<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 September 30, 1998
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)
450 EAST LAS OLAS BOULEVARD, FORT LAUDERDALE, FL 33301
(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 November 4, 1998, the registrant had issued and outstanding an aggregate of
95,942,768 shares of Common Stock.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
EXTENDED STAY AMERICA, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
------
September 30, December 31,
1998 1997(1)
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 27,121 $ 3,213
Accounts receivable.............................. 9,719 3,651
Prepaid expenses................................. 2,702 3,869
Deferred income taxes............................ 18,629 6,895
Other current assets............................. 716 866
---------- ----------
Total current assets......................... 58,887 18,494
Property and equipment, net....................... 1,487,038 1,042,741
Deferred loan costs............................... 17,225 8,167
Other assets...................................... 1,526 1,489
---------- ----------
$1,564,676 $1,070,891
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable................................. $ 55,627 $ 51,309
Accrued retainage................................ 21,276 19,951
Accrued property taxes........................... 8,978 3,417
Accrued interest................................. 2,037 356
Accrued salaries and related expenses............ 3,062 2,707
Income taxes payable............................. 5,779
Other accrued expenses........................... 25,318 5,099
---------- ----------
Total current liabilities.................... 122,077 82,839
---------- ----------
Deferred income taxes............................. 33,738 18,393
---------- ----------
Long-term debt.................................... 550,000 135,000
---------- ----------
Commitments
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000
shares authorized; no shares issued and
outstanding.....................................
Common stock, $.01 par value, 500,000,000 shares
authorized; 95,921,558 and 95,604,208 shares
issued and outstanding, respectively............ 959 956
Additional paid-in capital....................... 826,850 823,060
Retained earnings................................ 31,052 10,643
---------- ----------
Total stockholders' equity................... 858,861 834,659
---------- ----------
$1,564,676 $1,070,891
========== ==========
</TABLE>
_____________________
(1) Derived from audited financial statements
See notes to the unaudited condensed consolidated financial statements
1
<PAGE>
EXTENDED STAY AMERICA, INC.
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue............................................ $81,006 $38,773 $205,280 $87,564
------- ------- -------- -------
Property operating expenses........................ 32,593 17,436 87,767 39,923
Corporate operating and property
management expenses............................... 9,966 8,102 29,078 20,846
Merger, financing and other non-recurring charges.. 12,000 12,000 19,895
Depreciation and amortization...................... 10,865 5,274 30,308 13,344
------- ------- -------- -------
Total costs and expenses......................... 65,424 30,812 159,153 94,008
------- ------- -------- -------
Income (loss) from operations...................... 15,582 7,961 46,127 (6,444)
Interest expense (income), net..................... 6,429 (1,446) 12,111 (8,880)
------- ------- -------- -------
Income before income taxes......................... 9,153 9,407 34,016 2,436
Provision for income taxes......................... 3,661 3,763 13,607 3,415
------- ------- -------- -------
Net income (loss).................................. $ 5,492 $ 5,644 $ 20,409 $ (979)
======= ======= ======== =======
Net income (loss) per common share:
Basic............................................. $ 0.06 $ 0.06 $ 0.21 $ (0.01)
======= ======= ======== =======
Diluted........................................... $ 0.06 $ 0.06 $ 0.21 $ (0.01)
======= ======= ======== =======
Weighted average shares:
Basic............................................. 96,033 95,349 95,878 93,786
Effect of dilutive options........................ 690 1,444 998
------- ------- -------- -------
Diluted........................................... 96,723 96,793 96,876 93,786
======= ======= ======== =======
</TABLE>
See notes to the unaudited condensed consolidated financial statements
2
<PAGE>
EXTENDED STAY AMERICA, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................... $ 20,409 $ (979)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization..................................... 30,308 13,344
Merger expenses................................................... 485
Deferred loan costs............................................... 1,701 9,667
Unsuccessful development costs.................................... 14,388 2,363
Deferred income taxes............................................. 5,300 4,531
Changes in operating assets and liabilities....................... 450 (4,361)
--------- ---------
Net cash provided by operating activities..................... 72,556 25,050
--------- ---------
Cash flows from investing activities:
Additions to property and equipment................................. (455,409) (409,650)
Other assets........................................................ (37)
---------
Net cash used in investing activities......................... (455,446) (409,650)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt........................................ 443,500
Repayments of revolving credit facility............................. (28,500)
Proceeds from issuance of common stock.............................. 3,126 200,775
Additions to deferred loan costs.................................... (11,328) (7,652)
--------- ---------
Net cash provided by financing activities..................... 406,798 193,123
--------- ---------
Increase (decrease) in cash and cash equivalents..................... 23,908 (191,477)
Cash and cash equivalents at beginning of period..................... 3,213 224,325
--------- ---------
Cash and cash equivalents at end of period........................... $ 27,121 $ 32,848
========= =========
Noncash investing and financing transactions:
Capitalized or deferred items included in accounts payable
and accrued liabilities............................................ $ 70,185 $ 39,655
========= =========
Conversion of amounts due under revolving credit facility
to term loan....................................................... $ 100,000 $
========= =========
Capitalization of amortized deferred loan costs..................... $ 511 $
========= =========
Supplemental cash flow disclosures:
Cash paid for:
Income taxes, net of refunds of $411 in 1998....................... $ 2,672 $ 1,129
========= =========
Interest expense, net of amounts capitalized....................... $ 14,703 $
========= =========
</TABLE>
See notes to the unaudited condensed consolidated financial statements
3
<PAGE>
EXTENDED STAY AMERICA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
NOTE 1 -- BASIS OF PRESENTATION
Extended Stay America, Inc. ("ESA") was organized on January 9, 1995 as a
Delaware corporation to develop, own and manage extended stay lodging
facilities.
On April 11, 1997, ESA, ESA Merger Sub, Inc. ("Merger Sub"), a wholly-owned
subsidiary of ESA, and Studio Plus Hotels, Inc. ("SPH") consummated a merger
(the "Merger") pursuant to which SPH was merged with and into Merger Sub and the
12,557,786 shares of SPH common stock issued and outstanding on such date were
converted into 15,410,915 shares of common stock, par value $.01 per share, of
ESA ("Common Stock") and options to purchase 1,072,565 shares of SPH common
stock were converted into options to purchase 1,316,252 shares of Common Stock.
The Merger was accounted for using the pooling of interests method of
accounting. The accompanying unaudited condensed consolidated financial
statements of ESA and SPH (together, the "Company") give effect to the Merger as
if it had been consummated as of the beginning of the periods presented. 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. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included.
The condensed consolidated balance sheet data at December 31, 1997 was
derived from audited financial statements of the Company but does not include
all disclosures required by generally accepted accounting principles.
Operating results for the three-month and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. 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, 1997.
In April 1998, the Accounting Standards Executive Committee released
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities"
("SOP 98-5"). SOP 98-5 requires that start-up costs, including pre-opening and
organizational costs be expensed as incurred and is effective for financial
statements issued for periods beginning after December 15, 1998. At September
30, 1998, the Company had unamortized pre-opening and organization costs of
approximately $1.1 million. Under SOP 98-5, the Company would have reported a
reduction of expenses of approximately $174,000 for the nine months ended
September 30, 1998.
For the nine months ended September 30, 1998 and 1997, the computation of
diluted earnings per share does not include approximately 6,287,000 and
3,075,000 weighted average shares, respectively, of Common Stock represented by
outstanding options because the exercise price of the options was greater than
the average market price of Common Stock during the period.
Certain previously reported amounts have been reclassified to conform with
the current period's presentation.
4
<PAGE>
NOTE 2 -- INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases and for operating loss and tax carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Income tax expense for the three-month and nine-month periods ended
September 30, 1998 and 1997 differed from the amounts computed by applying the
U.S. Federal income tax rate of 35% primarily as a result of the impact of state
and local income taxes and as a result of nondeductible expenses associated with
the Merger recognized in the second quarter of 1997.
NOTE 3 -- LONG-TERM DEBT
Effective March 10, 1998, the Company issued $200 million aggregate
principal amount of Senior Subordinated Notes (the "Notes"). The Notes contain
certain redemption features, bear interest at an annual rate of 9.15% and mature
on March 15, 2008. The Notes are uncollateralized and are subordinated to all
senior indebtedness of the Company and contain certain covenants for the benefit
of the holders of the Notes. These convenants, among other things, restrict
under certain circumstances the Company's ability to incur additional
indebtedness, pay dividends and make investments and other restricted payments,
enter into transactions with 5% stockholders or affiliates, create liens, and
sell assets.
Effective March 10, 1998, the Company amended its existing credit facility
("the Amended Credit Facility"). The Amended Credit Facility provides for $350
million in term loans (the "Term Loans") and $350 million in a revolving loan
facility (the "Revolving Facility"). The Revolving Facility and $150 million of
the Term Loans mature December 31, 2002 and bear interest, at the Company's
option, at either the Base Rate (as defined) or the Eurodollar rate, plus an
applicable margin which will be between .875% and 0% for Base Rate loans and
1.875% and 1% for Eurodollar loans. Term Loans of $200 million mature December
31, 2003, subject to maximum principal amortization of 1% in each of the years
1999 through 2002 and payment of the balance in four equal quarterly payments in
2003, and bear interest, at the Company's option, at either the Base Rate plus
1.75% or the Eurodollar rate plus 2.75%. At September 30, 1998, the Term Loans
were borrowed and the Revolving Facility remained available and committed under
the Amended Credit Facility. Availability of the Revolving Facility is
dependent, however, upon the Company satisfying certain financial ratios of debt
and interest compared to earnings before interest, taxes, depreciation and
amortization, with such amounts being calculated pursuant to definitions
contained in the Amended Credit Facility.
