<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BRIDGESTREET ACCOMMODATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7021 04-3327773
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1896 GEORGETOWN ROAD
HUDSON, OH 44236
(216) 650-2425
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM N. HULETT, III
BRIDGESTREET ACCOMMODATIONS, INC.
1896 GEORGETOWN ROAD
HUDSON, OH 44236
(216) 650-2425
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES OF COMMUNICATIONS TO:
CONSTANTINE ALEXANDER, ESQUIRE
NUTTER, MCCLENNEN & FISH, LLP
ONE INTERNATIONAL PLACE
BOSTON, MA 02110
(617) 439-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If the Form is a post-effective amendment filed pursuant to Rule 426(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED(1) PER SHARE PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Common Stock (par value
$.01 per share).................. 3,000,000 shares $36,000,000.00 $10,910.00
======================================================================================================================
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase to
cover over-allotments and shares held by certain selling stockholders.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 7, 1997
SHARES
BRIDGESTREET ACCOMMODATIONS, INC.
COMMON STOCK
------------------------
Of the shares of Common Stock offered hereby, shares
are being issued and sold by BridgeStreet Accommodations, Inc. ("BridgeStreet"
or the "Company") and shares are being sold by certain stockholders of
the Company (the "Selling Stockholders"). See "Principal and Selling
Stockholders." The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders. See "Use of Proceeds." Prior to this
offering, there has been no public market for the Common Stock. It is currently
estimated that the initial public offering price will be between $ and
$ per share. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. Application has
been made for quotation of the Common Stock on the Nasdaq National Market under
the symbol "BEDS."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGES
8 TO 12 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Per Share.............................. $ $ $ $
- -------------------------------------------------------------------------------------------------------
Total.................................. $ $ $ $
- -------------------------------------------------------------------------------------------------------
Total Assuming Full Exercise of Over-
Allotment Option(3).................. $ $ $ $
=======================================================================================================
</TABLE>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $2,160,000, which will be borne by
the Company. See "Use of Proceeds."
(3) Assuming exercise in full of the 30-day option granted by the Company to the
Underwriters to purchase up to additional shares, on the same terms,
solely to cover over-allotments. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in on or about
, 1997.
------------------------
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
[MAP AND PHOTOS TO COME]
THE UNDERWRITERS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF THE COMMON STOCK TO STABILIZE ITS
MARKET PRICE, THE PURCHASE OF THE COMMON STOCK TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
------------------------
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm, and with quarterly reports
for the first three quarters of each fiscal year containing unaudited interim
consolidated financial information.
The Company has filed an application with the United States Patent and
Trademark Office to register the service mark "BridgeStreet."
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and pro forma and historical financial statements, including the
notes thereto, appearing elsewhere in this Prospectus. BridgeStreet
Accommodations, Inc. ("BridgeStreet" or the "Company") was incorporated in 1996,
and in January and March 1997 acquired by merger (the "Combination") five
flexible accommodation service providers (the "Founding Companies"). See
"Combination." Unless otherwise indicated, the information contained in this
Prospectus (i) gives effect to the Combination and (ii) assumes that the
Underwriters' over-allotment option will not be exercised. Investors should
carefully consider the information set forth under the heading "Risk Factors."
THE COMPANY
BridgeStreet is a leading provider of flexible accommodation services,
primarily for business people and professionals requiring lodging for one week
to several months. The Company offers high-quality, fully-furnished apartments,
townhouses, condominiums and, to a lesser extent, houses (collectively,
"accommodations"). Together with the specialized amenities offered by the
Company, these accommodations are intended to provide guests with a "home away
from home." As of March 31, 1997, BridgeStreet had more than 2,100 units under
lease in 16 metropolitan areas located in the Midwest and Mid-Atlantic regions
of the United States, and an occupancy rate of approximately 90%.
As a provider of flexible accommodation services, BridgeStreet leases
substantially all of its accommodations on a short-term basis from property
managers, and then rents them to its clients. This enables the Company to (i)
adjust the quantity, mix and location of its accommodations as client needs
dictate and local economic conditions warrant, (ii) expand and enter new markets
without the costs and lead times associated with investing in "bricks and
mortar" and (iii) avoid the fixed costs associated with ownership or long-term
leasing of real estate. The Company also leases the furniture for its
accommodations on a short-term basis from furniture rental companies. These
furniture leasing arrangements enable BridgeStreet to maintain well-appointed,
modern and attractive accommodations, upgrade and replace furniture as needed,
and satisfy specific furnishing requests. BridgeSteet's leasing strategy
distinguishes it from fixed-location lodging providers, such as all-suite or
extended-stay hotels, that own their lodging facilities and furnishings or lease
them on a long-term basis.
Traditionally, travelers on extended trips have stayed in hotels and
motels. According to industry sources, in 1995, guests staying four or more
nights represented approximately 30% of total domestic hotel stays during that
year. The Company believes that business travelers on extended trips
increasingly desire alternatives to conventional hotel and motel rooms, which
typically lack the spaciousness and amenities of home. The Company believes that
this has been an important factor in the recent growth in the extended-stay
segment of the lodging industry. Participants in this segment include flexible
accommodation service providers, all-suite hotels and extended-stay hotels.
By providing flexible accommodation services, the Company can satisfy
client requests for accommodations in a variety of locations and neighborhoods,
as well as requests for accommodations of specific types and sizes. The
substantial majority of the Company's accommodations are located within
high-quality property complexes that typically feature, among other things,
in-unit washers and dryers, dedicated parking and access to fitness facilities
(including, in many cases, pools, saunas and tennis courts). In addition, at a
guest's request, BridgeStreet can upgrade an accommodation by providing
specialized amenities such as office furniture, fax machines and computers. The
Company's accommodations generally are priced competitively with all-suite and
upscale extended-stay hotel rooms even though, on average, they are
substantially larger. For example, BridgeStreet's one-bedroom unit averages
approximately 750 square feet versus approximately 400 square feet for a
one-bedroom unit at a typical all-suite or upscale extended-stay hotel.
BridgeStreet was founded in August 1996, and in the first quarter of 1997
combined by merger five regional providers of flexible accommodation services.
The Company has achieved significant growth in recent years. On a combined
basis, consolidated units available for rent increased from 1,041 units on
January 1, 1994
3
<PAGE> 5
to 1,936 units on December 31, 1996, representing a compound annual growth rate
of 36%. In addition, combined net revenues increased from $18.9 million in 1994
to $37.6 million in 1996, representing a compound annual growth rate of 41%.
The Company plans to achieve its goal of becoming a leading national
provider of flexible accommodation services by implementing an aggressive
acquisition program and a national operating strategy designed to increase
internal revenue growth, cost efficiencies and profitability. Key elements of
the Company's business strategy include:
Growth through Acquisitions. The Company believes that the flexible
accommodation services industry is highly fragmented, with over 400
geographically dispersed companies in the United States, few of which have more
than a regional presence. BridgeStreet plans to take advantage of the fragmented
nature of the industry by acquiring flexible accommodation service companies in
major metropolitan areas frequented by business travelers. BridgeStreet intends
to implement its business model at each acquired company as soon as practicable
after the acquisition is completed. BridgeStreet's acquisition strategy is to:
- Enter New Geographic Markets and Establish Nationwide Coverage. In each
new market, the Company initially will target for acquisition one local
or regional flexible accommodation services provider having the size and
quality of operations suitable for serving as the Company's base for
expansion in the market. Acquisitions in new markets will enable
BridgeStreet to (i) gain local or regional market share rapidly, (ii)
increase sales to existing clients by meeting their needs for
accommodations in other regions, (iii) increase sales to the acquired
company's clients by providing them with access to BridgeStreet's growing
national network and (iv) establish the BridgeStreet brand name in new
regions and enhance its nationwide recognition.
- Expand Within Existing Markets. Once the Company has established
operations in a new region, it may seek to expand its market share by
acquiring other flexible accommodation service providers within that
region. The Company believes that it can achieve operating efficiencies
by incorporating the businesses of smaller acquired companies into the
Company's operations without any significant increase in infrastructure.
National Operating Strategy. The Company has begun to implement a national
operating strategy with the following components:
- Maximize Sales to Existing and New Clients. The Company plans to
maximize sales to existing corporate clients and to obtain new clients
through a national sales and marketing program which highlights the
Company's expanding national network. Many of the Company's clients are
Fortune 1000 companies with significant, national employee lodging
requirements. These corporate clients generally have numerous key
decision makers (such as human resource directors, relocation managers or
training directors) who both establish and administer company travel and
accommodation policies. The Company plans to obtain a greater share of
each client's lodging requirements by establishing relationships with
additional key decision makers and emphasizing the Company's expanding
national presence.
- Achieve Cost Efficiencies. The Company believes it should be able to
reduce total operating expenses of the Founding Companies and any
additional acquired companies by consolidating certain functions
performed separately by such companies. In addition, the Company believes
that as a large, national flexible accommodation services company, it
should be able to achieve lower costs (as a percentage of revenues)
compared to those of the individual Founding Companies and other acquired
companies in such areas as leasing accommodations and furniture,
purchasing certain hard and soft goods, and obtaining financing
arrangements, employee benefits and insurance.
- Adopt Best Practices. The Company will continue reviewing its operations
at the local and regional operating levels in order to identify "best
practices" that can be implemented throughout its operations. Areas where
"best practices" may be utilized include accommodation pricing, occupancy
management and cash flow management. BridgeStreet believes the
implementation of these practices will enable the Company to provide
superior customer service and maximize sales opportunities.
4
<PAGE> 6
- -------------------------------------------------------------------------------
- Implement Management Information System. BridgeStreet intends to develop
and implement a centrally-controlled, computerized management information
system that will integrate the Company's customer contact, sales,
marketing, finance, telephone, property management, internet access,
lease management and reservation functions. BridgeStreet believes that
the proposed system will enable it to deliver superior customer service,
more efficiently manage its operations and achieve cost savings.
The Company is a Delaware corporation. Its principal executive offices are
located at 1896 Georgetown Road, Hudson, Ohio 44236 and its telephone number is
(216) 650-2425. As used herein, unless the context otherwise requires,
"BridgeStreet" or the "Company" refers to BridgeStreet Accommodations, Inc. and
its wholly-owned subsidiaries.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... shares
Common Stock offered by the Selling
Stockholders............................... shares
Common Stock to be outstanding after the
offering................................... shares (1)
Use of proceeds.............................. To repay certain indebtedness, including
indebtedness of the Founding Companies assumed
by the Company in connection with the
Combination, the outstanding principal amount
under the Company's revolving credit facility
and certain advances made to the Company by an
affiliated party, to implement an enhanced
management information system and for general
corporate purposes, including working capital
and future acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol....... BEDS
</TABLE>
- ---------------
(1) Excludes an aggregate of 1,100,000 shares of Common Stock reserved for
issuance under the Company's 1997 Equity Incentive Plan and Stock Plan for
Non-Employee Directors. Of this amount, 434,000 and 37,500 shares of Common
Stock will be issuable upon exercise of outstanding options under the 1997
Equity Incentive Plan and Stock Plan for Non-Employee Directors,
respectively. See "Management -- Director Compensation" and " -- Executive
Compensation; Equity Incentive Plan."
- -------------------------------------------------------------------------------
5
<PAGE> 7
- -------------------------------------------------------------------------------
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND FOOTNOTE DATA)
The following summary unaudited pro forma financial data presents certain
data for the Company, as adjusted for (i) the effects of the Combination on a
historical basis, (ii) the effects of certain pro forma adjustments to the
historical financial statements of the Founding Companies and (iii) the
consummation of this offering. See the Company's Unaudited Pro Forma Combined
Financial Statements, each of the Founding Companies' financial statements and
the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA(1):
Revenues.................................................................... $ 37,566
Operating income(2)......................................................... 2,115
Income before income taxes(3)............................................... 2,108
Net income(4)............................................................... $ 1,196
========
Net income per share........................................................ $
========
Weighted average shares outstanding.........................................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------
PRO FORMA
PRO FORMA(1) AS ADJUSTED(5)
-------------- --------------
<S> <C> <C>
PRO FORMA COMBINED BALANCE SHEET DATA:
Working capital (deficit)...................................... $ (46) $ 10,718
Total assets................................................... 13,353 22,976
Long-term debt, net of current maturities...................... 1,087 --
Total stockholders' equity..................................... 7,682 19,298
</TABLE>
- ---------------
(1) The Pro Forma Combined Statement of Operations Data assumes that the
Combination and this offering took place on January 1, 1996. The Pro Forma
Combined Balance Sheet Data assumes that the Combination took place as of
December 31, 1996. This data is not necessarily indicative of the results
the Company would have had if these events actually then occurred or of the
Company's future results. The Pro Forma Combined Statement of Operations
Data excludes (i) any adjustments for the compensation to be paid in 1997
for services to be rendered in 1997 by the Company's Chief Executive Officer
and Chief Financial Officer pursuant to their employment agreements, and
(ii) non-recurring, non-cash compensation expense recorded in the first
quarter of 1997 in connection with the accelerated vesting of restricted
stock. The pro forma data presented herein is based on preliminary
estimates, available information and certain assumptions that management
deems appropriate and should be read in conjunction with the other financial
statements and notes thereto included elsewhere in this Prospectus.
(2) Reflects (i) the reduction of $552,000 in salary and benefits to executives
of the Founding Companies and (ii) the $172,000 amortization of goodwill to
be recorded as a result of the Combination assuming a 35-year amortization
period.
(3) Reflects an interest expense reduction of $158,000 related to bank debt and
notes payable to be repaid from the net proceeds of this offering.
(4) Reflects an increase in the Company's historical provision for income taxes
of $373,000 to account for the Company's estimated consolidated effective
tax rate subsequent to the Combination, after considering nondeductible
goodwill amortization.
(5) Reflects the issuance of shares of Common Stock by the
Company in this offering and the application of the net proceeds as
described under "Use of Proceeds."
- -------------------------------------------------------------------------------
6
<PAGE> 8
SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following table presents summary data for each of the Founding
Companies (including their respective affiliates, if any) for the three most
recent fiscal years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Temporary Corporate Housing Columbus, Inc.
Revenues........................................................ $8,309 $9,754 $12,502
Operating income................................................ 206 336 1,087
Operating income, pro forma(1).................................. 156 390 1,170
Number of units at end of year.................................. 510 539 624
Corporate Lodgings, Inc.
Revenues........................................................ $4,069 $6,067 $ 8,820
Operating income................................................ 87 39 195
Operating income, pro forma(1).................................. 76 184 255
Number of units at end of year.................................. 213 301 434
Exclusive Interim Properties, Ltd.(2)
Revenues........................................................ $4,015 $5,521 $ 8,626
Operating income................................................ 104 300 213
Operating income, pro forma(1).................................. 166 490 344
Number of units at end of year.................................. 125 302 441
Home Again, Inc.
Revenues........................................................ $ 532 $1,570 $ 4,035
Operating income................................................ 49 74 315
Operating income (loss), pro forma(1)........................... (77) (51) 200
Number of units at end of year.................................. 40 100 198
Temporary Housing Experts, Inc.
Revenues........................................................ $2,000 $3,086 $ 3,583
Operating income (loss)......................................... 115 30 (73)
Operating income, pro forma(1).................................. 161 194 148
Number of units at end of year.................................. 153 214 239
</TABLE>
- ---------------
(1) Reflects (i) an adjustment to the compensation of an executive of the
Founding Company to reflect the compensation to be paid to such executive
pursuant to an employment agreement signed in connection with the
Combination and (ii) amortization of goodwill to be recorded as a result of
the Combination, assuming a 35-year amortization period and the push-down of
goodwill to the acquired entities. The adjustment increased (decreased)
historical operating income for each Founding Company as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
COMPANY 1994 1995 1996
-------------------------------------------------------- ---- ----- -----
<S> <C> <C> <C>
Temporary Corporate Housing Columbus, Inc............... $(50) $ 54 $ 83
Corporate Lodgings, Inc................................. (11) 145 60
Exclusive Interim Properties, Ltd.(2)................... 62 190 131
Home Again, Inc......................................... (126) (125) (115)
Temporary Housing Experts, Inc.......................... 46 164 221
</TABLE>
(2) Prior to the Combination, Exclusive Interim Properties, Ltd.'s fiscal year
end was March 31. The 1994 and 1995 data presents data for that company's
fiscal years ended March 31, 1995 and 1996, respectively. The 1996 data
presents 12 months of data derived from the unaudited three-month period
ended March 31, 1996 and the audited nine-month period ended December 31,
1996.
7
<PAGE> 9
RISK FACTORS
The following factors should be considered, together with the other
information in this Prospectus, in evaluating an investment in the Company. This
Prospectus contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ significantly from the results discussed in the forward-looking
statements as a result of any number of factors, including the risk factors set
forth below and other factors discussed elsewhere in this Prospectus.
LIMITED COMBINED OPERATING HISTORY
BridgeStreet was founded in August 1996 to acquire flexible accommodation
service providers and has only conducted combined operations since the
Combination in the first quarter of 1997. Prior to the Combination, each of the
Founding Companies operated (together with any affiliates) as a separate,
independent entity. The Company intends to continue to operate the Founding
Companies under their current management, although it will integrate some sales,
marketing and customer service functions, implement centralized financial and
management information systems and controls, and implement "best practices"
throughout its operations. The Company's senior management group has been
assembled only recently, and there can be no assurance that this group will be
successful in these integration and implementation efforts, in managing the
combined operations of the Founding Companies or in implementing the Company's
business strategy. Any failure to do so could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Management."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY AND PLANNED RAPID EXPANSION
As part of its strategy to establish a nationwide presence, BridgeStreet
intends to grow in part through the acquisition of additional flexible
accommodation service providers in major metropolitan markets throughout the
United States. However, in cases where the Company seeks to enter a new market
but is unable to acquire a suitable existing provider on terms the Company deems
acceptable, the Company may elect to establish a new operation or strategic
alliance in that market. The Company also intends to pursue rapid internal
growth through expansion of existing and acquired operations. See
"Business -- Growth Strategy" and "-- Acquisition Strategy."
There can be no assurance that the Company will be able to identify,
acquire or profitably manage additional businesses or successfully integrate any
acquired businesses into the Company without substantial costs, delays or other
operational or financial problems. Certain risks inherent in an acquisition
strategy, such as increasing leverage and debt service requirements (to the
extent that the Company elects to finance its acquisitions with debt) and
combining disparate company systems and cultures, could adversely affect the
Company's ability to integrate acquired businesses. The process of integrating
acquired companies may involve unforeseen difficulties and may require a
disproportionate amount of management's attention and financial and other
resources. Moreover, increased competition for acquisition candidates may
develop, in which event fewer acquisition opportunities may be available to the
Company and acquisition costs for the opportunities that are available may be
higher. There can be no assurance that any business acquired in the future will
achieve anticipated revenues and earnings, and the size, timing and integration
of such acquisitions may cause substantial fluctuations in the Company's
operating results from quarter to quarter. To the extent that the Company
chooses to enter particular markets by establishing new operations, its results
may be adversely affected by the increased time required for such operations to
achieve profitability. Future internal growth will depend on a number of
factors, including the effective and timely initiation and development of client
relationships, the availability of additional accommodations on acceptable
terms, the maintenance of the high quality of services the Company provides to
its guests, and the recruitment, training, motivation and retention of qualified
employees.
Sustaining the Company's growth and expansion will require substantial
enhancements to the Company's operational and financial systems and controls as
well as additional administrative, operational and financial resources. There
can be no assurance that the Company will be able to manage its expanding
operations
8
<PAGE> 10
successfully or that it will be able to maintain or accelerate its growth, and
any failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations.
RISKS RELATED TO ACQUISITION FINANCING
The Company may choose to finance future acquisitions by issuing shares of
Common Stock for a portion or all of the consideration to be paid. In the event
that the Common Stock does not maintain a sufficient market value, or potential
acquisition candidates otherwise are unwilling to accept Common Stock as part of
the consideration for the sale of their businesses, the Company might not be
able to utilize Common Stock as consideration for acquisitions and would be
required to utilize more of its cash resources, if available, in order to
maintain its acquisition program. If the Company does not have sufficient cash
resources, its growth could be limited unless it could obtain additional capital
through debt or equity financings. While the Company currently has a $10 million
revolving credit facility to finance acquisitions, there can be no assurance
that this credit facility will be sufficient for the Company's acquisition
financing needs in the near term, or that additional financing will be available
if and when needed or on terms acceptable to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Combined." The inability of the
Company to use its Common Stock as consideration for future acquisitions or to
obtain additional financing for acquisitions could have a material adverse
effect on the Company's business, financial condition and results of operations.
MARKET ACCEPTANCE OF BRAND NAME
BridgeStreet has yet to complete the integration of the Founding Companies
and, as a result, has limited history upon which to gauge client acceptance of
its combined operations. Further, the Company will compete against other
companies with substantially greater brand name recognition, and there can be no
assurance that the Company will be able to persuade clients of such competitors
to use the Company's services. The failure of the Company to successfully
promote and establish "BridgeStreet" as a recognized brand name capable of
attracting sufficient numbers of clients, or the receipt of adverse publicity
relating to the Company's brand name, could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Sales and Marketing" and "-- Competition."
DEPENDENCE ON THIRD PARTIES
BridgeStreet generally leases its accommodations from residential property
managers. The Company's profitability largely depends on its ability to lease
accommodations on favorable terms, and local or regional declines in either
vacancy rates or new apartment construction could lead to an increase in leasing
costs or an inability to satisfy client demand. The Company also leases the
furniture used in its accommodations from furniture rental companies, which may
increase their prices, restrict the Company's flexibility in renting greater or
lesser amounts of furniture, or otherwise impose unfavorable conditions on the
Company's ability to customize the furnishings in its accommodations. The
Company's reliance on third party vendors, assuming the occurrence of any of the
events described above, would negatively affect the Company's operating margins
and could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Properties" and
" -- Accommodations and Services."
MARKET CONDITIONS MAY AFFECT PROFITABILITY
The Company's operating results depend primarily on the difference, or
"spread," between the rental rates it charges its clients for accommodations and
the lease amounts it pays to the owners or managers of such accommodations. The
rates that the Company is able to charge its customers in a given market can be
expected to fluctuate based in part on conditions existing within the lodging
industry as a whole, including the occupancy rates of, and average daily rates
being charged by, hotels and other competitors. To the extent competitors in a
given market were to exert downward pressure on the rates that the Company is
able to charge its clients, the Company's aggregate "spread" could decrease. In
addition, while the Company seeks to manage the risks of fluctuating rates by
"matching" its rental obligations with the length of its clients' stays through
flexible lease arrangements, competitive rental market conditions could force
the Company to enter
9
<PAGE> 11
into longer-term, fixed rate leases in order to establish or protect its unit
inventory. The fixed rates in such leases also might lead to a reduction in the
Company's "spread" in the event of downward trends in lodging prices. A
reduction in the Company's "spread," as a result of either lower average daily
rates charged by competitors or longer-term leases entered into by the Company,
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Industry Overview" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
FACTORS AFFECTING TRAVEL, SEASONALITY AND CYCLICALITY
The Company's operations are subject to events generally affecting levels
of business and leisure travel, including business cycles, political changes and
technological advances. The Company cannot predict the likelihood of occurrence
of any such events. To the extent any such event significantly reduces travel,
there could be a material adverse effect on the Company's business, financial
condition and results of operations. The Company typically experiences a decline
in earnings during its first quarter due to a decrease in business travel
following the holiday season and travel disruptions caused by winter weather. As
a general matter, due to (i) the Company's reliance on corporate clients and
(ii) the strong correlation between the lodging industry's performance and
macroeconomic conditions, the Company may be subject to cyclical changes in
revenues and profits in response to changes in the national economy or the
economies of the regions in which it operates. See "Management's Discussion of
Financial Condition and Results of Operations -- Seasonality."
COMPETITION
The lodging industry generally, and the flexible accommodation services
industry in particular, is highly competitive. Providers of flexible
accommodation services compete with each other and with traditional hotels,
motels, and all-suite and extended-stay hotels, primarily on the basis of
location, availability, price and quality of accommodations, brand name
recognition, and quality and scope of service. The Company competes with other
flexible accommodation service providers both for clients and for possible
acquisitions. The Company expects its business to become more competitive as
existing competitors expand and new competitors enter the industry. Moreover,
because the financial barriers to entry are relatively low in the flexible
accommodation services industry, entities that maintain a vendor-vendee
relationship with companies in this industry, such as real estate managers or
furniture rental businesses, have entered the industry and more such entities
may decide to enter the industry in the future. Certain of the Company's
existing competitors have, and any new competitors that enter the industry may
have, access to significantly greater financial resources than the Company. In
particular, Oakwood Corporate Housing, Inc. ("Oakwood"), a flexible
accommodation services provider which currently rents a substantially larger
number of accommodations than the Company, is affiliated with R&B Realty Group,
the nation's tenth largest apartment management company. This affiliation gives
Oakwood access to apartment communities and capital that may be unavailable to
the Company. Competitive market conditions could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- Competition."
DEPENDENCE ON KEY PERSONNEL
BridgeStreet's day-to-day operations depend on the continuing efforts of
its executive officers and the senior management of the Company's operating
subsidiaries. In particular, the Company depends on: William N. Hulett, III, its
President and Chief Executive Officer; Rocco A. Di Lillo, its Vice President and
Chief Operating Officer; and Mark D. Gagne, its Chief Financial Officer and
Treasurer. There can be no assurance that the Company will be able to retain the
services of any of these individuals. If any of these individuals does not
continue in his management role following this offering and if the Company is
unable to attract and retain qualified replacements, there could be a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management."
LICENSING AND TAX ISSUES
As a lessee of its accommodations, BridgeStreet believes that it and its
employees are either outside the purview of, or exempted from, laws in the
majority of jurisdictions in which the Company operates requiring
10
<PAGE> 12
real estate brokers to hold licenses. However, there can be no assurance that
the Company's position will be upheld if challenged or that any such
jurisdiction will not amend its laws to specifically require the Company and/or
one or more of its employees to be licensed brokers. Moreover, there can be no
assurance that the Company will not operate in the future in jurisdictions
requiring such licensing. If the Company were found to have failed to comply
with brokerage licensing laws, there could be a material adverse effect upon the
Company's business, financial condition and results of operations.
The Company provides flexible accommodation services for extended periods
in leased as opposed to fixed-location accommodations. As a result, in some of
the jurisdictions in which the Company operates, the Company believes that it is
exempt from sales and "bed" taxes that many jurisdictions require fixed-location
lodging providers to charge their overnight guests. The imposition of a sales or
"bed" tax requirement on the Company in the jurisdictions in which the Company
operates and currently does not charge such taxes, or the pursuit by taxing
authorities of arrearages and penalties with respect to prior periods during
which the Company did not collect and remit such taxes, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Regulation and Tax."
CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
Upon completion of this offering, the Company's directors, executive
officers and principal stockholders, together with their affiliates, will
beneficially own approximately % of the Company's outstanding shares of
Common Stock (approximately % if the Underwriters exercise their
over-allotment option in full). As a result, these stockholders, if acting
together, will have the ability to influence the outcome of corporate actions
requiring stockholder approval, including the election of directors and the
approval of significant corporate transactions, such as a merger or sale of
substantially all of the Company's assets, irrespective of how other
stockholders of the Company may vote. This concentration of ownership may have
the effect of delaying or preventing a change in control of the Company. See
"Management" and "Principal and Selling Stockholders."
POSSIBLE FUTURE SALES OF SHARES
Sales of substantial amounts of Common Stock in the public market after
this offering under Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), or otherwise, or the perception that such sales could occur,
may adversely affect prevailing market prices of the Common Stock and could
impair the future ability of the Company to raise capital through an offering of
its equity securities or to effect acquisitions using shares of its Common
Stock. Prior to this offering, the Company had outstanding 5,475,000 shares of
Common Stock, of which are being offered by the Selling Stockholders in
this offering. The remaining shares are "restricted securities" within
the meaning of Rule 144. Subject to the contractual lockup provisions discussed
below and unless the resale of the shares is registered under the Securities
Act, these shares may not be sold in the open market until after the first
anniversary of the transaction in which they were acquired, and then only in
compliance with the applicable requirements of Rule 144. See "Shares Eligible
for Future Sale."
The Company and each of its directors, executive officers and existing
stockholders have agreed not to offer to sell, sell, contract to sell, grant any
option to purchase, or otherwise dispose of, directly or indirectly, any shares
of capital stock of the Company or securities convertible into or exchangeable
for capital stock or warrants or other rights to acquire shares of capital stock
of the Company which may now or in the future be beneficially owned (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) by such persons (other than pursuant to employee stock option
plans or in connection with other employee incentive compensation arrangements)
prior to the expiration of 180 days from the date of this Prospectus, except (i)
for shares of Common Stock offered hereby, (ii) with the prior written consent
of , or (iii) with respect to the Company, in
connection with acquisitions or upon the exercise of options, or the grant of
options to purchase shares of Common Stock, pursuant to the Company's stock
option plans. In connection with future acquisitions, the Company may issue
shares of Common Stock which, if the Company also files a registration statement
with respect to such shares, may be subject to immediate resale. See
"Underwriting."
11
<PAGE> 13
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and By-Laws as in effect upon
the closing of this offering will require that any action required or permitted
to be taken by stockholders of the Company must be effected at a duly called
annual or special meeting of stockholders and may not be effected by any consent
in writing, and will require reasonable advance notice by a stockholder with
respect to a proposal or director nomination such stockholder desires to present
at any such meeting. Special meetings of stockholders may be called only by the
President or Chairman of the Company or by the Board of Directors. In addition,
the Board of Directors will have the authority, without further action by the
stockholders, to fix the rights and preferences of, and issue up to 5,000,000
shares of, Preferred Stock. These provisions and other provisions of the
Certificate of Incorporation and By-Laws may have the effect of deterring
unsolicited acquisition proposals or hostile takeovers or delaying or preventing
changes in control or management of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares of Common Stock
over the then current market prices. In addition, these provisions may limit the
ability of stockholders to approve transactions that they may deem to be in
their best interests. The Company also is subject to Section 203 of the Delaware
General Corporation Law (the "DGCL") which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with any "interested stockholder" for a period of three
years following the date that such stockholder became an interested stockholder.
See "Description of Capital Stock."
NO PRIOR MARKET FOR COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or continue after this offering. The initial public offering
price of the Common Stock was determined by negotiations between the Company and
the Representatives of the Underwriters, and may not be indicative of the market
price for the Common Stock after this offering. See "Underwriting" for a
description of the factors considered in determining the initial public offering
price. From time to time after this offering, there may be significant
volatility in the market price for the Common Stock. Quarterly operating results
of the Company, changes in general conditions in the economy or the lodging
industry, or other developments affecting the Company or the Company's
competitors could cause the market price of the Common Stock to fluctuate
substantially. The equity markets have, on occasion, experienced significant
price and volume fluctuations that have affected the market prices for many
companies' securities and have been unrelated to the operating performance of
those companies. Any such fluctuations following completion of this offering may
adversely affect the prevailing market price of the Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the pro forma net tangible book value of
their shares of Common Stock in the amount of $ per share, and may
experience further dilution in that value from issuances of Common Stock in
connection with future acquisitions. See "Dilution."
ABSENCE OF DIVIDENDS
The Company has never paid dividends on the Common Stock and does not
anticipate paying any dividends in the foreseeable future. Declarations of
dividends on the Common Stock will depend upon, among other things, future
earnings, if any, the operating and financial condition of the Company, its
capital requirements and general business conditions. The Company's credit
facility currently prohibits dividend payments. See "Dividend Policy."
12
<PAGE> 14
COMBINATION
The Company was incorporated in August 1996 to become a leading national
provider of flexible accommodation services. In the Combination, the Company
acquired the Founding Companies through stock-for-stock mergers and issued
4,301,000 shares of Common Stock to their former stockholders. For a description
of the transactions pursuant to which these companies were merged into
BridgeStreet, see "Certain Transactions -- Organization of the Company; The
Combination." Certain of such stockholders are Selling Stockholders in the
offering. See "Principal and Selling Stockholders."
Set forth below is a brief description of each of the Founding Companies:
Temporary Corporate Housing Columbus, Inc.: Temporary Corporate Housing
Columbus, Inc. (together with three affiliates, "TCH") was founded by Lynda
Clutchey and Max Holzer in 1983. TCH is headquartered in Columbus, Ohio and,
prior to its acquisition by the Company, operated its flexible accommodation
services business in the following metropolitan areas: Cincinnati, Cleveland and
Columbus, Ohio; and Pittsburgh, Pennsylvania. During its fiscal year ended
December 31, 1996, TCH had combined revenues of approximately $12.5 million.
Corporate Lodgings, Inc.: Corporate Lodgings, Inc. (together with four
affiliates, "CLI") was founded by Rocco A. Di Lillo in 1987. CLI is
headquartered in Hudson, Ohio and, prior to its acquisition by the Company,
operated its flexible accommodation services business in the following
metropolitan areas: Akron, Canton and Cleveland, Ohio; Lexington and Louisville,
Kentucky; Minneapolis, Minnesota; Milwaukee, Wisconsin; Pittsburgh,
Pennsylvania; and Detroit, Michigan. During its fiscal year ended December 31,
1996, CLI had combined revenues of approximately $8.8 million.
Exclusive Interim Properties, Ltd.: Exclusive Interim Properties, Ltd.
(together with an affiliate, "EIP") was founded by Melanie R. Sabelhaus in 1987.
EIP is headquartered in Baltimore, Maryland and, prior to its acquisition by the
Company, operated its flexible accommodation services business in the Baltimore,
Maryland and District of Columbia metropolitan areas. During its 12 months ended
December 31, 1996, EIP had combined revenues of approximately $8.6 million.
Home Again, Inc.: Home Again, Inc. (together with two affiliates, "Home
Again") was founded by Sandra A. Brown in 1993. Home Again is headquartered in
Minneapolis, Minnesota and, prior to its acquisition by the Company, operated
its flexible accommodation services business in the Minneapolis, Minnesota and
Oklahoma City, Oklahoma metropolitan areas. During its fiscal year ended
December 31, 1996, Home Again had combined revenues of approximately $4.0
million.
Temporary Housing Experts, Inc.: Temporary Housing Experts, Inc. ("THEI")
was founded in 1991 by Connie F. and Thomas W. O'Briant. THEI is headquartered
in Memphis, Tennessee and, prior to its acquisition by the Company, operated its
flexible accommodation services business in the Memphis, Tennessee and Jackson,
Mississippi metropolitan areas. During its fiscal year ended December 31, 1996,
THEI had revenues of approximately $3.6 million.
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered hereby (assuming an initial public offering price of $
per share and after deducting estimated underwriting discounts and commissions
payable by the Company and estimated offering expenses of $2,160,000) are
estimated to be approximately $11.7 million (approximately $15.0 million if the
Underwriters' over-allotment option is exercised in full). The Company will not
receive any proceeds from the sale of shares of Common Stock by the Selling
Stockholders.
The Company currently intends to use approximately (i) $1.6 million of the
net proceeds to repay certain indebtedness of the Founding Companies assumed in
connection with the Combination (which indebtedness bears interest at a weighted
average interest rate of 7.8% and matures at various dates through December
2008) and (ii) $500,000 of the net proceeds to repay amounts the Company
estimates will be outstanding under its revolving credit facility with Fleet
Bank at the closing of this offering (which amounts bear interest at the bank's
prime lending rate of interest, which was 8.5% as of April 8, 1997). The Company
also intends to use approximately $1.5 million of the net proceeds to enhance
its management information system capabilities. While the Company intends to
repay all amounts borrowed under its revolving credit facility upon the closing
of this offering, which amounts have been used to fund short-term working
capital requirements, it will be able to continue to borrow funds from this
facility following the offering, subject to the terms of the credit facility
agreement. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Combined." The
expenses incurred by the Company in connection with this offering will be paid
by American Business Partners, LLC ("ABP"), and the Company will reimburse ABP
out of the proceeds of this offering. See "Certain Transactions -- Organization
of the Company; ABP."
The balance of the net proceeds from this offering, approximately $8.1
million, will be used for working capital and general corporate purposes,
including possible acquisitions. Although the Company regularly reviews
strategic acquisition opportunities, the Company at this time has no binding
agreements with respect to any material acquisitions. Pending the use of the net
proceeds of this offering for the purposes described above, the Company will
invest such proceeds in short-term, interest-bearing, investment grade
securities.
DIVIDEND POLICY
Following this offering, the Company intends to retain all earnings to
finance the growth and development of its business and does not anticipate
paying cash dividends on the Common Stock in the foreseeable future. Any future
determination as to the payment of dividends on the Common Stock will be at the
discretion of the Board of Directors and will depend upon, among other things,
the Company's future earnings, if any, the operating and financial condition of
the Company, its capital requirements, general business conditions and any other
factors the Board of Directors of the Company may consider. The Company's
revolving credit facility currently prohibits dividend payments.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 (i) on a pro forma basis to reflect the Combination and (ii)
on a pro forma as adjusted basis to reflect the amendment and restatement of the
Company's Certificate of Incorporation on April 10, 1997, the sale of the
shares of Common Stock offered by the Company hereby (at an assumed
initial public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company) and the application of the net proceeds therefrom as described
under "Use of Proceeds." This table should be read in conjunction with the
Company's Unaudited Pro Forma Combined Financial Statements and the related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
PRO PRO FORMA
FORMA AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Current maturities of long-term debt.................................. $ 175 $ --
====== =======
Long-term debt, net of current maturities............................. $1,087 $ --
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value: none authorized, pro forma; 5,000,000
shares authorized, none issued or outstanding, pro forma as
adjusted........................................................... -- --
Common Stock, $.01 par value: 10,000,000 shares authorized, 5,475,000
shares issued and outstanding, pro forma; 35,000,000 shares
authorized, shares issued and outstanding, pro forma as
adjusted(1)........................................................ 55 55
Additional paid-in capital............................................ 7,628 19,244
Accumulated deficit................................................... (1) (1)
------ -------
Total stockholders' equity......................................... 7,682 19,298
------ -------
Total capitalization.......................................... $8,769 $19,298
====== =======
</TABLE>
- ---------------
(1) Excludes an aggregate of 1,100,000 shares of Common Stock reserved for
issuance under the Company's 1997 Equity Incentive Plan and Stock Plan for
Non-Employee Directors. Of this amount, 434,000 and 37,500 shares of Common
Stock will be issuable upon exercise of outstanding options under the 1997
Equity Incentive Plan and Stock Plan for Non-Employee Directors,
respectively, as of the date of this Prospectus. See "Management -- Director
Compensation" and " -- Executive Compensation; Stock Option Plan."
15
<PAGE> 17
DILUTION
The pro forma net tangible book value of the Company as of December 31,
1996, after giving effect to the Combination, was approximately $1,414,000, or
$0.26 per share. Pro forma net tangible book value per share represents the book
value of the Company's total tangible assets less total liabilities divided by
the number of shares of Common Stock outstanding. After giving effect to the
sale by the Company of shares of Common Stock in this offering at an
assumed initial public offering price of $ per share and after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by the Company, the pro forma net tangible book value at December 31,
1996 would have been approximately $13.2 million, or $ per share. This
represents an immediate increase in pro forma net tangible book value per share
of $ to the existing stockholders, and an immediate dilution in pro forma
net tangible book value per share of $ to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................... $
Pro forma net tangible book value before offering................. $0.26
Increase attributable to new investors............................
-----
Pro forma net tangible book value after offering....................
------
Dilution to new investors........................................... $
======
</TABLE>
The following table sets forth, on a pro forma basis to give effect to the
Combination as of December, 31, 1996, the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid by the Company's existing stockholders and by investors
purchasing shares of Common Stock offered hereby (assuming an initial offering
price of $ per share and before deducting underwriting discounts and
commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 5,475,000 % $ 1,414,000 8.7% $ 0.26
New investors................. 14,850,000 91.3 $
--------- ------ ----------- ------
Total............... 100.0% $16,264,000 100.0%
========= ====== =========== ======
</TABLE>
16
<PAGE> 18
SELECTED FINANCIAL AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE AND FOOTNOTE DATA)
For financial reporting purposes, TCH is presented as the acquiror of all
of the other companies acquired by BridgeStreet in the Combination.
Consequently, the Company's historical combined financial statements for periods
ended on or before December 31, 1996 are the historical combined financial
statements of TCH. The following selected historical financial data of TCH as of
December 31, 1995 and 1996 and for each year in the three-year period ended
December 31, 1996 has been derived from the audited financial statements of TCH
included elsewhere herein. The remaining selected historical financial data of
TCH has been derived from unaudited financial statements of TCH, which have been
prepared on the same basis as the audited financial statements and, in the
opinion of management, reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of that data.
<TABLE>
<CAPTION>
HISTORICAL (TCH ONLY)
------------------------------------------- PRO FORMA(1)
------------
YEAR ENDED DECEMBER 31, YEAR ENDED
------------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996
------ ------ ------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $5,627 $6,803 $8,309 $9,754 $12,502 $ 37,566
Cost of services........................ 4,520 5,312 6,475 7,354 9,088 27,945
Selling, general and administrative
expense.............................. 1,328 1,373 1,628 2,064 2,327 7,334(2)
Goodwill amortization................... 172(3)
------ ------ ------ ------ ------- --------
Operating income........................ (221) 118 206 336 1,087 2,115
Interest and other income (expense),
net.................................. 11 5 21 53 89 (7)(4)
------ ------ ------ ------ ------- --------
Income (loss) before provision for
income taxes......................... (210) 123 227 389 1,176 2,108
Provision for income taxes.............. (84) 49 114 178 512 912(5)
------ ------ ------ ------ ------- --------
Net income (loss)....................... $ (126) $ 74 $ 113 $ 211 $ 664 $ 1,196
====== ====== ====== ====== ======= ========
Net income per share.................... $
Weighted average shares outstanding..... ========
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL (TCH ONLY)
----------------------------------------
DECEMBER 31, DECEMBER 31, 1996
---------------------------------------- -----------------------------
1992 1993 1994 1995 1996 PRO FORMA(1) AS ADJUSTED(6)
---- ------ ------ ------ ------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).... $499 $ 592 $ 496 $ 563 $ 986 $ (46) $ 10,718
Total assets................. 901 1,209 1,672 2,510 2,013 13,353 22,976
Long-term debt, less current
maturities................ 16 10 67 -- -- 1,087 --
Total stockholders' equity... 471 545 658 869 1,184 7,682 19,298
</TABLE>
- ---------------
(1) The Pro Forma Combined Statement of Operations Data assumes that the
Combination and this offering took place on January 1, 1996. The Pro Forma
Combined Balance Sheet Data assumes that the Combination took place as of
December 31, 1996. This data is not necessarily indicative of the results
the Company would have had if these events actually then occurred or of the
Company's future results. The Pro Forma Combined Statement of Operations
Data excludes (i) any adjustments for the compensation to be paid in 1997
for services to be rendered in 1997 by the Company's Chief Executive Officer
and Chief Financial Officer pursuant to their employment agreements, and
(ii) non-recurring, non-cash compensation expense recorded in the first
quarter of 1997 in connection with the accelerated vesting of restricted
stock. The pro forma data presented herein is based on preliminary
estimates, available information and certain assumptions that management
deems appropriate and should be read in conjunction with the other financial
statements and notes thereto included elsewhere in this Prospectus.
17
<PAGE> 19
(2) Reflects the reduction of $552,000 in salary and benefits to principals of
the Founding Companies.
(3) Reflects the $172,000 amortization of goodwill to be recorded as a result of
the Combination assuming a 35-year amortization period.
(4) Reflects an interest expense reduction of $158,000 related to bank debt and
notes payable to be repaid from the net proceeds of this offering.
(5) Reflects an increase in the Company's historical provision for income taxes
of $373,000 to account for the Company's estimated consolidated effective
tax rate subsequent to the Combination, after considering nondeductible
goodwill amortization.
(6) Reflects the issuance of shares of Common Stock by the Company in
this offering and the application of the net proceeds as described under
"Use of Proceeds."
18
<PAGE> 20
SELECTED INDIVIDUAL FOUNDING COMPANY FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The selected historical and pro forma financial data presented below for
the individual Founding Companies (including their respective affiliates, if
any) is derived from, and should be read in conjunction with, their respective
audited financial statements and related notes thereto appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Temporary Corporate Housing Columbus, Inc.
Revenues........................................................ $8,309 $9,754 $12,502
Operating income................................................ 206 336 1,087
Operating income, pro forma(1).................................. 156 390 1,170
Number of units at end of year.................................. 510 539 624
Corporate Lodgings, Inc.
Revenues........................................................ $4,069 $6,067 $ 8,820
Operating income................................................ 87 39 195
Operating income, pro forma(1).................................. 76 184 255
Number of units at end of year.................................. 213 301 434
Exclusive Interim Properties, Ltd.(2)
Revenues........................................................ $4,015 $5,521 $ 8,626
Operating income................................................ 104 300 213
Operating income, pro forma(1).................................. 166 490 344
Number of units at end of year.................................. 125 302 441
Home Again, Inc.
Revenues........................................................ $ 532 $1,570 $ 4,035
Operating income................................................ 49 74 315
Operating income (loss), pro forma(1)........................... (77) (51) 200
Number of units at end of year.................................. 40 100 198
Temporary Housing Experts, Inc.
Revenues........................................................ $2,000 $3,086 $ 3,583
Operating income (loss)......................................... 115 30 (73)
Operating income, pro forma(1).................................. 161 194 148
Number of units at end of year.................................. 153 214 239
</TABLE>
- ---------------
(1) Reflects (i) an adjustment to the compensation of an executive of the
Founding Company to reflect the compensation to be paid to such executive
pursuant to an employment agreement signed in connection with the
Combination and (ii) amortization of goodwill to be recorded as a result of
the Combination, assuming a 35-year amortization period and the push-down of
goodwill to the acquired entities. The adjustment increased (decreased)
historical operating income for each Founding Company as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
COMPANY 1994 1995 1996
------------------------------------------------------------ ---- ----- -----
<S> <C> <C> <C>
Temporary Corporate Housing Columbus, Inc................... $(50) $ 54 $ 83
Corporate Lodgings, Inc..................................... (11) 145 60
Exclusive Interim Properties, Ltd.(2)....................... 62 190 131
Home Again, Inc............................................. (126) (125) (115)
Temporary Housing Experts, Inc.............................. 46 164 221
</TABLE>
(2) Prior to the Combination, Exclusive Interim Properties, Ltd.'s fiscal year
end was March 31. The 1994 and 1995 data presents data for that company's
fiscal years ended March 31, 1995 and 1996, respectively. The 1996 data
presents 12 months of data derived from the unaudited three-month period
ended March 31, 1996 and the audited nine-month period ended December 31,
1996.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Unaudited Pro Forma Combined Financial Statements and the Founding Companies'
Financial Statements and the related notes thereto appearing elsewhere in this
Prospectus.
INTRODUCTION
BridgeStreet was incorporated in August 1996 with the goal of becoming a
leading national provider of flexible accommodation services. The Company plans
to achieve this goal by implementing an aggressive acquisition program and a
national operating strategy designed to increase internal revenue growth, cost
efficiencies and profitability. In the first quarter of 1997, BridgeStreet
acquired by merger the five Founding Companies in the Combination.
The Company's revenues are derived primarily from renting accommodations to
guests for extended periods. Revenues depend on the number of accommodations the
Company has available under lease, the occupancy rate and the rate charged. The
rate charged is a function of, among other factors, (i) the type, size and
location of the accommodation being rented, (ii) the rental period and (iii) any
additional amenities made available to the guest during his or her stay. Cost of
services consists primarily of lease payments for accommodations and their
furnishings, and expenses associated with cleaning, maintaining and providing
utilities to accommodations. Selling, general and administrative expense
consists primarily of compensation and related benefits for management and key
employees, administrative salaries and benefits, office rents and utilities,
professional fees and advertising.
Prior to their acquisition by BridgeStreet, the Founding Companies were
managed as independent private businesses. As such, their historical results of
operations reflect different tax structures (i.e., S corporations and C
corporations) which have influenced, among other things, their historical levels
of owners' compensation and benefits. Certain Founding Company owners agreed to
reductions in their compensation and benefits in connection with the
Combination.
BridgeStreet currently is in the process of integrating the Founding
Companies and their operations and administrative functions. This integration
process may present opportunities to (i) enhance revenues through the geographic
cross-sell capabilities that each of the Founding Companies can provide to its
existing clients and (ii) reduce costs through, among other things, the
elimination of duplicative functions and the receipt of greater volume discounts
from vendors. However, integration also will necessitate additional costs and
expenditures related to corporate management and administration, public company
operations, systems integration and facilities expansion. As a result of these
possible cost savings and various additional costs, historical operating results
may not be comparable to, or indicative of, future performance. There can be no
assurance that the Company's integration efforts will be successful. See "Risk
Factors -- Limited Combined Operating History."
For financial reporting purposes, Temporary Corporate Housing Columbus,
Inc. (together with its three affiliates) is presented as the acquiror of the
other Founding Companies. Consequently, the Company's historical financial
statements for periods ended on or before December 31, 1996 are the historical
financial statements of TCH.
RESULTS OF OPERATIONS -- COMBINED
The Combined Founding Company Statements of Operations data for the years
ended December 31, 1994, 1995 and 1996 do not purport to present the combined
Founding Companies in accordance with generally accepted accounting principles,
but represent merely a summation of the data of the individual Founding
Companies on a historical basis and do not include the effects of pro forma
adjustments. This data will not be comparable to and may not be indicative of
the Company's post-Combination results of operations because (i) the Founding
Companies historically were not under common control or management and had
different tax structures during the periods presented, (ii) the Company used the
purchase method of
20
<PAGE> 22
accounting to reflect the Combination and (iii) the Founding Companies were not
all acquired at the same time.
The following table sets forth certain unaudited combined data of the
Founding Companies and that data as a percentage of revenues on a historical
basis and excludes the effects of pro forma adjustments for the periods
indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1994 1995 1996(1)
----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues..................... $18,925 100.0% $25,998 100.0% $37,566 100.0%
Cost of services............. 14,048 74.2 19,121 73.5 27,944 74.4
Selling, general and
administrative expense..... 4,413 23.3 6,099 23.5 7,884 21.0
------- ----- ------- ----- ------- -----
Operating income............. $ 464 2.5% $ 778 3.0% $ 1,738 4.6%
======= ===== ======= ===== ======= =====
</TABLE>
- ---------------
(1) With respect to EIP, data for the period ending December 31, 1996 includes
data derived from the unaudited three-month period ended March 31, 1996 and
the audited nine-month period ended December 31, 1996. Data for 1995 and
1994 includes data for EIP's fiscal years ended March 31, 1996 and March 31,
1995, respectively.
1996 Compared to 1995
Revenues. Revenues increased $11.6 million, or 44.5%, from $26.0 million
in 1995 to $37.6 million in 1996. Revenues for each of the Founding Companies
increased during this period. The increase primarily was a result of an increase
in the number of accommodations rented during the year, both in existing markets
and in new markets.
Cost of Services. Cost of services increased $8.8 million, or 46.1%, from
$19.1 million in 1995 to $27.9 million in 1996. Cost of services as a percentage
of revenues increased slightly from 73.5% in 1995 to 74.4% in 1996. The dollar
increase in cost of services resulted primarily from an increase in the number
of accommodations leased during the year. Cost of services as a percentage of
revenues was adversely affected by certain pricing practices at one of the
Founding Companies, which since have been discontinued, as well as higher
leasing and maintenance costs and lower occupancy rates resulting from the entry
by another Founding Company into new markets.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $1.8 million, or 29.3%, from $6.1 million in
1995 to $7.9 million in 1996, primarily as a result of an increase in staffing
required to support the increased number of accommodations, higher compensation
paid to owners of the Founding Companies and increased overhead costs associated
with entering new markets. Selling, general and administrative expense decreased
as a percentage of revenues from 23.5% in 1995 to 21.0% in 1996, generally as a
result of spreading the fixed costs of the Founding Companies' operations over a
larger revenue base.
1995 Compared to 1994
Revenues. Revenues increased $7.1 million, or 37.4%, from $18.9 million in
1994 to $26.0 million in 1995. Revenues for each of the Founding Companies
increased during this period. The increase primarily was a result of an increase
in the number of accommodations rented during the year, both in existing markets
and in new markets. In addition, Home Again initiated operations in mid-1993,
and as a result did not have its operations fully implemented during 1994.
Cost of Services. Cost of services increased $5.1 million, or 36.1%, from
$14.0 million in 1994 to $19.1 million in 1995 as a result of the increase in
the number of accommodations leased during the year. Cost of services as a
percentage of revenues decreased slightly from 74.2% in 1994 to 73.5% in 1995.
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<PAGE> 23
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $1.7 million, or 38.2%, from $4.4 million in
1994 to $6.1 million in 1995, and increased slightly as a percentage of revenues
from 23.3% in 1994 to 23.5% in 1995. The increase both in dollars and as a
percentage of revenues primarily was a result of an increase in staffing
required to support the increased number of accommodations, higher compensation
paid to certain owners of the Founding Companies and increased overhead costs
associated with entering new markets.
LIQUIDITY AND CAPITAL RESOURCES -- COMBINED
On a combined basis, the Founding Companies generated $1.6 million and
$700,000 of net cash from operating activities during 1995 and 1996,
respectively. Net cash used in investing activities by the Founding Companies
was $791,000 during each of 1995 and 1996. Cash used in investing activities
primarily was for the purchase of operating stock and property and equipment.
Net cash used in financing activities by the Founding Companies on a combined
basis was approximately $150,000 and $350,000 during 1995 and 1996,
respectively. Net cash used in financing activities primarily was for the
repayment of notes to stockholders, payment of long-term debt and distributions
to stockholders. The combined cash and cash equivalents of the Founding
Companies decreased by $400,000, from $1.4 million in 1995 to $1.0 million in
1996. At December 31, 1996, three of the Founding Companies had a working
capital deficit aggregating approximately $700,000.
Prior to the closing of this offering, the Company will pay approximately
$191,000 to the former stockholder of Home Again. This payment is expected to be
funded from cash provided by operating activities. Upon the closing of this
offering, BridgeStreet intends to repay an aggregate of approximately $2.0
million of indebtedness and other obligations both assumed from the Founding
Companies and incurred by it in connection with the Combination. See "Use of
Proceeds."
The Company has entered into a revolving credit facility with Fleet
National Bank. The facility provides the Company with a revolving line of credit
of up to $10.0 million, secured by guarantees by certain material subsidiaries
of the Company and a pledge of the capital stock of all of the Company's
wholly-owned operating subsidiaries. The credit facility may be used for
refinancing of Founding Company indebtedness, post-offering acquisitions and
working capital. Loans made under the credit facility bear interest at the
Company's option of either the bank's prime lending rate or 1.25% above the
Eurodollar rate. The credit facility will terminate on March 31, 2002, or sooner
at the discretion of the Company, and all amounts outstanding thereunder (if
any) will be due upon such termination. The credit facility (i) prohibits the
payment of dividends and other distributions by the Company, (ii) generally will
not permit the Company to incur or assume other indebtedness and (iii) requires
the Company to comply with certain financial covenants.
While there can be no assurance, management believes that cash flow from
operations, funds from the Company's credit facility and the net proceeds to the
Company from this offering will be adequate to meet the Company's capital
requirements for the next 12 months, depending on the size and methods of
financing potential acquisitions.
IMPACT OF INFLATION
Due to the low levels of inflation experienced in 1994, 1995 and 1996,
inflation did not have a significant effect on the combined results of the
Founding Companies in those years.
SEASONALITY
Quarterly earnings may be affected by the timing of certain holidays,
business and vacation patterns, weather conditions, economic factors and other
considerations affecting travel. Corporate relocation activity peaks in the
summer months and declines significantly during the first part of the first
quarter. Long-term consulting activity tends to follow a similar pattern, but
not to the same extent. The Company expects to realize lower revenues, operating
income and net income during the first quarter.
22
<PAGE> 24
INDIVIDUAL FOUNDING COMPANIES
RESULTS OF OPERATIONS -- TEMPORARY CORPORATE HOUSING
1996 Compared to 1995 and 1995 Compared to 1994
Revenues. Revenues increased $2.7 million, or 28.2%, from $9.8 million in
1995 to $12.5 million in 1996. This increase was a result of an increase in the
number of accommodations rented during the year, an improvement in the occupancy
rate and an increase in the rates realized by TCH. Revenues increased $1.4
million, or 17.4%, from $8.3 million in 1994 to $9.8 million in 1995. This
increase was a result of an increase in the number of accommodations rented
during the year, an improvement in the occupancy rate and an increase in the
rates realized by TCH.
Cost of Services. Cost of services increased $1.7 million, or 23.6%, from
$7.4 million in 1995 to $9.1 million in 1996, primarily as a result of an
increase in the number of accommodations leased and the cost of furnishing such
accommodations during the year. Cost of services as a percentage of revenues
decreased from 75.4% in 1995 to 72.7% in 1996 as a result of an improved
occupancy rate and an increase in the rates realized by TCH. Cost of services
increased $879,000, or 13.6%, from $6.5 million in 1994 to $7.4 million in 1995,
primarily as a result of an increase in the number of accommodations leased and
the cost of furnishing such accommodations during the year. Cost of services as
percentage of revenues decreased from 77.9% in 1994 to 75.4% in 1995 as a result
of an improved occupancy rate and an increase in the rates realized by TCH.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $263,000, or 12.7%, from $2.1 million in 1995
to $2.3 million in 1996, primarily as a result of increased compensation to the
stockholders, administrative payroll and sales commissions. Selling, general and
administrative expense as a percentage of revenues decreased from 21.2% in 1995
to 18.6% in 1996, primarily as a result of spreading the fixed costs of the
company's operations over a larger revenue base. Selling, general and
administrative expense increased $436,000, or 26.8%, from $1.6 million in 1994
to $2.1 million in 1995. Selling, general and administrative expense increased
as a percentage of revenues increased from 19.6% in 1994 to 21.2% in 1995. This
increase both in dollars and as a percentage of revenues primarily was a result
of increased compensation to the stockholders, administrative payroll and sales
commissions.
LIQUIDITY AND CAPITAL RESOURCES -- TEMPORARY CORPORATE HOUSING
For the three years ended December 31, 1996, TCH generated $873,000 in net
cash flow from operating activities. Increases in cash flow primarily were
generated from net income plus depreciation and amortization of $1.2 million,
while reductions in cash flow were due to increases in accounts receivable
balances of $401,000 attributable to TCH's increased sales levels. TCH also
expended $374,000 during this period, primarily for purchases of operating stock
and property and equipment. Cash used in financing activities was $432,000
during this period and primarily was attributable to loans to stockholders and a
dividend to stockholders of $349,000.
At December 31, 1996, TCH had working capital of $986,000. TCH historically
has funded its operations from cash provided by operating activities. At
December 31, 1996, TCH had cash and cash equivalents of $598,000 with no
outstanding indebtedness.
RESULTS OF OPERATIONS -- CORPORATE LODGINGS
1996 Compared to 1995 and 1995 Compared to 1994
Revenues. Revenues increased $2.7 million, or 45.4%, from $6.1 million in
1995 to $8.8 million in 1996. This increase was a result of an increase in the
number of accommodations rented during the year, an improvement in the occupancy
rate and an increase in the rates realized by CLI. Revenues increased $2.0
million, or 49.1%, from $4.1 million in 1994 to $6.1 million in 1995. This
increase was a result of an increase in the number of accommodations rented
during the year and an increase in the rates realized by CLI.
Cost of Services. Cost of services increased $2.1 million, or 50.9%, from
$4.0 million in 1995 to $6.1 million in 1996. Cost of services as percentage of
revenues also increased, from 66.7% in 1995 to 69.2% in
23
<PAGE> 25
1996. The increase both in dollars and as a percentage of revenues primarily was
a result of an increase in the cost to lease, furnish and clean a unit. Cost of
services increased $1.3 million, or 47.4%, from $2.7 million in 1994 to $4.0
million in 1995, primarily as a result of an increase in the number of
accommodations leased and the cost of furnishing such accommodations during the
year. Cost of services as percentage of revenues decreased from 67.5% in 1994 to
66.7% in 1995 primarily as a result of an increase in the rates realized by CLI.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $537,000, or 27.1%, from $2.0 million in 1995
to $2.5 million in 1996, primarily as a result of increased compensation to the
majority stockholder, increased sales and administrative payroll, and general
office expenses. Selling, general and administrative expense as a percentage of
revenues decreased from 32.7% in 1995 to 28.6% in 1996, primarily as a result of
spreading the fixed costs of the company's operations over a larger revenue
base. Selling, general and administrative expense increased $745,000, or 60.2%,
from $1.2 million in 1994 to $2.0 million in 1995. The increase both in dollars
and as a percentage of revenues primarily was a result of costs associated with
entering the Milwaukee, Wisconsin market and expansion within the Lexington,
Kentucky market.
RESULTS OF OPERATIONS -- EXCLUSIVE INTERIM PROPERTIES
Twelve Months Ended December 31, 1996 Compared to Fiscal Year Ended March 31,
1996 and Fiscal Year Ended March 31, 1996 Compared to Fiscal Year Ended March
31, 1995
Revenues. Revenues increased $3.1 million, or 56.2%, from $5.5 million in
the fiscal year ended March 31, 1996 to $8.6 million in the 12 months ended
December 31, 1996. This increase was a result of an increase in the number of
accommodations rented. Revenues increased $1.5 million, or 37.5%, from $4.0
million in the fiscal year ended March 31, 1995 to $5.5 million in the fiscal
year ended March 31, 1996, as a result of an increase in the number of
accommodations rented during the year.
Cost of Services. Cost of services increased $2.8 million, or 65.8%, from
$4.2 million in the fiscal year ended March 31, 1996 to $7.0 million in the 12
months ended December 31, 1996, primarily as a result of an increase in the
number of accommodations leased. Cost of services as a percentage of revenues
increased from 76.9% in the fiscal year ended March 31, 1996 to 81.6% in the 12
months ended December 31, 1996. The increase in cost of services as a percentage
of revenues primarily was attributable to the effect of certain pricing
practices, which since have been discontinued. Cost of services increased $1.2
million, or 40.8%, from $3.0 million in the fiscal year ended March 31, 1995 to
$4.2 million in the fiscal year ended March 31, 1996, as a result of an increase
in the number of accommodations leased during the year.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $399,000, or 40.9%, from $975,000 in the fiscal
year ended March 31, 1996 to $1.4 million in the 12 months ended December 31,
1996. Selling, general and administrative expense as a percentage of revenues
decreased from 17.7% in the fiscal year ended March 31, 1996 to 15.9% in the 12
months ended December 31, 1996, primarily as a result of spreading the fixed
costs of the company's operations over a larger revenue base. Selling, general
and administrative expense increased $80,000, or 8.9%, from $895,000 in the
fiscal year ended March 31, 1995 to $975,000 in the fiscal year ended March 31,
1996. Selling, general and administrative expense as a percentage of revenues
decreased from 22.3% in the fiscal year ended March 31, 1995 to 17.7% in the
fiscal year ended March 31, 1996, primarily as a result of spreading the fixed
costs of the company's operations over a larger revenue base.
RESULTS OF OPERATIONS -- HOME AGAIN
1996 Compared to 1995
Revenues. Revenues increased $2.5 million, or 157.0%, from $1.6 million in
1995 to $4.0 million in 1996. This increase was a result of an increase in the
number of accommodations rented during the year.
Cost of Services. Cost of services increased $1.9 million, or 144.1%, from
$1.3 million in 1995 to $3.1 million in 1996, as a result of an increase in the
number of accommodations leased during the year. Cost of
24
<PAGE> 26
services as percentage of revenues decreased from 81.8% in 1995 to 77.7% in
1996, primarily as a result of spreading the fixed costs of the company's
operations over a larger revenue base.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $374,000, or 176.4%, from $212,000 in 1995 to
$586,000 in 1996. The increase both in dollars and as a percentage of revenues
primarily was a result of increased compensation to the stockholder and an
increase in administrative payroll.
RESULTS OF OPERATIONS -- TEMPORARY HOUSING EXPERTS
1996 Compared to 1995
Revenues. Revenues increased $500,000, or 16.1%, from $3.1 million in 1995
to $3.6 million in 1996. This increase was a result of an increase in the number
of accommodations rented during the year.
Cost of Services. Cost of services increased $388,000, or 17.7%, from $2.2
million in 1995 to $2.6 million in 1996. The increase both in dollars and as a
percentage of revenues primarily was a result of an increase in the number of
accommodations leased during the year and a lower occupancy rate due to entering
a new market in August 1995.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $212,000, or 24.5%, from $866,000 to 1995 to
$1.1 million in 1996. The increase both in dollars and as a percentage of
revenues primarily was a result of increased compensation to the stockholders
and an increase in administrative payroll.
25
<PAGE> 27
BUSINESS
OVERVIEW
BridgeStreet is a leading provider of flexible accommodation services,
primarily for business people and professionals requiring lodging for one week
to several months. The Company offers high-quality, fully-furnished apartments,
townhouses, condominiums and, to a lesser extent, houses (collectively,
"accommodations"). Together with the specialized amenities offered by the
Company, these accommodations are intended to provide guests with a "home away
from home." As of March 31, 1997, BridgeStreet had more than 2,100 units under
lease in 16 metropolitan areas located in the Midwest and Mid-Atlantic regions
of the United States, and an occupancy rate of approximately 90%.
As a provider of flexible accommodation services, BridgeStreet leases
substantially all of its accommodations on a short-term basis from property
managers, and then rents them to its clients. This enables the Company to (i)
adjust the quantity, mix and location of its accommodations as client needs
dictate and local economic conditions warrant, (ii) expand and enter new markets
without the costs and lead times associated with investing in "bricks and
mortar" and (iii) avoid the fixed costs associated with ownership or long-term
leasing of real estate. The Company also leases the furniture for its
accommodations on a short-term basis from furniture rental companies. These
furniture leasing arrangements enable BridgeStreet to maintain well-appointed,
modern and attractive accommodations, upgrade and replace furniture as needed,
and satisfy specific furnishing requests. BridgeSteet's leasing strategy
distinguishes it from fixed-location lodging providers, such as all-suite or
extended-stay hotels, that own their lodging facilities and furnishings or lease
them on a long-term basis.
Traditionally, travelers on extended trips have stayed in hotels and
motels. According to industry sources, in 1995, guests staying four or more
nights represented approximately 30% of total domestic hotel stays during that
year. The Company believes that business travelers on extended trips
increasingly desire alternatives to conventional hotel and motel rooms, which
typically lack the spaciousness and amenities of home. The Company believes that
this has been an important factor in the recent growth in the extended-stay
segment of the lodging industry. Participants in this segment include flexible
accommodation service providers, all-suite hotels and extended-stay hotels.
By providing flexible accommodation services, the Company can satisfy
client requests for accommodations in a variety of locations and neighborhoods,
as well as requests for accommodations of specific types and sizes. The
substantial majority of the Company's accommodations are located within
high-quality property complexes that typically feature, among other things,
in-unit washers and dryers, dedicated parking and access to fitness facilities
(including, in many cases, pools, saunas and tennis courts). In addition, at a
guest's request, BridgeStreet can upgrade an accommodation by providing
specialized amenities such as office furniture, fax machines and computers. The
Company's accommodations generally are priced competitively with all-suite and
upscale extended-stay hotel rooms even though, on average, they are
substantially larger. For example, BridgeStreet's one-bedroom unit averages
approximately 750 square feet versus approximately 400 square feet for a
one-bedroom at a typical all-suite or upscale extended-stay hotel.
BridgeStreet was founded in August 1996, and in the first quarter of 1997
combined by merger five regional providers of flexible accommodation services.
The Company has achieved significant growth in recent years. On a pro forma
basis, consolidated units available for rent increased from 1,041 units on
January 1, 1994 to 1,936 units on December 31, 1996, representing a compound
annual growth rate of 36%. In addition, pro forma net revenues increased from
$18.9 million in 1994 to $37.6 million in 1996, representing a compound annual
growth rate of 41%.
GROWTH STRATEGY
The Company plans to achieve its goal of becoming a leading national
provider of flexible accommodation services by implementing an aggressive
acquisition program and a national operating strategy designed to
26
<PAGE> 28
increase internal revenue growth, cost efficiencies and profitability. Key
elements of the Company's business strategy include:
Growth through Acquisitions. The Company believes that the flexible
accommodation services industry is highly fragmented, with over 400
geographically dispersed companies in the United States, few of which have more
than a regional presence. BridgeStreet plans to take advantage of the fragmented
nature of the industry by acquiring flexible accommodation service companies in
major metropolitan areas frequented by business travelers. BridgeStreet intends
to implement its business model at each acquired company as soon as practicable
after the acquisition is completed. BridgeStreet's acquisition strategy is to:
- Enter New Geographic Markets and Establish Nationwide Coverage. In each
new market, the Company initially will target for acquisition one local
or regional flexible accommodation services provider having the size and
quality of operations suitable for serving as the Company's base for
expansion in the market. Acquisitions in new markets will enable
BridgeStreet to (i) gain local or regional market share rapidly, (ii)
increase sales to existing clients by meeting their needs for
accommodations in other regions, (iii) increase sales to the acquired
company's clients by providing them with access to BridgeStreet's growing
national network and (iv) establish the BridgeStreet brand name in new
regions and enhance its nationwide recognition.
- Expand Within Existing Markets. Once the Company has established
operations in a new region, it may seek to expand its market share by
acquiring other flexible accommodation service providers within that
region. The Company believes that it can achieve operating efficiencies
by incorporating the businesses of smaller acquired companies into the
Company's operations without any significant increase in infrastructure.
National Operating Strategy. The Company has begun to implement a national
operating strategy with the following components:
- Maximize Sales to Existing and New Clients. The Company plans to
maximize sales to existing corporate clients and to obtain new clients
through a national sales and marketing program which highlights the
Company's expanding national network. Many of the Company's clients are
Fortune 1000 companies with significant, national employee lodging
requirements. These corporate clients generally have numerous key
decision makers (such as human resource directors, relocation managers or
training directors) who both establish and administer company travel and
accommodation policies. The Company plans to obtain a greater share of
each client's lodging requirements by establishing relationships with
additional key decision makers and emphasizing the Company's expanding
national presence.
- Achieve Cost Efficiencies. The Company believes it should be able to
reduce total operating expenses of the Founding Companies and any
additional acquired companies by consolidating certain functions
performed separately by such companies. In addition, the Company believes
that as a large, national flexible accommodation services company, it
should be able to achieve lower costs (as a percentage of revenues)
compared to those of the individual Founding Companies and other acquired
companies in such areas as leasing accommodations and furniture,
purchasing certain hard and soft goods, and obtaining financing
arrangements, employee benefits and insurance.
- Adopt Best Practices. The Company will continue reviewing its operations
at the local and regional operating levels in order to identify "best
practices" that can be implemented throughout its operations. Areas where
"best practices" may be utilized include accommodation pricing, occupancy
management and cash flow management. BridgeStreet believes the
implementation of these practices will enable the Company to provide
superior customer service and maximize sales opportunities.
- Implement Management Information System. BridgeStreet intends to develop
and implement a centrally-controlled, computerized management information
system that will integrate the Company's customer contact, sales,
marketing, finance, telephone, property management, internet access,
lease management and reservation functions. BridgeStreet believes that
the proposed system will enable it to deliver superior customer service,
more efficiently manage its operations and achieve cost savings.
27
<PAGE> 29
ACQUISITION STRATEGY
Given the highly fragmented nature of the flexible accommodation services
industry, the Company believes that there are numerous potential acquisition
targets both within markets currently served by the Company and in other major
metropolitan areas. The Company intends to implement an aggressive acquisition
program aimed at (i) expanding into major metropolitan markets not currently
served by the Company and (ii) acquiring other flexible accommodation service
providers in its existing markets to enhance its market position.
In new markets, the Company will target for acquisition one or more leading
local or regional flexible accommodation service providers. Generally, these
companies will be run by successful entrepreneurs, whom BridgeStreet will
endeavor to retain after the acquisitions, and will be of sufficient size to
provide the basis for the Company's future expansion within the new markets.
Each of the Company's acquisition candidates will be expected to demonstrate
potential for increased revenues and profitability. The Company also will
evaluate certain qualitative characteristics of acquisition candidates,
including their reputations in their respective geographic regions, the size and
strength of their customer bases, the quality and experience levels of their
operational management, and their operating histories.
In existing markets, the Company will seek to acquire flexible
accommodation service providers that meet the Company's criteria with respect to
reputation, customer base, management and operating history. Some of the
companies acquired within existing markets will be large enough to retain much
of their own operating and management infrastructures. Other, generally smaller
acquired companies will be combined with BridgeStreet's existing operations to
eliminate redundant functions and improve profitability. Acquisitions in
existing markets should improve revenues and profitability by enhancing regional
brand name recognition and leveraging the economies of scale associated with a
larger business enterprise.
The Company believes that acquisition by BridgeStreet will be attractive to
many smaller independent operators because of (i) the Company's strategy to
create a large, professionally-managed company with national brand name
recognition and a reputation for quality service and customer satisfaction, (ii)
the experience of its officers with industry consolidations, (iii) the Company's
decentralized operating strategy, (iv) the Company's increased visibility and
access to financial resources as a public company, (v) the potential for
increased profitability due to centralized administrative functions, enhanced
systems capabilities and access to increased marketing resources, (vi) the
ability of the acquired companies to participate in the Company's growth and
expansion, and (vii) the strong desire of the owners of many privately-held
companies for liquidity and a return on their investments in their companies.
Based on BridgeStreet's experience in the Combination, BridgeStreet
believes the senior executives of the Founding Companies will be instrumental in
establishing new markets for BridgeStreet and in identifying and completing
future acquisitions. Prior to the Combination, the Founding Companies' senior
executives led their companies' successful expansion into 11 new markets. Many
of these executives had leadership roles in founding and directing the National
Interim Housing Network ("NIHN"), the flexible accommodation services industry's
leading trade association. The Company believes that the visibility of these
individuals within NIHN and within the industry in general will increase the
industry's awareness of the Company and its acquisition program, thereby
attracting interest from owners of other flexible accommodation service
companies.
As consideration for future acquisitions, the Company intends to use
various combinations of cash, notes and Common Stock. The consideration paid for
each future acquisition will depend on such factors as the acquired company's
historical operating results and future prospects and the ability of the
acquired company's business to complement the services offered by the Company.
The Company currently has no binding acquisition agreements. The timing, size
and success of the Company's acquisition efforts and the associated capital
commitments cannot be readily predicted. In the event that no suitable
acquisition candidates exist in a given market, the Company is prepared to enter
a market by establishing a new operation or strategic alliance.
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<PAGE> 30
ACCOMMODATIONS AND SERVICES
Accommodations
BridgeStreet offers high-quality, fully-furnished one-, two- and
three-bedroom accommodations that, together with the specialized amenities
offered by the Company, are intended to provide guests with a "home away from
home." BridgeStreet selects its accommodations based on location, general
condition and basic amenities, with the goal of providing accommodations that
meet each guest's particular needs. As a flexible accommodation services
provider, the Company can satisfy client requests for accommodations in a
variety of locations and neighborhoods, including requests for proximity to an
office, school or area attraction, as well as requests for accommodations of
specific types and sizes. The substantial majority of the Company's
accommodations are located within high-quality property complexes that typically
feature in-unit washers and dryers, dedicated parking, and access to fitness
facilities (including, in many cases, pools, saunas and tennis courts). Standard
furnishings typically include, among other things, cable televisions, answering
machines and clock radios. BridgeStreet also is able to customize its
accommodations at a guest's request with items such as office furniture, fax
machines and computers.
The Company's accommodations generally are priced competitively with
all-suite or upscale extended-stay hotel rooms even though, on average, they are
substantially larger. For example, BridgeStreet's one-bedroom unit averages
approximately 750 square feet versus approximately 400 square feet for a
one-bedroom unit at a typical all-suite or upscale extended-stay hotel. The
Company believes it generally is able to price its accommodations competitively
due to (i) the high quality of its accommodations, (ii) its relatively low
operating cost structure and (iii) its ability to lease accommodations in
accordance with demand and leave unfavorable markets quickly. The length of a
guest's stay can range from a few nights to a few years, with the typical stay
ranging from 30 to 45 days.
Corporate Client Services
The Company believes that it provides valuable, cost-effective services to
its corporate clients, many of which have human resource directors, relocation
managers or training directors with significant, national employee lodging
requirements. In particular, the Company aims to relieve its clients of the
administrative burden often associated with relocating employees and/or
providing them with temporary housing. In addition to providing clients with a
diverse range of accommodation types and sizes in a variety of locations, the
Company believes it satisfies its clients' needs for (i) a high degree of local
market knowledge, (ii) special accommodation requests (such as last-minute
location switches), (iii) accurate, customized billing options and (iv) other
ancillary services such as assistance in locating permanent housing and school
systems. The Company believes that existing and potential clients will
increasingly turn to outside providers such as BridgeStreet to satisfy their
employee lodging requirements as their awareness of BridgeStreet and the
flexible accommodation services industry increases.
Guest Services
The Company strives to provide the highest quality of customer service by
coordinating in advance all aspects of a guest's lodging experience. Prior to a
guest's arrival, BridgeStreet arranges to have keys and directions sent to the
guest, along with other information relating to the guest's interests (as
discerned through prior communications), such as literature on local golf
courses or other forms of entertainment. The Company makes at least one
follow-up telephone call to the guest before the guest moves in to ensure that
the guest will feel comfortable in his or her new accommodation from the moment
of arrival. Immediately prior to the guest's arrival, BridgeStreet's
professional housekeeping staff cleans and inventories the accommodation to
ensure that it is prepared for the guest.
During a guest's stay, BridgeStreet keeps in touch with the guest to
confirm that he or she is satisfied, and to encourage the guest to call whenever
the Company can be of assistance. In addition, the Company maintains a
representative in each city in which it operates to be responsive to guests'
needs. The Company's guest services department offers guests comprehensive
information services before and during their stays to help guests acclimate
themselves to their new surroundings. A guest can obtain information concerning,
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<PAGE> 31
among other things, local schools, day care providers and area playgrounds, by
placing a single telephone call. Similarly, the guest services department can
identify local entertainment and cultural events, and help coordinate automobile
rentals, grocery shopping and other miscellaneous activities.
BridgeStreet also oversees the moving-out process. The guest is asked
either to mail the keys to the Company in a self-addressed, stamped envelope or
simply to leave the keys in the accommodation. The guest also is asked to
complete a form evaluating his or her stay, and is encouraged to contact the
Company whenever the guest needs accommodations in other locations where
BridgeStreet provides services. The guest's evaluation form is thoroughly
reviewed, and (if applicable) a copy is sent to the corporate client.
CLIENT BASE
BridgeStreet has a diverse client base composed primarily of domestic
Fortune 1000 corporations, business professionals and professional firms. Among
the Company's clients are Ameritech Corp., Andersen Consulting, members of the
Baltimore Orioles, Bell Atlantic Corp., Cargill Inc., Ernst & Young LLP, KPMG
Peat Marwick LLP, Maybelline, Inc. and United Healthcare Corporation. The
Company's guests include corporate employees, consultants, legal and accounting
professionals, sales representatives, traveling health care workers, visiting
professors, professional athletes, artistic performers, medical patients and
their relatives, and people between homes. No client accounted for more than 5%
of the Company's pro forma 1996 revenues.
SALES AND MARKETING
BridgeStreet focuses primarily on business-to-business selling. At the
local level, each of the Company's operating subsidiaries has corporate account
specialists that call on local companies (including local branches of regional
or national companies) to solicit business. The account specialist focuses his
or her efforts on the key decision makers at each company responsible for
establishing and administering travel and accommodation policies, typically
human resource directors, relocation managers or training directors. By
aggressively pursuing relationships with potential clients and expanding
services to existing clients, BridgeStreet seeks to become each client's primary
or sole provider of flexible accommodation services nationwide. As its
operations expand, BridgeStreet increasingly will market its nationwide
capabilities to its local corporate clients.
