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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 2, 1998
BRIDGESTREET ACCOMMODATIONS, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 000-22843 04-3327773
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
30670 BAINBRIDGE ROAD, SOLON, OH 44139
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (440) 248-3005
N.A.
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS:
On March 2, 1998, BridgeStreet Accommodations, Inc. (the "Company") completed
the acquisition of all the issued and outstanding capital stock of Global Travel
Apartments, Inc. ("Global Travel"), a privately held corporation that provides
corporate lodging services in Toronto and surrounding areas. The transaction
consisted of the issuance of 139,000 shares of the Company's common stock, $0.01
par value per share (the "Common Stock") and the payment of $2.1 million in
cash.
The cash portion of the purchase price was funded from borrowings under the
Company's revolving credit agreement. The purchase price paid by the Company in
connection with the acquisition was determined as the result of negotiations
between the Company and Global Travel.
Global Travel was founded in 1977 and provides both short and long term living
accommodations primarily to large corporations. Glorbal Travel currently leases
and manages approximately 450 apartment units throughout Toronto and surrounding
areas.
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ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements:
In accordance with Item 7(a)(4) of Form 8-K, financial statements will be
filed by amendment to this Form 8-K no later than 60 days after March 17,
1998.
(b) Pro Forma Financial Information:
In accordance with Item 7(b) of form 8-K, the required pro forma financial
statements will be filed by amendment to this Form 8-K no later than 60 days
after March 17, 1998.
(c) Exhibits:
(2) - Purchase Agreement, dated March 2, 1998 among BridgeStreet
Accommodations, Inc. and Global Travel Apartments, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
BRIDGESTREET ACCOMMODATIONS, INC.
By:
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Mark D. Gagne, C.P.A.
Chief Financial Officer
Date: March 17, 1998
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "AGREEMENT") is entered into as of
this 2nd day of March 1998, by and among BridgeStreet Accommodations, Inc., a
Delaware corporation ("BRIDGESTREET"), BridgeStreet Canada, Inc., an Ontario
corporation (the "BUYER"), Global Hospitality Inc., an Ontario corporation
("GHI"), Thomas Vincent ("VINCENT") and the Vincent Family Trust (the "TRUST"
and together with Vincent and GHI, the "STOCKHOLDERS").
WHEREAS, Global Travel Apartments Inc., an Ontario corporation
("GLOBAL") operates a business consisting of providing lodging related services
including but not limited to providing temporary and permanent lodging
accommodations, acting as a lodging reservation agent, providing property
management services, providing real estate brokerage services and other various
services related to the lodging industry (the "BUSINESS");
WHEREAS, GTA Suites Inc., an Ontario corporation ("GTA" and together
with Global, the "COMPANIES" and each individually a "COMPANY") holds certain
leases for real property necessary for the operation of the Business;
WHEREAS, the Stockholders are the holders of record and beneficial
owners of the issued and outstanding shares of capital stock of the Companies as
set forth on SCHEDULE 1 attached hereto (the "SHARES"); and
WHEREAS, the Stockholders desire to sell and the Buyer desires to
purchase, on the terms and conditions set forth in this Agreement, all of the
Shares which as of the Closing Date (as defined below) will constitute all of
the issued and outstanding shares in the capital of each of the Companies.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties intending to be legally bound agree as follows:
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ARTICLE I
PURCHASE AND SALE OF SHARES
SECTION 1.01 PURCHASE AND SALE. Upon the terms and subject to the
conditions contained herein, the Stockholders shall sell and transfer, free and
clear of any claim, charge, community property interest, condition, equitable
interest, lien, option, pledge, security interest, right of first refusal or
restriction of any kind including, without limitation, any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership (each an "ENCUMBRANCE ") to the Buyer and the Buyer shall purchase, at
the Closing (as defined below), all of the Shares.
SECTION 1.02 PURCHASE PRICE; PAYMENT TERMS. In consideration for the
Shares the Buyer shall pay to the Stockholders an aggregate purchase price of
Five Million Two Hundred Fifty Thousand Dollars ($5,250,000) (the "PURCHASE
PRICE"), plus the Additional Purchase Price (as defined below). The Purchase
Price and Additional Purchase Price shall be payable in Canadian currency
(referenced hereinafter by the letters "CAN" following any designation of a cash
amount) and securities of the Buyer, determined as follows:
(a) CLOSING PAYMENT. At the Closing, the Buyer shall pay to the
Stockholders Three Million Dollars ($3,000,000 CAN) by certified or bank check
or wire transfer (the "CLOSING PAYMENT"). The Closing Payment shall be disbursed
to the Stockholders in accordance with SCHEDULE 1.02(A) attached hereto.
(b) EXCHANGEABLE SHARES. At the Closing, in satisfaction of the balance
of the Purchase Price ($2,250,000 CAN) the Buyer shall issue to the Stockholders
an aggregate of One Hundred Thirty-Nine Thousand One Hundred Sixty (139,160) of
its exchangeable shares (the "EXCHANGEABLE SHARES"), which such Exchangeable
Shares shall have such terms and conditions as are set forth on SCHEDULE
1.02(B)(I) attached hereto (the "SHARE CONDITIONS"). The Exchangeable Shares
shall be issued to the Stockholders in accordance with SCHEDULE 1.02(B)(II)
attached hereto and delivered to the Escrow Agent named in the Escrow Pledge
Agreement (as defined below).
(c) RESTRICTIONS ON TRANSFER. Subject to the terms and conditions of
the Escrow Pledge Agreement, for the period commencing on the Closing Date and
terminating on March 3, 1999, no Stockholder shall offer, sell, contract to
sell, make subject to any purchase option, exercise any rights with respect to
the registration of, transfer, assign, redeem, encumber or otherwise dispose of,
directly or indirectly any Exchangeable Shares or those shares of BridgeStreet
Stock (as defined below) exchangeable therefor (the "RESTRICTED SHARES"). The
certificates representing the Restricted Shares shall be held in escrow pursuant
to the terms and conditions of the Escrow Pledge Agreement.
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Nothing herein shall prohibit a Stockholder from exercising his or its exchange
rights pursuant to the Share Conditions during the periods set forth above.
SECTION 1.03 ADDITIONAL PURCHASE PRICE. Subject to the terms and
conditions contained herein, the Buyer shall pay to the Stockholders the sums
(in addition to the Purchase Price) set forth below (the "ADDITIONAL PURCHASE
PRICE"):
(a) BOOK VALUE PAYMENT. At the Closing, Buyer may elect to (i) pay to
the Stockholders at the Closing that amount equal to Global's estimated net
tangible book value as determined in accordance with United States generally
accepted accounting principles ("US GAAP") as of the Closing Date (the
"ESTIMATED TANGIBLE BOOK VALUE") or (ii) pay the amount equal to the Actual
Tangible Book Value (as defined below) in accordance with Section 1.04(a) below,
to the Stockholders on the Book Value Payment Date (as defined below. The
accounting policies set forth on SCHEDULE 1.03(A) (the "ACCOUNTING POLICIES")
shall govern, to the extent applicable, the calculation of the Estimated
Tangible Book Value. Such amount shall be payable by certified or bank check or
wire transfer (the "BOOK VALUE PAYMENT").
(b) EBIT PAYMENT. In the event that earnings before interest and taxes
("EBIT") of the Business as of the Closing Date (x) for the twelve months
commencing on March 1, 1998 and ending February 28, 1999 (as determined in
accordance with US GAAP) exceed One Million Dollars ($1,000,000 CAN), the Buyer
shall pay to the Stockholders, Five Dollars ($5.00 CAN) for each dollar in
excess of such One Million Dollars ($1,000,000 CAN) (the "INITIAL EBIT PAYMENT")
and (y) for the six months commencing on March 1, 1999 and ending on August 31,
1999 (as determined in accordance with US GAAP) exceed Six Hundred Fifty
Thousand Dollars ($650,000 CAN), the Buyer shall pay to the Stockholders Two
Dollars ($2.00) for every One Dollar ($1.00 CAN) in excess of such Six Hundred
Fifty Thousand Dollars ($650,000 CAN) up to a maximum of Four Hundred Thousand
Dollars ($400,000 CAN) (the "SECOND EBIT PAYMENT" and together with the Initial
EBIT Payment, the "EBIT PAYMENTS" and each individually an "EBIT PAYMENT"). For
the purposes of clarification only, the Business as of the Closing Date shall
not include (i) any businesses acquired by BridgeStreet or any affiliate thereof
subsequent to the Closing Date or (ii) any offices opened by BridgeStreet
subsequent to the Closing Date.
SECTION 1.04 DETERMINATION OF ADDITIONAL PURCHASE PRICE; ADJUSTMENTS.
The Additional Purchase Price shall be determined and adjusted in accordance
with the following:
(a) ACTUAL TANGIBLE BOOK VALUE. Within sixty (60) days after the
Closing Date, the Buyer and Vincent shall arrive at Global's actual net tangible
book value as of the Closing Date, determined in accordance with US GAAP (the
"ACTUAL TANGIBLE BOOK VALUE"), and, if they shall be unable to agree by such
time, Arthur Andersen shall make such determination. The Accounting
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Policies shall govern, to the extent applicable, the calculation of the Actual
Tangible Book Value. The determination of Arthur Andersen shall be final and
binding on the parties and the costs associated with such determination shall be
borne equally by the parties. If Buyer elected not to make the Book Value
Payment pursuant to Section 1.03(a) above, the amount equal to the Actual
Tangible Book Value shall be paid to the Stockholders in accordance with this
Section 1.04(a); HOWEVER, in the event that the Actual Tangible Book Value is
less than zero (0), the Stockholders shall pay to Buyer an amount equal to the
deficit. The Stockholders shall be jointly and severally liable for such
payment. To the extent that the Estimated Tangible Book Value was paid to the
Stockholders at the Closing pursuant to Section 1.03(a) above and such amount
exceeds the Actual Tangible Book Value, such excess shall be repaid by the
Stockholders to the Buyer. The Stockholders shall be jointly and severally
liable for such payment. To the extent that the Actual Tangible Book Value
exceeds the Estimated Book Value and such Estimated Book Value was paid to the
Stockholders at the Closing pursuant to Section 1.03(a) above, such excess shall
be paid by the Buyer to Vincent on behalf of the Stockholders. Any such payments
required to made pursuant to the provisions of this subsection shall be made in
Canadian currency and promptly by check or wire transfer, but in any event
within ten (10) days following the agreement on or determination of the Actual
Tangible Book Value ("THE BOOK VALUE PAYMENT DATE").
