------------------------
(a) Owner's and MMJV's Limited Liability
Owner and MMJV shall not be liable or responsible for any loss, damage, or
injury to any person or to any property of Licensee or Licensee's guests in or
upon the Suite or other areas of the Complex, resulting from any cause
whatsoever, including but not limited to theft and vandalism, unless due to the
willful misconduct of Owner or MMJV.
(b) Licensee Indemnifies Owner and MMJV
In addition, Licensee agrees to indemnify and hold Owner, MMJV, and the
City of Homestead and their agents, servants, employees and representatives
harmless from and against any liability losses, claims, demands, costs and
expenses including attorney's fees and litigation expenses arising out of any
personal injury or property damage occurring in or upon the Suite or other areas
of the Complex due to contravention of any provision of the Agreement or of any
applicable laws, rules, regulations or order of any governmental agency having
appropriate jurisdiction over any actions or negligence of Licensee.
15. Security Deposit
----------------
As security for the prompt and full payment of the License Fee and the full
and faithful performance by Licensee of each and every other obligation of
Licensee under this Agreement, Licensee has deposited with Owner the sum set
forth in Exhibit One as the "Security Deposit", the receipt of which is hereby
acknowledged by Owner. The Security Deposit may be commingled by Owner with its
independent funds, and used as Owner deems appropriate. No
10
<PAGE>
interest shall be paid to Licensee on the Security Deposit. If, at any time
during the term of this Agreement, any portion of the License Fee or any other
amount payable by Licensee to Owner pursuant to this Agreement is not promptly
paid when due, the Owner may, without waiving any other remedy which it may have
under this Agreement, appropriate and apply all or any portion of the Security
Deposit to the payment of such amount. Licensee shall, in such event and upon
written demand of Owner forthwith, remit to Owner an amount sufficient to
restore the Security Deposit to the original sum deposited, and Licensee's
failure to do so within five (5) business days after receipt of such demand
shall constitute a breach of this Agreement. If Licensee's right to the use and
possession of the Suite is terminated pursuant to Paragraph 11 above, the Owner
may, at its option, appropriate and apply the Security Deposit, or so much
thereof as may be necessary, to compensate Owner for any loss or damage
sustained or suffered by Owner due to Licensee's breach. Otherwise, the Security
Deposit shall be returned to Licensee at the expiration of the term of this
Agreement, or any renewal term, less any costs and expenses incurred by Owner in
restoring the Suite to the condition required hereunder.
16. Miscellaneous
-------------
(a) Upon the expiration of the term of this Agreement (or, if
applicable, upon the expiration of any renewal term pursuant to Licensee's right
of first refusal under Paragraph nine (9) hereof) or upon the earlier
termination of this Agreement, Licensee shall surrender possession of the Suite
to Owner (with permanent improvements) in the condition in which it was
originally delivered to Licensee, except for normal wear and tear and damage
caused by casualty or force beyond the control of Licensee or Licensee's guests.
(b) Neither Licensee or its heirs, executors, administrators, personal
representatives and successors shall sell, assign, sublease, pledge or encumber
this Agreement, or any of Licensee's rights and obligations hereunder without
the prior written consent of Owner,
11
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which consent shall not be unreasonably withheld. Any attempted sale,
assignment, sublease, pledge, transfer or encumbrance in contravention of the
foregoing shall be null and void and of no effect. Owner shall have the right to
assign this Agreement upon notice to Licensee.
(c) It is understood that Owner may mortgage, pledge, assign or
otherwise encumber the Suite, this Agreement as security for financing
improvements to be made to the Suite of other purposes of the Owner and that, in
such event, this Agreement and the rights and interests of Licensee hereunder
shall be subordinate thereto; provided that any such mortgagee, pledgee,
assignee or the holder of any such lien shall agree in writing to recognize this
Agreement, and the rights and interests of any such mortgagee, pledgee, assignee
or the holder of any such lien shall agree in writing to recognize this
Agreement and the rights and interests of Licensee hereunder in the event of
foreclosure or enforcement of said lain even if Licensee is not then in default
in the performance of Licensee's obligations under this Agreement.
(d) All notices, demands and other communications between the parties
required or appropriate hereunder shall be in writing and deemed given if
mailed, postage prepaid, to the address set forth above for the Owner and to the
address set forth on Exhibit One for the Licensee, or to such other address as
may be designated by either party from time to time in writing.
(e) This Agreement shall be construed and enforced in accordance with
the laws of the State of Florida.
(f) This Agreement, together with the Exhibits annexed hereto, contain
the entire agreement of the parties with respect to the matters provided for
herein, and shall supersede any written or oral agreement previously made or
entered into by the parties hereto. The following Exhibits are annexed hereto
and made part thereof:
(i) Exhibit One - Name and address of Licensee, Designation of the License
Fee,
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Payment Schedule, Seating Capacity, Security Deposit, Fixtures, Furnishings, and
Equipment of the Suite.
(ii) Exhibit Two - Diagram of the Complex Showing the Location of the
Suite.
(g) This agreement and all the terms and provisions hereof shall inure
to the benefit of and be binding on the parties hereto, their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns. No amendment or modification to this Agreement shall be effective
unless the same is in writing and signed by Owner and MMJV.
(h) Licensee is duly authorized to execute this Agreement and the
person executing this Agreement on behalf of Licensee is duly authorized to
execute this Agreement on Licensee's behalf.
13
<PAGE>
IN THE WITNESS WHEREOF, this agreement shall become effective and binding
upon the parties when executed by Owner, MMJV and Licensee, as indicted below.
WITNESS AS TO OWNER HOMESTEAD MOTORSPORTS
AND MMJV: JOINT VENTURE, AND MIAMI
MOTORSPORTS JOINT VENTURE,
both by Miami Motorsports, Inc., their
Administrative Venturer
By: /s/ Jorge Dominicis
- - --------------------------------- -------------------------------------
Name: Jorge Dominicis
- - --------------------------------- -----------------------------------
Date: 2/14/96
-----------------------------------
Extended Stay America, Inc.
LICENSEE: LICENSEE:
By: /s/ Robert A. Brannon
- - --------------------------------- -------------------------------------
Senior Vice-Prsident
Name: Robert A. Brannon
- - --------------------------------- -----------------------------------
Date: 2/22/96
-----------------------------------
By:
- - --------------------------------- -------------------------------------
Name:
- - --------------------------------- -----------------------------------
Date:
-----------------------------------
* Each person or persons listed on Exhibit One as Licensee must sign the
Agreement. If the Licensee is a corporation or a partnership, the title of the
authorized signatory must be included.
14
<PAGE>
EXHIBIT ONE
NAME AND ADDRESS OF LICENSEE,
EXECUTIVE SUITE DESIGNATION,
DESIGNATION OF THE LICENSE FEE,
PAYMENT SCHEDULE, SEATING
CAPACITY, SECURITY DEPOSIT, FIXTURES,
FURNISHINGS AND EQUIPMENT OF THE SUITE
1. Name, Address and Telephone Number of Licensee:
Extended Stay America, Inc.