The Company tailors its marketing strategy to the needs of particular
clients. For example, BridgeStreet markets itself to a corporation with
relocating employees by focusing on its ability to situate large families in
houses and apartments with three or more bedrooms, its access to accommodations
in both metropolitan and suburban settings, and its access to accommodations
that allow pets. In contrast, when marketing to a potential corporate client
having consultants in need of short-term housing, the Company emphasizes its
flexible lease terms and its ability to customize an accommodation with
amenities such as office equipment (including computers), additional telephone
lines and other work-related items.
The Company intends to implement an advertising program designed to enhance
the "BridgeStreet" name both inside and outside the flexible accommodation
services industry and broaden its client base. In addition, the Company intends
to promote its brand name by advertising in trade publications, Chamber of
Commerce listings, local visitor magazines and telephone directories, on the
radio and the Internet, and through periodic direct mail campaigns.
LEASING AGREEMENTS
BridgeStreet leases substantially all of its accommodations through
flexible, short-term leasing arrangements in order to match its supply of
accommodations with client demand. The Company believes that its flexible
leasing strategy allows it to react quickly to changes in market demand for
particular geographic locations and types of accommodations. The Company's
strategy also provides it flexibility to address cyclicality in particular
markets. At March 31, 1997, BridgeStreet's occupancy rate was approximately 90%.
The Company seeks to maintain high occupancy rates by staggering its lease
expiration dates within a geographic area, allowing it to adjust its inventory
of accommodations in a given market to reflect fluctuations in overall demand
and demand for particular types of accommodations.
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The Company strives to develop strong relationships with property managers
to ensure that it has a reliable supply of high-quality, conveniently-located
accommodations. The Company believes that it can provide property managers with
numerous direct benefits, including (i) higher overall occupancy levels, (ii)
simplified lease agreements (with one lease often covering numerous individual
units), (iii) convenient, timely payment (with one check for all units under
lease in a complex) and (iv) maintenance by BridgeStreet of the accommodations
it leases.
BridgeStreet leases the furniture for its accommodations on a short-term
basis ordinarily from major furniture rental companies. Furniture leases range
from three to 18 months, but may be terminated by the Company prior to
expiration. Through its short-term furniture leasing approach, the Company is
able to maintain well-appointed, modern and attractive accommodations, upgrade
and replace furniture as needed and satisfy specific furnishing requests.
PROPERTIES
BridgeStreet leases all of its accommodations (with the exception of 19
condominium units which are owned). The Company has no plans to purchase or own
any additional properties. The Company's accommodations include one-, two- and
three-bedroom apartments, condominiums, townhouses, and, to a lesser extent,
houses. As of March 31, 1997, the Company had approximately 2,100 accommodations
under lease, with lease terms generally ranging from one to 18 months. The
following table indicates as of that date the number of units under lease in
each metropolitan area in which BridgeStreet operates:
<TABLE>
<CAPTION>
50 OR FEWER 51 TO 150 GREATER THAN 150
- --------------------- --------------------- ----------------------------
<S> <C> <C>
Canton, OH Akron, OH Baltimore, MD
Detroit, MI* Cincinnati, OH Cleveland, OH
Oklahoma City, OK* Jackson, MS Columbus, OH
Lexington, KY Minneapolis/St. Paul, MN**
Louisville, KY Pittsburgh, PA**
Memphis, TN Washington, DC
Milwaukee, WI
</TABLE>
- ---------------
* BridgeStreet has operated in this metropolitan area for less than 12 months.
** The operations of two Founding Companies have been integrated in this
metropolitan area.
INDUSTRY OVERVIEW
United States Lodging Industry Overview
In 1996, the United States lodging industry posted record profits of
approximately $11 billion and hotel occupancies reached 67%, representing their
highest level since 1982. The United States lodging industry is estimated to
have generated approximately $76.0 billion in annual room revenues in 1996 and
had overall supply of approximately 3.4 million rooms at December 31, 1996.
The Company believes that the domestic lodging industry has benefited from
a gradually improving supply and demand balance, evidenced by increasing average
daily room and occupancy rates in recent years. Room supply growth in the
lodging industry slowed in the early 1990s and has rebounded in recent years,
but demand nonetheless continues to grow faster than supply. According to
industry reports, supply growth was 0.3% in 1993, 1.0% in 1994, 1.2% in 1995 and
2.1% in 1996. This slow supply growth, coupled with 1.7%, 3.0%, 1.7% and 2.3%
increases in demand (measured by occupied rooms) in 1993, 1994, 1995 and 1996,
respectively, reflects an improved supply and demand balance in the industry.
According to Smith Travel Research, although consumers prefer new hotel
rooms, more than two-thirds of all hotel rooms in the United States are at least
15 years old. The Company believes that new hotels and lodging concepts are
emerging to compete with older hotels by offering newer and more contemporary
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<PAGE> 33
facilities. New concepts in the lodging industry are focusing more closely on
customer needs and are offering modern amenities such as microwave ovens, voice
mail and computers.
Lodgings for Stays of Four Nights or Longer
According to D. K. Shifflet & Associates, in 1995 guests staying four or
more consecutive nights in a hotel accounted for more than 30% of all hotel
rooms rented. Based on 1995 room demand of 3.4 million rooms, this data shows an
implied demand of nearly one million rooms for such stays. According to industry
statistics, extended-stay hotels currently offer approximately 100,000 rooms.
The demand for guest stays of four or more consecutive nights has resulted
in the following accommodation concepts:
All-Suite Hotels. All-suite hotels constitute a relatively new segment of
the lodging industry, having developed largely over the past 10 years. All-suite
hotels were developed partially in response to the increasing number of
corporate relocations, transfers and temporary assignments, and principally are
oriented toward business travelers willing to pay rates in the mid- to
upper-price levels. All-suite hotel rooms are larger than traditional hotel
rooms and, in some cases, contain efficiency kitchens. All-suite hotels
typically offer discounts to guests staying for extended periods.
Extended-Stay Hotels. Extended-stay hotels are an extension of the
all-suites concept, generally providing more space, rooms and "home-like"
conveniences to the traveler. Extended-stay hotel units typically are larger
than traditional hotel rooms and, in some cases, include kitchen facilities with
a stove, refrigerator and microwave, a work desk, laundry facilities, and a
separate bedroom. From 1991 through 1996, the compound annual growth rate in
occupied rooms in extended-stay hotels was approximately 11.1%, compared to
approximately 2.1% for the overall domestic lodging industry, while the compound
annual growth rate in room supply in such hotels was approximately 9.9%,
compared to approximately 1.1% for the overall domestic lodging industry.
Flexible Accommodation Service Providers. Flexible accommodation service
providers utilize a substantially different business model than fixed-location
providers (such as all-suite and extended-stay hotels) with respect to sourcing
of inventory (i.e., accommodations and furnishings), unit economics, and sales
and marketing. Companies in the flexible accommodation services industry
typically do not own real estate but instead lease apartments, condominiums,
townhouses and even houses on a short-term basis. These companies then rent the
leased accommodations, primarily for business travelers. The Company believes
that growth in the flexible accommodation services industry is attributable to
an increased demand by travelers on extended trips for accommodations that
better approximate their everyday living environment. Accommodations in this
segment typically are the most "home-like" in the lodging industry, offering
full-sized, fully-equipped kitchens, bedrooms, bathrooms and living rooms.
Flexible accommodation service providers focus primarily on employees in the
corporate workforce, from entry-level to executive. Due to their short-term
leasing strategy, flexible accommodation service providers are less capital- and
labor-intensive, and have a more variable cost structure, than fixed-location
providers.
COMPETITION
Flexible accommodation service providers compete primarily on the basis of
location, availability, price and quality of accommodations, quality and scope
of service and brand name recognition. The Company believes that, while it
currently competes against all lodging providers, in the future its primary
competition will come from other flexible accommodation service providers and,
to a lesser extent, all-suite hotels and upscale extended-stay hotels. The
Company intends to compete by maintaining a loyal customer base and offering a
client-oriented approach with convenient locations, large and high-quality
customized accommodations, and personalized customer service.
The Company expects its business to become more competitive as existing
competitors expand and additional companies enter the flexible accommodation
services industry. The Company believes that the largest providers of flexible
accommodation services currently are Oakwood, Gables Corporate Accommoda-
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tions, Accommodations America, Inc., ExecuStay, Inc. and Globe Furniture
Rentals, Inc., some of which are larger (in terms of number of available
accommodations) than BridgeStreet. Certain of the Company's existing competitors
have, and any new competitors that enter the industry may have, access to
significantly greater resources than the Company. In particular, Oakwood is
affiliated with R&B Realty Group, the nation's tenth largest apartment
management company. This affiliation gives Oakwood access to apartment
communities and capital that may be unavailable to the Company. See "Risk
Factors -- Competition."
REGULATION AND TAX
The Company is subject to employment laws, including minimum wage,
overtime, working condition and work permit requirements. The Company believes
that it is in compliance with all applicable employment laws, and intends to
continue to comply with such laws.
In addition, the Company is subject to the Americans with Disabilities Act
(the "ADA") as a private entity providing public accommodations. All public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While the Company believes that all of the
units it leases are substantially in compliance with these requirements, a
determination that such units are not in compliance with the ADA could result in
the imposition of fines or an award of damages to private litigants.
As a lessee of its accommodations, BridgeStreet believes that it and its
employees are either outside the purview of, or exempted from, laws in the
majority of jurisdictions in which the Company operates requiring real estate
brokers to hold licenses. However, there can be no assurance that the Company's
position would be upheld if challenged or that any such jurisdiction will not
amend its laws to require the Company and/or one or more of its employees to be
licensed brokers. Moreover, there can be no assurance that the Company will not
operate in the future in jurisdictions requiring such licensing. See "Risk
Factors -- Licensing and Tax Issues."
In some of the jurisdictions in which the Company operates, the Company
believes that it is not required to charge the sales and "bed" taxes that are
applicable to overnight guests in fixed-location lodgings. There can be no
assurance, however, that the tax laws in particular jurisdictions will not
change or that a tax collection agency will not successfully challenge the
Company's position regarding the applicability of such taxes. See "Risk Factors
- -- Licensing and Tax Issues."
INSURANCE
The Company purchases general liability, comprehensive property damage,
automobile, workers' compensation and other insurance coverages that management
considers adequate for the protection of the Company's assets and operations,
although there can be no assurance that the coverage limits of such policies
will be adequate. A successful claim against the Company beyond the scope of its
insurance coverage or in excess of its limits could have a material adverse
effect on the Company's business, financial condition and results of operations.
Claims against the Company, regardless of their merit or outcome, also may have
an adverse effect on the Company's reputation and business.
INTELLECTUAL PROPERTY
The Company has filed an application with the United States Patent and
Trademark Office to register the service mark "BridgeStreet."
HEADQUARTERS AND REGIONAL OFFICES
The Company's corporate headquarters is located in Hudson, Ohio and is
occupied pursuant to a lease that expires in October 1998. In addition, the
Company currently leases regional offices in Columbus, Ohio; Baltimore,
Maryland; Memphis, Tennessee; and Minneapolis, Minnesota.
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<PAGE> 35
EMPLOYEES
As of March 31, 1997 the Company had approximately 200 full-time employees
and approximately 40 part-time employees. BridgeStreet expects that it will
increase the number of its employees as it expands its business. The Company's
employees are not subject to any collective bargaining agreements, and
management believes that its relationship with its employees is good.
LEGAL PROCEEDINGS
The Company is from time to time a party to litigation arising in the
ordinary course of business. There can be no assurance that the Company's
insurance coverage will be adequate to cover all liabilities arising out of such
litigation. Management believes that any liability that the Company might incur
upon the resolution of any existing litigation will not have a material adverse
effect upon the Company's business, financial condition and results of
operations.
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<PAGE> 36
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of May 1, 1997 concerning the
Company's current directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITIONS
---------------------------------------------------- --- ----------------------------
<S> <C> <C>
William N. Hulett, III.............................. 53 President, Chief Executive
Officer and Director
Rocco A. Di Lillo................................... 45 Vice President, Chief
Operating Officer and
Director
Mark D. Gagne, CPA.................................. 36 Chief Financial Officer and
Treasurer
Paul M. Verrochi.................................... 48 Chairman of the Board
Lynda D. Clutchey................................... 39 Director
Connie F. O'Briant.................................. 38 Director
Melanie R. Sabelhaus................................ 48 Director
</TABLE>
William N. Hulett, III has been President, Chief Executive Officer and a
director of the Company since January 1997. He also is Chief Executive Officer
and sole director of each of the Company's wholly-owned subsidiaries. Mr.
Hulett's career in the hotel industry has spanned 33 years, from 1960 to 1993.
During 21 years with Westin Hotels (from 1960 to 1981), Mr. Hulett managed some
of the finest hotels in America, including the St. Francis in San Francisco and
The Mayflower in Washington, D.C., served as the Managing Director for all
Westin Hotels in Hawaii, and also served as Vice President for Operations and
Development, during which time he built the Westin in Cincinnati and the Westin
O'Hare in Chicago. In 1981, Mr. Hulett joined the Nestle Corporation as
President of the Stouffer Hotel Company ("Stouffer"). During his 12 years as
President of Stouffer, he built, acquired or joint ventured over 35 hotels. In
1993, when Stouffer was sold, he devoted his time to fund raising and building
the Rock and Roll Hall of Fame and Museum, which opened in Cleveland, Ohio in
1995. He served as its Chairman and Chief Executive Officer until joining
BridgeStreet in 1997. Mr. Hulett is a director of the Travel Industry
Association of America and of Developers Diversified Realty Corporation, and has
served the American Hotel and Motel Association in various capacities, including
Vice Chairman of its Educational Institute.
Rocco A. Di Lillo has been Vice President, Chief Operating Officer and a
director of the Company, and President and Chief Operating Officer of one of the
Company's five operating subsidiaries, since January 1997. Mr. Di Lillo also is
President of City Visitor Publications, Inc., a leading publisher of travel and
visitor guides in the Midwest. Until the Combination in January 1997, Mr. Di
Lillo was President and sole director of CLI, which he founded in March 1987,
and which expanded into 10 Midwest cities in six states. CLI was named to the
"Weatherhead 100," which honors the 100 fastest-growing companies in Northeast
Ohio, in both 1995 and 1996. Mr. Di Lillo is a charter member of NIHN, the
flexible accommodation services industry's leading trade association.
Mark D. Gagne, CPA, has been Chief Financial Officer and Treasurer of the
Company since January 1997. From January 1996 until January 1997, Mr. Gagne was
a consultant to ABP. Previously, from February 1992 to December 1995, Mr. Gagne
was Chief Financial Officer and Treasurer of CMG Information Services Inc. and
subsidiaries, a publicly traded group of direct marketing services, fulfillment
services and information/internet technologies companies. From April 1988 to
January 1992, Mr. Gagne was Vice President and Chief Financial Officer of the
Trodella Companies, three privately held construction services companies. From
1982 to 1988, Mr. Gagne served in a number of positions as a Certified Public
Accountant for Kennedy & Lehan, P.C. and Arthur Andersen LLP.
Paul M. Verrochi has been Chairman of the Board of Directors of the Company
since August 1996. In 1992, Mr. Verrochi co-founded American Medical Response,
Inc. ("AMR"), which prior to its acquisition
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<PAGE> 37
was a publicly held company and the largest national provider of ambulance
services. From August 1992 to January 1996, Mr. Verrochi served as AMR's
President and Chief Executive Officer, and until January 1997 he also served as
the Chairman of the Board of Directors. Mr. Verrochi was selected as the 1995
National Entrepreneur of the Year for Emerging Growth Companies by Inc.
Magazine. Mr. Verrochi serves as an advisory board member to numerous charitable
foundations, including the New England Aquarium and the Boston Symphony
Orchestra. Mr. Verrochi also is Chairman of ABP and a director of Coach USA,
Inc., a publicly held company.
Lynda Clutchey has been a director of the Company, and President and Chief
Operating Officer of one of the Company's five operating subsidiaries, since
January 1997. Until January 1997, Ms. Clutchey was President and a director of
TCH, which she co-founded in August 1983. Prior to co-founding TCH, Ms. Clutchey
served in the United States Peace Corps, working with an agricultural marketing
cooperative in the Philippines. Ms. Clutchey is a charter member of NIHN and
served on its Board of Directors from its inception in 1990 through 1994.
Connie F. O'Briant has been a director of the Company, and President and
Chief Operating Officer of one of the Company's five operating subsidiaries,
since January 1997. Until January 1997, Ms. O'Briant was President and a
director of THEI, which she co-founded in May 1991. Active in civic and
relocation industry efforts, THEI is involved in the Executive Newcomer's
Committee, the Memphis Area Chamber of Commerce and the Mid-South Relocation
Council. THEI received the Memphis Business Journal's "Memphis Business of the
Year" Small Business Award in 1994. Ms. O'Briant is a member of the President's
Council of United American Bank and an investment partner of Junior Achievement.
Ms. O'Briant also is a member of NIHN and served on its Board of Directors from
1995 to 1996.
Melanie R. Sabelhaus has been a director of the Company, and President and
Chief Operating Officer of one of the Company's five operating subsidiaries,
since January 1997. Until January 1997, Ms. Sabelhaus was President and a
director of EIP, which she founded in June 1987. Prior to founding EIP, Ms.
Sabelhaus spent 17 years in various sales and management positions at IBM. Ms.
Sabelhaus was listed in the Women's Top 100 of Maryland 1996, and also was
honored by the Baltimore Business Journal in 1995 for operating one of the top
25 women-owned businesses in that city. Ms. Sabelhaus is a charter member of
NIHN.
COMMITTEES OF THE BOARD OF DIRECTORS
Upon or prior to the closing of this offering, the Company will establish
an Audit Committee and Compensation Committee. The Audit Committee, a majority
of which will be independent directors, will make recommendations concerning the
engagement of independent public accountants, review with the independent public
accountants the plans for and results of the Company's annual audit, approve
professional services provided by and the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls. The Compensation
Committee, a majority of which will be independent directors, will establish a
general compensation policy for the Company, approve increases in directors'
fees and salaries paid to officers and senior employees of the Company,
administer the Company's 1997 Equity Incentive Plan and Stock Plan for
Non-Employee Directors, and determine, subject to the provisions of the
Company's employee benefit plans, the directors, officers and employees of the
Company eligible to participate in any of the plans, the extent of such
participation and terms and conditions under which benefits may be vested,
received or exercised.
DIRECTOR COMPENSATION
Members of the Board of Directors who also serve as officers of the Company
or its subsidiaries do not receive compensation for serving on the Board. Each
other member of the Board will receive a fee of $2,000 for each Board of
Directors meeting attended and an additional fee of $1,000 for each committee
meeting attended, except that $500 will be paid for each committee meeting
attended on the same date as a Board meeting. All directors will receive
reimbursement of reasonable expenses incurred in attending Board and committee
meetings and otherwise carrying out their duties.
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<PAGE> 38
The Company's Board of Directors has adopted the Stock Plan for
Non-Employee Directors (the "Directors' Plan"). Subject to adjustment for stock
splits and similar events, a total of 100,000 shares of Common Stock are
reserved for issuance under the Directors' Plan. Pursuant to the Directors'
Plan, on the date of this Prospectus, each director who is neither an employee
of the Company or one of its subsidiaries nor a holder of five percent or more
of the Company's Common Stock (a "non-employee director") will receive an option
to purchase 12,500 shares of Common Stock with a per-share exercise price equal
to the initial public offering price. Thereafter, each such non-employee
director will be granted, on every third anniversary of this Prospectus
(provided he or she still is a non-employee director at such time), an option to
acquire an additional 7,500 shares of Common Stock. Each non-employee director
initially elected following this offering will be granted upon such election an
option to purchase 7,500 shares of Common Stock, and thereafter will be granted,
immediately following every third anniversary of such election provided he or
she still is a non-employee director at such time (or third annual meeting at
which such non-employee director is reelected, if the director initially was
elected at an annual meeting) an option to acquire an additional 7,500 shares of
Common Stock. The exercise price of options granted following this offering will
be the fair market value of the Common Stock on the date of grant. Each option
will be non-transferable except upon death (unless otherwise approved by the
Board), will expire 10 years after the date of grant and will become exercisable
with respect to one-third of the shares of Common Stock issuable thereunder on
each of the first three anniversaries of the date of grant if the individual is
a director at such time. If the director dies or otherwise ceases to be a
director prior to the expiration of an option, the option (if exercisable) will
remain exercisable for a period of one year (following death) or three months
(following other termination of the individual's status as a director), but in
no event beyond the tenth anniversary of the date of grant. The Board of
Directors may at any time or times amend the Directors' Plan for any purpose
that at the time may be permitted by law.
As of the date of this Prospectus, options to purchase 37,500 shares of
Common Stock have been granted under the plan.
EXECUTIVE COMPENSATION
The Company did not pay any compensation to its executive officers in 1996.
Equity Incentive Plan
The Company has adopted the 1997 Equity Incentive Plan (the "Equity
Incentive Plan"), which provides for the award ("Award") of up to 1,000,000
shares of Common Stock in the form of incentive stock options ("ISOs"),
non-qualified stock options, stock appreciation rights, performance shares,
restricted stock or stock units. All directors and employees of, and all
consultants and advisors to, the Company (including its subsidiaries) are
eligible to participate in the Equity Incentive Plan.
The Equity Incentive Plan will be administered by the Compensation
Committee (the "Committee"), which determines who shall receive Awards from
those individuals eligible to participate in the Equity Incentive Plan, the type
of Award to be made, the number of shares of Common Stock that may be acquired
pursuant to the Award and the specific terms and conditions of each Award,
including the purchase price, term, vesting schedule, restrictions on transfer
and any other conditions and limitations applicable to the Awards or their
exercise. Options that are ISOs may be exercisable for not more than 10 years
after the date the option is awarded. The Committee may at any time accelerate
the exercisability of all or any portion of an option.
In the event of a merger or consolidation in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding shares of capital stock, or in the event of the sale
or transfer of substantially all of the Company's assets, if the Committee so
determines, all outstanding Awards will terminate, provided that on or before 20
days prior to the proposed effective date of any such transaction, the Committee
either (i) makes all outstanding Awards exercisable prior to the consummation of
the transaction or (ii) arranges for the surviving or acquiring corporation, if
any, to grant to participants replacement Awards.
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<PAGE> 39
The Equity Incentive Plan may be amended from time to time by the Board of
Directors or terminated in its entirety; however, no amendment may be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement.
Options to Purchase Shares of Common Stock
Messrs. Hulett, Di Lillo and Gagne have been awarded options under the
Equity Incentive Plan, effective as of the date of this Prospectus, to purchase
150,000, 75,000 and 75,000 shares of Common Stock, respectively. Each option (i)
has a per share exercise price equal to the initial public offering price, (ii)
becomes exercisable with respect to one-third of the shares issuable thereunder
on each of the first three anniversaries of the closing of this offering and
(iii) expires 10 years from the date of grant. With respect to Messrs. Hulett
and Gagne, upon the effectiveness of a change in control (as defined in their
employment contracts), the stock option granted to each of them will become
exercisable in full. In addition, if the Company fails to continue Mr. Hulett's
employment following the term of his employment contract for a reason other than
for cause (as defined) or disability, then all options held by Mr. Hulett at
such time will become exercisable in full. See "--Employment Contracts."
In addition to the options granted to Messrs. Hulett, Di Lillo and Gagne,
the Company has awarded options under the Equity Incentive Plan, effective as of
the date of this Prospectus, to purchase an aggregate of 134,000 shares of
Common Stock, with each such option having a per share exercise price equal to
the initial public offering price.
Employment Contracts
Mr. Hulett has a three-year employment contract beginning June 1, 1997 and
ending May 31, 2000 to serve as the Company's Chief Executive Officer and
President. Under this contract, Mr. Hulett will receive a base salary of
$200,000, subject to discretionary increases and also subject to specified
increases if the Company achieves budgeted net earnings per share. Mr. Hulett
also may receive a bonus of up to 50% of his base salary based on performance
goals and other criteria. Mr. Hulett has agreed not to compete with the Company
for a period of two years following termination of his employment. From January
through May 1997, Mr. Hulett served as a consultant to the Company pursuant to a
consulting agreement.
Mr. Gagne has an employment contract ending May 31, 2000 to serve as the
Company's Chief Financial Officer. Under this contract, Mr. Gagne will receive a
base salary of $125,000, subject to discretionary increases, and a bonus of up
to 40% of his base salary based on performance goals and other criteria. Under
certain circumstances, Mr. Gagne will receive as severance three months' salary,
six months' benefits and a pro rata portion of his bonus payment, if payable. In
the event of a change in control (as defined), Mr. Gagne may terminate the
contract and receive one year's salary and a pro rata portion of his bonus, if
payable. Mr. Gagne has agreed not to compete with the Company for a period of
two years following termination of his employment.
Mr. Di Lillo has an employment contract ending January 2, 2000. Under this
contract, Mr. Di Lillo will receive a base salary of $125,000, subject to
discretionary increases, and a bonus of up to 40% of his base salary based on
performance goals and other criteria. The contract may be terminated by the
Company without cause upon the approval of two-thirds of the Company's Board of
Directors. Mr. Di Lillo is subject to the non-competition provisions described
in "Certain Transactions--Organization of the Company; The Combination."
LIMITATION OF CERTAIN LIABILITY OF OFFICERS AND DIRECTORS
As permitted by the DGCL, the Company's Certificate of Incorporation
provides for the elimination, subject to certain conditions, of the personal
liability of directors of the Company for monetary damages for breach of their
fiduciary duties. The directors, however, remain subject to equitable remedies.
The Company's Certificate of Incorporation also provides that the Company will
indemnify its directors and officers. In addition, the Company maintains an
indemnification insurance policy covering all directors and officers of the
Company. In general, the Company's Certification of Incorporation and the
indemnification insurance policy
38
<PAGE> 40
attempt to provide the maximum protection permitted by Delaware law with respect
to indemnification of directors and officers.
Under the indemnification provisions of the Company's Certificate of
Incorporation and the indemnification insurance policy, the Company will repay
certain expenses incurred by a director or officer in connection with any civil
or criminal action or proceeding, and specifically including actions by or in
the name of the Company (derivative suits), where the individual's involvement
is by reason of the fact that he or she is or was a director or officer of the
Company. Such indemnifiable expenses include, to the maximum extent permitted by
law, attorney's fees, judgments, civil or criminal fines, settlement amounts,
and other expenses customarily incurred in connection with legal proceedings. A
director or officer will not receive indemnification if he or she is found not
to have acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Company.
39
<PAGE> 41
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock, as of May 1, 1997 and as adjusted to
reflect the sale of shares of Common Stock by the Selling Stockholders, of (i)
each director of the Company, (ii) certain executive officers of the Company,
(iii) all directors and executive officers as a group, (iv) each person or
entity known to the Company to beneficially own more than 5% of the outstanding
Common Stock and (v) the Selling Stockholders. Except as indicated in the
footnotes below, the persons named in this table have sole investment and voting
power with respect to the shares beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED PRIOR SHARES TO BENEFICIALLY OWNED
TO OFFERING(1) BE SOLD AFTER OFFERING(1)
----------------------- IN ---------------------
NUMBER PERCENT OFFERING NUMBER PERCENT
--------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
William N. Hulett, III............... 175,000 3.2% -- 175,000 %
Rocco A. Di Lillo(2)................. 810,851 14.8
Mark D. Gagne........................ 81,400 1.5 -- 81,400
Paul M. Verrochi(2).................. 300,500(3) 5.5 -- 300,500
Sandra A. Brown(2)(4)................ 475,000 8.7
Lynda D. Clutchey(2)................. 1,537,285(5) 28.1 (6)
Connie F. O'Briant(2)................ 391,408(7) 7.1
Melanie R. Sabelhaus(2).............. 1,001,805(8) 18.3
SLD Partnership(9)................... 1,489,395 27.2
All directors and executive officers
as a group (7 persons)............. 4,298,249(10) 78.5
</TABLE>
- ---------------
* Less than 1%
(1) Percentages are based upon 5,475,000 shares of Common Stock outstanding on
May 1, 1997 and shares of Common Stock outstanding as of the
closing of this offering, respectively.
(2) The stockholder's address is c/o BridgeStreet Accommodations, Inc., 1896
Georgetown Road, Hudson, Ohio 44236.
(3) Includes 150,250 shares of Common Stock held in a trust for the benefit of
Mr. Verrochi's children, with respect to which Mr. Verrochi disclaims
beneficial ownership.
(4) Ms. Brown is President and Chief Operating Officer of one of the Company's
operating subsidiaries. Prior to the Combination, she was a senior
executive officer of Home Again.
(5) Consists of (i) 47,890 shares of Common Stock held jointly with Ms.
Clutchey's spouse and (ii) 1,489,395 shares of Common Stock held by SLD
Partnership, an Ohio general partnership, with respect to which Ms.
Clutchey shares voting and investment power. Ms. Clutchey and each of two
of her siblings owns a one-third interest in SLD Partnership.
(6) Represents Ms. Clutchey's one-third interest in the shares of Common Stock
being offered by SLD Partnership in this offering.
(7) Includes 191,790 shares of Common Stock held by Ms. O'Briant's spouse, as
to which shares Ms. O'Briant disclaims beneficial ownership.
(8) Includes 18,250 shares of Common Stock held by Ms. Sabelhaus' spouse, as to
which shares Ms. Sabelhaus disclaims beneficial ownership.
(9) The address of SLD Partnership is 1515 Bethel Road, Columbus, Ohio 43220.
(10) See Notes 3, 5, 7 and 8 above.
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<PAGE> 42
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
Start-Up Funding
The Company was initially capitalized in August 1996 with an aggregate of
$2,000 provided by Messrs. Verrochi, Donald W. Glazer, Joseph E. Palmer, Dominic
J. Puopolo and Michael L. Stark. As a result of a 499-for-1 stock split in
November 1996 (and following certain subsequent transfers), these individuals
currently beneficially own 818,140 shares of Common Stock in the aggregate.
ABP
Mr. Verrochi, Chairman of the Company, is a principal and Chairman of ABP,
and Mr. Glazer, Secretary of the Company, is a principal of ABP. ABP has
advanced interest-free funds on behalf of the Company for various expenses
incurred by the Company in connection with the Combination and this offering.
The Company will repay such funds from the proceeds of this offering. See "Use
of Proceeds."
ABP has also agreed to assist the Company to complete future acquisitions
if the Company so requests. Under the agreement between the parties, which is
terminable at will by either party, ABP will receive from the Company in cash 1%
of the transaction value of acquisitions for which ABP at the Company's request
provides financial advisory services. ABP also will be reimbursed for all direct
expenses incurred by ABP in connection with such acquisitions.
The Combination
In connection with the Combination, the Company acquired all of the issued
and outstanding capital stock of the Founding Companies. See "Combination." The
aggregate consideration paid by the Company in the Combination was 4,301,000
shares of Common Stock. Of this amount, individuals who are executive officers
and/or directors of the Company received the following: Mr. Di Lillo, 835,901
shares; Ms. Sabelhaus, 1,001,805 shares (including shares issued to her spouse);
Ms. O'Briant, 391,408 shares (including shares issued to her spouse); and Ms.
Clutchey, 1,537,285 shares (including shares issued to a general partnership in
which each of Ms. Clutchey and two of her siblings holds a one-third interest).
See "Principal and Selling Stockholders." Pursuant to the terms of the
agreements by which their Founding Companies were merged into the Company, each
of Mr. Di Lillo, Ms. Sabelhaus, Ms. O'Briant and Ms. Clutchey were designated
directors of the Company.
Each of Ms. Sabelhaus, Ms. O'Briant and Ms. Clutchey has entered into an
employment agreement with the Company which provides for an initial base salary
of $100,000, subject to upward adjustment in the sole discretion of the
Company's Board of Directors, and participation in the Company's bonus and
benefit plans. The employment agreements expire on January 2, 2000 but may be
terminated earlier in the event of disability, for cause (as defined) or without
cause by the approval of two-thirds of the Company's Board of Directors. Mr. Di
Lillo also entered into an employment agreement in connection with the
Combination. See "Management -- Executive Compensation; Employment Contracts."
Each of Mr. Di Lillo, Ms. Sabelhaus, Ms. O'Briant and Ms. Clutchey has
agreed not to compete with the Company until January 2, 2002 or, if later, three
years from the date of termination of employment by the Company (regardless of
the reason therefor).
TRANSACTIONS INVOLVING OFFICERS AND DIRECTORS
As a result of the Combination, the Company assumed the obligations of TCH
under a three-year contract, effective January 1, 1996, with Saturn Enterprises,
Inc. ("Saturn"), a corporation of which David Clutchey III is the sole
stockholder. Mr. Clutchey is the husband of Lynda Clutchey, a director of
BridgeStreet. Pursuant to the contract, TCH leased from Saturn on a
non-exclusive basis televisions, VCRs, and microwave ovens. In 1994, 1995 and
1996, TCH paid or accrued expenses under this contract of
41
<PAGE> 43
approximately $11,200, $47,400 and $107,300, respectively. The Company has no
obligation to lease equipment under the contract, but may continue to do so.
BridgeStreet believes that the terms of this contract are no less favorable than
could be obtained from non-affiliated parties.
The Company also assumed TCH's obligations under an exclusive lease
agreement with Integrity Furniture, Inc., a company which is 49% owned by SLD
Partnership, an Ohio general partnership in which Ms. Clutchey and two of her
siblings each have a one-third interest. The agreement was entered into on
September 12, 1995, has a five-year term and provides that the lessor has the
exclusive right to furnish all of the Company's leased accommodations in
Pittsburgh, Pennsylvania at agreed-upon prices. The initial unit lease terms are
for minimum three-month periods that then are renewable monthly. The Company
believes that the lease terms are no less favorable than could be obtained from
non-affiliated parties. The rental amounts under this contract totalled
approximately $213,000 during 1996.
Stephen and David Holzer performed consulting services for TCH from June
1992 until November 1996. For such services, each earned $48,000 per year during
1994, 1995 and 1996. The Holzers are brothers of Ms. Clutchey and general
partners of SLD Partnership. The consulting agreements were terminated in
November 1996.
CLI performed certain general and administrative services (e.g., accounting
services) for City Visitor, an entity which publishes a travel magazine and is
100% owned by Mr. Di Lillo. For services during 1994, 1995 and 1996, City
Visitor paid CLI approximately $42,000, $51,000 and $15,000, respectively. City
Visitor sold advertising space in its magazine to CLI during these years, and
was paid, respectively, approximately $34,000, $22,000 and $31,000. Following
this offering, the Company intends to continue purchasing advertising space from
City Visitor from time to time. However, the Company has neither entered into a
contract with, nor made any commitment with respect to the amounts of
advertising purchases from, City Visitor. The Company believes that the prices
currently paid to City Visitor for advertising are no less favorable than could
be obtained from non-affiliated third parties.
COMPANY POLICY
The Company's policy is that any future transactions with directors,
officers, employees or affiliates of the Company be approved in advance by a
majority of the Company's Board of Directors, including a majority of
disinterested directors, and be on terms no less favorable to the Company than
the Company could obtain from non-affiliated parties.
42
<PAGE> 44
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 35,000,000 shares of
Common Stock, $.01 par value per share, and 5,000,000 shares of Preferred Stock,
$.01 par value per share. The following summary of the Common Stock and the
Preferred Stock is qualified by reference to the Company's Amended and Restated
Certificate of Incorporation and By-laws included as exhibits to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
The Company had outstanding immediately prior to this offering 5,475,000
shares of Common Stock and options to purchase an aggregate of 471,500 shares of
Common Stock. A total of 1,000,000 shares of Common Stock are reserved for
issuance under the Equity Incentive Plan and a total of 100,000 shares of Common
Stock are reserved for issuance under the Directors' Plan. Holders of Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders, and do not have cumulative voting
rights. Subject to preferences that may be applicable to any outstanding shares
of Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors of the Company out of funds legally available therefor. See "Dividend
Policy." All outstanding shares of Common Stock are, and the shares to be sold
in this offering when issued and paid for will be, fully paid and nonassessable,
and the holders thereof will have no preferences or conversion, exchange or
pre-emptive rights. In the event of any liquidation, dissolution or winding-up
of the affairs of the Company, holders of Common Stock will be entitled to share
ratably in the assets of the Company remaining after payment or provision for
payment of all of the Company's debts and obligations and after liquidation
payments to holders of outstanding shares of Preferred Stock, if any.
PREFERRED STOCK
The Preferred Stock, if issued, would have priority over the Common Stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. The Board of Directors has the authority, without
further stockholder authorization, to issue from time to time shares of
Preferred Stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations of each series. In addition to
having a preference with respect to dividends or liquidation proceeds, the
Preferred Stock, if issued, may be entitled to the allocation of capital gains
from the sale of the Company's assets. Although the Company has no present plans
to issue any shares of Preferred Stock following the closing of this offering,
the issuance of shares of Preferred Stock, or the issuance of rights to purchase
such shares, could decrease the amount of earnings and assets available for
distribution to the holders of Common Stock, could adversely affect the rights
and powers, including voting rights, of the Common Stock, and could have the
effect of delaying, deterring or preventing a change in control of the Company
or an unsolicited acquisition proposal.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATIONS
OF DIRECTORS
The By-laws establish an advance notice procedure with regard to the
nomination by the stockholders of the Company of candidates for election as
directors and with regard to other matters to be brought by stockholders before
a meeting of stockholders of the Company.
These procedures require that a stockholder seeking to nominate a director
or propose business at an annual meeting give written notice of such nomination
or proposal, delivered to or mailed and received by the Secretary of the Company
at the principal executive offices of the Company not less than 60 days nor more
than 90 days prior to the meeting. Detailed requirements as to the form, timing
and substance of that notice are specified in the By-laws. No persons shall be
eligible for election as a director of the Company nor shall any business matter
be conducted unless nominated or proposed, as the case may be, in strict
accordance with the procedures set forth in the Company's By-laws, as determined
by the President of the Company.
Although the By-laws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
of any other business desired by stockholders to be conducted at an annual or
any other meeting, the By-laws (i) may have the effect of precluding nominations
for the election of
43
<PAGE> 45
directors or precluding the conduct of business at a particular annual meeting
if the proper procedures are not followed or (ii) may discourage or deter a
third party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company, even if the
conduct of such solicitation or such attempt might be beneficial to the Company
and its stockholders.
OTHER PROVISIONS
Special Meetings of the Stockholders of the Company. The Company's By-laws
provide that a special meeting of the stockholders of the Company only may be
called by the President, the Chairman of the Board or by order of the Board of
Directors. The By-laws do not authorize the stockholders to call a special
meeting of stockholders, potentially limiting the stockholders' ability to offer
proposals between annual meetings if no special meetings are otherwise called by
the President, Chairman or the Board.
Amendment of the By-laws. The Company's Certificate of Incorporation
provides that the By-laws may be amended only by a majority vote of the Board of
Directors or by a vote of at least 75% of the outstanding shares of the
Company's stock entitled to vote in the election of directors.
No Action by Written Consent. The Company's Certificate of Incorporation
does not permit the Company's stockholders to act by written consent. As a
result, any action to be taken by the Company's stockholders must be taken at a
duly called meeting of the stockholders.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is subject to Section 203 of the DGCL which, with certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any "interested stockholder" for a period of
three years following the date that such stockholder became an interested
stockholder, unless: (i) prior to such date, the Board of Directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and officers and
(b) by employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer or (iii) on or after such date, the
business combination is approved by the Board of Directors and authorized at an
annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. An "interested stockholder" is defined as any person that is (i)
the owner of 15% or more of the outstanding voting stock of the corporation or
(ii) an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
TRANSFER AGENT
The transfer agent and registrar for the Company will be selected prior to
the closing of this offering.
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<PAGE> 46
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have shares
of Common Stock issued and outstanding, and 471,500 shares of Common Stock
issuable upon the exercise of outstanding options. Of these shares,
shares sold pursuant to this offering (or shares, if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction under the Securities Act, except any shares
purchased by an "affiliate" (as that term is defined under the rules and
regulations of the Securities Act) of the Company, which shares will be subject
to the resale limitations of Rule 144 of the Securities Act. The remaining
shares outstanding upon completion of this offering will be subject to the
resale limitations of Rule 144.
In general, under Rule 144, if a period of at least one year has elapsed
between the later of the date on which restricted securities were acquired from
the Company and the date on which they were acquired from an affiliate, then the
holder of such restricted securities (including an affiliate) is entitled to
sell that number of shares within any three-month period that does not exceed
the greater of (i) one percent of the then outstanding shares of Common Stock or
(ii) the average weekly reported volume of trading of Common Stock during the
four calendar weeks preceding such sale. Sales under Rule 144 also are subject
to certain requirements pertaining to the manner of sales, notices of sales and
the availability of current public information concerning the Company. Any
shares not constituting restricted securities sold by affiliates must be sold in
accordance with the foregoing volume limitations and other requirements but
without regard to the one year holding period. Under Rule 144(k), if a period of
at least two years has elapsed from the later of the date on which restricted
securities were acquired from the Company and the date on which they were
acquired from the affiliate, a holder of such restricted securities who is not
an affiliate at the time of the sale and has not been an affiliate for at least
three months prior to the sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
The Company and each of its directors, executive officers and existing
stockholders has agreed not to offer to sell, sell, contract to sell, grant any
option to sell or otherwise dispose of, directly or indirectly, any shares of
Common Stock or securities convertible into or exchangeable for Common Stock or
warrants or other rights to acquire shares of Common Stock which may now or in
the future be beneficially owned (within the meaning of Rule 13d-3 under the
Exchange Act) by such persons (other than pursuant to employee stock option
plans or in connection with other employee incentive compensation arrangements)
prior to the expiration of 180 days from the date of this Prospectus, except (i)
for shares of Common Stock offered hereby, (ii) with the prior written consent
of or (iii) with respect to the Company, in connection with
acquisitions or upon the exercise of options, or the grant of options to
purchase shares of Common Stock, pursuant to the Equity Incentive Plan and the
Directors' Plan.
An additional 100,000 shares of Common Stock are reserved for issuance
under the Directors' Plan and 1,000,000 shares are reserved for issuance under
the Equity Incentive Plan. The Company presently intends to file a registration
statement under the Securities Act to register Common Stock to be issued
pursuant to exercise of options granted or to be granted under the Directors'
Plan and Equity Incentive Plan. Common Stock issued after the effective date of
such registration statement upon exercise of such options would be available for
immediate resale in the open market, subject to compliance with Rule 144 in the
case of affiliates.
Prior to this offering, there has been no public market for the Common
Stock of the Company, and no predictions can be made of the effect, if any, that
the availability of shares for sale or the actual sale of shares will have on
market prices prevailing from time to time.
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<PAGE> 47
UNDERWRITING
The Underwriters named below, acting through
(the "Representatives"), have severally agreed, subject to the terms and
conditions set forth in the Underwriting Agreement by and among the Company, the
Selling Stockholders and the Representatives (the "Underwriting Agreement"), to
purchase from the Company and the Selling Stockholders, and the Company and the
Selling Stockholders have agreed to sell to the Underwriters, the number of
shares of Common Stock set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
..............................................
..............................................
---------
Total..............................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the shares listed above are subject to certain
conditions. The Underwriting Agreement also provides that the Underwriters are
committed to purchase, and the Company is obligated to sell, all of the shares
offered by this Prospectus, if any of the shares being sold pursuant to the
Underwriting Agreement are purchased (without consideration of any shares that
may be purchased through the exercise of the Underwriters' over-allotment
option).
The Representatives have advised the Company that the Underwriters propose
to offer the shares to the public initially at the public offering price set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession to other dealers not in excess
of $ per share. After the initial public offering of the shares, the
public offering price, the concessions to selected dealers and the reallowance
to other dealers may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
additional shares of Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less underwriting discounts and
commissions. The Underwriters may exercise such option only to cover
over-allotments, if any, incurred in the sale of the shares. To the extent the
Underwriters exercise such option, each of the Underwriters will become
obligated, subject to certain conditions, to purchase the percentage of such
additional shares of Common Stock that is approximately equal to the percentage
of shares it is obligated to purchase as shown in the table set forth above.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
The Company and each of its directors, executive officers and existing
stockholders have agreed not to offer to sell, sell, contract to sell, grant any
option to purchase or otherwise dispose of, directly or indirectly, any shares
of capital stock of the Company or securities convertible into or exchangeable
for capital stock or warrants or other rights to acquire shares of capital stock
of the Company which may now or in the future be beneficially owned (within the
meaning of Rule 13d-3 under the Exchange Act) by such persons (other than
pursuant to employee stock option plans or in connection with other employee
incentive compensation arrangements) prior to the expiration of 180 days from
the date of this Prospectus, except (i) for shares of Common Stock offered
hereby, (ii) with the prior written consent of , and
(iii) with
46
<PAGE> 48
respect to the Company, in connection with acquisitions or upon the exercise of
options, or the grant of options to purchase shares of Common Stock, pursuant to
the Equity Incentive Plan and the Directors' Plan.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to shares offered hereby for
officers, employees, business associates and related persons of the Company who
have expressed an interest in purchasing Common Stock. The number of shares of
Common Stock available for sale to the general public will be reduced to the
extent such persons purchase reserved shares. Any reserved shares that are not
so purchased will be offered by the Underwriters to the general public on the
same basis as the other shares offered hereby.
The Representatives have informed the Company and the Selling Stockholders
that the Underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of shares offered hereby and that the Underwriters do not
intend to confirm sales of shares to any account over which they exercise
discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. The proposed initial public offering price has been
determined by negotiations among the Company, the Selling Stockholders and the
Representatives. Among the factors considered in determining the initial public
offering price, in addition to prevailing market conditions, were certain
financial information of the Company, the history of, and prospects for, the
Company and the industry in which it competes, an assessment of the Company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's development,
and the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to the Company. The
initial public offering price set forth on the cover page of this Prospectus
should not, however, be considered an indication of the actual value of the
Common Stock. Such price is subject to change as a result of market conditions
and other factors. There can be no assurance that an active trading market will
develop for the Common Stock or that the Common Stock will trade in the public
market subsequent to this offering at or above the initial public offering
price.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Representatives
to bid for and purchase the Common Stock. As an exception to these rules, the
Representatives are permitted to engage in certain transactions that stabilize
the price of the Common Stock. Such transactions consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the Common Stock.
If the Representatives create a short position in the Common Stock in
connection with the offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives may
reduce that short position by purchasing shares of Common Stock in the open
market. The Representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. Neither the Company nor the
Representatives make any representation or prediction as to the direction or
magnitude of any effect that the transaction described above might have on the
price of the Common Stock. In addition, neither the Company nor the
Representatives make any representation that the Representatives will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
LEGAL MATTERS
The validity of the shares offered will be passed upon for the Company by
Nutter, McClennen & Fish, LLP, Boston, Massachusetts. Certain legal matters will
be passed upon for the Underwriters by .
47
<PAGE> 49
EXPERTS
The financial statements and schedule included in this Prospectus and
elsewhere in the Registration Statement, to the extent of and for the periods
indicated in the reports, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, with respect to the Common Stock offered hereby. This Prospectus
omits certain information contained in the Registration Statement, and reference
is made to the Registration Statement and the exhibits and schedules thereto for
further information with respect to the Company and the Common Stock offered
hereby. Statements contained in this Prospectus concerning the provisions or
contents of any contract, agreement or any other document referred to herein are
not necessarily complete with respect to each such contract, agreement or
document filed as an exhibit to the Registration Statement, and reference is
made to such exhibit for a more complete description of the matters involved,
and each such statement shall be deemed qualified by such reference. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1204, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of the Registration
Statement or any part thereof may be obtained from such office, upon payment of
the fees prescribed by the Commission. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that submit electronic filings to the
Commission.
48
<PAGE> 50
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Basis of Presentation............................................................... F-3
Pro Forma Combined Balance Sheet as of December 31, 1996 (unaudited)................ F-4
Pro Forma Combined Statement of Operations for the Year Ended December 31, 1996
(unaudited)...................................................................... F-5
Notes to Unaudited Pro Forma Combined Financial Statements.......................... F-6
HISTORICAL FINANCIAL STATEMENTS
BRIDGESTREET ACCOMMODATIONS, INC.
Report of Independent Public Accountants......................................... F-7
Balance Sheet.................................................................... F-8
Statement of Operations.......................................................... F-9
Statement of Stockholders' Equity................................................ F-10
Statement of Cash Flows.......................................................... F-11
Notes to Financial Statements.................................................... F-12
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
Report of Independent Public Accountants......................................... F-15
Combined Balance Sheets.......................................................... F-16
Combined Statements of Operations................................................ F-17
Combined Statements of Stockholders' Equity...................................... F-18
Combined Statements of Cash Flows................................................ F-19
Notes to Combined Financial Statements........................................... F-20
CORPORATE LODGINGS, INC.
Report of Independent Public Accountants......................................... F-26
Combined Balance Sheets.......................................................... F-27
Combined Statements of Operations................................................ F-28
Combined Statements of Stockholders' Equity (Deficit)............................ F-29
Combined Statements of Cash Flows................................................ F-30
Notes to Combined Financial Statements........................................... F-31
EXCLUSIVE INTERIM PROPERTIES, LTD.
Report of Independent Public Accountants......................................... F-36
Combined Balance Sheets.......................................................... F-37
Combined Statements of Operations................................................ F-38
Combined Statements of Stockholders' Equity...................................... F-39
Statements of Cash Flows......................................................... F-40
Notes to Combined Financial Statements........................................... F-41
</TABLE>
F-1
<PAGE> 51
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HOME AGAIN, INC.
Report of Independent Public Accountants......................................... F-46
Combined Balance Sheets.......................................................... F-47
Combined Statements of Operations................................................ F-48
Combined Statements of Stockholder's Equity...................................... F-49
Combined Statements of Cash Flows................................................ F-50
Notes to Combined Financial Statements........................................... F-51
TEMPORARY HOUSING EXPERTS, INC.
Report of Independent Public Accountants......................................... F-54
Balance Sheets................................................................... F-55
Statements of Operations......................................................... F-56
Statements of Stockholders' Equity............................................... F-57
Statements of Cash Flows......................................................... F-58
Notes to Financial Statements.................................................... F-59
</TABLE>
F-2
<PAGE> 52
BRIDGESTREET ACCOMMODATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to the acquisitions by BridgeStreet Accommodations, Inc. ("BridgeStreet" or the
"Company"), through stock-for-stock mergers (the "Combination"), of the
following providers of flexible accommodation services: (i) Temporary Corporate
Housing Columbus, Inc. and three affiliates ("TCH"), (ii) Exclusive Interim
Properties, Ltd. and an affiliate ("EIP"), (iii) Corporate Lodgings, Inc. and
four affiliates ("CLI"), (iv) Home Again, Inc. and two affiliates ("Home Again")
and (v) Temporary Housing Experts, Inc. ("THEI") (collectively, the "Founding
Companies"). The acquisitions have been accounted for using the purchase method
of accounting, and TCH has been identified as the acquiror for financial
presentation purposes. The unaudited pro forma combined financial statements
also give effect to this offering and the use of proceeds from this offering as
described under "Use of Proceeds." These financial statements are based on the
historical financial statements of the Founding Companies included elsewhere in
this Prospectus and the estimates and assumptions set forth herein.
The unaudited pro forma combined balance sheet gives effect to the
Combination, and the payment of the related purchase prices for the Founding
Companies, as if the Combination had occurred on December 31, 1996. The
allocation of the purchase price to the assets acquired and the liabilities
assumed initially has been assigned and recorded based on estimates of their
fair value, and may be revised as additional information concerning the
valuation of such assets and liabilities becomes available. The purchase price
represents a fair market valuation of the acquired entities as determined by an
independent investment banking firm based on specific information regarding each
of the Founding Companies, which included historical financial statements, tax
returns and detailed discussions with each company's management as to
operations, financial condition and future prospects. Other valuation factors
included published industry information and certain financial analyses. The
unaudited pro forma combined statement of operations for the year ended December
31, 1996 gives effect to the Combination as if it had occurred on January 1,
1996. The historical results of operations for EIP represents 12 months derived
from the unaudited three months ended March 31, 1996 and the audited nine months
ended December 31, 1996. In the opinion of management, all adjustments necessary
to present fairly the pro forma financial statements have been made.
The unaudited pro forma combined financial information presented herein
does not purport to represent what the Company's financial position and results
of operations actually would have been had such events occurred on the dates
noted above, or to project the Company's financial position or results of
operations for any future period or the future results of the Founding
Companies. The unaudited pro forma combined financial statements should be read
in conjunction with the other financial statements and notes thereto included
elsewhere in this Prospectus.
F-3
<PAGE> 53
BRIDGESTREET ACCOMMODATIONS, INC. AND FOUNDING COMPANIES
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HOME PRO FORMA
TCH CLI THEI EIP AGAIN BRIDGESTREET ADJUSTMENTS
------ ------ ---- ------ ---- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 598 $ 180 $ 52 $ -- $146 $ 6 $ --
Investments in short-term marketable securities...... 152 -- -- -- -- -- --
Accounts receivables, net............................ 795 604 99 418 108 -- --
Security deposits held by landlords.................. -- -- 24 151 8 -- --
Deferred tax asset................................... 129 28 71 167 -- 1 --
Prepaid expense & other.............................. 34 126 26 -- 218 -- --
------- ------- ----- ------- ----- ----- --- -----
Total current assets............................... 1,708 938 272 736 480 7 --
Operating stock........................................ 268 -- 146 580 196 -- --
Property and equipment................................. 27 118 57 1,392 143 -- --
Other assets........................................... -- 1 -- 8 -- 412 (176)(d)
Notes receivable-stockholders related party............ 10 --
Goodwill............................................... -- -- -- -- -- -- 6,031(c)
------- ------- ----- ------- ----- ----- --- -----
Total assets................................... $2,013 $1,057 $475 $2,716 $819 $419 $ 5,855
========== ========== ======== ========== ======== ======== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt................. $ -- $ 10 $ 19 $ 137 $ 9 $ -- $ --
Due to stockholders and affiliates................... -- 28 -- 93 191 417 --
Accounts payable and accrued expenses................ 622 440 58 584 366 -- --
Accrued income taxes................................. 100 76 16 -- -- -- --
Deferred income...................................... -- 428 34 155 31 -- --
Refundable deposits.................................. -- -- 50 260 60 -- --
------- ------- ----- ------- ----- ----- --- -----
Total current liabilities.......................... 722 982 177 1,231 657 417 --
Long-term debt, net of current maturities.............. -- -- 12 1,049 26 -- --
Deferred income taxes.................................. 107 -- 58 233 -- -- --
Stockholders' Equity (Deficit):
Common stock......................................... 31 5 1 -- 3 12 3(d)
Additional paid in capital........................... -- 180 -- 76 -- (9) 7,382(d)
Treasury stock....................................... (4) -- -- -- -- -- 4(d)
Retained earnings (deficit).......................... 1,157 (110) 227 127 133 (1) 1,534(d)
------- ------- ----- ------- ----- ----- --- -----
Total stockholders' equity......................... 1,184 75 228 203 136 2 5,855
------- ------- ----- ------- ----- ----- --- -----
Total liabilities and stockholders' equity..... $2,013 $1,057 $475 $2,716 $819 $419 $ 5,855
========== ========== ======== ========== ======== ======== =====
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS AS ADJUSTED
--------- ----------- -----------
<S> <<C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 982 $ 9,858(a) $10,840
Investments in short-term marketable securities...... 152 -- 152
Accounts receivables, net............................ 2,024 -- 2,024
Security deposits held by landlords.................. 183 -- 183
Deferred tax asset................................... 395 -- 395
Prepaid expense & other.............................. 404 -- 404
------ -------- --- -------- ---
Total current assets............................... 4,140 9,858 13,998
Operating stock........................................ 1,190 -- 1,190
Property and equipment................................. 1,737 -- 1,737
Other assets........................................... 245 (235)(e) 10
Notes receivable-stockholders related party............ 10 -- 10
Goodwill............................................... 6,031 -- 6,031
------ -------- --- -------- ---
Total assets................................... $13,353 $ 9,623 $22,976
====== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt................. $ 175 $ (175)(b) $ --
Due to stockholders and affiliates................... 731 (731)(b) --
Accounts payable and accrued expenses................ 2,070 -- 2,070
Accrued income taxes................................. 192 -- 192
Deferred income...................................... 648 -- 648
Refundable deposits.................................. 370 -- 370
------ -------- --- -------- ---
Total current liabilities.......................... 4,186 (906) 3,280
Long-term debt, net of current maturities.............. 1,087 (1,087)(b) --
Deferred income taxes.................................. 398 -- 398
Stockholders' Equity (Deficit):
Common stock......................................... 55 --(e) 55
Additional paid in capital........................... 7,628 11,616(e) 19,244
Treasury stock....................................... -- -- --
Retained earnings (deficit).......................... (1) -- (1)
------ -------- --- -------- ---
Total stockholders' equity......................... 7,682 11,616 19,298
------ -------- --- -------- ---
Total liabilities and stockholders' equity..... $13,353 $ 9,623 $22,976
====== =========== ===========
</TABLE>
See accompanying notes to pro forma financial statements.
F-4
<PAGE> 54
BRIDGESTREET ACCOMMODATIONS, INC. AND FOUNDING COMPANIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDING DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
HOME
TCH CLI THEI EIP AGAIN BRIDGESTREET ADJUSTMENTS(J) PRO FORMA
----------- ---------- ---------- ---------- ---------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........ $ 12,502 $ 8,820 $ 3,583 $ 8,626 $ 4,035 $ -- $ -- $ 37,566
Cost of
services....... 9,088 6,106 2,578 7,039 3,134 -- $ -- 27,945
Selling, general
and
administrative
expense........ 2,327 2,519 1,078 1,374 586 2 (552)(f) 7,334
Goodwill
amortization... -- -- -- -- -- -- 172(g) 172
----------- ---------- ---------- ---------- ---------- ---------- ------- --------
Operating income
(loss)......... 1,087 195 (73) 213 315 (2) 380 2,115
Other income
(expenses)..... 89 (206) 5 (130) 77 -- 158(h) (7)
----------- ---------- ---------- ---------- ---------- ---------- ------- --------
Income (loss)
before
provision for
income
taxes.......... 1,176 (11) (68) 83 392 (2) 538 2,108
Provision
(benefit) for
income taxes... 513 9 (23) 41 -- (1) 373(i) 912
----------- ---------- ---------- ---------- ---------- ---------- ------- --------
Net income
(loss)......... $ 663 $ (20) $ (45) $ 42 $ 392 $ (1) $ 165 $ 1,196
=========== ========== ========== ========== ========== ========== ======= ========
Pro forma net
income per
share.......... $
========
Shares used in
computing pro
forma net
income per
share..........
</TABLE>
See accompanying notes to pro forma financial statements.
F-5
<PAGE> 55
NOTES TO PRO FORMA FINANCIAL STATEMENTS
1. BACKGROUND
BridgeStreet was incorporated in August 1996 with the objective of becoming
a leading national provider of flexible accommodation services. During the first
quarter of 1997, the Company acquired all of the outstanding stock of the
Founding Companies in exchange for 4,301,000 shares of Common Stock of the
Company. The Company conducted no operations prior to January 2, 1997 except in
connection with this offering and the Combination. For financial reporting
purposes, TCH has been designated as the accounting acquiror, and its
acquisition of the remaining four Founding Companies has been accounted for
using the purchase method of accounting.
2. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS (IN THOUSANDS EXCEPT
SHARE AND PER SHARE AMOUNTS)
(a) Records the net increase to cash from the net proceeds of this offering
of shares of Common Stock at an assumed offering price of $ per
share, less underwriters' discounts and other offering costs, and less the use
of proceeds to pay down approximately $1,262 of bank debt and $731 payable to
stockholders and affiliates.
(b) Records the assumed repayment of bank debt and amounts payable to
stockholders and affiliates.
(c) Records the goodwill resulting from the acquisition of four of the
Founding Companies by TCH. The goodwill is calculated as follows:
<TABLE>
<S> <C>
Appraised value of the four Founding Companies................... $ 5,630
Transaction costs................................................ 1,042
----------
Total purchase price............................................. 6,672
Less: fair market value of net assets acquired................... 641
----------
Goodwill......................................................... $ 6,031
==========
</TABLE>
(d) Increase in stockholders' equity to record fair market value of shares
issued to acquire Founding Companies other than TCH, record transaction fees
paid in Company stock and eliminate in consolidation the Founding Companies'
equity sections. Also allocates to paid-in capital $176 of deferred merger
costs.
(e) Records net proceeds of this offering assuming an offering price of
$ per share less underwriters' commissions and other offering costs of
$3,000. Also allocates to paid-in capital $235 of deferred offering costs.
3. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS (IN
THOUSANDS EXCEPT PER SHARE AMOUNTS)
(f) Compensation to certain executives of the Founding Companies has been
adjusted to reflect the compensation to be paid pursuant to employment
agreements signed in connection with the Combination.
(g) Amortization of goodwill over 35 years.
(h) Interest expense related to the bank debt and notes payable to
stockholders has been eliminated because it is assumed to have been repaid at
the beginning of the period.
(i) Pro forma provision for income taxes has been adjusted to reflect the
Company's estimated consolidated effective tax rate subsequent to the
Combination, after considering nondeductible goodwill amortization.
(j) The pro forma combined statement of operations excludes any adjustments
for the compensation to be paid in 1997 for services to be rendered in 1997 by
the Company's Chief Executive Officer and Chief Financial Officer pursuant to
their employment agreements. The statement also excludes approximately $563 of
non-recurring non-cash compensation expense recorded in the first quarter of
1997 in connection with the vesting of restricted stock.
F-6
<PAGE> 56
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of BridgeStreet Accommodations, Inc.:
We have audited the accompanying balance sheet of BridgeStreet
Accommodations, Inc. as of December 31, 1996, and the related statement of
operations, stockholders' equity and cash flows from Inception (August 19, 1996)
through December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements arc free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BridgeStreet Accommodations,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows from inception through December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 10, 1997
F-7
<PAGE> 57
BRIDGESTREET ACCOMMODATIONS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................................... $ 5,804
Deferred income taxes......................................................... 890
--------
Total current assets....................................................... 6,694
Deferred offering and merger costs.............................................. 411,783
Organization costs.............................................................. 449
--------
Total assets.......................................................... $418,926
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to affiliate.............................................................. $417,546
Stockholders' Equity:
Capital stock................................................................. 11,740
Additional paid-in capital.................................................... (9,024)
Accumulated deficit........................................................... (1,336)
--------
Total stockholders' equity................................................. 1,380
--------
Total liabilities and stockholders' equity............................ $418,926
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 58
BRIDGESTREET ACCOMMODATIONS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
INCEPTION
(AUGUST 19, 1996)
THROUGH
DECEMBER 31, 1996
-----------------
<S> <C>
Revenues..................................................................... $ --
Selling, general and administrative expense.................................. 2,226
-------
Loss before benefit for income taxes......................................... (2,226)
Benefit for income taxes..................................................... (890)
-------
Net loss..................................................................... $(1,336)
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 59
BRIDGESTREET ACCOMMODATIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, inception, August 19,
1996............................ -- $ -- $ -- $ -- $ --
Shares issued................... 1,174,000 11,740 (9,024) -- 2,716
Net loss........................ -- -- -- (1,336) (1,336)
------- ------ ------- ------- -------
Balance, December 31, 1996........ 1,174,000 $11,740 $ (9,024) $(1,336) $ 1,380
======= ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 60
BRIDGESTREET ACCOMMODATIONS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION
(AUGUST 19, 1996)
THROUGH
DECEMBER 31, 1996
-----------------
<S> <C>
Cash Flows From Operating Activities:
Net loss................................................................... $(1,336)
Adjustments to reconcile net loss to net cash used in operating
activities --
Change in assets and liabilities --
Deferred income taxes................................................. (890)
-------
Net cash used in operating activities.............................. (2,226)
Cash Flows Used in Investing Activities:
Organization costs......................................................... (449)
Cash Flows From Financing Activities:
Advances from affiliate.................................................... 5,763
Issuance of common stock................................................... 2,716
-------
Net cash provided by financing activities.......................... 8,479
-------
Net increase in cash and cash equivalents.................................... 5,804
Cash and cash equivalents, beginning of period..................... --
-------
Cash and cash equivalents, end of period........................... $ 5,804
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 61
BRIDGESTREET ACCOMMODATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
BridgeStreet Accommodations, Inc. ("BridgeStreet" or "the Company") was
incorporated on August 19, 1996 to create a leading national provider of
flexible accommodation services through the acquisition and consolidation of the
operations of flexible accommodation service companies. During the first quarter
of 1997 the Company acquired, through stock-for-stock transactions, five
flexible accommodation service providers (the "Combination"). BridgeStreet
intends to complete an initial public offering (the "Offering") of its common
stock and subsequent to the Offering continue to acquire, through merger or
purchase, similar companies to expand its national and regional operations.
BridgeStreet's primary assets at December 31, 1996 are cash and deferred
offering and merger costs. BridgeStreet's only operations to date have related
to the Combination and the Offering. Funding for the deferred offering and
merger costs has been provided by American Business Partners, LLC ("ABP"). See
Note 4.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash and cash equivalents.
Stock Based Compensation Plans
The Company intends to account for its stock-based compensation plans under
Statement of Financial Accounting Standards ("SFAS") No. 123, and to elect the
disclosure only provisions for stock options as permitted by SFAS No. 123.
3. INCOME TAXES
The Company records income taxes pursuant to SFAS No. 109, Accounting for
Income Taxes. Under SFAS No. 109, deferred income taxes are recognized for the
tax consequences of temporary differences by applying enacted statutory rates
applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. The
effect on deferred income taxes of a change in tax rates is recognized as income
in the period that includes the enactment. At December 31, 1996 the Company has
recorded as an asset deferred income taxes of $890.
4. RELATED PARTY TRANSACTIONS
Funding for the deferred Offering and merger costs has been provided by
ABP. Certain shareholders of BridgeStreet are principals of ABP including the
Company's Chairman. In addition, the Chief Financial Officer of the Company was
a consultant to ABP from January 1996 through December 1996, and the Chief
F-12
<PAGE> 62
BRIDGESTREET ACCOMMODATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Executive Officer of the Company was a consultant to ABP from October 31, 1996
through December 31, 1996. At December 31, 1996 ABP has provided aggregate
funding of $417,546. Upon completion of the Offering the Company will pay ABP
for the funding it provided.
The Company also has a consulting agreement with ABP in which ABP will
perform services for the Company in connection with its acquisition program. In
exchange for such services, ABP will be paid a fee of 1% of the transaction
value for each acquisition by the Company after the closing of the Offering for
which ABP provides financial advisory services. ABP also will be reimbursed for
all direct expenses incurred by ABP in connection with such acquisitions. The
Company is not obligated to utilize ABP's services in connection with its
acquisition program.
5. CAPITAL STOCK:
The Company's authorized capital stock consists of 35,000,000 (increased on
April 10, 1997, from 10,000,000 at December 31, 1996) shares of Common Stock,
$0.01 par value per share, and 5,000,000 shares of Preferred Stock, $0.01 par
value per share.
Common Stock. BridgeStreet effected a 499-for-one stock split in November
1996 of its Common Stock for each share of Common Stock then outstanding. The
effects of the stock split have been retroactively reflected on the balance
sheet and in the accompanying notes. At December 31, 1996 there were 1,174,000
shares of Common Stock outstanding. Holders of Common Stock are entitled to one
vote for each share held of record on all matters to be submitted to a vote of
the stockholders, and do not have cumulative voting rights. In the event of any
liquidation, dissolution or winding-up of the affairs of the Company, holders of
Common Stock will be entitled to share ratably in the assets of the Company
remaining after payment or provision for payment of all of the Company's debts
and obligations and after liquidation payments to holders of outstanding shares
of Preferred Stock, if any.
Preferred Stock. At December 31, 1996 there were no shares of Preferred
Stock outstanding. Holders of Preferred Stock would have priority over the
holders of Common Stock with respect to dividends, and to other distributions,
including the distribution of assets upon liquidation. The Board of Directors
has the authority, without stockholder authorization, to issue shares of
Preferred Stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations as among series.
6. STOCK OPTION PLANS
The Company has adopted the 1997 Equity Incentive Plan (the "Equity
Incentive Plan") which provides for the award of incentive stock options
("ISOs"), non-qualified stock options, stock appreciation rights, performance
shares, restricted stock or stock units to all directors and employees of
(including directors and employees of the Founding Companies) and consultants
and advisors to the Company. The number of shares authorized and reserved for
issuance under the Equity Incentive Plan is 1,000,000. In general, the terms of
awards granted under the Equity Incentive Plan (including vesting schedules)
will be established by the Compensation Committee of the Company's Board of
Directors. As of April 10, 1997 the Company had awarded options to purchase
334,000 shares of Common Stock under the Equity Incentive Plan effective as of
the date of the final Prospectus used in connection with the Offering. Of this
amount, options to purchase 300,000 shares were granted pursuant to employment
agreements. Each option will have a per-share exercise price equal to the
Offering price.
The Company has adopted the Stock Plan for Non-Employee Directors (the
"Directors' Plan"). Pursuant to the Directors' Plan, on the date of the final
Prospectus used in connection with the Offering, each director who is not an
employee of the Company or one of its subsidiaries (a "non-employee director")
and neither is a holder of five percent or more of the Company's Common Stock
nor was a stockholder of the Company prior to the Offering will receive options
to purchase 12,500 shares of Common Stock with a per-
F-13
<PAGE> 63
BRIDGESTREET ACCOMMODATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
share exercise price equal to the Offering price. Thereafter, each such
non-employee director will be granted, on every third anniversary of the final
Prospectus (provided he or she still is a non-employee director at such time),
an option to acquire an additional 7,500 shares of Common Stock, and each
non-employee director initially elected following the Offering also will be
granted an option to purchase 7,500 shares of Common Stock having a per-share
exercise price equal to the fair market value of the Common Stock on the date of
such grant. The number of shares authorized and reserved for issuance under the
Directors Plan is 100,000. No options have been granted under the plan as of
April 10, 1997.
7. COMMITMENTS
Subsequent to December 31, 1996 the Company entered into three year
employment contracts with three officers requiring minimum base salaries
aggregating $450,000 per year. The contracts also provide severance benefits of
up to 12 months' pay for two of the officers.
8. RESTRICTED STOCK COMPENSATION
In 1996, the CEO and CFO purchased 225,000 shares of restricted Common
Stock, which vested when the restrictions were removed on March 31, 1997. In
connection with this vesting, the Company recognized non-recurring, non-cash
compensation expense of approximately $563,000, which will be charged to
operations with an offsetting credit to Additional paid-in capital in the first
quarter of 1997. The compensation charge of approximately $563,000 represented
the difference between the value of the stock issued and the amount paid by the
officers, measured by an independent appraisal as of the date the individuals
were appointed to be the CEO and CFO.
9. SUBSEQUENT EVENTS
During the first quarter of 1997, the Company acquired through
stock-for-stock mergers five flexible accommodation service providers. The
aggregate consideration paid by the Company was 4,301,000 shares of Common
Stock. The companies acquired were Temporary Corporate Housing Columbus, Inc.
(together with its three affiliates), Corporate Lodgings, Inc. (together with
its four affiliates), Exclusive Interim Properties, Ltd. (together with its
affiliate), Home Again, Inc. (together with its two affiliates) and Temporary
Housing Experts, Inc.
During the first quarter of 1997 the Company entered into a credit
agreement with a bank to provide up to $10 million of revolving credit. The
revolving credit, secured by the capital stock of the Company's operating
subsidiaries, extends to March 31, 2002. Interest is payable at the prime rate
or 1.25% above the Eurodollar rate. A commitment fee is payable on the average
unused credit at a rate of 0.375%. The revolving credit agreement contains
certain restrictive covenants with which the Company must comply.
F-14
<PAGE> 64
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Temporary Corporate Housing Columbus, Inc.:
We have audited the accompanying combined balance sheets of Temporary
Corporate Housing Columbus, Inc. as of December 31, 1995 and 1996, and the
related combined statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Temporary Corporate
Housing Columbus, Inc. as of December 31, 1995 and 1996, and the combined
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 28, 1997
F-15
<PAGE> 65
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 834,615 $ 597,939
Investment in short-term marketable securities.................... 219,300 152,253
Accounts receivable, less allowance for doubtful accounts
of $45,000 in 1996............................................. 755,649 794,445
Deferred income taxes............................................. 255,217 129,200
Refundable taxes.................................................. -- 33,927
Other current assets.............................................. 36,883 --
----------- -----------
Total current assets........................................... 2,101,664 1,707,764
Operating stock, net of accumulated amortization.................... 220,251 268,086
Property and equipment, net of accumulated depreciation............. 33,482 26,961
Notes receivable -- stockholder/related party....................... 154,602 10,568
----------- -----------
Total assets.............................................. $2,509,999 $2,013,379
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................................. $ 208,712 $ 218,407
Accrued expenses --
Payroll and employee benefits.................................. 391,420 61,201
Other.......................................................... 371,880 342,413
Accrued income taxes.............................................. 501,520 100,000
Due to stockholder................................................ 64,844 --
----------- -----------
Total current liabilities...................................... 1,538,376 722,021
Deferred income taxes............................................... 102,500 107,744
Commitments and contingencies
Stockholders' Equity:
Common stock...................................................... 31,000 31,000
Treasury stock.................................................... (4,185) (4,185)
Retained earnings................................................. 842,308 1,156,799
----------- -----------
Total stockholders' equity..................................... 869,123 1,183,614
----------- -----------
Total liabilities and stockholders' equity................ $2,509,999 $2,013,379
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-16
<PAGE> 66
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Revenues.............................................. $8,308,840 $9,754,222 $12,501,885
Operating Expenses:
Cost of services.................................... 6,474,548 7,353,552 9,087,689
Selling, general and administrative expense......... 1,628,406 2,064,463 2,326,772
---------- ---------- -----------
Total operating expenses......................... 8,102,954 9,418,015 11,414,461
---------- ---------- -----------
Operating income................................. 205,886 336,207 1,087,424
Other Income (Expense):
Interest income..................................... 9,586 25,592 47,093
Interest expense.................................... (2,957) (6,914) (107)
Other income........................................ 14,024 34,537 41,941
---------- ---------- -----------
Other income, net................................ 20,653 53,215 88,927
---------- ---------- -----------
Income before provision for income taxes.............. 226,539 389,422 1,176,351
Provision for income taxes............................ 113,116 178,269 512,627
---------- ---------- -----------
Net income............................................ $ 113,423 $ 211,153 $ 663,724
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-17
<PAGE> 67
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------ TREASURY RETAINED STOCKHOLDERS'
SHARES AMOUNT STOCK EARNINGS EQUITY
------ ------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993............ 2,056 $31,000 $ (4,185) $ 517,732 $ 544,547
Net income.......................... -- -- -- 113,423 113,423
----- ------- ------- ---------- ----------
Balance, December 31, 1994............ 2,056 31,000 (4,185) 631,155 657,970
Net income.......................... -- -- -- 211,153 211,153
----- ------- ------- ---------- ----------
Balance, December 31, 1995............ 2,056 31,000 (4,185) 842,308 869,123
Net income.......................... -- -- -- 663,724 663,724
Cash dividend....................... -- -- -- (349,233) (349,233)
----- ------- ------- ---------- ----------
Balance, December 31, 1996............ 2,056 $31,000 $ (4,185) $1,156,799 $ 1,183,614
===== ======= ======= ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-18
<PAGE> 68
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income............................................ $ 113,423 $ 211,153 $ 663,724
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization...................... 66,652 78,684 60,333
Gain on sale of assets............................. -- -- (500)
Change in operating assets and liabilities --
Accounts receivable.............................. (207,780) (154,680) (38,796)
Other assets..................................... 572 (30,978) 36,883
Accounts payable................................. (25,488) 53,404 9,695
Accrued expenses................................. 280,353 560,967 (761,206)
Deferred income taxes............................ (42,338) (98,307) 97,334
--------- --------- ---------
Net cash provided by operating activities..... 185,394 620,243 67,467
--------- --------- ---------
Cash Flows From Investing Activities:
Purchases of investments in short-term marketable
securities......................................... (134,501) (194,925) (330,887)
Sales of investments in short-term marketable
securities......................................... 27,888 151,076 397,934
Proceeds from sale of assets.......................... -- -- 4,507
Purchases of operating stock.......................... (76,610) (24,591) (77,642)
Purchases of property and equipment................... (30,341) (57,798) (28,012)
--------- --------- ---------
Net cash used in investing activities......... (213,564) (126,238) (34,100)
--------- --------- ---------
Cash Flows From Financing Activities:
Due to stockholders................................... 5,154 (1,920) (64,844)
Cash dividend......................................... -- -- (349,233)
Payments of notes payable............................. (10,318) -- --
Collections on notes receivable....................... -- -- 144,034
Additions to notes receivable......................... -- (154,602) --
--------- --------- ---------
Net cash used in financing activities......... (5,164) (156,522) (270,043)
--------- --------- ---------
Net (decrease) increase in cash and cash
equivalents................................. (33,334) 337,483 (236,676)
Cash and cash equivalents, beginning of year............ 530,466 497,132 834,615
--------- --------- ---------
Cash and cash equivalents, end of year.................. $ 497,132 $ 834,615 $ 597,939
========= ========= =========
Supplemental cash flow information:
Cash paid for interest........................ $ 2,957 $ 6,914 $ 107
========= ========= =========
Cash paid for income taxes.................... $ 25,264 $ 33,348 $ 828,618
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-19
<PAGE> 69
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
The accompanying combined financial statements include the accounts of
Temporary Corporate Housing Columbus, Inc. and three affiliated entities in the
same business (collectively, "TCH" or the "Company"), substantially all of which
are commonly owned through a general partnership, the general partners of which
are all family members. The affiliated entities are Temporary Corporate Housing
Cincinnati, Inc., Temporary Corporate Housing Cleveland, Inc. and Temporary
Corporate Housing Pittsburgh, Inc. The Company was founded in 1983, and provides
fully-furnished apartments, townhouses, condominiums and, to a lesser extent,
homes (collectively, "accommodations") to individuals in need of flexible
accommodations. The Company has offices in four cities: Columbus, Cleveland and
Cincinnati, Ohio; and Pittsburgh, Pennsylvania.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these combined financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Combination
The accompanying combined financial statements include the accounts of
Temporary Corporate Housing Columbus, Inc. and three affiliated entities. All
significant intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash and cash equivalents. The fair
market value of the Company's financial instruments approximates their financial
statement carrying value.
Investments in Available-for-Sale Marketable Securities
Investments in available-for-sale short-term marketable securities are
stated at cost, which approximates market value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Upon sale or retirement, the related cost and accumulated depreciation are
removed from the accounts, and any gain or loss is recorded in the combined
statement of operations. Depreciation is determined using the straight-line
method for financial
F-20
<PAGE> 70
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
reporting and income tax reporting purposes over the estimated useful lives of
the respective assets. Estimated useful lives are as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
ASSET CLASSIFICATION LIFE
------------------------------------------------------- ----------
<S> <C>
Computer equipment..................................... 1-5 Years
Office furniture and equipment......................... 5 Years
Automobiles............................................ 5 Years
</TABLE>
Repairs and maintenance are charged to expense as incurred. General and
administrative costs associated with the opening of new Company offices are
expenses as incurred.
Revenue Recognition
The Company recognizes revenues on the rentals of accommodations to its
clients on a pro rata basis over the length of the client's stay.
Concentration of Credit Risk
Concentration of credit risk is limited to accounts receivable. The Company
does not require collateral or other security to support their receivables. The
Company conducts periodic reviews of its clients' financial condition and
payment practices to minimize collection risks on accounts receivable.
Operating Stock
Operating stock to furnish new units, including linen, glassware,
silverware, utensils and minor appliances, is capitalized as it is purchased and
amortized over a three year period to a residual value of 50% of the original
cost. Additional purchases of operating stock for units already established is
expensed as incurred.