The Amended Credit Facility contains a number of covenants, including,
among others, covenants limiting under certain circumstances the ability of the
Company and its subsidiaries to incur debt, make investments, pay dividends,
prepay other indebtedness, engage in transactions with affiliates, enter into
sale-leaseback transactions, create liens, make capital expenditures, acquire or
dispose of assets, or engage in mergers or acquisitions. In addition, the
Amended Credit Facility contains affirmative covenants, including, among others,
covenants requiring maintenance of corporate existence, compliance with laws,
maintenance of properties and insurance, and the delivery of financial and other
information. The Amended Credit Facility also specifies events of default,
including a change of control, and requires the Company to comply with certain
financial tests and to maintain certain financial ratios on a consolidated
basis. The Company's obligations under the Amended Credit Facility are
guaranteed by each of the Company's subsidiaries and are collateralized by a
first priority lien on all stock of such subsidiaries owned by the Company and
all other current and future assets of the Company and its subsidiaries (other
than mortgages on the Company's and its subsidiaries' real property).
5
<PAGE>
NOTE 4 -- MERGER, FINANCING AND OTHER NON-RECURRING CHARGES
The Company, consistent with its normal operating procedures, invests
varying amounts in the sites under option in terms of (1) earnest money which
would be applied to the purchase of the site but that in many cases may not be
refundable, (2) legal, environmental, engineering, and architectural outlays
necessary to determine the feasibility of acquiring the site and constructing a
hotel on such site, and (3) salaries, wages, and travel costs of the Company's
personnel related to the sites which are capitalized in accordance with
generally accepted accounting principles. In the quarter ended September 30,
1998, the Company announced a reduction in its development plans for 1999 and
2000 as a result of capital market conditions. Accordingly, certain sites under
option would not be developed. As a result, the Company established a valuation
allowance of $12.0 million which resulted in a corresponding expense during the
period ended September 30, 1998.
During the three months ended June 30, 1997, the Company recorded merger,
financing, and other charges totaling $19.9 million. These one-time, pre-tax
charges consisted of (i) $9.7 million of merger expenses and costs associated
with the integration of SPH's operations following the Merger, (ii) the write-
off of $9.7 million of deferred costs associated with the Company's $400 million
mortgage facilities which were terminated upon execution of a revolving credit
agreement with various banks, and (iii) a charge of $500,000 in connection with
moving the listing of the Company's Common Stock to the New York Stock Exchange,
Inc. from The Nasdaq National Market.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Extended Stay America, Inc. ("ESA"), was organized on January 9, 1995, as a
Delaware corporation to develop, own, and manage extended stay lodging
facilities. Studio Plus Hotels, Inc. ("SPH") was formed in December 1994 and
acquired (through merger and exchange of SPH common stock for partnership
interests immediately prior to completion of the SPH initial public offering in
June 1995) all of the assets of Studio Plus, Inc. and the SPH predecessor
entities, which owned and operated StudioPLUS(TM) extended stay facilities since
1986. The acquisition of the interests of the controlling shareholder or
partner and affiliates of the predecessor entities was accounted for as a
pooling of interests.
On April 11, 1997, ESA, ESA Merger Sub, Inc. ("Merger Sub"), a wholly-owned
subsidiary of ESA, and SPH consummated a merger pursuant to which SPH was merged
with and into Merger Sub (the "Merger") and the 12,557,786 shares of SPH common
stock that were outstanding on the closing date were converted into 15,410,915
shares of common stock, par value $.01 per share, of ESA ("Common Stock") and
options to purchase 1,072,565 shares of SPH common stock were converted into
options to purchase 1,316,252 shares of Common Stock. The Merger was accounted
for using the pooling of interests method of accounting. The accompanying
unaudited condensed consolidated financial statements of ESA and SPH (together,
the "Company") give effect to the Merger as if it had been consummated at the
beginning of the periods presented.
The Company owns and operates three brands in the extended stay lodging
market--StudioPLUSTM Deluxe Studios ("StudioPLUS"), EXTENDED STAYAMERICA
Efficiency Studios ("EXTENDED STAY"), and Crossland Economy StudiosSM
("Crossland"), each designed to appeal to different price points below $500 per
week. All three brands offer the same core components: a living/sleeping area; a
fully-equipped kitchen or kitchenette; and a bathroom. EXTENDED STAY rooms are
designed to compete in the economy category. Crossland guestrooms are typically
smaller than EXTENDED STAY rooms and are targeted for the budget category, while
StudioPLUS facilities serve the mid-price category and generally feature larger
guestrooms, an exercise facility, and a swimming pool.
The following is a summary of the Company's selected development and
operational results for the three months and nine months ended September 30,
1998 and 1997.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Facilities Open (at Period End)........ 269 151 269 151
Total Facilities Developed................... 30 35 84 76
Average Occupancy Rate....................... 78% 80% 74% 75%
Average Weekly Room Rate..................... $ 290 $ 264 $ 286 $ 262
</TABLE>
Average occupancy rates are determined by dividing the guestrooms occupied
on a daily basis by the total number of guestrooms. Due to the Company's rapid
expansion, its overall average occupancy rate has been negatively impacted by
the lower occupancy typically experienced during the pre-stabilization period
for newly opened facilities. This negative impact on overall average occupancy
is expected to diminish as the ratio of newly opened facilities to total
facilities in operation at the end of the period decreases. Average weekly room
rates are determined by dividing room revenue by the number of rooms occupied on
a daily basis for the applicable period and multiplying by seven. The average
weekly room rates vary from standard room rates due primarily to (i) stays of
less than one week, which are charged at a higher nightly rate, (ii) higher
weekly rates for rooms which are larger than the standard rooms, and (iii)
additional charges for more than one person per room. Future occupancy and room
rates may be impacted by a number of factors including the number and geographic
location of new facilities as well as the season in which such facilities
commence operations. There can be no assurance that the foregoing occupancy and
room rates can be maintained.
7
<PAGE>
The following is a summary of the Company's development status as of
September 30, 1998, by brand. The Company expects to complete the construction
of the facilities currently under construction generally within the next twelve
months. There can be no assurance, however, that the Company will complete
construction within time periods historically experienced by the Company. The
Company's ability to complete construction may be materially impacted by various
factors including final permitting and obtaining certificates of occupancy as
well as weather-induced construction delays.
<TABLE>
<CAPTION>
EXTENDED
Crossland STAY StudioPLUS Total
--------- -------- ---------- -----
<S> <C> <C> <C> <C>
Operating Facilities................... 21 163 85 269
Facilities Under Construction.......... 18 46 17 81
</TABLE>
Results of Operations
For the Three Months Ended September 30, 1998 and 1997
Property Operations
The following is a summary of the properties operated during the specified
periods and the related average occupancy and weekly room rates:
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------------------------------------------
September 30, 1998 September 30, 1997
----------------------------------- -----------------------------------
Average Average Average Average
Facilities Occupancy Weekly Room Facilities Occupancy Weekly Room
Open Rate Rate Open Rate Rate
---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Crossland...... 21 66% $198 3 72% $183
EXTENDED STAY.. 163 81 286 99 79 251
StudioPLUS..... 85 76 328 49 84 308
--- -- ---- --- -- ----
Total........ 269 78% $290 151 80% $264
=== == ==== === == ====
</TABLE>
Because newly opened properties typically experience lower occupancies
during their pre-stabilization period, average occupancy rates are impacted by
the ratio of newly opened properties to total properties. For the EXTENDED STAY
brand, occupancy rates increased for the third quarter of 1998 as compared to
the third quarter of 1997 primarily due to a decrease in the ratio of newly
opened properties to total properties for that brand. Occupancy rates decreased
for the Crossland and StudioPLUS brands primarily due to an increase in the
number of newly opened properties for these brands. The average occupancy rate
in the third quarter of 1998 for the 116 properties that were owned and operated
by the Company as of June 30, 1997 was 85%.
The increase in overall average weekly room rates for the third quarter of
1998 as compared to the third quarter of 1997 reflects the geographic dispersion
of properties opened since September 30, 1997 and the higher standard weekly
room rates in certain of those markets, in addition to increases in rates
charged at previously opened properties. The Company expects that its average
weekly room rate will continue to be impacted as the lower priced EXTENDED STAY
and Crossland facilities increase as a percentage of the Company's total
facilities. The average weekly room rate for the 116 properties that were owned
and operated throughout both periods increased by 5% in the third quarter of
1998.
The Company recognized total revenues for the three months ended September
30, 1998 and 1997 of $81.0 million and $38.8 million, respectively, an increase
of $42.2 million. Approximately $40.0 million of the increased revenue was
attributable to properties opened subsequent to June 30, 1997 and approximately
$2.2 million was attributable to an increase in revenue for the 116 properties
that were owned and operated throughout both periods.
Property operating expenses, consisting of all expenses directly allocable
to the operation of the facilities but excluding any allocation of corporate
operating and property management expenses, depreciation or interest were $32.6
million (40% of total revenue) for the third quarter of 1998, compared to $17.4
million (45% of total revenue) for the third quarter of 1997. The decrease in
property operating expenses as a percentage of total revenue for the third
quarter of 1998 as compared to the third quarter of 1997 was primarily a result
of a decrease in the ratio of
8
<PAGE>
newly opened properties to total properties. In addition, the increase in
revenues of previously opened properties resulted in a decrease in property
operating expenses as a percentage of total revenue for those sites. As a result
of the foregoing, the Company realized property operating margins of 60% and 55%
for the third quarter of 1998 and 1997, respectively.
The provision for depreciation and amortization for the lodging facilities
of $10.5 million and $5.1 million for the third quarter of 1998 and 1997,
respectively, was provided using the straight-line method over the estimated
useful lives of the assets. These provisions reflect a pro rata allocation of
the annual depreciation and amortization charge for the periods for which the
facilities were in operation. The increase in depreciation and amortization for
the third quarter of 1998 as compared to the third quarter of 1997 is due to the
operation of 118 additional facilities in 1998.
Corporate Operations
Corporate operating and property management expenses include all expenses
not directly related to the development or operation of lodging facilities.