2. Executive Suite Designation: 601
3. The total licensee fee for the use and possession of the Suite by Licensee
during the term of the License Agreement shall be: $159,750 including
applicable sales tax and shall be payable as follows:
(a) $ 26,625 upon execution of this Agreement; and
--------------
(b) $ 26,625 on each six month anniversary thereafter during the
--------------
term of the License Agreement until the Licensee fee is fully paid.
4. On all events taking place after March 1-3, 1996 Licensee will have a
commitment to spend a minimum of $500 on catering for Friday and Saturday of
the event. For the March 1-3, 1996 event licensee will have credits toward
catering costs of $500 on Friday, $1,000 on Saturday and $1,000 on Sunday.
5. The Suite shall have a seating capacity for 30 persons in
-----------
contoured seating facing the race track in the outside balcony of the Suite.
6. Licensee shall be entitled to be issued a total of 30 tickets to
-----------
each MMJV promoted motorsports event held at the Complex;
15
<PAGE>
7. The Suite will be furnished and include the following fixtures, furnishings
and equipment:
(a) contoured seating for the majority of tickets issued to the Licensee
for the Suite, in the balcony of the Suite facing the race track;
(b) sofas for overflow seating in the inside air conditioned area of the
Suite;
(c) painted walls;
(d) sink with running cold water;
(e) one color television; and
(f) cocktail table.
16
<PAGE>
EXHIBIT TWO
DIAGRAM OF STADIUM SHOWING LOCATION OF THE SUITE
17
<PAGE>
DATE: As of March 18, 1996 10N
SUITE NO.: 207B
ACCOUNT NO.: New
LICENSE: Extended Stay America, Inc.
TERM: Ten (10) Years
JOE ROBBIE STADIUM
EXECUTIVE SUITE LICENSE AGREEMENT
This License Agreement ("Agreement") made and entered into by and between
ROBBIE STADIUM CORPORATION, f/k/a Dolphin Stadium Corporation, a Florida
corporation, with offices at 2269 N.W. 199th Street, Miami, Florida 33056,
("Owner") and Extended Stay America, Inc. "Licensee" as further described on
Exhibit One to this Agreement.
WITNESSETH:
In consideration of mutual covenants and agreements set forth in this
Agreement, Owner and Licensee do hereby agree as follows:
1. Grant of License--Executive Suite.
----------------------------------
Subject to the terms and conditions set forth in this Agreement, Owner
hereby grants Licensee the exclusive privilege and right to the use and
possession as described herein of the executive suite (the "Suite") located in
Joe Robbie Stadium, Dade County, Florida (the "Stadium") and identified by
number on Exhibit One. A diagram of the Stadium showing the location where the
Suite is located is attached as Exhibit Two.
2. Term of Agreement.
------------------
The Term of this Agreement shall commence upon the execution of this
Agreement by both Licensee and Owner, and shall expire on February 28, of the
tenth calendar year after the calendar year in which the Licensee has initially
been issued tickets for the Suite for either the Florida Marlins or Miami
Dolphins regular season games in the Stadium (whichever issuance is earlier). As
used in this License Agreement, the term "Contract Year" shall mean the
twelve-month period commencing March 1, and
<PAGE>
expiring February 28, during the Term, except that in the year of execution, the
Contract Year shall commence with the date of execution and expire on February
28th. If this License Agreement is a renewal of an existing License Agreement
between Owner and Licensee, then the Term and initial Contract Year hereunder
shall commence upon the expiration of the existing License Agreement.
3. Suite Fee and Licensee's Privilege and Right to Suite
-----------------------------------------------------
The use and possession of the Suite shall be contingent upon payment
to Owner of the fee (the "Suite Fee") for each Contract Year in the amounts and
at the times set forth in Exhibit One plus any sales, use, property or other
governmental taxes due with respect to the Suite. The Suite Fee is the aggregate
of several charges including the license of the Suite and charges attributable
to that number of Miami Dolphins' and Florida Marlins' season tickets for the
Suite set forth in Exhibit One. In the event that the Suite Fee is not paid at
such times and in such amounts as set forth in Exhibit One, then Licensee
acknowledges and agrees that use and possession of the Suite shall be subject to
the Default provisions of Paragraph 11 hereof. In the event that the Owner does
not receive payment in full from Licensee on or before the applicable payment
due date set forth on Exhibit One the Owner may consider said failure to pay a
material breach, and may elect to charge Licensee a late fee of one (1.0%)
percent per month of the payment then due and owing until it is paid in full
and, without limitation of its other remedies, Owner may terminate this
Agreement upon such failure to pay in accordance with the terms of Paragraph 11
hereinbelow.
4. Furnishings, Decor and Alterations
----------------------------------
At the commencement of Licensee's use of the Suite hereunder, the
Suite shall be furnished and equipped with the fixtures, furnishing and
equipment described in Exhibit One. Licensee shall not make any additions or
alterations in the interior or exterior of the Suite or the fixtures,
furnishings and equipment therein without the prior written consent of Owner.
However, Licensee may supply articles of appointment, such as pictures, plants
or insignia reasonable in size and in good taste, as determined solely by Owner.
Any such additions, or alterations permitted by Owner shall be made at
Licensee's expense and be made
2
<PAGE>
free of any liens or encumbrances, in a good workmanlike manner, and in
compliance with all applicable permits, authorizations, building and zoning
laws, ordinances, orders, rules, regulations and requirements of all
governmental authorities having appropriate jurisdiction. Any fixtures or
materials incorporated in or attached to the Suite by Licensee shall become the
property of Owner unless Licensee shall have obtained the written approval of
Owner to remove same prior to the expiration of the term of this Agreement, and
if so removed, Licensee shall, at its own expense, repair and restore the Suite
to its condition as of the commencement of this Agreement.
5. Possession and Use.
------------------
Licensee shall be entitled to the exclusive use and possession of the
Suite during the term of this Agreement, except as provided in Paragraph 6
below, and subject to the provisions of this Agreement. Licensee and Licensee's
guests shall be entitled to use the Suite only at times for which appropriate
tickets for admission to the Suite have been obtained and the Stadium is
intended to be open for use by the general public. Licensee and Licensee's
guests shall be bound by and shall observe the terms and conditions upon which
tickets for admission to the Stadium have been issued by the sponsor or promoter
of each event for which tickets have been issued including, without limitation,
the policy adopted by the issuer of such tickets with respect to the
cancellation or postponement of the game or event.
Access to the Suites shall be from the Club Level of the Stadium
through a private door to the Suites. Access to the Club Level shall be shared
only by persons holding appropriate tickets for admission to the Suites and to
the Club Level Seats. Each Suite shall be provided with a lock system.
