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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to section 13 or 15(d) of the Securities Exchange
- Act of 1934 for the fiscal year ended December 31, 1999 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
_______________
COMMISSION FILE NUMBER 000-22843
---------------------------------------------------------
BridgeStreet Accommodations, Inc.
(Exact name of registrant as specified in its charter)
DE 04-332773
(State or other jurisdiction (I.R.S. Employer Identification No.)
- --------------------------------- ----------------------------------
of incorporation or organization)
2242 Pinnacle Parkway, Twinsburg, OH 44087
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (330) 405-6060
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
Common Stock, $.01 par value per share American Stock Exchange
- -------------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
As of March 1, 2000, 8,005,037 shares of common stock were outstanding, of which
6,927,063 shares were held of record by non-affiliates. The aggregate market
value of shares held by non-affiliates was approximately $12,122,360 based on
the closing price per share of such common stock on such date as reported by the
American Stock Exchange.
Documents Incorporated by Reference
Portions of BridgeStreet Accommodations, Inc.'s definitive Proxy
Statement for its special or annual meeting of stockholders, which BridgeStreet
may file within 120 days after the end of its fiscal year ended December 31,
1999, may be incorporated by reference into Part III hereof as provided therein.
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PART I
ITEM 1. BUSINESS
OVERVIEW
BridgeStreet Accommodations, Inc. ("BridgeStreet" or the "Company") is a
leading provider of flexible accommodation services in metropolitan markets
located domestically in the Midwest, Mid-Atlantic, Southwest and Western regions
of the United States, and internationally in locations throughout the United
Kingdom and Toronto, Canada. The Company offers high-quality, fully-furnished
apartments, townhouses, and condominiums (collectively, "accommodations"),
primarily for individuals traveling on business and company executives
relocating to new communities who require lodging for one week to several
months.
As a provider of flexible accommodation services, BridgeStreet leases
substantially all of its accommodations on a short-term basis from property
managers, and then rents them to its clients. This enables the Company to (i)
adjust the quantity, mix and location of its accommodations as client needs
dictate and local economic conditions warrant, (ii) expand and enter new markets
without the costs and lead times associated with investing in "bricks and
mortar" and (iii) avoid the fixed costs associated with ownership or long-term
leasing of real estate. The Company also leases a substantial amount of the
furniture for its accommodations on a short-term basis from furniture rental
companies. These furniture leasing arrangements enable BridgeStreet to maintain
well appointed, modern and attractive accommodations, upgrade and replace
furniture as needed, and satisfy specific furnishing requests. BridgeStreet's
leasing strategy distinguishes it from fixed-location lodging providers, such as
all-suite or extended-stay hotels, that own their lodging facilities and
furnishings or lease them on a long-term basis.
Traditionally, travelers on extended trips have stayed in hotels and
motels. The Company believes that business travelers on extended trips
increasingly desire alternatives to conventional hotel and motel rooms, which
typically lack the spaciousness and amenities of home. The Company believes that
this has been an important factor in the recent growth in the extended-stay
segment of the lodging industry. Participants in this segment include flexible
accommodation service providers, all-suite hotels and extended-stay hotels.
By providing flexible accommodation services, the Company can satisfy
client requests for accommodations in a variety of locations and neighborhoods,
as well as requests for accommodations of specific types and sizes. The
substantial majority of the Company's accommodations are located within
high-quality property complexes that typically feature, among other things,
in-unit washers and dryers, dedicated parking and access to fitness facilities
(including, in many cases, pools, saunas and tennis courts). In addition, at a
guest's request, BridgeStreet can upgrade an accommodation by providing
specialized amenities such as office furniture, fax machines and computers. The
Company's accommodations generally are priced competitively with all-suite and
upscale extended-stay hotel rooms even though, on average, the Company believes
its accommodations are substantially larger.
BridgeStreet was founded in August 1996. It acquired operations in the
first quarter of 1997 by the merger (the "Combination") of five regional
providers of flexible accommodation services (collectively, the "Founding
Companies"). Subsequently, the Company acquired the businesses of ten additional
providers during 1997 and 1998.
RECENT DEVELOPMENTS
On March 23, 2000, the Company entered into a definitive merger agreement
(the "Agreement") providing for the acquisition of the Company by MeriStar
Hotels & Resorts, Inc. ("MMH").
Under the terms of the Agreement, each outstanding share of the Company
would be exchanged for $1.50 in cash, plus 0.5 share of MMH common stock. Total
consideration per share of the Company is estimated to be approximately $3.00.
The Agreement is subject to approval of the stockholders of the Company and
other customary conditions.
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GROWTH STRATEGY
The Company plans to achieve its goal of becoming a leading international
provider of flexible accommodation services through a national operating
strategy designed to increase local market share, internal revenue growth, cost
efficiencies and profitability. Key elements of the Company's business strategy
include:
Local Market Share: The Company has offices in many markets that offer
significant opportunity for expansion. In the fourth quarter of 1999, the
Company trained all general managers and a group of corporate officers on new
sales techniques. The Company is currently training local sales account
representatives on these techniques, and instituting procedures to make this
sales process part of the overall Company culture. With a better trained sales
force, the Company believes that it will be in a better position to penetrate
local markets and increase its market share.
Growth Through National Accounts: The Company believes that there is
substantial growth potential in national accounts. The Company's current
customers include a significant number of large national companies who utilize
the Company's services in a limited, but loyal, manner. The Company plans to
maximize sales to these existing corporate clients and to obtain new clients
through a national sales and marketing program which promotes the BridgeStreet
brand and highlights the Company's expanding national and international network,
as well as the Company's ability to serve as a central point of contact on all
issues. Many of the Company's clients are Fortune 2000 companies with
significant national and international employee lodging requirements.
Growth Through Network Partner Relationships: The Company has developed a
Network Partner relationship with flexible accommodation service providers in
the United States and in 22 countries worldwide. Through Network Partner
agreements, the Company has expanded the number of locations where it can better
serve its clients needs. In certain additional markets, the Company intends to
enter into Network Partner agreements with one or more leading local or regional
flexible accommodation service providers having the size and quality of
operations suitable for serving the Company's client base. Generally, these
companies are managed by successful entrepreneurs and are of sufficient size to
provide the basis for the Company's future expansion within the new markets. The
Company also evaluates certain qualitative characteristics of Network Partner
candidates, including their reputations in their respective geographic regions,
the size and strength of their customer bases, the quality and experience levels
of their operational management and their operating histories. Network Partner
agreements in new markets will enable BridgeStreet to (i) gain local or regional
market share rapidly, (ii) increase sales to existing clients by meeting their
needs for accommodations in other regions, (iii) direct sales from the local
network partner to BridgeStreet's national network, (iv) establish the
BridgeStreet brand name in new regions and enhance its nationwide recognition
and (v) earn referral fee income for providing reservation agent services.
The Company contracts with Network Partners to provide flexible
accommodations to BridgeStreet clients in the cities served by these Network
Partners. The Company utilizes its Global Sales Center to book reservations into
cities served by Network Partners. Network Partner agreements expand the
Company's geographical presence without the investment required for an
acquisition or start-up costs of a new operation. The Company believes that
increasing the number of cities served through Network Partner agreements is a
cost-effective approach to achieving incremental revenue growth from existing
clients.
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ACCOMMODATIONS AND SERVICES
Accommodations
BridgeStreet offers high-quality, fully-furnished one-, two- and
three-bedroom accommodations that, together with the specialized amenities
offered by the Company, are intended to provide guests with a "home away from
home." BridgeStreet selects its accommodations based on location, general
condition and basic amenities, with the goal of providing accommodations that
meet each guest's particular needs. As a flexible accommodation services
provider, the Company can satisfy client requests for accommodations in a
variety of locations and neighborhoods, including requests for proximity to an
office, school or area attraction, as well as requests for accommodations of
specific types and sizes. The substantial majority of the Company's
accommodations are located within high-quality property complexes that typically
feature in-unit washers and dryers, dedicated parking, and access to fitness
facilities (including, in many cases, pools, saunas and tennis courts). Standard
furnishings typically include, among other things, cable televisions, answering
machines and clock radios. BridgeStreet also is able to customize its
accommodations at a guest's request with items such as office furniture, fax
machines and computers.
The Company's accommodations generally are priced competitively with
all-suite or upscale extended-stay hotel rooms even though, on average, the
Company believes its accommodations are substantially larger. Based on data from
Smith Travel Research, all suite or upscale extended-stay hotel rooms average
400 square feet in size and charge an average daily rate of $98.40 compared to
the Company's accommodations which average 720 square feet and charge an average
daily rate of $69.71. The Company believes it generally is able to price its
accommodations competitively due to (i) the high quality of its accommodations,
(ii) its relatively low operating cost structure and (iii) its ability to lease
accommodations in accordance with demand and leave unfavorable markets quickly.
The length of a guest's stay can range from a few nights to a few years, with
the typical stay ranging from 30 to 45 days.
Corporate Client Services
The Company believes that it provides valuable, cost-effective services to
its corporate clients, many of which have human resource directors, relocation
managers or training directors with significant, national employee lodging
requirements. In particular, the Company aims to relieve its clients of the
administrative burden often associated with relocating employees and/or
providing them with temporary housing. In addition to providing clients with a
diverse range of accommodation types and sizes in a variety of locations, the
Company believes it satisfies its clients' needs for (i) a high degree of local
market knowledge, (ii) special accommodation requests (such as last-minute
location switches), (iii) accurate, customized billing options and (iv) other
ancillary services such as assistance in locating permanent housing and school
systems. The Company believes that existing and potential clients will
increasingly turn to outside providers such as BridgeStreet to satisfy their
employee lodging requirements as their awareness of BridgeStreet and the
flexible accommodation services industry increases.
Guest Services
The Company strives to provide the highest quality of customer service by
coordinating in advance all aspects of a guest's lodging experience. Prior to a
guest's arrival, BridgeStreet arranges to have keys and directions sent to the
guest, along with other information relating to the guest's interests (as
discerned through prior communications), such as literature on local golf
courses or other forms of entertainment. The Company typically makes at least
one follow-up telephone call to the guest before the guest moves in to ensure
that the guest will feel comfortable in his or her new accommodation from the
moment of arrival. Immediately prior to the guest's arrival, BridgeStreet's
professional housekeeping staff cleans and inventories the accommodation to
ensure that it is prepared for the guest.
During a guest's stay, BridgeStreet keeps in touch with the guest to
confirm that he or she is satisfied, and to encourage the guest to call whenever
the Company can be of assistance. In addition, the Company maintains a
representative in each city in which it operates to be responsive to guests'
needs. The Company's guest services department offers guests comprehensive
information services before and during their stays to help guests acclimate
themselves to their new surroundings. A guest can obtain information concerning,
among other things, shopping, local schools and area playgrounds, by placing a
single telephone call. Similarly, the guest services department can identify
local entertainment and cultural events, and help coordinate automobile rentals,
grocery shopping and other miscellaneous activities.
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BridgeStreet also oversees the moving-out process. The guest is asked
either to mail the keys to the Company in a self-addressed, stamped envelope or
simply to leave the keys in the accommodation. The guest also is asked to
complete a guest satisfaction survey evaluating his or her stay, and is
encouraged to contact the Company whenever the guest needs accommodations in
other locations where BridgeStreet provides services. The guest's evaluation
form is thoroughly reviewed, and (if applicable) a copy is sent to the corporate
client. BridgeStreet's historic guest evaluations indicate that it meets or
exceeds guest expectations 98% of the time.
CLIENT BASE
BridgeStreet's diverse customer base centers on Fortune 2000 corporations,
professional firms and travel-wise individuals. In 1999, Andersen Worldwide
accounted for approximately 10.4%, or $9.9 million, of the Company's
consolidated revenues. No other client accounted for more than 5% of
consolidated revenues during 1999. In 1998, Andersen Worldwide accounted for
approximately 11.4%, or $11 million, of the Company's consolidated revenues. No
other client accounted for more than 5% of the Company's consolidated revenues
during 1998. In 1997, no client accounted for more than 5% of the Company's 1997
consolidated revenues.
SALES AND MARKETING
BridgeStreet focuses primarily on business-to-business selling. At the
local level, each of the Company's operating subsidiaries has corporate account
specialists that call on local companies (including local branches of regional
or national companies) to solicit business. The account specialist focuses his
or her efforts on the key decision makers at each company responsible for
establishing and administering travel and accommodation policies, typically
human resource directors, relocation managers or training directors. By
aggressively pursuing relationships with potential clients and expanding
services to existing clients, BridgeStreet seeks to become each client's primary
or sole provider of flexible accommodation services nationwide. BridgeStreet
operates a global sales office located at the corporate headquarters to market
its nationwide capabilities to its local corporate clients.
The Company tailors its marketing strategy to the needs of particular
clients. For example, BridgeStreet markets itself to a corporation with
relocating employees by focusing on its ability to situate large families in
apartments with three or more bedrooms, its access to accommodations in both
metropolitan and suburban settings, and its access to accommodations that allow
pets. In contrast, when marketing to a potential corporate client having
consultants in need of short-term housing, the Company emphasizes its flexible
lease terms and its ability to customize an accommodation with amenities such as
office equipment (including computers), additional telephone lines and other
work-related items.
The Company intends to continue an advertising program designed to enhance
the BridgeStreet name both inside and outside the flexible accommodation
services industry and broaden its client base. In addition, the Company promotes
its brand name by advertising in trade publications, Chamber of Commerce
listings, local visitor magazines and telephone directories and the Internet,
and through periodic direct mail campaigns.
INTERNET STRATEGY
The Company expanded its Web site in 1998 to include a complete listing of
all cities served, an expanded list of services and amenities provided, virtual
tours of actual apartment accommodations, and a mechanism to obtain feedback
from visitors to its Web site. In 1999, the Company continued to improve its
Internet presence and utilized the Internet to supplement traditional marketing
strategies and to better serve its customers. During the latter part of 1999,
the Company also began the development of a custom extranet, linked with the
intranet of one of its major customers. This extranet provides the Company with
the ability to efficiently serve the needs of the guests employed by this major
customer. It also provides a convenient method for those potential guests to
research and select their accommodations. The Company intends to offer its
customized extranet technology to other major customers.
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LEASING ARRANGEMENTS
BridgeStreet leases substantially all of its accommodations through
flexible, short-term leasing arrangements in order to match its supply of
accommodations with client demand. The Company believes that its flexible
leasing strategy allows it to react to changes in market demand for particular
geographic locations and types of accommodations. The Company's strategy also
provides it flexibility to address cyclicality in particular markets. During the
12 months ended December 31, 1999, BridgeStreet's average occupancy rate was
approximately 90%. The Company seeks to maintain high occupancy rates by
managing its lease expiration dates within a geographic area, allowing it to
adjust its inventory of accommodations in a given market to reflect fluctuations
in overall demand and demand for particular types of accommodations.
The Company strives to develop strong relationships with property managers
to ensure that it has a reliable supply of high-quality, conveniently-located
accommodations. The Company believes that it can provide property managers with
numerous direct benefits, including (i) higher overall occupancy levels, (ii)
simplified lease agreements (with one lease often covering numerous individual
units), (iii) convenient, timely payment (with one check for all units under
lease in a complex) and (iv) maintenance by BridgeStreet of the accommodations
it leases.
BridgeStreet leases the majority of the furniture for its accommodations on
a short-term basis ordinarily from major furniture rental companies. Furniture
leases range from three to 18 months, but may be terminated by the Company prior
to expiration. Through its short-term furniture leasing approach, the Company is
able to maintain well-appointed, modern and attractive accommodations, upgrade
and replace furniture as needed and satisfy specific furnishing requests.
COMPETITION
Flexible accommodation service providers compete primarily on the basis of
location, availability, price and quality of accommodations, quality and scope
of service and brand name recognition. The Company intends to compete by
maintaining a loyal customer base and offering a client-oriented approach with
convenient locations, large and high-quality customized accommodations, and
personalized customer service.
The Company expects its industry to become more competitive as existing
competitors expand and additional companies enter the flexible accommodation
services industry. The Company believes that, in addition to itself, the largest
providers of flexible accommodation services currently are Oakwood, ExecuStay by
Marriott and Globe Business Resources, Inc., some of which are larger (in terms
of number of available accommodations) than BridgeStreet. Certain of the
Company's existing competitors have, and any new competitors that enter the
industry may have, access to significantly greater resources than the Company.
In particular, the Company's current competitors are affiliated as follows:
Oakwood is affiliated with R&B Realty Group, the nation's tenth largest
apartment management company. This affiliation gives Oakwood access to apartment
communities and capital that may be unavailable to the Company. ExecuStay by
Marriott is affiliated with Marriott International, one of the world's largest
lodging companies. This affiliation gives ExecuStay access to hotel and extended
suite properties as an alternative to true flexible accommodations and to
capital that may be unavailable to the Company. Globe Business Resources is in
the process of affiliating with Equity Residential Properties Trust, the largest
apartment owner in the United States. This affiliation, if completed, would give
Globe access to apartment communities and capital that may be unavailable to the
Company.
In addition to competition from these competitors, the Company also
competes with all-suite hotels and upscale extended-stay hotels.
REGULATION AND TAX
The Company is subject to employment laws, including minimum wage,
overtime, working condition and work permit requirements. The Company believes
that it is in compliance with all applicable employment laws, and intends to
continue to comply with such laws.
In addition, the Company is subject to the Americans with Disabilities Act
(the "ADA") as a private entity providing public accommodations. All public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While the Company believes that all of the
units it leases are substantially in compliance with these requirements, a
determination that such units are not in compliance with the ADA could result in
the imposition of fines or an award of damages to private litigants.
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As a lessee of its accommodations, BridgeStreet believes that it and its
employees are either outside the purview of, exempted from or in compliance with
laws in the jurisdictions in which the Company operates requiring real estate
brokers to hold licenses. However, there can be no assurance that the Company's
position in any jurisdiction where it believes itself to be excepted or exempted
would be upheld if challenged or that any such jurisdiction will not amend its
laws to require the Company and/or one or more of its employees to be licensed
brokers. Moreover, there can be no assurance that the Company will not operate
in the future in additional jurisdictions requiring such licensing.
In some of the jurisdictions in which the Company operates, the Company
believes that it is not required to charge certain guests the sales and "bed"
taxes that are applicable to establishments furnishing rooms to transient
guests. There can be no assurance, however, that the tax laws in particular
jurisdictions will not change or that a tax collection agency will not
successfully challenge the Company's position regarding the applicability of
such taxes. The Company believes that it properly charges and remits such taxes
in all jurisdictions where it is required to do so.
INSURANCE
The Company purchases general liability, comprehensive property damage,
automobile, workers' compensation and other insurance coverages that management
considers adequate for the protection of the Company's assets and operations,
although there can be no assurance that the coverage limits of such policies
will be adequate. A successful claim against the Company beyond the scope of its
insurance coverage or in excess of its limits could have a material adverse
effect on the Company's business, financial condition and results of operations.
Claims against the Company, regardless of their merit or outcome, also may have
an adverse effect on the Company's reputation and business.
EMPLOYEES
As of December 31, 1999, the Company had approximately 475 employees. The
Company's employees are not subject to any collective bargaining agreements, and
management believes that its relationship with its employees is good.
ITEM 2. PROPERTIES
During 1999, the Company relocated its corporate headquarters to Twinsburg,
Ohio, under the terms of a lease that expires in May 2009. The Company has the
option to extend the lease for one five-year extension term. The Company can
terminate the lease any time after five years, with a termination fee equal to
the unamortized cost of build out improvements and commissions. In addition, the
Company currently leases administrative offices in the majority of its markets.
The Company believes that its corporate and administrative facilities are
adequate to serve its current level of operations. If additional facilities are
required, the Company believes that suitable additional or alternative space
will be available as needed on commercially reasonable terms.
ACCOMMODATIONS
The Company leases all of its accommodations. The Company has no plans to
purchase or own any properties. The Company's accommodations include one-, two-
and three-bedroom apartments, condominiums and townhouses. As of December 31,
1999, the Company had approximately 3,400 accommodations under lease, with
approximately 90% of such leases being for one year or less. The terms of the
Company's leases generally range from one to 18 months. During 1999, the Company
entered into a fifteen year lease commencing January 1, 2000, and expiring
December 31, 2015, for accommodations in a United Kingdom property. This
property is an apartment-type complex in downtown London with 63 units.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time a party to litigation arising in the
ordinary course of business. There can be no assurance that the Company's
insurance coverage will be adequate to cover all liabilities arising out of such
litigation. Management believes that any liability that the Company might incur
upon the resolution of any existing litigation will not have a material adverse
effect upon the Company's business, financial condition and results of
operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
Since November 1998, the Common Stock has been quoted on The American Stock
Exchange under the symbol "BDS." Previously, from September 1997 until November
1998, the Common Stock was quoted on the Nasdaq National Market under the symbol
"BEDS". The following table sets forth for each period indicated the high and
low sale prices for the Common Stock as reported by The American Stock Exchange
or the Nasdaq National Market as the case may be.
HIGH LOW
---- ---
1999
----
First Quarter ................. $ 4 15/16 $2 15/16
Second Quarter ................. $ 4 3/8 $3 1/16
Third Quarter ................. $ 4 13/16 $2 15/16
Fourth Quarter ................. $ 3 3/16 $1 3/16
1998
----
First Quarter ................. $12 1/4 $10
Second Quarter ................. $11 5/8 $3 11/16
Third Quarter ................. $ 5 1/16 $2 9/16
Fourth Quarter ................. $ 3 3/4 $2 7/16
As of March 17, 2000, there were 68 holders of record of Common Stock.
DIVIDEND POLICY
The Company intends to retain all earnings to finance the growth and
development of its business and does not anticipate paying cash dividends on the
Common Stock in the foreseeable future. Any future determination as to the
payment of dividends on the Common Stock will be at the discretion of the Board
of Directors and will depend upon, among other things, the Company's future
earnings, if any, the operating and financial condition of the Company, its
capital requirements, general business conditions and other factors the Board of
Directors of the Company may consider. The Company's revolving credit facility
currently prohibits dividend payments.
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ITEM 6. SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND FOOTNOTE DATA)
For financial reporting purposes, Temporary Corporate Housing Columbus, Inc.
("TCH") is presented as the acquirer of all of the other companies acquired by
BridgeStreet in the Combination. Consequently, the Company's historical combined
financial statements for periods ended on or before December 31, 1996, are the
historical combined financial statements of TCH. The historical financial
statements as of December 31, 1999, 1998 and 1997 and for the years then ended
are of the Company and include the accounts of each of the Founding Companies
and all other acquisitions from their respective dates of acquisition. The
following selected historical financial data of the Company for the years ended
December 31, 1999, 1998 and 1997 and of TCH as of December 31, 1996 and 1995,
and for each year in the three-year period ended December 31, 1996, have been
derived from the applicable audited financial statements of the Company and TCH.
The remaining selected historical financial data of TCH has been derived from
unaudited financial statements of TCH, which have been prepared on the same
basis as the audited financial statements and, in the opinion of management,
reflect all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of that data.
<TABLE>
<CAPTION>
BridgeStreet Historical (TCH only)
Year Ended --------------------
December 31, Year Ended December 31,
------------------------------- -------------------------------------------
1999 1998(1) 1997(1) 1996(1) 1995(1) 1994 1993 1992
---- ------- ------- ------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues .................... 95,408 $ 96,667 $ 51,059 $ 12,400 $ 9,696 $ 8,309 $ 6,803 $ 5,627
Cost of services ............ 70,319 71,310 37,737 9,052 7,344 6,475 5,312 4,520
Selling, general and
administrative expense .... 22,753 20,026 9,887 2,327 2,064 1,628 1,373 1,328
Officers' stock
compensation .............. -- -- 1,210(3) -- -- -- -- --
Restructuring Charge ........ -- 1,330(2) -- -- -- -- -- --
Goodwill amortization ....... 1,264 1,098 489 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) ..... 1,073 2,903 1,736 1,021 288 206 118 (221)
Interest and other income
(expense), net ............ (482) (176) 90 155 101 21 5 11
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
provision for income
taxes ..................... 591 2,726 1,825 1,176 389 227 123 (210)
Provision (benefit) for
income taxes .............. 655 1,267 1,371 512 178 114 49 (84)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) ........... $ (64) $ 1,459 $ 454 $ 664 $ 211 $ 113 $ 74 $ (126)
========== ========== ========== ========== ========== ========== ========== ==========
Net income (loss) per
share, basic and diluted(4) $ (0.01) $ 0.18 $ 0.08 $ 0.42 $ 0.13 $ 0.07 $ 0.05 $ (0.08)
========== ========== ========== ========== ========== ========== ========== ==========
Weighted average shares
outstanding - basic(4) .... 8,169,835 8,123,306 5,904,484 1,596,350 1,596,350 1,596,350 1,596,350 1,596,350
Weighted average shares
outstanding - diluted(4) .. 8,169,835 8,123,306 5,930,248 1,596,350 1,596,350 1,596,350 1,596,350 1,596,350
</TABLE>
<TABLE>
<CAPTION>
BridgeStreet Historical (TCH only)
--------------------------- ---------------------------------------
December 31, December 31,
--------------------------- ---------------------------------------
1999 1998 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital ....................... $ 3,397 $ 3,351 $ 9,172 $ 986 $ 563 $ 496 $ 592 $499
Total assets .......................... 65,607 61,429(1) 42,563 2,013 2,510 1,672 1,209 901
Long-term debt, less current maturities 11,236 7,608 26 -- -- 67 10 16
Total stockholders' equity ............ 43,044 42,986 37,578 1,184 869 658 545 471
</TABLE>
(1)Certain amounts have been reclassified to conform to the 1999 presentation.
(2)Consists of a management restructuring charge. This represents a reduction of
$0.09 per share in 1998.
(3)Consists of non-recurring, non-cash compensation expense recorded in
connection with the accelerated vesting of restricted stock. This represents a
reduction of $0.20 per share in 1997.
(4)The weighted average number of common shares outstanding in 1992 through 1996
is the number of shares issued by the Company on January 2, 1997, in exchange
for all the issued and outstanding capital stock of TCH.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
BridgeStreet Accommodations, Inc. ("BridgeStreet" or the "Company") was
incorporated in August 1996. Since that time the Company has become a leading
provider of flexible accommodation services. The Company completed 15
acquisitions in 1997 and 1998 and now conducts operations throughout the U.S.,
Canada, and the U.K./Europe. In markets where the Company does not directly
conduct operations, it has created alliances with Network Partners that allow
BridgeStreet to offer a broad array of locations for its customers throughout
the world.
BridgeStreet has created a single brand name as a result of the
consolidation of its acquired operations. The Company has achieved broad
geographic coverage throughout the U.S. and throughout the world for its
customers, many of whom have global needs. During 1999, BridgeStreet developed a
common systems platform for its operations. These systems were largely
implemented during 1999 with completion scheduled for 2000 and 2001. Common
systems enable BridgeStreet to provide large national and international
customers a centralized point of contact for sales, reservations, project
management and billing information. Common systems also enable BridgeStreet to
achieve greater efficiencies in managing its properties.
The Company's revenues are derived primarily from renting
accommodations to guests for extended periods. Revenues depend on the number of
accommodations the Company has available under lease, the occupancy rate and the
rate charged. The rate charged is a function of, among other factors, (i) the
type, size and location of the accommodation being rented, (ii) the rental
period and (iii) any additional amenities made available to the guest during his
or her stay. As of December 31, 1999, the Company had approximately 3,400
accommodations under lease compared to 4,100 and 3,000 accommodations under
lease at December 31, 1998 and 1997, respectively. During 1999, the Company
operated at an occupancy rate of approximately 90% compared to approximately 89%
in both 1998 and 1997.
Cost of services consists primarily of lease payments for
accommodations and their furnishings, and expenses associated with cleaning,
maintaining and providing utilities to accommodations. Selling, general and
administrative expense consists primarily of compensation and related benefits
for management and key employees, administrative salaries and benefits, office
rents and utilities, professional fees and advertising.
As discussed in Note 1 to the financial statements, in the first
quarter of 1997, the Company merged with five flexible accommodation operating
companies in stock for stock tax-free mergers. The mergers were accounted for
using the purchase method of accounting with Temporary Corporate Housing
Columbus, Inc. ("TCH") designated as the accounting acquirer and the other
operating companies designated as "acquired companies." The results of
operations of the "acquired companies" have been included in the accompanying
consolidated financial statements from their respective dates of acquisition.
The purchase price and allocation of the purchase price of the four "acquired
companies," including the value of stock issued to the founders of BridgeStreet
as a transaction fee, was approximately $17.7 million based on an independent
appraisal of the net assets acquired. The aggregate cost of the acquisitions
exceeded the estimated fair value of assets and liabilities of the acquired
companies by $17.5 million which is being amortized as goodwill over 35 years.
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<PAGE> 11
RESULTS OF OPERATIONS
BridgeStreet's Consolidated Statement of Operations for the year ended
December 31, 1999, includes a full year of operating results of TCH, Corporate
Lodgings, Inc. ("CLI"), Exclusive Interim Properties, Ltd. ("EIP"), Temporary
Housing Experts, Inc. ("THEI"), HAI Acquisition Corp. ("HAI"), BridgeStreet
Texas, L.P., BridgeStreet Arizona, Inc., BridgeStreet North Carolina, Inc.,
BridgeStreet Raleigh, Inc., BridgeStreet Colorado, Inc., BridgeStreet
Accommodations Limited, BridgeStreet Canada, Inc. and BridgeStreet California,
Inc.
BridgeStreet's Consolidated Statement of Operations for the year ended
December 31, 1998 includes a full year of operating results of TCH, CLI, EIP,
THEI, HAI, BridgeStreet Texas, L.P. and BridgeStreet Arizona, Inc. The operating
results for the year ended December 31, 1998 also include the operating results
of the following wholly-owned operating subsidiaries from the indicated dates on
which they acquired (by merger with or purchase of substantially all of the
assets of) flexible accommodation service providers: BridgeStreet North
Carolina, Inc. (January 2, 1998); BridgeStreet Raleigh, Inc. (January 2, 1998);
BridgeStreet Colorado, Inc. (January 2, 1998); BridgeStreet Texas L.P.
("Austin", January 2, 1998); BridgeStreet Accommodations Limited (February 19,
1998); BridgeStreet Canada, Inc. (March 2, 1998), and BridgeStreet California,
Inc. (June 1, 1998).
BridgeStreet's Consolidated Statement of Operations for the year ended
December 31, 1997, includes the operating results of TCH, CLI, EIP and THEI, all
of which were acquired on January 2, 1997. The operating results for the year
ended December 31, 1997 also include the operations of the following
wholly-owned operating subsidiaries from the indicated dates on which they
acquired (by merger with or purchase of substantially all of the assets of)
flexible accommodation service providers: HAI (March 31, 1997); BridgeStreet
Texas, L.P. ("Dallas", December 1, 1997); and BridgeStreet Arizona, Inc.
("Arizona", December 1, 1997).
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues. Revenues decreased $1.3 million, or 1.3%, from $96.7 million
for the year ended December 31, 1998 to $95.4 million for the year ended
December 31, 1999. The decrease in revenues was primarily the result of a
decrease in the number of accommodations rented during the third and fourth
quarters of the year. The Company believes that a significant amount of this
revenue decline was related to the Year 2000 ("Y2K") effect on a portion of its
customers. The Company believes that during the third and fourth quarters
consulting activity generally slowed as businesses completed Y2K compliance
projects and/or delayed the commencement of new non-Y2K projects pending the
effect of Y2K on their business. Since consultants on project assignments
represent a sizable portion of the Company's revenues, this action negatively
effected the Company's 1999 revenues.
Cost of Services. Cost of services decreased $1.0 million, or 1.4%,
from $71.3 million for the year ended December 31, 1998, to $70.3 million for
the year ended December 31, 1999. Cost of services, as a percentage of revenues,
decreased from 73.8% for the year ended December 31, 1998, to 73.7% for the year
ended December 31, 1999. The decrease in cost of services is in line with the
decrease in revenues.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased by $2.8 million, or 13.6%, from $20.0 million
for the year ended December 31, 1998 to $22.8 million for the year ended
December 31, 1999. As a percentage of revenues, selling, general and
administrative expenses increased from 20.7% in 1998 to 23.8% in 1999.
Contributing to the increase in expenses were the full year 1999 operations in
London, which were acquired in February 1998, Canada, which were acquired in
March of 1998, and California, which were acquired in June of 1998. In addition,
the London operations began to increase staffing in the second half of 1999 to
accommodate growth from a major contract awarded from a leading international
consulting company. Collectively, these operations resulted in an additional
$1.3 million of expense in 1999 compared to 1998. Depreciation and amortization
expense increased $0.6 million as a result of the acquisitions completed in 1998
and the completion of system development work in 1998 and 1999. As a percent of
sales, selling, general and administrative expenses increased primarily as a
result of the Company's lower than expected sales in the second half of 1999.