(b) DETERMINATION OF EBIT PAYMENTS. For purposes of calculating the
EBIT Payments (subject to the agreement of Vincent acting reasonably), if any,
the following shall apply, notwithstanding any US GAAP provision to the
contrary:
(i) The Buyer agrees to operate the Business in good faith, and
neither BridgeStreet nor the Buyer will make any material change
in the operation of the Business as it exists on the Closing
Date the purpose of which is to reduce the EBIT Payments, if
any, unless any such change is agreed to by Vincent and the
Buyer. Vincent and Buyer agree that Buyer shall employ a
Director of Finance and that Vincent shall use his best efforts
to hire such Director of Finance as soon as reasonably
practicable following the Closing Date, but in no event later
than June 1, 1998. Vincent and the Buyer agree that all costs
associated with the employment of such Director of Finance shall
be treated as an expense for the purposes of calculating EBIT.
(ii) The books and records of Global and the Business will be kept
separate and distinct from those subsidiaries or divisions of
BridgeStreet other than the Buyer. If Global is hereafter merged
or otherwise combined in any way into or with any other
business, or any other business, subsidiary or division of
BridgeStreet shall hereafter be added to or consolidated with
the Buyer, EBIT
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shall be calculated as if such merger, combination, addition or
consolidation had not been effected.
(iii) All reasonable charges incurred by BridgeStreet for services
provided or expenses incurred directly on behalf of Global,
including, without limitation, credit checking, legal and
accounting services, advertising and other general
administrative expenses, shall be deducted from EBIT.
(iv) All interest income in excess of interest expense incurred (as
defined in subsection (viii) below), all capital gains or losses
and all gains or losses arising from sales or exchanges of
Global's assets other than income or expense arising out of
operations in the ordinary course of business of Global shall be
deducted from (or added to, in the case of losses) EBIT.
(v) All gains from insurance proceeds relating to Global's assets
will be deducted from EBIT, except that proceeds of insurance
against physical damage to property will be included to the
extent, if any, that such proceeds do not exceed the deduction
taken in the period on account of the property damaged. Proceeds
of insurance in respect of lost business income due to business
interruption will be included in EBIT.
(vi) Appropriate adjustments will be made to insure that there is no
material or substantial upward or downward adjustment of income
during any period due to the acceleration or deferral of sales
or other income into a period other than that in which same
would normally accrue or occur, or due to the acceleration or
deferral of any losses, costs or expenses into any period other
than that in which same would normally accrue or occur.
(vii) During the period commencing on March 1, 1998 and ending on
August 31, 1999, a dollar reserve may be set up and deducted
from EBIT to cover the amount of any contingent liability which
is probable and estimateable including but not limited to any
such liability relating to or arising from any legal claim or
proceeding, together with a reasonable estimate of the cost of
litigating same. After such contingent liability has been fully
and finally resolved (with all appeals exhausted) any amounts
less than such dollar reserve shall be treated as additional
EBIT and payment therefor in accordance with Section 1.03(b)
above shall be made to Vincent on behalf of the Stockholders, as
promptly as practicable thereafter by company check or wire
transfer, at the option of the Buyer.
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(viii) Interest and other financing payments to BridgeStreet for
funds requested by Global (directly or indirectly on behalf of
the Business) and advanced by BridgeStreet in its sole
discretion will be deducted from EBIT to the extent of
BridgeStreet's costs of borrowing (not to exceed 8%), plus
BridgeStreet's reasonable cost of carrying any necessary
compensating balances, from time to time, and payments to
BridgeStreet for guarantees will be deducted from EBIT.
(ix) All gains or losses generated by Global that are not related to
the operation of the Business, shall be deducted from (or added
to, in the case of losses) EBIT.
(x) The amount of Canadian goods and services tax paid by Global and
for which it does not receive an input tax credit and all
provincial sales taxes shall be deducted from EBIT. No corporate
income or capital taxes will be deducted from EBIT.
(xi) The Accounting Policies shall govern, to the extent applicable,
the calculation of the EBIT Payment.
(b) TERMINATION OF VINCENT'S EMPLOYMENT. Notwithstanding anything
contained herein to the contrary, in the event that (i) Vincent's employment by
the Buyer pursuant to the terms and conditions of the Employment Agreement (as
defined below) is terminated for Cause (as defined in the Employment Agreement)
by the Buyer or voluntarily by Vincent on or prior to April 28, 1999, no EBIT
Payments shall be made to the Stockholders or (ii) Vincent's employment by the
Buyer pursuant to the terms and conditions of the Employment Agreement is
terminated for Cause by the Buyer or voluntarily by Vincent after April 28, 1999
but on or prior to August 31, 1999, no Second EBIT Payment shall be made to the
Stockholders. In the event that Vincent's employment by the Buyer pursuant to
the terms and conditions of the Employment Agreement is terminated without Cause
by Buyer or due to Vincent's death or Disability (as defined in the Employment
Agreement) at any time on or prior to August 31, 1999, the EBIT Payments, if
any, shall be made to the Stockholders in accordance with the provisions hereof.
SECTION 1.05 PAYMENT OF EBIT PAYMENTS; DISPUTES. The Buyer shall
deliver to Vincent an accounting of (i) the Initial EBIT Payment no later than
April 1, 1999 and (ii) the Second EBIT Payment no later than October 1, 1999 (in
either case an "EBIT PAYMENT NOTICE"). In the
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event Vincent disputes either such accounting, he shall deliver written notice
thereof (the "EBIT DISPUTE NOTICE") to the Buyer within ten (10) business days
of his receipt of the EBIT Payment Notice. If the Buyer and Vincent are unable
to agree on the amount of an EBIT Payment within ten (10) business days of
Buyer's receipt of the EBIT Dispute Notice, each of Buyer and Vincent shall
submit their respective calculation of such EBIT Payment to Arthur Andersen and
Arthur Andersen shall determine the amount of such EBIT Payment. The
determination of Arthur Andersen shall be final and binding on the parties and
the costs associated with such determination shall be borne by the party whose
calculation of such EBIT Payment differs most from Arthur Andersen's calculation
of such EBIT Payment. The Initial EBIT Payment, if any, required to be made
pursuant to the provisions of Section 1.04(b) shall be made by the Buyer to
Vincent on behalf of the Stockholders by check or wire transfer as Vincent may
direct no later than May 1, 1999 if Vincent fails to deliver an EBIT Dispute
Notice, or if Vincent delivers an EBIT Dispute Notice as promptly as practicable
but in any event within ten (10) business days following the agreement or
determination of the EBIT Payment. The Second EBIT Payment, if any, required to
be made pursuant to Section 1.04 (b) shall be made by Buyer to Vincent on behalf
of the Stockholders by check or wire transfer as Vincent may direct no later
than November 1, 1999 if Vincent fails to deliver an EBIT Dispute Notice, or if
Vincent delivers an EBIT Dispute Notice as promptly as practicable but in any
event within ten (10) business days following the agreement or determination of
the Second EBIT Payment. Vincent and his legal and financial advisors shall have
access to all financial records of Global material to the calculation of the
EBIT Payments during normal business hours upon at least 24 hours prior notice
to Buyer.
SECTION 1.06 POWER OF ATTORNEY. Each Stockholder does hereby appoint,
make and constitute Vincent as its true and lawful attorney, to act in its
absolute discretion for it, in its name, place and stead to calculate,
determine, receive and disburse the Additional Payments; if any, and to sign,
seal, acknowledge, execute and/or deliver any and all documents and related
instruments relating to or in connection with the Additional Payments, giving
and granting to Vincent full power to do and perform all and every act and thing
whatsoever requisite and necessary to be done with reference to the Additional
Payments as fully to all intent and purposes as each such Stockholder might or
could do if personally present at the doing thereof, with full power of
substitution and revocation, hereby ratifying and confirming all that Vincent
may or shall lawfully do or cause to be done by virtue of this power of
attorney. The power of attorney granted hereunder is coupled with an interest
and shall not be affected by the disability of a Stockholder and shall not
expire until all such matters relating to the Additional Payments have been
finally concluded or adjudicated in full.
SECTION 1.07 CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Blake, Cassels
& Graydon, 10:00 a.m. (Toronto time) on March 3, 1998 (the "CLOSING DATE") in
Toronto, Ontario.
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(a) STOCKHOLDERS' DELIVERIES. In connection with the Closing, the
Stockholders shall cause to be delivered to the Buyer the following (or receive
the Buyer's written waiver with respect thereto):
(i) Stock certificates evidencing the Shares, endorsed to transfer
in blank or with an executed blank stock power attached in a
form sufficient to permit the valid transfer of the Shares;
(ii) the original minute books (including the By-laws certified by
each Company's secretary), stock record books and corporate
seals, if any, of each Company;
(iii) A copy of the Articles of Incorporation of each Company, as
certified as of a recent date by each Company's Secretary; a
Certificate of Status, as certified by the Ministry of Consumer
and Commercial Relations for the Province of Ontario;
(iv) A copy of the Articles of Incorporation of GHI as certified as
of a recent date by the Secretary of GHI and a Certificate of
Status as certified by the Ministry of Consumer and Commercial
Relations for the Province of Ontario;
(v) A copy of the Trust Indenture or other governing documents of
the Trust, as certified as of a recent date by the Trustee
thereof;
(vi) A copy of resolutions of the Board of Directors of GHI
certified by GHI's Secretary as being complete and correct as of
the Closing Date and satisfactory in form and substance to Buyer
authorizing and approving the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby and the acts of the officers and employees of GHI in
carrying out the terms and provisions hereof;
(vii) Share transfer powers executed in blank with reference to the
Exchangeable Shares which such share transfer powers are to be
delivered to the Escrow Agent;
(viii) Consents dated effective as of the Closing Date, with respect
to the transactions contemplated by this Agreement, in a form
approved by Buyer in its reasonable discretion, to the extent
required under each Company's property leases, rental contracts
and any other material contracts;
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(ix) All Non-Competition and Non-Disclosure Agreements existing on
the Closing Date, from each of the employees of Global and GTA
(if any) identified on SCHEDULE 1.07(A)(IX);
(x) All of the books, data, documents, instruments and other records
relating to the Business;
(xi) A certificate confirming that no Stockholder is a non-resident
of Canada for purposes of the Income Tax Act (Canada);
(xii) Opinions of counsel to the Stockholders dated as of the
Closing Date and substantially in the forms of EXHIBIT A-1 and
EXHIBIT A-2 attached hereto;
(xiii) Resignations of the officers and directors of each Company;
(xiv) Evidence satisfactory in form and substance to the Buyer and
its counsel that those shares of capital stock of Global set
forth on SCHEDULE 1.07(A)(XIV) (the "REDEEMED SHARES") have been
redeemed in full by Global pursuant to documents of transfer
satisfactory in form and substance to Buyer and its counsel and
in accordance with applicable law on or prior to the Closing
Date;
(xv) A certified resolution of each of the directors of the
Companies approving the transfers of the Shares contemplated
hereby;
(xvi) Evidence satisfactory in form and substance to the Buyer and
its counsel that the real property described on SCHEDULE
1.07(A)(XVI)(the "TRANSFERRED REAL PROPERTY") has been
transferred by Global to a third party pursuant to documents of
transfer satisfactory in form and substance to the Buyer and its
counsel on or prior to the Closing Date;
(xvii) Evidence satisfactory in form and substance to Buyer and its
counsel that Executive Corporate Housing Calgary, Inc. ("GLOBAL
CALGARY") has changed its name to a name which does not include
the words "Global" or "Executive Corporate Housing" (the "NAME
CHANGE"); and
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(xviii) Such other certificates, documents and instruments as the
Buyer and its counsel shall reasonably require.