This Agreement provides Licensee only with the right and privilege to
possess and use the Suite in the manner set forth herein, and except as pertains
to the special right and privilege to so possess and use the Suite, this
Agreement does not confer upon Licensee and Licensee's guests any greater or
lesser rights and privileges with respect to admission to the Stadium than
afforded to other holders of tickets for admission thereto.
6. Admission Tickets.
-----------------
3
<PAGE>
During the term of this Agreement, Licensee shall receive the number
of admission tickets to the Stadium for access to the Suite as set forth in
Exhibit One for each pre-season and regular season football game played by the
Miami Dolphins at the Stadium and each pre-season and regular season baseball
game played by the Florida Marlins at the Stadium. In addition, during the Term
of this Agreement, Owner shall make available and Licensee shall be free to
purchase (i) up to four (4) direct access tickets for admission to the Suite for
Miami Dolphin games, and (ii) that number of additional tickets for admission to
the Suite for regular season baseball games played by the Florida Marlins at the
Stadium as set forth on Exhibit One. Licensee shall also be responsible for
purchasing the required admission tickets to the Stadium for access to the Suite
for any other games or events at the Stadium, including but not limited to
post-season football games of the Miami Dolphins, post-season baseball games of
the Florida Marlins, Major League Baseball All-Star Games, college bowl games,
or concerts (collectively, "Special Events"), for which Licensee desires to use
the Suite. Admission tickets for such other games or events shall be priced by
the sponsor or promoter of the game or event, but in no event shall the
admission price charged to Licensee and Licensee's guests exceed the admission
price charged for an admission ticket to the highest priced category of seats in
the Stadium. After Owner offers tickets for purchase for certain Special
Events at the Stadium, if the Licensee shall determine not to purchase such
tickets for the Suite within the time specified, then, at the option of Owner,
the use of the Suite for such Special Event shall revert to Owner and Owner
shall be free to sell the use of the Suite for such Special Event to a third
party.
In the event the Suite is deemed by the promoter of any event, concert
or game hosted in the Stadium to have obstructed or non-manifest seats, Licensee
shall not have the right to purchase admission tickets to the Suite. However,
Owner in its sole discretion, may offer alternative seating in the Stadium to
Licensee on terms and in locations to be determined by Owner.
Licensee shall be entitled to exclusive use and possession of their
respective suites during any World Series Game or Major League Baseball All-Star
Game held in the Stadium during the Term of this License and shall be entitled
to purchase admission tickets for each seat in their respective suite;
provided, however, that any seat for which any admission ticket has not been
purchased within the time specified by Owner in advance of the Major League
4
<PAGE>
Baseball All-Star Game or World Series Game may be made available by Owner for
purchase by others.
Notwithstanding any other provision herein to the contrary, it is
understood and agreed that the availability of the upper tier of Suites (i.e.,
Suites No. 301 et seq., collectively, the "300 Level Suites") during any Super
Bowl Games held in the Stadium will be subject to the requirements of the
National Football League. Accordingly, Licensees of 300 Level Suites may be
required either to relinquish use and possession of their Suite for any Super
Bowl Game held in the Stadium or to share possession of their Suite with others
who have been required to do so. A Licensee of a 300 Level Suite shall be
entitled to purchase admission tickets to the Super Bowl Game for at least fifty
percent (50%) of the seats in their respective suites. Owner shall make
reasonable effort (but can make no guaranty) to place Licensees of 300 Level
Suites and their guests in comparable suites as closely together as
circumstances will permit.
Licensees of Suites located in the lower tier of Suites (i.e., Suites
No. 201 et seq., collectively, the "200 Level Suites") shall be entitled to
exclusive use and possession of their respective suites during any Super Bowl
Game held in the Stadium and shall be entitled to purchase admission tickets for
each seat in their respective suites; provided, however, that any seat for
which any admission ticket has not been purchased within the time specified by
owner in advance of the Super Bowl Game may be made available by Owner to
others, including Licensees of 300 Level Suites who have been required to
relinquish possession of their Suite, as aforesaid, to accommodate requirements
of the National Football League.
7. Furnishings and Services
------------------------
During the term of this Agreement, Owner shall provide the following
to the Suite:
(a) The fixtures, furnishings and equipment described in Exhibit One;
(b) Color television, with standard all-channel reception for the
Miami area and closed circuit broadcasts of any football games played by
the Miami Dolphins or any baseball games played by the Florida Marlins as
may be available to Owner;
5
<PAGE>
(c) Heat, air conditioning, ventilation, running cold water, and
electricity during all games and events for which the Stadium is open for
use by the general public;
(d) Ordinary repair and maintenance of the interior and exterior of
the Suite made necessary by normal wear and tear;
(e) Dusting, sweeping and cleaning the Suite and rubbish removal and
disposal following each Stadium game or event;
(f) Telephone equipment and local area telephone service at Owner's
expenses;
(g) Food and beverage services through the caterer licensed by Owner
at Licensee's order and expense; and
(h) Such other special services as Owner, in its sole discretion, may
offer at prevailing rates and terms established from time to time by Owner.
8. Special Parking.
---------------
Licensee shall have the right to occupy, at no additional cost, four
(4) parking spaces for automobiles located in designated Stadium Site parking
areas in the Stadium parking lots at the times during which Licensee is entitled
to use the Suite. Licensee shall have the option to purchase additional parking
passes, depending upon availability, on a first-come, first served basis at the
then prevailing rates.
9. Right of First Refusal.
----------------------
If not in default in the performance of Licensee's obligations under
this Agreement, Licensee shall have the right of first refusal to renew this
license after the expiration of the term of this Agreement at such license fee
and on such other terms and conditions as Owner may, in its sole discretion,
determine. The Licensee's right of first refusal shall be offered and exercised
in accordance with the following procedures. On or about the thirteenth month
prior to the expiration of the term of this Agreement, Owner shall submit to
Licensee a license agreement which sets forth the license fee and other terms
and conditions offered by Owner for the license of the Suite. Licensee may
exercise its right of first refusal by executing and returning such license
agreement to Owner, together with any deposit or other payment
6
<PAGE>
which may be required thereunder, within thirty (30) days after the agreement is
sent to Licensee by Owner. If Licensee shall not timely return such agreement to
Owner together with the required deposit or payment, then this right of first
refusal shall terminate and Owner shall be free to offer the Suite for license
to a third party.
10. Covenants of Licensee.
---------------------
Licensee covenants and agrees with Owner as follows:
(a) Licensee shall keep and maintain the Suite in good repair, order
and condition, except for normal wear and tear, and shall reimburse Owner
for costs incurred by Owner to repair any damage caused by Licensee or
Licensee's guests to the Suite or to the property of Owner therein.
(b) Licensee and Licensee's guests shall abide by and observe rules
and regulations established from time to time by Owner pertaining to the
use and occupancy of the Suite.
(c) Licensee and Licensee's guests shall at all times maintain proper
decorum while using the Suite and shall comply with all present and future
laws, ordinances, orders, rules and regulations of all governmental
authorities and will not suffer or permit to remain any use or manner of
use of the Suite in violation thereof.