Accommodation and Furniture Leases
The Company leases substantially all of its accommodations on a short-term
basis with lease terms ranging from three months to one year. Furniture for the
accommodations is leased on a monthly basis from various furniture rental
companies, including a related party. (See Note 6)
3. INCOME TAXES
The Company records income taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No.
109, deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to future years to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized as income in the period that includes the enactment
date.
F-21
<PAGE> 71
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Current --
City and state.......................... $ 12,360 $ 13,964 $ 112,447
Federal................................. 58,418 65,998 531,441
-------- -------- ---------
70,778 79,962 643,888
-------- -------- ---------
Deferred --
City and state.......................... 7,394 17,168 (22,923)
Federal................................. 34,944 81,139 (108,338)
-------- -------- ---------
42,338 98,307 (131,261)
-------- -------- ---------
Total provision for income
taxes......................... $113,116 $178,269 $ 512,627
======== ======== =========
</TABLE>
A reconciliation between the provision for income taxes computed at the
statutory rates and the amount reflected in the accompanying combined statements
of operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Computed expected federal tax provision for
the three years ended December 31, 1994,
1995 and 1996............................ $ 77,023 $132,403 $399,959
Increase in taxes resulting from --
City and state income taxes.............. 16,297 28,015 84,627
Other.................................... 19,796 17,851 28,041
-------- -------- --------
Provision for income taxes....... $113,116 $178,269 $512,627
======== ======== ========
</TABLE>
Deferred tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Tax assets --
Accruals not yet deductible for tax purposes...... $255,217 $129,200
Net operating loss carryforward................... 17,391 --
Less -- valuation allowance............................ (17,391) --
-------- --------
255,217 129,200
-------- --------
Tax liabilities
Operating stock and prepaid supplies expensed for
tax purposes.................................... 102,500 107,744
-------- --------
Net deferred tax assets...................... $152,717 $ 21,456
======== ========
</TABLE>
The Company had no net operating loss ("NOL") carryforwards as of December
31, 1996. At December 31, 1995, the valuation allowance related to uncertainty
concerning the Company's ability to realize the NOL.
F-22
<PAGE> 72
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT; OPERATING STOCK
Property and equipment, and operating stock, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
-------- ---------
<S> <C> <C>
Computer equipment............................................. $183,201 $169,577
Furniture and office equipment................................. 89,252 80,738
Automobiles.................................................... 62,084 57,584
-------- --------
Total property and equipment......................... 334,537 307,899
Less -- accumulated depreciation............................... 301,055 280,938
-------- --------
Property and equipment, net.......................... $ 33,482 $26,961
======== ========
Operating stock................................................ $398,570 $476,212
Less -- accumulated amortization............................... 178,319 208,126
-------- --------
Operating stock, net................................. $220,251 $268,086
======== ========
</TABLE>
5. LEASE COMMITMENTS
The Company leases administrative offices, accommodations and furniture at
several locations through August 31, 1999. Rent expense for the fiscal years
ended December 31, 1994, 1995 and 1996 was $4,965,215, $5,642,868 and
$6,998,444, respectively. Minimum future rental payments on noncancelable leases
at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
----------
<S> <C>
1997..................................................................... $ 969,826
1998..................................................................... 796,825
1999..................................................................... 806,518
2000..................................................................... 301,523
--------
Total.......................................................... $2,874,692
========
</TABLE>
6. RELATED PARTY TRANSACTIONS
For the period from November 1, 1992 until October 31, 1995, the Company
leased office space for its corporate headquarters located in Columbus, Ohio,
from a former owner of the Company and spouse of one the general partners of SLD
Partnership ("SLD"), an Ohio general partnership that owns substantially all of
the outstanding capital stock of the Company. The lease term and annual rental
amounts were comparable to the current lease agreement for the same premises
that the Company entered into, effective November 1, 1995, with an unaffiliated
entity. Rent expense related to this office space for the years ended December
31, 1994, 1995 and 1996 was $9,720, $10,200 and $11,378, respectively.
The Company has entered into an exclusive furniture lease agreement with
Integrity Furniture, Inc., which is 49% owned by SLD. The agreement was entered
into on September 12, 1995, has a five year period and provides that the lessor
will have the exclusive right to furnish all of the Company's leased
accommodations in Pittsburgh, Pennsylvania at agreed-upon prices. The initial
unit lease terms are for minimum three-month periods that then are renewable
monthly. In management's opinion, the lease terms and rental amounts are
comparable to other agreements that the Company has entered into with
unaffiliated entities.
F-23
<PAGE> 73
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
On October 15, 1995, the Company loaned to SLD $45,000 (included in related
party notes receivable as of December 31, 1995), at an annual interest rate of
7% beginning November 1995. Also in 1995 SLD borrowed $109,602 from the Company.
Both of these notes were repaid in full during 1996.
The Company leases televisions, VCRs and microwave ovens from Saturn
Enterprises, Inc. ("Saturn"), which is owned by the spouse of one of the general
partners of SLD. The original agreement commenced on January 1, 1989, and was
renewed on December 28, 1995 for a three-year period beginning on January 1,
1996. These items are rented at rates that are comparable to those charged by
unaffiliated companies. Included in accounts payable at December 31, 1995 and
1996 are amounts owed to Saturn of approximately $47,000 and $17,500,
respectively.
For the period from June 1992 until November 1996, the Company received
consulting services from two of the general partners of SLD. The cost incurred
for these services was $96,000 in each of 1994, 1995 and 1996. The consulting
contracts with the two general partners of SLD were terminated in November 1996.
7. PROFIT SHARING PLAN
Eligible employees of the Company participated in a profit sharing plan
(the "Plan") sponsored by the Company. This defined contribution plan provides
that the Company will make contributions to the Plan in its sole discretion. The
Company's contributions to the Plan amounted to approximately $43,523 in 1995.
The Plan was terminated by the Company on December 31, 1995. In accordance with
the provisions of the Plan agreement, all plan assets were distributed to the
participants during 1996.
8. CONTINGENCIES
The Company is a party to litigation in the ordinary course of business.
The Company does not anticipate an unfavorable result in any such litigation or
believe that an unfavorable result, if it occurred, would have a material
adverse effect on its business, financial condition and results of operations.
9. STOCKHOLDERS' EQUITY
Combined stockholders' equity includes the following common stock accounts
as of December 31, 1995 and 1996 (no par value for all classes of stock):
<TABLE>
<CAPTION>
OUTSTANDING
SHARES AMOUNT
----------- -------
<S> <C> <C>
Temporary Corporate Housing Columbus, Inc. --
Class A common stock --
Voting common stock authorized -- 500 shares.............. 500 $25,000
Class B common stock --
Nonvoting common stock authorized -- 500 shares........... 56 --
Temporary Corporate Housing Cleveland, Inc. --
Voting common stock authorized -- 500 shares.............. 500 500
Temporary Corporate Housing Cincinnati, Inc. --
Voting common stock authorized -- 500 shares.............. 500 5,000
Temporary Corporate Housing Pittsburgh, Inc. --
Voting common stock authorized -- 500 shares.............. 500 500
----- -------
2,056 $31,000
===== =======
</TABLE>
The treasury stock in the combined financial statements represents 40
shares of TCH Class B common stock purchased for $4,185.
F-24
<PAGE> 74
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. ACCRUED EXPENSES -- OTHER
Accrued expenses -- other includes an accrual for sales and use taxes of
$125,000 and $200,000 as of December 31, 1995 and 1996, respectively.
11. SALE OF COMPANY
Effective on January 2, 1997, the Company was acquired, through a stock for
stock merger, by Bridgestreet Accommodations, Inc. The stockholders of the
Company received 1,596,350 shares of Bridgestreet Accommodations, Inc.'s common
stock in exchange for all of the outstanding common stock of the Company.
F-25
<PAGE> 75
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Corporate Lodgings, Inc.:
We have audited the accompanying combined balance sheets of Corporate
Lodgings, Inc., as of December 31, 1995 and 1996, and the related combined
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Corporate Lodgings,
Inc. as of December 31, 1995 and 1996, and the combined results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 28, 1997
F-26
<PAGE> 76
CORPORATE LODGINGS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 343,231 $ 179,795
Accounts receivable -- trade, less allowance for doubtful accounts
of $29,689 and $43,172 in 1995, and 1996, respectively......... 376,317 604,098
Deferred income taxes............................................. 78,734 28,215
Prepaid expenses and other current assets......................... 217,793 126,116
---------- ----------
Total current assets...................................... 1,016,075 938,224
Property and equipment, net of accumulated depreciation........... 117,777 117,906
Notes receivable -- stockholder................................... 30,034 --
Other assets...................................................... 1,752 1,249
---------- ----------
Total assets.............................................. $1,165,638 $1,057,379
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable.................................................. $ 186,859 $ 282,436
Accrued expenses --
Payroll, bonuses and related items............................. 275,007 65,238
Other.......................................................... 59,566 92,631
Accrued income taxes.............................................. 125,104 76,093
Current portion of notes payable.................................. 28,893 9,720
Notes payable -- stockholder...................................... 194,015 28,493
Deferred income................................................... 371,283 427,987
---------- ----------
Total current liabilities................................. 1,240,727 982,598
Notes payable....................................................... 9,720 --
Commitments and contingencies
Stockholders' Equity (Deficit):
Common stock...................................................... 5,000 5,000
Additional paid-in capital........................................ 800 179,797
Accumulated deficit............................................... (90,609) (110,016)
---------- ----------
Total stockholders' equity (deficit)........................... (84,809) 74,781
---------- ----------
Total liabilities and stockholders' equity (deficit)...... $1,165,638 $1,057,379
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-27
<PAGE> 77
CORPORATE LODGINGS, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues............................................... $4,069,094 $6,067,389 $8,820,039
---------- ---------- ----------
Operating Expenses:
Cost of services..................................... 2,744,916 4,046,624 6,105,473
Selling, general and administrative expense.......... 1,237,403 1,981,852 2,519,435
---------- ---------- ----------
Total operating expenses.......................... 3,982,319 6,028,476 8,624,908
---------- ---------- ----------
Operating income.................................. 86,775 38,913 195,131
Other Income (Expense):
Interest income...................................... 1,992 1,646 1,284
Interest expense..................................... (6,851) (14,615) (26,625)
Other income (expense), net.......................... (2,491) 504 (180,449)
---------- ---------- ----------
Other expense, net................................ (7,350) (12,465) (205,790)
---------- ---------- ----------
Income (loss) before provision for income taxes... 79,425 26,448 (10,659)
Provision for income taxes............................. 50,454 47,463 8,748
---------- ---------- ----------
Net income (loss)...................................... $ 28,971 $ (21,015) $ (19,407)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-28
<PAGE> 78
CORPORATE LODGINGS, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
--------------------- PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
--------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993............ 1,450 $3,000 $ 800 $ (98,565) $(94,765)
Net income.......................... -- -- -- 28,971 28,971
Issuance of stock................... 100 1,000 -- -- 1,000
----- ------ -------- --------- --------
Balance, December 31, 1994............ 1,550 4,000 800 (69,594) (64,794)
Net loss............................ -- -- -- (21,015) (21,015)
Issuance of stock................... 100 1,000 -- -- 1,000
----- ------ -------- --------- --------
Balance, December 31, 1995............ 1,650 5,000 800 (90,609) (84,809)
Net loss............................ -- -- -- (19,407) (19,407)
Capital contribution................ -- -- 178,997 -- 178,997
----- ------ -------- --------- --------
Balance, December 31, 1996............ 1,650 $5,000 $179,797 $(110,016) $ 74,781
===== ====== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-29
<PAGE> 79
CORPORATE LODGINGS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996
-------- --------- ---------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income...................................... $ 28,971 $ (21,015) $ (19,407)
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities --
Depreciation and amortization....................... 16,376 36,496 52,970
Change in operating assets and liabilities --
Accounts receivable............................... (43,184) (145,204) (227,781)
Deferred income taxes............................. (1,346) (36,580) 50,519
Prepaid expenses and other current assets......... (10,206) (141,831) 91,677
Accounts payable.................................. (67,939) 98,767 95,577
Accounts payable -- stockholder................... 72,468 (11,544) --
Accrued expenses.................................. 47,090 209,822 (176,704)
Accrued income taxes.............................. 20,217 76,525 (49,011)
Deferred income................................... 16,665 151,041 56,704
Other............................................. (379) (434) --
-------- --------- ---------
Net cash provided by (used in) operating
activities................................... 78,733 216,043 (125,456)
-------- --------- ---------
Cash Flows From Investing Activities:
Purchases of property and equipment.................... (26,159) (94,032) (53,953)
Other.................................................. -- -- 1,357
-------- --------- ---------
Net cash used in investing activities.......... (26,159) (94,032) (52,596)
-------- --------- ---------
Cash Flows From Financing Activities:
Cash received from notes receivable -- stockholder..... 1,648 5,576 30,034
Issuance (payments) of notes payable, net.............. 13,642 11,303 (15,418)
Issuance (payments) of notes payable -- stockholder.... -- 112,000 --
Issuance of common stock............................... 1,000 1,000 --
-------- --------- ---------
Net cash provided by financing activities...... 16,290 129,879 14,616
-------- --------- ---------
Net (decrease) increase in cash and cash equivalents..... 68,864 251,890 (163,436)
Cash and cash equivalents, beginning of year............. 22,477 91,341 343,231
-------- --------- ---------
Cash and cash equivalents, end of year................... $ 91,341 $ 343,231 $ 179,795
======== ========= =========
Supplemental cash flow information:
Cash paid for interest......................... $ 6,851 $ 14,615 $ 25,675
======== ========= =========
Cash paid for income taxes..................... $ 31,583 $ 7,518 $ 14,726
======== ========= =========
</TABLE>
Non-Cash Transaction:
In 1996 the stockholder contributed to capital a note payable to the
stockholder for $178,977.
The accompanying notes are an integral part of these combined financial
statements.
F-30
<PAGE> 80
CORPORATE LODGINGS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
The accompanying combined financial statements include the accounts of
Corporate Lodgings, Inc., a C corporation, and four S corporations which all are
owned substantially by the same individual and operate similar businesses
(collectively, the "Company"). The four S corporations are Corporate Lodgings,
Pennsylvania Inc.; Corporate Lodgings, Minnesota Inc.; Corporate Lodgings,
Kentucky Inc.; and Corporate Lodgings, Wisconsin Inc. The Company was founded in
1987 and provides fully-furnished apartments, townhouses, condominiums and, to a
lesser extent, homes (collectively, "accommodations") to individuals in need of
flexible accommodations. The Company has offices in: Ohio, Pennsylvania,
Minnesota, Kentucky and Wisconsin.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these combined financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Combination
The accompanying combined financial statements include the accounts of
Corporate Lodgings, Inc. and four affiliated entities which are under common
control of and management by a single shareholder. All significant intercompany
accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash and cash equivalents. The fair
market value of the Company's financial instruments approximates their financial
statement carrying value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Upon sale or retirement, the related cost and accumulated depreciation are
removed from the accounts, and any gain or loss is recorded in the combined
statements of operations. Depreciation is determined using the straight-line
method for financial reporting purposes and accelerated methods for income tax
reporting purposes over the estimated useful lives of the respective assets.
Estimated useful lives are as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
------------------------------------------------------------------ -----------
<S> <C>
Computer equipment................................................ 3 Years
Office furniture and equipment.................................... 5 Years
</TABLE>
Repairs and maintenance are charged to expense as incurred. General and
administrative costs associated with the opening of new company offices are
expensed as incurred.
F-31
<PAGE> 81
CORPORATE LODGINGS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Company recognizes revenues on the rentals of accommodations for its
clients on a pro rata basis over the length of the clients' stay.
Concentration of Credit Risk
Concentration of credit risk is limited to accounts receivable. The Company
does not require collateral or other security to support their receivables. The
Company conducts periodic reviews of its clients' financial condition and
payment practices to minimize collection risk on accounts receivable.
Operating Stock
The Company leases operating stock such as linens, small appliances,
glassware, silverware, dishes, etc.
Accommodation and Furniture Leases
The Company leases substantially all of its accommodations on a short-term
basis with lease terms that range from three months to one year. Furniture for
the accommodations is leased on a monthly basis from various furniture rental
companies.
3. INCOME TAXES
The Company records income taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No.
109, deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to future years to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized as income in the period that includes the enactment
date.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Current provision (benefit) --
State............................................. $10,403 $ 16,142 $ (3,189)
Federal........................................... 38,897 61,501 (12,311)
------- -------- --------
49,300 77,643 (15,500)
------- -------- --------
Deferred provision (benefit) --
State............................................. 171 (4,463) 3,586
Federal........................................... 983 (25,717) 20,662
------- -------- --------
1,154 (30,180) 24,248
------- -------- --------
Total provision for income taxes.......... $50,454 $ 47,463 $ 8,748
======= ======== ========
</TABLE>
F-32
<PAGE> 82
CORPORATE LODGINGS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between the provision for income taxes computed at the
statutory rates and the amount reflected in the accompanying combined statements
of operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Computed expected federal tax provision (benefit)..... $27,005 $ 8,992 $(3,624)
Increase (decrease) in taxes resulting from --
Impact of S corporation not taxable................. 13,908 29,699 4,470
State income taxes, net of federal benefit.......... 5,141 2,547 (4,355)
Other............................................... 4,400 6,225 12,257
------- ------- -------
Provision for income taxes.................. $50,454 $47,463 $ 8,748
======= ======= =======
</TABLE>
Deferred tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
--------- ---------
<S> <C> <C>
Tax Assets:
Accruals................................................... $ 117,550 $ 152,152
Other...................................................... 63,750 178,641
--------- ---------
181,300 330,793
--------- ---------
Tax Liabilities:
Receivables................................................ (73,016) (251,205)
Other...................................................... (29,550) (51,373)
--------- ---------
(102,566) (302,578)
--------- ---------
Net deferred tax asset............................. $ 78,734 $ 28,215
========= =========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Computer equipment............................................. $127,281 $159,835
Furniture and office equipment................................. 48,734 65,555
-------- --------
Total property and equipment......................... 176,015 225,390
Less -- accumulated depreciation............................... 58,238 107,484
-------- --------
Property and equipment, net.......................... $117,777 $117,906
======== ========
</TABLE>
5. NOTES PAYABLE
As of December 31, 1995 and 1996, the Company had $38,613 and $9,720,
respectively, of notes payable outstanding, related in part to the purchase of
computer equipment. The notes bear interest at rates ranging from 6.75% to 9.75%
and are secured by all business assets. All such outstanding notes mature in
1997.
F-33
<PAGE> 83
CORPORATE LODGINGS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. RELATED PARTY TRANSACTIONS
Notes Receivable -- Stockholder
As of December 31, 1995, the Company held notes receivable from the
majority stockholder of $30,034. All of such notes are non-interest-bearing with
the exception of one, which bears interest at 5.69%. Included in the
accompanying statements of operations is $1,114, $1,023 and $854 of interest
income related to these notes for the years ended December 31, 1994, 1995 and
1996, respectively. These notes were repaid in 1996.
Notes Payable -- Stockholder
As of December 31, 1995 and 1996, the Company had $194,015 and $28,493
respectively, of notes payable due to the majority stockholder. The notes bear
interest at rates ranging from 6.75% and 9.75% and are payable on demand.
Interest expense for the fiscal years ended December 31, 1994, 1995 and 1996 of
$3,873, $10,943 and $24,168, respectively, related to these notes is included in
the accompanying statements of operations.
Contingent Liabilities
During 1995, the Company entered into an agreement to guarantee a
promissory note of the majority stockholder. As of December 31, 1995 and 1996,
there was $25,000 outstanding on the note. In addition, during December 1995,
the Company pledged the inventory, accounts receivable, contract rights,
equipment and general intangibles of one of the affiliated companies to secure a
$200,000 promissory note between the majority stockholder and a bank. As of
December 31, 1995 and 1996, there was $137,000 and $109,000, respectively,
outstanding on the promissory note.
City Visitor
The Company purchases advertising space from City Visitor Publications,
Inc. ("City Visitor"), an entity which publishes a travel magazine and is 100%
owned by the majority stockholder of the Company. Included in the accompanying
statements of operations is $34,048, $21,780 and $31,356 of advertising expense
paid to City Visitor in 1994, 1995, and 1996, respectively. In addition, the
Company will from time to time pay expenses on behalf of City Visitor which are
subsequently repaid to the Company by City Visitor. Included in accounts payable
in the accompanying balance sheet is approximately $866 and $1,790 as of
December 31, 1995 and 1996, respectively.
In addition, the Company performed certain general and administrative
functions, such as accounting and finance, on behalf of City Visitor. In
connection with these services, the Company billed City Visitor approximately
$42,200, $51,000 and $14,500 for the years ended December 31, 1994, 1995 and
1996, respectively.
7. LEASE COMMITMENTS
The Company leases administrative offices, accommodations and furniture at
several locations through January 1998. The terms of the leases of
accommodations are typically less than one year. Rent expense for the fiscal
years ended December 31, 1994, 1995 and 1996 was $1,575,031, $2,317,274 and
$3,518,705, respectively. Minimum future rental payments at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
1997...................................................... $ 78,583
1998...................................................... 61,558
1999...................................................... 3,834
---------
Total..................................................... $143,975
========
</TABLE>
F-34
<PAGE> 84
CORPORATE LODGINGS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. PENSION PLAN
Eligible employees of the Company participate in a defined contribution
profit sharing plan sponsored by the Company. The plan provides that the Company
may make discretionary contributions to the plan. For the years ended December
31, 1994, 1995 and 1996, the Company did not make any discretionary
contributions to the plan.
9. STOCKHOLDERS' EQUITY
Combined stockholders' equity includes the following common stock accounts
as of December 31, 1995 and 1996.
<TABLE>
<CAPTION>
OUTSTANDING
SHARES AMOUNT
----------- ------
<S> <C> <C>
Corporate Lodgings, Inc.:
No par value, voting common stock, 1,750 shares authorized.... 1,250 $1,000
Corporate Lodgings, Pennsylvania:
No par value, voting common stock, 750 shares authorized... 100 1,000
Corporate Lodgings, Minnesota:
No par value, voting common stock, 750 shares authorized... 100 1,000
Corporate Lodgings, Kentucky:
No par value, voting common stock, 750 shares authorized... 100 1,000
Corporate Lodgings, Wisconsin:
No par value, voting common stock, 750 shares authorized... 100 1,000
----- ------
1,650 $5,000
===== ======
</TABLE>
10. CONTINGENCIES
Various lawsuits have arisen in the ordinary course of the Company's
business. The Company does not anticipate an unfavorable result in any such
litigation or believe that an unfavorable result, if it occurred, would have a
material adverse effect on its business, financial condition and results of
operations.
11. OTHER INCOME (EXPENSE), NET
Included in other income (expense) for the year ended December 31, 1996 is
approximately $160,000 for services rendered by an outside consultant related to
the sale of the Company.
12. SALE OF COMPANY
Effective on January 2, 1997, the Company was acquired, through a stock for
stock merger, by BridgeStreet Accommodations, Inc. The stockholders of the
Company received 836,437 shares of BridgeStreet Accommodations, Inc.'s common
stock in exchange for all of the outstanding common stock of the Company.
F-35
<PAGE> 85
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Exclusive Interim Properties, Ltd.:
We have audited the accompanying combined balance sheets of Exclusive
Interim Properties, Ltd. as of March 31, 1996 and as of December 31, 1996, and
the related combined statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended March 31, 1996 and for the
nine month period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Exclusive Interim
Properties, Ltd. as of March 31, 1996 and December 31, 1996, and the combined
results of their operations and their cash flows for each of the two years in
the period ended March 31, 1996 and for the nine month period ended December 31,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 11, 1997
F-36
<PAGE> 86
EXCLUSIVE INTERIM PROPERTIES, LTD.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER
MARCH 31, 31,
1996 1996
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 32,284 $ --
Accounts receivable -- trade
less allowance for doubtful accounts of $25,191 and
$107,191 at March 31, 1996 and December 31, 1996, 158,664 405,244
respectively..................................................
Other receivables................................................. 23,913 12,384
Security deposits held by landlord................................ 85,473 150,614
Deferred income taxes............................................. 143,058 166,650
---------- ----------
Total current assets........................................... 443,392 734,892
Operating stock, net of accumulated amortization.................... 381,852 580,394
Land, property and equipment, net of accumulated depreciation....... 1,367,371 1,391,834
Other assets........................................................ 10,504 7,950
---------- ----------
Total assets................................................... $2,203,119 $2,715,070
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................................. $ 296,444 $ 366,004
Accrued expenses
Payroll, bonuses and related items............................. 18,852 15,308
Other.......................................................... 98,750 202,575
Deferred revenue.................................................. 123,138 155,313
Security deposits due to customers................................ 117,475 260,443
Current portion of long-term debt................................. 70,080 136,579
Notes payable-stockholder......................................... 110,549 94,655
---------- ----------
Total current liabilities...................................... 835,288 1,230,877
Deferred income taxes............................................... 152,741 232,168
Long-term debt, net of current maturities........................... 1,113,921 1,049,038
Commitments and contingencies
Stockholders' Equity:
Common stock...................................................... 20 20
Additional paid in capital........................................ 50,200 75,801
Retained earnings................................................. 50,949 127,166
---------- ----------
Total stockholders' equity..................................... 101,169 202,987
---------- ----------
Total liabilities and stockholders' equity................ $2,203,119 $2,715,070
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-37
<PAGE> 87
EXCLUSIVE INTERIM PROPERTIES, LTD.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED MARCH 31, ENDED
------------------------- DECEMBER 31,
1995 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
Revenues.............................................. $4,014,541 $5,521,373 $7,136,843
Operating Expenses:
Cost of services.................................... 3,015,261 4,246,342 5,789,975
Selling, general and administrative expense......... 895,109 975,186 1,110,249
---------- ---------- ----------
Total operating expenses......................... 3,910,370 5,221,528 6,900,224
---------- ---------- ----------
Operating income................................. 104,171 299,845 236,619
Other Income (Expense):
Interest income..................................... 3,195 -- 29
Interest expense.................................... (110,726) (133,025) (95,974)
---------- ---------- ----------
Other expense, net............................... (107,531) (133,025) (95,945)
---------- ---------- ----------
Income (loss) before provision (benefit) for income
taxes............................................... (3,360) 166,820 140,674
Provision (benefit) for income taxes.................. (18,466) 57,723 64,457
---------- ---------- ----------
Net income............................................ $ 15,106 $ 109,097 $ 76,217
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-38
<PAGE> 88
EXCLUSIVE INTERIM PROPERTIES, LTD.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL RETAINED STOCKHOLDERS'
----------------- PAID-IN EARNINGS EQUITY
SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1994................ 2,000 $20 $ 40,500 $(73,254) $(32,734)
Contributions........................ -- -- 2,600 -- 2,600
Net income........................... -- -- -- 15,106 15,106
----- --- -------- -------- --------
Balance, March 31, 1995................ 2,000 20 43,100 (58,148) (15,028)
Contributions........................ -- -- 50,000 -- 50,000
Withdrawals.......................... -- -- (42,900) -- (42,900)
Net income........................... -- -- -- 109,097 109,097
----- --- -------- -------- --------
Balance, March 31, 1996................ 2,000 20 50,200 50,949 101,169
Contributions........................ -- -- 56,100 -- 56,100
Withdrawals.......................... -- -- (30,499) -- (30,499)
Net income........................... -- -- -- 76,217 76,217
----- --- -------- -------- --------
Balance, December 31, 1996............. 2,000 $20 $ 75,801 $127,166 $202,987
===== === ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-39
<PAGE> 89
EXCLUSIVE INTERIM PROPERTIES, LTD.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED MARCH 31, ENDED
------------------------- DECEMBER 31,
1995 1996 1996
----------- --------- ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income.......................................... $ 15,106 $ 109,097 $ 76,217
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization.................... 70,149 118,131 116,218
Provision for bad debts.......................... -- 25,191 82,000
Change in operating assets and liabilities
Accounts receivable............................ (19,981) (145,513) (317,051)
Security deposits held by landlord............. (32,230) (32,753) (65,141)
Accounts payable............................... (22,061) 196,063 69,560
Deferred revenue............................... 71,172 23,988 32,175
Security deposits due to customers............. 10,100 29,150 142,968
Accrued expenses............................... 59,803 21,194 100,281
Other.......................................... 20,769 58,306 55,836
----------- --------- ---------
Net cash provided by operating activities... 172,827 402,854 293,063
----------- --------- ---------
Cash Flows From Investing Activities:
Purchases of operating stock........................ (37,782) (323,287) (278,487)
Purchases of property and equipment................. (1,377,093) (10,164) (58,183)
----------- --------- ---------
Net cash used in investing activities....... (1,414,875) (333,451) (336,670)
----------- --------- ---------
Cash Flows From Financing Activities:
Due to stockholder.................................. 82,265 (11,716) (15,894)
Proceeds from long-term debt........................ 1,191,600 -- 71,266
Principal payments of long-term debt................ -- (69,266) (69,650)
Capital contributions............................... 2,600 50,000 56,100
Distributions to stockholder........................ -- (42,900) (30,499)
----------- --------- ---------
Net cash provided by (used in) financing
activities................................ 1,276,465 (73,882) 11,323
----------- --------- ---------
Net (decrease) increase in cash and cash
equivalents......................................... 34,417 (4,479) (32,284)
Cash and cash equivalents, beginning of period........ 2,346 36,763 32,284
----------- --------- ---------
Cash and cash equivalents, end of period.............. $ 36,763 $ 32,284 $ --
=========== ========= =========
Supplemental Cash Flow Information:
Cash paid for interest...................... $ 99,726 $ 133,025 $ 92,391
=========== ========= =========
Cash paid for income taxes.................. $ -- $ 1,273 $ --
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-40
<PAGE> 90
EXCLUSIVE INTERIM PROPERTIES, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
The accompanying combined financial statements include the accounts of
Exclusive Interim Properties, Ltd., which is owned by a sole stockholder, and
Haus Account, LLC (the "LLC") and an individual condominium unit, each of which
are owned by the sole stockholder of EIP and her spouse (collectively, the
"Company"). These entities and the condominium unit are involved in the same
business. The Company was founded in 1987 and provides fully-furnished
apartments, townhouses, condominiums and, to a lesser extent, homes
(collectively, "accommodations") to individuals in need of flexible
accommodations. The Company has offices in Baltimore, Maryland; and Washington,
D.C.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these combined financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Combination
The accompanying combined financial statements include the accounts of
Exclusive Interim Properties, Ltd. and one affiliated entity. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash and cash equivalents. The fair
market value of the Company's financial instruments approximates their financial
statement carrying value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Upon sale or retirement, the related cost and accumulated depreciation are
removed from the accounts, and any gain or loss is recorded in the combined
statements of operations. Depreciation is computed on the straight-line method
over estimated useful lives for financial reporting purposes. For income tax
reporting purposes, depreciation on equipment is determined using the
double-declining balance method. Condominiums are depreciated using the
straight-line method for financial reporting and income tax reporting purposes
over the estimated useful life of the units. Estimated useful lives are as
follows:
<TABLE>
<CAPTION>
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
---------------------------------------------------------- ---------------------
<S> <C>
Computer equipment........................................ 3 years
Office furniture and equipment............................ 7 years
Condominiums.............................................. 39 years
Vehicles.................................................. 5 years
Leasehold improvements.................................... Lease life
</TABLE>
Repairs and maintenance are charged to expense as incurred. General and
administrative costs associated with the opening of new company offices are
expensed as incurred.
F-41
<PAGE> 91
EXCLUSIVE INTERIM PROPERTIES, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Company recognizes revenues on the rentals of accommodations to its
clients on a pro-rata basis over the length of the guest's stay.
Concentration of Credit Risk
Concentration of credit risk is limited to accounts receivable. The Company
does not require collateral or security to support their receivables. The
Company conducts periodic reviews of its clients' financial condition and
payment practices to minimize collection risk on accounts receivable.
Operating Stock
Operating stock to furnish new apartment units, including linens,
glassware, silverware, utensils, and small appliances, is capitalized as it is
purchased and amortized over a three-year period to a residual value of 50% of
its original cost. Additional purchases of operating stock for apartment units
already established is expensed as incurred.
Accommodation and Furniture Leases
The Company leases substantially all of its accommodations on a short-term
basis with lease terms ranging from three months to one year. Furniture for the
accommodations is leased on a monthly basis from various furniture rental
companies.
3. INCOME TAXES
The Company records income taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No.
109, deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to future years to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized as income in the period that includes the enactment
date.
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------- DECEMBER 31,
1995 1996 1996
-------- -------- ------------
<S> <C> <C> <C>
Total provision (benefit) for income taxes:
State............................................ $ (7,673) $ 13,294 $ 14,390
Federal.......................................... (56,467) 97,833 105,902
-------- -------- --------
(64,140) 111,127 120,292
-------- -------- --------
Deferred
State............................................ 5,464 (6,389) (6,679)
Federal.......................................... 40,210 (47,015) (49,156)
-------- -------- --------
45,674 (53,404) (55,835)
-------- -------- --------
Total provision (benefit) for income
taxes.................................. $(18,446) $ 57,723 $ 64,457
======== ======== ========
</TABLE>
Income taxes are not provided on the portion of income related to the LLC
because those taxes are paid by the partners.
F-42
<PAGE> 92
EXCLUSIVE INTERIM PROPERTIES, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between the provision for income taxes computed at the
statutory rates and the amount reflected in the accompanying combined statements
of operations for the two years ended March 31, 1996 and the nine months ended
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------- DECEMBER 31,
1995 1996 1996
-------- -------- ------------
<S> <C> <C> <C>
Computed expected federal tax provision............ $ (1,142) $ 56,719 $ 47,829
Increase (decrease) in taxes resulting from:
State income taxes............................... (222) 11,010 9,284
Deductions taken for books not allowed for tax
purposes...................................... 3,941 4,053 3,400
LLC income not taxable........................... (14,996) (11,531) (4,373)
Other............................................ (6,047) (2,528) 8,317
-------- -------- --------
Provision (benefit) for income taxes..... $(18,466) $ 57,723 $ 64,457
======== ======== ========
</TABLE>
The Company uses the cash basis method for its tax returns. Deferred tax
(assets) liabilities consist of the following:
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Tax assets:
Payables and accruals not yet deducted for tax
purposes......................................... 214,874 295,680
Net operating loss carry forwards................... -- 39,638
-------- --------
214,874 335,318
-------- --------
Tax liabilities:
Accounts receivable not yet reported for tax
purposes......................................... (63,466) (162,098)
Operating stock expensed for tax purposes........... (152,741) (232,158)
Other............................................... (8,350) (6,580)
-------- --------
(224,557) (400,836)
-------- --------
Net deferred tax liabilities................ (9,683) (65,518)
======== ========
</TABLE>
The Company has net operating loss carryforwards of $99,000 as of December
31, 1996.
4. LAND, PROPERTY AND EQUIPMENT; OPERATING STOCK
Land, property and equipment, and operating stock consist of the following:
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Land.................................................. $ 266,235 $ 266,235
Condominiums.......................................... 1,166,700 1,166,700
Leasehold improvements & vehicles..................... -- 30,992
Computer equipment.................................... 37,392 64,582
Furniture and office equipment........................ 66,266 66,266
---------- ----------
Total land, property and equipment.......... 1,536,593 1,594,775
Less -- accumulated depreciation...................... 169,222 202,941
---------- ----------
Land, property and equipment, net........... $1,367,371 $1,391,834
========== ==========
Operating stock....................................... $ 535,583 $ 814,070
Less -- accumulated amortization...................... 153,731 233,676
---------- ----------
Operating stock, net........................ $ 381,852 $ 580,394
========== ==========
</TABLE>
F-43
<PAGE> 93
EXCLUSIVE INTERIM PROPERTIES, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Mortgage note -- LLC.................................. $ 975,520 $ 962,935
Installment note -- LLC............................... 150,000 100,000
Mortgage notes -- stockholder......................... 58,481 56,182
Revolving lines of credit............................. -- 49,817
Automobile loan....................................... -- 16,683
---------- ----------
Total....................................... 1,184,001 1,185,617
Less-current maturities............................... 70,080 136,579
---------- ----------
Total long-term debt........................ $1,113,921 $1,049,038
========== ==========
</TABLE>
Mortgage Note -- LLC
On May 12, 1994, the LLC entered into a Mortgage note agreement with a
bank, under which the bank provided cash of $1,005,000 in exchange for a
$1,005,000 Mortgage note (the "Mortgage"). The Mortgage is secured by
substantially all assets of the LLC, including 18 condominiums owned by the LLC.
The Mortgage calls for monthly principal payments of $1,340 through June 1, 1999
at which time all outstanding borrowings are due. The Mortgage bears interest at
bank's prime rate plus 1.5%. The interest rates at both March 31, 1996 and
December 31, 1996 were 9.75%. Interest is payable monthly, in arrears.
Installment Note -- LLC
On May 12, 1994, the LLC entered into an agreement with a bank, pursuant to
which the bank provided the LLC with cash of $200,000 in exchange for a $200,000
installment note (the "Installment Note"). The Installment Note calls for annual
principal payments of $50,000, from May 1, 1995 through May 1, 1998. The
Installment Note bears interest at the highest prime rate published in the Wall
Street Journal on the last day of the immediately prior calendar month plus
1.5%. The interest rate at both March 31, 1996 and December 31, 1996 was 9.75%.
Interest is payable monthly, in arrears.
Mortgage -- Stockholder
On October 22, 1993, the principal stockholder of the Company entered into
a mortgage note agreement for $65,000. The mortgage is secured by a condominium
owned by the stockholder located in Baltimore, Maryland. The mortgage calls for
monthly payments of principal and interest in the amount of $590. The mortgage
bears interest at a fixed rate of 7.0%. The mortgage and the condominium were
contributed by the stockholder to the Company.
Revolving Lines of Credit
At December 31, 1996, the Company had a line of credit agreement expiring
February 15, 1997 which provided for borrowings of up to $50,000 and bore
interest at 8.25% on such date. At December 31, 1996, the Company's advances on
this line of credit were $49,817.
Automobile Loan
In April 1996, the Company entered into a note payable agreement for
$21,000 with Chrysler Financial Group. The note calls for monthly payments of
principal and interest of $570 through April 1999. The note bears interest at a
fixed rate of 8.55%.
F-44
<PAGE> 94
EXCLUSIVE INTERIM PROPERTIES, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule of required debt payments as of December 31,
1996:
<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------------- ----------
<S> <C>
1997..................................................... $ 136,579
1998..................................................... 70,080
1999..................................................... 935,300
2000..................................................... 4,000
2001..................................................... 4,000
Thereafter............................................... 35,658
----------
Total.......................................... $1,185,617
==========
</TABLE>
6. LEASE COMMITMENTS
The Company leases administrative offices, accommodations and furniture at
several locations through August 31, 1999. Rent expense for the fiscal years
ended March 31, 1995 and 1996 and for the nine months ended December 31, 1996
was $2,183,491, $3,240,935 and $4,102,087, respectively. Minimum future rental
payments at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
1997...................................................... $ 57,212
1998...................................................... 56,522
1999...................................................... 48,526
2000...................................................... 50,088
2001...................................................... 41,741
--------
Total........................................... $254,089
========
</TABLE>
7. CONTINGENCIES
Various lawsuits have arisen in the ordinary course of the Company's
business. The Company does not anticipate an unfavorable result in any such
litigation or believe that an unfavorable result, if it occurred, would have a
material adverse effect on its business, financial condition and results of
operations.
8. SALE OF COMPANY
Effective on January 2, 1997, the Company was acquired, through a stock for
stock merger, by BridgeStreet Accommodations, Inc. The stockholders of the
Company received 1,001,805 shares of BridgeStreet Accommodations, Inc.'s common
stock in exchange for all of the outstanding common stock of and equity
interests in the Company.
F-45
<PAGE> 95
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of Home Again, Inc.:
We have audited the accompanying combined balance sheets of Home Again,
Inc. as of December 31, 1995 and 1996, and the related combined statements of
operations, stockholder's equity and cash flows for each of the two years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Home Again, Inc. as
of December 31, 1995 and 1996, and the results of their operations and their
cash flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 21, 1997
F-46
<PAGE> 96
HOME AGAIN, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................ $ 14,210 $145,140
Accounts receivable.................................................. 68,905 109,167
Security deposits held by landlords.................................. 6,801 7,553
Prepaid expenses..................................................... 131,325 217,172
Other current assets................................................. 1,774 1,293
-------- --------
Total current assets.............................................. 223,015 480,325
Operating stock, net of accumulated amortization....................... 35,966 196,015
Property and equipment, net of accumulated depreciation................ 68,759 142,508
-------- --------
Total assets................................................. $327,740 $818,848
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable..................................................... $191,119 $300,755
Accrued expenses --
Payroll and employee benefits..................................... 6,977 290
Other............................................................. 42,500 64,750
Deferred revenue..................................................... 20,850 30,880
Security deposits due to customers................................... -- 60,460
Due to stockholder................................................... 2,812 191,404
Current portion of long-term debt.................................... -- 8,595
-------- --------
Total current liabilities......................................... 264,258 657,134
Long-term debt, net of current maturities.............................. -- 25,608
Commitments and Contingencies
Stockholder's Equity:
Common stock......................................................... 30 30
Additional paid-in capital........................................... 2,970 2,970
Retained earnings.................................................... 60,482 133,106
-------- --------
Total stockholder's equity........................................ 63,482 136,106
-------- --------
Total liabilities and stockholder's equity................... $327,740 $818,848
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-47
<PAGE> 97
HOME AGAIN, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
Revenues............................................................ $1,569,502 $4,034,905
Operating Expenses:
Cost of services.................................................. 1,283,752 3,133,900
Selling, general and administrative expense....................... 212,242 586,339
---------- ----------
Total operating expenses....................................... 1,495,994 3,720,239
---------- ----------
Operating income............................................... 73,508 314,666
Other Income:
Interest income................................................... 362 1,202
Other income...................................................... 33,042 75,702
---------- ----------
Other income, net.............................................. 33,404 76,904
---------- ----------
Net income.......................................................... $ 106,912 $ 391,570
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-48
<PAGE> 98
HOME AGAIN, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL RETAINED STOCKHOLDER'S
--------------- PAID-IN EARNINGS EQUITY
SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
------ ------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994..................... 1,000 $ 10 $ 990 $ (46,430) $ (45,430)
Issuance of stock............................ 2,000 20 1,980 -- 2,000
Net income................................... -- -- -- 106,912 106,912
----- ---- ------ --------- ----------
Balance, December 31, 1995..................... 3,000 30 2,970 60,482 63,482
Distributions to stockholder................. -- -- -- (318,946) (318,946)
Net income................................... -- -- -- 391,570 391,570
----- ---- ------ --------- ----------
Balance, December 31, 1996..................... 3,000 $ 30 $2,970 $ 133,106 $ 136,106
===== ==== ====== ========= ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-49
<PAGE> 99
HOME AGAIN, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
-------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income.......................................................... $106,912 $ 391,570
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization.................................... 23,518 101,045
Change in operating assets and liabilities --
Accounts receivable............................................ (54,407) (40,262)
Security deposits held by landlords............................ (783) (752)
Prepaid expenses............................................... (96,119) (85,847)
Other current assets........................................... (999) 481
Accounts payable............................................... 171,759 109,636
Advanced rent.................................................. 5,132 10,030
Security deposits due customers................................ -- 60,460
Accrued expenses............................................... 19,789 15,563
-------- ---------
Net cash provided by operating activities................... 174,802 561,924
-------- ---------
Cash Flows From Investing Activities:
Purchases of operating stock........................................ (43,159) (200,689)
Purchases of property and equipment................................. (55,918) (134,154)
-------- ---------
Net cash used in investing activities....................... (99,077) (334,843)
-------- ---------
Cash Flows From Financing Activities:
Due to stockholder.................................................. (64,179) 188,592
Proceeds from issuance of stock..................................... 2,000 --
Payments of long-term debt.......................................... -- (4,411)
Proceeds from long-term debt........................................ -- 38,614
Distribution to stockholder......................................... -- (318,946)
-------- ---------
Net cash used in financing activities....................... (62,179) (96,151)
-------- ---------
Net increase in cash and cash equivalents............................. 13,546 130,930
Cash and cash equivalents, beginning of year.......................... 664 14,210
-------- ---------
Cash and cash equivalents, end of year................................ $ 14,210 $ 145,140
======== =========
Supplemental Cash Flow Information:
Cash paid for interest...................................... $ 362 $ 1,202
======== =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-50
<PAGE> 100
HOME AGAIN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
The accompanying combined financial statements include the accounts of Home
Again, Inc. and two affiliated entities in the same business (collectively,
"Home Again" or the "Company"), all of which are S corporations owned by the
same stockholder. The Company was founded in 1994 and provides fully-furnished
apartments, townhouses, condominiums and, to a lesser extent, homes
(collectively, "accommodations") to individuals in need of flexible
accommodations. The Company has offices in Minneapolis, Minnesota; and Oklahoma
City, Oklahoma.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash and cash equivalents. The fair
market value of the Company's financial instruments approximates their financial
statement carrying value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Leasehold improvements are capitalized and charged to expense through
depreciation. Upon sale or retirements, the related cost and accumulated
depreciation are removed from the accounts, and any gain or loss is recorded in
the statement of operations. Depreciation is determined using the straight-line
method for financial reporting purposes and accelerated methods for income tax
reporting purposes over the estimated useful lives of the respective assets.
Estimated useful lives are as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
----------------------------------------------------------------- -----------
<S> <C>
Computer equipment............................................... 3-5 years
Office furniture and equipment................................... 5 years
Leasehold improvements........................................... 7 years
Vehicles......................................................... 5 years
</TABLE>
Repairs and maintenance are charged to expense as incurred. General and
administrative costs associated with the opening of new company offices are
expenses as incurred.
Revenue Recognition
The Company recognizes revenues on the sublease of accommodations for its
clients as services are provided.
F-51
<PAGE> 101
HOME AGAIN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Credit Risk
Concentration of credit risk is limited to accounts receivable. The Company
does not require collateral or other security to support their receivables. The
Company conducts periodic reviews of its clients' financial conditions and
payment practices to minimize collection risks on accounts receivable.
Operating Stock
Operating stock to furnish new apartment units, including linen, glass and
silver, and minor appliances is capitalized as it is purchased and amortized
over a three-year period to a residual value of 50% of the original cost.
Additional purchases of operating stock for apartment units established is
expensed as incurred.
Apartment and Furniture Leases
The Company leases substantially all of its accommodations under lease
terms ranging from one to two years. Furniture for the accommodations is leased
on a monthly basis from various furniture rental companies.
3. INCOME TAXES
The Company, with the consent of its stockholder, elected to be recognized
as an S corporation under the appropriate federal and state tax codes beginning
June 8, 1993. In lieu of corporate income taxes, the stockholders of an S
corporation are taxed on their proportionate shares of the Company's taxable
income. As a result, the recognition of current and deferred income taxes is not
needed in the accompanying combined financial statements.
4. PROPERTY AND EQUIPMENT; OPERATING STOCK
Property and equipment and operating stock consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
------- --------
<S> <C> <C>
Computer equipment.............................................. $18,542 $ 35,171
Furniture and office equipment.................................. 71,405 146,787
Vehicles........................................................ -- 42,143
------- --------
Total property and equipment............................... 89,947 224,101
Less -- accumulated depreciation................................ 21,188 81,593
------- --------
Property and equipment, net........................... $68,759 $142,508
======= ========
Operating stock................................................. $43,159 $243,848
Less -- accumulated amortization................................ 7,193 47,833
------- --------
Operating stock, net.................................. $35,966 $196,015
======= ========
</TABLE>
5. DEBT
Long-term debt consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Note payable to a bank, interest rate of 8.75%, due in 48 equal
installments through October 2000, secured by an automobile
purchased with the proceeds from the note........................... $ 18,031
Note payable to a bank, interest rate of 9.5%, due in 48 equal
installments through March 2000; secured by an automobile purchased
with the proceeds from the note..................................... 16,172
--------
34,203
Less -- current maturities............................................ 8,595
--------
Total long-term debt.................................................. $ 25,608
========
</TABLE>
F-52
<PAGE> 102
HOME AGAIN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule of required debt payments as of December 31,
1996:
<TABLE>
<S> <C>
1997....................................................................... $ 8,595
1998....................................................................... 9,641
1999....................................................................... 10,561
2000....................................................................... 5,406
-------
Total............................................................ $34,203
=======
</TABLE>
6. LEASE COMMITMENTS
The Company leases administrative offices, apartment units and furniture at
several locations through 1998. Rent expense for the fiscal years ended December
31, 1995 and 1996 was $989,203 and $2,592,965 respectively. Minimum future
rental payments on long-term leases at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
<S> <C>
1997.......................................... $ 59,793
1998.......................................... 57,078
1999.......................................... 53,340
2000.......................................... 51,070
2001.......................................... 50,247
Thereafter.................................... 111,168
--------
Total............................... $382,696
========
</TABLE>
7. DISTRIBUTION TO STOCKHOLDER
The Company declared a distribution to the stockholder during December 1996
in the amount of $191,404, related to 1996 earnings, to be paid in 1997.
8. CONTINGENCIES
Various lawsuits have arisen in the ordinary course of the Company's
business. The Company does not anticipate an unfavorable result in any such
litigation or believe that an unfavorable result, if it occurred, would have a
material adverse effect on its business, financial condition and results of
operations.
9. STOCKHOLDERS' EQUITY
Combined stockholder's equity includes the following common stock accounts
as of December 31, 1995 and 1996 (.01 par value and voting for all classes of
common stock).
<TABLE>
<CAPTION>
OUTSTANDING
SHARES AMOUNT
----------- ------
<S> <C> <C>
Home Again, Inc.
Authorized--1,000,000................................................ 1,000 $ 10
Home Again, Corporate Housing, Inc.
Authorized--100,000.................................................. 1,000 $ 10
Home Again, Amenities, Inc.
Authorized--100,000.................................................. 1,000 $ 10
</TABLE>
10. SALE OF COMPANY
Effective on March 31, 1997, the Company was acquired, through a stock for
stock merger, by Bridgestreet Accomodations, Inc. The stockholder of the Company
received 475,000 shares of Bridgestreet Accomodations, Inc.'s common stock in
exchange for all of the outstanding common stock of the Company.
F-53
<PAGE> 103
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Temporary Housing Experts, Inc.:
We have audited the accompanying balance sheets of Temporary Housing
Experts, Inc. as of December 31, 1995 and 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the two years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Temporary Housing Experts,
Inc. as of December 31, 1995 and 1996, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Memphis, Tennessee
March 21, 1997
F-54
<PAGE> 104
TEMPORARY HOUSING EXPERTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................ $213,845 $ 51,536
Accounts receivable, less allowance for doubtful accounts of $1,311
in 1995 and 1996.................................................. 77,481 99,487
Deferred income taxes................................................ 46,300 70,794
Prepaid expenses..................................................... -- 25,504
Security deposits held by landlord complexes......................... 18,566 24,244
-------- --------
Total current assets.............................................. 356,192 271,565
Operating stock, net of accumulated amortization....................... 141,680 145,086
Property and equipment, net of accumulated depreciation................ 82,265 58,450
-------- --------
Total assets................................................. $580,137 $475,101
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt................................. $ 15,669 $ 18,745
Accounts payable..................................................... 1,257 6,046
Security deposits due to customers................................... 51,087 50,548
Deferred revenue..................................................... 3,363 34,347
Accrued expenses..................................................... 115,750 51,875
Accrued income taxes................................................. 48,287 15,895
-------- --------
Total current liabilities......................................... 235,413 177,456
Long-term debt, net of current maturities.............................. 15,669 11,873
Deferred income taxes.................................................. 56,671 58,033
Stockholders' Equity:
Common stock......................................................... 1,000 1,000
Retained earnings.................................................... 271,384 226,739
-------- --------
Total stockholders' equity........................................ 272,384 227,739
-------- --------
Total liabilities and stockholders' equity................... $580,137 $475,101
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
<PAGE> 105
TEMPORARY HOUSING EXPERTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
Revenues............................................................ $3,085,736 $3,582,924
Operating Expenses:
Cost of services.................................................. 2,190,252 2,578,247
Selling, general and administrative expense....................... 865,689 1,077,568
---------- ----------
Total operating expenses....................................... 3,055,941 3,655,815
---------- ----------
Operating income (loss)........................................ 29,795 (72,891)
Other Income (Expense):
Interest expense.................................................. (1,018) (977)
Other income (expense)............................................ (3,649) 6,197
---------- ----------
Other income (expense), net.................................... (4,667) 5,220
---------- ----------
Income (loss) before provision for income taxes..................... 25,128 (67,671)
Benefit for income taxes............................................ (1,923) (23,026)
---------- ----------
Net income (loss)................................................... $ 27,051 $ (44,645)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE> 106
TEMPORARY HOUSING EXPERTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994......................... 1,000 $1,000 $244,333 $ 245,333
Net income....................................... -- -- 27,051 27,051
----- ------ -------- ---------
Balance, December 31, 1995......................... 1,000 1,000 271,384 272,384
Net loss......................................... -- -- (44,645) (44,645)
----- ------ -------- ---------
Balance, December 31, 1996......................... 1,000 $1,000 $226,739 $ 227,739
===== ====== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-57
<PAGE> 107
TEMPORARY HOUSING EXPERTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income................................................ $ 27,051 $ (44,645)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities --
Depreciation and amortization................................. 41,044 59,507
Provision for bad debts....................................... (1,359) --
Gain on sale of property and equipment........................ -- (6,197)
Change in operating assets and liabilities --
Accounts receivable......................................... 740 (26,547)
Prepaid expenses and deposits............................... 1,247 (31,182)
Accounts payable............................................ (12,131) 4,789
Accrued expenses............................................ 102,745 (96,267)
Deferred revenue............................................ (4,615) 30,984
Refundable customer deposits................................ 17,584 (539)
Loans made to employees..................................... (1,676) --
Loan payments from employees................................ -- 4,541
Deferred income taxes....................................... (23,512) (23,132)
--------- ---------
Net cash provided by (used in) operating activities...... 147,118 (128,688)
--------- ---------
Cash Flows from Investing Activities:
Purchases of operating stock..................................... (54,534) (23,250)
Purchases of property and equipment.............................. (83,521) (33,553)
Proceeds from sale of property and equipment..................... -- 23,901
--------- ---------
Net cash used in investing activities.................... (138,055) (32,902)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from notes payable...................................... 31,338 17,100
Payments of notes payable........................................ (14,251) (17,819)
Advances from stockholder........................................ -- 50,000
Repayments to stockholder........................................ -- (50,000)
--------- ---------
Net cash provided by (used in) financing activities...... 17,087 (719)
--------- ---------
Net (decrease) increase in cash and cash equivalents............... 26,150 (162,309)
Cash and cash equivalents, beginning of year....................... 187,695 213,845
--------- ---------
Cash and cash equivalents, end of year............................. $ 213,845 $ 51,536
========= =========
Supplemental Cash Flow Information:
Cash paid for interest................................... $ 979 $ 969
========= =========
Cash paid for income taxes............................... $ 17,800 $ 27,564
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE> 108
TEMPORARY HOUSING EXPERTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Temporary Housing Experts, Inc. (the "Company") was founded in 1993, and
provides fully-furnished apartments, townhouses, condominiums and, to a lesser
extent, homes (collectively "accommodations") to individuals in need of flexible
accommodations. The Company has offices in: Memphis, Tennessee; and Jackson,
Mississippi.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash and cash equivalents. The fair
market value of the Company's financial instruments approximates their financial
statement carrying value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Leasehold improvements are capitalized and charged to expense through
depreciation. Upon sale or retirement, the related cost and accumulated
depreciation are removed from the accounts, and any gain or loss is recorded in
the statement of operations. Depreciation is determined using the straight-line
method for financial reporting purposes and accelerated methods for income tax
reporting purposes over the estimated useful lives of the respective assets.
Estimated useful lives are as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
---------------------------------------------------------------- -----------
<S> <C>
Computer equipment.............................................. 3 Years
Office furniture and equipment.................................. 5 Years
Leasehold improvements.......................................... 7 Years
Vehicles........................................................ 5 Years
</TABLE>
Revenue Recognition
The Company recognizes revenues on the rentals of accommodations to its
clients on a pro rata basis over the length of the client's stay.
Concentration of Credit Risk
Concentration of credit risk is limited to accounts receivable. The Company
does not require collateral or other security to support their receivables. The
Company conducts periodic reviews of its clients' financial condition and
payment practices to minimize collection risks on accounts receivable.
F-59
<PAGE> 109
TEMPORARY HOUSING EXPERTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Operating Stock
Operating stock to furnish new units, including linen, glassware,
silverware and minor appliances is capitalized as it is purchased and amortized
over a three-year period to a residual value of 50% of the original cost.
Additional purchases of operating stock for apartment units already established
is expensed as incurred.
Accommodation and Furniture Leases
The Company leases substantially all of its accommodations under lease
terms ranging from one to two years. Furniture for the accommodations is leased
on a monthly basis from various furniture rental companies.
3. INCOME TAXES
The Company records income taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No.
109, deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to future years to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized as income in the period that includes the enactment
date.
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Current --
State........................................................ $ 5,009 $ 106
Federal...................................................... 16,580 --
--------- ---------
21,589 106
--------- ---------
Deferred --
State........................................................ $ (1,881) $ (2,891)
Federal...................................................... (21,631) (20,241)
--------- ---------
(23,512) (23,132)
--------- ---------
Total benefit for income taxes....................... $ (1,923) $(23,026)
========= =========
</TABLE>
A reconciliation between the benefit for income taxes computed at the
statutory rates and the amount reflected in the accompanying statements of
operations for the two years ended is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Computed expected federal tax provision (benefit).............. $ 3,769 $(23,008)
Increase (decrease) in taxes resulting from:
State income taxes, net of federal benefit................... 829 (4,060)
Other........................................................ (6,521) 4,042
------- --------
Benefit for income taxes............................. $(1,923) $(23,026)
======= ========
</TABLE>
F-60
<PAGE> 110
TEMPORARY HOUSING EXPERTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets (liabilities) consist of the following:
Tax assets --
Accruals not yet deductible for tax purposes................. $ 46,300 $ 20,750
Net operating loss carryforward.............................. -- 50,044
-------- -------
46,300 70,794
Tax liabilities --
Operating stock expensed for tax purposes.................... (56,671) (58,033)
-------- --------
Net deferred tax asset (liability)................... $(10,371) $ 12,761
-------- --------
</TABLE>
4. PROPERTY AND EQUIPMENT; OPERATING STOCK
Property and equipment and operating stock consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- --------
<S> <C> <C>
Leasehold improvements.......................................... $ 1,987 $ 1,987
Computer equipment.............................................. 26,298 42,602
Furniture and office equipment.................................. 28,429 23,204
Vehicles........................................................ 80,258 65,296
--------- --------
Total property and equipment.......................... 136,972 133,089
Less -- accumulated depreciation................................ 54,707 74,639
--------- --------
Property and equipment, net........................... $ 82,265 $ 58,450
========= ========
Operating stock................................................. $ 203,244 $226,494
Less -- accumulated amortization................................ 61,564 81,408
--------- --------
Operating stock, net.................................. $ 141,680 $145,086
========= ========
</TABLE>
5. DEBT
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
-------- --------
<S> <C> <C>
Notes payable to financial institutions, interest ranging from 0%
to 7.99% maturing at various dates through March 2001: secured
by certain automobiles purchased with the proceeds from the
notes.......................................................... $ 31,338 $ 30,618
Less -- current maturities....................................... (15,669) (18,745)
-------- --------
$ 15,669 $ 11,873
======== ========
</TABLE>
6. LEASE COMMITMENTS
The Company leases administrative offices, accommodations and furniture at
several locations through 1998. Rent expense for the fiscal years ended December
31, 1995 and 1996 was $1,890,967 and $2,164,855, respectively. Minimum future
rental payments on long-term leases at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
<S> <C>
1997................................................ $709,278
1998................................................ 65,825
--------
Total..................................... $775,103
========
</TABLE>
F-61
<PAGE> 111
TEMPORARY HOUSING EXPERTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. PENSION PLAN
Eligible employees of the Company participate in a profit sharing plan
sponsored by the Company. This defined contribution plan was effective on
January 1, 1995 and provides that the Company will match participant
contributions within specific limitations. The Company's contributions to the
plan amounted to approximately $28,000 in 1995. There was no contribution to the
plan in 1996.
8. CONTINGENCIES
Various lawsuits have arisen in the ordinary course of the Company's
business. The Company does not anticipate an unfavorable result in any such
litigation or believe that an unfavorable result, if it occurred, would have a
material adverse effect on its business, financial condition and results of
operations.
9. SALE OF COMPANY
Effective on January 2, 1997, the Company was acquired, through a stock for
stock merger, by BridgeStreet Accommodations, Inc. The stockholders of the
Company received 391,408 shares of BridgeStreet Accommodations, Inc.'s common
stock in exchange for all of the outstanding common stock of the Company.
F-62
<PAGE> 112
============================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 8
Combination................................ 13
Use of Proceeds............................ 14
Dividend Policy............................ 14
Capitalization............................. 15
Dilution................................... 16
Selected Financial and Other Data.......... 17
Selected Individual Founding Company
Financial and Other Data................. 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 20
Business................................... 26
Management................................. 35
Principal and Selling Stockholders......... 40
Certain Transactions....................... 41
Description of Capital Stock............... 43
Shares Eligible for Future Sale............ 45
Underwriting............................... 46
Legal Matters.............................. 47
Experts.................................... 48
Additional Information..................... 48
Index to Financial Statements.............. F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
============================================================
============================================================
SHARES
BRIDGESTREET
ACCOMMODATIONS,
INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
------------------------
, 1997
============================================================
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
SEC registration fee..................................................... $ 10,910
NASD filing fee.......................................................... 3,536
Blue Sky fees and expenses............................................... 5,000
Nasdaq listing fee....................................................... 37,313
Printing and engraving expenses.......................................... 150,000
Legal fees and expenses.................................................. 750,000
Accounting fees and expenses............................................. 750,000
Transfer agent and registrar fees........................................ 4,000
Premium for directors' and officers' insurance........................... 80,000
Miscellaneous............................................................ 369,241
----------
Total.......................................................... $2,160,000
=========
</TABLE>
ABP will bear all of the foregoing fees and expenses, and the Company will
reimburse ABP for such fees and expenses out of the proceeds of this offering.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. Reference is made to Section 145 of
the DGCL, as amended, which provides that a corporation may indemnify any person
who was or is a party to or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his or her conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite an adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper. The
Company's Certificate of Incorporation further provides that the Company shall
indemnify its directors and officers to the full extent permitted by the law of
the State of Delaware.
The Company's Certificate of Incorporation provides that the Company's
directors shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the
II-1
<PAGE> 114
extent that exculpation from liability is not permitted under the DGCL as in
effect at the time such liability is determined.
The Certificate of Incorporation also provides that each person who was or
is made a party to, or is involved in, any action, suit, proceeding or claim by
reason of the fact that he or she is or was a director, officer or employee of
the Registrant (or is or was serving at the request of the Registrant as a
director, officer, trustee employee or agent of any other enterprise including
service with respect to employee benefit plans) shall be indemnified and held
harmless by the Registrant, to the full extent permitted by Delaware law, as in
effect from time to time, against all expenses (including attorneys' fees and
expenses), judgments, fines, penalties and amounts to be paid in settlement
incurred by such person in connection with the investigation, preparation to
defend or defense of such action, suit, proceeding or claim.
The rights to indemnification and the payment of expenses provided by the
Certificate of Incorporation do not apply to any action, suit, proceeding or
claim initiated by or on behalf of a person otherwise entitled to the benefit of
such provisions. Any person seeking indemnification under the Certificate of
Incorporation shall be deemed to have met the standard of conduct required for
such indemnification unless the contrary shall be established. Any repeal or
modification of such indemnification provisions shall not adversely affect any
right or protection of a director or officer with respect to any conduct of such
director or officer occurring prior to such repeal or modification.
The Company maintains an indemnification insurance policy covering all
directors and officers of the Company and its subsidiaries.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the Combination, in January and March 1997, the Company
issued to the stockholders of the Founding Companies an aggregate of 4,301,000
shares of Common Stock in exchange for all of the issued and outstanding stock
of such companies.
Prior to the Combination, in August 1996, the Company issued to the
promoters of the Company an aggregate of 2,000 shares of Common Stock at a
purchase price of $1.00 per share. In August and November 1996, the Company
issued 150 and 350 shares of restricted Common Stock, respectively, at a
purchase price of $1.00 per share, to two individuals upon their agreement to
become executive officers of the Company in January 1997. The restrictions since
have lapsed. In November 1996, the Company issued 66 shares of Common Stock to a
consultant at a purchase price of $1.00 per share. A 499-for-1 stock dividend
(the "Stock Dividend") was declared by the Company with respect to all shares of
Common Stock that were outstanding as of November 28, 1996.
All such issuances of Common Stock (other than the Stock Dividend) have
been made in reliance upon the exemption from registration afforded by Section
4(2) under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) EXHIBITS. Unless otherwise indicated, the following exhibits will be
filed by amendment to this Registration Statement.
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------ ------------------------------------------------------------------------- ----------
<C> <S> <C>
1 Form of Underwriting Agreement...........................................
*3.1 Certificate of Incorporation of the Company..............................
3.2 By-laws of the Company...................................................
4.1 Specimen Stock Certificate...............................................
5 Opinion of Nutter, McClennen & Fish, LLP.................................
*10.1 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., EIP Acquisition Corp., Exclusive Interim
Properties, Ltd. and Melanie R. Sabelhaus................................
</TABLE>
II-2
<PAGE> 115
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------ ------------------------------------------------------------------------- ----------
<C> <S> <C>
*10.2 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., THEI Acquisition Corp., Temporary
Housing Experts, Inc., Connie F. O'Briant and Thomas W. O'Briant.........
*10.3 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., TCHI Acquisition Corp., Temporary
Corporate Housing Columbus, Inc., Temporary Corporate Housing Cleveland,
Inc., Temporary Corporate Housing Cincinnati, Inc., Temporary Corporate
Housing Pittsburgh, Inc., SLD Partnership, Lynda Clutchey, David Clutchey
III, Beth Holzer and David Holzer........................................
*10.4 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., CL Acquisition Corp., Corporate
Lodgings, Inc., Corporate Lodgings of Kentucky, Inc., Corporate Lodgings
of Minnesota, Inc., Corporate Lodgings of Pennsylvania, Inc., Corporate
Lodgings of Wisconsin, Inc. and Rocco A. Di Lillo........................
*10.5 Agreement and Plan of Merger dated as of March 31, 1997 by and among
BridgeStreet International Inc., HAI Acquisition Corp., Home Again, Inc.,
Home Again Amenities, Inc., Home Again Corporate Housing, Inc. and Sandra
A. Brown.................................................................
10.6 1997 Equity Incentive Plan...............................................
10.7 Stock Plan for Non-Employee Directors....................................
*10.8 Employment Agreement dated December 30, 1996, between CL Acquisition
Corp. and Rocco A. Di Lillo..............................................
*10.9 Employment Agreement dated December 30, 1996, between EIP Acquisition
Corp. and Melanie R. Sabelhaus...........................................
*10.10 Employment Agreement dated December 30, 1996 between THEI Acquisition
Corp. and Connie F. O'Briant.............................................
*10.11 Employment Agreement dated December 30, 1996, between TCHI Acquisition
Corp. and Lynda Clutchey
10.12 Employment Agreement dated as of January 2, 1997, between BridgeStreet
International Inc. and Mark D. Gagne.....................................
10.13 Employment Agreement dated as of March 31, 1997, between BridgeStreet
International Inc. and William N. Hulett, III............................
*10.14 Revolving Credit Agreement. Dated as of March 31, 1997 between
BridgeStreet International Inc., as Borrower, and Fleet National Bank and
the Other Lending Institutions listed on Schedule 1 thereto and Fleet
National Bank as Agent...................................................
*10.15 Revolving Credit Note for the principal balance of $10,000,000, dated
March 31, 1997...........................................................
10.16 Rental Agreement between Saturn Enterprises Inc. and Temporary Corporate
Housing Inc. dated December 28, 1995.....................................
10.17 Exclusive Lease Agreement between Integrity Furniture, Inc. and Temporary
Corporate Housing Pittsburgh, Inc. dated September 12, 1995..............
*21 Subsidiaries of the Registrant...........................................
*23.1 Consent of Arthur Andersen, LLP..........................................
*23.2 Consent of Arthur Andersen, LLP..........................................
23.3 Consent of Nutter, McClennen & Fish, LLP (contained in Exhibit 5)........
*24 Power of Attorney (contained in the signature page to this Registration
Statement)...............................................................
*27 Financial Data Schedule..................................................
</TABLE>
- ---------------
* Filed herewith.
II-3
<PAGE> 116
(b) FINANCIAL STATEMENT SCHEDULES
The following Financial Statement Schedule is filed herewith as part of
this Registration Statement:
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A under the
Securities Act and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this Registration Statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, the
Commonwealth of Massachusetts, on the 7th day of May 1997.
BRIDGESTREET ACCOMMODATIONS, INC.
By: /s/ WILLIAM N. HULETT, III
------------------------------------
William N. Hulett, III
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below on this Registration Statement hereby constitutes and appoints
William N. Hulett, III, Mark D. Gagne, Constantine Alexander and James E.
Dawson, and each of them, with full power to act without the other, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities (until revoked in writing) to sign any and all amendments
(including post-effective amendments and amendments thereto) to this
Registration Statement on Form S-1 of the registrant, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he or she might or could do in person thereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- --------------
<C> <S> <C>
/s/ WILLIAM N. HULETT, III President, Chief Executive May 7, 1997
- --------------------------------------------- Officer and Director
William N. Hulett, III
/s/ MARK D. GAGNE Chief Financial Officer and May 7, 1997
- --------------------------------------------- Principal Accounting Officer
Mark D. Gagne
/s/ PAUL M. VERROCHI Chairman of the Board May 7, 1997
- ---------------------------------------------
Paul M. Verrochi
/s/ ROCCO A. DI LILLO Vice President, Chief Operating May 7, 1997
- --------------------------------------------- Officer and Director
Rocco A. Di Lillo
/s/ LYNDA D. CLUTCHEY Director May 7, 1997
- ---------------------------------------------
Lynda D. Clutchey
/s/ CONNIE F. O'BRIANT Director May 7, 1997
- ---------------------------------------------
Connie F. O'Briant
/s/ MELANIE R. SABELHAUS Director May 7, 1997
- ---------------------------------------------
Melanie R. Sabelhaus
</TABLE>
II-5
<PAGE> 118
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of BridgeStreet Accommodations, Inc.
We have audited, in accordance with generally accepted auditing standards,
the combined financial statements of Temporary Corporate Housing Columbus, Inc.
included in BridgeStreet Accommodations, Inc.'s Form S-1 and have issued our
report thereon dated February 28, 1997. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. Temporary Corporate
Housing Columbus, Inc.'s Schedule of Valuation and Qualifying Accounts, included
in Schedule II on page S-2, is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic combined financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic combined financial statements and, in our opinion, fairly
states in all material respects the combined financial data required to be set
forth therein in relation to the basic combined financial statements taken as a
whole.
Arthur Andersen LLP
Boston, Massachusetts
February 28, 1997
S-1
<PAGE> 119
SCHEDULE II
TEMPORARY CORPORATE HOUSING COLUMBUS, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
PROVISION
BALANCE AT CHARGED ACCOUNTS BALANCE
BEGINNING TO ACCOUNTS WRITTEN AT END
OF YEAR EXPENSE RECOVERED OFF OF YEAR
---------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Allowance for Doubtful Accounts....... $ -- $ 45,000 $ -- $ -- $45,000
Year Ended December 31, 1995
Allowance for Doubtful Accounts....... $ -- $ -- $ -- $ -- $ --
Year Ended December 31, 1994
Allowance for Doubtful Accounts....... $ -- $ -- $ -- $ -- $ --
</TABLE>
S-2
<PAGE> 120
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------ ------------------------------------------------------------------------- ----------
<C> <S> <C>
1 Form of Underwriting Agreement...........................................
*3.1 Certificate of Incorporation of the Company..............................
3.2 By-laws of the Company...................................................
4.1 Specimen Stock Certificate...............................................
5 Opinion of Nutter, McClennen & Fish, LLP.................................
*10.1 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., EIP Acquisition Corp., Exclusive Interim
Properties, Ltd. and Melanie R. Sabelhaus................................
*10.2 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., THEI Acquisition Corp., Temporary
Housing Experts, Inc., Connie F. O'Briant and Thomas W. O'Briant.........
*10.3 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., TCHI Acquisition Corp., Temporary
Corporate Housing Columbus, Inc., Temporary Corporate Housing Cleveland,
Inc., Temporary Corporate Housing Cincinnati, Inc., Temporary Corporate
Housing Pittsburgh, Inc., SLD Partnership, Lynda Clutchey, David Clutchey
III, Beth Holzer and David Holzer........................................
*10.4 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., CL Acquisition Corp., Corporate
Lodgings, Inc., Corporate Lodgings of Kentucky, Inc., Corporate Lodgings
of Minnesota, Inc., Corporate Lodgings of Pennsylvania, Inc., Corporate
Lodgings of Wisconsin, Inc. and Rocco A. Di Lillo........................
*10.5 Agreement and Plan of Merger dated as of March 31, 1997 by and among
BridgeStreet International Inc., HAI Acquisition Corp., Home Again, Inc.,
Home Again Amenities, Inc., Home Again Corporate Housing, Inc. and Sandra
A. Brown.................................................................
10.6 1997 Equity Incentive Plan...............................................
10.7 Stock Plan for Non-Employee Directors....................................
*10.8 Employment Agreement dated December 30, 1996, between CL Acquisition
Corp. and Rocco A. Di Lillo..............................................
*10.9 Employment Agreement dated December 30, 1996, between EIP Acquisition
Corp. and Melanie R. Sabelhaus...........................................
*10.10 Employment Agreement dated December 30, 1996 between THEI Acquisition
Corp. and Connie F. O'Briant.............................................
*10.11 Employment Agreement dated December 30, 1996, between TCHI Acquisition
Corp. and Lynda Clutchey
10.12 Employment Agreement dated as of January 2, 1997, between BridgeStreet
International Inc. and Mark D. Gagne.....................................
10.13 Employment Agreement dated as of March 31, 1997, between BridgeStreet
International Inc. and William N. Hulett, III............................
*10.14 Revolving Credit Agreement. Dated as of March 31, 1997 between
BridgeStreet International Inc., as Borrower, and Fleet National Bank and
the Other Lending Institutions listed on Schedule 1 thereto and Fleet
National Bank as Agent...................................................
*10.15 Revolving Credit Note for the principal balance of $10,000,000, dated
March 31, 1997...........................................................
10.16 Rental Agreement between Saturn Enterprises Inc. and Temporary Corporate
Housing Inc. dated December 28, 1995.....................................
10.17 Exclusive Lease Agreement between Integrity Furniture, Inc. and Temporary
Corporate Housing Pittsburgh, Inc. dated September 12, 1995..............
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------ ------------------------------------------------------------------------- ----------
<C> <S> <C>
*21 Subsidiaries of the Registrant...........................................
*23.1 Consent of Arthur Andersen, LLP..........................................
*23.2 Consent of Arthur Andersen, LLP..........................................
23.3 Consent of Nutter, McClennen & Fish, LLP (contained in Exhibit 5)........
*24 Power of Attorney (contained in the signature page to this Registration
Statement)...............................................................
*27 Financial Data Schedule..................................................
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BRIDGESTREET INTERNATIONAL INC.
BridgeStreet International Inc. (the "Company"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "GCL") filed its original Certificate of Incorporation
with the Delaware Secretary of State on August 19, 1996. The Certificate of
Incorporation subsequently was amended by a Certificate of Amendment filed with
the Delaware Secretary of State on November 26, 1996. This Amended and Restated
Certificate of Incorporation was duly adopted by a majority of the stockholders
of the Company on March 27, 1997 in accordance with the provisions of Sections
242 and 245 of the GCL.
NOW THEREFORE, the certificate of incorporation of the Company, as
amended and restated herein, shall at the effective time of this Amended and
Restated Certificate of Incorporation read as follows:
FIRST: The name of the Company is BridgeStreet Accommodations, Inc.
SECOND: The address of the registered office of the Company in the
State of Delaware is Company Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Company is to engage in any lawful act or
activity for which a Company may be organized under the General Company Law of
the State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: The aggregate number of shares of stock which the Company shall
have authority to issue is forty million (40,000,000) shares, consisting of
thirty-five million (35,000,000) shares of common stock, $.01 par value per
share (the "Common Stock"), and five million (5,000,000) shares of preferred
stock, $.01 par value per share (the "Preferred Stock"). Except as otherwise
provided by law, the shares of stock of the Company, regardless of class, may be
issued by the Company from time to time in such amounts, for such consideration
and for such corporate purposes as the Board of Directors may from time to time
determine. A description of the different classes and series of the
Corporation's capital stock and a statement
<PAGE> 2
of the designations and the relative rights, preferences and limitations of the
shares of each class and series of capital stock are as follows:
(a) Common Stock
(i) Voting Rights. Except as otherwise provided by the GCL or
in this Article FOURTH (or in any certificate of designation
establishing a series of Preferred Stock), the holders of Common Stock
shall exclusively possess all voting power. Each holder of record of
issued and outstanding Common Stock shall be entitled to one (1) vote
on all matters for each share so held.
(ii) Dividends. Subject to the rights and preferences, if any,
of the holders of Preferred Stock, each issued and outstanding share of
Common Stock shall entitle the record holder thereof to receive an
equal portion of cash dividends and distributions out of funds legally
available therefor, when, as and if declared by the Board of Directors,
in such amounts and at such times as the Board of Directors shall
determine.
(iii) Liquidation. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, after there
shall have been paid to or set aside for the holders of any class of
capital stock having preference over the Common Stock in such
circumstances the full preferential amounts to which they are
respectively entitled, the holders of the Common Stock, and of any
class or series of capital stock entitled to participate in whole or in
part therewith as to the distribution of assets, shall be entitled,
after payment or provision for payment of all debts and liabilities of
the Company, to receive the remaining assets of the Company available
for distribution, in cash or in kind, in proportion to their holdings.
(b) Preferred Stock
The Board of Directors of the Company is authorized by resolution or
resolutions, from time to time adopted, to provide for the issuance of Preferred
Stock in one or more series and to fix and state the voting powers,
designations, preferences and relative participating, optional or other special
rights of the shares of each series and the qualifications, limitations and
restrictions thereof, including, but not limited to, determination of one or
more of the following:
(i) the distinctive designations of each such series and the
number of shares which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of Directors
in creating such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by the Board of
Directors;
-2-
<PAGE> 3
(ii) the annual rate or amount of dividends payable on shares
of such series, whether such dividends shall be cumulative or
non-cumulative, the conditions upon which and the dates when such
dividends shall be payable, the date from which dividends on cumulative
series shall accrue and be cumulative on all shares of such series
issued prior to the payment date for the first dividend of such series,
the relative rights of priority, if any, of payment of dividends on
shares of that class or series, and the participating or other special
rights, if any, with respect to such dividends;
(iii) whether such series will have any voting rights in
addition to those prescribed by law and, if so, the terms and
conditions of the exercise of such voting rights;
(iv) whether the shares of such series shall be redeemable or
callable and, if so, the price or prices at which, and the terms and
conditions on which, such shares may be redeemed or called, which price
may vary under different conditions and at different redemption or call
dates;
(v) the amount or amounts payable upon the shares of such
series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Company, and the relative rights of
priority, if any, of payment of shares of such series;
(vi) whether the shares of such series shall be entitled to
the benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the amount
of such fund and the manner of its application, including the price or
prices at which such shares may be redeemed or purchased through the
application of such fund;
(vii) whether the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes or of
any other series of the same or any other class or classes of stock of
the Company, and if so convertible or exchangeable, the conversion
price or prices, or the rate or rates of exchange, and the adjustments
thereof, if any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or exchange;
(viii) whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
Preferred Stock and whether such shares may be reissued as shares of
the same or any other series of stock;
(ix) the conditions and restrictions, if any, on the payment
of dividends or on the making of other distributions on, or the
purchase, redemption or other acquisition by
-3-
<PAGE> 4
the Company, or any subsidiary thereof, of, the Common Stock or any
other class (or other series of the same class) ranking junior to the
shares of such series as to dividends or upon liquidation, dissolution
or winding up; and
(x) the conditions and restrictions, if any, on the creation
of indebtedness of the Company, or any subsidiary thereof, or on the
issue of any additional stock ranking on parity with or prior to the
shares of such series as to dividends or upon liquidation, dissolution
or winding up.