These expenses consist primarily of personnel expenses, professional and
consulting fees, and related travel expenses including costs that are not
directly related to a site that will be developed by the Company. The Company
incurred corporate operating and property management expenses of $10.0 million
(12% of total revenue) and $8.1 million (21% of total revenue) in the third
quarter of 1998 and 1997, respectively. The increase in the amount of these
expenses for the third quarter of 1998 as compared to 1997 reflects the impact
of additional personnel and related expenses in connection with the Company's
increased level of operating facilities and site development. Management expects
these expenses to increase in total amount but to continue to decline as a
percentage of revenue with the development of additional facilities in the
future.
Depreciation and amortization in the amount of $333,000 and $200,000 for
the third quarter of 1998 and 1997, respectively, were provided 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
office furniture and equipment.
The Company realized $1.4 million of interest income during the third
quarter of 1997, which was primarily attributable to the investment of funds
received from an offering of Common Stock. Approximately $1.2 million of
interest income was realized in the third quarter of 1998 primarily resulting
from the temporary investment of funds drawn under the Company's credit
facilities. The Company incurred interest charges of $12.5 million during the
third quarter of 1998, $4.9 million of which was capitalized and included in the
cost of buildings and improvements.
The Company recognized income tax expense of $3.7 million and $3.8 million
for the third quarter of 1998 and 1997, respectively. Income tax expense for
these periods differs from the federal income tax rate of 35% primarily due to
state and local income taxes.
Non-Recurring Charges
The Company, consistent with its normal operating procedures, invests
varying amounts in the sites under option in terms of (1) earnest money which
would be applied to the purchase of the site but that in many cases may not be
refundable, (2) legal, environmental, engineering, and architectural outlays
necessary to determine the feasibility of acquiring the site and constructing a
hotel on such site, and (3) salaries, wages, and travel costs of the Company's
personnel related to the sites which are capitalized in accordance with
generally accepted accounting principles. In the quarter ended September 30,
1998, the Company announced a reduction in its development plans for 1999 and
2000 as a result of capital market conditions. Accordingly, certain sites under
option would not be developed. As a result, the Company established a valuation
allowance of $12.0 million which resulted in a corresponding expense during the
period ended September 30, 1998.
9
<PAGE>
For the Nine Months Ended September 30, 1998 and 1997
Property Operations
The following is a summary of the properties operated during the specified
periods and the related average occupancy and weekly room rates:
<TABLE>
<CAPTION>
For the Nine Months Ended
------------------------------------------------------------------------
September 30, 1998 September 30, 1997
----------------------------------- ------------------------------------
Average Average Average Average
Facilities Occupancy Weekly Room Facilities Occupancy Weekly Room
Open Rate Rate Open Rate Rate
---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Crossland...... 21 63% $196 3 79% $179
EXTENDED STAY.. 163 76 281 99 73 248
StudioPLUS..... 85 72 322 49 82 303
--- -- ---- --- -- ----
Total........ 269 74% $286 151 75% $262
=== == ==== === == ====
</TABLE>
For the EXTENDED STAY brand, occupancy rates increased for the nine-month
period ended September 30, 1998 as compared to the same period in 1997 primarily
due to a decrease in the ratio of newly opened properties to total properties
for that brand. Occupancy rates decreased for the Crossland and StudioPLUS
brands primarily due to an increase in the number of newly opened properties for
these brands. The average occupancy rate in the nine months ended September 30,
1998 for the 75 properties that were owned and operated by the Company as of
December 31, 1996 was 82%.
The increase in average weekly room rates for the nine months ended
September 30, 1998 as compared to the same period of 1997 reflects the
geographic dispersion of properties opened since September 30, 1997 and the
higher standard weekly room rates in certain of those markets, in addition to
increases in rates charged at previously opened properties. The average weekly
room rate for the 75 properties that were owned and operated throughout both
periods increased 1% in the first nine months of 1998.
The Company recognized total revenues for the nine months ended September
30, 1998 and 1997 of $205.3 million and $87.6 million, respectively, an increase
of $117.7 million. Approximately $115.1 million of the increased revenue was
attributable to properties opened subsequent to December 31, 1996 and
approximately $2.6 million was attributable to an increase in revenue for the 75
properties that were owned and operated throughout both periods.
Property operating expenses for the nine months ended September 30, 1998
were $87.8 million (43% of total revenue) compared to $39.9 million (46% of
total revenue) for the nine months ended September 30 1997. The decrease in
property operating expenses as a percentage of total revenue for the nine months
ended September 30, 1998 as compared to the same period of 1997 was primarily a
result of improved occupancies and revenues for the facilities that were in
their pre-stabilization periods during the first nine months of 1997. As a
result of the foregoing, the Company realized property operating margins of 57%
and 54% for the nine months ended September 30, 1998 and 1997, respectively.
The provision for depreciation and amortization for the lodging facilities
was $29.3 million and $12.7 million for the nine months ended September 30, 1998
and 1997, respectively. The increase in depreciation and amortization for the
nine months ended September 30, 1998 as compared to the same period in 1997 is
due to the operation of 118 additional facilities in 1998.
Corporate Operations
Corporate operating and property management expenses for the nine months
ended September 30, 1998 and 1997 were $29.1 million and $20.8 million,
respectively, or 14% and 24% of total revenue, respectively. The increases in
the amount of these expenses for the nine-month period ended September 30, 1998
as compared to the same period of 1997 reflect the impact of additional
personnel and related expenses in connection with the Company's increased level
of operating facilities and site development. Management expects these expenses
to increase in total amount but to continue to decline as a percentage of
revenue with the development of additional facilities in the future.
10
<PAGE>
Depreciation and amortization for assets not directly related to operation
of the facilities was $1.1 million and $640,000 for the nine months ended
September 30, 1998 and 1997, respectively.
The Company realized $8.9 million of interest income during the nine-month
period ended September 30, 1997, which was primarily attributable to the
investment of funds received from an offering of Common Stock. Approximately
$2.6 million of interest income was realized in the nine-month period ended
September 30, 1998 primarily resulting from the temporary investment of funds
drawn under the Company's credit facilities. The Company incurred interest
charges of $27.5 million during the nine-month period ended September 30, 1998,
$12.8 million of which was capitalized and included in the cost of buildings and
improvements.
The Company recognized income tax expense of $13.6 million and $3.4 million
for the nine-month periods ended September 30, 1998 and 1997 respectively.
Income tax expense for these periods differs from the federal income tax rate of
35% primarily due to state and local income taxes and, in 1997, due to permanent
tax differences relating to non-deductible merger expenses. Management expects
that the annualized effective income tax rate for 1998 will be approximately
40%.
In the quarter ended September 30, 1998, the Company announced a reduction
in its development plans for 1999 and 2000 as a result of capital market
conditions. Accordingly, certain sites under option would not be developed. As a
result, the Company established a valuation allowance of $12.0 million which
resulted in a corresponding expense during the period ended September 30, 1998.
During the three months ended June 30, 1997, the Company recorded merger,
financing, and other charges totaling $19.9 million. These one-time, pre-tax
charges consisted of (i) $9.7 million of merger expenses and costs associated
with the integration of SPH's operations following the Merger, (ii) the write-
off of $9.7 million of deferred costs associated with the Company's $400 million
mortgage facilities which were terminated upon execution of a revolving credit
agreement with various banks, and (iii) a charge of $500,000 in connection with
moving the listing of the Company's Common Stock to the New York Stock Exchange,
Inc. from the Nasdaq National Market.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $27.1 million and $3.2 million
as of September 30, 1998 and December 31, 1997, respectively. At September 30,
1998, substantially all of the cash balances were invested, utilizing domestic
commercial banks and other financial institutions, in short-term commercial
paper and other securities having credit ratings of A1/P1 or equivalent. The
market value of the securities held approximates the carrying amount. In
addition, at September 30, 1998 and December 31, 1997, the Company invested
excess funds in an overnight sweep account with a commercial bank which invested
in short-term, interest-bearing reverse repurchase agreements. Due to the short-
term nature of these investments, the Company did not take possession of the
securities, which were instead held by the financial institution. The market
value of the securities held pursuant to the agreements approximates the
carrying amount. Deposits in excess of $100,000 are not insured by the Federal
Deposit Insurance Corporation.
During the nine months ended September 30, 1998, and 1997 the Company
generated cash from operating activities of $72.6 million and $25.1 million,
respectively.
The Company used $455.4 million and $409.7 million to acquire land and
develop and furnish a total of 166 and 155 sites, respectively, in the nine
months ended September 30, 1998 and 1997.
On February 6, 1997, the Company completed a private placement of 11.5
million shares of its Common Stock at a purchase price of $17.625 per share, for
an aggregate amount of approximately $203 million. Net proceeds received by the
Company from that private placement were approximately $198 million.
Effective September 26, 1997, the Company executed an agreement with
various banks establishing a revolving credit facility (the "Credit Facility")
for $500 million to be used for general corporate purposes, including the
construction and acquisition of extended stay hotel properties. The Credit
Facility had a maturity of December 31, 2002. Upon execution of the agreement
establishing the Credit Facility, the Company terminated two mortgage loan
facilities, which provided for an aggregate of $400 million in available
mortgage loans.
On March 10, 1998 (the "Effective Date"), the Company amended the Credit
Facility (the "Amended Credit Facility"). The Amended Credit Facility converted
$150 million of the amounts available under the Credit Facility into a term loan
facility (the "Converted Term Loans"), with the $350 million balance of the
amounts available under the Credit Facility remaining as a revolving loan
facility (the "Revolving Facility" and, together with the Converted Term Loans,
the "Converted Facilities"). With respect to the Converted Term Loans, $100
million was drawn on the Effective Date and the balance was drawn on July 31,
1998.
11
<PAGE>
The Amended Credit Facility also provides for up to $300 million in
additional term loans (the "Additional Term Loans"), $200 million of which were
committed as of the Effective Date and have been drawn (the "Committed Loans").