(b) BRIDGESTREET'S AND BUYER'S DELIVERIES. In connection with the
Closing, BridgeStreet and the Buyer shall deliver to the Stockholders the
following (or receive the Stockholders' written waiver with respect thereto):
(i) The Closing Payment;
(ii) The Book Value Payment (subject to the election of the Buyer as
set forth in Section 1.03(a) above);
(iii) A copy of the resolutions of the Board of Directors of each of
BridgeStreet and the Buyer certified by its Secretary or
Assistant Secretary as of the date hereof as being complete and
correct as of the Closing Date and the date hereof and
satisfactory in form and substance to the Stockholders,
authorizing and approving the execution, delivery and
performance of this Agreement, the reservation and issuance of
the Exchangeable Shares and shares of BridgeStreet Stock (as
defined below), as the case may be, and the other transactions
contemplated hereby and the acts of the officers and employees
of BridgeStreet and the Buyer in carrying out the terms and
provisions hereof;
(iv) The Share Certificates for the Exchangeable Shares which such
certificates are to be delivered into a temporary escrow pending
delivery to the Escrow Agent pursuant to the Escrow Pledge
Agreement;
(v) A copy of the Articles of Incorporation of the Buyer as
certified by the Secretary of the Buyer;
(vi) A copy of the Certificate of Incorporation of BridgeStreet as
certified as of a recent date by the Secretary of State of the
State of Delaware;
(vii) Opinions of counsel to Buyer and BridgeStreet dated as of the
Closing Date and substantially in the forms of EXHIBITS B-1 and
B-2 attached hereto; and
(viii) Such other certificates, documents and instruments as the
Stockholders and their counsel shall reasonably require.
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(c) JOINT DELIVERIES. In connection with the Closing, the named parties
shall cause to be delivered the following:
(i) An Employment Agreement between the Buyer and Vincent dated as
of the Closing Date, substantially in the form attached hereto
as EXHIBIT C (the "EMPLOYMENT AGREEMENT");
(ii) A Support Agreement among BridgeStreet, the Buyer and the
Stockholders dated as of the Closing Date, substantially in the
form attached hereto as EXHIBIT D (the "SUPPORT AGREEMENT");
(iii) An Escrow Pledge Agreement among the Buyer, the Stockholders
and the escrow agent dated as of the Closing Date, substantially
in the form attached hereto as EXHIBIT E (the "PLEDGE
AGREEMENT"); and
(iv) Such further documents, resolutions, certificates and
instruments as any party or its counsel reasonably requests to
facilitate the consummation of the transactions contemplated
hereby.
(d) TAXES. The Stockholders shall be responsible for all sales, use and
other transfer taxes (including bulk sales taxes, if any) imposed by federal,
state, provincial or local law with respect to the sale of the Shares to the
Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
The Stockholders jointly and severally represent and warrant to the
Buyer and BridgeStreet that the following representations and warranties are
true and correct (i) on the date hereof, except as expressly provided in the
Disclosure Schedule attached hereto (the "DISCLOSURE SCHEDULE") by specific
reference to a Section of this Article 2, and (ii) will be true and correct on
the Closing Date, except as expressly provided in the Disclosure Schedule, as
amended, by specific reference to a Section of this Article 2.
SECTION 2.01 ORGANIZATION AND AUTHORITY. Each of the Companies and GHI
is a corporation duly organized, validly existing, and in good standing under
the laws of the Province
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of Ontario, and has full corporate power and authority and all necessary
licenses and permits to conduct its business and own its property as now
conducted and owned. The Trust is a trust duly organized, validly existing, and
in good standing under the laws of the Province of Ontario and has full power
and authority to conduct its business and own its property as now conducted and
owned. Neither Company is or has been required to be qualified or licensed as an
extra-provincial or foreign corporation in any governmental jurisdiction. GHI
has full corporate power and authority, and the Trust, its Trustees and Vincent
have 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 the Board of Directors of GHI
and the trustees of the Trust, and no other corporate proceedings on the part of
GHI, and no other actions on the part of the Trust or Vincent, 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 Stockholders
and constitutes a legal, valid and binding obligation of the Stockholders
enforceable against each in accordance with its terms.
SECTION 2.02 CAPITALIZATION OF THE COMPANIES; NO SUBSIDIARIES. The
authorized capital stock of Global consists of (i) an unlimited number of Class
A Common shares, (ii) an unlimited number of Class B Common shares, (iii) an
unlimited number of Class C Common shares, (iv) an unlimited number of Class A
Preferred shares, (v) an unlimited number of Class B Preferred shares and (vi)
an unlimited number of Class C Preferred shares, of which the following shares
are issued and outstanding (i) 100 shares of Class A Common, (ii) 100 shares of
Class B Common, (iii) 625 shares of Class A Preferred, and (iv) 57,149 shares of
Class C Preferred (collectively, the "OUTSTANDING GLOBAL SHARES"). The
authorized capital stock of GTA consists of (i) an unlimited number of common
shares and (ii) an unlimited number of special shares of which 3 common shares
are issued and outstanding (the "OUTSTANDING GTA SHARES" and together with the
Outstanding Global Shares, the "OUTSTANDING SHARES"). The Outstanding Shares are
held by such persons and in such amounts as are set forth in SECTION 2.02 of the
Disclosure Schedule. Upon the redemption of the Redeemed Shares, the Shares held
by the Stockholders (i) comprise all of the issued and outstanding shares of
stock of each Company, (ii) are duly authorized, validly issued, fully paid and
non-assessable and are owned of record and beneficially by the Stockholders,
(iii) are held by the Stockholders free and clear of any Encumbrances, and (iv)
are not bound by or subject to any proxy, agreement, voting trust or other
restriction regarding the voting thereof. Neither Company has any authorized
class of capital stock other than those set forth above. The Companies neither
own nor have owned any shares of capital stock or other securities of, or any
other interest in, nor does either Company control or has it controlled,
directly or indirectly, any other corporation, association, joint venture,
partnership, or other business organization.
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SECTION 2.03 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 the acquisition of shares of any class of capital stock
of either Company, and neither Company has otherwise agreed to issue or sell any
shares of its capital stock or obligated itself to register or qualify for
distribution any shares of capital stock with the governing governmental
authorities. Neither Company is obligated directly, indirectly or contingently
to purchase any shares of capital stock except for the Redeemed Shares. The
cancellation of the shares of the capital of Ontario Vacations Corporation
("OVC") and Execupart City Centre Inc. ("ECCI") held by Granite Development
Corporation or Granite Capital Development Corporation (Northern and Eastern),
as the case may be, was validly effected under applicable law and such shares
were validly cancelled so that at the dates of amalgamation of such corporations
with Global, neither Granite Development Corporation nor Granite Development
Corporation (Northern and Eastern), nor their successors in interest, was a
shareholder of OVC or ECCI as the case may be, or became a shareholder of the
amalgamated entity. Global does not have any liability or obligation to either
Granite Development Corporation or Granite Capital Development Corporation
(Northern and Eastern), or their successors in interest.
SECTION 2.04 OWNERSHIP AND TITLE TO OUTSTANDING SHARES. Except for the
Redeemed Shares, the Stockholders are the sole registered and beneficial holders
of the Outstanding Shares. The Stockholders own all of their respective
Outstanding Shares free and clear of any Encumbrances and at the Closing will
transfer to the Buyer ownership and title to the Outstanding Shares (except for
the Redeemed Shares) free and clear of any Encumbrances.
SECTION 2.05 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 Stockholders shall not (i) contravene any provisions of Global's, GTA's
or GHI's Articles of Incorporation or By-Laws or the Trust's governing
instrument or agreement; (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 Global, GTA, or
any Stockholder is a party or by which it (or him) or its (or his) 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 Global, GTA or any Stockholder is bound or to which it (or he) is
subject; or (iv) violate any applicable law, rule, or regulation to which
Global, GTA or any Stockholder or any of its (or his) property is bound.
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SECTION 2.06 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES OR
OTHERS. No consent or approval of, or filing and expiration of a waiting period
or a period for disapproval by, any governmental authority or other third party
(including but not limited to any lenders of Global, GTA or the Stockholders),
is required for the transfer of control of Global or GTA or for the Stockholders
to consummate the transactions contemplated by this Agreement.
SECTION 2.07 FINANCIAL STATEMENTS.
(a) RESULTS OF OPERATION. Each Company's financial statements attached
as SCHEDULE 2.07 hereto (the "FINANCIAL STATEMENTS") fairly present the
financial position and results of operations of such Company as of and for their
respective dates, in conformity with Canadian GAAP applied on a consistent
basis, except as otherwise noted therein.
(b) INTERNAL CONTROLS. 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 Canadian 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.
SECTION 2.08 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
or reserved against the most recent balance sheet in the Financial Statements,
each Company (a) did not have as of November 30, 1997 (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 Canadian GAAP 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.
SECTION 2.09 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since
the Balance Sheet Date, neither Company has taken or agreed to take any action
that would obligate it 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; or entered into any transaction, agreement or commitment to manage a
Leased Premises (as defined below) or market the 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 Global's business or its
business prospects, or (ii) that, singly or in the aggregate, has resulted in or
is reasonably likely to have a material adverse effect on such Company's
business, assets, financial position, results of operations or prospects (a
"MATERIAL ADVERSE EFFECT");
(c) incurred any indebtedness for borrowed money, amended any existing
debt instruments or agreements to increase borrowings (except borrowings in the
ordinary course of business to finance working capital) 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 either such Company made in the ordinary course of business
which in the aggregate do not exceed $5,000.00 CAN);
(d) 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 $10,000.00 CAN and in the aggregate do not
exceed $20,000.00 CAN;
(e) 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;
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
the capital stock of such Company, or otherwise issued or acquired, directly or
indirectly, any shares of capital stock of such Company except for the Redeemed
Shares;
(g) paid any bonus compensation or fee to any officer, director,
stockholder, or employee of such Company or otherwise increased the compensation
paid or payable to any of the foregoing;
(h) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets;
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(i) contracted with or committed to any third party (A) to sell any
capital stock of such Company, (B) to sell any material assets of such Company
other than in the ordinary course of business, (C) to effect any merger,
consolidation, or other reorganization of such Company, or (D) to enter into any
agreement with respect thereto;
(j) entered into any leases of more than six months other than in the
ordinary course of business, or amended any existing leases of more than six
months;
(k) amended its Articles of Incorporation or By-laws;
(l) made any material write-up or write-down in the value of its
assets; or
(m) made any change in its accounting, policies or procedures.