11
<PAGE> 12
Non-Recurring Charges. The Statement of Operations for the year ended
December 31, 1998, includes a restructuring charge of $1.3 million on a pretax
basis ($732,000 after tax). This second quarter charge of $1.3 million
represented an accrual of $962,000 for severance and other employee benefits for
five employees, and an accrual of $368,000 for lease termination costs, the
write-off of certain software and marketing costs, and professional fees
associated with the management realignment. The accounting for the restructuring
charge is in compliance with the Emerging Issues Task Force ("EITF") 94-3,
"Liability Recognition for Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)." During 1998, $664,000 was charged against the
reserve consisting of severance and benefit expenses of $341,000, the write-off
of marketing materials and software of $202,000 and professional fees and other
expenses of $121,000. During 1999, approximately $520,000 was charged against
the reserve, consisting of severance and benefit expenses of $460,000, and
write-off of software and other expenses of $60,000. As of December 31, 1999,
the balance remaining in the reserve account is approximately $146,000. The
majority of the balance relates to continuing severance and benefit expenses.
The Company expects all costs to be incurred by the end of the second quarter of
2000, and no material incremental costs are expected to be recognized in future
periods. See footnote 10 in the Notes to the Consolidated Financial Statements
for additional information.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues. Revenues increased $45.6 million, or 89.3%, from $51.1
million for the year ended December 31, 1997, to $96.7 million for the year
ended December 31, 1998. The increase in revenues was primarily the result of an
increase in the number of accommodations rented during the year due to the
acquisitions of seven flexible accommodation service providers, plus a full year
of revenues for the 1997 acquisitions and growth in existing markets.
Cost of Services. Cost of services increased $33.6 million, or 89.0%,
from $37.7 million for the year ended December 31, 1997, to $71.3 million for
the year ended December 31, 1998. Cost of services, as a percentage of revenues,
decreased from 73.9% for the year ended December 31, 1997, to 73.8% for the year
ended December 31, 1998. The dollar increase in cost of services was primarily
related to the acquisitions of the flexible accommodation service providers as
discussed above. As a percentage of revenues, cost of services decreased
slightly from 1997 primarily due to higher gross margins from the Company's
Canadian and U.K. subsidiaries.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $10.1 million, or 102%, from $9.9 million for
the year ended December 31, 1997, to $20.0 million for the year ended December
31, 1998. Selling, general and administrative expense, as a percentage of
revenues, increased from 19.4% for the year ended December 31, 1997, to 20.7%
for the year ended December 31, 1998. The dollar increase in selling, general
and administrative expense was primarily a result of the acquisitions of
flexible accommodation service providers, as discussed above, and increased
corporate overhead. The increase, as a percentage of revenues, is primarily from
increased corporate overhead. The increase in corporate overhead is a direct
result of incurring a full year of costs in 1998 for a corporate management team
and other costs associated with creating a public company infrastructure. In
1997, these costs primarily were incurred during the second half of the year.
Non-Recurring Charges. The Statement of Operations for the year ended
December 31, 1997, includes $1.2 million of non-recurring, non-cash compensation
expense relating to the accelerated vesting of restricted stock held by
executive officers. The compensation charge represents the difference between
the value of stock issued to officers and the amount paid. The Statement of
Operations for the year ended December 31, 1998, includes a restructuring charge
of $1.3 million on a pretax basis ($732,000 after tax).
12
<PAGE> 13
Other Income, Net. The components of other income (expense) are as
follows for the years ended December 31:
1999 1998 1997
--------- --------- ---------
Interest income .......... $ 78,359 $ 146,458 $ 196,253
Interest expense ......... (707,381) (451,270) (120,065)
Other, net ............... 146,749 128,549 13,445
--------- --------- ---------
Other Income, net $(482,273) $(176,263) $ 89,633
========= ========= =========
Interest income has been decreasing as a result of the use of invested
funds for acquisitions. Interest expense is increasing as a result of borrowings
against the line of credit, both for acquisition payments and working capital
needs.
Income tax provision. For the year ended December 31, 1999, the Company
recorded a tax provision of approximately $655,000 on pretax income of
approximately $591,000, compared to a tax provision of approximately $1.3
million on pretax income of $2.7 million in 1998. The Company records income
taxes pursuant to Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Under SFAS No. 109, deferred income taxes are
recognized for the tax consequences of temporary differences by applying enacted
statutory rates to differences between the financial statement carrying amounts
and the tax basis of existing assets and liabilities. The tax provisions are
based on the Company's consolidated effective tax rate after considering
nondeductible expenses, such as amortization of goodwill, officers' stock
compensation in 1997 and foreign taxes for 1998 and 1999. The effective tax
rates are as follows for the years ended December 31:
1999 1998 1997
---- ---- ----
Effective tax rate 110.9% 46.5% 75.1%
The higher than normal 1999 effective tax rate is attributable to the
effect of the lower net income on a fixed amount of nondeductible goodwill
amortization. The higher than normal 1997 effective tax rate is attributable to
the effect of the non-recurring, non-deductible officer's stock compensation
charge recognized in 1997.
The Company does not provide deferred income taxes on unremitted
earnings of foreign subsidiaries, as such funds are deemed indefinitely
reinvested in those operations. It is not practicable to calculate the deferred
taxes associated with these unremitted earnings.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1999, net cash provided by operating
activities totaled $4.0 million. Net cash used in investing activities was $7.0
million, primarily for payments related to 1998 acquisitions, the purchase of
operating stock and equipment required in the Company's business, and costs
associated with implementing a company-wide fully integrated management
information system. Net cash provided by financing activities was $2.7 million,
primarily due to borrowings against the revolving line of credit. Cash and cash
equivalents decreased by approximately $280,000 during the period and totaled
$2.7 million at December 31, 1999.
For the year ended December 31, 1998, net cash provided by operating
activities totaled $1.6 million. Net cash used in investing activities was $15.5
million, primarily for acquisitions, the purchase of operating stock and
equipment required in the Company's business, and costs associated with
implementing a company-wide fully integrated management information system. Net
cash provided by financing activities was $8.0 million, primarily due to
borrowings against the revolving line of credit. Cash and cash equivalents
decreased by $6.0 million during the period and totaled $3.0 million at December
31, 1998.
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<PAGE> 14
In September 1997, the Company completed its initial public offering
of 3,007,250 common shares, of which 2,092,250 shares were issued by the Company
and 915,000 shares were sold by certain stockholders of the Company at a public
offering price of $9.00 per share (the "Offering"). The net proceeds to the
Company (after deducting underwriting discounts and commissions and expenses
incurred in connection with the Offering) of approximately $14.8 million were
used to repay $1.2 million of certain indebtedness of the Founding Companies
assumed in connection with the Combination (see footnote 1 in the Notes to the
Consolidated Financial Statements), $2.8 million (of which $1.0 million related
to acquisitions) of indebtedness outstanding under the Company's revolving
credit facility, $28,000 of the outstanding amount due under a loan made to the
Company by the spouse of one of the Company's directors, and approximately $3.6
million for acquisitions and expenses associated with acquisitions. The
remaining net proceeds were invested in short-term, interest bearing, investment
grade securities at December 31, 1997, and subsequently were used for
acquisitions during 1998.
The Company has a revolving credit facility (the "Revolving Credit
Facility") secured by guarantees by certain material subsidiaries of the Company
and a pledge of the capital stock of all of the Company's wholly-owned operating
subsidiaries. The revolving credit facility may be used for refinancing of the
Company's subsidiaries' indebtedness, acquisitions, working capital and to
repurchase up to $1.0 million of the Company's stock. Loans made under the
revolving credit facility bear interest, at the Company's option, at 0.25% to
0.5% above the bank's prime lending rate, or 1.75% to 2.0% above the Eurodollar
or LIBOR rates. During the second quarter of 1999, the revolving credit
agreement was amended to provide a Canadian sublimit and to add the Company's
Canadian subsidiary as a party to the agreement for purposes of borrowing under
the Canadian sublimit. Interest on the amounts borrowed under the Canadian
sublimit is payable, at the Company's option, at 1.5% to 1.75% above the bank's
Canadian prime lending rate, or 1.75% to 2.0% above the Canadian cost of funds
rate. The revolving credit facility (i) prohibits the payment of dividends and
other distributions by the Company, (ii) generally will not permit the Company
to incur or assume other indebtedness, (iii) requires the bank's approval for
certain acquisitions, and (iv) requires the Company to comply with certain
financial covenants. The Company had $11.2 million and $7.5 million outstanding
under the facility at December 31, 1999 and December 31, 1998, respectively. At
December 31, 1999 and 1998, the Company's weighted average interest rates were
7.85% and 6.75%, respectively.
At December 31, 1999, the Company was not in compliance with certain of
its financial covenants under the Revolving Credit Facility. The Company
subsequently received waivers of these covenants. Additionally, the Company's
current projections indicate that the Company may be out of compliance with
certain financial covenants during the first and second quarters of 2000. The
Company has received a waiver for the covenants it anticipates it may be out of
compliance with. The Company believes that with these waivers, it will be in
compliance with its financial covenants for the year ending December 31, 2000.
During the first quarter of 2000, the Company amended its Revolving Credit
Agreement to allow for an additional $2.0 million daily working capital line of
credit with one of the banks in the Revolving Credit Facility. Additional
borrowings under the amended revolving credit facility, up to the facility limit
of $25 million, require the approval of the majority bank providing the
facility. While there can be no assurance, management believes that cash flow
from operations and funds from the Revolving Credit Facility, or a successor
facility, will be adequate to fund the Company's capital requirements for the
year 2000.
Subsequent to the Combination through December 31, 1997, the Company
made three additional acquisitions. The acquisitions were accounted for using
the purchase method of accounting. The aggregate cost of these acquisitions was
$6.75 million, consisting of $4.4 million of cash and $2.35 million of stock.
The preliminary purchase price allocation of these acquisitions resulted in
goodwill of approximately $7.4 million that is being amortized over 35 years.
During 1998, the Company acquired seven companies. The acquisitions
have been accounted for using the purchase method of accounting. The total
aggregate cost of these acquisitions was approximately $20.5 million, consisting
of cash and promissory notes of $16.3 million and $4.2 million in common stock
or securities exchangeable for common stock. The purchase price allocation of
these acquisitions resulted in goodwill of approximately $21.2 million that is
being amortized over 35 years.
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<PAGE> 15
The Company intends to pursue growth through large national accounts as
well as increasing market share for its local and regional customers. As a
result of the acquisition of 15 operations in 1997 and 1998, combined with
alliances with its Network Partners, the Company has the geographic coverage
needed to conduct this growth strategy and does not intend to pursue further
acquisition opportunities at this time.
The Company's primary sources of funds to date have been cash flow from
operations, proceeds from the Offering, and its Revolving Credit Facility. The
Company anticipates future sources of funding will be cash flow from operations
and the Revolving Credit Facility. Principal future uses of cash will be to fund
expanding operations and investment in the Company's management information
systems. Capital expenditure requirements in 2000 are anticipated to be
approximately $4.5 million. Approximately $1.0 million of these expenditures are
related to furnishings and leasehold improvements for a new property in the U.K.
where the Company has an exclusive 15-year lease. These expenditures will be
funded from year-end 1999 cash balances held in the Company's London operations
in anticipation of these expenditures. Capital expenditures for the years ended
December 31, 1999, 1998 and 1997 were approximately $4.2 million, $4.1 million
and $1.6 million, respectively.
The Company anticipates funding the balance of its cash needs from cash
flow from operations during 2000. Seasonal and daily cash shortfalls will be
funded from the Company's Revolving Credit Facility.
On March 23, 2000, the Company entered into a definitive merger
agreement (the "Agreement") providing for the acquisition of the Company by
MeriStar Hotels & Resorts, Inc. ("MMH").
Under the terms of the Agreement, each outstanding share of the
Company would be exchanged for $1.50 in cash, plus 0.5 share of MMH common
stock. Total consideration per share of the Company is estimated to be
approximately $3.00. The Agreement is subject to approval of the stockholders of
the Company and other customary conditions.
The Company intends to retire its debt in the 2000 fiscal year in
connection with the merger agreement described in the Company's subsequent event
note to the consolidated financial statements.
INFLATION
Due to the relatively low levels of inflation experienced in 1999, 1998
and 1997, inflation did not have a significant effect on the results of the
Company during these periods.
SEASONALITY
Quarterly earnings may be affected by the timing of certain holidays,
business and vacation patterns, weather conditions, economic factors and other
considerations affecting travel. Corporate relocation activity peaks in the
summer months and declines significantly during the fourth quarter and the first
part of the first quarter. Long-term consulting activity tends to follow a
similar pattern, but not to the same extent. The Company expects to realize
lower revenues, operating income and net income during the first and fourth
quarters.
MANAGEMENT INFORMATION SYSTEMS AND YEAR 2000 ISSUES
The Company was formed in August 1996 and during 1997 and 1998 has
acquired fifteen flexible accommodation companies. The acquired companies each
had different computer hardware and software systems. As a result, the Company
has undertaken a complete review and assessment of its information technology
("IT") systems. The Company has determined that all accounting and property
management systems will be replaced with a single integrated system. Year 2000
("Y2K") compliance is a requirement for all new systems the Company has acquired
and will acquire or develop internally. The Company analyzed all other
non-information technology systems such as security, electrical, fire
protection, voice and data communication systems, which may contain embedded
technology microprocessors or other similar circuitry, to adequately address
Year 2000 issues. The Company did not experience any noticeable Year 2000 system
issues.
15
<PAGE> 16
During the fourth quarter of 1997, the Company evaluated several major
accounting software vendors. Key criteria evaluated included: Y2K compliance;
meeting company functional requirements; reporting capabilities; software
flexibility and scalability; vendor stability, growth and support; ease of use;
and cost. In the first quarter of 1998, based on these criteria and extensive
review of the software vendors, the Company selected an accounting software
vendor. During the second and third quarters of 1998, the Company undertook
phase one of its financial systems implementation. Phase one included: analyzing
accounting requirements; purchasing and setting up hardware and application
software; conducting a conference room pilot; and application documentation and
training. In August of 1998, the Company began the roll out phase in the
Company's Cleveland Region. The Company completed rolling out the accounting
software application to each of its North American regions during 1999. The
Company also implemented a wide area network (WAN) to connect all North American
offices to the central computer system.
During the first quarter of 1998, the Company evaluated several major
property management software vendors. Key criteria evaluated included: Y2K
compliance; meeting company functional requirements; reporting capabilities;
software flexibility and scalability; vendor stability, growth and support; ease
of use; and cost. Based on this review the Company determined that there was no
one software application that entirely met the key needs of the Company. In the
second quarter of 1998, the Company made the decision to internally develop its
property management systems. The system is being developed within the accounting
software package discussed above. This provides the Company with a fully
integrated accounting and property management system. During 1997 the Company
had developed a prototype property management system which will be the
underlying design framework for the first phase of the property management
system
During the third quarter of 1998, the Company undertook phase one of
its property management systems implementation. Phase one included: analyzing
property management requirements; purchasing and setting up hardware and
application software; conducting a conference room pilot; and, application
documentation and training. This phase was completed and during the fourth
quarter of 1998 and the Company began programming of the system. The Company
began the pilot installation of the system during the first quarter of 1999.
Full implementation has occurred in a number of the Company offices. The Company
expects to complete implementation to all United States offices during the year
2000.
The total cost to replace existing software, hardware and the cost of
implementing the new accounting and property management systems is estimated to
be $3.5 million, which will be capitalized as incurred.
CONTINGENCY PLANS AND RISKS OF THE COMPANY'S Y2K ISSUES. The Company
believes it had the internal controls and manual systems in place to prevent any
material interruption in its business operations due to Y2K problems. The
Company did not experience any noticeable Y2K system problems. Prior to the
complete implementation of the new accounting and property management systems,
the Company's operating subsidiaries that did not have the new systems upgraded
their existing systems to be Y2K compliant or discarded them in favor of manual
systems. The Company intends to rely on these manual systems and controls at
each operating subsidiary until each subsidiary has fully implemented the new
systems. The Company undertook extensive preparations for Y2K issues, much of
which was done internally. The total cost to analyze all Company systems, apply
necessary programming connections, and replace outdated hardware was less than
$50,000. As part of the analysis process, the Company used vendor-supplied tools
to identify potential Y2K problems. Testing was done on all critical systems to
ensure a complete and efficient transition. In addition, the information
technologies staff worked on January 1, 2000, to ensure proper operation of all
systems, and to assist system users in local markets with any unforeseen issues.
It is possible that Y2K, or similar issues such as leap year-related problems,
may occur with billing, payables, reservations, property management or other
systems. The Company believes any such problems will be minor and correctable.
In addition, the Company could be negatively impacted by customers or suppliers
that suffer long-term Y2K system problems or similar issues. The Company is
currently not aware of any Y2K or similar system problems with customers or
suppliers.
16
<PAGE> 17
Factors To Be Considered
The information set forth above contains forward-looking
statements, which involve risks and uncertainties. The Company's actual results
could differ materially from the results anticipated in these forward-looking
statements. Readers should refer to the discussion under "Risk Factors"
contained in the Company's Registration Statement on Form S-4 (No. 333-39187)
filed with the Securities and Exchange Commission, which is incorporated herein
by reference, concerning certain factors which could cause the Company's actual
results to differ materially from the results anticipated in the forward-looking
statements contained herein.
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK.
INTEREST RATE RISK
The Company has a $25 million revolving credit facility agreement. The
interest due under this facility is variable with the Company's rate tied to
various underlying rates (the bank's prime lending rate in both the USA and
Canada, Eurodollar rates, LIBOR rates, and the Canadian cost of funds rate). The
Company has not entered into any agreements to mitigate its interest rate risk.
A material change in the various underlying rates described above could
have a material impact on the Company. However, no assumptions have been made
regarding future interest rates.
The Company intends to retire its debt in the 2000 fiscal year in
connection with the merger agreement described in the Company's subsequent event
note to the consolidated financial statements.
EXCHANGE RATE RISK
Through the Company's wholly-owned operating subsidiaries of
BridgeStreet Accommodations Limited and BridgeStreet Canada, both formed in
1998, the Company operates internationally and enters into transactions
denominated in foreign currencies. As a result, the Company is subject to the
volatility that is associated with exchange rate movements. The effects of
foreign currency on operating results in the current year were not material to
the Company. The Company does not hedge its risk in foreign currency exchange
rate movements, and does not intend to do so in the foreseeable future.
Each of the above-mentioned subsidiaries primarily enters into
transactions denominated in their respective local currencies; and, therefore,
are not individually subject to significant volatility associated with exchange
rate movements. The Company deems its unremitted earnings of foreign
subsidiaries as indefinitely reinvested in those operations. While a material
change in the relevant exchange rates could have a material affect on the
financial results reported by the Company, the Company does not believe that a
material economic exposure exists because it generally does not expatriate or
repatriate foreign currencies into U.S. dollars.
17
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BRIDGESTREET ACCOMMODATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,677,937 $ 2,957,517
Trade accounts receivable, less allowance for doubtful
accounts of $300,000 in 1999 and $270,000 in 1998 4,599,981 5,976,054
Security deposits held by landlords 475,889 534,815
Deferred income taxes 884,756 691,591
Prepaid rent 2,949,410 2,066,086
Other current assets 1,402,113 1,019,983
----------- ------------
Total current assets 12,990,086 13,246,046
Operating stock, net of accumulated amortization 2,569,957 2,217,562
Property and equipment, net of accumulated depreciation 6,349,488 5,379,024
Other assets 9,647 10,150
Goodwill, net of accumulated amortization 43,687,449 40,576,629
------------ ------------
Total assets $ 65,606,627 $6l,429,411
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 98,759 $ 778,715
Due to stockholders and affiliates 950 369,949
Accounts payable 1,247,075 1,136,952
Accrued payroll and employee benefits 833,116 1,250,828
Accrued expenses, other 6,151,296 4,583,569
Deferred revenue 747,956 1,163,181
Security deposits due to customers 513,751 612,057
------------ ------------
Total current liabilities 9,592,903 9,895,251
Long-term debt, net of current maturities 11,235,892 7,608,452
Deferred income taxes 1,733,700 939,381
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value; authorized 5,000,000 shares;
no shares issued or outstanding -- --
Common stock, $0.01 par value; authorized 35,000,000 shares;
8,169,835 shares issued and outstanding in 1999 and 1998; 81,698 81,698
Additional paid in capital 40,134,726 40,134,726
Retained earnings 3,005,561 3,069,958
Accumulated other comprehensive income (177,853) (300,055)
------------ ------------
Total stockholders' equity 43,044,132 42,986,327
------------ ------------
Total liabilities and stockholders' equity $ 65,606,627 $ 61,429,411
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 19
BRIDGESTREET ACCOMMODATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues $ 95,408,355 $ 96,666,672 $ 51,059,156
Operating Expenses:
Cost of services 70,318,836 71,310,397 37,736,902
Selling, general and administrative expense 22,752,829 20,025,897 9,887,041
Officers' stock compensation -- -- 1,210,261
Goodwill amortization 1,263,690 1,097,624 489,148
Restructuring charge -- 1,330,000 --
------------ ------------ ------------
Total operating expenses 94,335,355 93,763,918 49,323,352
------------ ------------ ------------
Operating income 1,073,000 2,902,754 1,735,804
Other Income (Expense):
Interest income 78,359 146,458 196,253
Interest expense (707,381) (451,270) (120,065)
Other income, net 146,749 128,549 13,445
------------ ------------ ------------
Other income (expense), net (482,273) (176,263) 89,633
------------ ------------ ------------
Income before provision for income taxes 590,727 2,726,491 1,825,437
Provision for income taxes 655,124 1,267,423 1,371,346
------------ ------------ ------------
Net income (loss) $ (64,397) $ 1,459,068 $ 454,091
Other comprehensive income:
Foreign currency translation adjustment 122,202 (300,055) --
------------ ------------ ------------
Comprehensive income $ 57,805 $ 1,159,013 $ 454,091
============ ============ ============
Net income (loss) per share-basic and diluted $ (0.01) $ 0.18 $ 0.08
============ ============ ============
Weighted average shares outstanding-basic 8,169,835 8,123,306 5,904,484
Weighted average shares outstanding-diluted 8,169,835 8,123,306 5,930,248
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 20
BRIDGESTREET ACCOMMODATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Total
------------ Treasury Paid-In Retained Comprehensive Stockholders'
Shares Amount Stock Capital Earnings Income Equity
------ ------ ----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 12/31/96 2,056 $ 31,000 $(4,185) $ - $1,156,799 $ - $ 1,183,614
Original BridgeStreet equity 1,174,000 11,740 - (9,024) - - 2,716
Merger of TCH and BridgeStreet (2,056) (31,000) 4,185 - - - (26,815)
Issuance of stock to founders 4,301,000 43,010 - 17,548,922 - - 17,591,932
Officers' stock compensation - - - 1,210,261 - - 1,210,261
Common stock offering 2,092,250 20,922 - 14,791,476 - - 14,812,398
Issuance of stock to acquired
companies 222,095 2,221 - 2,347,779 - - 2,350,000
Net income - - - - 454,091 - 454,091
--------- -------- -------- ----------- ---------- --------- -----------
Balance at 12/31/97 7,789,345 $ 77,893 - $35,889,414 $1,610,890 - $37,578,197
Issuance of stock to acquired
companies 379,958 3,800 - 4,240,529 - - 4,244,329
Options exercised 532 5 - 4,783 - - 4,788
Foreign currency translation - - - - - (300,055) (300,055)
Net income - - - - 1,459,068 - 1,459,068
--------- -------- -------- ----------- ---------- --------- -----------
Balance at 12/31/98 8,169,835 $ 81,698 - $40,134,726 $3,069,958 $(300,055) $42,986,327
Foreign currency translation - - - - - 122,202 122,202
Net income - _ - - (64,397) - (64,397)
--------- -------- -------- ----------- ---------- --------- -----------
Balance at 12/31/99 8,169,835 $ 81,698 - $40,134,726 $3,005,561 $(177,853) $43,044,132
========= ======== ======== =========== ========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 21
BRIDGESTREET ACCOMMODATIONS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (64,397) $ 1,459,068 $ 454,091
Adjustments to reconcile net income (loss) to net
cash provided by operating activities--
Officers' stock compensation -- -- 1,210,261
Depreciation and amortization 2,937,961 2,505,578 990,346
Gain on sale of assets (296,253) (32,487) --
Deferred income taxes 604,160 96,466 225,942
Changes in operating assets and liabilities
excluding the effect of acquisitions--
Trade accounts receivable 1,336,771 (3,429,067) (420,154)
Security deposits held by landlords 56,628 (141,385) (83,560)
Prepaid expenses and other assets (1,279,609) (211,906) (1,514,887)
Accounts payable and accrued expenses 520,318 1,429,645 656,731
Accrued income taxes 686,499 -- (191,988)
Security deposits due to customers (92,709) (414,244) (24,451)
Deferred revenue (428,464) 362,677 30,749
----------- ------------ ------------
Net cash provided by operating activities 3,980,905 1,624,345 1,333,080
----------- ------------ ------------
Cash Flows From Investing Activities:
Purchases of investments in short-term marketable securities -- -- (124,997)
Sales of investments in short-term marketable
securities -- -- 277,250
Acquisitions, net of cash acquired (4,228,705) (11,503,537) (4,388,120)
Proceeds from sale of assets 1,495,273 90,420 --
Purchases of operating stock (743,617) (898,053) (768,321)
Purchases of property and equipment (3,481,255) (3,235,159) (876,936)
----------- ------------ ------------
Net cash used for investing activities (6,958,304) (15,546,329) (5,881,124)
----------- ------------ ------------
Cash Flows From Financing Activities:
Proceeds from initial public offering, net of offering costs -- -- 14,812,398
Proceeds from sale of stock -- 4,787 --
Borrowings against line of credit 4,737,418 7,500,000 2,775,000
Repayment against line of credit (1,700,000) -- (2,775,000)
Addition (repayment) of long-term debt 29,578 211,741 (1,212,807)
Due to stockholders/affiliates (370,572) 260,726 (727,271)
----------- ------------ ------------
Net cash provided by financing activities 2,696,424 7,977,254 12,872,320
----------- ------------ ------------
Effect of foreign currency translation on cash 1,395 (19,968) --
----------- ------------ ------------
Net increase (decrease) in cash
and cash equivalents (279,580) (5,964,698) 8,324,276
Cash and cash equivalents, beginning of year 2,957,517 8,922,215 597,939
----------- ------------ ------------
Cash and cash equivalents, end of year $ 2,677,937 $ 2,957,517 $ 8,922,215
=========== ============ ============
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Cash paid for interest $ 640,162 $ 416,901 $ 158,786
=========== ============ ============
Cash paid for income taxes $ 1,008,692 $ 1,773,512 $ 1,327,975
=========== ============ ============
</TABLE>
Non-Cash Transaction:
During the first quarter of 1997, the Company exchanged 4,301,000 shares of
Common Stock of the Company for all of the outstanding stock of the five
Founding Companies. Additionally, during the fourth quarter, the Company
exchanged approximately 222,000 shares of Common Stock of the Company
for the assets of two flexible accommodation providers.
In the first quarter of 1998, the Company issued approximately 380,000
shares of Common Stock of the Company or securities convertible into
Common Stock of the Company as consideration for acquisitions.
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
BRIDGESTREET ACCOMMODATIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
BridgeStreet Accommodations, Inc. ("BridgeStreet" or the "Company") was
incorporated on August 19, 1996, to create a leading national provider of
flexible accommodation services through the acquisition and consolidation of the
operations of flexible accommodation service companies. During the first quarter
of 1997, the Company acquired all the outstanding stock of five flexible
accommodation service providers (the "Founding Companies"), in exchange for
4,301,000 shares of Common Stock of the Company (the "Combination"). The Company
conducted no operations prior to January 2, 1997, except in connection with its
initial public offering and the Combination. For financial reporting purposes,
the largest Founding Company, Temporary Corporate Housing Columbus, Inc. ("TCH")
was designated as the accounting acquirer, and its acquisition of the remaining
four Founding Companies was accounted for using the purchase method of
accounting.
The consolidated financial statements presented herein have been
prepared by the Company and include the accounts of TCH, Corporate Lodgings,
Inc., Exclusive Interim Properties, Ltd. and Temporary Housing Experts, Inc. all
of which (together with certain affiliated companies) were merged with and into
subsidiaries of the Company on January 2, 1997, as well as the accounts of the
following wholly-owned operating subsidiaries from the indicated dates on which
they acquired (by merger with or purchase of substantially all of the assets of)
such flexible accommodation service providers: HAI Acquisition Corp. (March 31,
1997); BridgeStreet Texas, L.P. (Dallas, December 1, 1997); BridgeStreet
Arizona, Inc. (December 1, 1997); BridgeStreet North Carolina, Inc. (January 2,
1998); BridgeStreet Raleigh, Inc. (January 2, 1998); BridgeStreet Texas, L.P.
(Austin, January 2, 1998); BridgeStreet Colorado, Inc. (January 2, 1998);
BridgeStreet Accommodations Limited (February 19, 1998); BridgeStreet Canada,
Inc. (March 2, 1998); and BridgeStreet California, Inc. (June 1, 1998). All
intercompany accounts and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
in the preparation of these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Financial Instruments
The Company considers all highly liquid investments with original
maturities of three months or less to be cash and cash equivalents. Investments
in short-term marketable securities are deemed to be available-for-sale, and
accordingly, are stated at their fair value. Other financial instruments
consisting of trade and other receivables, and long-term debt (which are at
variable interest rates) are considered to have a fair value which approximates
carrying value at December 31, 1999 and 1998.
23
<PAGE> 24
Concentration of Credit Risk
Concentration of credit risk is limited to accounts receivable. The
Company may require collateral or other security to support their receivables.
The Company conducts periodic reviews of its clients' financial condition and
payment practices to minimize collection risks on accounts receivable.
Operating Stock
Operating stock to furnish new units, including linen, glassware,
silverware, utensils and minor appliances, is capitalized as it is purchased and
amortized, on a straight line basis, over a three year period to a residual
value of 50% of the original cost. Additional purchases of operating stock for
units already established are expensed as incurred.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Upon sale or retirement, the related cost and accumulated
depreciation are removed from the accounts, and any gain or loss is recorded in
the consolidated statements of operations. Depreciation is determined using the
straight-line method for financial reporting purposes over the estimated useful
lives of the respective assets. The double-declining balance method is used for
tax purposes. Estimated useful lives are as follows:
Estimated
Asset Classification Useful Life
-------------------- -----------
Computer hardware and software............. 3-7 Years
Office furniture and equipment ............ 5-7 Years
Automobiles ............................... 5 Years
Condominiums .............................. 39 Years
Leasehold Improvements .................... Lease life up to 7 Years
Repairs and maintenance are charged to expense as incurred. General and
administrative costs associated with the opening of new Company offices are
expensed as incurred.
Revenue Recognition
The Company recognizes revenues on the rentals of accommodations to its
clients on a pro rata basis over the length of the client's stay. Amounts
received relating to periods after the balance sheet date are reported as
deferred revenue in the accompanying consolidated balance sheets. Security
deposits received from guests are classified as a current liability, and
security deposits paid to landlords are classified as current assets in the
accompanying consolidated balance sheets.
Goodwill
Goodwill represents the excess purchase price paid over the fair value
of the net assets acquired and all transaction costs incurred in connection with
the acquisitions. The amortization of goodwill is provided on a straight-line
basis over a 35-year period. Goodwill amortization totaled approximately
$1,264,000, $1,098,000 and $489,000 in 1999, 1998 and 1997, respectively.
Accumulated amortization of goodwill totaled $2,747,000 and $1,587,000 at
December 31, 1999 and 1998, respectively.
24
<PAGE> 25
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" and Accounting Principles Board Opinion (APB) No. 17
"Intangible Assets", management regularly evaluates its accounting for goodwill
considering such factors as historical and future profitability, and believes
that the asset is realizable and the amortization period is appropriate.
Accommodation and Furniture Leases
The Company leases substantially all of its accommodations on a
short-term basis with lease terms typically ranging from one month to one year.
Furniture for the accommodations is substantially all leased on a monthly basis
from various furniture rental companies.
Effects of Foreign Currency
The Company has business operations in the United Kingdom and Canada.
In accordance with SFAS No. 52, the Company has converted the foreign
components of its balance sheets at the exchange rates of the foreign currency
at the balance sheet date. For December 31, 1999, the rates were 1.6150 U.S.
Dollars for one British Pound, and .6925 U.S. Dollar for one Canadian Dollar.