All shares within each series of Preferred Stock shall be alike in every
particular, except with respect to the dates from which dividends, if any, shall
commence to accrue.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Company, and for further
definition, limitation and regulation of the powers of the Company and of its
directors and stockholders:
(i) The business and affairs of the Company shall be managed
by or under the direction of the Board of Directors. No director need
be a stockholder.
(ii) The Board of Directors shall have the power to make,
alter, amend, change, add to or repeal the By-Laws of the Company,
subject to the right of the stockholders to make, alter, amend, change,
add to or repeal the By-Laws, provided that any such action by the
stockholders shall require the affirmative vote of the holders of at
least seventy-five percent (75%) of the then combined voting power of
all outstanding shares of stock of the Company entitled to vote
generally in the election of directors, voting together as a single
class.
(iii) Except as otherwise fixed pursuant to the provisions of
Article FOURTH hereof relating to the rights of the holders of any
class or series of stock having a preference over the Common Stock with
respect to the election of additional directors under specified
circumstances, the number of directors of the Company shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of the
Company. Election of directors need not be by written ballot unless the
By-Laws so provide.
(iv) Except as otherwise fixed pursuant to the provisions of
Article FOURTH hereof relating to the rights of the holders of any
class or series of stock having a preference over the Common Stock with
respect to the election of directors under specified circumstances,
newly created directorships resulting from any increase in the number
of directors and any vacancies on the Board of Directors resulting from
-4-
<PAGE> 5
death, resignation, disqualification, removal or other cause shall be
filled solely by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board
of Directors, or by a sole remaining director. Any director elected in
accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease
in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
(v) No director shall be personally liable to the Company
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from
liability or limitation thereof is not permitted under the GCL as the
same exists or may hereafter be amended. Any repeal or modification of
this Article FIFTH by the stockholders of the Company shall not
adversely affect any right or protection of a director of the Company
existing at the time of such repeal or modification with respect to
acts or omissions occurring prior to such repeal or modification.
(vi) The Company shall indemnify any officer or director
who, as a result of his or her acting as an officer or director of the
Company, was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, and upon request
shall pay any expense incurred by any officer or director in connection
with any such action, suit or proceeding in advance of the final
disposition of such matter, all to the fullest extent permitted by
Delaware law.
(vii) In addition to the powers and authority hereinbefore or
by statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Company, subject, nevertheless, to
the provisions of the GCL, this Certificate of Incorporation and any
By-Law adopted by the stockholders; provided, however, that no By-Laws
hereafter adopted by the stockholders shall invalidate any prior act of
the directors which would have been valid if such By-Laws had not been
adopted.
(viii) Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the
Company may be kept (subject to any provisions contained in the GCL)
outside the State of Delaware at such places as may be designated from
time to time by the Board of Directors or in the By-Laws of the
Company.
-5-
<PAGE> 6
(ix) If at any time the Company shall have a class of stock
registered pursuant to the provisions of the Securities Exchange Act of
1934, for so long as such class is so registered, any action by the
stockholders of such class must be taken at an annual or special
meeting of stockholders and may not be taken by written consent.
SIXTH: Whenever a compromise or arrangement is proposed between the
Company and its creditors or any class of them and/or between the Company and
its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of the
Company or of any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for the Company under the provisions of Section
291 of the GCL or on the application of trustees in dissolution or of any
receiver or receivers appointed for the Company under the provisions of Section
279 of the GCL, order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Company, as the case may be,
to be summoned in such manner as said court directs. If a majority in number
representing three-fourths in value of the creditors or class or creditors,
and/or stockholders or class of stockholders of the Company, as the case may be,
agree to any compromise or arrangement and to any reorganization of the Company
as a consequence of such compromise or arrangement, then said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of the
Company, as the case may be, and also on the Company.
SEVENTH: The Company reserves the right to amend, alter, change or
repeal any of the provisions contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 75% of the then combined voting
power of all outstanding shares of the Company entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend or adopt any provision inconsistent with, or repeal, paragraphs
(i), (ii), (iii), (iv), (v), (vii) or (ix) of Article FIFTH or this Article
SEVENTH or any provision hereof or thereof.
-6-
<PAGE> 7
The undersigned Vice President and Chief Operating Officer of the
Company, Rocco A. Di Lillo, whose mailing address is BridgeStreet
Accommodations, Inc., 1896 Georgetown Road, Hudson, Ohio 44236, hereby executes
this Amended And Restated Certificate of Incorporation on this 9th day of April,
1997.
BRIDGESTREET INTERNATIONAL INC.
By: /s/ Rocco A. Di Lillo
----------------------------------
Rocco A. Di Lillo
Vice President and Chief
Operating Officer
-7-
<PAGE> 1
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") dated as of
December 30, 1996 is among BridgeStreet International Inc., a Delaware
corporation ("BridgeStreet"), EIP Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of BridgeStreet ("Acquisition"), Exclusive Interim
Properties, Ltd., a Maryland corporation (the "Company"), and Melanie R.
Sabelhaus, the sole stockholder of the Company (the "Stockholder"), and provides
for the merger of the Company with and into Acquisition (the "Merger"). The
Boards of Directors of BridgeStreet, Acquisition and the Company have determined
that the Merger is in the best interests of their respective stockholders and
the Merger has been approved by the stockholders of the Company and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Articles of Merger" has the meaning given to it in Section 2.2.
1.2 "Balance Sheet Date" means March 31, 1996.
1.3 "Certificate of Merger" has the meaning given to it in Section 2.2
1.4 "Closing" means the closing of this Agreement as provided in Section
2.2.
1.5 "Code" means the Internal Revenue Code of 1986, as amended to date.
1.6 "Commission" means the Securities and Exchange Commission.
1.7 "DGCL" means the Delaware General Corporation Law.
1.8 "Disclosure Schedule" means the Disclosure Schedule attached hereto
as Schedule 1.
1.9 "Effective Time" means 12:01 a.m. EST on January 2, 1997, as such
date shall be specified in the Articles of Merger filed with the State
Department of Assessments and Taxation of the State of Maryland in accordance
with Section 3-107 of the MGCL (as defined herein) and the Certificate of Merger
filed with the Secretary of State of the State of Delaware in accordance with
Section 252 of the DGCL, unless Acquisition and the Company agree that another
time shall be the Effective Time, in which case such time shall be specified in
the Articles of Merger and the Certificate of Merger.
<PAGE> 2
1.10 "Employment Contract" means the employment contract attached hereto
as Exhibit 1.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.12 "Financial Statements" means the financial statements of the
Company attached hereto as Exhibit 2 consisting of the balance sheets as of
December 31, 1994 and 1995 and March 31, 1996 and the statements of operations,
changes in stockholders' equity and cash flows for each of the fiscal years
ended on December 31, 1994 and 1995 and for the three-month period ended on
March 31, 1996.
1.13 "MGCL" means the Maryland General Corporation Law.
1.14 "Merger Stock" means the shares of BridgeStreet Common Stock
exchanged for Shares pursuant to Section 2.7(c).
1.15 "BridgeStreet Common Stock" means the shares of Common Stock, $0.01
par value, of BridgeStreet.
1.16 "Non-Competition and Non-Disclosure Agreement" means the
non-competition and non-disclosure agreement attached hereto as Exhibit 3.
1.17 "Securities Act" means the Securities Act of 1933, as amended.
1.18 "Share" means a share of Common Stock, $.01 par value per share, of
the Company, and "Shares" means all of such shares.
1.19 "Surviving Corporation" means Acquisition.
1.20 References to the "knowledge" of any entity or to things which any
entity does or does not "know" or which are "known" by any entity refer to the
knowledge of any of the entity's officers or directors.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the MGCL and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of BridgeStreet, and the separate corporate
existence of the Company shall cease. Notwithstanding this Section 2.1,
BridgeStreet may elect with the consent of the Company (which consent shall not
be unreasonably withheld) to merge Acquisition into the Company. In such event,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect the foregoing.
-2-
<PAGE> 3
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause articles of merger
(the "Articles of Merger") with respect to the Merger to be filed and recorded
in accordance with Article 3-107 of the MGCL and shall cause a certificate of
merger (the "Certificate of Merger") with respect to the Merger to be filed and
recorded in accordance with Section 252 of the DGCL and (b) shall take all such
further actions as may be required by law to make the Merger effective. The
Merger shall be effective at the Effective Time. Before the filing of the
Articles of Merger and the Certificate of Merger, a closing (the "Closing") will
be held at the offices of Nutter, McClennen & Fish, LLP, One International
Place, Boston, Massachusetts (or such other place as the parties may agree) for
the purpose of confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Sections 3-114 and 3-114.1 of the MGCL and Sections 259, 260 and 261 of the
DGCL.
2.4 TAX CONSEQUENCES. it is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that Article FIRST of the Certificate of
Incorporation of the Surviving Corporation shall be amended as follows:
"FIRST: The name of the corporation shall be Exclusive Interim
Properties, Ltd."
2.6 DIRECTORS AND OFFICERS. On the day following the Effective Time, the
directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 4, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of capital stock of Acquisition that is issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding without change.
(b) All Shares held in the treasury of the Company immediately prior to
the Effective Time shall be cancelled, without the payment of any consideration
therefor.
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(c) All other Shares which are outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holder
thereof into and be exchangeable for such number of shares of BridgeStreet
Common Stock as is set forth on Exhibit 5A hereto, subject to the payment of
cash in lieu of fractional shares in accordance with Section 2.8 hereof, with
the effect that the stockholders and share ownership of BridgeStreet will be as
set forth on Exhibit 5B immediately after the Merger.
2.8 EXCHANGE OF AND PAYMENT FOR SHARES.
(a) As soon as practicable after the Effective Time and after surrender
to BridgeStreet of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraph (c) of this
Section 2.8 and to the provisions of Article 8, BridgeStreet shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of BridgeStreet Common Stock into which any shares previously represented
by the surrendered certificate shall have been converted at the Effective Time
and a check payable to such person representing the payment of cash in lieu of
any fractional share determined in accordance with paragraph (f) of this Section
2.8. Until surrendered as contemplated by the preceding sentence, each
certificate which immediately prior to the Effective Time shall have represented
any Shares shall be deemed at and after the Effective Time to represent only the
right to receive upon such surrender the certificates and payment contemplated
by the preceding sentence.
(b) No dividends or other distributions declared after the Effective
Time with respect to BridgeStreet Common Stock shall be paid to the holder of
any unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.8. After the
surrender of such certificate in accordance with this Section 2.8, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of BridgeStreet Common Stock represented by such
certificate.
(c) If any cash or certificate representing shares of BridgeStreet
Common Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to BridgeStreet any transfer or
other taxes required by reason of the issuance of a certificate representing
shares of BridgeStreet Common Stock in any name other than that of the
registered holder of the certificate surrendered, or otherwise required, or
shall establish to the satisfaction of BridgeStreet that such tax has been paid
or is not payable.
(d) All rights to receive BridgeStreet Common Stock and cash in lieu of
fractional shares shall be deemed, when paid or issued hereunder, to have been
paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
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(e) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of BridgeStreet Common Stock into which
they were converted, or both, as provided herein.
(f) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of BridgeStreet Common
Stock shall be issued upon the surrender for exchange of certificates which
prior to the Effective Time shall have represented any Shares, no dividend or
distribution of BridgeStreet shall relate to any fractional share and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of BridgeStreet. In lieu of any fractional shares, there
shall be paid to each holder of Shares who otherwise would be entitled to
receive a fractional share of BridgeStreet Common Stock an amount of cash equal
to the fair value of such fractional shares as of the Effective Time as
conclusively determined in good faith by the Board of Directors of the Surviving
Corporation.
2.9 ADJUSTMENTS. If, between the date of this Agreement and the
Effective Time, the outstanding shares of BridgeStreet Common Stock shall have
been changed into a different number of shares or a different class by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with a
record date within said period, the number of shares of BridgeStreet Common
Stock into which shares of Company Common Stock are to be converted shall be
correspondingly and appropriately adjusted.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to BridgeStreet and Acquisition
that, except as expressly provided in the Disclosure Schedule by specific
reference to a Section of this Article 3, the following representations and
warranties are true and correct as of the date hereof:
3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full corporate power and authority to conduct its business and
own its properties as now conducted and owned. The Company is duly qualified or
licensed and in good standing as a foreign corporation in those states listed on
the Disclosure Schedule, which are the only jurisdictions in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary. The Company has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors and stockholders of the Company,
and no other corporate
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proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company enforceable against it in accordance with
its terms.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The authorized
capital and number of issued and outstanding shares of capital stock of the
Company are as set forth on the Disclosure Schedule. No Shares are held in the
Company's treasury. The Shares held by the Stockholder comprise all of the
issued and outstanding shares of Common Stock of the Company, are duly
authorized, validly issued, fully paid and non-assessable and are owned of
record and beneficially by the Stockholder. The Company has no other authorized
class of capital stock other than the Common Stock. The Company does not own and
has not owned any shares of capital stock or other securities of, or any other
interest in, nor does it control or has it controlled, directly or indirectly,
any other corporation, association, joint venture, partnership, or other
business organization. The Shares have been issued and sold in full compliance
with all applicable federal and state securities laws. The Stockholder has no
dissenting shareholder or appraisal rights with regard to the Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any of the Shares or the
acquisition of shares of any other class of capital stock of the Company, and
the Company has not otherwise agreed to issue or sell any shares of its capital
stock and has no obligation to register any of the Shares under the Securities
Act. The Company is not obligated directly, indirectly or contingently to
purchase any Shares.
3.4 NAME. The Company has not had any other name and does not conduct or
operate, and has not heretofore conducted or operated, its business under any
name other than its current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation of the transactions contemplated hereby and thereby, and the
compliance with the terms, conditions and provisions hereof by the Company do
not (i) contravene any provisions of the Company's Articles of Incorporation or
By-Laws; (ii) conflict with or result in a breach of or constitute a default (or
an event that might, with the passage of time or the giving of notice or both,
constitute a default) or give rise to any right to terminate, cancel or
accelerate or to any loss of benefit under any of the terms, conditions, or
provisions of any lease, indenture, mortgage, loan, or credit agreement or any
other agreement or instrument to which the Company is a party or by which it or
its assets may be bound or affected; (iii) violate or constitute a breach of any
decision, judgment, or order of any court or arbitration board or of any
governmental department, commission, board, agency, or instrumentality, domestic
or foreign, by which the Company is bound or to which it is subject; or (iv)
violate
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any applicable law, rule, or regulation to which the Company or any of its
property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a waiting period or a period for
disapproval by, any governmental authority is required for the Company to
consummate the transactions contemplated by this Agreement, except for filing
and acceptance of the Articles of Merger pursuant to the MGCL and for filing and
acceptance of the Certificate of Merger pursuant to the DGCL.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present (subject, in the case of
the unaudited statements, to (i) recurring audit adjustments normal in nature
and amount and (ii) disclosure of notes in connection therewith) the financial
position of the Company as of their respective dates, and the results of
operations and cash flows for the periods presented therein, all in conformity
with generally accepted accounting principles applied on a consistent basis,
except as otherwise noted therein.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the most recent balance sheet in the Financial Statements, the
Company (a) did not have as of the Balance Sheet Date any liability or
obligation of any nature, whether accrued, absolute, contingent, or otherwise
and whether due or to become due, including without limitation liabilities that
may become known or arise after the date hereof and which relate to transactions
entered into or any state of facts existing on or before the Balance Sheet Date,
which would be required under generally accepted accounting principles to be
shown in such balance sheet or referenced in the notes thereto, and (b) has not
incurred since the Balance Sheet Date any such liability or obligation except in
the ordinary course of business.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, the Company has not taken or agreed to take any action that would
obligate the Company to have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement, or commitment other than in the ordinary course of
business;
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<PAGE> 8
(b) entered into or agreed to enter into any transaction, agreement, or
commitment, suffered the occurrence of any event or events, or experienced any
change in financial condition, business, results of operations, prospects, or
otherwise, (i) that has interfered or is reasonably likely to interfere with the
normal and usual operations of the Company's business or its business prospects
or (ii) that, singly or in the aggregate, has resulted or is reasonably likely
to result in a material adverse change in the financial condition, assets,
liabilities, earnings, business, or business prospects of the Company;
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation (except for
loans to any employee of the Company in the ordinary course of business which in
the aggregate do not exceed $5,000);
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of the Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to the Company, or any claims held
by the Company;
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer, or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm, or
corporation;
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect of the
capital stock of the Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of the Company;
(g) paid any long-term liability, otherwise than in accordance with its
terms;
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of the Company or otherwise increased the compensation paid or
payable to any of the foregoing;
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets;
(j) contracted with or committed to any third party (i) to sell any
capital stock of the Company, (ii) to sell any material assets of the Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of the Company, or (iv) to enter into any
agreement with respect thereto; or
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<PAGE> 9
(k) incurred any expenses or fees of counsel, accountants or
consultants for personal services rendered to the Stockholder after September
30, 1996 in preparation for or in connection with this Agreement, the
transactions contemplated hereunder or otherwise.
3.10 TITLE TO ASSETS. The Disclosure Schedule describes fully all real
property owned by the Company. The Company has good and clear record and
marketable title to such real property and good and sufficient title to all
other properties owned by it, including, without limitation, all property
reflected in the most recent balance sheet in the Financial Statements, other
than property disposed of in the ordinary course of business subsequent to the
Balance Sheet Date (none of such dispositions being materially adverse), free
and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the most recent
balance sheet in the Financial Statements, or as specified in the notes thereto,
(b) the lien of taxes not yet due or payable or being contested in good faith by
appropriate proceedings and (c) such imperfections of title and encumbrances, if
any, as do not materially detract from the value or interfere with the use of
the properties subject thereto or affected thereby, or otherwise materially
impair business operations.
3.11 INTELLECTUAL PROPERTY. The Company owns, or is licensed or
otherwise has the full and unrestricted right to use, all trademarks, trade
names, service marks, copyrights, technology, know-how, trade secrets and
techniques used in its business (collectively, the "Proprietary Information").
All such trademarks, trade names, service marks and federally registered
copyrights are listed on the Disclosure Schedule. The Company has no obligation
still outstanding to compensate other persons for the use of any Proprietary
Information or for the sale of any service comprising or derived from
Proprietary Information. The Company has granted to no other person any license
or other right to use in any manner any of the Proprietary Information, whether
or not requiring the payment of royalties. To the Company's knowledge (a) no
other person has a right or license granted directly or indirectly by or through
the Company to use any Proprietary Information; (b) none of the Proprietary
Information is being infringed by others, or is subject to any outstanding
order, decree, judgment or stipulation; (c) there are no claims or demands of
any other person, and no proceedings have been instituted, or are pending or
threatened, relating to the Proprietary Information; and (d) no proceeding has
been filed or threatened charging the Company with infringement of any patent,
trademark, copyright, or other proprietary right, nor is there any basis for any
such proceeding.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All transactions heretofore between the Company and each
Stockholder, officer or director of the Company or any Affiliate (as defined
below) of such Stockholder, officer or director have been conducted on an
arm's-length basis on terms no different than would be obtained if the
transaction had been between the Company and an unrelated party. Except for
transactions reflected on the latest balance sheet or accompanying schedules in
the Financial Statements there are no debts or other obligations of the Company
outstanding to or
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from the Stockholder, officer or director or any Affiliate of such Stockholder,
officer or director of the Company. As used herein, "Affiliate" of a
Stockholder, officer or director means any member of the immediate family of
such person or any entity in which such person or any such family member is an
officer or owner of more than five percent of the outstanding equity securities.
(b) The Disclosure Schedule contains a true and complete description of
each transaction conducted or completed, in whole or in part, during the current
fiscal year, or is currently proposed, between the Company and any officer,
director or Stockholder or any Affiliate of any such person. With respect to
each of the last three complete fiscal years, the Disclosure Schedule sets forth
all information that would be required to be provided under Items 402 and 404 of
Regulation S-K of the Commission under the Securities Act if a registration
statement on Form S-1 were filed by the Company with the Commission on the date
hereof.
3.13 MATERIAL CONTRACTS. The Disclosure Schedule lists all material
leases, contracts, instruments, agreements or commitments (whether written or
oral) relating to the conduct of the business of the Company (the "Material
Contracts"). The Company has delivered to BridgeStreet true and correct copies
of each Material Contract and a written description, accurate in all material
respects, of each oral arrangement so listed. Without limiting the generality of
the foregoing, the aforesaid list includes all contracts, agreements and
instruments of the following types to which the Company is a party:
(a) labor union contracts, together with a list of all labor unions
representing or attempting to represent employees of the Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of the Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of the
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Company whose current salary rate is $25,000 or more and any bonuses paid or
payable to each such person for the 1995 fiscal year and to date in the 1996
fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of personal property, contracts for the
purchase or sale of real or personal property, and agreements for financing;
(f) licenses and other contractual rights to any Proprietary
Information, including, without limitation, any copyright, trademark, service
mark or trade name, whether domestic or foreign, owned in whole or in part or
used by the Company;
(g) other license agreements (as licensor or licensee);
(h) property, casualty, crime, directors and officers, and other forms
of insurance;
(i) bank accounts and safety deposit boxes identifying all authorized
signatories, together with a list of all effective powers of attorney granted by
the Company to anyone;
(j) agreements, contracts or other arrangements to which the Company is
a guarantor, surety or endorser;
(k) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of the Company's
requirements for a particular product from a single supplier or to a single
customer;
(l) contracts, agreements, commitments, arrangements or understandings
limiting the freedom of the Company from competing in any line of business or
with any person or entity;
(m) leases of real property with a term of more than one year
(regardless of whether the Company is the lessor or lessee); and
(n) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (m) above involving payment by
or to the Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Contracts are in full force and effect. Except to the extent
that a material adverse effect on the Company's financial condition, assets,
liabilities, earnings, business or prospects would not result if the following
were not true: (A) The Company and each other party to each of the Material
Contracts have performed all the obligations required to be performed by them to
date, have received no notice of default and are not in default (with due notice
or lapse of time or both) under any of the Material Contracts; (B) the Company
has no present expectation or intention of not fully performing all its
obligations under any of
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the Material Contracts, and the Company has no knowledge of any breach or
anticipated breach by any other party to any of the Material Contracts; and (C)
there exists no actual or, to the knowledge of the Company, threatened
termination, cancellation or limitation of the business relationship of the
Company with any party to any Material Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the knowledge of the Company, threatened
against the Company or its officers or directors (in their capacities as such)
in any court, at law or in equity, or before any arbitration board or any
governmental department, commission, board, bureau, agency, or instrumentality;
nor has the Company been, nor is it, subject to any orders, awards, fines,
judgments, decrees, or injunctions the effect of which in the aggregate would
have a material adverse effect on the business or financial position or
prospects of the Company. The Company does not know or have grounds to know of
any basis for any such action, suits, or other form of proceeding or disputes or
of any governmental investigation relating to the Company or its business.
3.15 TAXES. The Company has filed all tax returns, reports and
information filings that are required to be filed, including, without
limitation, federal (U.S.), state, and municipal income or franchise tax
returns, and has paid all taxes shown as due on such returns, together with any
interest and penalties accrued with respect thereto. The Company is not required
to pay any other taxes except as shown in such tax returns, reports and
information filings. All such returns, reports, and information filings required
to be filed, including any amendments to date, have been prepared in good faith
and without misrepresentation. The Company has either paid or, in accordance
with generally accepted accounting principles applied consistently with prior
periods, adequately provided for, by reserves or other proper accounting
treatment shown in the records and books of account, its liability for all taxes
of every kind, including without limitation its liability for federal, state,
and municipal income or franchise tax for the current tax year and for all prior
years. The Company has no knowledge of any proposed or threatened assessment or
reassessment of federal, state, or municipal income or franchise taxes. The
United States federal income tax returns of the Company have been examined by
the Internal Revenue Service for all taxable years through and including the
fiscal year ended as set forth in the Disclosure Schedule. In addition, at the
date hereof all withholding tax or source deductions have been deducted and
remitted as due to the appropriate governmental authority as required by law or
the Company has adequately provided for such deductions by reserves or other
proper accounting treatment in its books and records of account.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1996 there has not
been (a) any material adverse change in the business, affairs or prospects of
the Company nor, to the Company's knowledge, are any such changes threatened,
anticipated or contemplated; (b) any actual or, to the Company's knowledge,
threatened, anticipated or contemplated damage, destruction, loss, conversion,
termination, cancellation, default or taking by eminent domain or other action
by governmental authority which has materially affected or may hereafter
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<PAGE> 13
materially affect the properties, assets, business affairs or prospects of the
Company; (c) any material and adverse pending or, to the Company's knowledge,
threatened, anticipated or contemplated dispute of any kind with any material
customer, supplier, source of financing, employee, landlord, subtenant or
licensee of the Company, or any pending or, to the Company's knowledge,
threatened, anticipated or contemplated occurrence or situation of any kind,
nature or description which is reasonably likely to result in any reduction in
the amount, or any change in the terms or conditions, of business with any
material customer, supplier, or source of financing; or (d) any pending, or, to
the Company's knowledge, threatened, anticipated or contemplated occurrence or
situation of any kind, nature or description materially and adversely affecting
the properties, assets, business, affairs or prospects of the Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1993 the Company:
(a) has not made any contributions, payments or gifts of its property to or for
the private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has not established or maintained any unrecorded fund
or asset for any purpose, or has made any false or artificial entries on its
books or records for any reason; (c) has not made any payments to any person
with the intention or understanding that any part of such payment was to be used
for any other purpose other than that described in the documents supporting the
payment; or (d) has not made any contribution, or has reimbursed any political
gift or contribution made by any other person, to candidates for public office,
whether Federal, state or local, where such contribution or reimbursement would
be in violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by the
Company or the trusts created thereunder has engaged in a prohibited transaction
which could subject any such employee benefit plan or trust to a material tax or
penalty on prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by the
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts created thereunder has been terminated so as to result
in a material liability of the Company under ERISA nor has any such employee
benefit plan of the Company incurred any material liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, other than for
required insurance premiums which have been paid or are not yet due and payable;
the Company has not withdrawn from or caused a partial withdrawal to occur with
respect to any Multi-employer Plan resulting in any assessed and unpaid
withdrawal liability; the Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required as of the end of the most recent fiscal year under each such plan; the
Company has not incurred any accumulated funding deficiency with respect to any
such plan, whether or not waived; nor has there been
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<PAGE> 14
any reportable event, or other event or condition, which presents a material
risk of termination of any such employee benefit plan by the Pension Benefit
Guaranty Corporation.
(c) The present value of all vested accrued benefits under the employee
pension benefit plans which are subject to Title IV or ERISA, maintained by the
Company, did not, as of the most recent valuation date for each such plan,
exceed the then current value of the assets of such employee benefit plans
allocable to such benefits.
(d) To the Company's knowledge, (i) each employee pension benefit plan
subject to Title IV of ERISA, maintained by the Company, has been administered
in accordance with its terms in all material respects and is in compliance in
all material respects with all applicable requirements of ERISA and other
applicable laws, regulations and rules, and (ii) the Company has filed in a
timely manner with respect to all such plans those actuarial reports, annual
reports and all other filings required by all such applicable requirements of
ERISA and other applicable laws, regulations and rules, and the Company has
delivered to BridgeStreet a copy of any such report filed since December 31,
1993.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "accumulated funding deficiency", "reportable
event", and "accrued benefits" shall have the respective meanings assigned to
them in ERISA, and the term "prohibited transactions" shall have the meaning
assigned to it in Code Section 4975 and ERISA.
(f) The Company has no liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of the Company.
3.19 LABOR MATTERS. A true and complete list of all of the Company's
officers and employees (the "Employees") and their respective salaries, wages,
other compensation, dates of employment, date and amount of last salary
increase, and positions has been provided to BridgeStreet by the Company. There
are no material disputes, employee grievances, or disciplinary actions pending
or, to the knowledge of the Company, threatened by or between the Company and
any of the Employees. With respect to the Employees, the Company has complied in
all respects with all provisions of all laws relating to the employment of labor
and has no liability for any arrears of wages or taxes or penalties for failure
to comply with any such law or for any severance or termination payments of any
type. No election or proceedings relating to the labor relations of the Company
is pending or, to the Company's knowledge, threatened. The Company has not had
any material union activity or had any material labor trouble of any kind,
nature or description at any time heretofore. All personnel policies and manuals
of the Company are listed on the Disclosure Statement and true and complete
copies thereof have been provided to BridgeStreet. No Employee or consultant of
the Company shall have the right to receive from the Surviving Corporation or
BridgeStreet a severance payment or other payment in the nature thereof in the
event his or
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her employment is terminated by the Surviving Corporation following the Merger,
whether such right arises as a matter of contract, past policy or understanding,
by operation of law, or otherwise.
3.20 PERMITS; COMPLIANCE WITH LAW. The Company possesses all franchises,
permits, licenses, certificates, approvals, and other authorizations ("Permits")
necessary to own or lease and operate its properties and to conduct its business
as now conducted, except for incidental Permits that would be readily obtainable
without undue burden in the event of any lapse, termination, cancellation, or
forfeiture or that if not obtained would not materially and adversely affect the
Company's business. All such material Permits are in full force and effect, and,
to the knowledge of the Company, no suspension or cancellation of any of them is
threatened, and no material Permits will be adversely affected by the
consummation of the Merger. The Company has not failed nor is it failing to
comply with any applicable law, rule, regulation, or order, where such failure
would have a material adverse effect on the Company's business, and there are no
proceedings pending or, to the Company's knowledge, threatened, nor has the
Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. The Company is in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. The term "Hazardous Material" means (a) any "hazardous
substance" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, (b) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act, as amended, (c) any petroleum or
petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or
contaminant or hazardous, dangerous, or toxic chemical, material, waste or
substance regulated under or within the meaning of any other Environmental Law.
There is no alleged liability, or to the Company's knowledge, potential
liability (including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) of the
Company arising out of, based on or resulting from (i) the presence or release
into the environment of any Hazardous Material at any location, whether or not
owned by the Company or (ii) any violation or alleged violation of any
Environmental Law, which alleged or potential liability, singly or in the
aggregate, would have a material and adverse effect on the condition, financial
or otherwise, or the earnings, business affairs or business prospects of the
Company.
3.22 LEASES. The Disclosure Schedule sets forth, as of October 31,
1996, the number of units of real property leased by the Company (each a "Leased
Premises"). Except to the extent that a material adverse effect on the Company's
financial condition, assets, liabilities, earnings, business or prospects would
not occur if the following, in the aggregate, were not true: (a) Each lease
covering a Leased Premises is in full force and effect (there
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existing no default under any such lease which, with the lapse of time or notice
or otherwise, would entitle the lessor or lessee to terminate the same); (b) the
Company has the right to use the Leased Premises in accordance with the terms of
the respective leases free and clear of all claims or other interests or rights
of third parties; (c) there is no violation of any covenant, restriction or
other agreement or understanding, oral or written, affecting or relating to
title or use of any Leased Premises; and (d) there is no pending or threatened
condemnation or similar proceedings or assessments affecting any of the Leased
Premises, nor to the Company's knowledge is any such condemnation or assessment
threatened or contemplated by any governmental authority.
3.23 CORPORATE RECORDS. The corporate record books of the Company are in
good order, complete, accurate, up to date, with all necessary signatures, and
set forth all meetings and actions taken by the shareholders and directors, and
all votes of the shareholders or Directors set forth in certificates furnished
to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by the Company have been properly maintained and are in good operating
order and repair, free from known defects in construction or design, sound and
properly functioning, usable and not obsolete, and in compliance with all
zoning, building and fire codes and all other laws, rules, regulations and
requirements of governmental authorities and the fire insurance rating
association having jurisdiction, except to the extent that the failure to do so,
in the aggregate, would not have a material adverse effect on the financial
condition, assets, liabilities, earnings, business or prospects of the Company.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the most recent balance sheet in the Financial Statements,
less the reserve for doubtful accounts in the amount shown on such balance
sheet, are valid and enforceable claims and subject to no set off or
counterclaim and will be collectible in the normal course of business. The
Company has no accounts or loans receivable from any of its directors, officers
or employees (other than loans to any employee in the ordinary course of
business which in the aggregate do not exceed $5,000).
3.26 CHARTER DOCUMENTS. The Company has heretofore delivered to
BridgeStreet copies of its Articles of Incorporation, as amended to date,
certified by the appropriate governmental authority, and copies of its by-laws,
as amended to date, and a list of the officers and directors of the Company in
office, all as certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of fact set forth
in this Agreement (including without limitation all information in the Financial
Statements and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) or otherwise provided by or on behalf of the Company to BridgeStreet is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) or any information provided
to BridgeStreet by or on behalf of the Company omit to state a material
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<PAGE> 17
fact necessary in order to make the statements made or information disclosed, in
the light of the circumstances under which they were made or disclosed, not
misleading.
3.28 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
3.29 TAX-FREE REORGANIZATION. The Company has no reason to believe that
the Merger will not qualify as a reorganization within the meaning of Section
368 of the Code.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to BridgeStreet and Acquisition
as follows:
4.1 TITLE TO THE SHARES. The Stockholder owns the Shares free and clear
of any claims, liens, charges, encumbrances, security interests and rights of
others whatsoever, and the Shares are not bound by or subject to any proxy,
agreement, voting trust or other restriction regarding the voting thereof.
4.2 AUTHORITY. The Stockholder has full power, authority and capacity to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by the Stockholder and constitutes
a legal, valid and binding obligation of the Stockholder enforceable against her
in accordance with its terms.
5. REPRESENTATIONS AND WARRANTIES OF BRIDGESTREET AND ACQUISITION
BridgeStreet and Acquisition represent and warrant to the Company and
the Stockholder as follows:
5.1 ORGANIZATION AND AUTHORITY. Each of BridgeStreet and Acquisition is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified to do business as a foreign corporation in each
jurisdiction where the failure to be so qualified would, in the aggregate, have
a material adverse effect on the business or financial condition of
BridgeStreet. Each of BridgeStreet and Acquisition has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the respective Boards of Directors of BridgeStreet and
Acquisition and the sole stockholder of Acquisition, and no
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other corporate proceedings on the part of BridgeStreet or Acquisition are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by each of BridgeStreet and Acquisition and constitutes a
valid and binding agreement of each, enforceable against each in accordance with
its terms.
5.2 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by BridgeStreet and Acquisition nor the consummation
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective charter documents or By-Laws of
BridgeStreet or Acquisition; (ii) require any consent, approval, authorization,
or permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) filing the Articles of Merger pursuant to the MGCL and the
Certificate of Merger pursuant to the DGCL and (B) filings required under the
Securities Act and the securities or blue sky laws of the various states; (iii)
result in a default (or an event that might, with the passage of time or the
giving of notice or both, constitute a default) or give rise to any right to
terminate, cancel, or accelerate or to any loss of benefit under any of the
terms, conditions, or provisions of any note, license, lease, agreement, or
other instrument or obligation to which BridgeStreet or Acquisition is a party
or by which BridgeStreet or Acquisition or any of their respective assets may be
bound, other than as previously disclosed in writing to the Company; or (iv)
violate any order, writ, injunction, decree, statute, rule, or regulation
applicable to BridgeStreet or Acquisition or any of their respective assets.
5.3 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the knowledge of BridgeStreet or Acquisition,
threatened, against, involving or affecting BridgeStreet or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau, agency, or instrumentality, that either
singly or in the aggregate might prevent BridgeStreet and Acquisition from
consummating the transactions contemplated hereby or that would have a material
adverse effect on the business, operations, or financial condition of
BridgeStreet and its subsidiaries taken as a whole.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by BridgeStreet
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable.
5.5 CHARTER DOCUMENTS. BridgeStreet has heretofore delivered to the
Company copies of its Articles of Incorporation, as amended to date, certified
by the appropriate governmental authority, and copies of its by-laws, as amended
to date, and a list of the officers and directors of BridgeStreet in office, all
as certified by its Secretary.
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6. COVENANTS
6.1 BOARD OF DIRECTORS. Until such time as BridgeStreet completes an
initial public offering of its common stock (the "IPO"), the Stockholder and the
former stockholders of Temporary Housing Experts, Inc., Corporate Lodgings, Inc.
and Temporary Corporation Housing Columbus, Inc. shall each have the right to
designate one director of BridgeStreet, and the Stockholder and such
stockholders agree to vote their Merger Stock (and any additional voting
securities of BridgeStreet issued in respect thereof) and take such other action
as shall be necessary (i) to cause each such designee to be elected to
BridgeStreet's Board of Directors, and (ii) fix the number of directors on the
Board of Directors at six. The Stockholder's initial designee pursuant to this
Section 6.1 shall be Melanie R. Sabelhaus.
6.2 CONFIDENTIAL INFORMATION. BridgeStreet will, and will cause its
employees and agents and Acquisition to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, BridgeStreet will promptly return to the Company or
destroy all documents (including all copies thereof) received by BridgeStreet
containing such Confidential Information. For purposes hereof, "Confidential
Information" shall mean all information of any kind concerning the Company,
except information (i) ascertainable or obtained from public or published
information, (ii) received from a third party not known to BridgeStreet to be
under an obligation to the Company to keep such information confidential, (iii)
that is or becomes known to the public (other than through a breach of this
Agreement), (iv) that was in BridgeStreet's possession before disclosure thereof
to it in connection with this Agreement or (v) that was independently developed
by BridgeStreet.
6.3 BEST EFFORTS. Subject to the terms and conditions hereof each party
to this Agreement agrees to fully cooperate with the others and the others'
counsel, accountants and representatives in connection with any steps required
to be taken as part of its obligations under this Agreement. Each party to this
Agreement agrees that it will use its reasonable efforts to cause all conditions
to its obligations under this Agreement to be satisfied as promptly as possible,
and will not undertake a course of action inconsistent with this Agreement or
which would make any of its representations, warranties, agreements or covenants
in this Agreement untrue in any material respect or any conditions precedent to
its obligations under this Agreement unable to be satisfied at or prior to the
Closing.
6.4 PUBLIC ANNOUNCEMENTS. All public announcements, notices or other
communications regarding this Agreement and the transactions contemplated hereby
to third parties other than the parties hereto and their respective advisors and
the Stockholder of the Company shall require the prior approval of BridgeStreet.
6.5 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any
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event that would be likely to cause any representation or warranty of the
Notifying Party contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time and (ii) any material failure
of the Notifying Party to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by it hereunder. The Company shall
promptly notify BridgeStreet in writing if at any time prior to a closing in
connection with the IPO it shall obtain knowledge of any facts that might make
it necessary or appropriate to amend or supplement the Prospectus in order to
make the statements contained therein not misleading or comply with applicable
law. The delivery of any notice pursuant to this Section 6.5 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
6.6 COVENANTS OF THE STOCKHOLDER. The Stockholder hereby covenants and
agrees with BridgeStreet and Acquisition that she shall:
(a) use her best efforts to take whatever action may be reasonably
necessary or desirable to (i) effect, perfect or confirm of record or otherwise
in the Surviving Corporation full right, title and interest in and to the
business, properties and assets now conducted or owned by the Company, free and
clear of all restrictions, liens, encumbrances, rights, title and interests in
others, or to collect, realize upon, gain possession of, or otherwise acquire,
full right, title and interest in and to such business, properties and assets;
(ii) carry out the intent and purposes of the transactions contemplated hereby;
and (iii) cause or permit BridgeStreet to undertake and complete the IPO.
(b) provide to BridgeStreet the notifications required of the Company
under Section 6.5;
(c) (i) execute and deliver at the Closing the Employment Contract, the
Securities Representation Letter (as defined below) and the Non-Competition and
Non-Disclosure Agreement, and (ii) use her best efforts to obtain and deliver at
the Closing the Non- Competition and Non-Disclosure Agreements executed by the
persons set forth in Exhibit 7.1(c); and
(d) execute and deliver such other instruments and take such other
actions as may be reasonably required in order to carry out the intent of this
Agreement.
6.7 TAX FREE REORGANIZATION. From and after the Effective Time, neither
BridgeStreet nor the Surviving Corporation nor the Stockholder shall take or
suffer to be taken any action which will cause the Merger not to constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code.
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7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 The obligations of BridgeStreet and Acquisition to consummate the
Merger are subject to the satisfaction at the Closing, or waiver by BridgeStreet
in writing, in whole or in part, of each of the following conditions:
(a) BridgeStreet and Acquisition shall have received the opinion of
counsel to the Company, dated the date of the Closing and in form and substance
satisfactory to the BridgeStreet and its counsel, substantially to the effect
set forth on Exhibit 6.
(b) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for BridgeStreet acting reasonably.
(c) The Stockholder shall have executed and delivered to BridgeStreet
the Employment Contract, the Non-Competition and Non-Disclosure Agreement, and
the persons listed on Exhibit 7 shall have executed and delivered to
BridgeStreet the Non-Competition and Non-Disclosure Agreement.
(d) The Stockholder shall have executed and delivered to BridgeStreet a
letter agreement substantially in the form attached hereto as Exhibit 8 (the
"Securities Representation Letter").
(e) The Company shall have delivered to BridgeStreet and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Company's shareholders.
(f) The Company shall have delivered to BridgeStreet such other
certificates, documents and opinions as BridgeStreet and its counsel shall
reasonably require.
7.2 The obligation of the Company to consummate this Agreement is
subject to the satisfaction at the Closing, or waiver by the Company in writing,
in whole or in part, of each of the following conditions:
(a) The Company shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Company and its counsel,
of Nutter, McClennen & Fish, LLP, counsel to BridgeStreet, substantially to the
effect set forth on Exhibit 9.
(b) All proceedings taken by BridgeStreet and Acquisition and all
instruments executed and delivered by BridgeStreet and Acquisition prior to the
date of the Closing in
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connection with the transactions herein contemplated shall be satisfactory in
form and substance to counsel for the Company, acting reasonably.
(c) BridgeStreet and Acquisition shall have delivered to the Company a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
(d) BridgeStreet shall have executed and delivered each Employment
Contract.
(e) On the day following the Effective Time, the officers and directors
of BridgeStreet shall be as set forth on Exhibit 4.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK; LEGEND
The shares of Merger Stock will not have been registered under the
Securities Act or the blue sky laws of any state by reason of their contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and of such state laws. Such shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act and such state laws or an exemption therefrom.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities,
losses, judgments, settlements, and expenses, including,
without limitation, all reasonable fees and disbursements of
counsel incident to the investigation or defense of any claim
or proceeding or threatened claim or proceeding.
(ii) "Indemnified Party" means each of BridgeStreet, the
Surviving Corporation, and their respective subsidiaries.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Stockholder shall, from and after the Effective Time, indemnify,
defend, and hold each Indemnified Party harmless from, against and in respect of
any and all Damages incurred by any Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by the Company or by the Stockholder in this
Agreement (collectively referred to herein as "Claims").
(c) The Company's representations, warranties, covenants and agreements
set forth in Article 3 shall, for purposes of this Article 9, be deemed to have
survived the Effective Time notwithstanding any contrary terms of this
Agreement, and whenever such
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representations, warranties, covenants and agreements are referred to in this
Article 9, the text of the same as set forth in Article 3 shall be deemed to be
set forth in their entirety herein, and the same are hereby incorporated herein
by such references. Each such representation, warranty, covenant and agreement
shall be deemed to have been relied upon by the party or parties to which made,
notwithstanding any investigation or inspection made by or on behalf of such
party or parties and shall not be affected in any respect by any such
investigation or inspection.
9.2 LIMITATIONS OF INDEMNITY OBLIGATIONS. The indemnity obligations of
the Stockholders under this Agreement shall be subject to the following
limitations:
(a) The indemnity obligations of the Stockholder shall expire on the
third anniversary of the Effective Time (the "Cut-off Date"); provided, however,
that such obligations with respect to (i) the representations and warranties
contained in Sections 3.1, 3.2, 3.18 and 3.21 and Article 4 of this Agreement
shall continue forever without limitation, and (ii) the representations and
warranties regarding taxes, which are contained in Section 3.15, shall remain in
effect until all claims for taxes due by or on account of the Company for any
period up to and including the Effective Time have been settled and any statute
of limitations period with respect to such taxes has expired; and provided
further that the indemnity obligations of the Stockholder for Claims timely
asserted by an Indemnified Party in the manner provided in this Agreement shall
continue until such Claims are finally resolved and discharged.
(b) The aggregate indemnity obligations of the Stockholder under this
Agreement and of Robert G. Sabelhaus and the Stockholder under the Membership
Interest Purchase Agreement of even date herewith among BridgeStreet,
Acquisition, Melanie R. Sabelhaus and Exclusive Interim Properties, Ltd. (the
"Purchase Agreement") shall not in any event exceed the sum of the amounts set
forth on Exhibit 10 opposite each such person's name or, in the event of an IPO,
the greater of (i) such amount and (ii) the amount equal to the total number of
BridgeStreet Shares received by the Stockholder and Mr. Sabelhaus under this
Agreement and the Purchase Agreement (after adjusting for any stock split or
combination) multiplied by the price at which the BridgeStreet Common Stock is
sold to the public in the IPO.
(c) The Indemnified Parties shall be entitled to indemnification only
if the aggregate and collective Damages for which they otherwise would be
entitled to indemnification under this Agreement and the Purchase Agreement
exceed $50,000, in which event they shall be entitled to indemnification of the
full amount of such Damages. Notwithstanding the immediately preceding sentence,
however, the Indemnified Parties shall be entitled to indemnification for
Damages incurred or suffered by them as a result of the breach of Section 3.15
without regard to such $50,000 minimum.
9.3 NOTICE OF CLAIM. An Indemnified Party shall promptly notify the
Stockholder in writing of any Claim asserted by a third person that might give
rise to any indemnity
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obligation of the Stockholder hereunder (a "Third Party Claim"), specifying in
reasonable detail the nature thereof and indicating the amount (estimated if
necessary) of the Damages that have been or may be sustained by the Indemnified
Party. Failure of any Indemnified Party to promptly give such notice shall not
relieve the Stockholder of her obligation to indemnify under this Article 9, but
as a result of any such failure, the Stockholder shall not be liable to the
Indemnified Parties for the amount of actual damages caused by such failure.
Together with or following such notice, the Indemnified Parties shall deliver to
the Stockholder copies of all notices and documents received by the Indemnified
Parties relating to the Third Party Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Stockholder shall
have the right (without prejudice to the right of any Indemnified Party to
participate at their own expense through counsel of their own choosing) to
defend against any Third Party Claim at her expense and through counsel of her
own choosing and to control such defense if she gives written notice of her
intention to do so within 15 business days of her receipt of notice of Third
Party Claim. The Indemnified Parties shall cooperate fully in the defense of
such Third Party Claim and shall make available to the Stockholder or her
counsel all pertinent information under their control relating thereto. The
Indemnified Parties shall have the right to elect to settle any Third Party
Claim; provided, however, the Stockholder shall not have any indemnification
obligation with respect to any monetary payment to any third party required by
such settlement unless she shall have consented thereto. The Stockholder shall
have the right to elect to settle any Third Party Claim subject to the consent
of BridgeStreet; provided, however, that if BridgeStreet fails to give such
consent within 15 business days of being requested to do so, BridgeStreet shall,
at its expense, assume the defense of such Third Party Claim and regardless of
the outcome of such matter, the Stockholder's liability hereunder shall be
limited to the amount of any such proposed settlement. The foregoing provisions
notwithstanding, in no event may the Stockholder (a) adjust, compromise or
settle any Third Party Claim (i) unless such adjustment, compromise or
settlement unconditionally releases BridgeStreet or the Surviving Corporation
from all liability or (ii) if such adjustment, compromise or settlement affects
the absolute and sole right of BridgeStreet or the Surviving Corporation to own
or use any of the Company's assets or (b) defend any Third Party Claim which, if
adversely determined, would materially impair the financial condition, business
or prospects of BridgeStreet or the Surviving Corporation.
10. MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Article 3 and 4 and except for the representations and warranties contained in
Article 5, the representations and warranties made in this Agreement shall not
survive beyond the Effective Time.
10.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Disclosure Schedule and the Exhibits hereto, the entire agreement among the
parties with respect to the subject matter hereto and supersedes all other prior
agreements and
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understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof (except for the confidentiality and secrecy
agreements that previously have been executed by BridgeStreet, the Company and
American Business Partners) and (b) shall not be assigned by operation of law or
otherwise, provided that BridgeStreet or Acquisition may assign its respective
rights and obligations to any direct or indirect subsidiary of BridgeStreet, but
no such assignment shall relieve BridgeStreet of its obligations hereunder.
10.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to BridgeStreet or Acquisition, to it at:
BridgeStreet International Inc.
67 Batterymarch Street, Suite 500
Boston, Massachusetts 02110
Attention: Donald W. Glazer, Secretary
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
If to the Company or the Stockholder, to it or her at:
Exclusive Interim Properties, Ltd.
1406 Shoemaker Road
Baltimore, MD 21209
Attention: Melanie R. Sabelhaus, President
with a copy to:
Neil Ruther, Esq.
5100 Falls Road
Suite 135 Village SQI
Baltimore, MD 21210-1999
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<PAGE> 26
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
10.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
10.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
10.8 EXPENSES. All costs and expenses incurred subsequent to September
30, 1996 in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses; provided that the Company's
costs and expenses, including all brokerage, investment banking, legal, and
accounting fees, shall be borne by the Stockholder.
10.9 PARTIES IN INTEREST. Except as provided in Section 6.1 this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
BRIDGESTREET INTERNATIONAL INC.
By: /s/ Donald W. Glazer
--------------------------------
Title: Vice-President
EXCLUSIVE INTERIM PROPERTIES, LTD.
By: /s/ Melanie R. Sabelhaus
--------------------------------
Title: President
EIP ACQUISITION CORP.
By: /s/ Donald W. Glazer
--------------------------------
Title: President
/s/ Melanie R. Sabelhaus
------------------------------------
Melanie R. Sabelhaus
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<PAGE> 1
EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this Agreement") dated as of
December 30, 1996 is among BridgeStreet International Inc., a Delaware
corporation ("BridgeStreet"), THEI Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of BridgeStreet ("Acquisition"), Temporary Housing
Experts, Inc., a Tennessee corporation (the "Company"), and Connie F. O'Briant
and Thomas W. O'Briant, Jr., the sole stockholders of the Company (the
"Stockholders"), and provides for the merger of the Company with and into
Acquisition (the "Merger"). The Boards of Directors of BridgeStreet, Acquisition
and the Company have determined that the Merger is in the best interests of
their respective stockholders and the Merger has been approved by the
stockholders of the Company and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Articles of Merger" has the meaning given to it in Section 2.2.
1.2 "Balance Sheet Date" means June 30, 1996.
1.3 "Certificate of Merger" has the meaning given to it in Section 2.2
1.4 "Closing" means the closing of this Agreement as provided in
Section 2.2.
1.5 "Code" means the Internal Revenue Code of 1986, as amended to date.
1.6 "Commission" means the Securities and Exchange Commission.
1.7 "DGCL" means the Delaware General Corporation Law.
1.8 "Disclosure Schedule" means the Disclosure Schedule attached hereto
as Schedule 1.
1.9 "Effective Time" means 12:01 a.m. EST on January 2, 1997, as such
date shall be specified in the Articles of Merger filed with the Secretary of
State of the State of Tennessee in accordance with Section 48-21-107 of the TBCA
(as defined herein) and the Certificate of Merger filed with the Secretary of
State of the State of Delaware in accordance with Section 252 of the DGCL,
unless Acquisition and the Company agree that another time shall be the
Effective Time, in which case such time shall be specified in the Certificates
of Merger.
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1.10 "Employment Contract" means the employment contract attached
hereto as Exhibit 1.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.12 "Financial Statements" means the financial statements of the
Company attached hereto as Exhibit 2 consisting of the balance sheets as of
December 31, 1994 and 1995 and June 30, 1996 and the statements of operations,
changes in stockholders' equity and cash flows for each of the fiscal years
ended on December 31, 1994 and 1995 and for the six-month period ended on June
30, 1996.
1.13 "Merger Stock" means the shares of BridgeStreet Common Stock
exchanged for Shares pursuant to Section 2.7(c).
1.14 "BridgeStreet Common Stock" means the shares of Common Stock,
$0.01 par value, of BridgeStreet.
1.15 "Non-Competition and Non-Disclosure Agreement" means the
non-competition and non-disclosure agreement attached hereto as Exhibit 3.
1.16 "Securities Act" means the Securities Act of 1933, as amended.
1.17 "Share" means a share of Common Stock, $.01 par value per share,
of the Company, and "Shares" means all of such shares.
1.18 "Surviving Corporation" means Acquisition.
1.19 "TBCA" means the Tennessee Business Corporation Act.
1.20 References to the "knowledge" of any entity or to things which any
entity does or does not "know" or which are "known" by any entity refer to the
knowledge of any of the entity's officers or directors.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the TBCA and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of BridgeStreet, and the separate corporate
existence of the Company shall cease. Notwithstanding this Section 2.1,
BridgeStreet may elect with the consent of the Company (which consent shall not
be unreasonably withheld) to merge Acquisition into the Company. In such event,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect the foregoing.
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2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause articles of merger
(the "Articles of Merger") with respect to the Merger to be filed and recorded
in accordance with Section 48- 21-107 of the TBCA and shall cause a certificate
of merger (the "Certificate of Merger") with respect to the Merger to be filed
and recorded in accordance with Section 252 of the DGCL and (b) shall take all
such further actions as may be required by law to make the Merger effective. The
Merger shall be effective at the Effective Time. Before the filing of the
Articles of Merger and the Certificate of Merger, a closing (the "Closing") will
be held at the offices of Nutter, McClennen & Fish, LLP, One International
Place, Boston, Massachusetts (or such other place as the parties may agree) for
the purpose of confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Section 48-21-108 of the TBCA and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. it is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that Article FIRST of the Certificate of
Incorporation of the Surviving Corporation shall be amended as follows:
"FIRST: The name of the corporation shall be Temporary Housing Experts,
Inc."
2.6 DIRECTORS AND OFFICERS. On the day following the Effective Time,
the directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 4, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of capital stock of Acquisition that is issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding without change.
(b) All Shares held in the treasury of the Company immediately prior
to the Effective Time shall be cancelled, without the payment of any
consideration therefor.
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<PAGE> 4
(c) All other Shares which are outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holders
thereof into and be exchangeable for such numbers of shares of BridgeStreet
Common Stock as are set forth on Exhibit 5A hereto, subject to the payment of
cash in lieu of fractional shares in accordance with Section 2.8 hereof, with
the effect that the stockholders and share ownership of BridgeStreet will be as
set forth on Exhibit 5B immediately after the Merger.
2.8 EXCHANGE OF AND PAYMENT FOR SHARES.
(a) As soon as practicable after the Effective Time and after surrender
to BridgeStreet of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraph (c) of this
Section 2.8 and to the provisions of Article 8, BridgeStreet shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of BridgeStreet Common Stock into which any shares previously represented
by the surrendered certificate shall have been converted at the Effective Time
and a check payable to such person representing the payment of cash in lieu of
any fractional share determined in accordance with paragraph (f) of this Section
2.8. Until surrendered as contemplated by the preceding sentence, each
certificate which immediately prior to the Effective Time shall have represented
any Shares shall be deemed at and after the Effective Time to represent only the
right to receive upon such surrender the certificates and payment contemplated
by the preceding sentence.
(b) No dividends or other distributions declared after the Effective
Time with respect to BridgeStreet Common Stock shall be paid to the holder of
any unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.8. After the
surrender of such certificate in accordance with this Section 2.8, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of BridgeStreet Common Stock represented by such
certificate.
(c) If any cash or certificate representing shares of BridgeStreet
Common Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to BridgeStreet any transfer or
other taxes required by reason of the issuance of a certificate representing
shares of BridgeStreet Common Stock in any name other than that of the
registered holder of the certificate surrendered, or otherwise required, or
shall establish to the satisfaction of BridgeStreet that such tax has been paid
or is not payable.
(d) All rights to receive BridgeStreet Common Stock and cash in lieu of
fractional shares shall be deemed, when paid or issued hereunder, to have been
paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
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<PAGE> 5
(e) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of BridgeStreet Common Stock into which
they were converted, or both, as provided herein.
(f) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of BridgeStreet Common
Stock shall be issued upon the surrender for exchange of certificates which
prior to the Effective Time shall have represented any Shares, no dividend or
distribution of BridgeStreet shall relate to any fractional share and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of BridgeStreet. In lieu of any fractional shares, there
shall be paid to each holder of Shares who otherwise would be entitled to
receive a fractional share of BridgeStreet Common Stock an amount of cash equal
to the fair value of such fractional shares as of the Effective Time as
conclusively determined in good faith by the Board of Directors of the Surviving
Corporation.
2.9 ADJUSTMENTS. If, between the date of this Agreement and the
Effective Time, the outstanding shares of BridgeStreet Common Stock shall have
been changed into a different number of shares or a different class by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with a
record date within said period, the number of shares of BridgeStreet Common
Stock into which shares of Company Common Stock are to be converted shall be
correspondingly and appropriately adjusted.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to BridgeStreet and Acquisition
that, except as expressly provided in the Disclosure Schedule by specific
reference to a Section of this Article 3, the following representations and
warranties are true and correct as of the date hereof:
3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Tennessee and has full corporate power and authority to conduct its business and
own its properties as now conducted and owned. The Company is duly qualified or
licensed and in good standing as a foreign corporation in those states listed on
the Disclosure Schedule, which are the only jurisdictions in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary. The Company has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors and stockholders of the Company,
and no other corporate
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<PAGE> 6
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company enforceable against it in accordance with
its terms.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The authorized
capital and number of issued and outstanding shares of capital stock of the
Company are as set forth on the Disclosure Schedule. No Shares are held in the
Company's treasury. The Shares held by the Stockholders comprise all of the
issued and outstanding shares of Common Stock of the Company, are duly
authorized, validly issued, fully paid and non-assessable and are owned of
record and beneficially by the Stockholders. The Company has no other authorized
class of capital stock other than the Common Stock. The Company does not own and
has not owned any shares of capital stock or other securities of, or any other
interest in, nor does it control or has it controlled, directly or indirectly,
any other corporation, association, joint venture, partnership, or other
business organization. The Shares have been issued and sold in full compliance
with all applicable federal and state securities laws. No holder of Shares has
any dissenting shareholder or appraisal rights with regard to the Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any of the Shares or the
acquisition of shares of any other class of capital stock of the Company, and
the Company has not otherwise agreed to issue or sell any shares of its capital
stock and has no obligation to register any of the Shares under the Securities
Act. The Company is not obligated directly, indirectly or contingently to
purchase any Shares.
3.4 NAME. The Company has not had any other name and does not conduct or
operate, and has not heretofore conducted or operated, its business under any
name other than its current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation of the transactions contemplated hereby and thereby, and the
compliance with the terms, conditions and provisions hereof by the Company do
not (i) contravene any provisions of the Company's Charter or By-Laws; (ii)
conflict with or result in a breach of or constitute a default (or an event that
might, with the passage of time or the giving of notice or both, constitute a
default) or give rise to any right to terminate, cancel or accelerate or to any
loss of benefit under any of the terms, conditions, or provisions of any lease,
indenture, mortgage, loan, or credit agreement or any other agreement or
instrument to which the Company is a party or by which it or its assets may be
bound or affected; (iii) violate or constitute a breach of any decision,
judgment, or order of any court or arbitration board or of any governmental
department, commission, board, agency, or instrumentality, domestic or foreign,
by which the Company is bound or to which it is subject; or (iv) violate
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<PAGE> 7
any applicable law, rule, or regulation to which the Company or any of its
property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a waiting period or a period for
disapproval by, any governmental authority is required for the Company to
consummate the transactions contemplated by this Agreement, except for filing
and acceptance of the Articles of Merger pursuant to the TBCA and for filing and
acceptance of the Certificate of Merger pursuant to the DGCL.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present (subject, in the case of
the unaudited statements, to (i) recurring audit adjustments normal in nature
and amount and (ii) disclosure of notes in connection therewith) the financial
position of the Company as of their respective dates, and the results of
operations and cash flows for the periods presented therein, all in conformity
with generally accepted accounting principles applied on a consistent basis,
except as otherwise noted therein.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the most recent balance sheet in the Financial Statements, the
Company (a) did not have as of the Balance Sheet Date any liability or
obligation of any nature, whether accrued, absolute, contingent, or otherwise
and whether due or to become due, including without limitation liabilities that
may become known or arise after the date hereof and which relate to transactions
entered into or any state of facts existing on or before the Balance Sheet Date,
which would be required under generally accepted accounting principles to be
shown in such balance sheet or referenced in the notes thereto, and (b) has not
incurred since the Balance Sheet Date any such liability or obligation except in
the ordinary course of business.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, the Company has not taken or agreed to take any action that would
obligate the Company to have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement, or commitment other than in the ordinary course of
business;
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<PAGE> 8
(b) entered into or agreed to enter into any transaction, agreement, or
commitment, suffered the occurrence of any event or events, or experienced any
change in financial condition, business, results of operations, prospects, or
otherwise, (i) that has interfered or is reasonably likely to interfere with the
normal and usual operations of the Company's business or its business prospects
or (ii) that, singly or in the aggregate, has resulted or is reasonably likely
to result in a material adverse change in the financial condition, assets,
liabilities, earnings, business, or business prospects of the Company;
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation (except for
loans to any employee of the Company in the ordinary course of business which in
the aggregate do not exceed $5,000);
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of the Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to the Company, or any claims held
by the Company;
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer, or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm, or
corporation;
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect of the
capital stock of the Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of the Company;
(g) paid any long-term liability, otherwise than in accordance with its
terms;
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of the Company or otherwise increased the compensation paid or
payable to any of the foregoing;
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets;
(j) contracted with or committed to any third party (i) to sell any
capital stock of the Company, (ii) to sell any material assets of the Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of the Company, or (iv) to enter into any
agreement with respect thereto; or
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<PAGE> 9
(k) incurred any expenses or fees of counsel, accountants or
consultants for personal services rendered to the Stockholders after September
30, 1996 in preparation for or in connection with this Agreement, the
transactions contemplated hereunder or otherwise.
3.10 TITLE TO ASSETS. The Disclosure Schedule describes fully all real
property owned by the Company. The Company has good and clear record and
marketable title to such real property and good and sufficient title to all
other properties owned by it, including, without limitation, all property
reflected in the most recent balance sheet in the Financial Statements, other
than property disposed of in the ordinary course of business subsequent to the
Balance Sheet Date (none of such dispositions being materially adverse), free
and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the most recent
balance sheet in the Financial Statements, or as specified in the notes thereto,
(b) the lien of taxes not yet due or payable or being contested in good faith by
appropriate proceedings and (c) such imperfections of title and encumbrances, if
any, as do not materially detract from the value or interfere with the use of
the properties subject thereto or affected thereby, or otherwise materially
impair business operations.
3.11 INTELLECTUAL PROPERTY. The Company owns, or is licensed or
otherwise has the full and unrestricted right to use, all trademarks, trade
names, service marks, copyrights, technology, know-how, trade secrets and
techniques used in its business (collectively, the "Proprietary Information").
All such trademarks, trade names, service marks and federally registered
copyrights are listed on the Disclosure Schedule. The Company has no obligation
still outstanding to compensate other persons for the use of any Proprietary
Information or for the sale of any service comprising or derived from
Proprietary Information. The Company has granted to no other person any license
or other right to use in any manner any of the Proprietary Information, whether
or not requiring the payment of royalties. To the Company's knowledge (a) no
other person has a right or license granted directly or indirectly by or through
the Company to use any Proprietary Information; (b) none of the Proprietary
Information is being infringed by others, or is subject to any outstanding
order, decree, judgment or stipulation; (c) there are no claims or demands of
any other person, and no proceedings have been instituted, or are pending or
threatened, relating to the Proprietary Information; and (d) no proceeding has
been filed or threatened charging the Company with infringement of any patent,
trademark, copyright, or other proprietary right, nor is there any basis for any
such proceeding.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All transactions heretofore between the Company and each
Stockholder, officer or director of the Company or any Affiliate (as defined
below) of such Stockholder, officer or director have been conducted on an
arm's-length basis on terms no different than would be obtained if the
transaction had been between the Company and an unrelated party. Except for
transactions reflected on the latest balance sheet or accompanying schedules in
the Financial Statements there are no debts or other obligations of the Company
outstanding to or
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from each Stockholder, officer or director or Affiliate of such Stockholder,
officer or director of the Company. As used herein, "Affiliate" of a
Stockholder, officer or director means any member of the immediate family of
such person or any entity in which such person or any such family member is an
officer or owner of more than five percent of the outstanding equity securities.
(b) The Disclosure Schedule contains a true and complete description of
each transaction conducted or completed, in whole or in part, during the current
fiscal year, or is currently proposed, between the Company and any officer,
director or Stockholder or any Affiliate of any such person. With respect to
each of the last three complete fiscal years, the Disclosure Schedule sets forth
all information that would be required to be provided under Items 402 and 404 of
Regulation S-K of the Commission under the Securities Act if a registration
statement on Form S-1 were filed by the Company with the Commission on the date
hereof.
3.13 MATERIAL CONTRACTS. The Disclosure Schedule lists all material
leases, contracts, instruments, agreements or commitments (whether written or
oral) relating to the conduct of the business of the Company (the "Material
Contracts"). The Company has delivered to BridgeStreet true and correct copies
of each Material Contract and a written description, accurate in all material
respects, of each oral arrangement so listed. Without limiting the generality of
the foregoing, the aforesaid list includes all contracts, agreements and
instruments of the following types to which the Company is a party:
(a) labor union contracts, together with a list of all labor unions
representing or attempting to represent employees of the Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of the Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of the
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Company whose current salary rate is $25,000 or more and any bonuses paid or
payable to each such person for the 1995 fiscal year and to date in the 1996
fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of personal property, contracts for the
purchase or sale of real or personal property, and agreements for financing;
(f) licenses and other contractual rights to any Proprietary
Information, including without limitation, any copyright, trademark, service
mark, trade name, whether domestic or foreign, owned in whole or in part or used
by the Company;
(g) other license agreements (as licensor or licensee);
(h) property, casualty, crime, directors and officers, and other forms
of insurance;
(i) bank accounts and safety deposit boxes identifying all authorized
signatories, together with a list of all effective powers of attorney granted by
the Company to anyone;
(j) agreements, contracts or other arrangements to which the Company is
a guarantor, surety or endorser;
(k) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of the Company's
requirements for a particular product from a single supplier or to a single
customer;
(l) contracts, agreements, commitments, arrangements or understandings
limiting the freedom of the Company from competing in any line of business or
with any person or entity;
(m) leases of real property with a term of more than one year
(regardless of whether the Company is the lessor or lessee); and
(n) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (m) above involving payment by
or to the Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Contracts are in full force and effect. Except to the extent
that a material adverse effect on the Company's financial condition, assets,
liabilities, earnings, business or prospects would not result if the following
was not true: (A) the Company and each other party to each of the Material
Contracts have performed all the obligations required to be performed by them to
date, have received no notice of default and are not in default (with due notice
or lapse of time or both) under any of the Material Contracts; (B) the Company
has no present expectation or intention of not fully performing all its
obligations under any of
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the Material Contracts, and the Company has no knowledge of any breach or
anticipated breach by any other party to any of the Material Contracts; and (C)
there exists no actual or, to the knowledge of the Company, threatened
termination, cancellation or limitation of the business relationship of the
Company with any party to any Material Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the knowledge of the Company, threatened
against the Company or its officers or directors (in their capacities as such)
in any court, at law or in equity, or before any arbitration board or any
governmental department, commission, board, bureau, agency, or instrumentality;
nor has the Company been, nor is it, subject to any orders, awards, fines,
judgments, decrees, or injunctions the effect of which in the aggregate would
have a material adverse effect on the business or financial position or
prospects of the Company. The Company does not know or have grounds to know of
any basis for any such action, suits, or other form of proceeding or disputes or
of any governmental investigation relating to the Company or its business.
3.15 TAXES. The Company has filed all tax returns, reports and
information filings that are required to be filed, including, without
limitation, federal (U.S.), state, and municipal income or franchise tax
returns, and has paid all taxes shown as due on such returns, together with any
interest and penalties accrued with respect thereto. The Company is not required
to pay any other taxes except as shown in such tax returns, reports and
information filings. All such returns, reports, and information filings required
to be filed, including any amendments to date, have been prepared in good faith
and without misrepresentation. The Company has either paid or, in accordance
with generally accepted accounting principles applied consistently with prior
periods, adequately provided for, by reserves or other proper accounting
treatment shown in the records and books of account, its liability for all taxes
of every kind, including without limitation its liability for federal, state,
and municipal income or franchise tax for the current tax year and for all prior
years. The Company has no knowledge of any proposed or threatened assessment or
reassessment of federal, state, or municipal income or franchise taxes. The
United States federal income tax returns of the Company have been examined by
the Internal Revenue Service for all taxable years through and including the
fiscal year ended as set forth in the Disclosure Schedule. In addition, at the
date hereof all withholding tax or source deductions have been deducted and
remitted as due to the appropriate governmental authority as required by law or
the Company has adequately provided for such deductions by reserves or other
proper accounting treatment in its books and records of account.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1996 there has not
been (a) any material adverse change in the business, affairs or prospects of
the Company nor, to the Company's knowledge, are any such changes threatened,
anticipated or contemplated; (b) any actual or, to the Company's knowledge,
threatened, anticipated or contemplated damage, destruction, loss, conversion,
termination, cancellation, default or taking by eminent domain or other action
by governmental authority which has materially affected or may hereafter
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materially affect the properties, assets, business affairs or prospects of the
Company; (c) any material and adverse pending or, to the Company's knowledge,
threatened, anticipated or contemplated dispute of any kind with any material
customer, supplier, source of financing, employee, landlord, subtenant or
licensee of the Company, or any pending or, to the Company's knowledge,
threatened, anticipated or contemplated occurrence or situation of any kind,
nature or description which is reasonably likely to result in any reduction in
the amount, or any change in the terms or conditions, of business with any
material customer, supplier, or source of financing; or (d) any pending, or, to
the Company's knowledge, threatened, anticipated or contemplated occurrence or
situation of any kind, nature or description materially and adversely affecting
the properties, assets, business, affairs or prospects of the Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1993 the Company:
(a) has not made any contributions, payments or gifts of its property to or for
the private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has not established or maintained any unrecorded fund
or asset for any purpose, or has made any false or artificial entries on its
books or records for any reason; (c) has not made any payments to any person
with the intention or understanding that any part of such payment was to be used
for any other purpose other than that described in the documents supporting the
payment; or (d) has not made any contribution, or has reimbursed any political
gift or contribution made by any other person, to candidates for public office,
whether Federal, state or local, where such contribution or reimbursement would
be in violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by the
Company or the trusts created thereunder has engaged in a prohibited transaction
which could subject any such employee benefit plan or trust to a material tax or
penalty on prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by the
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts created thereunder has been terminated so as to result
in a material liability of the Company under ERISA nor has any such employee
benefit plan of the Company incurred any material liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, other than for
required insurance premiums which have been paid or are not yet due and payable;
the Company has not withdrawn from or caused a partial withdrawal to occur with
respect to any Multi-employer Plan resulting in any assessed and unpaid
withdrawal liability; the Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required as of the end of the most recent fiscal year under each such plan; the
Company has not incurred any accumulated funding deficiency with respect to any
such plan, whether or not waived; nor has there been
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any reportable event, or other event or condition, which presents a material
risk of termination of any such employee benefit plan by the Pension Benefit
Guaranty Corporation.
(c) The present value of all vested accrued benefits under the employee
pension benefit plans which are subject to Title IV or ERISA, maintained by the
Company, did not, as of the most recent valuation date for each such plan,
exceed the then current value of the assets of such employee benefit plans
allocable to such benefits.
(d) To the Company's knowledge, (i) each employee pension benefit plan
subject to Title IV of ERISA, maintained by the Company, has been administered
in accordance with its terms in all material respects and is in compliance in
all material respects with all applicable requirements of ERISA and other
applicable laws, regulations and rules, and (ii) the Company has filed in a
timely manner with respect to all such plans those actuarial reports, annual
reports and all other filings required by all such applicable requirements of
ERISA and other applicable laws, regulations and rules, and the Company has
delivered to BridgeStreet a copy of any such report filed since December 31,
1993.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "accumulated funding deficiency", "reportable
event", and "accrued benefits" shall have the respective meanings assigned to
them in ERISA, and the term "prohibited transactions" shall have the meaning
assigned to it in Code Section 4975 and ERISA.
(f) The Company has no liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of the Company.
3.19 LABOR MATTERS. A true and complete list of all of the Company's
officers and employees (the "Employees") and their respective salaries, wages,
other compensation, dates of employment, date and amount of last salary
increase, and positions has been provided to BridgeStreet by the Company. There
are no material disputes, employee grievances, or disciplinary actions pending
or, to the knowledge of the Company, threatened by or between the Company and
any of the Employees. With respect to the Employees, the Company has complied in
all respects with all provisions of all laws relating to the employment of labor
and has no liability for any arrears of wages or taxes or penalties for failure
to comply with any such law or for any severance or termination payments of any
type. No election or proceedings relating to the labor relations of the Company
is pending or, to the Company's knowledge, threatened. The Company has not had
any material union activity or had any material labor trouble of any kind,
nature or description at any time heretofore. All personnel policies and manuals
of the Company are listed on the Disclosure Statement and true and complete
copies thereof have been provided to BridgeStreet. No Employee or consultant of
the Company shall have the right to receive from the Surviving Corporation or
BridgeStreet a severance payment or other payment in the nature thereof in the
event his or
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her employment is terminated by the Surviving Corporation following the Merger,
whether such right arises as a matter of contract, past policy or understanding,
by operation of law, or otherwise.
3.20 PERMITS; COMPLIANCE WITH LAW. The Company possesses all franchises,
permits, licenses, certificates, approvals, and other authorizations ("Permits")
necessary to own or lease and operate its properties and to conduct its business
as now conducted, except for incidental Permits that would be readily obtainable
without undue burden in the event of any lapse, termination, cancellation, or
forfeiture or that if not obtained would not materially and adversely affect the
Company's business. All such material Permits are in full force and effect, and,
to the knowledge of the Company, no suspension or cancellation of any of them is
threatened, and no material Permits will be adversely affected by the
consummation of the Merger. The Company has not failed nor is it failing to
comply with any applicable law, rule, regulation, or order, where such failure
would have a material adverse effect on the Company's business, and there are no
proceedings pending or, to the Company's knowledge, threatened, nor has the
Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. The Company is in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. The term "Hazardous Material" means (a) any "hazardous
substance" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, (b) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act, as amended, (c) any petroleum or
petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or
contaminant or hazardous, dangerous, or toxic chemical, material, waste or
substance regulated under or within the meaning of any other Environmental Law.
There is no alleged liability, or to the Company's knowledge, potential
liability (including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) of the
Company arising out of, based on or resulting from (i) the presence or release
into the environment of any Hazardous Material at any location, whether or not
owned by the Company or (ii) any violation or alleged violation of any
Environmental Law, which alleged or potential liability, singly or in the
aggregate, would have a material and adverse effect on the condition, financial
or otherwise, or the earnings, business affairs or business prospects of the
Company.
3.22 LEASES. The Disclosure Schedule sets forth as of October 31, 1996
the number of units of real property leased by the Company (each a "Leased
Premises"). Except to the extent that a material adverse effect on the Company's
financial condition, assets, liabilities, earnings, business or prospects would
not occur if the following, in the aggregate, was not true: (a) each lease
covering a Leased Premises is in full force and effect (there
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<PAGE> 16
existing no default under any such lease which, with the lapse of time or notice
or otherwise, would entitle the lessor or lessee to terminate the same); (b) the
Company has the right to use the Leased Premises in accordance with the terms of
the respective leases free and clear of all claims or other interests or rights
of third parties; (c) there is no violation of any covenant, restriction or
other agreement or understanding, oral or written, affecting or relating to
title or use of any Leased Premises; and (d) there is no pending or threatened
condemnation or similar proceedings or assessments affecting any of the Leased
Premises, nor to the Company's knowledge is any such condemnation or assessment
threatened or contemplated by any governmental authority.
3.23 CORPORATE RECORDS. The corporate record books of the Company are in
good order, complete, accurate, up to date, with all necessary signatures, and
set forth all meetings and actions taken by the shareholders and directors, and
all votes of the shareholders or Directors set forth in certificates furnished
to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by the Company have been properly maintained and are in good operating
order and repair, free from known defects in construction or design, sound and
properly functioning, usable and not obsolete, and in compliance with all
zoning, building and fire codes and all other laws, rules, regulations and
requirements of governmental authorities and the fire insurance rating
association having jurisdiction, except to the extent that the failure to do so,
in the aggregate, would not have a material adverse effect on the financial
condition, assets, liabilities, earnings, business or prospects of the Company.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the most recent balance sheet in the Financial Statements,
less the reserve for doubtful accounts in the amount shown on such balance
sheet, are valid and enforceable claims and subject to no set off or
counterclaim and will be collectible in the normal course of business. The
Company has no accounts or loans receivable from any of its directors, officers
or employees (other than loans to any employee in the ordinary course of
business which in the aggregate do not exceed $5,000).
3.26 CHARTER DOCUMENTS. The Company has heretofore delivered to
BridgeStreet copies of its articles of incorporation, as amended to date,
certified by the appropriate governmental authority, and copies of its by-laws,
as amended to date, and a list of the officers and directors of the Company in
office, all as certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of fact set forth
in this Agreement (including without limitation all information in the Financial
Statements and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) or otherwise provided by or on behalf of the Company to BridgeStreet is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) or any information provided
to BridgeStreet by or on behalf of the Company omit to state a material
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<PAGE> 17
fact necessary in order to make the statements made or information disclosed, in
the light of the circumstances under which they were made or disclosed, not
misleading.
3.28 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
3.29 TAX-FREE REORGANIZATION. The Company has no reason to believe that
the Merger will not qualify as a reorganization within the meaning of Section
368 of the Code.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders represent and warrant to BridgeStreet and Acquisition
as follows:
4.1 TITLE TO THE SHARES. The Stockholders own the Shares free and clear
of any claims, liens, charges, encumbrances, security interests and rights of
others whatsoever, and that the Shares are not bound by or subject to any proxy,
agreement, voting trust or other restriction regarding the voting thereof.
4.2 AUTHORITY. Each Stockholder has full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by the Stockholders and constitutes
a legal, valid and binding obligation of the Stockholders enforceable against
them in accordance with its terms.
5. REPRESENTATIONS AND WARRANTIES OF BRIDGESTREET AND ACQUISITION
BridgeStreet and Acquisition represent and warrant to the Company and
the Stockholders as follows:
5.1 ORGANIZATION AND AUTHORITY. Each of BridgeStreet and Acquisition is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified to do business as a foreign corporation in each
jurisdiction where the failure to be so qualified would, in the aggregate, have
a material adverse effect on the business or financial condition of
BridgeStreet. Each of BridgeStreet and Acquisition has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the respective Boards of Directors of BridgeStreet and
Acquisition and the sole stockholder of Acquisition, and no
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other corporate proceedings on the part of BridgeStreet or Acquisition are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by each of BridgeStreet and Acquisition and constitutes a
valid and binding agreement of each, enforceable against each in accordance with
its terms.
