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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 31, 1998
EXECUSTAY CORPORATION
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(Exact name of registrant as specified in its charter)
Maryland 000-22941 52-2042280
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification No.)
7595 Rickenbacker Drive, Gaithersburg, Maryland 20879
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(Address of principal executive offices)
Registrant's telephone number, including area code: (301) 948-4888
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Item 2. Acquisition or Disposition of Assets.
On March 31, 1998, ExecuStay Corporation of
America (the "Buyer"), a wholly-owned
subsidiary of ExecuStay Corporation
("ExecuStay"), purchased certain assets of
Southern California Relocations, Inc., a
California corporation ("Seller"), pursuant to
an Asset Purchase Agreement (the "Asset
Purchase Agreement") among the Buyer,
ExecuStay, Seller and Janette MacDonell, a
resident of the State of California. As a
result of this acquisition, Buyer obtained the
ongoing business of Seller, including rights
under and to Seller's ongoing customer leases
and contracts as well as Seller's office
equipment. Prior to this transaction,
ExecuStay and Buyer were not affiliated with
Seller and the Asset Purchase Agreement was
negotiated at arms' length. Seller's purchase
price was determined through negotiations by
the parties. The consideration for the
acquisition of Seller's assets was $4,621,000
consisting of 94,693 shares of ExecuStay's
common stock and $3,465,750 in cash. The total
purchase price is subject to post-closing
adjustments to be determined 30 and 60 days
from the date of the Asset Purchase Agreement,
and which are based upon amounts paid or
received by one party under certain assumed
contracts and prepaid deposits that were
payable or receivable by the other party.
The cash used in the acquisition came from
cash and investments on hand.
A copy of the Asset Purchase Agreement is
attached hereto as Exhibit 2.1.
Item 5. Other Events.
On April 15, 1998, ExecuStay entered into a
definitive credit agreement (the "Credit
Agreement") with its bank to obtain a
$20,000,000 acquisition line-of-credit and a
$5,000,000 working capital line-of-credit.
These lines-of-credit will be available until
December 31, 2000 and 1998, respectively.
Under the terms of the Credit Agreement,
ExecuStay will have an option of a floating
rate of interest at the bank's Prime Rate plus
0.75% to 1.25% or fixed rate of interest at the
Prime Rate plus 0.75% to 1.50%, depending upon
performance. If the fixed rate option is
chosen, ExecuStay will be subject to prepayment
penalties. The Credit Agreement is
collateralized by an assignment of the stock of
all subsidiaries of ExecuStay.
A copy of the Credit Agreement is attached
hereto as Exhibit 10.1.
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Item 7. Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Asset Purchase Agreement by and
between ExecuStay Corporation of
America, ExecuStay Corporation,
Southern California Relocations, Inc.
and Janette MacDonell, dated as of
March 31, 1998.
The following schedules and exhibits
to the Asset Purchase Agreement have
been omitted, and ExecuStay Corporation
will file supplementally any such
schedules or exhibits to the Commission
upon request:
Schedules to Asset Purchase Agreement
-------------------------------------
Schedule A List of Key Employees
Schedule 1.1(a) Customer List
Schedule 1.1(b) Assumed Contracts
Schedule 1.1(c) Tangible Property
Schedule 1.1(f) Non-competition Agreements with Employees
Schedule 1.1(g) Service Contracts
Schedule 2.3 Proration Schedules
Schedule 2.5 Allocation of Purchase Price
Schedule 3.12 Ten Largest Customers and Suppliers
Schedule 5.1(d) Employee Bonuses
Exhibits to Asset Purchase Agreement
------------------------------------
Exhibit A Form of Non-competition Agreement
Exhibit B Form of Escrow Agreement
Exhibit C Seller's Financial Statements -- December 31,
1995, 1996 and 1997
Exhibit D Assignment and Assumption Agreement
Exhibit E Form of Employment Agreement (Janette MacDonell)
Exhibit F Opinion of Counsel
10.1 Credit Agreement between ExecuStay
Corporation and its bank, dated as of
April 15, 1998.
The following schedules and exhibits to
the Credit Agreement have been omitted,
and ExecuStay Corporation will file
supplementally any such schedules or
exhibits to the Commission upon request:
</TABLE>
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Schedules to Credit Agreement
Schedule 1 Tangible Net Worth
Schedule 2 Funded Debt Ratio
Schedule 3 Debt Coverage Ratio
Exhibits to Credit Agreement
Exhibit A Form of Acquisition Notice
Exhibit B Form of Assumption Agreement
Exhibit C Covenant Compliance Certificate
Exhibit D Form of Revolving Note
Exhibit E Security Agreement
Exhibit F Form of Term Note
Exhibit G Solvency Certificate
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SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 15, 1998 EXECUSTAY CORPORATION
/s/ Gary R. Abrahams
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Gary R. Abrahams
Chief Executive Officer
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INDEX TO EXHIBITS
Exhibit
Number Item
2.1 Asset Purchase Agreement by and between
ExecuStay Corporation of America, ExecuStay
Corporation, Southern California Relocations,
Inc. and Janette MacDonell, dated as of March
31, 1998.
10.1 Credit Agreement between ExecuStay
Corporation and its bank, dated as of
April 15, 1998.
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EXHIBIT 2.1
================================================================================
ASSET PURCHASE AGREEMENT
by and between
EXECUSTAY CORPORATION OF AMERICA,
EXECUSTAY CORPORATION,
SOUTHERN CALIFORNIA RELOCATIONS, INC.
and
JANETTE MACDONELL
March 31, 1998
================================================================================
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made this 31st day of March, 1998
(the "Agreement") by and among Southern California Relocations, Inc., a
California corporation ("Seller"), Janette MacDonell, a resident of the State
of California, ExecuStay Corporation of America, a Maryland corporation
("Buyer"), and ExecuStay Corporation, a publicly owned Maryland corporation
("ExecuStay").
WHEREAS, Seller is engaged in, among other activities, the business of
providing interim housing in units located at properties throughout the United
States (the "interim housing business");
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the
Business of Seller (as defined below) upon the terms and conditions set forth
herein;
WHEREAS, as a condition to purchasing the Business and executing this
Agreement, Buyer has requested that each of Seller and Janette MacDonell
execute a Non-Competition Agreement in the form attached hereto as Exhibit A
(the "Non-Competition Agreement"), and each of Seller and Janette MacDonell has
agreed to do so; and
WHEREAS, as a condition to purchasing the Business and executing this
Agreement, Buyer has requested that each of Janette MacDonell and the Company's
key sales officers listed on Schedule A execute employment agreements with the
Buyer (the "Employment Agreements"), and each of Janette MacDonell and the said
officers have agreed to do so.
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
SALE OF BUSINESS
1.1 SALE AND PURCHASE OF BUSINESS. Subject to the terms and
conditions of this Agreement, Seller shall deliver, transfer and convey to
Buyer, and Buyer shall purchase and pay for, the Business and the
Non-Competition Agreements. The Business is being sold "as is" with all faults
and conditions and no representations and warranties, express or implied,
except as set forth in this Agreement. The term "Business" means:
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(a) the list of interim housing customers of Seller,
which is attached hereto as Schedule 1.1(a);
(b) the on-going leases and contracts of Seller with its
customers, the underlying property leases with property owners for
such customer leases and contracts, and the on-going office property
leases of Seller, all as of the Closing Date (all such contracts and
leases are hereinafter referred to as the "Assumed Contracts," all of
which are listed on Schedule 1.1(b) attached hereto);
(c) all equipment (including computer equipment),
fixtures, furniture and other tangible assets of Seller listed on
Schedule 1.1(c) attached hereto (the "Tangible Property");
(d) the right to use in perpetuity the Seller's 800
telephone numbers and telephone numbers relating to the Seller's
corporate offices in Redwood City, California and any other regional
office phone numbers to the extent assignable;
(e) all rights to use trademarks, service marks, trade
names and all other intellectual property rights of Seller, including
the right to use in perpetuity the name Relocations Services, Inc.
(all such intellectual property rights are hereinafter referred to as
the "Trademarks");
(f) all rights pursuant to the non-competition agreements
with the Seller's employees listed on Schedule 1.1(f) attached hereto
or obtained pursuant to Section 5.1(d) of this Agreement; and
(g) the Service Contracts (as defined in Section 1.2
below, all of which are listed on Schedule 1.1(g) attached hereto).
The term "Business" does not include:
(h) any and all amounts prepaid by Seller for any period
after the Effective Time (as defined in Section 2.2 below), which
includes payments for rental of real property, furniture and
housewares, and all of the related underlying contracts for the
provision of services such as electric usage, cable, insurance,
televisions, service, water, sewer and telephone; and
(i) any amounts billed by Seller but not received by
Seller prior to the Effective Time for any period before the Effective
Time, which includes payments for rental of real property, furniture
and housewares, and all of the related underlying contracts for the
provision of services such as electric usage, cable, insurance,
televisions, service, water, sewer and telephone.
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It is understood that the sale of the Business to Buyer pursuant to
this Agreement does not involve the sale of real property.
1.2 ASSIGNMENT OF SERVICE CONTRACTS. With respect to the Assumed
Contracts (other than the on-going office property leases of Seller), Seller
shall, on the closing date set forth in Section 2.2 (the "Closing Date"),
assign to Buyer all of the related underlying contracts for the rental of
furniture and housewares and all of the related underlying contracts for the
provision of electric usage, cable television service, water, sewer, telephone
service and so on (all such contracts are referred to hereinafter the "Service
Contracts"). Upon such assignment, and subject to the adjustments to the
Closing Date Payment (as defined in Section 2.1) made pursuant to Section 2.3
herein and the subsequent payments made under Section 2.4(a), Buyer shall (a)
be entitled to all of Seller's rights (including the right to the return of all
security deposits, if any, paid by Seller), (b) assume all of Seller's
obligations arising after the Effective Time (as defined in Section 2.2), and
(c) make all further payments due under the terms of the Service Contracts that
accrue from and after the Effective Time, as if the named party to each Service
Contract were the Buyer.
1.3 NON-ASSIGNABLE SERVICE CONTRACTS. The parties hereto
recognize that it may be impossible or impractical for Seller to assign all of
the Service Contracts. A Service Contract that is impossible or impractical to
assign shall be referred to hereinafter as a "Non-Assignable Service Contract".
Seller agrees that Non-Assignable Service Contracts shall not be extended
beyond their initial expiration dates. With respect to each Non-Assignable
Service Contract, and subject to the adjustments to the Closing Date Payment
(as defined in Section 2.1) made pursuant to Section 2.3 herein and the
subsequent payments made under Section 2.4(a), the following shall apply as of
the Closing Date and thereafter: (a) Seller shall assign to Buyer its economic
rights and obligations with respect to such Non-Assignable Service Contracts;
(b) Seller shall remain legally obligated under the terms of such
Non-Assignable Service Contracts; (c) Buyer shall be entitled to all of
Seller's rights (including the right to the return of security deposits, if
any, paid by Seller), and shall assume all of Seller's financial obligations
arising after the Effective Time and make all further payments due by Seller
under the terms of the Non-Assignable Service Contracts which accrue from and
after the Effective Time; and (d) Buyer shall indemnify and hold Seller
harmless for any claim made against Seller due to the non-payment or
non-performance by Buyer of any financial or other obligation assumed by Buyer
hereunder with respect to each such Non-Assignable Service Contract. Seller
and Janette MacDonell shall remain jointly and severally liable for and shall
indemnify and hold Buyer harmless for any claim made against Buyer with respect
to the non-performance or non-payment of any financial or other obligation of
Seller with respect to a Non-Assignable Service Contract which accrued prior to
the Effective Time.
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1.4 ASSUMPTION OF LIABILITIES. Buyer shall assume the obligations
and liabilities of Seller with respect to the Business that arise on or after
the Effective Time (the "Assumed Liabilities"). Buyer shall not assume, and
Seller shall remain liable for, all of Seller's obligations, liabilities and
expenses incurred with respect to the Business or the conduct of the Business
which have arisen or accrued prior to the Effective Time (the "Retained
Liabilities"), including the accrued vacation of Seller's employees as of the
Effective Time.
ARTICLE II
PURCHASE PRICE AND CLOSING
2.1 PURCHASE PRICE. The combined Purchase Price for both the
Business being sold to Buyer and the Non-Competition Agreement shall be
composed of Four Million Six Hundred Twenty One Thousand Dollars ($4,621,000),
payable (i) $3,465,750 in cash, $3,365,750 of which shall be paid on the
Closing Date (the "Closing Date Payment") and $100,000 of which will be held in
escrow in accordance with Section 2.2(e) below (the "Escrowed Amount") and (ii)
$1,155,250 by the issuance to Seller of 94,693 shares of common stock of
ExecuStay (the "Purchase Shares," defined as $1,155,250 divided by the average
closing price per share of ExecuStay's common stock for the five trading days
prior to the Closing Date), subject to the proration adjustments to the Closing
Date Payment set forth in Section 2.3 hereof and any payments made pursuant to
Section 2.4 hereof. The Purchase Shares shall have the "piggyback"
registration rights provided in Section 4.5 hereto. The Purchase Price is
payable as set forth in Section 2.2 of this Agreement.
2.2 CLOSING; PAYMENT OF PURCHASE PRICE; ESCROW.
(a) The sale and purchase of the Business and
Non-Competition Agreement (the "Closing") shall occur on or before
March 31, 1998 (the "Closing Date"). The Closing will be effective,
and amounts due and payable on Assumed Contracts and Service Contracts
(including the Non-Assignable Service Contracts) shall be prorated
between Buyer and Seller as set forth in Section 2.3 hereof, as of
12:01 a.m. on April 1, 1998 (the "Effective Time").
(b) The documents to be transferred and the payments to
be made in connection with the transactions contemplated by this
Agreement shall occur at the offices of Buyer in Gaithersburg,
Maryland or at such other location as may be agreed to by the parties,
at 10:00 a.m. on the Closing Date, or at such other time and date as
shall be mutually agreed upon by the parties.
(c) At the Closing, Seller and Janette MacDonell shall
deliver to Buyer and ExecuStay the documents set forth in Article VIII
hereof and Buyer
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and ExecuStay shall deliver to Seller and Janette MacDonell the
documents set forth in Article VII hereof.
(d) At the Closing, Buyer shall pay the Closing Date
Payment, as adjusted pursuant to Section 2.3 hereof, and deliver the
Purchase Shares in the following manner:
(i) Buyer will deliver to Seller the Closing Date
Payment by wire transfer of immediately available funds to the
account designated by Seller to Buyer prior to the Closing;
and
(ii) ExecuStay shall deliver to Seller a stock
certificate, bearing the following restrictive legend,
representing the Purchase Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
SUCH SHARES OF STOCK MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF WITHOUT EITHER (I) AN OPINION
OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION OR
QUALIFICATION UNDER THE FEDERAL SECURITIES ACT OF
1933, AS AMENDED, AND ALL APPLICABLE STATE SECURITIES
LAWS; OR (II) SUCH REGISTRATION OR QUALIFICATION
(e) The Escrowed Amount shall be deposited in an escrow
account (the "Escrow Account") with an escrow agent (the "Escrow
Agent") acceptable to each of Buyer and Seller. Such deposit shall be
made pursuant to an escrow agreement in the form attached hereto as
Exhibit B (the "Escrow Agreement"), which shall be made by and among
Buyer, Seller and the Escrow Agent at the Closing Date. The Escrowed
Amount shall be available to pay any amounts due to Buyer under
Sections 2.4(a) and 2.4(b) hereof. Payment of any amounts due to
Buyer shall be made from the Escrow Account in the manner and at as
such times as the Escrow Agreement and Section 2.4 hereof provide.
The release of any remaining Escrowed Amount, together with interest
thereon, shall be made to Seller by certified or cashier's check
within ten (10) days after the last amount due to Buyer is calculated
under Section 2.4 below or at an earlier time if Buyer and Seller so
agree.
2.3 PRORATIONS AND PREPAYMENTS. Amounts due or payable or prepaid
on Assumed Contracts and Service Contracts (including the Non-Assignable
Service Contracts), whether collection occurs prior to or after the Closing
Date, shall be
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prorated as of the Effective Time based on a 365 day year. Seller is not
selling to Buyer and Buyer is not purchasing any of Seller's accounts
receivable for amounts due to Seller prior to the Effective Time. At Closing,
and subject to the payments to be made after Closing as provided in Section
2.4(a), the following adjustments to the Closing Date Payment and no other
shall be made:
(a) the Closing Date Payment shall be increased in an
amount equal to all amounts prepaid by Seller in connection with the
Assumed Contracts or the Service Contracts for any period after the
Effective Date, all of which amounts are listed in Schedule 2.3
attached hereto (including payments for rental of real property,
furniture and housewares, and all of the related underlying contracts
for the provision of services such as electric usage, insurance,
cable, television service, water, sewer and telephone);
(b) the Closing Date Payment shall be increased in an
amount equal to all of the security deposits paid by Seller and not
received by Seller prior to the Effective Date in connection with the
Assumed Contracts or the Service Contracts, all of which deposits are
listed in Schedule 2.3;
(c) the Closing Date Payment shall be decreased in an
amount equal to all amounts received by Seller in connection with the
Assumed Contracts or the Service Contracts for any period after the
Effective Date, all of which amounts are listed in Schedule 2.3; and
(d) the Closing Date Payment shall be decreased in an
amount equal to all of the outstanding deposits received by Seller
prior to the Effective Date for any period after the Effective Date in
connection with the Assumed Contracts or the Service Contracts, all of
which deposits are listed in Schedule 2.3 attached hereto.