(d) Licensee shall not permit the preparation of food in the Suite nor
shall Licensee permit any food or beverages to be brought into the Suite,
except such food or beverage provided exclusively through the Stadium
caterer.
11. Default.
-------
In the event Licensee fails to pay when due any amounts (including,
without limitation, the Suite Fee) to be paid by Licensee pursuant to this
Agreement or otherwise defaults in the performance or observation of its duties
and obligations under this Agreement, Owner may, at its option, terminate the
rights of Licensee hereunder by giving Licensee twenty (20) days prior written
notice. In the event that Licensee shall not have cured the default or breach
specified in said notice within said twenty (20) day period, then Owner may
terminate the right of Licensee to the use and possession of the Suite and all
other rights or
7
<PAGE>
privileges of Licensee under this Agreement and declare the entire unpaid
balance of the Suite Fee immediately due and payable, whereupon Owner shall have
no further obligation of any kind to Licensee and may enter the Suite and remove
all items of property of Licensee for storage at Licensee's expense. Owner may,
without waiving any other right or remedy to which it may be entitled,
immediately apply the Security Deposit (as defined below) to Licensee's
obligations to pay the Suite Fee or other amounts owed to Owner as a result of
such default. Upon Owner's termination of Licensee's license to use the Suite,
Owner shall be free to relicense the Suite to a third party without obligation
to Licensee. Owner may relicense the right to the use and possession of the
Suite to another party; provided that, if there are any other Suites in the
Stadium available to be licensed, Owner may give priority to licensing such
other suites. Licensee shall remain obligated to make all payments due or
becoming due under this Agreement, but if Owner licenses the right to the use
and possession of the Suite to another party, then all amounts received from
such other party applicable to any remaining period of this Agreement shall be
applied first to the expense of relicensing and then to the reduction of any
obligations of Licensee to Owner under this Agreement. If the consideration
collected by Owner upon any such relicensing is not sufficient to pay the full
amount of all such obligations of Licensee, Licensee shall pay any such
deficiency upon demand.
The foregoing remedies of Owner shall not be to the exclusion of any
other right or remedy set forth herein or otherwise available to Owner in law or
in equity. Licensee shall be responsible for all attorney's fees and costs
incurred by Owner in the enforcement of this Agreement whether or not litigation
is actually commenced and including any appellate proceedings. Licensee hereby
waives trial by jury.
No waiver by Owner of any default or breach by Licensee of its
obligations hereunder shall be construed to be a waiver or release of any other
or subsequent default or breach by Licensee hereunder, and no failure or delay
by Owner in the exercise of any remedy provided for herein shall be construed to
constitute a forfeiture or waiver thereof or of any other right or remedy
available to Owner.
12. Strikes, Damage, Destruction, Etc.
-----------------------------------
8
<PAGE>
In the event of any damage to or destruction of the Suite or the
Stadium which renders the Suite or the Stadium unusable, then, Owner shall
attempt to relocate Licensee to another executive suite at the Stadium. However,
if Owner is unable to relocate Licensee to another executive suite at the
Stadium, then, the Suite Fee payable hereunder shall be abated during the period
of time that the Suite is unusable. Any such abatement of the Suite Fee shall be
computed annually by dividing the number of games and other events for which the
Suite was unusable by the total number of games and events in the Stadium during
the applicable year including the number of such scheduled games and events
which were canceled as a result of any such damage or destruction. Any such
abatement shall be offset against the next succeeding installment of the Suite
Fee payable by Licensee. If in the event of any damage to or destruction of the
Suite or the Stadium, Owner elects not to repair or restore same, this Agreement
shall terminate as of the date of such damage or destruction, and the entire
amount of the abatement shall be promptly paid to Licensee.
In the event of any strike or other labor disturbance which results in
the cancellation of any Miami Dolphins or Florida Marlins scheduled game at the
Stadium, or the cancellation of any other scheduled event at the Stadium, then,
the Owner shall return to Licensee, as Licensee's sole and exclusive remedy for
such termination or cancellation, the aggregate ticket price for admission to
any such canceled game(s) or event(s) purchased by Licensee for the Suite. In
the event that the Florida Marlins shall relocate and shall play its home games
at a ball park other than the Stadium, then, the Owner shall return to Licensee,
as Licensee's sole and exclusive remedy for such relocation, this aggregate
ticket price paid by Licensee for admission to the Suite for any Florida
Marlins' games which are not played at the Stadium.
13. Access by Owner.
----------------
Owner, its officers, agents, employees, and representatives shall be
entitled to have access to the Suite on such occasions and to such extent as
Owner, shall in its sole discretion, deem necessary or appropriate for the
proper performance of the duties and obligations required or contemplated to be
performed by Owner or to be observed by Licensee under this Agreement for the
compliance with the rules and regulations governing use of the Stadium. For such
purposes, Owner shall retain duplicate keys to the Suite and the cabinets in the
Suite, and Licensee shall not change the locks or place any additional
9
<PAGE>
locks on, or otherwise restrict or impede Owner's access to, the Suite or the
cabinets therein.
14. Owner's Right to Relocate.
-------------------------
Owner expressly reserves the right after the execution and during the
term of this License Agreement, at its sole cost and expense, to remove the
Licensee from the Suite and relocate the Licensee to some other suite of Owner's
choosing of the same approximate size, if Owner determines that such relocation
is necessary in connection with any construction or renovation projects at the
Stadium. Licensee, by the execution of this License Agreement, acknowledges the
foregoing right of Owner, and no rights granted in this License Agreement to
Licensee shall be deemed to have been breached or interfered with by reason of
Owner's exercise of the right of relocation reserved in this Paragraph 14.
Licensee agrees that Owner's exercise of its election to remove and relocate
Licensee shall not terminate this License or release the Licensee, in whole or
in part, from Licensee's obligation to pay the Licensee Fees and perform the
covenants and agreements under this License Agreement for the full term of this
License.
15. Disclaimer of Liability.
-----------------------
Owner shall not be liable or responsible for any loss, damage, or
injury to any person or to any property of Licensee or Licensee's guests in or
upon the Suite or the Stadium, resulting from any cause whatsoever, including
but not limited to theft and vandalism, unless due to the willful misconduct of
Owner.
In addition, Licensee agrees to indemnify and hold Owner harmless from
and against any liability, losses, claims, demands, costs and expenses including
attorney's fees and litigation expenses arising out of any personal injury or
property damage occurring in or upon the Suite or the Stadium due to or
resulting from the breach by Licensee or Licensee's guests of any of the terms
and conditions of this Agreement or of any applicable laws, rules, regulations
or orders of any governmental agency having appropriate jurisdiction over the
Stadium, the Suite or over any actions or negligence of Licensee.