Additional Term Loans in excess of Committed Loans may be borrowed after
December 31, 1998 provided that at least $275 million must be outstanding under
the Revolving Facility on the date such loans are incurred.
The Company is required to repay indebtedness outstanding under the Amended
Credit Facility with the net cash proceeds from certain sales of assets, from
certain issuances of debt or equity by the Company, and from certain insurance
recovery events (subject to certain reinvestment rights). The Company is also
required to repay indebtedness outstanding under the Amended Credit Facility
annually in an amount equal to 50% of the Company's excess cash flow (as
defined).
Amounts drawn under the Converted Facilities bear interest, at the
Company's option, at either the Base Rate (as defined) or the Eurodollar rate,
plus an applicable margin. The applicable margin is an annual rate which
fluctuates based on the Company's ratio of consolidated debt to consolidated
EBITDA and which will be between .875% and 0% for Base Rate loans and 1.875% and
1% for Eurodollar loans.
Committed Loans bear interest, at the Company's option, at either the
Base Rate plus 1.75% or the Eurodollar rate plus 2.75%. Additional Term Loans
that are not Committed Loans will bear interest at rates to be agreed upon.
The Converted Facilities mature on December 31, 2002. Additional Term Loans
will mature no earlier than December 31, 2003, subject to maximum principal
amortization of 1% of the initially funded amounts in each of the years 1999
through 2002 and payment of the balance due in four equal quarterly payments in
2003.
The Company's obligations under the Converted Facilities are guaranteed by
each of the Company's subsidiaries (the "Guarantors") and are collateralized by
a first priority lien on all stock owned by the Company and the Guarantors and
all other current and future assets of the Company and the Guarantors (other
than mortgages on the Company's and the Guarantors' real property). The
obligations of the Company and the Guarantors under the Additional Term Loans
are collateralized on a pari passu basis by way of perfected first priority
security interests in the assets securing the Converted Facilities.
The Amended Credit Facility contains a number of covenants, including,
among others, covenants limiting under certain circumstances the ability of the
Company and its subsidiaries to incur debt, make investments, pay dividends,
prepay other indebtedness, engage in transactions with affiliates, enter into
sale-leaseback transactions, create liens, make capital expenditures, acquire or
dispose of assets, or engage in mergers or acquisitions. In addition, the
Amended Credit Facility contains affirmative covenants, including, among others,
covenants requiring maintenance of corporate existence, compliance with laws,
maintenance of properties and insurance, and the delivery of financial and other
information. The Amended Credit Facility also specifies events of default,
including a change of control, and requires the Company to comply with certain
financial tests and to maintain certain financial ratios on a consolidated
basis.
At September 30, 1998, the Company had drawn the Converted Term Loans and
the Committed Loans and $350 million remained available and committed under the
Revolving Facility. Availability under the Revolving Facility is dependent upon
the Company satisfying certain financial ratios of debt and interest compared to
earnings before interest, taxes, depreciation, and amortization, with such
amounts being calculated pursuant to definitions contained in the Amended Credit
Facility.
Effective March 10, 1998, the Company issued $200 million aggregate
principal amount of Senior Subordinated Notes, (the "Notes"). The Notes bear
interest at an annual rate of 9.15%, payable semiannually on March 15 and
September 15 of each year, commencing September 15, 1998, and mature on March
15, 2008. The Notes are redeemable, in whole or in part, any time on or after
March 15, 2003, initially at 104.575% of their principal amount, plus accrued
interest, declining ratably to 100% of their principal amount, plus accrued
interest, on or after March 15, 2006. Additionally, at any time prior to March
15, 2001, the Company may redeem up to 35% of the principal amount of the Notes
with the proceeds of one or more public equity offerings by the Company of its
Common Stock, at a redemption price of
12
<PAGE>
109.15% of their principal amount, plus accrued interest, provided that at least
$130 million aggregate principal amount of Notes remains outstanding after each
such redemption.
The Notes are uncollateralized and are subordinated to all senior
indebtedness of the Company and contain certain covenants for the benefit of the
holders of the Notes. These covenants, among other things, restrict under
certain circumstances the Company's ability to incur additional indebtedness,
pay dividends and make investments and other restricted payments, enter into
transactions with 5% stockholders or affiliates, create liens, and sell assets.
In connection with the Amended Credit Facility and the Notes, the Company
incurred additions to deferred loan costs of $11.3 million during the nine
months ended September 30, 1998.
The Company had commitments totaling approximately $225 million to complete
construction of extended stay properties at September 30, 1998. The Company
believes that the remaining availability under the Amended Credit Facility,
together with cash on hand and cash flows from operations, will provide
sufficient funds for the Company to develop the properties currently planned to
open in 1998 and to fund its operating expenses through 1998. The Company
expects to continue to rapidly expand its operations. Beginning in 1999, the
Company plans to open 50 to 70 properties annually with total development costs
of approximately $350 million per year. The Company expects to finance this
development with internally generated cash flows and increases in its debt
facilities. The timing and amount of financing needed will depend on a number
of factors, including the number of properties the Company constructs or
acquires, the timing of such development, and the cash flow generated by its
properties. In the event that the capital markets provide favorable
opportunities, the Company's plans or assumptions change or prove to be
inaccurate, or the foregoing sources of funds prove to be insufficient to fund
the Company's growth and operations, or if the Company consummates acquisitions,
the Company may seek additional capital sooner than currently anticipated.
Sources of financing may include public or private debt or equity financing.
There can be no assurance that such additional financing will be available to
the Company or, if available, that it can be obtained on acceptable terms or
within the limitations contained in the Company's financing arrangements.
Failure to obtain such financing could result in the delay or abandonment of
some or all of the Company's development and expansion plans and expenditures
and could have a material adverse effect on the Company.
Impact of the Year 2000 Issue and Accounting Releases
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Based on its
assessment, management of the Company does not anticipate that any significant
modification or replacement of the Company's software will be necessary for its
computer systems to properly utilize dates beyond December 31, 1999 or that the
Company will incur significant operating expenses to make any such computer
system improvements. The Company is undertaking an assessment as to whether any
of its significant suppliers, lenders, or service providers will need to make
any such software modifications or replacements. Management does not expect the
failure of any of such third parties to address the Year 2000 Issue to have a
material adverse effect on the Company's business, operations, or financial
condition, although there can be no assurance to that effect.
In April 1998, the Accounting Standards Executive Committee released
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities"
("SOP 98-5"). SOP 98-5 requires that start-up costs, including pre-opening and
organizational costs be expensed as incurred and is effective for financial
statements issued for periods beginning after December 15, 1998. At September
30, 1998, the Company had unamortized pre-opening and organization costs of
approximately $1.1 million. Under SOP 98-5, the Company would have reported a
reduction of expenses of approximately $174,000 for the nine months ended
September 30, 1998.
Seasonality and Inflation
Based upon the operating history of the Company's facilities, management
believes that extended stay lodging facilities are not as seasonal in nature as
the overall lodging industry. Management does expect, however, that occupancy
and revenues may be lower than average during the first and fourth quarters of
each calendar year. Because many of the Company's expenses do not fluctuate
with occupancy, such declines in occupancy may cause fluctuations or decreases
in the Company's quarterly earnings.
13
<PAGE>
The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the revenue or operating results of the
Company during any of the periods presented. There can be no assurance,
however, that inflation will not affect future operating or construction costs.
Special Note on Forward-Looking Statements
Certain statements in this Form 10-Q constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance,
or achievements of the Company to be materially different from any future
results, performance, or achievements expressed or implied by such forward-
looking statements. Such factors include, among other things, the Company's
limited operating history and uncertainty as to the Company's future
profitability; the ability to meet construction and development schedules and
budgets; the ability to develop and implement operational and financial systems
to manage rapidly growing operations; the uncertainty as to the consumer demand
for extended stay lodging; increasing competition in the extended stay lodging
market; the ability to integrate and successfully operate acquired properties
and the risks associated with such properties; the ability to obtain financing
on acceptable terms to finance the Company's growth strategy; the ability of the
Company to operate within the limitations imposed by financing arrangements; and
general economic conditions as they may impact the overall lodging industry.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The Company undertakes no
obligations to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise.
14
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information
On August 13, 1998, the Company exchanged all $200 million aggregate
principal amount of its outstanding 9.15% Senior Subordinated Notes due 2008
(the "Old Notes") for an equal principal amount of newly-issued 9.15% Senior
Subordinated Notes due 2008 (the "New Notes"). The form and terms of the New
Notes are the same in all material respects as the form and terms of the Old
Notes except that the New Notes were registered under the Securities Act of
1933, as amended, and do not bear legends restricting the transfer thereof. The
New Notes evidence the same indebtedness as the Old Notes (which they replace)
and are entitled to the benefits of the Indenture, dated as of March 10, 1998,
between the Company and Manufacturers and Traders Trust Company, as Trustee.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
------ ----------------------
10.1 Amendment, dated as of September 18, 1998, to Credit Agreement,
dated as of September 26, 1997 and Amended and Restated as of March
10, 1998, by and among the Company and Morgan Stanley Senior
Funding, Inc. as Syndication Agent and Arranger, The Industrial Bank
of Japan, Limited, as Administrative Agent, and various banks
10.2 Pro Player Stadium Executive Suite License Agreement, dated as of
July 16, 1998, by and between South Florida Stadium Corporation
d/b/a Pro Player Stadium and the Company
10.3 Broward County Arena Executive Suite License Agreement, by and
between Arena Operating Company, Ltd. and the Company
27.1 Financial Data Schedule (for EDGAR filings only)
(b) Reports on Form 8-K
None
15
<PAGE>
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 November 10, 1998.
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
(Principal Accounting Officer)
16
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
AMENDMENT TO CREDIT AGREEMENT
-----------------------------
AMENDMENT, dated as of September 18, 1998 (this "Amendment"), among
EXTENDED STAY AMERICA, INC., a Delaware corporation (the "Borrower"), the banks
party to the Credit Agreement described below (the "Banks"), MORGAN STANLEY
SENIOR FUNDING, INC., as Syndication Agent and Arranger, and THE INDUSTRIAL BANK
OF JAPAN, LIMITED, as Administrative Agent. All capitalized terms used herein
and not otherwise defined shall have the respective meanings provided such terms
in the Credit Agreement referred to below.