Other than payments required by Section 2.3(a) through (d) above, any
uncollected receivables or other amounts due to Seller from third parties after
Closing that relate to the operation of the Company prior to the Effective Time
shall be collected by Buyer, using its best efforts, and shall be paid to
Seller in accordance with Section 2.4(a) below. If Buyer is unable to collect
any such amounts due to Seller ninety (90) days after the Effective Time,
Seller and Janette MacDonell shall have the right to pursue collection
directly.
2.4 PAYMENTS FOLLOWING CLOSING.
(a) Following the Closing, Buyer and Seller shall each
make payments to the other in accordance with this Section 2.4(a) for
(i) any amounts received by either Buyer or Seller after the Closing
Date, which amounts would have been subject to prorations under
Section 2.3 above if
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such amounts had been received before the Closing Date, (ii) any
amounts which should have been included in Schedule 2.3 but were
mistakenly omitted on the Closing Date, and (iii) any amounts due to
Seller under the last paragraph of Section 2.3 above; PROVIDED that
any payments due to Buyer shall be drawn first from the Escrow
Account. To determine the amount of the required payments under this
Section 2.4(a), Buyer and Seller agree to perform the following:
(1) an interim accounting of all payments
required (an "Interim Accounting") within thirty (30) days of
the Closing Date. To the extent that the Interim Accounting
indicates that payments are required from Buyer, Buyer shall,
within fifteen (15) days thereafter, pay to Seller such
required payments. To the extent that the Interim Accounting
indicates that payments are required from Seller, Buyer shall
be paid from the Escrow Account within fifteen (15) days
thereafter in the manner provided in the Escrow Agreement, or,
if Seller objects to such payment in a timely manner as
provided in the Escrow Agreement, then Buyer shall be paid in
accordance with the terms of the Escrow Agreement. If the
Escrowed Amount remaining in the Escrow Account is
insufficient to cover the required payments, Seller must make
the required payments from another source by certified or
cashier's check.
(2) a final accounting of all payments required
(a "Final Accounting") within sixty (60) days of the Closing
Date. To the extent that the Final Accounting indicates
that payments are required from Buyer, Buyer shall, within
fifteen (15) days thereafter, pay to Seller such required
payments. To the extent that the Final Accounting indicates
that payments are required from Seller, Buyer shall be paid
from the Escrow Account within fifteen (15) days thereafter in
the manner provided in the Escrow Agreement, or, if Seller
objects to such payment in a timely manner as provided in the
Escrow Agreement, then Buyer shall be paid in accordance with
the terms of the Escrow Agreement. If the Escrowed Amount
remaining in the Escrow Account is insufficient to cover the
required payments, Seller must make the required payments from
another source by certified or cashier's check. If the Escrow
Account no longer exists, and Seller objects in writing to the
Final Accounting within fifteen (15) days of receipt of a
written notice by Buyer of any amount due, then the matter
shall be submitted to binding arbitration in accordance with
Section 2.4(c). In the event and to the extent that Buyer or
Seller become aware following the Final Accounting of
additional payments that need to be made, such party shall
promptly notify the other of such payments, and Buyer and
Seller agree that any amount needing to be paid from one to
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the other shall be promptly paid by the responsible party to
the other, provided that any payments due to Buyer shall be
drawn first from the Escrow Account in the manner provided in
the Escrow Agreement. If the Escrowed Amount remaining in the
Escrow Account is insufficient to cover the required payments,
Seller must make the required payments from another source by
certified or cashier's check. If the Escrow Account no longer
exists, and Seller objects in writing within fifteen (15) days
of receipt of a written notice by Buyer of any amount due to
Buyer, then the matter shall be submitted to binding
arbitration in accordance with Section 2.4(c).
(b) Seller and Janette MacDonell shall pay Buyer to the
extent that (x) the Bad Debts (defined as the receivables generated,
directly or indirectly, from, by or through "Existing Contracts" (as
defined below) during a period of up to a maximum of 18-months
beginning at the Effective Time (the "Receivable Guarantee Period")
that have not been collected by the date ninety (90) days after the
date of invoice of each receivable) exceed (y) $________ (0.55% of
Seller's gross revenue billed subsequent to April 1, 1998 for those
contracts that are assumed as of April 1, 1998), PROVIDED that Buyer
shall use its normal billing and collecting practices with respects to
any receivables generated, directly or indirectly, from, by or through
Existing Contracts. To calculate the amount due to Buyer, if any,
Buyer, Seller and Janette MacDonell agree to perform an accounting of
the extent of the Bad Debts as of the last day of the Receivable
Guarantee Period. Any amount due under this Section 2.4(b) shall be
paid to Buyer within fifteen (15) days after the end of the Receivable
Guarantee Period from the Escrow Account in the manner provided in the
Escrow Agreement, or, if Seller objects to such payment in a timely
manner as provided in the Escrow Agreement, then Buyer shall be paid
in accordance with the terms of the Escrow Agreement. If the Escrowed
Amount remaining in the Escrow Account is insufficient to cover the
required payments, Seller or Janette MacDonell must make the required
payments from another source by certified or cashier's check. If the
Escrow Account no longer exists, and Seller or Janette MacDonell
object in writing to Buyer's calculation of any amount due to Buyer
within fifteen (15) days of receipt of notice of a written notice by
Buyer, then the matter shall be submitted to binding arbitration in
accordance with Section 2.4(c). If Seller or Janette MacDonell do not
timely object to the calculation of the amount due under this Section
2.4(b), then Buyer may offset the amount due from any compensation or
other amounts owed by Buyer to Seller or Janette MacDonell or pursue
payment from Seller and Janette MacDonell by other means. For
purposes of this Section 2.4(b), the term "Existing Contract" shall
mean every contract of Seller pursuant to which any tenant or customer
of, and any person or corporation that referred tenants or customers
to, Seller is renting interim accommodations from Seller.
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(c) If Seller or Janette MacDonell timely deliver an
objection to a calculation of any amount due to Buyer pursuant to
Sections 2.4(a)(2) or 2.4(b), or if Buyer and Seller or Janette
MacDonell disagree as to any amount due to Seller or Janette MacDonell
under Section 2.4(a), then the matter shall be submitted to binding
arbitration in Palo Alto, California. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. Judgment upon an
arbitration award may be entered by any court of competent
jurisdiction. Each party shall bear its own costs and expenses
(including legal fees) of such arbitration. Payment of any amounts
due as a result of any arbitration award shall immediately be made by
the party owing such amount by certified or cashier's check.
Notwithstanding the submission of any matter to arbitration, Buyer,
Seller and Janette MacDonell may agree in writing at any time to
settle the matter in dispute and to cancel any on-going arbitration
proceedings.
2.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Non-Competition Agreement and the various components of the
Business, including, among others, the Assumed Contracts, the Service Contracts
and the Tangible Property, all as set forth on Schedule 2.5. Buyer and Seller
agree to file all tax returns, including Federal Form 8594, in a manner which
is consistent with such allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND JANETTE MACDONELL
Seller and Janette MacDonell represent and warrant as follows:
3.1 INCORPORATION AND CORPORATE POWER; AUTHORIZATION, NO CONFLICTS.
(a) Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California and has
all requisite corporate power and authority and all authorizations, licenses,
permits and certifications necessary to carry on the Business as now being
conducted. Seller is qualified as a foreign corporation to do business in
every jurisdiction in which the nature of its business or its ownership of
property requires it to be qualified and in which the failure to be so
qualified would have a material adverse effect on the financial or operating
condition of the Business.
(b) Seller has the power, capacity and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated herein. The execution, delivery and performance of this Agreement
and any related
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agreement by Seller have been duly and validly authorized by the Board of
Directors of Seller and by all other necessary corporate action on the part of
Seller. This Agreement and any related agreements constitute the legally valid
and binding obligations of Seller and Janette MacDonell, enforceable against
Seller and Janette MacDonell in accordance with their respective terms. The
execution, delivery and performance of this Agreement by Seller and Janette
MacDonell and the execution, delivery and performance of any related agreements
and the consummation of the contemplated transactions by Seller and Janette
MacDonell will not violate or constitute a breach or default, whether upon
lapse of time and/or the occurrence of any act or event or otherwise, under the
Articles of Incorporation or Bylaws of Seller or any other contract, commitment
or arrangement of Seller and Janette MacDonell, or result in the imposition of
any encumbrance against any of the Assumed Contracts or the Service Contracts
or, to the best knowledge of Seller and Janette MacDonell, violate any
applicable law.
3.2 ASSUMED CONTRACTS, SERVICE CONTRACTS AND TANGIBLE PROPERTY.
(a) Schedule 1.1(b) contains an accurate and complete
list of all the Assumed Contracts and Schedule 1.1(g) contains an
accurate and complete list of all the Service Contracts. To the best
knowledge of Seller and Janette MacDonell, (i) each Assumed Contract
and each Service Contract is valid and in full force and effect; (ii)
Seller has duly performed all of its obligations thereunder; and (iii)
no breach or default, alleged breach or default, or event which would
(with the passage of time, notice or both) constitute a breach or
default thereunder by Seller or any other party or obligor with
respect thereto, has occurred or, as a result of this Agreement or
consummation of the transactions contemplated by this Agreement, will
occur. Consummation of the transactions contemplated by this
Agreement will not (and will not give any person a right to) terminate
or modify any rights of, or accelerate or augment any obligation of,
Seller under any of such Assumed Contract or Service Contract.
(b) With respect to any lease which is an Assumed
Contract (a "Lease"), in addition to the representations set forth in
Section 3.2(a) above, Seller represents itself to be the absolute
owner of each such Lease with the absolute right and title to assign
such Lease, the rents, income and profits due to Seller or to become
due to Seller thereunder, and all security deposits and prepaid rents
held by Seller with respect thereto. In addition, (i) all Leases are
valid and in full force and have not been modified, amended or
terminated, except as stated herein; (ii) there are no outstanding
assignments or pledges by Seller of any Lease, the rents, income and
profits due or to become due thereunder or any security deposits with
respect thereto; and (iii) each lessee is in possession and paying
rent and other charges as required under its Lease.
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(c) Schedule 1.1(c) contains an accurate and complete
list of all the Seller's Tangible Property.
3.3 TITLE TO ASSETS. Seller has, and will continue to have at
the Closing Date, good and marketable title to all the Assumed Contracts, the
Service Contracts and the Tangible Property. Except with respect to the
Non-Assignable Service Contracts, Seller has the right, power, and authority to
sell, convey, assign, transfer and deliver the Assumed Contracts, the Service
Contracts and the Tangible Property to Buyer in accordance with the terms of
this Agreement.
3.4 LEGAL MATTERS. There is no suit, action, arbitration, legal,
administrative or other proceeding or governmental investigation instituted
against or, to the best knowledge of Seller and Janette MacDonell, pending or
threatened against Seller or Janette MacDonell, or Seller's assets. There is
no judgment, order, injunction, or award or decree of any court, governmental
authority, or regulatory agency to which Seller or Janette MacDonell is
subject, and neither Seller nor Janette MacDonell have received notice that
Seller is in violation of any federal, state or local law or regulation
including, without limitation, those relating to labor, antitrust, civil rights
or equal protection of the law.
3.5 BROKERS. No brokers, finders or other persons (other than
Seller or existing employees of Seller) have been engaged, or brokers' fees,
finders' fees, or commissions been incurred, by Seller or Janette MacDonell in
connection with the transactions contemplated by this Agreement.
3.6 PERIOD PRECEDING EXECUTION OF AGREEMENT. Since the date of
the Latest Financial Statements (as defined in Section 3.13), there has not
been to the best of Seller or Janette MacDonell's knowledge:
(a) any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting Seller or the
Business;
(b) any pledge by Seller of the Assumed Contracts,
Service Contracts or the Tangible Property; or
(c) any notice received by Seller that a contract is in
default.
3.7 SUPPLEMENTS TO SCHEDULES. From time to time after the date of
this Agreement and prior to Closing, Seller and Janette MacDonell shall
promptly inform Buyer in writing and supplement or amend any Schedules or
Exhibits to this Agreement, if any matter arises which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in any Schedule or Exhibit or if it becomes necessary to
correct any information in such Schedule or Exhibit which has become inaccurate
in any material respect.
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3.8 REASONABLE EFFORTS. Seller and Janette MacDonell from the
date of this Agreement until the Closing Date will (i) use reasonable efforts
to obtain any consent, authorization or approval of, or exemption by, any
governmental authority or agency, or third party required to be obtained by it
in connection with this Agreement or the taking of any action in connection
with the consummation hereof, (ii) duly comply with all applicable laws as may
be required for the valid and effective sale and transfer of the Business and
for the performance of all of the acts and all things contemplated by this
Agreement and (iii) take all reasonable actions necessary and appropriate to
preserve and protect the value of the Business.
3.9 NOTIFICATION. Prior to the Closing, Seller, and Janette
MacDonell shall give prompt notice to Buyer of (i) any event or alleged event
which would constitute a default under this Agreement or which would cause any
warranty or representation of Seller or Janette MacDonell under this Agreement
to be untrue or misleading, or (ii) any notice or other communication from any
third party alleging that the consent from any such third party is or may be
required with respect to the transactions contemplated in this Agreement.
3.10 NO NEGOTIATIONS OUTSIDE AGREEMENT. Prior to Closing or the
termination of this Agreement, Seller and Janette MacDonell, and their agents
and representatives, will not discuss a possible merger, sale or other
distribution of all or any part of the Business (a "Sale") with any other
person or provide any information to any other person regarding Seller, other
than (i) information provided to legal counsel, investment advisors,
accountants and other representatives acting in a fiduciary capacity or (ii)
information which is traditionally provided in the regular course of Seller's
business operations to third parties where Seller has no reason to believe that
such information may be utilized to evaluate a possible Sale. Seller and
Janette MacDonell represents that neither Seller nor Janette MacDonell is a
party to or bound by any Agreement with respect to a Sale other than this
Agreement.
3.11 INTELLECTUAL PROPERTY RIGHTS. Seller owns and possesses all
right, title and interest, or holds a valid license, in and to trademarks,
service marks, trade names, corporate names, trade secrets, know-how or other
intellectual property rights owned by, licensed to or otherwise controlled by
the Seller or used in, developed for use in or necessary to the conduct of the
Seller's Business as now conducted or planned to be conducted. Seller does not
license to third parties any of its intellectual property. Neither Seller nor
Janette MacDonell has received any notice of, nor are there any facts known to
the Seller or Janette MacDonell which indicate a likelihood of, any
infringement or misappropriation by, or conflict from, any third party with
respect to the Seller's intellectual property rights; no claim by any third
party contesting the validity of any of the Seller's intellectual property
rights has been made, is currently outstanding or, to the best knowledge of the
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Seller and Janette MacDonell, is threatened; and neither the Seller nor Janette
MacDonell have received any notice of any infringement, misappropriation or
violation by the Seller of any intellectual property rights of any third
parties and the Seller has not infringed, misappropriated or otherwise violated
any such intellectual property rights.
3.12 CUSTOMERS AND SUPPLIERS. Schedule 3.12 lists the ten largest
customers and suppliers of the Business for the fiscal year ended December 31,
1997 and sets forth opposite the name of each such customer or supplier the
approximate percentage of net sales or purchases by the Seller attributable to
such customer or supplier for such period. Since December 31, 1997, no
customer or supplier listed on Schedule 3.12, and in particular Intel and State
Farm, has indicated that it will stop doing business with, or significantly
decrease the rate of business done with, the Seller.
3.13 FINANCIAL STATEMENTS. Seller and Janette MacDonell have
delivered to Buyer (a) balance sheets relating to the Seller as at December 31,
1995 and December 31, 1996 and statements of income for the fiscal periods then
ended; and (b) a balance sheet relating to the Seller as at December 31, 1997
(the "Latest Balance Sheet") and statements of income for the period then ended
(the documents provided under this Section 3.13(b) are hereinafter referred to
as the "Latest Financial Statements," and the documents provided under Sections
3.13(a) and (b) are hereinafter referred to as the "Financial Statements").
True and correct copies of the Financial Statements are attached hereto as
Exhibit C. All such Financial Statements are true, correct and accurate in all
respects and have been compiled in accordance with statements on standards for
accounting and review services issued by the American Institute of Certified
Public Accountants.
3.14 TAX MATTERS.
(a) Each of Seller and any subsidiary, any affiliated,
combined or unitary group of which the Company or any subsidiary is or was a
member, any "Plans" (as defined in Section 3.16(b) hereof), as the case may be
(each, a "Tax Affiliate" and, collectively, the "Tax Affiliates"), has: (i)
timely filed (or has had timely filed on its behalf) all returns, declarations,
reports, estimates, information returns, and statements ("Returns") required to
be filed or sent by it in respect of any "Taxes" (as defined in subsection (f)
below) or required to be filed or sent by it by any taxing authority having
jurisdiction; (ii) timely and properly paid (or has had paid on its behalf) all
Taxes shown to be due and payable on such Returns; (iii) established on its
Latest Balance Sheet, in accordance with generally accepted accounting
principles, reserves that are adequate for the payment of any Taxes not yet due
and payable; (iv) complied with all applicable laws, rules, and regulations
relating to the withholding of Taxes and the payment thereof (including,
without
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limitation, withholding of Taxes under Sections 1441 and 1442 of the Internal
Revenue Code of 1986, as amended (the "Code"), or similar provisions under any
foreign laws), and timely and properly withheld from individual employee wages
and paid over to the proper governmental authorities all amounts required to be
so withheld and paid over under all applicable laws.