10
<PAGE>
16. Security Deposit.
-----------------
As security for the prompt and full payment of the Suite Fee and the
full and faithful performance by Licensee of each and every other obligation of
Licensee under this Agreement, Licensee has deposited with Owner the sum set
forth in Exhibit One as the "Security Deposit", the receipt of which is hereby
acknowledged by Owner. It is a condition of the Bank that is financing the
construction of the Stadium that Owner collect a security deposit and that such
deposit be held throughout the entire Term. Accordingly, the Security Deposit
shall remain with Owner throughout the Term of this Agreement and Licensee may
not apply such deposit to its obligations to pay annual Suite Fees. The
Security Deposit may be commingled by Owner with its independent funds, and may
be used by Owner for payment of any and all indebtedness incurred by Owner in
connection with the construction of the Stadium and the improvements located
thereon. No interest shall be paid to Licensee on the Security Deposit. If, at
any time during the term of this Agreement, any portion of the Suite Fee or any
other amount payable by Licensee to Owner pursuant to this Agreement is not
promptly paid when due, then Owner may, without waiving any other remedy which
it may have under this Agreement, appropriate and apply all or any portion of
the Security Deposit to the payment of such amount. Licensee shall, in such
event and upon written demand of Owner forthwith, remit to Owner an amount
sufficient to restore the Security Deposit to the original sum deposited, and
Licensee's failure to do so within five (5) business days after receipt of such
demand shall constitute a breach of this Agreement. If Licensee's right to the
use and possession of the Suite is terminated pursuant to Paragraph 11 above,
then Owner may, at its option, appropriate and apply the Security Deposit, or so
much thereof as may be necessary, to compensate Owner for any loss or damage
sustained or suffered by Owner due to Licensee's breach. Otherwise, the Security
Deposit shall be returned to Licensee at the expiration of the term of this
Agreement, or any renewal term, less any costs and expenses incurred by Owner in
restoring the Suite to the condition required hereunder.
17. Third Party Beneficiaries.
--------------------------
Owner has heretofore arranged financing for the construction of the
Stadium and the Suite with a financial institution (the "Bank"). Licensee
acknowledges that Owner has pledged and may in the future pledge its interests
in this Agreement to the Bank and that the Bank will be relying on, and
11
<PAGE>
will be entitled to rely on, the commitments made by Licensee in this Agreement
and that the Bank shall have the rights of a third party beneficiary with
respect to this Agreement.
18. Miscellaneous.
-------------
(a) Upon the expiration of the term of this Agreement (or, if
applicable, upon the expiration of any renewal term pursuant to Licensee's
right of first refusal under Paragraph 9 hereof) or upon the earlier
termination of this Agreement, Licensee shall surrender possession of the
Suite to Owner in the condition in which it was originally delivered to
Licensee, except for normal wear and tear, and damage caused by casualty or
force beyond the control of Licensee or Licensee's guests.
(b) Licensee shall not sell, assign, sublease, pledge or otherwise
transfer or encumber this Agreement, or any of Licensee's rights and
obligations hereunder without the prior written consent of Owner and the
Bank, which consent may be withheld for any reason at Owner's sole
discretion. Any attempted sale, assignment, sublease, pledge, transfer or
encumbrance in contravention of the foregoing shall be null, void and of no
force or effect, and shall be deemed to be a breach of this Licensee
Agreement by Licensee. Any such breach by Licensee shall give rise to a
right by Owner to (i) prohibit admission to the Suite for any purchaser,
assignee, sublessee, pledgee or other transferee whom Owner has not
approved or provided its consent, and (ii) terminate this License Agreement
and following such termination by Owner, Licensee shall forfeit its right
to the Security Deposit. Licensee shall indemnify and hold harmless Owner
and shall remain fully liable for any property damage, personal injury or
death resulting from or arising in connection with any such sale,
assignment, pledge, transfer or encumbrance to which Owner has not
consented.
(c) It is understood that Owner has mortgaged, pledged, assigned or
otherwise encumbered the Suite, this Agreement and/or the Security Deposit
as security for financing improvements to be made to the suites or other
facilities operated by Owner in the Stadium or for other purposes of the
Owner, and that this Agreement and the rights and interests of Licensee
hereunder shall be subordinate thereto; provided that any such mortgagee,
pledgee, assignee or the holder of any
12
<PAGE>
such lien shall agree in writing to recognize this Agreement and the rights
and interests of Licensee hereunder in the event of foreclosure or
enforcement of said lien if Licensee is not then in default in the
performance of Licensee's obligations under this Agreement.
(d) All notices, demands and other communications between the parties
required or appropriate hereunder shall be in writing and deemed given if
mailed, postage prepaid, to the address set forth above for the Owner and
to the address set forth on Exhibit One for the Licensee, or to such other
address as may be designated by either party, from time to time, in
writing.
(e) This Agreement shall be construed and enforced in accordance with
the laws of the State of Florida.
(f) This Agreement, together with the Exhibits annexed hereto,
contains the entire agreement of the parties with respect to the matters
provided for herein, and shall supersede any written instrument or oral
agreement previously made or entered into by the parties hereto. The
following Exhibits are annexed hereto and made a part hereof:
(i) Exhibit One--Name and address of Licensee, Designation of
the Suite Fee, Payment Schedule, Security Deposit, Seating Capacity,
Number of Tickets to be issued for Miami Dolphins and Florida Marlins,
Fixtures, Furnishings, and Equipment of the Suite.
(ii) Exhibit Two--Diagram of the Stadium Showing the Location of
the Suite.
(g) This Agreement and all the terms and provisions hereof shall inure
to the benefit of and be binding upon the parties hereto, their respective
heirs, executors, administrators, personal representatives, successors and
permitted assigns. No amendment or modification to this Agreement shall be
effective unless the same is in writing and signed by both Owner and
Licensee and is consented to by the Bank.
[signatures on following page]
13
<PAGE>
IN WITNESS WHEREOF, this agreement shall become effective and binding
upon the parties when executed by both Licensee and Owner, as indicted below.
WITNESS AS TO OWNER: ROBBIE STADIUM CORPORATION, a
Florida corporation
____________________________ By:______________________________
Name:_________________________
Title:________________________
____________________________ Date:_________________________
WITNESS AS TO LICENSEE: LICENSEE:
By:/s/ Robert A. Brannon
____________________________ _____________________________
Name: Robert A. Brannon
________________________
Title: Vice President
________________________
____________________________
Date: 3/18/96
________________________
____________________________ By:_____________________________
Name:________________________
Title:_______________________
____________________________
Date:________________________
- - -----------------
*Each person or persons listed on Exhibit One as Licensee must sign the
Agreement. If the Licensee is a corporation or a partnership, the title of the
authorized signatory must be included.
14
<PAGE>
EXHIBIT ONE
NAME AND ADDRESS OF LICENSEE,
EXECUTIVE SUITE DESIGNATION,
DESIGNATION OF THE SUITE FEE,
PAYMENT SCHEDULE, SEATING
CAPACITY, SECURITY DEPOSIT, FIXTURES,
FURNISHINGS AND EQUIPMENT OF THE SUITE
1. Name, Address and Telephone Number of Licensee:
Extended Stay America, Inc.