W I T N E S S E T H :
-------------------
WHEREAS, the Borrower, the Banks, Morgan Stanley Senior Funding, Inc., as
Syndication Agent and Arranger, and The Industrial Bank of Japan, as
Administrative Agent are parties to an Amended and Restated Credit Agreement,
dated as of March 10, 1998 (as amended, modified and supplemented through the
date hereof, the "Credit Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement as herein
provided;
NOW THEREFORE, it is agreed:
1. Section 11 of the Credit Agreement is hereby amended by (a) adding the
proviso "provided that the September 1998 Charge shall not be deemed to
constitute corporate overhead for purposes of this definition" at the end of the
definition of "Annualized Corporate Overhead Amount", (b) deleting the "and"
before clause (iv) of the proviso to the definition of "Consolidated Net Income"
and inserting a comma in lieu thereof, (c) adding the phrase "and (v) the
September 1998 Charge shall not be taken into account in determining
Consolidated Net Income of the Borrower" at the end of the definition of
"Consolidated Net Income" and (d) adding the following definition in the
appropriate alphabetical order:
"September 1998 Charge" shall mean the non-recurring expense of up to
$13,250,000 resulting from the establishment in the fiscal quarter of the
Borrower ended September 1998 of a valuation allowance for costs which have been
incurred to acquire options for sites, the performance of related due diligence
and other related expenses.
2. This Amendment is limited precisely as written and shall not be deemed
to be a consent to or modification of any other term or condition of the Credit
Agreement, the other Credit Documents or any of the instruments or agreements
referred to therein.
3. In order to induce the Banks to enter into this Amendment, the Borrower
hereby represents and warrants that (x) no Default or Event of Default exists on
the Amendment Date (as defined below) after giving effect to this Amendment and
(y) all of the representations and warranties contained in the Credit Documents
shall be true and correct in all material respects on the Amendment Date after
giving effect to this Amendment with the same effect as though such
representations and warranties had been made on and as of the Amendment Date (it
being understood that any representation or warranty made as of a specific date
shall be true and correct in all material respects as of such specific date).
<PAGE>
4. This Amendment shall become effective for all purposes on the first
date (the "Amendment Date"), on and after the date that the Borrower and the
Required Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered (including by way of
telecopier) the same to Administrative Agent's counsel (attention: M. Irmak
Canevi, Fax: (212) 354-8113).
5. This Amendment may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Borrower and the Administrative Agent.
8. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
9. From and after the Amendment Date, all references in the Credit
Agreement and each of the Credit Documents to the Credit Agreement or each of
the Credit Documents shall be deemed to be references to such Credit Agreement
or each of the Credit Documents as amended hereby.
* * *
2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
EXTENDED STAY AMERICA, INC.
By: /s/ Robert A. Brannon
---------------------------------------
Name: Robert A. Brannon
Title: Senior Vice President
MORGAN STANLEY SENIOR FUNDING,
INC., Individually, as Syndication Agent
and as Arranger
By: /s/ Michael T. McLaughlin
---------------------------------------
Name: Michael T. McLaughlin
Title: Principal
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, Individually and as
Administrative Agent
By: /s/ Takuya Honjo
---------------------------------------
Name: Takuya Honjo
Title: Senior Vice President
3
<PAGE>
BALANCED HIGH YIELD FUND I, LTD., c/o
BHF-BANK AKTIENGESELLSCHAFT
Acting through its New York Branch as
attorney-in-fact
By: /s/ John Sykes
-----------------------------------
Name: John Sykes
Title: Vice President
By: /s/ Tony Heyman
-----------------------------------
Name: Tony Heyman
Title: AVP
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ Brian S. Dossie
-----------------------------------
Name: Brian S. Dossie
Title: Assistant Vice President
BANK ONE, KENTUCKY, NA
By:
-----------------------------------
Name:
Title:
BANKBOSTON, NA
By: /s/ Renee A. Ross
-----------------------------------
Name: Renee A. Ross
Title: Managing Director
BANKERS TRUST COMPANY
By:
-----------------------------------
Name:
Title:
4
<PAGE>
BEAR STEARNS INVESTMENT
PRODUCTS, INC.
By:
-----------------------------------
Name:
Title:
BLACK DIAMOND CAPITAL
MANAGEMENT LLC
c/o TORONTO DOMINION TX, INC.
By:
-----------------------------------
Name:
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
By: /s/ Karen Volk
-----------------------------------
Name: Karen Volk
Title: Authorized Signatory
CAPTIVA III FINANCE, LTD.
c/o PACIFIC INVESTMENT
MANAGEMENT CO.
By: PIMCO Management Inc.,
a general partner
By: /s/ Richard M. Weil
----------------------------------
Name: Richard M. Weil
Title: Senior Vice President
5
<PAGE>
CHANG HWA COMMERCIAL BANK, LTD.,
NEW YORK BRANCH
By:
-----------------------------------
Name:
Title:
CHEVY CHASE BANK, FSB
By:
-----------------------------------
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENE
By: /s/ Marcus Edward
-----------------------------------
Name: Marcus Edward
Title: Vice President
By: /s/ Sean Mounier
-----------------------------------
Name: Sean Mounier
Title: First Vice President
DELANO COMPANY
By PACIFIC INVESTMENT
MANAGEMENT COMPANY, as its
Investment Advisor
By: PIMCO Management Inc.,
a general partner
By: /s/ Richard M. Weil
-----------------------------------
Name: Richard M. Weil
Title: Senior Vice President
6
<PAGE>
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSENAG
By: /s/ Paul Judicke
-----------------------------------
Name: Paul Judicke
Title: Vice President
By: /s/ John S. Runnio
-----------------------------------
Name: John S. Runnio
Title: First Vice President
FIRST COMMERCIAL BANK
By: /s/ June Shiong Lu
-----------------------------------
Name: June Shiong Lu
Title: SVP & General Manager
FLOATING RATE PORTFOLIO
c/o INVESCO SENIOR SECURED
MANAGEMENT
By: /s/ Kathleen A. Lenarcic
-----------------------------------
Name: Kathleen A. Lenarcic
Title: Authorized Signatory
HELLER FINANCIAL, INC.
By: /s/ Linda W. Wolf
-----------------------------------
Name: Linda W. Wolf
Title: Senior Vice President
IMPERIAL BANK
By: /s/ Steven K. Johnson
-----------------------------------
Name: Steven K. Johnson
Title: Senior Vice President
7
<PAGE>
KZH III LLC
By: /s/ Virginia Conway
-------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH ING-2 LLC
By: /s/ Virginia Conway
-------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH-PAMCO LLC
By:
-------------------------------
Name:
Title:
LAND BANK OF TAIWAN
By:
-------------------------------
Name:
Title:
LEHMAN COMMERCIAL PAPER INC.
By:
-------------------------------
Name:
Title:
8
<PAGE>
MANUFACTURERS AND TRADERS TRUST
COMPANY
By: /s/ R. Buford Sears
-------------------------------
Name: R. Buford Sears
Title: Administrative Vice President
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ Benjamin W. Lau
-------------------------------
Name: Benjamin W. Lau
Title: Authorized Signatory
ML CLO XIX STERLING (CAYMAN) LTD.
c/o STERLING ASSET MANAGEMENT,
LLC
By:
-------------------------------
Name:
Title:
ML CLO XX PILGRIM AMERICA
(CAYMAN), LTD. c/o PILGRIM
AMERICA INVESTMENTS, INC.
By:
-------------------------------
Name:
Title:
9
<PAGE>
MOUNTAIN CLO TRUST
By:
-------------------------------
Name:
Title:
ORIX USA CORPORATION
By: /s/ Mr. Charles Kobayashi
------------------------------
Name: Mr. Charles Kobayashi
Title: Vice President & Manager
PAM CAPITAL FUNDING, LP
c/o PROTECTIVE ASSET
MANAGEMENT COMPANY
By:
-------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
c/o BOSTON MANAGEMENT
RESEARCH
By: /s/ Scott H. Page
------------------------------
Name: Scott H. Page
Title: Vice President
SUMMIT BANK
By:
-------------------------------
Name:
Title:
10
<PAGE>
THE DEVELOPMENT BANK OF
SINGAPORE, LTD.
By:
-------------------------------
Name:
Title:
THE LONG TERM CREDIT BANK OF
JAPAN, LTD.
By: /s/ Thomas Meyer
-------------------------------
Name: Thomas Meyer
Title: Senior Vice President
THE SUMITOMO BANK, LIMITED
By:
-------------------------------
Name:
Title:
TORONTO DOMINION TX, INC.
By:
-------------------------------
Name:
Title:
11
<PAGE>
RZB FINANCE LLC
By: /s/ John A. Valiska
-----------------------------
Name: John A. Valiska
Title: Vice President
By: /s/ Pearl Geffers
-----------------------------
Name: Pearl Geffers
Title: Vice President
12
<PAGE>
ANNEX I
ACKNOWLEDGEMENT AND AGREEMENT
-----------------------------
Each of the undersigned, each being a Subsidiary Guarantor on the Amendment
Date (including each Subsidiary of the Borrower which was a Subsidiary Guarantor
immediately before the Amendment Date and each Subsidiary of the Borrower which
becomes a Subsidiary Guarantor on the Amendment Date) hereby acknowledges and
agrees to the provisions of the foregoing Amendment, and hereby agrees for the
benefit of the Banks that all references in the Credit Documents to the "Credit
Agreement" shall be deemed to be a reference to the Credit Agreement as amended
by this Amendment.
ESA 0100, INC.
ESA 0102, INC.
ESA 0106, INC.
ESA 0115, INC.