(b) There are no liens for Taxes upon any of the assets,
except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted
or assessed against Seller or the Tax Affiliates that has not been resolved and
paid in full. No waiver, extension or comparable consent given by Seller or
the Tax Affiliates regarding the application of the statute of limitations with
respect to any Taxes or Returns is outstanding, nor is any request for any such
waiver or consent pending. There has been no Tax audit or other administrative
proceeding or court proceeding with regard to any Taxes or Returns, nor is any
such Tax audit or other proceeding pending, nor has there been any notice to
Seller by any Taxing authority regarding any such Tax, audit or other
proceeding, or, to the best knowledge of Seller, is any such Tax audit or other
proceeding threatened with regard to any Taxes or Returns. Seller does not
expect the assessment of any additional Taxes on Seller or the Tax Affiliates
and is not aware of any unresolved questions, claims or disputes concerning the
liability for Taxes on Seller or the Tax Affiliates which would exceed the
estimated reserves established on its books and records.
(d) Neither Seller nor any Tax Affiliate is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code and the consummation of the transactions
contemplated by this Agreement will not be a factor causing payments to be made
by Seller or any Tax Affiliate that are not deductible (in whole or in part)
under Section 280G of the Code.
(e) Neither Seller nor any Tax Affiliate has requested any
extension of time within which to file any Return, which Return has not since
been filed.
(f) For purposes of this Agreement, the term "Taxes" means
all taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated, severance, stamp,
occupation, property, or other taxes, customs duties, fees, assessments, or
charges of any kind whatsoever, including, without limitation, all interest and
penalties thereon, and additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign, upon Seller or any Tax Affiliate.
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3.15 EMPLOYEES. Except as set forth in the Disclosure Schedule
under the caption referencing this Section 3.15, and only with respect to
employees of Seller who perform functions in connection with the Business: (a)
to the best knowledge of Seller and Janette MacDonell, no employee of Seller
and no group of the Seller's employees has any plans to terminate his or her
employment; (b) Seller has complied with all laws relating to the employment of
labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes; (c) Seller has no material labor relations problem pending and its labor
relations are satisfactory; (d) there are no workers' compensation claims
pending against Seller nor is Seller aware of any facts that would give rise to
such a claim; (e) to the best knowledge of Seller, no employee of Seller is
subject to any secrecy or non-competition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the Business; and (f) no employee or former employee of Seller has any claim
with respect to any intellectual property rights of Seller set forth under the
caption referencing Section 4.18 hereof in the Disclosure Schedule.
3.16 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in the Disclosure Schedule under the
caption referencing Section 3.16 hereof in the Disclosure Schedule, with
respect to all employees and former employees of Seller who perform or
performed functions in connection with the Business and all dependents and
beneficiaries of such employees and former employees: (i) Seller does not
maintain or contribute to any nonqualified deferred compensation or retirement
plans, contracts or arrangements; (ii) Seller does not maintain or contribute
to any qualified defined contribution plans (as defined in Section 3(34) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 414(i) of the Code; (iii) Seller does not maintain or contribute to any
qualified defined benefit plans (as defined in Section 3(35) of ERISA or
Section 414(j) of the Code); and (iv) Seller does not maintain or contribute to
any employee welfare benefit plans (as defined in Section 3(1) of ERISA).
(b) To the extent required (either as a matter of law or to
obtain the intended tax treatment and tax benefits), all employee benefit plans
(as defined in Section 3(3) of ERISA) which Seller does maintain or to which it
does contribute (collectively, the "Plans") comply in all material respects
with the requirements of ERISA and the Code. With respect to the Plans, (i)
all required contributions which are due have been made and a proper accrual
has been made for all contributions due in the current fiscal year; (ii) there
are no actions, suits or claims pending, other than routine uncontested claims
for benefits; and (iii) there have been no prohibited transactions (as defined
in Section 406 of ERISA or Section 4975 of the Code).
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(c) Buyer has received true and complete copies of (i) the
most recent determination letter, if any, received by Seller from the Internal
Revenue Service regarding the Plans which Seller maintains or to which it
contributes and any amendment to any Plan made subsequent to any Plan
amendments covered by any such determination letter; (ii) the most recent
financial statements and annual report or return for the Plans; and (iii) the
most recently prepared actuarial valuation reports.
(d) Seller does not contribute (and has not ever contributed)
to any multi-employer plan, as defined in Section 3(37) of ERISA. Seller has
no actual or potential liabilities under Section 4201 of ERISA for any complete
or partial withdrawal from a multi-employer plan. Seller has no actual or
potential liability for death or medical benefits after separation from
employment, other than (i) death benefits under the employee benefit plans or
programs (whether or not subject to ERISA) set forth under the caption
referencing this Section 4.19 in the Disclosure Schedule and (ii) health care
continuation benefits described in Section 4980B of the Code.
(e) Neither Seller nor any of its directors, officers,
employees or other "fiduciaries", as such term is defined in Section 3(21) of
ERISA, has committed any breach of fiduciary responsibility imposed by ERISA or
any other applicable law with respect to the Plans which would subject Seller,
Buyer, Buyer's subsidiaries or any of their respective directors, officers or
employees to any liability under ERISA or any applicable law.
(f) Seller has not incurred any liability for any tax or
civil penalty or any disqualification of any employee benefit plan (as defined
in Section 3(3) of ERISA) imposed by Sections 4980B and 4975 of the Code and
Part 6 of Title I and Section 502(i) of ERISA.
3.17 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed or
recorded on the Latest Balance Sheet, the Seller has no obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due and whether or not insured) arising out of transactions or
events heretofore entered into, or any action or inaction, or any state of
facts existing, with respect to or based upon transactions or events heretofore
occurring, except for liabilities which have arisen after the date of the
Latest Balance Sheet arising in the ordinary course of business.
3.18 NO MATERIAL ADVERSE CHANGES. Since the date of the Latest
Financial Statements, there has been no material adverse change in customer,
employee or supplier relations, or the business condition of Seller.
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3.19 LIMITATIONS REGARDING REPRESENTATIONS AND WARRANTIES. As
used in this Agreement or in any other agreement, document, certificate or
instrument delivered by Seller or Janette MacDonell to Buyer, the phrase "to
the best of Seller's and/or Janette MacDonell's actual knowledge", "to the best
of Seller's and/or Janette MacDonell's knowledge" or any similar phrase shall
mean the knowledge, after due inquiry, of Janette MacDonell and each and every
officer and director of Seller. Buyer agrees to inform Seller promptly in
writing if it discovers that any representation or warranty of Seller or
Janette MacDonell is inaccurate in any material respect, or if it believes that
Seller or Janette MacDonell has failed to deliver to Buyer any document or
material which it or she is obligated to deliver hereunder.
3.20 DISCLOSURE. Neither this Agreement nor any other agreement,
document, certificate or instrument nor the Financial Statements delivered by
Seller or Janette MacDonell to Buyer, taken as a whole, contains any untrue
statement of a material fact regarding the Seller or its Business or any of the
other matters dealt with in this Article III relating to the Seller, the
Business or the transactions contemplated by this Agreement. There is no fact
specific to the Business that has not been disclosed to Buyer of which Seller
or Janette MacDonell or any officer or director of the Seller is aware which
could materially affect adversely the Business, including operating results,
assets, customer relations and employee relations, of the Business.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents, warrants, and covenants as follows:
4.1 AUTHORITY; APPROVAL OF TRANSACTIONS. Buyer has the power,
capacity and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
of this Agreement and any related agreement by Buyer have been duly and validly
authorized by the Board of Directors of Buyer and by all other necessary
corporate action on the part of Buyer. This Agreement and any related
agreements constitute the legally valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms. The
execution, delivery and performance of this Agreement by Buyer and the
execution, delivery and performance of any related agreements and the
consummation of the contemplated transactions by Buyer will not violate or
constitute a breach or default, whether upon lapse of time and/or the
occurrence of any act or event or otherwise, under the Articles of
Incorporation or Bylaws of Buyer or any other contract, commitment or
arrangement of Buyer, or violate any law.
4.2 LEGAL MATTERS. There is no suit, action, arbitration, legal,
administrative or other proceeding or governmental investigation pending or, to
the best knowledge of Buyer, threatened against or related to it which might
adversely affect or restrict its ability to consummate the transactions
contemplated hereby.
4.3 BROKERS. No brokers, finders or other persons have been
engaged, or brokers' fees, finders' fees or commissions incurred, by Buyer in
connection with the transactions contemplated by this Agreement.
4.4 REASONABLE EFFORTS. From the date of this Agreement until
the Closing, Buyer will (i) use reasonable efforts to obtain any consent,
authorization or approval of, or exemption by, any governmental authority or
agency, or third party required to be obtained by it in connection with this
Agreement for the taking of any action in connection with the consummation
hereof and (ii) duly comply with all applicable laws as may be required for the
performance of all acts and all things contemplated by this Agreement.
4.5 PIGGYBACK REGISTRATION RIGHTS. The Purchase Shares shall have
the following piggyback registration rights:
(a) If ExecuStay shall propose to file a registration
statement with the Securities and Exchange Commission under the
Securities Act of 1933, as
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amended (the "Securities Act") (except registrations on such Forms or
similar form(s) solely for registration of securities in connection
with an employee benefit plan, dividend reinvestment or stock option
plan or a merger or consolidation), covering an underwritten public
offering of ExecuStay's Common Stock within two years from the date of
this Agreement, ExecuStay will notify the Seller and Janette MacDonell
in writing at least thirty days prior to each such filing and will
include in the registration statement (to the extent permitted by
applicable regulation), but on one occasion only (except as otherwise
set forth in the last sentence of this Section 4.5(a) below) under
this Section 4.5, the Purchase Shares to the extent requested by
Seller and Janette MacDonell, which request must made in writing
within ten days after the receipt of any such notice. If the
registration statement filed pursuant to the thirty day notice has not
become effective within six months following the date such notice is
given to Seller and Janette MacDonell, ExecuStay must again notify
Seller and Janette MacDonell in the manner provided above.
Notwithstanding, the number of Purchase Shares proposed to be
registered thereby shall be reduced upon the request of the managing
underwriter(s) of such offering. If, as a result of such a request by
the managing underwriter(s), less than all of the Purchase Shares are
registered, Seller and Janette MacDonell shall be entitled for a
period of two years following such registration to another one-time
right to register the remaining Shares in accordance with the
provisions of this Section 4.5.
(b) All expenses of any such registration statement
referred to in this Section 4.5, except the fees of counsel to Seller
and Janette MacDonell (unless Seller and Janette MacDonell use
ExecuStay's counsel, in which case ExecuStay shall pay for such fees),
underwriting commission or discounts, filing fees, and any transfer or
other taxes applicable to such Purchase Shares, shall be borne by
ExecuStay.
(c) Except as provided in Section 4.5(a) above, upon
effectiveness of a registration statement which includes some or all
of the Purchase Shares, the rights under this Section 4.5 shall
terminate. The rights under this Section 4.5 shall be available
exclusively to Seller and Janette MacDonell, her heirs and the
personal representatives of her estates, and shall not be available to
any transferee or purchaser of the Purchase Shares other than Janette
MacDonell.
(d) ExecuStay will furnish the Seller and Janette
MacDonell with a reasonable number of copies of any prospectus
included in such filings and will amend or supplement, at ExecuStay's
expense, the same as required during the period of required use
thereof.
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(e) In the case of the filing of any registration
statement, and to the extent permissible under the Securities Act, and
controlling precedent thereunder, ExecuStay, Seller and Janette
MacDonell shall provide cross indemnification agreements to each other
in customary scope, including but not limited to any losses, claims,
damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Securities Exchange Act of 1934,
as amended, or other federal or state laws, of covering the accuracy
and completeness of the information furnished by each.
(f) Seller and Janette MacDonell agree to cooperate with
ExecuStay in the preparation and filing of any such registration
statement, and in furnishing of information concerning the Seller and
Janette MacDonell for inclusion therein, or in any efforts by
ExecuStay to establish that the proposed sale is exempt under the
Securities Act as to any proposed distribution.
ARTICLE V
COVENANTS OF SELLER AND JANETTE MACDONELL
5.1 CONDUCT OF THE BUSINESS. Seller and Janette MacDonell agree
to observe each term set forth in this Section 5.1 and agree that, from the
date hereof until the Closing Date, unless otherwise consented to by Buyer in
writing:
(a) Seller and Janette MacDonell shall not, directly or
indirectly, sell, pledge, dispose of or encumber any part of the Business,
except in the ordinary course of business.
(b) The Business shall be conducted only in, and Seller and
Janette MacDonell shall not take any action except in, the ordinary course of
Seller's business, on an arm's-length basis and in accordance in all material
respects with all applicable laws, rules and regulations and Seller's past
custom and practice;
(c) Seller and Janette MacDonell shall not, directly or
indirectly, do or permit to occur any of the following insofar as they relate
to Business: (i) acquire (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership, joint venture or
other business organization or division or material assets thereof; (ii) incur
any indebtedness for borrowed money or issue any debt securities except the
borrowing of working capital in the ordinary course of business and consistent
with past practice; (iii) permit any accounts payable owed to trade creditors
to remain outstanding more than 60 days; (iv) accelerate, beyond the normal
collection cycle, collection of accounts receivable; or (v) enter into or
propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 5.1(c);
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(d) Seller and Janette MacDonell shall not, directly or
indirectly, (i) enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officers or directors or consultants
(except for bonuses paid to certain of Seller's employees in the amounts listed
in Schedule 5.1(d)); or (ii) in the case of employees, officers or consultants
who earn in excess of $50,000 per year, take any action with respect to the
grant of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits payable in effect on the date hereof
(except for bonuses paid to certain of Seller's employees in the amounts listed
on Schedule 5.1(d)); PROVIDED, HOWEVER, that if certain employees listed on
Schedule 5.1(d) either do not have non-competition agreements with Seller or
have non-competition agreements with Seller that cannot be assigned to Buyer as
part of the Business, then Seller or Janette MacDonell must require such
employees, as consideration for receiving their bonuses, to execute
non-competition agreements with Seller, in form satisfactory to Buyer, which
non-competition agreements shall be assignable and assigned to Buyer at the
Effective Time as part of the Business.
(e) Seller and Janette MacDonell shall not adopt or amend any
bonus, profit sharing, compensation, pension, retirement, deferred
compensation, employment or other employee benefit plan, trust, fund or group
arrangement for the benefit or welfare of any employees or affiliates;
(f) Seller shall not cancel or terminate its current
insurance policies covering the Business, or cause any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated or lapsed policies for substantially
similar premiums are in full force and effect;
(g) Seller and Janette MacDonell shall (i) use their best
efforts to preserve intact the organization and goodwill of the Business, keep
available the services of Seller's officers and employees as a group and
maintain satisfactory relationships with suppliers, distributors, customers and
others having business relationships with Seller in connection with the
Business; (ii) confer on a regular and frequent basis with representatives of
Buyer to report operational matters and the general status of ongoing
operations with respect to the Business; (iii) not intentionally take any
action which would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at the Closing;
(iv) notify Buyer of any emergency or other change in the normal course of the
Business or in the operation of the properties of the Business and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such emergency,
change, complaint, investigation or hearing would be material, individually or
in the aggregate, to the business, operations or financial condition of Seller
or to
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Seller's or Buyer's ability to consummate the transactions contemplated by this
Agreement; and (v) promptly notify Buyer in writing if Seller or Janette
MacDonell shall discover that any representation or warranty made by it in this
Agreement was when made, or has subsequently become, untrue in any respect;
(h) Seller shall (i) file any Tax returns, elections or
information statements with respect to any liabilities for Taxes of Seller or
other matters relating to Taxes of Seller which affect the Business and
pursuant to applicable law must be filed prior to the Closing Date; (ii)
promptly upon filing provide copies of any such Tax returns, elections or
information statements to Buyer; (iii) make any such Tax elections or other
discretionary positions with respect to taxes taken by or affecting Seller only
upon prior consultation with and consent of Buyer; and (iv) not amend any
Return;
(i) Neither Seller nor Janette MacDonell shall make any
election with respect to taxes, change an annual accounting period, adopt or
change any accounting method or file any amended return, report or form, if
such election, adoption, change or filing would have the effect of increasing
the Tax liability of the Buyer with respect to any period ending after the
Closing Date.
5.2 CONDITIONS. Seller and Janette MacDonell shall take all
commercially reasonable actions necessary to cause the conditions set forth in
Article VIII to be satisfied and to consummate the transactions contemplated
herein as soon as reasonably possible after the satisfaction thereof.
5.3 COOPERATION WITH AUDIT; AUDIT COST. Seller and Janette
MacDonell shall cooperate in any audit conducted by Buyer's accountants that
may be necessary in connection with any filing of Form 8-K with the Securities
and Exchange Commission. Buyer shall pay the costs of Buyer's accountants in
any analysis and reviews Buyer may perform as to Seller's financial statements
and any audit Buyer may conduct as described in the preceding sentence.
ARTICLE VI
COVENANTS OF BUYER
Buyer covenants and agrees with Seller and Janette MacDonell
as follows:
6.1 CONDITIONS. Buyer shall take all commercially reasonable
actions necessary to cause the conditions set forth in Article VII to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof.
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<PAGE> 24
ARTICLE VII
CONDITIONS TO SELLER'S AND
JANETTE MACDONELL'S OBLIGATION TO CLOSE
Seller's and Janette MacDonell's obligations hereunder are subject to
the fulfillment prior to or at Closing of each of the following conditions, the
performance of any of which may be waived in writing by Seller and Janette
MacDonell.