George D. Johnson
500 E. Broward Boulevard, Suite 950
Fort Lauderdale, Florida 33394
2. Executive Suite Designation: Suite No.: 207B
3. The Suite Fee for the use and possession of the Suite by Licensee during
the initial year of the Term of the License Agreement shall be One Hundred and
Fifteen Thousand Dollars ($115,000.00). The entire Suite Fee for the initial
year shall be payable upon execution of this Agreement.
Thereafter, the Suite Fee shall be due and payable by Licensee not later
than March 1st, each year during the Term of this Agreement. The Suite Fee
includes an aggregate of several charges including a sum payable each year to
the Miami Dolphins for Miami Dolphins' season tickets provided to Licensee and a
sum payable each year to the Florida Marlins for Florida Marlins' season tickets
provided to Licensee.
4. Each year by February 1, the Suite Fee is subject to adjustment as
follows:
(a) If in any year the prices charged for Executive Suite tickets for
the Florida Marlins' or the Miami Dolphins' home games are increased from the
prices charged for such tickets during the preceding year, then the Suite Fee
may be increased by the aggregate amount of increased prices for that number of
seats representing the seating capacity
15
<PAGE>
of the Executive Suite.
(b) The Suite Fee may also be increased each year by an amount up
to five percent (5%) of the Suite Fee for the preceding Contract
Year based upon the percentage increase in the Consumer Price
Index for National Consumers (as published by the Bureau of
Labor Statistics of the U.S. Department of Labor) over the
preceding Contract Year.
5. Licensee has deposited with Owner the sum of Fifty Thousand Dollars
($50,000.00), which amount shall be held as the Security Deposit.
6. The Suite shall seat Sixteen (16) persons facing the playing field.
7. Licensee has designated Phyllis Korman and Anne Levisy as its
representatives authorized to make decisions and take certain actions for the
Licensee in connection with the Executive Suite, to order additional tickets and
to place orders for the purchase of catering items for the Executive Suite.
Licensee may change such representative by giving Owner written notice of its
intent to add, substitute or delete additional persons as representatives.
8. Licensee shall be entitled to Sixteen (16) season tickets to Miami
Dolphins pre-season and regular season football games played at the Stadium each
year during the term of the License Agreement.
9. Licensee shall be entitled to Eight (8) season tickets to Florida
Marlins regular season home baseball games played at the Stadium each year
during the term of the License Agreement. Licensee may purchase that number of
additional season tickets for the Florida Marlins regular season home games up
to seating capacity of the Suite.
10. The Suite will be furnished and include the following fixtures,
furnishings and equipment:
(a) upholstered chair seats facing the playing field;
(b) carpeted floor;
16
<PAGE>
(c) wall coverings;
(d) built-in cabinetry (including lockable liquor cabinet);
(e) sink with running cold water;
(f) ice-maker;
(g) counter-size refrigerator;
(h) color television;
(i) lounge-seats and table.
17
<PAGE>
[DIAGRAM OF STADIUM SHOWING LOCATION OF THE SUITE]
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
May 7, 1996
Mr. George D. Johnson, Jr.
Mr. Robert A. Brannon
Extended Stay America, Inc.
500 East Broward Boulevard
Suite 950
Fort Lauderdale, FL 33394-3073
RE: $300 MILLION LINE OF CREDIT
Dear George and Bob:
The purpose of this commitment letter is to set forth the proposed terms
and conditions upon which "CS First Boston", or any of its affiliates (the
"Lender") will provide a line of credit up to $300 million. Such terms and
conditions are as follows:
COMPANY: Extended Stay America, Inc. ("STAY")
LOAN AMOUNT: $300 million
SECURITY/UNDERWRITING: The Line of Credit (the "Line") shall be secured by
first mortgages, assignments of leases and rents,
security deposits, etc. on certain extended stay hotels
(the "Properties") owned or to be owned by each
applicable Mortgagor as set forth below.
COMMITMENT FEE: $3,000,000 (1.00%) of which $300,000 shall be earned and
paid upon execution of this Commitment and $2,700,000
shall be earned upon execution of the Credit Facility
Agreement (the "CFA").
DRAWDOWN FEE: None
UNUSED LINE FEE: None
1
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
TERMINATION FEE: None
BORROWER/MORTGAGOR: Loans shall be made to individual bankruptcy-remote,
special-purpose entities controlled, directly or
indirectly and owned by STAY.
LOAN FUNDING: Subject to the provisions below, the Borrower/Mortgagor,
at the time a loan is to be funded, may choose at its
sole discretion, the Fixed Rate or Floating Rate
Program.
Once a Program is selected, however, all loans will be
funded under the chosen Program until $50 million of
such loans have been made. After each $50 million of
Loans have been advanced, Borrower/Mortgagor shall
again be free to choose the Fixed or Floating Rate
Program subject to the same $50 million aggregation
requirement.
So long as Lender has not sold or participated loans
made under the Floating Rate Program and to the extent
that Borrower/Mortgagor has taken not less than $50
million in loans under such Floating Rate Program, it
may convert said loans into the Fixed Rate Program as
described below; provided, however, that Borrower may
not elect to convert loans hereunder, if after giving
effect to such conversion, the Lender would be left
holding Floating Rate Loans greater than $0 but less
than $50 million. In the event of any such conversion,
Borrower and STAY shall be deemed to have selected the
Fixed Rate Program for the purposes of the preceeding
paragraph, unless, if after giving effect to such
conversion, Lender holds Fixed Rate Loans equal to an
integral multiple of $50 million. Borrower/Mortgagor
shall pay for all closing costs relating to the
conversions hereunder.
LOAN TERMS-FIXED RATE PROGRAM
- - -----------------------------
LOAN AMOUNT: Loan amounts shall be made at the time of each property's
certificate of occupancy and shall be calculated based
on the
2
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
lowest of: (a) a maximum of 65% of the lesser of the
actual land acquisition and construction cost or
estimated budgeted cost; (b) 65% of Appraised Value as
determined by an MAI appraiser; or (c) a loan amount
based on 1.40x DSC (based on projected "underwritable
net cash flow" as defined below) using the greater of:
(i) a loan constant based on the actual interest rate
using a 25-year amortization or (ii) an 11.5% loan
constant.
To the extent that the Line encumbers any acquired
properties with over 12 months of operating history,
those loans shall be calculated based on the lowest of:
(a) a maximum of 65% of the acquisition cost; (b) 65%
of Appraised Value as determined by an MAI appraiser;
or (c) a loan amount based on 1.40x DSC (based on
"underwritable net cash flow" as defined below) using
the greater of: (i) a loan constant based on the
actual interest rate using a 20-year amortization or
(ii) an 11.5% loan constant.