5.2 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by BridgeStreet and Acquisition nor the consummation
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective charter documents or By-Laws of
BridgeStreet or Acquisition; (ii) require any consent, approval, authorization,
or permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) filing the Articles of Merger pursuant to the TBCA and the
Certificate of Merger pursuant to the DGCL and (B) filings required under the
Securities Act and the securities or blue sky laws of the various states; (iii)
result in a default (or an event that might, with the passage of time or the
giving of notice or both, constitute a default) or give rise to any right to
terminate, cancel or accelerate or to any loss of benefit under any of the
terms, conditions, or provisions of any note, license, lease, agreement, or
other instrument or obligation to which BridgeStreet or Acquisition is a party
or by which BridgeStreet or Acquisition or any of their respective assets may be
bound, other than as previously disclosed in writing to the Company; or (iv)
violate any order, writ, injunction, decree, statute, rule, or regulation
applicable to BridgeStreet or Acquisition or any of their respective assets.
5.3 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the knowledge of BridgeStreet or Acquisition,
threatened, against, involving or affecting BridgeStreet or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau, agency, or instrumentality, that either
singly or in the aggregate might prevent BridgeStreet and Acquisition from
consummating the transactions contemplated hereby or that would have a material
adverse effect on the business, operations, or financial condition of
BridgeStreet and its subsidiaries taken as a whole.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by BridgeStreet
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable.
5.5 CHARTER DOCUMENTS. BridgeStreet has heretofore delivered to the
Company copies of its Articles of Incorporation, as amended to date, certified
by the appropriate governmental authority, and copies of its by-laws, as amended
to date, and a list of the officers and directors of BridgeStreet in office, all
as certified by its Secretary.
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6. COVENANTS
6.1 BOARD OF DIRECTORS. Until such time as BridgeStreet completes an
initial public offering of its common stock (the "IPO"), the Stockholders and
the former stockholders of each of Corporate Lodgings, Inc., Temporary Corporate
Housing Columbus, Inc. and Exclusive Interim Properties, Ltd. shall each have
the right to designate one director of BridgeStreet, and the Stockholders and
such stockholders agree to vote their Merger Stock (and any additional voting
securities of BridgeStreet issued in respect thereof) and take such other action
as shall be necessary (i) to cause each such designee to be elected to
BridgeStreet's Board of Directors and (ii) to fix the number of directors on the
Board of Directors at six. The Stockholders' initial designee pursuant to this
Section 6.1 shall be Connie F. O'Briant.
6.2 CONFIDENTIAL INFORMATION. BridgeStreet will, and will cause its
employees and agents and Acquisition to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, BridgeStreet will promptly return to the Company or
destroy all documents (including all copies thereof) received by BridgeStreet
containing such Confidential Information. For purposes hereof, "Confidential
Information" shall mean all information of any kind concerning the Company,
except information (i) ascertainable or obtained from public or published
information, (ii) received from a third party not known to BridgeStreet to be
under an obligation to the Company to keep such information confidential, (iii)
that is or becomes known to the public (other than through a breach of this
Agreement), (iv) that was in BridgeStreet's possession before disclosure thereof
to it in connection with this Agreement or (v) that was independently developed
by BridgeStreet.
6.3 BEST EFFORTS. Subject to the terms and conditions hereof each party
to this Agreement agrees to fully cooperate with the others and the others'
counsel, accountants and representatives in connection with any steps required
to be taken as part of its obligations under this Agreement. Each party to this
Agreement agrees that it will use its reasonable efforts to cause all conditions
to its obligations under this Agreement to be satisfied as promptly as possible,
and will not undertake a course of action inconsistent with this Agreement or
which would make any of its representations, warranties, agreements or covenants
in this Agreement untrue in any material respect or any conditions precedent to
its obligations under this Agreement unable to be satisfied at or prior to the
Closing.
6.4 PUBLIC ANNOUNCEMENTS. All public announcements, notices or other
communications regarding this Agreement and the transactions contemplated hereby
to third parties other than the parties hereto and their respective advisors and
the shareholders of the Company shall require the prior approval of
BridgeStreet.
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6.5 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it
hereunder. The Company shall promptly notify BridgeStreet in writing if at any
time prior to a closing in connection with the IPO it shall obtain knowledge of
any facts that might make it necessary or appropriate to amend or supplement the
Prospectus in order to make the statements contained therein not misleading or
comply with applicable law. The delivery of any notice pursuant to this Section
6.5 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
6.6 COVENANTS OF THE STOCKHOLDERS. The Stockholders hereby covenant and
agree with BridgeStreet and Acquisition that they shall:
(a) use their best efforts to take whatever action may be reasonably
necessary or desirable to (i) effect, perfect or confirm of record or otherwise
in the Surviving Corporation full right, title and interest in and to the
business, properties and assets now conducted or owned by the Company, free and
clear of all restrictions, liens, encumbrances, rights, title and interests in
others, or to collect, realize upon, gain possession of, or otherwise acquire,
full right, title and interest in and to such business, properties and assets;
(ii) carry out the intent and purposes of the transactions contemplated hereby;
and (iii) cause or permit BridgeStreet to undertake and complete the IPO.
(b) provide to BridgeStreet the notifications required of the Company
under Section 6.5;
(c) (i) execute and deliver at the Closing the Employment Contract, the
Securities Representation Letter (as defined below) and the Non-Competition and
Non-Disclosure Agreement, and (ii) use their best efforts to obtain and deliver
at the Closing the Non-Competition and Non-Disclosure Agreements executed by
the persons set forth in Exhibit 7.1(c); and
(d) execute and deliver such other instruments and take such other
actions as may be reasonably required in order to carry out the intent of this
Agreement.
6.7 TAX FREE REORGANIZATION. From and after the Effective Time, neither
BridgeStreet nor the Surviving Corporation nor the Stockholders shall take or
suffer to be taken any action which will cause the Merger not to constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code.
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7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 The obligations of BridgeStreet and Acquisition to consummate the
Merger are subject to the satisfaction at the Closing, or waiver by BridgeStreet
in writing, in whole or in part, of each of the following conditions:
(a) BridgeStreet and Acquisition shall have received the opinion of
counsel to the Company, dated the date of the Closing and in form and substance
satisfactory to the BridgeStreet and its counsel, substantially to the effect
set forth on Exhibit 6.
(b) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for BridgeStreet acting reasonably.
(c) The Stockholders shall have executed and delivered to BridgeStreet
the Employment Contract, the Non-Competition and Non-Disclosure Agreement, and
the persons listed on Exhibit 7 shall have executed and delivered to
BridgeStreet the Non-Competition and Non-Disclosure Agreement.
(d) The Stockholders shall have executed and delivered to BridgeStreet
a letter agreement substantially in the form attached hereto as Exhibit 8 (the
"Securities Representation Letter").
(e) The Company shall have delivered to BridgeStreet and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Company's shareholders.
(f) The Company shall have delivered to BridgeStreet such other
certificates, documents and opinions as BridgeStreet and its counsel shall
reasonably require.
7.2 The obligation of the Company to consummate this Agreement is
subject to the satisfaction at the Closing, or waiver by the Company in writing,
in whole or in part, of each of the following conditions:
(a) The Company shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Company and its counsel,
of Nutter, McClennen & Fish, LLP, counsel to BridgeStreet, substantially to the
effect set forth on Exhibit 9.
(b) All proceedings taken by BridgeStreet and Acquisition and all
instruments executed and delivered by BridgeStreet and Acquisition prior to the
date of the Closing in
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connection with the transactions herein contemplated shall be satisfactory in
form and substance to counsel for the Company, acting reasonably.
(c) BridgeStreet and Acquisition shall have delivered to the Company a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
(d) BridgeStreet shall have executed and delivered each Employment
Contract.
(e) On the day following the Effective Time, the officers and directors
of BridgeStreet shall be as set forth on Exhibit 4.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK; LEGEND
The shares of Merger Stock will not have been registered under the
Securities Act or the blue sky laws of any state by reason of their contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and of such state laws. Such shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act and such state laws or an exemption therefrom.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities,
losses, judgments, settlements, and expenses, including,
without limitation, all reasonable fees and disbursements of
counsel incident to the investigation or defense of any claim
or proceeding or threatened claim or proceeding.
(ii) "Indemnified Party" means each of BridgeStreet, the
Surviving Corporation, and their respective subsidiaries.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Stockholders shall, from and after the Effective Time, indemnify,
defend, and hold each Indemnified Party harmless from, against and in respect of
any and all Damages incurred by any Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by the Company or by the Stockholders in this
Agreement (collectively referred to herein as "Claims").
(c) The Company's representations, warranties, covenants and agreements
set forth in Article 3 shall, for purposes of this Article 9, be deemed to have
survived the Effective Time notwithstanding any contrary terms of this
Agreement, and whenever such
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representations, warranties, covenants and agreements are referred to in this
Article 9, the text of the same as set forth in Article 3 shall be deemed to be
set forth in their entirety herein, and the same are hereby incorporated herein
by such references. Each such representation, warranty, covenant and agreement
shall be deemed to have been relied upon by the party or parties to which made,
notwithstanding any investigation or inspection made by or on behalf of such
party or parties and shall not be affected in any respect by any such
investigation or inspection.
9.2 LIMITATIONS OF INDEMNITY OBLIGATIONS. The indemnity obligations of
the Stockholders under this Agreement shall be subject to the following
limitations:
(a) The indemnity obligations of the Stockholders shall expire on the
third anniversary of the Effective Time (the "Cut-off Date"); provided, however,
that such obligations with respect to (i) the representations and warranties
contained in Sections 3.1, 3.2, 3.18 and 3.21 and Article 4 of this Agreement
shall continue forever without limitation, and (ii) the representations and
warranties regarding taxes, which are contained in Section 3.15, shall remain in
effect until all claims for taxes due by or on account of the Company for any
period up to and including the Effective Time have been settled and any statute
of limitations period with respect to such taxes has expired; and provided
further that the indemnity obligations of the Stockholders for Claims timely
asserted by an Indemnified Party in the manner provided in this Agreement shall
continue until such Claims are finally resolved and discharged.
(b) The aggregate indemnity obligations of each Stockholder for any
Damages shall not in any event exceed the amount set forth on Exhibit 10
opposite such Stockholder's name or, in the event of an IPO, the greater of (i)
such amount and (ii) the amount equal to the Merger Stock received by such
Stockholder (after adjusting for any stock split or combination) multiplied by
the price at which the BridgeStreet Common Stock is sold to the public in the
IPO.
(c) The Indemnified Parties shall be entitled to indemnification only
if the aggregate and collective Damages incurred or suffered by them exceed
$50,000, in which event they shall be entitled to indemnification of the full
amount of such Damages. Notwithstanding the immediately preceding sentence,
however, the Indemnified Parties shall be entitled to indemnification for
Damages incurred or suffered by them as a result of the breach of Section 3.15
without regard to such $50,000 minimum.
9.3 NOTICE OF CLAIM. An Indemnified Party shall promptly notify the
Stockholders in writing of any Claim asserted by a third person that might give
rise to any indemnity obligation of the Stockholders hereunder (a "Third Party
Claim"), specifying in reasonable detail the nature thereof and indicating the
amount (estimated if necessary) of the Damages that have been or may be
sustained by the Indemnified Party. Failure of any Indemnified Party to promptly
give such notice shall not relieve the Stockholders of their obligation to
indemnify under this Article 9, but as a result of any such failure, the
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Stockholders shall not be liable to the Indemnified Parties for the amount of
actual damages caused by such failure. Together with or following such notice,
the Indemnified Parties shall deliver to the Stockholders copies of all notices
and documents received by the Indemnified Parties relating to the Third Party
Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Stockholders shall
have the right (without prejudice to the right of any Indemnified Party to
participate at their own expense through counsel of their own choosing) to
defend against any Third Party Claim at their expense and through counsel of
their own choosing and to control such defense if they give written notice of
their intention to do so within 15 business days of their receipt of notice of
Third Party Claim. The Indemnified Parties shall cooperate fully in the defense
of such Third Party Claim and shall make available to the Stockholders or their
counsel all pertinent information under their control relating thereto. The
Indemnified Parties shall have the right to elect to settle any Third Party
Claim; provided, however, the Stockholders shall not have any indemnification
obligation with respect to any monetary payment to any third party required by
such settlement unless they shall have consented thereto. The Stockholders shall
have the right to elect to settle any Third Party Claim subject to the consent
of BridgeStreet; provided, however, that if BridgeStreet fails to give such
consent within 15 business days of being requested to do so, BridgeStreet shall,
at its expense, assume the defense of such Third Party Claim and regardless of
the outcome of such matter, the Stockholders' liability hereunder shall be
limited to the amount of any such proposed settlement. The foregoing provisions
notwithstanding, in no event may the Stockholders (a) adjust, compromise or
settle any Third Party Claim (i) unless such adjustment, compromise or
settlement unconditionally releases BridgeStreet or the Surviving Corporation
from all liability or (ii) if such adjustment, compromise or settlement affects
the absolute and sole right of BridgeStreet or the Surviving Corporation to own
or use any of the Company's assets or (b) defend any Third Party Claim which, if
adversely determined, would materially impair the financial condition, business
or prospects of BridgeStreet or the Surviving Corporation.
10. MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Article 3 and 4 and except for the representations and warranties contained in
Article 5, the representations and warranties made in this Agreement shall not
survive beyond the Effective Time.
10.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Disclosure Schedule and the Exhibits hereto, the entire agreement among the
parties with respect to the subject matter hereto and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof (except for the
confidentiality and secrecy agreements that previously have been executed by
BridgeStreet, the Company and American Business Partners) and (b) shall not be
assigned by operation of law or otherwise, provided that BridgeStreet or
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Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of BridgeStreet, but no such assignment shall relieve
BridgeStreet of its obligations hereunder.
10.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to BridgeStreet or Acquisition, to it at:
BridgeStreet International Inc.
67 Batterymarch Street, Suite 500
Boston, Massachusetts 02110
Attention: Donald W. Glazer, Secretary
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
If to the Company or any Stockholder, to it, him or her at:
Temporary Housing Experts, Inc.
6148 East Shelby Drive
Memphis, TN 38141
Attention: Connie F. O'Briant
with a copy to:
Apperson, Crump, et al.
1755 Kirby Parkway
Suite 100
Memphis, TN 38120
Attention: Thomas R. Buckner, Esq.
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<PAGE> 26
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
10.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
10.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
10.8 EXPENSES. All costs and expenses incurred Subsequent to September
30, 1996 in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses; provided that the Company's
costs and expenses, including all brokerage, investment banking, legal, and
accounting fees, shall be borne by the Stockholders.
10.9 JOINT AND SEVERAL. The representations, warranties, agreements,
covenants and obligations of the Stockholders under this Agreement are joint and
several.
10.10 PARTIES IN INTEREST. Except as provided in Section 6.1, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
10.11 PLAN OF MERGER. For purposes of Section 48-21-102 of the TBCA, the
plan of merger with respect to the Merger (the "Plan of Merger") shall be as set
forth on Exhibit 11. The stockholders and directors of the Company by virtue of
their approval of this Agreement shall be deemed to have approved the Plan of
Merger upon the satisfaction of the conditions contained in Article 8 of this
Agreement. Notwithstanding such approval and the filing with the Secretary of
State of Tennessee of the Plan of Merger as a part of the Articles of Merger,
the Plan of Merger shall continue to be subject to all the other provisions of
this Agreement and such other provisions shall control in the event of any
inconsistencies between such provisions and the Plan of Merger.
[Rest of Page Intentionally Left Blank]
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<PAGE> 27
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
BRIDGESTREET INTERNATIONAL INC.
By: /s/ Donald W. Glazer
-------------------------------
Title: Vice-President
----------------------------
TEMPORARY HOUSING EXPERTS, INC.
By: /s/ Connie F. O'Briant
-------------------------------
Title: President
----------------------------
THEI ACQUISITION CORP.
By: /s/ Donald W. Glazer
-------------------------------
Title: President
----------------------------
/s/ Connie F. O'Briant
----------------------------------
Connie F. O'Briant
Stockholder
/s/ Thomas W. O'Briant
-----------------------------------
Thomas W. O'Briant
Stockholder
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<PAGE> 1
EXHIBIT 10.3
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") dated as of
December 30, 1996 is among BridgeStreet International Inc., a Delaware
corporation ("BridgeStreet"), TCHI Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of BridgeStreet ("Acquisition"), and Temporary
Corporate Housing - Columbus, Inc., an Ohio corporation, Temporary Corporate
Housing - Cleveland, Inc., an Ohio corporation, Temporary Corporate Housing -
Cincinnati, Inc., an Ohio corporation and Temporary Corporate Housing -
Pittsburgh, Inc., a Pennsylvania corporation (each individually, a "Company,"
and collectively, the "Companies"), and SLD Partnership, an Ohio General
Partnership, Lynda Clutchey and David Clutchey, III and David Holzer and Beth
Holzer jointly (each individually, a "Stockholder," and collectively, the
"Stockholders"), and provides for the merger of the Companies with and into
Acquisition (the "Merger"). The Boards of Directors of BridgeStreet, Acquisition
and the Company have determined that the Merger is in the best interests of
their respective stockholders and the Merger has been approved by the
stockholders of the Company and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Articles of Merger" has the meaning given to it in Section 2.2.
1.2 "Balance Sheet Date" means June 30, 1996.
1.3 "BridgeStreet Common Stock" means the shares of Common Stock, $0.01
par value, of BridgeStreet.
1.4 "Closing" means the closing of this Agreement as provided in
Section 2.2.
1.5 "Code" means the Internal Revenue Code of 1986, as amended to date.
1.6 "Commission" means the Securities and Exchange Commission.
1.7 "DGCL" means the Delaware General Corporation Law.
1.8 "Delaware Certificate of Merger" has the meaning given to it in
Section 2.2.
1.9 "Disclosure Schedule" means the Disclosure Schedule attached hereto
as Schedule 1.
<PAGE> 2
1.10 "Effective Time" means 12:01 a.m. EST on January 2, 1997, as such
date shall be specified in the Ohio Certificate of Merger (as defined herein)
filed with the Secretary of State of Ohio in accordance with Section 1701.81 of
the OGCL (as defined herein), the Articles of Merger filed with the Department
of State of the Commonwealth of Pennsylvania in accordance with Section 1927 of
the PBCL (as defined herein) and the Delaware Certificate of Merger filed with
the Secretary of State of the State of Delaware in accordance with Section 252
of the DGCL, unless Acquisition and the Company agree that another time shall be
the Effective Time, in which case such time shall be specified in the Articles
of Merger, the Ohio Certificate of Merger and the Delaware Certificate of
Merger.
1.11 "Employment Contract" means the employment contract attached
hereto as Exhibit 1.
1.12 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.13 "Financial Statements" means the financial statements of the
Companies attached hereto as Exhibit 2 consisting of the balance sheets as of
December 31, 1994 and 1995 and June 30, 1996 and the statements of operations,
changes in stockholders' equity and cash flows for each of the fiscal years
ended on December 31, 1994 and 1995 and for the six-month period ended on June
30, 1996.
1.14 "Merger Stock" means the shares of BridgeStreet Common Stock
exchanged for Shares pursuant to Section 2.7(c).
1.15 "Non-Competition and Non-Disclosure Agreement" means the
non-competition and non-disclosure agreement attached hereto as Exhibit 3.
1.16 "OGCL" means the Ohio General Corporation Law.
1.17 "Ohio Certificate of Merger" has the meaning given to it in
Section 2.2.
1.18 "PBCL" means the Pennsylvania Business Corporation Law.
1.19 "Share" means a share of Common Stock, $.01 par value per share,
of each of the Companies, and "Shares" means all of such shares of all of the
Companies.
1.20 "Securities Act" means the Securities Act of 1933, as amended.
1.21 "Surviving Corporation" means Acquisition.
1.22 References to the "knowledge" of any entity or to things which any
entity does or does not "know" or which are "known" by any entity refer to the
knowledge of any of the entity's officers or directors.
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<PAGE> 3
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the OGCL, the
PBCL and the DGCL. Following the Merger, Acquisition shall continue as the
Surviving Corporation and be a subsidiary of BridgeStreet, and the separate
corporate existences of the Companies shall cease. Notwithstanding this Section
2.1, BridgeStreet may elect with the consent of the Companies (which consent
shall not be unreasonably withheld) to merge into one of the Companies
Acquisition and the other Companies. In such event, the parties agree to execute
an appropriate amendment to this Agreement in order to reflect the foregoing.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause articles of merger
(the "Articles of Merger") with respect to the Merger to be filed and recorded
in accordance with Section 1927 of the PBCL, shall cause a certificate of merger
(the "Ohio Certificate of Merger") with respect to the Merger to be filed and
recorded in accordance with Section 1701.81 of the OGCL and shall cause a
certificate of merger (the "Delaware Certificate of Merger") with respect to the
Merger to be filed and recorded in accordance with Section 252 of the DGCL and
(b) shall take all such further actions as may be required by law to make the
Merger effective. The Merger shall be effective at the Effective Time. Before
the filing of the Articles of Merger, the Ohio Certificate of Merger and the
Delaware Certificate of Merger, a closing (the "Closing") will be held at the
offices of Nutter, McClennen & Fish, LLP, One International Place, Boston,
Massachusetts (or such other place as the parties may agree) for the purpose of
confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Section 1701.82 of the OGCL, Section 1929 of the PBCL and Sections 259, 260
and 261 of the DGCL.
2.4 TAX CONSEQUENCES. it is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that Article FIRST of the Certificate of
Incorporation of the Surviving Corporation shall be amended as follows:
"FIRST: The name of the corporation shall be Temporary Corporate
Housing, Inc."
2.6 DIRECTORS AND OFFICERS. On the day following the Effective Time,
the directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 4, and
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<PAGE> 4
each such person shall hold office until his or her respective successor is duly
elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of capital stock of Acquisition that is issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding without change.
(b) All Shares held in the treasury of each Company immediately prior
to the Effective Time shall be cancelled, without the payment of any
consideration therefor.
(c) All other Shares which are outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holders
thereof into and be exchangeable for such numbers of shares of BridgeStreet
Common Stock as are set forth on Exhibit 5A hereto, subject to the payment of
cash in lieu of fractional shares in accordance with Section 2.8 hereof, with
the effect that the stockholders and share ownership of BridgeStreet will be as
set forth on Exhibit 5B immediately after the Merger.
2.8 EXCHANGE OF AND PAYMENT FOR SHARES.
(a) As soon as practicable after the Effective Time and after surrender
to BridgeStreet of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraph (c) of this
Section 2.8 and to the provisions of Article 8, BridgeStreet shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of BridgeStreet Common Stock into which any shares previously represented
by the surrendered certificate shall have been converted at the Effective Time
and a check payable to such person representing the payment of cash in lieu of a
fractional share determined in accordance with paragraph (f) of this Section
2.8. Until surrendered as contemplated by the preceding sentence, each
certificate which immediately prior to the Effective Time shall have represented
any Shares shall be deemed at and after the Effective Time to represent only the
right to receive upon such surrender the certificates and payment contemplated
by the preceding sentence.
(b) No dividends or other distributions declared after the Effective
Time with respect to BridgeStreet Common Stock shall be paid to the holder of
any unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.8. After the
surrender of such certificate in accordance with this Section 2.8, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of BridgeStreet Common Stock represented by such
certificate.
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<PAGE> 5
(c) If any cash or certificate representing shares of BridgeStreet
Common Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to BridgeStreet any transfer or
other taxes required by reason of the issuance of a certificate representing
shares of BridgeStreet Common Stock in any name other than that of the
registered holder of the certificate surrendered, or otherwise required, or
shall establish to the satisfaction of BridgeStreet that such tax has been paid
or is not payable.
(d) All rights to receive BridgeStreet Common Stock and cash in lieu of
fractional shares shall be deemed, when paid or issued hereunder, to have been
paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
(e) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of BridgeStreet Common Stock into which
they were converted, or both, as provided herein.
(f) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of BridgeStreet Common
Stock shall be issued upon the surrender for exchange of certificates which
prior to the Effective Time shall have represented any Shares, no dividend or
distribution of BridgeStreet shall relate to any fractional share and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of BridgeStreet. In lieu of any fractional shares, there
shall be paid to each holder of Shares who otherwise would be entitled to
receive a fractional share of BridgeStreet Common Stock an amount of cash equal
to the fair value of such fractional shares as of the Effective Time as
conclusively determined in good faith by the Board of Directors of the Surviving
Corporation.
2.9 ADJUSTMENTS. If, between the date of this Agreement and the
Effective Time, the outstanding shares of BridgeStreet Common Stock shall have
been changed into a different number of shares or a different class by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with a
record date within said period, the number of shares of BridgeStreet Common
Stock into which the Shares are to be converted shall be correspondingly and
appropriately adjusted.
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<PAGE> 6
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
The Companies represent and warrant to BridgeStreet and Acquisition
that, except as expressly provided in the Disclosure Schedule by specific
reference to a Section of this Article 3, the following representations and
warranties are true and correct as of the date hereof:
3.1 ORGANIZATION AND AUTHORITY. Each Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Ohio (except Temporary Corporate Housing - Pittsburgh, Inc., which Company is
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania), and has full corporate power and authority to
conduct their businesses and own their properties as now conducted and owned.
Each Company is duly qualified or licensed and in good standing as a foreign
corporation in those states listed on the Disclosure Schedule, which are the
only jurisdictions in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary. Each Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the trans actions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors and stockholders of each Company, and no other corporate
proceedings on the part of each Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by each Company and constitutes a
legal, valid and binding obligation of each Company enforceable against it in
accordance with its terms.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The authorized
capital and number of issued and outstanding shares of capital stock of each
Company are set forth on the Disclosure Schedule. No Shares are held in any
Company's treasury. Collectively, the Shares held by the Stockholders comprise
all of the issued and outstanding shares of Common Stock of the Companies, are
duly authorized, validly issued, fully paid and non-assessable and are owned of
record and beneficially by the Stockholders in the respective amounts listed on
the Disclosure Schedule. No Company has any other authorized class of capital
stock other than the Common Stock. No Company owns and no Company has owned any
shares of capital stock or other securities of, or any other interest in, nor
does any Company control or has it controlled, directly or indirectly, any other
corporation, association, joint venture, partnership, or other business
organization. The outstanding Shares have been issued and sold in full
compliance with all applicable Federal and state securities laws. No holder of
Shares has any dissenting shareholder or appraisal rights with regard to the
Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any of the Shares or the
acquisition of shares of any other class of capital stock of any Company,
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<PAGE> 7
and no Company has otherwise agreed to issue or sell any shares of its capital
stock or has any obligation to register any of the Shares under the Securities
Act. No Company is obligated directly, indirectly or contingently to purchase
any Shares.
3.4 NAME. No Company has had any other name or conducts or operates, or
has heretofore conducted or operated, its business under any name other than its
current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation of the transactions contemplated hereby and thereby, and the
compliance with the terms, conditions and provisions hereof by each Company do
not (i) contravene any provisions of any Company's articles of incorporation or
By-Laws; (ii) conflict with or result in a breach of or constitute a default (or
an event that might, with the passage of time or the giving of notice or both,
constitute a default) or give rise to any right to terminate, cancel or
accelerate or to any loss of benefit under any of the terms, conditions, or
provisions of any lease, indenture, mortgage, loan, or credit agreement or any
other agreement or instrument to which any Company is a party or by which it or
its assets may be bound or affected; (iii) violate or constitute a breach of any
decision, judgment, or order of any court or arbitration board or of any
governmental department, commission, board, agency, or instrumentality, domestic
or foreign, by which any Company is bound or to which it is subject; or (iv)
violate any applicable law, rule, or regulation to which any Company or any of
its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a waiting period or a period for
disapproval by, any governmental authority is required for any Company to
consummate the transactions contemplated by this Agreement, except for filing
and acceptance of the Articles of Merger pursuant to the PBCL, the Ohio
Certificate of Merger pursuant to the OGCL and the Delaware Certificate of
Merger pursuant to the DGCL.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present (subject, in the case of
the unaudited financial statements, to (i) recurring audit adjustments normal in
nature and amount and (ii) disclosure of notes in connection therewith) the
financial position of each Company as of their respective dates, and the results
of operations and cash flows for the periods presented therein, all in
conformity with generally accepted accounting principles applied on a consistent
basis, except as otherwise noted therein.
(b) Each Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets;
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<PAGE> 8
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the most recent balance sheet in the Financial Statements, no Company
(a) had as of the Balance Sheet Date any liability or obligation of any nature,
whether accrued, absolute, contingent, or otherwise and whether due or to become
due, including without limitation liabilities that may become known or arise
after the date hereof and which relate to transactions entered into or any state
of facts existing on or before the Balance Sheet Date, which would be required
under generally accepted accounting principles to be shown in such balance sheet
or referenced in the notes thereto, and (b) has incurred since the Balance Sheet
Date any such liability or obligation except in the ordinary course of business.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, no Company has taken or agreed to take any action that would
obligate such Company to have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement, or commitment other than in the ordinary course of
business;
(b) entered into or agreed to enter into any transaction, agreement, or
commitment, suffered the occurrence of any event or events, or experienced any
change in financial condition, business, results of operations, prospects, or
otherwise, (i) that has interfered or is reasonably likely to interfere with the
normal and usual operations of such Company's business or its business prospects
or (ii) that, singly or in the aggregate, has resulted or is reasonably likely
to result in a material adverse change in the financial condition, assets,
liabilities, earnings, business, or business prospects of such Company;
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation (except for
loans to any employee of such Company in the ordinary course of business which
in the aggregate do not exceed $5,000);
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of such Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to such Company, or any claims held
by such Company;
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property
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<PAGE> 9
transfer, or otherwise, or by the purchase of any property or assets of any
other individual, partnership, firm, or corporation;
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect of the
capital stock of such Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of such Company;
(g) paid any long-term liability, otherwise than in accordance with its
terms;
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of such Company or otherwise increased the compensation paid or
payable to any of the foregoing;
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets;
(j) contracted with or committed to any third party (i) to sell any
capital stock of such Company, (ii) to sell any material assets of such Company
other than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of such Company, or (iv) to enter into
any agreement with respect thereto; or
(k) incurred any expenses or fees of counsel, accountants or
consultants for personal services rendered to the Stockholders after September
30, 1996 in preparation for or in connection with this Agreement, the
transactions contemplated hereunder or otherwise.
3.10 TITLE TO ASSETS. The Disclosure Schedule describes fully all real
property owned by each Company. Each Company has good and clear record and
marketable title to such real property and good and sufficient title to all
other properties owned by it, including, without limitation, all property
reflected in the most recent balance sheet in the Financial Statements, other
than property disposed of in the ordinary course of business subsequent to the
Balance Sheet Date (none of such dispositions being materially adverse), free
and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the most recent
balance sheet in the Financial Statements, or as specified in the notes thereto,
(b) the lien of taxes not yet due or payable or being contested in good faith by
appropriate proceedings and (c) such imperfections of title and encumbrances, if
any, as do not materially detract from the value or interfere with the use of
the properties subject thereto or affected thereby, or otherwise materially
impair business operations.
3.11 INTELLECTUAL PROPERTY. Each Company owns, or is licensed or
otherwise has the full and unrestricted right to use, all trademarks, trade
names, service marks, copyrights, technology, know-how, trade secrets and
techniques used in its business (collectively, the "Proprietary Information").
All such trademarks, trade names, service marks and federally
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<PAGE> 10
registered copyrights are listed on the Disclosure Schedule. No Company has any
obligation still outstanding to compensate other persons for the use of any
Proprietary Information or for the sale of any service comprising or derived
from Proprietary Information. No Company has granted to any other person any
license or other right to use in any manner any of the Proprietary Information,
whether or not requiring the payment of royalties. To the knowledge of each
Company (a) no other person has a right or license granted directly or
indirectly by or through any Company to use any Proprietary Information; (b)
none of the Proprietary Information is being infringed by others, or is subject
to any outstanding order, decree, judgment or stipulation; (c) there are no
claims or demands of any other person, and no proceedings have been instituted,
or are pending or threatened, relating to the Proprietary Information; and (d)
no proceeding has been filed or threatened charging any Company with
infringement of any patent, trademark, copyright, or other proprietary right,
nor is there any basis for any such proceeding.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All transactions heretofore between each Company and each of its
Stockholders, officers or directors or any Affiliate (as defined below) of such
Stockholder, officer or director have been conducted on an arm's-length basis on
terms no different than would be obtained if the transaction had been between
such Company and an unrelated party. Except for transactions reflected on the
latest balance sheet and accompanying schedules in the Financial Statements
there are no debts or other obligations of any Company outstanding to or from
each Stockholder, officer or director or Affiliate of such Stockholder, officer
or director of such Company. As used herein, "Affiliate" of a Stockholder,
officer or director means any member of the immediate family of such person or
any entity in which such person or any such family member is an officer or owner
of more than five percent of the outstanding equity securities.
(b) The Disclosure Schedule contains a true and complete description of
each transaction conducted or completed, in whole or in part, during the current
fiscal year, or is currently proposed, between each Company and any officer,
director or Stockholder thereof or any Affiliate of any such person. With
respect to each of the last three complete fiscal years, the Disclosure Schedule
sets forth all information that would be required to be provided under Items 402
and 404 of Regulation S-K of the Commission under the Securities Act if a
registration statement on Form S-1 were filed by such Company with the
Commission on the date hereof.
3.13 MATERIAL CONTRACTS. The Disclosure Schedule lists all material
leases, contracts, instruments, agreements or commitments (whether written or
oral) relating to the conduct of the business of each Company (the "Material
Contracts"). Each Company has delivered to BridgeStreet true and correct copies
of each Material Contract and a written description, accurate in all material
respects, of each oral arrangement so listed. Without limiting the generality of
the foregoing, the aforesaid list includes all contracts, agreements and
instruments of the following types to which each Company is a party:
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(a) labor union contracts, together with a list of all labor unions
representing or attempting to represent employees of each Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of each Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of each Company whose current salary
rate is $25,000 or more and any bonuses paid or payable to each such person for
the 1995 fiscal year and to date in the 1996 fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of personal property, contracts for the
purchase or sale of real or personal property, and agreements for financing;
(f) licenses and other contractual rights to any Proprietary
Information, including, without limitation, any copyright, trademark, service
mark or trade name, whether domestic or foreign, owned in whole or in part or
used by each Company;
(g) other license agreements (as licensor or licensee);
(h) property, casualty, crime, directors and officers, and other forms
of insurance;
(i) bank accounts and safety deposit boxes identifying all authorized
signatories, together with a list of all effective powers of attorney granted by
each Company to anyone;
(j) agreements, contracts or other arrangements to which each Company
is a guarantor, surety or endorser;
(k) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of each Company's
requirements for a particular product from a single supplier or to a single
customer;
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(l) contracts, agreements, commitments, arrangements or understandings
limiting the freedom of each Company from competing in any line of business or
with any person or entity;
(m) leases of real property with a term of more than one year
(regardless of whether the Company is the lessor or lessee); and
(n) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (m) above involving payment by
or to each Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Contracts are in full force and effect. Except to the extent
that a material adverse effect on the Company's financial condition, assets,
liabilities, earnings, business or prospects would not result if the following
were not true: (A) Each Company and each other party to each of the Material
Contracts have performed all the obligations required to be performed by them to
date, have received no notice of default and are not in default (with due notice
or lapse of time or both) under any of the Material Contracts; (B) each Company
has no present expectation or intention of not fully performing all its
obligations under any of the Material Contracts, and each Company has no
knowledge of any breach or anticipated breach by any other party to any of the
Material Contracts; and (C) there exists no actual or, to the knowledge of each
Company, threatened termination, cancellation or limitation of the business
relationship of such Company with any party to any Material Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the knowledge of any Company, threatened
against any Company or its officers or directors (in their capacities as such)
in any court, at law or in equity, or before any arbitration board or any
governmental department, commission, board, bureau, agency, or instrumentality;
nor has any Company been, nor is it, subject to any orders, awards, fines,
judgments, decrees, or injunctions the effect of which in the aggregate would
have a material adverse effect on the business or financial position or
prospects of such Company. No Company knows or has grounds to know of any basis
for any such action, suits, or other form of proceeding or disputes or of any
governmental investigation relating to such Company or its business.
3.15 TAXES. Each Company has filed all tax returns, reports and
information filings that are required to be filed, including, without
limitation, federal (U.S.), state, and municipal income or franchise tax
returns, and has paid all taxes shown as due on such returns, together with any
interest and penalties accrued with respect thereto. No Company is required to
pay any other taxes except as shown in such tax returns, reports and information
filings. All such returns, reports, and information filings required to be
filed, including any amendments to date, have been prepared in good faith and
without misrepresentation. Each Company has either paid or, in accordance with
generally accepted
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accounting principles applied consistently with prior periods, adequately
provided for, by reserves or other proper accounting treatment shown in the
records and books of account, its liability for all taxes of every kind,
including without limitation its liability for federal, state, and municipal
income or franchise tax for the current tax year and for all prior years. No
Company has any knowledge of any proposed or threatened assessment or
reassessment of federal, state, or municipal income or franchise taxes. The
United States federal income tax returns of each Company have been examined by
the Internal Revenue Service for all taxable years through and including the
fiscal year ended as set forth in the Disclosure Schedule. In addition, at the
date hereof all withholding tax or source deductions have been deducted and
remitted as due to the appropriate governmental authority as required by law or
each Company has adequately provided for such deductions by reserves or other
proper accounting treatment in its books and records of account.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1996 there has not
been (a) any material adverse change in the business, affairs or prospects of
any Company nor, to the best of each Company's knowledge, are any such changes
threatened, anticipated or contemplated; (b) any actual or, to each Company's
knowledge, threatened, anticipated or contemplated damage, destruction, loss,
conversion, termination, cancellation, default or taking by eminent domain or
other action by governmental authority which has materially affected or may
hereafter materially affect the properties, assets, business affairs or
prospects of any Company; (c) any material and adverse pending or, to each
Company's knowledge, threatened, anticipated or contemplated dispute of any kind
with any material customer, supplier, source of financing, employee, landlord,
subtenant or licensee of any Company, or any pending or, to each Company's
knowledge, threatened, anticipated or contemplated occurrence or situation of
any kind, nature or description which is reasonably likely to result in any
reduction in the amount, or any change in the terms or conditions, of business
with any material customer, supplier, or source of financing; or (d) any
pending, or, to each Company's knowledge, threatened, anticipated or
contemplated occurrence or situation of any kind, nature or description
materially and adversely affecting the properties, assets, business, affairs or
prospects of any Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1993 no Company: (a)
has made any contributions, payments or gifts of its property to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has established or maintained any unrecorded fund or
asset for any purpose, or has made any false or artificial entries on its books
or records for any reason; (c) has made any payments to any person with the
intention or understanding that any part of such payment was to be used for any
other purpose other than that described in the documents supporting the payment;
or (d) has made any contribution, or has reimbursed any political gift or
contribution made by any other person, to candidates for public office, whether
Federal, state or local, where such contribution or reimbursement would be in
violation of applicable law.
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3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by any
Company or the trusts created thereunder has engaged in a prohibited transaction
which could subject any such employee benefit plan or trust to a material tax or
penalty on prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by any
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts created thereunder has been terminated so as to result
in a material liability of any Company under ERISA nor has any such employee
benefit plan of any Company incurred any material liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, other than for
required insurance premiums which have been paid or are not yet due and payable;
no Company has withdrawn from or caused a partial withdrawal to occur with
respect to any Multi-employer Plan resulting in any assessed and unpaid
withdrawal liability; each Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required as of the end of the most recent fiscal year under each such plan; no
Company has incurred any accumulated funding deficiency with respect to any such
plan, whether or not waived; nor has there been any reportable event, or other
event or condition, which presents a material risk of termination of any such
employee benefit plan by the Pension Benefit Guaranty Corporation.
(c) The present value of all vested accrued benefits under the employee
pension benefit plans which are subject to Title IV or ERISA, maintained by each
Company, did not, as of the most recent valuation date for each such plan,
exceed the then current value of the assets of such employee benefit plans
allocable to such benefits.
(d) To the best of each Company's knowledge, (i) each employee pension
benefit plan subject to Title IV of ERISA, maintained by each Company, has been
administered in accordance with its terms in all material respects and is in
compliance in all material respects with all applicable requirements of ERISA
and other applicable laws, regulations and rules, and (ii) the Company has filed
in a timely manner with respect to all such plans those actuarial reports,
annual reports and all other filings required by all such applicable
requirements of ERISA and other applicable laws, regulations and rules, and the
Company has delivered to BridgeStreet a copy of any such report filed since
December 31, 1993.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "accumulated funding deficiency", "reportable
event", and "accrued benefits" shall have the respective meanings assigned to
them in ERISA, and the term "prohibited transactions" shall have the meaning
assigned to it in Code Section 4975 and ERISA.
(f) No Company has any liability disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-
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retirement benefits, including pension, medical and death benefits, which
liability would have a material adverse effect on the financial condition of any
Company.
3.19 LABOR MATTERS. A true and complete list of all of each Company's
officers and employees (the "Employees") and their respective salaries, wages,
other compensation, dates of employment, date and amount of last salary
increase, and positions has been provided to BridgeStreet by the Company. There
are no material disputes, employee grievances, or disciplinary actions pending
or, to the knowledge of any Company, threatened by or between any Company and
any of the Employees. With respect to the Employees, each Company has complied
in all respects with all provisions of all laws relating to the employment of
labor and has no liability for any arrears of wages or taxes or penalties for
failure to comply with any such law or for any severance or termination payments
of any type. No election or proceedings relating to the labor relations of any
Company is pending or, to any Company's knowledge, threatened. No Company has
had any material union activity or had any material labor trouble of any kind,
nature or description at any time heretofore. All personnel policies and manuals
of each Company are listed on the Disclosure Statement and true and complete
copies thereof have been provided to BridgeStreet. No Employee or consultant of
any Company shall have the right to receive from the Surviving Corporation or
BridgeStreet a severance payment or other payment in the nature thereof in the
event his or her employment is terminated by the Surviving Corporation following
the Merger, whether such right arises as a matter of contract, past policy or
understanding, by operation of law, or otherwise.
3.20 PERMITS; COMPLIANCE WITH LAW. Each Company possesses all
franchises, permits, licenses, certificates, approvals, and other authorizations
("Permits") necessary to own or lease and operate its properties and to conduct
its business as now conducted, except for incidental Permits that would be
readily obtainable without undue burden in the event of any lapse, termination,
cancellation, or forfeiture or that if not obtained would not materially and
adversely affect each Company's business. All such material Permits are in full
force and effect, and, to the knowledge of each Company, no suspension or
cancellation of any of them is threatened, and no material Permits will be
adversely affected by the consummation of the Merger. No Company has failed nor
is it failing to comply with any applicable law, rule, regulation, or order,
where such failure would have a material adverse effect on any Company's
business, and there are no proceedings pending or, to each Company's knowledge,
threatened, nor has any Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. Each Company is in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of any Company. The term "Hazardous Material" means (a) any
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"hazardous substance" as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (b) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act, as amended, (c) any
petroleum or petroleum product, (d) any polychlorinated biphenyl and (e) any
pollutant or contaminant or hazardous, dangerous, or toxic chemical, material,
waste or substance regulated under or within the meaning of any other
Environmental Law. There is no alleged liability, or to each Company's
knowledge, potential liability (including, without limitation, alleged or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) of such Company arising out of, based on or resulting from (i) the
presence or release into the environment of any Hazardous Material at any
location, whether or not owned by any Company or (ii) any violation or alleged
violation of any Environmental Law, which alleged or potential liability, singly
or in the aggregate, would have a material and adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of such Company.
3.22 LEASES. The Disclosure Schedule sets forth, as of October 31,
1996, the number of units of real property leased by each Company (each a
"Leased Premises"). Except to the extent that a material adverse effect on the
Company's financial condition, assets, liabilities, earnings, business or
prospects would not occur if the following, in the aggregate, were not true: (a)
each lease covering a Leased Premises is in full force and effect (there
existing no default under any such lease which, with the lapse of time or notice
or otherwise, would entitle the lessor or lessee to terminate the same); (b)
each Company has the right to use the Leased Premises in accordance with the
terms of the respective leases free and clear of all claims or other interests
or rights of third parties; (c) there is no violation of any covenant,
restriction or other agreement or understanding, oral or written, affecting or
relating to title or use of any Leased Premises; and (d) there is no pending or
threatened condemnation or similar proceedings or assessments affecting any of
the Leased Premises, nor to each Company's knowledge is any such condemnation or
assessment threatened or contemplated by any governmental authority.
3.23 CORPORATE RECORDS. The corporate record books of each Company are
in good order, complete, accurate, up to date, with all necessary signatures,
and set forth all meetings and actions taken by the shareholders and directors,
and all votes of the shareholders or Directors set forth in certificates
furnished to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by each Company have been properly maintained and are in good operating
order and repair, free from known defects in construction or design, sound and
properly functioning, usable and not obsolete, and in compliance with all
zoning, building and fire codes and all other laws, rules, regulations and
requirements of governmental authorities and the fire insurance rating
association having jurisdiction, except to the extent that the failure to do so,
in the aggregate, would not have a material adverse effect on the financial
condition, assets, liabilities, earnings, business or prospects of such Company.
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3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of each
Company shown or reflected on the most recent balance sheet in the Financial
Statements, less the reserve for doubtful accounts in the amount shown on such
balance sheet, are valid and enforceable claims and subject to no set off or
counterclaim and will be collectible in the normal course of business. No
Company has accounts or loans receivable from any of its directors, officers or
employees (other than loans to any employee in the ordinary course of business
which in the aggregate do not exceed $5,000).
3.26 CHARTER DOCUMENTS. Each Company has heretofore delivered to
BridgeStreet copies of its articles of incorporation, as amended to date,
certified by the appropriate governmental authority, and copies of its by-laws,
as amended to date, and a list of the officers and directors of such Company in
office, all as certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of fact set forth
in this Agreement (including without limitation all information in the Financial
Statements and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) or otherwise provided by or on behalf of each Company to BridgeStreet is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) or any information provided
to BridgeStreet by or on behalf of any Company omit to state a material fact
necessary in order to make the statements made or information disclosed, in the
light of the circumstances under which they were made or disclosed, not
misleading.
3.28 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
3.29 TAX-FREE REORGANIZATION. No Company has any reason to believe that
the Merger will not qualify as a reorganization within the meaning of Section
368 of the Code.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders represent and warrant to BridgeStreet and Acquisition
as follows:
4.1 TITLE TO THE SHARES. The Stockholders own all issued and
outstanding Shares free and clear of any claims, liens, charges, encumbrances,
security interests and rights of others whatsoever, and that such Shares are not
bound by or subject to any proxy, agreement, voting trust or other restriction
regarding the voting thereof.
4.2 AUTHORITY. Each Stockholder has full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on behalf
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of each Stockholder where applicable, and no other action is necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by the Stockholders
and constitutes a legal, valid and binding obligation of the Stockholders
enforceable against them in accordance with its terms.
5. REPRESENTATIONS AND WARRANTIES OF BRIDGESTREET AND ACQUISITION
BridgeStreet and Acquisition represent and warrant to the Company and
the Stockholders as follows:
5.1 ORGANIZATION AND AUTHORITY. Each of BridgeStreet and Acquisition is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified to do business as a foreign corporation in each
jurisdiction where the failure to be so qualified would, in the aggregate, have
a material adverse effect on the business or financial condition of
BridgeStreet. Each of BridgeStreet and Acquisition has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the respective Boards of Directors of BridgeStreet and
Acquisition and the sole stockholder of Acquisition, and no other corporate
proceedings on the part of BridgeStreet or Acquisition are necessary to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
each of BridgeStreet and Acquisition and constitutes a valid and binding
agreement of each, enforceable against each in accordance with its terms.
5.2 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by BridgeStreet and Acquisition nor the consummation
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective charter documents or By-Laws of
BridgeStreet or Acquisition; (ii) require any consent, approval, authorization,
or permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) filing and acceptance of the Articles of Merger pursuant
to the PBCL, the Ohio Certificate of Merger pursuant to the OGCL and the
Delaware Certificate of Merger pursuant to the DGCL and (B) filings required
under the Securities Act and the securities or blue sky laws of the various
states; (iii) result in a default (or an event that might, with the passage of
time or the giving of notice or both, constitute a default) or give rise to any
right to terminate, cancel or accelerate or to any loss of benefit under any of
the terms, conditions, or provisions of any note, license, lease, agreement, or
other instrument or obligation to which BridgeStreet or Acquisition is a party
or by which BridgeStreet or Acquisition or any of their respective assets may be
bound, other than as previously disclosed in writing to the Company; or (iv)
violate any order, writ, injunction,
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decree, statute, rule, or regulation applicable to BridgeStreet or Acquisition
or any of their respective assets.
5.3 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the knowledge of BridgeStreet or Acquisition,
threatened, against, involving or affecting BridgeStreet or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau, agency, or instrumentality, that either
singly or in the aggregate might prevent BridgeStreet and Acquisition from
consummating the transactions contemplated hereby or that would have a material
adverse effect on the business, operations, or financial condition of
BridgeStreet and its subsidiaries taken as a whole.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by BridgeStreet
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable.
5.5 CHARTER DOCUMENTS. BridgeStreet has heretofore delivered to the
Company copies of its Articles of Incorporation, as amended to date, certified
by the appropriate governmental authority, and copies of its by-laws, as amended
to date, and a list of the officers and directors of BridgeStreet in office, all
as certified by its Secretary.
6. COVENANTS
6.1 BOARD OF DIRECTORS. Until such time as BridgeStreet completes an
initial public offering of its common stock (the "IPO"), the Stockholders and
the former stockholders of each of Temporary Housing Experts, Inc., Corporate
Lodgings, Inc. and Exclusive Interim Properties, Ltd. shall each have the right
to designate one director of BridgeStreet, and the Stockholders agree to vote
their Merger Stock (and any additional voting securities of BridgeStreet issued
in respect thereof) and take such other action as shall be necessary (i) to
cause each such designee to be elected to BridgeStreet's Board of Directors, and
(ii) fix the number of directors on the Board of Directors at six. The
Stockholders' initial designee pursuant to this Section 6.1 shall be Lynda
Clutchey.
6.2 CONFIDENTIAL INFORMATION. BridgeStreet will, and will cause its
employees and agents and Acquisition to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, BridgeStreet will promptly return to the Company or
destroy all documents (including all copies thereof) received by BridgeStreet
containing such Confidential Information. For purposes hereof, "Confidential
Information" shall mean all information of any kind concerning the Companies,
except information (i) ascertainable or obtained from public or published
information, (ii) received from a third party not known to BridgeStreet to be
under an obligation to any of the Companies to keep
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such information confidential, (iii) that is or becomes known to the public
(other than through a breach of this Agreement), (iv) that was in BridgeStreet's
possession before disclosure thereof to it in connection with this Agreement or
(v) that was independently developed by BridgeStreet.
6.3 BEST EFFORTS. Subject to the terms and conditions hereof each party
to this Agreement agrees to fully cooperate with the others and the others'
counsel, accountants and representatives in connection with any steps required
to be taken as part of its obligations under this Agreement. Each party to this
Agreement agrees that it will use its reasonable efforts to cause all conditions
to its obligations under this Agreement to be satisfied as promptly as possible,
and will not undertake a course of action inconsistent with this Agreement or
which would make any of its representations, warranties, agreements or covenants
in this Agreement untrue in any material respect or any conditions precedent to
its obligations under this Agreement unable to be satisfied at or prior to the
Closing.
6.4 PUBLIC ANNOUNCEMENTS. All public announcements, notices or other
communications regarding this Agreement and the transactions contemplated hereby
to third parties other than the parties hereto and their respective advisors and
the shareholders of the Companies shall require the prior approval of
BridgeStreet.
6.5 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it
hereunder. The Company shall promptly notify BridgeStreet in writing if at any
time prior to a closing in connection with the IPO it shall obtain knowledge of
any facts that might make it necessary or appropriate to amend or supplement the
Prospectus in order to make the statements contained therein not misleading or
comply with applicable law. The delivery of any notice pursuant to this Section
6.5 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
6.6 COVENANTS OF THE STOCKHOLDERS. The Stockholders hereby covenant and
agree with BridgeStreet and Acquisition that they shall:
(a) use their best efforts to take whatever action may be reasonably
necessary or desirable to (i) effect, perfect or confirm of record or otherwise
in the Surviving Corporation full right, title and interest in and to the
business, properties and assets now conducted or owned by the Company, free and
clear of all restrictions, liens, encumbrances, rights, title and interests in
others, or to collect, realize upon, gain possession of, or otherwise acquire,
full right, title and interest in and to such business, properties and assets;
(ii) carry out the intent and purposes of the transactions contemplated hereby;
and (iii) cause or permit BridgeStreet to undertake and complete the IPO.
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(b) provide to BridgeStreet the notifications required of the Company
under Section 6.5;
(c) (i) execute and deliver at the Closing the Employment Contract, the
Securities Representation Letter (as defined below) and the Non-Competition and
Non-Disclosure Agreement, and (ii) use their best efforts to obtain and deliver
at the Closing the Non- Competition and Non-Disclosure Agreements executed by
the persons set forth in Exhibit 7.1(c); and
(d) execute and deliver such other instruments and take such other
actions as may be reasonably required in order to carry out the intent of this
Agreement.
6.7 TAX FREE REORGANIZATION. From and after the Effective Time, neither
BridgeStreet nor the Surviving Corporation nor the Stockholders shall take or
suffer to be taken any action which will cause the Merger not to constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code.
6.8 CONSENT TO SERVICE OF PROCESS. Acquisition hereby consents to be
sued and served with process in the State of Ohio, and irrevocably appoints the
Secretary of State of Ohio as its agent to accept such service of process.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 The obligations of BridgeStreet and Acquisition to consummate the
Merger are subject to the satisfaction at the Closing, or waiver by BridgeStreet
in writing, in whole or in part, of each of the following conditions:
(a) BridgeStreet and Acquisition shall have received the opinion of
counsel to the Company, dated the date of the Closing and in form and substance
satisfactory to the BridgeStreet and its counsel, substantially to the effect
set forth on Exhibit 6.
(b) All proceedings taken by the Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for BridgeStreet acting reasonably.
(c) The Stockholders shall have executed and delivered to BridgeStreet
the Employment Contract, the Non-Competition and Non-Disclosure Agreement, and
the persons listed on Exhibit 7 shall have executed and delivered to
BridgeStreet the Non-Competition and Non-Disclosure Agreement.
(d) The Stockholders shall have executed and delivered to BridgeStreet
a letter agreement substantially in the form attached hereto as Exhibit 8 (the
"Securities Representation Letter").
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<PAGE> 22
(e) The Company shall have delivered to BridgeStreet and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of the
Company's shareholders.
(f) The Company shall have delivered to BridgeStreet such other
certificates, documents and opinions as BridgeStreet and its counsel shall
reasonably require.
7.2 The obligation of each Company to consummate this Agreement is
subject to the satisfaction at the Closing, or waiver by the Companies in
writing, in whole or in part, of each of the following conditions:
(a) The Companies shall have received the opinion, dated the date of
the Closing and in form and substance satisfactory to the Company and its
counsel, of Nutter, McClennen & Fish, LLP, counsel to BridgeStreet,
substantially to the effect set forth on Exhibit 9.
(b) All proceedings taken by BridgeStreet and Acquisition and all
instruments executed and delivered by BridgeStreet and Acquisition prior to the
date of the Closing in connection with the transactions herein contemplated
shall be satisfactory in form and substance to counsel for the Companies, acting
reasonably.
(c) BridgeStreet and Acquisition shall have delivered to the Companies
a certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
(d) BridgeStreet shall have executed and delivered each Employment
Contract.
(e) On the day following the Effective Time, the officers and directors
of BridgeStreet shall be as set forth on Exhibit 4.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK; LEGEND
The shares of Merger Stock will not have been registered under the
Securities Act or the blue sky laws of any state by reason of their contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and of such state laws. Such shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act and such state laws or an exemption therefrom.
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<PAGE> 23
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities,
losses, judgments, settlements, and expenses, including,
without limitation, all reasonable fees and disbursements of
counsel incident to the investigation or defense of any claim
or proceeding or threatened claim or proceeding.
(ii) "Indemnified Party" means each of BridgeStreet, the
Surviving Corporation, and their respective subsidiaries.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Stockholders shall, from and after the Effective Time, indemnify,
defend, and hold each Indemnified Party harmless from, against and in respect of
any and all Damages incurred by any Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by the Company or by the Stockholders in this
Agreement (collectively referred to herein as "Claims"), including, with respect
to Section 3.20 herein, any Claims arising out of the failure of any Company to
be duly qualified as a foreign corporation at all times in all jurisdictions in
which it conducts or has conducted business operations.
(c) The Companies' representations, warranties, covenants and
agreements set forth in Article 3 shall, for purposes of this Article 9, be
deemed to have survived the Effective Time notwithstanding any contrary terms of
this Agreement, and whenever such representations, warranties, covenants and
agreements are referred to in this Article 9, the text of the same as set forth
in Article 3 shall be deemed to be set forth in their entirety herein, and the
same are hereby incorporated herein by such references. Each such
representation, warranty, covenant and agreement shall be deemed to have been
relied upon by the party or parties to which made, notwithstanding any
investigation or inspection made by or on behalf of such party or parties and
shall not be affected in any respect by any such investigation or inspection.
9.2 LIMITATIONS OF INDEMNITY OBLIGATIONS. The indemnity obligations of
the Stockholders under this Agreement shall be subject to the following
limitations:
(a) The indemnity obligations of the Stockholders shall expire on the
third anniversary of the Effective Time (the "Cut-off Date"); provided, however,
that such obligations with respect to (i) the representations and warranties
contained in Sections 3.1, 3.2, 3.18 and 3.21 and Article 4 of this Agreement
shall continue forever without limitation, and (ii) the representations and
warranties regarding taxes, which are contained in Section 3.15, shall remain in
effect until all claims for taxes due by or on account of any of the
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<PAGE> 24
Companies for any period up to and including the Effective Time have been
settled and any statute of limitations period with respect to such taxes has
expired; and provided further that the indemnity obligations of the Stockholders
for Claims timely asserted by an Indemnified Party in the manner provided in
this Agreement shall continue until such Claims are finally resolved and
discharged.
(b) The aggregate indemnity obligations of each Stockholder for any
Damages shall not in any event exceed the amount set forth on Exhibit 10
opposite such Stockholder's name or, in the event of an IPO, the greater of (i)
such amount and (ii) the amount equal to the Merger Stock received by such
Stockholder (after adjusting for any stock split or combination) multiplied by
the price at which the BridgeStreet Common Stock is sold to the public in the
IPO.
(c) The Indemnified Parties shall be entitled to indemnification only
if the aggregate and collective Damages incurred or suffered by them exceed
$50,000, in which event they shall be entitled to indemnification of the full
amount of such Damages. Notwithstanding the immediately preceding sentence,
however, the Indemnified Parties shall be entitled to indemnification for
Damages incurred or suffered by them as a result of the breach of Section 3.15
without regard to such $50,000 basket.
9.3 NOTICE OF CLAIM. An Indemnified Party shall promptly notify the
Stockholders in writing of any Claim asserted by a third person that might give
rise to any indemnity obligation of the Stockholders hereunder (a "Third Party
Claim"), specifying in reasonable detail the nature thereof and indicating the
amount (estimated if necessary) of the Damages that have been or may be
sustained by the Indemnified Party. Failure of any Indemnified Party to promptly
give such notice shall not relieve the Stockholders of their obligation to
indemnify under this Article 9, but as a result of any such failure, the
Stockholders shall not be liable to the Indemnified Parties for the amount of
actual damages caused by such failure. Together with or following such notice,
the Indemnified Parties shall deliver to the Stockholders copies of all notices
and documents received by the Indemnified Parties relating to the Third Party
Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Stockholders shall
have the right (without prejudice to the right of any Indemnified Party to
participate at their own expense through counsel of their own choosing) to
defend against any Third Party Claim at their expense and through counsel of
their own choosing and to control such defense if they give written notice of
their intention to do so within 15 business days of their receipt of notice of
Third Party Claim. The Indemnified Parties shall cooperate fully in the defense
of such Third Party Claim and shall make available to the Stockholders or their
counsel all pertinent information under their control relating thereto. The
Indemnified Parties shall have the right to elect to settle any Third Party
Claim; provided, however, the Stockholders shall not have any indemnification
obligation with respect to any monetary payment to any third party required by
such settlement unless they shall have consented thereto. The Stockholders shall
have the right to elect to settle any Third Party Claim subject to the consent
of
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<PAGE> 25
BridgeStreet; provided, however, that if BridgeStreet fails to give such consent
within 15 business days of being requested to do so, BridgeStreet shall, at its
expense, assume the defense of such Third Party Claim and regardless of the
outcome of such matter, the Stockholders' liability hereunder shall be limited
to the amount of any such proposed settlement. The foregoing provisions
notwithstanding, in no event may the Stockholders (a) adjust, compromise or
settle any Third Party Claim (i) unless such adjustment, compromise or
settlement unconditionally releases BridgeStreet or the Surviving Corporation
from all liability or (ii) if such adjustment, compromise or settlement affects
the absolute and sole right of BridgeStreet or the Surviving Corporation to own
or use any of the Company's assets or (b) defend any Third Party Claim which, if
adversely determined, would materially impair the financial condition, business
or prospects of BridgeStreet or the Surviving Corporation.
10. MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Article 3 and 4 and except for the representations and warranties contained in
Article 5, the representations and warranties made in this Agreement shall not
survive beyond the Effective Time.
10.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Disclosure Schedule and the Exhibits hereto, the entire agreement among the
parties with respect to the subject matter hereto and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof (except for the
confidentiality and secrecy agreements that previously have been executed by
BridgeStreet, the Company and American Business Partners) and (b) shall not be
assigned by operation of law or otherwise, provided that BridgeStreet or
Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of BridgeStreet, but no such assignment shall relieve
BridgeStreet of its obligations hereunder.
10.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
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<PAGE> 26
If to BridgeStreet or Acquisition, to it at:
BridgeStreet International Inc.
67 Batterymarch Street, Suite 500
Boston, Massachusetts 02110
Attention: Donald W. Glazer, Secretary
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Secretary
If to the Company or any Stockholder, to it, him or her at:
Temporary Corporate Housing - Columbus, Inc.
1515 Bethel Road
Columbus, OH 43220
Attention: Lynda Clutchey
with a copy to:
Hahn Loeser Parks
One Columbus
10 West Broad Street, Suite 1800
Columbus, OH 43215-3420
Attention: Michael Becker, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
10.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
10.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
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<PAGE> 27
10.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
10.8 EXPENSES. All costs and expenses incurred subsequent to September
30, 1996 in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses; provided that the Companies'
costs and expenses, including all brokerage, investment banking, legal, and
accounting fees, shall be borne by the Stockholders.
10.9 JOINT AND SEVERAL. The representations, warranties, agreements,
covenants and obligations of the Stockholders under this Agreement are joint and
several.
10.10 PARTIES IN INTEREST. Except as provided in Section 6.1, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
10.11 PRINCIPAL OFFICE. The principal office of the Surviving
Corporation in the State of Delaware is located at Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware.
[Rest of Page Intentionally Left Blank]
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<PAGE> 28
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
BRIDGESTREET INTERNATIONAL INC.
By: /s/ Donald W. Glazer
-----------------------------------------
Title: Vice President
TEMPORARY CORPORATE HOUSING -COLUMBUS, INC.
By: /s/ Lynda Clutchey
-----------------------------------------
Title: President
TEMPORARY CORPORATE HOUSING - CLEVELAND, INC.
By: /s/ Lynda Clutchey
-----------------------------------------
Title: President
TEMPORARY CORPORATE HOUSING - CINCINNATI, INC.
By: /s/ Lynda Clutchey
-----------------------------------------
Title: President
TEMPORARY CORPORATE HOUSING - PITTSBURGH, INC.
By: /s/ Lynda Clutchey
-----------------------------------------
Title: President
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<PAGE> 29
TCHI ACQUISITION CORP.
By: /s/ Donald W. Glazer
-------------------------------------
Title: President
SLD PARTNERSHIP
By: /s/ Stephen Holzer
-------------------------------------
Title: Partner
/s/ David Holzer
--------------------------------------------
David Holzer
/s/ Beth Holzer
--------------------------------------------
Beth Holzer
/s/ Lynda Clutchey
--------------------------------------------
Lynda Clutchey
/s/ David Clutchey, III
--------------------------------------------
David Clutchey, III
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<PAGE> 1
EXHIBIT 10.4
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this Agreement") dated as of
December 30, 1996 is among BridgeStreet International Inc., a Delaware
corporation ("BridgeStreet"), CL Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of BridgeStreet ("Acquisition"), and Corporate Lodgings,
Inc., Corporate Lodgings of Minnesota, Inc., Corporate Lodgings of Wisconsin,
Inc., Corporate Lodgings of Pennsylvania, Inc. and Corporate Lodgings of
Kentucky, Inc., each an Ohio corporation (each individually, a "Company," and
collectively, the "Companies"), and Rocco DiLillo, the majority stockholder of
the Companies (the "Stockholder"), and provides for the merger of the Companies
with and into Acquisition (the "Merger"). The Boards of Directors of
BridgeStreet, Acquisition and the Companies have determined that the Merger is
in the best interests of their respective stockholders and the Merger has been
approved by the stockholders of the Companies and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Ohio Certificate of Merger" has the meaning given to it in Section
2.2.
1.2 "Balance Sheet Date" means June 30, 1996.
1.3 "Delaware Certificate of Merger" has the meaning given to it in
Section 2.2
1.4 "Closing" means the closing of this Agreement as provided in
Section 2.2.
1.5 "Code" means the Internal Revenue Code of 1986, as amended to date.
1.6 "Commission" means the Securities and Exchange Commission.
1.7 "DGCL" means the Delaware General Corporation Law.
1.8 "Disclosure Schedule" means the Disclosure Schedule attached hereto
as Schedule 1.
1.9 "Effective Time" means 12:01 a.m. EST on January 2, 1997, as such
date shall be specified in the Ohio Certificate of Merger filed with the
Secretary of State of the State of Ohio in accordance with Section 1701.81 of
the OGCL (as defined herein) and the Delaware Certificate of Merger filed with
the Secretary of State of the State of Delaware in accordance with Section 252
of the DGCL, unless Acquisition and the Company agree that
<PAGE> 2
another time shall be the Effective Time, in which case such time shall be
specified in the Certificates of Merger.
1.10 "Employment Contract" means the employment contract attached
hereto as Exhibit 1.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.12 "Financial Statements" means the financial statements of the
Companies attached hereto as Exhibit 2 consisting of the balance sheets as of
December 31, 1994 and 1995 and June 30, 1996 and the statements of operations,
changes in stockholder's equity and cash flows for each of the fiscal years
ended on December 31, 1994 and 1995 and for the six-month period ended on June
30, 1996.
1.13 "Merger Stock" means the shares of BridgeStreet Common Stock
exchanged for Shares pursuant to Section 2.7(c).
1.14 "BridgeStreet Common Stock" means the shares of Common Stock,
$0.01 par value, of BridgeStreet.
1.15 "Non-Competition and Non-Disclosure Agreement" means the
non-competition and non-disclosure agreement attached hereto as Exhibit 3.
1.16 "Securities Act" means the Securities Act of 1933, as amended.
1.17 "Share" means a share of Common Stock, $.01 par value per share,
of each of the Companies, and "Shares" means all of such shares of all of the
Companies.
1.18 "Surviving Corporation" means Acquisition.
1.19 "OGCL" means the Ohio General Corporation Law.
1.20 References to the "knowledge" of any entity or to things which any
entity does or does not "know" or which are "known" by any entity refer to the
knowledge of any of the entity's officers or directors.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the OGCL and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and be a subsidiary of BridgeStreet, and the separate corporate
existences of the Companies shall cease. Notwithstanding this Section 2.1,
BridgeStreet may elect with the consent of the
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<PAGE> 3
Companies (which consent shall not be unreasonably withheld) to merge into one
of the Companies Acquisition and the other Companies. In such event, the parties
agree to execute an appropriate amendment to this Agreement in order to reflect
the foregoing.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties (a) shall cause a certificate of
merger (the "Ohio Certificate of Merger") with respect to the Merger to be filed
and recorded in accordance with Section 1701.81 of the OGCL and shall cause a
certificate of merger (the "Delaware Certificate of Merger") with respect to the
Merger to be filed and recorded in accordance with Section 252 of the DGCL and
(b) shall take all such further actions as may be required by law to make the
Merger effective. The Merger shall be effective at the Effective Time. Before
the filing of the Ohio Certificate of Merger and the Delaware Certificate of
Merger, a closing (the "Closing") will be held at the offices of Nutter,
McClennen & Fish, LLP, One International Place, Boston, Massachusetts (or such
other place as the parties may agree) for the purpose of confirming all the
foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Section 1701.82 of the OGCL and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. it is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, except that Article FIRST of the Certificate of
Incorporation of the Surviving Corporation shall be amended as follows:
"FIRST: The name of the corporation shall be Corporate Lodgings, Inc."
2.6 DIRECTORS AND OFFICERS. On the day following the Effective Time,
the directors and officers of the Surviving Corporation shall be as set forth on
Exhibit 4, and each such person shall hold office until his or her respective
successor is duly elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
(a) Each share of capital stock of Acquisition that is issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding without change.
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<PAGE> 4
(b) All Shares held in the treasury of each Company immediately prior
to the Effective Time shall be cancelled, without the payment of any
consideration therefor.
(c) All other Shares which are outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holders
thereof into and be exchangeable for such numbers of shares of BridgeStreet
Common Stock as are set forth on Exhibit 5A hereto, subject to the payment of
cash in lieu of fractional shares in accordance with Section 2.8 hereof, with
the effect that the stockholder and share ownership of BridgeStreet will be as
set forth on Exhibit 5B immediately after the Merger.
2.8 EXCHANGE OF AND PAYMENT FOR SHARES.
(a) As soon as practicable after the Effective Time and after surrender
to BridgeStreet of any certificate which prior to the Effective Time shall have
represented any Shares, subject to the provisions of paragraph (c) of this
Section 2.8 and to the provisions of Article 8, BridgeStreet shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing the
shares of BridgeStreet Common Stock into which any shares previously represented
by the surrendered certificate shall have been converted at the Effective Time
and a check payable to such person representing the payment of cash in lieu of
any fractional share determined in accordance with paragraph (f) of this Section
2.8. Until surrendered as contemplated by the preceding sentence, each
certificate which immediately prior to the Effective Time shall have represented
any Shares shall be deemed at and after the Effective Time to represent only the
right to receive upon such surrender the certificates and payment contemplated
by the preceding sentence.
(b) No dividends or other distributions declared after the Effective
Time with respect to BridgeStreet Common Stock shall be paid to the holder of
any unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.8. After the
surrender of such certificate in accordance with this Section 2.8, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of BridgeStreet Common Stock represented by such
certificate.
(c) If any cash or certificate representing shares of BridgeStreet
Common Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to BridgeStreet any transfer or
other taxes required by reason of the issuance of a certificate representing
shares of BridgeStreet Common Stock in any name other than that of the
registered holder of the certificate surrendered, or otherwise required, or
shall establish to the satisfaction of BridgeStreet that such tax has been paid
or is not payable.
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<PAGE> 5
(d) All rights to receive BridgeStreet Common Stock and cash in lieu of
fractional shares shall be deemed, when paid or issued hereunder, to have been
paid or issued, as the case may be, in full satisfaction of all rights
pertaining to the Shares.
(e) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of BridgeStreet Common Stock into which
they were converted, or both, as provided herein.
(f) Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of BridgeStreet Common
Stock shall be issued upon the surrender for exchange of certificates which
prior to the Effective Time shall have represented any Shares, no dividend or
distribution of BridgeStreet shall relate to any fractional share and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of BridgeStreet. In lieu of any fractional shares, there
shall be paid to each holder of Shares who otherwise would be entitled to
receive a fractional share of BridgeStreet Common Stock an amount of cash equal
to the fair value of such fractional shares as of the Effective Time as
conclusively determined in good faith by the Board of Directors of the Surviving
Corporation.
2.9 ADJUSTMENTS. If, between the date of this Agreement and the
Effective Time, the outstanding shares of BridgeStreet Common Stock shall have
been changed into a different number of shares or a different class by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with a
record date within said period, the number of shares of BridgeStreet Common
Stock into which the Shares are to be converted shall be correspondingly and
appropriately adjusted.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
The Companies represent and warrant to BridgeStreet and Acquisition
that, except as expressly provided in the Disclosure Schedule by specific
reference to a Section of this Article 3, the following representations and
warranties are true and correct as of the date hereof:
3.1 ORGANIZATION AND AUTHORITY. Each Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Ohio and has full corporate power and authority to conduct its business and own
its properties as now conducted and owned. Each Company is duly qualified or
licensed and in good standing as a foreign corporation in those states listed on
the Disclosure Schedule, which are the only jurisdictions in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary. Each Company has
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<PAGE> 6
full corporate power and authority to execute and deliver this Agreement and to
consummate the trans actions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors and stockholders of
each Company, and no other corporate proceedings on the part of each Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
each Company and constitutes a legal, valid and binding obligation of each
Company enforceable against it in accordance with its terms.
3.2 CAPITALIZATION OF THE COMPANY; NO SUBSIDIARIES. The authorized
capital and number of issued and outstanding shares of capital stock of each
Company are set forth on the Disclosure Schedule. No Shares are held in any
Company's treasury. The issued and outstanding Shares of each Company are duly
authorized, validly issued, fully paid and non-assessable and are owned of
record and beneficially by the holders thereof. No Company has any other
authorized class of capital stock other than the Common Stock. No Company owns
and no Company has owned any shares of capital stock or other securities of, or
any other interest in, nor does any Company control or has it controlled,
directly or indirectly, any other corporation, association, joint venture,
partnership, or other business organization. The outstanding Shares have been
issued and sold in full compliance with all applicable federal and state
securities laws. No holder of Shares has any dissenting shareholder or appraisal
rights with regard to the Merger.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any of the Shares or the
acquisition of shares of any other class of capital stock of any Company, and no
Company has otherwise agreed to issue or sell any shares of its capital stock or
has any obligation to register any of the Shares under the Securities Act. No
Company is obligated directly, indirectly or contingently to purchase any
Shares.
3.4 NAME. No Company has had any other name or conducts or operates, or
has heretofore conducted or operated, its business under any name other than its
current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of
this Agreement, together with all documents and instruments contemplated herein,
the consummation of the transactions contemplated hereby and thereby, and the
compliance with the terms, conditions and provisions hereof by each Company do
not (i) contravene any provisions of any Company's articles of incorporation or
By-Laws; (ii) conflict with or result in a breach of or constitute a default (or
an event that might, with the passage of time or the giving of notice or both,
constitute a default) or give rise to any right to terminate, cancel or
accelerate or to any loss of benefit under any of the terms, conditions, or
provisions of any lease, indenture, mortgage, loan, or credit agreement or any
other agreement or instrument to which any Company is a party or by which it or
its assets may be bound or affected; (iii) violate or constitute a breach of any
decision, judgment, or order of any court or arbitration
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board or of any governmental department, commission, board, agency, or
instrumentality, domestic or foreign, by which any Company is bound or to which
it is subject; or (iv) violate any applicable law, rule, or regulation to which
any Company or any of its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a waiting period or a period for
disapproval by, any governmental authority is required for any Company to
consummate the transactions contemplated by this Agreement, except for filing
and acceptance of the Ohio Certificate of Merger pursuant to the OGCL and for
filing and acceptance of the Delaware Certificate of Merger pursuant to the
DGCL.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present (subject, in the case of
the unaudited statements, to (i) recurring audit adjustments normal in nature
and amount and (ii) disclosure of notes in connection therewith) the financial
position of each Company as of their respective dates, and the results of
operations and cash flows for the periods presented therein, all in conformity
with generally accepted accounting principles applied on a consistent basis,
except as otherwise noted therein.
(b) Each Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and with
statutory accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the most recent balance sheet in the Financial Statements, no Company
(a) had as of the Balance Sheet Date any liability or obligation of any nature,
whether accrued, absolute, contingent, or otherwise and whether due or to become
due, including without limitation liabilities that may become known or arise
after the date hereof and which relate to transactions entered into or any state
of facts existing on or before the Balance Sheet Date which would be required
under generally accepted accounting principles to be shown in such balance sheet
or referenced in the notes thereto, and (b) has incurred since the Balance Sheet
Date any such liability or obligation except in the ordinary course of business.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, no Company has taken or agreed to take any action that would
obligate such Company to have:
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(a) taken any action or entered into or agreed to enter into any
transaction, agreement, or commitment other than in the ordinary course of
business;
(b) entered into or agreed to enter into any transaction, agreement, or
commitment, suffered the occurrence of any event or events, or experienced any
change in financial condition, business, results of operations, prospects, or
otherwise, (i) that has interfered or is reasonably likely to interfere with the
normal and usual operations of such Company's business or its business prospects
or (ii) that, singly or in the aggregate, has resulted or is reasonably likely
to result in a material adverse change in the financial condition, assets,
liabilities, earnings, business, or business prospects of such Company;
(c) incurred any indebtedness for borrowed money, or assumed,
guaranteed, endorsed, or otherwise become responsible for the obligations of any
other individual, partnership, firm, or corporation (except to endorse checks
for collection for deposit in the ordinary course of business), or made any loan
or advance to any individual, partnership, firm, or corporation (except for
loans to any employee of such Company in the ordinary course of business which
in the aggregate do not exceed $5,000);
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of such Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to such Company, or any claims held
by such Company;
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer, or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm, or
corporation;
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect of the
capital stock of such Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of such Company;
(g) paid any long-term liability, otherwise than in accordance with its
terms;
(h) paid any bonus compensation to any officer, director, shareholder,
or employee of such Company or otherwise increased the compensation paid or
payable to any of the foregoing;
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets;
(j) contracted with or committed to any third party (i) to sell any
capital stock of such Company, (ii) to sell any material assets of such Company
other than in the ordinary
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course of business, (iii) to effect any merger, consolidation, or other
reorganization of such Company, or (iv) to enter into any agreement with respect
thereto; or
(k) incurred any expenses or fees of counsel, accountants or
consultants for personal services rendered to the Stockholder after September
30, 1996 in preparation for or in connection with this Agreement, the
transactions contemplated hereunder or otherwise.
3.10 TITLE TO ASSETS. The Disclosure Schedule describes fully all real
property owned by each Company. Each Company has good and clear record and
marketable title to such real property and good and sufficient title to all
other properties owned by it, including, without limitation, all property
reflected in the most recent balance sheet in the Financial Statements, other
than property disposed of in the ordinary course of business subsequent to the
Balance Sheet Date (none of such dispositions being materially adverse), free
and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the most recent
balance sheet in the Financial Statements, or as specified in the notes thereto,
(b) the lien of taxes not yet due or payable or being contested in good faith by
appropriate proceedings and (c) such imperfections of title and encumbrances, if
any, as do not materially detract from the value or interfere with the use of
the properties subject thereto or affected thereby, or otherwise materially
impair business operations.
3.11 INTELLECTUAL PROPERTY. Each Company owns, or is licensed or
otherwise has the full and unrestricted right to use, all trademarks, trade
names, service marks, copyrights, technology, know-how, trade secrets and
techniques used in its business (collectively, the "Proprietary Information").
All such trademarks, trade names, service marks and federally registered
copyrights are listed on the Disclosure Schedule. No Company has any obligation
still outstanding to compensate other persons for the use of any Proprietary
Information or for the sale of any service comprising or derived from
Proprietary Information. No Company has granted to any other person any license
or other right to use in any manner any of the Proprietary Information, whether
or not requiring the payment of royalties. To the knowledge of each Company (a)
no other person has a right or license granted directly or indirectly by or
through any Company to use any Proprietary Information; (b) none of the
Proprietary Information is being infringed by others, or is subject to any
outstanding order, decree, judgment or stipulation; (c) there are no claims or
demands of any other person, and no proceedings have been instituted, or are
pending or threatened, relating to the Proprietary Information; and (d) no
proceeding has been filed or threatened charging any Company with infringement
of any patent, trademark, copyright, or other proprietary right, nor is there
any basis for any such proceeding.