SECTION 2.10 TITLE TO ASSETS. SECTION 2.10 of the Disclosure Schedule
describes fully all tangible and intangible assets (including but not limited to
accounts receivable) and personal property owned by each Company (the "ASSETS").
Each Company has good and clear record and marketable title to its respective
Assets, free and clear of all Encumbrances, except (a) as reflected in the
balance sheet contained 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. The Assets consist of all assets used in
or necessary to conduct the Business.
SECTION 2.11 Intentionally Omitted.
SECTION 2.12 INTELLECTUAL PROPERTY. Each Company owns free of any
Encumbrance, is licensed or, to the Stockholders' knowledge, otherwise has the
full and unrestricted right to use the trademarks, trade names and service marks
listed in SECTION 2.12 of the Disclosure Schedule, and all inventions,
copyrights, technology, know-how, trade secrets, customer lists, technology,
technical data, mask works, databases, computer software (including source and
object codes), web address sites and domain names and techniques used in the
Business (collectively, the "PROPRIETARY INFORMATION"). Neither 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. Neither 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 best of
the Stockholders' knowledge: (i) no other person has a right or license
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granted directly or indirectly by or through either Company to use any
Proprietary Information, (ii) none of the Proprietary Information is being
infringed by others, or is subject to any outstanding order, decree, judgment or
stipulation, (iii) 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 (iv) no proceeding has been filed or threatened
charging either Company with infringement of any patent, trademark, copyright,
or other proprietary right, nor is there any basis for any such proceeding.
SECTION 2.12 of the Disclosure Schedule lists all telephone numbers used by the
Business since January 1, 1996.
SECTION 2.13 OBLIGATIONS TO OR FROM AFFILIATES. SECTION 2.13 of the
Disclosure Schedule contains a true and complete description of each transaction
conducted or completed, in whole or in part, since January 1, 1997, or currently
proposed, between a Company on the one hand, and any other officer or director
of either Company, a Stockholder or any Affiliate (as defined below) of any such
person on the other hand (in each case an "INSIDER"). All transactions
heretofore between either Company and an Insider 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 most recent balance
sheet in the Financial Statements, there are no debts or other obligations of
either Company to, or to either Company from, an Insider. As used herein,
"AFFILIATE" of a designated person means (i) any stockholder, officer, director,
trustee or beneficiary of a Stockholder, (ii) any member of the immediate family
of such person or of any officer or director of either Company or (iii) any
entity in which such any person, entity or family member is an officer or owner
of more than five percent (5%) of beneficial interest in the outstanding equity
securities.
SECTION 2.14 MATERIAL CONTRACTS. SECTION 2.14 of the Disclosure
Schedule lists all material leases, contracts, instruments, agreements or
commitments relating to the conduct of the Business or to which either Company
is a party or by which its respective assets are bound (the "MATERIAL
CONTRACTS"). Each Company has delivered to the Buyer true and correct copies or
representative examples thereof 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:
(a) labor union contracts, together with a list of all labor unions
representing or actively and visibly attempting to represent employees of either
Company, to the knowledge of the Stockholders;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing or other
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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;
(c) bonus plans or arrangements maintained by either Company, together
with a list of employees eligible to participate;
(d) 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;
(e) written or oral agreements, understandings and arrangements of any
kind with any officer, director, employee, stockholder or agent of either
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 either Company
whose current salary rate is $25,000 CAN or more, and any bonuses paid or
payable to each such person for the fiscal years ending February 28, 1996, 1997
and 1998;
(f) 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;
(g) 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 either Company;
(h) other license agreements (as licensor or licensee);
(i) property, casualty, theft, directors and officers, and other forms
of insurance;
(j) bank accounts and safety deposit boxes identifying all authorized
signatories, together with a list of all effective powers of attorney granted by
either Company to anyone;
(k) agreements, contracts or other arrangements to which either Company
is a guarantor, surety or endorser;
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(l) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of each Company's
or a customer's requirements for a particular product from a single supplier or
to a single customer;
(m) contracts, agreements, commitments, arrangements or understandings
limiting the freedom of either Company from competing in any line of business or
with any person or entity;
(n) leases of real property (regardless of whether either Company is
the lessor or lessee); and
(o) contracts, agreements, instruments, arrangements or understandings
which have not been included in items (a) through (n) above which otherwise are
material to the Business including but not limited to any agreements or
commitments to manage a Leased Premises or market the Business.
All of the Material Contracts are in full force and effect. Each
Company and (to the knowledge of the Stockholders) 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. Neither Company has any present expectation or intention of not fully
performing all its obligations under any of the Material Contracts, and the
Stockholders have no knowledge of any breach or anticipated breach by any other
party to any of the Material Contracts. There exists no actual or, to the best
of the Stockholders' knowledge, threatened termination, cancellation or
limitation of the business relationship of either Company with any party to any
Material Contract.
SECTION 2.15 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
Stockholders, threatened against either Company or its respective 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. Neither Company is and, to the knowledge of
the Stockholders, has been subject to any orders, awards, fines, judgments,
decrees, or injunctions. The Stockholders do not know of any basis for any such
action, suits, or other form of proceeding or disputes or of any governmental
investigation relating to either Company or the Business.
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SECTION 2.16 TAXES.
For purposes of this Agreement the following terms shall have the
meanings set forth below:
(i) "COMPANY" includes any predecessor corporation of Global or GTA.
(ii) "TAX ACT" means the Income Tax Act (Canada).
(iii) "TAX RETURNS" means all returns, amended returns,
declarations, reports, estimates, information returns and
statements regarding Taxes which are or were filed or required
to be filed under applicable law, whether on a consolidated,
combined, unitary or individual basis.
(iv) "TAX" or "TAXES" means all taxes, charges, fees, levies,
imposts and other assessments, including all income, sales, use,
goods and services, value added, capital, capital gains,
alternative, net worth, transfer, profits, withholding, payroll,
employer health, excise, franchise, real property and personal
property taxes, and any other taxes, customs duties, fees,
assessments or similar charges in the nature of a tax including
Canada Pension Plan and provincial pension plan contributions,
unemployment insurance and employment insurance payments and
workers compensation premiums, together with any instalments
with respect thereto, and any interest, fines and penalties,
imposed by any governmental authority (including federal, state,
provincial, municipal and foreign governmental authorities), and
whether disputed or not.
(a) Each Company has prepared and filed on time with all appropriate
governmental bodies all Tax Returns of every nature required to be filed by or
on behalf of such Company in respect of any Taxes or in respect of any other
provision in any domestic or foreign federal, provincial, municipal, territorial
or other taxing statute for all fiscal periods ending prior to the date hereof
and will continue to do so in respect of any fiscal period ending on or before
the Closing Date. All such Tax Returns are true, correct and complete in all
material respects, and no material fact has been omitted therefrom. No extension
of time in which to file any such Tax Returns is in effect. All Taxes required
to be paid prior to the date hereof including all Taxes shown on all such
returns, or on any assessments or reassessments in respect of any such returns
have been paid in full. There are no liens on any of the assets of either
Company which arose in connection with any failure or asserted failure to pay
any Tax, other than liens for current Taxes not yet due and payable. Each
Company has made adequate provision in the Financial Statements for the payment
of all Taxes in respect of all fiscal periods ending on or before the Closing
Date.
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(b) There are no reassessments of either Company's Taxes that have been
issued and are outstanding and there are no outstanding issues which have been
raised and communicated to either Company by any governmental body for any
taxation year in respect of which a Tax Return of either Company has been
audited. No governmental body has challenged, disputed or questioned either
Company in respect of Taxes or of any returns, filings or other reports filed
under any statute providing for Taxes. Neither Company is negotiating any draft
assessment or reassessment with any governmental body. The Stockholders are not
aware of any contingent Tax liabilities or any grounds for an assessment or
reassessment of either Company, including, without limitation, unreported
benefits conferred on any shareholder of either Company, aggressive treatment of
income, expenses, credits or other claims for deduction under any return or
notice other than as disclosed in the Financial Statements. None of the
Companies nor any Stockholder has received any indication from any governmental
body that an assessment or reassessment of either Company is proposed in respect
of any Taxes, regardless of its merits. Neither Company has executed or filed
with any governmental body any agreement or waiver extending the period for
assessment, reassessment or collection of any Taxes.
(c) Each Company has withheld from each payment made to any of its
present or former employees, officers and directors, and to all persons who are
non-residents of Canada for the purposes of the Tax Act all amounts required by
law to be withheld, and furthermore, has remitted such withheld amounts within
the prescribed periods to the appropriate governmental body. Each Company has
remitted all Canada Pension Plan contributions, provincial pension plan
contributions, unemployment and employment insurance premiums, employer health
taxes and other Taxes payable by it in respect of its employees and has remitted
such amounts to the proper governmental body within the time required under the
applicable legislation. Each Company has charged, collected and remitted on a
timely basis all Taxes as required under applicable legislation on any sale,
supply or delivery whatsoever, made by such Company.
(d) Copies of (A) any Tax examinations, (B) extensions of statutory
limitations, (C) the federal, provincial, state and local income and capital Tax
Returns of each Company, and (D) correspondence between each Company and all
taxing authorities for its last three (3) taxation years will be furnished to
the Buyer prior to the Closing Date and such Tax Returns are true, correct and
complete.
(e) The provision for Taxes, if any, shown on the most recent balance
sheet contained in the Financial Statements is adequate to cover the aggregate
estimated liability of each Company arising out of facts or circumstances
occurring on or prior to the Balance Sheet Date for all Taxes.
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(f) At the Closing Date, for purposes of the Tax Act, each Company will
own depreciable property of the prescribed classes and having undepreciated
capital costs as set out in SECTION 2.16 of the Disclosure Schedule.
(g) Neither Company nor any of its subsidiaries will at any time be
deemed to have a capital gain pursuant to subsection 80.03(2) of the Tax Act as
a result of any transaction or event taking place in any taxation year ending on
or before the Closing Date.
(h) None of the Stockholders is a non-resident of Canada for purposes
of section 116 of the Tax Act.
(i) No Taxes will be payable by either Company which would not have
been payable but for the redemption of the Redeemed Shares or the transfer of
the Transferred Real Property by Global to GHI.
(j) The amalgamations of Global with OVC and ECCI did not result in
either Company being liable to pay any Taxes.
SECTION 2.17 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there
has not been: (a) any material adverse change in the business, assets or
prospects of either Company nor, to the Stockholders' knowledge, are any such
changes threatened, anticipated or contemplated; (b) any actual or, to the
Stockholders' 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 had or may
have a Material Adverse Effect; (c) any material and adverse pending or, to the
best of the Stockholders' knowledge, threatened, anticipated or contemplated
dispute of any kind with any material customer, supplier, source of financing,
employee, lessor, landlord, subtenant or licensee of either Company, or any
pending or, to the best of the Stockholders' 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, employee, lessor, landlord, subtenant or licensee of either
Company; or (d) any pending, or, to the best of the Stockholders' knowledge,
threatened, anticipated or contemplated occurrence or situation of any kind,
nature or description which is reasonably likely to have a Material Adverse
Effect except as has been disclosed in writing (including the schedules hereto)
to Buyer as reasonably likely to cause such a Material Adverse Effect.