INTEREST RATE: The interest rate will be fixed based on the
interpolated 7-year U.S. Treasury plus the spread as
outlined below.
SPREAD: The applicable spread for each loan shall be based upon
the rate set on the date the loan is funded, it being
understood that once a Fixed Rate Spread has been
determined for a loan, in no event shall it be reduced.
The Spread shall be as follows:
<TABLE>
<CAPTION>
Aggreate Fixed Spread
Rate Loans Funded in Basis Points
----------------- ---------------
<S> <C>
$0 - 75 MM +385
$75.01 - 150 MM +375
$150.01 - 225 MM +365
$225.01 - 300 MM +355
</TABLE>
FUNDING TERM: STAY may draw under the Line during the three year
period following execution of the CFA.
3
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
LOAN TERM: All loans shall be due the earlier of 7 years and 3
months from the date of the first loan funding or 8
years from the execution of the CFA.
PREPAYMENT: Years 1-5: Locked out
Year 6: 1% penalty
Year 7 (First 6 months): .5% penalty
Year 7 (Last 6 months): Prepayable at par.
Notwithstanding the above, all Prepayment provisions
for purposes of the Fixed Rate Program shall be based
on the date on which the applicable loan actually funds
and shall allow that said loan to be prepayable at par
during its final six months.
AMORTIZATION: Based on a 15-year schedule.
LOAN TERMS-FLOATING RATE PROGRAM
- - --------------------------------
LOAN AMOUNT: Loan amounts shall be made at the time of each
property's certificate of occupancy and shall be
calculated based on the lowest of: (a) a maximum of 65%
of the lesser of the actual land acquisition and
construction cost or estimated budgeted cost; (b) 65%
of Appraised Value as determined by an MAI appraiser;
or (c) a loan amount based on 1.40x DSC (based on
projected "underwritable net cash flow" as defined
below) using the greater of: (i) a loan constant based
on the actual interest rate using a 25-year
amortization or (ii) an 11.5% loan constant.
To the extent that the Line encumbers any acquired
properties with over 12 months operating history, those
loans shall be calculated based on the lowest of: (a) a
maximum of 65% of the acquisition cost; (b) 65% of
Appraised Value as determined by an MAI appraiser; or
(c)
4
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
a loan amount based on 1.40x DSC (based on
"underwritable net cash flow" as defined below)
using the greater of: (i) a loan constant based
on the actual interest rate using a 20-year
amortization or (ii) an 11.5% loan constant.
INTEREST RATE: The interest rate will float monthly based on
the 30-day LIBOR plus 300 basis points.
FUNDING TERM: STAY may draw under the Line during the 3-year
period following the execution of the CFA.
LOAN TERM: All loans shall be due 3 years from the date
following execution of the CFA.
PREPAYMENT: Year 1: Locked out
Years 2-3: Prepayable at par
Notwithstanding the above, all Prepayment
provisions for purposes of the Floating Rate
Program shall be based on the date on which the
applicable loan actually funds and shall allow
that said loan shall be prepayable at par during
its final six months. Additionally, the
Borrower/Mortgagor shall be liable for any
prepayment penalty created with regard to any
LIBOR contract breakage costs.
AMORTIZATION: Based on a 20-year schedule and an assumed 9.90%
interest rate.
GENERAL TERMS
-------------
CROSS-COLLATERALIZATION: Properties encumbered by the Line shall be
cross-defaulted and cross-collateralized with
one another. Notwithstanding the foregoing, the
Lender may modify and release the cross-
collateralization and cross-defaulting of
individual loans in its sole discretion to
create separate pools of Loans.
5
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
RECOURSE: The Lender will have recourse to STAY equal to
25% of the aggregate, non-securitized principal
balance outstanding under the Line at the time
of the default. Said recourse shall be released
(for the loans that have been securitized) upon
securitization provided there have been no
defaults that have not been cured under the
Line. In addition, STAY and Borrower/Mortgagor
shall be responsible for any interest due on any
loan which has not been securitized.
The Lender will have full recourse to
Borrower/Mortgagor.
RELEASES: Individual releases of Properties from the Line
shall be allowed within 12 months of a loan
funding at Borrower/Mortgagor's request to the
extent that said loan(s) have less than 1.25X
DSC and (i) the Lender receives the greater of
1% of the outstanding principal balance or yield
maintenance to the extent that said loan is
subject to lock out provisions plus any relevant
LIBOR contract breakage costs and (ii) the
remaining loans in the pool have not less than
1.55X DSC.
After the lock out period, any loan may be
released from the line such that Lender
receives: (i) (x) the greater of 120% of its
original allocated loan amount and (y) 95% of
any net sales proceeds (with such excess in
either instance to be used to paydown the
aggregate loan balance), (ii) any required
prepayment penalty and (iii) an opinion from
Borrower/Mortgagor's counsel acceptable to
Lender and its counsel regarding the continued
nonconsolidation of STAY with any
Borrower/Mortgagor.
Upon a Release as described above, Line capacity
shall remain unchanged.
UNDERWRITABLE NET
CASH FLOW: "Underwritable Net Cash Flow" shall be defined
as the most recent 12 months of actual revenues
(or reasonable projected revenues, as
appropriate) at the lower of actual or
6
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
95% occupancy, less actual (or projected, as
appropriate) expenses including a 4% management
fee and a 5% FF&E reserve. The management
agreement shall also include an additional 1%
management fee, subordinated to Lender's debt
service. In addition, the management agreement
shall be terminable, at Lender's option, upon
default.
COSTS AND EXPENSES: Borrower/Mortgagor shall be responsible for all
customary loan closing related expenses,
including, but not limited to, the cost of title
insurance, transfer and recording fees, and the
fees and expenses of Lender's counsel.
Borrower/Mortgagor shall reimburse Lender and
Servicer for any out of pocket expenses,
including travel, due diligence (including
appraisal, architectural, environmental and
engineering reports), legal costs and
miscellaneous expenses. Lender and STAY shall
agree on reasonable, per asset limits on such
expenses.
RESERVES: The Lender shall hold as additional collateral
for its loan (i) reserves from loan proceeds at
closing, if required, for deferred maintenance,
capital improvements, and environmental
remediation, (ii) any required real estate tax
and insurance premium escrow account, (iii) a
to-be-agreed upon FF&E reserve, and (iv) a
liquidity reserve for 4 month's debt service (to
be reduced and released upon certain specified
property performance).
RIGHT OF REFUSAL: STAY, prior to funding of the first loan, must
deliver to Lender proof, to be determined in its
sole discretion, that it has fulfilled its
obligations to other parties regarding required
financings under other credit lines or has
received a waiver thereto.
With regard to the Line, in the event STAY
finances in excess of $175 million of secured
hotel debt (excluding construction financing,
the existing $100 million mortgage facility, and
the financing of any loans rejected by Lender)
with another lender within the Funding Term,
without
7
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
financing at least $100 million of hotel debt
under the Line, Lender's obligations under the
Line shall be terminated at Lender's option.