3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All transactions heretofore between each Company and each of its
stockholders, officers or directors or any Affiliate (as defined below) of such
stockholder, officer or director have been conducted on an arm's-length basis on
terms no different than
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would be obtained if the transaction had been between such Company and an
unrelated party. Except for transactions reflected on the latest balance sheet
or accompanying schedules in the Financial Statements there are no debts or
other obligations of any Company outstanding to or from each stockholder,
officer or director or Affiliate of such stockholder, officer or director of
such Company. As used herein, "Affiliate" of a stockholder, officer or director
means any member of the immediate family of such person or any entity in which
such person or any such family member is an officer or owner of more than five
percent of the outstanding equity securities.
(b) The Disclosure Schedule contains a true and complete description of
each transaction conducted or completed, in whole or in part, during the current
fiscal year, or is currently proposed, between each Company and any officer,
director or stockholder thereof or any Affiliate of any such person. With
respect to each of the last three complete fiscal years, the Disclosure Schedule
sets forth all information that would be required to be provided under Items 402
and 404 of Regulation S-K of the Commission under the Securities Act if a
registration statement on Form S-1 were filed by such Company with the
Commission on the date hereof.
3.13 MATERIAL CONTRACTS. The Disclosure Schedule lists all material
leases, contracts, instruments, agreements or commitments (whether written or
oral) relating to the conduct of the business of each Company (the "Material
Contracts"). Each Company has delivered to BridgeStreet true and correct copies
of each Material Contract and a written description, accurate in all material
respects, of each oral arrangement so listed. Without limiting the generality of
the foregoing, the aforesaid list includes all contracts, agreements and
instruments of the following types to which each Company is a party:
(a) labor union contracts, together with a list of all labor unions
representing or attempting to represent employees of each Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements,
agreements providing for termination or severance benefits, non-competition
agreements, non-disclosure agreements, contracts for professional personal
services, contracts with other persons engaged in sales or distributing
activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, shareholder or agent of each Company
relating to present or
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future compensation or other benefits available to such person or otherwise,
together with a list of the names and current annual salary rates of all present
officers and employees of each Company whose current salary rate is $25,000 or
more and any bonuses paid or payable to each such person for the 1995 fiscal
year and to date in the 1996 fiscal year;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of personal property, contracts for the
purchase or sale of real or personal property, and agreements for financing;
(f) licenses and other contractual rights to any Proprietary
Information, including without limitation, any copyright, trademark, service
mark or trade name, whether domestic or foreign, owned in whole or in part or
used by each Company;
(g) other license agreements (as licensor or licensee);
(h) property, casualty, crime, directors and officers, and other forms
of insurance;
(i) bank accounts and safety deposit boxes identifying all authorized
signatories, together with a list of all effective powers of attorney granted by
each Company to anyone;
(j) agreements, contracts or other arrangements to which each Company
is a guarantor, surety or endorser;
(k) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of each Company's
requirements for a particular product from a single supplier or to a single
customer;
(l) contracts, agreements, commitments, arrangements or understandings
limiting the freedom of each Company from competing in any line of business or
with any person or entity;
(m) leases of real property with a term of more than one year
(regardless of whether the Company is the lessor or lessee); and
(n) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (m) above involving payment by
or to each Company of more than $50,000 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of the Company.
All of the Material Contracts are in full force and effect. Except to the extent
that a material adverse effect on the Company's financial condition, assets,
liabilities, earnings, business or prospects would not result if the following
was not true: (A) each Company and each other party to each of the Material
Contracts have performed all the obligations required to be performed by them to
date, have received no notice of default and are not in default (with
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due notice or lapse of time or both) under any of the Material Contracts; (B)
each Company has no present expectation or intention of not fully performing all
its obligations under any of the Material Contracts, and each Company has no
knowledge of any breach or anticipated breach by any other party to any of the
Material Contracts; and (C) there exists no actual or, to the knowledge of each
Company, threatened termination, cancellation or limitation of the business
relationship of such Company with any party to any Material Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the knowledge of any Company, threatened
against any Company or its officers or directors (in their capacities as such)
in any court, at law or in equity, or before any arbitration board or any
governmental department, commission, board, bureau, agency, or instrumentality;
nor has any Company been, nor is it, subject to any orders, awards, fines,
judgments, decrees, or injunctions the effect of which in the aggregate would
have a material adverse effect on the business or financial position or
prospects of such Company. No Company knows or has grounds to know of any basis
for any such action, suits, or other form of proceeding or disputes or of any
governmental investigation relating to such Company or its business.
3.15 TAXES. Each Company has filed all tax returns, reports and
information filings that are required to be filed, including, without
limitation, federal (U.S.), state, and municipal income or franchise tax
returns, and has paid all taxes shown as due on such returns, together with any
interest and penalties accrued with respect thereto. No Company is required to
pay any other taxes except as shown in such tax returns, reports and information
filings. All such returns, reports, and information filings required to be
filed, including any amendments to date, have been prepared in good faith and
without misrepresentation. Each Company has either paid or, in accordance with
generally accepted accounting principles applied consistently with prior
periods, adequately provided for, by reserves or other proper accounting
treatment shown in the records and books of account, its liability for all taxes
of every kind, including without limitation its liability for federal, state,
and municipal income or franchise tax for the current tax year and for all prior
years. No Company has any knowledge of any proposed or threatened assessment or
reassessment of federal, state, or municipal income or franchise taxes. The
United States federal income tax returns of each Company have been examined by
the Internal Revenue Service for all taxable years through and including the
fiscal year ended as set forth in the Disclosure Schedule. In addition, at the
date hereof all withholding tax or source deductions have been deducted and
remitted as due to the appropriate governmental authority as required by law or
each Company has adequately provided for such deductions by reserves or other
proper accounting treatment in its books and records of account.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1996 there has not
been (a) any material adverse change in the business, affairs or prospects of
any Company nor, to the best of each Company's knowledge, are any such changes
threatened, anticipated or contemplated; (b) any actual or, to each Company's
knowledge, threatened, anticipated or
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contemplated damage, destruction, loss, conversion, termination, cancellation,
default or taking by eminent domain or other action by governmental authority
which has materially affected or may hereafter materially affect the properties,
assets, business affairs or prospects of any Company; (c) any material and
adverse pending or, to each Company's knowledge, threatened, anticipated or
contemplated dispute of any kind with any material customer, supplier, source of
financing, employee, landlord, subtenant or licensee of any Company, or any
pending or, to each Company's knowledge, threatened, anticipated or contemplated
occurrence or situation of any kind, nature or description which is reasonably
likely to result in any reduction in the amount, or any change in the terms or
conditions, of business with any material customer, supplier, or source of
financing; or (d) any pending, or, to each Company's knowledge, threatened,
anticipated or contemplated occurrence or situation of any kind, nature or
description materially and adversely affecting the properties, assets, business,
affairs or prospects of any Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1993 no Company:
(a) has made any contributions, payments or gifts of its property to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has established or maintained any unrecorded fund or
asset for any purpose, or has made any false or artificial entries on its books
or records for any reason; (c) has made any payments to any person with the
intention or understanding that any part of such payment was to be used for any
other purpose other than that described in the documents supporting the payment;
or (d) has made any contribution, or has reimbursed any political gift or
contribution made by any other person, to candidates for public office, whether
Federal, state or local, where such contribution or reimbursement would be in
violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by any
Company or the trusts created thereunder has engaged in a prohibited transaction
which could subject any such employee benefit plan or trust to a material tax or
penalty on prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by any
Company which are employee pension benefit plans and which are subject to Title
IV of ERISA or the trusts created thereunder has been terminated so as to result
in a material liability of any Company under ERISA nor has any such employee
benefit plan of any Company incurred any material liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, other than for
required insurance premiums which have been paid or are not yet due and payable;
no Company has withdrawn from or caused a partial withdrawal to occur with
respect to any Multi-employer Plan resulting in any assessed and unpaid
withdrawal liability; each Company has made or provided for all contributions to
all such employee pension benefit plans which it maintains and which are
required as of the end of the most recent
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fiscal year under each such plan; no Company has incurred any accumulated
funding deficiency with respect to any such plan, whether or not waived; nor has
there been any reportable event, or other event or condition, which presents a
material risk of termination of any such employee benefit plan by the Pension
Benefit Guaranty Corporation.
(c) The present value of all vested accrued benefits under the employee
pension benefit plans which are subject to Title IV or ERISA, maintained by each
Company, did not, as of the most recent valuation date for each such plan,
exceed the then current value of the assets of such employee benefit plans
allocable to such benefits.
(d) To the best of each Company's knowledge, (i) each employee pension
benefit plan subject to Title IV of ERISA, maintained by each Company, has been
administered in accordance with its terms in all material respects and is in
compliance in all material respects with all applicable requirements of ERISA
and other applicable laws, regulations and rules, and (ii) the Company has filed
in a timely manner with respect to all such plans those actuarial reports,
annual reports and all other filings required by all such applicable
requirements of ERISA and other applicable laws, regulations and rules, and the
Company has delivered to BridgeStreet a copy of any such report filed since
December 31, 1993.
(e) As used in this Agreement, the terms "employee benefit plan",
"employee pension benefit plan", "accumulated funding deficiency", "reportable
event", and "accrued benefits" shall have the respective meanings assigned to
them in ERISA, and the term "prohibited transactions" shall have the meaning
assigned to it in Code Section 4975 and ERISA.
(f) No Company has any liability disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of any Company.
3.19 LABOR MATTERS. A true and complete list of all of each Company's
officers and employees (the "Employees") and their respective salaries, wages,
other compensation, dates of employment, date and amount of last salary
increase, and positions has been provided to BridgeStreet by the Company. There
are no material disputes, employee grievances, or disciplinary actions pending
or, to the knowledge of any Company, threatened by or between any Company and
any of the Employees. With respect to the Employees, each Company has complied
in all respects with all provisions of all laws relating to the employment of
labor and has no liability for any arrears of wages or taxes or penalties for
failure to comply with any such law or for any severance or termination payments
of any type. No election or proceedings relating to the labor relations of any
Company is pending or, to any Company's knowledge, threatened. No Company has
had any material union activity or had any material labor trouble of any kind,
nature or description at any time heretofore. All personnel policies and manuals
of each Company are listed on the Disclosure Statement and true and complete
copies thereof have been provided to BridgeStreet. No
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Employee or consultant of any Company shall have the right to receive from the
Surviving Corporation or BridgeStreet a severance payment or other payment in
the nature thereof in the event his or her employment is terminated by the
Surviving Corporation following the Merger, whether such right arises as a
matter of contract, past policy or understanding, by operation of law, or
otherwise.
3.20 PERMITS; COMPLIANCE WITH LAW. Each Company possesses all
franchises, permits, licenses, certificates, approvals, and other authorizations
("Permits") necessary to own or lease and operate its properties and to conduct
its business as now conducted, except for incidental Permits that would be
readily obtainable without undue burden in the event of any lapse, termination,
cancellation, or forfeiture or that if not obtained would not materially and
adversely affect each Company's business. All such material Permits are in full
force and effect, and, to the knowledge of each Company, no suspension or
cancellation of any of them is threatened, and no material Permits will be
adversely affected by the consummation of the Merger. No Company has failed nor
is it failing to comply with any applicable law, rule, regulation, or order,
where such failure would have a material adverse effect on any Company's
business, and there are no proceedings pending or, to each Company's knowledge,
threatened, nor has any Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. Each Company is in material compliance with
all applicable existing federal, state and local laws and regulations relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of any Company. The term "Hazardous Material" means (a) any "hazardous
substance" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, (b) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act, as amended, (c) any petroleum or
petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or
contaminant or hazardous, dangerous, or toxic chemical, material, waste or
substance regulated under or within the meaning of any other Environmental Law.
There is no alleged liability, or to each Company's knowledge, potential
liability (including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) of such
Company arising out of, based on or resulting from (i) the presence or release
into the environment of any Hazardous Material at any location, whether or not
owned by any Company or (ii) any violation or alleged violation of any
Environmental Law, which alleged or potential liability, singly or in the
aggregate, would have a material and adverse effect on the condition, financial
or otherwise, or the earnings, business affairs or business prospects of such
Company.
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3.22 LEASES. The Disclosure Schedule sets forth as of October 31, 1996
the number of units of real property leased by each Company (each a "Leased
Premises"). Except to the extent that a material adverse effect on the Company's
financial condition, assets, liabilities, earnings, business or prospects would
not occur if the following, in the aggregate, was not true: (a) each lease
covering a Leased Premises is in full force and effect (there existing no
default under any such lease which, with the lapse of time or notice or
otherwise, would entitle the lessor or lessee to terminate the same); (b) each
Company has the right to use the Leased Premises in accordance with the terms of
the respective leases free and clear of all claims or other interests or rights
of third parties; (c) there is no violation of any covenant, restriction or
other agreement or understanding, oral or written, affecting or relating to
title or use of any Leased Premises; and (d) there is no pending or threatened
condemnation or similar proceedings or assessments affecting any of the Leased
Premises, nor to each Company's knowledge is any such condemnation or assessment
threatened or contemplated by any governmental authority.
3.23 CORPORATE RECORDS. The corporate record books of each Company are
in good order, complete, accurate, up to date, with all necessary signatures,
and set forth all meetings and actions taken by the shareholders and directors,
and all votes of the shareholders or Directors set forth in certificates
furnished to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by each Company have been properly maintained and are in good operating
order and repair, free from known defects in construction or design, sound and
properly functioning, usable and not obsolete, and in compliance with all
zoning, building and fire codes and all other laws, rules, regulations and
requirements of governmental authorities and the fire insurance rating
association having jurisdiction, except to the extent that the failure to do so,
in the aggregate, would not have a material adverse effect on the financial
condition, assets, liabilities, earnings, business or prospects of such Company.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of each
Company shown or reflected on the most recent balance sheet in the Financial
Statements, less the reserve for doubtful accounts in the amount shown on such
balance sheet, are valid and enforceable claims and subject to no set off or
counterclaim and will be collectible in the normal course of business. No
Company has accounts or loans receivable from any of its directors, officers or
employees (other than loans to any employee in the ordinary course of business
which in the aggregate do not exceed $5,000).
3.26 CHARTER DOCUMENTS. Each Company has heretofore delivered to
BridgeStreet copies of its articles of incorporation, as amended to date,
certified by the appropriate governmental authority, and copies of its by-laws,
as amended to date, and a list of the officers and directors of such Company in
office, all as certified by its Secretary.
3.27 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of fact set forth
in this Agreement (including without limitation all information in the Financial
Statements and the
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other Schedules, Exhibits, and attachments hereto, taken as a whole) or
otherwise provided by or on behalf of each Company to BridgeStreet is false or
misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) or any information provided
to BridgeStreet by or on behalf of any Company omit to state a material fact
necessary in order to make the statements made or information disclosed, in the
light of the circumstances under which they were made or disclosed, not
misleading.
3.28 BROKERS. No broker, finder, or investment banker is entitled to
any brokerage, finder's, or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
3.29 TAX-FREE REORGANIZATION. No Company has any reason to believe that
the Merger will not qualify as a reorganization within the meaning of Section
368 of the Code.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to BridgeStreet and Acquisition
as follows:
4.1 TITLE TO THE SHARES. The stockholders of the Companies own all
issued and outstanding Shares free and clear of any claims, liens, charges,
encumbrances, security interests and rights of others whatsoever, and such
Shares are not bound by or subject to any proxy, agreement, voting trust or
other restriction regarding the voting thereof.
4.2 AUTHORITY. The Stockholder has full power, authority and capacity
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by the Stockholder and constitutes
a legal, valid and binding obligation of the Stockholder enforceable against him
in accordance with its terms.
5. REPRESENTATIONS AND WARRANTIES OF BRIDGESTREET AND ACQUISITION
BridgeStreet and Acquisition represent and warrant to the Companies and
the Stockholder as follows:
5.1 ORGANIZATION AND AUTHORITY. Each of BridgeStreet and Acquisition is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified to do business as a
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foreign corporation in each jurisdiction where the failure to be so qualified
would, in the aggregate, have a material adverse effect on the business or
financial condition of BridgeStreet. Each of BridgeStreet and Acquisition has
full corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the respective Boards of Directors of
BridgeStreet and Acquisition and the sole stockholder of Acquisition, and no
other corporate proceedings on the part of BridgeStreet or Acquisition are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by each of BridgeStreet and Acquisition and constitutes a
valid and binding agreement of each, enforceable against each in accordance with
its terms.
5.2 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by BridgeStreet and Acquisition nor the consummation
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective charter documents or By-Laws of
BridgeStreet or Acquisition; (ii) require any consent, approval, authorization,
or permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) filing the Ohio Certificate of Merger pursuant to the OGCL
and the Delaware Certificate of Merger pursuant to the DGCL and (B) filings
required under the Securities Act and the securities or blue sky laws of the
various states; (iii) result in a default (or an event that might, with the
passage of time or the giving of notice or both, constitute a default) or give
rise to any right to terminate, cancel or accelerate or to any loss of benefit
under any of the terms, conditions, or provisions of any note, license, lease,
agreement, or other instrument or obligation to which BridgeStreet or
Acquisition is a party or by which BridgeStreet or Acquisition or any of their
respective assets may be bound, other than as previously disclosed in writing to
the Company; or (iv) violate any order, writ, injunction, decree, statute, rule,
or regulation applicable to BridgeStreet or Acquisition or any of their
respective assets.
5.3 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the knowledge of BridgeStreet or Acquisition,
threatened, against, involving or affecting BridgeStreet or Acquisition, in any
court, at law or in equity, or before any arbitration board or any governmental
department, commission, board, bureau, agency, or instrumentality, that either
singly or in the aggregate might prevent BridgeStreet and Acquisition from
consummating the transactions contemplated hereby or that would have a material
adverse effect on the business, operations, or financial condition of
BridgeStreet and its subsidiaries taken as a whole.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by BridgeStreet
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable.
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5.5 CHARTER DOCUMENTS. BridgeStreet has heretofore delivered to the
Company copies of its Articles of Incorporation, as amended to date, certified
by the appropriate governmental authority, and copies of its by-laws, as amended
to date, and a list of the officers and directors of BridgeStreet in office, all
as certified by its Secretary.
6. COVENANTS
6.1 BOARD OF DIRECTORS. Until such time as BridgeStreet completes an
initial public offering of its common stock (the "IPO"), the Stockholder and the
former stockholders of each of Temporary Housing Experts, Inc., Temporary
Corporation Housing Columbus, Inc. and Exclusive Interim Properties, Ltd. shall
each have the right to designate one director of BridgeStreet, and the
Stockholder and such stockholders agree to vote their Merger Stock (and any
additional voting securities of BridgeStreet issued in respect thereof) and take
such other action as shall be necessary (i) to cause each such designee to be
elected to BridgeStreet's Board of Directors, and (ii) fix the number of
directors on the Board of Directors at six. The Stockholders' initial designee
pursuant to this Section 6.1 shall be Rocco DiLillo.
6.2 CONFIDENTIAL INFORMATION. BridgeStreet will, and will cause its
employees and agents and Acquisition to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any person. If this
Agreement is terminated, BridgeStreet will promptly return to each Company or
destroy all documents (including all copies thereof) received by BridgeStreet
containing such Confidential Information. For purposes hereof, "Confidential
Information" shall mean all information of any kind concerning the Companies,
except information (i) ascertainable or obtained from public or published
information, (ii) received from a third party not known to BridgeStreet to be
under an obligation to one of the Companies to keep such information
confidential, (iii) that is or becomes known to the public (other than through a
breach of this Agreement), (iv) that was in BridgeStreet's possession before
disclosure thereof to it in connection with this Agreement or (v) that was
independently developed by BridgeStreet.
6.3 BEST EFFORTS. Subject to the terms and conditions hereof each party
to this Agreement agrees to fully cooperate with the others and the others'
counsel, accountants and representatives in connection with any steps required
to be taken as part of its obligations under this Agreement. Each party to this
Agreement agrees that it will use its reasonable efforts to cause all conditions
to its obligations under this Agreement to be satisfied as promptly as possible,
and will not undertake a course of action inconsistent with this Agreement or
which would make any of its representations, warranties, agreements or covenants
in this Agreement untrue in any material respect or any conditions precedent to
its obligations under this Agreement unable to be satisfied at or prior to the
Closing.
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6.4 PUBLIC ANNOUNCEMENTS. All public announcements, notices or other
communications regarding this Agreement and the transactions contemplated hereby
to third parties other than the parties hereto and their respective advisors and
the shareholders of the Companies shall require the prior approval of
BridgeStreet.
6.5 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the
"Notifying Party") shall give prompt notice to the other parties of (i) the
occurrence or non-occurrence of any event that would be likely to cause any
representation or warranty of the Notifying Party contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure of the Notifying Party to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder. Each Company shall promptly notify BridgeStreet in writing if
at any time prior to a closing in connection with the IPO it shall obtain
knowledge of any facts that might make it necessary or appropriate to amend or
supplement the Prospectus in order to make the statements contained therein not
misleading or comply with applicable law. The delivery of any notice pursuant to
this Section 6.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.6 COVENANTS OF THE STOCKHOLDER. The Stockholder hereby covenants and
agrees with BridgeStreet and Acquisition that he shall:
(a) use his best efforts to take whatever action may be reasonably
necessary or desirable to (i) effect, perfect or confirm of record or otherwise
in the Surviving Corporation full right, title and interest in and to the
business, properties and assets now conducted or owned by each Company, free and
clear of all restrictions, liens, encumbrances, rights, title and interests in
others, or to collect, realize upon, gain possession of, or otherwise acquire,
full right, title and interest in and to such business, properties and assets;
(ii) carry out the intent and purposes of the transactions contemplated hereby;
and (iii) cause or permit BridgeStreet to undertake and complete the IPO.
(b) provide to BridgeStreet the notifications required of each Company
under Section 6.5;
(c) (i) execute and deliver at the Closing the Employment Contract, the
Securities Representation Letter (as defined below) and the Non-Competition and
Non-Disclosure Agreement, and (ii) use his best efforts to obtain and deliver at
the Closing the Non-Competition and Non-Disclosure Agreements executed by the
persons set forth in Exhibit 7.1(c) and any Securities Representation Letters
executed by stockholders that are not parties to this Agreement; and
(d) execute and deliver such other instruments and take such other
actions as may be reasonably required in order to carry out the intent of this
Agreement.
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6.7 TAX FREE REORGANIZATION. From and after the Effective Time, neither
BridgeStreet nor the Surviving Corporation nor the Stockholder shall take or
suffer to be taken any action which will cause the Merger not to constitute a
reorganization within the meaning of Section 368(a)(2)(D).
6.8 CONSENT TO SERVICE OF PROCESS. Acquisition hereby consents to be
sued and served with process in the State of Ohio, and irrevocably appoints the
Secretary of State of Ohio as its agent to accept such service of process.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 The obligations of BridgeStreet and Acquisition to consummate the
Merger are subject to the satisfaction at the Closing, or waiver by BridgeStreet
in writing, in whole or in part, of each of the following conditions:
(a) BridgeStreet and Acquisition shall have received the opinion of
counsel to each Company, dated the date of the Closing and in form and substance
satisfactory to the BridgeStreet and its counsel, substantially to the effect
set forth on Exhibit 6.
(b) All proceedings taken by each Company and all instruments executed
and delivered by the Company prior to the date of the Closing in connection with
the transactions herein contemplated shall be satisfactory in form and substance
to counsel for BridgeStreet acting reasonably.
(c) The Stockholder shall have executed and delivered to BridgeStreet
the Employment Contract, the Non-Competition and Non-Disclosure Agreement, and
the persons listed on Exhibit 7 shall have executed and delivered to
BridgeStreet the Non-Competition and Non-Disclosure Agreement.
(d) Each of the stockholders of the Companies shall execute and deliver
to BridgeStreet a letter agreement substantially in the form attached hereto as
Exhibit 9.
(e) Each Company shall have delivered to BridgeStreet and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of each
Company's shareholders.
(f) Each Company shall have delivered to BridgeStreet such other
certificates, documents and opinions as BridgeStreet and its counsel shall
reasonably require.
7.2 The obligation of each Company to consummate this Agreement is
subject to the satisfaction at the Closing, or waiver by the Companies in
writing, in whole or in part, of each of the following conditions:
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(a) The Companies shall have received the opinion, dated the date of
the Closing and in form and substance satisfactory to the Company and its
counsel, of Nutter, McClennen & Fish, LLP, counsel to BridgeStreet,
substantially to the effect set forth on Exhibit 9.
(b) All proceedings taken by BridgeStreet and Acquisition and all
instruments executed and delivered by BridgeStreet and Acquisition prior to the
date of the Closing in connection with the transactions herein contemplated
shall be satisfactory in form and substance to counsel for the Companies, acting
reasonably.
(c) BridgeStreet and Acquisition shall have delivered to the Companies
a certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
(d) BridgeStreet shall have executed and delivered each Employment
Contract.
(e) On the day following the Effective Time, the officers and directors
of BridgeStreet shall be as set forth on Exhibit 4.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK; LEGEND
The shares of Merger Stock will not have been registered under the
Securities Act or the blue sky laws of any state by reason of their contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and of such state laws. Such shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act and such state laws or an exemption therefrom.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities,
losses, judgments, settlements, and expenses, including,
without limitation, all reasonable fees and disbursements of
counsel incident to the investigation or defense of any claim
or proceeding or threatened claim or proceeding.
(ii) "Indemnified Party" means each of BridgeStreet,
the Surviving Corporation, and their respective subsidiaries.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Stockholder shall, from and after the Effective Time, indemnify,
defend, and hold each Indemnified Party harmless from, against and in respect of
any and all Damages incurred by
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any Indemnified Party arising from or in connection with any actual or alleged
breach of any representation, warranty, covenant or agreement made by each
Company or by the Stockholder in this Agreement (collectively referred to herein
as "Claims"), including, with respect to Section 3.20 herein, any Claims arising
out of the failure of any Company to be duly qualified as a foreign corporation
at all times in all jurisdictions in which it conducts or has conducted business
operations.
(c) The Companies' representations, warranties, covenants and
agreements set forth in Article 3 shall, for purposes of this Article 9, be
deemed to have survived the Effective Time notwithstanding any contrary terms of
this Agreement, and whenever such representations, warranties, covenants and
agreements are referred to in this Article 9, the text of the same as set forth
in Article 3 shall be deemed to be set forth in their entirety herein, and the
same are hereby incorporated herein by such references. Each such
representation, warranty, covenant and agreement shall be deemed to have been
relied upon by the party or parties to which made, notwithstanding any
investigation or inspection made by or on behalf of such party or parties and
shall not be affected in any respect by any such investigation or inspection.
9.2 LIMITATIONS OF INDEMNITY OBLIGATIONS. The indemnity obligations of
the Stockholder under this Agreement shall be subject to the following
limitations:
(a) The indemnity obligations of the Stockholder shall expire on the
third anniversary of the Effective Time (the "Cut-off Date"); provided, however,
that such obligations with respect to (i) the representations and warranties
contained in Sections 3.1, 3.2, 3.18 and 3.21 and Article 4 of this Agreement
shall continue forever without limitation, and (ii) the representations and
warranties regarding taxes, which are contained in Section 3.15, shall remain in
effect until all claims for taxes due by or on account of any of the Companies
for any period up to and including the Effective Time have been settled and any
statute of limitations period with respect to such taxes has expired; and
provided further that the indemnity obligations of the Stockholder for Claims
timely asserted by an Indemnified Party in the manner provided in this Agreement
shall continue until such Claims are finally resolved and discharged.
(b) The aggregate indemnity obligations of the Stockholder for any
Damages shall not in any event exceed the amount set forth on Exhibit 10
opposite such Stockholder's name or, in the event of an IPO, the greater of (1)
such amount and (ii) the amount equal to the Merger Stock received by such
Stockholder (after adjusting for any stock split or combination) multiplied by
the price at which the BridgeStreet Common Stock is sold to the public in the
IPO.
(c) The Indemnified Parties shall be entitled to indemnification only
if the aggregate and collective Damages incurred or suffered by them exceed
$50,000, in which event they shall be entitled to indemnification of the full
amount of such Damages. Notwithstanding the immediately preceding sentence,
however, the Indemnified Parties shall
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be entitled to indemnification for Damages incurred or suffered by them as a
result of the breach of Section 3.15 without regard to such $50,000 basket.
9.3 NOTICE OF CLAIM. An Indemnified Party shall promptly notify the
Stockholder in writing of any Claim asserted by a third person that might give
rise to any indemnity obligation of the Stockholder hereunder (a "Third Party
Claim"), specifying in reasonable detail the nature thereof and indicating the
amount (estimated if necessary) of the Damages that have been or may be
sustained by the Indemnified Party. Failure of any Indemnified Party to promptly
give such notice shall not relieve the Stockholder of his obligation to
indemnify under this Article 9, but as a result of any such failure, the
Stockholder shall not be liable to the Indemnified Parties for the amount of
actual damages caused by such failure. Together with or following such notice,
the Indemnified Parties shall deliver to the Stockholder copies of all notices
and documents received by the Indemnified Parties relating to the Third Party
Claim (including court papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Stockholder shall
have the right (without prejudice to the right of any Indemnified Party to
participate at their own expense through counsel of their own choosing) to
defend against any Third Party Claim at his expense and through counsel of his
own choosing and to control such defense if he gives written notice of his
intention to do so within 15 business days of their receipt of notice of Third
Party Claim. The Indemnified Parties shall cooperate fully in the defense of
such Third Party Claim and shall make available to the Stockholder or his
counsel all pertinent information under their control relating thereto. The
Indemnified Parties shall have the right to elect to settle any Third Party
Claim; provided, however, the Stockholder shall not have any indemnification
obligation with respect to any monetary payment to any third party required by
such settlement unless they shall have consented thereto. The Stockholder shall
have the right to elect to settle any Third Party Claim subject to the consent
of BridgeStreet; provided, however, that if BridgeStreet fails to give such
consent within 15 business days of being requested to do so, BridgeStreet shall,
at its expense, assume the defense of such Third Party Claim and regardless of
the outcome of such matter, the Stockholder's liability hereunder shall be
limited to the amount of any such proposed settlement. The foregoing provisions
notwithstanding, in no event may the Stockholder (a) adjust, compromise or
settle any Third Party Claim (i) unless such adjustment, compromise or
settlement unconditionally releases BridgeStreet or the Surviving Corporation
from all liability or (ii) if such adjustment, compromise or settlement affects
the absolute and sole right of BridgeStreet or the Surviving Corporation to own
or use any of any Company's assets or (b) defend any Third Party Claim which, if
adversely determined, would materially impair the financial condition, business
or prospects of BridgeStreet or the Surviving Corporation.
10. MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Article 3 and 4 and except
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for the representations and warranties contained in Article 5, the
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
10.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with
the Disclosure Schedule and the Exhibits hereto, the entire agreement among the
parties with respect to the subject matter hereto and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof (except for the
confidentiality and secrecy agreements that previously have been executed by
BridgeStreet, the Company and American Business Partners) and (b) shall not be
assigned by operation of law or otherwise, provided that BridgeStreet or
Acquisition may assign its respective rights and obligations to any direct or
indirect subsidiary of BridgeStreet, but no such assignment shall relieve
BridgeStreet of its obligations hereunder.
10.3 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to BridgeStreet or Acquisition, to it at:
BridgeStreet International Inc.
67 Batterymarch Street, Suite 500
Boston, Massachusetts 02110
Attention: Donald W. Glazer, Secretary
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esq.
If to the Company or the Stockholder, to it or him at:
Corporate Lodgings, Inc.
1780 Stoney Hill Drive
Hudson, OH 44236
Attention: Rocco DiLillo
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with a copy to:
David M. Lowry, Esq.
32 Edgarton Road
Suite 200
Akron, OH 44303-1133
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
10.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
10.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
10.8 EXPENSES. All costs and expenses incurred subsequent to September
30, 1996 in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses; provided that the Companies'
costs and expenses, including all brokerage, investment banking, legal, and
accounting fees, shall be borne by the Stockholder.
10.9 PARTIES IN INTEREST. Except as provided in Section 6.1, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
10.10 PRINCIPAL OFFICE. The principal office of the Surviving
Corporation in the State of Delaware is located at Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware.
[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
BRIDGESTREET INTERNATIONAL INC.
By: /s/ Donald W. Glazer
-----------------------------------------
Title: Vice-President
---------------------------------------
CL ACQUISITION CORP.
By: /s/ Donald W. Glazer
-----------------------------------------
Title: President
---------------------------------------
CORPORATE LODGINGS, INC.
By: /s/ Rocco Di Lillo
-----------------------------------------
Title: President
---------------------------------------
CORPORATE LODGINGS OF MINNESOTA, INC.
By: /s/ Rocco Di Lillo
-----------------------------------------
Title: President
---------------------------------------
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CORPORATE LODGINGS OF WISCONSIN, INC.
By: /s/ Rocco Di Lillo
-----------------------------------------
Title: President
---------------------------------------
CORPORATE LODGINGS OF PENNSYLVANIA, INC.
By: /s/ Rocco Di Lillo
-----------------------------------------
Title: President
---------------------------------------
CORPORATE LODGINGS OF KENTUCKY, INC.
By: /s/ Rocco Di Lillo
-----------------------------------------
Title: President
---------------------------------------
/s/ Rocco Di Lillo
---------------------------------------------
Rocco DiLillo,
Stockholder
<PAGE> 1
EXHIBIT 10.5
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") dated as of March 31,
1997 is among BridgeStreet International Inc., a Delaware corporation
("BridgeStreet"), HAI Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of BridgeStreet ("Acquisition") and Home Again, Inc.,
Home Again Amenities, Inc. and Home Again Corporate Housing, Inc., each a
Minnesota corporation (each individually, a "Company," and collectively, the
"Companies"), and Sandra Brown (the "Stockholder"), and provides for the merger
of the Companies with and into Acquisition (the "Merger"). The Boards of
Directors of BridgeStreet, Acquisition and the Companies have determined that
the Merger is in the best interests of their respective stockholders and the
Merger has been approved by the stockholders of the Companies and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings set forth below:
1.1 "Articles of Merger" has the meaning given to it in Section 2.2.
1.2 "Balance Sheet" means the balance sheet dated December 31, 1996
contained in the Financial Statements (as defined herein), and the accompanying
schedules thereto.
1.3 "Balance Sheet Date" means December 31, 1996.
1.4 "BridgeStreet Common Stock" means the shares of Common Stock, $0.01 par
value, of BridgeStreet.
1.5 "BridgeStreet Financial Statements" mean the financial statements of
the Operating Subsidiaries (as defined herein) attached hereto as Exhibit 1,
each of which (with the exception of Exclusive Interim Properties, Ltd.)
consists of the balance sheets as of December 31, 1995 and 1996 and the
statements of operations for each of the fiscal years ended on December 31, 1995
and 1996. With respect to Exclusive Interim Properties, Ltd., the financial
statements consist of the balance sheets as of March 31, 1996 and December 31,
1996, and the statements of operations for the fiscal year ended on March 31,
1996 and the nine months ended on December 31, 1996.
1.6 "Certificate of Merger" has the meaning given to it in Section 2.2.
1.7 "Closing" means the closing of this Agreement as provided in Section
2.2.
1.8 "Code" means the Internal Revenue Code of 1986, as amended to date.
<PAGE> 2
1.9 "Commission" means the Securities and Exchange Commission.
1.10 "DGCL" means the Delaware Business Corporation Law.
1.11 "Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule 1.
1.12 "Effective Time" means the date on which the Articles of Merger (as
defined herein) are filed with the Secretary of State of the State of Minnesota
in accordance with Section 302A.615 of the MBCA (as defined herein), and the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware in accordance with Section 252 of the DGCL, unless Acquisition and the
Companies agree that another time shall be the Effective Time, in which case
such time shall be specified in the Articles of Merger, and the Certificate of
Merger.
1.13 "Employment Agreement" means the employment agreement attached hereto
as Exhibit 2.
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.15 "Financial Statements" means the combined financial statements of the
Companies attached hereto as Exhibit 3 consisting of the balance sheets as of
December 31, 1995 and 1996 and the statements of operations for each of the
fiscal years ended on December 31, 1995 and 1996.
1.16 "GAAP" means generally accepted accounting principles.
1.17 "MBCA" means the Minnesota Business Corporation Act.
1.18 "Merger Stock" means the shares of BridgeStreet Common Stock exchanged
for Shares pursuant to Section 2.7(c).
1.19 "Operating Subsidiaries" mean Corporate Lodgings, Inc., Exclusive
Interim Properties, Ltd., Temporary Corporate Housing, Inc. and Temporary
Housing Experts, Inc.
1.20 "Securities Act" means the Securities Act of 1933, as amended
1.21 "Share" means a share of Common Stock, $.01 par value per share, of
each of the Companies, and "Shares" means all of such shares of all of the
Companies.
1.22 "Surviving Corporation" means the corporation that survives the
Merger.
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1.23 References to the "knowledge" of any entity or to things which any
entity does or does not "know" or which are "known" by any entity refer to the
knowledge of any of the entity's officers or directors.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the MBCA and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and a subsidiary of BridgeStreet, and the separate corporate
existences of the Companies shall cease.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver of
all conditions to the Merger, the parties (a) shall cause articles of merger
(the "Articles of Merger") with respect to the Merger to be filed and recorded
in accordance with Section 302A.615 of the MBCA and shall cause a certificate of
merger (the "Certificate of Merger") with respect to the Merger to be filed and
recorded in accordance with Section 252 of the DGCL and (b) shall take all such
further actions as may be required by law to make the Merger effective. The
Merger shall be effective at the Effective Time. Before the filing of the
Articles of Merger and the Certificate of Merger, a closing (the "Closing") will
be held at the offices of Nutter, McClennen & Fish, LLP, One International
Place, Boston, Massachusetts (or such other place as the parties may agree) for
the purpose of confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Section 302A.641 of the MBCA and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation.
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the directors and
officers of the Surviving Corporation shall be as set forth on Exhibit 4, and
each such person shall hold office until his or her respective successor is duly
elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
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(a) Each share of Acquisition that is issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding without change.
(b) All Shares held in the treasury of each Company immediately prior to the
Effective Time shall be cancelled, without the payment of any consideration
therefor.
(c) All other Shares which are outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holders
thereof into and be exchangeable for: (i) an aggregate of Four Hundred
Seventy-Five Thousand (475,000) shares of BridgeStreet Common Stock; and (ii) in
the event that the Companies' tangible net book value as of March 31, 1997
determined in accordance with GAAP and Section 2.10 herein exceeds Two Hundred
Thousand Dollars ($200,000.00) (the "Excess"), cash equal to the Excess.
2.8 EXCHANGE OF AND PAYMENT FOR SHARES.
(a) As soon as practicable after the Effective Time and after surrender to
BridgeStreet of the certificates which prior to the Effective Time shall have
represented the Shares, subject to the provisions of paragraph (c) of this
Section 2.8 and to the provisions of Article 8, BridgeStreet shall cause to be
distributed to the Stockholder (i) a certificate registered in the name of such
person representing the Merger Stock and (ii) the Excess as determined under and
in accordance with Section 2.10. Until surrendered as contemplated by the
preceding sentence, each certificate which immediately prior to the Effective
Time shall have represented any Shares shall be deemed at and after the
Effective Time to represent only the right to receive upon such surrender the
certificates and payment contemplated by the preceding sentence.
(b) No dividends or other distributions declared after the Effective Time
with respect to BridgeStreet Common Stock shall be paid to the holder of any
unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.8. After the
surrender of such certificate in accordance with this Section 2.8, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of BridgeStreet Common Stock represented by such
certificate.
(c) If any cash or certificate representing shares of BridgeStreet Common
Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to BridgeStreet any transfer or
other taxes required by reason of the issuance of a certificate representing
shares of BridgeStreet Common Stock in any name other than that of the
registered holder of the certificate surrendered, or otherwise required, or
shall establish to the satisfaction of BridgeStreet that such tax has been paid
or is not payable.
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(d) All rights to receive BridgeStreet Common Stock and cash as described
above shall be deemed, when paid or issued hereunder, to have been paid or
issued, as the case may be, in full satisfaction of all rights pertaining to the
Shares.
(e) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of BridgeStreet Common Stock into which
they were converted, or both, as provided herein.
2.9 ADJUSTMENTS. If, between the date of this Agreement and the Effective
Time, the outstanding shares of BridgeStreet Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the number of shares of BridgeStreet Common Stock into which
the Shares are to be converted shall be correspondingly and appropriately
adjusted.
2.10 PAYMENT OF THE EXCESS. The determination of the Excess shall be made
by the mutual agreement of BridgeStreet and the Stockholder on or before April
15, 1997. BridgeStreet and the Stockholder acknowledge and agree that, in
determining the Excess, they shall use as a baseline the Companies' pre-Closing,
unaudited combined balance sheet as of March 31, 1997, subject to any
adjustments that typically would be made for purposes of interim financial
statement presentation on an accrual basis. The payment of the Excess shall be
made by check or wire transfer within 15 business days of such determination.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
The Companies represent and warrant to BridgeStreet and Acquisition
that, except as expressly provided in the Disclosure Schedule by specific
reference to a Section of this Article 3, the following representations and
warranties are true and correct as of the date hereof:
3.1 ORGANIZATION AND AUTHORITY. Each Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Minnesota, and has full corporate power and authority to conduct its business
and own its property as now conducted and owned. Each Company is duly qualified
or licensed and in good standing as a foreign corporation in those states listed
on the Disclosure Schedule, which are the only jurisdictions in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, and has been so qualified
or licensed during all times when such qualification and licensure was necessary
in the conduct of the Company's business. Each Company has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions
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contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors and stockholder of each Company, and no
other corporate proceedings on the part of each Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by each Company and
constitutes a legal, valid and binding obligation of each Company enforceable
against it in accordance with its terms.
3.2 CAPITALIZATION OF EACH COMPANY; NO SUBSIDIARIES. The authorized capital
and number of issued and outstanding shares of capital stock of each Company are
set forth on the Disclosure Schedule. No Shares are held in any Company's
treasury. Collectively, the Shares held by the Stockholder comprise all of the
issued and outstanding shares of Common Stock of each Company, are duly
authorized, validly issued, fully paid and non-assessable and are owned of
record and beneficially by the Stockholder. No Company has any authorized class
of capital stock other than the Common Stock. No Company owns and no Company has
owned any shares of capital stock or other securities of, or any other interest
in, nor does any Company control or has it controlled, directly or indirectly,
any other corporation, association, joint venture, partnership, or other
business organization. The Shares have been issued and sold in full compliance
with all applicable Federal and state securities laws.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any of the Shares or the
acquisition of shares of any other class of capital stock of any Company, and no
Company has otherwise agreed to issue or sell any shares of its capital stock or
has any obligation to register any of the Shares under the Securities Act. No
Company is obligated directly, indirectly or contingently to purchase any
Shares.
3.4 NAME. No Company has had any other name or conducts or operates, or has
heretofore conducted or operated, its business under any name other than its
current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of this
Agreement, together with all documents and instruments contemplated herein, the
consummation of the transactions contemplated hereby and thereby, and the
compliance with the terms, conditions and provisions hereof by each Company do
not (i) contravene any provisions of any Company's articles of incorporation or
By-Laws; (ii) conflict with or result in a breach of or constitute a default (or
an event that might, with the passage of time or the giving of notice or both,
constitute a default) or give rise to any right to terminate, cancel or
accelerate or to any loss of benefit under any of the terms, conditions, or
provisions of any lease, indenture, mortgage, loan, or credit agreement or any
other agreement or instrument to which any Company is a party or by which it or
its assets may be bound or affected; (iii) violate or constitute a breach of any
decision, judgment, or order of any court or arbitration board or of any
governmental department, commission, board, agency, or instrumentality,
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domestic or foreign, by which any Company is bound or to which it is subject; or
(iv) violate any applicable law, rule, or regulation to which any Company or any
of its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a waiting period or a period for
disapproval by, any governmental authority is required for any Company to
consummate the transactions contemplated by this Agreement, except for filing
and acceptance of the Articles of Merger pursuant to the MBCA and the
Certificate of Merger pursuant to the DGCL.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present the financial position of each
Company as of their respective dates, and the results of operations for the
periods presented therein, all in conformity with GAAP applied on a consistent
basis (i) except as otherwise noted therein and (ii) except that no
representations or warranties are being made with respect to the footnote
disclosures contained therein.
(b) Each Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and with statutory accounting principles and
to maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the most recent balance sheet in the Financial Statements, no Company
(a) had as of the Balance Sheet Date any liability or obligation of any nature,
whether accrued, absolute, contingent, or otherwise and whether due or to become
due, including without limitation liabilities that may become known or arise
after the date hereof and which relate to transactions entered into or any state
of facts existing on or before the Balance Sheet Date, which would be required
under GAAP to be shown in such balance sheet or referenced in the notes thereto,
and (b) has incurred since the Balance Sheet Date any such liability or
obligation except in the ordinary course of business.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, no Company has taken or agreed to take any action that would
obligate such Company to have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement, or commitment other than in the ordinary course of
business;
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(b) entered into or agreed to enter into any transaction, agreement, or
commitment, suffered the occurrence of any event or events, or experienced any
material change in financial condition, business, results of operations,
prospects, or otherwise, (i) that has interfered or is reasonably likely to
interfere with the normal and usual operations of such Company's business or its
business prospects or (ii) that, singly or in the aggregate, has resulted or is
reasonably likely to result in a material adverse change in the financial
condition, assets, liabilities, earnings, business, or business prospects of
such Company;
(c) incurred any indebtedness for borrowed money, or assumed, guaranteed,
endorsed, or otherwise become responsible for the obligations of any other
individual, partnership, firm, or corporation (except to endorse checks for
collection for deposit in the ordinary course of business), or made any loan or
advance to any individual, partnership, firm, or corporation (except for loans
to any employee of such Company in the ordinary course of business which in the
aggregate do not exceed $5,000.00);
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of such Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to such Company, or any claims held
by such Company;
(e) made any investment of a capital nature or entered into a commitment for
such investment either by purchase of stock or securities, contributions to
capital, property transfer, or otherwise, or by the purchase of any property or
assets of any other individual, partnership, firm, or corporation, other than
capital expenditures in the ordinary course of business that individually do not
exceed $5,000.00 and in the aggregate do not exceed $20,000.00;
(f) declared, set aside, or paid any dividend or other distribution (whether
in cash, stock, property or any combination thereof) in respect of the capital
stock of such Company (other than distributions made to the Stockholder on or
prior to the Effective Time in amounts necessary to satisfy the Stockholder's
estimated individual tax liability for 1996 and the period of 1997 ending at
such Effective Time (using an estimated tax rate of 40%)), or redeemed or
otherwise acquired, directly or indirectly, any shares of capital stock of such
Company;
(g) paid any long-term liability, otherwise than in accordance with its
terms;
(h) paid any bonus compensation or fee to any officer, director,
shareholder, or employee of such Company or otherwise increased the compensation
paid or payable to any of the foregoing (except in the case of employees'
routine scheduled increases in salary);
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets;
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(j) contracted with or committed to any third party (i) to sell any capital
stock of such Company, (ii) to sell any material assets of such Company other
than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of such Company, or (iv) to enter into
any agreement with respect thereto;
(k) incurred any expenses or fees of counsel, accountants or consultants for
personal services rendered to the Stockholder after December 31, 1996, except in
preparation for or in connection with this Agreement and the transactions
contemplated hereunder; or
(l) issued any debt instruments, entered into any leases of more than one
year, amended any existing debt instruments or leases of more than one year or
increased borrowings (other than borrowings in the ordinary course of business
to finance working capital); and no indebtedness for borrowed money by such
Company will be outstanding as of the date of the Closing.
3.10 TITLE TO ASSETS. No Company owns real property. Each Company has good
and clear record and marketable title to all properties owned by it, including,
without limitation, all property reflected in the Balance Sheet, other than
property disposed of in the ordinary course of business subsequent to the
Balance Sheet Date (none of such dispositions being materially adverse), free
and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the Balance
Sheet, or as specified in the notes thereto, (b) the lien of taxes not yet due
or payable or being contested in good faith by appropriate proceedings and (c)
such imperfections of title and encumbrances, if any, as do not materially
detract from the value or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations.
3.11 INTELLECTUAL PROPERTY. Each Company owns, or is licensed or otherwise
has the full and unrestricted right to use, all trademarks, trade names, service
marks, copyrights, technology, know-how, trade secrets and techniques used in
its business (collectively, the "Proprietary Information"). All such trademarks,
trade names, service marks and federally registered copyrights are listed on the
Disclosure Schedule. No Company has any obligation still outstanding to
compensate other persons for the use of any Proprietary Information or for the
sale of any service comprising or derived from Proprietary Information. No
Company has granted to any other person any license or other right to use in any
manner any of the Proprietary Information, whether or not requiring the payment
of royalties. To the knowledge of each Company (a) no other person has a right
or license granted directly or indirectly by or through any Company to use any
Proprietary Information; (b) none of the Proprietary Information is being
infringed by others, or is subject to any outstanding order, decree, judgment or
stipulation; (c) there are no claims or demands of any other person, and no
proceedings have been instituted, or are pending or threatened, relating to the
Proprietary Information; and (d) no proceeding has been filed or threatened
charging any Company with infringement of any patent, trademark, copyright, or
other proprietary right, nor is there any basis for any such proceeding.
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3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All transactions heretofore between each Company and its Stockholder,
officers or directors or any Affiliate (as defined below) of such Stockholder,
officer or director have been conducted on an arm's-length basis on terms no
different than would be obtained if the transaction had been between such
Company and an unrelated party. Except for debts or other outstanding
obligations reflected on the Balance Sheet, there are no debts or other
obligations of any Company to, or to any Company from, the Stockholder or any
officer or director, or any Affiliate of such Stockholder, officer or director
of such Company. As used herein, "Affiliate" of a Stockholder, officer or
director means any member of the immediate family of such person or any entity
in which such person or any such family member is an officer or owner of more
than five percent of the beneficial interest or outstanding equity securities of
such entity.
(b) The Disclosure Schedule contains a true and complete description of each
transaction conducted or completed, in whole or in part, since January 1, 1996,
or currently proposed, between each Company and any officer, director or
Stockholder thereof or any Affiliate of any such person. With respect to each of
the last three complete fiscal years, the Disclosure Schedule sets forth all
information that would be required to be provided under Items 402 and 404 of
Regulation S-K of the Commission under the Securities Act if a registration
statement on Form S-1 were filed by such Company with the Commission on the date
hereof.
3.13 MATERIAL CONTRACTS. The Disclosure Schedule lists all material leases,
contracts, instruments, agreements or commitments (whether written or oral)
relating to the conduct of the business of each Company (the "Material
Contracts"). Each Company has made available to BridgeStreet true and correct
copies of each Material Contract and a written description, accurate in all
material respects, of each oral arrangement so listed. Without limiting the
generality of the foregoing, the aforesaid list includes all contracts,
agreements and instruments of the following types to which each Company is a
party:
(a) labor union contracts, together with a list of all labor unions
representing or attempting to represent employees of each Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements, agreements
providing for termination or severance benefits, non-competition agreements,
non-disclosure
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agreements, contracts for professional personal services, contracts with other
persons engaged in sales or distributing activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any kind
with any officer, director, employee, shareholder or agent of each Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of each Company whose current salary
rate is $25,000.00 or more and any bonuses paid or payable to each such person
for the 1995 and 1996 fiscal years;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of personal property, contracts for the
purchase or sale of real or personal property, and agreements for financing;
(f) licenses and other contractual rights to any Proprietary Information,
including, without limitation, any copyright, trademark, service mark or trade
name, whether domestic or foreign, owned in whole or in part or used by each
Company;
(g) other license agreements (as licensor or licensee);
(h) property, casualty, crime, directors and officers, and other forms of
insurance;
(i) bank accounts and safety deposit boxes identifying all authorized
signatories, together with a list of all effective powers of attorney granted by
each Company to anyone;
(j) agreements, contracts or other arrangements to which each Company is a
guarantor, surety or endorser;
(k) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of each Company's
requirements for a particular product from a single supplier or to a single
customer;
(l) contracts, agreements, commitments, arrangements or understandings
limiting the freedom of each Company from competing in any line of business or
with any person or entity;
(m) leases of real property with a term of more than one year (regardless of
whether each Company is the lessor or lessee); and
(n) contracts, agreements, instruments, arrangements or understandings which
have not been included in items (a) through (m) above involving payment by or to
each Company of more than $50,000.00 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of each Company.
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All of the Material Contracts are in full force and effect. Except to the extent
that a material adverse effect on each Company's financial condition, assets,
liabilities, earnings, business or prospects would not result if the following
were not true: (A) Each Company and each other party to each of the Material
Contracts have performed all the obligations required to be performed by them to
date, have received no notice of default and are not in default (with due notice
or lapse of time or both) under any of the Material Contracts; (B) each Company
has no present expectation or intention of not fully performing all its
obligations under any of the Material Contracts, and each Company has no
knowledge of any breach or anticipated breach by any other party to any of the
Material Contracts; and (C) there exists no actual or, to the knowledge of each
Company, threatened termination, cancellation or limitation of the business
relationship of each Company with any party to any Material Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the knowledge of any Company, threatened
against any Company or its officers or directors (in their capacities as such)
in any court, at law or in equity, or before any arbitration board or any
governmental department, commission, board, bureau, agency, or instrumentality;
nor has any Company been, nor is it, subject to any orders, awards, fines,
judgments, decrees, or injunctions the effect of which in the aggregate would
have a material adverse effect on the business or financial position or
prospects of such Company. No Company knows or has grounds to know of any basis
for any such action, suits, or other form of proceeding or disputes or of any
governmental investigation relating to such Company or its business.
3.15 TAXES. Each Company has filed all tax returns, reports and information
filings that are required to be filed, including, without limitation, federal
(U.S.), state, and municipal income or franchise tax returns, and has paid all
taxes shown as due on such returns, together with any interest and penalties
accrued with respect thereto. No Company is required to pay or remit any other
taxes (including sales taxes) except as shown in such tax returns, reports and
information filings. All such returns, reports, and information filings required
to be filed, including any amendments to date, have been prepared in good faith
and without misrepresentation. Each Company has either paid or, in accordance
with GAAP applied consistently with prior periods, adequately provided for, by
reserves or other proper accounting treatment shown in the records and books of
account, its liability for all taxes of every kind, including without limitation
its liability for federal, state, and municipal income or franchise tax for the
current tax year and for all prior years. No Company has any knowledge of any
proposed or threatened assessment or reassessment of federal, state, or
municipal income or franchise taxes. In addition, at the date hereof all
withholding tax or source deductions have been deducted and remitted as due to
the appropriate governmental authority as required by law or each Company has
adequately provided for such deductions by reserves or other proper accounting
treatment in its books and records of account.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there has not been
(a) any material adverse change in the business, affairs or prospects of any
Company nor, to
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each Company's knowledge, are any such changes threatened, anticipated or
contemplated; (b) any actual or, to each Company's knowledge, threatened,
anticipated or contemplated damage, destruction, loss, conversion, termination,
cancellation, default or taking by eminent domain or other action by
governmental authority which has materially affected or may hereafter materially
affect the properties, assets, business, affairs or prospects of any Company;
(c) any material and adverse pending or, to each Company's knowledge,
threatened, anticipated or contemplated dispute of any kind with any material
customer, supplier, source of financing, employee, lessor, landlord, subtenant
or licensee of any Company, or any pending or, to each Company's knowledge,
threatened, anticipated or contemplated occurrence or situation of any kind,
nature or description which is reasonably likely to result in any reduction in
the amount, or any change in the terms or conditions, of business with any
material customer, lessor, supplier, or source of financing; or (d) any pending,
or, to each Company's knowledge, threatened, anticipated or contemplated
occurrence or situation of any kind, nature or description materially and
adversely affecting the properties, assets, business, affairs or prospects of
any Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1992 no Company: (a)
has made any contributions, payments or gifts of its property to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has established or maintained any unrecorded fund or
asset for any purpose, or has made any false or artificial entries on its books
or records for any reason; (c) has made any payments to any person with the
intention or understanding that any part of such payment was to be used for any
other purpose other than that described in the documents supporting the payment;
or (d) has made any contribution, or has reimbursed any political gift or
contribution made by any other person, to candidates for public office, whether
Federal, state or local, where such contribution or reimbursement would be in
violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by any Company
or the trusts created thereunder has engaged in a prohibited transaction which
could subject any such employee benefit plan or trust to a material tax or
penalty on prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by any Company
which are employee pension benefit plans and which are subject to Title IV of
ERISA or the trusts created thereunder has been terminated so as to result in a
material liability of any Company under ERISA nor has any such employee benefit
plan of any Company incurred any material liability to the Pension Benefit
Guaranty Corporation established pursuant to ERISA, other than for required
insurance premiums which have been paid or are not yet due and payable; no
Company has withdrawn from or caused a partial withdrawal to occur with respect
to any Multi-employer Plan resulting in any assessed and unpaid withdrawal
liability;
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each Company has made or provided for all contributions to all such employee
pension benefit plans which it maintains and which are required as of the end of
the most recent fiscal year under each such plan; no Company has incurred any
accumulated funding deficiency with respect to any such plan, whether or not
waived; nor has there been any reportable event, or other event or condition,
which presents a material risk of termination of any such employee benefit plan
by the Pension Benefit Guaranty Corporation.
(c) The present value of all vested accrued benefits under the employee
pension benefit plans which are subject to Title IV or ERISA, maintained by each
Company, did not, as of the most recent valuation date for each such plan,
exceed the then current value of the assets of such employee benefit plans
allocable to such benefits.
(d) To each Company's knowledge, (i) each employee pension benefit plan
subject to Title IV of ERISA, maintained by each Company, has been administered
in accordance with its terms in all material respects and is in compliance in
all material respects with all applicable requirements of ERISA and other
applicable laws, regulations and rules, and (ii) each Company has filed in a
timely manner with respect to all such plans those actuarial reports, annual
reports and all other filings required by all such applicable requirements of
ERISA and other applicable laws, regulations and rules, and each Company has
delivered to BridgeStreet a copy of any such report filed since December 31,
1993.
(e) As used in this Agreement, the terms "employee benefit plan", "employee
pension benefit plan", "accumulated funding deficiency", "reportable event", and
"accrued benefits" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transactions" shall have the meaning assigned to it in
Code Section 4975 and ERISA.
(f) No Company has any liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of any Company.
3.19 LABOR MATTERS. A true and complete list of all of each Company's
officers and employees (the "Employees") and their respective salaries, wages,
other compensation, dates of employment, date and amount of last salary
increase, and positions has been provided to BridgeStreet by each Company. There
are no material disputes, employee grievances, or disciplinary actions pending
or, to the knowledge of any Company, threatened by or between any Company and
any of the Employees. With respect to the Employees, each Company has complied
in all respects with all provisions of all laws relating to the employment of
labor and has no liability for any arrears of wages or taxes or penalties for
failure to comply with any such law or for any severance or termination payments
of any type. No election or proceedings relating to the labor relations of any
Company is pending or, to any Company's knowledge, threatened. No Company has
had any material union activity or had any material labor trouble of any kind,
nature or description at any time
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heretofore. All personnel policies and manuals of each Company are listed on the
Disclosure Schedule and true and complete copies thereof have been provided to
BridgeStreet. No Employee or consultant of any Company shall have the right to
receive from the Surviving Corporation or BridgeStreet a severance payment or
other payment in the nature thereof in the event his or her employment is
terminated by the Surviving Corporation following the Merger, whether such right
arises as a matter of contract, past policy or understanding, by operation of
law, or otherwise.
3.20 PERMITS; COMPLIANCE WITH LAW. Each Company possesses all franchises,
permits, licenses, certificates, approvals, and other authorizations ("Permits")
necessary to own or lease and operate its properties and to conduct its business
as now conducted, except for incidental Permits that would be readily obtainable
without undue burden in the event of any lapse, termination, cancellation, or
forfeiture or that if not obtained would not materially and adversely affect
each Company's business. All such material Permits are in full force and effect,
and, to the knowledge of each Company, no suspension or cancellation of any of
them is threatened, and no material Permits will be adversely affected by the
consummation of the Merger. No Company has failed nor is it failing to comply
with any applicable law, rule, regulation, or order, where such failure would
have a material adverse effect on any Company's business, and there are no
proceedings pending or, to each Company's knowledge, threatened, nor has any
Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. Each Company is in material compliance with all
applicable existing federal, state and local laws and regulations relating to
protection of human health or the environment or imposing liability or standards
of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business, affairs or business prospects
of any Company. The term "Hazardous Material" means (a) any "hazardous
substance" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, (b) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act, as amended, (c) any petroleum or
petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or
contaminant or hazardous, dangerous, or toxic chemical, material, waste or
substance regulated under or within the meaning of any other Environmental Law.
There is no alleged liability, or to each Company's knowledge, potential
liability (including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) of such
Company arising out of, based on or resulting from (i) the presence or release
into the environment of any Hazardous Material at any location, whether or not
owned by any Company or (ii) any violation or alleged violation of any
Environmental Law, which alleged or potential liability, singly or in the
aggregate, would have a material and adverse effect on the condition, financial
or otherwise, or the earnings, business, affairs or business prospects of such
Company.
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3.22 LEASES. The Disclosure Schedule sets forth, as of January 31, 1997,
the number of units of real property leased by each Company (each a "Leased
Premises"). Except to the extent that a material adverse effect on the Company's
financial condition, assets, liabilities, earnings, business, affairs or
business prospects would not occur if the following, in the aggregate, were not
true: (a) each lease covering a Leased Premises is in full force and effect
(there existing no default under any such lease which, with the lapse of time or
notice or otherwise, would entitle the lessor or lessee to terminate the same);
(b) each Company has the right to use the Leased Premises in accordance with the
terms of the respective leases free and clear of all claims or other interests
or rights of third parties; (c) there is no violation of any covenant,
restriction or other agreement or understanding, oral or written, affecting or
relating to title or use of any Leased Premises; and (d) there is no pending or
threatened condemnation or similar proceedings or assessments affecting any of
the Leased Premises, nor to each Company's knowledge is any such condemnation or
assessment threatened or contemplated by any governmental authority.
3.23 CORPORATE RECORDS. The corporate record books of each Company are in
good order and complete (to the extent required by the laws of the State of
Minnesota), and are accurate, up to date, contain all necessary signatures, and
set forth all meetings and actions taken by the stockholders and directors, and
all votes of the stockholders or directors set forth in certificates furnished
to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by each Company have been properly maintained and are in good operating
order and repair (ordinary wear and tear excepted), free from known defects in
construction or design, sound and properly functioning, usable and not obsolete,
and in compliance with all zoning, building and fire codes and all other laws,
rules, regulations and requirements of governmental authorities and the fire
insurance rating association having jurisdiction, except to the extent that the
failure to do so, in the aggregate, would not have a material adverse effect on
the financial condition, assets, liabilities, earnings, business, affairs or
business prospects of such Company.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of each Company
shown or reflected on the Balance Sheet, less the reserve for doubtful accounts
in the amount shown on such balance sheet, are valid and enforceable claims and
subject to no set off or counterclaim and will be collectible in the normal
course of business. No Company has accounts or loans receivable from any of its
directors, officers or employees (other than loans to any employee in the
ordinary course of business which in the aggregate do not exceed $5,000.00).
3.26 CHARTER DOCUMENTS. Each Company has heretofore delivered to
BridgeStreet copies of its articles of incorporation, as amended to date,
certified by the appropriate governmental authority, and copies of its by-laws,
as amended to date, and a list of the officers and directors of such Company in
office, all as certified by its Secretary.
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3.27 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of fact set forth in
this Agreement (including without limitation all information in the Financial
Statements and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) or otherwise provided by or on behalf of each Company to BridgeStreet is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) or any information provided
to BridgeStreet by or on behalf of any Company omit to state a material fact
necessary in order to make the statements made or information disclosed, in the
light of the circumstances under which they were made or disclosed, not
misleading.
3.28 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
3.29 TAX-FREE REORGANIZATION. No Company has any reason to believe that the
Merger will not qualify as a reorganization within the meaning of Section 368 of
the Code.
3.30 TANGIBLE NET BOOK VALUE. The aggregate tangible net book value of the
Companies as of the date of the Closing will be at least Two Hundred Thousand
Dollars ($200,000.00).
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to BridgeStreet and Acquisition as
follows:
4.1 TITLE TO THE SHARES. The Stockholder owns all issued and outstanding
Shares free and clear of any claims, liens, charges, encumbrances, security
interests and rights of others whatsoever, and such Shares are not bound by or
subject to any proxy, agreement, voting trust or other restriction regarding the
voting thereof.
4.2 AUTHORITY. The Stockholder has full power, authority and capacity to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary by the Stockholder to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholder and constitutes
a legal, valid and binding obligation of the Stockholder enforceable against her
in accordance with its terms.
4.3 ACCREDITED INVESTOR. The Stockholder is an "accredited investor" (as
such term is defined in Rule 501 promulgated under the Securities Act) because
either (i) her individual net worth or joint net worth with her spouse exceeds
One Million Dollars ($1,000,000), or (ii) her individual income was in excess of
Two Hundred Thousand Dollars ($200,000) (or her joint income with her spouse was
in excess of Three Hundred Thousand
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Dollars ($300,000)) in each of 1995 and 1996 and she has a reasonable
expectation that such income (whether individual or joint) will reach the same
level during 1997.
5. REPRESENTATIONS AND WARRANTIES OF BRIDGESTREET AND
ACQUISITION
BridgeStreet and Acquisition represent and warrant to the Companies and
the Stockholder as follows:
5.1 ORGANIZATION AND AUTHORITY. Each of BridgeStreet and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified to do business as a foreign corporation in each
jurisdiction where the failure to be so qualified would, in the aggregate, have
a material adverse effect on the business or financial condition of
BridgeStreet. Each of BridgeStreet and Acquisition has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the respective Boards of Directors of BridgeStreet and
Acquisition and the sole stockholder of Acquisition, and no other corporate
proceedings on the part of BridgeStreet or Acquisition are necessary to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
each of BridgeStreet and Acquisition and constitutes a valid and binding
agreement of each, enforceable against each in accordance with its terms.
5.2 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by BridgeStreet and Acquisition nor the consummation
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective charter documents or By-Laws of
BridgeStreet or Acquisition; (ii) require any consent, approval, authorization,
or permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) filing and acceptance of the Articles of Merger pursuant
to the MBCA and the Certificate of Merger pursuant to the DGCL and (B) filings
required under the Securities Act and the securities or blue sky laws of the
various states; (iii) result in a default (or an event that might, with the
passage of time or the giving of notice or both, constitute a default) or give
rise to any right to terminate, cancel or accelerate or to any loss of benefit
under any of the terms, conditions, or provisions of any note, license, lease,
agreement, or other instrument or obligation to which BridgeStreet or
Acquisition is a party or by which BridgeStreet or Acquisition or any of their
respective assets may be bound, other than as previously disclosed in writing to
the Companies; or (iv) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to BridgeStreet or Acquisition or any of their
respective assets.
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5.3 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the knowledge of BridgeStreet or Acquisition,
threatened, against, involving or affecting BridgeStreet, the Operating
Subsidiaries, or Acquisition, in any court, at law or in equity, or before any
arbitration board or any governmental department, commission, board, bureau,
agency, or instrumentality, that either singly or in the aggregate might prevent
BridgeStreet and Acquisition from consummating the transactions contemplated
hereby or that would have a material adverse effect on the business, operations,
or financial condition of BridgeStreet and the Operating Subsidiaries taken as a
whole.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by BridgeStreet
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable.
5.5 CHARTER DOCUMENTS. BridgeStreet has heretofore delivered to the
Companies copies of its Articles of Incorporation, as amended to date, certified
by the appropriate governmental authority, and copies of its by-laws, as amended
to date, and a list of the officers and directors of BridgeStreet in office, all
as certified by its Secretary.
5.6 TAX-FREE REORGANIZATION. Neither BridgeStreet nor Acquisition has any
reason to believe that the Merger will not qualify as a reorganization within
the meaning of Section 368 of the Code.
5.7 CAPITALIZATION. The total number of issued and outstanding shares of
capital stock of BridgeStreet immediately prior to the Effective Time shall be
Five Million (5,000,000), all of which shall be BridgeStreet Common Stock.
Acquisition has (i) One Thousand (1,000) shares of common stock, par value $.01
per share, issued and outstanding, all of which is owned by BridgeStreet, and
(ii) no outstanding options or warrants to purchase such common stock.
BridgeStreeet owns all of the issued and outstanding capital stock of each of
the Operating Subsidiaries.
5.8 BRIDGESTREET FINANCIAL STATEMENTS. The BridgeStreet Financial
Statements fairly present the financial position of each Operating Subsidiary as
of their respective dates, and the results of operations for the periods
presented therein, all in conformity with GAAP applied on a consistent basis (i)
except as otherwise noted therein and (ii) except that no representations or
warranties are being made with respect to the footnote disclosures contained
therein.
6. COVENANTS
6.1 CONFIDENTIAL INFORMATION. BridgeStreet and its employees and agents
will, and BridgeStreet will cause the Operating Subsidiaries, Acquisition and
their its employees
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and agents to, hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, all Confidential Information (as hereinafter defined) and
will not disclose the same to any person. If this Agreement is terminated,
BridgeStreet will promptly return to each Company or destroy all documents
(including all copies thereof) received by BridgeStreet containing such
Confidential Information. For purposes hereof, "Confidential Information" shall
mean all information of any kind concerning the Companies, except information
(i) ascertainable or obtained from public or published information, (ii)
received from a third party not known to BridgeStreet to be under an obligation
to the Companies to keep such information confidential, (iii) that is or becomes
known to the public (other than through a breach of this Agreement), (iv) that
was in BridgeStreet's possession before disclosure thereof to it in connection
with this Agreement or (v) that was independently developed by BridgeStreet.
6.2 BEST EFFORTS. Subject to the terms and conditions hereof each party to
this Agreement agrees to fully cooperate with the others and the others'
counsel, accountants and representatives in connection with any steps required
to be taken as part of its obligations under this Agreement. Each party to this
Agreement agrees that it will use its reasonable efforts to cause all conditions
to its obligations under this Agreement to be satisfied as promptly as possible,
and will not undertake a course of action inconsistent with this Agreement or
which would make any of its representations, warranties, agreements or covenants
in this Agreement untrue in any material respect or any conditions precedent to
its obligations under this Agreement unable to be satisfied at or prior to the
Closing.
6.3 PUBLIC ANNOUNCEMENTS. All public announcements, notices or other
communications regarding this Agreement and the transactions contemplated hereby
to third parties other than the parties hereto and their respective advisors
shall require the prior approval of both BridgeStreet and the Stockholder.
6.4 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 6.4 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
6.5 COVENANTS OF THE STOCKHOLDER. The Stockholder hereby covenants and
agrees with BridgeStreet and Acquisition that she shall:
(a) use her best efforts to take whatever action may be reasonably
necessary or desirable to (i) effect, perfect or confirm of record or otherwise
in the Surviving Corporation full right, title and interest in and to the
business, properties and assets now conducted or owned by each Company, free and
clear of all restrictions, liens, encumbrances, rights, title
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and interests in others, or to collect, realize upon, gain possession of, or
otherwise acquire, full right, title and interest in and to such business,
properties and assets; (ii) carry out the intent and purposes of the
transactions contemplated hereby; and (iii) cause or permit BridgeStreet to
undertake and complete the initial public offering of BridgeStreet Common Stock
(the "IPO");
(b) provide to BridgeStreet the notifications required of each Company
under Section 6.4;
(c) deliver at the Closing the Employment Agreement;
(d) notify BridgeStreet in writing if at any time prior to a closing in
connection with the IPO she shall obtain knowledge of any facts that might make
it necessary or appropriate to amend or supplement the Prospectus used in the
registration statement filed in connection with the IPO in order to make the
statements contained therein not misleading or comply with applicable law (with
the delivery of any notice pursuant to this Section 6.5(d) not limiting or
otherwise affecting the remedies available hereunder to the party receiving such
notice); and
(e) execute and deliver such other instruments and take such other actions
as may be reasonably required in order to carry out the intent of this
Agreement.
6.6 TAX FREE REORGANIZATION. From and after the Effective Time, neither
BridgeStreet nor the Surviving Corporation nor the Stockholder shall take or
suffer to be taken any action which will cause the Merger not to constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code.
6.7 NON-COMPETITION; NON-SOLICITATION. For a period of five (5) years from
the date hereof or for a period of three (3) years from the date the
Stockholder's employment by Acquisition subsequent to the Merger terminates
regardless of the reason therefor (or if there is no reason therefor), whichever
later occurs, the Stockholder will not engage or become interested, directly or
indirectly, as an owner, employee, director, partner, consultant, through stock
ownership, investment of capital, lending of money or property, rendering of
services, or otherwise, either alone or in association with others, in the
operation, management or supervision of any type of business or enterprise in
any way similar to or competitive with BridgeStreet and the Operating
Subsidiaries (including the Companies' business as conducted through Acquisition
following the Effective Time) (the "BridgeStreet Group"). In addition, during
such period the Stockholder will not, directly or indirectly, whether on behalf
of herself or anyone else: (i) solicit or accept orders from any present or past
customer of the BridgeStreet Group or Home Again for a product or service
offered or sold by, or competitive with a product or service offered or sold by,
the BridgeStreet Group; (ii) induce or attempt to induce any such customer to
reduce such customer's purchases from the BridgeStreet Group (including without
limitation leases of accommodations); (iii) use for her benefit or disclose the
name and/or requirements of any such customer to any other
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person or persons, natural or corporate; (iv) enter into any competitive leasing
arrangements relating to properties containing units leased by the BridgeStreet
Group as of the date of termination of the Stockholder's employment; or (v)
solicit any of the BridgeStreet Group's employees to leave the employ of the
BridgeStreet Group or hire anyone who (A) is an employee of the BridgeStreet
Group or (B) was an employee of the BridgeStreet Group within six months prior
to the date of hire by the Stockholder.
6.8 PROPRIETARY INFORMATION. The Stockholder will not at any time hereafter
knowingly disclose to or use for the benefit of anyone else any of the
Proprietary Information or the BridgeStreet Proprietary Information without
BridgeStreet's prior written authorization in each particular case. The
Stockholder also will at all times hereafter take all action and sign and
deliver all instruments BridgeStreet or Acquisition may require to vest or
perfect in BridgeStreet or Acquisition all right, title and interest in and to
the Proprietary Information or the BridgeStreet Proprietary Information, or to
assist BridgeStreet or Acquisition in filing or prosecuting any application, in
her name or any other name, in any country, for any patent, trademark, service
mark, copyright or other right therein, or any modification, reissue, division,
continuation, revival or extension thereof, or in conducting any legal or
administrative proceedings for securing, protecting or enforcing any of the
foregoing. The Stockholder further agrees that she has disclosed to BridgeStreet
in writing all proprietary information conceived or developed in whole or in
part by her relating to either the Companies or the BridgeStreet Group prior to
the date hereof. As used herein, "BridgeStreet Proprietary Information" means
(i) any and all inventions, discoveries, ideas, research, engineering methods,
practices, processes, systems (including, without limitation, reservation
systems), formulae, designs, products, projects, improvements and developments
which (a) have not been generally available, (b) relate to the BridgeStreet
Group or any subsequently-formed operating subsidiary of BridgeStreet, and (c)
are made, conceived or reduced to practice by the Stockholder subsequent to the
date hereof, or by any other employee or consultant of the BridgeStreet Group,
or in whole or in part at the expense of the BridgeStreet Group or on the
premises of the BridgeStreet Group or with the assistance of the BridgeStreet
Group's employees or consultants with the BridgeStreet Group's equipment or
supplies or those of the BridgeStreet Group's employees or consultants, and (ii)
any and all trade secrets, reservation systems, marketing plans, forecasts,
unpublished financial statements, budgets, licenses, prices and employee,
lessor, customer and supplier lists of the BridgeStreet Group.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 The obligations of BridgeStreet and Acquisition to consummate the
Merger are subject to the satisfaction at the Closing, or waiver by BridgeStreet
in writing, in whole or in part, of each of the following conditions:
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(a) BridgeStreet and Acquisition shall have received the opinion of
counsel to each Company, dated the date of the Closing and in form and substance
satisfactory to the BridgeStreet and its counsel, substantially to the effect
set forth on Exhibit 5.
(b) All proceedings taken by each Company and all instruments executed and
delivered by the Company prior to the date of the Closing in connection with the
transactions herein contemplated shall be satisfactory in form and substance to
counsel for BridgeStreet acting reasonably.
(c) The Stockholder shall have delivered to BridgeStreet the Employment
Agreement executed by Richard Brown.
(d) The Stockholder shall have executed and delivered to BridgeStreet a
letter agreement substantially in the form attached hereto as Exhibit 6 (the
"Investment Representation Letter").
(e) Each Company shall have delivered to BridgeStreet and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of each
Company's stockholders.
(f) The Companies shall have delivered to BridgeStreet a combined balance
sheet prepared in accordance with GAAP which reflects that as of December 31,
1996, the Companies had an aggregate tangible net book value of at least One
Hundred Fifty Thousand Dollars ($150,000.00).
(g) The Companies shall have delivered to BridgeStreet a pro forma
combined income statement for the fiscal year ended December 31, 1997,
reasonably satisfactory to BridgeStreet in terms of form, assumptions and
substance, which projects that, for such fiscal year, the Companies will have
combined revenues of at least Six Million Dollars ($6,000,000.00) and net income
before taxes of at least Eight Hundred Thousand Dollars ($800,000.00).
(h) Each Company shall have delivered to BridgeStreet such other
certificates, documents and opinions as BridgeStreet and its counsel shall
reasonably require.
7.2 The obligation of each Company to consummate this Agreement is subject
to the satisfaction at the Closing, or waiver by each Company in writing, in
whole or in part, of each of the following conditions:
(a) The Companies shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Companies and its counsel,
of Nutter, McClennen & Fish, LLP, counsel to BridgeStreet, substantially to the
effect set forth on Exhibit 7.
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(b) All proceedings taken by BridgeStreet and Acquisition and all
instruments executed and delivered by BridgeStreet and Acquisition prior to the
date of the Closing in connection with the transactions herein contemplated
shall be satisfactory in form and substance to counsel for the Companies, acting
reasonably.
(c) BridgeStreet and Acquisition shall have delivered to the Companies a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK; LEGEND
The shares of Merger Stock will not have been registered under the
Securities Act or the blue sky laws of any state by reason of their contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and of such state laws. Such shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act and such state laws or an exemption therefrom.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities, losses,
judgments, settlements, and expenses, including, without limitation,
all reasonable fees and disbursements of counsel incident to the
investigation or defense of any claim or proceeding or threatened
claim or proceeding.
(ii) "Indemnified Party" means each of BridgeStreet, the
Surviving Corporation, and their respective subsidiaries.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Stockholder shall, from and after the Effective Time, indemnify,
defend, and hold each Indemnified Party harmless from, against and in respect of
any and all Damages incurred by any Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by each Company or by the Stockholder in this
Agreement (collectively referred to herein as "Claims").
(c) The Companies' representations, warranties, covenants and agreements
set forth in Article 3 shall, for purposes of this Article 9, be deemed to have
survived the Effective Time notwithstanding any contrary terms of this
Agreement, and whenever such representations, warranties, covenants and
agreements are referred to in this Article 9, the
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<PAGE> 25
text of the same as set forth in Article 3 shall be deemed to be set forth in
their entirety herein, and the same are hereby incorporated herein by such
references. Each such representation, warranty, covenant and agreement shall be
deemed to have been relied upon by the party or parties to which made,
notwithstanding any investigation or inspection made by or on behalf of such
party or parties and shall not be affected in any respect by any such
investigation or inspection.