For December 31, 1998, the rates were 1.6628 U.S. Dollars for one British
Pound, and .6504 U.S. Dollar for one Canadian Dollar. The foreign components of
the income statements have been converted at blended exchange rates which were
as follows:
For the Year Ending December 31,
1999 1998
---- ----
U.S. Dollars for one British Pound 1.6172 1.6593
U.S. Dollar for one Canadian Dollar .6732 .6709
The Company did not have foreign operations prior to March 1998.
The cumulative effect of using the two different methods of converting
foreign currencies is shown on the statement of stockholders' equity as Foreign
Currency Translation.
Self-Insurance
On January 2, 1999, the Company converted its insured employee health
care plan, which covered employees in the United States, into a self-insured
health care plan. The self-insured health care plan provides the employees the
same coverage as they had under the prior plan, and is managed by the same
carrier. Under the plan, the Company funds medical costs up to two cap limits.
The first is $25,000 per covered individual; the second is a monthly maximum
stop loss amount. (During 1999, that amount was approximately $42,000 per
month.) Included in accrued expenses, other in the accompanying consolidated
balance sheet at December 31, 1999, is an accrual for the estimated run out
liability of approximately $112,500. The run out liability is the amount that
the Company would be required to pay its carrier to convert the self-insured
health plan back into a fully-insured health plan on December 31, 1999. Also
included in accrued expenses, other in the accompanying consolidated balance
sheet at December 31, 1999, is an accrual for the estimated incurred but not
reported (IBNR) liability of approximately $40,500. The IBNR represents the
Company's estimate of health insurance costs incurred during the year ended
1999, but not yet presented to the Company for payment.
25
<PAGE> 26
Advertising Costs
Advertising costs are expensed as incurred, and amounted to
approximately $885,000, $1,007,000 and $542,000 in 1999, 1998 and 1997,
respectively.
Reclassification
Certain items in the 1998 and 1997 financial statements have been
reclassified to conform to the 1999 presentation.
3. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income" which requires disclosure of comprehensive income, defined
as changes in stockholders' equity from non-owner sources, such as foreign
currency translation adjustment. The adoption of this statement had no impact on
the Company's net income or stockholders' equity. Prior year financial
statements have been reclassified to conform to the requirements of this
statement.
4. BUSINESS SEGMENTS
In 1998, the Company adopted SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information." This statement requires companies to
identify segments consistent with the manner in which management makes decisions
about allocating resources to segments and measuring their performance. It also
requires disclosure of products and services, geographic areas and major
customers. The Company's operating subsidiaries meet the aggregation criteria
established by SFAS No. 131 and have been aggregated for disclosure purposes.
The geographic and major customer disclosures are being made in accordance with
this statement, and are as follows.
In 1999, Andersen Worldwide accounted for approximately $9.9 million,
or 10.4% of the Company's consolidated 1999 revenues. In 1998, Andersen
Worldwide accounted for approximately $11 million, or 11.4% of the Company's
consolidated 1998 revenues. No client accounted for more than 10% of the
Company's consolidated 1997 revenues.
For the year ending December 31, 1999, the Company's United Kingdom
and Canadian subsidiaries each accounted for more than 10% of the Company's
revenue and consolidated pretax income, before corporate expenses, from external
customers. For the year ending December 31, 1998, no single country outside of
the United States comprised 10% or more of the Company's revenue from external
customers. Approximate revenues and pretax income, before corporate expenses,
for the Company's segments are as follows:
<TABLE>
<CAPTION>
REVENUES 1999 1998
- -------- ---- ----
<S> <C> <C> <C> <C>
United Kingdom $11,500,000 12.1% $ 7,400,000 7.7%
Canada 10,900,000 11.4% 8,700,000 9.0%
United States 73,000,000 76.5% 80,600,000 83.3%
PRETAX INCOME (before corporate expenses)
- -------------
United Kingdom $ 900,000 13.8% $ 1,000,000 11.5%
Canada 1,200,000 18.5% 1,100,000 12.7%
United States 4,400,000 67.7% 6,500,000 75.8%
</TABLE>
26
<PAGE> 27
Prior to March 1998, the Company did not have revenue from countries
outside of the United States. Long-lived assets located outside the United
States are as follows:
As of December 31
------------------------------
1999 1998
---- ----
Operating stock $ 128,000 $ 49,000
Property and equipment 1,504,000 574,000
Goodwill 14,965,000 11,339,000
----------- -----------
$16,597,000 $11,962,000
=========== ===========
All remaining long-lived assets are located in the United States.
5. INCOME TAXES
The Company records income taxes pursuant to SFAS No. 109, "Accounting for
Income Taxes". Under SFAS No. 109, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted statutory
rates to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities.
The components of income before provision for income taxes follow:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Domestic (net of corporate overhead) $(1,505,000) $ 421,000 $1,825,000
Foreign 2,096,000 2,305,000 0
----------- ----------- ----------
Total $ 591,000 $ 2,726,000 $1,825,000
=========== =========== ==========
</TABLE>
Provision for income taxes follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current tax expense
Federal $ (548,000) $ 155,000 $1,077,000
State and local (65,000) 174,000 226,000
Foreign 679,000 848,000 0
----------- ----------- ----------
Total current expense $ 66,000 $ 1,177,000 $1,303,000
----------- ----------- ----------
Deferred tax expense
Federal $ 472,000 $ 79,000 $ 58,000
State and local 7,000 29,000 10,000
Foreign 110,000 (18,000) 0
----------- ----------- ----------
Total deferred expense $ 589,000 $ 90,000 $ 68,000
----------- ----------- ----------
Total provision for income taxes $ 655,000 $ 1,267,000 $1,371,000
=========== =========== ==========
</TABLE>
Net income tax refunds were $110,000 in 1999. Total income tax payments, net of
refunds, were $1.1 million and $1.3 million in 1998 and 1997, respectively.
27
<PAGE> 28
A reconciliation of the federal statutory income tax rate of 34% and the
effective income tax rate for the year ended December 31 follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income before income taxes $ 591,000 $ 2,726,000 $ 1,825,000
========= =========== ===========
Tax Expense at U.S. statutory rate 201,000 $ 927,000 621,000
State taxes, net of federal tax benefit (43,000) 115,000 156,000
Foreign tax effect - net 127,000 162,000 --
Goodwill 287,000 255,000 161,000
Officers' stock award -- -- 411,000
Meals and entertainment 77,000 23,000 23,000
Other - net 6,000 (215,000) (1,000)
--------- ----------- -----------
Provision for income taxes $ 655,000 $ 1,267,000 $ 1,371,000
========= =========== ===========
Effective income tax rate: 110.9% 46.5% 75.1%
</TABLE>
Deferred tax assets (liabilities) at December 31, 1999 and 1998 follow:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Deferred tax assets
Accruals not yet deductible for tax purposes $ 751,000 $ 839,000
Accounts receivable (12,000) (195,000)
Deferred income 40,000 41,000
Alternative minimum tax carryforward 78,000 --
Other 28,000 7,000
----------- ---------
Gross deferred tax assets $ 885,000 $ 692,000
=========== =========
Deferred tax liabilities
Operating stock $(1,013,000) $(800,000)
Fixed assets (319,000) (114,000)
Intangible assets (304,000) (12,000)
Other (98,000) (13,000)
----------- ---------
Gross deferred tax liabilities $(1,734,000) $(939,000)
=========== =========
Net deferred tax liability $ (849,000) $(247,000)
=========== =========
</TABLE>
The company does not provide deferred income taxes on unremitted
earnings of foreign subsidiaries as the funds are deemed indefinitely reinvested
in those operations. It is not practicable to calculate the deferred taxes
associated with these unremitted earnings.
28
<PAGE> 29
6. ACQUISITIONS
As discussed in Note 1, in the first quarter of 1997, the Company
merged with five flexible accommodation operating companies in stock-for-stock
tax-free mergers. The mergers have been accounted for using the purchase method
of accounting with TCH designated as the accounting acquirer and the other
operating companies designated as "acquired companies." The results of
operations of the "acquired companies" have been included in the accompanying
consolidated financial statements from their respective dates of acquisition.
The purchase price and allocation of the purchase price of the four "acquired
companies," including the value of stock issued to the founders of BridgeStreet
as a transaction fee, was approximately $17.7 million based on an independent
appraisal of the net assets acquired. The aggregate cost of the acquisitions
exceeded the estimated fair value of assets and liabilities of the acquired
companies by $17.5 million which is being amortized as goodwill over 35 years.
Subsequent to March 31, 1997, the Company made three additional
acquisitions during 1997. The cost of these acquisitions was $6.75 million,
consisting of $4.40 million of cash and $2.35 million of stock. The purchase
price allocation of these acquisitions resulted in goodwill of approximately
$7.4 million.
During 1998, the Company acquired seven companies. The acquisitions
have been accounted for using the purchase method of accounting. The total
aggregate cost of these acquisitions was approximately $20.5 million, consisting
of cash and notes of $16.3 million and $4.2 million in common stock or
securities exchangeable for common stock. The purchase price allocation of these
acquisitions resulted in initial goodwill of approximately $17.0 million that is
being amortized over 35 years. During 1999, the Company paid additional purchase
consideration based on performance goals established at the time of the
acquisitions. These amounts totaled $4.2 million, and are being amortized over
the remaining life of the goodwill.
The Company has not acquired any additional flexible accommodation
service companies since June 1998.
The following table presents unaudited selected financial information
for the Company, the five Founding companies, and the acquisitions of ABA, Inc.
of Dallas, ABA, Inc. of Phoenix, Home on the Road, Inc. of Charlotte, Home on
the Road-Raleigh, London Life, GTA and Gracious Corporate Lodging on a pro forma
basis, assuming the companies had been combined and the initial public offering
had occurred as of the beginning of 1997.
Year ended December 31,
-----------------------
1998 1997
---- ----
Revenues $102,642,000 $88,261,000
Net income $ 1,617,000 $ 1,398,000
Net income per share-basic and diluted $ 0.20 $ 0.17
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the acquisitions
been made at the beginning of 1997.
29
<PAGE> 30
7. PROPERTY AND EQUIPMENT, AND OPERATING STOCK
Property and equipment, and operating stock consist of the following at
December 31:
1999 1998
----- ----
Land $ - $ 266,235
Condominiums - 998,484
Computer hardware and software 4,721,274 2,776,076
Office furniture and equipment and leasehold
improvements 3,569,270 2,216,008
Automobiles 622,830 491,894
---------- ----------
Total property and equipment 8,913,374 6,748,697
Less-accumulated depreciation 2,563,886 1,369,673
---------- ----------
Property and equipment, net $6,349,488 $5,379,024
========== ==========
Operating stock $4,009,374 $3,263,510
Less-accumulated amortization 1,439,417 1,045,948
---------- ----------
Operating stock, net $2,569,957 $2,217,562
========== ==========
Depreciation expense was $1,285,355, $829,003 and $259,730 in 1999,
1998 and 1997, respectively. Operating stock amortization expense was $393,469,
$596,354 and $241,468 in 1999, 1998 and 1997, respectively.
8. ACCRUED EXPENSES, OTHER
Accrued expenses, other includes the following at December 31:
1999 1998
---------- ----------
Cash overdrafts $1,845,000 $1,306,000
Accrued income taxes 708,000 -
Accrued sales and use tax 542,000 440,000
Accrued maintenance 493,000 529,000
Accrued legal and accounting 117,000 90,000
Accrued restructuring 146,000 666,000
Accrued other 2,300,000 1,553,000
---------- ----------
Total $6,151,000 $4,584,000
========== ==========
30
<PAGE> 31
9. RELATED PARTY TRANSACTIONS
An operating subsidiary of the Company purchases advertising space from
City Visitor Publications, Inc., ("City Visitor"), an entity that publishes a
travel magazine and is 100% owned by a former executive officer and beneficial
shareholder of the Company. Included in the accompanying consolidated statements
of operations for the years ended December 31, 1999, 1998 and 1997 are $19,933,
$22,500 and $16,000 of advertising expenses paid to City Visitor. In addition,
during 1999 the Company purchased certain office assets from City Visitor. The
purchase price of those assets was $7,000. The Company believes that this amount
represents the assets' fair market value at the time of the purchase.
TCH leases televisions, VCRs and microwave ovens from Saturn
Enterprises, Inc. ("Saturn"), which is owned by the spouse of one of the
Company's directors. The original agreement commenced on January 1, 1989, and
was renewed on December 28, 1995, for a three-year period beginning on January
1, 1996. These items are rented at rates that are comparable to those charged by
unaffiliated companies. Included in accounts payable in the accompanying
consolidated balance sheets at December 31, 1999 and 1998, are amounts owed to
Saturn of approximately $9,000 and $18,000, respectively.
BridgeStreet Canada contracts with The Apartment Maid Service, Inc.
(TAMSI) for housekeeping services at its leased properties. TAMSI is owned by a
relative of a senior manager of the Company. The services are provided at rates
that are comparable to those charged by unaffiliated companies. Included in the
accompanying consolidated statements of operations for the periods ended
December 31, 1999, 1998 and 1997, is approximately $592,000, $460,000, and $0 of
housekeeping expense related to this arrangement, respectively. Included in
accounts payable in the accompanying consolidated balance sheets at December 31,
1999 and 1998 are amounts owed to TAMSI of approximately $3,000 and $4,000,
respectively.
BridgeStreet Canada rents five townhouses from Global Hospitality Inc.,
which is owned by a senior manager along with related parties. BridgeStreet
Canada entered into a property management agreement with respect to these
properties that requires BridgeStreet Canada to pay rents in the amount of CAN
$1,250 per unit per month (CAN $75,000 per year). The initial term of this
agreement was for one year and ten months, and, therefore, the original
agreement expired on December 31, 1999. In January of 2000, the agreement was
renewed for three years (along with an unrelated party agreement to manage the
thirteen other townhouses in the development). The rental has been increased to
CAN $1,350 per unit per month (CAN $81,000 per year). BridgeStreet believes that
the rental amount, and other terms of the property management agreement, are the
same or similar to what could be obtained in an arms length transaction.
Included in the accompanying consolidated statements of operations for the
periods ended December 31, 1999, 1998 and 1997, is approximately $49,000,
$39,000 and $0 of rent expense related to this management contract.
During 1999, an operating subsidiary of the Company leased office space
from ABA Office Corporation, Inc. which is 100% owned by a senior manager of the
Company. The lease expired July 31, 1999, and was not renewed. Included in the
accompanying consolidated statements of operations for the periods ended
December 31, 1999, 1998 and 1997, is $14,000, $24,000 and $2,000 of rent expense
related to the office space, respectively. There are no amounts included in
accounts payable in the accompanying consolidated balance sheets at December 31,
1999 and 1998 due ABA Office Corporation. In management's opinion, the lease
terms and rental amounts are comparable to amounts charged by unaffiliated
entities.
31
<PAGE> 32
10. RESTRUCTURING CHARGE
During the second quarter of 1998, the Company announced a realignment
of its senior management, which resulted in a charge of $1.33 million on a
pretax basis ($732,000 after tax). The second quarter charge to earnings of
$1.33 million represents an accrual of $962,000 for severance and other employee
benefits for five employees and an accrual of $368,000 for lease termination
costs, the write-off of certain software and marketing costs and professional
fees associated with the realignment. The accounting for the restructuring
charge is in compliance with the Emerging Issues Task Force ("EITF") 94-3,
"Liability Recognition for Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)." During 1998, approximately $664,000 was charged
against the reserve consisting of severance and benefit expenses of $341,000,
the write-off of marketing materials and software of $202,000 and professional
fees and other expenses of $121,000. During 1999, approximately $520,000 was
charged against the reserve consisting of severance and benefit expenses of
$460,000, and write-off of software and other expenses of $60,000. As of
December 31, 1999, the balance remaining in the reserve account is approximately
$146,000. The majority of the balance relates to continuing severance and
benefit expenses. The Company expects all costs to be incurred by the end of the
second quarter of 2000.
11. COMMITMENTS AND CONTINGENCIES
Employment Contracts. During the first quarter of 1997, the Company
entered into three-year employment contracts with three officers requiring
minimum base salaries aggregating $450,000 per year. The contracts also provide
severance benefits of up to the longer of 12 months pay or the remaining
contract term for two of the officers. During the second quarter of 1998 the
Company announced a management restructuring and entered into severance
agreements with two of the officers. During 1998, the Company entered into a
three year employment contract with its Chief Executive Officer. The contract
expires in June of 2001.
Lease Commitments. The Company leases administrative offices,
accommodations and furniture at several locations through July 2004. Rent
expense for the years ended December 31, 1999 and 1998 was approximately
$57,357,000 and $56,031,000, respectively. Minimum future rental payments on
non-cancelable leases with a term of twelve months or longer at December 31,
1999, are as follows:
OPERATING LEASES
----------------
2000 $ 13,234,000
2001 3,546,000
2002 3,175,000
2003 2,954,000
2004 2,735,000
Thereafter 21,856,000
--------------
Total $ 47,500,000
==============
Litigation
The Company is party to litigation in the ordinary course of business.
The Company does not anticipate an unfavorable result in any such litigation or
believe that an unfavorable result, if it occurred, would have a material
adverse effect on its business, financial condition or results of operations.
32
<PAGE> 33
12. EARNINGS PER SHARE
For purposes of calculating the basic and diluted earnings per share,
no adjustments have been made to the reported amounts of net income.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Basic common shares (weighted average) 8,169,835 8,123,306 5,904,484
Dilutive stock options -- -- 25,764
--------- --------- ---------
Diluted common shares 8,169,835 8,123,306 5,930,248
========= ========= =========
</TABLE>
There were no dilutive stock options outstanding at December 31, 1999
or 1998 as all stock options were anti-dilutive.
13. REVOLVING CREDIT AGREEMENT AND LONG-TERM DEBT
The Company has a $25 million revolving credit facility agreement. The
revolving credit agreement is secured by 65% of the capital stock of the
Company's operating subsidiaries and extends to March 31, 2002. The revolving
credit agreement contains certain restrictive covenants with which the Company
must comply. The credit facility (i) prohibits the payment of dividends and
other distributions by the Company, (ii) generally will not permit the Company
to incur or assume other indebtedness, (iii) requires the bank's approval for
acquisitions meeting certain cash and total acquisition consideration, and (iv)
requires the Company to comply with certain financial covenants.
During the year ended 1999, the Company twice amended its revolving
credit facility agreement. During the first quarter of 1999, the revolving
credit agreement was amended with respect to certain pricing provisions,
financial covenants and other miscellaneous matters. During the second quarter
of 1999, the revolving credit agreement was amended to provide a Canadian
sublimit and to add the Company's Canadian subsidiary as a party to the
agreement for purposes of borrowing under the Canadian sublimit.
As of December 31, 1999, the Company was not in compliance with the
financial covenants of the agreement. Subsequent to December 31, 1999, the
Company amended its revolving credit agreement to waive the effect of breaches
of certain provisions of the credit agreement. After this amendment, the Company
is in compliance with, or has a waiver for, all covenants as of December 31,
1999. The amendment also allowed the Company to establish a $2.0 million line of
credit agreement with one of the participating banks.
Additionally, the Company's current projections indicate that the
Company may be out of compliance with certain financial covenants during the
first and second quarters of 2000. The Company has received a waiver for the
covenants it anticipates it may be out of compliance with. The Company believes
that with these waivers, it will be in compliance with its financial covenants
for the year ending December 31, 2000.
The Company has $11.2 million and $7.5 million outstanding under the
facility at December 31, 1999 and 1998. Interest on the United States balance is
payable, at the Company's option, at 0.25% to 0.5% above the bank's prime
lending rate, or 1.75% to 2.0% above the Eurodollar or LIBOR rates. A commitment
fee is payable on the average unused credit at a rate of 0.375% to 0.45%.
Interest on the amounts borrowed under the Canadian sublimit is
payable, at the Company's option, at 1.5% to 1.75% above the bank's Canadian
prime lending rate, or 1.75% to 2.0% above the Canadian cost of funds rate.
At December 31, 1999 and 1998, the Company's weighted average interest
rate was 7.85% and 6.75%, respectively.
33
<PAGE> 34
At December 31, 1999, the Company has term notes and capitalized
leases, which are secured by fixed assets, totaling approximately $168,000.
These notes and leases are payable in various installments through May 2002. At
December 31, 1998, the Company had two non-interest bearing promissory notes
payable totaling $730,000 resulting from two acquisitions. Of the notes, one
note for $100,000 was due and paid on February 1, 1999, and the other note for
$630,000 was due and paid on June 1, 1999. The Company also has term notes and
capitalized leases, which are secured by fixed assets, totaling approximately
$157,000. These notes and leases are payable in various installments through May
2002.
14. CAPITAL STOCK
The Company's authorized capital stock consists of 35,000,000 shares of
Common Stock, $.01 par value per share, and since April 10, 1997, 5,000,000
shares of Preferred Stock, $0.01 par value per share.
Common Stock. On September 24, 1997, the Company completed its initial
public offering of 3,007,250 common shares, of which 2,092,250 shares were
issued by the Company and 915,000 shares were sold by certain stockholders of
the Company at a public offering price of $9.00 per share (the "Offering"). The
net proceeds to the Company (after deducting underwriting discounts and
commissions and expenses incurred in connection with the Offering) of
approximately $14.8 million were used to repay $1.0 million of certain
indebtedness of the Founding Companies assumed in connection with the
Combination, $2.8 million (of which $1.0 million related to acquisitions) of
indebtedness outstanding under the Company's revolving credit facility, $28,000
of the outstanding amount due under a loan made to the Company by the spouse of
one of the Company's directors, and approximately $3.6 million for acquisitions
and expenses associated with acquisitions. The remaining net proceeds were
invested in short-term, interest bearing, investment grade securities at
December 31, 1997, and subsequently used for acquisitions, working capital and
general corporate purposes.
At December 31, 1999 and 1998, there were 8,169,835 shares of Common
Stock outstanding. Holders of Common Stock are entitled to one vote for each
share held of record on all matters to be submitted to a vote of the
stockholders, and do not have cumulative voting rights. In the event of any
liquidation, dissolution or winding-up of the affairs of the Company, holders of
Common Stock will be entitled to share ratably in the assets of the Company
remaining after payment or provision for payment of all of the Company's debts
and obligations and after liquidation payments to holders of outstanding shares
of Preferred Stock, if any.
Preferred Stock. At December 31, 1999 and 1998, there were no shares of
Preferred Stock outstanding. Holders of Preferred Stock would have priority over
the holders of Common Stock with respect to dividends, and to other
distributions, including the distribution of assets upon liquidation. The Board
of Directors has the authority, without stockholder authorization, to issue
shares of Preferred Stock in one or more series and to fix terms, limitations,
relative rights and preferences and variations as among series.
15. RESTRICTED STOCK COMPENSATION
In 1996, the Chief Executive Officer and Chief Financial Officer
purchased 250,000 shares of restricted Common Stock for nominal value. The
restrictions were originally scheduled to lapse upon the earlier to occur of
five years from the date of purchase or upon the successful completion of an
initial public offering of the Company's Common Stock or a change in control of
the Company, as long as the individuals holding the stock were the Chief
Executive Officer and Chief Financial Officer on the date the restrictions
lapsed. As part of the negotiations involving these officers' employment
agreements during the first quarter of 1997, the Company's Board of Directors
removed all restrictions on the stock as of March 31, 1997, and all of the
restricted shares became fully vested. In connection with this vesting, the
Company recognized non-recurring, non-cash compensation expense of approximately
$1,210,000, which was charged to operations with an offsetting credit to
additional paid-in capital in the first quarter of 1997. The compensation charge
of approximately $1,210,000 represented the difference between the value of the
stock issued and the amount paid by the officers, measured by an independent
appraisal as of the date the individuals were appointed to be the Chief
Executive Officer and Chief Financial Officer.
34
<PAGE> 35
16. STOCK OPTION PLANS
The Company adopted the 1997 Equity Incentive Plan (the "Equity
Incentive Plan") which provides for the award of incentive stock options
("ISOs"), non-qualified stock options, stock appreciation rights, performance
shares, restricted stock and stock units to all directors and employees
(including directors and employees of the founding companies) and consultants
and advisors to the Company. The number of shares authorized and reserved for
issuance under the Equity Incentive Plan is 1,500,000. In general, options are
granted at the market price on the date of grant, vest in equal increments over
3 years, and expire 10 years from the date of grant. During 1999, the Company
granted options under the Equity Incentive Plan to purchase 71,750 shares at
prices ranging from $3.44 to $4.88. As of December 31, 1999, the Company had
outstanding options to purchase 1,075,834 shares of Common Stock under the
Equity Incentive Plan at prices ranging from $3.44 to $9.00.
In 1998, the Company granted additional options to its Chief Executive
Officer and President to purchase 300,000 shares of Common Stock. Although these
options were not granted pursuant to the Equity Incentive Plan, they are subject
to the same terms and conditions contained in that plan as discussed above. The
options were granted at a price of $7.50 per share. The market value of the
Company's common stock on the date of grant was $5.25. Of these options, 175,000
will vest over a two year period on a pro rata basis. The remaining 125,000
options will vest in full after eight years with accelerated vested occurring
upon certain conditions being met as follows: One-third of the options will vest
if the Company's closing stock price averages $9.75 per share for ten
consecutive trading days. Another one-third will vest if the Company's closing
stock price averages $14.625 per share for ten consecutive trading days. The
final one-third will vest if the Company's closing stock price averages $19.50
per share for ten consecutive trading days.
The Company has adopted the Stock Plan for Non-Employee Directors (the
"Directors' Plan"). During 1997, each director who was not an employee of the
Company or one of its subsidiaries and neither a holder of five percent or more
of the Company's Common Stock nor a stockholder of the Company prior to the
Company's initial public offering ( a "non-employee director"), and each
director nominee, received options to purchase 12,500 shares of Common Stock
with a per-share exercise price equal to the offering price. These options vest
in equal increments over three years, and expire ten years from the date of the
grant. During 1999, the Directors' Plan was amended to provide for annual option
grants to the non-employee directors. Each non-employee director initially
elected following the Offering also will be granted an option to purchase 7,500
shares of Common Stock having a per-share exercise price equal to the fair
market value of the Common Stock on the date of such grant. These options vest
immediately, and expire ten years from the date of the grant. The number of
shares authorized and reserved for issuance under the Directors' Plan is
100,000. During 1999, the Company granted options to purchase 15,000 shares at
prices ranging from $4.00 to $4.50. As of December 31, 1999, the Company had
outstanding options to purchase 42,500 shares of Common Stock at prices ranging
from $4.00 to $9.00 per share, under the Directors' Plan.
35
<PAGE> 36
The Company continues to account for stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" under which no compensation cost for
stock options is recognized for stock option awards granted at or above fair
market value. SFAS No. 123, "Accounting for Stock-Based Compensation"
established accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation plans. The Company
has elected to remain on its current method of accounting as described above,
and has adopted the disclosure requirements of SFAS No. 123. Had compensation
expense for the Company's stock-based compensation plans been determined based
upon fair values at the grant dates for awards under those plans in accordance
with SFAS No. 123, the Company's net income per share would have been reduced to
the pro forma amounts indicated below.
1999 1998 1997
---- ---- ----
Net Income
As reported...... $ (64,397) $1,459,068 $454,091
Pro forma........ (475,588) 1,063,785 289,964
Earnings per share
As reported..... $ (0.01) $ 0.18 $ 0.08
Pro forma....... $ (0.06) $ 0.13 $ 0.05
The weighted average fair value of options granted during 1999, 1998
and 1997 estimated on the date of grant using the Black-Scholes option pricing
model was $2.26, $1.93 and $4.78, respectively. The fair value of options
granted is estimated on the date of grant using the following assumptions:
expected volatility of 30% to 41%, risk-free interest rates of 5.0% to 6.5%,
and an expected life ranging from 8 to 10 years, annual forfeitures ranging
from 0.0% to 10.0%, and an expected dividend yield of 0.0%.
Summary information about the Company's stock options outstanding at
December 31, 1999 is as follows.
Number of Price per
Options Share
---------- ------------------
Balance, January 1, 1997 0
Options granted 537,517 $9.00 to $11.37
----------
Balance, January 1, 1998 537,517 $9.00 to $11.37
Options granted 769,350 $3.50 to $7.50
Options exercised (532) $9.00
Options terminated (145,251) $4.00 to $9.00
----------
Balance, January 1, 1999 1,161,084 $3.50 to $9.00
----------
Options granted 86,750 $3.44 to $4.88
Options terminated (129,500) $3.50 to $4.88
----------
Balance, December 31, 1999 1,118,334 $3.44 to $9.00
==========
On August 17, 1998, the Company reset the price of 140,984 stock
options to $4.00.
36
<PAGE> 37
Detailed information about the Company's stock options outstanding
at December 31, 1999 is as follows.
Exercise Outstanding Weighted Average Exercisable
Price at 12/31/99 Contractual Period at 12/31/99
- -------------------------------------------------------------------------------
$3.44 3,000 9.75
$3.50 132,000 8.95 35,833
$3.63 8,500 9.41
$3.75 1,500 9.37
$3.88 3,000 9.67
$4.00 207,334 8.93 61,612
$4.13 3,000 9.17
$4.25 7,500 8.59 2,500
$4.50 10,500 9.17
$4.56 500 9.17
$4.63 500 9.17
$4.69 500 9.17
$4.81 3,000 9.67
$7.50 500,000 8.46 201,563
$9.00 237,500 7.77 154,167
- ----------------------------------------------------------------------------
$3.44 - $9.00 1,118,334 455,675
========= =========
17. DEFINED CONTRIBUTION PLANS
The Company and its subsidiaries have a defined contribution (401(k))
plan for substantially all employees. Employees may contribute up to 15% of
their pay. Currently, the Company contributes, in cash, amounts equal to 30
percent of the employee's contributions up to 5 percent of the employee's pay.
The employee vests in the Company match over a three-year period on a pro rata
basis. The amount expensed for the Company's matching contribution to the plan
was $81,300, $51,800 and $0 in 1999, 1998 and 1997, respectively.
18. SELECTED QUARTERLY DATA
The following is a summary of unaudited quarterly results for years
ended December 31, 1999 and 1998.
(Amounts in thousands, except per share amounts.)
Three Months Ended 1999
--------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Revenues $23,186 $23,739 $25,133 $ 23,350
Operating income (loss) 238 777 1,000 (942)
Net income (loss) 83 271 506 (924)
Earnings (loss) per share -
Basic and diluted $ 0.01 $ 0.03 $ 0.06 $ (0.11)
Three Months Ended 1998
--------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Revenues $19,539 $24,584 $27,634 $ 24,910
Operating income (loss) 77 (358) 2,163 1,021
Net income (loss) 70 (241) 1,142 488
Earnings (loss) per share -
Basic and diluted $ 0.01 $ (0.03) $ 0.14 $ 0.06
37
<PAGE> 38
Results for the second quarter of 1998 include expense of $1.33 million on a
pretax basis ($732,000 after tax) for a restructuring charge. The one-time
charge reduced earnings in the second quarter, and for the year, by $0.09 per
share.
19. SUBSEQUENT EVENTS
On March 23, 2000, the Company entered into a definitive merger
agreement (the "Agreement") providing for the acquisition of the Company by
MeriStar Hotels & Resorts, Inc. ("MMH").
Under the terms of the Agreement, each outstanding share of the Company
would be exchanged for $1.50 in cash, plus 0.5 share of MMH common stock. Total
consideration per share of the Company is estimated to be approximately $3.00.
The Agreement is subject to approval of the stockholders of the Company and
other customary conditions.
38
<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
Board of Directors of BridgeStreet Accommodations, Inc.
We have audited the accompanying consolidated balance sheets of
BridgeStreet Accommodations, Inc. (a Delaware corporation) and subsidiaries as
of December 31, 1999 and 1998, and the related consolidated statements of
operations and comprehensive income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
BridgeStreet Accommodations, Inc. and subsidiaries as of December 31, 1999 and
1998, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14(a)(1) and
(2) and Item 14(d) of Form 10-K are the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
March 28, 2000
39
<PAGE> 40
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item will be contained in the
Company's Proxy Statement or an Amendment to this Form 10-K, which the Company
intends to file within 120 days following the end of its fiscal year ended
December 31, 1999, and such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item will be contained in the
Company's Proxy Statement or an Amendment to this Form 10-K, which the Company
intends to file within 120 days following the end of its fiscal year ended
December 31, 1999, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item will be contained in the
Company's Proxy Statement or an Amendment to this Form 10-K, which the Company
intends to file within 120 days following the end of its fiscal year ended
December 31, 1999, and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of its fiscal year ended December 31, 1999, and such
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of the Company and its
subsidiaries are included pursuant to Item 8.
<TABLE>
<CAPTION>
Item Page No.