SECTION 2.18 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1993
neither Company: (i) has made any contributions, payments or gifts of its
property to or for the private use
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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); (ii) 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; (iii) 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 (iv) has
made any contribution, or has reimbursed any political gift or contribution made
by any other person, to candidates for public office, whether federal,
provincial or local, where such contribution or reimbursement would be in
violation of applicable law.
SECTION 2.19 EMPLOYEE BENEFIT PLANS.
For purposes of this Section 2.19 the following terms shall have the
meanings set forth below:
(i) "EMPLOYEE PLAN" shall refer to any plan, program, policy,
practice, contract, agreement or other arrangement providing for
bonuses, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits
of any kind, whether formal or informal, funded or unfunded and
whether or not legally binding, including without limitation, any
plan which is or has been maintained, contributed to, or required
to be contributed to, by either Company for the benefit of any
"Employee" (as defined below), and pursuant to which either
Company has or may have any material liability, contingent or
otherwise.
(ii) "EMPLOYEE" shall mean any current, former, or retired employee,
officer, or director of either Company.
(iii) "EMPLOYEE AGREEMENT" shall refer to each employment, severance,
consulting or similar agreement or contract between either
Company and any Employee.
(a) EMPLOYEE PLANS; EMPLOYEE AGREEMENTS. SECTION 2.19(A) of the
Disclosure Schedule contains an accurate and complete list of each Employee Plan
and each Employee Agreement, together with a schedule of all liabilities,
whether or not accrued, under each such Employee Plan. Neither Company has any
plan or commitment, whether legally binding or not, to establish any new
Employee Plan or Employee Agreement, to modify any Employee Plan or Employee
Agreement (except to the extent required by law or to conform any such Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to the Buyer in writing, or as required by this
Agreement), or to enter into any Employee Plan or Employee Agreement, nor does
it have any intention or commitment to do any of the foregoing;
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(b) DOCUMENTATION PROVIDED TO BUYER. Each Company has provided to the
Buyer: (A) correct and complete copies of all documents embodying each Employee
Plan and each Employee Agreement including all amendments thereto and copies of
all forms of agreement and enrollment used therewith; (B) the most recent annual
actuarial valuations, if any, prepared for each Employee Plan; (C) the three
most recent annual reports, if any, required under applicable law in connection
with each Employee Plan or related trust; (D) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under applicable law with respect to each Employee Plan; (E) all
governmental determination letters and rulings (as to rulings, only those
received by or to the knowledge of the Stockholders, applicable to either
Company) relating to Employee Plans and copies of all applications and
correspondence to or from governmental authorities with respect to any Employee
Plan; (F) if the Employee Plan is funded, the most recent annual and periodic
accounting of Employee Plan assets; and (G) all communications material to any
Employee or Employees relating to any Employee Plan and any proposed Employee
Plans, in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any liability to either Company;
(c) COMPLIANCE; ACTIONS; DISCONTINUANCE OF EMPLOYEE PLANS; PENALTIES.
(A) Each Company has performed all obligations required to be performed by it
under each of its Employee Plans and each Employee Plan has been established and
maintained in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations; (B) there are no actions, suits
or claims pending, or, to the knowledge of the Stockholders threatened or
anticipated (other than routine claims for benefits) against any Employee Plan
or against the assets of any Employee Plan; (C) except as otherwise prohibited
by law, each Employee Plan can be amended, terminated or otherwise discontinued
after the Closing Date in accordance with its terms, without liability to either
Company or the Buyer (other than ordinary administration expenses typically
incurred in a termination event); (D) there are no inquiries or proceedings
pending or, to the knowledge of the Stockholders threatened by any governmental
authority with respect to any Employee Plan; and (E) neither Company is subject
to any penalty or tax with respect to any Employee Plan;
(d) PENSION PLANS. Neither Company does now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan;
(e) MULTIEMPLOYER PLANS. At no time has either Company contributed to
or been requested to contribute to any Multiemployer Plan;
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(f) POST-EMPLOYMENT; RETIREMENT BENEFITS. No Employee Plan provides, or
has any liability to provide, life insurance, medical or other employee benefits
to any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and neither Company has
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
would be provided with life insurance, medical or other employee welfare
benefits upon their retirement or termination of employment, except to the
extent required by statute;
(g) EFFECTS OF TRANSACTIONS. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Employee Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee;
SECTION 2.20 LABOR MATTERS. A true and complete list of all of Global
and GTA 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 the Buyer by Global. There are no
material disputes, employee grievances or disciplinary actions pending or, to
the best of the Stockholders' knowledge, threatened by or between either 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 either Company is pending or, to the best of the
Stockholders' knowledge, threatened. Neither Company has had any material union
activity nor any material labor trouble of any kind, nature or description at
any time heretofore. All personnel manuals of each Company are listed in SECTION
2.20 of the Disclosure Schedule and true and complete copies thereof have been
provided to the Buyer. To the Stockholders' knowledge no Employee or consultant
of either Company shall have the right to receive from such Company a severance
payment or other payment in the nature thereof in the event his or her
employment is terminated by such Company following the Closing Date, whether
such right arises as a matter of contract, past policy or understanding, or
otherwise, except as required by the Employment Standards Act (Ontario) or the
common law of Ontario.
SECTION 2.21 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,
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termination, cancellation, or forfeiture. To the knowledge of the Stockholders,
all such material Permits are in full force and effect, and no suspension or
cancellation of any of them is threatened, and no material Permits will be
adversely affected by the consummation of this Agreement. Neither 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, and there are no
proceedings pending or, to the Stockholders' knowledge, threatened, nor has
either Company received notice, regarding any such failure.
SECTION 2.22 ENVIRONMENTAL MATTERS.
For the purposes of this Section 2.22 the following terms shall have
the meanings set forth below:
(i) "ENVIRONMENTAL LAW" means a law, rule or regulation of any
governmental body in respect of the natural environment,
public or occupational health or safety, and the
manufacture, importation, handling, transportation,,
storage, disposal and treatment of Hazardous Substances.
(ii) "HAZARDOUS SUBSTANCE" means any solid, liquid, gas, odor,
heat, sound, vibration, radiation or combination of them
that may impair the natural environment, injure or damage
property or plant or animal life or harm or impair the
health of any individual, and includes, without limitation,
any substance specifically regulated by any Environmental
Law and any waste.
(a) To the Stockholders' knowledge, each Company is in material
compliance with all applicable existing Environmental Laws. To the Stockholders'
knowledge, there is no alleged or 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 either Company arising out of, based on or
resulting from (i) the presence or release into the environment by either
Company of any Hazardous Substance at any location used in connection with the
Business by a Company, whether or not owned by a Company or (ii) any violation
or alleged violation of any Environmental Law by either Company, which alleged
or potential liability, singly or in the aggregate, would have a Material
Adverse Effect.
SECTION 2.23 LEASES. SECTION 2.23 of the Disclosure Schedule sets
forth, as of a recent date specified therein (or on an attachment thereto), the
number and a brief description of the units of real property (i) leased by
either Company from property owners, property managers or others, listing for
each such unit the lease term (beginning and ending dates), any extension
option, rent expense, lessor name and unit location, and (ii) leased by either
Company to its clients or others, listing for each such unit the lease term
(beginning and ending dates), lessee name, rental rate and
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unit location. (Each such leased unit is referred to herein as "LEASED
PREMISES".) Except as set forth in SECTION 2.23 of the Disclosure Schedule, each
lease covering a Leased Premises is in full force and effect and has not been
amended and is in good standing and to the knowledge of the Stockholders there
is no dispute thereunder (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). 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 (exclusive of any
claims or other interests or rights any third party or parties may have against
the lessor under any such lease). Except as set forth in SECTION 2.23 of the
Disclosure Schedule, 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 by either Company or, to the knowledge of the
Stockholders, by any third party, nor has either Company done any act whereby
the unexpired residue of the term is or may be in any way charged or encumbered
in accordance with the terms of any such Leases. There is no pending or, to the
knowledge of the Stockholders, threatened or contemplated condemnation or
similar proceedings or assessments affecting any of the Leased Premises. SECTION
2.23 of the Disclosure Schedule also sets forth a list of all security deposits
with respect to all Leased Premises (i) paid to either Company and (ii) paid by
either Company to others.
SECTION 2.24 CORPORATE RECORDS. The books of account, minute books,
stock record books, and other records of each Company, all of which have been
made available to Buyer, are complete and correct and have been maintained in
accordance with commercially reasonable business practices, including the
maintenance of an adequate system of internal controls. The minute books of each
Company contain all necessary signatures and contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of each Company, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. As of the Closing Date, all of the books and
records referenced in this Section 2.24 will be in the possession of each
Company.
SECTION 2.25 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
material defects in construction or design, sound and properly functioning,
usable and not obsolete, and, are 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 be in such compliance, in
the aggregate, would not have a Material Adverse Effect.
SECTION 2.26 ACCOUNTS RECEIVABLE. All of the accounts receivable of
each Company
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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. SECTION
2.26 of the Disclosure Schedule sets forth a list of all accounts receivable of
each Company on the Closing Date and except as designated thereon, all accounts
receivable are valid and enforceable claims subject to no set off or
counterclaim and will be collectible in the normal course of business. Neither
Company has accounts or loans receivable from any of its directors, officers or
employees (other than loans receivable from employees in the ordinary course of
business which in the aggregate do not exceed $5,000.00 CAN).
SECTION 2.27 CHARTER DOCUMENTS. Each Company has heretofore delivered
to the Buyer copies of its Articles of Incorporation and By-laws, both as
amended to date, and a list of the officers and directors of each Company in
office, all as certified by its respective Secretary.
SECTION 2.28 BROKERS. No broker, finder, or investment banker is
entitled to any brokerage, finder's, or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of either Company.
SECTION 2.29 PRIVATE COMPANY. Each Company is a "private company" as
defined in the Securities Act (Ontario).
SECTION 2.30 SECURITIES REPRESENTATIONS. The Stockholders have received
and had a reasonable opportunity to review a copy of the Prospectus, as amended
or supplemented to date, that is a part of BridgeStreet's Registration Statement
on Form S-4 (File N. 333-39187), prior to the date of this Agreement.
SECTION 2.31 DISCLOSURE OF ALL MATERIAL MATTERS. To the knowledge of
the Stockholders, 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 Companies to the Buyer 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 the Buyer
or on behalf of the Companies 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.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BRIDGESTREET AND THE BUYER
BridgeStreet and the Buyer jointly and severally represent and warrant
to the Stockholders that the following representations and warranties were true
and correct as of the Closing Date and are true and correct as of the date
hereof:
SECTION 3.01 ORGANIZATION AND AUTHORITY. Each of BridgeStreet and the
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware and of the Province of Ontario,
respectively, 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 (including Ontario)
where the failure to be so qualified would, in the aggregate, have a material
adverse effect on the business or financial condition of BridgeStreet or the
Buyer. Each of BridgeStreet and the Buyer 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 of each of BridgeStreet and the Buyer, and
no other corporate proceedings on the part of either of them 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 the Buyer and constitutes a valid and binding
agreement, enforceable against it in accordance with its terms.