7.1 REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING. Buyer's
representations and warranties, contained in this Agreement, shall be true in
all material respects at Closing as though such representations and warranties
were made as of such time.
7.2 COMPLIANCE. Buyer shall have performed and complied in all
material respects with all covenants, agreements and conditions required by
this Agreement to be performed and complied with by Buyer prior to or at
Closing.
7.3 ASSIGNMENT AND ASSUMPTION AGREEMENT. Buyer shall have
executed and delivered to Seller an Assignment and Assumption Agreement,
attached hereto as Exhibit D, whereby Seller assigns the Business to Buyer and
Buyer assumes the Assumed Liabilities from Seller.
7.4 CLOSING DOCUMENTS. On the Closing Date, Buyer and ExecuStay
shall have delivered to Seller and Janette MacDonell the following Closing
Documents:
(a) an executed copy of each of this Agreement and any
other agreement, document, certificate or instrument delivered by
Buyer;
(b) a certificate executed by Buyer, dated the Closing
Date, stating that the covenants set forth in Sections 7.1 and 7.2
above have been satisfied;
(c) the stock certificate or certificates issued to
Seller representing the Purchase Shares, which certificates shall
include the restrictive legend set forth in Section 2.2(d)(ii) of this
Agreement;
(d) such other certificates, documents and instruments as
Seller and Janette MacDonell reasonably request related to the
transactions contemplated hereby;
(e) a copy of the text of the resolutions adopted by the
board of directors of Buyer and ExecuStay authorizing the execution,
delivery and performance of this Agreement and the consummation of all
of the
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<PAGE> 25
transactions contemplated by this Agreement, along with a certificate
executed by the secretary of Buyer and ExecuStay certifying to Seller
that such copies are true, correct and complete copies of such
resolutions and that such resolutions were duly adopted and have not
been amended or rescinded;
(f) incumbency certificates executed on behalf of Buyer
and ExecuStay by its corporate secretary certifying the signature and
office of each officer of Seller executing this Agreement and any
other agreement, document, certificate or instrument delivered by
Seller;
(g) the two-year employment agreement between Janette
MacDonell and Buyer referred to in Section 8.5 hereof in the form
attached hereto as Exhibit E; and
(h) an opinion from counsel to ExecuStay as to the
legality of the Purchase Shares in the form attached hereto as Exhibit
F.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligations hereunder are subject to the fulfillment prior to
or at Closing of each of the following conditions, the performance of any of
which may be waived in writing by Buyer.
8.1 REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING. The
representations and warranties of Seller and Janette MacDonell contained in
this Agreement, or in any other agreement, document, certificate or instrument
delivered by Seller or Janette MacDonell to Buyer, shall be true in all
material respects at Closing as though such representations and warranties were
made as of such time.
8.2 COMPLIANCE. Seller and Janette MacDonell shall have
performed and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed and complied with by
it or her prior to or at Closing.
8.3 DUE DILIGENCE RESULTS. Nothing shall have come to the
attention of Buyer or its agents in the course of its due diligence
investigation, pursuant to Section 10.1 or otherwise, which demonstrates that
any representation or warranty of Seller or Janette MacDonell is inaccurate or
incomplete.
8.4 NON-COMPETITION AGREEMENTS. Seller and Janette MacDonell
shall have executed and delivered to Buyer the Non-Competition Agreements, the
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execution and delivery of such agreements being a material inducement to Buyer
to enter into this Agreement.
8.5 EMPLOYMENT AGREEMENTS. Janette MacDonell shall have executed
and delivered to Buyer a two-year employment agreement in the form attached
hereto as Exhibit E, and the individuals listed in Schedule A shall have
executed and delivered to Buyer employment agreements of at least one year with
Buyer, all of which shall be satisfactory to Buyer.
8.6 NO MATERIAL ADVERSE CHANGES. Since the date of this
Agreement, there has been no material adverse change in customer, employee or
supplier relations, or the business condition of Seller.
8.7 NO RELATED LITIGATION. There is no instituted or pending
action or proceeding before any court or governmental authority or agency,
domestic or foreign, or, to the best of Seller's or Janette MacDonell's
knowledge, threatened action or proceeding, to which the Seller or Janette
MacDonell are a party (i) challenging or seeking to make illegal, or to delay
or otherwise directly or indirectly restrain or prohibit, the consummation of
the transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Buyer of all or a material portion of the business or
assets of Seller, (iii) seeking to invalidate or render unenforceable any
material provision of this Agreement or any of the agreements related to this
Agreement, or (iv) otherwise relating to the transactions contemplated hereby.
8.8 ASSIGNMENT AND ASSUMPTION AGREEMENT. Seller shall have
executed and delivered to Buyer an Assignment and Assumption Agreement whereby
Seller assigns the Business to Buyer and Buyer assumes the Assumed Liabilities
from Seller.
8.9 CLOSING DOCUMENTS. On the Closing Date, Seller and Janette
MacDonell have delivered to Buyer the following Closing Documents:
(a) an executed copy of each of this Agreement, the
Non-Competition Agreements and the Employment Agreements, and any
other agreement, document, certificate or instrument delivered by
Seller or Janette MacDonell;
(b) certificates executed by Seller and Janette
MacDonell, dated the Closing Date, stating that the covenants set
forth in Sections 8.1 and 8.2 above have been satisfied;
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<PAGE> 27
(c) any consents required to properly assign the Assumed
Contracts and the Service Contracts to Buyer, to the extent
obtainable;
(d) a copy of the text of the resolutions adopted by the
board of directors of Seller authorizing the execution, delivery and
performance of this Agreement and the consummation of all of the
transactions contemplated by this Agreement, along with a certificate
executed by the secretary of Seller certifying to Buyer that such
copies are true, correct and complete copies of such resolutions and
that such resolutions were duly adopted and have not been amended or
rescinded;
(e) incumbency certificates executed on behalf of Seller
by its corporate secretary certifying the signature and office of each
officer of Seller executing this Agreement and any other agreement,
document, certificate or instrument delivered by Seller;
(f) all documents necessary to vest in Buyer clear and
good title to all the Tangible Property;
(g) all documents necessary to assign to Buyer all of
Seller's economic rights under the Non-Assignable Service Contracts;
(h) non-competition agreements between Seller and certain
of its employees obtained pursuant to Section 5.1(d) above; and
(i) such other certificates, documents and instruments as
Buyer reasonably requests related to the transactions contemplated
hereby.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER AND JANETTE MACDONELL. In addition
to any other indemnification contained in this Agreement, Seller and Janette
MacDonell jointly and severally covenant and agree with Buyer to indemnify
Buyer and ExecuStay Corporation (its parent company), their directors,
officers, shareholders, agents, advisors and lenders and their successors and
assigns, and hold them harmless from, against, and in respect of any and all
costs, losses, claims, liabilities, fines, penalties, damages, and expenses
(including interest which may be imposed in connection therewith, court costs,
and reasonable fees and disbursements of counsel) (collectively, "Damages"),
incurred by any of them in connection with:
(a) any misrepresentation, omission or breach of any of
the representations, warranties, covenants or agreements made by
Seller or
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Janette MacDonell in this Agreement, in the Exhibits or Schedules
hereto, or any agreements delivered in connection with the
transactions contemplated hereby; or
(b) the Retained Liabilities.
9.2 INDEMNIFICATION BY BUYER. In addition to any other
indemnification contained in this Agreement, Buyer covenants and agrees with
Seller and Janette MacDonell to indemnify Janette MacDonell and Seller, its
directors, officers, shareholders, agents, advisors and lenders and their
successors and assigns, and hold them harmless from, against, and in respect of
any and all costs, losses, claims, liabilities, fines, penalties, damages, and
expenses (including interest which may be imposed in connection therewith,
court costs, and reasonable fees and disbursements of counsel) (collectively,
"Damages"), incurred by any of them in connection with:
(a) any misrepresentation, omission or breach of any of
the representations, warranties, covenants or agreements made by Buyer
in this Agreement or in any agreement delivered in connection with the
transactions contemplated hereby; or
(b) the Assumed Liabilities.
9.3 RIGHT TO DEFEND, ETC. Within seven (7) days after the written
assertion against a party which is protected by the indemnification provisions
of Sections 9.1 and 9.2 above (an "Indemnified Party") by a third person of a
claim or liability which would entitle the Indemnified Party to Damages, the
Indemnified Party shall give written notice of the claim to the party obligated
to indemnify it ("Indemnifying Party"). Failure to give such notice, or any
delay prejudicial to the interests of the Indemnifying Party, shall relieve the
Indemnifying Party of any obligation of indemnification with respect to such
claim or liability to the extent the Indemnifying Party is in fact prejudiced
by such failure or delay. Upon receipt of timely notice, the Indemnifying
Party shall undertake the responsibility for the defense of such claim, at its
own expense. If, within seven (7) days after delivery of the notice of claim by
the Indemnified Party, the Indemnifying Party fails to advise the Indemnified
Party of its agreement to contest and defend against any such claim, or if the
Indemnifying Party does not participate in such litigation, proceedings, or
settlement negotiations, for any reason, then the Indemnified Party shall have
the right, at the Indemnifying Party's expense, to take such action as it deems
appropriate to defend, contest, settle, or compromise any such claim or
liability, and the Indemnifying Party agrees to be bound by any and all
rulings, judgments, compromises, and settlements reached by the Indemnified
Party in good faith, in the same manner as if it has participated therein.
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<PAGE> 29
9.4 PAYMENT.
(a) Each Indemnifying Party agrees to reimburse each
Indemnified Party within thirty (30) days after presentation of an
itemized statement of Damages incurred by such Indemnified Party.
(b) If payment is not made within such thirty (30) day
period, the Indemnified Party may offset such Damages against any
amounts owed by it to the Indemnifying Party.
9.5 SETTLEMENT. Except as otherwise provided in this Agreement, no
Indemnified Party shall be entitled to indemnification under this Article VII
if such Indemnified Party voluntarily makes any payment in respect of, settles,
or offers to settle, or consents to any compromise or admits liability with
respect to, any third- party claim without the prior consent (which consent
shall not be unreasonably withheld) of the Indemnifying Party.
ARTICLE X
MISCELLANEOUS
10.1 INVESTIGATION OF SELLER'S RECORDS. Buyer may at any time
prior to Closing, through its representatives, accountants or counsel, make
such investigation of Seller's records relating to the Business as Buyer deems
reasonably necessary or advisable, and its representatives shall have access to
both Seller's premises and to such books, records and documents as Buyer shall
reasonably request. Buyer shall be furnished such operating data and other
information as it may reasonably request. Such investigation shall be at
Buyer's expense.
10.2. CONFIDENTIALITY. The parties to this Agreement agree that this
Agreement and the transactions contemplated by this Agreement, as well as any
other agreements between any of the same parties with respect to the
transactions contemplated by this Agreement, and any information provided to
Buyer by Seller or Janette MacDonell regarding the leases subject to this
Agreement or regarding the transactions contemplated by this Agreement, shall
be held in strict confidence by each party hereto prior to the Closing;
provided, however that the parties to this Agreement agree that the
confidentiality required by this Section 10.2 shall not be breached as a result
of any filings made by Buyer or ExecuStay Corporation with the Securities and
Exchange Commission.
10.3 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to Closing: (a) by unanimous consent
of Seller and Buyer; or (b) by Buyer if, as a result of its investigation made
pursuant to Section 10.1, Buyer in its sole discretion determines not to
proceed to Closing on this
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Agreement. Except as otherwise provided herein, termination of this Agreement
pursuant to this Section 10.3 shall terminate all obligations of the parties
hereunder.
10.4 REMEDIES FOR BREACH OF CONTRACT. In the event of a breach by
any party to this Agreement of any of its provisions, the non-breaching party
shall be entitled to (a) injunctive relief, in whole or in part and from time
to time, as more fully described below and (b) to seek actual damages. The
parties acknowledge that remedies at law for any breach of the provisions of
this Agreement will be inadequate and, accordingly, that the non-breaching
party shall, in addition to all other available remedies (including, without
limitation, seeking such monetary damages as can be shown to have been
sustained by reason of such breach, subject to the limitation set forth in the
preceding sentence), be entitled to injunctive or other equitable relief; and
the parties to this Agreement further agree that they shall not plead or
otherwise defend any claim of breach or threatened breach on grounds of
adequate remedy at law in an action by the non-breaching party for injunctive
relief. Injunctive relief and the right to seek actual damages (subject to
the limitation set forth above) shall be cumulative and nonexclusive remedies
and shall be in addition to any other remedy to which a non-breaching party
hereunder is entitled.
10.5 RISK OF LOSS. If, prior to Closing, furniture located
pursuant to any rental contract between Seller and another party in units
subject to leases or rentals assigned pursuant this Agreement is destroyed or
damaged, such loss shall be borne, as between Buyer and Seller, solely by
Seller.
10.6 SALES TAXES. Seller shall pay or have reduced from the
Purchase Price otherwise payable to Seller all sales, transfer, excise and
documentary taxes, and all recordation and filing fees, if any, payable in
connection with the transactions contemplated hereby.
10.7 GOVERNING LAW; VENUE. All questions concerning the
construction, validity and interpretation of this Agreement and the performance
of the obligations imposed by this Agreement will be governed by the internal
laws, and not the law of conflicts, of the State of California. The parties
hereto further agree that any action brought to enforce any right or obligation
under this Agreement shall be subject to the exclusive jurisdiction of the
Courts of the State of California.
10.8 TIME IS OF THE ESSENCE. Time is material and of the essence
with regard to the performance of all obligations and the payment of all sums
pursuant to this Agreement.
10.9 EXPENSES. Each party will pay all of its expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder, and the consummation of the transactions contemplated by
this Agreement.
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10.10 HEADINGS. The headings set forth herein are for convenience
only and shall not be used in interpreting the text of the sections in which
they appear.
10.11 INCORPORATION OF EXHIBITS AND SCHEDULES. Each of the Exhibits
and Schedules attached hereto is by this reference incorporated herein and made
a part of this Agreement.
10.12 NOTICES. Any notice or other communication required, permitted
or desirable hereunder, shall be sufficiently given if sent to a party by
facsimile to the facsimile number shown below for such party or if sent to a
party by certified United States mail to the address shown below for such
party.
<TABLE>
<S> <C>
SELLER: Relocation Services, Inc.
652 Bair Island Road, Suite 207
Redwood City, California 94063-2738
Attn: Ms. Janette MacDonell
Facsimile Number: (301) 948-7118
JANETTE
MACDONELL:
Facsimile Number: (650) 306-0122
With Copy To: Anton M. Rosandic, Esq.
The Benice Group
P.O Box 16579
Irvine, CA 92623-6579
Facsimile Number: (714) 885-9199
BUYER and
EXECUSTAY: Gary R. Abrahams, President
ExecuStay Corporation of America
7595 Rickenbacker Drive
Gaithersburg, MD 20879
Facsimile Number: (301) 948-7118
With Copy To: John T. Kramer, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
Facsimile Number: (612) 340-8738
</TABLE>
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<PAGE> 32
10.13 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the parties hereto.
10.14 NO ASSIGNMENT WITHOUT APPROVAL. This Agreement shall not be
assigned by the Buyer or Janette MacDonell without the prior written approval
of the other parties to this Agreement.
10.15 ENTIRE AGREEMENT. This Agreement and the Exhibits and
Schedules attached hereto, sets forth the entire agreement and understanding of
the parties, and there are no other prior or contemporaneous written or oral
agreements, undertakings, promises, warranties, or covenants not specifically
referred to, attached hereto or contained herein. This Agreement cannot be
waived, modified or changed except by a writing signed by all of the parties
hereto.
10.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and/or by facsimile signature, any one of which need not contain
the signatures of more than one party, but each of which shall constitute an
original and all such counterparts taken together shall constitute one and the
same instrument.
10.17 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
10.18 ATTORNEYS' FEES. In any action brought by any of the other
parties to this Agreement in connection with this Agreement and the
transactions contemplated hereby, the prevailing party in such action shall be
entitled to recover from the other party reasonable attorneys' fees, costs and
expenses.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal on the day and year first above written.
<TABLE>
<S> <C>
BUYER SELLER
EXECUSTAY CORPORATION SOUTHERN CALIFORNIA
OF AMERICA RELOCATIONS, INC.
By: /s/ Gary R. Abrahams By: /s/ Janette MacDonell
---------------------------------- ----------------------------------
Gary R. Abrahams, Janette MacDonell
President President
EXECUSTAY CORPORATION JANETTE MACDONELL
By: /s/ Gary R. Abrahams /s/ Janette MacDonell
----------------------------------- -------------------------------------
Gary R. Abrahams,
President
</TABLE>
32
<PAGE> 1
EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of the 15th day of April, 1998, is made
by and between CRESTAR BANK, a Virginia banking corporation (the Lender),
EXECUSTAY CORPORATION, a Maryland corporation (the Company), EXECUSTAY
CORPORATION OF AMERICA, a Maryland corporation (ECA), EXECUTIVE AMENITIES,
INC., a Maryland corporation (Amenities), EXECUTIVE AMENITIES-WEST, INC., a
Maryland corporation (Amenities West), EXECUTIVE FURNITURE CENTRE, INC., a
Maryland corporation (Furniture), BOLAND CORPORATE HOUSING, INC., a New York
corporation (Boland), CORPORATE ACCOMMODATIONS, INC., a Connecticut
corporation (Accommodations), and any Subsidiary (as defined herein) that
subsequently becomes a party to this Agreement, in accordance with the
provisions set forth below (together with the Company, ECA, Amenities,
Amenities West, Furniture, Boland and Accommodations, collectively, the
Borrowers, and individually, a Borrower).