- ---- --------
<S> <C>
Report of Independent Public Accountants................................................
Consolidated Balance Sheets as of December 31, 1999 and 1998............................
Consolidated Statements of Operations and Comprehensive Income for the
years ended December 31, 1999, 1998 and 1997...........................................
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997........................................................
Consolidated Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997...........................................................................
</TABLE>
40
<PAGE> 41
(a)(2) FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts
(a)(3) EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
------- ----------- --------
<S> <C> <C>
*3.1 Certificate of Incorporation of the Company.....................................
*3.2 By-laws of the Company..........................................................
*4 Form of Specimen Stock Certificate..............................................
*10.1 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., EIP Acquisition Corp., Exclusive Interim
Properties, Ltd. and Melanie R. Sabelhaus.......................................
*10.2 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., THEI Acquisition Corp., Temporary Housing
Experts, Inc., Connie F. O'Briant and Thomas W. O'Briant........................
*10.3 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., TCHI Acquisition Corp., Temporary Corporate
Housing Columbus, Inc., Temporary Corporate Housing Cleveland, Inc., Temporary
Corporate Housing Cincinnati, Inc., Temporary Corporate Housing Pittsburgh, Inc.,
SLD Partnership, Lynda Clutchey, David Clutchey III, Beth Holzer and David Holzer
*10.4 Agreement and Plan of Merger dated as of December 30, 1996 by and among
BridgeStreet International Inc., CL Acquisition Corp., Corporate Lodgings, Inc.,
Corporate Lodgings of Kentucky, Inc., Corporate Lodgings of Minnesota, Inc.,
Corporate Lodgings of Pennsylvania, Inc., Corporate Lodgings of Wisconsin, Inc.
and Rocco A. DiLillo............................................................
*10.5 Agreement and Plan of Merger dated as of March 31, 1997 by and among BridgeStreet
International Inc., HAI Acquisition Corp., Home Again, Inc., Home Again
Amenities, Inc., Home Again Corporate Housing, Inc. and Sandra A. Brown.........
10.6 Purchase Agreement dated February 19, 1998 among BridgeStreet Accommodations,
Inc. and London Life Apartments Limited (Incorporated by reference to the
Company's Current Report on Form 8-K dated March 4, 1998).......................
*10.7 1997 Equity Incentive Plan......................................................
*10.8 Stock Plan for Non-Employee Directors...........................................
*10.9 Employment Agreement dated December 30, 1996, between CL Acquisition Corp. and
Rocco A. DiLillo................................................................
*10.10 Employment Agreement dated December 30, 1996, between EIP Acquisition Corp. and
Melanie R. Sabelhaus............................................................
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C>
*10.11 Employment Agreement dated December 30, 1996 between THEI Acquisition Corp. and
Connie F. O'Briant..............................................................
*10.12 Employment Agreement dated December 30, 1996, between TCHI Acquisition Corp. and
Lynda Clutchey..................................................................
*10.13 Employment Agreement dated as of January 2, 1997, between BridgeStreet
International Inc. and Mark D. Gagne............................................
*10.14 Employment Agreement dated as of March 31, 1997, between BridgeStreet
International Inc. and William N. Hulett, III...................................
*10.15 Revolving Credit Agreement dated as of March 31, 1997 between
BridgeStreet International Inc., as Borrower, and Fleet National
Bank and the Other Lending Institutions listed on Schedule 1
thereto and Fleet National Bank as Agent......
*10.16 Revolving Credit Note for the principal balance of $10,000,000, dated March 31,
1997............................................................................
*10.17 Rental Agreement between Saturn Enterprises Inc. and Temporary Corporate Housing
Inc. dated December 28, 1995....................................................
*10.18 Exclusive Lease Agreement between Integrity Furniture, Inc. and Temporary
Corporate Housing Pittsburgh, Inc. dated September 12, 1995.....................
10.19 Stock Purchase Agreement dated as of March 2, 1998 by and among BridgeStreet
Accommodations, Inc., BridgeStreet Canada, Inc., Global Hospitality, Inc., Thomas
Vincent and the Vincent Family Trust (Incorporated by reference to the Company's
Current Report on Form 8-K dated March 17, 1998)................................
**10.20 Separation Agreement dated as of January 21, 1999 between BridgeStreet
Accommodations, Inc. and Melanie R. Sabelhaus...................................
**10.21 Separation Agreement dated as of February 10, 1999 between BridgeStreet
Accommodations, Inc. and Rocco DiLillo..........................................
**10.22 Separation Agreement dated as of March 4, 1999 between BridgeStreet
Accommodations, Inc. and Connie F. O'Briant.....................................
**10.23 Amendment to Employment Agreement dated as of January 2, 1997, between
BridgeStreet International Inc. and Mark D. Gagne...............................
+10.24 Third Amendment to Revolving Credit Agreement dated as of May 5, 1997, between
BridgeStreet Accommodations, Inc. and Fleet National Bank.......................
+10.25 Fourth Amendment to Revolving Credit Agreement dated as of May 5, 1997, between
BridgeStreet Accommodations, Inc. and Fleet National Bank.......................
+10.26 Fifth Amendment to Revolving Credit Agreement dated as of May 5, 1997, between
BridgeStreet Accommodations, Inc. and Fleet National Bank.......................
+10.27 Employment Agreement dated as of June 12, 1998 between BridgeStreet
Accommodations, Inc. and John E. Danneberg......................................
</TABLE>
42
<PAGE> 43
<TABLE>
<S> <C>
+10.28 Employment Agreement dated as of January 3, 2000 between BridgeStreet
Accommodations, Inc. and Wayne B. Goldberg......................................
+10.29 Employment Agreement dated as of January 3, 2000 between BridgeStreet
Accommodations, Inc. and Ware H. Grove..........................................
+10.30 Sixth Amendment to Revolving Credit Agreement dated as of May 5, 1997, between
BridgeStreet Accommodations, Inc. and Fleet National Bank.......................
+21 Subsidiaries of the Registrant..................................................
+23 Consent of Arthur Andersen LLP..................................................
+27 Financial Data Schedule.........................................................
</TABLE>
* Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 333-26647).
** Incorporated by reference to the Company's 1998 filing of Form 10-K.
+ Filed herewith.
(b) The Company filed no reports on Form 8-K during the last quarter of its
fiscal year ended December 31, 1999.
(c) See item 14(a) (3) above
43
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BRIDGESTREET ACCOMMODATIONS, INC.
Date: March 30, 2000 By: /s/ John E. Danneberg
-------------------------------------
John E. Danneberg
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ John E. Danneberg PRESIDENT, CHIEF EXECUTIVE OFFICER MARCH 28, 2000
- ---------------------------------- AND DIRECTOR
JOHN E. DANNEBERG
/s/ Ware H. Grove CHIEF FINANCIAL OFFICER MARCH 28, 2000
- ----------------------------------
WARE H. GROVE
/s/ Paul M. Verrochi CHAIRMAN OF THE BOARD MARCH 28, 2000
- ----------------------------------
PAUL M. VERROCHI
/s/ Lynda D. Clutchey DIRECTOR MARCH 28, 2000
- ----------------------------------
LYNDA D. CLUTCHEY
/s/ David B. Hammond DIRECTOR MARCH 28, 2000
- ----------------------------------
DAVID B. HAMMOND
/s/ William N. Hulett DIRECTOR MARCH 28, 2000
- ----------------------------------
WILLIAM N. HULETT
/s/ Stephen J. Ruzika DIRECTOR MARCH 28, 2000
- ----------------------------------
STEPHEN J. RUZIKA
/s/ Jerry Sue Thornton DIRECTOR MARCH 28, 2000
- ----------------------------------
JERRY SUE THORNTON
/s/ Robert A. Bosak
- ---------------------------------- TREASURER, CORPORATE CONTROLLER MARCH 28, 2000
ROBERT A. BOSAK, CPA AND PRINCIPAL ACCOUNTING OFFICER
</TABLE>
44
<PAGE> 45
SCHEDULE II
BRIDGESTREET ACCOMMODATIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Provision Accounts Balance
Beginning Charged to Accounts Written Payments at End
of Year Expense Recovered Off Made of Year
------- ------- --------- --- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Allowance for Doubtful Accounts $270,000 $ 30,000 $ - $ - $ - $300,000
Restructuring reserve $665,703 $ - $ - $ - $520,135 $145,568
Year ended December 31, 1998
Allowance for Doubtful Accounts $166,762 $ 103,238 $ -- $ -- $ -- $270,000
Restructuring reserve $ -- $1,330,000 $ -- $ -- $664,297 $665,703
Year ended December 31, 1997
Allowance for Doubtful Accounts $ 45,000 $ 121,672 $ -- $ -- $ -- $166,762
</TABLE>
45
<PAGE> 1
Exhibit 10.24
THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT
---------------------------------------------
This Third Amendment to Revolving Credit Agreement ("Third Amendment")
is made as of February 17, 1999 by and among Bridgestreet Accommodations, Inc.
f/k/a Bridgestreet International, Inc. ("Borrower"), a Delaware corporation
having its principal place of business at 30670 Bainbridge Road, Solon, OH
44139, Fleet National Bank, a national banking association ("Fleet"), Bank One,
N.A., a national banking association ("Bank One"), and Fleet National Bank, as
agent for itself and Bank One (the "Agent").
RECITALS
--------
WHEREAS, the Borrower, Fleet and Agent have previously entered into
that certain Revolving Credit Agreement, dated as of March 31, 1997 (the
"Original Credit Agreement"), pursuant to which Fleet made available to the
Borrower a revolving credit loan facility having a maximum available borrowing
amount of $10,000,000; and
WHEREAS, the Borrower, Fleet and the Agent previously entered into that
certain First Amendment to Revolving Credit Agreement dated as of May 5, 1997
pursuant to which certain provisions of the Original Credit Agreement were
amended;
WHEREAS, Fleet subsequently assigned a portion of its original
commitment to Bank One;
WHEREAS, the Borrower, Fleet and Bank One previously entered into that
certain Second Amendment to Revolving Credit Agreement dated as of March 20,
1998 pursuant to which the aggregate commitment of Fleet and Bank One was
increased to $25.0 million and certain other provisions of the Original Credit
Agreement were further amended (the Original Credit Agreement, as amended to
date, being referred to herein as the "Credit Agreement");
WHEREAS, the parties hereto now desire to amend the Credit Agreement in
certain respects in order to (i) amend certain pricing provisions, (ii) modify
certain financial covenants, (iii) amend the requirements for permitted
acquisitions, and (iv) make certain other modifications to the provisions of the
Credit Agreement, all as more particularly set forth hereinbelow.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby agree to modify and amend the Credit Agreement as follows:
Section 1. DEFINITIONS. All capitalized terms used herein without
definition shall have their respective meanings provided therefor in the Credit
Agreement.
Section 2. AMENDMENT OF SPECIFIC PROVISIONS. The following specific
provisions of the Credit Agreement are hereby modified and amended as follows:
<PAGE> 2
(a) Section 1.1 of the Credit Agreement is hereby amended by adding
thereto the definition of "Adjustment Date" as follows:
"ADJUSTMENT DATE. The first day of the calendar month immediately
following the month in which a compliance certificate is to be delivered by the
Borrower pursuant to Section 7.4(c) hereof."
(b) Section 1.1 of the Credit Agreement is hereby amended by adding
thereto the definition of "Applicable Margin" as follows:
"APPLICABLE MARGIN. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each, a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Borrower's Leverage Ratio, as determined for the
period ending on the fiscal quarter ended immediately preceding the applicable
Rate Adjustment Period."
INTEREST RATES FEES
---------------------------------------------------------------------------
LEVERAGE RATIO PRIME RATE EURODOLLAR RATE COMMITMENT FEE RATE
LOANS LOANS
---------------------------------------------------------------------------
less than or
equal to 1.25:1 0.25% 1.75% 0.375%
---------------------------------------------------------------------------
greater
than 1.25:1 0.50% 2.00% 0.450%
---------------------------------------------------------------------------
In the event the Borrower fails to deliver any compliance certificate
pursuant to Section 7.4(c) hereof, then, for the period commencing on the next
Adjustment Date to occur subsequent to such failure through the date immediately
following the date on which such compliance certificate is delivered, the
Applicable Margin shall be the highest Applicable Margin set forth above. From
February __, 1999 until the receipt by the Agent of the quarterly financial
statements of the Borrower for the fiscal quarter ended March 31,1999, the
Applicable Margin shall be the highest Applicable Margin set forth above."
(c) Section 1.1 of the Credit Agreement is hereby amended by adding
thereto a definition of "Commitment Fee Rate" as follows:
"COMMITMENT FEE RATE. As referred to as such in the table contained in
the definition of "Applicable Margin"."
(d) Section 1.1 of the Credit Agreement is hereby amended by adding the
following sentence to the end of the definition of "Consolidated EBITDA":
-2-
<PAGE> 3
"For purposes of calculating Consolidated EBITDA for any
period that includes the second fiscal quarter in the fiscal
year ended December 31, 1998, a one time restructuring charge
of $1,330,000 shall be added back to the calculation of
Consolidated EBITDA for such period."
(e) Section 1.1 of the Credit Agreement is hereby amended by deleting
the definition of "Majority Banks" in its entirety and replacing it with the
following:
"MAJORITY BANKS. As of any date, the Banks holding at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding principal amount
of the Revolving Credit Notes on such date."
(f) Section 2.2 of the Credit Agreement by deleting the words "at the
rate of 0.2% per annum" from the third line thereof and inserting in lieu
thereof the following words: "at a rate per annum equal to the Commitment Fee
Rate".
(g) Section 2.5(a) of the Credit Agreement is hereby amended by adding
the words "PLUS the Applicable Margin" after the words "Prime Rate" in the third
line of Section 2.5(a).
(h) Section 2.5 of the Credit Agreement is hereby further amended by
deleting the words "one and one-quarter of one percent (1.25%)" from the third
and fourth lines of Section 2.5(b) and replacing in lieu thereof the words
"Applicable Rate".
(i) Section 8.5(b) of the Credit Agreement is hereby amended by
deleting the word "and" prior to subclause (viii) and inserting in lieu thereof
a semi-colon and by adding to the end of such subparagraph (b) the following
additional subclauses;
"(ix) the total cash consideration to be paid in the proposed
acquisition is less than $2,500,000; (x) the total cash consideration to be paid
in the proposed acquisition, together with the total cash consideration paid in
previous acquisitions during the immediately preceding twelve (12) months, is
less than $5,000,000; and (xi) the aggregate consideration to be paid in the
proposed acquisition, together with the aggregate consideration paid in all
acquisitions during the immediately preceding twelve months, is less than or
equal to $15,000,000."
(j) Section 9.2 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
"9.2 PROFITABLE OPERATIONS. The Borrower will not permit
Consolidated Net Income for any fiscal quarter to be less than One Dollar
($1.00)."
(k) Section 9.3 of the Credit Agreement is hereby amended by deleting
such section in its entirety and replacing it with the following:
-3-
<PAGE> 4
"9.3 LEVERAGE RATIO. The Borrower will not permit, as at the
last day of each fiscal quarter, the Leverage Ratio to exceed 2.50:1."
(l) Section 9.4 of the Credit Agreement is hereby amended by deleting
such section in its entirety and replacing it with the following:
"9.4 MINIMUM CONSOLIDATED EBITDA. The Borrower will maintain,
as at the last day of any fiscal quarter, Consolidated EBITDA in an amount at
least equal to the greater of (a) $5,300,000 or (b) ninety percent (90%) of
Consolidated EBITDA for the immediately preceding fiscal quarter, all as
determined for the four consecutive fiscal quarters of the Borrower ended on
such date."
(m) Section 9.5 of the Credit Agreement is hereby amended by deleting
such section in its entirety and replacing it with the following:
"9.5 MINIMUM RENTAL OCCUPANCY. The Borrower shall maintain
minimum Rental Occupancy rates as follows: (a) the average Rental Occupancy rate
during any month shall be equal to or greater than eighty-five percent (85%),
except that for the month of December the average Rental Occupancy rate shall be
equal to or greater than eighty-percent (80%); and (b) commencing as of June
30, 1999, the average Rental Occupancy for the immediately preceding twelve
months shall be greater than ninety percent (90%). As used herein, the term
"Rental Occupancy" means the ratio of the number of rental units for which the
Borrower has executed lease agreements with subtenants to the total number of
rental units for which the Borrower is then committed to pay rent."
SECTION 3. WAIVER. The Borrower has requested the Bank to waive
compliance with Section 8.4 of the Credit Agreement for the sole purpose of
permitting the Borrower to repurchase up to 250,000 shares of its Common Stock
listed on the American Stock Exchange at an aggregate repurchase price of up to
$1,000,000 pursuant to the Borrower's stock buy back plan at any time during the
period [commencing on the date hereof and ending December 31, 1999], (the
"BuyBack"). The Bank hereby waives compliance with Section 8.4 of the Credit of
Agreement for the sole purpose of permitting the BuyBack.
SECTION 4. CONFIRMATION OF STOCK PLEDGE AGREEMENT. The parties hereto
agree that all references to the "Credit Agreement" contained in the Stock
Pledge Agreement and all Supplements thereto shall mean or refer to the Credit
Agreement as amended and supplemented by this Third Amendment and as it may be
further amended, supplemented, modified and restated and in effect from time to
time, including without limitation any such amendment, supplement, modification
or restatement which increases the amount of Indebtedness owing by the Borrower
thereunder.
SECTION 5. LOAN DOCUMENTS RATIFIED AND CONFIRMED. The Credit Agreement,
the Notes and each of the other Loan Documents, as specifically supplemented or
amended by this Third
-4-
<PAGE> 5
Amendment and the other documents executed in connection herewith, are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed. Without limiting the generality of the foregoing, the Security
Documents and all of the collateral described therein do, and shall continue to,
secure the payment of all obligations under the Loan Documents, in each case as
amended or supplemented pursuant to this Third Amendment.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby makes
the following representations and warranties to Fleet, Bank One and the Agent in
connection herewith.
(a) REPRESENTATIONS IN LOAN DOCUMENTS. Each of the representations and
warranties made by or on behalf of the Borrower in any of the Loan Documents, as
amended by and through this Agreement, was true and correct when made and is
true and correct on and as of the date hereof (except for representations and
warranties limited as to time or with respect to a specific event, which
representations and warranties shall continue to be limited as to such time or
event), with the same full force and effect as if each of such representations
and warranties had been made by such Borrower on the date hereof and in this
Agreement.
(b) EVENTS OF DEFAULT. No Event of Default exists on the date hereof
(after giving effect to all of the arrangements and transactions contemplated by
this Agreement). No condition exists on the date hereof which would, with notice
or the lapse of time, or both, constitute an Event of Default.
(c) BINDING EFFECT OF DOCUMENTS.
1. This Agreement has been duly executed and delivered by the Borrower
and is in full force and effect as of the date hereof, and the agreements and
obligations of the Borrower contained herein constitute legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms.
2. The obligations of the Borrower to repay to Fleet and Bank One all
of the unpaid principal of each of the Revolving Loans made pursuant to the
Credit Agreement, as amended hereby, to pay to Fleet and Bank One all of the
unpaid interest accrued or to accrue thereon, and to pay to Fleet and Bank One
all of the other obligations of the Borrower are and will continue to be
entitled to all of the benefits and to all of the security created by the Credit
Agreement, the other Loan Documents and the Security Documents.
SECTION 7. MISCELLANEOUS.
(a) FEES, COSTS AND EXPENSES. Borrower shall pay, upon execution of
this Amendment, the following facility fees:
(i) to Fleet, $20,000;
(ii) to Bank One, $5,000; and
-5-
<PAGE> 6
(b) In addition to the foregoing fees, Borrower agrees to pay on demand
all reasonable costs and expenses of the Agent, Fleet and the Bank One,
including without limitation all reasonable fees and expenses of counsel, in
connection with the preparation, execution and delivery of this Third Amendment
and the other documents and instruments to be delivered herewith.
(c) NO OTHER CHANGES. Except as otherwise expressly provided by this
Agreement, all of the terms, conditions and provisions of the Credit Agreement,
the Revolving Credit Notes and each of the other Loan Documents and Security
Documents remain unaltered, valid, binding and in full force and effect in the
form existing immediately prior to the execution and delivery of this Agreement.
Except as otherwise expressly provided by this Agreement, nothing herein is
intended or shall be construed so as to: (a) limit, discharge, release, diminish
or otherwise modify any indebtedness, obligations, liabilities or duties of
Borrower, or (b) terminate, release, waive, or otherwise modify any mortgage,
security interest, right, power or remedy of the Agent, Fleet or Bank One. This
Agreement constitutes an instrument supplemental to the Credit Agreement and the
other Loan Documents, which is to be construed together with and as part of the
Loan Documents.
(d) GOVERNING LAW. This Agreement is intended to take effect as a
sealed instrument and shall be deemed to be a contract under the laws of the
Commonwealth of Massachusetts. This Agreement and the rights and obligations of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the laws of the Commonwealth of Massachusetts.
(e) BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, but all such counterparts shall together constitute one agreement.
It shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto in making proof of this Agreement.
Executed facsimile signature pages of this Agreement shall be acceptable to each
of the parties.
(g) CONFLICT WITH OTHER AGREEMENTS. If any of the terms of this
Agreement shall conflict in any respect with any of the terms of any of the Loan
Documents, the terms of this Agreement shall be controlling.
******
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as an instrument under seal as of the date first
above written.
BRIDGESTREET ACCOMMODATIONS, INC.
By: /s/ John Danneberg
-----------------------------------
Title: President
BANK ONE, N.A.
By:
-----------------------------------
Title:
FLEET NATIONAL BANK
By:
-----------------------------------
Title:
FLEET NATIONAL BANK, as AGENT
By:
-----------------------------------
Title:
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as an instrument under seal as of the date first
above written.
BRIDGESTREET ACCOMMODATIONS, INC.
By:
-------------------------------
Title:
BANK ONE, N.A.
By: /s/ Thomas R. Utgard
-------------------------------
Title: Vice President
FLEET NATIONAL BANK
By:
-------------------------------
Title:
FLEET NATIONAL BANK, as AGENT
By:
-------------------------------
Title:
-7-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as an instrument under seal as of the date first
above written.
BRIDGESTREET ACCOMMODATIONS, INC.
By:
-------------------------------
Title:
BANK ONE, N.A.
By:
-------------------------------
Title:
FLEET NATIONAL BANK
By: /s/ Helen Balboni
-------------------------------
Title: Vice President
FLEET NATIONAL BANK, as AGENT
By: /s/ Helen Balboni
-------------------------------
Title: Vice President
-7-
<PAGE> 1
Exhibit 10.25
BRIDGESTREET CANADA, INC.
-------------------------
FIRST CHICAGO NBD BANK, CANADA
------------------------------
$6,000,000 Canadian Dollar Line of Credit
-----------------------------------------
April 29, 1999
1. Fourth Amendment to Revolving Credit Agreement among Bridgestreet
Accommodations, Inc., Fleet National Bank, Bank One, N.A., and Fleet as
agent, adding Bridgestreet Canada, Inc. as a borrower and First Chicago
NBD Bank, Canada as a Bank
2. Promissory Note Agreement between Bridgestreet Canada, Inc. and First
Chicago NBD Bank dated April 29, 1999
3. Resolution of Board of Directors of Bridgestreet Accommodations, Inc.
authorizing negotiation of loans with First Chicago NBD Bank, Canada
<PAGE> 2
FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
----------------------------------------------
This Fourth Amendment to Revolving Credit Agreement ("this Amendment")
is made as of the 29th day of April, 1999 by and among Bridgestreet
Accommodations, Inc. f/k/a Bridgestreet International, Inc. ("Borrower"), a
Delaware corporation having its principal place of business at 2242 Pinnacle
Parkway, Twinsburg, OH 44087; Bridgestreet Canada, Inc., a wholly-owned
subsidiary of Borrower and an Ontario corporation having its principal place of
business at 1000 Yonge Street, #301, Toronto, Canada M4W 2K2 ("Bridgestreet
Canada"); Fleet National Bank, a national banking association ("Fleet"); Bank
One, N.A., a national banking association ("Bank One"); First Chicago NBD Bank,
Canada, a chartered bank incorporated under the laws of Canada ("First
Chicago"); and Fleet National Bank, as agent for itself, Bank One and First
Chicago (the "Agent").
RECITALS
--------
WHEREAS, the Borrower, Fleet, Bank One and Agent have previously
entered into that certain Revolving Credit Agreement, dated as of March 31,
1997, as amended (the "Credit Agreement");
WHEREAS, the parties hereto now desire to amend the Credit Agreement in
certain respects in order to: (i) add First Chicago as a "Bank" thereunder with
respect to the Canadian Sublimit described herein, and (ii) add Bridgestreet
Canada as a party thereto eligible to borrow under the Canadian Sublimit.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby agree to modify and amend the Credit Agreement as follows:
Section 1. DEFINITIONS. All capitalized terms used herein without
definition shall have their respective meanings provided therefor in the Credit
Agreement.
Section 2. AMENDMENT OF SPECIFIC PROVISIONS. The following specific
provisions of the Credit Agreement are hereby modified and amended as follows:
(a) Section 1.1 of the Credit Agreement is hereby amended by adding or
substituting thereto the following definitions, in each case to be inserted in
alphabetical order in the listing of definitions therein:
"APPLICABLE CANADIAN MARGIN. For each period commencing on an
Adjustment Date through the date immediately preceding the next
Adjustment Date (each, a "Rate Adjustment Period"), the Applicable
Canadian Margin shall be the applicable margin set forth below with
respect to the Borrower's Leverage Ratio, as determined for the period
ending on the fiscal quarter ended immediately preceding the applicable
Rate Adjustment Period."
<PAGE> 3
- --------------------------------------------------------------------
INTEREST RATES
- --------------------------------------------------------------------
LEVERAGE RATIO CANADIAN PRIME RATE COST OF FUNDS LOANS
LOANS
- --------------------------------------------------------------------
less than
or equal to 1.25:1 1.50% 1.75%
- --------------------------------------------------------------------
greater
than 1.25:1 1.75% 2.00%
- --------------------------------------------------------------------
In the event the Borrower fails to deliver any compliance certificate
pursuant to Section 7.4(c) hereof, then, for the period commencing on
the next Adjustment Date to occur subsequent to such failure through
the date immediately following the date on which such compliance
certificate is delivered, the Applicable Canadian Margin shall be the
highest Applicable Canadian Margin set forth above."
"BRIDGESTREET CANADA. Bridgestreet Canada, Inc., a Subsidiary of the
Borrower and an Ontario corporation having its principal place of
business located at 1000 Yonge Street, #301, Toronto, Canada M4W 2K2."
"CANADIAN PRIME RATE. At any time, the annual rate of interest most
recently announced and made effective by First Chicago at its head
office in Toronto, Ontario, Canada, as its 'Canadian Prime Rate.' Such
rate is used for reference purposes only and is not necessarily the
best or lowest rate charged by First Chicago to its most substantial or
creditworthy customers and serves only as the basis upon which
effective rates of interest are calculated for obligations making
reference thereto."
"CANADIAN SUBLIMIT. The discretionary line of credit extended by First
Chicago to Bridgestreet Canada pursuant to Section 2.9 hereof in the
maximum amount outstanding at any one time not to exceed the lesser of
US $5,000,000 or Canadian $6,000,000 to be used by Bridgestreet Canada
for general corporate purposes."
"COMMITMENT. With respect to each Bank other than First Chicago, the
amount set forth on SCHEDULE I hereto as the amount of such Bank's
commitment to make Revolving Credit Loans of US Dollars to the
Borrower, as the same may be reduced from time to time pursuant to
Section 2.3; or if such commitment is terminated pursuant to the
provisions hereof, zero; provided, however, that the amount of the
commitment of Bank One shall be reduced by the US Dollar equivalent
(computed by the Agent at its selling rate for Canadian Dollars) of all
Revolving Credit Loans outstanding from time to time pursuant to the
Canadian Sublimit, and the Commitment Percentages of Fleet and Bank One
shall be adjusted accordingly."
-2-
<PAGE> 4
"COST OF FUNDS. With respect to First Chicago shall mean its costs of
funding a Revolving Credit Loan with a term exceeding 30 days made
pursuant to the Canadian Sublimit, as determined by First Chicago in
its sole discretion.
"COST OF FUNDS LOAN. A Revolving Credit Loan bearing interest at a rate
computed by reference to First Chicago's Cost of Funds.
"CURRENT SUBSIDIARIES. The entities listed on SCHEDULE 6.19, as such
schedule may be amended from time to time."
"FIRST CHICAGO. First Chicago NBD Bank, Canada, a chartered bank
incorporated under the laws of Canada
"FOREIGN SUBSIDIARY. Each Subsidiary of the Borrower that is organized
under the laws of any jurisdiction other than the United States or any
state thereof."
"INTEREST PERIOD. (a) With respect to each Revolving Credit Loan not
made pursuant to the Canadian Sublimit, initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day
of one of the periods set forth below, as selected by the Borrower in a
Revolving Credit Loan Request (i) for any Prime Rate Loan, the last day
of each calendar quarter; (ii) for any Eurodollar Rate Loan, 1, 2 or 3
months; and thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Revolving Credit Loan
and ending on the last day of one of the periods set forth above, as
selected by the Borrower in a Conversion Request;
(b) With respect to each Revolving Credit Loan made pursuant to the
Canadian Sublimit, the period commencing on the Drawdown Date thereof
and ending on the last day of each month,
provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a
Eurodollar Business Day, that Interest Period shall be
extended to the next succeeding Eurodollar Business Day
unless the result of such extension would be to carry
such Interest Period into another calendar month, in
which event such Interest Period shall end on the
immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Prime Rate Loan
or a Cost of Funds Loan would end on a day that is not a
Business Day, that Interest Period shall end on the next
succeeding Business Day;
-3-
<PAGE> 5
(c) if the Borrower shall fail to give notice as provided in
Section 2.7 or Section 2.9 hereof, the Borrower shall be
deemed to have requested a conversion of the affected
Eurodollar Rate Loan or Cost of Funds Loan to a Prime
Rate Loan and the continuance of all Prime Rate Loans as
Prime Rate Loans on the last day of the then current
Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan
that begins on the last Eurodollar Business Day of a
calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Eurodollar Business Day of a calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan
or a Cost of Funds Loan that would otherwise extend
beyond the Revolving Credit Loan Maturity Date shall end
on the Revolving Credit Loan Maturity Date.
"PRIME RATE LOANS. Revolving Credit Loans bearing interest calculated
by reference to the Prime Rate or, in the case of Revolving Credit
Loans made pursuant to the Canadian Sublimit, calculated by reference
to the Canadian Prime Rate.
"REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by
the Banks other than First Chicago to the Borrower pursuant to Section
Section 2. 1 through 2.8 hereof, and revolving credit loans made or to
be made by First Chicago pursuant to the Canadian Sublimit referred to
in Section 2.9.
"TYPE. As to any Revolving Credit Loan not made pursuant to the
Canadian Sublimit, its nature as a Prime Rate Loan or a Eurodollar Rate
Loan, and, in the case of a Revolving Credit Loan made pursuant to the
Canadian Sublimit, its nature as a Prime Rate Loan or a Cost of Funds
Loan."
(b) SCHEDULE I is hereby substituted for SCHEDULE I to the Credit
Agreement, and SCHEDULE 6.19 hereto is hereby substituted for SCHEDULE
6.19 to the Credit Agreement.
(c) The second sentence of Section 2.1 is hereby amended to read
in its entirety as follows:
"The Revolving Credit Loans shall be made PRO RATA in accordance with
each Bank's Commitment Percentage, except as provided in Section 2.9;
provided, however, that during such time as the Bank One Commitment is
reduced to zero but the Fleet Commitment is not reduced to zero, Fleet
shall make such Revolving Credit Loans or portions thereof not funded
by Bank One.
-4-
<PAGE> 6
(d) The first sentence of Section 2.4 is hereby amended to read in its
entirety as follows:
"2.4 THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrower in substantially
the form of EXHIBIT A hereto or, in the case of Revolving Credit Loans
made pursuant to the Canadian Sublimit, by the promissory note of
Bridgestreet Canada payable to the order of First Chicago in
substantially the form of EXHIBIT A-1 hereto."
(e) EXHIBIT A-1 is hereby added to the Credit Agreement following
EXHIBIT A.
(f) The following Sections 2.9 and 2.10 are hereby added to the Credit
Agreement following Section 2.8 thereof.
"2.9 CANADIAN SUBLIMIT.