SECTION 3.02 CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement by each of BridgeStreet and the Buyer
nor the consummation of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or By-laws of BridgeStreet or the Buyer, (ii) require any consent,
approval, authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, (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 the Buyer is a party or by which BridgeStreet or the Buyer or
any assets of either of them may be bound (other than under BridgeStreet's
Revolving Credit Agreement dated as of March 31, 1997, for which a waiver has
been sought); or (iv) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to BridgeStreet or the Buyer or any assets of
either of them.
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SECTION 3.03 LITIGATION. There are no actions, suits, causes of action,
claims, litigation, arbitration, administrative hearings or other form of
proceedings or disputes pending, or, threatened, against, involving or affecting
BridgeStreet or the Buyer, 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
either BridgeStreet or the Buyer from consummating the transactions contemplated
hereby.
SECTION 3.04 REGISTRATION OF THE BRIDGESTREET STOCK. The shares of
BridgeStreet's common stock par value $.01 per share (the "BRIDGESTREET STOCK")
to be issued in exchange for the Exchangeable Shares have been registered under
BridgeStreet's Registration Statement on Form S-4 (File No. 333-39187) (the
"REGISTRATION STATEMENT") in compliance with the U.S. Securities Act of 1933, as
amended (the "SECURITIES ACT"). The Registration Statement has been declared
effective by the Securities and Exchange Commission. Based in part upon the
representations of the Stockholders set forth in Section 2.30 of this Agreement,
after the BridgeStreet Stock to be issued in exchange for the Exchangeable
Shares has been issued under the terms of the Support Agreement, it may be
freely sold by the Stockholders (subject to the restrictions referenced in
Section 1.02(c) above) without registration under the Securities Act, subject to
the Stockholders' compliance with Rule 145 under the Securities Act. The shares
of BridgeStreet Stock to be issued in exchange for the Exchangeable Shares will
be, when so issued in accordance with the terms of the Support Agreement, duly
authorized, validly issued, fully paid and non-assessable. BridgeStreet
previously has delivered (or caused to be delivered) to each Stockholder (or to
their counsel) a copy of the Prospectus forming a part of the Registration
Statement (the "PROSPECTUS").
SECTION 3.05 SEC FILINGS. The information contained in the Prospectus,
and the information contained in BridgeStreet's periodic and other reports filed
under the U.S. Securities Exchange Act of 1934, as amended (subject to the
provisions hereof) as of their respective dates, does not contain any statement
that, at the time and in the light of the circumstances under which it was made,
was false or misleading with respect to any material fact, or that omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein not false or misleading.
SECTION 3.06 EXCHANGEABLE SHARES. The Exchangeable Shares to be issued
as a portion of the Purchase Price hereunder will be, when so issued in
accordance with the terms of this Agreement, duly authorized, validly issued,
fully paid and non-assessable. There are no other Exchangeable Shares issued or
reserved for issuance except pursuant to this Agreement.
SECTION 3.07 BRIDGESTREET SECURITIES. No order ceasing or suspending
trading in BridgeStreet Stock or prohibiting the sale of BridgeStreet Stock has
been issued and no proceedings
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for this purpose have been instituted, are pending, contemplated or threatened
to the best knowledge of Buyer and BridgeStreet. The BridgeStreet Stock to be
issued in exchange for the Exchangeable Shares will be duly authorized for
trading on the facilities of the Nasdaq National Market ("Nasdaq") and
BridgeStreet has no present intention to de-quote such BridgeStreet Stock from
Nasdaq.
SECTION 3.08 ONTARIO SECURITYHOLDERS. Based solely on the shareholder
register dated as of February 23, 1998 provided to Buyer by American Securities
Transfer & Trust, Inc., transfer agent to BridgeStreet, (i) residents of Ontario
are not the registered holders of more than ten percent (10%) of the outstanding
shares of BridgeStreet Stock and (ii) the number of Ontario residents who are
registered holders of the outstanding shares of BridgeStreet Stock is not more
than ten percent (10%) of the total number of registered holders of the
outstanding shares of BridgeStreet Stock.
ARTICLE IV
COVENANTS
SECTION 4.01 COVENANTS OF THE STOCKHOLDERS BRIDGESTREET AND BUYER. The
Stockholders BridgeStreet and Buyer covenant and agree to:
(a) cause the delivery at the Closing of the Employment Agreement,
Support Agreement and Escrow Pledge Agreement;
(b) execute and deliver such other instruments and take such other
actions, and the Stockholders shall cause each Company to execute and deliver
such instruments and take such action, as may be reasonably required in order to
carry out the intent of this Agreement; and
(c) use his/its best efforts on and after the date hereof to obtain, by
instruments satisfactory in form and substance to the other parties, consents
effective as of the Closing Date from all third parties where consents are
required in order to consummate the transactions contemplated hereby.
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SECTION 4.02 ADDITIONAL COVENANTS OF THE STOCKHOLDERS. The Stockholders
covenant and agree with BridgeStreet and the Buyer as follows:
(a) NON-COMPETITION. For a period of five (5) years from the Closing
Date no Stockholder shall 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 that at any time
during such period is in any way competitive with the business of BridgeStreet
and its operating subsidiaries (collectively, the "BRIDGESTREET GROUP"), except
ownership of shares in a publicly-traded corporation or publicly-traded mutual
fund or publicly-traded limited partnership in which no Stockholder participates
and in which no Stockholder's aggregate ownership interest is five percent (5%)
or more.
The geographic scope of the limitations set forth in this Section 8
shall extend to every city, state, province or country in which any member of
the BridgeStreet Group does business (as defined below) or in good faith in the
near future intends to commence doing business, during the term set forth above.
For the purposes of this Section 4.02, the business of the BridgeStreet
Group shall mean providing lodging related services including but not limited to
providing temporary and permanent lodging accommodations, acting as a lodging
reservation agent, providing property management services, providing real estate
brokerage services and other various services related to the lodging industry.
Such business may be hereinafter referred to as the "BRIDGESTREET BUSINESS".
If any restriction set forth in this Section 8 is found by a court of
competent jurisdiction to be unenforceable because it extends for too long a
period of time or over too great a range of activities or is too broad a
geographic area, such restriction shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area for which it may
be enforceable.
(b) NON-SOLICITATION. During the period described in Section 4.02(a)
above, no Stockholder shall, directly or indirectly, whether on behalf of
himself or itself or anyone else: (i) solicit or accept orders for a product or
service produced or offered in connection with the BridgeStreet Business by any
member of the BridgeStreet Group from any present or past customer of any member
of the BridgeStreet Group; (ii) induce any such customer to reduce such
customer's purchases from the BridgeStreet Group (including without limitation
leases of accommodations); (iii) use for his or its benefit or disclose the name
and/or requirements of any such customer to any
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other person or persons, natural or corporate; (iv) enter into any competitive
leasing arrangements relating to properties containing units leased by the
BridgeStreet Group; or (v) solicit any of the BridgeStreet Group's employees to
leave the employ of the BridgeStreet Group or hire anyone who is an employee of
the BridgeStreet Group.
(c) PROPRIETARY INFORMATION. No Stockholder will at any time hereafter
knowingly disclose to or use for the benefit of anyone else any of the
technology, know-how, trade secrets and techniques used in the Business (the
"PROPRIETARY INFORMATION") or the BridgeStreet Proprietary Information (as
defined below) without BridgeStreet's prior written authorization in each
particular case, unless compelled to disclose any such information by judicial
or administrative process, or, in the opinion of legal counsel, by other
requirements of law, and will not disclose the same to any person. Each
Stockholder also will at all times hereafter take all action and sign and
deliver all instruments as BridgeStreet or the Buyer may require to vest or
perfect in BridgeStreet or the Buyer all right, title and interest in and to the
Proprietary Information or the BridgeStreet Proprietary Information, or to
assist BridgeStreet or the Buyer in filing or prosecuting any application, in
its or his name or any other name, in any country, for any patent, trademark,
service mark, copyright or other or similar 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, all costs for which will be paid by BridgeStreet or the
Buyer. Each Stockholder further agrees that it or he has disclosed to
BridgeStreet in writing all proprietary information conceived or developed in
whole or in part by it or him relating to either Company 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
Stockholders 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.
SECTION 4.03 COVENANTS OF BRIDGESTREET, THE BUYER AND THE STOCKHOLDERS.
BridgeStreet, the Buyer, Vincent and the Stockholders covenant and agree as
follows:
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(a) 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.
(b) PUBLIC ANNOUNCEMENTS. All public announcements, notices or other
communications made by Global, GTA or the Stockholders 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
BridgeStreet, except as may be required by law.
(c) NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the
"NOTIFYING PARTY") shall give prompt notice to the other parties of 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 or him or her
hereunder.
SECTION 4.04 COVENANTS OF BRIDGESTREET. BridgeStreet covenants and
agrees to use its best efforts, at its sole cost and expense, to ensure that the
shares of BridgeStreet Stock delivered to the Stockholders upon the exchange of
the Exchangeable Shares are, at such time, listed and tradeable on the Nasdaq or
such other system or exchange or market on which such stock is listed and traded
at such date. In the event that a holder of Exchangeable Shares wishes to
dispose of underlying BridgeStreet Stock, it shall so advise BridgeStreet. If at
that time the sale of such BridgeStreet Stock through the Nasdaq (or other U.S.
exchange or market on which such BridgeStreet Stock is then listed) would not be
permitted under Ontario Securities Commission ("OSC") Rule 72-5A or under
proposed OSC Rule 72-501 or otherwise, BridgeStreet shall, at its cost and
expense, use its best efforts to obtain a discretionary order from the OSC
permitting such trade.
ARTICLE V
CONDITIONS OF CLOSING
SECTION 5.01 CONDITIONS TO BRIDGESTREET'S AND THE BUYER'S OBLIGATION TO
CLOSE. The obligation of BridgeStreet and the Buyer to sign and consummate the
transactions contemplated by this Agreement are subject to the satisfaction or
(if applicable) the waiver of the Buyer and BridgeStreet in writing, in whole or
in part, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Stockholders in Article 2 of this Agreement must be
accurate in all material respects as of the date of this Agreement.
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(b) COVENANTS AND OTHER OBLIGATIONS. Each of the covenants and
obligations that each Stockholder is required to perform or to comply with
pursuant to this Agreement at or prior to the Closing Date must have been duly
performed and complied with in all material respects.