9.2 LIMITATIONS OF INDEMNITY OBLIGATIONS. The indemnity obligations of the
Stockholder under this Agreement shall be subject to the following limitations:
(a) The indemnity obligations of the Stockholder shall expire on the third
anniversary of the Effective Time (the "Cut-off Date"); provided, however, that
such obligations with respect to (i) the representations and warranties
contained in Sections 3.1, 3.2, 3.18, 3.21 and 3.22 and Article 4 of this
Agreement shall continue forever without limitation, and (ii) the
representations and warranties regarding taxes, which are contained in Section
3.15, shall remain in effect until all claims for taxes due by or on account of
the Companies for any period up to and including the Effective Time have been
settled and any statute of limitations period with respect to such taxes has
expired; and provided further that the indemnity obligations of the Stockholder
for Claims timely asserted by an Indemnified Party in the manner provided in
this Agreement shall continue until such Claims are finally resolved and
discharged.
(b) The aggregate indemnity obligations of the Stockholder for any Damages
shall not in any event exceed Nine Hundred Fifty Thousand Dollars ($950,000) or,
in the event of an IPO, the greater of (i) such amount and (ii) the amount equal
to the number of shares of Merger Stock which the Stockholder is entitled to
receive by reason of the Merger (appropriately adjusted for stock dividends,
stock splits and the like) multiplied by the per share price at which the
BridgeStreet Common Stock is sold to the public in the IPO.
(c) The Indemnified Parties shall be entitled to indemnification only if
the aggregate and collective Damages incurred or suffered by them exceed Fifty
Thousand Dollars ($50,000.00), in which event they shall be entitled to
indemnification of the full amount of such Damages. Notwithstanding the
immediately preceding sentence, however, the Indemnified Parties shall be
entitled to indemnification for Damages incurred or suffered by them as a result
of the breach of Section 3.15 or Section 3.30 without regard to such Fifty
Thousand Dollar ($50,000.00) basket.
9.3 NOTICE OF CLAIM. An Indemnified Party shall promptly notify the
Stockholder in writing of any Claim asserted by a third person that might give
rise to any indemnity obligation of the Stockholder hereunder (a "Third Party
Claim"), specifying in reasonable detail the nature thereof and indicating the
amount (estimated if necessary) of the Damages that have been or may be
sustained by the Indemnified Party. Failure of any Indemnified Party to promptly
give such notice shall not relieve the Stockholder of her obligation to
indemnify under this Article 9, but as a result of any such failure, the
Stockholder shall not
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be liable to the Indemnified Parties for the amount of actual damages caused by
such failure. Together with or following such notice, the Indemnified Parties
shall deliver to the Stockholder copies of all notices and documents received by
the Indemnified Parties relating to the Third Party Claim (including court
papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Stockholder shall
have the right (without prejudice to the right of any Indemnified Party to
participate at her own expense through counsel of her own choosing) to defend
against any Third Party Claim at her expense and through counsel of her own
choosing and to control such defense if she gives written notice of her
intention to do so within 15 business days of her receipt of notice of Third
Party Claim. The Indemnified Parties shall cooperate fully in the defense of
such Third Party Claim and shall make available to the Stockholder or her
counsel all pertinent information under their control relating thereto. The
Indemnified Parties shall have the right to elect to settle any Third Party
Claim; provided, however, the Stockholder shall not have any indemnification
obligation with respect to any monetary payment to any third party required by
such settlement unless she shall have consented thereto. The Stockholder shall
have the right to elect to settle any Third Party Claim subject to the consent
of BridgeStreet; provided, however, that if BridgeStreet fails to give such
consent within 15 business days of being requested to do so, BridgeStreet shall,
at its expense, assume the defense of such Third Party Claim and regardless of
the outcome of such matter, the Stockholder's liability hereunder shall be
limited to the amount of any such proposed settlement. The foregoing provisions
notwithstanding, in no event may the Stockholder (a) adjust, compromise or
settle any Third Party Claim (i) unless such adjustment, compromise or
settlement unconditionally releases BridgeStreet or the Surviving Corporation
from all liability or (ii) if such adjustment, compromise or settlement affects
the absolute and sole right of BridgeStreet or the Surviving Corporation to own
or use any of any Company's assets or (b) defend any Third Party Claim which, if
adversely determined, would materially impair the financial condition, business
or prospects of BridgeStreet or the Surviving Corporation.
10. MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Article 3 and 4 and except for the representations and warranties contained in
Article 5, the representations and warranties made in this Agreement shall not
survive beyond the Effective Time.
10.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with the
Disclosure Schedule and the Exhibits hereto, the entire agreement among the
parties with respect to the subject matter hereto and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise, provided that BridgeStreet or Acquisition may
assign its respective rights and obligations to
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<PAGE> 27
any direct or indirect subsidiary of BridgeStreet, but no such assignment shall
relieve BridgeStreet of its obligations hereunder.
10.3 VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to BridgeStreet or Acquisition, to it at:
BridgeStreet International Inc.
67 Batterymarch Street, Suite 500
Boston, Massachusetts 02110
Attention: Donald W. Glazer, Secretary
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esquire
If to any of the Companies or the Stockholder, to it or her at:
Home Again, Inc.
3550 Annapolis Lane
Plymouth, MN 55447
Attention: Sandra A. Brown
with a copy to:
Fabyanske, Svoboda, Westra & Hart, P.A.
920 Second Avenue South
Minneapolis, MN 55402
Attention: Thomas J. Tucci, Esquire
-27-
<PAGE> 28
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
10.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
10.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
10.8 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
10.9 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
[Rest of Page Intentionally Left Blank]
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<PAGE> 29
[Page intentionally left blank]
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<PAGE> 30
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
BRIDGESTREET INTERNATIONAL INC.
By: /s/ Mark D. Gagne
-----------------------------------------
Title: Chief Financial Officer
HOME AGAIN, INC.
By: /s/ Sandra A. Brown
-----------------------------------------
Title: Chief Executive Officer and President
HOME AGAIN AMENITIES, INC.
By: /s/ Sandra A. Brown
-----------------------------------------
Title: Chairman
HOME AGAIN CORPORATE HOUSING, INC.
By: /s/ Sandra A. Brown
-----------------------------------------
Title: Vice President
/s/ Sandra A. Brown
-----------------------------------------
Sandra A. Brown,
Stockholder
HAI ACQUISITION CORP.
By: /s/ Mark D. Gagne
-----------------------------------------
Title: President
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<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of December 30,
1996 by and between CL Acquisition Corp, a Delaware corporation ("Acquisition"),
and Rocco DiLillo of Hudson, Ohio (the "Employee").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in
this Agreement, Acquisition hereby offers and the Employee hereby accepts
employment.
2. TERM. Subject to earlier termination as hereafter provided,
the Employee's employment hereunder shall be for a term of three (3) years,
commencing effective January 2, 1997, (the "Effective Date"). The term of this
Agreement, as from time to time extended or renewed, is hereafter referred to as
"the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Employee shall serve as the
President of Acquisition. In addition, and without further
compensation, the Employee shall serve as a director and/or officer of
Acquisition and/or one or more of Acquisition's Affiliates if so
elected or appointed from time to time.
(b) During the term hereof, the Employee shall be employed by
Acquisition on a full-time basis, shall have all powers and duties
consistent with his position, subject to the direction and control of
Acquisition's Board of Directors (the "Board"), and shall perform such
other duties and responsibilities on behalf of Acquisition and its
Affiliates as may reasonably be designated from time to time by the
Board or by its designees.
(c) During the term hereof, the Employee shall devote his full
business time and his best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests
of Acquisition and its Affiliates and to the discharge of his duties
and responsibilities hereunder. The Employee shall not engage in any
other business activity or serve in any industry, trade, professional,
governmental or academic position during the term of this Agreement,
except as may be expressly approved in advance by the Board in writing
or to the extent that any such activity or service does not materially
and adversely affect the discharge of his duties and responsibilities
hereunder.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed
<PAGE> 2
by the Employee under and during the term hereof and subject to performance of
the Employee's duties and of the obligations of the Employee, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, Acquisition shall pay
the Employee a base salary at the rate of One Hundred Twenty Five
Thousand Dollars ($125,000) per annum, payable in accordance with the
payroll practices of Acquisition for its executives and subject to
increase from time to time by the Board or a compensation committee of
the Board, in its sole discretion. Such base salary, as from time to
time increased, is hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Employee shall be entitled to
participate in such bonus plan as Acquisition provides to its
executives generally, in accordance with the terms of that plan, as
amended by Acquisition from time to time. Employee shall be entitled to
receive 40% of base salary in such plan.
(c) VACATIONS. During the term hereof, the Employee shall be
entitled to four (4) weeks of vacation per annum or such greater amount
of time as shall be approved by the Chief Executive Officer of
Acquisition, to be taken at such times and intervals as shall be
determined by the Employee, subject to the reasonable business needs of
Acquisition. Vacation time shall not cumulate from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of Acquisition,
the Employee shall be entitled to participate in any and all employee
benefit plans from time to time in effect for employees of Acquisition
generally, except to the extent such plans are in a category of benefit
(including without limitation bonus compensation) otherwise provided to
the Employee. Such participation shall be subject to (i) the terms of
the applicable plan documents, (ii) generally applicable Company
policies and (iii) the discretion of the Board or any administrative or
other committee provided for in or contemplated by such plan.
Acquisition may alter, modify, add to or delete its employee benefit
plans at any time as it, in its sole judgment, determines to be
appropriate, without recourse by the Employee. Employee shall receive,
at such time as is mutually determined by the Employee and Acquisition,
an option to purchase 75,000 shares of common stock in BridgeStreet (or
as such name is amended or changed) at an exercise price equal to the
price at which the common stock is offered in the IPO (as defined
herein).
(e) BUSINESS EXPENSES. Acquisition shall pay or reimburse the
Employee for all reasonable and necessary business expenses incurred or
paid by the Employee in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and
<PAGE> 3
documentation as may be specified by Acquisition from time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS.
Notwithstanding the provisions of Section 2 hereof, the Employee's employment
hereunder shall terminate prior to the expiration of the term under the
following circumstances:
(a) DEATH. In the event of the Employee's death during the
term hereof, the Employee's employment hereunder shall immediately and
automatically terminate. In that event, Acquisition shall pay to the
Employee's designated beneficiary or, if no beneficiary has been
designated by the Employee, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
(b) DISABILITY.
(i) Acquisition may terminate the Employee's
employment hereunder, upon notice to the Employee, in the
event that the Employee becomes disabled during his
employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature
and, as a result, is unable to perform substantially all
of his duties and responsibilities hereunder for one
hundred eighty (180) consecutive days during any period of
three hundred sixty-five (365) consecutive calendar days.
(ii) The Board may designate another employee
to act in the Employee's place during any period of the
Employee's disability. Notwithstanding any such
designation, the Employee shall continue to receive the
Base Salary in accordance with Section 4(a) and benefits
in accordance with Section 4(d), to the extent permitted
by the then-current terms of the applicable benefit plans,
until the Employee becomes eligible for disability income
benefits under any disability income plan (if one is
provided by Acquisition) or until the termination of his
employment, whichever shall first occur.
(iii) While receiving disability income
payments under Acquisition's disability income plan, if
any, the Employee shall not be entitled to receive any
Base Salary under Section 4(a) hereof, but shall continue
to participate in Company benefit plans in accordance with
Section 4(d) and the terms of such plans, until the
termination of his employment.
(iv) If any question shall arise as to whether
during any period the Employee is disabled through any
illness, injury, accident or condition of either a
physical or psychological nature
<PAGE> 4
so as to be unable to perform substantially all of his
duties and responsibilities hereunder, the Employee may,
and at the request of Acquisition shall, submit to a
medical examination by a physician selected by Acquisition
to whom the Employee or his duly appointed guardian, if
any, has no reasonable objection to determine whether the
Employee is so disabled and such determination shall for
the purposes of this Agreement be conclusive of the issue.
If such question shall arise and the Employee shall fail
to submit to such medical examination, Acquisition's
determination of the issue shall be binding on the
Employee.
(c) BY ACQUISITION FOR CAUSE. Acquisition may terminate the
Employee's employment hereunder for Cause at any time upon notice to
the Employee setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board of Directors of
BridgeStreet International, Inc. ("BridgeStreet") in its reasonable
judgment, shall constitute Cause for termination:
(i) The Employee's repeated failure to perform
(other than by reason of disability), or gross negligence
in the performance of, his material duties and
responsibilities hereunder and the continuance of such
failure or negligence for a period of thirty (30) days
after notice to the Employee;
(ii) Material breach by the Employee of any
provision of this Agreement or any other written agreement
between the Employee and Acquisition or any of its
Affiliates;
(iii) Other conduct by the Employee that
involves a material violation of law or breach of
fiduciary obligation on the part of the Employee or is
otherwise materially harmful to the business, interests,
reputation or prospects of Acquisition or any of its
Affiliates.
Upon the giving of notice of termination of the Employee's
employment hereunder for Cause, Acquisition shall not have any further
obligation or liability to the Employee, other than for Base Salary
earned and unpaid at the date of termination.
(d) BY ACQUISITION AFTER THE IPO. If approved by a vote of
two-thirds of the directors of BridgeStreet, Acquisition may terminate
the Employee's employment hereunder upon notice to the Employee for any
reason or for no reason at any time after the completion, if any, of
BridgeStreet's initial public offering of its Common Stock (the "IPO")
(including the closing of any exercise by the underwriters in such an
offering of an over-allotment option granted to
<PAGE> 5
them by BridgeStreet); provided, however, that if the Employee is
unable to sell at least twenty percent (20%) of the shares of
BridgeStreet Common Stock held by him as of the Effective Date upon
completion of the IPO, then this subsection (d) shall, at such time, be
deemed null and void and of no further force and effect whatsoever
until such time as the Employee is able to sell such number of shares.
Upon the giving of notice of termination of the Employee's
employment under this Section 5(d), Acquisition shall not have any
further obligation or liability to the Employee, other than for Base
Salary earned and unpaid at the date of termination.
6. EFFECT OF TERMINATION. The provisions of this Section 6 shall
apply to termination due to the expiration of the term, pursuant to Section 5 or
otherwise.
(a) Payment by Acquisition of any Base Salary and
contributions to the cost of the Employee's continued participation in
Acquisition's group health and dental plans, if any, that are due the
Employee in each case under the applicable termination provision of
Section 5 shall constitute the entire obligation of Acquisition to the
Employee.
(b) Benefits shall terminate pursuant to the terms of the
applicable benefit plans based on the date of termination of the
Employee's employment without regard to any continuation of Base Salary
or other payment to the Employee following such date of termination.
(c) Provisions of this Agreement shall survive any termination
if so provided herein or if necessary or desirable fully to accomplish
the purposes of such provision, including without limitation the
obligations of the Employee under Section 7. The Employee recognizes
that no compensation is earned after termination of employment.
7. CONFIDENTIAL INFORMATION.
(a) The Employee acknowledges that Acquisition and its
Affiliates will continually develop Confidential Information, that the
Employee may develop Confidential Information for Acquisition or its
Affiliates and that the Employee may learn of Confidential Information
during the course of employment. The Employee agrees that, except as
required for the proper performance of his duties for Acquisition, he
will not, directly or indirectly, use or disclose any Confidential
Information, as defined below. The Employee understands and agrees that
this restriction will continue to apply after his employment
terminates, regardless of the reason for termination.
(b) The Employee agrees that all Confidential Information
which he creates or to which he has access as a result of his
employment is and shall
<PAGE> 6
remain the sole and exclusive property of Acquisition. Except as
required for the proper performance of his duties, the Employee will
not copy any documents, tapes or other media containing Confidential
Information ("Documents") or remove any Documents, or copies, from
Company premises. The Employee will return to Acquisition immediately
after his employment terminates, and at such other times as may be
specified by Acquisition, all Documents and copies and all other
property of Acquisition then in his possession or control.
8. ENFORCEMENT OF COVENANTS. The Employee acknowledges that he
has carefully read and considered all the terms and conditions of this
Agreement, including the restraints imposed upon him pursuant to Section 7
hereof. The Employee further agrees that all goodwill of Acquisition and its
Affiliates is their exclusive property. The Employee further acknowledges and
agrees that, were he to breach any of the covenants contained in Section 7
hereof, the damage would be irreparable. The Employee therefore agrees that
Acquisition or any of its Affiliates, as the case may be, in addition to any
other remedies available to it, shall be entitled to preliminary and permanent
injunctive relief against any breach or threatened breach by the Employee of any
of said covenants, without having to post bond.
9. CONFLICTING AGREEMENTS. The Employee hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which the Employee is a party or is bound and that the Employee is not
subject to any covenants against competition or similar covenants that would
affect the performance of his obligations hereunder. The Employee will not
disclose to or use any proprietary information of a third party without such
party's consent.
10. DEFINITIONS. Words or phrases which are initially capitalized
or are within quotation marks shall have the meanings provided in this Section
10 and as provided elsewhere herein. For purposes of this Agreement, the
following definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with
Acquisition, where control may be by either management authority or
equity interest.
(b) "Confidential Information" means any and all information
of Acquisition that is not generally known by others with whom
Acquisition does, or plans to, compete or do business, including but
not limited to (i) Acquisition's products and services, technical data,
methods and processes, (ii) Acquisition's marketing activities and
strategic plans, (iii) Acquisition's costs and sources of supply, (iv)
the identity and special needs of Acquisition's customers and
prospective customers and vendors and prospective vendors, and (v) the
people and organizations with whom Acquisition has business
relationships and those relationships. Confidential Information also
includes such
<PAGE> 7
information that Acquisition may receive or has received belonging to
customers or others who do business with Acquisition.
(c) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization, other than Acquisition or any of its Affiliates.
11. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
12. ASSIGNMENT. Neither Acquisition nor the Employee may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that Acquisition may assign its rights and obligations under this Agreement
without the consent of the Employee in the event that Acquisition shall
hereafter affect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person. This Agreement shall inure to the benefit of and be binding upon
Acquisition and the Employee, their respective successors, executors,
administrators, heirs and permitted assigns.
13. SEVERABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. WAIVER. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of either
party to require the performance of any term or obligation of this Agreement,
or the waiver by either party of any breach of this Agreement, shall not
prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.
15. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Employee at his
last known address on the books of Acquisition or, in the case of Acquisition,
at BridgeStreet's principal place of business, attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and supersedes all prior communications,
agreements and understandings, written or oral, with respect to the terms and
conditions of the Employee's employment.
<PAGE> 8
17. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Employee and by an expressly authorized
representative of Acquisition.
18. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
20. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of Delaware, without
regard to the conflict of laws principles thereof.
[Remainder of this page intentionally left blank.]
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Employee and Acquisition, by its duly authorized
representative, as of the date first above written.
Employee: CL ACQUISITION CORP.
/s/ Rocco DiLillo By: /s/ Donald W. Glazer
- ---------------------------- -------------------------------
Rocco DiLillo Name: Donald W. Glazer
Title: President
<PAGE> 1
Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of December 30,
1996 by and between EIP Acquisition Corp, a Delaware corporation
("Acquisition"), and Melanie R. Sabelhaus of Owings Mills, Maryland (the
"Employee").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, Acquisition hereby offers and the Employee hereby accepts employment.
2. TERM. Subject to earlier termination as hereafter provided, the
Employee's employment hereunder shall be for a term of three (3) years,
commencing effective January 2, 1997, (the "Effective Date"). The term of this
Agreement, as from time to time extended or renewed, is hereafter referred to as
"the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Employee shall serve as the
President of Acquisition. In addition, and without further
compensation, the Employee shall serve as a director and/or officer of
Acquisition and/or one or more of Acquisition's Affiliates if so
elected or appointed from time to time.
(b) During the term hereof, the Employee shall be employed by
Acquisition on a full-time basis, shall have all powers and duties
consistent with her position, subject to the direction and control of
Acquisition's Board of Directors (the "Board"), and shall perform such
other duties and responsibilities on behalf of Acquisition and its
Affiliates as may reasonably be designated from time to time by the
Board or by its designees.
(c) During the term hereof, the Employee shall devote her full
business time and her best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests
of Acquisition and its Affiliates and to the discharge of her duties
and responsibilities hereunder. The Employee shall not engage in any
other business activity or serve in any industry, trade, professional,
governmental or academic position during the term of this Agreement,
except as may be expressly approved in advance by the Board in writing
or to the extent that any such activity or service does not materially
and adversely affect the discharge of her duties and responsibilities
hereunder.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Employee under and during the term hereof and subject to
performance of the
<PAGE> 2
Employee's duties and of the obligations of the Employee, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, Acquisition shall pay
the Employee a base salary at the rate of One Hundred Thousand Dollars
($100,000) per annum, payable in accordance with the payroll practices
of Acquisition for its executives and subject to increase from time to
time by the Board or a compensation committee of the Board, in its sole
discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Employee shall be entitled to
participate in such bonus plan as Acquisition provides to its
executives generally, in accordance with the terms of that plan, as
amended by Acquisition from time to time.
(c) VACATIONS. During the term hereof, the Employee shall be
entitled to four (4) weeks of vacation per annum or such greater amount
of time as shall be approved by the Chief Executive Officer of
Acquisition, to be taken at such times and intervals as shall be
determined by the Employee, subject to the reasonable business needs of
Acquisition. Vacation time shall not cumulate from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of Acquisition,
the Employee shall be entitled to participate in any and all employee
benefit plans from time to time in effect for employees of Acquisition
generally, except to the extent such plans are in a category of benefit
(including without limitation bonus compensation) otherwise provided to
the Employee. Such participation shall be subject to (i) the terms of
the applicable plan documents, (ii) generally applicable Company
policies and (iii) the discretion of the Board or any administrative or
other committee provided for in or contemplated by such plan.
Acquisition may alter, modify, add to or delete its employee benefit
plans at any time as it, in its sole judgment, determines to be
appropriate, without recourse by the Employee.
(e) BUSINESS EXPENSES. Acquisition shall pay or reimburse the
Employee for all reasonable and necessary business expenses incurred or
paid by the Employee in the performance of her duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by
Acquisition from time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding
the provisions of Section 2 hereof, the Employee's employment hereunder shall
terminate prior to the expiration of the term under the following circumstances:
<PAGE> 3
(a) DEATH. In the event of the Employee's death during the
term hereof, the Employee's employment hereunder shall immediately and
automatically terminate. In that event, Acquisition shall pay to the
Employee's designated beneficiary or, if no beneficiary has been
designated by the Employee, to her estate, any earned and unpaid Base
Salary, prorated through the date of her death.
(b) DISABILITY.
(i) Acquisition may terminate the Employee's
employment hereunder, upon notice to the Employee, in
the event that the Employee becomes disabled during
her employment hereunder through any illness, injury,
accident or condition of either a physical or
psychological nature and, as a result, is unable to
perform substantially all of her duties and
responsibilities hereunder for one hundred eighty
(180) consecutive days during any period of three
hundred sixty-five (365) consecutive calendar days.
(ii) The Board may designate another employee
to act in the Employee's place during any period of
the Employee's disability. Notwithstanding any such
designation, the Employee shall continue to receive
the Base Salary in accordance with Section 4(a) and
benefits in accordance with Section 4(d), to the
extent permitted by the then-current terms of the
applicable benefit plans, until the Employee becomes
eligible for disability income benefits under any
disability income plan (if one is provided by
Acquisition) or until the termination of her
employment, whichever shall first occur.
(iii) While receiving disability income payments
under Acquisition's disability income plan, if any,
the Employee shall not be entitled to receive any
Base Salary under Section 4(a) hereof, but shall
continue to participate in Company benefit plans in
accordance with Section 4(d) and the terms of such
plans, until the termination of her employment.
(iv) If any question shall arise as to whether
during any period the Employee is disabled through
any illness, injury, accident or condition of either
a physical or psychological nature so as to be unable
to perform substantially all of her duties and
responsibilities hereunder, the Employee may, and at
the request of Acquisition shall, submit to a medical
examination by a physician selected by Acquisition to
whom the Employee or her duly appointed guardian, if
any, has no reasonable objection to determine whether
the Employee is so disabled and such
<PAGE> 4
determination shall for the purposes of this
Agreement be conclusive of the issue. If such
question shall arise and the Employee shall fail to
submit to such medical examination, Acquisition's
determination of the issue shall be binding on the
Employee.
(c) BY ACQUISITION FOR CAUSE. Acquisition may terminate the
Employee's employment hereunder for Cause at any time upon notice to
the Employee setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board of Directors of
BridgeStreet International, Inc. ("BridgeStreet") in its reasonable
judgment, shall constitute Cause for termination:
(i) The Employee's repeated failure to perform
(other than by reason of disability), or gross
negligence in the performance of, her material duties
and responsibilities hereunder and the continuance of
such failure or negligence for a period of thirty
(30) days after notice to the Employee;
(ii) Material breach by the Employee of any
provision of this Agreement or any other written
agreement between the Employee and Acquisition or any
of its Affiliates;
(iii) Other conduct by the Employee that
involves a material violation of law or breach of
fiduciary obligation on the part of the Employee or
is otherwise materially harmful to the business,
interests, reputation or prospects of Acquisition or
any of its Affiliates.
Upon the giving of notice of termination of the Employee's
employment hereunder for Cause, Acquisition shall not have any further
obligation or liability to the Employee, other than for Base Salary
earned and unpaid at the date of termination.
(d) BY ACQUISITION AFTER THE IPO. If approved by a vote of
two-thirds of the directors of BridgeStreet, Acquisition may terminate
the Employee's employment hereunder upon notice to the Employee for any
reason or for no reason at any time after the completion, if any, of
BridgeStreet's initial public offering of its Common Stock (the "IPO")
(including the closing of any exercise by the underwriters in such an
offering of an over-allotment option granted to them by BridgeStreet);
provided, however, that if the Employee is unable to sell at least
twenty percent (20%) of the shares of BridgeStreet Common Stock held by
her as of the Effective Date upon completion of the IPO, then this
subsection (d) shall, at such time, be deemed null and void and of no
further force and effect whatsoever until such time as the Employee is
able to sell such number of shares.
<PAGE> 5
Upon the giving of notice of termination of the Employee's
employment under this Section 5(d), Acquisition shall not have any
further obligation or liability to the Employee, other than for Base
Salary earned and unpaid at the date of termination.
6. EFFECT OF TERMINATION. The provisions of this Section 6 shall apply
to termination due to the expiration of the term, pursuant to Section 5 or
otherwise.
(a) Payment by Acquisition of any Base Salary and
contributions to the cost of the Employee's continued participation in
Acquisition's group health and dental plans, if any, that are due the
Employee in each case under the applicable termination provision of
Section 5 shall constitute the entire obligation of Acquisition to the
Employee.
(b) Benefits shall terminate pursuant to the terms of the
applicable benefit plans based on the date of termination of the
Employee's employment without regard to any continuation of Base Salary
or other payment to the Employee following such date of termination.
(c) Provisions of this Agreement shall survive any termination
if so provided herein or if necessary or desirable fully to accomplish
the purposes of such provision, including without limitation the
obligations of the Employee under Section 7. The Employee recognizes
that no compensation is earned after termination of employment.
7. CONFIDENTIAL INFORMATION.
(a) The Employee acknowledges that Acquisition and its
Affiliates will continually develop Confidential Information, that the
Employee may develop Confidential Information for Acquisition or its
Affiliates and that the Employee may learn of Confidential Information
during the course of employment. The Employee agrees that, except as
required for the proper performance of her duties for Acquisition, she
will not, directly or indirectly, use or disclose any Confidential
Information, as defined below. The Employee understands and agrees that
this restriction will continue to apply after her employment
terminates, regardless of the reason for termination.
(b) The Employee agrees that all Confidential Information
which she creates or to which she has access as a result of her
employment is and shall remain the sole and exclusive property of
Acquisition. Except as required for the proper performance of her
duties, the Employee will not copy any documents, tapes or other media
containing Confidential Information ("Documents") or remove any
Documents, or copies, from Company premises. The Employee will return
to Acquisition immediately after her employment terminates, and at such
other times as may be specified by Acquisition, all Documents and
copies and all other property of Acquisition then in her
<PAGE> 6
possession or control.
8. ENFORCEMENT OF COVENANTS. The Employee acknowledges that she has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon her pursuant to Section 7 hereof. The
Employee further agrees that all goodwill of Acquisition and its Affiliates is
their exclusive property. The Employee further acknowledges and agrees that,
were she to breach any of the covenants contained in Section 7 hereof, the
damage would be irreparable. The Employee therefore agrees that Acquisition or
any of its Affiliates, as the case may be, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Employee of any of said
covenants, without having to post bond.
9. CONFLICTING AGREEMENTS. The Employee hereby represents and warrants
that the execution of this Agreement and the performance of her obligations
hereunder will not breach or be in conflict with any other agreement to which
the Employee is a party or is bound and that the Employee is not subject to any
covenants against competition or similar covenants that would affect the
performance of her obligations hereunder. The Employee will not disclose to or
use any proprietary information of a third party without such party's consent.
10. DEFINITIONS. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 10
and as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with
Acquisition, where control may be by either management authority or
equity interest.
(b) "Confidential Information" means any and all information
of Acquisition that is not generally known by others with whom
Acquisition does, or plans to, compete or do business, including but
not limited to (i) Acquisition's products and services, technical data,
methods and processes, (ii) Acquisition's marketing activities and
strategic plans, (iii) Acquisition's costs and sources of supply, (iv)
the identity and special needs of Acquisition's customers and
prospective customers and vendors and prospective vendors, and (v) the
people and organizations with whom Acquisition has business
relationships and those relationships. Confidential Information also
includes such information that Acquisition may receive or has received
belonging to customers or others who do business with Acquisition.
(c) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization, other than Acquisition or any of its Affiliates.
<PAGE> 7
11. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
12. ASSIGNMENT. Neither Acquisition nor the Employee may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that Acquisition may assign its rights and obligations under this Agreement
without the consent of the Employee in the event that Acquisition shall
hereafter affect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person. This Agreement shall inure to the benefit of and be binding upon
Acquisition and the Employee, their respective successors, executors,
administrators, heirs and permitted assigns.
13. SEVERABILITY. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Employee at her
last known address on the books of Acquisition or, in the case of Acquisition,
at BridgeStreet's principal place of business, attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Employee's employment.
17. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Employee and by an expressly authorized
representative of Acquisition.
18. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
<PAGE> 8
provision of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
20. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of Delaware, without
regard to the conflict of laws principles thereof.
[Remainder of this page intentionally left blank.]
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Employee and Acquisition, by its duly authorized
representative, as of the date first above written.
Employee: EIP ACQUISITION CORP.
/s/ Melanie R. Sabelhaus By: /s/ Donald W. Glazer
- --------------------------- -----------------------------
Melanie R. Sabelhaus Name: Donald W. Glazer
Title: President
<PAGE> 1
EXHIBT 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of December 30,
1996 by and between THEI Acquisition Corp., a Delaware corporation
("Acquisition"), and Connie F. O'Briant of Collierville, Tennessee (the
"Employee").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, Acquisition hereby offers and the Employee hereby accepts employment.
2. TERM. Subject to earlier termination as hereafter provided, the
Employee's employment hereunder shall be for a term of three (3) years,
commencing effective January 2, 1997, (the "Effective Date"). The term of this
Agreement, as from time to time extended or renewed, is hereafter referred to as
"the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Employee shall serve as the
President of Acquisition. In addition, and without further
compensation, the Employee shall serve as a director and/or officer of
Acquisition and/or one or more of Acquisition's Affiliates if so
elected or appointed from time to time.
(b) During the term hereof, the Employee shall be employed by
Acquisition on a full-time basis, shall have all powers and duties
consistent with her position, subject to the direction and control of
Acquisition's Board of Directors (the "Board"), and shall perform such
other duties and responsibilities on behalf of Acquisition and its
Affiliates as may reasonably be designated from time to time by the
Board or by its designees.
(c) During the term hereof, the Employee shall devote her full
business time and her best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests
of Acquisition and its Affiliates and to the discharge of her duties
and responsibilities hereunder. The Employee shall not engage in any
other business activity or serve in any industry, trade, professional,
governmental or academic position during the term of this Agreement,
except as may be expressly approved in advance by the Board in writing
or to the extent that any such activity or service does not materially
and adversely affect the discharge of her duties and responsibilities
hereunder.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Employee under and during the term hereof and subject to
performance of the
<PAGE> 2
Employee's duties and of the obligations of the Employee, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, Acquisition shall pay
the Employee a base salary at the rate of One Hundred Thousand Dollars
($100,000) per annum, payable in accordance with the payroll practices
of Acquisition for its executives and subject to increase from time to
time by the Board or a compensation committee of the Board, in its sole
discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Employee shall be entitled to
participate in such bonus plan as Acquisition provides to its
executives generally, in accordance with the terms of that plan, as
amended by Acquisition from time to time.
(c) VACATIONS. During the term hereof, the Employee shall be
entitled to four (4) weeks of vacation per annum or such greater amount
of time as shall be approved by the Chief Executive Officer of
Acquisition, to be taken at such times and intervals as shall be
determined by the Employee, subject to the reasonable business needs of
Acquisition. Vacation time shall not cumulate from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of Acquisition,
the Employee shall be entitled to participate in any and all employee
benefit plans from time to time in effect for employees of Acquisition
generally, except to the extent such plans are in a category of benefit
(including without limitation bonus compensation) otherwise provided to
the Employee. Such participation shall be subject to (i) the terms of
the applicable plan documents, (ii) generally applicable Company
policies and (iii) the discretion of the Board or any administrative or
other committee provided for in or contemplated by such plan.
Acquisition may alter, modify, add to or delete its employee benefit
plans at any time as it, in its sole judgment, determines to be
appropriate, without recourse by the Employee.
(e) BUSINESS EXPENSES. Acquisition shall pay or reimburse the
Employee for all reasonable and necessary business expenses incurred or
paid by the Employee in the performance of her duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by
Acquisition from time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding
the provisions of Section 2 hereof, the Employee's employment hereunder shall
terminate prior to the expiration of the term under the following circumstances:
<PAGE> 3
(a) DEATH. In the event of the Employee's death during the
term hereof, the Employee's employment hereunder shall immediately and
automatically terminate. In that event, Acquisition shall pay to the
Employee's designated beneficiary or, if no beneficiary has been
designated by the Employee, to her estate, any earned and unpaid Base
Salary, prorated through the date of her death.
(b) DISABILITY.
(i) Acquisition may terminate the Employee's
employment hereunder, upon notice to the Employee, in
the event that the Employee becomes disabled during
her employment hereunder through any illness, injury,
accident or condition of either a physical or
psychological nature and, as a result, is unable to
perform substantially all of her duties and
responsibilities hereunder for one hundred eighty
(180) consecutive days during any period of three
hundred sixty-five (365) consecutive calendar days.
(ii) The Board may designate another employee
to act in the Employee's place during any period of
the Employee's disability. Notwithstanding any such
designation, the Employee shall continue to receive
the Base Salary in accordance with Section 4(a) and
benefits in accordance with Section 4(d), to the
extent permitted by the then-current terms of the
applicable benefit plans, until the Employee becomes
eligible for disability income benefits under any
disability income plan (if one is provided by
Acquisition) or until the termination of her
employment, whichever shall first occur.
(iii) While receiving disability income payments
under Acquisition's disability income plan, if any,
the Employee shall not be entitled to receive any
Base Salary under Section 4(a) hereof, but shall
continue to participate in Company benefit plans in
accordance with Section 4(d) and the terms of such
plans, until the termination of her employment.
(iv) If any question shall arise as to whether
during any period the Employee is disabled through
any illness, injury, accident or condition of either
a physical or psychological nature so as to be unable
to perform substantially all of her duties and
responsibilities hereunder, the Employee may, and at
the request of Acquisition shall, submit to a medical
examination by a physician selected by Acquisition to
whom the Employee or her duly appointed guardian, if
any, has no reasonable objection to determine whether
the Employee is so disabled and such
<PAGE> 4
determination shall for the purposes of this
Agreement be conclusive of the issue. If such
question shall arise and the Employee shall fail to
submit to such medical examination, Acquisition's
determination of the issue shall be binding on the
Employee.
(c) BY ACQUISITION FOR CAUSE. Acquisition may terminate the
Employee's employment hereunder for Cause at any time upon notice to
the Employee setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board of Directors of
BridgeStreet International, Inc. ("BridgeStreet") in its reasonable
judgment, shall constitute Cause for termination:
(i) The Employee's repeated failure to
perform (other than by reason of disability), or
gross negligence in the performance of, her material
duties and responsibilities hereunder and the
continuance of such failure or negligence for a
period of thirty (30) days after notice to the
Employee;
(ii) Material breach by the Employee of any
provision of this Agreement or any other written
agreement between the Employee and Acquisition or any
of its Affiliates;
(iii) Other conduct by the Employee that
involves a material violation of law or breach of
fiduciary obligation on the part of the Employee or
is otherwise materially harmful to the business,
interests, reputation or prospects of Acquisition or
any of its Affiliates.
Upon the giving of notice of termination of the Employee's
employment hereunder for Cause, Acquisition shall not have any further
obligation or liability to the Employee, other than for Base Salary
earned and unpaid at the date of termination.
(d) BY ACQUISITION AFTER THE IPO. If approved by a vote of
two-thirds of the directors of BridgeStreet, Acquisition may terminate
the Employee's employment hereunder upon notice to the Employee for any
reason or for no reason at any time after the completion, if any, of
BridgeStreet's initial public offering of its Common Stock (the "IPO")
(including the closing of any exercise by the underwriters in such an
offering of an over-allotment option granted to them by BridgeStreet);
provided, however, that if the Employee is unable to sell at least
twenty percent (20%) of the shares of BridgeStreet Common Stock held by
her as of the Effective Date upon completion of the IPO, then this
subsection (d) shall, at such time, be deemed null and void and of no
further force and effect whatsoever until such time as the Employee is
able to sell such number of shares.
<PAGE> 5
Upon the giving of notice of termination of the Employee's
employment under this Section 5(d), Acquisition shall not have any
further obligation or liability to the Employee, other than for Base
Salary earned and unpaid at the date of termination.
6. EFFECT OF TERMINATION. The provisions of this Section 6 shall apply
to termination due to the expiration of the term, pursuant to Section 5 or
otherwise.
(a) Payment by Acquisition of any Base Salary and
contributions to the cost of the Employee's continued participation in
Acquisition's group health and dental plans, if any, that are due the
Employee in each case under the applicable termination provision of
Section 5 shall constitute the entire obligation of Acquisition to the
Employee.
(b) Benefits shall terminate pursuant to the terms of the
applicable benefit plans based on the date of termination of the
Employee's employment without regard to any continuation of Base Salary
or other payment to the Employee following such date of termination.
(c) Provisions of this Agreement shall survive any termination
if so provided herein or if necessary or desirable fully to accomplish
the purposes of such provision, including without limitation the
obligations of the Employee under Section 7. The Employee recognizes
that no compensation is earned after termination of employment.
7. CONFIDENTIAL INFORMATION.
(a) The Employee acknowledges that Acquisition and its
Affiliates will continually develop Confidential Information, that the
Employee may develop Confidential Information for Acquisition or its
Affiliates and that the Employee may learn of Confidential Information
during the course of employment. The Employee agrees that, except as
required for the proper performance of her duties for Acquisition, she
will not, directly or indirectly, use or disclose any Confidential
Information, as defined below. The Employee understands and agrees that
this restriction will continue to apply after her employment
terminates, regardless of the reason for termination.
(b) The Employee agrees that all Confidential Information
which she creates or to which she has access as a result of her
employment is and shall remain the sole and exclusive property of
Acquisition. Except as required for the proper performance of her
duties, the Employee will not copy any documents, tapes or other media
containing Confidential Information ("Documents") or remove any
Documents, or copies, from Company premises. The Employee will return
to Acquisition immediately after her employment terminates, and at such
other times as may be specified by Acquisition, all Documents and
copies and all other property of Acquisition then in her
<PAGE> 6
possession or control.
8. ENFORCEMENT OF COVENANTS. The Employee acknowledges that she has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon her pursuant to Section 7 hereof. The
Employee further agrees that all goodwill of Acquisition and its Affiliates is
their exclusive property. The Employee further acknowledges and agrees that,
were she to breach any of the covenants contained in Section 7 hereof, the
damage would be irreparable. The Employee therefore agrees that Acquisition or
any of its Affiliates, as the case may be, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Employee of any of said
covenants, without having to post bond.
9. CONFLICTING AGREEMENTS. The Employee hereby represents and warrants
that the execution of this Agreement and the performance of her obligations
hereunder will not breach or be in conflict with any other agreement to which
the Employee is a party or is bound and that the Employee is not subject to any
covenants against competition or similar covenants that would affect the
performance of her obligations hereunder. The Employee will not disclose to or
use any proprietary information of a third party without such party's consent.
10. DEFINITIONS. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 10
and as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with
Acquisition, where control may be by either management authority or
equity interest.
(b) "Confidential Information" means any and all information
of Acquisition that is not generally known by others with whom
Acquisition does, or plans to, compete or do business, including but
not limited to (i) Acquisition's products and services, technical data,
methods and processes, (ii) Acquisition's marketing activities and
strategic plans, (iii) Acquisition's costs and sources of supply, (iv)
the identity and special needs of Acquisition's customers and
prospective customers and vendors and prospective vendors, and (v) the
people and organizations with whom Acquisition has business
relationships and those relationships. Confidential Information also
includes such information that Acquisition may receive or has received
belonging to customers or others who do business with Acquisition.
(c) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization, other than Acquisition or any of its Affiliates.
<PAGE> 7
11. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
12. ASSIGNMENT. Neither Acquisition nor the Employee may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that Acquisition may assign its rights and obligations under this Agreement
without the consent of the Employee in the event that Acquisition shall
hereafter affect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person. This Agreement shall inure to the benefit of and be binding upon
Acquisition and the Employee, their respective successors, executors,
administrators, heirs and permitted assigns.
13. SEVERABILITY. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Employee at her
last known address on the books of Acquisition or, in the case of Acquisition,
at BridgeStreet's principal place of business, attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Employee's employment.
17. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Employee and by an expressly authorized
representative of Acquisition.
18. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
<PAGE> 8
provision of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
20. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of Delaware, without
regard to the conflict of laws principles thereof.
[Remainder of this page intentionally left blank.]
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Employee and Acquisition, by its duly authorized
representative, as of the date first above written.
Employee: THEI ACQUISITION CORP.
/s/ Connie F. O'Briant By: /s/ Donald W. Glazer
- ---------------------------- -------------------------------
Connie F. O'Briant Name: Donald W. Glazer
Title: President
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of December 30,
1996 by and between TCHI Acquisition Corp, a Delaware corporation
("Acquisition"), and Lynda Clutchey of Lewis Center, Ohio (the "Employee").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, Acquisition hereby offers and the Employee hereby accepts employment.
2. TERM. Subject to earlier termination as hereafter provided, the
Employee's employment hereunder shall be for a term of three (3) years,
commencing effective January 2, 1997, (the "Effective Date"). The term of this
Agreement, as from time to time extended or renewed, is hereafter referred to as
"the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Employee shall serve as the
President of Acquisition. In addition, and without further
compensation, the Employee shall serve as a director and/or officer of
Acquisition and/or one or more of Acquisition's Affiliates if so
elected or appointed from time to time.
(b) During the term hereof, the Employee shall be employed by
Acquisition on a full-time basis, shall have all powers and duties
consistent with her position, subject to the direction and control of
Acquisition's Board of Directors (the "Board"), and shall perform such
other duties and responsibilities on behalf of Acquisition and its
Affiliates as may reasonably be designated from time to time by the
Board or by its designees.
(c) During the term hereof, the Employee shall devote her full
business time and her best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests
of Acquisition and its Affiliates and to the discharge of her duties
and responsibilities hereunder. The Employee shall not engage in any
other business activity or serve in any industry, trade, professional,
governmental or academic position during the term of this Agreement,
except as may be expressly approved in advance by the Board in writing
or to the extent that any such activity or service does not materially
and adversely affect the discharge of her duties and responsibilities
hereunder.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Employee under and during the term hereof and subject to
performance of the
<PAGE> 2
Employee's duties and of the obligations of the Employee, pursuant to this
Agreement or otherwise:
(a) BASE SALARY. During the term hereof, Acquisition shall pay
the Employee a base salary at the rate of One Hundred Thousand Dollars
($100,000) per annum, payable in accordance with the payroll practices
of Acquisition for its executives and subject to increase from time to
time by the Board or a compensation committee of the Board, in its sole
discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. Employee shall be entitled to
participate in such bonus plan as Acquisition provides to its
executives generally, in accordance with the terms of that plan, as
amended by Acquisition from time to time.
(c) VACATIONS. During the term hereof, the Employee shall be
entitled to four (4) weeks of vacation per annum or such greater amount
of time as shall be approved by the Chief Executive Officer of
Acquisition, to be taken at such times and intervals as shall be
determined by the Employee, subject to the reasonable business needs of
Acquisition. Vacation time shall not cumulate from year to year.
(d) OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of employees of Acquisition,
the Employee shall be entitled to participate in any and all employee
benefit plans from time to time in effect for employees of Acquisition
generally, except to the extent such plans are in a category of benefit
(including without limitation bonus compensation) otherwise provided to
the Employee. Such participation shall be subject to (i) the terms of
the applicable plan documents, (ii) generally applicable Company
policies and (iii) the discretion of the Board or any administrative or
other committee provided for in or contemplated by such plan.
Acquisition may alter, modify, add to or delete its employee benefit
plans at any time as it, in its sole judgment, determines to be
appropriate, without recourse by the Employee.
(e) BUSINESS EXPENSES. Acquisition shall pay or reimburse the
Employee for all reasonable and necessary business expenses incurred or
paid by the Employee in the performance of her duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by
Acquisition from time to time.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding
the provisions of Section 2 hereof, the Employee's employment hereunder shall
terminate prior to the expiration of the term under the following circumstances:
<PAGE> 3
(a) DEATH. In the event of the Employee's death during the
term hereof, the Employee's employment hereunder shall immediately and
automatically terminate. In that event, Acquisition shall pay to the
Employee's designated beneficiary or, if no beneficiary has been
designated by the Employee, to her estate, any earned and unpaid Base
Salary, prorated through the date of her death.
(b) DISABILITY.
(i) Acquisition may terminate the Employee's
employment hereunder, upon notice to the Employee, in
the event that the Employee becomes disabled during
her employment hereunder through any illness, injury,
accident or condition of either a physical or
psychological nature and, as a result, is unable to
perform substantially all of her duties and
responsibilities hereunder for one hundred eighty
(180) consecutive days during any period of three
hundred sixty-five (365) consecutive calendar days.
(ii) The Board may designate another employee
to act in the Employee's place during any period of
the Employee's disability. Notwithstanding any such
designation, the Employee shall continue to receive
the Base Salary in accordance with Section 4(a) and
benefits in accordance with Section 4(d), to the
extent permitted by the then-current terms of the
applicable benefit plans, until the Employee becomes
eligible for disability income benefits under any
disability income plan (if one is provided by
Acquisition) or until the termination of her
employment, whichever shall first occur.
(iii) While receiving disability income payments
under Acquisition's disability income plan, if any,
the Employee shall not be entitled to receive any
Base Salary under Section 4(a) hereof, but shall
continue to participate in Company benefit plans in
accordance with Section 4(d) and the terms of such
plans, until the termination of her employment.
(iv) If any question shall arise as to whether
during any period the Employee is disabled through
any illness, injury, accident or condition of either
a physical or psychological nature so as to be unable
to perform substantially all of her duties and
responsibilities hereunder, the Employee may, and at
the request of Acquisition shall, submit to a medical
examination by a physician selected by Acquisition to
whom the Employee or her duly appointed guardian, if
any, has no reasonable objection to determine whether
the Employee is so disabled and such
<PAGE> 4
determination shall for the purposes of this
Agreement be conclusive of the issue. If such
question shall arise and the Employee shall fail to
submit to such medical examination, Acquisition's
determination of the issue shall be binding on the
Employee.
(c) BY ACQUISITION FOR CAUSE. Acquisition may terminate the
Employee's employment hereunder for Cause at any time upon notice to
the Employee setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Board of Directors of
BridgeStreet International, Inc. ("BridgeStreet") in its reasonable
judgment, shall constitute Cause for termination:
(i) The Employee's repeated failure to perform
(other than by reason of disability), or gross
negligence in the performance of, her material duties
and responsibilities hereunder and the continuance of
such failure or negligence for a period of thirty
(30) days after notice to the Employee;
(ii) Material breach by the Employee of any
provision of this Agreement or any other written
agreement between the Employee and Acquisition or any
of its Affiliates;
(iii) Other conduct by the Employee that
involves a material violation of law or breach of
fiduciary obligation on the part of the Employee or
is otherwise materially harmful to the business,
interests, reputation or prospects of Acquisition or
any of its Affiliates.
Upon the giving of notice of termination of the Employee's
employment hereunder for Cause, Acquisition shall not have any further
obligation or liability to the Employee, other than for Base Salary
earned and unpaid at the date of termination.
(d) BY ACQUISITION AFTER THE IPO. If approved by a vote of
two-thirds of the directors of BridgeStreet, Acquisition may terminate
the Employee's employment hereunder upon notice to the Employee for any
reason or for no reason at any time after the completion, if any, of
BridgeStreet's initial public offering of its Common Stock (the "IPO")
(including the closing of any exercise by the underwriters in such an
offering of an over-allotment option granted to them by BridgeStreet);
provided, however, that if the Employee is unable to sell at least
twenty percent (20%) of the shares of BridgeStreet Common Stock held by
her as of the Effective Date upon completion of the IPO, then this
subsection (d) shall, at such time, be deemed null and void and of no
further force and effect whatsoever until such time as the Employee is
able to sell such number of shares.
<PAGE> 5
Upon the giving of notice of termination of the Employee's
employment under this Section 5(d), Acquisition shall not have any
further obligation or liability to the Employee, other than for Base
Salary earned and unpaid at the date of termination.
6. EFFECT OF TERMINATION. The provisions of this Section 6 shall apply
to termination due to the expiration of the term, pursuant to Section 5 or
otherwise.
(a) Payment by Acquisition of any Base Salary and
contributions to the cost of the Employee's continued participation in
Acquisition's group health and dental plans, if any, that are due the
Employee in each case under the applicable termination provision of
Section 5 shall constitute the entire obligation of Acquisition to the
Employee.
(b) Benefits shall terminate pursuant to the terms of the
applicable benefit plans based on the date of termination of the
Employee's employment without regard to any continuation of Base Salary
or other payment to the Employee following such date of termination.
(c) Provisions of this Agreement shall survive any termination
if so provided herein or if necessary or desirable fully to accomplish
the purposes of such provision, including without limitation the
obligations of the Employee under Section 7. The Employee recognizes
that no compensation is earned after termination of employment.
7. CONFIDENTIAL INFORMATION.
(a) The Employee acknowledges that Acquisition and its
Affiliates will continually develop Confidential Information, that the
Employee may develop Confidential Information for Acquisition or its
Affiliates and that the Employee may learn of Confidential Information
during the course of employment. The Employee agrees that, except as
required for the proper performance of her duties for Acquisition, she
will not, directly or indirectly, use or disclose any Confidential
Information, as defined below. The Employee understands and agrees that
this restriction will continue to apply after her employment
terminates, regardless of the reason for termination.
(b) The Employee agrees that all Confidential Information
which she creates or to which she has access as a result of her
employment is and shall remain the sole and exclusive property of
Acquisition. Except as required for the proper performance of her
duties, the Employee will not copy any documents, tapes or other media
containing Confidential Information ("Documents") or remove any
Documents, or copies, from Company premises. The Employee will return
to Acquisition immediately after her employment terminates, and at such
other times as may be specified by Acquisition, all Documents and
copies and all other property of Acquisition then in her
<PAGE> 6
possession or control.
8. ENFORCEMENT OF COVENANTS. The Employee acknowledges that she has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon her pursuant to Section 7 hereof. The
Employee further agrees that all goodwill of Acquisition and its Affiliates is
their exclusive property. The Employee further acknowledges and agrees that,
were she to breach any of the covenants contained in Section 7 hereof, the
damage would be irreparable. The Employee therefore agrees that Acquisition or
any of its Affiliates, as the case may be, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Employee of any of said
covenants, without having to post bond.
9. CONFLICTING AGREEMENTS. The Employee hereby represents and warrants
that the execution of this Agreement and the performance of her obligations
hereunder will not breach or be in conflict with any other agreement to which
the Employee is a party or is bound and that the Employee is not subject to any
covenants against competition or similar covenants that would affect the
performance of her obligations hereunder. The Employee will not disclose to or
use any proprietary information of a third party without such party's consent.
10. DEFINITIONS. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 10
and as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with
Acquisition, where control may be by either management authority or
equity interest.
(b) "Confidential Information" means any and all information
of Acquisition that is not generally known by others with whom
Acquisition does, or plans to, compete or do business, including but
not limited to (i) Acquisition's products and services, technical data,
methods and processes, (ii) Acquisition's marketing activities and
strategic plans, (iii) Acquisition's costs and sources of supply, (iv)
the identity and special needs of Acquisition's customers and
prospective customers and vendors and prospective vendors, and (v) the
people and organizations with whom Acquisition has business
relationships and those relationships. Confidential Information also
includes such information that Acquisition may receive or has received
belonging to customers or others who do business with Acquisition.
(c) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization, other than Acquisition or any of its Affiliates.
<PAGE> 7
11. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
12. ASSIGNMENT. Neither Acquisition nor the Employee may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that Acquisition may assign its rights and obligations under this Agreement
without the consent of the Employee in the event that Acquisition shall
hereafter affect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person. This Agreement shall inure to the benefit of and be binding upon
Acquisition and the Employee, their respective successors, executors,
administrators, heirs and permitted assigns.
13. SEVERABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Employee at her
last known address on the books of Acquisition or, in the case of Acquisition,
at BridgeStreet's principal place of business, attention of Chief Executive
Officer, or to such other address as either party may specify by notice to the
other actually received.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Employee's employment.
17. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Employee and by an expressly authorized
representative of Acquisition.
18. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
<PAGE> 8
provision of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
20. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of Delaware, without
regard to the conflict of laws principles thereof.
[Remainder of this page intentionally left blank.]
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Employee and Acquisition, by its duly authorized
representative, as of the date first above written.
Employee: TCHI ACQUISITION CORP.
/s/ Lynda Clutchey By: /s/ Donald W. Glazer
- ---------------------------- -------------------------------
Lynda Clutchey Name: Donald W. Glazer
Title: President
<PAGE> 1
EXHIBIT 10.14
REVOLVING CREDIT AGREEMENT
Dated as of March 31, 1997
between
BRIDGESTREET INTERNATIONAL INC., AS BORROWER
and
FLEET NATIONAL BANK
AND THE OTHER LENDING INSTITUTIONS
LISTED ON SCHEDULE 1 HERETO
and
FLEET NATIONAL BANK, as Agent
<PAGE> 2
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of March 31, 1997, by and
among BRIDGESTREET INTERNATIONAL INC., a Delaware corporation (the "Borrower"),
having its principal place of business at c/o American Business Partners, 67
Batterymarch Street, Suite 500, Boston, MA 02110, and FLEET NATIONAL BANK, a
national banking association ("Fleet"), and the other lending institutions
listed on Schedule I hereto, and FLEET NATIONAL BANK, as agent for itself and
such other lending institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION
1.1. DEFINITIONS. The following terms shall have the meanings set forth
in this Section 1 or elsewhere in the provisions of this Credit Agreement
referred to below:
Affiliate. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
Agent. Fleet National Bank acting as agent for the Banks.
Agent's Head Office. The Agent's head office located at One Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent's Special Counsel. Hutchins, Wheeler & Dittmar, A Professional
Corporation, or such other counsel as may be approved by the Agent.
Assignment and Acceptance. See Section 18.1 hereof.
Balance Sheet Date. December 31, 1996.
Banks. Fleet and the other lending institutions listed on Schedule I
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 18 hereof.
Business Day. Any day on which banking institutions in Boston,
Massachusetts, are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
<PAGE> 3
Capital Expenditures. Amounts paid or indebtedness incurred by the
Borrower or its Subsidiaries in connection with the purchase or lease by the
Borrower or its Subsidiaries of Capital Assets that would be required to be
capitalized and shown on the balance sheet of such Person in accordance with
generally accepted accounting principles.
Capitalization Documents. The certificate of incorporation and by-laws
of the Borrower.
Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See Section 6.18 hereof.
Closing Date. The first date on which the conditions set forth in
Sections 10 and 11 hereof have been satisfied and any Revolving Credit Loans are
to be made.
Code. The Internal Revenue Code of 1986, as amended.
Collateral. All of the property, rights and interests of the Borrower
and its Subsidiaries that are or are intended to be subject to the security
interests and mortgages created by the Security Documents.
Commitment. With respect to each Bank, the amount set forth on Schedule
I hereto as the amount of such Bank's commitment to make Revolving Credit Loans
to the Borrower, as the same may be reduced from time to time; or if such
commitment is terminated pursuant to the provisions hereof, zero.
Commitment Percentage. With respect to each Bank, the percentage set
forth on Schedule I hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks.
Compliance Certificate. See Section 7.4(c) hereof.
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated EBITDA. For any fiscal period, the sum of (a) the
Consolidated Net Income for the Borrower and its Subsidiaries for such period,
after all expenses and other proper charges but before payment or provision for
any income taxes or interest expense of the Borrower for such period, plus (b)
the aggregate
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<PAGE> 4
amount of depreciation, amortization and other non-cash charges made in
calculating Consolidated Net Income for such period, all as determined in
accordance with generally accepted accounting principles. For purposes of
calculating Consolidated EBITDA for the Current Subsidiaries for any period
including a fiscal quarter in the fiscal year ended December 31, 1996 (such
quarter being referred to herein as a "1996 Fiscal Quarter"), an adjustment,
reasonably satisfactory to the Agent, may be made for such 1996 Fiscal Quarter
to reduce management compensation expense during such period to an amount which
reflects management compensation expense of the Current Subsidiary since the
date of its acquisition of the Borrower.
Consolidated Funded Debt. At any time, all Indebtedness of the Borrower
and its Subsidiaries at such time, whether recourse is to all or a portion of
the assets of the Borrower or its Subsidiaries and whether or not contingent,
(a) in respect of money borrowed or the deferred purchase price of property and
services (excluding trade accounts payable), (b) in respect of letters of
credit, bankers' acceptances, or similar facilities, (c) in respect of any
Capitalized Leases, (d) evidenced by any loan or credit agreement, reimbursement
agreement, promissory note, debenture, bond, or other similar contract, and (e)
any Indebtedness of any other entity of a type described in (a), (b), (c), or
(d) that the Borrower or its Subsidiaries has guaranteed or for which the
Borrower or its Subsidiaries is otherwise responsible or liable, directly or
indirectly.
Consolidated Net Income (or Deficit). For any period, the consolidated
net income (or deficit) of the Borrower and Subsidiaries for such period, after
deduction of all expenses, taxes, and other proper charges, determined in
accordance with generally accepted accounting principles, after eliminating
therefrom all extraordinary nonrecurring items of income.
Consolidated Total Assets. All items which, in accordance with
generally accepted accounting principles, would be included in determining the
total assets on the asset side of a consolidated balance sheet of the Borrower
and its Subsidiaries.
Consolidated Total Liabilities. All items which, in accordance with
generally accepted accounting principles, would be included in determining the
total liabilities on the liability side of a consolidated balance sheet of the
Borrower and its Subsidiaries.
Consolidated Total Tangible Net Worth. At any date as of which the
amount thereof shall be determined, the excess of Consolidated Total Assets over
Consolidated Total Liabilities.
3
<PAGE> 5
Conversion Request. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Revolving Credit Loan in accordance
with Section 2.7 hereof.
Credit Agreement. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto, as amended or supplemented, and in effect from
time to time.
Current Subsidiaries. Collectively, Corporate Lodgings, Inc., a
Delaware corporation, Temporary Corporate Housing, Inc., a Delaware corporation,
Temporary Housing Experts, Inc., a Delaware corporation, Exclusive Interim
Properties, Ltd., a Delaware corporation, and HAI Acquisition Corp., a Delaware
corporation.
Default. See Section 12.1 hereof.
Distribution. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of the any Person, other
than dividends payable solely in shares of capital stock of such Person; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of any Person, directly or indirectly through a Subsidiary of such Person
or otherwise; the return of capital by any Person to its shareholders as such;
or any other distribution on or in respect of any shares of any class of capital
stock of any Person.
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Lending Office. Initially, the office of each Bank designated
as such in Schedule I hereto; thereafter, such other office of such Bank, if
any, located within the United States that will be making or maintaining Prime
Rate Loans.
Drawdown Date. The date on which any Revolving Credit Loan is made or
is to be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with Section 2.7 hereof.
EBITDA. For any fiscal period for any Person, the sum of (a) the net
income for such Person for such period, after all expenses and other proper
charges but before payment or provision for any income taxes or interest expense
of such Person for such period, after eliminating therefrom all extraordinary
nonrecurring items of income, plus (b) the aggregate amount of depreciation,
amortization and other non-cash charges made in calculating the net income in
clause (a) for such period for such Person, all as determined in accordance with
generally accepted accounting principles.
4
<PAGE> 6
Eligible Assignee. Any of (a) a commercial bank organized under the
laws of the United States, or any State thereof or the District of Columbia, and
having total assets in excess of $1,000,000,000; (b) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof or the District of Columbia, and having a net worth of at
least $100,000,000, calculated in accordance with generally accepted accounting
principles; (c) a commercial bank organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and having total
assets in excess of $1,000,000,000, provided that such bank is acting through a
branch or agency located in the country in which it is organized or another
country which is also a member of the OECD; (d) the central bank of any country
which is a member of the OECD; and (e) if, but only if, any Event of Default has
occurred and is continuing, any other bank, insurance company, commercial
finance company or other financial institution approved by the Agent, such
approval not to be unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(2) of ERISA maintained of contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws. See Section 6.18(a) hereof.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other Eurodollar interbank market as
5
<PAGE> 7
may be selected by the Agent in its sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank
designated as such in Schedule I hereto; thereafter, such other office of such
Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate of interest equal to (a) the rate per annum (rounded upwards
to the nearest whole multiple of 1/16 of 1%) of the rate at which the Agent's
Eurodollar Lending Office is offered Dollar deposits two (2) Eurodollar Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations of such
Eurodollar Lending Office are customarily conducted, for delivery on the first
day of such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of the Eurodollar Rate Loan of the Agent to
which such Interest Period applies, divided by (b) a number equal to 1.00 minus
the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans. Revolving Credit Loans bearing interest
calculated by reference to the Eurodollar Rate.
Event of Default. See Section 12.1 hereof.
Fleet. Fleet National Bank, a national banking association, in its
individual capacity.
generally accepted accounting principles. (a) When used in Section 9
hereof, whether directly or indirectly through reference to a capitalized term
used therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
the Borrower reflected in its financial statements for the year ended on the
Balance Sheet Date, and (b) when used in general, other than as provided above,
means principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (ii) consistently applied with past financial
statements of the Borrower adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as
6
<PAGE> 8
to financial statements in which such principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate, the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantor. Any Subsidiary of the Borrower that is a party to the
Guaranty or that delivers an Instrument of Adherence to the Guaranty pursuant to
Section 5.14 hereof.
Guaranty. The Guaranty, dated or to be dated on or prior to the Closing
Date, made by each of the Current Subsidiaries in favor of the Banks and the
Agent pursuant to which such entities jointly and severally guarantee to the
Banks and the Agent the payment and performance of the Obligations in form and
substance satisfactory to the Agent.
Hazardous Substances. See Section 6.18(b) hereof.
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit.
Interest Payment Date. (a) As to any Prime Rate Loan, the last day of
the calendar quarter which includes the Drawdown Date thereof; and (b) as to any
Eurodollar Rate Loan the last day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan, (a)
initially, the period commencing on the Drawdown Date of such Loan and ending on
the last day of one of the periods set forth below, as selected by the Borrower
in a Revolving Credit
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<PAGE> 9
Loan Request (i) for any Prime Rate Loan, the last day of each calendar quarter;
and (ii) for any Eurodollar Rate Loan, 1, 2 or 3 months; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Revolving Credit Loan and ending on the last day of one of
the periods set forth above, as selected by the Borrower in a Conversion
Request; provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar
Rate Loan would otherwise end on a day that is not a
Eurodollar Business Day, that Interest Period shall
be extended to the next succeeding Eurodollar
Business Day unless the result of such extension
would be to carry such Interest Period into another
calendar month, in which event such Interest Period
shall end on the immediately preceding Eurodollar
Business Day;
(b) if any Interest Period with respect to a Prime Rate
Loan would end on a day that is not a Business Day,
that Interest Period shall end on the next succeeding
Business Day;
(c) if the Borrower shall fail to give notice as provided
in Section 2.7 hereof, the Borrower shall be deemed
to have requested a conversion of the affected
Eurodollar Rate Loan to a Prime Rate Loan and the
continuance of all Prime Rate Loans as Prime Rate
Loans on the last day of the then current Interest
Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate
Loan that begins on the last Eurodollar Business Day
of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end
on the last Eurodollar Business Day of a calendar
month; and
(e) any Interest Period relating to any Eurodollar Rate
Loan that would otherwise extend beyond the Revolving
Credit Loan Maturity Date shall end on the Revolving
Credit Loan Maturity Date.
Instrument of Adherence. An Instrument of Adherence to the Guaranty
substantially in the form of Exhibit A to the Guaranty.
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Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Leverage Ratio. As at the last day of any fiscal quarter, the ratio of
(a) Consolidated Total Funded Debt to (b) Consolidated EBITDA, determined for
the four consecutive fiscal quarters of the Borrower ended on such date.
Loan Documents. This Credit Agreement, the Revolving Credit Notes, the
Security Documents and all other documents designated by the parties thereto as
a "Loan Document" for purposes hereof.
Majority Banks. As of any date, the Banks holding at least sixty-six
and two-thirds percent (66-2/3%) of the outstanding principal amount of the
Revolving Credit Notes on such date; and if no such principal is outstanding,
the Banks whose aggregate Commitments constitutes at least fifty-one percent
(51%) of the Total Commitment.
Material Subsidiary. A Subsidiary of the Borrower whose (i) total
assets represent ten percent (10%) or more of the consolidated assets of the
Borrower and its Subsidiaries, or (ii) EBITDA represents ten percent (10%) or
more of Consolidated EBITDA, all as determined in accordance with generally
accepted accounting principles.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Obligations. All indebtedness, obligations and liabilities of any of
the Borrower and any of its Subsidiaries to any of the
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Banks and the Agent, individually or collectively, existing on the date of this
Credit Agreement or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise, in
each case arising or incurred under this Credit Agreement or any of the other
Loan Documents or in respect of any of the Revolving Credit Loans made or any of
the Revolving Credit Notes or other instruments at any time evidencing any
thereof.
Outstanding. With respect to the Revolving Credit Loans, the aggregate
unpaid principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Permitted Acquisitions. See Section 8.5.1 hereof.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 8.2 hereof.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Prime Rate. At any time, the annual rate of interest most recently
announced and made effective by Fleet at its head office in Boston,
Massachusetts, as its "Prime Rate". Such rate is used for reference purposes
only and is not necessarily the best or lowest rate charged by Fleet to its most
substantial or creditworthy customer and serves only as the basis upon which
effective rates of interest are calculated for obligations making reference
thereto.
Prime Rate Loans. Revolving Credit Loans bearing interest calculated by
reference to the Prime Rate.
Pro Forma Balance Sheet. See Section 6.4 hereof.
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
Revolving Credit Loan Maturity Date. Five (5) years from the Closing
Date, or such earlier date on which the Total Commitment is terminated pursuant
to the provisions hereof.
Revolving Credit Loan Request. See Section 2.6 hereof.
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Revolving Credit Loans. Revolving credit loans made or to be made by
the Banks to the Borrower pursuant to Section 2 hereof.
Revolving Credit Note Record. The grid attached to a Revolving Credit
Note, or the continuation of such grid, or any other similar record, including
computer records, maintained by any Bank with respect to any Revolving Credit
Loan referred to in such Revolving Credit Note.
Revolving Credit Notes. See Section 2.4 hereof.
Security Documents. The Stock Pledge Agreement, the Guaranty and all
Instruments of Adherence to the Guaranty delivered after the Closing Date
pursuant to Section 7.13 hereof.
Stock Pledge Agreement. The Stock Pledge Agreement, dated or to be
dated on or prior to the Closing Date, between the Borrower and the Agent in
form and substance satisfactory to the Agent.
Subordinated Debt. Unsecured Indebtedness of the Borrower that is
expressly subordinated and made junior to the payment and performance in full of
the Obligations, and evidenced as such by a subordination agreement or by
another written instrument containing subordination provisions in form and
substance approved by the Agent in writing.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time. The Total Commitment on the Closing Date is $10,000,000.
Type. As to any Revolving Credit Loan, its nature as a Prime Rate Loan
or a Eurodollar Rate Loan.
Unaudited Financial Statements. See Section 6.4.1 hereof.
Voting Stock. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
1.2. RULES OF INTERPRETATION.
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(a) A reference to any document or agreement shall
include such document or agreement as amended,
modified or supplemented from time to time in
accordance with its terms and the terms of this
Credit Agreement.
(b) The singular includes the plural and the plural
includes the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have
the meanings assigned to them by generally accepted
accounting principles applied on a consistent basis
by the accounting entity to which they refer.
(f) The words "include," "includes" and "including" are
not limiting.
(g) All terms not specifically defined herein or by
generally accepted accounting principles, which terms
are defined in the Uniform Commercial Code as in
effect in The Commonwealth of Massachusetts, have the
meanings assigned to them therein, with the term
"instrument" being that defined under Article 9 of
the Uniform Commercial Code.
(h) Reference to a particular "Section " refers to that
section of this Credit Agreement unless otherwise
indicated.
(i) The words "herein," "hereof," "hereunder," and words
of like import shall refer to this Credit Agreement
as a whole and not to any particular section or
subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth
in this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time
between the Closing Date and up to but not including the Revolving Credit Loan
Maturity Date upon notice by the Borrower to the Agent given in accordance with
Section 2.6 hereof, such sums as are requested by the Borrower up to a maximum
aggregate amount outstanding (after giving effect to all amounts requested) at
any one time equal to
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such Bank's Commitment, provided that the sum of the outstanding amount of the
Revolving Credit Loans (after giving effect to all amounts requested) shall not
at any time exceed the Total Commitment. The Revolving Credit Loans shall be
made pro rata in accordance with each Bank's Commitment Percentage. Each request
for a Revolving Credit Loan hereunder shall constitute a representation and
warranty by the Borrower that the conditions set forth in Sections 11 and 12
hereof, in the case of the initial Revolving Credit Loans to be made, and
Section 12, in the case of all other Revolving Credit Loans thereafter, have
been satisfied on the date of such request.
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Commitment Percentages
a commitment fee calculated at the rate of .375% per annum on the average daily
amount during each calendar quarter or portion thereof from the Closing Date to
the Revolving Credit Loan Maturity Date by which the Total Commitment exceeds
the outstanding amount of Revolving Credit Loans during such calendar quarter.
The commitment fee shall be payable quarterly in arrears on the first day of
each calendar quarter for the immediately preceding calendar quarter commencing
on the first such date following the date hereof, with a final payment on the
Revolving Credit Maturity Date.
2.3. OPTIONAL REDUCTION OF TOTAL COMMITMENT. The Borrower shall have
the right at any time and from time to time upon five (5) Business Days prior
written notice to the Agent to reduce by $500,000 or a larger integral multiple
of $100,000 or terminate entirely the Total Commitment, whereupon the
Commitments of the Banks shall be reduced pro rata in accordance with their
respective Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated. Promptly after receiving any notice of the Borrower
delivered pursuant to this Section 2.3, the Agent will notify the Banks of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Agent for the respective accounts of the Banks the
full amount of any commitment fee then accrued in the amount of the reduction.
No reduction of the Total Commitment or termination of the Commitments may be
reinstated.
2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrower in substantially the form
of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the Closing
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the time
of
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receipt of any payment of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Revolving Credit Note Record reflecting the
making of such Revolving Credit Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Revolving Credit Loans set forth on such
Bank's Revolving Credit Note Record shall be prima facie evidence of the
principal amount thereof owing and unpaid to such Bank, but the failure to
record, or any error in so recording, any such amount on such Bank's Revolving
Credit Note Record shall not limit or otherwise affect the obligations of the
Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided
in Section 4.10 hereof:
(a) Each Prime Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the annual rate equal to
the Prime Rate as in effect from time to time while such Prime Rate
Loan is outstanding.
(b) Each Eurodollar Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the last
day of the Interest Period with respect thereto at the annual rate
equal to the sum of the Eurodollar Rate plus one and one-quarter of one
percent (1.25%).
(c) The Borrower promises to pay interest on each Revolving
Credit Loan in arrears on each Interest Payment Date with respect
thereto.
2.6. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall give to
the Agent written notice in the form of Exhibit B hereto (or telephonic notice
confirmed in a writing in the form of Exhibit B hereto) of each Revolving Credit
Loan requested hereunder (a "Revolving Credit Loan Request") no later than (a)
12:00 noon (Boston time) on the Business Day of the proposed Drawdown Date of
any Prime Rate Loan and (b) 10:00 a.m. (Boston time) on the date three (3)
Eurodollar Business Days prior to the proposed Drawdown Date of any Eurodollar
Rate Loan. Each such notice shall specify (w) the principal amount of the
Revolving Credit Loan requested, (x) the proposed Drawdown Date of such
Revolving Credit Loan, (y) the Interest Period for such Revolving Credit Loan
and (z) the Type of such Revolving Credit Loan. Promptly upon receipt of any
such notice, the Agent shall notify each of the Banks thereof. Each Revolving
Credit Loan Request shall be irrevocable and binding on the Borrower and shall
obligate the Borrower to accept the Revolving Credit Loan requested from the
Banks on the proposed Drawdown Date. Each
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Revolving Credit Loan Request shall be in a minimum aggregate amount of $200,000
or a larger integral multiple of $50,000.
2.7. CONVERSION AND CONTINUATION OPTIONS.
2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN.
The Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan to a Revolving Credit Loan of another Type, provided that (a) with
respect to any such conversion of a Eurodollar Rate Loan to a Prime Rate Loan,
the Borrower shall give the Agent at least one (1) Business Day prior written
notice of such election; (b) with respect to any such conversion of a Prime Rate
Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at least three
(3) Eurodollar Business Days prior written notice of such election; (c) with
respect to any such conversion of a Eurodollar Rate Loan into a Revolving Credit
Loan of another Type, such conversion shall only be made on the last day of the
Interest Period with respect thereto or, if not made on such date, shall be
subject to the provisions of Section 4.9 hereof and (d) no Revolving Credit Loan
may be converted into a Eurodollar Rate Loan when any Event of Default has
occurred and is continuing. On the date on which such conversion is being made
each Bank shall take such action as is necessary to transfer its Commitment
Percentage of such Revolving Credit Loans to its Domestic Lending Office or its
Eurodollar Lending Office, as the case may be. All or any part of outstanding
Revolving Credit Loans of any Type may be converted into a Revolving Credit Loan
of another Type as provided herein, provided that any partial conversion shall
be in an aggregate minimum principal amount of $200,000 and an integral multiple
of $50,000 in excess thereof. Each Conversion Request relating to the conversion
of a Revolving Credit Loan to a Eurodollar Rate Loan shall be irrevocable by the
Borrower.
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any
Revolving Credit Loan of any Type may be continued as a Revolving Credit Loan of
the same Type upon the expiration of an Interest Period with respect thereto by
compliance by the Borrower with the notice provisions for continuations that are
contained in Section 2.7.1 hereof; provided that no Eurodollar Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Prime Rate Loan on the
last day of the first Interest Period relating thereto ending during the
continuance of any Default or Event of Default of which officers of the Agent
active upon the Borrower's account have actual knowledge. In the event that the
Borrower fails to provide any such notice with respect to the continuation of
any Eurodollar Rate Loan as such, then such Eurodollar Rate Loan shall be
automatically converted to a Prime Rate Loan on the last day of the first
Interest Period relating thereto. The Agent shall notify the Banks promptly when
any such
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automatic conversion contemplated by this Section 2.7 is scheduled to occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from
Eurodollar Rate Loans shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of all Eurodollar Rate Loans having the same Interest Period shall not be less
than $200,000 and a whole multiple of $50,000 in excess thereof.
2.8. FUNDS FOR REVOLVING CREDIT LOANS.
2.8.1. FUNDING PROCEDURES. Not later than 11:00 a.m. (Boston
time) on the proposed Drawdown Date of any Revolving Credit Loans, each of the
Banks will make available to the Agent, at its Head Office, in immediately
available funds, the amount of such Bank's Commitment Percentage of the amount
of the requested Revolving Credit Loans. Upon receipt from each Bank of such
amount, and upon receipt of the documents required by Sections 11 and 12 hereof
and the satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrower the aggregate amount
of such Revolving Credit Loans made available to the Agent by the Banks. The
failure or refusal of any Bank to make available to the Agent at the aforesaid
time and place on any Drawdown Date the amount of its Commitment Percentage of
the requested Revolving Credit Loans shall not relieve any other Bank from its
several obligation hereunder to make available to the Agent the amount of such
other Bank's Commitment Percentage of any requested Revolving Credit Loans.
2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to
the contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such Bank's
Commitment Percentage of the Revolving Credit Loans to be made on such Drawdown
Date, and the Agent may (but it shall not be required to), in reliance upon such
assumption, make available to the Borrower a corresponding amount with written
notice to the Borrower of such Bank's failure to fund. If any Bank makes
available to the Agent such amount on a date after such Drawdown Date, such Bank
shall pay to the Agent on demand an amount equal to the product of (a) the
average computed for the period referred to in clause (c) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by the Agent
during each day included in such period, times (b) the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans, time (c) a fraction, the
numerator of which is the number of days that elapse from and including such
Drawdown Date to the date on which the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans shall become immediately available to
the Agent, and the denominator of which is 365. A statement of the Agent
submitted
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to such Bank with respect to any amounts owing under this paragraph shall be
prima facie evidence of the amount due and owing to the Agent by such Bank. If
the amount of such Bank's Commitment Percentage of such Revolving Credit Loans
is not made available to the Agent by such Bank within three (3) Business Days
following such Drawdown Date, the Agent shall be entitled to recover such amount
from the Borrower on demand, with interest thereon at the rate per annum
applicable to the Revolving Credit Loans made on such Drawdown Date.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS
3.1. MATURITY. The Borrower promises to pay on the Revolving Credit
Loan Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the
sum of the outstanding amount of the Revolving Credit Loans exceeds the Total
Commitment, then the Borrower shall immediately pay the amount of such excess to
the Agent for application to the Revolving Credit Loans.
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. The Borrower shall
have the right, at its election, to repay the outstanding amount of the
Revolving Credit Loans, as a whole or in part, at any time without penalty or
premium, provided that any full or partial prepayment of the outstanding amount
of any Eurodollar Rate Loans pursuant to this Section 3.3 may be made only on
the last day of the Interest Period relating thereto. The Borrower shall give
the Agent, no later than 10:00 a.m. (Boston time), at least three (3) Business
Days' prior written notice of any proposed prepayment pursuant to this Section
3.3 of Prime Rate Loans, and four (4) Eurodollar Business Days' notice of any
proposed prepayment pursuant to this Section 3.3 of Eurodollar Rate Loans, in
each case specifying the proposed date of prepayment of Revolving Credit Loans
and the principal amount to be prepaid. Each such partial prepayment of the
Revolving Credit Loans shall be in an integral multiple of $50,000, shall be
accompanied by the payment of accrued interest on the principal prepaid to the
date of prepayment and shall be applied, in the absence of instruction by the
Borrower, first to the principal of Prime Rate Loans and then to the principal
of Eurodollar Rate Loans. Each partial prepayment shall be allocated among the
Banks, in proportion, as nearly as practicable, to the respective unpaid
principal amount of each Bank's Revolving Credit Note, with adjustments to the
extent practicable to equalize any prior repayments not exactly in proportion.