RECITALS
The Lender has agreed to provide working capital and acquisition
financing to the Borrowers. The Borrowers are engaged as an integrated group
in the interim housing business. The integrated operation requires financing
on such a basis that the credit supplied to the Company be made available from
time to time to the other Borrowers, as required for the continued successful
operations of the Borrowers separately, and the integrated operation as a
whole. In that connection, the Borrowers have requested that the Lender extend
credit to the Borrowers to finance Permitted Acquisitions (as defined below)
and for other general corporate purposes of the Borrowers. Each Borrower
expects to derive substantial direct and indirect benefits from the credit
extended by the Lender to the other Borrowers, since the successful operation
of each of the Borrowers is dependent on the continued successful performance
of the functions of the integrated group.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Lender, the Borrowers and any
Subsidiaries that may become parties to this Agreement agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings assigned to them below, which meanings shall be equally
applicable to the singular and plural forms of the terms defined.
"Acquired Assets" means the assets, stock or other ownership interests
to be purchased or acquired by an Acquisition Company pursuant to the terms of
an Acquisition Agreement.
<PAGE> 2
"Acquisition Agreement" means the agreement between an Acquisition
Company and a Target or the seller or sellers of a Target, pursuant to which
such Acquisition Company agrees to purchase substantially all of the assets,
stock or other ownership interests of a Target, or merge with a Target,
together with all amendments to such agreement.
"Acquisition Analysis" means, with respect to any proposed Acquisition
Agreement, an analysis, prepared by the chief financial officer of the Company,
of the structure and financial impact of the acquisition in question, including
the Target's most recent financial statements and a summary of the material tax
and accounting consequences related to the acquisition, which analysis shall be
in form and substance reasonably satisfactory to the Lender.
"Acquisition Company" means any Borrower or any Subsidiary of any
Borrower acquiring title to any of the Acquired Assets or merging with a
Target.
"Acquisition Facility Termination Date" means December 31, 2000.
"Acquisition Loan" means each loan to be made to the Borrowers by the
Lender pursuant to Section 23 of this Agreement.
"Acquisition Note" means each promissory note, in substantially the
form of Exhibit A attached to this Agreement, evidencing the joint and several
obligations of the Borrowers to repay each Acquisition Loan, together with
interest thereon, and all extensions, renewals, modifications and amendments
thereof.
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of common stock, by contract or otherwise.
"Agreement" means this Loan Agreement, as the same may be amended,
modified or supplemented from time to time.
"Assumption Agreement" means each Assumption Agreement, substantially
in the form of Exhibit B attached to this Agreement, executed by a Subsidiary
that becomes a party to this Agreement, the Notes and other Loan Documents in
accordance with the provisions of Section 8.4 below.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required to close under the
laws of the State, and, with respect to the determination of LIBOR, on which
banks are open for business in the London interbank market.
2
<PAGE> 3
"Capital Lease" means any lease that has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Cash Management Agreement" means any applicable agreement between the
Company and the Lender pursuant to which funds are transferred automatically to
and from the Company's operating account or controlled disbursement account
with the Lender, as any such agreement may be amended, modified or supplemented
from time to time.
"Closing" means the initial disbursement of the Loans.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and all regulations issued pursuant thereto.
"Collateral" means, collectively, and includes all property of a
Borrower in which a Lien is granted to the Lender pursuant to a Security
Agreement or any other Loan Document.
"Covenant Compliance Certificate" means a certificate executed by a
Principal Officer of the Company, substantially in the form of Exhibit C
attached to this Agreement, containing a calculation of the financial covenants
contained in Section 7 below and certifying that no Default or Event of Default
has occurred.
"Date Affected Information Technology" means a system comprised of one
or more components including computer hardware, computer software or equipment
with computerized functions, which reads, produces or processes date data by
input, output or otherwise.
"Debt" means, collectively, and includes, without duplication, with
respect to any specified Person, (a) indebtedness or liability for borrowed
money (whether by loan, the issuance and sale of debt securities or the sale of
assets to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such assets from such Person) or for the deferred
purchase price of property or services; (b) obligations as a lessee under a
Capital Lease; (c) obligations to reimburse the issuer of letters of credit or
acceptances; (d) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any other
Person or otherwise to assure a creditor against loss; (e) obligations under
interest rate swap, cap or collar agreements or similar agreements or
arrangements designed to protect that Person against fluctuations in interest
rates; (f) obligations under any foreign exchange contract, currency swap or
other similar agreements or arrangements designed to protect that Person
against fluctuations in currency values; and (g) obligations secured by any
Lien on property owned by the specified Person, whether or not the obligations
have been assumed.
3
<PAGE> 4
"Debt Coverage Ratio" means, at any time, the ratio of EBDA of the
Company and its Subsidiaries for the period of 12 months ended on the last day
of the most recently ended fiscal quarter of the Company to current maturities
of consolidated long-term Debt of the Company and its Subsidiaries then
outstanding, determined in accordance with GAAP.
"Default" means any event that, with the giving of notice, the lapse
of time, or both, would constitute an Event of Default.
"Default Rate" means the rate at which interest accrues on the loans
upon the occurrence of an Event of Default, determined in accordance with the
provisions of Section 2.4.
"Dollars" and "$" means the lawful currency of the United States of
America.
"EBDA" means, for any Person for any period, (a) consolidated Net
Income of such Person and its Subsidiaries for such period, plus (b) to the
extent deducted to determine such consolidated Net Income, depreciation and
amortization expenses, less (c) to the extent added to determine such
consolidated Net Income, extraordinary or unusual or other gains not incurred
in the ordinary course of business, less (d) dividends paid by such Person
during such period, less (e) Non-Financed Capital Expenditures of such Person
and its Subsidiaries during such period for such period, in each case
determined in accordance with GAAP.
"EBITDA" means, for any Person for any period, (a) consolidated Net
Income of such Person and its Subsidiaries for such period, plus, (b) to the
extent deducted to determine such consolidated Net Income, the sum of (1)
depreciation expense, (2) interest expense, (3) amortization expense, and (4)
tax expense, less (c) to the extent added to determine such consolidated Net
Income, extraordinary or unusual gains or other gains not incurred in the
ordinary course of business, less (d) Non-Financed Capital Expenditures of such
Person and its Subsidiaries during such period, in each case determined in
accordance with GAAP.
"Equity Issuance" means any issuance or sale by a Person of its
capital stock or other similar equity security, or any warrants, options or
similar rights to acquire, or securities convertible into or exchangeable for,
such capital stock or other similar equity security.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all regulations issued pursuant thereto.
"Event of Default" means any of the events specified as an "Event of
Default" under this Agreement, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"Fully Date Capable" means the ability to correctly process date data
(including, but not limited to, reading, producing, calculating, comparing, and
sequencing date data) from, into, and between the twentieth and twenty-first
centuries) without material degradation in performance
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<PAGE> 5
and without unusual intervention, including correct and continuous processing
during the transition between 1999 and 2000, and correct processing if leap
years.
"Funded Debt" means, for any Person, the sum of the consolidated Debt
of such Person and its Subsidiaries for (a) borrowed money, the deferred
purchase price of property or services and obligations under repurchase
agreements, (b) Capital Lease obligations, (c) the amount of any outstanding
Debt guaranteed and (d) contingent or matured reimbursement obligations for
letters of credit issued for the account of such Person or any Subsidiary of
such Person, in each case determined in accordance with GAAP.
"Funded Debt Ratio" means, at any time, the ratio of (a) Funded Debt
of the Company and its Subsidiaries outstanding on the last day of the most
recently ended fiscal quarter of the Company to (b) EBITDA of the Company and
its Subsidiaries for the period of 12 months then ended.
"GAAP" means generally accepted accounting principles consistently
applied.
"Increased Costs" means any reserve, special deposit, capital adequacy
guideline or similar requirement relating to any extensions of credit or other
assets of the Lender, or the deposits with or other liabilities of the Lender,
that (a) is imposed as a result of any Regulatory Change or as a result of the
application of existing capital adequacy guidelines (including, without
limitation, any Regulatory Change or capital adequacy guideline that requires
that letters of credit issued, or lines of credit established, by the Lender be
classified as "risk assets" for purposes of, or otherwise be subject to the
provisions of, any capital adequacy guidelines applicable to the Lender), and
(b) increases the cost to the Lender of making, issuing or maintaining any
Loan, reduces the amount receivable by the Lender in connection with any Loan,
or reduces the rate of return on the Lender's capital as a consequence of its
obligations under this Agreement.
"Interest Payment Date" means the first day of each calendar month.
"LIBOR" means for each calendar month, the rate at which dollar
deposits with a one-month maturity are offered to leading banks in the London
interbank market at 11:00 a.m. (London time) on the first Business Day of such
calendar month, based on the British Bankers Association quotations published
by an On-Line Information Service, selected by the Lender, plus adjustments
(expressed as a percentage) for reserve requirements, all of the foregoing as
determined by the Lender's Funds Management Division in accordance with its
customary practices.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement, or preferential
arrangement, charge or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
5
<PAGE> 6
agreement, any Capital Lease and the filing of any financing statement under
the UCC or comparable law of any jurisdiction to evidence any of the
foregoing).
"Loan Documents" means this Agreement, the Notes, each Security
Agreement, any Cash Management Agreement, and any other document now or
hereafter executed or delivered in connection with the Obligations, in evidence
thereof or as security therefor, including, without limitation, any life
insurance assignment, pledge agreement, security agreement, deed of trust,
mortgage, guaranty, promissory note or subordination agreement.
"Loans" means the Revolving Loans, the Term Loans and the Acquisition
Loans to be made to the Borrowers under this Agreement.
"Maximum Amount" means $5,000,000; provided, however, that the Maximum
Amount shall be permanently reduced by an amount equal to the original
principal amount of each Term Loan made by the Lender, with each such reduction
becoming effective on the date of disbursement of each Term Loan.
"Minimum Net Worth Level" shall mean $30,000,000 through and
including March 31, 1998, and adjusted upward, effective as of June 30, 1998,
and as of the end of each fiscal quarter of the Company thereafter, by an
amount equal to the sum of (a) 75% of the Net Income of the Company and its
Subsidiaries for such fiscal quarter, with each of the foregoing increases being
fully cumulative, and with no reduction being made on account of any negative
Net Income of the Company and its Subsidiaries for any fiscal quarter, plus (b)
90% of the aggregate amount of the Net Equity Proceeds received by the Company
or any Subsidiary during such fiscal quarter.
"Net Equity Proceeds" means, with respect to an Equity Issuance by a
Person, the aggregate amount of all cash received by such Person in respect of
such Equity Issuance net of investment banking fees, legal fees, accountants
fees, underwriting discounts and commissions and other customary fees and
expenses actually incurred by such Person in connection with such Equity
Issuance.
"Net Income" means, for any Person for any period, the consolidated
gross revenues of such Person and its Subsidiaries for such period less all
consolidated operating and non-operating expenses (including taxes) of such
Person and its Subsidiaries for such period, all as determined in accordance
with GAAP.
"Non-Financed Capital Expenditures" means, for any Person for any
period, capital expenditures of such Person (including, without limitation,
expenditures for property on or held for lease) that are not financed
contemporaneously with the incurrence of such expenditure, or within 120 days
thereafter, with Debt incurred by such Person.
"Notes" means the Revolving Note, each Term Note and each Acquisition
Note.
"Net Worth" means, at time, amounts that would be included under
stockholders' equity on the consolidated balance sheet of the Company and its
Subsidiaries.
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<PAGE> 7
"Obligations" means the Loans, the Notes, and all other indebtedness
and obligations of the Borrowers to the Lender, now existing or hereafter
arising, of every kind and description, direct or indirect, fixed or
contingent, liquidated or unliquidated, due or to become due, secured or
unsecured, joint, several or joint and several, as amended, modified, renewed,
extended or increased from time to time.
"On-Line Information Service" means a text line or other on-line
information service provided to the Lender by any of Reuters Information
Services, Inc., Knight-Ridder Financial/Americas, Dow Jones Telerate, Inc. or
Bloomberg Financial Markets News Services, or any comparable reporting service
selected by the Lender.
"Organizational Documents" means, with respect to any Person that is
an entity, such Person's articles or certificate of incorporation, bylaws,
partnership agreement and certificate, articles of organization and operating
agreement, trust agreement, or such other documents as may govern such Person's
formation, organization and management.
"Permitted Acquisition" means the purchase of Acquired Assets by an
Acquisition Company pursuant to an Acquisition Agreement provided that (a) the
Pro Forma Financials reflect that the Borrowers will be in compliance with all
of the financial covenants set forth in Section 7 of this Agreement as of the
closing of such purchase, (b) the Net Income of the Target, exclusive of
extraordinary or unusual gains or losses, or other gains or losses not incurred
in the ordinary course of business, to the extent added or subtracted to
determine such Net Income, for the most recent 12-month period is not less than
$0, unless otherwise approved by the Lender, (c) the Target is in substantially
the same line of business as the Company, (d) the Lender receives not less than
five days' prior written notice of the closing thereof, (e) no Default or Event
of Default shall occur after giving effect thereto, and (f) if such purchase is
for consideration of more than $5,000,000, it has been approved by the Lender.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, limited liability company or other entity of whatever
nature.
"Primary Operating Account" means any deposit account or controlled
disbursement account on which a Borrower draws to pay all or substantially all
of its operating expenses.
"Prime Rate" means the rate of interest established and announced from
time to time by the Lender and recorded in its Central Credit Administration
Division as its Prime Rate, it being understood and agreed that the Prime Rate
is used as a reference for fixing the lending rate on commercial loans and is
not necessarily the lowest or most favorable rate of interest charged by the
Lender on such loans.
"Principal Officer" means the President, the Chief Executive Officer
or the Chief Financial Officer of the Company.
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<PAGE> 8
"Pro Forma Financials" means, with respect to any Target or
Acquisition Company, consolidated and consolidating balance sheets and income
statements of the Company and Target or Acquisition Company, as applicable,
setting forth projections for the 12-month period following the acquisition
after giving effect to the closing of the related Acquisition Agreement and
Acquisition Loan, and setting forth in reasonable detail the assumptions
underlying such projections, which assumptions are acceptable to the Lender.
"Regulatory Change" means any change, after the date of this
Agreement, in any federal or state laws, rules and regulations, or
interpretations thereof, or the adoption after the date of this Agreement of
any rules, interpretations, directives or requests, applying to a class of
financial institutions including the Lender, under any federal or state laws or
regulations by any court or regulatory authority charged with the
interpretation or administration thereof.
"Reinvestment Loss" means, with respect to any Acquisition Loan or
Term Loan that bears interest based on the Treasury Rate and is being prepaid
in whole or in part, the amount by which the present value of the interest that
would have been earned on the prepaid amount for the remaining term of such
Loan exceeds the present value of the interest that would be earned by
reinvesting such prepaid amount at the Treasury Rate for such remaining Loan
term. To compute such present value, the applicable Treasury Rate for the
remaining Loan term shall be used as the discount rate.
"Related Acquisition Documents" means the documents described in any
Acquisition Agreement and related in any manner to the acquisition of any
Acquired Assets, including, but not limited to, the buy/sell agreement,
historical financial statements of the Target and a detailed description of the
Acquired Assets, and every other document, instrument or certificate executed
in connection with such Acquisition Agreement.
"Revolving Facility Termination Date" means December 31, 1998.
"Revolving Loans" means the loans to be made to the Borrowers by the
Lender pursuant to Section 2.1 of this Agreement.
"Revolving Note" means a $5,000,000 promissory note in substantially
the form of Exhibit D attached to this Agreement, evidencing the joint and
several obligations of the Borrowers to repay each Revolving Loan, together
with interest thereon, and all extensions, renewals, modifications and
amendments thereof.
"SEC" means the Securities and Exchange Commission.
"Security Agreement" means a Security Agreement, in the form of
Exhibit E attached to this Agreement, from the Company and any other Borrower
that at any time owns a Subsidiary, in favor of the Lender, and granting to the
Lender as security for the Obligations a first priority
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<PAGE> 9
Lien in all stock or other ownership interests in all Subsidiaries at any time
owned by the Borrowers.
"Spread" shall mean the percentage corresponding to the Funded Debt
Ratio set forth below, as calculated by the Lender. The applicable Spreads on
the date hereof are .75% for the LIBOR option, and 1.00% for the Treasury Rate
option. The Spreads will be adjusted on a quarterly basis based on the table
set forth below:
<TABLE>
<CAPTION>
Spread for Spread for
Funded Debt Ratio LIBOR Treasury Rate
----------------- ----- -------------
<S> <C> <C>
Less than or equal to 1.5 to 1 0.75% 1.00%
Greater than 1.50 to 1 but less than or equal 0.95% 1.20%
to 2.5 to 1
Greater than 2.5 to 1 but less than or equal 1.25% 1.50%
to 4.0 to 1
</TABLE>
The Spread will be adjusted to the percentage corresponding to the applicable
Funded Debt Ratio in effect as of the last day of each fiscal quarter of the
Company. The adjustment will become effective as of the first day of the
calendar month next succeeding the last day of the 30-day period within which
the Company must deliver its financial statements to the Lender pursuant to
Section 58. No decrease in the Spread shall become effective if, at such time,
any Default or Event of Default has occurred and is continuing. If the
Company's financial statements are not delivered to the Lender within the
specified time periods, the Spread may be increased, at the option of the
Lender, to the highest applicable percentage from the date on which the
statements were due through the next adjustment date.