ESA 0121, INC.
ESA 0123, INC.
ESA 0124, INC.
ESA 0125, INC.
ESA 0127, INC.
ESA 0131, INC.
ESA 0132, INC.
ESA 0140, INC.
ESA 0145, INC.
ESA 0153, INC.
ESA 0155, INC.
ESA 0161, INC.
ESA 0163, INC.
ESA 0172, INC.
ESA 0174, INC.
ESA 0175, INC.
ESA 0180, INC.
ESA 0186, INC.
ESA 0201, INC.
ESA 0206, INC.
ESA 0223, INC.
ESA 0231, INC.
ESA 0232, INC.
ESA 0247, INC.
ESA 0280, INC.
ESA 0291, INC.
ESA 0295, INC.
ESA 0296, INC.
ESA 0302, INC.
<PAGE>
ESA 0303, INC.
ESA 0305, INC.
ESA 0308, INC.
ESA 0309, INC.
ESA 0311, INC.
ESA 0315, INC.
ESA 0316, INC.
ESA 0317, INC.
ESA 0325, INC.
ESA 0328, INC.
ESA 0331, INC.
ESA 0335, INC.
ESA 0341, INC.
ESA 0352, INC.
ESA 0355, INC.
ESA 0356, INC.
ESA 0361, INC.
ESA 0362, INC.
ESA 0370, INC.
ESA 0371, INC.
ESA 0373, INC.
ESA 0379, INC.
ESA 0381, INC.
ESA 0382, INC.
ESA 0396, INC.
ESA 0399, INC.
ESA 0410, INC.
ESA 0413, INC.
ESA 0414, INC.
ESA 0417, INC.
ESA 0418, INC.
ESA 0421, INC.
ESA 0450, INC.
ESA 0454, INC.
ESA 0455, INC.
ESA 0478, INC.
ESA 0479, INC.
ESA 0480, INC.
ESA 0486, INC.
ESA 0494, INC.
ESA 0501, INC.
ESA 0503, INC.
ESA 0504, INC.
ESA 0510, INC.
ESA 0521, INC.
2
<PAGE>
ESA 0522, INC.
ESA 0525, INC.
ESA 0526, INC.
ESA 0527, INC.
ESA 0530, INC.
ESA 0532, INC.
ESA 0541, INC.
ESA 0552, INC.
ESA 0553, INC.
ESA 0554, INC.
ESA 0555, INC.
ESA 0557, INC.
ESA 0561, INC.
ESA 0562, INC.
ESA 0564, INC.
ESA 0565, INC.
ESA 0574, INC.
ESA 0576, INC.
ESA 0590, INC.
ESA 0600, INC.
ESA 0629, INC.
ESA 0634, INC.
ESA 0640, INC.
ESA 0646, INC.
ESA 0658, INC.
ESA 0659, INC.
ESA 0660, INC.
ESA 0670, INC.
ESA 0675, INC.
ESA 0677, INC.
ESA 0679, INC.
ESA 0680, INC.
ESA 0681, INC.
ESA 0691, INC.
ESA 0699, INC.
ESA 0700, INC.
ESA 0701, INC.
ESA 0706, INC.
ESA 0731, INC.
ESA 0733, INC.
ESA 0734, INC.
ESA 0737, INC.
ESA 0745, INC.
ESA 0752, INC.
ESA 0753, INC.
3
<PAGE>
ESA 0765, INC.
ESA 0767, INC.
ESA 0780, INC.
ESA 0785, INC.
ESA 0788, INC.
ESA 0789, INC.
ESA 0795, INC.
ESA 0802, INC.
ESA 0805, INC.
ESA 0806, INC.
ESA 0810, INC.
ESA 0815, INC.
ESA 0817, INC.
ESA 0824, INC.
ESA 0828, INC.
ESA 0831, INC.
ESA 0838, INC.
ESA 0851, INC.
ESA 0857, INC.
ESA 0858, INC.
ESA 0859, INC.
ESA 0860, INC.
ESA 0861, INC.
ESA 0869, INC.
ESA 0876, INC.
ESA 0877, INC.
ESA 0884, INC.
ESA 0885, INC.
ESA 0886, INC.
ESA 0898, INC.
ESA 0901, INC.
ESA 0902, INC.
ESA 0903, INC.
ESA 0911, INC.
ESA 0916, INC.
ESA 0919, INC.
ESA 0931, INC.
ESA 0932, INC.
ESA 0936, INC.
ESA 0939, INC.
ESA 0942, INC.
ESA 0951, INC.
ESA 0974, INC.
ESA 0976, INC.
ESA 0977, INC.
4
<PAGE>
ESA 0979, INC.
ESA 0981, INC.
ESA 0985, INC.
ESA 0986, INC.
ESA 0990, INC.
ESA 0991, INC.
ESA 0992, INC.
ESA 0993, INC.
ESA 0994, INC.
ESA 0995, INC.
ESA 0996, INC.
ESA 1015, INC.
ESA 1500, INC.
ESA 1501, INC.
ESA 1502, INC.
ESA 1510, INC.
ESA 1514, INC.
ESA 1546, INC.
ESA 1550, INC.
ESA 1591, INC.
ESA 1594, INC.
ESA 1596, INC.
ESA 1634, INC.
ESA 2503, INC.
ESA 2509, INC.
ESA 2522, INC.
ESA 3503, INC.
ESA 3504, INC.
ESA 4012, INC.
ESA 4013, INC.
ESA 4014, INC.
ESA 4015, INC.
ESA 4016, INC.
ESA 4019, INC.
ESA 4023, INC.
ESA 4027, INC.
ESA 4034, INC.
ESA 6000, INC.
ESA 6002, INC.
ESA 6005, INC.
ESA 6011, INC.
ESA 6012, INC.
ESA 6016, INC.
ESA 6022, INC.
ESA 6026, INC.
5
<PAGE>
ESA 6027, INC.
ESA 6028, INC.
ESA 6029, INC.
ESA 6030, INC.
ESA 6036, INC.
ESA 6037, INC.
ESA 6048, INC.
ESA 6049, INC.
ESA 6055, INC.
ESA 6057, INC.
ESA 6066, INC.
ESA 6072, INC.
ESA 6073, INC.
ESA 6074, INC.
ESA 6086, INC.
ESA 7003, INC.
ESA 7010, INC.
ESA 7011, INC.
ESA 7502, INC.
ESA 7508, INC.
ESA 7512, INC.
ESA 7513, INC.
ESA 7519, INC.
ESA 8515, INC.
ESA 8525, INC.
ESA 8546, INC.
ESA ARIZONA, INC.
ESA C1, INC.
ESA COL, INC.
ESA FLORIDA, INC.
ESA GEORGIA, INC.
ESA ILLINOIS, INC.
ESA INDIANA, INC.
ESA LOUISIANA, INC.
ESA MARYLAND, INC.
ESA MINNESOTA, INC.
ESA OHIO, INC.
ESA OKLAHOMA, INC.
ESA TEXAS, INC.
ESA TENNESSEE, INC.
ESA UTAH, INC.
ESA VIRGINIA, INC.
ESA WASHINGTON, INC.
EXTENDED STAY 0453, INC.
EXTENDED STAY 0463, INC.
6
<PAGE>
EXTENDED STAY 0507, INC.
EXTENDED STAY 0547, INC.
EXTENDED STAY 2506, INC.
EXTENDED STAY CA, INC.
ESA MANAGEMENT, INC.
ESA WEST, INC.
ESA INTERNATIONAL, INC.
STUDIO PLUS HOTELS, INC.
STUDIO PLUS PROPERTIES, INC.
By
------------------------------------
Name:
Title:
On behalf of each Subsidiary
Guarantor listed above
7
<PAGE>
EXHIBIT 10.2
July 16, 1998 PRO PLAYER STADIUM
EXECUTIVE SUITE LICENSE AGREEMENT
This License Agreement ("Agreement") is made and entered into by and
between South Florida Stadium Corporation d/b/a Pro Player Stadium, a Florida
corporation, with offices at 2269 N.W. 199th Street, Miami, Florida 33056,
("Owner") and EXTENDED STAY AMERICA, INC. ("Licensee") whose address is 450 E.
Las Olas Blvd., Suite 1100, Fort Lauderdale, FL 33301, whose telephone number is
(954) 713-1600 and whose designee and contact for the purposes of this Agreement
is George D. Johnson, Jr., President and CEO.
WITNESSETH:
In consideration of the mutual covenants and agreements set forth in this
Agreement, Owner and Licensee do hereby agree as follows:
A. Grant of License. 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 Pro Player Stadium, Dade County, Florida (the "Stadium") and
identified by number in Paragraph B.
B. Basic Terms. As used herein, the following terms shall apply to this
Agreement:
1. Suite. The Suite shall have the following characteristics:
a. This License is for Suite Number 203A.
b. The Suite shall have the following number of Total Seats:
Sixteen (16).
c. The Suite shall have a location in relation to the playing
field in the Stadium shown in attached Exhibit A.
2. Ticket Allotment. The Ticket Allotment for the Suite shall be
Sixteen (16) season tickets for Miami Dolphins home games and
Zero (0) season tickets for Florida Marlins home games.
3. Suite Fee. (See Paragraph E).
a. Annual Suite Fee: Eighty three thousand dollars ($83,000).
b. Initial Payment due: Upon receipt of signed agreement.
4. Term. Three (3) years (See Paragraph F).
<PAGE>
5. Security Deposit: Waived (See Paragraph G). No additional
Security Deposit is required if this Agreement is a renewal of an
existing License Agreement.
C. Furnishings, Decor and Alteration of Suite; Suite Services. Schedule 1 to
this Agreement governs the manner in which the Suite shall be furnished and
equipped and sets forth services to be provided to the Suite.
D. Possession and Use, Tickets and Parking. Schedule 2 to this Agreement
governs Licensee's right of use and access, rights with respect to tickets
and rights with respect to parking.