4. CERTAIN GENERAL PROVISIONS
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4.1. FUNDS FOR PAYMENTS.
4.1.1. PAYMENTS TO AGENT. All payments of principal, interest,
commitment fees and any other amounts due hereunder or under any of the other
Loan Documents shall be made to the Agent, for the respective accounts of the
Banks and the Agent, at the Agent's Head Office or at such other location in the
Boston, Massachusetts, area that the Agent may from time to time designate, in
each case in immediately available funds.
4.1.2. NO OFFSET, ETC. All payments by the Borrower hereunder
and under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such deduction
or if any such obligation is imposed upon the Borrower with respect to any
amount payable by it hereunder or under any of the other Loan Documents, the
Borrower will pay to the Agent, for the account of the Banks or (as the case may
be) the Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks or the Agent to receive the same net amount which
the Banks or the Agent would have received on such due date had no such
obligation been imposed upon the Borrower. The Borrower will deliver promptly to
the Agent certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrower hereunder or
under such other Loan Document.
4.2. COMPUTATIONS. All computations of interest on the Revolving Credit
Loans and commitment fees or other fees shall, unless otherwise expressly
provided herein, be based on a 360-day year and paid for the actual number of
days elapsed. Except as otherwise provided in the definition of the term
"Interest Period" with respect to Eurodollar Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Revolving Credit Loans as reflected on the Revolving
Credit Note Records from time to time shall be considered correct and binding on
the Borrower absent manifest error or unless within five (5) Business Days after
receipt of any notice by the Agent or any of the Banks of such outstanding
amount, the Agent or such Bank shall notify the Borrower to the contrary.
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4.3. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate that would
otherwise determine the rate of interest to be applicable to any Eurodollar Rate
Loan during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (a) any Revolving Credit
Loan Request or Conversion Request with respect to Eurodollar Rate Loans shall
be automatically withdrawn and shall be deemed a request for Prime Rate Loans,
(b) each Eurodollar Rate Loan will automatically, on the last day of the then
current Interest Period relating thereto, become a Prime Rate Loan, and (c) the
obligations of the Banks to make Eurodollar Rate Loans shall be suspended until
the Agent or the Majority Banks determine that the circumstances giving rise to
such suspension no longer exist, whereupon the Agent or, as the case may be, the
Agent upon the instruction of the Majority Banks, shall so notify the Borrower
and the Banks.
4.4. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (a) the
commitment of such Bank to make Eurodollar Rate Loans or convert Revolving
Credit Loans of another Type to Eurodollar Rate Loans shall forthwith be
suspended and (b) such Bank's Revolving Credit Loans then outstanding as
Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate
Loans on the last day of each Interest Period applicable to such Eurodollar Rate
Loans or within such earlier period as may be required by law. The Borrower
hereby agrees promptly to pay the Agent for the account of such Bank, upon
demand by such Bank, any additional amounts necessary to compensate such Bank
for any costs incurred by such Bank in making any conversion in accordance with
this Section 4.5, including any interest or fees payable by such Bank to lenders
of funds obtained by it in order to make or maintain its Eurodollar Rate Loans
hereunder.
4.5. ADDITIONAL COSTS, ETC. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
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(a) subject any Bank or the Agent to any tax, levy,
impost, duty, charge, fee, deduction or withholding
of any nature with respect to this Credit Agreement,
the other Loan Documents, such Bank's Commitment or
the Revolving Credit Loans (other than taxes based
upon or measured by the income or profits of such
Bank or the Agent); or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to
any Bank of the principal of or the interest on any
Revolving Credit Loans or any other amounts payable
to any Bank or the Agent under this Credit Agreement
or any of the other Loan Documents; or
(c) impose or increase or render applicable (other than
to the extent specifically provided for elsewhere in
this Credit Agreement) any special deposit, reserve,
assessment, liquidity, capital adequacy or other
similar requirements (whether or not having the force
of law) against assets held by, or deposits in or for
the account of, or loans by, or letters of credit
issued by, or commitments of an office of any Bank;
or
(d) impose on any Bank or the Agent any other conditions
or requirements with respect to this Credit
Agreement, the other Loan Documents, the Revolving
Credit Loans, such Bank's Commitment, or any class of
loans, letters of credit or commitments of which any
of the Revolving Credit Loans or such Bank's
Commitment forms a part, and the result of any of the
foregoing is:
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or
maintaining any of the Revolving Credit
Loans or such Bank's Commitment, or;
(ii) to reduce the amount of principal, interest,
reimbursement Obligation, or other amount
payable to such Bank or the Agent hereunder
on account of such Bank's Commitment or any
of the Revolving Credit Loans; or
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(iii) to require such Bank or the Agent to make
any payment or to forego any interest or
other sum payable hereunder, the amount of
which payment or foregone interest or other
sum is calculated by reference to the gross
amount of any sum receivable or deemed
received by such Bank or the Agent from the
Borrower hereunder;
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or other sum.
4.6. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline, or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Revolving Credit Loans to a level below that which such Bank or
the Agent could have achieved but for such adoption, change, or compliance
(taking into consideration such Bank's or the Agent's then existing policies
with respect to capital adequacy and assuming full utilization of such entity's
capital) by any amount deemed by such Bank or (as the case may be) the Agent to
be material, then such Bank or the Agent may notify the Borrower of such fact.
To the extent that the amount of such reduction in the return on capital is not
reflected in the Prime Rate, the Borrower agrees to pay such Bank or (as the
case may be) the Agent for the amount of such reduction in the return on capital
as and when such reduction is determined upon presentation by such Bank or (as
the case may be) the Agent of a certificate in accordance with Section 4.7
hereof. Each Bank shall allocate such cost increases among its customers in good
faith and on an equitable basis.
4.7. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Sections 4.5 or 4.6 and a brief explanation of such amounts
which are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive, absent manifest error, that such amounts are due and owing.
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4.8. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from and against any loss, cost, or expense (including loss
of anticipated profits) that such Bank may sustain or incur as a consequence of
(a) default by the Borrower in payment of the principal amount of or any
interest on any Eurodollar Rate Loans as and when due and payable, including any
such loss or expense arising from interest or fees payable by such Bank to
lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans,
(b) default by the Borrower in making a borrowing or conversion after the
Borrower has given (or is deemed to have given) a Revolving Credit Loan Request
or a Conversion Request relating thereto in accordance with Section 2.6 or
Section 2.7, or (c) the making of any payment of a Eurodollar Rate Loan or the
making of any conversion of any such Revolving Credit Loan to a Prime Rate Loan
on a day that is not the last day of the applicable Interest Period with respect
thereto, including interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain any such Revolving Credit Loans.
4.9. INTEREST AFTER DEFAULT. Overdue principal and (to the extent
permitted by applicable law) interest on the Revolving Credit Loans and all
other overdue amounts payable hereunder or under any of the other Loan Documents
shall bear interest payable on demand at a rate per annum equal to two percent
(2%) above the Prime Rate until such amount shall be paid in full (after as well
as before judgment).
4.10. REPLACEMENT BANK. Within thirty (30) days after any Bank has
demanded compensation from the Borrower pursuant to Sections 4.5 or 4.6 hereof
or any Bank has become a Delinquent Bank, as defined in Section 14.5.3 hereof
(any such Bank described in the foregoing clause is hereinafter referred to as
an "Affected Bank"), the Borrower may request that the Non-Affected Banks
acquire all, but not less than all, of the Affected Bank's outstanding Revolving
Credit Loans and assume all, but not less than all, of the Affected Bank's
Commitment. If the Borrower so requests, the Non-Affected Banks may elect to
acquire all or any portion of the Affected Bank's outstanding Revolving Credit
Loans and to assume all or any portion of the Affected Bank's Commitment. If the
Non-Affected Banks do not elect to acquire and assume all of the Affected Bank's
outstanding Revolving Credit Loans and Commitment, the Borrower may designate a
replacement bank or banks, which must be satisfactory to the Agent, to acquire
and assume that portion of the outstanding Revolving Credit Loans and Commitment
of the Affected Bank not being acquired and assumed by the Non-Affected Banks.
The provisions of Section 18 hereof shall apply to all reallocations pursuant to
this Section 4.10, and the Affected Bank and any Non-Affected Banks and/or
replacement banks which are to acquire the Revolving Credit Loans and Commitment
of the Affected Bank shall execute and deliver to the Agent, in accordance with
the
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provisions of Section 18 hereof, such Assignments and Acceptances and other
instruments, including, without limitation, Notes, as are required pursuant to
Section 18 hereof to give effect to such reallocations. Any Non-Affected Banks
and/or replacement banks which are to acquire the Revolving Credit Loans and
Commitment of the Affected Bank shall be deemed to be Eligible Assignees for all
purposes of Section 18 hereof. On the effective date of the applicable
Assignments and Acceptances, the Borrower shall pay to the Affected Bank all
interest accrued on its Revolving Credit Loans up to but excluding such date,
along with any fees payable to such Affected Bank hereunder up to but excluding
such date.
5. SECURITY AND GUARANTIES
5.1. STOCK PLEDGE. The Obligations shall be secured by a pledge by the
Borrower of all the capital stock of its Subsidiaries owned by Borrower, whether
now owned or hereafter acquired, pursuant to the terms of the Stock Pledge
Agreement.
5.2. GUARANTY. The Obligations shall also be guaranteed pursuant to the
terms of the Guaranty, as amended by the Instruments of Adherence delivered
pursuant to Section 7.13 hereof after the Closing Date.
6. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Banks and the Agent as
follows:
6.1. CORPORATE AUTHORITY.
6.1.1. INCORPORATION; GOOD STANDING. Each of the Borrower and
each of its Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated, and (c) is in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
where such qualification is necessary except where a failure to be so qualified
would not have a materially adverse effect on the business, assets or financial
condition of the Borrower and its Subsidiaries, considered as a whole.
6.1.2. AUTHORIZATION. The execution, delivery and performance
of this Credit Agreement and the other Loan Documents to which the Borrower or
any of its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the corporate authority of such
Person, (b) have been duly authorized by all necessary corporate proceedings,
(c) do not conflict with or result in any breach or contravention of any
provision of law, statute, rule or
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regulation to which the Borrower or such Subsidiary of the Borrower is subject
or any judgment, order, writ, injunction, license or permit applicable to the
Borrower or such Subsidiary, and (d) do not conflict with any provision of the
corporate charter or bylaws of, or any agreement or other instrument binding
upon, the Borrower or such Subsidiary.
6.1.3. ENFORCEABILITY. The execution and delivery of this
Credit Agreement and the other Loan Documents to which the Borrower or any
Subsidiary of the Borrower is or is to become a party will result in valid and
legally binding obligations of the Borrower or such Subsidiary of the Borrower
enforceable against such Person in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
6.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
the Borrower and any of its Subsidiaries of this Credit Agreement and the other
Loan Documents to which the Borrower or any Subsidiary of the Borrower is or is
to become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained.
6.3. TITLE TO PROPERTIES, LEASES. Except as indicated on Schedule 6.3
hereto, the Borrower and each of its Subsidiaries owns all of the assets
reflected in the consolidated balance sheet of the Borrower and its Subsidiaries
as at the Balance Sheet Date or acquired since that date (except property and
assets sold or otherwise disposed of in the ordinary course of business since
that date), subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
6.4. FINANCIAL STATEMENTS AND PROJECTIONS.
6.4.1. FINANCIAL STATEMENTS. There has been furnished to the
Agent an unaudited internally prepared consolidated pro forma balance sheet of
the Borrower and its Subsidiaries as at December 31, 1996 (the "Pro Forma
Balance Sheet"), and related combined statements of financial condition, income
changes in stockholders' equity and cash flows of the Borrower and its
Subsidiaries for the fiscal year (or nine months in the case of Exclusive
Interim Properties, Ltd.), ended December 31, 1996 (the "Unaudited Financial
Statements"). The
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Unaudited Financial Statements have been prepared in accordance with generally
accepted accounting principles and fairly present the financial condition of the
Borrower and its Subsidiaries as at the close of business on the date thereof.
There are no contingent liabilities of the Borrower or any of its Subsidiaries
as of such date involving material amounts, known to the officers of the
Borrower, which were not disclosed in the Unaudited Financial Statements and the
notes related thereto. There has also been furnished to the Agent audited
consolidated financial statements of financial condition, income, changes in
stockholders equity and cash flows as of and for the fiscal years ended December
31, 1994 and December 31, 1995 for each Current Subsidiary, which financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered thereby
and present fairly the financial condition of each Current Subsidiary, as the
case may be, for such period.
6.4.2. PROJECTIONS. The projections of the annual operating
budgets of the Borrower and its Subsidiaries on a consolidated basis, balance
sheets and cash flow statements for the 1997 fiscal year, copies of which have
been delivered to the Agent, disclose all assumptions made with respect to
general economic, financial and market conditions used in formulating such
projections. To the knowledge of the Borrower, no facts exist that (individually
or in the aggregate) would result in any material change in any of such
projections. The projections are based upon reasonable estimates and
assumptions, have been prepared on the basis of the assumptions stated therein
and reflect the reasonable estimates of the Borrower and its Subsidiaries of the
results of operations and other information projected therein.
6.5. NO MATERIAL CHANGES, ETC. Since the Pro Forma Balance Sheet date,
there has occurred no materially adverse change in the financial condition or
business of the Borrower as shown on or reflected in the balance sheet of the
Borrower as at the Pro Forma Balance Sheet date, or the statement of income for
the fiscal year then ended, other than changes in the ordinary course of
business that have not had any materially adverse effect either individually or
in the aggregate on the business or financial condition of the Borrower. Since
the Pro Forma Balance Sheet date, the Borrower has not made any Distribution.
6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower and its
Subsidiaries possess all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of their business substantially as now conducted without known
conflict with any rights of others.
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6.7. LITIGATION. Except as set forth on Schedule 6.7, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against the Borrower or any of the Borrower's Subsidiaries before any court,
tribunal or administrative agency or board that, if adversely determined, might,
either in any case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of the Borrower or its
Subsidiaries or materially impair the right of the Borrower or any of its
Subsidiaries, considered as a whole, to carry on business substantially as now
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of the Borrower and its Subsidiaries, or which
question the validity of this Credit Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto.
6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. None of the Borrower or any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Borrower and the Borrower's Subsidiaries
considered as whole. None of the Borrower or any of the Borrower's Subsidiaries
is a party to any contract or agreement that has or is expected, in the judgment
of the Borrower's officers, to have any materially adverse effect on the
business of the Borrower and the Borrower's Subsidiaries considered as a whole.
6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of the Borrower
or any of the Borrower's Subsidiaries is in violation of any provision of its
charter documents, bylaws, or any agreement or instrument to which it may be
subject or by which it or any of its properties may be bound or any decree,
order, judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that could result in the imposition of substantial penalties
or materially and adversely affect the financial condition, properties or
business of the Borrower and the Borrower's Subsidiaries considered as a whole.
6.10. TAX STATUS. The Borrower and the Borrower's Subsidiaries (a) have
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which any of them is subject,
(b) have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have set
aside on their books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
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amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Borrower know of no basis for any such claim.
6.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the Borrower
or any of the Borrower's Subsidiaries is a "holding company," or a "subsidiary
company" of a "holding company," or an affiliate" of a "holding company," as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it an "investment company," or an "affiliated company" or a "principal
underwriter" of an "investment company," as such terms are defined in the
Investment Company Act of 1940.
6.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower or any of the Borrower's Subsidiaries
and any rights relating thereto.
6.14. COLLATERAL. The Collateral and the Agent's rights with respect to
the Collateral are not subject to any setoff, claims, withholdings or other
defenses. The Borrower is the owner of the Collateral free from any lien,
security interest, encumbrance and any other claim or demand, except for
Permitted Liens.
6.15. CERTAIN TRANSACTIONS. Except as shown on Schedule 6.15 and except
for arm's length transactions pursuant to which the Borrower or its Subsidiaries
makes payments in the ordinary course of business upon terms no less favorable
than the Borrower or such Subsidiary could obtain from third parties, none of
the officers, directors, or employees of the Borrower or any of the Borrower's
Subsidiaries is presently a party to any transaction with the Borrower or a
Subsidiary of the Borrower (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Borrower, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
6.16. EMPLOYEE BENEFIT PLANS.
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6.16.1. IN GENERAL. Each Employee Benefit Plan has been
maintained and operated in compliance in all material respects with the
provisions of ERISA and, to the extent applicable, the Code, including but not
limited to the provisions thereunder respecting prohibited transactions. The
Borrower has heretofore delivered to the Agent the most recently completed
annual report, Form 5500, with all required attachments, and actuarial statement
required to be submitted under Section 103(d) of ERISA, with respect to each
Guaranteed Pension Plan.
6.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee
Benefit Plan which is an employee welfare benefit plan within the meaning of
Section 3(l) or Section 3(2)(B) of ERISA, no benefits are due unless the event
giving rise to the benefit entitlement occurs prior to plan termination (except
as required by Title I, Part 6 of ERISA) . The Borrower or an ERISA Affiliate,
as appropriate, may terminate each such Plan at any time (or at any time
subsequent to the expiration of any applicable bargaining agreement) in the
discretion of the Borrower or such ERISA Affiliate without liability to any
Person.
6.16.3. GUARANTEED PENSION PLANS. Each contribution required
to be made to a Guaranteed Pension Plan, whether required to be made to avoid
the incurrence of an accumulated funding deficiency, the notice or lien
provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or extension of amortization periods
has been received with respect to any Guaranteed Pension Plan. No liability to
the PBGC (other than required insurance premiums, all of which have been paid)
has been incurred by the Borrower or any ERISA Affiliate with respect to any
Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or
any other event or condition which presents a material risk of termination of
any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each
Guaranteed Pension Plan (which in each case occurred within twelve months of the
date of this representation), and on the actuarial methods and assumptions
employed for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of Section 4001 of ERISA did not
exceed the aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
6.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any
ERISA Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a
result of a sale of assets described in Section 4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan
is in reorganization or insolvent under and within the meaning of
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Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA.
6.17. REGULATIONS U AND X. The proceeds of the Revolving Credit Loans
shall be used for refinancing existing indebtedness of the Borrower with Bank
One, The First National Bank of Ohio, Fleet National Bank, Columbia Bank and
Homewood Federal Savings, working capital purposes and making Permitted
Acquisitions. No portion of any Revolving Credit Loan is to be used for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.
6.18. ENVIRONMENTAL COMPLIANCE. The Borrower represents that, to its
knowledge:
(a) none of the Borrower, its Subsidiaries or any
operator of the Real Estate or any operations thereon
is in violation, or alleged violation, of any
judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters,
including without limitation, those arising under the
Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, or
any state or local statute, regulation, ordinance,
order or decree relating to health, safety or the
environment (hereinafter "Environmental Laws"), which
violation would have a material adverse effect on the
business, assets or financial condition of the
Borrower and its Subsidiaries taken as a whole;
(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including,
without limitation, any federal, state or local
governmental authority, (i) that it has been
identified by the United States Environmental
Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste,
as defined by 42 U.S.C. Section 6903(5), any
hazardous substances as defined
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by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33)
and any toxic substances, oil or hazardous materials
or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which it
has generated, transported or disposed of has been
found at any site at which a federal, state or local
agency or other third party has conducted or has
ordered that the Borrower or such Subsidiary of the
Borrower conduct a remedial investigation, removal or
other response action pursuant to any Environmental
Law; or (iii) that it is or shall be a named party to
any claim, action, cause of action, complaint, or
legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the
release of Hazardous Substances;
(c) (i) no portion of the Real Estate has been used for
the handling, processing, storage or disposal of
Hazardous Substances except in accordance with
applicable Environmental Laws; (ii) in the course of
any activities conducted by the Borrower, any of its
Subsidiaries or operators of its properties, no
Hazardous Substances have been generated or are being
used on the Real Estate except in accordance, with
applicable Environmental Laws; (iii) there have been
no releases (i.e. any past or present releasing,
spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing
or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the properties of
the Borrower or any of its Subsidiaries, which
releases would have a material adverse effect on the
value of any of the Real Estate or adjacent
properties or the environment; (iv) to the best of
the Borrower's knowledge, there have been no releases
on, upon, from or into any real property in the
vicinity of any of the Real Estate which, through
soil or groundwater contamination, may have come to
be located on, and which would have a material
adverse effect on the value of, the Real Estate; and
(v) in addition, any Hazardous Substances
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that have been generated on any of the Real Estate
have been transported offsite only by carriers having
an identification number issued by the EPA, treated
or disposed of only by treatment or disposal
facilities maintaining valid permits as required
under applicable Environmental Laws, which
transporters and facilities have been and are, to the
best of the Borrower's knowledge, operating in
compliance with such permits and applicable
Environmental Laws; and
(d) none of the Borrower, its Subsidiaries or any of the
Real Estate is subject to any applicable
environmental law requiring the performance of
Hazardous Substances site assessments, or the removal
or remediation of Hazardous Substances, or the giving
of notice to any governmental agency or the recording
or delivery to other Persons of an environmental
disclosure document or statement by virtue of the
transactions set forth herein and contemplated
hereby, or as a condition to the effectiveness of any
other transactions contemplated hereby.
6.19. SUBSIDIARIES, ETC. The Borrower does not have any Subsidiaries
except as set forth on Schedule 6.19 hereto. Except as set forth on Schedule
6.19 hereto, the Borrower is not engaged in any joint venture or partnership
with any other Person.
6.20. CHIEF EXECUTIVE OFFICES. The Borrower's chief executive office is
at c/o American Business Partners, 67 Batterymarch Street, Suite 500, Boston, MA
02110 at which location its books and records are kept.
6.21. FISCAL YEAR. The Borrower has a fiscal year which is the twelve
(12) months ending on December 31 of each year.
6.22. DISCLOSURE. No representation or warranty made by the Borrower in
this Credit Agreement or in any agreement, instrument, document, certificate,
statement or letter furnished to the Agent by or on behalf of the Borrower in
connection with any of the transactions contemplated by any of the Loan
Documents contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances in which they are made.
6.23. INSURANCE. The Borrower and its Subsidiaries maintain with
financially sound and reputable insurers insurance with respect to its
properties and businesses against such
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casualties and contingencies as are in accordance with sound business practices.
7. AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans:
7.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Revolving Credit Loans, the
commitment fees and all other amounts provided for in this Credit Agreement and
the other Loan Documents to which the Borrower is a party, all in accordance
with the terms of this Credit Agreement and such other Loan Documents.
7.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief
executive office in Boston, Massachusetts or at such other place in the United
States of America as the Borrower shall designate upon written notice to the
Agent, where notices, presentations and demands to or upon the Borrower in
respect of the Loan Documents to which the Borrower is a party may be given or
made.
7.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep true and accurate
records and books of account in which full, true and correct entries will be
made in accordance with generally accepted accounting principles and (b)
maintain adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties and the
properties of its Subsidiaries, contingencies, and other reserves.
7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower
will deliver to the Agent:
(a) as soon as practicable, but in any event not later
than ninety (90) days after the end of each fiscal
year of the Borrower, the consolidated balance sheet
of the Borrower and its Subsidiaries and the
consolidating balance sheet of the Borrower and its
Subsidiaries, each as at the end of such year, and
the related consolidated statement of income and
statement of cash flow for such year, and the
consolidating statement of income and statement of
cash flow for such year, each setting forth in
comparative form the figures for the previous fiscal
year and all such statements to be in reasonable
detail, prepared in accordance with generally
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accepted accounting principles, and certified without
qualification by Arthur Andersen LLP or by other
independent certified public accountants satisfactory
to the Agent, that, in making the examination
necessary to said certification, they have obtained
no knowledge of any Default or Event of Default, or,
if such accountants shall have obtained knowledge of
any then existing Default or Event of Default they
shall disclose in such statement any such Default or
Event of Default; provided that such accountants
shall not be liable to the Banks for failure to
obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later
than forty-five (45) days after the end of each of
the first three fiscal quarters of the Borrower,
copies of the unaudited consolidated balance sheet of
the Borrower and its Subsidiaries and the unaudited
consolidating balance sheet of the Borrower and its
Subsidiaries, each as at the end of such quarter, and
the related consolidated statement of income and
statement of cash flow and consolidating statement of
income and statement of cash flow, each for the
portion of the Borrower's fiscal year then elapsed,
all in reasonable detail and prepared in accordance
with generally accepted accounting principles,
together with a certification by the principal
financial or accounting officer of the Borrower that
the information contained in such financial
statements fairly presents the financial position of
the Borrower and its Subsidiaries on the date thereof
(subject to year-end adjustments);
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b)
above, a statement certified by the principal
financial or accounting officer of the Borrower in
substantially the form of Exhibit C hereto and
setting forth in reasonable detail computations
evidencing compliance with the covenants contained in
Section 9 and (if applicable) reconciliations to
reflect changes in generally accepted accounting
principles since the Balance Sheet Date:
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(d) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed
with the Securities and Exchange Commission or sent
to the stockholders of the Borrower;
(e) thirty (30) days prior to the beginning of each
fiscal year, an operating plan and budget, for the
Borrower and its Subsidiaries updating those
projections delivered to the Agent and referred to in
Section 6.4.2 or, if applicable, updating any later
such projections delivered in response to a request
pursuant to this Section 7.4(e); and
(f) from time to time such other financial data and
information (including accountants' management
letters) as the Agent or any Bank may reasonably
request.
7.5. NOTICES.
7.5.1. DEFAULTS. The Borrower will promptly notify the Agent
in writing of the occurrence of any Default or Event of Default. If any Person
shall give any notice or take any other action in respect of a claimed default
(whether or not constituting an Event of Default) under this Credit Agreement or
any other note, evidence of indebtedness, indenture or other obligation to which
or with respect to which the Borrower or any of its Subsidiaries is a party or
obligor, whether as principal, guarantor, surety or otherwise, the Borrower
shall forthwith give written notice thereof to the Agent, describing the notice
or action and the nature of the claimed default.
7.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give
notice to the Agent (a) of any violation of any Environmental Law that the
Borrower reports in writing or is reportable by such Person in writing (or for
which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency and (b) upon becoming aware
thereof, of any inquiry, proceeding, investigation, or other action, including a
notice from any agency of potential environmental liability, of any federal,
state or local environmental agency or board, that has the potential to
materially affect the assets, liabilities, financial conditions or operations of
the Borrower and its Subsidiaries taken as a whole, or the Agent's security
interests pursuant to the Security Documents.
7.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Borrower
will, immediately upon becoming aware thereof, notify the Agent in writing of
any setoff, claims (including,
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with respect to the Real Estate, environmental claims), withholdings or other
defenses to which any of the Collateral, or the Agent's rights with respect to
the Collateral, are subject.
7.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will
give notice to the Agent in writing within fifteen (15) days of becoming aware
of any litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Borrower or any of its Subsidiaries or to which
the Borrower or any of its Subsidiaries is or becomes a party involving an
uninsured claim against the Borrower or any of its Subsidiaries that could
reasonably be expected to have a materially adverse effect on the Borrower and
its Subsidiaries taken as a whole, and stating the nature and status of such
litigation or proceedings. The Borrower will give notice to the Agent, in
writing, in form and detail satisfactory to the Agent, within ten (10) days of
any judgment not covered by insurance against the Borrower or any of its
Subsidiaries in an amount in excess of $500,000.
7.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Borrower will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company. It (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(b) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Borrower may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (c) will, and will cause
each of its Subsidiaries to, continue to engage primarily in the businesses now
conducted by them and in related businesses; provided that nothing in this
Section 7.6 shall prevent the Borrower from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in the judgment
of the Borrower, desirable in the conduct of its or their business and that do
not in the aggregate materially adversely affect the business of the Borrower
and its Subsidiaries, considered as a whole.
7.7. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as may
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be reasonable and prudent and in accordance with the terms of the Security
Agreements.
7.8. TAXES. The Borrower will, and will cause each of its Subsidiaries
to, duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower will, and will cause each of its
Subsidiaries to, pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
7.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. The Borrower shall permit
the Banks, through the Agent or any of the Banks' other designated
representatives, to visit and inspect any of the properties of the Borrower and
its Subsidiaries, to examine the books of account of the Borrower and its
Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss
the affairs, finances and accounts of the Borrower and its Subsidiaries with,
and to be advised as to the same by, its and their officers, all at such
reasonable times and intervals as the Agent or any Bank may reasonably request.
7.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
Borrower will, and will cause each of its Subsidiaries to, comply with (a) the
applicable laws and regulations wherever its business is conducted, including
all Environmental Laws, in all material respects, (b) the provisions of its
charter documents and by-laws, (c) all agreements and instruments by which it or
any of its properties may be bound in all material respects and (d) all
applicable decrees, orders, and judgments. If any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the Borrower or its
Subsidiaries may fulfill any of its obligations hereunder or any of the other
Loan Documents to which the Borrower or its Subsidiaries is a party, the
Borrower will immediately take or cause to be taken all reasonable steps within
the power of the Borrower to obtain such authorization, consent, approval,
permit or license and furnish the Agent and the Banks with evidence thereof.
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7.11. EMPLOYEE BENEFIT PLANS. The Borrower will (a) promptly upon
filing the same with the Department of Labor or Internal Revenue Service,
furnish to the Agent a copy of the most recent actuarial statement required to
be submitted under Section 103(d) of ERISA and Annual Report, Form 5500, with
all required attachments, in respect of each Guaranteed Pension Plan and (b)
promptly upon receipt or dispatch, furnish to the Agent any notice, report or
demand sent or received in respect of a Guaranteed Pension Plan under Sections
302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.
7.12. USE OF PROCEEDS. The Borrower will use the proceeds of the
Revolving Credit Loans solely to refinance existing indebtedness of the Borrower
as stated in Section 6.17, for working capital purposes and to make Permitted
Acquisitions.
7.13. ADDITIONAL SUBSIDIARIES. (a) The Borrower will not, and will not
permit its Subsidiaries to, form or acquire any Subsidiaries except as permitted
under Section 8.5 hereof. If, after the Closing Date, the Borrower acquires,
either directly or indirectly, any Subsidiary in accordance with Section 8.5
hereof, it will notify the Agent five (5) Business Days prior to such
acquisition and provide the Agent with an updated Schedule 6.19, and will,
concurrently with the acquisition of any Subsidiary, pledge to the Agent all
capital stock (or similar interests) of such Subsidiary pursuant to the Stock
Pledge Agreement.
(b) The Borrower shall cause each of its Material Subsidiaries
that are not parties on the Closing Date to the Guaranty to execute and deliver
to the Agent, on a date no later than five (5) Business Days after such Person
becomes a Material Subsidiary of the Borrower, an Instrument of Adherence to the
Guaranty, together with such supporting documentation, including legal opinions
and corporate authority documents as the Agent may reasonably request.
7.14. FURTHER ASSURANCES. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
instruments and documents as the Banks or the Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans:
8.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
permit its Subsidiaries to, create, incur, assume,
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guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under
any of the Loan Documents;
(b) current liabilities of the Borrower and its
Subsidiaries incurred in the ordinary course of
business not incurred through (i) the borrowing of
money, or (ii) the obtaining of credit except for
credit on an open account basis customarily extended
and in fact extended in connection with normal
purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor,
materials and supplies to the extent that payment
therefor shall not at the time be required to be made
in accordance with the provisions of Section 7.8;
(d) Indebtedness in respect of judgments or awards that
have been in force for less than the applicable
period for taking an appeal so long as execution is
not levied thereunder or in respect of which the
Borrower or its Subsidiaries shall at the time in
good faith be prosecuting an appeal or proceedings
for review and in respect of which a stay of
execution shall have been obtained pending such
appeal or review;
(e) endorsements for collection, deposit or negotiation
and warranties of products or services, in each case
incurred in the ordinary course of business;
(f) Subordinated Debt;
(g) obligations under Capitalized Leases not exceeding
$100,000 in aggregate amount at any time outstanding
or operating leases of houses, apartments and
condominiums entered into in the normal course of
business;
(h) purchase money Indebtedness incurred in connection
with the acquisition after the date hereof of any
real or personal property by the Borrower or its
Subsidiaries, provided that the aggregate principal
amount of such Indebtedness of the Borrower and its
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Subsidiaries shall not exceed the aggregate amount of
$500,000 at any one time; and
(i) Indebtedness existing on the date hereof and listed
and described on Schedule 8.1 hereto.
8.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit
its Subsidiaries to, (a) create or incur or suffer to be created or incurred or
to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other
security interest of any kind upon any of its property or assets of any
character whether now owned or hereafter acquired, or upon the income or profits
therefrom; (b) transfer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to payment of its general
creditors; (c) acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase money security
agreement, device or arrangement; (d) suffer to exist for a period of more than
thirty (30) days after the same shall have been incurred any Indebtedness or
claim or demand against it that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or (e) sell, assign, pledge or otherwise transfer any accounts,
contract rights, general intangibles, chattel paper or instruments, with or
without recourse; provided that the Borrower and its Subsidiaries may create or
incur or suffer to be created or incurred or to exist:
(i) liens to secure taxes, assessments and other
government charges in respect of obligations
not overdue or liens on properties to secure
claims for labor, material or supplies in
respect of obligations not overdue;
(ii) deposits or pledges made in connection with,
or to secure payment of, workmen's
compensation, unemployment insurance, old
age pensions or other social security
obligations;
(iii) liens on properties in respect of judgments
or awards, the Indebtedness with respect to
which is permitted by Section 8.1(d);
(iv) liens of carriers, warehousemen, mechanics
and materialmen, and other like liens on
properties in existence less than 120 days
from the date of
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creation thereof in respect of obligations
not overdue;
(v) encumbrances on Real Estate consisting of
easements, rights of way, zoning
restrictions, restrictions on the use of
real property and defects and irregularities
in the title thereto, landlord's or lessor's
liens under leases to which the Borrower or
any of its Subsidiaries is a party, and
other minor liens or encumbrances none of
which in the opinion of the Borrower
interferes materially with the use of the
property affected in the ordinary conduct of
the business of the Borrower or such
Subsidiary of the Borrower which defects do
not individually or in the aggregate have a
materially adverse effect on the business of
the Borrower and its Subsidiaries considered
as a whole;
(vi) liens existing on the date hereof and listed
on Schedule 8.2 hereto;
(vii) purchase money security interests in or
purchase money mortgages on real or personal
property acquired after the date hereof to
secure purchase money Indebtedness of the
type and amount permitted by Section 8.1(h),
incurred in connection with the acquisition
of such property, which security interests
or mortgages cover only the real or personal
property so acquired;
(viii) leases of apartments, houses and
condominiums entered into by Borrower or the
Subsidiaries as lessor in the ordinary
course of business; and
(ix) liens in favor of the Agent for the benefit
of the Banks and the Agent under the Loan
Documents.
8.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not make or permit
to exist or to remain outstanding any Investment by the Borrower or its
Subsidiaries except Investments in:
(a) marketable direct or guaranteed obligations of the
United States of America that mature
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within one (1) year from the date of purchase by the
Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks
having total assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper"
issued by a corporation organized and existing under
the laws of the United States of America or any state
thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if
rated by Moody's Investors Services, Inc., and not
less than "A 1" if rated by Standard and Poor's;
(d) Investments existing on the date hereof and listed on
Schedule 8.3 hereto;
(e) Investments consisting of the Guaranty and the
Instruments of Adherence delivered after the Closing
Date pursuant to Section 7.13 hereof; and
(f) Investments consisting of loans and advances to
employees for moving, entertainment, travel and other
similar expenses in the ordinary course of business
not to exceed $50,000 in the aggregate at any time
outstanding.
8.4. DISTRIBUTIONS. The Borrower will not make any Distributions except
distributions to shareholders of subsidiary S Corporations for payment of
personal tax liability related to the earnings of the subsidiary.
8.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
8.5.1. MERGERS AND ACQUISITIONS.
(a) The Borrower will not, and will not permit its
Subsidiaries to become a party to any merger or consolidation, or agree to or
effect any asset acquisition or stock acquisition (other than the acquisition of
assets in the ordinary course of business consistent with past practices) except
the merger or consolidation of one or more wholly-owned Subsidiaries of the
Borrower with and into the Borrower, or the merger or consolidation of two or
more wholly-owned Subsidiaries of the Borrower.
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(b) Notwithstanding the provisions of Section 8.5.1(a), the
Borrower may become a party to any asset acquisition or stock acquisition (each,
a "Permitted Acquisition") if the following conditions have been met: (i) the
proposed transaction will not otherwise create a Default or Event of Default;
(ii) the Person being acquired (or whose assets are being substantially
acquired) shall be predominantly involved in the existing lines of business of
the Borrower or in lines of business substantially related thereto; (iii) all of
the assets material to the operation of the business of the Person being
acquired or all or substantially all of the assets being acquired and material
to the operation of the business of the Borrower shall be located in North
America; (iv) in the event of a stock acquisition, the Borrower shall have
complied with the provisions of Section 7.13 to the satisfaction of the Bank in
its reasonable discretion; (v) the board of directors and (if required by
applicable law) the shareholders, or the equivalent thereof, of the business to
be acquired shall have approved such transaction; (vi) the Borrower shall have
provided calculations showing compliance with the covenants set forth in Section
9 on a pro forma historical combined basis as if the proposed transaction
occurred on the first day of the period of measurement; (vii) the business being
acquired shall have had positive operating cash flow for at least the two (2)
fiscal years immediately preceding the acquisition, as such operating cash flow
may be adjusted, in a manner reasonably satisfactory to the Agent, to reduce
management compensation expense in any such two-year period to an amount which
reflects projected management compensation expense on an ongoing basis,
following the acquisition and (viii) the Agent shall have received at least ten
(10) days prior to the acquisition, an accurate summary of the material terms of
the transactions, including a copy of the applicable acquisition agreement.
8.5.2. DISPOSITION OF ASSETS. The Borrower will not, and will
not permit its Subsidiaries to, become a party to or agree to or effect any
disposition of assets, other than the disposition of assets in the ordinary
course of business, consistent with past practices.
8.6 INTENTIONALLY OMITTED.
8.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and
will not permit its Subsidiaries to (a) use any of the Real Estate or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances, except in accordance with applicable Environmental Laws, (b)
generate any Hazardous Substances on any of the Real Estate, (c) conduct any
activity at any Real Estate or use any Real Estate in any manner so as to cause
a release (i.e. releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping) or
threatened release of Hazardous Substances on, upon or into the Real Estate or
(d)
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otherwise conduct any activity at any Real Estate or use any Real Estate in any
manner that would materially violate any Environmental Law or bring such Real
Estate in material violation of any Environmental Law.
8.8. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will:
(a) engage in any "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of
the Code which could result in a material liability
for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency," as such term is
defined in Section 302 of ERISA, whether or not such
deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to
an extent which, or terminate any Guaranteed Pension
Plan in a manner which, could result in the
imposition of a lien or encumbrance on the assets of
the Borrower or any of its Subsidiaries pursuant to
Section 302(f) or Section 4068 of ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of
Section 4001 of ERISA) of all Guaranteed Pension
Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit
liabilities and assets of any such Plan with assets
in excess of benefit liabilities.
8.9. FISCAL YEAR. The Borrower will not, and will not permit its
Subsidiaries to, change the date of the end of its fiscal years from that set
forth in Section 6.21 hereof.
8.10. SUBSIDIARIES. The Borrower will not, and will not permit its
Subsidiaries to, form, acquire or in any manner have any Subsidiaries except for
Subsidiaries acquired pursuant to a Permitted Acquisition or with the Majority
Banks' prior written consent.
8.11. NEGATIVE PLEDGES. The Borrower will not, and will not permit its
Subsidiaries to, enter into any agreement (excluding this Credit Agreement and
the Loan Documents) prohibiting the creation or assumption of any lien upon its
properties, revenues or assets, whether now owned or hereafter
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acquired, other than agreements with Persons prohibiting any such lien on assets
in which such Person has a prior security interest which is permitted by Section
8.2.
8.12. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit its Subsidiaries to, enter into, or cause, suffer or permit to exist (a)
any arrangement or contract with any of its other Affiliates of a nature
customarily entered into by Persons which are Affiliates of each other
(including management or similar contracts or arrangements relating to the
allocation of revenues, taxes and expenses or otherwise) requiring any payments
to be made by the Borrower or such Subsidiary of the Borrower unless such
arrangement is fair and equitable to the Borrower or such Subsidiary; or (b) any
other transaction, arrangement, contract with any of its Affiliates which would
not be entered into by a prudent Person in the position of the Borrower or such
Subsidiary with, or which is on terms which are less favorable than are
obtainable from, any person which is not one of its Affiliates.
8.13. INCONSISTENT AGREEMENTS. The Borrower will not, and will not
permit its Subsidiaries to, enter into any agreement containing any provision
which would be violated or breached by the performance by the Borrower of its
obligations hereunder or under any of the Loan Documents.
8.14. MODIFICATION OF DOCUMENTS. The Borrower will not, and will not
permit its Subsidiaries to, consent to or agree to any amendment, supplement or
other modification to its certificate of incorporation or its by-laws; provided
that the Borrower or its Subsidiaries may amend, supplement, and modify its
certificate of incorporation and its by-laws with written notice to the Agent,
so long as such amendment, supplement or other modification shall not have a
materially adverse effect on (i) the ability of the Borrower to enter into and
to perform and observe its obligations under the Loan Documents, and (ii) the
assets, properties, business, operations, condition (financial and otherwise),
and prospects of the Borrower and its Subsidiaries taken as a whole.
9. FINANCIAL COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans:
9.1. CONSOLIDATED TOTAL TANGIBLE NET WORTH. The Borrower will maintain,
at all times, Consolidated Total Tangible Net Worth in an amount equal to at
least:
(a) $1,800,000, plus
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(b) fifty percent (50%) of Consolidated Net Income for the
immediately preceding fiscal quarter. No reduction shall be given in calculating
the minimum Consolidated Total Tangible Net Worth for any Consolidated Net
Deficit, plus
(c) eighty percent (80%) of the gross proceeds from any
issuance of equity securities of the Borrower, net of out-of-pocket expenses
incurred by the Borrower in connection with such offering.
9.2. PROFITABLE OPERATIONS. The Borrower will not permit Consolidated
Net Income for any fiscal quarter, other than the fiscal quarter in which the
Borrower consummates an initial public offering of its capital stock under the
Securities Act of 1933, as amended, to be less than $1.00.
9.3. LEVERAGE RATIO. The Borrower will not permit, as at the last day
of each fiscal quarter, the Leverage Ratio to exceed 4.00:1.00.
9.4. MINIMUM CONSOLIDATED EBITDA. The Borrower will maintain, as at the
last day of any fiscal quarter, Consolidated EBITDA in amount at least equal to
the greater of (a) $2,000,000, or (b) ninety percent (90%) of Consolidated
EBITDA for the immediately preceding fiscal quarter, all as determined for the
four consecutive fiscal quarters of the Borrower ended on such date.
10. CLOSING CONDITIONS
The obligations of the Banks to make the initial Revolving Credit Loans
shall be subject to the satisfaction of the following conditions precedent on or
prior to the Closing Date:
10.1. LOAN DOCUMENTS, ETC. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to each of the
Banks. Each Bank shall have received a fully executed copy of each such
document.
10.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. The Agent shall have
received from the Borrower and each Subsidiary a copy, certified by a duly
authorized officer of such Person to be true and complete on the Closing Date,
of each of (a) its charter or other incorporation documents as in effect on such
date of certification, and (b) its bylaws as in effect on such date.
10.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by the Borrower and each of its Subsidiaries
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall
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have been duly and effectively taken, and evidence thereof satisfactory to the
Agent shall have been provided to the Agent.
10.4. INCUMBENCY CERTIFICATE. The Agent shall have received from each
of the Borrower and each of the Subsidiaries an incumbency certificate, dated as
of the Closing Date, signed by a duly authorized officer of the Borrower or such
Subsidiary, as the case may be, and giving the name and bearing a specimen
signature of each individual who shall be authorized: (a) to sign, in the name
and on behalf of each of the Borrower or such Subsidiary, as the case may be,
each of the Loan Documents to which the Borrower or such Subsidiary is or is to
become a party; (b) with respect to the Borrower, to make Revolving Credit Loan
Requests and Conversion Requests; and (c) to give notices and to take other
action on its behalf under the Loan Documents.
10.5. VALIDITY OF LIENS. The Security Documents shall be effective to
create in favor of the Agent a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest in
and lien upon the Collateral. All filings, recordings, deliveries of instruments
and other actions necessary or desirable in the opinion of the Agent to protect
and preserve such security interests shall have been duly effected. The Agent
shall have received evidence thereof in form and substance satisfactory to the
Agent.
10.6. UCC SEARCH RESULTS. The Agent shall have received results of UCC
searches with respect to the Collateral, indicating no liens other than
Permitted Liens and otherwise in form and substance satisfactory to the Agent.
10.7. CERTIFICATES OF INSURANCE. The Agent shall have received (a) a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying its insurers, types of insurance, and insurance
limits, and (b) certified copies of all policies evidencing such insurance (or
certificates therefore signed by the insurer or an agent authorized to bind the
insurer).
10.8. SOLVENCY CERTIFICATE. The Agent shall have received an officer's
certificate of the Borrower dated as of the Closing Date as to the solvency of
the Borrower following the consummation of the transactions contemplated herein
and in form and substance satisfactory to the Banks.
10.9. OPINION OF COUNSEL. Each of the Banks and the Agent shall have
received a favorable legal opinion addressed to the Banks and the Agent, dated
as of the Closing Date, in form and substance satisfactory to the Banks and the
Agent, from Nutter, McClennen & Fish, LLP, counsel to the Borrower.
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10.10. PAYMENT OF EXPENSES. The Borrower shall have paid the reasonable
fees and expenses of the Agent's Special Counsel incurred in connection with the
Loan Documents.
10.11. DISBURSEMENT INSTRUCTIONS. The Agent shall have received
disbursement instructions from the Borrower with respect to the proceeds of the
initial Revolving Credit Loan.
11. CONDITIONS TO ALL BORROWINGS
The obligations of the Banks to make any Revolving Credit Loan,
including the initial Revolving Credit Loan, whether on or after the Closing
Date, shall also be subject to the satisfaction of the following conditions
precedent:
11.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of the Borrower and its Subsidiaries contained in
this Credit Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Credit Agreement shall be true
as of the date as of which they were made and shall also be true at and as of
the time of the making of such Revolving Credit Loan with the same effect as if
made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
11.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Revolving Credit
Loan.
11.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
11.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
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12. EVENTS OF DEFAULT; ACCELERATION; ETC.
12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrower shall fail to pay any principal of the
Revolving Credit Loans when the same shall become due
and payable, whether at the stated date of maturity
or any accelerated date of maturity or at any other
date fixed for payment;
(b) the Borrower shall fail to pay any interest on the
Revolving Credit Loans, the commitment fee or other
sums due hereunder or under any of the other Loan
Documents, when the same shall become due and
payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date
fixed for payment and such failure shall continue for
a period of three (3) Business Days;
(c) the Borrower shall fail to comply with any of its
covenants contained in Section 8.1, 8.4 - 8.7, 8.9,
8.10, 8.12, 8.14 or 9.1 - 9.4;
(d) the Borrower shall fail to perform any term, covenant
or agreement contained herein or in any of the other
Loan Documents (other than those specified elsewhere
in this Section 12.1) for fifteen (15) days after
written notice of such failure has been given to the
Borrower by the Agent;
(e) any representation or warranty of the Borrower or any
Subsidiary in this Credit Agreement or any of the
other Loan Documents or in any other document or
instrument delivered pursuant to or in connection
with this Credit Agreement shall prove to have been
false in any material respect upon the date when made
or deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to
pay at maturity, or within any applicable period of
grace, any obligation for borrowed money or credit
received or in respect of any Capitalized Leases, in
either case with respect to obligations in excess of
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$100,000, or fail to observe or perform any material
term, covenant or agreement contained in any
agreement by which it is bound, evidencing or
securing borrowed money or credit received or in
respect of any Capitalized Leases, in either case
with respect to obligations in excess of $100,000,
for such period of time as would permit (assuming the
giving of appropriate notice if required) the holder
or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof, and
shall not cure such failure within three (3) Business
Days thereof.
(g) the Borrower shall make an assignment for the benefit
of creditors, or admit in writing its inability to
pay or generally fail to pay its debts as they mature
or become due, or shall petition or apply for the
appointment of a trustee or other custodian,
liquidator or receiver of the Borrower or any of its
Subsidiaries or of any substantial part of the assets
of the Borrower or any of its Subsidiaries or shall
commence any case or other proceeding relating to the
Borrower or any of its Subsidiaries under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such
case or other proceeding shall be commenced against
the Borrower or any of its Subsidiaries and the
Borrower or such Subsidiary shall indicate its
approval thereof, consent thereto or acquiescence
therein or such petition or application shall not
have been dismissed within sixty (60) days following
the filing thereof;
(h) a decree or order is entered appointing any such
trustee, custodian, liquidator or receiver or
adjudicating the Borrower or any of its Subsidiaries
bankrupt or insolvent, or approving a petition in any
such case or other proceeding, or a decree or order
for relief is entered in respect of the Borrower or
any of its Subsidiaries in an involuntary
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case under federal bankruptcy laws as now or
hereafter constituted;
(i) there shall remain in force, undischarged,
unsatisfied and unstayed, for more than thirty days,
whether or not consecutive, any final judgment
against the Borrower or any of its Subsidiaries that,
with other outstanding final judgments, undischarged,
against the Borrower or any of its Subsidiaries
exceeds in the aggregate $100,000;
(j) if any of the Loan Documents shall be canceled,
terminated, revoked or rescinded or the Agent's
security interests, mortgages or liens in a
substantial portion of the Collateral shall cease to
be perfected, or shall cease to have the priority
contemplated by the Security Documents, in each case
otherwise than in accordance with the terms thereof
or with the express prior written agreement, consent
or approval of the Banks, or any action at law, suit
or in equity or other legal proceeding to cancel,
revoke or rescind any of the Loan Documents shall be
commenced by or on behalf of the Borrower or
Subsidiary party thereto or any of its stockholders,
or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall
make a determination that, or issue a judgment,
order, decree or ruling to the effect that, any one
or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof,
(k) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority
Banks shall have determined in their reasonable
discretion that such event reasonably could be
expected to result in liability of the Borrower or
any of its Subsidiaries to the PBGC or such
Guaranteed Pension Plan in an aggregate amount
exceeding $100,000 and such event in the
circumstances occurring reasonably could constitute
grounds for the termination of such Guaranteed
Pension Plan by the PBGC or for the appointment by
the appropriate United States District Court of a
trustee to administer such Guaranteed Pension Plan;
or a trustee shall have been appointed by the United
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States District Court to administer such Plan; or the
PBGC shall have instituted proceedings to terminate
such Guaranteed Pension Plan;
(l) the Borrower or any of its Subsidiaries shall be
enjoined, restrained or in any way prevented by the
order of any court or any administrative or
regulatory agency from conducting any material part
of its business and such order shall continue in
effect for more than thirty (30) days;
(m) there shall occur any material damage to, or loss,
theft or destruction of, any Collateral, whether or
not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or
other casualty, which in any such case causes, for
more than fifteen (15) consecutive days, the
cessation or substantial curtailment of revenue
producing activities at any facility of the Borrower
or its Subsidiaries if such event or circumstance is
not covered by business interruption insurance and
would have a material adverse effect on the business
or financial condition of the Borrower and its
Subsidiaries, considered as a whole;
(n) there shall occur the loss, suspension or revocation
of, or failure to renew, any license or permit now
held or hereafter acquired by the Borrower or any of
its Subsidiaries if such loss, suspension, revocation
or failure to renew would have a material adverse
effect on the business or financial condition of the
Borrower and its Subsidiaries, considered as a whole;
(o) the Borrower or any of its Subsidiaries shall be
indicted for a state or federal crime, or any civil
or criminal action shall otherwise have been brought
against the Borrower or any of its Subsidiaries a
punishment for which in any such case could include
the forfeiture of any assets of the Borrower or any
of its Subsidiaries having a fair market value in
excess of $100,000 or a material adverse effect on
the business or financial condition of the Borrower
and its Subsidiaries, considered as a whole;
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(p) Exel Holdings, Linda Clutchey and her siblings,
Melanie and Robert Sabelhaus, Rocco DiLillo, and
Connie and Thomas O'Briant collectively shall at any
time, legally or beneficially, own in the aggregate
less than 51% of the issued and outstanding capital
stock of the Borrower;
(q) Any Person (other than a current stockholder of
Borrower) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange
Act of 1934, as amended), directly or indirectly, of
25% or more of the issued and outstanding capital
stock of Borrower.
(r) at any time individuals who were directors of the
Borrower on the Closing Date or within six (6) months
of the Closing Date shall cease, for any reason, to
constitute a majority of the board or directors
(except to the extent that individuals who were
directors on the Closing Date were replaced by
individuals (i) elected by a majority of the
remaining members of the board of directors of the
Borrower or (ii) nominated for election by a majority
of the remaining members of the board of directors of
the Borrower);
(s) there shall occur any material adverse change in the
financial condition of the Borrower and its
Subsidiaries as reported on the audited financial
statements of the Borrower for the fiscal year ended
December 31, 1996 delivered to the Agent in
accordance with Section 7.4, hereof, from financial
condition of the Borrower and its Subsidiaries as
reported on the Unaudited Financial Statements;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Revolving Credit Notes and the other Loan Documents to be, and they shall
thereupon forthwith become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrower; provided that in the event of any Event of Default
specified in Sections 12.1(g) or 12.1(h)), all such amounts shall become
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immediately due and payable automatically and without any requirement of notice
from the Agent or any Bank.
12.2. TERMINATION OF COMMITMENTS. If any one or more of the
Events of Default specified in Section 12.1(g) or Section 12.1(h)) shall occur,
any unused portion of the credit hereunder shall forthwith terminate and each of
the Banks shall be relieved of all further obligations to make Revolving Credit
Loans to the Borrower. If any other Event of Default shall have occurred and be
continuing, the Agent may and, upon the request of the Majority Banks, shall, by
notice to the Borrower, terminate the unused portion of the credit hereunder,
and upon such notice being given such unused portion of the credit hereunder
shall terminate immediately and each of the Banks shall be relieved of all
further obligations to make Revolving Credit Loans. No termination of the credit
hereunder shall relieve the Borrower of any of the Obligations.
12.3. REMEDIES. In case any one or more of the Events of
Default shall have occurred and be continuing, and whether or not the Banks
shall have accelerated the maturity of the Revolving Credit Loans pursuant to
Section 12.1, each Bank, if owed any amount with respect to the Revolving Credit
Loans, may proceed to protect and enforce its rights by suit in equity, action
at law or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Bank are
evidenced, including as permitted by applicable law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank; provided that, prior to undertaking such
action, the Bank shall have requested the Agent to do so and shall have given
the Agent reasonable time to do so, but the Agent shall have failed to do so. No
remedy herein conferred upon any Bank or the Agent or the holder of any
Revolving Credit Note is intended to be exclusive of any other remedy and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
12.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event
that following the occurrence or during the continuance of any Default or Event
of Default, the Agent or any Bank, as the case may be, receives any monies in
connection with the enforcement of any the Security Documents, or otherwise with
respect to the realization upon any of the Collateral, such monies shall be
distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all
reasonable costs, expenses, disbursements
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and losses which shall have been incurred or
sustained by the Agent in connection with the
collection of such monies by the Agent, for the
exercise, protection or enforcement by the Agent of
all or any of the rights, remedies, powers and
privileges of the Agent under this Credit Agreement
or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of
adequate indemnity to the Agent against any taxes or
liens which by law shall have, or may have, priority
over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Banks may determine;
provided, however, that distributions in respect of
such obligations shall be made (i) pari passu among
Obligations and (ii) Obligations owing to the Banks
with respect to each type of Obligation such as
interest, principal, fees and expenses, shall be made
among the Banks pro rata; and provided, further, that
the Agent may in its discretion make proper allowance
to take into account any Obligations not then due and
payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the
Banks and the Agent of all of the Obligations, to the
payment of any obligations required to be paid
pursuant to Section 9-504(l)(c) of the Uniform
Commercial Code of the Commonwealth of Massachusetts;
and
(d) Fourth, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled
thereto.
13. SETOFF
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any of
the Banks to the Borrower and any investment securities or other property of the
Borrower in the possession of such Bank may be applied to or set off by such
Bank, with notice to the Borrower, against the payment of Obligations and any
and all other liabilities, direct, or indirect, absolute or contingent, then
due, now existing or hereafter arising, of the Borrower to such Bank under the
Credit Agreement. Each of the Banks agrees with each other Bank that (a) if an
amount to be set off is to be applied to Indebtedness of the Borrower to such
Bank, other than Indebtedness evidenced by the Revolving Credit Notes held by
such Bank owed to such
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Bank, such amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by all such Revolving Credit Notes held by such Bank and
(b) if such Bank shall receive from the Borrower, whether by voluntary payment,
exercise of the right of setoff, counterclaim, cross action, enforcement of the
claim evidenced by the Revolving Credit Notes held by such Bank by proceedings
against the Borrower at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Revolving Credit Note or
Revolving Credit Notes held by such Bank any amount in excess of its ratable
portion of the payments received by all of the Banks with respect to the
Revolving Credit Notes held by all of the Banks, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, pro tanto assignment of claims, subrogation or
otherwise as shall result in each Bank receiving in respect of the Revolving
Credit Notes held by it, its proportionate payment as contemplated by this
Credit Agreement; provided that if all or any part of such excess payment is
thereafter recovered from such Bank, such disposition and arrangements shall be
rescinded and the amount restored to the extent of such recovery, but without
interest.
14. THE AGENT
14.1. AUTHORIZATION.
(a) The Agent is authorized to take such action on behalf
of each of the Banks and to exercise all such powers
as are hereunder and under any of the other Loan
Documents and any related documents delegated to the
Agent, together with such powers as are reasonably
incident thereto, provided that no duties or
responsibilities not expressly assumed herein or
therein shall be implied to have been assumed by the
Agent.
(b) The relationship between the Agent and each of the
Banks is that of an independent contractor. The use
of the term "Agent" is for convenience only and is
used to describe, as a form of convention, the
independent contractual relationship between the
Agent and each of the Banks. Nothing contained in
this Credit Agreement nor the other Loan Documents
shall be construed to create an agency, trust or
other fiduciary relationship between the Agent and
any of the Banks.
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(c) As an independent contractor empowered by the Banks
to exercise certain rights and perform certain duties
and responsibilities hereunder and under the other
Loan Documents, the Agent is nevertheless a
"representative" of the Banks, as that term is
defined in Article I of the Uniform Commercial Code,
for purposes of actions for the benefit of the Banks
and the Agent with respect to all collateral security
and guaranties contemplated by the Loan Documents.
Such actions include the designation of the Agent as
"secured party," mortgagee" or the like on all
financing statements and other documents and
instruments, whether recorded or otherwise, relating
to the attachment, perfection, priority or
enforcement of any security interests, mortgages or
deeds of trust in collateral security intended to
secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the
Agent.
14.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Credit Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrower.
14.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
14.4. NO REPRESENTATIONS. The Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the Revolving
Credit Notes, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Revolving
Credit Notes, or for the value of any such collateral security or for the
validity, enforceability or collectability of any such amounts owing with
respect to the Revolving Credit Notes, or for
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any recitals or statements, warranties or representations made herein or in any
of the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of the Borrower, or be bound to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
covenants or agreements herein or in any instrument at any time constituting, or
intended to constitute, collateral security for the Revolving Credit Notes or to
inspect any of the properties, books or records of the Borrower. The Agent shall
not be bound to ascertain whether any notice, consent, waiver or request
delivered to it by the Borrower or any holder of any of the Revolving Credit
Notes shall have been duly authorized or is true, accurate and complete. The
Agent has not made nor does it now make any representations or warranties,
express or implied, nor does it assume any liability to the Banks, with respect
to the credit worthiness or financial conditions of the Borrower. Each Bank
acknowledges that it has, independently and without reliance upon the Agent or
any other Bank, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter into this Credit
Agreement.
14.5. PAYMENTS.
14.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the
Agent hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to distribute
to each Bank such Bank's pro rata share of payments received by the Agent for
the account of the Banks except as otherwise expressly provided herein or in any
of the other Loan Documents.
14.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent
the distribution of any amount received by it in such capacity hereunder, under
the Revolving Credit Notes or under any of the other Loan Documents might
involve it in liability, it may refrain from making distribution until its right
to make distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any amount
received and distributed by the Agent is to be repaid, each Person to whom any
such distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such Persons as shall be determined by such court.
14.5.3. DELINQUENT BANKS. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other Loan Documents,
any Bank that fails (a) to make available to the Agent its pro rata share of any
Revolving Credit Loan or (b) to comply with the provisions of Section 13 with
respect to making dispositions and arrangements with the other Banks, where such
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Bank's share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all of the
Banks, in each case as, when and to the full extent required by the provisions
of this Credit Agreement, shall be deemed delinquent (a "Delinquent Bank") and
shall be deemed a Delinquent Bank until such time as such delinquency is
satisfied. A Delinquent Bank shall be deemed to have assigned any and all
payments due to it from the Borrower, whether on account of outstanding
Revolving Credit Loans, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective pro
rata shares of all outstanding Revolving Credit Loans. The Delinquent Bank
hereby authorizes the Agent to distribute such payments to the nondelinquent
Banks in proportion to their respective pro rata shares of all outstanding
Revolving Credit Loans. A Delinquent Bank shall be deemed to have satisfied in
full a delinquency when and if, as a result of application of the assigned
payments to all outstanding Revolving Credit Loans of the nondelinquent Banks,
the Banks' respective pro rata shares of all outstanding Revolving Credit Loans
have returned to those in effect immediately prior to such delinquency and
without giving effect to the nonpayment causing such delinquency.
14.6. HOLDERS OF REVOLVING CREDIT NOTES. The Agent may deem and treat
the payee of any Revolving Credit Note as the absolute owner or purchaser
thereof for all purposes hereof until it shall have been furnished in writing
with a different name by such payee or by a subsequent holder, assignee or
transferee.
14.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrower as
required by Section 15), and liabilities of every nature and character arising
out of or related to this Credit Agreement, the Revolving Credit Notes, or any
of the other Loan Documents or the transactions contemplated or evidenced hereby
or thereby, or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
14.8. AGENT AS BANK. In its individual capacity, Fleet shall have the
same obligations and the same rights, powers and privileges in respect to its
Commitment and the Revolving Credit Loans made by it, and as the holder of any
of the Revolving Credit Notes as it would have were it not also the Agent.
14.9. RESIGNATION. The Agent may resign at any time by giving sixty
(60) days prior written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a
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Default or Event of Default shall have occurred and be continuing, such
successor Agent shall be reasonably acceptable to the Borrower. If no successor
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a financial institution having a
rating of not less than A or its equivalent by Standard & Poor's Corporation.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation, the provisions of this Credit Agreement and the
other Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this Section 14.10 it shall promptly notify the
other Banks of the existence of such Default or Event of Default.
14.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one or more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Banks and (b) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such sale or
other disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.
15. EXPENSES
The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Credit Agreement, the other Loan Documents and the other
agreements and instruments mentioned
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herein, (b) any taxes (including any interest and penalties in respect thereto)
payable by the Agent or any of the Banks (other than taxes based upon the
Agent's or any Bank's net income) on or with respect to the transactions
contemplated by this Credit Agreement (the Borrower hereby agreeing to indemnify
the Agent and each Bank with respect thereto), (c) the reasonable fees, expenses
and disbursements of the Agent's Special Counsel or any local counsel to the
Agent incurred in connection with the preparation, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
each closing hereunder, and amendments, modifications, approvals, consents or
waivers hereto or hereunder, (d) the fees, expenses and disbursements of the
Agent incurred by the Agent in connection with the preparation, administration
or interpretation of the Loan Documents and other instruments mentioned herein,
including in connection with any commercial finance examinations, (e) the
reasonable fees, expenses and disbursements incurred by the Agent in connection
with the syndication of the revolving credit facility described herein, (f) all
reasonable out-of-pocket expenses (including without limitation reasonable
attorneys' fees and costs, which attorneys may be employees of any Bank or the
Agent, and reasonable consulting, accounting, appraisal, investment banking and
similar professional fees and charges) incurred by any Bank or the Agent in
connection with (i) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrower or any of its Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default and
(ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's or the Agent's relationship with the
Borrower or its Subsidiaries and (g) all reasonable fees, expenses and
disbursements of any Bank or the Agent incurred in connection with UCC searches,
UCC filings or mortgage recordings. The covenants of this Section 15 shall
survive payment or satisfaction of all other Obligations.
16. INDEMNIFICATION
The Borrower agrees to indemnify and hold harmless the Agent and the
Banks from and against any and all claims, actions and suits not arising out of
the negligence or willful misconduct of the Agent or such Bank, whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of this Credit
Agreement or any of the other Loan Documents or the transactions contemplated
hereby including, without limitation, (a) any actual or proposed use by the
Borrower or any of its Subsidiaries of the proceeds of any of the Revolving
Credit Loans, (b) the Borrower entering into or performing this Credit Agreement
or any of the other Loan Documents or (c) with respect to the Borrower and its
Subsidiaries and their respective properties and assets, the violation of any
Environmental Law, the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release
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<PAGE> 62
or threatened release of any Hazardous Substances or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to, claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and allocated costs
of internal counsel incurred in connection with any such investigation,
litigation or other proceeding. In litigation, or the preparation therefor, the
Banks and the Agent shall be entitled to select their own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this Section 16 are unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment in satisfaction of such obligations which is permissible under
applicable law. The covenants contained in this Section 16 shall survive payment
or satisfaction in full of all other Obligations.
17. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Revolving Credit Notes, in any of the other Loan Documents or in any
documents or other papers delivered by or on behalf of the Borrower or its
Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Banks of any of the
Revolving Credit Loans, as herein contemplated, and shall continue in full force
and effect so long as any amount due under this Credit Agreement or the
Revolving Credit Notes or any of the other Loan Documents remains outstanding or
any Bank has any obligation to make any Revolving Credit Loans, and for such
further time as may be otherwise expressly specified in this Credit Agreement.
All statements contained in any certificate or other paper delivered to any Bank
or the Agent at any time by or on behalf of the Borrower pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower hereunder.
18. ASSIGNMENT AND PARTICIPATION
18.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Revolving Credit Loans at the time owing to it and the Revolving Credit
Notes held by it; provided that (a) each of the Agent and, unless a Default or
Event of Default shall have occurred and be continuing, the Borrower shall have
given its prior written consent to such assignment, which consent, in the
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<PAGE> 63
case of the Borrower, will not be unreasonably withheld, (b) each such
assignment shall be of a constant, and not a varying, percentage of all the
assigning Bank's rights and obligations under this Credit Agreement, (c) each
assignment shall be in an amount that is a whole multiple of $1,000,000 (d) each
Bank which is a Bank on the date hereof shall retain, free of any such
assignment, an amount of its Commitment of not less than $1,000,000 and (e) the
parties to such assignment shall execute and deliver to the Agent, for recording
in the Register (as hereinafter defined), an Assignment and Acceptance,
substantially in the form of Exhibit D hereto (an "Assignment and Acceptance"),
together with any Revolving Credit Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (y) the assigning Bank shall, to the extent provided in such assignment and
upon payment to the Agent of the registration fee referred to in Section 18.3,
be released from its obligations under this Credit Agreement.
18.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS, COVENANTS.
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is
the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim,
the assigning Bank makes no representation or
warranty, express or implied, and assumes no
responsibility with respect to any statements,
warranties or representations made in or in
connection with this Credit Agreement or the
execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit
Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any
security interest or mortgage,
(b) the assigning Bank makes no representation or
warranty and assumes no responsibility with respect
to the financial condition of the Borrower and its
Subsidiaries or any other Person primarily or
secondarily liable in
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<PAGE> 64
respect of any of the Obligations, or the performance
or observance by the Borrower or any other Person
primarily or secondarily liable in respect of any of
the Obligations of any of their obligations under
this Credit Agreement or any of the other Loan
Documents or any other instrument or document
furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of
this Credit Agreement, together with copies of the
most recent financial statements referred to in
Section 7.4 and Section 8.4 and such other documents
and information as it has deemed appropriate to make
its own credit analysis and decision to enter into
such Assignment and Acceptance;
(d) such assignee will, independently and without
reliance upon the assigning Bank, the Agent or any
other Bank and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking
or not taking action under this Credit Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to
exercise such powers under this Credit Agreement and
the other Loan Documents as are delegated to the
Agent by the terms hereof or thereof, together with
such powers as are reasonably incidental thereto;
(g) such assignee agrees that it will perform in
accordance with their terms all of the obligations
that by the terms of this Credit Agreement are
required to be performed by it as a Bank; and
(h) such assignee represents and warrants that it is
legally authorized to enter into such Assignment and
Acceptance.
18.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to the
Banks
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<PAGE> 65
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Banks may treat
each Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrower and the Banks at any reasonable time and from time to
time upon reasonable prior notice. Upon each such recordation, the assigning
Bank agrees to pay to the Agent a registration fee in the sum of $3,500.
18.4. NEW REVOLVING CREDIT NOTES. Upon its receipt of an Assignment and
Acceptance executed by the parties to such assignment, together with each
Revolving Credit Note subject to such assignment, the Agent shall (a) record the
information contained therein in the Register, and (b) give prompt notice
thereof to the Borrower and the Banks (other than the assigning Bank). Within
five (5) Business Days after receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent, in exchange for each
surrendered Revolving Credit Note, a new Revolving Credit Note to the order of
such Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Revolving Credit
Note to the order of the assigning Bank in an amount equal to the amount
retained by it hereunder. Such new Revolving Credit Notes shall provide that
they are replacements for the surrendered Revolving Credit Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Revolving Credit Notes, shall be dated the effective date of such in
Assignment and Acceptance and shall otherwise be substantially the form of the
assigned Revolving Credit Notes. Within five (5) days of issuance of any new
Revolving Credit Notes pursuant to this Section 18.4, the Borrower shall deliver
an opinion of counsel, addressed to the Banks and the Agent, relating to the due
authorization, execution and delivery of such new Revolving Credit Notes and the
legality, validity and binding effect thereof, in form and substance
satisfactory to the Banks. The surrendered Revolving Credit Notes shall be
canceled and returned to the Borrower.
18.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (a) any such sale or participation shall not affect the rights and duties
of the selling Bank hereunder to the Borrower and (b) the only rights granted to
the participant pursuant to such participation arrangements with respect to
waivers, amendments or modifications of the Loan Documents shall be the rights
to approve waivers, amendments or modifications that would reduce the principal
of or the interest rate on any Revolving Credit Loans, extend the term
64
<PAGE> 66
or increase the amount of the Commitment of such Bank as it relates to such
participant, reduce the amount of any commitment fees to which such participant
is entitled or extend any regularly scheduled payment date for principal or
interest.
18.6. DISCLOSURE. The Borrower agrees that in addition to disclosures
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (a) to treat in confidence such information unless such
information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process and (c)
not to make use of such information for purposes of transactions unrelated to
such contemplated assignment or participation.
18.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to Section 12.1 or Section
12.2, and the determination of the Majority Banks shall for all purposes of this
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Revolving Credit Loans. If any Bank sells a
participating interest in any of the Revolving Credit Loans to a participant,
and such participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall promptly notify the Agent of the sale of such
participation. A transferor Bank shall have no right to vote as a Bank hereunder
or under any of the other Loan Documents for purposes of granting consents or
waivers or for purposes of agreeing to amendments or modifications to any of the
Loan Documents or for purposes of making requests to the Agent pursuant to
Section 12.1 or Section 12.2 to the extent that such participation is
beneficially owned by the Borrower or any Affiliate of the Borrower, and the
determination of the Majority Banks shall for all purposes of this Agreement and
the other Loan Documents be made without regard to the interest of such
transferor Bank in the Revolving Credit Loans to the extent of such
participation.
18.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 16 with respect to any
claims or actions arising prior to the date of such assignment. If any assignee
Bank is not incorporated under the laws of the United States of America or any
state thereof, it shall, prior to the date on which any interest or fees are
payable hereunder or under any of the other
65
<PAGE> 67
Loan Documents for its account, deliver to the Borrower and the Agent
certification as to its exemption from deduction or withholding of any United
States federal income taxes. Anything contained in this Section 18 to the
contrary notwithstanding, any Bank may at any time pledge all or any portion of
its interest and rights under this Credit Agreement (including all or any
portion of its Revolving Credit Notes) to any of the twelve Federal Reserve
Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section
341. No such pledge or the enforcement thereof shall release the pledgor Bank
from its obligations hereunder or under any of the other Loan Documents.
18.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
19. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Revolving Credit Notes c/o American Business Partners,
67 Batterymarch Street, Suite 500, Boston, Massachusetts 02110 shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to the Borrower, at c/o American Business
Partners, 67 Batterymarch Street, Suite 500, Boston,
Massachusetts 02110 Attention: Mark Gagne, Chief
Financial Officer, or at such other address for
notice as the Borrower shall last have furnished in
writing to the Person giving the notice;
(b) if to the Agent, at One Federal Street, Boston,
Massachusetts 02110, USA, Attention: Mary M. Barcus,
Vice President, or such other address for notice as
the Agent shall last have furnished in writing to the
Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on
Schedule 1 hereto, or such other address for notice
as such Bank shall have last furnished in writing to
the Person giving the notice.
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<PAGE> 68
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the fifth Business Day following the mailing thereof.
20. GOVERNING LAW
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 19. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
21. HEADINGS
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
22. COUNTERPARTS
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of which
when executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Credit Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
23. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 25.
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<PAGE> 69
24. WAIVER OF JURY TRIAL
The Borrower hereby waives its right to a jury trial with respect to
any action or claim arising out of any dispute in connection with this Credit
Agreement, the Revolving Credit Notes or any of the other Loan Documents, any
rights or obligations hereunder or thereunder or the performance of which rights
and obligations. The Borrower (a) certifies that no representative, agent or
attorney of any Bank or the Agent has represented, expressly or otherwise, that
such Bank or the Agent would not, in the event of litigation, seek to enforce
the foregoing waivers and (b) acknowledges that the Agent and the Banks have
been induced to enter into this Credit Agreement or the other Loan Documents to
which it is a party, among other things, the waivers and certifications
contained herein.
25. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit Agreement
to be given by all of the Banks may be given, and any term of this Credit
Agreement, the other Loan Documents or any other instrument related hereto or
mentioned herein may be amended, and the performance or observance by the
Borrower or any of its Subsidiaries of any terms of this Credit Agreement, the
other Loan Documents or such other instrument or the continuance of any Default
or Event of Default may be waived (either generally or in a particular instance
and either retroactively or prospectively) with, but only with, the written
consent of the Borrower and the written consent of the Majority Banks.
Notwithstanding the foregoing, the rate of interest on the Revolving Credit
Notes (other than interest accruing pursuant to Section 4.9 following the
effective date of any waiver by the Majority Banks of the Default or Event of
Default relating thereto), the term of the Revolving Credit Notes, the amount of
the Commitments of the Banks and the amount of commitment fee hereunder may not
be changed without the written consent of the Borrower and the written consent
of each Bank affected thereby; the definition of Majority Banks may not be
amended without the written consent of all of the Banks; and Section 14 may not
be amended without the written consent of the Agent. No waiver shall extend to
or affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.
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<PAGE> 70
26. SEVERABILITY
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Credit Agreement in any jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
69
<PAGE> 71
REVOLVING CREDIT AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have duly executed this Revolving
Credit Agreement as a sealed instrument as of the date first set forth above.
BRIDGESTREET INTERNATIONAL INC.
By: /s/ Mark D. Gagne
-------------------------------------
Name: Mark D. Gagne
Title: Chief Financial Officer
FLEET NATIONAL BANK, INDIVIDUALLY AND AS
AGENT
By: /s/ Mary M. Barcus
-------------------------------------
Name: Mary M. Barcus
Title: Vice President
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<PAGE> 72
SCHEDULE I
<TABLE>
<CAPTION>
Name and Address of Bank Commitment Commitment %
- ------------------------ ---------- ------------
<S> <C> <C>
Fleet National Bank $10,000,000 100%
One Federal Street
Boston, MA 02110
</TABLE>
71
<PAGE> 1
EXHIBIT 10.15
REVOLVING CREDIT NOTE
$10,000,000 March 31, 1997
FOR VALUE RECEIVED, the undersigned BridgeStreet International Inc., a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
Fleet National Bank (the "Bank") at the Agent's Head Office (as defined in the
Credit Agreement referred to below) in immediately available funds:
(a) prior to or on the Revolving Credit Loan Maturity Date (as
defined in the Credit Agreement referred to below) the principal amount of Ten
Million Dollars ($10,000,000) or, if less, the aggregate unpaid principal amount
of Revolving Credit Loans advanced by the Bank to the Borrower pursuant to the
Revolving Credit Agreement, dated as of March 31, 1997 (as amended and in effect
from time to time, the "Credit Agreement"), among the Borrower, the Bank and
other parties thereto; and
(b) interest on the principal balance hereof from time to time
outstanding from the Closing Date under the Credit Agreement through and
including the maturity date hereof at the times and at the rates provided in the
Credit Agreement.
This Note evidences borrowings under and has been issued by the
Borrower in accordance with the terms of the Credit Agreement. The Bank and any
holder hereof is entitled to the benefits of the Credit Agreement, the Security
Documents and the other Loan Documents, and may enforce the agreements of the
Borrower contained therein, and any other hereof may exercise the respective
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the respective terms thereof. All capitalized terms used in this
Note and not otherwise defined herein shall have the same meanings herein as in
the Credit Agreement.
The Borrower irrevocably authorizes the Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Revolving Credit Loan or
at the time of receipt of any payment of principal of this Note, an appropriate
notation on a grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, reflecting the making of
such Revolving Credit Loan or (as the case may be) the receipt of such payment.
The outstanding amount of the Revolving Credit Loans set forth on the grid
attached to this Note, or the continuation of such grid, or any other similar
record, including computer records, maintained by the Bank with respect to any
Revolving Credit Loans shall be prima facie evidence of the principal amount
thereof owing and unpaid to the Bank, but the failure to record, or any error in
so recording, any such amount on any such grid, continuation or other record
shall not limit or otherwise affect the obligation of the Borrower hereunder or
under the Credit Agreement to make payments of principal of and interest on this
Note when due.
<PAGE> 2
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY
FEDERAL COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 19 OF THE CREDIT AGREEMENT.
THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has caused this Revolving Credit
Note to be signed in its corporate name and its corporate seal to be impressed
thereon by its duly authorized officer as of the day and year first above
written.
[Corporate Seal] BRIDGESTREET INTERNATIONAL INC.
/s/ Mark D. Gagne By: Mark D. Gagne
- -------------------------------- ---------------------------
Title: Chief Financial Officer
-3-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Temporary Corporate Housing, Inc.
Corporate Lodgings, Inc.
Exclusive Interim Properties, Inc.
HAI Acquisition Corp.
Temporary Housing Experts, Inc.
The Company owns all of the issued and outstanding
capital stock of each of its subsidiaries.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
To BridgeStreet Accommodations, Inc.
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) for BridgeStreet Accommodations,
Inc. dated April 10, 1997, for Temporary Corporate Housing Columbus, Inc. dated
February 28, 1997, for Corporate Lodgings, Inc. dated February 28, 1997, for
Exclusive Interim Properties, Ltd. dated March 11, 1997, and for Home Again,
Inc. dated March 21, 1997, included in or made part of this registration
statement.
/S/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 6, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BridgeStreet Accommodations, Inc.
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) for Temporary Housing Experts, Inc.,
dated March 21, 1997, included in or made part of this registration statement.
/S/ ARTHUR ANDERSEN LLP
Memphis, Tennessee
May 6, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> AUG-19-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,804
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,694
<PP&E> 0
<DEPRECIATION> 0
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0
0
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</TABLE>