"State" means the State of Maryland.
"Subsidiary" as to any Person, means a corporation, partnership,
limited partnership, limited liability company or other entity of which shares
of stock or other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such entity are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
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<PAGE> 10
"Target" means any Person, all or substantially all of the stock (or
comparable ownership interests) or assets of which are being acquired by an
Acquisition Company, or which is being merged or consolidated with an
Acquisition Company, pursuant to the terms of an Acquisition Agreement.
"Term Loan" means each loan to be made to the Borrowers by the Lender
pursuant to Section 2.2 of this Agreement.
"Term Note" means each promissory note, in substantially the form of
Exhibit F attached to this Agreement, evidencing the joint and several
obligations of the Borrowers to repay each Term Loan, together with interest
thereon, and all extensions, renewals, modifications and amendments thereof.
"Treasury Rate" shall mean, with respect to any Loan, the rate per
annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) which
is the weekly average yield on United States Treasury Securities, adjusted to a
constant maturity equal to the term of such Loan (or for purposes of
determining the Reinvestment Loss, the remaining term of such Loan), for the
most recent weekly reporting period covered in the weekly statistical release
(currently entitled "Weekly Summary of Banking and Credit Measures") published
by the Board of Governors of the Federal Reserve System on the Friday most
immediately preceding the date on which such Loan is disbursed (or for purposes
of determining the Reinvestment Loss, on which such Loan is prepaid in whole or
in part).
"UCC" means the Uniform Commercial Code as in effect in the State.
SECTION 2. LOANS.
SECTION 2.1. REVOLVING LOANS.
(a) Subject to the terms and conditions of this
Agreement, the Lender agrees to make Revolving Loans to the Borrowers from time
to time until the Revolving Facility Termination Date in an aggregate principal
amount not to exceed at any one time outstanding the Maximum Amount. Up to the
Maximum Amount, the Borrowers may borrow, repay without penalty and reborrow
hereunder from the date of this Agreement until the Termination Date.
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<PAGE> 11
(b) The proceeds of the Revolving Loans shall be used for
short-term working capital purposes and capital expenditures and for no other
purposes.
(c) The Company authorizes the Lender to make Revolving
Loans from time to time in amounts sufficient to pay checks drawn on the
Company's operating accounts with the Lender, subject to the limitation set
forth in Section 21(?) above, all as more particularly described in the Cash
Management Agreement. In addition, the Company may request that a Revolving
Loan be made. Any request for a Revolving Loan must be received by the Lender
no later than 12:00 noon (Washington, D.C. time) on the date on which the
Revolving Loan is to be made. Each request must specify the amount and purpose
of the Revolving Loan. The Lender, in its sole discretion, may accept requests
from the Company by telephone. If required by the Lender, requests made by
telephone shall be confirmed in writing and delivered to the Lender within two
Business Days after the date of the request. Revolving Loans may be requested
by those individuals designated by the Company from time to time in written
instruments delivered to the Lender; provided, however, that the Borrowers
shall remain liable with respect to any Revolving Loan disbursed by the Lender
in good faith hereunder, even if such Revolving Loan is requested by an
individual who has not been so designated. The proceeds of each Revolving Loan
will be credited to a deposit account maintained with the Lender by the Company
pursuant to a Cash Management Agreement. The Company agrees to confirm in
writing from time to time, when and as requested by the Lender, the purpose for
which the proceeds of each Revolving Loan were used.
(d) The unpaid principal balance of the Revolving Loans
shall bear interest at a rate per annum equal to LIBOR plus the applicable
Spread in effect from time to time. The interest rate on the Revolving Loans
shall be determined based on LIBOR in effect as of the date of disbursement of
the initial Revolving Loan and shall be adjusted on the first Business Day of
each succeeding calendar month (to be effective as of the first day of such
calendar month if not a Business Day) to reflect LIBOR then in effect, and the
applicable Spread shall be adjusted from time to time as provided in the
definition of such term. Payments of interest on each Revolving Loan shall be
made on each Interest Payment Date, beginning on the Interest Payment Date next
succeeding the date of disbursement of such Revolving Loan.
(e) The obligation of the Borrowers to repay the
Revolving Loans, together with interest thereon, shall be evidenced by the
Revolving Note. The unpaid principal balance of the Revolving Note shall be
payable on the Revolving Facility Termination Date.
SECTION 2.2. TERM LOANS.
(a) Subject to the terms and conditions of this
Agreement, the Lender agrees to make Term Loans to the Borrowers from time to
time until the Revolving Facility Termination Date, in an aggregate principal
amount not to exceed $5,000,000. The minimum amount of each Term Loan shall be
$500,000.
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<PAGE> 12
(b) The proceeds of the Term Loans shall be used to pay
for capital expenditures incurred by the Borrowers, or to refinance Revolving
Loans that were used to finance such capital expenditures. The Lender must
receive written notice of the Company of a request for a Term Loan, specifying
the amount requested, at least five Business Days prior to the date on which
the Term Loan is to be made. Such notice shall (1) include a specific
description of the capital expenditures incurred, (2) if requested by the
Lender, be accompanied by copies of receipts, invoices, canceled checks or
other satisfactory evidence of such expenditures, and (3) specify the interest
rate option selected by the Company.
(c) The unpaid principal balance of each Term Loan from
time to time outstanding shall bear interest at a per annum rate equal to (1)
the Treasury Rate most recently published prior to the date of disbursement of
such Term Loan plus the applicable Spread in effect on such date, or (2) LIBOR
plus the applicable Spread in effect from time to time, whichever is selected
by the Company. If the LIBOR option is selected, the interest rate on such
Term Loan shall be determined based on LIBOR in effect as of the date of
disbursement and shall be adjusted on the first Business Day of each succeeding
calendar month (to be effective as of the first day of such calendar month if
not a Business Day) to reflect LIBOR then in effect, and the applicable Spread
shall be adjusted from time to time as provided in the definition of such term.
If the Treasury Rate Option is selected, the interest rate on such Term Loan
shall be fixed for the entire term based on the Treasury Rate most recently
published prior to the date of disbursement and Spread in effect on the date of
disbursement. Payments of interest on each Term Loan shall be made on each
Interest Payment Date, beginning on the Interest Payment Date next succeeding
the date of disbursement of such Term Loan.
(d) The joint and several obligations of the Borrowers to
repay each Term Loan, together with interest thereon, shall be evidenced by a
Term Note. The aggregate principal amount of each Term Note shall be payable
in 24 equal consecutive monthly installments of principal due on the first day
of each calendar month beginning on the first such payment date next succeeding
the date on which such Term Loan has been disbursed. If not sooner paid, the
entire unpaid principal balance of each Term Note and all accrued and unpaid
interest thereon shall be due and payable in full on the date on which the last
scheduled principal installment under such Term Note is due. The amount of
each monthly installment of principal shall be equal to 1/24th of the original
principal amount of such Term Note. The Borrowers shall have the right to
prepay a Term Note in whole or in part at any time. Partial prepayments of a
Term Note shall be applied to installments due thereunder in the inverse order
of their maturities. If the Borrowers prepay, in whole or in part, a Term Note
that bears interest based on the Treasury Rate, the Borrowers shall pay a
prepayment premium equal to the Reinvestment Loss. Amounts prepaid with
respect to the Term Loans may not be reborrowed.
SECTION 2.3. ACQUISITION LOANS.
(a) Subject to the applicable terms and conditions of
this Agreement, the Lender agrees to make Acquisition Loans to the Borrowers
from time to time until the
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<PAGE> 13
Acquisition Facility Termination Date in an aggregate principal amount not to
exceed $20,000,000.
(b) The proceeds of each Acquisition Loan shall be used
to finance the purchase or acquisition of a Permitted Acquisition by an
Acquisition Company pursuant to the terms of an Acquisition Agreement.
(c) Any request for an Acquisition Loan shall be made
upon written notice from the Company, which must be received by not later than
five days prior to the date on which an Acquisition Loan of $5,000,000 or more
is to be made, and not later than one days prior to the date on which an
Acquisition Loan of less than $5,000,000 is to be made. Such notice shall
specify the interest rate selected by the Company, the term of the Acquisition
Loan (which shall not exceed five years), and the number of monthly principal
installments in which such Acquisition Loan is to be repaid. Such notice for
an Acquisition Loan of $5,000,000 or more shall be accompanied by a description
of the applicable Acquisition Company, the purchase price therefor and
preliminary drafts of the documents and information described in Section 83.
The Lender shall have the right to approve or decline, in its sole discretion,
any Acquisition Loan of more than $5,000,000.
(d) Each Acquisition Loan shall bear interest on the
unpaid principal balance thereof from time to time outstanding at a rate per
annum equal to (1) the Treasury Rate most recently published prior to the date
of disbursement of such Acquisition Loan plus the applicable Spread in effect
on such date, or (2) LIBOR plus the applicable Spread in effect from time to
time, whichever is selected by the Company. If the LIBOR option is selected,
the interest rate on such Acquisition Loan shall be determined based on LIBOR
in effect as of the date of disbursement of such Acquisition Loan, and shall be
adjusted on the first Business Day of each succeeding calendar month (to be
effective as of the first day of such calendar month if not a Business Day) to
reflect LIBOR then in effect, and the Spread shall be adjusted from time to
time as provided in the definition of such term. If the Treasury Rate option
is selected, the interest rate on such Acquisition Loan shall be fixed for the
entire term based on the Treasury Rate most recently published prior to the
date of disbursement and Spread in effect on the date of disbursement.
Payments of interest on each Acquisition Loan shall be made on each Interest
Payment Date, beginning on the Interest Payment Date next succeeding the date
of disbursement of such Acquisition Loan.
(e) The joint and several obligations of the Borrowers
to repay each Acquisition Loan, together with interest thereon, shall be
evidenced by an Acquisition Note. The principal amount of each Acquisition
Note shall be payable in equal consecutive monthly installments of principal,
payable on the first day of each calendar month. The first principal payment
shall be made on such payment date as may be selected by the Company, but not
later than six months after the date on which such Acquisition Loan is
disbursed, and the final principal payment shall be due not later than five
years after the date on which such Acquisition Loan is disbursed. The amount
of each principal installment shall be equal to the original
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<PAGE> 14
principal balance of Acquisition Loan divided by the scheduled number of
principal installments due. If not sooner paid, the entire unpaid principal
balance of each Acquisition Note and all accrued and unpaid interest thereon
shall be due and payable in full on the date on which the last scheduled
principal installment under such Acquisition Note is due. The Borrowers shall
have the right to prepay an Acquisition Note in whole or in part at any time.
Partial repayments of an Acquisition Note shall be applied to installments due
thereunder in the inverse order of their maturities. If the Borrowers prepay,
in whole or in part, an Acquisition Note that bears interest based on the
Treasury Rate, the Borrowers shall pay a prepayment premium equal to the
Reinvestment Loss.
(f) The closing of each transaction contemplated by an
Acquisition Agreement shall occur simultaneously with the making of an
Acquisition Loan. Each Acquisition Company shall be the owner of all of the
Acquired Assets free and clear of all Liens except Liens permitted by this
Agreement. No party to an Acquisition Agreement shall waive, except with the
consent of the Lender, any condition precedent to the obligation of such party
to close as set forth in such Acquisition Agreement. Each Acquisition Company
shall have performed all of its obligations to the sellers of the Target under
such Acquisition Agreement required to be performed on or before the closing
thereof. Each Acquisition Company shall become a Borrower pursuant to the
provisions of Section 84. If a Target remains as a surviving entity, the
Target also shall become a Borrower pursuant to the provisions of Section 8.4.
SECTION 2.4. PAYMENTS AND COMPUTATIONS. All payments due under this
Agreement (including any payment or prepayment of principal, interest, fees and
other charges) or with respect to the Notes or the Loans shall be made in
lawful money of the United States of America, in immediately available funds,
without defense, setoff or counterclaim, to the Lender at its office at
Commercial Loan Services, P.O. Box 26202, Richmond, Virginia 23260-6202, or at
such other place as the Lender may designate, and shall be applied first to
accrued fees, next to accrued late charges, next to accrued interest and then
to principal. If any payment of principal, interest or fees is due on a day
other than a Business Day, then the due date will be extended to the next
succeeding full Business Day and interest and fees will be payable with respect
to the extension. If any payment of principal, interest or fees is not made
within ten days of its due date, each Borrower agrees to pay to the Lender a
late charge equal to 5% of the amount of the payment; provided, however, that
as long as a Borrower makes payments of principal, interest and fees through
the Lender's automatic debit service, no late charge shall be payable if the
Lender fails to debit any such payment when it is due (if sufficient collected
funds are on deposit in such Borrower's account with the Lender), and such
failure shall not constitute an Event of Default hereunder. Upon the
occurrence of an Event of Default and during the continuation of such Event of
Default, interest shall accrue on the Loans at a per annum rate of 2% above the
rate of interest that otherwise would be applicable. Interest and fees shall
be computed on the basis of a year of 360 days and actual days elapsed. The
Lender may, but shall not be obligated to, debit the amount of any payment due
from a Borrower under this Agreement to any deposit or investment account of
such Borrower maintained with the Lender or any Affiliate of the Lender.
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<PAGE> 15
No setoff, claim, counterclaim, reduction or diminution of any obligation of
any defense of any kind or nature that a Borrower has or may have against the
Lender (other than the defense of payment) shall be available against the
Lender in any suit or action brought by the Lender to enforce this Agreement or
any other Loan Document. The foregoing shall not be construed as a waiver by
the Borrowers of any rights or claims that the Borrowers may have against the
Lender, but any recovery upon such rights and claims shall be had from the
Lender separately, it being the intent of this Agreement and the other Loan
Documents that the Borrowers shall be obligated to pay, absolutely and
unconditionally, all amounts due hereunder and under the other Loan Documents.
SECTION 2.5. INCREASED COSTS. If, as a result of any Regulatory
Change or for any other reason, the Lender incurs Increased Costs, the
Borrowers agree to pay such Increased Costs to the Lender within ten Business
Days after receipt by the Borrowers of the Lender's invoice therefor. The
invoice will be accompanied by a written statement of the Lender setting forth
in reasonable detail the basis and the calculation of the Increased Costs. The
Lender's calculation shall include reasonable averaging and attribution methods
to determine the Increased Costs attributable to the Loans.
SECTION 2.6. COMMITMENT FEE. The Borrowers agree to pay to the
Lender on the first day of each January, April, July and October a fee of .35%
per annum of the average daily amount for the calendar quarter most recently
ended of the difference between $20,000,000 and the aggregate amount of
Acquisition Loans made by the Lender.
SECTION 2.7. PRIMARY DEPOSITORY RELATIONSHIP. If the Company fails
to maintain its Primary Operating Account with the Lender, interest shall
accrue on the Loans at a per annum rate of 1.0% above the rate of interest that
otherwise would be applicable, effective as of the first day following the day
on which the Company moves its Primary Operating Account.
SECTION 2.8. MANDATORY PREPAYMENT.
(a) The Borrowers shall prepay the Revolving Loans to the
extent that the aggregate amount of outstanding Revolving Loans exceeds the
Maximum Amount at any time.
(b) All Net Equity Proceeds received by any Borrower
shall be applied to the prepayment of the Loans, with such prepayments being
applied first to Acquisition Loans and then to Term Loans.
SECTION 2.9. COMPANY AS AGENT. Each Borrower appoints the Company as
its agent to request and receive the proceeds of the Loans on behalf of the
Borrowers, and to give all notices and consents on behalf of the Borrowers.
The Company agrees to distribute the proceeds of the Loans among the Borrowers
for the purposes contemplated by this Agreement.
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<PAGE> 16
SECTION 3. COLLATERAL.
SECTION 3.1. SECURITY INTEREST. To secure the Obligations, each
Borrower shall grant to the Lender, its successors and assigns, a first
priority security interest in all stock and other ownership interests of such
Borrower in any Subsidiary, now owned or hereafter acquired, by executing and
delivering a Security Agreement to the Lender.
SECTION 3.2. PERFECTION OF SECURITY INTEREST. The Borrowers shall
perform any and all steps in all relevant or appropriate jurisdictions as may
be necessary or reasonably requested by the Lender to perfect, maintain and
protect the Lender's security interest in the Collateral. All instruments and
certificated securities that evidence the Collateral shall be delivered to the
Lender, duly endorsed in blank. The Borrowers shall pay the taxes and costs
of, or incidental to, any recording or filing of any financing statements
concerning the Lender's security interests.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrowers represent and
warrant that:
SECTION 4.1. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION.
Each of the Borrowers (a) is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation; (b) has the power and authority
to own its assets and to transact the business in which it is now engaged or in
which it is proposed to be engaged; and (c) is duly qualified as a foreign
corporation or limited liability company and in good standing under the laws of
each other jurisdiction in which such qualification is required. As of the
date of this Agreement, ECA, Amenities, Amenities West, Furniture, Boland and
Accommodations are direct, wholly owned Subsidiaries of the Company and no
other Borrower owns any Subsidiaries.