OTHER INDEBTEDNESS: The Borrower/Mortgagor will not incur any other
indebtedness related to the Properties (i.e.,
Properties securing loans under the Line.)
LOAN DOCUMENTATION: All documentation shall be in form and content
acceptable to Lender and its counsel, and shall
be supported by acceptable representations and
warranties of the Borrower/Mortgagor, opinions
of counsel and proof of related matters that
counsel shall deem necessary.
PROCESS: Borrower/Mortgagor shall submit detailed
information (per a to-be-determined schedule)
regarding a prospective property to Lender and
Lender shall have 5 business days to approve or
decline said request upon receipt of selected
information provided that Lender has, prior
thereto, received substantially all of the
information not less than 15 business days prior
thereto. Said time periods described above
shall be doubled for the initial four
prospective Properties presented to Lender. At
the time that the Commitment is executed, form
loan documents shall have been prepared to
facilitate quick turnaround.
ASSUMABILITY: Loans under the Line may be assumed subject to
Lender and Rating Agency approval (if
applicable), defeasance reserves, other Rating
Agency (if applicable) and Lender requirements,
and upon payment of a 1% (of outstanding
balance) transfer fee at the time of the
Assumption.
LOAN COVENANTS: Pre-conditions of funding of the first loan
under the Line: STAY shall have completed at
least $100 million in a follow-on equity or
quasi-equity offering.
Pre-conditions of funding of any loan under the
Line: 1) STAY's stock market capitalization
shall at all times be at
8
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
least $300 million; 2) the current Board of
Directors shall always constitute a majority of
the Board; 3) both Wayne Huizenga and George
Johnson shall be Board members to the extent
that they are living and have not been declared
judicially incompetent; 4) neither STAY nor any
of its subsidiaries shall have had a bankruptcy
filing; 5) STAY's overall debt service coverage
shall always exceed 1.40x (not including cash
flows and associated debt related to properties
in service for less than nine months); 6) STAY's
overall book debt/total capitalization ratio
cannot exceed 70%; 7) STAY's tangible net worth
shall always exceed $50 million; 8) the dividend
payout by STAY shall not be in excess of 50% of
the difference between net income over
cumulative losses not included in the previous
definition of net income; 9) STAY shall at all
times have unrestricted and unpledged cash on
hand of not less than $20 million; 10) a
declared default or acceleration under other
STAY financings which financings are in
principal amount exceeding $10 million, and 11)
other customary loan covenants.
Events of Default/Acceleration: 1) the current
Board of Directors shall not constitute a
majority of the Board; 2) either Wayne Huizenga
or George Johnson shall cease to be Board
members to the extent that they are living and
have not been declared judicially incompetent;
3) a bankruptcy filing by either STAY or any of
its subsidiaries; 4) STAY's tangible net worth
shall always exceed $50 million; 5) the dividend
payout by STAY shall be in excess of 50% of the
difference between net income over cumulative
losses not included in the previous definition
of net income; 6) a declared default or
acceleration under other STAY financings which
financings are in principal amount exceeding $10
million, and 7) other customary loan covenants.
9
<PAGE>
CS FIRST BOSTON MORTGAGE CAPITAL CORPORATION
May 7, 1996
SECURITIZATION: CS First Boston shall have a right of first
refusal with regard to the securitized financing
of the Floating Rate Loans. Such right of first
refusal shall be based upon the then-
competitive fees for said engagement based on
the size, complexity and other relevant
conditions. In addition, STAY will cooperate
with Lender in any securitization it undertakes
of STAY-sponsored loans in terms of Rating
Agency and investor meetings, site inspections,
management interviews, provision of additional
information, etc.
Please acknowledge your acceptance of the terms and conditions relating to
the financing described herein by executing the acknowledgment below. By
your signature below, you agree to work exclusively with CS First Boston
and CS First Boston Mortgage Capital Corporation to proceed in good faith
to mutually acceptable Loan Documents. This Agreement may be executed in
one or more counterparts, each of which when so executed and delivered
shall be deemed an original.
Sincerely,
William S. Pitofsky
Managing Director
Acknowledged:
By: By: /s/ Robert A. Brannon
------------------------------ -----------------------------------
Mr. George D. Johnson, Jr. Mr. Robert A. Brannon
Chief Executive Officer Chief Financial Officer
10
<PAGE>
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE LOSS
EXTENDED STAY AMERICA, INC.
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
--------------------------------
MARCH 31, 1995 MARCH 31, 1996
--------------- ---------------
<S> <C> <C>
Weighted average shares issued and outstanding...................... 3,681,966 22,467,393
Additional dilution of shares issued on August 18, 1995............. 6,381,415
Effect of employee stock options outstanding........................ 632,897
Effect of shares issued to underwriters upon execution of mortgage
loan agreement subsequent to September 30, 1995.................... 792,739
----------- -----------
Weighted average shares (A)......................................... 11,489,017 22,467,393
=========== ===========
Net (loss).......................................................... $ (248,601) $ (429,310)
=========== ===========
Net (loss) per common share......................................... $ (0.02) $ (0.02)
=========== ===========
- - -----------
</TABLE>
(A) The net loss per common share amount for the three months ended March 31,
1996 has been computed in accordance with Accounting Principles Board
Opinion No. 15. The net loss per common share amount for the three months
ended March 31, 1995 has been computed in accordance with a Staff
Accounting Bulletin (SAB) of the Securities and Exchange Commission.
According to the SAB, equity securities, including stock, warrants, options
and other potentially dilutive securities, issued within a twelve-month
period prior to an initial public offering of common stock must be treated
as common stock equivalents for all periods presented if the issue price of
the common stock or the exercise price of the warrants, options or other
potentially dilutive securities is substantially less than the initial
public offering price, including loss years where the impact of the
incremental shares is anti-dilutive. As permitted by the SAB, the treasury
stock method has been used in determining the weighted average number of
shares of common stock outstanding during the period presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-09-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 123,357,510 104,010,918
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 92,817 291,266
<CURRENT-ASSETS> 124,133,690 105,346,748
<PP&E> 18,336,389 51,986,606
<DEPRECIATION> 130,852 328,293
<TOTAL-ASSETS> 149,618,649 166,369,727
<CURRENT-LIABILITIES> 2,396,404 1,836,672
<BONDS> 0 0
0 0
0 0
<COMMON> 221,309 228,531
<OTHER-SE> 147,000,936 164,304,524
<TOTAL-LIABILITY-AND-EQUITY> 149,618,649 166,369,727
<SALES> 0 0
<TOTAL-REVENUES> 877,885 1,170,829
<CGS> 0 0
<TOTAL-COSTS> 3,033,817 3,050,271
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,307,422) (429,310)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,307,422) (429,310)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,307,422) (429,310)
<EPS-PRIMARY> (.10) (.02)
<EPS-DILUTED> (.10) (.02)
</TABLE>