E. Payments. Section 3.1 of Schedule 3 of this Agreement governs the payment
of the annual Suite Fee.
F. Term. Section 3.2 of Schedule 3 to this Agreement governs the term of this
Agreement and Licensee's right of first refusal. This Agreement shall
become effective and binding when executed by both Licensee and Owner.
G. Security Deposit. Section 3.3 of Schedule 3 of this Agreement governs the
payment of the Security Deposit.
H. Other Terms and Conditions. Schedule 4 to this Agreement sets forth other
Terms and Conditions applicable to this Agreement.
I. Special Stipulations. Schedule 5, if Schedule 5 is attached hereto,
contains any modifications of this Agreement or additional agreements
between the parties.
J. Entire Agreement. This Agreement, consisting of this basic Agreement and
Schedules 1, 2, 3, 4 and (if attached) Schedule 5, constitutes the entire
Agreement between the parties. This Agreement supersedes all prior
agreements or negotiations concerning the subject matter hereof. No
representation, promise or undertaking heretofore or concurrently made,
whether in advertising or marketing materials, discussions or otherwise,
shall be binding on either party unless specifically set forth herein.
2
<PAGE>
IN WITNESS WHEREOF, this Agreement shall become effective and binding upon
the parties when executed by both Licensee and Owner, as indicated below.
SOUTH FLORIDA STADIUM CORPORATION
D/B/A PRO PLAYER STADIUM, a Florida
corporation
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Date:
----------------------------
LICENSEE*:
By: /s/ George D. Johnson Jr.
---------------------------------
Name: George D. Johnson Jr.
----------------------------
Title: President and CEO
---------------------------
Date:
----------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Date:
----------------------------
- -------------------------------
* Each person or persons listed above as Licensee must sign this Agreement.
If the Licensee is a corporation or a partnership, the title of the authorized
signatory must be included.
3
<PAGE>
SCHEDULE 1
Furnishings, Decor and Alterations
of the Suite; Suite Services
1.1 During the term of this Agreement, Owner shall provide the following to the
Suite:
a. The following fixtures, furnishings and equipment: upholstered
chair seats facing the playing field; carpeted floor; wall
coverings; built-in cabinetry (including lockable liquor
cabinet); sink with running cold water; ice-maker; counter-size
refrigerator, color television; lounge-seats and table; and such
other furnishings as Owner shall provide.
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;
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.
1.2 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
free of any liens or encumbrances, in a good workmanlike manner, and in
compliance
5
<PAGE>
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.
6
<PAGE>
SCHEDULE 2
Possession and Use, Tickets and Parking
2.1 Possession and Use.
Licensee shall be entitled to the use and possession of the Suite during
the term of this Agreement, except as provided in Section 2.2 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 such event including,
without limitation, the policy 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 or 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.
2.2 Admission Tickets.
Licensee's rights with respect to admission tickets for events at the
Stadium, including Miami Dolphins' and Florida Marlins' pre-season and regular
season games and Special Events shall depend on whether Licensee is a Stadium
Licensee, Dolphins' Licensee or Marlins' Licensee, as hereinafter defined.
Licensees which are entitled to both Miami Dolphins' and Florida Marlins' season
tickets are sometimes hereinafter referred to as "Stadium, Licensees"; Licensees
which are entitled to Miami Dolphins' season tickets only are sometimes
hereinafter referred to as "Dolphins' Licensees"; and Licensees which are
entitled to Florida Marlins' season tickets only are sometimes hereinafter
referred to as "Marlins' Licensees". Stadium Licensees, Dolphins' Licensees and
Marlins' Licensees shall be entitled to the following respective benefits set
forth below:
a) Stadium Licensees. During the term of this Agreement, Stadium Licensee
shall receive the number of admission tickets to the Stadium set forth in
Paragraph B above for access to the Suite for each pre-season and regular season
football game played by the Miami Dolphins at the Stadium and each regular
season baseball game played by the Florida Marlins at the Stadium.
Additionally, Owner shall make available and Stadium Licensee shall be free to
purchase (i) up to four (4) direct access tickets for admission to the Suite for
7
<PAGE>
all pre-season and regular season Miami Dolphins' games, and (ii) up to (4)
direct access tickets for admission to the Suite for all regular season Florida
Marlins' games.
Stadium Licensee shall also have the opportunity to purchase 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 Stadium 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 Stadium Licensees and their guests exceed the admission price charged
for an admission ticket to the highest priced category of seats in the Stadium.
If after Owner offers tickets for purchase for Special Events at the Stadium,
Stadium Licensee determines not to purchase any of 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 Stadium
Licensee purchases some, but not all of the admission tickets to the Suite for a
Special Event, Owner may make available for purchase by others, including
executive suite licensees who have been relocated or otherwise denied access to
their respective suites, any unpurchased admission tickets for seats in and
access to the Suite.
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, Stadium
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 Stadium Licensee on terms and in locations to be determined by Owner.
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, Stadium 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 Stadium 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 Stadium Licensees of
300 Level Suites and their guests in comparable suites as closely together as
circumstances will permit.
Stadium Licensees of Suites located in the lower tier of Suites (i.e.,
Suite 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 and access to 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 Stadium Licensees of 300 Level Suites who have
8
<PAGE>
been required to relinquish possession of their Suite, as aforesaid, to
accommodate requirements of the National Football League.
b) Dolphins' Licensees. During the term of this Agreement, Dolphins'
Licensee shall receive the number of admission tickets to the Stadium set forth
in Paragraph B above for access to the Suite for each pre-season and regular
season football game played by the Miami Dolphins at the Stadium. Additionally,
Owner shall make available and Dolphins' Licensee shall be free to purchase up
to four (4) direct access tickets for admission to the Suite for all pre-season
and regular season Miami Dolphins games.
Dolphins' Licensee shall also have the opportunity to purchase 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 all post-season football
games of the Miami Dolphins, college bowl games, or concerts (collectively,
"Special Events"), but specifically excluding any and all baseball related
events, such as post-season baseball games of the Florida Marlins and Major
League Baseball All Star Games, for which Dolphins' 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 Dolphins' Licensee and its guests exceed the admission price
charged for an admission ticket to the highest category of seats in the Stadium.
After Owner offers tickets for purchase for Special Events at the Stadium, if
Dolphins' Licensee shall determine not to purchase any of 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 to a third party. In the event Dolphins' Licensee
purchases some, but not all of the admission tickets to the Suite for a Special
Event, Owner may make available for purchase by others, including executive
suite licensees who have been relocated or otherwise denied access to their
respective suites, any unpurchased admission tickets for seats in the Suite.
Dolphins' Licensee shall also be given the opportunity to purchase tickets
for any other games or events at the Stadium, subject to availability.
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, Dolphins'
Licensee shall not have the right to purchase admission tickets to the Suite.
However, Owner in its discretion, may offer alternative seating in the Stadium
to Dolphins' Licensee on terms and in locations to be determined by Owner.
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, Dolphins' Licensee 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 reported to do so. A Dolphins' Licensee of a 300 Level
Suite shall be entitled to purchase admission tickets to the Super Bowl Game for
at least fifty
9
<PAGE>
percent (50%) of the seats in their respective suites. Owner shall make
reasonable effort (but can make no guaranty) to place Dolphins' Licensees of 300
Level Suites and their guests in comparable suites as close together as
circumstances will permit.
Dolphins' 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 and access to 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 Dolphins' 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.
c) Marlins' Licensees. During the term of this Agreement, Marlins'
Licensee shall receive the number of admission tickets to the Stadium set forth
in Paragraph B above for access to the Suite for each regular season baseball
game played by the Florida Marlins at the Stadium. Additionally, Marlins'
Licensee shall also have the opportunity to purchase the required admission
tickets to the Stadium for access to the Suite for any of the following games
for which Marlins' Licensee desires to use the Suite: exhibition baseball games
played at the Stadium, post-season baseball games of the Florida Marlins
(including World Series games) played at the Stadium and the Major League
Baseball All-Star Game to be held at the Stadium in the year 2000. Admission
tickets for such games shall be priced by the sponsor or promoter of the game,
but in no event shall the admission price charged to Marlins' Licensee and its
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 such games at the Stadium, if Marlins' Licensee shall determine not to
purchase any tickets for the Suite within the time specified, then, at the
option of Owner, the use of the Suite for such game shall revert to Owner and
Owner shall be free to sell the use of the Suite to a third party. In the event
Marlins' Licensee purchases some, but not all of the admission tickets to the
Suite for such games, Owner may make available for purchase by others, including
executive suite licensees who have been relocated or otherwise denied access to
their respective suites, any unpurchased admission tickets for seats in the
Suite.
Marlins' Licensee shall also be given the opportunity to purchase tickets
for any other games or events at the Stadium, subject to availability.
In the event the Suite is deemed by the promoter of any such game hosted in
the Stadium to have obstructed or non-manifest seats, Marlins' 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 Marlins'
Licensee on terms and in locations to be determined by Owner.
10
<PAGE>
2.3 Special Parking.
Stadium, Dolphins' and Marlins' Licensees shall have the right to obtain,
at no additional cost, four (4) V.I.P. automobile parking spaces located in
designated Stadium site parking areas at the Stadium at the times during which
such Licensees are entitled to use the Suite. Stadium, Dolphins' and Marlins'
Licensees shall have the option to purchase additional parking passes, depending
upon availability, on a first-come, first served basis at the then prevailing
rates.
11
<PAGE>
SCHEDULE 3
Payments, Term and Security Deposit
3.1 Suite Fee.
The use and possession of the Suite shall be contingent upon payment to
Owner of the fee (the "Suite Fee") for each Contract Year at the times set forth
herein and in the amounts set forth in Paragraph B, plus any sales, use,
property or other governmental taxes due with respect to Licensee's use of the
Suite or imposed upon the payment of the Suite Fee (except for any federal,
state or local income, franchise or similar tax imposed upon Owner). The entire
Suite Fee for the initial year shall be payable on or before the date specified
in Paragraph B. 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 the license of the Suite,
and a sum payable each year, as applicable, to the Miami Dolphins for Miami
Dolphins' season tickets and/or to the Florida Marlins for Florida Marlins'
season tickets provided to Licensee.