(c) MINIMUM FINANCIAL REQUIREMENTS. The Buyer at its sole discretion
shall have satisfied itself of the fulfillment (or projected fulfillment) by the
Business as of the Closing Date and as of the date hereof of the following
financial requirements:
<TABLE>
<S> <C>
Minimum Tangible Net Book Value of Assets .................................... $0
Minimum Pro Forma EBIT for the Fiscal Year Ending
February 28, 1998.............................................................. $700,000 CAN
Minimum Pro Forma EBIT
for the Fiscal Year Ending February 28, 1999................................... $1,000,000 CAN
Minimum Projected Revenues for the Fiscal Year Ending
February 28, 1998.............................................................. $13,000,000 CAN
Minimum Projected Revenues for the Fiscal Year Ending
February 28, 1999.............................................................. $15,000,000 CAN
</TABLE>
(d) EXECUTION AND DELIVERY OF DOCUMENTS. The Stockholders shall have
executed (or had executed) and delivered to the Buyer the items required to be
delivered pursuant to Sections 1.07(a)(i) through (xvii) and Sections 1.07(c)(i)
through (iv).
(e) CONSENTS. All consents or approvals required for the consummation
of the transactions contemplated by this Agreement by any third party shall have
been obtained and be duly effective.
(f) BOARD OF DIRECTORS APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the Board of Directors of
BridgeStreet.
(g) GOVERNMENT APPROVALS. All approvals, consents, permits or licenses
from any federal, state or local governmental agency or body required in
connection with the consummation of the transactions contemplated hereby shall
have been duly obtained to the extent that such approvals, consent, permits or
licenses can be legally obtained.
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(h) NO INJUNCTIONS; NO OTHER APPROVALS. No preliminary or permanent
injunctive or other order shall have been issued by any federal or state
regulatory body or agency prohibiting the consummation of the transactions
contemplated hereby; no governmental agency or body shall have instituted or
notified any party of its intention to institute or threaten to institute any
suit, action, or legal or administrative proceeding to restrain, enjoin or
otherwise question the validity or legality of the transactions contemplated by
this Agreement, and no order or decree so restraining or enjoining such
transactions shall be in effect; and no other consent or approval required for
the consummation of the transactions contemplated hereby by any third party
shall not have been obtained and be duly effective.
(i) REDEMPTION OF CAPITAL STOCK. Global shall have consummated the
redemption of the Redeemed Shares.
(j) TRANSFERRED REAL PROPERTY. Global shall have consummated the
transfer of the Transferred Real Property.
(k) NAME CHANGE. Global Calgary shall have completed the Name Change.
SECTION 5.02 CONDITIONS TO STOCKHOLDERS' OBLIGATION TO CLOSE. The
obligation of the Stockholders to sign and consummate the transactions
contemplated by this Agreement are subject to the satisfaction or the waiver of
the Stockholders in writing, in whole or in part, of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by BridgeStreet and the Buyer in Article 3 of this Agreement
must be accurate in all material respects as of the date of this Agreement.
(b) COVENANTS AND OTHER OBLIGATIONS. Each of the covenants and
obligations that each of BridgeStreet and the Buyer is required to perform or to
comply with pursuant to this Agreement at or prior to the Closing Date must have
been duly performed and complied with in all material respects.
(c) EXECUTION AND DELIVERY OF DOCUMENTS. The Buyer shall have delivered
to the Stockholders the Closing Payment and the items required to be delivered
pursuant to Sections 1.07(b)(i) through (viii) and Sections 1.07(c)(i) through
(iv).
(d) GOVERNMENT APPROVALS. All approvals, consents, permits or licenses
from any federal, state or local governmental agency or body required in
connection with the consummation of the transactions contemplated hereby shall
have been obtained.
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(e) NO INJUNCTIONS; NO OTHER APPROVALS. No preliminary or permanent
injunctive or other order shall have been issued by any federal or state
regulatory body or agency prohibiting the consummation of the transactions
contemplated hereby; no governmental agency or body shall have instituted or
notified any party of its intention to institute or threaten to institute any
suit, action, or legal or administrative proceeding to restrain, enjoin or
otherwise question the validity or legality of the transactions contemplated by
this Agreement, and no order or decree so restraining or enjoining such
transactions shall be in effect; and no other consent or approval required for
the consummation of the transactions contemplated hereby by any third party
shall not have been obtained and be duly effective.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
SECTION 6.01 SURVIVAL. The representations, warranties, covenants and
agreements set forth in this Agreement shall be deemed to have survived the
Closing Date notwithstanding any contrary terms of this Agreement, and whenever
such representations, warranties, covenants and agreements of this Agreement are
referred to in this Article 6, the text of the same as set forth in all other
Articles of this Agreement 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.
SECTION 6.02 AGREEMENTS TO INDEMNIFY.
For purposes of this Article VI, the following terms shall have the
meanings set forth below:
(i) "CLAIMS" means assertions of indemnification obligations
hereunder made by an Indemnified Party.
(ii) "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.
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<PAGE> 38
(iii) "INDEMNIFYING PARTIES" means the parties obligated to provide
indemnification under this Section 6.02.
(iv) "INDEMNIFIED PARTY" means a party entitled to indemnification
under this Section 6.02.
(a) STOCKHOLDERS AS INDEMNIFYING PARTIES. On the terms and subject to
the limitations set forth in this Agreement, the Stockholders shall jointly and
severally indemnify, defend and hold BridgeStreet and the Buyer and their
respective subsidiaries, officers, directors, employees (other than an
indemnifying party employed by Buyer) and agents harmless from, against and in
respect of any and all Damages incurred by them arising from or in connection
with any breach of any representation, warranty, covenant or agreement made by
the Stockholders in this Agreement.
(b) BRIDGESTREET AND BUYER AS INDEMNIFYING PARTIES. On the terms and
subject to the limitations set forth in this Agreement, BridgeStreet and the
Buyer shall indemnify, defend and hold the Stockholders and their trustees,
officers, directors, employees and agents harmless from, against and in respect
of any and all Damages incurred by them arising from or in connection with any
breach of any representation, warranty, covenant or agreement made by either or
both of BridgeStreet and the Buyer in this Agreement.
SECTION 6.03 LIMITATIONS OF INDEMNITY OBLIGATIONS. The indemnity
obligations of the Indemnifying Parties with respect to the representations and
warranties contained in this Agreement, shall expire on the third anniversary of
the Closing; PROVIDED, HOWEVER, that the Stockholders' representations and
warranties contained in Sections 2.04, 2.19 and 2.22 hereof shall continue in
effect for the full period of any applicable statute of limitations period, and
the representations and warranties regarding Taxes (contained in Section 2.16
hereof) shall remain in effect until all claims for Taxes due by or on account
of each Company for any period ending on or before the Closing Date have been
settled and any statute of limitations period with respect to such Taxes has
expired; and PROVIDED, FURTHER, that indemnity obligations with respect to
Claims timely asserted by an Indemnified Party in the manner provided in this
Agreement shall continue until such Claims are finally resolved and discharged.
Notwithstanding anything contained herein to the contrary (i) with respect to
any breach involving fraud on the part of the Indemnifying Party or any other
remedies to which the Indemnified Parties may otherwise be entitled at law or in
equity, the remedies of the Indemnified Parties provided herein shall be in
addition to, and not in lieu of, any other remedies to which the Indemnified
Parties are entitled; and (ii) the aggregate of all claims for indemnification
by the Buyer and BridgeStreet against the Stockholders or by the Stockholders
against BridgeStreet and the Buyer shall not exceed the sum equal to the
Purchase Price and Additional Purchase Price.
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<PAGE> 39
SECTION 6.04 NOTICE OF CLAIM. An Indemnified Party shall promptly
notify the Indemnifying Party in writing of any Claim asserted by a third person
that might give rise to any indemnity obligation 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 Indemnifying Party of his or its
obligation to indemnify under this Article 6, but as a result of any such
failure, the Indemnifying Party shall not be liable to any Indemnified Party for
the amount of actual damages caused solely by such failure. Together with or
following such notice, one or more of the Indemnified Parties shall deliver to
the Indemnifying Party copies of all notices and documents received by such
Indemnified Parties relating to the Third Party Claim (including court papers).
SECTION 6.05 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The
Indemnifying Party shall have the right (without prejudice to the right of any
Indemnified Party to participate at his or its own expense through counsel of
its own choosing) to defend against any Third Party Claim at his or its expense
and through counsel of his or its own choosing and to control such defense if he
or it gives written notice of his or its intention to do so within 15 business
days of his or its receipt of notice of such Third Party Claim. The Indemnified
Parties shall cooperate fully in the defense of such Third Party Claim and shall
make available to the Indemnifying Party or his or its counsel all pertinent
information under their control relating thereto. Any Indemnified Party shall
have the right to elect to settle any Third Party Claim for which it has
asserted a timely Claim against an Indemnifying Party; provided, however, that
the Indemnifying Party shall not have any indemnification obligation with
respect to any monetary payment to any third party required by such settlement
unless it or he or she shall have consented thereto. An Indemnifying Party shall
have the right to elect to settle any Third Party Claim with respect to which an
Indemnified Party has asserted a timely Claim, subject to the consent of the
Indemnified Party; PROVIDED, HOWEVER, that if no such consent is given within 15
business days of being requested to do so, the Indemnified Party shall, at its
expense, assume the defense of such Third Party Claim and regardless of the
outcome of such matter, the Indemnified Party's liability hereunder shall be
limited to the amount of any such proposed settlement. The foregoing provisions
notwithstanding, (a) in no event may an Indemnifying Party adjust, compromise or
settle any Third Party Claim unless such adjustment, compromise or settlement
unconditionally releases the Indemnified Parties from all liability, and (b) in
no event shall the Indemnifying Party defend any Third Party Claim which, if
adversely determined, would (in the sole judgment of the Indemnified Party)
materially impair the financial condition, business or prospects of one of the
Indemnified Parties. In addition, the Indemnifying Party may not adjust,
compromise or settle any Third Party Claim if such adjustment, compromise or
settlement affects the absolute and sole right of the Indemnified Parties to own
or operate the Business.
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<PAGE> 40
SECTION 6.06 SETOFF. In the event that BridgeStreet or the Buyer shall
be entitled to receive indemnification pursuant to this Article 6, in addition
to any other remedies that BridgeStreet or the Buyer may have at law or in
equity, BridgeStreet or the Buyer, shall be entitled to (i) withhold any and all
further payments due or to become due to any Stockholder including, without
limitation, any such payments due or to become due under Section 1.03 hereof and
any payments due or to become due pursuant to Vincent's employment arrangements
with the Buyer (to the extent allowed by law and to the extent consented to in
advance and in writing by Vincent) until settlement or other conclusion of the
Claim, (ii) exercise the rights and remedies under the Escrow Pledge Agreement,
and (iii) offset any Damages to BridgeStreet or the Buyer resulting from such
event against any and all payments thereafter due or to become due to the
Stockholders.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 RESTRICTIVE LEGENDS. Certificates representing the
Exchangeable Shares and shares of BridgeStreet Stock to be issued hereunder upon
the exchange of the Exchangeable Shares will bear legends requiring compliance
with the requirements of Rule 145 and any other requirements of, the Securities
Act, if applicable, and the resale restrictions set forth in Section 1.02(c)
above, in connection with any resale of such shares.