2.9.1 Subject to such terms and conditions as First Chicago may from
time to time impose, First Chicago severally agrees to make available
to Bridgestreet Canada for general corporate purposes, a line of credit
for not more than two revolving credit loans of Canadian Dollars up to
a maximum aggregate amount not to exceed Canadian $6,000,000 (the
'Canadian Sublimit'). Each such Revolving Credit Loan shall be made on
not less than two Business Days' notice to First Chicago and the Agent
and shall be subject to First Chicago's discretion in each instance.
The Canadian Sublimit shall expire on the Revolving Credit Loan
Maturity Date. Revolving Credit Loans under the Canadian Sublimit shall
be made by First Chicago (and no other Bank) and shall be made
available directly to Bridgestreet Canada by First Chicago and not
through the Agent. First Chicago shall notify the Agent promptly after
the disbursement of the proceeds of any Revolving Credit Loan under the
Canadian Sublimit.
2.9.2 Revolving Credit Loans pursuant to the Canadian Sublimit shall be
payable on demand and shall bear interest at the Canadian Prime Rate
plus the Applicable Canadian Margin unless Bridgestreet Canada shall
have requested at least three Business Days prior to the Drawdown Date
of such Revolving Credit Loan that it remain outstanding for a period
of greater than 30 days, in which case Bridgestreet Canada may, so long
as no Default or Event of Default shall have occurred and be
continuing, elect that such a Revolving Credit Loan bear interest at a
rate computed by reference to First Chicago's Cost of Funds plus the
Applicable Canadian Margin. Upon such an election by the Borrower,
First Chicago shall determine its Cost of Funds for the requested
maturity of such Revolving Credit Loan and notify the Borrower of the
same. Upon receipt of such notice Bridgestreet Canada may borrow such
Revolving Credit Loan at the rate, for the term and upon such
conditions as First Chicago may impose. In no event shall any Canadian
Sublimit Loan have a maturity subsequent to the Revolving Credit
Termination Date.
-5-
<PAGE> 7
2.9.3 Upon the maturity of any Cost of Funds Loan, such Cost of Funds
Loan shall automatically convert to a Prime Rate Loan bearing interest
at the Canadian Prime Rate plus the Applicable Canadian Margin unless
the Borrower shall have requested that such Cost of Funds Loan continue
to bear interest at a rate computed by reference to First Chicago's
Cost of Funds at least three Business Days prior to such maturity date,
and no Default or Event of Default shall have occurred and be
continuing, in which case the procedure described in Section 2.9.2
shall apply to the renewal of such Cost of Funds Loan.
2.9.4 Bridgestreet Canada shall give the Agent at least two Business
Days' notice of any repayment of a Revolving Credit Loan under the
Canadian Sublimit, and each such repayment shall be in the minimum
amount of $100,000. Bridgestreet Canada shall not be entitled to make
more than one repayment of Revolving Credit Loans outstanding under the
Canadian Sublimit in any month, and amounts repaid with respect to such
Revolving Credit Loans may not be reborrowed. Upon the effective date
of any such repayment, the Commitment Percentages of Fleet and Bank One
shall be adjusted to reflect the corresponding increase in Bank One's
Commitment Percentage and Bank One shall pay to Fleet an amount
sufficient to cause its share of outstanding Revolving Credit Loans of
US Dollars to be equal to its Commitment Percentage as so adjusted. In
the event that any such payment is not made by Bank One within one
Business Day of receipt by First Chicago of such repayment, Bank One
shall pay to Fleet an additional amount computed as provided in Section
2.8.2 hereof for each Business Day thereafter until such payment is
received by Fleet, and if any such payment is not made by Bank One
within three Business Days of receipt by First Chicago of such
repayment, Bank One shall pay to Fleet interest thereon from the date
of receipt by First Chicago at a rate per annum equal to two percent
(2%) above the Prime Rate until such amount shall be paid in full
(after as well as before judgment). Promptly after receipt of notice of
the disbursement of the proceeds of a Revolving Credit Loan under the
Canadian Sublimit or receipt by Fleet of a payment from Bank One
following repayment of such a Revolving Credit Loan, the Agent shall
issue to Fleet and to Bank One a new Schedule I evidencing the
respective Commitment Percentages and the dollar amounts of such Banks
respective Commitments."
(g) Section 7.13 is hereby amended, effective as of the Closing Date,
to read in its entirety as follows:
"7.13. ADDITIONAL SUBSIDIARIES. (a) The Borrower will not, and will not
permit its Subsidiaries to, form or acquire any Subsidiaries except as
permitted pursuant to Section 8.5 hereof. If, after the Closing Date,
the Borrower acquires, either directly or indirectly, any Subsidiary in
accordance with Section 8.5 hereof, it will notify the Agent five (5)
Business Days prior to such acquisition and provide the Agent with an
updated SCHEDULE 6.19, and will concurrently with the acquisition of
any Subsidiary, pledge to the Agent all capital stock (or similar
interests) of such Subsidiary pursuant to the Stock Pledge Agreement;
provided, however, that the Borrower shall not be required to pledge
more than 65% of
-6-
<PAGE> 8
the total combined voting power of all classes of capital stock of any
Foreign Subsidiary entitled to vote owned by the Borrower until such
time as the Borrower is required to deliver such remaining shares to
the Agent pursuant to Section 7.15.
"(b) The Borrower shall cause each of its Material
Subsidiaries (other than those that are Foreign Subsidiaries all of
whose capital stock is not required to be pledged to the Agent pursuant
to Section 7.13(a) or that are parties on the Closing Date to the
Guaranty) to execute and deliver to the Agent, on a date no later than
five (5) Business Days after such Person becomes a Material Subsidiary
of the Borrower, an Instrument of Adherence to the Guaranty, together
with such supporting documentation, including legal opinions and
evidence of corporate authority as the Agent may reasonably request."
(h) The following Section 7.15 is hereby added to the Credit Agreement
following Section 7.14 thereof, effective as of the Closing Date:
"7.15. FOREIGN SUBSIDIARIES SECURITY. If the Agent reasonably believes
that appropriate changes have been made to the relevant provisions of
the Internal Revenue Code as in effect on the Closing Date, the
regulations and rules promulgated thereunder and any rulings issued
thereunder the Agent may (or upon the reasonable request of the
Majority Banks, shall) request that counsel for the Borrower acceptable
to the Agent within 30 days after such request deliver evidence
satisfactory to the Agent, with respect to any Foreign Subsidiary of
the Borrower, that (i) a pledge of 66 2/3%% or more of the total
combined voting power of all classes of capital stock of such Foreign
Subsidiary entitled to vote owned by the Borrower or (ii) the
execution, delivery and performance by such Foreign Subsidiary of an
Instrument of Adherence to the Guaranty, in either case, would cause
the earnings of such Foreign Subsidiary to be deemed a dividend to the
Borrower or would otherwise violate a material applicable law or
governmental or regulatory restriction or rule (including laws, rules,
or restrictions of, or issued by, a government or regulatory authority
of a foreign jurisdiction or would otherwise cause a material adverse
monetary tax consequence to the Borrower), and in the case of a failure
to deliver the evidence described in (i) above, (A) that portion of
such Foreign Subsidiary's outstanding capital stock owned by the
Borrower and not theretofore pledged pursuant to the Stock Pledge
Agreement shall be pledged to the Agent, for the benefit of itself and
the Banks pursuant to the Stock Pledge Agreement (or another pledge
agreement in substantially similar form, if necessary in order to
perfect such pledge), and (B) such Foreign Subsidiary, if it is a
Material Subsidiary, shall execute and deliver an Instrument of
Adherence to the Guaranty of the Obligations of the Borrower under the
Loan Documents, in each case with all documents delivered pursuant to
this Section 7.15 to be in form and substance satisfactory to the
Agent."
-7-
<PAGE> 9
(i) Subsection 8.5.1(b)(iii) of the Agreement is hereby amended to read
in its entirety as follows:
"(iii) all of the assets material to the operation of the business of
the Person being acquired or all or substantially all of the assets
being acquired and material to the operation of the business of the
Borrower shall be located in the United States of America."
(j) Section 12.1(p) is hereby amended, effective as of the Closing
Date, to read in its entirety as follows:
"(p) Acquisition by any Person of 10% or more of the outstanding
equity securities of any class of the Borrower, or the failure
of individuals who are members of the Board of Directors of
the Borrower on the Closing Date (together with any new or
replacement directors whose initial nomination for election
was approved by a majority of the directors who were either
directors on the Closing Date or previously so approved) to
constitute a majority of the Board of Directors of the
Borrower."
(k) The following Section 18.10 is hereby added to the Credit Agreement
following Section 18.09 thereof:
"18.10. RESTRICTIONS ON ASSIGNMENT BY FIRST CHICAGO. First Chicago
agrees that it will not grant participations in or otherwise assign any
interest in Revolving Credit Loans outstanding pursuant to the Canadian
Sublimit to any Person who is not resident in Canada for the purposes
of the Income Tax Act (Canada) other than Fleet."
SECTION 3. CONFIRMATION OF STOCK PLEDGE AGREEMENT. The parties hereto
agree that all references to the "Credit Agreement" contained in the Stock
Pledge Agreement and all Supplements thereto shall mean or refer to the Credit
Agreement as amended and supplemented by this Amendment and as it may be further
amended, supplemented, modified and restated and in effect from time to time,
including without limitation any such amendment, supplement, modification or
restatement which increases the amount of Indebtedness owing by the Borrower
thereunder.
SECTION 4. LOAN DOCUMENTS RATIFIED AND CONFIRMED. The Credit Agreement,
the Notes and each of the other Loan Documents, as specifically supplemented or
amended by this Amendment and the other documents executed in connection
herewith, are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed. Without limiting the generality of the
foregoing, the Security Documents and all of the collateral described therein
do, and shall continue to, secure the payment of all obligations of the Borrower
under the Loan Documents, in each case as amended or supplemented pursuant to
this Amendment.
-8-
<PAGE> 10
SECTION 5. REPRESENTATIONS AND WARRANTIES. (i) The Borrower hereby
makes the following representations and warranties to Fleet, Bank One and the
Agent in connection herewith.
(a) REPRESENTATIONS IN LOAN DOCUMENTS. Each of the representations and
warranties made by or on behalf of the Borrower in any of the Loan Documents, as
amended by and through this Amendment, was true and correct when made and is
true and correct on and as of the date hereof (except for representations and
warranties limited as to time or with respect to a specific event, which
representations and warranties shall continue to be limited as to such time or
event), with the same full force and effect as if each of such representations
and warranties had been made by such Borrower on the date hereof and in this
Amendment.
(b) EVENTS OF DEFAULT. Except as previously disclosed to the Agent, no
Event of Default exists on the date hereof (after giving effect to all of the
arrangements and transactions contemplated by this Amendment), and no condition
exists on the date hereof which would, with notice or the lapse of time, or
both, constitute an Event of Default.
(c) BINDING EFFECT OF DOCUMENTS.
1. This Amendment has been duly executed and delivered by the
Borrower and Bridgestreet Canada and is in full force and effect as of the date
hereof, and the agreements and obligations of the Borrower and Bridgestreet
Canada contained herein constitute legal, valid and binding obligations of the
Borrower and Bridgestreet Canada, enforceable against the Borrower and
Bridgestreet Canada in accordance with their respective terms.
2. The obligations of the Borrower to repay to Fleet and Bank
One all of the unpaid principal of each of the Revolving Loans made pursuant to
the Credit Agreement, as amended hereby, to pay to Fleet and Bank One all of the
unpaid interest accrued or to accrue thereon, and to pay to Fleet and Bank One
all of the other obligations of the Borrower are and will continue to be
entitled to all of the benefits and to all of the security created by the Credit
Agreement, the other Loan Documents and the Security Documents.
(i) First Chicago hereby represents and warrants to each of the
Borrower and Bridgestreet Canada that First Chicago is a Person resident in
Canada for purposes of the Income Tax Act (Canada).
SECTION 6. GUARANTY BY BORROWER. The Borrower hereby guaranties (the
"Borrower Guaranty") to First Chicago the full and punctual payment, performance
and fulfillment of all liabilities, obligations and undertakings of Bridge-
street Canada to First Chicago, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising or acquired
(the "Obligations"). The Borrower Guaranty shall operate as a continuing and
absolute guaranty of the due and punctual payment of the Obligations, and not of
their collectibility only. If Bridgestreet Canada defaults in the payment or
performance of the Obligations, the obligations
-9-
<PAGE> 11
of the Borrower under the Borrower Guaranty shall become immediately due and
payable to First Chicago, without demand or notice of any kind, all of which are
expressly waived. The Borrower waives any right that the Borrower may have to
require First Chicago first to proceed against Bridgestreet Canada or against
any other guarantor or any other person. The Borrower also waives any right that
the Borrower may have to require First Chicago to realize on any security before
proceeding against the Borrower for the enforcement of the Borrower Guaranty.
The Borrower further waives any right that the Borrower may have against
Bridgestreet Canada arising as a result of payment or other performance by the
Borrower under the Borrower Guaranty, whether arising by way of any right of
subrogation, contribution, reimbursement or otherwise. The liability of the
Borrower under the Borrower Guaranty shall be unlimited.
The Borrower agrees, as a principal and not as a guarantor only, to pay
to First Chicago, on demand, all costs and expenses paid or incurred by First
Chicago (including court costs and attorneys' fees) in connection with the
Obligations, the Borrower Guaranty and the enforcement thereof.
The Borrower waives presentment, demand, protest, notice of acceptance,
notice of the Obligations incurred and all other notices of any kind and all
defenses which may be available to the Borrower. The Borrower agrees to the
provisions of any instrument, security or other writing evidencing or securing
any of the Obligations and agrees that the obligations of the Borrower under the
Borrower Guaranty shall not be released or discharged, in whole or in part, by:
(i) any renewals, extensions or postponements of the time of payment of any of
the Obligations or any other forbearance or indulgence with respect thereto;
(ii) any rescissions, waivers, amendments or modifications of any of the terms
of any agreement evidencing, securing or otherwise executed in connection with
the Obligations; or (iii) the substitution or release of any security for the
Obligations or of any other person primarily or secondarily liable on any of the
Obligations, whether or not notice thereof shall be given to the Borrower. The
enforcement of the Borrower Guaranty shall not be affected by the delay, neglect
or failure of First Chicago to take any action with respect to any security,
right, obligation, endorsement, guaranty or other means of collecting the
Obligations which it may at any time hold, including perfection or enforcement
thereof, or by any change with respect to Bridgestreet Canada in the form or
manner of doing business. The Borrower agrees that the Borrower shall be and
remain bound upon the Borrower Guaranty irrespective of any action, delay or
omission by First Chicago in dealing with Bridgestreet Canada, any of the
Obligations, any collateral therefor, or any person at any time liable with
respect to the Obligations.
If for any reason Bridgestreet Canada has no legal existence or is
under no legal obligation to discharge any of the Obligations, or if any of the
Obligations shall have become irrecoverable from Bridgestreet Canada by
operation of law or for any other reason, or if any security for or other
guaranty of the Obligations shall be found invalid, the Borrower shall
nonetheless be and remain bound on the Borrower Guaranty.
-10-
<PAGE> 12
Any deposits or other sums at any time credited by or due from First
Chicago to the Borrower, and any securities or other property of the Borrower at
any time held by First Chicago may at all times be held and treated as security
for all obligations of the Borrower under the Borrower Guaranty. Regardless of
the adequacy of any security therefor, First Chicago may apply or set off such
deposits or other sums against such obligations at any time, without notice to
the Borrower.
The Borrower Guaranty shall remain in full force and effect until
receipt by First Chicago of written notice of the revocation of the Borrower
Guaranty, and until such notice is acknowledged by an officer of First Chicago.
Such notice shall not affect any Obligations incurred prior to receipt of such
notice or Obligations incurred pursuant to any contract or commitment in
existence prior to receipt of such notice, and all checks, drafts, notes,
instruments and writings made by or for the account of Bridgestreet Canada and
drawn on First Chicago or any of its agents purporting to be dated on or before
the date of receipt of such notice, although presented to and paid or accepted
by First Chicago after that date, shall form part of the Obligations. The
Borrower Guaranty shall continue to be effective or be reinstated,
notwithstanding any termination, if at any time any payment made or value
received with respect to any of the Obligations is rescinded or must otherwise
be returned by First Chicago due to the insolvency, bankruptcy or reorganization
of Bridgestreet Canada or otherwise, all as though such payment had not been
made or value received. The Borrower waives trial by jury in any action arising
out of the Borrower Guaranty.
The Borrower Guaranty shall be binding upon and inure to the benefit of
the Borrower and First Chicago and their respective successors and assigns. No
provision of the Borrower Guaranty may be amended or waived except by a writing
signed by First Chicago. The invalidity or unenforceability of any one or more
phrases, clauses or sections of the Borrower Guaranty shall not affect the
validity or enforceability of the remaining portions of it.
The Borrower hereby confirms to First Chicago that the Borrower
Guaranty is entitled to all of the benefits and to all of the security created
by the Security Documents.
SECTION 7. MISCELLANEOUS.
(a) FEES, COSTS AND EXPENSES. Upon execution of this Amendment: (i)
Bridgestreet Canada shall pay to First Chicago a fee in the amount of Canadian
$5,000 and (ii) the Borrower shall pay to Fleet, an amendment fee in the amount
of US $3,500.
(b) In addition to the foregoing fees, Borrower agrees to pay on demand
all reasonable costs and expenses of the Agent, Fleet, Bank One and First
Chicago, including without limitation all reasonable fees and expenses of
counsel, in connection with the preparation, execution and delivery of this
Amendment and the other documents and instruments to be delivered herewith.
-11-
<PAGE> 13
(c) NO OTHER CHANGES. Except as otherwise expressly provided by this
Amendment, all of the terms, conditions and provisions of the Credit Agreement,
the Revolving Credit Notes and each of the other Loan Documents and Security
Documents remain unaltered, valid, binding and in full force and effect in the
form existing immediately prior to the execution and delivery of this Amendment.
Except as otherwise expressly provided by this Amendment, nothing herein is
intended or shall be construed so as to: (a) limit, discharge, release, diminish
or otherwise modify any indebtedness, obligations, liabilities or duties of
Borrower, or (b) terminate, release, waive, or otherwise modify any mortgage,
security interest, right, power or remedy of the Agent, Fleet, Bank One or First
Chicago. This Amendment constitutes an instrument supplemental to the Credit
Agreement and the other Loan Documents, which is to be construed together with
and as part of the Loan Documents.
(d) GOVERNING LAW. This Amendment is intended to take effect as a
sealed instrument and shall be deemed to be a contract under the laws of the
Commonwealth of Massachusetts. This Amendment and the rights and obligations of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the laws of the Commonwealth of Massachusetts.
(e) BINDING EFFECT; ASSIGNMENT. This Amendment shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(f) COUNTERPARTS. This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute one agreement.
It shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto in making proof of this Amendment.
Executed facsimile signature pages of this Amendment shall be acceptable to each
of the parties.
(g) CONFLICT WITH OTHER AGREEMENTS. If any of the terms of this
Amendment shall conflict in any respect with any of the terms of any of the Loan
Documents, the terms of this Amendment shall be controlling.
*
*
*
*
*
*
-12-
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an instrument under seal as of the date first above written.
BRIDGESTREET CANADA, INC. BRIDGESTREET ACCOMMODATIONS, INC.
By /s/ John Danneberg By /s/ John Danneberg
------------------------ -------------------------------
Title: Pres. Title: Pres.
-------------------- ---------------------------
FIRST CHICAGO NBD BANK CANADA BANK ONE, N.A.
By By
------------------------ -------------------------------
Title: Title:
-------------------- ---------------------------
FLEET NATIONAL BANK FLEET NATIONAL BANK, as AGENT
By By
------------------------ -------------------------------
Title: Title:
-------------------- ---------------------------
-13-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an instrument under seal as of the date first above written.
BRIDGESTREET CANADA, INC. BRIDGESTREET ACCOMMODATIONS, INC.
By By
------------------------ -------------------------------
Title: Title:
-------------------- ---------------------------
FIRST CHICAGO NBD BANK CANADA BANK ONE, N.A.
By By
------------------------ -------------------------------
Title: Title:
-------------------- ---------------------------
FLEET NATIONAL BANK FLEET NATIONAL BANK, as AGENT
By/s/Helen K. Balboni By/s/Helen K. Balboni
------------------------ -------------------------------
Title:Vice President Title:Vice President
-------------------- ---------------------------
-13-
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an instrument under seal as of the date first above written.
BRIDGESTREET CANADA, INC. BRIDGESTREET ACCOMMODATIONS, INC.
By By
------------------------ -------------------------------
Title: Title:
-------------------- ---------------------------
FIRST CHICAGO NBD BANK CANADA BANK ONE, N.A.
By By/s/ Thomas R. Utgard
------------------------ -------------------------------
Title: Title:Vice President
-------------------- ---------------------------
FLEET NATIONAL BANK FLEET NATIONAL BANK, as AGENT
By By
------------------------ -------------------------------
Title: Title:
-------------------- ---------------------------
-13-
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an instrument under seal as of the date first above written.
BRIDGESTREET CANADA, INC. BRIDGESTREET ACCOMMODATIONS, INC.
By By
------------------------ -------------------------------
Title: Title:
-------------------- ---------------------------
FIRST CHICAGO NBD BANK CANADA BANK ONE, N.A.
By/s/???????????????? By
------------------------ -------------------------------
Title: VP Title:
-------------------- ---------------------------
FLEET NATIONAL BANK FLEET NATIONAL BANK, as AGENT
By By
------------------------ -------------------------------
Title: Title:
-------------------- ---------------------------
-13-
<PAGE> 18
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE 1
- ----------
REVISED REVISED CURRENT REVISED
NAME AND ADDRESS OF BANK COMMITMENT COMMITMENT COMMITMENT % OUTSTANDINGS OUTSTANDINGS
- ------------------------ ---------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Fleet Bank 20,000,000.00 20,000,000.00 92.23815893% 6,480,000.00 7,471,290.87
One Federal Street
Boston, MA 02110
Bank One 5,000,000.00 1,683,000.00 7.76184107% 1,620,000.00 628,709.13
50 South Main Street
Akron, OH 44309
Total U.S. Commitment ------------- ------------- ------------ ------------- ------------
25,000,000.00 21,683,000.00 100.00000000% 8,100,000.00 8,100,000.00
============= ============= ============= ============ ============
CURRENT PLANNED
CANADIAN DRAW/(PAYDOWN) DRAW/(PAYDOWN) REVISED
O/S (CND$) (CND$) (US$) O/S (CND$)
---------- -------------- -------------- ----------
First Chicago NBD, Canada 0.00 5,000,000.00 3,317,000.00 5,000,000.00
Fleet's Exchange Rate as of 3-MAY-99 0.66340
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Schedule 6.19
NUMBER OF NUMBER OF PAR OR
CLASS OF AUTHORIZED NUMBER OF OUTSTANDING LIQUIDATION
ISSUER RECORD OWNER SHARES SHARES ISSUED SHARES SHARES VALUE
- ------ ------------ ------ ------ ------------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
DOMESTIC SUBSIDIARIES
---------------------
Corporate BridgeStreet Common 10,000 1,000 1,000 $0.01
Lodgings, Inc Accommodations, Inc. Preferred none
BridgeStreet BridgeStreet Common 10,000 1,000 1,000 $0.01
Maryland, Inc. Accommodations, Inc. Preferred none
Temporary BridgeStreet Common 10,000 1,000 1,000 $0.01
Housing Experts, Accommodations, Inc. Preferred none
Inc.
Temporary BridgeStreet Common 10,000 1,000 1,000 $0.01
Corporate Housing, Accommodations, Inc. Preferred none
Inc.
BridgeStreet BridgeStreet Common 10,000 1,000 1,000 $0.01
Nevada, Inc. Accommodations, Inc. Preferred none
BridgeStreet BridgeStreet Common 10,000 1,000 1,000 $0.01
Colorado, Inc. Accommodations, Inc. Preferred none
BridgeStreet BridgeStreet Common 10,000 1,000 1,000 $0.01
Arizona, Inc. Accommodations, Inc. Preferred none
HAI Acquisition, BridgeStreet Common 10,000 1,000 1,000 $0.01
Corp. Accommodations, Inc. Preferred none
BridgeStreet BridgeStreet Common 10,000 1,000 1,000 $0.01
North Carolina, Inc. Accommodations, Inc. Preferred none
BridgeStreet BridgeStreet Common 10,000 1,000 1,000 $0.01
Raleigh, Inc. Accommodations, Inc. Preferred none
BridgeStreet BridgeStreet Common 10,000 1,000 1,000 $0.01
California, Inc. Accommodations, Inc. Preferred none
FOREIGN SUBSIDIARIES
--------------------
BridgeStreet BridgeStreet Common 894,048 751,000 751,000 $1.00
Canada, Inc. Accommodations, Inc. Exchangeable
BridgeStreet BridgeStreet Common 2,000,000 1,000,000 1,000,000 (pound) 1
Accommodations, Ltd. Accommodations, Inc. Preferred none (sterling)
Loryt(1), Ltd. BridgeStreet Common 100 100 100 (pound) 1
Accommodations, Inc. Preferred none (sterling)
BridgeStreet BridgeStreet Common 100 100 100 (pound) 1
Accommodations Accommodations, Inc. Preferred none (sterling)
London, Ltd.
In process of being struck from the Companies House register
BridgeStreet International N/A N/A N/A N/A N/A N/A
Accommodations, Ltd.
In process of being struck from the Companies House register
BridgeStreet N/A N/A N/A N/A N/A N/A
International Suites, Ltd.
</TABLE>
<PAGE> 1
Exhibit 26.1
FIFTH AMENDMENT TO AND WAIVER OF
REVOLVING CREDIT AGREEMENT
This Fifth Amendment to and Waiver of Revolving Credit Agreement ("this
Amendment") is made as of the 15th day of February, 2000 by and among
Bridgestreet Accommodations, Inc. f/k/a Bridgestreet International, Inc.
("Borrower"), a Delaware corporation having its principal place of business at
2242 Pinnacle Parkway, Twinsburg, OH 44087; Bridgestreet Canada, Inc., a
wholly-owned subsidiary of Borrower and an Ontario corporation having its
principal place of business at 1000 Yonge Street, #301, Toronto, Canada M4W 2K2
("Bridgestreet Canada"); Fleet National Bank, a national banking association
("Fleet"); Bank One, N.A., a national banking association ("Bank One"); Bank
One, Canada, a chartered bank incorporated under the laws of Canada ("Bank One
Canada"); and Fleet National Bank, as agent for itself, Bank One and Bank One
Canada (the "Agent").
RECITALS
--------
WHEREAS, the Borrower, Fleet, Bank One, Bank One Canada and Agent have
previously entered into that certain Revolving Credit Agreement, dated as of
March 31, 1997, as amended (the "Credit Agreement");
WHEREAS, the parties hereto now desire to amend the Credit Agreement in
certain respects as provided herein and desire to waive the effect of breaches
of certain provisions of the Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby as follows:
Section 1. DEFINITIONS. All capitalized terms used herein without
definition shall have their respective meanings provided therefor in the Credit
Agreement.
Section 2. AMENDMENT AND WAIVER OF SPECIFIC PROVISIONS.
(i) The following provisions of the Credit Agreement are hereby amended
as follows:
(a) The definition of the term "Security Documents" appearing in
Section 1.1 of the Credit Agreement is hereby amended to read in its entirety as
follows:
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<PAGE> 2
"SECURITY DOCUMENTS The Stock Pledge Agreement, the Guaranty and all
Instruments of Adherence to the Guaranty delivered after the Closing Date
pursuant to Section 7.13 hereof, and a Security Agreement covering the accounts
receivable and other rights to payment of the Borrower, and related financing
statements prepared for filing under the Uniform Commercial Code and the
Personal Property Security Act of the Province of Ontario."
(b) Subsection (b) of Section 7.4 of the Credit Agreement is hereby
amended by adding the following proviso at the end thereof:
"provided, however, that the unaudited consolidated balance sheet of
the Borrower and its Subsidiaries and the unaudited consolidating
balance sheet of the Borrower and its Subsidiaries for the first
quarter of their 2000 fiscal years, each as at the end of such quarter,
and the related consolidated statement of income and statement of cash
flow and consolidating statement of income and statement of cash flow,
each for the portion of the Borrower's fiscal year then elapsed, shall
be provided to the Agent on or before April 20, 2000."
(c) The following subsection (f) is hereby added to Section 7.4 of the
Credit Agreement, and existing subsection (f) is hereby designated subsection
(g):
"(f) weekly, within three Business Days of the end of the prior week, a
statement of cash position as of the end of such week and a cash
flow forecast for the next succeeding eight-week period."
(c) The following subsection (j) is hereby added to Section 8.1 of the
Credit Agreement:
"(j) Indebtedness to Bank One, N.A. pursuant to a short-term line of
credit in a maximum principal amount outstanding at any one time not to
exceed $2,000,000."
(d) The following subsection (x) is hereby added to 8.2 of the Credit
Agreement:
"(x) a security interest in the accounts receivable of the Borrower to
secure indebtedness permitted by Section 8.1(j), and a security
interest in the accounts receivable of Bridgestreet Canada to secure
Revolving Credit Loans made pursuant to the Canadian Sublimit."
(e) The following subsection (t) is hereby added to Section 12.1 of the
Credit Agreement following subsection (s):
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<PAGE> 3
"(a) the Borrower shall fail to pay any principal owed to Bank One,
N.A. when the same shall become due and payable, whether at the stated
date of maturity or any accelerated date of maturity or at any other
date fixed for payment, or shall fail to pay any interest or fee due to
Bank One, N.A. when the same shall become due and payable, and such
failure shall continue for a period of three (3) Business Days."
(ii) The following provisions of the Credit Agreement are hereby waived
for the periods and subject to the limitations indicated below:
(a). The Consolidated EBITDA of the Borrower and its subsidiaries for
the fiscal quarter ending September 30, 1999 was, and the Borrower's estimate of
Consolidated EBITDA for the fiscal quarter ending December 31, 1999 will be,
$6,396,146 and $4,281,125, respectively, or $70,248 and $849,542 less than that
required by Section 9.4 of the Credit Agreement. The Banks hereby agree to waive
the effect of such breaches of Section 9.4 of the Credit Agreement for such
fiscal quarters.
(b) The Borrower has incurred indebtedness to Bank One, N.A. arising
out of overdrafts on its demand deposit account with such Bank in violation of
Section 8.1 of the Credit Agreement. The Banks hereby agree to waive the effect
of such breach of Section 8.1 of the Credit Agreement for all such overdrafts
outstanding as of the date hereof.
(C) The provisions of Sections 9.2, 9.3, 9.4 and 9.5 of the Credit
Agreement are hereby waived for the fiscal quarter ending December 31, 1999, and
the provisions of Section 9.5 of the Credit Agreement are hereby waived for the
months of January and February, 2000.
(d) The Borrower will, simultaneously herewith, incur indebtedness to
Bank One, N.A. pursuant to a Line of Credit Loan Agreement providing for a
$2,000,000 short-term line of credit, such line of credit to be secured by a
security interest in Borrower's accounts receivable. The Banks hereby agree to
waive the effect of any breach of any provision of the Loan Documents arising
out of the execution and delivery by Bridgestreet of such documents and all
other documents and instruments relating to such short-term line of credit, and
the performance by the Borrower and Bridgestreet Canada in accordance with the
terms and provisions thereof.
(e) The requirements of Section 12.1(p) and (q) are hereby waived with
respect to a sale of capital stock of the Borrower, or a change of beneficial
ownership of the Borrower, in either case pursuant to an agreement providing for
the payment in full
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<PAGE> 4
of all Revolving Credit Loans by the acquiror of capital stock of the Borrower,
subject to the payment in full of all Revolving Credit Loans, all interest
thereon and fees incurred in connection therewith, and all costs of collection
relating thereto at the time of the completion pursuant to the terms of such
agreement of any such acquisition or change of beneficial ownership.
SECTION 3. The Borrower hereby agrees that any Revolving Credit Loans
in excess of amounts currently outstanding may be borrowed only with the prior
written consent of the Majority Banks.
SECTION 4. DELIVERY OF ADDITIONAL COLLATERAL. The Borrower and
Bridgestreet Canada have delivered to the Agent herewith a Security Agreement
covering the accounts and other rights to payment of the Borrower and
Bridgestreet Canada, as well as financing statements and notice filings prepared
for filing in the state of Ohio and the recorder of Summit County, Ohio and the
personal property security register of the Province of Ontario. The Borrower and
Bridgestreet Canada hereby confirm that such Security Agreement, financing
statements and notice filings constitute "Security Documents" as defined in the
Credit Agreement, and represent and warrant to the Agent that the filing of such
financing statements in such offices constitutes all acts necessary in order to
perfect the security interests granted by such Security Agreement.