In the event that the Suite Fee is not paid at such times and in such
amounts as set forth above, then Licensee acknowledges and agrees that use and
possession of the Suite shall be subject to the Default provisions of Section
4.2 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 above 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
Section 4.2.
The Suite Fee payable hereunder shall remain the same and shall not
increase until the commencement of the third year of any four year term
Agreement, the commencement of the fourth year of any seven year term Agreement
or the commencement of the sixth year of any ten year term Agreement (the period
when the Suite Fee remains unchanged shall be referred to as the "Freeze
Period"). After the Freeze Period, 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 in the Executive Suite. (For example,
if all ticket prices increased $1.00 per game ticket over the
preceding year and the Suite has 12 seats, the increase in the Suite
Fee pursuant to this paragraph would be calculated as follows:
Dolphins Tickets (10 home games) S1 X 12 X 10 = S120 Suite Fee
increase: Marlins tickets (assuming 81 home games) S1 X 12 X 81 = S972
Suite Fee increase.) Notwithstanding the foregoing, the Suite Fee of a
Dolphins' Licensee shall not increase due to an increase in the prices
of
12
<PAGE>
Florida Marlins' tickets and the Suite Fee of a Marlins' Licensee
shall not increase due to an increase of prices for Miami Dolphins'
tickets.
B. The Suite Fee may also be increased each year by an amount of 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.
3.2 Term and Right of First Refusal.
The term of this Agreement shall commence upon the execution of this
Agreement by both Licensee and Owner, and shall expire on February 28, 2001,
unless earlier terminated, pursuant to this Section 3.2. As used in this
Agreement, the term "Contract Year" shall mean the twelve-month period
commencing March 1, and 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 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 this existing
License Agreement.
Either Owner or Licensee may terminate his Agreement by delivering written
notice of termination to the other between February 1, 1999 and March 1, 1999
and such termination shall become effective upon one party's receipt of the
other party's notice of termination. Upon such termination, this Agreement shall
forthwith become void and of no further force and effect and the parties hereto
shall be released from all future obligations or performance required under this
Agreement, provided however that the party exercising the right to terminate
shall be in good standing of its performance obligations under the Agreement.
After any such termination under this Section 3.2, Owner shall be free to
relicense the Suite to a third party without obligation to Licensee.
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 suite fee and on such
other terms and conditions as Owner may, in its 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 suite 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 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.
13
<PAGE>
3.3 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 Paragraph B 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 Section 4.2 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.
14
<PAGE>
SCHEDULE 4
Other Terms and Conditions
4.1 Covenants of Licensee.
Licensee covenants and agrees with Owner as follows:
A. While in possession of the Suite, 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. License shall not be responsible for any damage caused by
persons using the Suite other than Licensee or Licensee's guests.
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 provided, however, that such rules and
regulations do not materially interfere with Licensee's use and enjoyment
of the Suite for the purposes intended.
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 beverage to be brought into the Suite, except
such food or beverage provided exclusively through the Stadium caterer or
otherwise purchased at the Stadium.
4.2 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
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 to Licensee's obligations to pay the
Suite Fee or other amounts owned to Owner as a result of such default. Upon
Owner's termination of Licensee's license to use the Suite, Owner
15
<PAGE>
shall be free to relicense the Suite 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 reasonable attorney's fees and
costs incurred by Owner in the enforcement of this Agreement whether or not
litigation is actually commenced. In the event that such enforcement results in
trial, the prevailing party shall be entitled to recover all reasonable
attorney's fees incurred as a result hereof, including fees and costs of any
appellate proceedings. LICENSEE AND OWNER HEREBY WAIVE 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.
4.3 Strikes, Damage, Destruction, Etc.
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 Licensee by the total number of games and events in the Stadium
for which Licensee was entitled use 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 force majeure or any strike or other labor disturbance
which results in the cancellation of any Miami Dolphins' or Florida Marlins'
scheduled game(s) at the Stadium, or the cancellation of any other scheduled
events(s) at the Stadium, then, the Owner
16
<PAGE>
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, the aggregate ticket
price paid by Licensee for admission to the Suite for any Florida Marlins' games
which are not played at the Stadium.
4.4 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 locks on,
or otherwise restrict or impede Owner's access to, the Suite or the cabinets
therein.
4.5 Owner's Right to Relocate.
-------------------------
Owner expressly reserves the right after the execution and during the term
of this 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 Agreement, acknowledges the foregoing right
of Owner, and no rights granted in this 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 Section 4.5. Licensee agrees that Owner's
exercise of its election to remove and relocate Licensee shall not terminate
this Agreement or release the Licensee, in whole or in part, from Licensee's
obligation to pay the Suite Fees and perform the covenants and agreements under
this Agreement for the full term of this Agreement.
4.6 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, and including the sole of joint negligence of
Owner, unless due to the intentional misconduct of Owner or Owner's employees,
agents or other representatives.
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
17
<PAGE>
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, or from any other cause whatsoever, including but not limited to the
sole or joint negligence of the Owner.
4.7 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 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.
4.8 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 Section 3.2 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 first offering to Owner the right to accept any such
transfer on its own behalf. If Owner does not accept Licensee's offer to
assign this Agreement to Owner within ten (10) days after Licensee delivers
written notice to Owner of its intent to so transfer this Agreement,
Licensee may transfer this Agreement upon obtaining the prior written
consent of Owner, which consent may not be unreasonably withheld. 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 License 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,
subleasee, 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
18
<PAGE>
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 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 in Paragraph B 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 and all the terms and provisions hereof shall inure to the
benefit of and be binding upon the parties hereto, and their respective
successors and permitted assigns. If Licensee is a natural person, this
Agreement shall automatically terminate upon the death of Licensee. No
amendment or modification of 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.
19
<PAGE>
EXHIBIT 10.3
BROWARD
--------------
COUNTY ARENA
EXECUTIVE SUITE LICENSE AGREEMENT
---------------------------------
Licensee : Extended Stay America, Inc.
Address : 450 E. Las Olas Blvd., Suite 1100
Fort Lauderdale, FL 33301
Phone No. : (954) 713-1600 Fax No. (954) 713-1650
Contact Person: Phyllis Korman
This License Agreement ("Agreement") is made and entered into by and
between ARENA OPERATING COMPANY, LTD., a Florida limited partnership,
("Operator") and Licensee.
In consideration of the mutual covenants and agreements set forth in this
Agreement, Operator and Licensee do hereby agree as follows:
A. Grant of License. Subject to the Basic Terms described below and the Terms
and Conditions set forth in this Agreement, Operator hereby grants Licensee
the privilege and right to use the executive suite (the "Suite") located at
the Broward County Civic Arena, in the City of Sunrise, Florida (the
"Arena").
B. Basic Terms. The following terms shall apply to this Agreement:
1. Suite. The Suite and the License granted hereunder shall have the
following characteristics:
Suite No. SL #46
Annual Suite Fee: $120,000 Security Deposit: $24,000 (see Section 3.2)
Security Deposit is due upon execution of this Agreement.
50% of the Initial Suite Fee Payment due on or before March 1st, 1998.
Balance of Initial Suite Fee Payment due on or before July 1st, 1998.
Annual Payment due on or before September 1st of each succeeding year.
The Term of this Agreement is 7 years commencing September 1st, 1998 and
expiring on August 31st, 2005 (See Section 3.3).
<PAGE>
allotted for the Suite shall be sixteen (16) (See Section 2.2).
C. Terms and Conditions. The attached Terms and Conditions are incorporated by
reference into this Agreement.
D. Entire Agreement. This Agreement, consisting of the basic Agreement and the
attached Terms and Conditions, constitutes the entire Agreement between the
parties. This Agreement supersedes all prior agreements or negotiations
concerning the subject matter hereof. No representation, promise or
undertaking heretofore or concurrently made, whether in advertising or
marketing materials, discussions or otherwise, shall be binding on either
party unless specifically set forth herein.
IN WITNESS WHEREOF, this Agreement shall become effective and binding upon
the parties when executed by both Licensee and Operator, as indicated below.
Licensee has reviewed the attached Terms and Conditions of this Agreement and
agrees to be bound hereby.
ARENA OPERATING COMPANY, LTD., LICENSEE*:
a Florida limited partnership
By: Arena Operating Company, Inc. a --------------------------------
Florida corporation, its general partner
By: By: /s/ George D. Johnson, Jr.
---------------------------------------- ----------------------------
Name: Name:
-------------------------------------- --------------------------
Title: Title: CEO
------------------------------------- -------------------------
Date:
-------------------------------------- By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
- ----------------
* Each person or persons listed above as Licensee must sign this Agreement.
If the Licensee is a corporation or a partnership, the title of the authorized
signatory must be included.
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 27,121 0
<SECURITIES> 0 0
<RECEIVABLES> 9,719 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 58,887 0
<PP&E> 1,547,813 0
<DEPRECIATION> 60,775 0
<TOTAL-ASSETS> 1,564,676 0
<CURRENT-LIABILITIES> 122,077 0
<BONDS> 550,000 0
0 0
0 0
<COMMON> 959 0
<OTHER-SE> 857,902 0
<TOTAL-LIABILITY-AND-EQUITY> 1,564,676 0
<SALES> 0 0
<TOTAL-REVENUES> 81,006 205,280
<CGS> 0 0
<TOTAL-COSTS> 32,593 87,767
<OTHER-EXPENSES> 32,831 71,386
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,429 12,111
<INCOME-PRETAX> 9,153 34,016
<INCOME-TAX> 3,661 13,607
<INCOME-CONTINUING> 5,492 20,409
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,492 20,409
<EPS-PRIMARY> 0.06 0.21
<EPS-DILUTED> 0.06 0.21
</TABLE>