SECTION 7.02 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and either (i) delivered by hand, (ii) made by facsimile
transmission, (iii) sent by recognized overnight courier, or (iv) sent by
registered mail (or in the U.S.A. by certified mail, return receipt requested)
postage prepaid.
If to BridgeStreet or the Buyer:
BridgeStreet Accommodations, Inc.
30670 Bainbridge Road
Solon, OH 44139
Attn: Mark D. Gagne
Facsimile telephone number: (440) 542-0317
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<PAGE> 41
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
Attn: James E. Dawson, Esq.
Facsimile telephone number: (617) 973-9748
If to the Stockholders:
Global Hospitality Inc.
The Vincent Family TNA
c/o Global Travel Apartments, Inc.
1000 Young Street, Suite 103
Toronto, Ontario M4W2V2
CANADA
Attn: Mr. Thomas Vincent
Facsimile telephone number:
with a copy to:
Fraser & Beatty
1 First Canadian Place
Toronto, Ontario M5X 1B2
CANADA
Attn: Robert Thomson, Esq.
Facsimile telephone number: (416) 863-4592
All notices, requests, consents and other communications hereunder shall be
deemed to have been properly given (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by facsimile transmission, at the time that receipt thereof has
been acknowledged by electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iv) if sent by registered or certified
mail, on the fifth business day following the day such mailing is made.
SECTION 7.03 ENTIRE AGREEMENT. It is agreed that all offers, statements
of intent, understandings and agreements heretofore had among the parties or
their affiliates respecting this
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<PAGE> 42
transaction are merged in this Agreement (including the Schedules and Exhibits
thereto), which fully and completely expresses the agreement of the parties, and
that there are no representations, warranties or agreements, except as
specifically set forth or referred to in this Agreement.
SECTION 7.04 WAIVER. No waiver of any breach of any provision of this
Agreement shall constitute a waiver of any other breach of that or any other
provision hereof.
SECTION 7.05 GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the internal laws of the Province of Ontario and the laws of Canada
applicable therein, without giving effect to the conflict of law principles
thereof. Buyer and BridgeStreet (i) agree that any action or proceeding arising
out of or relating to this Agreement may be instituted in the Courts of Ontario,
(ii) waive any objection which each may have now or hereafter to the venue of
any action or proceeding, (iii) irrevocably submit to the jurisdiction of the
said courts and the enforcement of any judgments or orders thereof and (iv) not
to seek, and hereby waive, any review of the merits of any such judgments or
orders by the courts of any other jurisdiction. Further, BridgeStreet hereby
appoints the Buyer at its registered office in Ontario as BridgeStreet's
attorney for service of process.
SECTION 7.06 SEVERABILITY. In the event that any court of competent
jurisdiction shall finally determine that any provision, or any portion thereof,
contained in this Agreement shall be void or unenforceable in any respect, then
such provision shall be deemed limited to the extent that such court determines
it enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine any such provision, or portion thereof,
wholly unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect. Notwithstanding the foregoing, in
the event that any provision of Section 4.02(a) related to a time period or
areas of restriction shall be declared by a court of competent jurisdiction to
exceed the maximum time period or area such court deems reasonable and
enforceable, said time period or areas of restriction shall be deemed to become
and hereafter shall be the maximum time period or areas which such court deems
reasonable and enforceable.
SECTION 7.07 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.
SECTION 7.08 PUBLICITY. None of the parties hereto shall issue any
press release or otherwise make any public statement with respect to the
execution of, or the transactions contemplated by, this Agreement without the
prior written consent of the others, except as may be required by law.
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<PAGE> 43
SECTION 7.09 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by different parties hereto on separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
SECTION 7.10 EXPENSES. All costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses; provided that Global costs and expenses, including all
brokerage, investment banking, legal and accounting fees, shall be borne by the
Stockholders.
SECTION 7.11 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, expressed 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.
IN WITNESS WHEREOF, the Buyer, BridgeStreet and the Stockholders have
executed this Agreement as of the day and year first above written.
BRIDGESTREET ACCOMMODATIONS, INC.
By:
-------------------------
Name: Mark D. Gagne
Title: Chief Financial Officer
BRIDGESTREET CANADA, INC.
By:
-------------------------
Name: Mark D. Gagne
Title: Treasurer
GLOBAL HOSPITALITY INC.
By:
-------------------------
Its:
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<PAGE> 44
VINCENT FAMILY TRUST
By:
--------------------------
Thomas Vincent, in his capacity as Trustee
with liability limited to the assets of the Trust
By:
--------------------------
James Parsons, in his capacity as Trustee
with liability limited to the assets of the Trust
- ------------------------------
Thomas Vincent
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<PAGE> 45
SCHEDULE 1
Shares
<TABLE>
<CAPTION>
STOCKHOLDERS SHARES
- ------------ ------
<S> <C>
Global Hospitality Inc. 100 Class B Common Shares
Vincent Family Trust 100 Class A Common Shares
</TABLE>
GTA Shares
<TABLE>
<CAPTION>
STOCKHOLDERS SHARES
- ------------ ------
<S> <C>
Thomas Vincent 3
</TABLE>
<PAGE> 46
SCHEDULE 1.02(a)
Closing Payment
<TABLE>
<CAPTION>
STOCKHOLDER CASH PAYMENT
- ----------- ------------
<S> <C>
Global Hospitality Inc. (100 Class B Shares) $ 10 CAN
Vincent Family Trust (100 Class B Shares) $ 2,499,990 CAN
Thomas Vincent (3 GTA shares) $ 500,000 CAN
TOTAL $ 3,000,000 CAN
</TABLE>
<PAGE> 47
SCHEDULE 1.02(b)(i)
Terms of Exchangeable Shares
Attached to this Schedule are copies of the Share Conditions of
BridgeStreet Canada, Inc. (the "Buyer") and a form of Support Agreement which
together govern the attributes of the Exchangeable Shares of Buyer and the
rights and obligations of the parties in connection therewith. In summary terms:
1. Holders of Exchangeable Shares of Buyer (the "Exchangeable
Shares") are entitled to dividends equivalent to those paid on
the Common Stock (the "Common Stock") of BridgeStreet
Accommodations, Inc. ("BridgeStreet"), when and if such dividends
are declared and paid by BridgeStreet.
2. Exchangeable Shares are non-voting.
3. The Exchangeable Shares are to be automatically exchanged
one-for-one for Common Stock immediately prior to the
liquidation, dissolution or winding-up of BridgeStreet, thus
ensuring economic equivalence on liquidation. In addition, the
Exchangeable Shares are to be automatically exchanged one-for-one
for Common Stock immediately prior to the liquidation,
dissolution or winding-up of Buyer.
4. The Exchangeable Shares are redeemable at the option of the
holder at any time at an aggregate redemption price equal to the
value of the underlying BridgeStreet Common Stock. Payment of the
redemption price shall be satisfied by delivery of that number of
shares of Common Stock (the "Conversion Shares") equal to the
number of Exchangeable Shares redeemed.
5. The Exchangeable Shares will be redeemable by Buyer at any time
on or after the fifth anniversary of the Closing Date.
6. A holder of Exchangeable Shares exercising its right of
redemption hereunder acknowledges the grant to BridgeStreet of an
overriding call right on the Exchangeable Shares which call right
is to be exercised by delivering such holder the Conversion
Shares in exchange for such Exchangeable Shares.
The above Summary is subject to the Share conditions and, in the case
of a conflict, the terms of the Share Conditions shall prevail.
<PAGE> 48
SCHEDULE 1.02(b)(ii)
Exchangeable Shares
<TABLE>
<CAPTION>
STOCKHOLDERS NUMBER OF EXCHANGEABLE SHARES
- ------------ -----------------------------
<S> <C>
Global Hospitality Inc. 0
Vincent Family Trust 139,160
Thomas Vincent 0
</TABLE>
<PAGE> 49
SCHEDULE 1.03(a)
Accounting Policies
REVENUE RECOGNITION
SHORT TERM SERVICED ACCOMMODATIONS ("SHORT TERM") - Revenues are
recognized on a pro rata basis over the term of the lease with the guest.
ESTATE AGENCY/RELOCATION SERVICES ("LONG TERM AND "SHORT TERM") -
Commissions are recognized at the time of the booking of the let up to the break
option date.
CORPORATE LEASE MANAGEMENT - Revenues are recognized on a pro rata
basis over the term of the management agreement.
RENTAL DISCOUNTS RELATED TO COMPANY LEASES
Commissions received from the landlord related to leases in the name of
the Company are amortized over the life of the lease, as a reduction in rent
expense, regardless of when the commission is paid to the Company.
DEPRECIATION
Capital assets are depreciated over their useful lives as follows:
Furniture and Fittings - 5 years on a straight-line basis.
Office Equipment - 5 years on a straight-line basis. Computers
and Technology Equipment - 3 years on a straight-line basis.
Motor Vehicles - 5 years on a straight-line basis.
Leasehold Improvements - Over the remaining life of the lease
not to exceed 7 years on a straight-line basis.
RESERVE FOR DOUBTFUL ACCOUNTS RECEIVABLE
Accounts receivable 90 days or greater are reserved against at 100%.
DILAPIDATION RESERVE
The Company records a dilapidation reserve on leases recorded in their
name to cover anticipated expenses expected to be incurred at the termination of
the lease. Anticipated expenses include routine maintenance such as carpet and
furniture cleaning as well as general repairs and replacement such as painting,
carpet replacement, wallpapering, etc.
<PAGE> 50
SCHEDULE 1.07(a)(ix)
Existing Non-Competition and Non-Disclosure Agreements
Ferris W. Breen Controller
Sherri D. Donell Administrative Assistant
Cathy Huffman General Manager
Robert Metivier Marketing Manager
Karen Payne Accounting clerk
Jim Pearce Sales Manager
Gwyneth Storr Internet Research Assistant
Thomas Vincent President
<PAGE> 51
SCHEDULE 1.07(a)(xiv)
Redeemed Shares
<TABLE>
<CAPTION>
HOLDER: SHARES:
- ------- -------
<S> <C>
Global Hospitality Inc. 625 Class A Preferred Shares
D.W. Hartford 1,851 Class C Preferred Shares
Thomas Vincent 57,149 Class C Preferred Shares
</TABLE>
<PAGE> 52
SCHEDULE 1.07(a)(xvi)
Transferred Real Property
2563 Addingham, Oakville, Ontario Canada
2549 Addingham, Oakville, Ontario Canada
2555 Addingham, Oakville, Ontario Canada
2559 Addingham, Oakville, Ontario Canada
2561 Addingham, Oakville, Ontario Canada
<PAGE> 53
SCHEDULE 2.07
Financial Statements