SECTION 5. LOAN DOCUMENTS RATIFIED AND CONFIRMED. The Credit Agreement,
the Notes and each of the other Loan Documents, as specifically supplemented or
amended by this Amendment and the other documents executed in connection
herewith, are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed. Without limiting the generality of the
foregoing, the Security Documents and all of the collateral described therein
do, and shall continue to, secure the payment of all obligations of the Borrower
and Bridgestreet Canada under the Loan Documents, in each case as amended or
supplemented pursuant to this Amendment.
SECTION 6. REPRESENTATIONS AND WARRANTIES. (i) The Borrower hereby
makes the following representations and warranties to the Banks and the Agent in
connection herewith.
(a) REPRESENTATIONS IN LOAN DOCUMENTS. Each of the representations and
warranties made by or on behalf of the Borrower in any of the Loan Documents, as
amended by and through this Amendment, was true and correct when made and is
true and correct on and as of the date hereof (except for representations and
warranties limited as to time or with respect to a specific event, which
representations and warranties shall continue to be limited as to such time or
event), with the same full force
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<PAGE> 5
and effect as if each of such representations and warranties had been made by
such Borrower on the date hereof and in this Amendment.
(b) EVENTS OF DEFAULT. Except as previously disclosed to the Agent, no
Event of Default exists on the date hereof (after giving effect to all of the
arrangements and transactions contemplated by this Amendment), and no condition
exists on the date hereof which would, with notice or the lapse of time, or
both, constitute an Event of Default.
(c) BINDING EFFECT OF DOCUMENTS. This Amendment has been duly executed
and delivered by the Borrower and Bridgestreet Canada and is in full force and
effect as of the date hereof, and the agreements and obligations of the Borrower
and Bridgestreet Canada contained herein constitute legal, valid and binding
obligations of the Borrower and Bridgestreet Canada, enforceable against the
Borrower and Bridgestreet Canada in accordance with their respective terms.
SECTION 7. CONDITIONS AND EFFECTIVE DATE. The agreement of the Banks
and the Agent to amend the Credit Agreement and to waive the effect of Events of
Default referred to herein is subject to the satisfaction of the following terms
and conditions:
(a) Upon execution of this Amendment the Borrower shall pay to Fleet a
waiver fee in the amount of US $50,000.
(b) The Security Agreement and financing statements referred to in
Section 4 shall have been executed and delivered to the Agent, and such
financing statements shall have been recorded in the filing offices referred to
in such Section 4, with no financing statements filed prior thereto appearing in
the records of such filing offices.
(c) The Borrower shall have delivered to the Agent copies of
resolutions adopted by the Board of Directors of the Borrower authorizing the
execution and delivery of the aforementioned Security Agreement and financing
statements to the Agent.
(d) In addition to the waiver fee referred to above, Borrower agrees to
pay on demand all reasonable costs and expenses of the Agent, Fleet, Bank One
and Bank One Canada, including without limitation all reasonable fees and
expenses of counsel, in connection with the preparation, execution and delivery
of this Amendment and the other documents and instruments to be delivered
herewith.
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<PAGE> 6
SECTION 8. MISCELLANEOUS.
(a) NO OTHER CHANGES. Except as otherwise expressly provided by this
Amendment, all of the terms, conditions and provisions of the Credit Agreement,
the Revolving Credit Notes and each of the other Loan Documents and Security
Documents remain unaltered, valid, binding and in full force and effect in the
form existing immediately prior to the execution and delivery of this
Amendment. Except as otherwise expressly provided by this Amendment, nothing
herein is intended or shall be construed so as to: (i) limit, discharge,
release, diminish or otherwise modify any indebtedness, obligations, liabilities
or duties of Borrower, or (ii) terminate, release, waive, or otherwise modify
any mortgage, security interest, right, power or remedy of the Agent, Fleet,
Bank One or Bank One Canada. This Amendment constitutes an instrument
supplemental to the Credit Agreement and the other Loan Documents, which is to
be construed together with and as part of the Loan Documents.
(b) GOVERNING LAW. This Amendment is intended to take effect as a
sealed instrument and shall be deemed to be a contract under the laws of the
Commonwealth of Massachusetts. This Amendment and the rights and obligations of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the laws of the Commonwealth of Massachusetts.
(c) BINDING EFFECT; ASSIGNMENT. This Amendment shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(d) COUNTERPARTS. This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute one agreement.
It shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto in making proof of this Amendment.
Executed facsimile signature pages of this Amendment shall be acceptable to each
of the parties.
(e) CONFLICT WITH OTHER AGREEMENTS. If any of the terms of this
Amendment shall conflict in any respect with any of the terms of any of the Loan
Documents, the terms of this Amendment shall be controlling.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an instrument under seal as of the date first above written.
BRIDGESTREET CANADA, INC. BRIDGESTREET ACCOMMODATIONS, INC.
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<PAGE> 7
By /s/ John Danneberg By /s/ John Danneberg
--------------------------------- ---------------------------------
Title: Pres. Title: Pres.
----------------------------- -----------------------------
BANK ONE CANADA BANK ONE, N.A.
By /s/ By /s/ Richard C. France
--------------------------------- ---------------------------------
Title: Title: First Vice President
----------------------------- -----------------------------
FLEET NATIONAL BANK FLEET NATIONAL BANK, as AGENT
By /s/ Helen Balboni By /s/ Helen Balboni
--------------------------------- ---------------------------------
Title: Vice President Title: Vice President
----------------------------- -----------------------------
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<PAGE> 8
SECURITY AGREEMENT
(Accounts Receivable and Other Rights to Payment)
February 15, 2000
Bridgestreet Accommodations, Inc., a Delaware corporation with a
principal place of business at 2242 Pinnacle Parkway, Twinsburg, Ohio 44087
("Bridgestreet") and Bridgestreet Canada, Inc., an Ontario corporation having
its principal place of business at 1000 Yonge Street, #301, Toronto, Canada M4W
2K2 ("Bridgestreet Canada" and together with Bridgestreet, the "Borrowers"),
hereby pledge, assign and transfer to Fleet National Bank, as agent
(hereinafter called the "Agent"), and hereby grant to Agent a security interest
in and to the following property whether now owned or existing or hereafter
acquired or arising:
i. all of Borrowers' Accounts Receivable;
ii. all of Borrowers' chattel paper, including all additions and
substitutions thereto or therefor;
iii. all of Borrowers' general intangibles;
iv. all other rights of Borrowers to the payment of money, including
without limitation amounts due from affiliates, tax refunds,
insurance proceeds, amounts due under factoring agreements, and all
rights to receive deposits and advance payments;
v. all of Borrowers' documents and instruments, whether negotiable or
non--negotiable;
vi. all lists, files, records (including, without limitation, computer
programs, tapes and related electronic data processing software)
and writings of Borrowers or in which Borrowers have an interest in
any way relating to the foregoing property and all rights of
Borrowers of retrieval from third parties of electronically
processed and recorded information pertaining to any of such
property; and
vii. all guaranties and security for, and all proceeds of, any of the
foregoing.
The property described above shall hereafter be collectively referred
to as the "Collateral."
A security interest in the Collateral of Bridgestreet is granted to
Agent as security
<PAGE> 9
for the payment and performance of any and all liabilities and obligations
(direct and indirect, absolute or contingent, sole, joint or several, secured or
unsecured, now existing or hereafter arising) of Bridgestreet to Fleet National
Bank or Bank One, N.A., a national banking association ("Bank One"), including
without limitation the obligations of Bridgestreet to Fleet and Bank One
pursuant to a Revolving Credit Agreement dated as of March 31, 1997, as amended
(the "Credit Agreement") and the obligations of the Bridgestreet to Bank One
pursuant to a $2,000,000 short-term line of credit. A security interest in the
Collateral of Bridgestreet Canada is granted to Agent as security for the
payment and performance of any and all liabilities and obligations (direct and
indirect, absolute or contingent, sole, joint or several, secured or unsecured,
now existing or hereafter arising) of Bridgestreet Canada to Bank One, Canada, a
chartered bank incorporated under the laws of Canada (collectively, with Fleet
National Bank and Bank One, the "Banks"), including without limitation the
obligations of Bridgestreet Canada to Bank One, Canada pursuant to the Canadian
Sublimit referred to in the Credit Agreement, and the Promissory Note Agreement
dated April 29, 1999 evidencing the same. The liabilities and obligations so
secured are hereafter referred to as the "Obligations."
Borrowers further agree with Agent as follows:
1. DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
(a) ACCOUNTS RECEIVABLE. The terms "Account" and "Account Receivable"
shall mean any right to payment for goods sold or lodging or other services
rendered whether or not earned by performance and whether defined in the
applicable Uniform Commercial Code as an "account" or a "contract right" and
also shall include all notes, drafts, acceptances and other instruments
evidencing any such rights.
(b) DEFAULT. Shall mean an event specified in Section 7.
2. ACCOUNTS RECEIVABLE.
(a) Each Account Receivable in which Agent is granted a security
interest hereunder will at all times be a valid Account Receivable representing
an existing, undisputed indebtedness incurred by the named account debtor for
goods theretofore delivered or shipped to, or for services theretofore performed
for such account debtor. Except as specifically brought to the attention of
Agent in writing, there will be no off-sets or counterclaims of any nature
against, nor any agreement under which any allowance, adjustment or discount may
be claimed in respect of, any such Account Receivable. Borrowers shall at all
times be the lawful owners of each such Account Receivable free and clear of all
liens, encumbrances and security interests other than the security interest
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<PAGE> 10
hereby granted to Agent.
(b) The offices where Borrowers keeps their records concerning the
Accounts Receivable and their chief executive offices are located at the
addresses shown at the beginning of this Agreement. Borrowers will give Agent
prior written notice the chief executive office of either of them will be
located at another address. Borrowers will not remove such records to another
location without the prior written consent of Agent. The locations at which the
Borrowers do business other than their chief executive offices are listed in
Exhibit A.
(c) Borrowers agree to give separate assignments with respect to each
Account Receivable when requested by Agent.
3. AUTHORITY OF BORROWERS. So long as no Default as defined in Section
7 shall have occurred and be continuing, the Borrowers shall be authorized to
collect all of their Accounts Receivable. At any time after a Default hereunder,
Agent at its option may require the Borrowers to comply with the following
requirements:
i. COLLECTIONS FORWARDED TO AGENT. Upon receipt of Agent's
notification of its election as provided above, Borrowers will hold all
collections of Accounts Receivable and other proceeds of Collateral in trust for
Agent without commingling the same with other funds of Borrowers and will
promptly, on the day of receipt thereof, transmit such collections to Agent in
the identical form in which they were received by Borrowers, with such
endorsements as may be appropriate, accompanied by a report, in form approved by
Agent, showing the amount of such collections and the cash discounts applicable
thereto. At such intervals as Agent may request, such reports shall also set
forth the amount of all merchandise returns, allowances, adjustments, discounts
and other credits not previously reported to Agent and the amount owing on
Accounts Receivable which Borrowers deem should be charged-off.
ii. COLLECTIONS CREDITED TO OBLIGATIONS. All collections in
the form of cash, checks or other demand remittances so transmitted to Agent
shall, upon receipt by Agent, be credited to the Obligations of the Borrower for
whose account the payment giving rise thereto was made. Each such credit shall
be conditional upon final payment to Agent at its office of all items giving
rise to such credit, and if any item is not so paid, the credit for such item
shall be reversed whether or not the item has been returned. All collections in
the form of notes, drafts, acceptances or other instruments not payable on
demand shall be delivered by Borrowers to the collection department of Agent.
When such items are collected, the amount thereof shall be credited by Agent to
the Obligations, with appropriate advice to Borrowers. Until such items are
collected, Borrowers will not, without the consent of Agent, make any entry on
their books or records indicating that the same were received in payment of the
Account Receivable
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<PAGE> 11
giving rise thereto.
4. ADDITIONAL REPORTS. Borrowers shall from time to time deliver to
Agent such reports as to Collateral as Agent shall reasonably request and in
form reasonably required by Agent, including without limitation a monthly
Accounts Receivable Aging Report within 10 days of the end of each month or more
frequently if requested by the Agent. A copy of each such report shall also be
provided to Bank One at 50 South Main Street, Akron, Ohio 44308 Attn: Richard
France.
5. MISCELLANEOUS AGREEMENTS.
(a) Borrowers will at all reasonable times and from time to time and,
so long as no Default has occurred and is continuing, upon reasonable advance
notice, allow Agent, by or through any of its officers, agents, employees,
attorneys or accountants, to examine and inspect and make extracts from
Borrowers' books and other records, and to arrange for verification of accounts,
under reasonable procedures, directly with account debtors or by other methods.
(b) Borrowers will join with Agent in appropriate financing statements
under the Uniform Commercial Code and the Personal Property Security Act and
will at all times and from time to time, at the request of Agent, do, make,
execute and deliver all such additional and further acts, things, deeds,
assurances and instruments as Agent may require, more completely to vest in and
assure to Agent its rights hereunder in or to the Collateral. Agent may file, as
a financing statement or other notice filing, a photocopy or other reproduction
of a financing statement or of this Agreement.
(c) Borrowers will not create, grant or suffer to exist any security
interest, lien or encumbrance upon or in respect of any of the Collateral except
in favor of Agent.
(d) Agent shall be under no obligation to take steps necessary to
preserve rights in any Collateral against prior parties but may do so at its
option. At any time after the occurrence and during the continuance of a
Default, Agent may notify the account debtors on any Accounts Receivable or the
obligor on any other Collateral of Agent's security interest therein and
instruct such account debtors and obligors to make all future payments thereon
to Agent. At its option Agent may discharge any taxes, liens, security interests
or other encumbrances to which any Collateral is at any time subject, and may,
upon the failure of Borrowers so to do, purchase insurance on any Collateral and
pay for the repair, maintenance or preservation thereof, and Borrowers agree to
reimburse Agent promptly after receipt of a statement in reasonable detail as to
the amount and purpose thereof for any payments made or expenses reasonably
incurred by Agent pursuant to the foregoing authorization. At any time after and
during the continuance of a Default, Agent may take control of any proceeds of
Collateral to which
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<PAGE> 12
Agent is entitled hereunder or under applicable law.
(e) Borrowers will not change their names, identity or form of business
organization without giving Agent prior written notice thereof and in connection
with any such change, execute and deliver, or cause to be executed and
delivered, to Agent all such additional security agreements, financing
statements and other documents as Agent shall reasonably require.
(f) Borrowers will pay all costs and expenses (including reasonable
fees and expenses of Agent's special counsel) in connection with the
preparation, execution and delivery' of this Agreement and related documents.
6. AGENT AS BORROWERS' ATTORNEY. With respect to any Account Receivable
included in the Collateral, Borrowers hereby irrevocably appoint Agent the true
and lawful attorney for Borrowers with full power of substitution, in the name
of Agent or in the name of Borrowers or otherwise, for the sole benefit of Agent
but at the sole expense of Borrowers, at any time after the occurrence and
during the continuance of a Default hereunder: (a) to demand, collect, receive
payment of, receipt for, settle, compromise or adjust, and give discharges and
releases in respect of the Accounts Receivable or any of them; (b) to commence
and prosecute any suits, actions or proceedings at law or in equity in any court
of competent jurisdiction to collect the Accounts Receivable or any of them and
to enforce any other rights in respect thereof or in respect of the goods which
have given rise thereto; (c) to defend any suit, action, or proceeding brought
against Borrowers in respect of any Account Receivable or the goods or services
which have given rise thereto; (d) to settle, compromise or adjust any suit,
action or proceeding described in clause (b) or (c) above and, in connection
therewith, to give such discharges or releases as to Agent may seem appropriate;
(e) to endorse checks, notes, drafts, acceptances, money orders, bills of
lading, warehouse receipts or other instruments or documents evidencing or
securing the Accounts Receivable or any of them; (f) to receive, open and
dispose of all mail addressed to Borrowers and to notify the post office
authorities to change the address of delivery of mail addressed to Borrowers to
such address, care of Agent, as Agent may designate; and (g) generally to sell,
assign, transfer, pledge, make any agreement in respect of or otherwise deal
with any Account Receivable or the goods or services which have given rise
thereto as fully and completely as though Agent were the absolute owner thereof
for all purposes. The powers conferred on Agent by this Agreement are solely to
protect the interest of Agent and the Banks and shall not impose any duty upon
Agent to exercise any such power, and if Agent shall exercise any such power, it
shall be accountable only for amounts that it actually receives as a result
thereof and shall not be responsible to Borrowers except for willful misconduct.
7. DEFAULTS. Any or all Obligations shall, at the option of Agent and
notwithstanding any time allowed by any instrument evidencing a liability,
become
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<PAGE> 13
immediately due and payable, without notice or demand, upon the occurence of
any of the following events (each, a "Default"):
(a) default in the payment of any of the Obligations continuing beyond
any applicable grace period, or the occurrence of an Event of Default under the
Credit Agreement; or
(b) default in the performance of any covenant or agreement contained
in this Agreement or any agreement between Bank One and Bridgestreet or any
agreement between Bank One, Canada and Bridgestreet Canada; or
(c) the assertion of any claim to priority over the security interest
of the Agent with respect to any material portion of the Collateral.
8. RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any such
Default, and at any time thereafter, Agent shall have the rights and remedies of
a secured party under the Uniform Commercial Code and the Personal Property
Security Act in addition to the rights and remedies provided herein or in any
other instrument or paper executed by Borrowers. Whenever notification with
respect to the sale or other disposition of Collateral is required by law, such
notification of the time and place of public sale, or of the date after which a
private sale or other intended disposition is to be made, shall be deemed
reasonable if given at least seven days before the time of such public sale, or
the date after which any such private sale or other intended disposition is to
be made, as the case may be. Borrowers agree to pay on demand all costs and
expenses (including reasonable attorneys' fees) reasonably incurred or paid by
Agent in enforcing the Obligations on default. After deducting all costs and
expenses of collection, storage, custody, sale or other disposition and delivery
(including legal costs and reasonable attorneys' fees) and all other charges
against the Collateral, the residue of the proceeds of any such sale or other
disposition shall be applied to the payment of the Obligations, in such order of
preference as Agent may determine, and, unless otherwise provided by law, any
surplus shall be returned to Borrower whose Collateral resulted in such surplus.
9. GENERAL. Any condition or restriction imposed herein with respect to
Borrowers may be waived, modified or suspended by Agent but only on Agent's
prior action in writing and only as so expressed in such writing and not
otherwise. Agent shall not be deemed to have waived any of its other rights
hereunder or under any other agreement, instrument or paper signed by Borrowers
unless such waiver be in writing and signed by Agent. No delay or omission on
the part of Agent in exercising any right shall operate as a waiver of such
right or any other right. A waiver on any one occasion shall not be construed as
a bar to, or waiver of, any right or remedy on any future occasion. All Agent's
rights and remedies, whether evidenced hereby or by any other agreement,
instrument or paper, shall be cumulative and may be exercised separately or
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<PAGE> 14
concurrently. Any demand upon, or notice to, Borrowers that Agent may elect to
give shall be effective if given in the manner provided for in Section 19 of the
Credit Agreement. Demands or notices addressed to any other address at which
Agent customarily communicates with Borrowers shall also be effective. This
Agreement and all rights and obligations hereunder, including matters of
construction, validity and performance, shall be governed by the law of
Massachusetts.
This Agreement is executed as an instrument under seal.
BRIDGESTREET CANADA, INC. BRIDGESTREET ACCOMMODATIONS, INC.
By /s/ John Danneberg By /s/ John Danneberg
------------------------------- --------------------------------
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<PAGE> 15
<TABLE>
<CAPTION>
<S> <C> <C>
This FINANCING STATEMENT is presented to a filing officer for filing pursuant to the Uniform Commercial Code.
- ---------------------------------------------------------------------------------------------------------------------------------
1 Debtor(s) (Last Name First) and Address(es) 2 Secured Party(ies) and Address(es) 3 For Filing Officer
(Date, Time, Number, and Filing Office)
Bridgestreet Accommodations, Inc. Fleet National Bank, as agent
2242 Pinnacle Parkway 100 Federal Street
Twinsburg, OH 44087 Boston, MA 02110
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4 This financing statement covers the following types (or items) of property: 5 Assignee(s) of Secured Party and
Address(es)
now owned or hereafter acquired: accounts receivable, chattel paper,
general intangibles, documents and instruments, and all other rights to
the payment of money; all records relating to the foregoing; all proceeds
of the foregoing
------------------------------------------
Check [X]if covered: [X]Products of Collateral are also covered No. of additional sheets presented:
- ----------------------------------------------------------------------------------------------------------------------------------
Filed with
- ----------------------------------------------------------------------------------------------------------------------------------
(USE WHICHEVER SIGNATURE LINE IS APPLICABLE)
BRIDGESTREET ACCOMMODATIONS, INC.
- -------------------------------------------------------- -----------------------------------------------------------
By: /s/ John Danneberg By: /s/ Richard France
------------------------------------------------------ -----------------------------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
DEBTOR COPY
This form of financing statement is
STANDARD FORM- approved by the Secretary of State REVISED, EFF. 1/1/79
UNIFORM COMMERCIAL CODE - UCC-1
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C> <C>
This FINANCING STATEMENT is presented to a filing officer for filing pursuant to the Uniform Commercial Code.
- ---------------------------------------------------------------------------------------------------------------------------------
1 Debtor(s) (Last Name First) and Address(es) 2 Secured Party(ies) and Address(es) 3 For Filing Officer
(Date, Time, Number, and Filing Office)
Bridgestreet Accommodations, Inc. Fleet National Bank, as agent
2242 Pinnacle Parkway 100 Federal Street
Twinsburg, OH 44087 Boston, MA 02110
- ---------------------------------------------------------------------------------------------------------------------------------
4 This financing statement covers the following types (or items) of property: 5 Assignee(s) of Secured Party and
Address(es)
now owned or hereafter acquired: accounts receivable, chattel paper,
general intangibles, documents and instruments, and all other rights to
the payment of money; all records relating to the foregoing; all proceeds
of the foregoing
------------------------------------------
Check [X]if covered: [X]Products of Collateral are also covered No. of additional sheets presented:
- ----------------------------------------------------------------------------------------------------------------------------------
Filed with
- ----------------------------------------------------------------------------------------------------------------------------------
(USE WHICHEVER SIGNATURE LINE IS APPLICABLE)
BRIDGESTREET ACCOMMODATIONS, INC.
- -------------------------------------------------------- -----------------------------------------------------------
By: /s/ John Danneberg By: /s/ Richard France
------------------------------------------------------ -----------------------------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
DEBTOR COPY
This form of financing statement is
STANDARD FORM- approved by the Secretary of State REVISED, EFF. 1/1/79
UNIFORM COMMERCIAL CODE - UCC-1
</TABLE>
<PAGE> 17
BRIDGESTREET CANADA, INC. BRIDGESTREET ACCOMMODATIONS, INC.
By/s/ John Danneberg By/s/ John Danneberg
-------------------------- ---------------------------
Title:Pres. Title:Pres.
---------------------- -----------------------
BANK ONE CANADA BANK ONE, N.A.
By By/s/Richard C. France
-------------------------- ---------------------------
Title: Title:First Vice President
---------------------- -----------------------
FLEET NATIONAL BANK FLEET NATIONAL BANK, as AGENT
By/s/ Helen Balboni By/s/ Helen Balboni
-------------------------- ---------------------------
Title:Vice President Title:Vice President
---------------------- -----------------------
-7-
<PAGE> 1
Exhibit 10.27(A)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of June 12, 1998,
by and between BridgeStreet Accommodations, Inc., a Delaware corporation
("BridgeStreet"), and John E. Danneberg, of Florham Park, New Jersey (the
"Executive").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, BridgeStreet hereby offers and the Executive hereby accepts
employment.
2. Term. Subject to earlier termination as hereafter provided, the
Executive's employment hereunder shall be for a three (3) year term beginning as
of the date hereof. The term of this Agreement, as from time to time extended or
renewed, is hereafter referred to as "the term of this Agreement" or "the term
hereof."
3. Capacity and Performance.
(a) During the term hereof, the Executive shall serve as the
Chief Executive Officer and President of BridgeStreet. In addition, and
without further compensation, the Executive shall serve as a director
and/or officer of BridgeStreet and/or one or more of BridgeStreet's
Affiliates if so elected or appointed from time to time.
(b) During the term hereof, the Executive shall be employed by
BridgeStreet on a full-time basis. The Executive shall have all powers
and duties consistent with his position, subject to the direction and
control of BridgeStreet's Board of Directors (the "Board"), and shall
perform such other duties and responsibilities on behalf of
BridgeStreet and its Affiliates as may reasonably be designated from
time to time by the Board.
(c) During the term hereof, the Executive shall devote his
full business time and his best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests
of BridgeStreet and its Affiliates and to the discharge of his duties
and responsibilities hereunder. During the term hereof, the Executive
shall not engage in any other business activity or serve in any
industry, trade, professional, governmental or academic position which
could materially conflict with the performance of the Executive's
duties and responsibilities during the term of this Agreement.
4. Compensation and Benefits. As compensation for all services
performed by the Executive under and during the term hereof and subject to
performance of the Executive's duties and of the obligations of the Executive,
pursuant to this Agreement or otherwise:
<PAGE> 2
(a) Base Salary. During the term hereof, BridgeStreet shall
pay the Executive a base salary of two hundred thousand dollars
($200,000) during the first year of the term hereof, two hundred
fourteen thousand dollars ($214,000) during the second year of the term
hereof and two hundred twenty-nine thousand dollars ($229,000) during
the third year of the term hereof, payable in accordance with the
payroll practices of BridgeStreet for its executives and subject to
increase from time to time by the Board or a compensation committee of
the Board, in its sole discretion. Such base salary, as from time to
time increased, is hereafter referred to as the "Base Salary".
(b) Stock Options. The Executive shall receive stock options
in accordance with the Stock Option Agreements attached hereto as
EXHIBIT A and executed simultaneously with the execution and delivery
of this Agreement.
(c) Other Benefits. During the term hereof and subject to any
contribution therefor generally required of employees of BridgeStreet,
the Executive shall be entitled to receive long-term disability and
medical insurance coverage and to participate in any and all employee
benefit plans (other than cash bonus plans) from time to time in effect
for employees of BridgeStreet generally, except to the extent such
plans are in a category of benefit otherwise provided to the Executive.
Such participation shall be subject to (i) the terms of the applicable
plan documents, and (ii) the discretion of the Board or any
administrative or other committee provided for in or contemplated by
such plan. BridgeStreet may alter, modify, add to or delete its
employee benefit plans at any time as it, in its sole judgment,
determines to be appropriate, without recourse by the Executive.
(d) Business Expenses. BridgeStreet shall pay or reimburse the
Executive for all reasonable and necessary business expenses incurred
or paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by
BridgeStreet from time to time.
(e) Travel Expenses. BridgeStreet shall pay or reimburse the
Executive for all reasonable expenses incurred or paid by the Executive and his
spouse for a period of twelve (12) months after the execution of this Agreement
with respect to traveling to and from BridgeStreet's corporate headquarters and
Executive's primary residences, including: (i) the cost of airfare to the
Cleveland area; (ii) all ground transportation costs including taxicabs and
automobile rental; (iii) all lodging expenses; and (iv) any other reasonable
transportation expenses.
(f) Life Insurance. BridgeStreet shall pay the premiums on a
term life insurance policy covering the Executive. The death proceeds shall not
be less than $200,000, and the Executive shall designate in his sole and
absolute discretion the beneficiary or beneficiaries of the policy. If the
Executive does not designate a beneficiary, the proceeds will be payable to his
estate. Executive knows of no reason why such insurance shall not be obtainable
at standard premium rates.
-2-
<PAGE> 3
(g) Disability Policy. BridgeStreet shall pay the premiums on
a disability policy for the benefit of the Executive. The policy will provide
benefit payments calculated on an annual basis which on an after tax basis will
equal $120,000 per annum. In determining the after tax basis, the maximum
federal and applicable state income tax rates shall be used.
5. Termination of Employment. Notwithstanding the provisions of Section 2
hereof, the Executive's employment hereunder shall terminate prior to the
expiration of the term under the following circumstances:
(a) Death. In the event of the Executive's death during the
term hereof, the Executive's employment hereunder shall immediately and
automatically terminate. In that event, BridgeStreet shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
(b) Disability.
(i) BridgeStreet may terminate the Executive's
employment hereunder, upon notice to the Executive,
in the event that the Executive becomes disabled
through any illness, injury, accident or condition of
either a physical or psychological nature and, as a
result, is unable to perform substantially all of his
duties and responsibilities hereunder for one hundred
twenty (120) consecutive days or for an aggregate of
one hundred eighty (180) days during any period of
three hundred sixty-five (365) consecutive calendar
days.
(ii) The Board may designate another executive
to act in the Executive's place during any period of
the Executive's disability. Notwithstanding any such
designation, the Executive shall continue to receive
the Base Salary in accordance with Section 4(a) and
benefits in accordance with Section 4(c), to the
extent permitted by the then-current terms of the
applicable benefit plans, until the Executive becomes
eligible for disability income benefits under the
disability policy.
(iii) While receiving disability income payments
under BridgeStreet's disability income plan, if any,
the Executive shall not be entitled to receive any
Base Salary under Section 4(a) hereof, but shall
continue to participate in BridgeStreet benefit plans
in accordance with Section 4(c) and the terms of such
plans, to the extent permitted by such plans, until
the termination of his employment.
(iv) If any question shall arise as to whether
during any period the Executive is disabled through
any illness, injury, accident or condition of either
a physical or psychological nature so as to be unable
to perform substantially all of his duties and
responsibilities hereunder, the Executive
-3-
<PAGE> 4
may, and at the request of BridgeStreet shall, submit
to a medical examination by a physician selected by
BridgeStreet to whom the Executive or his duly
appointed guardian, if any, has no reasonable
objection to determine whether the Executive is so
disabled. If the Executive does not agree with the
determination of the physician, the Executive may
submit to a medical examination by a second physician
selected by the Executive to whom BridgeStreet has no
reasonable objection to determine whether the
Executive is so disabled. If the two physicians
selected agree as to whether the Executive is
disabled, such determination shall for the purposes
of this Agreement be conclusive of the issue. If the
two physicians selected do not agree as to whether
the Executive is disabled, then those two are to
select a third physician to examine the Executive and
to issue a report containing an opinion as to whether
the Executive is disabled. If these two physicians
cannot agree upon the selection of the third
physician, that physician shall be selected by the
president of the local medical society in the
community where the Executive resides. BridgeStreet
and the Executive shall be bound by the opinion of
the two physicians, or if the two physicians cannot
agree, by the opinion of the third physician. If such
question shall arise and the Executive shall fail to
submit to such medical examination, BridgeStreet's
determination of the issue shall be binding on the
Executive.
(c) By BridgeStreet for Cause. BridgeStreet may terminate the
Executive's employment hereunder for Cause at any time upon written
notice to the Executive setting forth the specific facts and
circumstances constituting Cause and the specific actions required to
cure. The following, as determined by the Board in its reasonable
judgment, shall constitute Cause for termination:
(i) The Executive's repeated failure to perform
(other than by reason of disability), or gross
negligence in the performance of, his material duties
and responsibilities hereunder and the continuance of
such failure or negligence for a period of thirty
(30) days after written notice is received by the
Executive;
(ii) Material breach by the Executive of any
provision of this Agreement or any other written
agreement between the Executive and BridgeStreet or
any of its Affiliates for a period of thirty (30)
days after written notice is received by the
Executive;
(iii) Other conduct whereby the Executive is
convicted of (a) a felony or (b) a misdemeanor, other
than a traffic violation, which involves moral
turpitude and which, in the reasonable judgment of
the Board, reflects adversely on the reputation of
BridgeStreet.
-4-
<PAGE> 5
Upon the giving of notice of termination of the Executive's
employment hereunder for Cause, BridgeStreet shall not have any further
obligation or liability to the Executive, other than for Base Salary
earned and unpaid at the date of termination.
(d) By Executive for Cause. The Executive may terminate his
employment hereunder for Cause at any time upon written notice to BridgeStreet
setting forth the specific facts and circumstances constituting Cause and the
specific actions required to cure. For this purpose, Cause shall mean a material
breach by BridgeStreet of any provision of this Agreement or any other written
agreement between Executive and BridgeStreet for a period of thirty (30) days
after written notice is received by BridgeStreet.
6. Effect of Termination. The provisions of this Section 6 shall apply
to termination due to the expiration of the term, pursuant to Section 5 or
otherwise.
(a) Except as otherwise provided in paragraph (d), payment by
BridgeStreet of any Base Salary and contributions to the cost of the
Executive's continued participation in BridgeStreet's group health and
dental plans, if any, that are due the Executive in each case under the
applicable termination provision of Section 5 shall constitute the
entire obligation of BridgeStreet to the Executive.