SECTION 4.2. POWER AND AUTHORITY. The execution, delivery and
performance by the Borrowers of the Loan Documents to which each is a party
have been duly authorized by all necessary corporate actions and do not and
will not (a) require any consent or approval of, or filing or registration
with, any governmental agency or authority or the stockholders or members of
such Borrower; (b) contravene such Borrower's Organizational Documents; (c)
result in a breach of or constitute a default under any agreement or instrument
to which such Borrower is a party or by which it or its properties may be bound
or affected; (d) result in or require the creation or imposition of any Lien
upon or with respect to any of the properties now owned or hereafter acquired
by such Borrower; or (e) cause such Borrower to be in default under any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to such Borrower.
SECTION 4.3. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be,
legal, valid and binding obligations of the Borrowers, enforceable against the
Borrowers in accordance with their respective terms.
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SECTION 4.4. FINANCIAL STATEMENTS. The financial statements of the
Borrowers that have been furnished to the Lender in connection with this
Agreement are complete and correct and fairly present the financial condition
of the Borrowers as of the dates of such statements. Since the dates of such
statements, there has been no material adverse change in the condition
(financial or otherwise), business or operations of a Borrower. The Pro Forma
Financials, when and as delivered to the Lender, will represent the Company's
best estimate of the future operations of the applicable Acquisition Company
and Target and will be based on the assumptions stated therein, all of which
will be believed by the Company to be reasonable assumptions.
SECTION 4.5. LITIGATION. There is no pending or threatened action or
proceeding against or affecting any of the Borrowers before any court,
governmental agency or arbitrator, that, in any one case or in the aggregate,
may affect the financial condition, operations, properties or business of any
of the Borrowers in a materially adverse manner.
SECTION 4.6. OWNERSHIP AND LIENS. Each Borrower has title to all of
its assets, including the Collateral, and none of the Collateral or such assets
is subject to any Lien, except Liens permitted by this Agreement.
SECTION 4.7. ERISA. No Borrower has incurred any material
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code, nor has a Borrower incurred any material liability to
the PBGC in connection with any "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) established or maintained by any Borrower. None of the
employee pension benefit plans (as defined above) of a Borrower, nor any
trusts created thereunder, nor any trustee or administrator thereof, has
engaged in a "prohibited transaction," as such term is defined in Section 406
of ERISA or Section 4975 of the Code, that could subject such plans or any of
them, any such trust, or any trustee or administrator thereof, or any party
dealing with such plans or any such trust to any material liability or tax or
penalty on prohibited transactions imposed by such Sections 406 or 4975.
Neither a Borrower or an Affiliate of a Borrower is now, or at any time in the
past has been, obligated to make contributions to a "multiemployer plan," as
such term is defined in Section 4001(a)(3) of ERISA.
SECTION 4.8. TAXES. Each Borrower has filed all tax returns
(federal, state and local) required to be filed and has paid all taxes,
assessments and governmental charges and levies thereon to be due, including
interest and penalties.
SECTION 4.9. DEBT. No Borrower is in any manner directly or
contingently obligated with respect to any Debt that is not permitted by this
Agreement. No Borrower is in default with respect to any Debt.
SECTION 4.10. YEAR 2000. The Borrowers have undertaken reasonable
efforts to determine whether all material Date Affected Information Technology
used in the business operations of the Borrowers is Fully Date Capable, and, to
the extent necessary, the Borrowers
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have initiated efforts to make their material Date Affected Information
Technology Fully Date Capable prior to the date that the failure to be Fully
Date Capable would adversely affect the operation thereof.
SECTION 5. AFFIRMATIVE COVENANTS. The Borrowers jointly and severally
covenant and agree that:
SECTION 5.1. MAINTENANCE OF EXISTENCE. Each Borrower will preserve
and maintain its corporate or other legal existence and good standing in the
jurisdiction of its formation, and qualify and remain qualified to do business
in each jurisdiction in which such qualification is required.
SECTION 5.2. MAINTENANCE OF RECORDS. Each Borrower will keep
adequate records and books of account, in which complete entries will be made
in accordance with GAAP, reflecting all financial transactions of such
Borrower. The principal records and books of account, including those
concerning the Collateral, shall be kept at 7595 Rickenbacker Drive,
Gaithersburg, Maryland 20879. No Borrower will move such records and books of
account or change its chief executive office or the name under which it does
business without giving the Lender at least 30 days' prior written notice.
SECTION 5.3. MAINTENANCE OF PROPERTIES. Each Borrower will maintain,
keep and preserve all of its properties (tangible and intangible) necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.
SECTION 5.4. CONDUCT OF BUSINESS. Each Borrower will continue to
engage in an efficient and economical manner in a business of the same general
type as conducted by it on the date of this Agreement and as otherwise defined
in its articles of incorporation or articles of organization, as applicable.
SECTION 5.5. MAINTENANCE OF INSURANCE. Each Borrower will maintain
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated.
SECTION 5.6. COMPLIANCE WITH LAWS. Each Borrower will comply in all
respects with all applicable laws, rules, regulations and orders (including,
without limitation, ERISA), such compliance to include, without limitation,
paying, before the same become delinquent, all taxes, assessments and
governmental charges imposed upon it or upon its property.
SECTION 5.7. RIGHT OF INSPECTION. At any reasonable time and from
time to time, with reasonable notice, the Borrowers will permit the Lender or
any agent or representative of the Lender to make copies of and abstracts from
the records and books of account of, and visit the
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properties of, the Borrowers, and to discuss the affairs, finances and accounts
of the Borrowers with any of their respective officers and directors and the
Borrowers' independent accountants.
SECTION 5.8. REPORTING REQUIREMENTS. The Borrowers will furnish to
the Lender:
(a) Monthly Financial Statements of the Company. As soon
as available and in any event within 30 days after the end of each calendar
month, unaudited financial statements consisting of consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such month and consolidated and consolidating statements of income, cash
flows and stockholder's equity of the Company and its Subsidiaries for such
month and the period commencing at the end of the previous fiscal year and
ending with the end of such month, all in reasonable detail and stating in
comparative form the respective consolidated figures for the corresponding date
and period in the previous fiscal year, and all prepared in accordance with the
GAAP. Such financial statements shall be certified to be accurate by a
Principal Officer of the Company (subject to year-end adjustments) and, for the
last month in each fiscal quarter, shall be accompanied by a copy of the Form
10-Q filed by the Company with the SEC and a Covenant Compliance Certificate
for such period;
(b) Annual Financial Statements of the Company. As soon
as available and, in any event, within 90 days after the end of each fiscal
year of the Company, audited financial statements consisting of the
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, and consolidated and
consolidating statements of income, stockholders' equity and cash flows of the
Company and its Subsidiaries for such fiscal year, all in reasonable detail and
all prepared in accordance with GAAP, accompanied by an opinion thereon
acceptable to the Lender of Grant Thornton LLP, or any other independent
certified public accounting firm selected by the Borrowers and acceptable to
the Lender, accompanied by the Form 10-K filed by the Company with the SEC for
such fiscal year;
(c) Management Letters. Promptly upon receipt thereof,
copies of any reports submitted to the Company by independent certified public
accountants in connection with examination of the financial statements of the
Company made by such accountants;
(d) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting a Borrower, that seeks damages
of $500,000 or more or that, if determined adversely to such Borrower, could
have a material adverse effect on the financial condition, properties or
operations of such Borrower;
(e) Notice of Defaults and Events of Default. As soon as
possible and, in any event, within ten days after the occurrence of each
Default and Event of Default, a written notice setting forth the details of
such Default or Event of Default and the action that is proposed to be taken by
the Borrowers with respect thereto;
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(f) Proxy Statements, etc. Promptly after the sending or
filing thereof, copies of all proxy statements, financial statements and
reports that the Company files with the SEC or sends to its stockholders, other
than routine notices concerning the annual meetings of the Company;
(g) Press Release. Promptly after it is issued, any
press release concerning the Company or any of its Subsidiaries;
(h) Acquisition Analysis. Within 30 days after the
signing of an Acquisition Agreement, for which an Acquisition Loan of
$5,000,000 or more will be requested, Pro Forma Financials and an Acquisition
Analysis reflecting the consummation of each Acquisition Agreement and the
transactions incident thereto. The Pro Forma Financials shall be materially
correct and complete, and shall present fairly the financial condition of the
Borrowers as of the date immediately after consummation of such Acquisition
Agreement and the transactions incident thereto;
(i) Certain Acquisition Documents. Within 30 days of the
purchase of Acquired Assets for consideration of less than $5,000,000, the
documents described in Section 8.3 with respect to such purchase; and
(j) General Information. Such other information
respecting the condition or operations, financial or otherwise, of the
Borrowers as the Lender from time to time reasonably may request.
SECTION 5.9. YEAR 2000 COMPLIANCE. The Borrowers shall initiate and
maintain a program to identify any Date Affected Information Technology used in
the business operations of each of the Borrowers that is not Fully Date
Capable, and, in connection therewith, undertake in good faith to make all
material Date Affected Information Technology used in such business operations
Fully Date Capable prior to the date that the failure to be Fully Date Capable
would adversely affect the operation thereof. Each Borrower shall advise the
Lender in the event that such Borrower has reason to believe that any material
Date Affected Information Technology will not be Fully Date Capable prior to
the date that the failure to be Fully Date Capable would adversely affect the
operation thereof, and advise the Lender in the event that such Borrower has
reason to believe that it will be adversely affected by the failure of any
affiliated or nonaffiliated entity to have its Date Affected Information
Technology Fully Date Capable. The Borrowers agree to provide the Lender, upon
request, access to and copies of information necessary to permit the Lender to
determine whether each Borrower's Date Affected Information Technology is, or
will be, Fully Date Capable, including, without limitation, (i) minutes,
resolutions and reports to and from each Borrowers' Board of Directors or
committee thereof, (ii) internally generated reports, consultant reports or
auditor's report regarding the status of each Borrowers' Date Affected
Information Technology, (iii) all documents relating to a "Year 2000" program,
and (iv) officer certificates or other statements requested by the Lender
regarding status of Date Affected Information Technology. The Borrowers
acknowledge that the Lender's right to
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receive, or the Lender's receipt of, the foregoing information does not impose
any obligation on the Lender to assess the accuracy or effect of such
information, or to recommend or require remedial action of any kind. The
Borrowers hereby acknowledge that the actual or potential failure or
degradation of any material Date Affected Information Technology due to its
failure to be Fully Date Capable may constitute a material adverse change in
the Borrowers' business or financial condition.
SECTION 6. NEGATIVE COVENANTS. The Borrowers agree that, without first
obtaining the prior written consent of the Lender:
SECTION 6.1. LIENS. The Borrowers will not create, incur, assume or
permit to exist, any Lien upon or with respect to any of their properties, now
owned or hereafter acquired, except: (a) Liens in favor of the Lender; (b)
Liens that are incidental to the conduct of the business of a Borrower, are not
incurred in connection with the obtaining of credit and do not materially
impair the value or use of assets of such Borrower; and (c) purchase-money
Liens, whether now existing or hereafter arising (including those arising out
of a Capital Lease) on any fixed assets provided that (1) any property subject
to a purchase-money Lien is acquired by a Borrower in the ordinary course of
its respective business and the Lien on any such property is created
contemporaneously with such acquisition, (2) each such Lien shall attach only
to the property so acquired, (3) the Debt secured by all such Liens shall not
exceed the aggregate at any time outstanding $250,000 in the aggregate for all
of the Borrowers.
SECTION 6.2. DEBT. The Borrowers will not create, incur, assume or
permit to exist, any Debt, except: (a) the Obligations; (b) Debt of a Borrower
subordinated to the Obligations on terms satisfactory to the Lender; (c)
ordinary trade accounts payable; (d) Debt of a Borrower (including Debt arising
out of a Capital Lease) or any Subsidiary secured by purchase-money Liens
permitted by this Agreement; and (e) Debt of a Borrower to any other Borrower.
SECTION 6.3. MERGERS, ETC. No Borrower will merge or consolidate
with any Person, or permit any Subsidiary to do so, except that (a) one
Borrower may merge into or transfer assets to any other Borrower, and (b) an
Acquisition Company or a Target may merge with any Borrower or Subsidiary
provided that (1) the surviving entity becomes a Borrower pursuant to the
provisions of Section 84 of this Agreement, and (2) after giving effect
thereto, no Default or Event of Default shall occur.
SECTION 6.4. SALE AND LEASEBACK. No Borrower will sell, transfer or
otherwise dispose of, any real or personal property to any Person and
thereafter, directly or indirectly, lease back the same or similar property.
SECTION 6.5. DIVIDENDS AND DISTRIBUTIONS. The Company will not
declare or pay any dividends or distributions; or purchase, redeem, retire or
otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its stockholders as such
whether in cash, assets or obligations of the Company; or allocate or otherwise
set apart
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any sum for the payment of any dividend or distribution on, or for the
purchase, redemption or retirement of, any shares of its capital stock; or make
any other distribution by reduction of capital or otherwise in respect of any
shares of its capital stock; except that, subject to the compliance by the
Company with the provisions of Section 7 below, (a) the Company may declare and
deliver dividends and make distributions payable solely in common stock of the
Company, and (b) provided that after giving effect thereto, no Default or Event
of Default shall occur, the Company may pay cash dividends from retained
earnings.
SECTION 6.6. SALE OF ASSETS. No Borrower will sell, lease, assign,
transfer or otherwise dispose of, any of its now owned or hereafter acquired
assets, except for (a) goods sold or leased in the ordinary course of business
and (b) the sale or other disposition of assets other than Inventory no longer
used or useful in the conduct of its business and not exceeding $100,000 in the
aggregate for all Borrowers during any fiscal year; and (c) the sale, lease,
assignment or transfer of its assets by a Borrower to any other Borrower.
SECTION 6.7. LOANS. No Borrower will make any loan or advance to any
Person except for (a) travel advances or other advances in an aggregate amount
not to exceed $50,000 at any one time outstanding, which are made to any
employee of any Borrower in the ordinary course of such Borrower's business and
in furtherance of such employee's performance under a contract with a Customer
and (b) loans made to a Borrower by any other Borrower.
SECTION 6.8. GUARANTIES, ETC. No Borrower will assume, guarantee,
endorse or otherwise be or become directly or contingently responsible or
liable (including, but not limited to, any liability arising out of any
agreement to purchase any obligation, stock, assets, goods or services, or to
supply or advance any funds, assets, goods or services, or to maintain or cause
such Person to maintain a minimum working capital or net worth or otherwise to
assure the creditors of any Person against loss) for obligations of any Person,
or permit any such guaranties or liabilities to exist, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
SECTION 6.9. ACQUISITIONS. No Borrower will form a Subsidiary,
become a partner or joint venturer with any person, or purchase or acquire all
or substantially all of the assets of any Person, or any capital stock of or
ownership interest in any other Person, except that an Acquisition Company may
purchase Acquired Assets in connection with a Permitted Acquisition provided
that (a) the applicable Acquisition Company and Target become Borrowers
pursuant to Section 84 and (b) after giving effect thereto, no Default or Event
of Default shall occur.
SECTION 6.10. TRANSACTIONS WITH AFFILIATES. No Borrower will enter
into any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
such Borrower's business and upon fair and reasonable terms no less favorable
to such Borrower than would be applicable in a comparable arm's-length
transaction with a Person not an Affiliate.
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SECTION 7. FINANCIAL COVENANTS. Until the Lender's obligation to make Loans
has been terminated and the Obligations have been paid in full, the Borrowers
agree that:
SECTION 7.1. NET WORTH. The Company shall maintain at all
times Tangible Net Worth of not less than the Minimum NET WORTH Level.
SECTION 7.2. FUNDED DEBT RATIO. The Company shall maintain for each
12-month period ending as of the last day of each fiscal quarter of the Company
a Funded Debt Ratio of not greater than 4.0 to 1.
SECTION 7.3. DEBT COVERAGE RATIO. The Company shall maintain for
each 12-month period ending as of the last day of each fiscal quarter of the
Company a Debt Coverage Ratio of not less than 1.5 to 1.
SECTION 8. CONDITIONS OF LENDING. The making of the Loans shall be subject
to the following conditions:
SECTION 8.1. CONDITIONS PRECEDENT TO CLOSING. The initial
disbursement of the Loans shall be subject to the following conditions
precedent:
(a) The Loan Documents shall have been appropriately
completed, duly executed by the parties thereto, recorded where necessary and
delivered to the Lender.
(b) No Default or Event of Default shall have occurred
and be continuing.
(c) All representations and warranties contained herein
shall be true and correct at the Closing Date.
(d) All legal matters incident to the Loans shall be
satisfactory to counsel for the Lender, and the Borrowers agree to execute and
deliver to the Lender such additional documents and certificates relating to
the Loans as the Lender reasonably may request.
(e) Financing statements in form and substance
satisfactory to the Lender shall have been properly filed in each office where
necessary to perfect the Lender's security interest in the Collateral,
termination statements shall have been filed with respect to any other
financing statements covering all or any portion of the Collateral and all
taxes and fees with respect to such recording and filing shall have been paid
by the Borrowers, and the Lender shall receive all instruments and certificates
evidencing the collateral, endorsed in blank.
(f) The Borrowers shall have delivered to the Lender (1)
certified copies of evidence of all corporate actions taken by the Borrowers to
authorize the execution and delivery of the Loan Documents, (2) certified
copies of the Organizational Documents of the Borrowers, (3) certificates of
incumbency and signatures for the officers of the Borrowers executing the Loan
Documents, (4) good standing certificates, dated not more than 30 days prior to
the Closing
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Date, from the appropriate state official of any state in which the Borrowers
are incorporated or qualified to do business, and (5) such additional
supporting documents as the Lender or counsel for the Lender reasonably may
request.
(g) The Lender shall have received the written opinion of
counsel to the Borrowers, issued by counsel acceptable to the Lender, and in
form and substance satisfactory to the Lender.
(h) The Lender shall have received financing statement,
judgment and tax lien searches reflecting that there are no Liens against the
Borrowers' assets other than those permitted by the Agreement.
SECTION 8.2. CONDITIONS PRECEDENT TO SUBSEQUENT DISBURSEMENTS. The
disbursement and issuance of subsequent Loans shall be subject to the following
conditions precedent:
(a) No Default or Event of Default shall have occurred
and be continuing.
(b) No material adverse change shall have occurred in the
financial condition of any Borrower.
(c) All representations and warranties shall be true and
correct at the date of such disbursement.
(d) No change shall have occurred in any law or
regulations thereunder or interpretations thereof that, in the opinion of
counsel for the Lender, would make it illegal for the Lender to make Loans
hereunder.
(e) For each Acquisition Loan and Term Loan, the Lender
shall receive an Acquisition Note or a Term Note, as applicable, appropriately
completed.
SECTION 8.3. ADDITIONAL CONDITIONS PRECEDENT TO SUBSEQUENT
DISBURSEMENTS OF ACQUISITION LOANS. In addition to the conditions precedent
stated in Section 8.2, the disbursement of any subsequent Acquisition Loan of
$5,000,000 or more shall be subject to the following conditions precedent:
(a) True and complete copies of the applicable
Acquisition Agreement, any Related Acquisition Documents (unless the Lender
otherwise elects not to require copies of the Related Acquisition Documents),
Pro Forma Financials and an Acquisition Analysis shall be delivered to the
Lender at least five Business Days prior to the disbursement of such
Acquisition Loan, with preliminary drafts thereof being delivered to the Lender
not less than 30 days prior to such disbursement.
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(b) The Acquisition Company shall deliver to the Lender a
certificate, dated as of the date of disbursement of the Acquisition Loan,
pursuant to which the Acquisition Company shall warrant and represent to the
Lender that (1) to the best of its knowledge, each of the representations and
warranties made by the sellers of the Target to the Acquisition Company under
such Acquisition Agreement is true and correct; (2) no broker or finder brought
about the making or closing of the Acquisition Loan made with respect to such
Acquisition Agreement, and neither the Borrowers nor the Lender have any
obligation to any Person in respect of any finder's or brokerage fees in
connection with such Acquisition Loan; (3) the parties to the Acquisition
Agreement have complied with all requirements of every bulk sales or transfer
law that may be applicable to the sale of the Acquired Assets to the
Acquisition Company, or the Acquisition Company has obtained indemnification
against any and all liability arising from the failure to so comply; (4) the
Acquisition Agreement and the Related Acquisition Documents approved by the
Lender have not been amended, (5) the applicable Acquisition Analysis and Pro
Forma Financials remain accurate and complete in all material respects; and (6)
as of the date immediately after the consummation of all the agreements and
transactions under and pursuant to such Acquisition Agreement, the Borrowers
will not have any material amount of liabilities, contingent or otherwise, not
reflected in the Pro Forma Financials.
(c) Termination statements shall have been filed with
respect to any financing statements covering all or any portion of the Acquired
Assets, except for financing statements perfecting Liens permitted by this
Agreement.
(d) The applicable Acquisition Company or Target, or
both, shall become Borrowers pursuant to the provisions of Section 8.4, unless
such Acquisition Company and Target, or either of them (1) has already become a
Borrower or (2) has been merged into a Borrower.
(e) The Lender shall have received evidence satisfactory
to it that, after giving effect to the Acquisition Loan, no Borrower is or will
be rendered insolvent within the meaning of Section 548 of the Federal
Bankruptcy Code and any applicable state fraudulent conveyance laws. This
condition may be satisfied by delivering to the Lender a Solvency Certificate,
in substantially the form of Exhibit G attached to this Agreement, dated as of
the disbursement date of the Acquisition Loan.
SECTION 8.4. CONDITIONS PRECEDENT TO SUBSIDIARIES BECOMING BORROWERS.
Each Acquisition Company and Target that is not a Borrower shall become a
Borrower under this Agreement, and any Subsidiary of the Company shall become a
Borrower under this Agreement, subject to the satisfaction of the following
conditions precedent:
(a) The Acquisition Company, Target or Subsidiary shall
execute and deliver to the Lender an Assumption Agreement.
(b) No Default or Event of Default shall have occurred
and be continuing.
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(c) All legal matters incident to such Acquisition
Company, Target or Subsidiary becoming a Borrower shall be satisfactory to
counsel for the Lender, and the Acquisition Company, Target or Subsidiary shall
execute and deliver to the Lender such additional documents and certificates
relating to the Loans as the Lender may reasonably request. Notwithstanding
the foregoing, the Lender and its counsel will not to attempt to renegotiate or
otherwise restructure the terms or conditions of any Acquisition Agreement.
(d) The Lender shall have received an opinion of counsel
to the Acquisition Company, Target or Subsidiary, addressed to the Lender,
covering such matters as the Lender may request, in form and substance
satisfactory to the Lender.
(e) Each Borrower with an ownership interest in the
Acquisition Company, Target or Subsidiary shall have executed and delivered to
the Lender a Security Agreement, financing statements in form and substance
satisfactory to the Lender shall have been properly filed in each office where
necessary to perfect the security interest of the Lender in the applicable
Collateral, termination statements shall have been filed with respect to any
other financing statements covering all or any portion of such Collateral, all
taxes and fees with respect to such recording and filing shall have been paid
by such Acquisition Company, Target or Subsidiary, the Lender shall have
received such lien searches or reports as it shall require confirming that the
foregoing filings and recordings have been completed, and the Lender shall
have received all instruments and certificated securities that evidence such
Collateral, endorsed in blank.
(f) The Acquisition Company, Target or Subsidiary shall
have delivered the following documents to the Lender, each of which shall be
certified as of the date on which it is to become a Borrower, by its secretary:
(1) copies of evidence of all actions taken by the Acquisition Company, Target
or Subsidiary to authorize the execution and delivery of the Assumption
Agreement and the other Loan Documents; (2) copies of the Organizational
Documents of the Acquisition Company, Target or Subsidiary; and (3) a
certificate as to the incumbency and signatures of the officers executing the
Assumption Agreement.
(g) The Lender shall have received a certificate of good
standing (or similar instrument) issued by the appropriate state official of
the state of incorporation of the Acquisition Company, Target or Subsidiary,
dated within 30 days of the date of the applicable Assumption Agreement.
SECTION 9. DEFAULT.
SECTION 9.1. EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Failure of a Borrower to pay any Obligation to the
Lender, including, without limitation, the principal of or interest on the
Notes or the Loans, when the same shall become due and payable, whether at
maturity, or otherwise, and such failure shall continue for a
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period of ten days after written notice to the Company from the Lender, which
may be a computer generated late payment notice; or
(b) Failure of the Borrowers to comply with any financial
covenant contained in Section 7 of this Agreement; or
(c) Failure of the Borrowers to perform or observe any
other term, condition, covenant, warranty, agreement or other provision
contained in this Agreement (except any such failure resulting in the
occurrence of another Event of Default described in this Section), within 30
days after receipt of notice from the Lender specifying such failure; or
(d) Discovery that any representation or warranty made or
deemed made by the Borrowers in this Agreement, any Loan Document or any
statement or representation made in any certificate, report or opinion
delivered pursuant to this Agreement (including any Borrowing Base Certificate
or financial statements) or in connection with any borrowing under this
Agreement was materially untrue or is breached in any material respect; or
(e) If, as a result of default, any other obligation of a
Borrower for the payment of any Debt in excess of $50,000 may be or is declared
to be due and payable prior to the expressed maturity thereof, unless and to
the extent that the declaration is being contested in good faith in a court of
appropriate jurisdiction; or
(f) A Borrower makes an assignment for the benefit of
creditors, files a petition in bankruptcy, petitions or applies to any tribunal
for any receiver or any trustee of such Borrower or any substantial part of its
property, or commences any proceeding relating to such Borrower under any
reorganization, arrangement, readjustments of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or
(g) If, within 60 days after the filing of a bankruptcy
petition or the commencement of any proceeding against a Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the proceeding shall not have been dismissed, or, if, within 60
days after the appointment, without the consent or acquiescence of such
Borrower, of any trustee, receiver or liquidator of such Borrower or of all or
any substantial part of the properties of such Borrower, the appointment shall
not have been vacated; or
(h) Any judgment against a Borrower in excess of $50,000
or any attachment in excess of $50,000 against any property of a Borrower that
remains unpaid, undischarged, unbonded or undismissed for a period of 30 days,
unless and to the extent that the judgment or attachment is appealed in good
faith in a court of higher jurisdiction and the appeal remains pending; or
(i) If the Lender, in good faith, deems itself insecure
or determines that material adverse change occurs in the financial or business
condition of the Borrowers, and the
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cause for such determination is not cured to the Lender's satisfaction within
30 days after notice from the Lender to the Company specifying the Lender's
basis therefor; or
(j) The dissolution, liquidation or termination of
existence of a Borrower; or
(k) If the Borrowers fail to give the Lender any notice
required by this Agreement within ten days after the occurrence of the event
giving rise to the obligation to give such notice, provided that such failure
to give notice shall not constitute an Event of Default if the applicable Event
of Default or breach is cured within any grace period that otherwise would have
been applicable had the notice been timely given; or
(l) If the Gary R. Abrahams, Marc B. Kaplan, and Robert
W. Zaugg are no longer active in the management of the Borrowers; or
(m) The occurrence of an event of default under any other
Loan Document and the expiration of all applicable cure periods.
SECTION 9.2. REMEDIES UPON DEFAULT. Upon the occurrence of an Event
of Default, the following provisions shall be applicable:
(a) The Lender, at its option, may terminate its
obligation to make Loans under this Agreement and declare all Obligations,
whether incurred prior to, contemporaneous with or subsequent to the date of
this Agreement, and whether represented in writing or otherwise, immediately
due and payable and may exercise all of its rights and remedies against the
Borrowers and any Collateral.
(b) The Lender is hereby authorized at any time or from
time to time, without notice to the Borrowers (any such notice being expressly
waived by the Borrowers), to setoff and apply any deposit (general or special,
time or demand, provisional or final) or investment account at any time held,
including any certificate of deposit, and other indebtedness at any time owed
by the Lender or any of its affiliates, whether or not any such deposit or
indebtedness is then due, to or for the credit or account of a Borrower against
any and all of the Obligations.
(c) THE LENDER AND EACH BORROWER EXPRESSLY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
SECTION 10. MISCELLANEOUS.
SECTION 10.1. COLLECTION COSTS. The Borrowers shall pay all of the
reasonable costs and expenses incurred by the Lender in connection with the
enforcement of this Agreement and the other Loan Documents, including, without
limitation, reasonable attorneys' fees and expenses.
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<PAGE> 29
SECTION 10.2. MODIFICATION AND WAIVER. Except for the other
documents expressly referred to in this Agreement, this Agreement contains the
entire agreement between the parties and supersedes all prior agreements
between the Lender and the Borrowers. No modification or waiver of any
provision of this Agreement or any other Loan Document and no consent by the
Lender to any departure therefrom by the Borrowers shall be effective unless
such modification or waiver shall be in writing and signed by an officer of the
Lender with a title of vice president or any higher office, and the same shall
then be effective only for the period and on the conditions and for the
specific instances and purposes specified in such writing. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers to any other or
further notice or demand in similar or other circumstances. No failure or
delay by the Lender in exercising any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of the Lender contained in
this Agreement and the other Loan Documents are cumulative and not exclusive of
any rights or remedies otherwise provided by law.
SECTION 10.3. NOTICES. All notices, requests, demands or other
communications provided for in this Agreement (except for requests for
Revolving Loans made by telephone as described in Section 2.1 above) shall be in
writing and shall be delivered by hand, sent prepaid by Federal Express (or a
comparable overnight delivery service) or sent by the United States mail,
certified, postage prepaid, return receipt requested, to the Lender, at
Crestar Bank, , Attention: 6410 Rockledge Drive, Bethesda, Maryland 20817,
Attention: Diane E. Bauman, or to the Borrowers at 7595 Rickenbacker Drive,
Gaithersburg, Maryland 20879, Attention: Chief Financial Officer. Any notice,
request, demand or other communication delivered or sent in the foregoing
manner shall be deemed given or made (as the case may be) upon the earliest of
(a) the date it is actually received, (b) the business day after the day on
which it is delivered by hand, (c) the business day after the day on which it
is properly delivered to Federal Express (or a comparable overnight delivery
service), or (d) the third business day after the day on which it is deposited
in the United States mail. A Borrower or the Lender may change its address by
notifying the other party of the new address in any manner permitted by this
Section 10.3. Rejection or other refusal to accept or the inability to deliver
because of a changed address of which no notice was given shall not affect the
date of such notice, election or demand sent in accordance with the foregoing
provisions.
SECTION 10.4. COUNTERPARTS. This Agreement may be executed by the
parties hereto individually or in any combination, in one or more counterparts,
each of which shall be an original and all of which together constitute one and
the same agreement.
SECTION 10.5. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
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<PAGE> 30
SECTION 10.6. SURVIVAL OF AGREEMENTS. All agreements,
representations and warranties made herein shall survive the delivery of this
Agreement and the making and renewal of the Loans hereunder.
SECTION 10.7. FEES AND EXPENSES. Whether or not any Loans are made
hereunder, the Borrowers shall pay on demand all out-of-pocket costs and
expenses incurred by the Lender in connection with the preparation,
negotiation, execution, delivery, filing, recording and enforcement of this
Agreement and any of the documents executed or delivered in connection
herewith, including, without limitation, the reasonable fees (up to $12,000)
and expenses of counsel to the Lender, and local counsel who may be retained by
the Lender, with respect to this Agreement and such documents and any
amendments thereof and with respect to advising the Lender as to its rights and
responsibilities thereunder.
SECTION 10.8. USE OF DEFINED TERMS. All terms defined in this
Agreement shall have the defined meanings when used in certificates, reports or
other documents made or delivered pursuant to this Agreement, unless the
context shall otherwise require.
SECTION 10.9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and bind the respective parties hereto and their successors and
assigns; provided, however, that no Borrower may assign its rights hereunder
without the prior written consent of the Lender.
SECTION 10.10. ACCOUNTING TERMS. All accounting terms used herein
that are not otherwise expressly defined in this Agreement shall have the
meanings respectively given to them in accordance with GAAP in effect on the
date of this Agreement. Except as otherwise provided herein, all financial
computations made pursuant to this Agreement shall be made in accordance with
GAAP and all balance sheets and other financial statements shall be prepared in
accordance with GAAP. Except as otherwise provided herein, whenever reference
is made in any provision of this Agreement to a balance sheet or other
financial statement or financial computation with respect to a Borrower, such
terms shall mean a consolidated balance sheet or other financial statement or
financial computation, as the case may be, with respect to such Borrower and
its Subsidiaries.
SECTION 10.11. CONFIDENTIALITY. Except as otherwise provided by
applicable law, the Lender shall utilize all non-public information obtained
pursuant to the requirements of this Agreement which has been identified as
confidential or proprietary by the Company in accordance with its customary
procedure for handling confidential information of this nature and in
accordance with safe and sound banking practices but in any event may make
disclosure: (a) to any of its affiliates (provided they shall agree to keep
such information confidential in accordance with the terms of this Section);
(b) as reasonably required by any bona fide assignee, participant or other
transferee in connection with the contemplated transfer of any Loan or
participations therein (provided they shall agree to keep such information
confidential in accordance with the terms of this Section); (c) as required by
any governmental authority or
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<PAGE> 31
representative thereof or pursuant to legal process; (d) to the Lender's
independent auditors, counsel and other professional advisors (provided they
shall be notified of the confidential nature of the information); and (e) after
the happening and during the continuance of an Event of Default, to any other
Person, in connection with the exercise by the Lender of rights hereunder or
under any of the other Loan Documents.
SECTION 10.12. INTERPRETATION.
(a) This Agreement and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with the
laws of the State of Maryland, without reference to conflict of laws
principles.
(b) The representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to have been given and
undertaken by the Borrowers jointly and severally.
[SIGNATURES ON FOLLOWING PAGES]
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<PAGE> 32
IN WITNESS WHEREOF, the Borrowers and the Lender have caused this
Agreement to be signed by their duly authorized representatives all as of the
day and year first above written.
LENDER:
------
CRESTAR BANK,
a Virginia banking corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
BORROWERS:
---------
EXECUSTAY CORPORATION,
a Maryland corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
EXECUSTAY CORPORATION OF AMERICA,
a Maryland corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
EXECUTIVE AMENITIES, INC.,
a Maryland corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
32
<PAGE> 33
EXECUTIVE AMENITIES-WEST, INC.,
a Maryland corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
EXECUTIVE FURNITURE CENTRE, INC.,
a Maryland corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
BOLAND CORPORATE HOUSING, INC.,
a New York corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
CORPORATE ACCOMMODATIONS, INC.,
a CONNECTICUT corporation
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
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<PAGE> 34
LIST OF SCHEDULES & EXHIBITS
Exhibit A - Form of Acquisition Note
Exhibit B - Form of Assumption Agreement
Exhibit C - Covenant Compliance Certificate
Exhibit D - Form of Revolving Note
Exhibit E - Form of Security Agreement
Exhibit F - Form of Term Note
Exhibit G - Form of Solvency Certificate
34