(b) Except as otherwise provided in paragraph (d), benefits
shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without
regard to any continuation of Base Salary or other payment to the
Executive following such date of termination.
(c) Except as otherwise provided in paragraph (d), provisions
of this Agreement shall survive any termination if so provided herein
or if necessary or desirable fully to accomplish the purposes of such
provisions, including without limitation the obligations of the
Executive under Sections 7 and 8 hereof. The Executive recognizes that
no compensation is earned after termination of employment except as
provided in paragraph (d).
(d) In the event the Executive's employment by BridgeStreet is
terminated by BridgeStreet notwithstanding the terms of this Agreement, or
Executive terminates this Agreement for Cause:
(i) BridgeStreet shall continue to pay to the Executive
his Base Salary as of the date of termination for the term of
this Agreement or twelve months, whichever is longer. The
Executive shall have no obligation to mitigate and shall
receive his Base Salary without any reduction for other
amounts earned by the Executive during the post-termination
period.
(ii) BridgeStreet shall continue to provide Executive
with the medical insurance coverage contemplated by Section
4(c) for the term of this Agreement or twelve months,
whichever is longer.
-5-
<PAGE> 6
7. Confidential Information.
(a) The Executive acknowledges that BridgeStreet and its
Affiliates will continually develop Confidential Information, that the
Executive may develop Confidential Information for BridgeStreet or its
Affiliates and that the Executive may learn of Confidential
Information. The Executive agrees that, except as required for the
proper performance of his duties for BridgeStreet, he will not,
directly or indirectly, use or disclose any Confidential Information,
as defined below. The Executive understands and agrees that this
restriction will continue to apply after his employment terminates,
regardless of the reason for termination.
(b) The Executive agrees that all Confidential Information
which he creates or to which he has access as a result of his
employment or the rendering of other services to BridgeStreet is and
shall remain the sole and exclusive property of BridgeStreet. Except as
required for the proper performance of his duties, the Executive will
not copy any documents, tapes or other media containing Confidential
Information ("Documents") or remove any Documents, or copies, from
BridgeStreet's premises. The Executive will return to BridgeStreet
immediately after his employment terminates, and at such other times as
may be specified by BridgeStreet, all Documents and copies and all
other property of BridgeStreet then in his possession or control.
8. Restricted Activities. The Executive agrees that some restrictions
on his activities during and after his employment are necessary to protect the
goodwill, Confidential Information and other legitimate interests of
BridgeStreet and its Affiliates:
(a) The Executive agrees that, during the term hereof and for
a period of two (2) years immediately following termination of his
employment (the "Non-Competition Period"), he will not, directly or
indirectly, whether as an owner, partner, investor, consultant,
employee or otherwise, provide services to or engage in, or undertake
any planning to engage in, any business engaged in the extended stay
lodgings business without the prior written consent of BridgeStreet, it
being understood that hotels, as such, are not included within such
prohibition.
(b) The Executive agrees that, during the term hereof, he will
not undertake any outside activity, whether or not competitive with the
business of BridgeStreet or any of its Affiliates, that could
reasonably give rise to a conflict of interest or otherwise interfere
with his duties and obligations to BridgeStreet or any of its
Affiliates.
(c) The Executive further agrees that during the term hereof
and during the Non-Competition Period, the Executive will not, and will
not assist anyone else to, (i) hire any employee of BridgeStreet or any
of its Affiliates or seek to persuade any employee of BridgeStreet or
any of its Affiliates to discontinue employment, (ii) solicit or
encourage any customer or vendor of or lessor to BridgeStreet or any of
its Affiliates to terminate or diminish its relationship with
BridgeStreet or any of its Affiliates, (iii) seek to persuade any
customer or prospective customer of BridgeStreet or any of its
Affiliates
-6-
<PAGE> 7
to conduct with anyone else any business or activity that such customer
or prospective customer conducts or could conduct with BridgeStreet or
any of its Affiliates, or (iv) call upon any prospective acquisition
candidates on the Executive's own behalf or on behalf of any third
party, which candidate was either called upon by the Executive or for
which the Executive made or had access to an acquisition analysis for
BridgeStreet.
9. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 7 and 8 hereof.
The Executive agrees that said restraints are necessary for the reasonable and
proper protection of BridgeStreet and its Affiliates and that each and every one
of the restraints is reasonable in respect to subject matter, length of time and
geographic area. The Executive further agrees that all goodwill of BridgeStreet
and its Affiliates is their exclusive property. The Executive further
acknowledges and agrees that, were he to breach any of the covenants contained
in Sections 7 or 8 hereof, the damage would be irreparable. The Executive
therefore agrees that BridgeStreet or any of its Affiliates, as the case may be,
in addition to any other remedies available to it, shall be entitled to
preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants, without having to post bond.
The parties further agree that, in the event that any provision of Sections 7 or
8 hereof shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too great a time, too large a
geographic area or too great a range of activities, such provision shall be
deemed to be modified to permit its enforcement to the maximum extent permitted
by law.
10. Conflicting Agreements. The Executive and BridgeStreet hereby
respectively represent and warrant that the execution of this Agreement and the
performance of the obligations hereunder will not breach or be in conflict with
any other agreement to which they are a party or are bound and that they are not
subject to any covenants against competition or similar covenants that would
affect the performance of their obligations hereunder. The Executive will not
disclose to or use any proprietary information of a third party without such
party's consent.
11. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 12
and as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or
indirectly controlling, controlled by or under common control with
BridgeStreet, where control may be by either management authority or
equity interest.
(b) "Confidential Information" means any and all information
of BridgeStreet or of its Affiliates that is not generally known by
others with whom BridgeStreet or any of its Affiliates does, or plans
to, compete or do business, including but not limited to (i)
BridgeStreet's or any of its Affiliates' products and services,
technical data, methods and processes, (ii) BridgeStreet's or any of
its Affiliates' marketing activities and strategic plans, (iii)
BridgeStreet's or any of its Affiliates' costs and sources of supply,
(iv) the
-7-
<PAGE> 8
identity and special needs of BridgeStreet's or any of its Affiliates'
customers and prospective customers, vendors and prospective vendors,
and acquisition candidates and (v) the people and organizations with
whom BridgeStreet or any of its Affiliates has business relationships
and those relationships. Confidential Information also includes such
information that BridgeStreet or any of its Affiliates may receive or
has received belonging to customers or others who do business with
BridgeStreet or any of its Affiliates. Notwithstanding anything herein
to the contrary, Confidential Information does not include any
information which is now generally publicly known or which subsequently
becomes generally publicly known other than as a direct or indirect
result of the breach of this Agreement by the Executive or any
information which BridgeStreet does not treat as Confidential
Information.
(c) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other entity or
organization, other than BridgeStreet or any of its Affiliates.
12. Withholding. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
13. Assignment. Neither BridgeStreet nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that BridgeStreet may assign its rights and obligations under this Agreement
with the consent of the Executive in the event that BridgeStreet shall hereafter
effect a reorganization, consolidate with, or merge into, any other Person or
transfer all or substantially all of its properties or assets to any other
Person ("Change of Control"). If the Executive does not consent, he shall resign
upon such Change of Control and such resignation shall be treated as a
termination by the Executive for Cause for the purposes of this Agreement. This
Agreement shall inure to the benefit of and be binding upon BridgeStreet and the
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.
14. Severability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
15. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
16. Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in
-8-
<PAGE> 9
person or deposited in the United States mail, postage prepaid, registered or
certified, and addressed to the Executive at his last known address on the books
of BridgeStreet or, in the case of BridgeStreet, at BridgeStreet's principal
place of business, attention of Chairman of the Board, or to such other address
as either party may specify by notice to the other actually received.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment.
18. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
representative of BridgeStreet.
19. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
21. Governing Law. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of Delaware, without
regard to the conflict of laws principles thereof. Each party hereby agrees to
submit himself or itself to the jurisdiction and venue of the courts of the
State of Delaware for purposes of any suit, action, or other proceeding arising
out of this Agreement and to the subject matter of the same, and hereby waives,
and agrees not to assert, as a defense in any such suit, action, or proceeding
that he or it is not subject to such jurisdiction, or that such suit, action or
proceeding may not be brought or is not maintainable in such courts, or that any
suit, action, or proceeding brought in any other court is not transferable to
any such Delaware court.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and BridgeStreet, by its duly authorized
representative, as of the date first above written.
EXECUTIVE: BRIDGESTREET ACCOMMODATIONS, INC.
/s/ John E. Danneberg /s/ Paul M. Verrochi
____________________________ By___________________________________
John E. Danneberg Name: Paul M. Verrochi
Title: Chairman of the Board
-9-
<PAGE> 10
EXHIBIT A
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT between BridgeStreet Accommodations, Inc.,
a Delaware corporation (the "Company"), and John E. Danneberg (the "Grantee")
dated effective as of June 12, 1998 (the "Date of Grant").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto act and agree as follows:
Section 1. The Plan
This Agreement is subject in every respect to the terms of the
Company's 1997 Equity Incentive Plan, as amended (the "Plan"), a copy of which
is attached hereto as Exhibit A and is incorporated herein in its entirety by
this reference. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Plan.
Section 2. Grant of Option
The Company hereby grants to the Grantee, as of the Date of Grant, an
option (the "Option") to purchase up to two hundred thousand (200,000) shares of
Common Stock, par value $.01 per share, of the Company (the "Option Shares") at
a price per share of $7.50, both the price and the number of shares being
subject to adjustment only as provided in the Plan.
Section 3. Terms of Option
Subject to such further limitations as are provided herein, the Option
shall become exercisable as follows:
(i) 125,000 of the Option Shares shall be exercisable from and
after the date hereof;
(ii) 37,500 of the Option Shares shall be exercisable on or
after the first anniversary of the Date of Grant; and
(iii) 37,500 of the Option Shares shall be exercisable on or
after the second anniversary of the Date of Grant.
Section 4. Termination of the Option
The Option and all rights hereunder with respect thereto, to the extent
such rights shall not have been exercised, shall terminate and become null and
void after the close of business on the day that is ten (10) years from the Date
of Grant (the "Option Term").
<PAGE> 11
Section 5. Cessation of Grantee's Employment
(a) If the Grantee ceases to be employed by the Company either by
reason of his or her death or by reason of termination by Grantee without Cause
during the Option Term, the Option shall be exercisable, to the extent the
Option was exercisable at the time of the Grantee's death or termination, as the
case may be, either by the Grantee's executor or administrator or, if not so
exercised, by the legatees or distributees of the Grantee's estate, in the event
of death, in all events only during the one (1) year period immediately
following the Grantee's death or termination, as the case may be, after which
time the Option shall terminate.
(b) If the Grantee ceases to be employed by the Company by reason of a
Change of Control, by termination by the Company without Cause, or by
termination by Grantee for Cause, the Option shall become immediately
exercisable as to all remaining Option Shares by the Grantee only during the one
(1) year period immediately following such cessation or termination, as the case
may be, after which time the Option shall terminate.
(c) Notwithstanding any other provisions set forth herein or in the
Plan, in no event shall the Option be exercised after the expiration of the
Option Term.
(d) Notwithstanding any other provisions set forth herein or in the
Plan, the Option shall terminate automatically and without notice to the Grantee
on the date the Grantee's employment is terminated for "Cause."
(e) For the purposes hereof:
(i) "Cause" shall mean cause as defined in the Employment
Agreement dated June 12, 1998, between the Company and the Grantee, except for a
termination by the Executive for Cause pursuant to Section 13 thereof; and
(ii) "Change of Control" shall mean a merger, consolidation,
tender offer, sale of all or substantially all of the Company's assets or a
comparable transaction in which the holders of the Company's outstanding voting
securities (including other securities convertible or exercisable therefor) as
of immediately prior to such transaction do not hold immediately following such
transaction securities of the surviving or acquiring entity (or the direct or
indirect parent of such entity) entitled to cast a majority of the votes
entitled to be cast for the election of Directors.
Section 6. Exercise of Option
(a) The Grantee may exercise the Option with respect to all or any part
of the number of Option Shares then exercisable hereunder by giving written
notice of election to the Company, attention: Treasurer. Such notice shall
specify the number of Option Shares as to which the Option is to be exercised.
-2-
<PAGE> 12
(b) At the time the Option is exercised, the Grantee shall make full
payment for the Option Shares purchased, in cash, certified check or bank
cashier's check, or through the surrender of shares of Common Stock at their
fair market value on the date of exercise or a note pursuant to a cashless
exercise program that the Company shall adopt. The Grantor also shall pay to the
Company or make provision satisfactory to the Company for the payment of any
taxes required by law to be withheld by the Company at the time of the exercise
of the Option or the sale of the Option Shares acquired upon such exercise.
(c) In the event exercise of the Option shall require the Company to
issue a fractional share of Common Stock of the Company, such fraction shall be
disregarded and the purchase price payable in connection with such exercise
shall be appropriately reduced. Any such fractional share shall be carried
forward and added to any shares covered by future exercise(s) of the Option.
(d) Notwithstanding anything to the contrary contained herein, the
Option shall not be exercisable unless either: (a) a registration statement
under the Securities Act of 1933, as amended (the "Act"), with respect to the
Option Shares shall have become, and continues to be, effective; (b) the Grantee
(i) shall have represented, warranted and agreed, in form and substance
satisfactory to the Company, at the time of exercising the Option, that he or
she is acquiring the Option Shares for his or her own account, for investment
and not with a view to or in connection with any distribution, (ii) shall have
agreed to restrictions on transfer in form and substance satisfactory to the
Company, and (iii) shall have agreed to an endorsement which makes appropriate
reference to such representations, warranties, agreements and restrictions on
the certificate(s) representing the Option Shares; or (c) the Grantee shall have
complied with any other applicable exemption requirement to registration under
the Act. The Company shall use its best efforts to ensure that a registration
statement has become and continues to be effective with respect to the offer and
sale of the Option Shares to the Grantee.
Section 7. No Rights of a Shareholder
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a shareholder of the Company with
respect to any Option Shares, in whole or in part, prior to the date of exercise
of the Option.
Section 8. Nontransferability of Option
During the Grantee's lifetime, unless otherwise allowed by the Board of
Directors of the Company pursuant to Section 6.3 of the Plan, the Option shall
be exercisable only by the Grantee, and the Option shall not in any event be
transferable except, in case of the death of the Grantee, by will or the laws of
descent and distribution.
Section 9. Employment not Affected
Neither the granting of the Option nor its exercise shall be construed
as granting to the Grantee any right with respect to his or her continued
employment by the Company. Except as may otherwise be limited by a written
agreement between the Company and the Grantee,
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<PAGE> 13
the right of the Company to terminate at will the Grantee's employment at any
time (whether by dismissal, discharge, retirement or otherwise) is specifically
reserved by the Company.
Section 10. Amendment of Option
The Option may be amended or modified at any time by the Company;
provided, however, that the Grantee's consent to such amendment or modification
shall be required unless the Board of Directors or the Compensation Committee of
the Company determines that the amendment or modification, taking into account
any related action, would not materially and adversely affect the Grantee.
Section 11. Notice
(a) Any notices required or permitted hereunder shall be addressed to
the Company at 30670 Bainbridge Road, Solon, Ohio 44139, Attention: Treasurer,
or to the Grantee at the most current address of the Grantee appearing in the
records of the Company, as the case may be.
(b) Either the Company or the Grantee may, by notice to the other given
in the manner provided in Section 11(a), change his, her or its address for
future notice.
Section 12. Governing Law
The validity, construction, interpretation and effect of this
instrument shall be governed by and determined in accordance with the law of the
State of Delaware, without regard to conflicts of law principles.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunder duly authorized and the Grantee has hereunto
set his hand all as of the 12th day of June, 1998.
BRIDGESTREET ACCOMMODATIONS, INC.
By_______________________________
Its
ACCEPTED:
___________________________________
_____________________________, Grantee
-4-
<PAGE> 14
Exhibit 10.27(B)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT between BridgeStreet Accommodations, Inc.,
a Delaware corporation (the "Company"), and John E. Danneberg (the "Grantee")
dated effective as of June 12, 1998 (the "Date of Grant").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto act and agree as follows:
Section 1. The Plan
The option granted pursuant to this Agreement is not granted pursuant
to the Company's 1997 Equity Incentive Plan, as amended (the "Plan"). This
Agreement shall nevertheless be subject to the terms of the Plan, a copy of
which is attached hereto as Exhibit A and is incorporated herein in its entirety
by this reference, except to the extent this Agreement and the Plan are in
conflict, in which case this Agreement shall control. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in the
Plan.
Section 2. Grant of Option
The Company hereby grants to the Grantee, as of the Date of Grant, an
option (the "Option") to purchase up to one hundred seventy-five thousand
(175,000) shares of Common Stock, par value $.01 per share, of the Company (the
"Option Shares") at a price per share of $7.50, both the price and the number of
shares being subject to adjustment only as provided in the Plan.
Section 3. Terms of Option
Subject to such further limitations as are provided herein, the Option
shall become exercisable as follows:
(i) 87,500 of the Option Shares shall be exercisable on or
after the first anniversary of the Date of Grant;
(ii) 87,500 of the Option Shares shall be exercisable on or
after the second anniversary of the Date of Grant.
The Option and all rights hereunder with respect thereto, to the extent
such rights shall not have been exercised, shall terminate and become null and
void after the close of business on the day that is ten (10) years from the Date
of Grant (the "Option Term").
Section 5. Cessation of Grantee's Employment
(a) If the Grantee ceases to be employed by the Company either by
reason of his or her death or by reason of termination by Grantee without Cause
during the Option Term, the Option shall be exercisable, to the extent the
Option was exercisable at the time of the
<PAGE> 15
Grantee's death or termination, as the case may be, either by the Grantee, in
the event of termination, or by the Grantee's executor or administrator or, if
not so exercised, by the legatees or distributees of the Grantee's estate, in
the event of death, in all events only during the one (1) year period
immediately following the Grantee's death or termination, as the case may be,
after which time the Option shall terminate.
(b) If the Grantee ceases to be employed by the Company by reason of a
Change of Control, by termination by the Company without Cause, or by
termination by Grantee for Cause, the Option shall become immediately
exercisable as to all remaining Option Shares by the Grantee only during the one
(1) year period immediately following such cessation or termination, as the case
may be, after which time the Option shall terminate.
(c) Notwithstanding any other provisions set forth herein or in the
Plan, in no event shall the Option be exercised after the expiration of the
Option Term.
(d) Notwithstanding any other provisions set forth herein or in the
Plan, the Option shall terminate automatically and without notice to the Grantee
on the date the Grantee's employment is terminated for "Cause."
(e) For the purposes hereof:
(i) "Cause" shall mean cause as defined in the Employment
Agreement dated June 12, 1998, between the Company and the Grantee, except for a
termination by the Executive for Cause pursuant to Section 13 thereof; and
(ii) "Change of Control" shall mean a merger, consolidation,
tender offer, sale of all or substantially all of the Company's assets or a
comparable transaction in which the holders of the Company's outstanding voting
securities (including other securities convertible or exercisable therefor) as
of immediately prior to such transaction do not hold immediately following such
transaction securities of the surviving or acquiring entity (or the direct or
indirect parent of such entity) entitled to cast a majority of the votes
entitled to be cast for the election of Directors.
Section 6. Exercise of Option
(a) The Grantee may exercise the Option with respect to all or any part
of the number of Option Shares then exercisable hereunder by giving written
notice of election to the Company, attention: Treasurer. Such notice shall
specify the number of Option Shares as to which the Option is to be exercised.
(b) At the time the Option is exercised, the Grantee shall make full
payment for the Option Shares purchased, in cash, certified check or bank
cashier's check, or through the surrender of shares of Common Stock at their
fair market value on the date of exercise or a note pursuant to a cashless
exercise program that the Company shall adopt. The Grantor also shall pay to the
Company or make provision satisfactory to the Company for the payment of
-2-
<PAGE> 16
any taxes required by law to be withheld by the Company at the time of the
exercise of the Option or the sale of the Option Shares acquired upon such
exercise.
(c) In the event exercise of the Option shall require the Company to
issue a fractional share of Common Stock of the Company, such fraction shall be
disregarded and the purchase price payable in connection with such exercise
shall be appropriately reduced. Any such fractional share shall be carried
forward and added to any shares covered by future exercise(s) of the Option.
(d) Notwithstanding anything to the contrary contained herein, the
Option shall not be exercisable unless either: (a) a registration statement
under the Securities Act of 1933, as amended (the "Act"), with respect to the
Option Shares shall have become, and continues to be, effective; (b) the Grantee
(i) shall have represented, warranted and agreed, in form and substance
satisfactory to the Company, at the time of exercising the Option, that he or
she is acquiring the Option Shares for his or her own account, for investment
and not with a view to or in connection with any distribution, (ii) shall have
agreed to restrictions on transfer in form and substance satisfactory to the
Company, and (iii) shall have agreed to an endorsement which makes appropriate
reference to such representations, warranties, agreements and restrictions on
the certificate(s) representing the Option Shares; or (c) the Grantee shall have
complied with any other applicable exemption requirement to registration under
the Act. The Company shall use its best efforts to ensure that a registration
statement has become and continues to be effective with respect to the offer and
sale of the Option Shares to the Grantee.
Section 7. No Rights of a Shareholder
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a shareholder of the Company with
respect to any Option Shares, in whole or in part, prior to the date of exercise
of the Option.
Section 8. Nontransferability of Option
During the Grantee's lifetime, unless otherwise allowed by the Board of
Directors of the Company pursuant to Section 6.3 of the Plan, the Option shall
be exercisable only by the Grantee, and the Option shall not in any event be
transferable except, in case of the death of the Grantee, by will or the laws of
descent and distribution.
Section 9. Employment not Affected
Neither the granting of the Option nor its exercise shall be construed
as granting to the Grantee any right with respect to his or her continued
employment by the Company. Except as may otherwise be limited by a written
agreement between the Company and the Grantee, the right of the Company to
terminate at will the Grantee's employment at any time (whether by dismissal,
discharge, retirement or otherwise) is specifically reserved by the Company.
-3-
<PAGE> 17
Section 10. Amendment of Option
The Option may be amended or modified at any time by the Company;
provided, however, that the Grantee's consent to such amendment or modification
shall be required unless the Board of Directors or the Compensation Committee of
the Company determines that the amendment or modification, taking into account
any related action, would not materially and adversely affect the Grantee.
Section 11. Notice
(a) Any notices required or permitted hereunder shall be addressed to
the Company at 30670 Bainbridge Road, Solon, Ohio 44139, Attention: Treasurer,
or to the Grantee at the most current address of the Grantee appearing in the
records of the Company, as the case may be.
(b) Either the Company or the Grantee may, by notice to the other given
in the manner provided in Section 11(a), change his, her or its address for
future notice.
Section 12. Governing Law
The validity, construction, interpretation and effect of this
instrument shall be governed by and determined in accordance with the law of the
State of Delaware, without regard to conflicts of law principles.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunder duly authorized and the Grantee has hereunto
set his hand all as of the 12th day of June, 1998.
BRIDGESTREET ACCOMMODATIONS, INC.
By /s/ Paul M. Verrochi
-------------------------------
Its Chairman of the Board
ACCEPTED:
/s/ John Danneberg
----------------------------------
John E. Danneberg, Grantee
---------------------------------
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<PAGE> 18
Exhibit 10.27 (c)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT between BridgeStreet Accommodations, Inc.,
a Delaware corporation (the "Company"), and John E. Danneberg (the "Grantee")
dated effective as of June 12, 1998 (the "Date of Grant").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto act and agree as follows:
Section 1. The Plan
The option granted pursuant to this Agreement is not granted pursuant
to the Company's 1997 Equity Incentive Plan, as amended (the "Plan"). This
Agreement shall nevertheless be subject to the terms of the Plan, a copy of
which is attached hereto as Exhibit A and is incorporated herein in its entirety
by this reference, except to the extent this Agreement and the Plan are in
conflict, in which case this Agreement shall control. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in the
Plan.
Section 2. Grant of Option
The Company hereby grants to the Grantee, as of the Date of Grant, an
option (the "Option") to purchase up to one hundred twenty-five thousand
(125,000) shares of Common Stock, par value $.01 per share, of the Company (the
"Option Shares") at a price per share of $7.50, both the price and the number of
shares being subject to adjustment only as provided in the Plan.
Section 3. Terms of Option
(a) Subject to such further limitations as are provided herein, the
Option shall become exercisable in full on the eighth anniversary of the Date of
Grant.
(b) The right to exercise the Option as to one-third (ignoring
fractional shares) of the total number of Option Shares shall be accelerated,
and the Option shall be exercisable as to such number of Option Shares, from and
after the first date the Average Closing Price is at least twice the Base Price.
(c) The right to exercise the Option as to an additional one-third
(ignoring fractional shares) of the total number of Option Shares shall be
accelerated, and the Option shall be exercisable as to such number of Option
Shares from and after the first date the Average Closing Price is at least three
times the Base Price.
(d) The right to exercise the Option as to the remaining Option Shares
shall be accelerated, and the Option shall be exercisable in full, from and
after the first date the Average Closing Price is at least four times the Base
Price.
<PAGE> 19
(e) For purposes hereof:
(i) "Average Closing Price" shall mean the average closing price
of a share of Common Stock for ten (10) consecutive trading days on the
principal national securities exchange (including the Nasdaq National
Market) on which the shares of Common Stock are listed or admitted to
trading or, if not listed or admitted to trading on any national
securities exchange (including the Nasdaq National Market), the average
of the bid and asked prices during such ten-day period in the
over-the-counter market as furnished by Nasdaq; provided, however, as
of immediately prior to the consummation of any Change of Control of
the Company the Average Closing Price shall be deemed to be the price
at which the Common Stock is valued in such Change of Control and
provided, further, the Average Closing Price shall be appropriately
adjusted in the event of any stock split, stock dividend or similar
transaction occurring during the period when the Average Closing Price
is being determined;
(ii) "Cause" shall mean "cause" as defined in the Employment
Agreement dated June 12, 1998, between the Company and the Grantee,
except for a termination by the Executive for Cause pursuant to Section
13 thereof.
(iii) "Change of Control" shall mean a merger, consolidation,
tender offer, sale of all or substantially all of the Company's assets
or comparable transaction in which the holders of the Company's
outstanding voting securities (including other securities convertible
or exercisable therefor) as of immediately prior to such transaction do
not hold immediately following such transaction securities of the
surviving or acquiring entity (or the direct or indirect parent of such
entity) entitled to cast a majority of the votes entitled to be cast
for the election of Directors; and
(iv) "Common Stock" shall mean the Company's presently
authorized Common Stock and any stock into or for which such Common
Stock may hereafter be converted or exchanged.
(v) "Base Price" shall mean $4 7/8.
Section 4. Termination of the Option
The Option and all rights hereunder with respect thereto, to the extent
such rights shall not have been exercised, shall terminate and become null and
void after the close of business on the day that is ten (10) years from the Date
of Grant (the "Option Term").
Section 5. Cessation of Grantee's Employment
(a) If the Grantee ceases to be employed by the Company either by
reason of his or her death or by reason of termination by Grantee without Cause
during the Option Term, the
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<PAGE> 20
Option shall be exercisable, to the extent the Option was exercisable at the
time of the Grantee's death or termination, as the case may be, either by the
Grantee, in the event of termination, or by the Grantee's executor or
administrator or, if not so exercised, by the legatees or distributees of the
Grantee's estate, in the event of death, in all events only during the one (1)
year period immediately following the Grantee's death or termination, as the
case may be, after which time the Option shall terminate.
(b) If the Grantee ceases to be employed by the Company by reason of a
termination by the Company without Cause or by termination by Grantee for Cause,
the Option shall become immediately exercisable as to all remaining Option
Shares by the Grantee only during the one (1) year period immediately following
such cessation or termination, as the case may be, after which time the Option
shall terminate.
(c) If there is a Change of Control, the Chairman of the Company shall
request that the Board of Directors approve that the Option shall become
immediately exercisable as to all remaining Option Shares by the Grantee only
during the one (1) year period immediately following such Change of Control,
after which time the Option shall terminate.
(d) Notwithstanding any other provisions set forth herein or in the
Plan, in no event shall the Option be exercised after the expiration of the
Option Term.
(e) Notwithstanding any other provisions set forth herein or in the
Plan, the Option shall terminate automatically and without notice to the Grantee
on the date the Grantee's employment is terminated for Cause.
Section 6. Exercise of Option
(a) The Grantee may exercise the Option with respect to all or any part
of the number of Option Shares then exercisable hereunder by giving written
notice of election to the Company, attention: Treasurer. Such notice shall
specify the number of Option Shares as to which the Option is to be exercised.
(b) At the time the Option is exercised, the Grantee shall make full
payment for the Option Shares purchased, in cash, certified check or bank
cashier's check, or through the surrender of shares of Common Stock at their
fair market value on the date of exercise or a note pursuant to any cashless
exercise program that the Company shall adopt. The Grantor also shall pay to the
Company or make provision satisfactory to the Company for the payment of any
taxes required by law to be withheld by the Company at the time of the exercise
of the Option or the sale of the Option Shares acquired upon such exercise.
(c) In the event exercise of the Option shall require the Company to
issue a fractional share of Common Stock of the Company, such fraction shall be
disregarded and the purchase price payable in connection with such exercise
shall be appropriately reduced. Any such
-3-
<PAGE> 21
fractional share shall be carried forward and added to any shares covered by
future exercise(s) of the Option.
(d) Notwithstanding anything to the contrary contained herein, the
Option shall not be exercisable unless either (a) a registration statement under
the Securities Act of 1933, as amended (the "Act"), with respect to the Option
Shares shall have become, and continues to be, effective; (b) the Grantee (i)
shall have represented, warranted and agreed, in form and substance satisfactory
to the Company, at the time of exercising the Option, that he or she is
acquiring the Option Shares for his or her own account, for investment and not
with a view to or in connection with any distribution, (ii) shall have agreed to
restrictions on transfer in form and substance satisfactory to the Company, and
(iii) shall have agreed to an endorsement which makes appropriate reference to
such representations, warranties, agreements and restrictions on the
certificate(s) representing the option shares; or (c) the Grantee shall have
complied with any other applicable exemption requirement to registration under
the Act. The Company shall use its best efforts to ensure that a registration
statement has become and continues to be effective with respect to the offer and
sale of the Option Shares to the Grantee.
Section 7. No Rights of a Shareholder
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a shareholder of the Company with
respect to any Option Shares, in whole or in part, prior to the date of exercise
of the Option.
Section 8. Nontransferability of Option
During the Grantee's lifetime, unless otherwise allowed by the Board of
Directors of the Company pursuant to Section 6.3 of the Plan, the Option shall
be exercisable only by the Grantee, and the Option shall not in any event be
transferable except, in case of the death of the Grantee, by will or the laws of
descent and distribution.
Section 9. Employment not Affected
Neither the granting of the Option nor its exercise shall be construed
as granting to the Grantee any right with respect to his or her continued
employment by the Company. Except as may otherwise be limited by a written
agreement between the Company and the Grantee, the right of the Company to
terminate at will the Grantee's employment at any time (whether by dismissal,
discharge, retirement or otherwise) is specifically reserved by the Company.
Section 10. Amendment of Option
The Option may be amended or modified at any time by the Company;
provided, however, that the Grantee's consent to such amendment or modification
shall be required unless the Board of Directors or the Compensation Committee of
the Company determines that
-4-
<PAGE> 22
the amendment or modification, taking into account any related action, would not
materially and adversely affect the Grantee.
Section 11. Notice
(a) Any notices required or permitted hereunder shall be addressed to
the Company at 30670 Bainbridge Road, Solon, Ohio 44139, Attention: Treasurer,
or to the Grantee at the most current address of the Grantee appearing in the
records of the Company, as the case may be.
(b) Either the Company or the Grantee may, by notice to the other given
in the manner provided in Section 11(a), change his, her or its address for
future notice.
Section 12. Governing Law
The validity, construction, interpretation and effect of this
instrument shall be governed by and determined in accordance with the law of the
State of Delaware, without regard to conflicts of law principles.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunder duly authorized and the Grantee has hereunto
set his hand all as of the 12th day of June, 1998.
BRIDGESTREET ACCOMMODATIONS, INC.
By /s/ Paul M. Verrochi
-------------------------------
Its Chairman of the Board
ACCEPTED:
/s/ John Danneberg
----------------------------------
John E. Danneberg, Grantee
---------------------------------
-5-
<PAGE> 1
Exhibit 10.28
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of January 3, 2000
by and between BridgeStreet Accommodations, Inc., a Delaware corporation
("BridgeStreet"), and Wayne B. Goldberg, of Powell, Ohio the ("Executive").
In consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, BridgeStreet hereby offers and the Executive hereby accepts
employment.
2. TERM. Subject to earlier termination as hereafter provided, the
Executive's employment hereunder shall be for a term beginning January 3, 2000
and ending January 2, 2001. The term of this Agreement, as from time to time
extended or renewed, is hereafter referred to as "the term of this Agreement" or
"the term hereof."
3. CAPACITY AND PERFORMANCE.
(a) During the term hereof, the Executive shall serve as the
Chief Operating Officer of BridgeStreet. In addition, and without
further compensation, the Executive shall serve as a director and/or
officer of BridgeStreet and/or one or more of BridgeStreet's Affiliates
if so elected or appointed from time to time.
(b) During the term hereof, the Executive shall be employed by
BridgeStreet on a full-time basis. The Executive shall have all powers
and duties consistent with his position, subject to the direction and
control of BridgeStreet's Chief Executive Officer and Board of Directors
(the "Board"), and shall perform such other duties and responsibilities
on behalf of BridgeStreet and its Affiliates as may reasonably be
designated from time to time by the Chief Executive Officer or the Board
or its designees.
(c) During the term hereof, the Executive shall devote his full
business time and his best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests
of BridgeStreet and its Affiliates and to the discharge of his duties
and responsibilities hereunder. During the term hereof, the Executive
shall not engage in any other business activity or serve in any
industry, trade, professional, governmental or academic position during
<PAGE> 2
the term of this Agreement without permission of the Board.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Executive under and during the term hereof and subject to
performance of the Executive's duties and of the obligations of the Executive,
pursuant to this Agreement or otherwise:
(a) BASE SALARY. During the term hereof, BridgeStreet shall pay
the Executive a base salary at the rate of two hundred thousand dollars
($200,000) per annum, payable in accordance with the payroll practices
of BridgeStreet for its executives and subject to increase from time to
time by the Board or the Compensation Committee of the Board, in its
sole discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary".
(b) BONUS COMPENSATION. The Executive shall be entitled to
participate in the bonus plan described on Exhibit A attached hereto
which will entitle him to receive up to a maximum of thirty percent
(30%) of his Base Salary.
(c) STOCK OPTIONS. Effective as of the date of the Executive's
employment the Executive shall be granted stock options to purchase
seventy-five thousand (75,000) shares of Common Stock of BridgeStreet
at a price per share equal to two dollars ($2.00) per share of
BridgeStreet Common Stock. Such stock options shall be granted pursuant
to, and shall be subject to the terms and conditions of, BridgeStreet's
employee stock option plan or other equity incentive plan then in
effect and the policies of the Board then in effect with regard to the
grant of stock options and the terms hereof, but shall in all events
provide as follows:
(i) The term of the stock options shall be for ten
years (subject to earlier termination as set forth in the plan
for merger and similar transactions).
(ii) The stock options shall become exercisable in
equal installments on the first, second and third
anniversaries of the date of the Executive's employment
provided that on each such date the Executive is employed by
BridgeStreet.
(iii) In the event that the Company undergoes a
Change in Control (as defined in Exhibit B attached hereto)
all stock options to become exercisable in the year of the
Change in Control shall become exercisable on the date of the
Change in Control and fifty percent (50%) of the remaining
unvested stock options shall become exercisable effective on
the date of the Change in Control.
<PAGE> 3
(iv) In the event BridgeStreet terminates the
Executive's employment with BridgeStreet notwithstanding the
terms of this Agreement, fifty percent (50%) of any stock
options not yet exercisable shall become exercisable and shall
remain exercisable for a period of three months from the date
of termination. In the event BridgeStreet terminates the
Executive's employment with BridgeStreet for Cause (as
hereinafter defined), all of the stock options exercisable by
the Executive on the date of termination shall be exercisable
for a period of one month from the date of termination and all
other stock options shall terminate as of the date the
Executive's employment terminates.
(v) In the event the Executive's employment with
BridgeStreet terminates because of his death, fifty percent
(50%) of any stock options not yet exercisable shall become
exercisable.
(d) OTHER BENEFITS. During the term hereof, the Executive shall
be entitled to receive medical insurance coverage and to participate in
any and all employee benefit plans from time to time in effect for
employees of BridgeStreet generally, except to the extent such plans are
in a category of benefit (including without limitation bonus
compensation) otherwise provided to the Executive. Such participation
shall be subject to (i) the terms of the applicable plan documents, (ii)
generally applicable BridgeStreet policies and (iii) the discretion of
the Board or any administrative or other committee provided for in or
contemplated by such plan. BridgeStreet may alter, modify, add to or
delete its employee benefit plans at any time as it, in its sole
judgment, determines to be appropriate, without recourse by the
Executive.
(e) BUSINESS EXPENSES. BridgeStreet shall pay or reimburse the
Executive for all reasonable and necessary business expenses incurred or
paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board and to such
reasonable substantiation and documentation as may be specified by
BridgeStreet from time to time.
(f) RELOCATION EXPENSES. BridgeStreet shall pay or reimburse
the executive up to fifty thousand dollars ($50,000) for all reasonable
and necessary expenses incurred or paid by the Executive in relocating
his principal residence from Powell, Ohio, to Twinsburg, Ohio, as
described on Exhibit C attached hereto, subject to such reasonable
substantiation and documentation as may be specified by BridgeStreet
from time to time. BridgeStreet will gross up the
<PAGE> 4
relocation expense reimbursement to the Executive for all applicable
payroll taxes incurred by the Executive as a result of the inclusion of
such relocation expenses in his gross wages. If the Executive voluntarily
terminates his employment with BridgeStreet within two (2) years of his
original employment date, the Executive will reimburse BridgeStreet two
thousand dollars ($2500) for every month or portion thereof, for which
the Executive has been employed that is less than twenty-four (24)
months.
(g) VACATION. The Executive shall be entitled to four fully paid
weeks of vacation each year to be taken at such times as shall not
unreasonably interfere with the Executive's employment obligations and
responsibilities and BridgeStreet's reasonable requirements. The
Executive's rights to vacations shall not cumulate from year to year.
5. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of Section
2 hereof, the Executive's employment hereunder shall terminate prior to the
expiration of the term under the following circumstances:
(a) DEATH. In the event of the Executive's death during the term
hereof, the Executive's employment hereunder shall immediately and
automatically terminate. In that event, BridgeStreet shall pay to the
Executive's designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, any earned and unpaid Base
Salary, prorated through the date of his death.
(b) DISABILITY.
(i) BridgeStreet may terminate the Executive's
employment hereunder, upon notice to the Executive, in the event
that the Executive becomes disabled through any illness, injury,
accident or condition of either a physical or psychological
nature and, as a result, is unable to perform substantially all
of his duties and responsibilities hereunder for ninety (90)
consecutive days or for an aggregate of one hundred eighty (180)
days during any period of three hundred sixty-five (365)
consecutive calendar days.
(ii) The Board may designate another executive to act in
the Executive's place during any period of the Executive's
disability. Notwithstanding any such designation, the Executive
shall continue to receive the Base Salary in accordance with
Section 4(a) and benefits in accordance with Section 4(d), to
the extent permitted by the then-current terms of the applicable
benefit plans, until the Executive becomes eligible for
disability income benefits under any disability income plan (if
<PAGE> 5
one is provided by BridgeStreet) or until the termination of his
employment, whichever shall first occur.
(iii) While receiving disability income payments under
BridgeStreet's disability income plan, if any, the Executive
shall not be entitled to receive any Base Salary under Section
4(a) hereof, but shall continue to participate in BridgeStreet
benefit plans in accordance with Section 4(d) and the terms of
such plans, to the extent permitted by such plans, until the
termination of his employment.
(iv) If any question shall arise as to whether during
any period the Executive is disabled through any illness,
injury, accident or condition of either a physical or
psychological nature so as to be unable to perform substantially
all of his duties and responsibilities hereunder, the Executive
may, and at the request of BridgeStreet shall, submit to a
medical examination by a physician selected by BridgeStreet to
whom the Executive or his duly appointed guardian, if any, has
no reasonable objection to determine whether the Executive is so
disabled and such determination shall for the purposes of this
Agreement be conclusive of the issue. If such question shall
arise and the Executive shall fail to submit to such medical
examination, BridgeStreet's determination of the issue shall be
binding on the Executive.
(c) BY BRIDGESTREET FOR CAUSE. BridgeStreet may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. The
following, as determined by the Board in its reasonable judgment, shall
constitute Cause for termination:
(i) The Executive's repeated failure to perform (other than by
reason of disability), or gross negligence in the performance
of, his material duties and responsibilities hereunder and the
continuance of such failure or negligence for a period of thirty
(30) days after notice to the Executive;
(ii) Material breach by the Executive of any provision of this
Agreement or any other written agreement between the Executive
and BridgeStreet or any of its Affiliates;
(iii) Other conduct by the Executive that involves a material
violation of law or breach of fiduciary obligation on the part
of the Executive or is otherwise materially harmful to the
<PAGE> 6
business, interests, reputation or prospects of BridgeStreet or
any of its Affiliates.
Upon the giving of notice of termination of the Executive's employment
hereunder for Cause, BridgeStreet shall not have any further obligation or
liability to the Executive, other than for Base Salary earned and unpaid at the
date of termination and except as provided below:
(A) BridgeStreet shall continue to pay to the Executive
his Base Salary as of the date of termination for a period of
one month.
(B) BridgeStreet shall continue to provide Executive
with the medical insurance coverage contemplated by Section 4(d)
for a period of one month.
(d) CHANGE OF CONTROL. The Executive may terminate his
employment hereunder at any time during the three-month period beginning three
months after a Change of Control has occurred by written notice given to
BridgeStreet. In the event of such termination:
(i) BridgeStreet shall continue to pay to the Executive
his Base Salary as of the date of the Change of Control for six
months from the date of termination.
(ii) BridgeStreet shall continue to provide Executive
with the medical insurance coverage contemplated by Section 4(d)
for six months from the date of termination.
6. EFFECT OF TERMINATION. The provisions of this Section 6 shall
apply to termination due to the expiration of the term, pursuant to Section 5 or
otherwise, except as otherwise provided in Section 5.
(a) Except as otherwise provided in paragraph (d), payment by
BridgeStreet of any Base Salary and contributions to the cost of the
Executive's continued participation in BridgeStreet's group health and
dental plans, if any, that are due the Executive in each case under the
applicable termination provision of Section 5 shall constitute the
entire obligation of BridgeStreet to the Executive.
<PAGE> 7
(b) Except as otherwise provided in paragraph (d), benefits
shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive's employment without
regard to any continuation of Base Salary or other payment to the
Executive following such date of termination.
(c) Except as otherwise provided in paragraph (d), provisions of
this Agreement shall survive any termination if so provided herein or if
necessary or desirable fully to accomplish the purposes of such
provisions, including without limitation the obligations of the
Executive under Sections 7 and 8 hereof. The Executive recognizes that
no compensation is earned after termination of employment except as
provided in paragraph (d).
(d) In the event the Executive's employment by BridgeStreet is
terminated by BridgeStreet notwithstanding the terms of this Agreement:
(i) BridgeStreet shall continue to pay to the Executive
his Base Salary as of the date of termination for the term of
this Agreement or twelve months, whichever is longer.
(ii) BridgeStreet shall continue to provide Executive
with the medical insurance coverage contemplated by Section 4(d)
for the term of this Agreement or twelve months, whichever is
longer.
7. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that BridgeStreet and its
Affiliates will continually develop Confidential Information, that the
Executive may develop Confidential Information for BridgeStreet or its
Affiliates and that the Executive may learn of Confidential Information.
The Executive agrees that, except as required for the proper performance
of his duties for BridgeStreet, he will not, directly or indirectly, use
or disclose any Confidential Information, as defined below. The
Executive understands and agrees that this restriction will continue to
apply after his employment terminates, regardless of the reason for
termination.
(b) The Executive agrees that all Confidential Information which
he creates or to which he has access as a result of his employment or
the rendering of other services to BridgeStreet is and shall remain the
sole and exclusive property of BridgeStreet. Except as required for the
proper performance of his duties, the Executive will not copy any
<PAGE> 8
documents, tapes or other media containing Confidential Information
("Documents") or remove any Documents, or copies, from BridgeStreet's
premises. The Executive will return to BridgeStreet immediately after
his employment terminates, and at such other times as may be specified
by BridgeStreet, all Documents and copies and all other property of
BridgeStreet then in his possession or control.
8. RESTRICTED ACTIVITIES. The Executive agrees that some restrictions
on his activities during and after his employment are necessary to protect the
goodwill, Confidential Information and other legitimate interests of
BridgeStreet and its Affiliates:
(a) The Executive agrees that, during the term hereof and for a
period of two (2) years immediately following termination of his
employment (the "Non-Competition Period"), he will not, directly or
indirectly, whether as an owner, partner, investor, consultant, employee
or otherwise, provide services to or engage in, or undertake any
planning to engage in, any type of business or enterprise in any way
similar to or competitive with the Business of BridgeStreet or any of
its Affiliates.
(b) The Executive agrees that, during the term hereof, he will
not undertake any outside activity, whether or not competitive with the
Business of BridgeStreet or any of its Affiliates, that could reasonably
give rise to a conflict of interest or otherwise interfere with his
duties and obligations to BridgeStreet or any of its Affiliates.
(c) The Executive further agrees that during the term hereof and
during the Non-Competition Period, the Executive will not, and will not
assist anyone else to, (i) hire any employee of BridgeStreet or any of
its Affiliates or seek to persuade any employee of BridgeStreet or any
of its Affiliates to discontinue employment, (ii) solicit or encourage
any customer or vendor of or lessor to BridgeStreet or any of its
Affiliates to terminate or diminish its relationship with BridgeStreet
or any of its Affiliates, (iii) seek to persuade any customer or
prospective customer of BridgeStreet or any of its Affiliates to conduct
with anyone else any business or activity that such customer or
prospective customer conducts or could conduct with BridgeStreet or any
of its Affiliates, or (iv) call upon any prospective acquisition
candidates on the Executive's own behalf or on behalf of any third
party, which candidate was either called upon by the Executive or for
which the Executive made or had access to an acquisition analysis for
BridgeStreet.
9. NOTIFICATION REQUIREMENT. Until four (4) weeks after the conclusion
of the Non-Competition Period, the Executive shall give notice to
<PAGE> 9
BridgeStreet of each new business activity he plans to undertake, at least
ninety (90) days prior to beginning any such activity. Such notice shall state
the name and address of the Person for whom such activity is undertaken and the
nature of the Executive's business relationship(s) and position(s) with such
Person. The Executive shall provide BridgeStreet with such other pertinent
information concerning such business activity as BridgeStreet may reasonably
request in order to determine the Executive's continued compliance with his
obligations under Sections 7 and 8 hereof.
10. ENFORCEMENT OF COVENANTS. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 7 and 8 hereof.
The Executive agrees that said restraints are necessary for the reasonable and
proper protection of BridgeStreet and its Affiliates and that each and every one
of the restraints is reasonable in respect to subject matter, length of time and
geographic area. The Executive further agrees that all goodwill of BridgeStreet
and its Affiliates is their exclusive property. The Executive further
acknowledges and agrees that, were he to breach any of the covenants contained
in Sections 7 or 8 hereof, the damage would be irreparable. The Executive
therefore agrees that BridgeStreet or any of its Affiliates, as the case may be,
in addition to any other remedies available to it, shall be entitled to
preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants, without having to post bond.
The parties further agree that, in the event that any provision of Sections 7 or
8 hereof shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too great a time, too large a
geographic area or too great a range of activities, such provision shall be
deemed to be modified to permit its enforcement to the maximum extent permitted
by law.
11. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which
the Executive is a party or is bound and that the Executive is not subject to
any covenants against competition or similar covenants that would affect the
performance of his obligations hereunder. The Executive will not disclose to or
use any proprietary information of a third party without such party's consent.
12. DEFINITIONS. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 12
and as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:
(a) "Affiliates" means all persons and entities directly or
<PAGE> 10
indirectly controlling, controlled by or under common control with
BridgeStreet, where control may be by either management authority or
equity interest.
(b) "Business of BridgeStreet" means the business of
BridgeStreet and its operating subsidiaries which provide
lodging related services including but not limited to
providing temporary and permanent lodging accommodations,
acting as a reservation agent, providing property management
services, providing real estate brokerage services and other
various services related to the lodging industry. BridgeStreet
business does not include hotel, motel, inn or other fixed
location lodging.
(c) "Confidential Information" means any and all information
of BridgeStreet or of its Affiliates that is not generally
known by others with whom BridgeStreet or any of its
Affiliates does, or plans to, compete or do business,
including but not limited to (i) BridgeStreet's or any of its
Affiliates' products and services, technical data, methods and
processes, (ii) BridgeStreet's or any of its Affiliates'
marketing activities and strategic plans, (iii) BridgeStreet's
or any of its Affiliates' costs and sources of supply, (iv)
the identity and special needs of BridgeStreet's or any of its
Affiliates' customers and prospective customers, vendors and
prospective vendors, and acquisition candidates and (v) the
people and organizations with whom BridgeStreet or any of its
Affiliates has business relationships and those relationships.
Confidential Information also includes such information that
BridgeStreet or any of its Affiliates may receive or has
received belonging to customers or others who do business with
BridgeStreet or any of its Affiliates.
(d) "Person" means an individual, a corporation, an
association, a partnership, an estate, a trust and any other
entity or organization, other than BridgeStreet or any of its
Affiliates.
13. WITHHOLDING. All payments made under this Agreement shall be
reduced by any tax or other amounts required to be withheld under applicable
law.
14. ASSIGNMENT. Neither BridgeStreet nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that BridgeStreet may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that BridgeStreet shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person. This Agreement shall inure to the benefit of and be binding upon
BridgeStreet and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns.
<PAGE> 11
15. SEVERABILITY. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
16. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of BridgeStreet or, in the case of BridgeStreet,
at BridgeStreet's principal place of business, attention of Chairman of the
Board, or to such other address as either party may specify by notice to the
other actually received.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment.
19. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
representative of BridgeStreet.
20. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
22. GOVERNING LAW. This Agreement shall be construed and enforced under
and be governed in all respects by the laws of the State of Ohio, without regard
to the conflict of laws principles thereof. Each party hereby agrees to
<PAGE> 12
submit himself or itself to the jurisdiction of the Common Pleas Court of the
State of Ohio and to the jurisdiction of the United States District Court for
Summit County the Northern District of Ohio, for purposes of any suit, action,
or other proceeding arising out of this Agreement and to the subject matter of
the same, and hereby waives, and agrees not to assert, as a defense in any such
suit, action, or proceeding that he or it is not subject to such jurisdiction,
or that such suit, action or proceeding may not be brought or is not
maintainable in such courts, or that any suit, action, or proceeding brought in
any other court is not transferable to any such Ohio court.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Executive and BridgeStreet, by its duly authorized
representative, as of the date first above written.
EXECUTIVE: BRIDGESTREET ACCOMMODATIONS, INC.
/s/ Wayne B. Goldberg By: /s/ John E. Danneberg
- ------------------------- --------------------------------------
Wayne B. Goldberg Name: John E. Danneberg
Title: Chief Executive Officer
<PAGE> 13
EXHIBIT A
BRIDGESTREET ACCOMMODATIONS, INC.
BONUS COMPENSATION PROGRAM
A bonus will be earned based upon the Executive's achievement of his performance
objectives and based upon BridgeStreet's achievement of its overall annual
profitability performance objectives.
The bonus allocation is as follows:
25% of bonus based upon achievement of Executive's performance objectives
75% of bonus based upon BridgeStreet achievement of annual profitability
objectives.
Bonus is earned annually and paid subject to BridgeStreet's customary bonus
payment practices, which are subject to change. Current bonus payment practice
is the first payroll in March of the year following the year in which the bonus
was earned. Payment of bonus is contingent upon employment at time of bonus
payment.
<PAGE> 14
EXHIBIT B
"Change in Control" means the occurrence of any of the following events:
(a) BridgeStreet is a party to, or the stockholders approve, a merger,
consolidation or reorganization with another corporation (other than a merger,
consolidation or reorganization that would result in the voting power of the
securities outstanding immediately before such merger, consolidation or
reorganization to continue to represent (either by virtue of such securities
remaining outstanding or being converted into securities of the surviving
entity) more than 50% of the voting power immediately following such merger,
consolidation or reorganization); (b) a sale of all, or substantially all, of
the assets of BridgeStreet; (c) any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, or any
syndicate or group deemed to be a person under Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of shares of Common Stock representing 51% or more of the voting
power of BridgeStreet's then outstanding securities entitled to vote in the
election of directors of BridgeStreet; (d) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board,
and any new directors whose election by the Board or nomination for election by
BridgeStreet's stockholders was approved by a vote of at least three-quarters of
the directors then still in office who either were directors at the beginning of
the period or whose selection or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or (e)
BridgeStreet is dissolved or liquidated; provided, however, that a change in
control under clause (a), (b), (c) or (e) shall not be deemed to be a Change in
Control as a result of an acquisition of securities of BridgeStreet (or, in the
case of clause (e), assets of BridgeStreet or securities of a successor to
BridgeStreet) by an employee benefit plan maintained by BridgeStreet (or, in the
case of clause (e), a successor) for its employees.
<PAGE> 15
EXHIBIT C
WAYNE B. GOLDBERG
EMPLOYMENT AGREEMENT WITH BRIDGESTREET INTERNATIONAL INC.
MOVING EXPENSES ADDENDUM
BridgeStreet Accommodations, Inc.("BridgeStreet") will reimburse Wayne B.
Goldberg ("Goldberg") for the following moving expenses in conjunction with his
employment as Chief Operating Officer of BridgeStreet and relocation to
Twinsburg:
HOME-SALE ASSISTANCE EXPENSES TO INCLUDE:
- - Real estate brokers commission for Goldberg home at 5307 Sheffield
Drive, Powell, OH
- - Closing costs to include all expenses incurred for the sale of Goldberg
home at 5307 Sheffield Drive, Powell, OH
HOME-BUYING ASSISTANCE EXPENSES TO INCLUDE:
- - House hunting trips/expenses including lodging, meals, baby-sitting,
laundry, telephone, transportation, etc. for Goldberg and his family.
- - Home-buying expenses including legal fees, loan application fees, loan
origination fees, state transfer taxes, home inspection fees,
pre-purchase property appraisal, escrow fees, radon-testing and any
other actual expenses incurred in conjunction with the purchase of a new
home.
RELOCATION EXPENSES TO INCLUDE:
- - Family relocation expenses for air travel, rental car, hotel or motel
and meals
- - Transportation of household goods - pickup and delivery, packing and
unpacking
- - Transportation of automobiles
- - Any miscellaneous expenses incurred as a result of Goldberg's move to
Twinsburg
<PAGE> 1
Exhibit 10.29
[BRIDGESTREET LETTERHEAD]
January 3, 2000
Mr. Ware H. Grove
7678 Mannheim Court
Hudson, OH 44236
Dear Ware:
I very much enjoyed meeting with you today to discuss the interim Chief
Financial Officer position with BridgeStreet Accommodations. Based upon your
background and qualifications, and the needs of BridgeStreet, I believe that
this position would be a mutually beneficial opportunity.
As I am aware of your pursuit of a permanent position, I have taken that into
consideration in formulating the following proposal which should address both
BridgeStreet's and your personal needs:
- - TERM OF AGREEMENT: Three (3) months commencing January 17, 2000, and ending
Friday, April 14, 2000.
- - RESPONSIBILITIES: All duties and tasks commensurate with that of the Chief
Financial Officer of a publicly held company.
- - WORK SCHEDULE: Four (4) or more days per week.
- - EMPLOYMENT STATUS: Independent consultant (not an employee of
BridgeStreet).
- - COMPENSATION: $700.00/day.
- - BENEFITS: None.
- - SALE OF BRIDGESTREET BONUS: If a sale of BridgeStreet should occur during
the term of this agreement, and you are instrumental in the coordination
and consummation of the sale, as determined by John Danneberg in his sole
discretion, you will earn a bonus upon sale of up to fifty thousand dollars
($50,000) to be paid within 30 days of sale.
JOHN E. DANNEBERG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PHONE 330-408-6060 FAX 330-405-6061
<PAGE> 2
Mr. Ware H. Grove
January 3, 2000
Page 2.
I am providing you with two copies of this letter, along with our "Secrecy
Agreement." To accept our offer to render consulting services, please sign one
copy of each, and return them to me in the enclosed envelope within the next
week. I sincerely hope that this offer meets your expectations, and I look
forward to welcoming you to BridgeStreet.
If you have any questions, please do not hesitate to call me at 330-405-6060.
Sincerely,
/s/John E. Danneberg
John E. Danneberg
JED:rc
Enclosures
ACCEPTANCE:
/s/ Ware H. Grove
- ------------------------------------------ ------------------------
Ware H. Grove Date
<PAGE> 1
SIXTH AMENDMENT TO AND WAIVER OF
REVOLVING CREDIT AGREEMENT
This Sixth Amendment to and Waiver of Revolving Credit Agreement ("this
Amendment") is made as of the _28_ day of March, 2000 by and among Bridgestreet
Accommodations, Inc. ("Borrower"), a Delaware corporation having its principal
place of business at 2242 Pinnacle Parkway, Twinsburg, OH 44087; Bridgestreet
Canada, Inc., a wholly-owned subsidiary of Borrower and an Ontario corporation
having its principal place of business at 1000 Yonge Street, #301, Toronto,
Canada M4W 2K2 ("Bridgestreet Canada"); Fleet National Bank, a national banking
association ("Fleet"); Bank One, N.A., a national banking association ("Bank
One"); Bank One, Canada, a chartered bank incorporated under the laws of Canada
("Bank One Canada"); and Fleet National Bank, as agent for itself, Bank One and
Bank One Canada (the "Agent").
RECITALS
--------
WHEREAS, the Borrower, Fleet, Bank One, Bank One Canada and Agent have
previously entered into that certain Revolving Credit Agreement, dated as of
March 31, 1997, as amended (the "Credit Agreement");
WHEREAS, the parties hereto now desire to amend the Credit Agreement in
certain respects as provided herein and desire to waive the effect of breaches
of certain provisions of the Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby as follows:
Section 1. Amendment and Waiver of Specific Provisions.
-------------------------------------------
(I) Section 9.3 of the Credit Agreement is hereby amended as follows:
"9.3 LEVERAGE RATIO. The Borrower will not permit, as at the last day
of each fiscal quarter, the Leverage Ratio to exceed 2.50 to 1;
provided, however, that for the fiscal quarter of the Borrower ending
June 30, 2000 the Borrower will not permit the Leverage Ratio to exceed
3.00 to 1."
(II) Sections 9.1, 9.2, 9.3, 9.4 and 9.5 of the Credit Agreement are
hereby waived for the Borrower's fiscal quarter ending March 31, 2000.
<PAGE> 2
SECTION 2. LOAN DOCUMENTS RATIFIED AND CONFIRMED. The Credit Agreement,
the Notes and each of the other Loan Documents, as specifically supplemented or
amended by this Amendment and the other documents executed in connection
herewith, are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed. Without limiting the generality of the
foregoing, the Security Documents and all of the collateral described therein
do, and shall continue to, secure the payment of all obligations of the Borrower
and Bridgestreet Canada under the Loan Documents, in each case as amended or
supplemented pursuant to this Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES. (i) The Borrower hereby makes
the following representations and warranties to the Banks and the Agent in
connection herewith.
(a) REPRESENTATIONS IN LOAN DOCUMENTS. Each of the representations and
warranties made by or on behalf of the Borrower in any of the Loan Documents, as
amended by and through this Amendment, was true and correct when made and is
true and correct on and as of the date hereof (except for representations and
warranties limited as to time or with respect to a specific event, which
representations and warranties shall continue to be limited as to such time or
event), with the same full force and effect as if each of such representations
and warranties had been made by such Borrower on the date hereof and in this
Amendment.
(b) EVENTS OF DEFAULT. Except as previously disclosed to the Agent, no
Event of Default exists on the date hereof (after giving effect to all of the
arrangements and transactions contemplated by this Amendment), and no condition
exists on the date hereof which would, with notice or the lapse of time, or
both, constitute an Event of Default.
(c) BINDING EFFECT OF DOCUMENTS. This Amendment has been duly executed
and delivered by the Borrower and Bridgestreet Canada and is in full force and
effect as of the date hereof, and the agreements and obligations of the Borrower
and Bridgestreet Canada contained herein constitute legal, valid and binding
obligations of the Borrower and Bridgestreet Canada, enforceable against the
Borrower and Bridgestreet Canada in accordance with their respective terms.
SECTION 4. TERMS AND CONDITIONS. The agreement of the Banks and the
Agent to amend the Credit Agreement and to waive the covenants referred to
herein is subject to the satisfaction of the following terms and conditions:
(a) The Borrower shall pay in full, upon consummation of the merger
between the Borrower and Meristar Brooklyn, Inc., all Revolving Credit Loans
outstanding under
2
<PAGE> 3
the Credit Agreement, all interest thereon and all fees and expenses of the
Agent and the Banks payable thereunder.
(b) Upon the consummation of the above-mentioned merger, the
Commitments of the Banks shall terminate without further action on the part of
the Agent or the Banks.
(c) Borrower agrees to pay on demand all reasonable costs and expenses
of the Agent, Fleet, Bank One and Bank One Canada, including without limitation
all reasonable fees and expenses of counsel, in connection with the preparation,
execution and delivery of this Amendment and the other documents and instruments
to be delivered herewith.
Section 6. Miscellaneous.
---------- --------------
(a) NO OTHER CHANGES. Except as otherwise expressly provided by this
Amendment, all of the terms, conditions and provisions of the Credit Agreement,
the Revolving Credit Notes and each of the other Loan Documents and Security
Documents remain unaltered, valid, binding and in full force and effect in the
form existing immediately prior to the execution and delivery of this Amendment.
Except as otherwise expressly provided by this Amendment, nothing herein is
intended or shall be construed so as to: (i) limit, discharge, release, diminish
or otherwise modify any indebtedness, obligations, liabilities or duties of
Borrower, or (ii) terminate, release, waive, or otherwise modify any mortgage,
security interest, right, power or remedy of the Agent, Fleet, Bank One or Bank
One Canada. This Amendment constitutes an instrument supplemental to the Credit
Agreement and the other Loan Documents, which is to be construed together with
and as part of the Loan Documents.
(b) GOVERNING LAW. This Amendment is intended to take effect as a sealed
instrument and shall be deemed to be a contract under the laws of the
Commonwealth of Massachusetts. This Amendment and the rights and obligations of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the laws of the Commonwealth of Massachusetts.
(c) BINDING EFFECT; ASSIGNMENT. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(d) COUNTERPARTS. This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute one agreement.
It shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto in making proof of this Amendment.
Executed facsimile signature pages of this Amendment shall be acceptable to each
of the parties.
3
<PAGE> 4
(e) CONFLICT WITH OTHER AGREEMENTS. If any of the terms of this Amendment
shall conflict in any respect with any of the terms of any of the Loan
Documents, the terms of this Amendment shall be controlling.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an instrument under seal as of the date first above written.
BRIDGESTREET CANADA, INC. BRIDGESTREET ACCOMMODATIONS, INC.
By__Ware Grove /s/________________ By__Ware Grove /s/_____________________
Title:__CFO_______________________ Title:__CFO____________________________
BANK ONE CANADA BANK ONE, N.A.
By___???/s/_______________________ By___Jack R Freeman____________________
Title:_Vice President_____________ Title:_First Vice President____________
FLEET NATIONAL BANK FLEET NATIONAL BANK, as AGENT
By__Helen Balboni_/s/_____________ By___Helen Balboni /s/________________
Title:_Vice President_____________ Title:_Vice President__________________
4
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction
of
Name Organization
- ---- ------------
BridgeStreet Accommodations Limited UK
BridgeStreet Arizona, Inc. DE
BridgeStreet California, Inc. DE
BridgeStreet Colorado, Inc DE
BridgeStreet Accommodations London Limited UK
BridgeStreet International Suites Limited
UK
BridgeStreet Maryland, Inc.
BridgeStreet Nevada, Inc. DE
BridgeStreet Raleigh, Inc. DE
DE
BridgeStreet North Carolina, Inc. DE
BridgeStreet Texas, L.P. DE
Corporate Lodgings, Inc. DE
HAI Acquisition Corp. DE
Temporary Corporate Housing, Inc. DE
Temporary Housing Experts, Inc. DE
BridgeStreet Canada, Inc. Ontario
BridgeStreet Wardrobe Place Limited UK
Loryt(1) Limited UK
Haus Account, LLC MD
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
BridgeStreet Accommodations, Inc.
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements (Nos. 333-37697, 333-53949 and 333-60971) on Form S-8.
/s/ Arthur Andersen LLP
- -----------------------
Cleveland, Ohio,
March 30, 2000
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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